Growth as a Bridge to Development: The Design Behind LAC Crece

The post-growth critique makes a simple argument. Its proponents contend that in an era of record global wealth, GDP expansion should no longer sit at the center of development policy. They argue the priority should be a wellbeing economy instead. For much of the world, that debate looks different.

Across the Atlantic, a different conversation is underway. Mario Draghi's 2024 report on European competitiveness called for massive investment to restore growth. In the United States, an "abundance agenda" has reframed the American debate on growth and supply. The debate is not settled — it is a pendulum, and it is swinging.

For Latin America and the Caribbean (LAC), however, the terms of this debate look different. The post-growth critique speaks primarily to, and from, economies that have already achieved the income levels, social protections, and institutional capacity that growth is supposed to deliver. LAC has not. Over the past six decades, the region grew at an average annual rate of just 1.8%, thanks in no small part to negative total factor productivity growth (at roughly -0.19% a year; see Figure 1).

In 2023, 27.3% of Latin Americans lived in poverty, while nearly 55% of workers held informal jobs without a contract or social security coverage. Even the Roadmap for Eradicating Poverty Beyond Growth — a 2026 UN report presenting the post-growth case — notes the point: middle-income countries may still need to grow to fund the public investment that development requires. 

A Different Debate for Latin America and the Caribbean

For LAC, then, the question is not whether, but how to grow and narrow the persistent and recently widening gap with comparable advanced economies (Figure 2) and exit what increasingly looks like a broad middle-income trap. That question is precisely what LAC Crece, the Inter-American Development Bank (IDB) Group’s growth initiative for Latin America and the Caribbean, was built to answer.

The post-growth critique identifies real tensions between GDP expansion and planetary boundaries; it does not yet offer a comparably actionable path out of poverty for countries that have not yet arrived. For LAC, growth and wellbeing are hard to treat as competing goals, because in the region the resources to fund the latter still depend on the former.

The historical evidence supports this view. Pritchett and Summers showed that wealthier countries are systematically healthier: income growth predicts child mortality, life expectancy, and basic welfare outcomes more robustly than public spending alone. Dollar and Kraay found that the incomes of the poor rose proportionally with average incomes across countries and decades. And the major episodes of mass poverty reduction on record — from East Asia in the 1980s and 1990s to more recent progress in parts of Sub-Saharan Africa — have coincided with sustained growth. 

As we recently argued in Project Syndicate, the region has largely done the hard work of stabilization; the task ahead is turning that resilience into growth. This is the conviction behind LAC Crece, the initiative launched to help governments design and execute growth strategies. Behind it sit three design features — the engineering that turns a growth strategy into a program a country can deliver.

Selectivity: Choosing Where to Start

The analytical starting point is not new. Hausmann, Rodrik and Velasco argued that the returns to reform depend on which constraint actually binds — and that a long list of correct reforms is not a strategy. LAC knows this in theory; the problem is that the region is overdiagnosed and underexecuted. Governments accumulate roadmaps, as implementation lags behind.

LAC Crece takes the diagnostics tradition one step further. Identifying binding constraints tells you what to fix — not where to start. 

That requires a second layer of selection, guided by four criteria: the scale of the growth impact; whether the conditions for a successful intervention are already in place; whether the intervention aligns with what the government has prioritized and is prepared to own; and the IDB Group’s comparative advantage in delivering it. The IDB Group — made up of the IDB, IDB Invest, and IDB Lab — brings proven instruments, sectoral knowledge, and coordination across sovereign lending, private-sector investment, and entrepreneurial innovation. A high-impact intervention that lacks resources, enabling conditions, or government ownership will not deliver.

The result is a portfolio with a thesis, not a catalog. 

Additionality: Making Every Public Dollar Count

The combined sovereign lending portfolio of all multilateral development banks and bilateral donors in LAC amounts to less than one percent of regional GDP. Fiscal constraints are tightening across the region. In this context, the question is not how much public money goes in, but what it unlocks.

This is not new. The "billions to trillions" agenda, launched by the multilateral development banks and the IMF in 2015 in the run-up to the Addis Ababa conference on financing for development, argued that the billions available in official development finance had to be used to catalyze trillions in domestic and international, public and private investment, and sought to mobilize private capital at scale through blended finance and guarantees. 

The results were mixed, and the lesson was clear: capital alone was insufficient without a pipeline of bankable projects, predictable rules, and pre-qualified operators. The test of every official dollar should therefore be the additional private investment it unlocks. LAC Crece operationalizes this principle by building pipelines, removing regulatory barriers, standardizing permits, pre-accrediting operators, and allocating risk to whoever can bear it best — through guarantee funds, blended structures, and first-loss instruments.

Sequencing: the Enabling Logic Behind LAC Crece

Growth generates more than income. It creates space for reform: fiscally, by generating revenue without new taxes, improving debt dynamics, and softening zero-sum politics; politically, because societies absorb the transition costs of reform more readily when the economy is expanding; and institutionally, because expanding formal opportunities and basic protection make good rules more enforceable and compliance more rational.

This is why the sequencing of LAC Crece is not arbitrary. Early, visible results (homes built, firms formalized, good jobs created, credit flowing) build the credibility that sustains deeper reforms. Programmatic instruments then lock those reforms in while the window is open. Quick wins and structural change are complements by design, each financing the other: the first politically, the second durably.

The logic has a second channel: growth also expands the fiscal resources available for development. A government with expanding revenues can fund the health system, the education system, and the social protection floor that development requires; a government in fiscal distress struggles to finance its agenda, whatever its intentions. 

The logic is not merely theoretical. The IDB Group has recently launched El Salvador Crece and Ecuador Crece, convening government, private sector, and development partners to design the program's next phase. As a partner to the country, the IDB Group is working to turn a more stable macroeconomic footing into sustained, broad-based growth — the question LAC Crece is built to answer.

The Bridge: Growth in Service of Wellbeing

The global debate about growth will continue, and it is a healthy one. A development institution that ignored the post-growth critique — the genuine tensions between GDP expansion and planetary boundaries, between aggregate income and its distribution — would not be doing its job. 

But for economies still building the social protections and institutions that a wellbeing economy presupposes, taking the critique seriously turns into a practical question: how to generate and sustain the growth that makes them possible? The institutional capacities and fiscal resources that make a wellbeing economy viable are themselves products of development, and development requires growth to fund it. Growth does not automatically reduce poverty: the composition and distribution of growth matter, as do the institutions that both shape and respond to it. That is why LAC Crece is selective about which motors to activate. 

LAC Crece is the IDB Group's operational answer to that sequencing problem: selective, additional, and designed so that growth creates the fiscal, political, and social space for the reforms that make it durable. The goals are not in dispute. The passage is the task.