A resurgence of populism in Latin America is stirring concern among international investors. The threat of nationalization and default in several countries does offer grounds for anxiety. Yet these developments should hardly be surprising, for the fruits of recent regulatory reforms, trade liberalization, and economic growth have failed to reach many of the region’s people. When given the choice, they sometimes vote for politicians who promise populist solutions.

But attempts to achieve salvation through “magical formulas and lyric exaltations”—whether Marxist or free market—have led nowhere, notes Javier Santiso, the chief development economist and deputy director of the Development Centre of the Organisation for Economic Co-operation and Development (OECD), in his 2006 book, Latin America’s Political Economy of the Possible. Santiso writes of a search for utopia that has long pervaded Latin America’s political economy. Today, however, countries such as Brazil and Chile want to “forge their own path of pragmatic political economy that combines neoclassical orthodoxies with progressive social policies.”

Along the same lines, Chile’s president, Michelle Bachelet, argues that “The problem has not been with open economies, but the lack of action to deal with poverty and social injustice.” In an interview for this special Latin American edition of The McKinsey Quarterly, she adds that “Chile has had its own experience—combining political stability, sound macroeconomic policies, and social cohesion—and we believe you can’t do one without considering the other.”

Investors can take some comfort in the direction of the region’s two biggest economies, Brazil and Mexico, for both continue to follow moderate policies, as do Chile, Colombia, and Peru. Their promarket approach may help to explain why the elites of Latin America have rarely been more optimistic about its future. A recent survey by Zogby International found that 53 percent of the respondents say that the region is on the “right track,” and 81 percent expect that their national economies will improve in the next two years.

Populists may doubt the motives of business, but we believe that local and multinational enterprises have a big role to play in the development of Latin America and the related improvement in its people’s standard of living. There are many opportunities to serve lower-income consumers, as we show in a special package of articles on the subject. In “How big retailers can serve Brazil’s mass-market shoppers” and “Selling to ‘mom-and-pop’ stores in Latin America,” we explore ways of engaging lower-income customers profitably. “Financing Latin America’s low-income consumers” and “Extending financial services to Latin America’s poor” (an essay by the president of the Inter-American Development Bank) address the financial needs of this population.

But business can achieve only so much without the active participation and cooperation of governments in regulatory and fiscal matters. In our work in the region, we see that its governments frustrate its business leaders. Many of them wonder if their countries will ever grow as fast as China or India. They are tired of the excuses and the lack of progress on important reforms, particularly at the microeconomic level. Chile, they note, has proved that a Latin American country can grow quickly over long periods of time. Why can’t other countries in the region do so as well? We think they can, and in “Five priorities for Brazil’s economy,” we offer a detailed plan for capturing its potential for growth.

Although we understand the frustration of executives in Latin America, we strongly encourage them to raise the ambitions of their companies. The many positive developments in the region’s macroeconomy and its increasingly deep capital markets have created significant and growing opportunities to create value—by innovating, moving up the value chain in commodities, or consolidating and restructuring fragmented industries. But more is at stake than profits: the future economic development of Latin America and the well-being of its people depend in part on the willingness of companies to pursue these investment opportunities.