From Survival to Innovation: How Entrepreneurship Can Power Latin America’s Future

The World Bank’s “Transformational Entrepreneurship for Jobs and Growth” urges Latin America and the Caribbean to shift from survivalist enterprises to innovation-driven, high-growth entrepreneurship as a pathway to inclusive prosperity. It calls for integrated policies in finance, skills, and regulation to unlock the region’s untapped entrepreneurial potential.

The World Bank’s Latin America and the Caribbean Economic Review (October 2025) offers a bold new vision for unlocking economic potential across the region. Developed in collaboration with regional research institutions, including the Inter-American Development Bank (IDB), CAF–Development Bank of Latin America, and several national entrepreneurship observatories, the report redefines entrepreneurship as a tool for structural transformation rather than mere self-employment. It argues that transformational entrepreneurship, the kind that innovates, scales, and formalizes, must drive the next chapter of Latin America and the Caribbean’s (LAC) development. For decades, low productivity and persistent inequality have constrained progress; this report sees a thriving entrepreneurial ecosystem as the key to breaking that cycle.

The Entrepreneurial Paradox

LAC has no shortage of entrepreneurs; almost half of its labor force is self-employed or engaged in microenterprises, yet few businesses grow, formalize, or innovate. The report calls this an “entrepreneurial paradox”: a region rich in initiative but poor in transformation. Most small businesses operate informally and survive on narrow profit margins, offering little in terms of stable employment or technological advancement. In contrast, a small subset of dynamic firms, often in digital services or export sectors, drives most of the productivity and job creation. These firms are proof that with the right support, entrepreneurship can power growth, but they remain exceptions rather than the rule.

Barriers to Growth and Innovation

The report identifies a web of constraints preventing entrepreneurship from flourishing. Access to finance remains one of the biggest barriers: early-stage firms struggle to secure credit, while venture capital is concentrated in a few countries such as Brazil, Mexico, and Chile. Financial institutions are typically risk-averse, leaving many start-ups underfunded or stalled. Regulatory red tape adds another layer of difficulty, with cumbersome licensing, taxation, and labor laws discouraging formalization. Education and training systems are also misaligned with entrepreneurial needs. Too few entrepreneurs possess managerial, digital, and innovation skills that enable growth. Gender inequality compounds these problems; women face systemic barriers to credit, markets, and networks, even though their enterprises often display higher resilience and survival rates.

The macroeconomic backdrop amplifies these challenges. Regional GDP growth remains sluggish, averaging around two percent, too low to meaningfully reduce poverty or absorb new labor market entrants. Productivity has stagnated for decades, and limited fiscal space leaves governments with little room for large-scale intervention. In this environment, entrepreneurship is not just a path to opportunity; it is one of the few viable engines of job creation and competitiveness available to LAC economies.

A New Wave of Innovation

Despite obstacles, the report captures a wave of optimism fueled by a surge in digital and innovation-driven start-ups. The number of Latin American “unicorns”, start-ups valued over $1 billion, has grown sharply in recent years, particularly in fintech, logistics, and e-commerce. These firms have demonstrated the region’s capacity for creativity and technological adaptation. However, their success remains concentrated in metropolitan hubs like São Paulo, Mexico City, and Bogotá, leaving large parts of the region excluded. The World Bank warns that without policies to spread innovation beyond urban and elite circles, digital entrepreneurship could deepen existing inequalities instead of bridging them. The goal, it argues, must be to connect these innovation hotspots with broader local industries, supply chains, and labor markets.

Building an Ecosystem for Transformation

The report calls for a fundamental policy shift, from fragmented, subsidy-driven programs to an integrated ecosystem approach. Governments should focus on enabling firms with high-growth potential by improving access to finance, reforming regulations, and investing in research and innovation systems. Simplified business registration, modernized labor codes, and tax incentives for innovation are key levers. Education systems must evolve to foster problem-solving, creativity, and digital literacy from an early age, linking vocational training to real market needs.

Inclusivity is also positioned as a driver of competitiveness. Empowering women, youth, and marginalized communities is not merely a social good but an economic imperative. Successful initiatives in Colombia, Chile, and Costa Rica, including women-led start-up accelerators and green entrepreneurship programs, show that inclusion boosts innovation and resilience. The report highlights these as models worth replicating across the region.

The Road Ahead

The World Bank concludes that regional cooperation will be critical for scaling impact. Integration of markets, harmonization of regulations, and creation of cross-border innovation networks could allow smaller economies to leverage regional strengths. The institution commits to continuing its support through policy advice, financing, and collaboration with local partners such as the IDB and CAF. The final message is both urgent and hopeful: Latin America can no longer rely on commodities and social transfers as engines of growth. Its greatest untapped asset lies in the creativity, resilience, and ambition of its people. When supported by strong institutions and forward-looking policies, these qualities can turn entrepreneurship into the region’s most powerful force for productivity, quality employment, and shared prosperity.