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New Missions for Latin America

Strategic clarity is needed now more than ever to face both the immediate cost-of-living crisis and the longer-term structural challenges facing Latin America and the Caribbean. Policymakers will need a new narrative that puts innovation-led growth and an empowered, capable state front and center.

SANTIAGO – The war in Ukraine and the global cost-of-living crisis are hitting Latin America and the Caribbean (LAC) hard. Growth in the region, which rebounded impressively from COVID-19 to reach an average rate of 6.8% in 2021, will fall to just 1.8% this year, with crippling effects on the most vulnerable people. Compared to 2021, Latin America’s poverty rate will increase by 0.9 percentage points to 33%, and extreme poverty will rise by 0.7 percentage points to 14.5% in 2022.

Still, many countries have an opportunity to redefine their economic policies. And while no two countries in the region are alike, they do face a common set of structural challenges, including dependence on natural resources, low productivity, weak public-sector capacity, and narrow fiscal space.

Tackling these structural challenges will require progressive governance and a focus on clear economic objectives like creating jobs, boosting productivity, reducing poverty, closing the digital divide, and accelerating the clean-energy transition. To sustain this agenda, governments will need a new narrative that puts innovation-led growth front and center. This is not to suggest that LAC countries need disruptive innovation for its own sake (as one finds in Silicon Valley). But they do need purposeful innovation to solve concrete, longstanding problems like the growing digital divide and rising greenhouse-gas emissions.