The intensification of the adverse impacts of climate change, the socioeconomic effects of the coronavirus disease (COVID-19) pandemic, and the global challenges posed by food and energy security are leading to the stagnation of the progress made in decades of fighting against poverty, hunger and income and gender inequality in Latin America and the Caribbean and in the world. The Economic Commission for Latin America and the Caribbean (ECLAC) estimates that the region’s economy will grow 2.7% this year, while 16 countries have not yet recovered their pre-pandemic GDP levels. The region faces the growing structural challenge of low investment, which in 2021 stood at 19.7% of GDP, below the levels seen in much of the developed and emerging countries.
To achieve the broad transformations needed to tackle the climate crisis, trillions of dollars of investment are needed, and the mobilization of inclusive and sufficient financing that does not further aggravate countries’ debt is essential. Yet developed countries have not even met their 2009 commitment to contribute $100 billion a year by 2020. With many developing countries facing mounting debt burdens and shrinking fiscal space, new ways cooperation, innovative instruments and grants and concessional financing should take precedence over debt-based instruments. In the first quarter of 2022, in Latin America the gross public debt of central governments stood at levels of 20 years ago (52.1% of GDP), in the Caribbean it reached 84.1% of GDP and in six countries of the subregion exceeded 90% of GDP. Due to vulnerability to climate change, private risk assessment companies worsen their rating and, therefore, the cost of public debt in Caribbean countries.
We need to turn commitments into actions and translate global pledges into regional and local solutions. Countercyclical fiscal packages in the region have not been in line with a green recovery or nationally determined contributions. However, Latin America and the Caribbean is well positioned to benefit from the climate transition. The endowment of resources in the region is important in terms of the necessary inputs for the energy transition (lithium, copper, wind energy and solar energy). Clean and affordable energy can reduce social gaps (16.7 million people lack access to electricity in the region) and be a catalyst for growth in the productive sectors. In addition, the volatility of fossil energy prices has indirect repercussions on the increase in food prices.
Latin America and the Caribbean is the most urbanized developing region (80%) -which is why it is necessary to invest in electromobility and infrastructure so that the growing transport sector is sustainable-, and there are opportunities to take advantage of the manufacturing and natural resources. Comprehensive approaches to mitigation can promote productive change and social inclusion if they are supported by coherent policy and investment decisions, through what ECLAC has called “the big push for sustainability” and implementation. simultaneous implementation of the Sustainable Development Goals (SDGs).
The region emits a small part of global emissions, but is highly vulnerable to the effects of climate change. However, finance flows for adaptation are equivalent to a small fraction of those dedicated to mitigation efforts. For small island developing states (SIDS) in the Caribbean and vulnerable countries in Central America—facing insufficient access to debt relief and concessional financing options—there is an urgent need to address the asymmetry between little contribution to global emissions and the effects of the climate emergency that are already being suffered. Innovative solutions, such as debt-for-climate adaptation swaps, the use of natural disaster clauses in debt management, and the establishment of a Caribbean Resilience Fund, need international support.
In preparation for the 27th session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP 27), the United Nations regional commissions, together with Egypt, the country that will hold the Presidency of the COP 27, and the high-level champions for climate action from COP 26 and COP 27, will organize a cycle of five regional forums called Towards COP 27: Regional Forums on Initiatives to Finance Climate Action and the SDGs. The forums bring together stakeholders from the public and private sectors to catalyze investment in climate mitigation and adaptation in line with the SDGs. The innovation of the forums lies in the fact that they create spaces to display a catalog of projects ready to be financed, discuss the creation of an enabling environment and the financial instruments and vehicles necessary to mobilize climate financing for projects that correspond to the different needs. of the five regions and, in this way, address climate change in a comprehensive manner and reduce the current gap in financial flows in line with the Paris Agreement.
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