"COVID-19 represents a time of choices. Both regions – Europe and Latin America and the Caribbean – need to take urgent measures to overcome the current health and economic crisis and to build a new path for development in the framework of a renewed partnership," Alicia Bárcena, Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), said today during a high-level meeting between foreign affairs ministers from both regions that was organized by the Government of Germany.
In her remarks, Bárcena stressed the importance of middle-income countries and the debate on development in transition, a concept developed alongside European counterparts that emphasizes that GDP per capita cannot be the criterion for defining the graduation of middle-income countries and that it is necessary to gauge development gaps using a multidimensional approach in order to include all countries in a modern cooperation framework.
ECLAC’s highest authority indicated that Latin America and the Caribbean is the region in the developing world most affected by COVID-19, with a death toll of nearly 500,000 people. “Despite the considerable fiscal efforts made by the region’s countries to respond to the crisis, these resources will not be sufficient to cover the growing needs of the emergency and the route towards a sustainable future,” Bárcena stated during the virtual gathering, adding that the pandemic has magnified the region’s structural gaps.
For that reason, ECLAC has proposed linking the short term with a transformative recovery articulated around 5 pillars: ending poverty by 2030 and firmly advancing towards equality and universal social protection; forging authentic competitiveness by furthering technological capabilities; investing in environmental sustainability; achieving universal social protection and building a welfare system; and attracting investment to strategic and sustainable activities with complementary industrial, social and environmental policies.
“In this effort at transformative recovery, scaling up the partnership with Europe could be a game changer,” Bárcena emphasized.
The European Union is Latin America and the Caribbean’s third-largest trading partner behind the United States and China, and in the last five years, European companies have been the largest investors in the region, accounting for 52% of Foreign Direct Investment (FDI) inflows, with an average value of around $87 billion dollars per year. Europe has been the main investor in the automotive industry (with a 26% share) and pharmaceuticals (40%). In 2019 alone, it represented 55% of the region’s FDI, ECLAC’s most senior representative specified.
“We believe that there are concrete opportunities for joint investments with Europe to move swiftly towards a green, digital, sustainable and inclusive recovery,” Bárcena affirmed, highlighting two major sectors: energy and digitalization.
It is forecast, she said, that Latin America and the Caribbean’s energy demand will rise by $852 billion dollars by 2030, but the total cost of the investments needed to meet energy needs can be reduced by investing more in non-conventional renewable sources. “At ECLAC we have estimated that investing in renewable energy would cost 1.3% of GDP, would lead to a more than 30% drop in total CO2 emissions, and would create nearly seven million jobs over a decade,” she said.
“The European Union is already the most important investor in renewable energies in Latin America and the Caribbean. In the last five years, 70% of all projects announced by the European Union have been aimed at renewable energy ventures. In 2020, this was one of the few industries that did not decline, and it represented 28% of total investment announcements,” Bárcena underlined.
With regard to digitalization, ECLAC’s Executive Secretary mentioned the gaps that still exist in the region. “A third of the population of Latin America and the Caribbean has limited or no access to an Internet connection (40 million households), mainly because their incomes do not allow them to pay connection fees and to buy hardware, such as smartphones, tablets or laptops,” she stated.
In that context, the region has established four clear priorities: ensuring the universalization of Internet access, which includes devices and low connection fees; developing digital infrastructure to enable access to 5G deployment, a technology that would allow for new forms of production (the Internet of Things) and consumption (autonomous vehicles); fully digitalizing our production system; and strong data security and data privacy protection.
More specifically, ECLAC proposes providing a basic digital basket through public-private partnerships at an annual cost of 1% of GDP, with significant differences between countries (ranging from less than 0.3% in Chile to 4% in Bolivia). Meanwhile, the Commission estimates that reaching national 5G coverage would entail an investment of $120 billion dollars over a seven-year period.
“We believe that European investments are strategic in a world that is reorganizing itself economically into three major hubs. Europe, which is one of those hubs, has been and should continue to be a source of new capital to develop industries in sectors linked to sustainable development, to build capacities and to improve technological levels,” Bárcena summarized, highlighting as well the fact that the two regions “share a strong multilateral commitment to achieving an open, non-discriminatory and development-centered trading system.”
She added that both regions must join forces so that a much-needed reform of the World Trade Organization, with sustainable development at the center, can be achieved in June 2021.
Bárcena indicated that the bi-regional partnership should also include financing for development at this time of COVID-19, particularly for small middle-income economies that have reached unsustainable debt and debt-servicing thresholds. “This is the case in Central America and the Small Island Developing States of the Caribbean,” she said.
The Executive Secretary highlighted the importance of European support for Caribbean debt relief and the issuance of Special Drawing Rights along with the reallocation of those already existing. She also pointed up the Fund to Alleviate COVID-19 Economics (FACE), an initiative proposed by the Government of Costa Rica to redirect liquidity from developed economies to developing ones, regardless of their income level, as well as the need to advocate at the G20 for it to extend the Debt Service Suspension Initiative (DSSI) to small island states.
In sum, the senior UN official stated, it is about exploring mechanisms for additional financing by expanding existing credit facilities and supporting middle-income countries so they can access financing for the economic recovery.
“COVID-19, and this timely ministerial meeting, represent a unique window of opportunity to lay the foundations for a joint roadmap which we cannot afford to miss. I am sure today we will start a new dynamic of bi-regional engagement. You can count on ECLAC’s full support,” she concluded.