RED: How Local Governments Can Bridge Development Gaps in Latin America and the Caribbean

Transforming local and regional governments is essential for Latin America and the Caribbean to advance toward sustainable, inclusive, and resilient development. This is the central message of the new 2025 Economy and Development Report (RED), published by CAF, which places subnational governments at the heart of the solutions to close the region’s social and territorial gaps.

Titled Local Solutions: The Role of Local and Regional Governments in Latin America and the Caribbean, the report examines the capabilities, limitations, and opportunities of municipalities and regions to drive meaningful change from within their territories.

The RED builds on a striking fact: local and regional governments are responsible for an average of 20% of public spending in the region, reaching nearly 50% in some countries. However, they operate under institutional constraints, fragmented legal frameworks, and serious coordination challenges among different levels of government.

The report identifies critical weaknesses in the formulation, implementation, evaluation, and oversight of local public policies. It also underscores the urgent need to strengthen subnational financing and fiscal management mechanisms, with clearer rules, better-aligned incentives, and greater predictability.

Highlights

Among the report’s main findings is that strengthening the institutional capacity of local and regional governments is essential to improve services such as education, health, and basic infrastructure, as well as to address challenges such as climate change, urban informality, and violence.

The study also reveals deep inequalities across territories—both in governments’ management capacities and in the outcomes achieved—highlighting the need for a more coordinated and ambitious territorial development policy.

“Building sustainable, equitable, and resilient development in Latin America and the Caribbean requires looking beyond central governments. This RED shows that municipalities and intermediate governments are key actors in the transformation the region needs. CAF will continue to support efforts to strengthen their capacity, autonomy, and representation,” said Sergio Díaz-Granados, CAF’s Executive President.

The report also explores new forms of coordination between government levels, with a focus on more robust multilevel governance and the development of technical capacities that enable local governments to more effectively fulfill their roles.

Atlas of Local and National Governments

As an added value, RED introduces CAF’s Atlas of Local and National Governments, the most comprehensive, open, transparent, and up-to-date database on subnational development indicators in the region. It includes demographic, education, employment, infrastructure, and public service data, as well as ethnic affiliation and access to information and communication technologies.

A total of 35 indicators were selected based on their relevance and availability in national censuses from 29 countries in the Community of Latin American and Caribbean States (CELAC). The Atlas also includes data from 262 regional governments and 18,236 local governments.

To publish the database, the information was organized to allow for comparisons between countries and jurisdictions, considering differences in census forms.

This platform enables users to view the status of each jurisdiction across key well-being variables such as unemployment, access to adequate water and sanitation, and population education levels. The interactive map view, in turn, illustrates how these indicators vary across regions within each country. Users can explore the significant heterogeneities across Latin America and the Caribbean and see how development indicators relate to geographic and demographic characteristics of each jurisdiction.

RED 2025 Launch

The official launch of RED 2025 took place on May 6 in Brasília, with the presence of government officials, territorial development experts, and civil society representatives.

📊 The full report and the Atlas are available free of charge at: scioteca.caf.com, and the Atlas can be accessed at atlasgobiernoslocales.caf.com.