Craig DempseyJust like most years, January has seen changes in minimum salary in Latin America for 2025. While the majority of the region has seen a rise in the minimum wage again, the strength of the US economy and the ballooning cost of living have meant that in dollar terms most have stood still. It is a legal right in all countries. But what has been the effect of the 2025 rises and what’s the long-term picture?
Some countries, particularly in Central America, have a variety of minimum wages depending on geographical location, sector and qualification. While the lowest minimum wage in Panama is USD$341, this can go as high as USD$1,015 per month for skilled and/or qualified workers. The average is around USD$635. Costa Rica also has a wide range of minimum salaries.
Mandatory bonuses are commonplace in the region, usually taking the form of an extra month’s salary, but up to two in some countries. A few countries such as Belize, Mexico and Puerto Rico have a daily or hourly rate in place, meaning that calculations must be made to provide comparison.
What’s the wider picture with minimum salary in Latin America?
The region as a whole has been increasing minimum wages dramatically over the last few years in response to economic pressures produced by the COVID-19 pandemic and other world events. The combination of depressed economies and a need to kickstart consumer confidence meant that most governments needed to put pesos into pockets. With cost of living and inflation then spiraling, that morphed into a need to keep people’s heads above water.
In Colombia, for example, the minimum wage has almost doubled in less than a decade, rocketing from one of the region’s lowest to firmly mid-table. The figure now stands at COP$1,423,500, plus a further COP$200,000 in transport subsidy. That’s around USD$380 in total. Chile had planned to establish a set minimum salary at CLP$500,000 for a number of years, but has abandoned that, with the figure standing at CLP$515,500 (USD$515) now and likely to continue rising annually.
The region has disparate economies, with GDP per capita being much higher in the Southern Cone than the “Central American 4” (El Salvador, Guatemala, Nicaragua, and Honduras). This means that minimum wages can be vastly different country to country. Perhaps nowhere is this more marked than in Puerto Rico. As an unincorporated part of the United States of America, wages are particularly high, at USD$7.25 per hour. For a 40-hour working week, that’s around USD$1,160 a month, comfortably ahead of neighbors.
The link between minimum wage rates in Latin America and the strength of individual economies has always been erratic. While it’s generally true to say that stronger economies (by per capita status) have higher minimum wages, there are some notable exceptions. Brazil especially has a fairly strong economy yet one of the region’s lowest minimum wage rates at R$1,518 (USD$245). By contrast, Honduras has a much weaker economy but almost double the value of minimum wages at L11,972 (USD$470).
Have there been real term changes in minimum salary in Latin America?
While there have been steep rises in minimum salary in Latin America over the past few years, that hasn’t necessarily meant more purchasing power. In fact, inflation linked to cost of living in many countries has matched or even exceeded the rise in minimum salaries in percentage terms, wiping out the benefits. In especially volatile economies such as Argentina, the minimum salary rate often changes on a monthly basis (announced a few in advance).
Not only have inflation levels and the rise in cost of living been ferocious, but the US dollar has been incredibly strong for years now. This means that in dollar terms the minimum salary in Latin America has often fallen or stood still. While that problem is limited for people making domestic purchases, it greatly limits access for many to the global market, with imports from the US becoming prohibitively expensive in many cases.
Perhaps the most noticeable countries for this are Ecuador, El Salvador and Panama. All three are dollarized economies, the first two using the USD directly and Panama having a firm peg to the dollar. Consequently, out of those three, only Ecuador has seen an increase in the minimum salary, and by only ten dollars to USD$470. While their cost of living is also increasing, the strength of their currency means that they have little flexibility to adjust wages.
Looking to the future
Will the minimum salary in Latin America continue rising? In general, yes, it almost certainly will. The dollarized economies may well see slower increases, but the long-term trend seems to be towards higher minimum salaries. However, Paraguay is starting to doubt the need for a minimum salary. Trade and Industry Minister Javier Giménez has called for it to be scrapped, which would require bypassing the constitution.
There are also concerns in many countries about the rising cost of labor, especially for small and medium-sized businesses (SMBs). These are the backbone of many economies and already facing severe pressure from large conglomerates. The fear, especially in lower-income countries, is that many people will simply slide into the black or grey economy rather than continue in legal minimum wage employment.
Continued rises in the minimum wage in Latin America are not always matched by wage rises in general, either, forcing a contraction in the middle classes. Most of the region fares very badly on inequality indices such as GINI already, and this could exacerbate the problem. If the minimum salary rises fast enough, it will simply become a standard salary as it moves too close to the median. For those looking at company formation in Latin America, this is worth monitoring.
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