5 Milestones of Latin American Development in 2021
December 24, 2021
Visions of Development is a section promoted by CAF—development bank of Latin America—that discusses the main development issues of the region. Its articles are published simultaneously in the main media outlets around Latin America.
Despite the wishes and hopes of a good part of humanity, 2021 will remain in our memory as another year of the pandemic. It was the year when we began to see the light at the end of the tunnel, thanks to vaccines, and there was also some economic euphoria after seeing a rebound in global growth, but the social, personal, health systems and much of the economic activity continued to tip the balance towards crisis side.
Economic growth in Latin America and the Caribbean in 2021 stood at 6.3% of GDP, a very positive figure after the sharp recession of 2020. But experts predict that maintaining these levels of growth will be difficult in the coming years. Thus, countries in the region will have to reinforce their social protection systems, invest more and better in infrastructure and work on increasing productivity and competitiveness.
In any case, 2021 leaves us with some noteworthy development milestones in Latin America and the Caribbean:
- Progress of vaccination in Latin America and the Caribbean
While the West and China advanced their vaccination plans at a frantic pace, developing regions struggled to access vaccines, in part due to the absence of drugs and poor infrastructure. Currently, 57% of the world’s population is vaccinated.
But Latin America and the Caribbean was lagging in 2021, picking up pace towards the end of the year to close at 56% of the population. In the US and the EU, around 61.5% of people have been vaccinated, and about 80% in China. The differences within the region are also remarkable, with countries such as Chile and Cuba with vaccination rates greater than 80%, others with also high numbers, such as Argentina (69%), Brazil (66%) and Uruguay (76%), and other still lagging, with less than 40%. Despite the initial drawbacks, all countries have ambitious vaccination plans to achieve herd immunity in the coming months, which is a sign of the region’s responsiveness.
The region is expected to grow by 6.3% in 2021, a necessary rebound after last year’s recession, which helped prop up some industries and enhance others, such as e-commerce or streaming. Despite the good news, the major structural challenges of Latin America and the Caribbean remain more relevant than ever after the pandemic. One of them is the low potential growth, dropping since 2015, which slowed the poverty reduction rate and inequality since the previous decade. Between 2015 and 2020, poverty rose by about 6 percentage points from the low of 27.8% in 2014. Half of that occurred with the collapse of economic activity and unemployment caused by the pandemic in 2020.
More than 40,000 international climate experts met in Glasgow for COP26, a global summit that was set to raise ambitions to reduce greenhouse gas emissions, and thereby achieve carbon neutrality by 2050.
For Latin America and the Caribbean, it was a step forward in positioning itself as a relevant and necessary player in the fight against global warming, thanks mainly to its rich biodiversity. The region also made strides in expanding financing for adaptation and mitigation initiatives, and in its commitment to nature-based solutions. During COP26, CAF announced that it will allocate USD 25 billion over the next five years to promote green growth in the region, expanding green operations from the current 24% to 40% by 2026.
The pandemic accelerated to varying degrees the digitalization of business, commerce, education and government at the global level. The region has an opportunity to consolidate digital transformation with greater investment in connectivity infrastructure, foster the productive use of digital technologies, close access gaps in households and workers and improve guarantees for data privacy. The regional scale can also be used to promote a regional digital market that can facilitate connectivity and digital entrepreneurship.
The crisis has also exposed the need to reach new consensus and unite different stakeholders in promoting solutions. In this sense, the role of development banks has been strategic in mobilizing funds to the region, serving as a transmission belt for extra-regional capital and innovating in financial products to strengthen sectors that promote sustainable development, create jobs and help reduce poverty.
In this connection, CAF’s board of directors approved by consensus in early December a USD 7 billion capitalization, thus doubling the portfolio by 2030, with a focus on a green bank and economic revival strategy, to help lay the foundation for a more prosperous, inclusive and environmentally friendly region.