Dubai — Latin America faces the challenge of an anticipated economic slowdown in 2024 amid global pressures and ongoing shocks from inflation. Insufficient efforts to address inequality and promote intraregional trade stand out as primary barriers to overcoming the region’s challenges.
Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), emphasized the critical need for Latin America to recognize that “investing in people, investing in greater equality in societies, is necessary for economies to flourish.” While acknowledging the structural progress of countries like Colombia, Georgieva stressed that “more can be done.”
ECLAC’s Alarming Findings
A recent report by the Economic Commission for Latin America and the Caribbean (ECLAC) highlighted a stark income disparity, with the wealthiest population earning 21 times more than the least favored. The combined wealth of billionaires in the region reached $453 billion in 2022, marking a $4.6 billion increase from 2021 and a substantial $56.3 billion surge from 2019.
Another significant challenge highlighted by Georgieva pertains to trade and interregional connections, particularly in light of disruptions in the supply chain during the pandemic and the ripple effects of the war in Ukraine.
Georgieva pointed out a key dilemma, stating, “Latin America doesn’t integrate enough” within the region itself. She noted that intraregional trade in Latin America is considerably below levels observed in other parts of the world. Addressing this, she emphasized the potential for Latin American countries to “eliminate barriers for Latin American countries, interacting among themselves, leveraging proximity,” stating that “that’s an aspect where more can be done.”
ECLAC figures indicated a 1.7% decline in the value of goods exports in Latin America and the Caribbean in the first half compared to the same period in 2022. On the flip side, regional sales of services grew by 17% during the same period, thanks to the boost from the tourism recovery.
Economic Challenges in 2024
Turning to economic projections, the IMF anticipates a moderation in economic growth for Latin America and the Caribbean from 4.1% in 2022 to 2.3% in 2023. The IMF also expects inflation to gradually converge toward levels set as targets by central banks. In October, the World Bank upwardly revised its GDP growth projections for Latin America and the Caribbean for 2023, reaching 2%.
Despite Latin America’s GDP being 11% higher than its pre-pandemic level in 2019, driven primarily by private consumption, Georgieva noted the significant contrast with East and South Asia (30% higher) and Eastern Europe (15% above), still affected by the war.
Regarding interest rates and monetary policy, Georgieva highlighted that most countries in Latin America have responded well to the risks of inflation, making timely adjustments. She emphasized that many countries in the region have already chosen a more moderate monetary policy, given the earlier decisions on interest rates.
Climate Action Challenges
At COP28, Georgieva addressed the financial challenges faced by emerging countries in investing in climate action. She underscored the need to mobilize necessary resources and make emerging markets more attractive for investment, stating, “It’s really challenging for emerging markets and developing economies to invest in climate action. Yet, if they don’t, the world will be at a loss because even if the United States, Europe, Japan, and Australia reduce their emissions to zero, two-thirds of the increase in emissions come from rapidly growing emerging markets and developing economies.”
At the 2023 United Nations Climate Change Conference, approval was given to establish a fund for losses and damages focused on the most vulnerable countries to the climate crisis. Managed by the World Bank for a provisional period of four years, the fund will commence with financial contributions from the United Arab Emirates ($100 million), Germany ($100 million), the United Kingdom (£40 million), the United States ($17.5 million), and Japan ($10 million).