November 8, 2016

Development Challenges in Latin America and the UN 2030 Agenda for Sustainable Development

Development Challenges in Latin America and the UN 2030 Agenda for Sustainable Development

In 2015, at the highest political level, the international community reached three global agreements: the 2030 Agenda for Sustainable Development and the 17 Sustainable Development Goals (SDGs), the Addis Ababa Action Agenda (AAAA) and the Paris Agreement (COP 21). These three Agreements articulate a comprehensive, long-term and world-wide strategy to address the most pressing challenges faced by contemporary societies: persistent poverty and inequality, and the environmental crisis.

 

For what refers to their organizational design, the Agreements build upon existing national, regional and global institutions, but envisage new coordination arrangements and follow-up procedures to fulfill their goals. In Latin America, the UN Economic Commission for Latin America and the Caribbean (ECLAC) has the mandate to coordinate, support, follow-up and assess the implementation of the actions outlined in the Agreements.

 

For that purpose, ECLAC defines four priorities, namely:

i.          strengthening the regional institutional architecture,

ii.          providing technical assistance on the Means of Implementation,

iii.          supporting the incorporation of the SDGs to national development plans, and

iv.          promoting the use of quantitative methods in order to follow-up the goals.

 

Consequently, on May 2016, ECLAC established the Forum of Latin America and Caribbean Countries on Sustainable Development (Forum). The Forum shall meet every year. It brings together all relevant stakeholders: national Governments, civil society and the private sector, as well as ECLAC subsidiary agencies, development banks, International Financial Institutions, other UN agencies and the different regional and sub-regional integration blocks. Likewise, every four years, the Forum shall provide a report on the accomplishments and challenges, which it identifies during the regional implementation of the 2030 Agenda, to the UN General Assembly and UN Economic and Social Council.

 

With respect to the institutional strategy, and in line with its (neo) structuralist intellectual tradition, ECLAC developed an analytical framework aiming to give theoretical coherence to the actions and objectives outlined in the Agreements. This framework incorporates global and environmental dimensions to the development challenges of the region, and advocates for a “Progressive Structural Change”.

 

Such Progressive Structural Change involves a transformation process toward productive activities based on three types of efficiencies: (i) Schumpeterian, (ii) Keynesian, and (iii) environmental. The Schumpeterian efficiency refers to a medium-term shift to high-efficiency and knowledge-based economic activities. The Keynesian efficiency aims at the promotion of closer integration with fast-growing markets, therefore enabling increases in production, employment, government earnings and welfare expenditures. The Environmental efficiency implies the advancement of a development strategy through clean energies and sustainable living and consumption patterns.

 

As well, ECLAC acknowledges the urgency of achieving a global consensus on the definition, recognition and respect of Global Public Goods (GPG). These GPGs include the respect for the environment, but also comprise the promotion of globally coordinated fiscal policies, as well as a new global financial architecture with increased stability, reduced uncertainty and volatility.

 

At the core of the conception of this long-term development strategy, ECLAC correctly recognizes the most distinctive socio-economic feature of the region: its enduring inequality and unacceptable poverty levels. Latin America may not be the poorest region in the world, but it certainly is the most unequal.

 

According to the most recent ECLAC aggregate data (July 2016), in the region, there was a significant decrease in the proportion of the population living in poverty conditions between 2002 and 2014. During these years, the (extreme) poverty rate decreased from over (19.2%) 44% of the population to around (11.8%) 28%. However, Latin America still maintains more than 168 million persons living in poverty conditions. What is more, for 2015, there are estimations conservatively forecasting an increase of about 1 percentage point in these indicators, roughly 2 million people more falling under the poverty line.

 

Regarding inequality levels, the region also showed an improvement from 2002 to 2014, when the Gini Coefficient went from around 0.588 to approximately 0.531. This figure does not reflect the differentiated performance between countries nor that this evolution depends largely on the particularities of every sub-region. On the whole, all countries benefited from the increase in global demand and high prices of commodities, whose production is labor intensive. The expansion and the deepening of non-contributive transfer programs in all countries also played a major and positive role in this sense. Moreover, in the Southern Cone countries, minimum wage policies and collective bargaining had a significant contribution to the improvement. Lastly, in Central America, non-labor income (i.e. foreign currency remittances) had the biggest impact in reducing poverty and inequality levels.

