Latin America has everything — so why does it stay poor?
There is a conversation George Castro has been having for decades with friends, at gatherings, around dinner tables: why can't Latin America get rich? The question sounds simple. The answer turns out to be uncomfortable.
The region has oil, gas, copper, lithium, gold. Fertile farmland, water, agriculture. Ports on two oceans. More than 600 million people and a privileged location between the United States, Europe, and Asia. And yet the World Bank projects growth of only 2.2% for 2026, the International Monetary Fund warns that the region has been dragging the same problems for decades: low productivity, too much debt, too little investment.
Countries with fewer natural resources than Latin America have built far more prosperous economies. Meanwhile, the region keeps exporting raw materials, creating bureaucracy, penalizing producers, tolerating and incentivizing informality, and wondering why it doesn't grow.
Castro's answer: the problem is not geographic or cultural. It is the consequence of decisions, institutions, and productive structure. And that eliminates the region's favorite excuse: "That's just how we Latins are." We don't have to be this way.
Productivity and informality: the silent brake nobody wants to name
For Castro, the key isn't how many resources Latin America has but how much it can produce with them. That's where the word that explains everything appears: productivity. How much value does a person, a company, or an economy produce with the resources it has?
The example he uses is direct. Two workers. Both put in the same 8 hours.
- Good roads, arrives on time
- Fast internet and reliable electricity
- Modern machinery and training
- Access to credit
- Efficient port to ship the product
- Bad roads, hours lost in traffic
- Expensive transport, old machinery
- Inadequate training
- No access to credit
- Deficient logistics, high costs
Both work equally hard. But they don't produce the same amount. CEPAL notes that regional productivity has stagnated or even deteriorated for much of the past 10 years. And growing at 2% is not enough to close the gap with developed countries.
And here the second major problem appears: informality. Nearly half of Latin America's workers are employed in informal activities. This is not a marginal problem — it's one in every two workers. CEPAL warns that informality can no longer be understood solely as a labor problem: it functions as a structural barrier to raising productivity, investment, and quality employment.
Castro rejects the idea that informal workers simply "decided to break the law." Informality is often a rational economic response. A person does the math: looks at how much it costs to hire, how many taxes, paperwork, contributions, regulations, accountants, permits. And concludes: "If I do everything they ask, the business won't work." That's why formality can't be decreed — it has to be made attractive. Formalizing a business should mean access to credit, legal certainty, and institutional protection — not just a new list of taxes and obligations that make the business unviable.
The result of not resolving this: businesses that never grow, companies that can't easily access credit, undertrained workers, lower tax revenue, and an economy that survives but never scales.
Why is it so hard to grow a business in Latin America?
Latin America has a curious paradox. It loves talking about entrepreneurship. It celebrates those who start. It holds conferences, fairs, programs, speeches. But when that entrepreneur wants to grow — hire 50 people, get a loan, open another plant, start exporting — the real ordeal begins.
The IDB has explicitly identified several of these problems: market fragmentation, regulatory distortions, and weak competition continue to limit business growth and productivity in Latin America. It adds: high public debt and restrictive financial conditions are two major obstacles to accelerating regional growth.
The investor's logic is clear. If they're going to build a plant that will recover its investment over 15 years, they need to know their property will be protected, contracts will be honored, tax rules won't change overnight, they can import machinery and export their product. The investor understands risk; what they can't tolerate is arbitrariness. Because risk can be calculated. Arbitrariness cannot.
The World Bank confirms it: Latin American countries that are maintaining more consistent policies are getting more growth, more investment, and greater market confidence. It's not magic — it's the consequence of predictable rules.
Competition vs. privilege: the real economic debate
Economic debate in Latin America is typically framed as a battle between market and state. Castro rejects that simplification. The real debate, he says, is between competition and privilege.
A market without competition is not a free market. If three companies control everything, if privileges exist, if the government's friend gets protection, if regulation prevents new competitors from entering — that's not competitive capitalism either. It's something else.
The IDB calculates that business concentration in Latin America is far higher than in advanced economies. It estimates that reforms boosting competition could substantially raise regional per capita income. When there's real competition, something remarkable happens: it forces improvement. If someone comes along who produces better, you have two options — improve or lose customers. That drives productivity.
Europe understood this decades ago: if you integrate markets, a company no longer produces for 5 or 10 million consumers — it can produce for hundreds of millions. That completely changes the scale. A Colombian company that can sell easily in Colombia, Peru, Ecuador, Chile, Brazil, and Mexico can invest more, buy better machines, and lower unit costs. That's called productivity.
The state's role, according to Castro, is precise and limited: security, justice, education, infrastructure, regulation, and competition. Not becoming the entrepreneur of absolutely everything. "I want a state that builds the conditions for millions of people to do business." No ministry can invent from Bogotá the millions of decisions an economy makes every day: what product to manufacture, what technology to buy, what price to charge, whom to hire, where to invest. That's what markets are for.
Education, security, and the difference between managing poverty and building prosperity
There can be capital, businesses, investment, natural resources, and a reasonably coherent regulatory framework — and still fail. Because two more pieces Latin America hasn't solved are still missing: education and security.
On education, Castro is direct: we cannot aspire to first-world wages with third-world productivity. And we don't increase productivity simply by decreeing higher wages. We increase it when a worker knows more, uses better technology, has better tools, and can produce more value in the same hour. That requires education — not just diplomas. "We need technicians, engineers, welders, mechanics, operators, specialists. People who know how to do the things companies need. Because a diploma hanging on a wall doesn't increase productivity by itself."
On security, the position is equally clear. There is no investment where a highway is controlled by an armed criminal structure. There is no tourism where people are afraid. There is no small business that can grow if it first has to negotiate with the neighborhood criminal. That's why security and economy are not two separate debates: security is also economic policy.
And every peso stolen through corruption isn't just an ethical problem: it's a peso that never becomes a road, a port, a school, or a hospital. It's productivity destroyed.
- We complain that companies don't come, but we keep changing the rules.
- We complain there's no formal employment, but we make hiring enormously costly.
- We complain that companies stay small, but we pile obstacles on anyone trying to grow.
- We complain about lacking infrastructure, but we waste commodity booms.
- We complain about low wages, but we produce little per hour worked — then look for an external scapegoat.
Castro arrives at the central conclusion of the episode — and of the entire series. The difference isn't between left and right. It's between two visions of the future.
Latin America has everything it needs to succeed: the resources, the people, the talent, the location, the energy, the agriculture, the minerals. But none of that guarantees wealth if institutions don't know what to do with it. Prosperity is not decreed. It is built over years with discipline, savings, investment, institutions, security, stable rules, and — above all — by respecting those who produce.
George Castro is a Colombian-American political analyst, entrepreneur, and one of the most influential figures in the Colombian community in the United States. For decades, he has played a prominent role in civic, business, and community life, bringing together political, diplomatic, institutional, and community leaders from Colombia and the United States while remaining actively involved in issues that matter to Colombians both inside and outside the country.
As the creator of @CastrosCommonSense, Castro brings that experience to a platform for direct and independent analysis of politics, the economy, and the major issues affecting Colombia. His approach seeks to move beyond slogans and partisan loyalties to provide context, judgment, and common sense to Colombians wherever they live.