Economic Growth

6 ways Latin America and the Caribbean can create a green, resilient, and inclusive recovery

The Christ the Redeemer statue in Rio de Janeiro, December 10, 2012. REUTERS/Gary Hershorn (BRAZIL - Tags: SOCIETY RELIGION TPX IMAGES OF THE DAY TRAVEL) - GM1E8CB0T4U01

With the right policies, Latin American and the Caribbean can turn the tide on the expected economic environment after COVID-19. Image: REUTERS/Gary Hershorn

Anna Wellenstein
Director for Sustainable Development, Latin America and Caribbean Region at World Bank Group
Julie Rozenberg
World Bank Sustainable Development Group, Economist
Ede Ijjasz-Vasquez
Former Regional Director Africa, Sustainable Development Practice Group
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Latin America

  • COVID-19 deaths and case numbers in Latin America are rising, whilst GDP is expected to decline 8% and 4 million may fall back into poverty.
  • But with the right policies, the region can plan for a sustainable economic rebound, write three experts from the World Bank.
  • From investing in resilience, to leveraging digital technologies, here are six things Latin America can do to help the recovery.

Latin America has been drastically affected by the COVID-19 pandemic. The number of cases and deaths continue to grow as we write this blog. This year 4 million people may slip back into poverty and GDP may decline 8%. While the focus of countries must be on the health crisis, it is time to plan for a sustainable economic rebound.

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The region has natural and built endowments that can position it for a robust, green recovery. The region has the cleanest energy matrix in the world, mining resources central to the decarbonization agenda, and dense cities that can easily expand electric and non-motorized transport modes. It has 22% of the forest areas of the world, and it can become an effective global carbon sink. It´s the world’s largest producer of ecosystem services and the first net food exporter, with great options for sustainable low-emissions agriculture and aquaculture. Latin America and the Caribbean (LAC) can leverage these attributes for a robust, greener recovery.

Latin America Inclusive Growth Framework Environment and Natural Resource Security
Latin America has 22% of the forest areas of the world. Image: World Bank

At the same time, the COVID-19 crisis has laid bare problems that predate the pandemic. About 20% of the region’s people live in slums, and 160 million people lack access to safe water. Both factors amplify the COVID-19 risks. Afro and indigenous people are one third of the region’s population, but they are two thirds of the poor. Every year on average, between 150,000 and 2.1 million people are pushed into extreme poverty because of natural hazards. The pandemic magnifies these inequalities and vulnerabilities. A green recovery for Latin America must not leave aside the inclusive and resilient dimensions of a strong and balanced turnaround .

The region can consider six priorities for its green, resilient and inclusive COVID-19 recovery:

  • Find new green growth opportunities and markets: the region can reimagine sectors like forestry, fishery and aquaculture. Aquaculture is the world’s fastest growing food industry, at 7% per year. The formal timber sector employs 1% of the region’s work force, and can transform into a sustainable sector that brings its large informal labor force into the mainstream economy. Climate-friendly agricultural products have enormous potential in export markets.
  • Transform cities into green and productive hubs: to reduce congestion, water and air pollution, expand green space and reduce energy consumption in buildings – to improve productivity and well-being. In 2017, 200,000 people died from air pollution in Latin America and the Caribbean, while 5.4 million were disabled by air pollution, and these numbers keep increasing. Low-carbon public transport would reduce congestion, air pollution and accidents, and raise the productivity of cities.
  • Reduce inefficiency in resource management: through water reuse, leak reduction, landscape management, energy efficiency and more efficient subsidies. LAC can leverage limited public budgets by minimizing inefficiencies in key infrastructure services. The electricity investment needs, for example, would go down from $23 billion a year to $8 billion by moving to demand-side management, energy efficien­cy, and renewable energy in South America.
  • Invest in resilience: 9 countries in LAC are among the top 20 with the highest disaster risks. The COVID-19 crisis has shown that resilience – broadly defined to include multiple and overlapping risks like pandemics, climate, food and energy prices, and economic shocks - is needed . Data, planning, and institutions focused on resilience are now indispensable. LAC needs more drought and flood risk management, adaptive social protection systems, better urban and coastal planning, smart infrastructure, and strong community resilience.
  • Tackle inclusion and social instability: by ensuring that Indigenous peoples, Afro-descendants, unemployed youth, slum residents, and persons with disabilities, and other excluded groups are part of the effort. This can be achieved by deepening the understanding of COVID-19 impact on these groups, ensuring that employment and recovery programs benefit them, and designing public service expansion programs to cover them.
  • Leverage digital technologies: every one of the above directions can only be accelerated in the recovery through innovative applications of digital technologies. This also requires closure of the digital divide that reinforces exclusion, and a dedicated effort to support the creation and growth of SMEs for new digital jobs.

These are long standing goals for the region. How to achieve them now when pressures are greater than ever?

First, most countries in LAC entered this crisis with weak fiscal positions. Each investment needs to focus on potential savings, as well as maximizing impacts and efficiency of all public spending.

Second, many countries of the region underinvest their capital budgets – for every dollar of infrastructure investment planned for construction in a year, only 40 to 80% is implemented. Many stimulus programs from past crises included complex projects whose benefits came too slow and too late. Investments should be ready, easy to implement, and fast to execute.

Third, jobs were a critical issue before the crisis and are even more so now. Recovery programs must prioritize the jobs needed by the poor and newly poor . Many investments to increase resilience, services, and efficiency can be designed to create more low and medium skills jobs. Digital technology recovery programs should be designed to generate skilled jobs and SMEs.

Countries across the region have swung into action with much needed recovery programs. The World Bank is a partner in these efforts. Bringing global know-how and financing, we can help the region use the recovery to build a better future starting today.

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