Natural endowment

Latin America must leverage its natural endowment to build back better.

Latin America has an enormous natural endowment that could position it for a robust green economic recovery. The challenge, as with any endowment, is to invest it successfully and sustainably for the long-term benefit of all stakeholders.

A senior economist at the World Bank explained, “Latin America has the cleanest energy matrix in the world, mining resources central to the decarbonisation agenda, 22% of the world’s forests, the world’s largest producer of ecosystem services and is a net exporter of food with many options for sustainable agriculture and aquaculture. Latin America must leverage its natural endowment for a robust, greener recovery.”

“Latin America must leverage its natural endowment for a robust, greener recovery.”

Senior economist, World Bank

There are several ways this could be achieved, for example: find new green growth opportunities and markets, transform cities into green and productive hubs, reduce inefficiencies in resource management and enable the digital economy by investing in the appropriate infrastructure.

A Swiss environmental and social investment specialist warns about the risks of only focusing on digital, “Digital does not always mean sustainable, the focus should be on building a circular economy and using digital tools to achieve this. For example, in agriculture, use robotics to measure soil health, improve efficient and reduce the use of chemicals, or consider blockchain technologies to track a whole supply chain so consumers can make informed decisions.

Unfortunately, most countries in Latin America and the Caribbean entered the global pandemic with weak fiscal positions so every investment must focus on potential savings, as well as maximising the returns and impact of public investment.

A former economic advisor to the Chilean government highlights another challenge, “Many countries in the region underinvest their capital budgets – for every dollar of infrastructure investment planned for construction in a year, only 40% to 80% is actually implemented. Many stimulus programmes from past crises included complex projects whose benefits came too late. Investments must be ready, easy to implement, and fast to execute.”

“Ultimately, it is government that makes the rules to force companies and investors to internalise their externalities.”

Environmental and social investment specialist, Switzerland

The environmental and social investment specialist believes governments have a critical role to play, “Ultimately, it is government that makes the rules to force companies and investors to internalise their externalities. There should be more co-operation between countries on standardising the rules to measure how green or socially responsible companies are. New regulations are needed around carbon emissions, use of plastics, use of petroleum and other natural resources.”

So, although Latin America has a large natural endowment, their reliance upon it is a challenge for the recovery of the region’s economies.

 

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