Overview

  • After six years of growth deceleration, the Latin America and the Caribbean (LAC) region had resumed in 2017 what seemed to be a path of modest but increasing growth. Unfortunately, this much-anticipated path was not to be, as the region hit several bumps in the road. Now, the region has entered a new phase of weak economic performance.

    The largest economies in the region face recession, macroeconomic turbulence, or growth deceleration. For example, the Argentinian recession will become deeper before the economy starts recovering, and Mexico’s deceleration is expected to continue. However, recent data for Colombia indicates a gradually building expansion.

    Growth in Latin America and the Caribbean is expected to be subdued in 2019, at 1.7 percent, reflecting challenging conditions in several of the largest economies. Gradually building momentum in Brazil and a recovery in Argentina are projected to contribute to a pickup in regional growth to 2.5 percent in 2020 and 2.7 percent in 2021. Growth in Central America is projected to accelerate moderately in the forecast period as the subregion moves past a difficult 2018. In the Caribbean, growth is projected to slow to 3.4 percent in 2019, from 4.3 percent in 2018.

    The region’s main challenges include a mixed growth picture accompanied by a complex macro and external environment in several countries , and unprecedented flows of intra-regional migration. We are seeing large flows of migration from both Venezuela and Central America. With growth slowing, many of those who escaped poverty are at risk of slipping back.

    Despite soft global trade, regional export growth has picked up, boosted by trade diversion in response to bilateral tariffs by the United States and China, and by solid growth in the United States. As these effects wane and global trade decelerates further, export growth in the region is projected to slow. Risks to the growth outlook remain tilted to the downside. Sharper-than-projected slowdowns in the United States and China could have negative spillovers on regional growth through trade, financial, and commodity market channels. Adverse market responses to weak fiscal conditions and disruptions from natural disasters are other important risks. ( Growth alone won’t be enough to continue recent social gains and the reduction of LAC’s persistent inequality. To do so, the region needs to invest in people, particularly the poor. LAC continues to underperform in education: around one out of every three youth doesn’t finish high school.  Investment in education quality will play an important role in allowing the poor to contribute to and benefit from future economic growth.

    Latin America and the Caribbean is extremely exposed and vulnerable to many natural disasters, such as earthquakes, floods that can ravage entire regions, and hurricanes that devastate Caribbean states.  The region is among the most vulnerable due to high population density in the areas where these disasters strike and the need for better risk management practices. Fortunately, we are getting better at understanding and managing these risks. Examples supported by the Bank include the Pacific Alliance catastrophe bonds for earthquakes. In addition, risk sharing across countries through mechanisms such as the Caribbean Catastrophe Risk Insurance Facility (CCRIF) can provide readily-available funds for the recovery after a member country suffers a hurricane.

    Last Updated: Oct 09, 2019

  • Our work is grounded in a three-pillar strategy: promoting inclusive growth, investing in human capital, and building resilience. This includes encouraging better governance and economic integration and leveraging the private finance necessary to address the region’s pressing development needs. The World Bank is also focusing on improving the lives of the most vulnerable, including historically excluded groups such as women, Afro-descendants, and Indigenous Peoples. Partnering with the many different voices of society is key to these efforts.

    The World Bank offers a package of financial services that go beyond traditional loans (risk management, risk insurance, swaps, climate insurance, climate adaptation financing, commodity swaps). The institution also serves as a powerhouse of global ideas and experience and a meeting ground for key players to facilitate development solutions tailored to each country’s needs.

    Investing in Human Capital: Improving the quality of education is fundamental to developing the skills demanded by the global marketplace. LAC has experienced a historic expansion in access to higher education, but much remains to be done in terms of quality and efficiency. Only half of those who enter these programs end up graduating on time. Inequality persists in both access and opportunities. The Bank supports a host of initiatives designed to improve education services and nurture the human capital needed for future development.

    Protecting the vulnerable: 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.  Poverty at the International Poverty Line of $1.90 a day fell from 4.6% in 2013 to 4.1% in 2015. However, inequality still abounds, and many remain at risk. Despite the gains, 82 million people still live in extreme poverty.  The middle class, which lives on US$10-US$50 per day, makes up 35 percent of the region’s total population. However, nearly 39% of Latin Americans live on US$4-US$10 per day and remain vulnerable to falling back into poverty. Improving the quality of health services and modernizing social protection systems are at the top of the Bank’s regional agenda. The key health-related challenges for LAC going forward are how to provide effective care over the lifecycle as populations age, and how to ensure the financial sustainability of the health systems. The region has been at the forefront of innovation in social protection, but regressive subsidies, inequality of opportunities, and exclusion of disadvantaged groups (Indigenous People, Afro-Descendants, people with disabilities, and others), still persist.

    Inclusive growth: The World Bank is working closely with countries to address fiscal and external imbalances, strengthen infrastructure services, and foster private sector development, innovation and jobs. From a macroeconomic point of view, the need to reduce fiscal deficits and rebuild buffers are the main challenges faced by the region. LAC’s infrastructure needs are enormous: the region has an estimated US$180 billion per year investment gap.

    Improving governance: Through finance and high-level knowledge exchanges, the 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.

