Latin America and the Caribbean is projected to grow 2.2% in 2026, broadly in line with the rate of 2.4% recorded in 2025, according to the World Bank Group’s Latin America and the Caribbean Economic Update. Although average regional growth remains modest, diverging country paths show that a stronger performance is possible.
Several countries making sound and durable policy choices are delivering stronger results, including faster growth consistently above 3 to 4%, more investment, and greater market confidence.
El Salvador and Paraguay continue to outperform the regional average, supported by improved security conditions, fiscal consolidation, and robust private investment. Panama and the Dominican Republic have sustained strong growth on similarly durable policy foundations. Argentina is on a similar trajectory, projected to expand for three consecutive years from 2025 to 2027, the first time in nearly two decades, driven by fiscal adjustment, tax reforms, and a more open economy.
“Latin America and the Caribbean has the potential to achieve stronger and more ambitious growth. Countries that have maintained sound macroeconomic frameworks, strengthened institutions, and advanced reforms are demonstrating that stronger growth is possible,“ said Susana Cordeiro Guerra, World Bank Vice President for Latin America and the Caribbean. “The region has significant talent and resources. The priority now is to build on these strengths through consistent policies and investment that can raise productivity, create better jobs, and increase incomes.“
The risks to the region are tilted to the downside. Energy price volatility could stall disinflation and keep central banks cautious, prolonging the high real interest rates that constrain credit and investment. High debt and interest burdens continue to limit fiscal space and crowd out public investment. El Niño could further disrupt agriculture and hydropower and push up food and energy prices.
The report examines how artificial intelligence could raise productivity while reshaping work across the region. Firms are already adopting AI broadly, though rarely in ways that reach their core business processes. Among the wider population, a median of 17% of working-age adults across the region report using GenAI tolls, roughly half the rate in the US and Canada. In both cases, the main barriers to productive use are not cost or access, but managerial know-how, workforce skills, and firms’ capacity to reorganize around new tools.
“AI is already here. The question is whether the region can use it productively,” said Carlos Rodriguez-Castelan, World Bank Acting Chief Economist for Latin America and the Caribbean. “A powerful tool is less relevant if workers and firms lack the capacity to act on what it produces. Governments that invest now in skills and firm capabilities will likely see real gains.“
The report identifies that generative AI is already changing cognitive work: roughly 8% of the workforce holds high-skill, knowledge-intensive jobs that could be enhanced by AI, while a similar share of the workforce, around 10%, works in routine cognitive occupations whose tasks are more exposed to automation. A second wave could reach physical work over time, as automation hardware becomes cheaper. About a quarter of workers hold routine manual jobs that may be exposed.
The report recommends building firms’ capabilities, expanding short-cycle and technical training, and modernizing digital government and data systems. It also highlights the potential of “small AI,” low-cost applications adapted to local needs that are already showing promise in areas from education and telemedicine to public service delivery. Small AI could also be a powerful tool for small and medium enterprises, farmers, and the broader population, putting scarce expertise within reach of millions.
