Strengthening trust is essential for the business sector to become more dynamic and for the necessary economic reforms to be carried out to enhance the post-COVID recovery of Latin America and the Caribbean, according to the new flagship report of the Inter-American Development Bank (IDB).
The analysis containing unpublished data and a review of the latest literature called “Trust: the key to social cohesion and growth in Latin America and the Caribbean”, points to the lack of trust as an acute problem that limits the socioeconomic development of the region and it affects the ability of their countries to solve complex challenges, such as climate change.
Nine out of ten people in the region mistrust others, according to the study. Confidence levels are equivalent to a quarter of levels in developed countries that make up the Organization for Economic Co-operation and Development (OECD).
The IDB’s flagship report analyzes the causes of that mistrust and offers recommendations so that policymakers can turn this challenge into an opportunity to address some of the most pressing development challenges in the region, such as low levels of productivity and innovation, delayed investment, and high rates of informality and tax evasion.
“Promoting trust through greater transparency and stronger institutions should be a priority on the political agenda in Latin America and the Caribbean. Placing trust at the center of government decision-making would significantly revive development in the region,” said IDB President Mauricio Claver-Carone.
“Greater trust means less bureaucracy that harms business, investment and innovation. It means more transparent governments, committed to keeping their promises and being accountable. And finally, it also involves engaged citizens who voice their opinions and actively participate to enhance democracies and support the construction of more inclusive societies”, he added.
Countries with higher confidence tend to enjoy higher levels of productivity, while those where confidence indices are low, have a larger informal economy in relation to their GDP.