Future of Work in Latin America: FII McKinsey Report on Technology and Talent Transformation

The Widening Economic Gap Between Latin America and North America

The FII McKinsey Global Future of Work Report reveals a sobering reality about the economic trajectory of Latin America. Across the 19 Latin American and Caribbean economies examined — from Brazil and Mexico to smaller nations like Jamaica and Trinidad and Tobago — the combined population reaches 600 million people, approximately 1.5 times that of the United States and Canada combined. Yet in 2023, the GDP of these two northern economies stood at $23.8 trillion, more than four times larger than Latin America’s $5.4 trillion.

The disparity becomes even starker in per capita terms. The GDP per capita in the United States and Canada reached $63,600 in 2023, dwarfing Latin America’s $9,000 by a factor of seven. This gap has not merely persisted — it has actively widened over the past quarter century, driven by fundamentally different trajectories in productivity growth, investment patterns, and technology adoption. The report positions this divergence not as inevitable destiny but as a correctable course, provided the region takes decisive action in embracing automation, artificial intelligence, and workforce transformation strategies. For organizations seeking to understand how complex reports like this one translate into actionable intelligence, Libertify’s interactive library offers AI-powered analysis tools that turn dense data into engaging visual experiences.

Future of Work Latin America: Productivity Growth Crisis Explained

At the heart of Latin America’s economic underperformance lies a profound productivity crisis. Over the past 25 years, the region’s productivity growth has been the slowest globally, averaging just 0.7% annually. The situation has deteriorated further in recent years: between 2018 and 2023, productivity growth turned negative at -0.4% per year. By contrast, the United States and Canada maintained productivity growth of 1.6% per year over the 25-year period and 1.4% in the most recent five years.

This productivity malaise stems from two interconnected challenges. First, the level of gross fixed capital formation in Latin America stands at approximately 19% of GDP — about $1 trillion in 2023 — significantly below the 21.4% of GDP ($5 trillion) recorded in the US and Canada. Second, an estimated 80% of Latin America’s GDP growth between 2000 and 2023 was driven by employment growth rather than productivity gains. With population growth slowing from 1.5% annually two decades ago to just 0.8% today, and the working-age population projected to start shrinking by 2042, the region can no longer rely on workforce expansion to compensate for weak productivity.

The informal economy compounds these challenges significantly. Approximately half of Latin America’s employed population works informally, predominantly in low-value sectors such as agriculture and construction. While the official unemployment rate sits at around 6%, down from 10% in 2020, this figure masks the enormous underutilization of human potential across the region. Only 52% of people over 25 have completed upper secondary education, compared with 90% in the US and 95% in Canada, creating a structural barrier to productivity improvement that demands urgent attention.

Automation and AI Potential Across Latin American Economies

Despite the challenges, the FII McKinsey report identifies a transformative opportunity in automation and AI adoption. Under a midpoint scenario assuming 20% automation adoption, Latin America’s annual productivity growth could reach up to 2.3% with full redeployment of automated workers’ hours. Even with 80% redeployment, the potential growth reaches 1.9% — a dramatic improvement over the current negative trajectory.

The report segments Latin American economies into three tiers based on their readiness for this transformation. Argentina, Chile, and Mexico emerge as the best positioned, with potential annual productivity gains of 2.0% to 2.5%. Brazil and Colombia could achieve boosts of 1.8% to 2.2% annually, while Peru’s potential ranges from 1.7% to 2.1%. These projections were developed through automation scenarios applied to six representative countries, comparing labor force and productivity implications with equivalent estimates for the United States.

The contrast with the US is instructive. With over 70% of workers holding advanced education and 24% of graduates specializing in STEM fields, the US could see up to 30% of work automated by 2030, potentially boosting productivity by 3% to 4% annually. This highlights both the opportunity and the urgency for Latin America: without rapid technology adoption and parallel investment in workforce skills, the productivity gap will only accelerate, as explored in our analysis of McKinsey’s global economic outlook.

Which Sectors Face the Highest Automation Disruption Risk

The report provides granular data on sector-level automation risk across Latin America. Office support and production work emerge as the most vulnerable categories, each employing approximately 27.8 million and 27.7 million full-time equivalents respectively. Under the midpoint scenario, office support faces 22% automation of current hours plus an additional 6% from generative AI acceleration, translating to 7.8 million displaced full-time equivalent positions by 2030.

Production work shows a similar pattern, with 23% of hours potentially automated through traditional automation and an additional 3% from generative AI, affecting 7.1 million FTEs. Food services follow closely with 27% automation potential affecting 5.9 million workers. At the country level, Argentina could see 33% of food service and office support hours automated. Chile shows similar proportions at 35% for food services and 30% for office support. Mexico’s highest-risk areas are production work at 32% and food services at 31%.

