While Europe is moving to the right, left-wing governments are coming to power in Latin America, most recently Bernardo Arévalo in Guatemala. What does this mean for Germany’s foreign and development policy? Pedro Morazán analyzes the latest developments in Latin America.
Leftward slide in Latin America against right-wing tendencies in Europe
In Latin America, there is currently a “new wave” of left-wing presidents in Chile, Colombia, Mexico, Brazil, Honduras and Guatemala. Some experts see this as a counter-trend to many European countries in which right-wing and radical right-wing parties, such as in Italy, Scandinavia, Poland and Hungary, have gained more influence in parliaments and government coalitions. Two different political developments, but they have social dissatisfaction in common. Poverty, inequality, migration pressure, inflation and the effects of the pandemic, among other things, have shifted the scales and reflect new challenges.
However, it is important for German foreign policy and development cooperation to recognize that the new political constellations, particularly in Colombia, Chile and Brazil, offer enormous opportunities for implementing a joint transformation agenda. Both Gustavo Petro in Colombia and Ignacio Lula da Silva in Brazil have already introduced their own initiatives for the protection of the rainforest and the Amazon. Both are also very active in international forums and should be won over as partners for a more far-reaching agenda that goes beyond small individual projects. German and European cooperation can only regain the necessary respect in the region with more extensive, structural change initiatives.
There is also greater agreement with these new governments on the need to combine ecological change with social justice. This second aspect is not a matter of course in most Latin American countries. Powerful oligarchies are still trying to maintain their privileges by any means necessary. In recent years, Western democracies have chosen these elites as partners for the implementation of a neoliberal agenda. Recent experience shows that economic liberalization under the leadership of oligarchic structures in LAC has led to a worsening of social inequalities without generating significant growth impulses. The task now is to learn from past mistakes and enter into partnerships with governmental and non-governmental structures that are already working to implement the transformation on the ground.
Latin America must once again become more of a focus for Germany
The interest of German foreign and development policy in Latin America has declined sharply in recent years. In development policy in particular, the region played a secondary role and at times even lagged behind China in terms of both financial and technical cooperation. It seems that geographical distance has surpassed cultural proximity. The strong focus on poverty reduction, which was linked to both the Millennium Development Goals (MDGs) and the Sustainable Development Goals (SDGs), has shifted the focus away from Latin America and the Caribbean towards Africa and the Middle East. The current crises are forcing both Germany and the European Union to change course.
Latin America and the Caribbean (LAC) as a region is an example of the global climate change paradox: the regions and countries that emit the least carbon dioxide are often the most affected by climate change. LAC accounts for less than 10% of total greenhouse gas emissions, mainly from the energy sector, agriculture and land use change. The latest IPCC report states that LAC will be affected by extreme weather events due to global warming more than almost any other region of the world (IPCC 2022).
This paradox can currently be observed from a different perspective. The Panama Canal, a key trade route, is affected by the risk of drought as a result of climate change. The area around the Panama Canal is currently experiencing an exceptionally dry year. This is bad for shipping, because every ship that passes through it needs millions of liters of water to float, depending on how many containers it is carrying and how heavy they are. This is a very negative omen for the global economy. A large proportion of the products and components in global value chains cross the Channel to reach their final destination. This is just one example of the enormous relevance that this previously forgotten region has for Germany and Europe.
But the drought is not only affecting the Panama Canal. Over the last 15 years, a “dry corridor” has formed in Central America, stretching from Guatemala to the north of Costa Rica and threatening to reach as far as Panama. Central America is a region that causes barely 0.3 % of global emissions. At the same time, it is one of the most vulnerable regions in the world, as it is the scene of constant and increasingly violent hurricanes that cause enormous economic losses (HBS 2022).
The report of the Intergovernmental Panel on Climate Change (IPCC) from 2022 shows that LAC are among the regions of the world that are very strongly affected by extreme weather events that occur as a result of global warming. The melting of glaciers in the central Andes of Peru with the resulting impact on water sources, the emergence of less predictable microclimates in the Andes of Ecuador and the Colombian Amazon region, the change in agricultural cycles in small-scale farming in Mexico and Bolivia, among others, as well as the droughts in Uruguay and Argentina are just a few examples that show how great the challenges facing the continent are.
