Latin America and the Caribbean is the most urbanized region in the developing world, with more than three quarters of the population living in urban areas.  These areas, which also provide the setting for most economic activities, range from tiny, remote Andean and Amazonian municipalities to the sprawling mega-cities of Mexico City and Sao Paolo, two of the world’s largest cities.

Poverty rates are much lower in towns and cities than in rural areas, but most of the region’s poor live in cities, often in conditions that prevent them from taking full advantage of the employment and other opportunities that cities can offer.   The United Nations estimates that around one-third of the region’s urban population live in slums.  These areas suffer from limited access to basic services and transportation networks, substandard housing, insecure land tenure arrangements, environmental degradation and severe social problems, including unemployment, crime and violence.  LAC has the highest homicide rate in the world, around five times more than the global average.

Slums are typically the result of urban growth outstripping formal job creation and service capacity, as well as failures in land, housing and financial markets that limit access to decent low-cost housing. Some cities take on the challenge of upgrading slum areas, but informal settlements may expand at a faster pace than remediation efforts can cope with. For example, the population of Sao Paolo increases by more than 300,000 per year, with growth concentrated in peri-urban and slum areas. 

And while uncontrolled urban expansion and dire conditions in existing slums already overstretch the capacity of many city administrators, local governments across the region face many additional challenges.  Political and fiscal decentralization is putting responsibility for more infrastructure, services and revenues into local hands.  And the effectiveness of urban management has a major impact on the competitiveness of cities – in terms of the cost and ease of doing business and their attractiveness to investors - and therefore on economic growth.   Administrators face difficult choices in allocating scarce resources between social and productive needs for infrastructure and services.

Governments are unable to provide many of the services needed, but local communities may not have the resources or capacity to organize provision themselves. This is especially true in newer, more informal settlements within or around larger cities, as community cohesion tends to be weaker than in more established towns and cities.

WORLD BANK ASSISTANCE IN URBAN DEVELOPMENT

The World Bank's urban development strategy in Latin America and the Caribbean is to work with local governments and communities to reduce urban poverty, expand access to services for all, especially the poor, and make cities more economically productive, environmentally sound and livable. The Bank pursues this by financing investments, providing technical assistance, and undertaking non-lending analytical and policy advisory work, in response to local demand and needs. The Bank is currently financing 59 urban development projects, with a total commitment of around $6 billion. These range from strengthening private housing finance markets to comprehensive municipal development project s aimed at upgrading basic infrastructure in urban areas.

Actions focus on the six main themes below, with projects often cutting across these for maximum impact.  Further details on each area, including examples of recent projects and programs, can be seen by clicking on the area headings.

1. Local economic development: The new urban paradigm emphasizes the need to enhance a city’s competitiveness for sustained and inclusive growth, thereby leading to a more sustainable pathway for reducing poverty. The purpose of local economic development (LED) is to build up the economic capacity of a local area to improve its economic future and the quality of life for all.  It is a process by which public, business and nongovernmental sector partners work collectively to create better conditions for economic growth and employment generation.  

Given its significance in the region, the World Bank is also focusing on Sustainable   Tourism as a means to reduce poverty, build environmental sustainability, foster social responsibility and preserve cultural heritage.

1. Infrastructure and urban environment:  Initiatives in this area seek to enhance urban (“brown”) environments and protect human health.  They include programs to improve solid waste collection and disposal, often in conjunction with water and sanitation programs.  Increasingly, projects include carbon finance, through which they assist the municipality or utility involved in service provision.

1. Housing and land development: World Bank activities in urban land and housing seek to support overall market development and expand services to the poor through property rights development, housing finance schemes, the targeting of subsidies to stimulate demand for housing, provision of supporting infrastructure, regulatory reform, and organization of the building industry.

1. Urban governance and management: Activities in this area focus on municipal governance and financing. They seek to strengthen the local government’s capacity to assume increased administrative, planning, management and financial responsibilities while enhancing accountability and transparency.   Bank activities include Municipal Development Projects (MDPs) and analytical and advisory work, including support to cities in forming longer term strategies for financing and service provision.

1. Slum upgrading, community development and crime and violence prevention:  This area includes urban upgrading and infrastructure improvements to make towns and cities, and especially inner-city and slum areas, more livable for residents and more efficient and competitive for businesses.  Urban upgrading projects finance improvements - and expansion of access - to water and sanitation systems, as well as schools, community centers and roads.   

In addition, given that the Region has the highest crime and violence rates in the world, the Bank promotes preventive, multi-sectoral, and local strategies that seek to develop or strengthen crime and violence prevention components in World Bank clients’ ongoing activities including urban projects. This is done through activities that complement and coordinate with, but go beyond, traditional police responses. Particularly important are the synergies among infrastructure, upgrading, and situational prevention and community-based social prevention activities.

1. Disaster risk management: An important part of the World Bank's mission to reduce poverty is providing assistance to prepare for and recover from natural or man-made disasters. Poorly planned development can turn recurring natural phenomena into human and economic disasters. In recent years, the approach to disaster management has evolved towards a broader concept of risk management. Instead of diverting financing from ongoing projects in order to finance recovery and reconstruction efforts, the Bank now provides investment lending for specific emergency response, as well as disaster mitigation, prevention, and vulnerability reduction projects.