Latin America and Caribbean Overview

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Overview

  • Latin America has become the region hardest hit in the world by the COVID-19 pandemic. The region has fallen into an economic crisis after what had already been several years of disappointing growth and limited progress on social indicators, as well as a period of social unrest in some countries at the end of 2019.

    While most countries in the region have enforced measures to limit contagion, the coronavirus continues to spread rapidly. The impact has been wide-reaching, from a decline in external demand to a rise in uncertainty and the closure of businesses. Tourism has collapsed as movements have been restricted to try to contain the outbreak.

    Unemployment rates have increased across Latin America and the Caribbean, substantially in some countries. Surveys suggest that the impact of the crisis is not only severe, but potentially long-lasting.

    The multiple domestic and external shocks from the pandemic will cause the region’s economic activity to contract by an estimated 7.9% in 2020, making it a far deeper recession than those during the 2008-09 global financial crisis and the Latin America debt crisis in the 1980s.

    Even so, there are reasons to temper these pessimistic forecasts. The international fallout from the pandemic has not been as bad as had been expected six months ago, especially on finance, remittances, and trade. In Latin America and the Caribbean, the large stimulus packages rolled out by several governments are mitigating the impact. Indeed, five of the 10 social transfer programs with the broadest population coverage in the developing world are in the region.

    These factors should fuel a regional economic rebound of 4% in 2021, underpinned by a normalization of local and global conditions.

    There are still numerous challenges. The region’s countries do not have the fiscal space of developed countries. Indeed, some were facing financial crises before the COVID-19 outbreak. What’s more, high levels of informality make it hard to provide relief through tax deferrals and wage subsidies to many firms and households. This informality combined with the low levels of funds makes designing an adequate policy response all that much more crucial.

    More than six months into the pandemic, the hopes for a full return to normalcy are pinned on vaccines. The scale of the global effort to support cutting-edge research and fund the production capacity for vaccines is unprecedented. However, it may take time to develop vaccines that are effective against COVID-19, produce them in sufficiently large quantities, make them available in developing countries, and promote them so that they are considered to be sufficiently safe. Given these challenges, Latin American and Caribbean countries may face no choice but to live with the virus, perhaps for several more years.

    Many countries in the region have gradually relaxed quarantines and lockdowns, either through explicit policy decisions or because stringent containment measures have become harder to enforce. Governments may need to focus on protecting the most vulnerable people while also adjusting health and safety standards across all sectors and activities in order to stem the probability of contagion as life goes on.

    Schooling deserves attention. Distance learning, even if feasible, is unlikely to deliver the same knowledge as face-to-face teaching. For many children in the poorest segment of society, it simply may not be an option. If lockdowns continue to affect the education sector for too long, many children may never return to school and instead begin their working lives earlier than anticipated. Those who do go back to school will have lost months or even years of education, undermining their future incomes and social mobility prospects.

    Given the unprecedented nature of the COVID-19 pandemic, forecasts of economic performance in 2020 could change, dramatically even. This poses a challenge. The types of policy responses needed to rekindle economic activity are vastly different in a sharp, temporary downturn than in a major, long-lasting recession. Assessing the situation correctly is crucial for countries to operate under common assumptions about the breadth and depth of the crisis, make policy decisions, and build consensus for them from the public and key stakeholders. Unfortunately, the severity of the global decline in output remains highly uncertain, and as such the impact on the region’s economies.

    The World Bank Group is taking broad, fast action to help developing countries strengthen their pandemic response such as by increasing disease surveillance, improving public health interventions, and supporting the private sector to sustain operations and jobs.

    Latin America and the Caribbean are also exposed and vulnerable to natural disasters, from earthquakes to floods that can ravage entire regions, and hurricanes that devastate Caribbean states. The region is among the most vulnerable in the world because of the high population density in the areas where these disasters strike and the need for better risk management practices. Fortunately, we are getting better at understanding and managing these risks. Examples supported by the World Bank include the Pacific Alliance catastrophe bonds for earthquakes. Risk sharing across countries through mechanisms such as the Caribbean Catastrophe Risk Insurance Facility (CCRIF) can also provide readily available funds for recovery after a member country is hit by a hurricane.

    Last Updated: Oct 09, 2020

  • Our work in the region has three pillars. The first is to promote inclusive economic growth by supporting improvements in accountability, competitiveness, productivity, and transparency. The second is to engage with traditionally excluded groups, among them Afro-descendants, indigenous peoples, and rural communities, while the third is to attract private investment. The second pillar emphasizes investing in human capital to prepare people for the challenges and opportunities that come with the changing nature of work. The third seeks to build resilience so that countries can better manage and withstand shocks, such as crime and violence, economic upheaval, infectious diseases, and natural disasters.

    With the COVID-19 pandemic, the World Bank is taking a more agile approach to helping Latin American and Caribbean countries reduce the impact of the outbreak. In addition to new funds, other resources have been disbursed by reorientating them from existing projects. These efforts are part of the Bank’s global response to the pandemic, which in its first stage will total $14 billion in the region.

    So far, about $4.5 billion has been distributed to countries for projects to minimize the loss of life, strengthen health systems and disease surveillance, mitigate the pandemic’s economic impact, and work with partners and the private sector to address supply chain issues and delivery. 

    More details of World Bank´s response to COVID-19 in Latin America and the Caribbean can be found here.

    Last Updated: Oct 09, 2020

  • The World Bank approved $7.8 billion in lending to the region for 67 operations in the 2020 fiscal year, including $6.8 billion in International Bank for Reconstruction and Development loans and $1 billion in International Developing Association commitments.

