Towards the transformation of the development model in Latin America and the Caribbean

In 2022, the countries of Latin America and the Caribbean face the effects of a series of shocks that have deteriorated their investment and production conditions, including the global financial crisis, the economic tensions between the major poles of the world economy, the pandemic of COVID-19, the war in Ukraine and the resurgence of inflation, in a context in which the environmental emergency is intensifying and the technological revolution is accelerating. Numerous analysts and international organizations speak of a series of cascading crises, including climate, health, employment, social, educational, food security, energy, and cost of living crises, all of which impact with different intensity and varied characteristics to many countries, including all of Latin America and the Caribbean.

The fight against inflation has tightened global financial conditions and increased volatility in financial markets and risk aversion. This has raised the cost of servicing debt, further reduced fiscal space and raised the risk of a recession in the world economy in 2023. The revision in growth rates for the vast majority of countries in the world for 2023 published recently by various agencies are down.

In the region, the combination of external and internal factors derived from the policy decisions adopted, or the absence of these, has reduced the capacity for economic growth and the generation of quality jobs and made it difficult to fight poverty and poverty extreme. Their economic and social structures have weakened and they have entered into situations that reinforce the inertia of weak economic performance.

Faced with this reality, ECLAC advocates that Latin America and the Caribbean redouble its efforts both to reactivate their economies and to transform the development models of the countries, placing at the center of these efforts policies for the transformation and diversification of production, as well as a a major boost in investment, public and private, to accelerate structural change and technological and digital transformation for high and sustained growth and sustainable and inclusive development.

In this strategy, the sectoral dimension is crucial, since it defines business strategies, business models and processes of capital formation and job creation. Although sectoral specificity must be defined in each national context, ECLAC proposes ten sectors or areas that are particularly promising: energy transition, electromobility, circular economy, bioeconomy, health manufacturing industry and digital transformation -which are at the center of innovation processes-, while the care economy, tourism, micro, small and medium-sized enterprises and the social economy are great generators of employment, with the consequent effects on income and the inclusion of disadvantaged social sectors.

Taking advantage of the potential in these areas implies transforming the region’s development model to generate favorable conditions for investment, growth, inclusion and sustainability.

The transformation of the model demands determined actions in multiple areas: development planning for policy coordination; improvement in the governance and institutional quality of the institutions in charge of the different areas; macroeconomic policies to accelerate growth and tackle inflation; construction of welfare states; strengthening of care systems as a pillar of a social state of rights; guarantee the rights of especially vulnerable populations; mitigation and adaptation to the environmental emergency; new governance of natural resources; implementation of industrial and technological policies; and regional integration in the face of the new geopolitics of globalization.

This agenda is ambitious, but the reality is that this is not a time for gradual or timid changes, but ambitious and transformational ones. Only raising the level of ambition can respond to the number of simultaneous challenges and shocks, and the complexity of the economies and societies in our region. To articulate the proposed strategies and policies, and to ensure their effective implementation and adjustments to new realities over time, new forms of experimentalist governance are required, based on iterative and participatory processes of policy formulation and implementation. In some cases, new fiscal, productive, social and environmental pacts will be necessary to overcome the problems of the situation and move in the long term towards sustainable, cohesive and resilient societies, characteristics that imply advancing towards the creation of welfare states within the framework of economies more efficient and productive.

In this moment of action to overcome limitations and take advantage of opportunities, ECLAC will present the analyzes and proposals summarized in these messages at its most important biennial meeting: the thirty-ninth period of sessions, to be held from October 24 to 26 in Buenos Aires. , Argentina, with the participation of high authorities of our region. We invite all those who are committed to working for the progress of Latin America and the Caribbean to participate in the debates.