Davos Agenda

Here's how Latin America can help tackle the global food, energy and climate crises

Uyuni salt flat, Bolivia in Latin America.

Some of the world's largest lithium reserves are under salt flats in Chile and Bolivia. Image: Jeison Higuita/Unsplash

Mauricio Cárdenas
Global Senior Research Fellow, Columbia’s Center on Global Energy Policy
Share:
Our Impact
What's the World Economic Forum doing to accelerate action on Davos Agenda?
A hand holding a looking glass by a lake
Crowdsource Innovation
Get involved with our crowdsourced digital platform to deliver impact at scale
Stay up to date:

Davos Agenda

This article is part of: World Economic Forum Annual Meeting

Listen to the article

  • Latin America is well positioned to increase its geopolitical relevance and become part of the solution to the global challenges.
  • The region can provide food, energy and biodiversity to tackle the world's combined crises.
  • Leaders in the region must resist a return to protectionism and big government, and prioritize macroeconomic stability.

With the world immersed in multiple and overlapping crises, Latin America seems to be in the right place to increase its geopolitical relevance and become part of the solution to the global challenges, rather than—once again—part of the problems that the world needs to solve.

The once-in-a-century COVID-19 pandemic—and the risk that other dangerous new viruses may emerge at any time—is far from the only example of the global crises of the day. Catastrophic extreme weather events resulting from climate change are now much more frequent, especially in countries that are the least prepared to cope with them. The world is facing food shortages. The energy crisis that started a year ago does not seem to be fading.

Latin America has the food and energy the world needs. It has the biodiversity that is essential to contain the climate crisis. It is a safe and reliable partner that neither has interest nor capabilities to start international wars. This, plus the large number of Free Trade Agreements with the US, Europe and Asia make it the poster-child of friend-shoring.

Have you read?

While democratic values and principles are being challenged everywhere, Venezuela apart, Latin America is a bastion of democracy and democratic freedom. Many countries in the region recently elected left-leaning leaders to replace far right or center-right governments. Transitions took place smoothly, notwithstanding the recent attempt of supporters of Jair Bolsonaro to seize government buildings in Brasilia.

The energy transition, as well as the need to strengthen energy security in Europe and other parts of the world, are good examples of why Latin America is more relevant today than in the past. It is the only region that can compete with China as a source of the critical minerals that are required for the energy transition. According to the International Energy Agency, for lithium, cobalt and rare earth elements, the top three producing nations control well over three-quarters of global output (the equivalent figure for oil is less than 40%). In the case of lithium processing, China accounts for 58% while Chile, the second largest producer, has 29%. Argentina and Bolivia have high lithium reserves as well.

The recently passed Inflation Reduction Act in the US mandates two sourcing requirements to receive the full clean vehicle credit, starting this year. To be eligible for the half of the total possible credit ($3,750 per vehicle), at least 40% of the critical mineral components of the vehicle’s battery must be extracted or processed in the US or a country that is party to a US Free Trade Agreement, or recycled in North America. This minimum threshold will continue to rise in the following years, up to 80% by 2027. To be eligible for the other half of the total possible credit, at least 50% of battery components need to be manufactured in US, Mexico, or Canada. The bill wants to deliberately reduce China’s dominance in these products, and in doing so is creating opportunities for Latin America.

In terms of energy security, Brazil’s oil production is increasing from 2.5 million barrels per day (bpd) in 2019 to 3.3 million bpd this year. In the same time span, Guyana’s production is increasing by 300 thousand bpd, and Argentina’s by 150 thousand bpd. This means that in a relatively short period of time, the region is adding more than a million barrels of oil per day to global production.

The energy transition, as well as the need to strengthen energy security in Europe and other parts of the world, are good examples of why Latin America is more relevant today than in the past. It is the only region that can compete with China as a source of the critical minerals that are required for the energy transition.

Mauricio Cárdenas, Global Senior Research Fellow, Columbia’s Center on Global Energy Policy

But the enhanced strategic weight of Latin America will not automatically translate into greater prosperity unless the right decisions are made. The group of leaders that now run the largest countries in the region shares a distrust of the private sector, wants a bigger role for the state, and has great ambitions in terms of government programs. As difficult times are coming in economic matters—the region is expected to grow less than 1% this year—the new cohort of leaders is likely to double its bets in terms of government intervention. There will be no times of moderation, or turns towards the political center. Chances are that policies will become more radical in a tenser economic context.

The real risk is that ideologies and dogmas take charge at this crucial juncture. Misguided reforms, that bring the state back in places where the market can do—and is doing—a better job, a return of protectionism, can all derail this great opportunity. Worse, if governments do not prioritize macroeconomic stability—and the costs that this implies in terms of tighter budgets and tolerance for higher interest rates—foreign investors may turn around. This will put the region back in the patient’s seat, rather than providing the remedies that the world urgently needs.

Don't miss any update on this topic

Create a free account and access your personalized content collection with our latest publications and analyses.

Sign up for free

License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

Share:
World Economic Forum logo
Global Agenda

The Agenda Weekly

A weekly update of the most important issues driving the global agenda

Subscribe today

You can unsubscribe at any time using the link in our emails. For more details, review our privacy policy.

2:45

Davos 2024 Opening Film

Andrea Willige

March 27, 2024

About Us

Events

Media

Partners & Members

  • Join Us

Language Editions

Privacy Policy & Terms of Service

© 2024 World Economic Forum