Call it Latin America’s perennial challenge: Low productivity.
Measured as output per worker or per hour, productivity in most of the region remains a fraction of that in advanced economies and has hardly improved over the past 75 years. The result is a development constraint that scholars and observers use to explain why Latin America and the Caribbean are currently immersed in a “low growth trap” that limits wages and political stability alike.
Early last year, the UN Development Program concluded in a report that low productivity is one of the “biggest obstacles” to regional growth and issued an urgent message to highlight the relevance of that constraint: “The region has struggled to take advantage of past technological revolutions and risks missing out on the benefits of digitalization and AI.”
Recent data puts this structural challenge into perspective: Between 1950 and today, the region’s productivity relative to the U.S. barely moved, and a Latin American worker produces, on average, about one-fifth of what a U.S. worker produces, according to the World Bank. While East Asia used productivity gains to fuel its convergence with advanced economies, Latin America largely stagnated, and from 2005 to 2019, the region’s average productivity growth was negative. Growth spurts—such as the commodity exports boom of the early 2010s—came and went without translating into sustained efficiency or development gains.
