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© World Bank
The Latin America and the Caribbean region experienced its strongest economic growth in 24 years in 2004, growing 6 percent, up from 2 percent in 2003. This performance reflects high demand for the region's exports, booming commodity prices, ample global liquidity, and improved domestic policies, such as floating exchange rate arrangements and adjustments in fiscal and current accounts. In line with global output and trade, growth in the region is expected to slow moderately to about 4.3 percent in 2005. The region has abundant natural resources and average incomes in the middle-income range, but it is marked by high inequality and entrenched poverty and exclusion. Development challenges facing the region's 30 countries include increasing investment and productivity; reducing economic volatility; broadening access to services, credit, and land; and strengthening infrastructure, institutions, and governance. WORLD BANK ASSISTANCE World Bank support to the region aims to reduce poverty through sustained, equitable growth and a focus on the poorest and most vulnerable people. Priorities include improving the investment climate and competitiveness in order to foster job creation; strengthening education and creating innovative systems for enhancing human capital and increasing productivity; improving public sector governance and institutions; fostering social equity and inclusion; achieving an inclusive but affordable welfare system; strengthening environmental institutions and promoting the effective use of natural resources; consolidating macroeconomic and financial stability; and using fiscal resources for infrastructure investments. Bank lending approved for Latin America and the Caribbean reached $5.2 billion in fiscal 2005, $4.9 billion in IBRD lending and $0.3 billion in IDA credits and grants. This financing was designed to support innovative solutions that integrate technical knowledge with customized local approaches. During fiscal 2005 the Bank made its first development policy loans to the region. The loans support the strengthening of social sectors in Bolivia, fiscal reform and housing sector policy in Brazil, broad-based growth in El Salvador, debt relief and the development of the financial sector in Honduras, and social programs in Uruguay. New results-focused Country Assistance Strategies were prepared for the Dominican Republic, El Salvador, Guatemala, Jamaica, and Uruguay. In Haiti the Bank supported development of a needs assessment (the Interim Cooperation Framework), endorsed a Transitional Support Strategy, and provided a first package of IDA credits and grants totaling $75 million. The Bank's analytic and advisory support to the region in fiscal 2005 included a flagship study of the rural sector (see “How Important Are Rural Activities to Development?”) and analytic work on building the climate for investment and fostering participation in development. (See also the IFC and MIGA annual reports.) BUILDING THE CLIMATE FOR INVESTMENT Across the region the Bank is assisting countries in their efforts to reduce the red tape that hinders private sector development and to address the poor logistics that make products costly and businesses unprofitable. Major financing to the region in fiscal 2005 included a $658 million loan to Brazil for programmatic fiscal reform and social security reform; a $250 million loan to Mexico to support innovation for competitiveness; a $200 million loan to Argentina for sustainable investment in infrastructure; a $200 million loan to Colombia for labor reform and social structural adjustment; a $100 million loan to Peru for improving decentralization and competitiveness, along with a $200 million guarantee facility; and a $150 million loan to the Dominican Republic for strengthening the power sector. To help identify priorities for public expenditure reform, the Bank carried out public expenditure reviews of Guatemala, Mexico, Paraguay, St. Lucia, St. Vincent and the Grenadines, and Uruguay in fiscal 2005. It completed investment climate surveys for Brazil, Ecuador, El Salvador, and Guatemala and launched surveys for Costa Rica and Jamaica. The results of the survey for El Salvador were used to design the first development policy loan for the country and provide benchmarks for monitoring and evaluating the loan. The Bank conducted other analytic work on growth and competitiveness, trade reform and labor market risk, labor competitiveness, migration (in the context of the North American Free Trade Agreement), the Central America Free Trade Agreement, and innovation. FOSTERING PARTICIPATION IN DEVELOPMENT The Bank is promoting efforts to reduce poverty, improve poor people's access to basic services, and increase the participation of excluded groups by funding programs in health, education, environmental protection, social inclusion, and social protection. In Mexico, northern Peru, and the Southern Cone countries, Development Marketplaces have encouraged innovation and have promoted young people's participation in development. Bank lending in fiscal 2005 included $503 million for environmental sustainability and $503 million for housing reform in Brazil, $300 million for basic education in Mexico, $260 million for disaster vulnerability reduction in Colombia, $100 million for social reform in Peru, and $40 million for land administration in El Salvador. The Bank supported countries' national antipoverty plans by endorsing Poverty Reduction Strategy Paper Progress Reports for Guyana and Honduras. The Bank's analytic and advisory support included poverty assessments for Bolivia, the Dominican Republic, Mexico, and Peru, and studies of youth development in Brazil, social protection in Central America, and poverty, inequality, and economic growth in Argentina. Regional studies were conducted on social security, service delivery reform, urban poverty, health care reform, education reform, and indigenous people, poverty, and human development. To increase access to information about the Bank's activities and foster informed debate on development issues, the Bank extended its public information services to 12 Latin American and Caribbean countries. It also contributed to knowledge sharing and capacity building through the Global Development Learning Network, which offers programs on health, small and medium enterprises, rural development, and education (see “The World in One Room” in “Addressing Worldwide Poverty”). |
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