The World Bank projects that Latin America will grow by 1.4% in 2023

Washington, (EFE)

In 2024 and 2025, growth will remain at 2.4%, the institution added.

The figure for this year is one tenth higher than that included in its previous report on the continent, published in January, but it is still “below what was expected,” the institution said in a statement.

This is mainly due to the effects of central bank interest rate hikes to fight inflation and the drop in commodity prices, the World Bank chief economist for Latin America and the Caribbean explained at a press conference. The Caribbean, William Maloney.

All in all, and despite the fact that the region has practically recovered from the covid-19 pandemic crisis, growth in the coming years will be too low to bring about a significant reduction in poverty, the expert explained in depth. interview with EFE.

Latin America has so far been able to withstand the current economic uncertainty, aggravated by the Russian invasion of Ukraine; and inflation, after having reached historical figures in many countries throughout 2022, will stand at 5% in 2023 (with the exception of Argentina).

However, the region’s integration into the global economy continues to be very low.

“Latin America, in general, trades less than it should, taking into account its proximity to its partners and its free trade agreements. We should be exporting a lot more,” Maloney said.

Added to this is a progressive reduction in foreign investment in the region, especially Spanish ones, the expert pointed out.

Maloney explained that among the reasons for the low amount of international investment are structural factors that will be difficult to reverse, such as the lack of higher and technical education or the lack of investment in infrastructure and services.

The region invests barely 3.5% of its Gross Domestic Product (GDP) in infrastructure, while in Asia or Africa around 7% is invested.

That, coupled with politically unstable institutions, results in a lack of integration and a loss of international investment in Latin America, with the exception of Mexico, which is increasingly connected to the US economy.

Several people buy food in a supermarket in Caracas (Venezuela). EFE/Miguel Gutierrez

The economist also warned against the trend towards protectionism in response to discontent with the results of free trade agreements, and advocated making a greater political effort to enter the European and US markets.

green opportunities

In this sense, the institution considers that there are currently two great opportunities for economic integration: the close relocation of companies (or “nearshoring”) and the production of green energy.

Maloney advanced that the World Bank is working together with some Latin American countries to promote the trade in green hydrogen. Several countries in the region, such as Panama or Chile, have already advanced their intention to become important international players.

However, these ambitions also require an adjustment to the standards of other economies, such as traceability – being able to verify the origin and the production chain – necessary to sell green fuel in European markets.

In the field of close relocation, the economist pointed to the example of the United States, which is making a great effort to nationalize the production of strategic products, such as microchips, to counteract the instability of supply chains and dependence on China.

The agency sees here a great opportunity to attract these companies to Latin America, where salaries tend to be lower, but considers that these investments should also have a positive effect in the receiving countries, beyond tax collection.

The economist gave the example of Mexico, where companies like IBM or HP are well established but “you don’t see an indigenous telephone company, or anything like that.”

According to Maloney, the two opportunities highlight the need for the region to integrate with the rest of the world.

“We need the markets and the technology, and we need our people to go abroad to learn as much as they can and to build networks of contacts,” he explained.