Interestingly, the report also highlights sectors where generative AI specifically amplifies automation potential beyond traditional technologies. Educators and workforce training show just 5% traditional automation risk but an additional 12% from generative AI. Business and legal professionals face 13% traditional plus 9% from generative AI. STEM professionals see 11% traditional automation combined with 8% from generative AI. These findings suggest that the future of work in Latin America will be shaped not just by physical automation but increasingly by AI capabilities that affect knowledge-intensive occupations.

Digital Transformation Success Stories and the Fintech Boom

Latin America’s technology story is not uniformly bleak. The region has demonstrated remarkable capacity for digital transformation in specific sectors. Internet penetration surged from just 10% two decades ago to over 75% today, comparable to levels seen in China. The COVID-19 pandemic further accelerated this digital shift, driving widespread adoption of digital payments and e-commerce platforms across the region.

The fintech ecosystem represents perhaps the brightest spot in Latin America’s technology landscape. Between 2017 and 2023, the ecosystem grew by an extraordinary 340%. Mobile payments have been a key enabler of financial inclusion, driving bancarization across the region and bringing millions of previously unbanked citizens into the formal financial system. The region now boasts over 30 unicorn startups, with approximately four-fifths concentrated in fintech and e-commerce sectors.

Brazil stands out as a global leader among emerging economies, ranking third after China and India in unicorn count with around 20. Mexico, Colombia, and Argentina are also experiencing significant startup growth. Notably, the region nearly tripled its number of unicorns over a five-year period that included the pandemic — a testament to entrepreneurial resilience. Companies like Rappi (a digital food courier platform) and Kavak (an online car marketplace) exemplify the region’s ability to create innovative solutions tailored to local market conditions. The success of these digital-first companies validates McKinsey’s broader thesis that technology adoption drives economic transformation.

Human Capital and Workforce Reskilling Imperatives

The report emphasizes that technology adoption alone cannot close the productivity gap — it must be accompanied by massive investment in human capital development. The current state of education in Latin America presents a significant hurdle. Tertiary education enrollment stands at 58% of the relevant age group, compared with 79% in the United States and 77% in Canada, representing a gap of nearly 20 percentage points.

The problem extends beyond enrollment to quality and relevance of education. The report’s survey of approximately 800 young people across six Latin American countries, along with the US and Canada, revealed concerning gaps in perceived job preparedness and alignment between educational outcomes and labor market demands. Latin America’s youth face a particularly challenging environment: a large share is inactive, underemployed, or employed in informal low-value-add sectors, limiting their ability to develop skills relevant to an AI-driven economy.

The reskilling imperative is enormous. The report estimates that up to 12 million occupations in the US alone will evolve into entirely new roles as automation advances. For Latin America, where workforce preparedness levels are significantly lower, the transformation challenge is proportionally larger. The report recommends prioritizing reskilling initiatives, expanding workforce development programs, and creating partnerships between government, education institutions, and the private sector. Emerging sectors such as medtech (telemedicine platforms, smart devices), edtech (remote-learning platforms, VR classrooms), and agritech (precision farming, drone-based crop management) offer particularly promising pathways for workforce transition and new job creation. Organizations managing these training materials can leverage platforms like Libertify to transform educational content into interactive experiences that dramatically improve engagement and retention.

Technology Infrastructure Gaps and R&D Investment Challenges

Latin America’s technology infrastructure remains a critical bottleneck for economic transformation. The region’s R&D expenditure stands at just 0.62% of GDP on a base of $5.4 trillion, compared with approximately 3.0% of GDP on a base of nearly $24 trillion in the US and Canada. This represents roughly a five-fold difference in the R&D investment rate — a gap that has remained largely unchanged over the past decade and directly constrains innovation capacity.

The report classifies Latin American economies into three technology readiness clusters. “Leading economies” — including Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Mexico, Panama, and Uruguay — achieve an R&D expenditure of 0.7% of GDP and an AI Preparedness Index score of 0.52 compared to the US score of 0.77. “Decelerating economies” like Argentina, Bolivia, Ecuador, Guatemala, Paraguay, Peru, and Trinidad and Tobago spend just 0.4% on R&D with an AI Preparedness Index of 0.43. “Challenged economies” including El Salvador, Honduras, Jamaica, and Nicaragua invest only 0.1% of GDP in R&D with the lowest AI Preparedness scores of 0.37.

