An Analysis of Trends: Latin America and the Caribbean - Summary and Overview

Editor’s note: this is an excerpt from An Analysis of Trends: Latin America and the Caribbean – Economic Growth and the Environment, 2010–2020.

Summary and Overview

In the coming decade, the countries of Latin America and the Caribbean face both his­toric opportunities and possibly unprecedented challenges. Their ability to grasp the unique prospects for deepening social investment that their demographics offer, and to avert the damage that climate change threatens, will be key to future prospects. If USAID’s missions in the region are more fully aware of the scope of both the promise and the challenge, they can better orient their support to partners in the region in a strategic fashion.

This paper first offers a high level survey of demographic, economic and environmental trends that are poised to shape the region’s development chances during the coming decade:

• The first part of the trends survey focuses on demographic factors. Many countries in the LAC region are going through an “age structural transition” (AST), during which their active working population is larger than the total number of young or elderly dependents. This transition offers an historic chance to increase family savings and per capita investment in health, education and hence overall welfare. However, to realize the potential of this opportunity, policies that support macroeconomic stability, education, and health must be set in place and maintained. In many countries, the requisite enabling policies are not in place, raising the very real likelihood that the full “demographic dividend” of the AST will not be achieved.
• Two additional demographic trends, while secondary to the AST in overall implications, are noteworthy and important to USAID’s programming. First, a large sub-group of the population — the indigenous and Afro-descendent communities of the region — is not participating in the transition. Their situation continues to call for special attention in any programming that seeks to advance equitable economic development. And the LAC region’s urbanization — among the highest in the world — is accompanied by a host of urban issues that call for urgent attention.
• The second section of the trends survey provides a summary of key external and internal economic factors that are most likely to shape the region’s choices during the coming decade. Improving macroeconomic policies underpinned a relatively quick recovery in the region from the downturn caused by the global financial crisis. And continuing high demand for raw materials from Asia will be a dominant trend for several, though not all, countries, particularly in South America. For Central America and the Caribbean, however, the United States and Europe will continue to be the key markets. Unfortunately, widespread and deeply rooted corruption threatens most countries’ ability to respond adequately to new opportunities.

The final section of the trends survey focuses on the growing impacts of climate change that the region faces. If current emissions levels continue unabated, Latin America and the Caribbean will need to adjust to a host of somewhat unpredictable but very costly impacts, from sea level rise, through coral bleaching and changing rainfall patterns, to glacial melt and severe weather events. The costs of the necessary adjustments will make a significant difference in the growth prospects for most countries.

The second part of the paper focuses on four key issue areas that merit increased attention from USAID. These include climate change adaptation, the challenges of small economies in Central America and the Caribbean, indigenous and minority issues, and urban issues. The ongoing need for stronger growth policies, including a focus on supporting innovation, is also briefly assessed as a cross-cutting issue. All other policy areas depend on its success or failure. Preliminary suggestions for USAID action are identified in each focal area.

How should USAID respond to the emerging trends identified? At the Panama conference, discussion of the emerging trends and what they imply for USAID work in the region led to the conclusion that USAID has a sound base of policy analysis and programming already in place. It does not need to set aside all its current work and start over. Indeed, abandoning foundations already laid in sustainable natural resource management and strengthening the enabling environment for trade and investment would undermine the new work that is needed.

At the same time, USAID cannot and should not just continue business as usual. Some existing lines of work need to be re-oriented. For example, given growing awareness of climate change impacts as a “killer threat” to biodiversity, environmental work should refocus on strengthening mitigation and building resilience to the impacts already being felt. Similarly, on the economic growth front, increased attention is needed to supporting more widespread and effective innovation in management and technology, as a critical way for the region to final overcome its weak competitiveness in the global economy.

USAID, with its long-standing presence and strong reputation in the region, can build on the existing base of its programs in the region to help strategically guide resources into areas that address the region’s key challenges, while taking advantage of the opportunities it faces. This paper points to lines of program activities that, according to expert opinion, would make a real difference for the region in the context it faces. USAID should take the analysis and ideas presented in this paper to the next level, by identifying exactly where its bounded, strategic focus will be in the region for the coming decade. By setting five to seven ambitious and strategic goals for the region and aligning all resources to achieve them, USAID can and will make a tangible difference for development in the region in the coming years.

Read the full report.