Blended In Or Blended Out? Let’s Talk Sustainability in LatAm
Latin America…home of sandy beaches, salsa dancing, delicious food, and beautiful people is also the home of poverty, political turmoil, and drug wars. Despite all its issues, Latin America (LatAm) still receives96.6 million tourists from all over the world every year and according to a 2019 Gallup poll, Latin Americans are some of the happiest people on earth — I mean…we would be too if we ate arepas and empanadas every day.
Latin America’s resilience doesn’t only make political headlines but also environmental ones. LatAm has demonstrated, in one way or another, its commitment to the development of a sustainable planet. Ranging from Chile and Mexico’s campaigns against single-use plastics to Ecuador’s commitment to the preservation of marine biodiversity to Belize’s policy to stop oil exploration in its territorial waters, LatAm’s ambition to combat climate change is in line with the threat it poses to the region. Coastal countries are particularly exposed to high or extreme climate risks like rising sea levels, tropical diseases, droughts, and the disappearance of Andean glaciers — which could set LatAm back decades of development.
Getting ready for climate change is no cheap feat, especially for low and middle-income countries without much room to take on additional debt. To crowd in catalytic capital for the sustainable development of underdeveloped countries, bilateral and multilateral banks have been using blended finance — the strategic use of development finance for the mobilization of additional private capital towards sustainable development in developing countries. Since 2000, 80 blended finance deals have closed in the region with an aggregate value of $14 billion. Blended finance instruments aim to decrease risk or perceived risk to private investors by combining relatively vanilla financial products that private investors already understand, with public capital that aims to guard against losses. Some de-risking components proven to attract commercial capital include first-loss guarantees, results-based grants, provision of international technical assistance, risk assurances, and concessional construction loans.
Blended finance is an ideal instrument for LatAm because most countries in the region are middle-income countries with plenty of investment opportunities, particularly among preferred investment sectors with constant cash flows like energy and infrastructure. If blended finance can show the bankability of projects in the region, it would unlock long-term private investment while integrating climate action in the real economy. With numerous mainstream global investors considering environmental and social factors, this creates a huge window of opportunity for safe portfolio diversification and the sustainable development of LatAm.
Maria Uquilas, Investment Intern
Improving the lives of nearly half a million people, the subway that will change Quito is being financed by a blended finance structure put together with CAF (Development Bank of Latin America, the World Bank, the Inter-American Development Bank, and the European Investment Bank. The project will not only solve traffic problems and improving connectivity in the city but will also reduce pollutant emissions.
When the clean-up volunteers in the Galápagos Islands came across a soda can with a brand from Indonesia, they were hardly surprised. For months, they had been cleaning the remote beaches of these iconic islands 600 miles off the coast of Ecuador and removing tones of plastic waste, much of it carried to the islands from other corners of the planet. To see how they common Ecuadorian citizens continue to strive for cleaner oceans, watch this video.
Water and Cities in Latin America: Challenges for Sustainable Development by Ismael Aguilar-Barajas (Editor), Jürgen Mahlknecht (Editor), Jonathan Kaledin (Editor), Marianne Kjellén (Editor), Abel Mejía-Betancourt (Editor)
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