Caribbean Competition – Weak Competition Is Holding Back Growth In The Caribbean And Latin America – IDB

By NAN Business Editor

News Americas, WASHINGTON, D.C., Mon. Dec. 15, 2025: Caribbean Competition is weak and holding back growth across the region as well as in Latin America, according to a new flagship report released by the Inter-American Development Bank, (IDB). The report, titled Markets for Development: Improving Lives through Competition, forms part of the IDB’s Development in the Americas series, which uses rigorous data and economic analysis to outline policy priorities to boost prosperity in the region.

Competition As A Driver of Growth

FLASHBACK – People travel by bus during a nationwide blackout in Santo Domingo on November 11, 2025. Santa Domingo found itself without electricity Tuesday as the Dominican Republic’s energy company announced a blackout of unspecified scope, caused by a “transmission system failure.” (Photo by Eddy Vittini / AFP) (Photo by EDDY VITTINI/AFP via Getty Images)

One of the report’s central findings is that markets in Latin America and the Caribbean are, on average, about four times more concentrated than those in advanced economies – meaning fewer dominant firms control larger portions of goods and services. This market power translates into higher markups, limited consumer choice, and slower productivity growth, according to the Bank.

If markets across the region operated with the same level of competitive intensity as in advanced economies, the IDB estimates per-capita output (GDP per person) could rise by about 11%, while income inequality might shrink by around 6%.

Strong competition is shown to benefit not only consumers through lower prices but also workers through higher real wages and expanded employment opportunities.

Business Environment Challenges

The report highlights several structural barriers that hinder competition, including:

Market Fragmentation: High logistics costs and poor connectivity within and between markets make it harder for firms to scale and compete.

Regulatory Complexity: Excessive or poorly designed regulations discourage new entrants and protect entrenched incumbents.

Weak Institutions: Many competition authorities in the region have limited resources or independence, reducing their ability to enforce fair market rules.

These conditions contribute to the so-called “missing middle” — a shortage of medium-sized enterprises that, in more competitive economies, help drive innovation and job creation.

Implications for Businesses and Consumers

For business leaders, the findings point to a pressing need for reforms that unlock competitive pressures:

Reducing red tape and simplifying market entry

Investing in infrastructure that lowers transaction costs

Strengthening antitrust enforcement and regulatory oversight

Lower market concentration could empower small and medium-sized firms to grow, broaden supply chains, and stimulate innovation across sectors such as telecommunications, banking, and health care.

Consumers in Latin America and the Caribbean currently face markups that are estimated to be higher than in advanced markets, while workers in many sectors see wages that reflect a weaker competitive environment.

Policy Priorities and Reforms

The IDB calls on governments to pursue reforms that balance regulation with competition enhancement. Priority areas include:

Modernizing competition laws

Investing in logistics and digital connectivity

Empowering competition agencies with greater independence

Streamlining business regulations to reduce barriers for new entrants

According to the report, countries that adopt such policies may attract more domestic and foreign investment, improve productivity, and create better-paying jobs.

A Roadmap For The Region’s Future

Although Latin America and the Caribbean have achieved macroeconomic stability in recent decades, long-term productivity growth has lagged behind global peers. The IDB report provides a data-driven blueprint focused on competition as a central engine for economic dynamism – offering a new lens for policymakers and business leaders seeking to unlock latent growth potential.

For markets across the hemisphere, encouraging fair competition is not just an economic ideal – it may be the most practical path to inclusive growth and heightened prosperity in the coming decade.