19446: Navigating the Dual Economy: Strategic Challenges for Managers in Latin America

Latin America’s structural socioeconomic properties differ significantly from those of developed countries. A key aspect of this distinction is the coexistence of formal markets—regulated through codified legal frameworks and welfare institutions—and informal markets, which emerge largely due to the dysfunction of formal systems (Dencker, Bacq, Gruber, & Haas, 2019; de Soto, 1989; North, 1990). A salient aspect is that Latin America has the highest total tax rate on corporate profits in the world, even greater than Africa (World Bank Data). Informal markets often rely on strong family and community networks as substitutes for formal institutions (Batjargal et al., 2013; Khavul, Bruton, & Wood, 2009). In such settings, market interactions are frequently driven by trust rather than formal property rights, offering creative solutions to cope with uncertainty and weak institutional frameworks (Portes & Haller, 2005; Kim & Li, 2014). Entrepreneurs and managers in Latin America must skillfully navigate this dual continuum, connecting developed, more formal economic zones with less-developed areas where poverty, corruption, and institutional weaknesses prevail (Webb, Kistruck, Ireland, & Ketchen, 2010). These dynamics not only define market activity within the region but also link informal economies to global markets through economic globalization (Reinecke, Donaghey, Wilkinson, & Wood, 2018). Thus, the interplay of formality and informality becomes central to strategic decision-making in the region, requiring leaders to adapt to highly heterogeneous market conditions (Godfrey, 2011). This symposium will explore the dualistic nature of Latin America’s economy and its implications for management practices, focusing on how these socioeconomic structures influence the strategies of entrepreneurs, managers, and organizations operating in the region.