Investment levels drive economic growth disparities in Latin America

Economic data highlights a correlation between gross fixed capital formation and long-term growth rates. Between 1995 and 2024, Latin America and the Caribbean averaged an annual growth rate of 2.3%, with investment levels at approximately 19% of GDP. In comparison, several Southeast Asian economies invested roughly 26% of their GDP and achieved 4.7% annual growth, while China invested nearly 40% of its GDP to achieve growth exceeding 8% annually.

Within the region, the Dominican Republic stands out with an average investment rate of approximately 24% of GDP, resulting in roughly 5% annual growth over the last three decades. Conversely, Mexico has averaged approximately 2% annual growth over the same period. While Mexico's total investment remains significant, public investment has declined from 7–10% of GDP during its industrialization phase to less than 3% in recent years, often due to fiscal tightening measures.