Latin America’s democratic development remains uneven as the region struggles with a large informal economy and a historical reliance on extracting rents rather than creating new wealth, according to a commentary published Wednesday by United Press International.
Beatrice Rangel, managing director for AMLA Consulting and a former executive fellow with the University of Pennsylvania’s Wharton School, wrote that for centuries much of Latin America has depended on extracting rents — income derived from privileged access to protected markets and political connections — rather than generating new value through productive enterprise. Genuine competition threatens that model, she argued, because it reduces the privileges of those who benefit from it.
The informal economy, Rangel wrote, is a central driver of the region’s institutional weakness. According to the International Labor Organization, informal employment across Latin America and the Caribbean stood at 46.7% in the first half of 2025, meaning nearly one worker in two operates outside the formal economy and its legal protections. That burden falls especially heavily on Indigenous communities and other historically excluded groups, she said.
“The larger the informal economy, the harder it becomes to sustain institutions governed by stable rules,” Rangel wrote. Workers and businesses outside the formal economy contribute less regularly to the tax system, she said, limiting the state’s capacity to provide public goods. When services are weak, citizens become more dependent on patronage networks or leaders who promise personal protection, creating what she described as a vicious cycle: informality weakens institutions, and weak institutions encourage personalized politics that allow informality to persist.
Rangel identified a handful of countries that have built more inclusive economies around middle-class growth: Chile, Uruguay and Costa Rica, she said, and Argentina during parts of its past. Elsewhere, she wrote, public spending and elite consumption still drive economic activity.
Mexico, Rangel argued, offers the clearest example of forces seeking to halt institutional progress. The country recently moved to postpone its next judicial elections from 2027 to 2028 and revise the rules governing candidate selection. The changes come one year after Mexico began electing judges by popular vote, an unprecedented system that supporters say will make the judiciary more democratic and accountable. Critics, including judges’ associations, argue the new system weakens professional standards and gives the ruling Morena party greater influence over the courts.
Rangel noted that former President Andres Manuel Lopez Obrador began reversing earlier political liberalization with a 2024 constitutional overhaul that set in motion the gradual replacement of thousands of judges through popular elections, a process that has continued under President Claudia Sheinbaum.
Other countries in the region have shown more positive signs, Rangel wrote. Brazil’s federal structure and the autonomy of its state governments provide counterweights to centralized power, she said, and its Supreme Court has taken an increasingly assertive role. In September, the court convicted former President Jair Bolsonaro of orchestrating a plot to overturn his 2022 election defeat, sentencing him to more than 27 years in prison, a verdict that remains politically contested.
In Paraguay, Rangel wrote, democracy has advanced gradually since Gen. Andres Rodriguez overthrew Alfredo Stroessner’s long dictatorship in 1989. Panama has combined sustained economic growth with the expansion of its middle class, and while it still faces serious governance problems, its democratic institutions have continued to develop.
Rangel pointed to Venezuela’s civic opposition as a demonstration that authoritarian systems are not immune to sustained public pressure. Maria Corina Machado became the leading symbol of resistance to Nicolas Maduro’s rule, challenging it from hiding for more than a year before winning the Nobel Peace Prize in October. Her movement showed that civic opposition can survive even when repression closes most formal political channels, Rangel wrote. Machado has since announced plans to run for president and return to Venezuela by year’s end.
Chile, Rangel wrote, offers a different example: its repeated constitutional debates have been divisive and inconclusive, but fundamental questions about representation and institutional legitimacy have remained in the public arena rather than being settled through authoritarian rule.
Rangel acknowledged that Latin America still contains powerful interests that benefit from privilege and informality, and that weak government allows both to endure. Yet she said citizens across much of the continent are demanding accountable institutions and greater opportunity, a pressure visible in elections and civic movements throughout the region. “Mexico may follow a different timetable,” she wrote, “but it cannot remain isolated from the same forces for change.”