Carlos Felipe Jaramillo, World Bank Vice President for Latin America and the Caribbean, Presents the Region’s Economic Outlook
On November 7, GAI hosted Carlos Felipe Jaramillo, World Bank Vice President for Latin America and the Caribbean, for a presentation on the World Bank’s views on the future economic outlook for the region.
Economic activity in the Latin America and the Caribbean (LAC) was paralyzed in 2020 as governments mandated national lockdowns to combat the spread of COVID-19, so 2021 proved to be a year of recovery and growth. However, just as many regional economies recovered their lost growth, new exogenous factors disrupted recovery. Jaramillo described how global inflation, supply chain disruptions, and Russia’s invasion of Ukraine have slowed growth and presented new challenges to the embattled region.
“The future of the region, in a nutshell, is difficult. It certainly has become more difficult than we thought it would be a year ago: When the world catches a cold, LAC gets pneumonia.”
Though challenges remain, Jaramillo highlighted several developments that make him optimistic about the transformations taking place in LAC.
Challenges and Opportunities
While growth has slowed down, the recovery that LAC experienced throughout 2021 was an indicator of the remarkable transformation the region experienced over the last 20 to 30 years. If the COVID-19 pandemic happened three decades ago, regional economies would have struggled significantly. While Latin American and Caribbean countries may have once lacked the financial resources to pursue stimulus programs in times of crisis, in 2020 and 2021 these advances were made possible through empowered public finances.
In 2022, however, rising market volatility challenged LAC’s still limited resources. Jaramillo pointed out that rising prices of key commodities such as food, oil, and fertilizer have created serious challenges, and central banks have had to adjust monetary policy, cutting the money supply to combat inflation. For this reason, the World Bank’s forecast for 2023 is bleak.
Addressing climate change is a particularly important issue to Jaramillo, who pointed to recent droughts in places like Argentina and Paraguay as illustrations of the threat that climate change poses to regional development. Throughout the COVID-19 pandemic the World Bank continued to work with countries to finance and strengthen mitigation and adaptation programs. While LAC nations are not the historical culprits of global emissions, Jaramillo noted their remarkable interest in projects like forest recovery and renewable energy development. The outcome of the ongoing COP27 in Egypt and Brazilian president-elect Luiz Inácio Lula da Silva’s participation in it will greatly define the region moving forward.
Jaramillo’s assessment of the region’s response to great power competition is more mixed. A pragmatic approach to trade with China has led to significant growth and allowed LAC to diversify its partners. For example, Uruguay’s current pursuit of a free trade agreement with China is a good representation of this pragmatic approximation. The war in Ukraine, on the other hand, has darkened the assessment. Rising instability makes it difficult to plan ahead, leading to missed opportunities for LAC.
At the conclusion of his conversation with GAI Founding Director Alejandro Werner, Jaramillo argued for the importance of education in regional recovery. This has also been an area of deep concern for the World Bank, since one year without schooling can lead to a 10% reduction in an individual’s future annual income. Some students in the region have lost two years or more since 2020, and many young children have not properly learned to read or write. These losses also lead to the inevitable expansion of inequality. Jaramillo stressed that more needs to be done to make up for lost time.
“I am disappointed that in the public arena people are not prioritizing education. People have not taken note of how urgent this is, and education is not a priority in the polls.”