By: Staff Writer
January 20, 2026
The Inter-American Development Bank said in a recent study that weak competition in Latin America and the Caribbean is behind most of the region’s problems.
The study, ‘Markets for Development: Improving Lives through Competition,” said: “Latin America and the Caribbean has made undeniable progress over recent decades, but growth remains too slow, inequality too high, and productivity too stagnant. Behind these persistent challenges lies a common thread: weak competition.
“When markets are closed, concentrated, or fragmented, resources are misallocated, innovation stalls, and opportunity narrows.”
The report also said: “Competition is not just about prices—it is a foundation of inclusive growth. When firms face rivals, they must innovate, improve quality, and lower costs. Consumers benefit from more affordable goods, workers from fairer wages, and economies from the shifting of resources toward the most productive firms.
“For Latin America and the Caribbean, the stakes are high: If product markets were as competitive as those in advanced economies, gross domestic product would be about 11 percent higher and inequality 6 percent lower.
Greater competition compels firms to expand production, hire more workers, and invest more. It also raises government revenue by encouraging formalization. By contrast, when firms wield excessive power in labour markets, they limit hiring to keep wages low, leading to fewer jobs, lower pay, and weaker overall growth.”
Because competition shapes both growth and inequality, competition policy is ultimately macroeconomic policy, frameworks that foster fair competition, with stronger and more independent antitrust institutions, regulations that reduce rather than entrench distortions, and infrastructure and regional integration that enable more firms to compete on equal terms.
The report also said: “Product market competition is comparatively weak in the region. Market concentration—how much of a market is controlled by a few firms— is roughly four times higher in Latin America and the Caribbean than in advanced economies, while markups average 1.35, as compared to 1.20. These differences remain even after costs of innovation and brand development are accounted for.
“Labor markets reveal similar imbalances. Workers in the region take home only about half the value they generate, compared with 65 percent in the United States and 81 percent in other advanced economies.
“Telecommunications often remain expensive as a result of high concentration. In banking, high profitability and concentration play an important role in keeping financing costs high, alongside other contributing factors. And, in many supply chains, large intermediaries use market power to squeeze upstream producers.
The report added: “To succeed, reforms must go beyond rules on paper. Governments need to invest in state capability and credible enforcement, through independent courts, a professional bureaucracy, and competition agencies with real autonomy.
“Party institutionalization and stable policy arenas are also crucial to prevent reforms from being reversed by political cycles. On the business side, aggregating interests through representative associations can shift demands toward public goods, like infrastructure and clear rules, rather than firm-specific favors.
“At the same time, countries should audit and phase out hidden barriers through coordinated regulatory and tax reviews and should sequence reforms in packages during windows of political opportunity.
“Finally, tight safeguards are needed to curb privileges and rents resulting from political connections that entrench incumbents.”