Panama City is hosting what organisers touted as the region's answer to Davos, as political and business leaders gather to tackle Latin America's persistent economic challenges amid growing concerns over rising poverty and middle-class stagnation.

The Latin America and the Caribbean International Economic Forum, which opened on January 29, brings together presidents, finance ministers and international organisations to address the region's dramatic growth slowdown. Historic data presented at the forum showed GDP growth has fallen from 5.1 per cent between 1950 and 1980 to 2.7 per cent in 1980-2009, before slumping to just 1.6 per cent over the past 15 years.

"We see the region mired in three major development traps: low capacity for growth, high inequality with weak social cohesion, and low institutional capacities," José Manuel Salazar-Xirinachs, executive secretary of the UN Economic Commission for Latin America and the Caribbean (ECLAC), told delegates.

The two-day event, organised by the Development Bank of Latin America and the Caribbean (CAF), comes as the region grapples with what some economists are calling a second "lost decade" of development. Between 2014 and 2023, growth averaged just 0.9 per cent annually - less than half the rate seen during the notorious "lost decade" of the 1980s.

Kristalina Georgieva, managing director of the International Monetary Fund, warned in a video address that the region's growth prospects remain weak, with GDP expected to average 2.6 per cent in the medium term. She identified three key bottlenecks: high informal employment, regulatory barriers limiting entrepreneurship, and inefficient public investment.

The gathering has drawn senior figures including Carlos Felipe Jaramillo, World Bank vice-president for Latin America, Felipe Larraín, former Chilean finance minister, and Santiago Peña, president of Paraguay. Sergio Díaz-Granados, CAF's executive president, announced plans to allocate $7bn for regional development projects, targeting at least 30 initiatives worth $100mn each over the next two years.

A particular focus has been placed on youth unemployment, with delegates hearing that 30mn young people in the region neither study nor work. Climate change also features prominently on the agenda, with recent extreme weather events having caused $7bn in losses across the region last year. Only 20 per cent of the region's energy comes from electric sources, presenting what organisers see as a significant opportunity for green transition.

The forum comes at a sensitive time for host nation Panama, as tensions simmer with the new US administration over management of the Panama Canal, which President Donald Trump threatened to “take back” without ruling out the use of force due to alleged Chinese influence. José Raúl Mulino, Panama's President, used his opening address to assert once more that "the Canal is and will continue to be Panama's," ahead of an impending visit by US Secretary of State Marco Rubio.

Mulino also stressed the need for a balance between state intervention and market forces, arguing against "bloated state employment" while acknowledging that "not everything can be left to the mercy of the market."

ECLAC's Salazar-Xirinachs called for a new approach to productive development policies, distinguishing them from traditional industrial policies or current US approaches based on subsidies and tariffs. "The new vision that we are promoting puts governance first, a governance that would define growth and competitiveness strategies in collaboration with the private sector," he said.

The forum includes representatives from 15 countries and features additional speakers such as Verónica Frisancho, Knowledge Manager at CAF, and Pepa Bueno, Editor-in-Chief of El País newspaper in Spain. Organisers plan to make it an annual fixture in Panama City, positioning it as a key platform for regional economic cooperation and policy development.