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At the IDB, we believe that together we can go farther. Our partnership network is making positive differences in Latin America and the Caribbean every day, and this blog is our channel for telling that story. Stay tuned for literature on partnership perspectives, stories from the field, changing trends, outlooks for development and the region, information on ways and opportunities to partner, and more. Thanks for stopping by.

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Happy Graduation, LAC. You Did It! Or Did You?

By - Apr 9 2015


Has Latin America and the Caribbean (LAC) really “graduated”? This seems to be a growing perception in the international donor community, as regional growth giants so leap and bound toward development that all of LAC appears to be on the up and up. As countries improve among such staple development indicators as infrastructure, health, entrepreneurship, and more, donors have diverted their eyes, and their wallets, to the region’s developing counterparts in Africa and elsewhere.

Yet a look at persisting challenges in Haiti versus boom times in Mexico City, the low ranks of LAC countries on the GINI Index, or even disparities within single countries like Brazil’s Northeastern and Southern portions, reveal that the region is a paradox indeed. This translates into mixed readings of LAC’s economic strength, with projections for growth and continued development offset by equally worrisome challenges. For example, while estimates hold that LAC’s GDP will surge from $7 trillion in 2012 to $14 trillion in 2025, today 130 million people in the region have seen nothing but poverty, surviving on less than $4 a day. While the active social media user pool in Latin America is expected to to expand to 254.5 million in 2015, 50 million people in the region live without electricity. While projections hold that LAC’s middle class will welcome 10 million new members annually between 2014 and 2025, today analysts fret that this middle class growth is actually “vulnerable” class growth instead, with many of these individuals at risk of falling back into poverty at the blink of an eye.

Yet more worrisome than these seemingly chronic development challenges are the popular notions that LAC is doing just fine. The assumption that the region, or parts of it, have “graduated’ beyond the need of donor support sets the stage for the stagnation—or worse, the deceleration—of development in Latin America and the Caribbean. Trends in Official Development Assistance (ODA) paint a dim picture, with ODA flows rising as a whole while LAC continues, since 2007, to receive diminishing pieces of the pie. Though valuable support from new actors, Multi-Latinas, inter-regional and South-to-South collaboration, and other sources continue to spur growth across the region, it is necessary that we highlight not only LAC’s successes, but the areas in which additional donor backing can make a transformative impact as well.

In truth, Latin America and the Caribbean has not graduated. And despite progress in the aforementioned sectors, a look at the state of regional education, ironically, is proof of this alone. With education quality poor, dropout rates high, and test scores low, the region’s human capital remains constrained by this limitation to their social mobility, and the region constrained from achieving this graduation in their development that so many dangerously perceive has occurred or will soon.

Thus, instead of positioning LAC as “graduated”, we should more accurately portray it as a region ready for continued growth. Despite its enduring poverty and the sizable obstacles to its development, LAC remains a land of opportunity for the interested donor. While the region’s combined GDP makes it the fourth largest economy in the world, donors could well invest in further integration through hardware (think roads and hard infrastructure) and software (think policy and cooperation). While the region’s abundance of natural resources well situate it as the world’s next breadbasket, additional support to technology, smallholder farms, and more could enable LAC to meet its full agricultural potential sooner, not later. There is potential for donors to contribute to longstanding sustainability in these areas and more.

Across sectors, similar paradoxes persist, ripe for the ready donor looking to give this still-developing region the springboard it needs for further growth. LAC may not have graduated just yet, but with further funding, enhanced knowledge exchange, and increased engagement with the donor community, it may very well do so in our lifetime. Its donors have already allowed for noteworthy progress region-wide, but to continue moving forward, and to avoid falling back, LAC needs a final donor push in the right direction. It needs methods from Finland for improving education, lessons from Korea to replicate its exemplary economic transformation, an understanding of how Norway has achieved remarkably low disparities in wealth, inspiration from Israel on how to incubate entrepreneurship and innovation, and support from the donor community at large to meet its full potential. Don’t just watch, participate in this growth story. LAC is open for business, open for investment, and open for the donor support it needs to make it to graduation. Join us.

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