Latin America and the Caribbean Must Rethink Its Future, and the Time Is Now

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by Carlos Felipe Jaramillo

The future belongs to those who believe in the beauty of their dreams – Eleanor Roosevelt

We can never really foresee the future. It is always dynamic and changing, and shaped by any number of unforeseen circumstances. Who could have predicted, for instance, that a global pandemic would burst upon us to disrupt our individual plans and collective dreams?

But while we cannot predict what is to come, we can dream about the future we want and take action to make it happen. This is the most important challenge lying ahead for Latin America and the Caribbean: to create our region’s future with a long-term vision that makes the most of opportunities and better prepares us to navigate future crises.

In other words, our countries have the opportunity to emerge from the coronavirus with a new growth paradigm that avoids the errors of the past and learns from successful cases in other parts of the world. Collective progress, job creation and the aim to lift millions of families out of poverty all depend on it.

This requires, among other things, that Latin American economies take a leap forward in terms of productivity and avoid taking refuge in closed frameworks. Protectionism can be very tempting, especially in times of uncertainty. But it is a dead end for the investment, innovation and dynamism that are needed if we want to leave behind the sluggish growth that the region has been mired in.

We are still in the emergency phase of the COVID-19 pandemic, and dealing with the health threat and its enormous social and economic costs is the most immediate challenge. Our governments are focusing most of their energy on this crisis and, as a strategic long-term partner, the World Bank has committed to amplify this effort with resources and technical advice. In Latin America alone, we have already deployed close to 2 billion dollars, benefitting 19 countries.

The prognosis is undoubtedly negative. According to estimates in our June 2020 Global Economic Prospects (GEP) report, the COVID-19 pandemic will result in a 7.2% fall in regional GDP this year, a number with no parallel over the last century. Latin America and the Caribbean will be the hardest hit region, and the direct consequence of this will be fewer jobs and more poverty.

Nevertheless, we will overcome the current crisis, and we must do so based on a vision of a better future. It is urgent that we set this course. The past 10 years were a lost decade in economic terms, with an average growth in per capita GDP of barely 0.56%. We must not allow such stagnation to happen again.

Identifying Opportunities and Leveraging Them

Rethinking the future means reviewing past policies, making the necessary adjustments and redirecting our energy toward a new, more dynamic growth pattern, one that benefits everyone in our societies — especially the poor and disadvantaged. It is time for Latin America to build its own model of success.

Our region needs to focus on building human capital as a long-term policy: it is crucial to foster productivity and incorporate the most vulnerable groups into the workplace. This future entails the adoption of new education and training models that build on the innovations tested during the pandemic, through digital tools and other distance learning methods. We need our workers to acquire the skills demanded by a more technology-driven labour market.

The World Bank is cooperating in various ways to support this goal, for instance, via inclusive learning programs like the one approved last March for Peru, which promotes professional advancement systems and early education. Similar projects aimed at building human capital through education have also been approved this year for Honduras and El Salvador, totalling US$30 million and US$250 million, respectively.

Moreover, Latin America must expand the use of digital technologies, which have often been a lifeline during this pandemic — and this means expanding access to those who do not yet have it. Those with good broadband coverage have been able to work remotely, keep their children in distance learning programs, consult physicians and use digital payments and other financial services. Unfortunately, nearly half of all Latin Americans lack a mobile broadband subscription, while only 46% have a land connection. We need to address this issue, so that digital reduces rather than exacerbates inequality.  

In this area, the World Bank last month approved an initiative worth US$94 million to promote the digital economy in a group of Caribbean countries. It involves an innovative project — the first of its kind in the area — which will expand connectivity, online public and financial services, and training programs for companies and individuals, with the goal of building a labour force that is ready for future needs. All of Latin America faces this challenge.  

However, to increase productivity, the region’s governments also need to create an environment that is conducive to investment, with more room for new entrepreneurs and new ideas, and to eliminate the impediments that have limited competition and curbed economic vitality for far too long. The most competitive companies are those that are more fully integrated into the global market, and we need a new generation of regional companies that can take advantage of the opportunities that will open up as the world recovers from the coronavirus.

Furthermore, environmental sustainability must be at the heart of our recovery from the crisis. Stimulus programs need to create jobs, growth and access to markets while protecting our region’s rich biodiversity. Investments in agriculture, fishing, forestry or irrigation and sanitation infrastructure can rapidly create jobs while improving resilience to droughts, floods and other climate-related effects that often fall hardest on the poorest.

Ultimately, rethinking the future of Latin America means identifying new opportunities and seizing them. The pandemic has been extremely destructive, and it will take time before its effects are left behind. But we can and must turn the destruction that we are now enduring into a creative opportunity. With the appropriate reforms, the crisis can lead to a new growth path that creates jobs, reduces poverty and closes the gaps for people and economies across the region. This is the challenge, and this is the time to act.  Join me at @CF_Jaramillo to continue this and other conversations using the hashtag  #Rethinkthefuture.

Carlos Felipe Jaramillo is the Vice President of the World Bank for Latin America and the Caribbean

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