These projections mask important intraregional differences. South American economies, which have been hit hardest by lower commodity prices and the slowdown in China, are expected to contract by 2.6 percent in 2016. In Mexico, Central America, and the Caribbean, lower commodity dependence and closer links to the U.S. economy are expected to fuel a modest expansion of 2.7 percent in 2016.
Sluggish growth, potentially for an extended period, is threatening the region’s hard-won social gains. The share of the population living on $2.50 a day or less, the threshold for extreme poverty in the region, fell from 24.5 percent in 2003 to 11.0 percent in 2013. In total, 76 million people were lifted out of poverty. These gains notwithstanding, in 2014, 39 percent of the population remained vulnerable to falling into poverty, and the increase in the size of the middle class has slowed.
World Bank assistance
The Bank approved $8.2 billion and 31 operations for the region this fiscal year, including $8.0 billion in IBRD loans and $183 million in IDA commitments.
Illustrating how the Bank’s role in Latin America and the Caribbean has evolved in recent decades, countries in the region now turn increasingly to the institution for more than direct lending, including such services as risk insurance, commodity swaps, and climate adaptation finance. An example is the Caribbean Catastrophe Risk Insurance Facility, which the Bank helped to establish in 2007, that now allows more than 20 Caribbean and Central American countries to pool risk, access disaster insurance at low cost, and better manage catastrophic risk.
The Bank also remains a vital source of ideas, best practices, and convening power. Two studies, Out of School and Out of Work: Risk and Opportunities for Latin America’s Ninis and Indigenous Latin America in the Twenty-First Century: The First Decade, offer insight and guidance on key development issues, while conferences such as Governance for Growth with Equity, held in Uruguay in April, demonstrate the Bank’s capacity to convene leaders around rising regional challenges.
Spurring economic recovery
To set the stage for economic recovery, the region needs to increase productivity, strengthen the business environment, and expose companies to greater domestic and external competition. To those ends, the Bank is supporting Colombia’s efforts to raise the level and allocation of productive skills among professionals and to streamline regulations to catalyze innovation. In Peru, it is helping to promote productivity by raising the quality of public education, and helping to improve the business environment by reducing entrance, operation, and market exit costs for companies.
Building sustainable infrastructure
Building better and more sustainable infrastructure to support higher growth in the region will require mobilizing investment from both the public and the private sectors. The Bank has played a catalytic role in this effort, providing lending and technical assistance to develop high-quality infrastructure with a lower carbon footprint. In Lima, Peru, and Quito, Ecuador, the Bank is working to develop metro systems that will reduce carbon emissions and unlock congestion. In the Caribbean, it is modernizing grid systems and helping businesses to retrofit their buildings so they can save energy and draw on renewable sources of power.
Investing in the poor and vulnerable
Protecting the poor and vulnerable from the economic slowdown, and building their human capital so they can share in the benefits of growth are top priorities in the region. In Costa Rica, the Bank is supporting efforts to improve the quality and availability of health care for the poor. In Haiti, it is working with its partners in the Education for All program to increase access to schools and quality education for 73,000 disadvantaged children, and to provide daily meals for 132,000 in this school year. In Mexico, it is helping to expand access to a broader range of social services for beneficiaries of the Prospera conditional cash transfer program.
Building resilience and responding to shocks
Helping countries to build resilience against unexpected shocks—such as natural disasters and public health emergencies—represents a cross-cutting theme that spans the Bank’s operational work. In Bolivia, the Bank is assisting in the development of a comprehensive system to better manage disaster-related risks. In February 2016, it offered $150 million to support the region’s response to the Zika virus. Following a major earthquake that struck Ecuador in April, killing hundreds of people and wounding thousands more, the Bank immediately made funds available from a recently approved $150 million Risk Mitigation and Emergency Recovery Project to pay for medicine, mobile hospitals, and other basic services.
Further Information: World Bank's Latin America and the Caribbean Region homepage »