The World Bank describes the Blue Economy as, ‘the sustainable and integrated development of economic sectors in healthy oceans’. The organisation estimates that coastal and marine-based industries contribute USD 2.5 trillion to the global economy and Latin America, with 40,000 kilometres of coastline, is starting to benefit from innovative financial mechanisms to promote its Blue Economy.
A professor at the University of Panama explained that the growth potential for the Blue Economy was clear, “Across Latin America and the Caribbean, the total population residing in coastal areas is 27% and coastal tourism accounts for USD 6 billion in the Caribbean alone.”
“Across Latin America and the Caribbean, the total population residing in coastal areas is 27% and coastal tourism accounts for USD 6 billion in the Caribbean alone.”
Professor, University of Panama
Consequently, regional and global development banks are seeing an opportunity to promote Latin America’s Blue Economy. At the 26th United Nations Climate Change conference (“COP26”) in Glasgow, the Inter-American Development Bank (“IDB”) announced the issuance of a USD 37 million fixed rate bond to help fund projects to increase access to clean water in the region, in what has been described as Latin America’s first Blue Bond.
The CEO of an environmental financing firm in Colombia summarised, “Multinational organisations such as the World Bank and the IDB are leading these Blue Economy initiatives in Latin America but there is still a long way to go in terms of attracting investment firms and financial institutions.”
But impact investment in the Blue Economy initiatives has been slow to reach the region as the plans for raising awareness have been hindered by the lack of collective ocean governance frameworks. To attract international investors, local governments need to implement ambitious reform programmes which need to be brought forward through specific policy actions. This includes designing new environmental frameworks for public-private partnerships and understanding the economic impact of creating such joint initiatives. Only with clear goals can sub-regions such as the Caribbean, where 95% of the territory is located in the marine habitat, have the potential to boost economic growth through blue projects.
A lack of information was another reason cited for a lack of private sector engagement, according to the environmental finance CEO, “There are few databases or information systems that can support policy making for Blue Economy initiatives. The International Finance Corporation (“IFC”) is working on a Blue Finance Guide which should help to highlight some of these challenges and encourage policymakers to solve them.”
“The International Finance Corporation is working on a Blue Finance Guide which should help to highlight some of these challenges and encourage policymakers to solve them.”
CEO, Environmental Financing firm, Colombia
In a sign that things may be changing, a year after the IDB’s bond, in October 2022 the IFC announced a USD 40 million agreement with Banco Internacional of Ecuador to support the first private sector blue bond in the region, which will be executed through the Quito Stock Exchange. The funds will support the preservation of clean water resources, sustainable aquaculture, fishing, and seafood value chain management.
The professor at the University of Panama confirmed that the Blue Economy was receiving more interest, “International investors are starting to turn their attention to the marine segment and there are several private funds with global impact that are actively seeking investment opportunities in the blue economy in the Caribbean region. The areas of greatest interest to the private sector are: marine waste management, the circular economy, fisheries and aquaculture, coral restoration and marine energy.”
These examples of cooperation between international agencies, local governments, private sector companies, and civil society are key to boost Latin America’s Blue Economy while at the same time establishing good ocean governance practices.