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Latin America and the Caribbean has proved relatively resilient in the face of rising debt stress, inflation, and uncertainty arising from the Russian war in Ukraine. Income and employment have largely recovered from the pandemic, and markets remain cautiously optimistic about the near future.

As for poverty, the pandemic exacerbated it from 24 percent to 26.5 percent between 2019 and 2021. In terms of inflation, excluding Argentina, the average is expected to decline to 5 percent in 2023, after reaching 7.9 in 2022.

Growth forecasts for 2023 have been steadily downgraded over the past six months to 1.4 percent. For 2024, the figure is 2.4 percent, which is expected to remain in 2025.

In terms of education, students have lost an average of two-thirds of their face-to-face school days, either partially or completely since the beginning of the pandemic. This equates to an estimated loss of 1.5 years of learning and mostly affects the youngest and most vulnerable, who are at risk of losing 12 percent of their total lifetime earnings.

Levels of informality are also of concern. Costly regulations have kept most firms informal, limiting their access to finance. Labor markets are also dominated by informality, which increased from 56.7 percent pre-pandemic to 63.4 percent in 2021, and social assistance is low.

Currently, the region has the largest migration crisis in history. In addition to traditional flows from Central America and Mexico in the United States, Venezuela and Haiti have been the source of large recent outflows. About 7.5 million Venezuelans have fled the country since 2015 and about 1.7 million Haitians are abroad adding to the 2 million internally displaced.

The challenging situation is exacerbated by increasingly severe effects of climate change, which have already caused significant economic and social losses. Hurricanes, floods and droughts are becoming more frequent, and it is estimated that 17 million people could be forced to leave their homes and nearly 5.8 million people could fall into extreme poverty by 2030, mainly due to a lack of safe drinking water, as well as increased exposure to excessive heat and flooding.

Having said that, green growth opportunities through renewable electricity - solar, wind and geothermal - and vast natural capital - water, trees, biodiversity - offer the potential for new industries. Other opportunities emerge in long-term policies such as reducing systemic risks, boosting investment in traditional and digital infrastructure, and improving human capital. In the short-term, opportunities lay in preserving macroeconomic stability, promoting advances in customs and transport regulatory and improving export and investment promotion agencies.

Last Updated: Apr 04, 2023

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Belkis Delcid Diaz
1818 H Street NW, Washington, DC 20433