The digital infrastructure gap is equally telling. While Latin America achieved 75% internet penetration, it took the region nine additional years compared to the US and Canada, and six years more than the EU. The report warns that there is a significant risk of repeating this lagging adoption pattern with artificial intelligence, as the IMF has similarly cautioned about AI’s potential to widen global economic divides. The business environment itself presents barriers: high costs of doing business, limited competition policies and frameworks, and an insufficient pool of skilled workers create a self-reinforcing cycle of underinvestment and underperformance.

Survey Insights: What Executives and Youth Think About the Future

One of the most valuable contributions of the FII McKinsey report is its primary research component. The study surveyed more than 1,200 business executives and approximately 800 young people across eight countries: six in Latin America (Argentina, Brazil, Chile, Colombia, Mexico, and Peru) plus the United States and Canada. These surveys provide ground-level perspectives on macroeconomic trends, technology adoption patterns, educational system effectiveness, skills gaps, and job preparedness.

The executive survey reveals a region aware of its challenges but struggling with implementation. Business leaders across Latin America recognize the imperative of digital transformation and automation, yet many report significant barriers to adoption including insufficient skilled talent, limited access to capital for technology investment, regulatory complexity, and infrastructure constraints. The gap between intention and execution is particularly pronounced in the “decelerating” and “challenged” economy segments.

The youth survey paints an equally nuanced picture. Young people across the region express strong interest in technology and digital skills, yet report significant misalignment between their educational experiences and the skills demanded by modern labor markets. This gap is especially concerning given that Latin America’s demographic dividend is fading — working-age population growth has already slowed substantially and is projected to turn negative after 2042. The window for converting a young, eager workforce into a digitally skilled economic engine is narrowing, as the World Bank’s Latin America division has repeatedly documented in its economic assessments of the region.

Future of Work Recommendations for Latin America’s Economic Revival

The report concludes with actionable recommendations organized around three strategic pillars. First, accelerating technology adoption across all economic segments through targeted investment incentives, public-private partnerships, and streamlined regulatory frameworks. This includes scaling investments in emerging sectors such as medtech, edtech, and agritech that have demonstrated particular promise for driving inclusive growth in the region.

Second, the report calls for a comprehensive overhaul of human capital development strategies. This encompasses reforming educational curricula to emphasize digital literacy, critical thinking, and problem-solving; expanding vocational training programs aligned with industry needs; and creating robust reskilling pathways for workers displaced by automation. The report notes that Latin America’s endowment of resources for the net-zero transition — including renewables, critical minerals, green hydrogen, and unique biodiversity — creates additional opportunities for high-value job creation in emerging green industries.

Third, macroeconomic reforms are essential to create the enabling environment for transformation. This includes boosting investment and innovation rates, reducing the informal economy, strengthening competition policies, lowering the cost of doing business, and building the institutional frameworks necessary to attract and retain both domestic and foreign investment. The report emphasizes that these reforms are not sequential but must be pursued simultaneously — the pace of global technological change will not wait for a step-by-step approach. Countries like those tracked by the OECD’s Latin American economic surveys that move fastest on these recommendations stand to capture disproportionate benefits in the coming decade.

Comparing Latin America with MENA: Lessons from Two Emerging Regions

The report draws illuminating comparisons between Latin America and the Middle East and North Africa (MENA) region, which was the focus of the first edition in this series. Both regions face similar challenges in productivity, labor force utilization, and automation adoption. They share high levels of economic inactivity and lagging technology adoption, with the notable exception of Saudi Arabia and other Gulf Cooperation Council countries that have made aggressive investments in technological modernization.

However, the two regions differ in crucial ways. Latin America can create jobs — but predominantly informal positions in low-value sectors. MENA, by contrast, faces a fundamental job creation challenge, though Saudi Arabia’s Vision 2030 aims to generate significant high-quality employment opportunities. On demographics, the trajectories diverge as well: MENA’s working-age population continues to grow with a rising number of unengaged youth, while Latin America’s demographic dividend is fading and its working-age population will begin shrinking within two decades.

These comparisons offer valuable lessons for both regions. The most fundamental finding applies universally: productivity, human capital, and technological readiness are the critical drivers of economic growth at the start of what the report calls “a new epoch of technology-led disruption.” For Latin America specifically, the message is clear — the region must act now to capitalize on its existing strengths in fintech, digital adoption, and entrepreneurial energy while aggressively addressing its weaknesses in education, R&D investment, and formal employment. The alternative — continued economic marginalization in an increasingly technology-driven global economy — would carry enormous costs for the 600 million people who call the region home.