The Latin American & Caribbean region (LAC) is at a turning point. The windfall from the global commodities boom has faded while LAC governments face increased social expectations from an emerging middle class that is more connected, more involved, and demanding more.

Gross Domestic Product in the region is expected to contract 1.3 percent in 2016, following a 0.7 percent decline in 2015. That marks the first back-to-back years of recession in over three decades. Economic growth is forecast to expand by 1.2 percent in 2017 and 2 percent in 2018, but the capacity to recover will be limited if macroeconomic challenges like fiscal deficits, inflation and high interest rates are not addressed. The challenge will be making these adjustments gradually and as equitably as possible to protect the most vulnerable while allowing the economies time to recover.

Domestic markets and domestic demand are no longer enough to fuel growth now that the commodity windfall is gone. External demand and shifting resources to the export economy are needed. Many LAC countries are already doing this and looking to international economic ties as a potential source of stable growth. Crucial to this transformation will be complementing regional integration with global integration efforts.

The good news is that the LAC region does not face a serious crisis. 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.

Now, satisfying rising demands from the middle class is harder as governments adjust to the new post-boom reality. The transformation happened so fast that governments are having difficulty keeping up and responding to those demands. Transparency and accountability are fundamental to maintaining government credibility and heading off impatience from the population and markets.

Investing in people, particularly the poor, will be key to continuing recent social gains and reducing LAC’s persistent inequality. In particular, investment in education quality will play an important role in allowing the poor to contribute to and benefit from future economic 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.

Last Updated: Sep 23, 2016

Latin America now faces a host of challenges that threaten the social transformation and profound gains made over the past decade. The prolonged economic downturn requires a steady commitment to protect the most vulnerable and safeguard the gains made by those who escaped poverty to enter the middle class.

The World Bank is striving to help countries rekindle growth and solidify hard-won social gains. Our focus is on laying the groundwork for economic recovery, improving infrastructure, investing in human capital and protecting the poor.

Our work in the region addresses the following core areas:

Shared prosperity: Latin America underwent a profound transformation over the past 15 years. Between 2000 and 2014 extreme poverty (US$2.50 a day) was cut by more than half from 25.5 to 10.8 percent, and overall poverty (less than US$4 a day) decreased dramatically from 42.8 to 23.4 percent. However, inequality still abounds and many remain at risk. Despite the gains, 82 million people still live in extreme poverty.  The middle class, who lives on US$10-US$50 per day, makes up 35 percent of the region’s total population. However, nearly 39 percent of Latin Americans live on US$4-US$10 per day and remain vulnerable to falling back into poverty. Helping countries get back on track for growth and modernizing their social protection systems is at the top of the Bank’s regional agenda.

Increased productivity: The region’s productivity suffers from high logistical costs, aging and inadequate infrastructure, and the need for more investment in human capital. Logistics in Latin America and the Caribbean cost 2 to 4 times more than in OECD countries and the Asian Tigers. The World Bank is working closely with countries to increase efficiency, spur innovation, develop urban and rural infrastructure, and develop a better skilled and more flexible labor force.

Investing in Human Capital: Improving the quality of education is fundamental to developing the skills demanded by the global marketplace. Latin America has virtually universal access to education, but 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. One in five Latin Americans aged 15 to 24 don't work or study, posing major development challenges. The World Bank supports a host of initiatives designed to improve education services and nurture the human capital needed for future development.

Better governance: The larger middle class expects more from its governments. At the same time, access to quality public services remains a challenge and there is growing dissatisfaction with the quality and level of services provided by the state – including education and security, among others.  Through finance and high-level knowledge exchanges, the World Bank is working to foster more effective and transparent governance to improve services and support an integrated response to social challenges like growing crime and violence. 

Environmental protection and green growth: Latin America and the Caribbean has contributed little to high global emissions, but is now is leading on green transport, emission targets, and payments for environmental services. The region is a global showcase for some of the most innovative, environmentally friendly practices. However, The economic bonanza seen in recent years led to new pressures: over 80 percent of the region’s population now live in cities. In addition, climate change poses significant threats. A 2 degree rise in temperature would reduce Brazil’s soybean crop by 70percent and the Caribbean’s fish-catch volume by 50percent. There is a big responsibility with the world’s largest freshwater reserves and carbon sink in the Amazon rain forest. 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: Sep 23, 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. The Bank is helping the region address its pressing development challenges 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.

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. 

Bolivia: the Rural Alliances Project (PAR) supported 770 producer organizations in 110 municipalities with a total of 29,000 beneficiary families increasing their income by 33 per cent in rural areas. The second version of the project is underway and will benefit 35,000 families in 120 municipalities.

Caribbean: Given the high vulnerability of the region, disaster risk management and adaptation to climate change represent a growing portion of the World Bank's portfolio in the Caribbean. In St Lucia, the Climate Adaption Finance Facility promotes increased climate resilience. More than 35,000 people (20 per cent of the population) have already benefitted from the rehabilitation of two bridges, 11 schools and four health facilities damaged by Hurricane Tomas.

Honduras: More than 7,000 small farmers in rural areas have improved their income by participating in the Rural Competitiveness Project (COMRURAL). Farmers have added value to their products through investments in productive technology and market knowledge.

Mexico: A 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. A little over half are expected to go to women's projects.

Nicaragua: The Second Land Administration Project (PRODEP II) covers six of the 15 Departments in the country, and has helped develop better property rights regulations benefitting more than 430,000 people, more than half of which are women. Cadastral information for about 85,000 parcels has been updated, and more than 67,000 families have received legal documents for their properties, of which more than 43,000 are new land titles.

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.

Last Updated: Sep 23, 2016

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