Latin America and the Caribbean are projected to experience a growth rate of 1.9 percent in 2024, according to the World Bank's latest report titled "Taxing Wealth for Equity and Growth." The region is expected to grow by 2.6 percent in 2025, which remains the lowest among global regions due to ongoing structural challenges.
The report emphasizes the importance of leveraging current economic conditions to enhance growth. Lower interest rates from the U.S. Federal Reserve and successful inflation management are seen as positive developments. Carlos Felipe Jaramillo, World Bank Vice President for Latin America and the Caribbean, stated, "The region has made strides in managing inflation and stabilizing its macroeconomic environment. This is a crucial moment to leverage these achievements to attract the investments necessary for sustainable development."
Investment levels remain low, with foreign direct investment (FDI) lagging behind figures from over a decade ago. William Maloney, World Bank Chief Economist for Latin America and the Caribbean, noted that seizing opportunities such as nearshoring requires comprehensive reforms: “This is a good time for the region to reconsider how its tax systems can best generate revenue while stimulating growth and advancing equity.”
The debt-to-GDP ratio increased to 62.8 percent in 2024 from 59.1 percent in 2019, posing challenges for fiscal space creation needed for public spending and investment. The report explores wealth taxes as a means of generating fiscal space while promoting income equality and economic growth.
One focus area is property taxes due to their potential impact on revenue generation. Despite holding significant wealth in real estate, Latin American countries collect minimal tax revenue from this sector compared to other regions like North America.
Modernization of property valuation systems could significantly increase contributions towards GDP by up to three percent. However, careful design is essential to ensure that reforms do not disproportionately affect low-income property owners.
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