 

Nonetheless, these results are somehow less promising when considering another measure for inequality: the Growth Incidence Curves. This indicator captures the relative or absolute growth rate of each percentile along the income distribution within a delimited timeframe. In absolute terms, income variations for every percentile are positive but not uniform: highest income percentiles had a significantly larger increase than the lowest income percentiles from 2002 to 2014. This translates in an increase in absolute inequality in the region, not portrayed by the Gini Coefficient because of its measurement methodology. Otherwise stated, the richest people in Latin America got substantially richer, while the poorest people increased their income only moderately, even when the relative income variation is higher for the latter.

 

Considering the objectives defined in the 2030 Agenda, as well as the evolution of its socio-economic landscape, Latin America, particularly ECLAC, faces two main challenges:

(i) To overcome the deficiencies and limitations of the Agreements for guaranteeing the transit to a sustainable development path; and

(ii) To implement the proposed Agenda, duly integrating the regional development priorities.

 

On the one hand, these Agreements have been criticized for several reasons, which must be considered when assessing the possibility of their implementation at a national or regional scale. The most common critique is the paradoxical broad scope but not sufficient granularity of the 17 SDGs. They depart from the notion that poverty is a multidimensional issue that must be addressed from different fronts. Nonetheless, when translating that truthful notion into action, they fail to make a clear distinction with regards to their prioritization. When there are 169 priorities, none of them is one. In addition, the attempt to cover all aspects of development left less scope for a local adjustment as each country may consider appropriate.

 

In addition, the Agreements do not comprehensively address the political determinants for the success of the 2030 Agenda as they overlook the implications of current power relations in the world. This feature closely relates to another limitation: oddly, the Agreements fail to give enough weight to structural challenges. Just to name one example, they do not come near to propose a plausible route towards a solution for the persistent global trade and financial imbalances between surplus and deficit countries. These imbalances have been systematically accumulating since the 90s and are fundamental to understand the origins of the 2008 crisis, which ended up launching hundreds of millions of people to poverty, and whose global effects we still endure. Again, there are strong political and economic interests behind this impasse which are not realistically approached in the Agreements.

 

On the other hand, Latin America is a region of middle-income countries, not poor enough to be a net recipient of Official Development Assistance but without the full capacities to autonomously transit toward a developed-region status. This is especially the case when considering the rigid structure of a world-system where the peripheral countries have few possibilities to adjust their insertion to global production chains and are sentenced to be suppliers of raw materials to the developed core.

 

In this sense, regional integration and cooperation is essential, especially when confronting other regional blocks or global interests. If acting on a coordinated manner, the negotiating and bargaining power of the region would be better positioned in order to push specific interests at the global level. Probably the best-known example in this sense is the integration agenda proposed by the BRICS countries.

 

ECLAC has a traditional political commitment with the advancement of an original and autonomous conception of development from a Latin American perspective. It also has the technical expertise and capabilities required for a rigorous analysis of the specificities of the sub-continent. All of this makes ECLAC a suitable institution to guide the strategy for the consolidation of a Progressive Structural Change on the basis of impartial arguments.

 

All things considered, it is a fallacy to talk about sustainable development and catching-up on a global scale, if we do not firstly recognize and effectively address the inequalities, which market-based global governance institutions and current political and economic dynamics allow and encourage.

 

Nevertheless, the limitations of these far-reaching initiatives are at the same time a window of opportunity for Latin America. The region can capitalize these prospects by outlining an independent development strategy, built upon its semi-peripheral position, and thanks to its historical experience to advance a sustainable solution against its persistent poverty and inequality levels. However limited by its own institutional condition, the efforts of ECLAC in this sense, faithful to its original and rich intellectual tradition, need to be recognized and encouraged.

Dimensions of Poverty and Inequality in Latin America
Nine strategies to reduce inequality
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About Alejandro Manriquez

Alejandro Manriquez

Alejandro Manriquez is former Deputy Director for International Affairs of the Mexican Financial Regulatory Authority. He is experienced in international cooperation in financial markets and as economic advisor for several Mexican Ministries. He is pursuing a master’s degree in International Economic Policy at the Institut d’Études Politiques de Paris (Sciences Po), following a dual specialization in Global Economic Policy and Latin America. Alejandro currently collaborates at the Science Technology and Innovation Directorate of the Organization for Economic Co-operation and Development (OECD).

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