Latin America has been called the “squeezed middle” in global climate policy circles. The region is not a big emitter like some major countries in Asia, nor is it as in need of as much development assistance as some countries in Africa.
Despite the fact that the region has made considerable progress on a number of the Millennium Development Goals including reducing extreme poverty and hunger, inequality and poverty are still serious problems. Moreover, an economic slowdown affecting much of the region has ushered in a new period of lackluster growth. At the same time, climate change impacts are being felt across the region and are likely to worsen causing billions of dollars in damages.
As a result of its status as a middle income region, Latin American countries know that they are not first in line for climate finance, given the need to support the Least Developed Countries and vulnerable Small Island States.
However, the region still needs considerable technological and financial support from developed countries for low emission policies and building resilience to climate impacts. Some Latin American countries are already using their own resources to finance climate action, and are willing to take further steps with adequate support. They are also playing a proactive role in the UN climate negotiations on finance with four countries to date making pledges to the Green Climate Fund--Colombia, Peru, Panama, Chile and Mexico.
Below, we share the responses of four Latin American experts on climate finance issues to the following three questions: What are Latin American countries’ main positions on climate finance? Who are the main actors on climate finance in the region and what is their impact? How are Latin American countries mobilizing the financial resources to support their own transition to a low emission and climate resilient development path?
Andrea Rodriguez, senior attorney climate change program, Interamerican Association for Environmental Defense (AIDA)
“The US 100 billion annually committed by 2020 should be used as a minimum floor for commitments beyond 2020. We believe that many countries in the region would like to see this in the agreement.
The main actors include national development banks like BNDES in Brazil, multilateral development banks like CAF, and countries with the capacity to make contributions, for example Mexico and Brazil. Private sector actors including commercial banks, that are investing more and more in climate change, such as the BICE Bank in Chile and Bancolombia in Colombia. Public and private partnerships will be crucial to open up opportunities to increase climate finance. Transparency will be also necessary to track finance and ensure resources are used appropriately.
Some Latin American countries are taking the proactive role of making pledges to the Green Climate Fund while others are still defining whether they need a climate finance strategy to ensure their needs are met. This is a key ask that civil society is pushing for to ensure that developing countries start adopting climate finance strategies to secure climate finance over the long term. Such strategies can contribute to effective planning, engage key stakeholders at the local level, enhance national capacity and promote country driven decision-making on climate related matters.”
Sandra Guzmán, co-founder and coordinator of the Climate Finance Group for Latin America and the Caribbean
“Latin American countries share some common positions on climate finance, such as the need to increase the $100 billion goal. Latin America also emphasizes the importance of balancing finance for adaptation with mitigation and giving developing countries direct access to the Green Climate Fund. However, there are differences with some countries differing on the role of South-South cooperation with some pointing to its importance while others fear it could distract from the responsibility of developed countries.
Increasing participation of finance ministries is central to raising awareness and increasing coherence among countries. Other actors can also play an active role including central and local governments, NGOs, and the private sector, which are needed to collaborate to create coherent national strategies for climate finance. National development banks also play an important part such as the Brazilian Development Bank (BNDES) which receives the largest source of climate finance in the region. A challenge going forward is to achieve harmonization across stakeholders to promote a cohesive approach and to catalyze financial opportunities and leverage funds among these actors.
Several countries are integrating climate change into their planning systems and providing resources through national budgets to deal with the problem such as Colombia, Mexico, and Peru. However, the amount of money that these countries spend on activities that cause climate change is still far higher. The INDCs were a huge opportunity for countries to define climate finance strategies, yet only 3 out of 25 countries mentioned it. Very few countries referred to clear numbers on finance, which means that even though it is a key implementation mechanism, countries are not integrating finance in a serious way. If they want the INDCs to succeed, they have to include better finance elements for conditional and unconditional measures.”
Marcela Jaramillo, Policy Advisor on climate finance at E3G and an associate at Nivela
“Latin American countries agree that developed countries must make good on their promise to deliver $100 billion per year from 2020. Many are mobilizing national public sources and integrating both mitigation and adaptation in their planning and institutions. Some are also prepared to be not only recipients but also to contribute with support where possible. With the majority of Latin American countries proposing both conditional and unconditional commitments in their INDCs, countries expect to continue combining national and international finance.
The main actors are still within the environment ministries, as well as foreign affairs, but there is growing involvement from finance and planning ministers. Norway, the UK and Germany, the World Bank and Inter-American Development Bank, and UN Agencies are very active, helping to shape progress made so far in many countries. South-South cooperation across countries in the region is also increasingly relevant. However, the lack of coordination between actors has undermined progress. Greater country ownership and strategic planning, that encourages coordinated action across government as well as increased dialogue with the private sector, is required to transform current models of development and redirect investments towards low-carbon and resilient alternatives.
Different policies and changes in regulation are being designed, with some countries working on national climate funds while others are formulating climate laws and plans. For example, Mexico and Chile are working on national finance strategies that align countries’ priorities and bring together actors in the public and private sectors. National development banks also play key roles by leading innovation, leveraging different sources of finance, shaping new markets and helping to deliver outcomes on the ground.”
Jorge Gastelumendi, Global Policy Lead at The Nature Conservancy, and lead advisor on climate finance to the Government of Peru
“Latin American countries are strongly aligned on climate finance. A key area is the obligation of developed countries to lead on mobilizing financial resources to developing countries, as well as their commitment for scaling up from a floor of $100 billion starting in 2020. Latin American countries are also proactively pushing for developed countries to commit to communicate periodically forward-looking information on financial flows to be provided and mobilized. Some more market-oriented Latin American countries have signaled in the past a certain level of flexibility on having the agreement recognize the efforts made by developing countries to channel resources towards their transition to a low emission and climate resilient development path, both at the domestic level and through south-south cooperation.
Across Latin America, finance and planning ministries are attempting to mainstream climate change into their development planning. At the last World Bank and IMF Annual Meeting held in Peru in September this year, climate change took a central role in the discussions among finance ministries, which is unprecedented for such a meeting hosted by a developing country.
The scale of the task to address the climate challenge cannot be solely tackled with public resources, either domestic or international. Mobilizing private resources is crucial to effectively overcome the challenge. Several countries in the region continue to build and provide the necessary signals to attract private investment that is aligned with low emission and climate resilient considerations.”
More participation, more possibilities
As the UN talks get underway in Paris, climate finance is a central issue for developing countries including those from Latin America. The finance package could make or break a new Paris agreement. Yet it needn’t do so if developed countries first and foremost play their part, supported by some innovative developing countries.
Developed countries have to show developing countries they are serious about the floor of $100 billion per annum from 2020 if they want Paris to succeed. Finance is essential not only for adaptation but also to spur low emission growth - a priority for developed countries keen to see a long-term mitigation goal that includes emissions reductions from everyone. Developed countries should clarify that adaptation will be treated equally to mitigation and take the lead on shifting larger investment flows away from dirty projects toward low emission and resilient options.
With their contributions to the Green Climate Fund and progress on developing national climate finance strategies, some Latin American countries are already charting a more constructive path away from the idea that developing countries will only act if finance is forthcoming. They are also willing to take more action with adequate finance, which suggests it is in the interests of developed countries to support this offer of enhancing ambition.
Victoria Hoffmeister, Kari Malkki and Kara Roanhorse, researchers in the Climate and Development Lab at Brown University, contributed to the preparation of this article.