Regional Challenges

Latin America and the Caribbean

THE WORLD BANK

2007

2

Latin America and the Caribbean’s Twin Development Challenges

Low and volatile growth

and persistently high inequality

contribute to high levels of poverty in an essentially a middle income country (MIC) region.

2Source: WDI, simple average of country figures 2000-5

Gini Coefficient, 2000-5(average)

0.0

10.0

20.0

30.0

40.0

50.0

60.0

ECA SA EAP MENA LAC

Income per capitaWith respect to OECD

1950-2005

3

Latin America and the Caribbean is one of the most unequal regions of the world

Gini Coefficients by country, and Regional averages

0.00

0.04

0.08

0.12

0.16

0.20

0.24

0.28

0.32

0.36

0.40

0.44

0.48

0.52

0.56

0.60

0.64

Trinidad and TobagoNicaragua

JamaicaVenezuela

UruguaySt. Lucia

GuyanaCosta Rica

Dominican RepublicPeru

MexicoEl Salvador

ArgentinaChile

HondurasEcuador

ColombiaPanama

ParaguayGuatemala

BoliviaBrazil

LAC

EAP

SSA

HIC

MENA

ECA

Source: WDR 2006

High Income Countries

Europe & Central Asia

Middle East & N. Africa

Sub-Saharan Africa

East Asia & Pacific

Latin America & Caribbean

4

Recent Progress in Growth Recovery and Job Creation

Due to favorable external conditions and good macroeconomic policies.

Growth per capita in LAC

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

2001 2002 2003 2004 2005 2006

Per

cen

t

Unemployment Rate

8.0

8.5

9.0

9.5

10.0

10.5

11.0

2003 2006P

erce

nt

4

5

Taking advantage of good times to reduce vulnerabilities

External Vulnerabilities

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2000 2001 2002 2003 2004 2005 2006e

Re

se

rve

s /

Sh

ort

Te

rm D

eb

t

-3

-2

-1

0

1

2

3

Cu

rre

nt

Ac

co

un

t (%

of

GD

P)

Reserves / ST Debt

Current Account (rs)

Accumulated international reserves and primary surpluses Reductions in public debt/GDP ratio

Reduced vulnerability and increased capacity to cope with future exogenous shocks.

5

Reducing Fiscal Vulnerabilities

0

10

20

30

40

50

60

2000 2001 2002 2003 2004 2005 2006

Pe

rce

nt

of

GD

P

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

Pe

rce

nt

of

GD

P

Public Debt Primary Surplus (rs)

6

Public Investment in Infrastructure in LAC

0.0

0.5

1.0

1.5

2.0

2.5

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Average Time to Start a Business

0

10

20

30

40

50

60

70

OECD SA ECA MENA EAP LAC SSA

Da

ys

2005 2006

But, modest progress in Investment Climate and Infrastructure

Total infrastructure investment in LAC remains very low around 3% of GDP compared to 7% of GDP in EAP (East Asia and the Pacific region).

Private investment has not compensated for the fall in public investment. 6

7

And in Poverty Reduction and Equity

Share of People in LAC with less than $1 and $2 a day (%)

0

5

10

15

20

25

$ 1 a day (PPP) $ 2 a day (PPP)

Early 2000s 2004

Inequality Trend: Gini Coefficient

50

51

52

53

54

55

Early 2000s 2004

7

MDGs: Proportion of LAC countries with a specific track towards MDGs

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Reduce extremepoverty

headcount rateby 1/2

Reduce under 5malnutrition rate

by 1/2

Achieve near100% netprimary

enrolment rate

Reduce under 5mortality rate by

2/3

Reduce infantmortality rate by

2/3

Reduce maternalmortality by 3/4*

Reduce share ofpopulation w/o

access to improved watersource by 1/2**

On track: MDG target is likely to be achieved Off track: Progress falls short of thegoalDiverging: MDG target is unlikely to be achieved No data available

Based on data from ECLAC (2005). Maternal mortality rates were obtained from United Nations (2005), Statistical databases: http://millenniumindicators.un.org0 8

With challenges in some MDG targets

9

To address these challenges, the WB strategy in LAC is centered around the four themes – “4Gs”

GROWTH & JOBS

Improving investment climate

Increasing investment in infrastructure

Deepening financial systems

Increasing innovation

GLOBAL

Climate change

Migration and remittances

Trade negotiations

Crime and violence

Energy

HIV/AIDs

Avian Flu

GOVERNANCE

Building inclusive and effective institutions

Improving efficiency and targeting of public spending

Increasing accountability for service delivery

Reducing corruption

Monitoring and evaluating results

GINI & Poverty(Social Inequality)

Reduce poverty and inequality

Improving equality of opportunities

Improve quality and delivery in education and health

Provide comprehensive and affordable social protection

Support direct anti-poverty programs (CCT’s)

10

Looking to the future

Continued need to achieve sustainable growth with greater equity

Large unmet demand for infrastructure. LAC is still lagging behind other MIC countries

Global issues remain relevant and have a growing importance and impact on the region (e.g. climate change, trade, remittances, energy)

11

Conclusion The LAC challenge is to overcome the twin disappointments of low growth and persistently high inequality

The WB response is to energize our partnership through knowledge leadership, innovative lending and customized implementation support

Our goal is to meet the hopes and dreams of Latin American and Caribbean peoples for a more equitable, inclusive and secure society