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- The United Nations regional commission projects regional economic growth of 2.2 percent in 2026 and 2.5 percent in 2027 and advises that increasing productivity and growth is necessary for reducing informality through productive formalisation strategies.
SANTIAGO, Chile – The Economic Commission for Latin American and the Caribbean (ECLAC), August 20, 2026, presented a new edition of its annual report Economic Survey of Latin America and the Caribbean 2026. Growth and productivity amid high informality: constraints and challenges in fostering productive formalisation in the region.
The report indicates that the regional economy is expected to grow by 2.2 percent in 2026, after a 2.4 percent expansion in 2025, and show a partial recovery of up to 2.5 percent in 2027. If these projections prove correct, Latin America and the Caribbean will have maintained five years with average growth near 2.3 percent, an insufficient level to provide a sustained increase in income per inhabitant, close development gaps, and significantly expand political spaces.
It also indicates that a declining international context―marked by lower worldwide growth, greater geopolitical tensions, financial volatility, and pressures in energy markets―partly explain the deceleration predicted for 2026. However, it states that the main limitation for regional growth is structural in nature: low levels of investment, decreased dynamism in formal job creation, and high and persistent labor informality.
“The region has managed to maintain significant progress regarding macroeconomic stability, but that stability must become a platform for more and better growth. To overcome the trap of low capacity for growth, we must increase investment and productivity and simultaneously move toward productive formalisation that strengthens people’s and businesses’ productive capacity, expands social protection, and generates more high-quality formal employment,” stated the executive secretary of ECLAC, José Manuel Salazar-Xirinachs.
Low growth in a new geopolitical era
During 2025, the region showed resilience in a reconfigured international context with increased uncertainty. Regional GDP grew by 2.4 percent ; inflation continued to converge toward central banks’ goals, employment continued to broaden, though less strongly, and real wages continued to recover. At the same time, the current account remained at a moderate level of 1.2 percent of regional GDP, and net capital flow facilitated accumulation of international reserves.
A global economic downturn is expected for 2026, with growth of 2.9 percent, the lowest rate since 2022. Geopolitical rivalries and the disruption of energy supplies have increased the prices of oil, fertilisers, and transportation, while the persistence of relatively high international interest rates and the appreciation of the dollar could worsen financing conditions for emerging economies.
At the regional level, ECLAC projects growth for Latin America and the Caribbean of 2.2 percent in 2026 and 2.5 percent in 2027, with marked heterogeneity at the subregional level. South America is expected to grow 2.5 percent in both 2026 and 2027. Growth in Central America is expected to be 1.6 percent in 2026 and 2.8 percent in 2027. This result is influenced by the contraction expected for Cuba and Haiti. If these two economies are excluded, the subregional average would be 4.0 percent for 2026 and 4.2 percent for 2027. The Caribbean is expected to grow 5.6 percent in 2026 and 7.9 percent in 2027, driven by increased growth in Guyana; if this country is not included, the subregional average would be 1.1 percent in 2026 and 2.2 percent in 2027.
Inflation is expected to remain contained, though its convergence toward goals will be slower. The recent price shock has been mainly concentrated on energy and fertilisers, with a more limited transmission to food than in previous incidents. However, increased energy costs could delay new reductions in monetary policy rates. In this context, ECLAC highlights the importance of preserving monetary credibility and actively using macroprudential tools to mitigate financial risks.
Regarding labor, the number of employed people increased by 1.6 percent in 2025—approximately 4.3 million jobs—but the job creation rate slowed for the third consecutive year. The unemployment rate decreased to 5.3%, and labor informality continued to drop, although it still includes nearly half of employed people. Indicators in early 2026 confirm a more moderate expansion of employment and show that the possibility of maintaining labor improvements will depend more and more on increases in investment, productivity, and growth.
Regarding fiscal matters, the stabilization of gross public debt at approximately 52 percent of GDP in Latin America has not been sufficient to rebuild the fiscal space. Low growth, the high cost of financing, and increased interest payments limit resources available for increasing public investment, social protection, and accelerating productive transformation. In the Caribbean, gross public debt was approximately 73 percent of GDP in 2025, which also reinforced the same limitations to moving toward more productive, inclusive, and sustainable development.
Informality weakens growth capacity for increasing productivity
The second part of the Economic Survey2026 examines informality not only as a labor or social protection problem but also as a structural restriction that limits economies’ capacities to transform growth into sustained increases in productivity, investment, and high-quality employment. At the same time, informality is a consequence of low growth and one of the mechanisms that perpetuate the trap of low capacity for growth.
Historical evidence shows that the greatest progress in formalisation took place between 2000 and 2013, which was the most recent period of greater economic growth, high investment rates, productivity increases, and expansion of formal salaried employment. This process has been less robust since 2014, along with the deceleration of investment and stalling of productivity. Currently, nearly half of employed people in the region continue to work in informal activities.
The analysis presented in the report shows that growth increases productivity both in the formal and informal sectors, but that its effects are more intense, rapid, and persistent in the first. Formal companies have more capacity to take advantage of economies of scale, incorporate innovation, access financing, and accumulate productive capacities. Therefore, the greater the weight of informality, the less growth capacity there is to generate permanent improvements to productivity.
Productive formalisation: An integral strategy to grow more and better
Given this analysis, ECLAC proposes developing strategies to boost productive formalisation in the region. This concept refers to a process in which increased formality is accompanied by a strengthening of productive capacities of people and companies, increases in productivity, and a productive transformation able to maintain more dynamic and inclusive growth. This focus transcends regulatory reforms or isolated administrative incentives and requires coherence and complementarity among labor, fiscal, financial, and productive development policies.
The report identified four complementary action areas:
Labor policies: furthering programs for job creation, training, and labor insertion; reducing gender gaps; better articulating labor and social policies, and strengthening the care economy and the use of digital tools to facilitate access and permanence in formality.
Fiscal policies: moving toward social protection financing systems that reduce disincentives to formality; establishing progressive and flexible paths to formalisation, and using digitalisation and administrative interoperability to simplify compliance and strengthen oversight.
Financial policies: reinforcing the role of the development bank as an instrument for productive insertion; designing mechanisms that recognize the heterogeneity of company makeups, and broadening systems of guarantees to reduce credit segmentation.
Productive development policies: strengthening and scaling integrated routes for company support, with an emphasis on technological extensionism; focusing interventions territorially; promoting anticipatory and multi-actor governance, along with productive integration and strengthening information, monitoring, evaluation, and learning systems.
ECLAC concludes that reducing informality is a necessary condition for strengthening the region’s growth capacity and escaping the trap of low capacity for growth. Productive formalisation would allow for improvement of employment quality, broadening social protection, and reducing inequalities, as well as increasing economies’ capacity to convert growth into sustained progress in productivity, broadening the space for public policy, and consolidating processes of productive transformation that maintain high rates of growth in the long term.
Impacts of demographic changes in Latin America and the Caribbean – ECLAC reports