Economic impact of climate change in LAC
The empirical evidence shows that climate change has a significant impact on the region’s economies. The slow onset effects of climate change are altering productivity and adaptability in many economic sectors relevant to most countries in the subcontinent. According to research by the UN Economic Commission for Latin America (ECLAC), the frequent occurrence of climate shocks reduces the income of the poorest 40 percent by more than 50 %. By 2030, an estimated 2.4 to 5.8 million people in the region could be driven into extreme poverty by the effects of climate change. Climate-related extreme events also affect the power supply and transportation systems. Transportation disruptions alone as a result of infrastructure damage cost an average of more than 1 percent of GDP in the entire region. In several Central American countries, the proportion is twice as high, at up to 2 percent. Brazilian companies lose an average of 22 billion US dollars as a result of environmental damage (World Bank 2022).
However, these effects are extremely heterogeneous depending on the region and over time. (ECLAC 2014). The effects of climate change in the agricultural sector differ depending on the crop, region, type of land and economic actors. In certain parts of Argentina, Chile and Uruguay, a moderate rise in temperature could have a positive impact on the agricultural sector for a certain period of time. In tropical regions and in Central America, however, rising temperatures are already having an increasingly negative impact. In general, climate change is putting additional pressure on water resources in Argentina, Chile, Brazil, Ecuador, Peru, Central America and the Caribbean.
Poverty and inequality have increased
Almost a third of people in LAC are affected by poverty and extreme poverty. (CEPAL 2022). Both the Covid 19 pandemic and climate change have wiped out the modest progress made in the fight against poverty in 20 years within 2 years. The number of people affected by poverty continued to rise in 2021 despite a strong recovery in growth. This is particularly sensitive as it points to the structural wounds left by the pandemic, which may take several years to heal (Rosales 2022).
The considerable inequalities in Latin America must also be pointed out once again. While the widespread decline in income inequality was widely recognized in the early 2000s, this trend stagnated in the 2010s and began to reverse in some countries even before the outbreak of the pandemic. The decline in inequality in the early 2000s was the result of several factors. The most important of these were economic growth, progress in the education sector and a successful increase in income through cash transfers. In some countries, such as Argentina and Uruguay, trade unions also played an important role in pushing through wage increases. An increase in the minimum wage was also important in other countries such as Brazil. Despite this progress, LAC has higher income inequality than all other regions with a similar level of economic development (UNDP 2021).
The rediscovery of Latin America by the German government
In June 2023, the German government drafted a new development policy strategy for the 32 LAC countries under the title “Perspectives with Latin America and the Caribbean” (BMZ 2023). Under the motto “Together for ecological change and social justice” , goals and instruments are defined in order to overcome common challenges. Climate change plays a central role in the strategy. Compared to the strategy of the previous government, greater importance is also attached to the social issue.
However, the regional distribution of priorities in the form of so-called partner countries remains problematic. In the sub-region of Central America, one searches in vain for “anchor” or partner countries of German development cooperation. The challenges in terms of biodiversity and poverty reduction in these countries are still very great.
The topic of foreign debt is mentioned. This is a sign that this topic is on the agenda. However, no concrete steps and instruments are defined here to specify the Federal Government’s contribution to the implementation of existing debt relief initiatives.
The strategy appears similarly diffuse with regard to the implementation of commitments already made to finance climate adaptation measures. This includes, not least, its own proposals for financing a fund for climate-related loss and damage, which was supported by Germany at COP27 in Egypt. The strategy could have set an example for the region right from the formulation stage. Instead, small initiatives that already exist are emphasized, which are correct, but in view of the dramatic situation on the continent are more of a drop in the ocean.
Literature
BMZ (2023). Perspectives with Latin America and the Caribbean: Working together for ecological change and social justice.
IPCC (2022): WGII Sixth Assessment Report. Chapter 12: Central and South America. Available en: https://report.ipcc.ch/ar6/wg2/IPCC_AR6_WGII_FullReport.pdf
HBS (2019). A un alto costo Generación de energía en América Latina, Fundación Heinrich Böll
UNDP (2021). Trapped: High Inequality and low Growth in Latin America and the Caribbean.
