For the fifth consecutive year the Latin American & Caribbean region (LAC) faces a continuing decline in growth, as a result of an external environment particularly adverse to commodity exporters.

As a result, LAC didn’t grow in 2015 and is expected to contract by 1% in 2016. The region’s growth average is weighed by the slowdown in important economies such as Venezuela and Brazil. Bright spots include economies in the north such as Mexico, Central America and the Caribbean; these economies linked to the US.

Policy makers worry that the constricted prospects may jeopardize the social gains of the past decade, pushing Latin American economies into the so-called middle-income trap –a status in which countries see their development prospects constrained.

Countries are struggling to find a balance between reducing spending and minimizing its effects on economic activity and hard-won social gains.

Over the last decade, the region experienced a deep economic and social transformation, which lifted millions out of poverty and swelled the ranks of the middle class. Strong economic growth – driven by both domestic reforms and a favorable global economic environment - was responsible for this progress. Complementary social programs, made possible by growing fiscal space, helped support the poor and disadvantaged.

But the region’s deceleration is beginning to dent such expansion, according to recent findings.

Looking forward, commodity exporting countries would benefit from reforms that increase savings, boost productivity, and strengthen long-term growth. Additional emphasis should be placed on building skills, and reducing obstacles to economic activity, such as poor infrastructure and inflexible labor or financial regulations.

But considering that benefits from such reforms will take time, the report also advocates a policy agenda that balances the need to stimulate economic activity in the short-term with the imperative of preserving macroeconomic stability.

In pursing this agenda, policymakers should strive to gradually implement fiscal adjustments over time, and to protect the poor by fairly distributing the pain of necessary spending cuts among all segments of society. 

Last Updated: Apr 13, 2016

Latin America’s deep social transformation of the past decade is being threatened by a downturn that is proving to be far more stubborn than previously anticipated.

Mindful of this unique set of circumstances, we are supporting our clients with a multipronged approach designed to help them rekindle growth and secure their hard-won social gains. Hence, improving productivity, investing in the region’s human capital -especially the most vulnerable- and in its aging infrastructure, are of paramount importance.

Our work in the region addresses the following core areas:

Shared prosperity: Despite impressive social gains achieved between 2003-2012, Latin America and the Caribbean remains a highly unequal region, with some 82 million people living on less than $2.50 per day. Additionally, while the middle class (US$10-US$50 per day) accounts for 35 percent of the region’s total population, another 38.9 percent of Latin Americans remain vulnerable (US$4-US$10 per day) to falling back into poverty should countries face economic shocks or protracted low growth.  Additionally, 1 in 5 Latin Americans never benefited from the recent bonanza, and have remained stuck in poverty –the so-called “chronic poor.” Helping countries continue to address the inequality gap by creating opportunities for all is at the top of the Bank’s regional agenda.

Increased productivity: Bottlenecks include high-cost logistics, inadequate infrastructure, and low quality education. Logistics in Latin America and the Caribbean cost 2 to 4 times more than in OECD countries and the Asian Tigers.

Better education: essential to boosting productivity and aligning outcomes to the skills demanded by the global marketplace. Even though Latin America has almost reached universality in access to education, quality remains an issue.  A recent World Bank study shows that low average teacher quality and management make Latin American students lose the equivalent of one full day of class every week.

An efficient state: Access to quality public services remains a challenge. There is a burgeoning dissatisfaction within the middle class with the quality and level of services provided by the state –including education and security, among others.  Citizen security has become a development challenge for many countries in the region. Through financing and high-level knowledge exchanges, the Bank has been supporting an integrated response to growing crime and violence.

Inclusive and green growth: LAC is a global showcase for some of the most innovative environmentally-friendly practices. Accounting for 6 percent of global greenhouse emissions from energy –13 percent if deforestation and agriculture are taken into account – the region has the least carbon-intensive energy matrix of any region in the world. It has also adopted payment schemes for preserving the environment. But the economic bonanza of recent years has led to new pressures: over 80 percent of the region’s population now live in cities. The Bank’s green growth agenda recognizes the importance of sustainability in the region’s development, and for preserving natural resources for future generations.

Last Updated: Apr 13, 2016

The World Bank has supported Latin America’s development agenda by tailoring its wide-ranging financial, knowledge, and convening services to the region’s diverse needs. Through financing - including innovative mechanisms, such as the Climate Investment Funds; in-depth development research - such as a recent study on improving teacher quality; technical assistance and convening services, the Bank is helping the region address its pressing development challenges.

Support was aimed at creating opportunities for all through public and private sector projects that expand public services, improve regional productivity, competitiveness and integration, create quality jobs and assist those most in need.

Some noteworthy examples include:

Argentina The northern provinces of Catamarca, Chaco, Corrientes, Formosa, Jujuy, Misiones, Salta, Tucumán and Santiago del Estero are home to 7.5 million people. Here the World Bank has provided US$ 800 million for water and road infrastructure projects that form part of the National Government’s Norte Grande Development Program.

Brazil: Millions of people facing poverty in the northeastern state of Ceará are benefitting from initiatives to increase professional training, improve family assistance programs and enhance water quality. Ceará Strengthening Service Delivery Program for Results (PforR) links disbursements to the accomplishment of pre-established development targets. 

Caribbean: Four years after it first met, over 2,500 government, private sector, civil society leaders from 15 Caribbean countries have participated in the Caribbean Growth Forum and over 100 reforms have been implemented to boost skills, productivity and business climate.

Ecuador: The project Creciendo con nuestros guaguas (Growing with our babies) is working to eliminate chronic malnutrition in children under five. The project works with parents and the community to improve children’s diets.

El Salvador: Through the Temporary Income Support Program (PATI), approximately 41,000 people living in poverty have benefitted from temporary community jobs and technical training. The program was initially implemented in 25 municipalities and subsequently expanded to eight more in 2015.

Jamaica: The Youth Employment in Digital and Animation Industries Project has already enabled over 4,000 young Jamaicans to find work within the digital enterprises. Furthermore the KingstOOn 2016 festival attracted animators from across the globe to showcase content created in the country and further the country’s ambition to become a digital hub.

Mexico: A recently approved US$400 million loan will support the efforts of the Mexican government to expand credit for productive purposes in rural areas. This project will fund around 75,000 loans to MSMEs in rural areas as well as small agricultural producers. It’s expected that a little over half are destined for women's projects.

Paraguay: The Sustainable Rural Development Project aims to contribute to improving the quality of life of small-scale farmers and indigenous communities. The initiative supports community organizations and encourages self-governance to enhance natural resource management in an effort to improve the population’s socioeconomic conditions.

Peru: A project is working to extend the benefits of rehabilitating water and sewage networks to more than 239,000 low income residents in Northern Lima.

Nicaragua: A community health project has helped to increase the number of pregnant women receiving post-natal care, from a third in 2010 to almost half today. The project is being expanded with additional financing to cover an extra 34 municipalities, taking the total number to 100 municipalities.

Uruguay: One of the country’s most interesting advances is the development of the National Agricultural Information System (SNIA). This is an ambitious web platform that the Ministry of Livestock, Agriculture GAP is implementing with a view to consolidate, in a single portal, information that will serve to integrate and generate data such as forecasts and early climate warnings, and monitoring of vegetation, soil and water resources to enable the generation of programs to simulate the impact of the use of new technologies.

Last Updated: Apr 13, 2016

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