    The Bank also issued its first ever multi-country catastrophe bond between Chile, Colombia, Mexico, and Peru, valued at more than $1.3 billion. The priorities in the region centered on supporting inclusive growth through higher productivity and competitiveness, with an emphasis on investing in education, health, and other aspects of human capital.

    It also invested in infrastructure and worked to improve the countries’ abilities to manage and withstand shocks—such as natural disasters, economic upheaval, and crime and violence—while also promoting greater transparency and accountability. In addition, the World Bank prioritized the inclusion of groups that have traditionally faced exclusion, including indigenous peoples and rural communities. As countries’ needs often exceed public resources, the Bank supported activities and interventions that attracted private investment whenever possible.

    The World Bank has been increasingly tailoring its extensive financial, knowledge, and convening services to the region’s diverse needs. This is attracting countries to turn to the Bank for more than direct lending. They are increasingly taking advantage of services including risk insurance, commodity swaps, climate adaptation finance, technical assistance, convening assistance, and development research.

    Some program highlights include:

    • Responding to the Venezuelan migrant crisis: The Bank is working to support migrants and host communities through analysis, financial resources, and technical support. We also are sharing knowledge and mobilizing our convening power around this crisis. In Colombia, we prepared that country’s first impact assessment of the Venezuelan migration for a national response policy and the Colombia National Development Plan. In January 2019, Colombia became eligible for the Global Concessional Financing Facility (GCFF). The Bank is providing a $750 million development policy loan that mobilized $32 million in GCFF co-financing to support Colombia’s fiscal sustainability and competitiveness amid the migration crisis. We are also supporting a project, composed of a $150 million Bank loan and $38 million in GCFF financing, to strengthen the country’s health care system and support the enrollment of migrants and refugees into the social security system. In November 2019, we launched a similar analysis of the impacts of Venezuelan migration in Peru. Along with United Nations agencies, we helped finance a national survey of the migrants and refugees by the National Institute of Statistics and Information, and supported institutional, qualitative, and sectoral analyses. Given the disproportional impact of the COVID-19 pandemic on migrants and refugees, we are mobilizing resources to address their increasing needs, including through technical assistance to the government. We are also completing a fiscal impact study of Venezuelan migration in Ecuador. In collaboration with six UN agencies, we designed, implemented, and financed a national survey and focus groups to support a study of the host and migrant communities. Ecuador became eligible for the GCFF in 2019 and accessed $6 million in concessional financing in May 2020.
    • Honduras: The Rural Competitiveness Project (COMRURAL) has contributed to increasing productivity, competitiveness, and market linkages among 7,200 small-scale rural producers of coffee, dairy, honey, and other products in Honduras. Each $1.00 invested by COMRURAL as part of a productive alliance has leveraged $1.50 from private financial institutions (around $12.5 million in total), increasing the financial inclusion and creditworthiness of small-scale farmers. Since 2008, the project has contributed to making agricultural value chains more competitive and increasing the volume of gross sales of rural producers by 23%. Producers supported by COMRURAL produce around 30% of all the special coffee exported by Honduras to the United States, Europe, and Asia.
    • Colombia: The Orinoquia Integrated Sustainable Landscapes Project ($5.9 million GEF) was the last project approved for FY19. Other projects approved in FY19 were: (i) Clean Energy Development Guarantee ($41 million IBRD; $40 million CTF), (ii) support to Bogota’s First Metro Line—the first project in the series ($70 million), (iii) the Multi-Purpose Cadaster IPF ($100 million), and (ii) the Fiscal Consolidation, Competitiveness, and Migration Policy DPF ($718.5 million IBRD; $31.5 million GCFF).
    • Panama: The National Indigenous Peoples Development Plan, designed jointly with Panama’s government and indigenous communities, is benefiting approximately 200,000 indigenous people, especially women and youth, who are the most excluded groups in the country. It supports investments proposed by the indigenous authorities in improving the access, quality, and cultural pertinence of the delivery of services in health, education, and water and sanitation. It also includes investments to improve governance capacity, planning, and coordination between Indigenous authorities and the government with a vision to contribute to breaching some of the largest levels of ethnic-based inequalities that exist in the region. Within the first months of implementation, two results can be highlighted: first, an executive decree was issued to legally formalize the National Indigenous Peoples Development Council; and, second, the traditional Indigenous Authorities accepted the inclusion of a woman advisor as part of each delegation that participates on the council.
    • The World Bank is providing a $100 million loan to support the Colombia Multipurpose Cadaster Project to strengthen land tenure security and provide access to cadaster information in the selected municipalities. Overall, the project will support the government to strengthen the system for land administration to complete the national coverage of the multi-purpose cadaster and maintain information to support the property market in both urban and rural areas. 
    • Caribbean: Ongoing World Bank support to building environmental and natural resource resilience in the Caribbean includes: 

                        i)  Developing renewable energy in Saint Lucia and Dominica and creating an insurance mechanism to include the fisheries sector in Grenada and Saint Lucia;

                        ii)   Building sustainable agriculture practices and competitiveness in Jamaica, the Dominican Republic, and the Organization of Eastern Caribbean States (OECS);

                        iii) Expanding marine protected areas in Belize and strengthening protection and climate resilience of the Belize Barrier Reef;

                        iv)   Banning single-use plastics and Styrofoam containers across the OECS;

                        v)   Developing a 7-megawatt geothermal energy plant in Dominica, the first in the Caribbean.

     

    Last Updated: Oct 09, 2020

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Region Contacts

Washington, DC
María Castro Barton
1818 H Street NW, Washington, DC 20433
1 (202) 473-2984
mcbarton@worldbankgroup.org
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