Roughly half of Latin America and the Caribbean’s 325 million workers lack formal contracts, and the World Bank says reducing informality requires broader reforms rather than drives to register microfirms.
About 30% of the region’s labor force is informal self-employed, employing 85% of informal workers; the report says many choose it for flexibility, independence and income that can outweigh formal-sector benefits.
The bank argues policy should focus on skills, business climate and social protection: 30% of larger firms say they cannot expand for lack of qualified labor, while workers value formal benefits at about half their cost.
That diagnosis matters as regional GDP growth is forecast at 2.1% this year after 2.4% in 2025, with informality seen both as a symptom of weak productivity and a drag on formal job creation.