Latin America: An Opportunity To Embark On A Sustainable And Inclusive Recovery
We are all recovering, slowly. This includes Latin America. The pandemic hit this region hard; a region that, although previously posting apparently solid growth, found that growth to be lacking given how quickly the house of cards came tumbling down. Regional GDP fell by 6.8% in 2020, according to data from CEPAL, which destroyed the social fabric and further widened historic social and economic inequalities.
Fortunately, and although there are still clouds on the horizon, we are leaving the worst of the pandemic behind us. Latin America posted 6.3% growth last year due to a boost in trade, rising raw material prices, and better financing conditions. It all seemed relatively positive until, toward the end of last year, inflation pressure began to emerge, interest rates rose, and bottlenecks reappeared in the supply chain, something that has only worsened since the outbreak of war in Ukraine.
Latin America posted 6.3% growth last year due to a boost in trade, rising raw material prices, and better financing conditions.
Although the war adds more uncertainty, nothing would suggest we are sinking back into a deep recession like the one we are recovering from. That said, the recovery will be slower than expected and will require additional measures to formulate more solid growth. That growth can only be solidified if it is sustainable, inclusive, and seeks public-private partnership as a way to accelerate progress. Crises have always been an important driving force for change. I am convinced that this pandemic will be no exception if we realize that we face an opportunity to change the way we live and work and make genuine progress toward different economic models.
One of the biggest lessons we learned from the pandemic is that we will get nowhere alone; we need to work together to overcome the major global challenges of climate change, economic and social inequality, the gender gap, poverty and hunger, accessibility to basic services, etc. Teamwork will be essential to address all the challenges and objectives enshrined in the Sustainable Development Goals (SDG) in 2015.
Latin America cannot miss this boat, the urgency of which has only been highlighted by digitalization. For example, let’s think about one of the shortcomings brought to light by the pandemic: the low level of investment in health and education infrastructures in the region. We cannot stand by and do nothing. Not in health, nor in education, nor in other basic service infrastructures, such as roads, railway connections, ports and airports, sanitation, energy, etc. Everything that promotes and accompanies development and underpins growth in a country.
We can’t ignore the issues of gender equality and financial inclusion. The former underpins society through economic, business, and social integration for half of the population – women. The latter, financial inclusion, is what lets us think about the future, whether that be to set up a small business or simply to finance studies, a better home, another opportunity, etc. All those things that add up to financial security and are important to ending the pockets of poverty that still remain in the region.
We cannot be left behind in the fight against climate change because Latin America is one of the regions most affected by the extreme weather events caused by global warming. We have little to lose and a great deal to gain if we make progress along the path to full decarbonization of our economies, the first stage of which is focused on a net zero emissions target by 2050.
“It is necessary to seek the support of the private sector to jointly face the great challenges ahead of us.”
Latin America must step up to harness this opportunity in full. That forward momentum requires decisiveness and a holistic approach capable of shifting from defensive measures with short-term goals to an agenda of sustainable and inclusive growth. For that, collaboration between the private sector and the public sector will be essential. It will be impossible to use either monetary policies (which need to be restrictive in order to contain inflation) or fiscal policies (with almost no room to maneuver following strong public borrowing during these years of crisis and pandemic) to the extent necessary for sustainable and inclusive growth. The competitive nature of the private sector must be harnessed in order to tackle the major challenges we face together and we cannot resolve alone. The lesson learned from the vaccines during the pandemic will light our path.
Public-private partnership would also help the world regain trust, one of the most pressing problems for Latin America according to a report by the IADB entitled “La clave de la cohesión social y el crecimiento en América Latina y Caribe” [“The key to social cohesion and growth in Latin America and the Caribbean”.] More transparency, more solid institutions, less bureaucracy, more social commitment, more productivity, fewer inequalities, more entrepreneurship, more education, more financial inclusion, more diversity, more and better governance are all things the public desires. The countries that lead the way on these fronts will not only get back off the ground faster but will lay down solid foundations and grow deep roots that will be hard to shake down or trample underfoot.
That is the positive aspect of this opportunity. We are moving forward, consolidating our position and pushing toward further progress, making it more difficult to move backwards.