Latin America and the Caribbean: Year in Review 2021

Following a difficult 2020, Latin America and the Caribbean has seen a return to growth this year. Although the region still has a long way to go in terms of its vaccine rollout, the pandemic has prompted a range of changes that will impact positively on the region in the medium to long term, among them increased digitalisation and a redoubled focus on sustainability.

This year was characterised by an economic bounce-back, with the IMF predicting that the region will have seen growth of 6.3% in 2021. This is higher than the world average of 5.9%, as well as that of the G7 countries, which is at 5.3%.

In terms of individual growth figures, among the region’s major economies the frontrunners are Chile (11%) and Peru (10%), followed by Colombia (7.6%) and Argentina (7.5%). Mexico, meanwhile, is set to grow by 6.2%, Brazil by 5.2% and Bolivia by 5%, while Venezuela’s economy will contract by 5%.

Notwithstanding these figures, the economic impact of the pandemic is still being felt across Latin America. GDP per capita is not expected to return to pre‑crisis levels until 2023‑24, while poverty and extreme poverty are at 12- and 20-year highs, respectively. In Latin America as elsewhere in the world, it remains to be seen what impact the Omicron variant will have.

With regard to vaccination figures, in many ways the vaccine rollout has reflected the various divisions, inequalities and stages of development in Latin America.

At one end of the scale is Chile, which by April this year was in the top-10 countries worldwide for per capita immunisations, alongside other global leaders like Israel, the UK and the UAE.

As a wealthier country, Chile was able to accomplish this through more advanced logistics and health care infrastructure.

By the end of the year, the country with the most successful vaccination rate was Cuba, at 255.29 doses per 100 people. At the other end of the scale was Haiti, with 1.6 doses per 100 people.

The pandemic also brought a number of structural issues sharply into focus, among them the widespread lack of adequate social safety nets and the prevalence of informal employment.

However, many countries are taking the pandemic as an impetus to make far-reaching changes, for example by working to increase digitalisation, or by putting sustainability at the heart of policy-making. In this sense, 2021 saw the implementation or expansion of many initiatives that will have a long-lasting impact on the region’s economy.

As in many emerging regions, one positive outcome of the pandemic was an expansion of digitalisation.

In 2020 this took the form of an explosion in e-commerce and online payments, turning the region into one of the fastest-growing e-commerce markets in the world. This trend has been consolidated in 2021 and is paving the way for an expansion of digital technologies across the board.

In Mexico, for example, this process was seen in a variety of sectors, most notably energy and banking; it is expected that this will help the country both to address structural vulnerabilities and reap the benefits of new global economic trends.

A significant development in this regard was Microsoft’s announcement in February that it was to invest $1.1bn in Mexico for the 2021-25 period. These funds will be used to establish cloud data centre clusters to enhance access to digital technologies. The plan also focuses on education and upskilling, with the creation of three laboratories in collaboration with public universities.

Digitalisation is also helping Mexico’s unbanked segment – which totals some 63% of the population – gain access to formal banking. A key challenge is fomenting trust in digital payments; in this light, cybersecurity has become a growth industry in the country.

Similarly, in Peru significant progress on banking penetration has been made with the aid of digital technologies, while there has been a substantial increase in the use of contactless payments due to social-distancing rules and health-related concerns.

Another regional pacesetter in terms of both digitalisation and moving away from cash, is Trinidad and Tobago, where 2021 saw the establishment of the Ministry of Digital Transformation, the Tech Investment Fund and a Tech Promotions and Development Company.

Digitalisation is part of a broader societal and technological shift that is often characterised as the Fourth Industrial Revolution (4IR).

Different technologies associated with the 4IR are gaining ground in Latin America.

For example, with an estimated 113m people living in substandard housing across the region, the 3D printing of low-cost houses – a process which uses a mix of concrete, water and other materials to build a house for as little as $4000 – is increasingly seen as a viable option to address housing shortages.

In El Salvador, pilot projects have been launched that use this approach to construct affordable housing for low-income families who have lost their homes due to natural disasters, while in Mexico an entirely new neighbourhood for 50 low-income families is being constructed using the 3D printing method.

Agriculture is another sector which is increasingly benefitting from the integration of 4IR techniques and technologies.

These tend to centre on leveraging innovation to boost yields and resiliency in national and regional supply chains, with a focus on practices that are adapted to local agro-ecological contexts.

In Guatemala, for instance, the World Bank-funded Responding to COVID-19: Modern and Resilient Agri-food Value Chains project, launched earlier this year, is an agro-industrialisation strategy that aims to reduce food losses and increase the uptake of climate-resilient technologies.

Another outcome of the Covid-19 pandemic has been to accelerate a shift towards what is known as the circular economy.

A counterpoint to the “take, make and throw away” linear model, the circular economy denotes an economic system in which products and materials are kept in circulation for as long as possible. In designing things to be as durable, reusable and recyclable as possible, the model places a high importance on efficiency and ecological sustainability, and is underpinned by a shift towards renewable energy sources.

As Latin America continues its economic recovery from Covid-19, countries in the region are increasingly looking towards the circular economy as a platform for sustainable future growth.

A major step in this direction came in February this year with the launch of the Regional Coalition on Circular Economy, a Latin America and Caribbean-wide initiative led by the UN Environmental Programme, which aims to increase access to financing for sustainable projects.

Elsewhere, circular economy solutions can also play a role in securing other everyday needs, such as clean water and sanitation.

For example, at the Atotonilco Wastewater Treatment Plant in Mexico, treated water is used to irrigate some 90,000 ha of agricultural land in the Mezquital Valley, while the sludge derived from the process is repurposed to produce electricity and thermal energy, and the biosolid by-products are used to enhance the soil in forests and agriculture.

When it comes to sustainability, the region’s universities are playing a leading role in driving and inspiring change.

For example, Mexico’s National Autonomous University (Universidad Nacional Autónoma de México, UNAM) in 2018 inaugurated a University Coordination for Sustainability, the goal of which is to make sustainability a central element of UNAM’s identity, establishing it as a national and international reference point in the field.

Meanwhile, the University of São Paulo (USP) – Brazil’s leading university – has implemented a range of measures to cut its carbon footprint, among them a reduction in the use of official vehicles and virtual thesis defences. The USP also recently instituted an Interdisciplinary Climate Investigation Centre, which brings together researchers from different subject areas.

Indeed, in Latin America in general there is a growing awareness of the importance of climate change education. In March this year Argentina’s government approved a law mandating the implementation of a national strategy on environmental education at all levels.

If this momentum can be sustained – and if it is accompanied by significant progress towards decarbonisation – then 2021 may well mark a watershed year in Latin America’s transition to genuine sustainability.