The World Bank said in a report on Tuesday that convergence and the green economy present opportunities for Latin America and the Caribbean (LAC) that the region should seize because the current estimated economic growth will not be enough to combat poverty.
According to the global lender, the region’s 2023 growth forecasts have been continuously revised downward over the past six months. Estimates for 2024 and 2025 are 1.4%, “too low for significant progress in reducing poverty”.
“The region has largely recovered from the pandemic crisis, but has unfortunately returned to the lower levels of growth of the past decade,” said Carlos Felipe Jaramillo, World Bank Vice President for Latin America and the Caribbean.
“Countries urgently need to accelerate inclusive growth.”
Two decades of progress in macroeconomic management have given Latin America and the Caribbean an overall economic resilience, with the debt ratio falling from 66.3% last year to 64.7% of GDP.
Poverty levels have fallen and employment has increased to the point where both have largely returned to pre-pandemic levels. Inflation, excluding Argentina, is expected to decline from 7.9% in 2022 to 5.0% this year.
But the region is also spending beyond its means and budget imbalances are expected to reach 2.7% of output this year.
Better integration
For years, LAC provided investors with a harsh environment of rapidly changing regulations, rising transportation costs and an unevenly skilled workforce that at times made Canada, the United Kingdom and the United States more attractive than regional giants Brazil and Mexico.
Added to this are investor concerns about local costs of capital, real estate and taxes, according to the World Bank.
“Latin America and the Caribbean remains one of the least integrated regions, while trade openness and (foreign direct) investment flows have mostly stagnated or declined over the past 20 years,” said William Maloney, chief economist for Latin America and the Caribbean. Bank.
“Countries need to find ways to become more attractive and take advantage of the near-boosting trends,” he said, taking advantage of the region’s advantages in producing renewable energy and green transformation products.