    Managing risks: Despite the big social gains of recent years, nearly 4 out of 10 households in the region are just one disaster away from falling back into poverty. It is often the poorest that suffer the most from these shocks, which are frequently followed by lower employment and consumption. The region needs to do better at protecting itself against natural disasters, and economic and social shocks (such as crime and violence).  This can be done by strengthening disaster and risk management policies and developing markets for credit and insurance to contribute to a faster recovery. Preparation is costly, and rewards may seem far off, but the cost of inaction is far higher. The World Bank Group has been a pioneer in supporting innovative market-based solutions for de-risking in LAC, such as the recent Cat-Bond for the Pacific Alliance.

     

    Last Updated: Oct 15, 2019

  • The World Bank approved $4.3 billion in lending to the region in fiscal year 2018, including $3.9 billion in IBRD loans and $428 million in IDA commitments. The Bank also issued the first ever multi-country catastrophe bond between Chile, Colombia, Mexico, and Peru, valued at more than $1.3 billion. The priorities in the region centered on supporting inclusive growth through higher productivity and competitiveness, with an emphasis on investing in education, health, and other aspects of human capital. It also invested in infrastructure and worked to improve countries’ abilities to manage and withstand shocks—such as natural disasters, economic upheaval, and crime and violence— while promoting greater transparency and accountability. In addition, the World Bank prioritized the inclusion of groups that have traditionally faced exclusion, including Indigenous Peoples and rural communities. As countries’ needs often exceed public resources, the Bank supported activities and interventions that attracted private investment whenever possible.

    The World Bank tailors its extensive financial, knowledge and convening services to the region’s diverse needs. Countries increasingly turn to the World Bank for more than direct lending, taking advantage of services including risk insurance, commodity swaps, climate adaptation finance, technical assistance, convening assistance and development research.

    One of the recent reports was “Afro-descendants in Latin America: Toward a Framework of Inclusion.” About one in four Latin Americans self-identify as Afro-descendants today. They comprise a highly heterogeneous population and are unevenly distributed across the region but share a common history of displacement and exclusion. Despite significant gains over the past decade, Afro-descendants still are overrepresented among the poor and are underrepresented in decision-making positions, both in the private and the public sector. The report proposes a framework to organize and think of the myriad options available to address their situations, based on the experience accumulated by the region and the data available.

    A second report was “The Jobs of Tomorrow: Technology, Productivity, and Prosperity in Latin America and the Caribbean.” This report discusses technology adoption and its impact on inclusive growth through productivity, jobs, types of skills, and wages in Latin America. The report focuses particularly on two dimensions of inclusive economic growth: overall job growth, and how less-skilled, less well-off workers can also benefit from technology adoption.

    Some program highlights include:

    Panama: The National Indigenous Peoples Development Plan. Designed jointly with the Panama’s Indigenous communities and the government of Panama, this is a Project benefiting approximately two-hundred thousand Indigenous peoples, especially women and youth who are the most excluded populations. It supports the investments proposed by the traditional authorities focused on access, quality and cultural pertinence of service delivery in health, education, and water and sanitation. It also includes investments to improve governance capacity, planning and coordination between Indigenous Authorities and the Government of Panama with a vision to contribute to breaching some of the largest levels of ethnic based inequalities that exist in the region. Within the first months of implementation, two results are highlighted: first, passing an Executive Decree to legally formalize the National Indigenous Peoples Development Council; and second the acceptance by the traditional Indigenous Authorities to include a woman advisor as part of each delegation that participates on the Council.

    Honduras: The Rural Competitiveness Project (Comrural) seeks to increase the productivity and competitiveness of around 7,200 small rural producers in Honduras and link them to domestic and international markets. Comrural promotes productive partnerships between rural producers and trade partners and supports the development of business plans, and, to date, has created more than 9,000 jobs and has helped to increase productivity in sectors such as specialty coffee, horticulture, fruits, dairy, beekeeping, rural tourism and aquaculture. Producers supported by Comrural produce around 30 percent of all the specialty coffee exported by Honduras to the United States, Europe and Asia.

    Colombia: The World Bank is providing a US$100 million loan to support the Colombia Multipurpose Cadaster Project to strengthen land tenure security and provide access to cadaster information in the selected municipalities.  Overall, the project will support the government to strengthen the system for land administration to be able to complete the national coverage of the multi-purpose cadaster and maintain the information in support of the property market in both urban and rural areas. 

    Caribbean: Ongoing World Bank support to building environment and natural resource resilience in the Caribbean includes:

    ·      Developing renewable energy in Saint Lucia and Dominica and creating an insurance mechanism to include the fisheries sector in Grenada and Saint Lucia;

    ·      Building sustainable agriculture practices and competitiveness in Jamaica, the Dominican Republic, and the OECS;

    ·      Expanding marine protected areas in Belize and strengthening protection and climate resilience of the Belize Barrier Reef;

    ·      Banning of single-use plastics and/or Styrofoam containers across the OECS;

    ·      Developing a 7mW geothermal energy plant in Dominica, the first in the Caribbean.

    Last Updated: Oct 15, 2019

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Washington, DC
Yanny Rocha
1818 H Street NW, Washington, DC 20433
+12024732489
yrocha@worldbank.org
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