Once prone to external shocks, Latin America has weathered this year’s geopolitical upheavals largely unscathed.

Growth will be in line with expectations at the beginning of 2026, exports are hitting records in several countries and the streets of the region’s main capitals have seen little unrest despite the oil shock triggered by the shutdown of the Strait of Hormuz.

In fact, this increasingly unpredictable world, where trade flows are being reshaped and great powers are racing to secure strategic natural resources, plays to the region’s strengths. Latin America is rich in commodities, free of interstate conflicts and increasingly turning toward more business-friendly policies. The experts at Citigroup Inc. rightly laid out the rationale for this opportunity in a noteworthy report in September: Latin America, they write, is “poised for take-off.”

And yet, despite an environment that is working in the region’s favor, including warmer ties with Washington, the expected boom remains just a promise. Latin America has everything it needs to experience another supercycle. But it isn’t happening anytime soon. At most, the region is seen growing about 2.5% next year and in 2028. Call it the no-show miracle.

The reason for the mismatch between expectations and reality lies on the other side of the economics textbook: microeconomics. In macroeconomics — the branch of the discipline concerned with big-picture variables such as GDP, inflation, interest rates and fiscal balances — Latin America has made enormous progress. Inflation targeting, flexible exchange rates and prudential measures have served the region well, enabling its main governments to finance themselves mostly through local markets. In many respects, their macroeconomic framework increasingly resembles that of richer economies.

But when it comes to the rules and incentives that shape how consumers, workers and companies behave, the region still lags painfully behind. What is really holding back Latin America’s long-term prospects is the anti-competitive, anti-production policy mix that still dominates much of the region: from protected industries and state-created monopolies to excessive regulation, cascading taxes and bureaucratic barriers that make it harder for companies to invest, innovate and compete. Firms and entrepreneurs pay an extra toll in the form of weak legal frameworks, corruption, extortion and insecurity. The interest for Latin America in international markets has all but dried up, with stock funds disappearing and minimal company listings.

Examples abound. Notary-office holders lead the ranking for the highest average declared net worth among Brazilian professionals, a testament to the nation’s legendary bureaucracy. In Mexico, AT&T Inc.’s announced exit is a reminder of the country’s difficulties in creating a truly competitive business environment. And in Argentina, there are still around 150 different taxes at all levels of government, a guaranteed recipe for business dysfunction, even after the anarcho-libertarian President Javier Milei managed to eliminate five national levies. Perhaps we should rename the country Taxgentina…The consequence of these distortions can be summed up in one revealing figure: 0.1%.

That’s Latin America’s average annual productivity growth since 1960. I’d frame that number or send it as a wallet card to every policymaker, government official and politician in the region, because fixing it is the key to Latin America’s future.

Basically, after more than six decades, the region hasn’t become significantly more efficient at producing things. It’s like trying to accelerate in a car stuck in first gear. If the region could lift productivity growth consistently above 1% or, better yet, 2% a year, the compounding effect would transform living standards and bring Latin America much closer to the level of development it deserves, as parts of Asia did in recent decades.

But if productivity remains stuck around its historical average, all the favorable external conditions in the world won’t be enough.

This is why the region needs a microeconomic revolution and why the advocates of a more competitive, deregulated and dynamic economy need to become its warriors. They should preach the benefits of a framework that benefits the majority of citizens rather than special-interest groups. Three decades ago, governments became convinced of the advantages of pursuing a macroeconomic framework that guaranteed stability, and they were willing to pay the political cost to achieve it. We now need to surf the region’s more probusiness shift to push just as hard for micro reforms.

The good news is that there are successful cases that can serve as templates. The creation of private pension systems allowed several Latin American countries to boost savings, with Mexico now holding assets worth more than 25% of GDP in its so-called Afores, compared with just 4.6% in 2008. Brazil’s Pix payment system has helped millions gain access to their first banking product while allowing fintechs to compete with established banks. More recently, Milei’s tough approach against bureaucracy helped the chronically loss-making national carrier Aerolíneas Argentinas SA post profits for two consecutive years, with the company paying income tax for the first time.

Such reforms are intrinsically complex. They usually mean taking on the people who benefit from the way things work in the very system that needs to be overhauled: Shielded companies, powerful unions, bureaucracies and politically connected interests. That is precisely why it is so difficult to reform them. But if Latin America wants finally to break out of its low-growth trap, that is the fight it needs to have.