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Countries
Latin America and Caribbean
The current economic and financial crisis has put a stop to an almost six-year stretch of economic growth in Latin America. Since 2004 the region's economy had been growing at a rate of more than four per cent per annum. According to the United Nations Economic Commission for Latin American and the Caribbean (ECLAC) the economy was set to shrink by 1.9 per cent in 2009. Export earnings dropped by 30 per cent as compared to the first three months of 2008. One reason was the falling prices for commodities, which account for a high percentage of Latin America's exports. The remittances sent home by Latin Americans working abroad also fell. The World Bank estimates that the total will have dropped by between 4 and 8 per cent in 2009, while foreign direct investment was expected to fall by 40 per cent. The ranks of the unemployed will rise across the region to an average of 9 per cent.
ECLAC estimates that Latin America is better equipped to face the crisis thanks to the long period of economic growth. The successes chalked up over the last few years in terms of reducing poverty are, however, once again jeopardised by the crisis.
Income disparities in Latin America are greater than anywhere else in the world. Violence and crime continues to grow, especially in the towns, due in part to social inequity.
Several groups within society – for example indigenous people, but also women – are disadvantaged. Many state institutions operate inefficiently and are prone to corruption. In a number of countries there are high levels of dissatisfaction with the quantity and quality of state services, with scepticism towards democracy and democratic institutions running high as a result. In 2008 only 63 per cent of Latin Americans believed that democracy can guarantee liberty and political participation. Only 44 per cent expressed confidence in their own governments, even though internationally acknowledged governance indicators show that Latin America's systems of government perform reasonably well compared with the rest of the world.
Development opportunities
In order to enjoy further economic development, the Latin American region needs to free itself from its dependence on commodities exports and develop competitive structures. The production of biofuels is a new challenge for Latin America. On the one hand, this new industry offers jobs and income in agriculture and could make an important contribution to climate protection, but conversely it could become a major environmental problem, if for instance forests are cleared to produce more cropland. It could also push up the prices of staple foods.
Only a democratically governed and, at the same time, "more social" Latin America has a good chance of successfully integrating itself in the world markets and global politics. International development policy can support the governments of the countries of Latin America and the Caribbean on this path.
Regional integration
In Latin America there is a growing awareness that regional integration makes political and economic sense if the region is to be able to play a part in shaping globalisation. The model for this process of integration is the European Union, which, along with the USA, is the region's most important trading and cooperation partner. Following the failure to establish a pan-American free-trade zone, the most important elements in the region's political and economic integration are the Central American Integration System (Sistema de la Integración Centroamericana, SICA), the Caribbean Community (CARICOM), the Community of Andean Nations (CAN) and the Common Market of the South (Mercado Común del Sur, Mercosur).
The association negotiations between the EU and Mercosur, which began in 2000, are also of economic importance for the European economy. However, there is no sign as yet of the negotiations reaching a conclusion, since it has not been possible so far to resolve the differences between the two economic groupings. These differences include diverging views on access to the European market for agricultural products from the Mercosur countries and also on access to the markets of the Mercosur countries for industrial products from Europe.
In June 2007, association negotiations began with Central America and the Andean Community. The aim is to improve those countries' access to the European market and foster political cooperation. In 2007, Economic Partnership Agreements (EPAs) were concluded with the Caribbean countries (CARIFORUM) as part of the agreements between the EU and the ACP countries; the EPAs are to be implemented over the next few years.
Future relations between Latin America and Germany, and indeed the whole EU, will depend to a substantial extent on how regional integration progresses.
Priority areas of cooperation with Latin America
With a view to optimising the division of labour Germany will consult with other donors and in future concentrate its development cooperation with Latin America more strongly on thematic areas in which it has a particularly great deal of experience. The following priority areas have been defined for German development cooperation with the countries of Latin America and the Caribbean:
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Democracy, the rule of law and the participation of the poor (good governance)
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Environmental and climate protection
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Urban drinking water supply and sanitation
These priority areas already account for three-quarters of the regional portfolio and their importance continues to rise.
Latin America and the Caribbean are important partners for the EU and Germany when it comes to influencing global conditions – for example with regard to climate protection and preserving biodiversity, international trade, and security policy.
In order for the countries in the region to have a fair chance of development, Germany advocates taking their development interests into greater account. This touches on German and European foreign policy, on the shape of international trade relations (e.g. EU agricultural market issues, WTO negotiations) and on the strategies pursued by important global players such as the World Bank and the EU Commission.
At the international level, Germany offers considerable support to Latin America and the Caribbean through its contributions to the World Bank, the Inter-American Development Bank (IDB) and the Caribbean Development Bank (CDB).
Moreover, as well as being an important donor within the scope of European development cooperation, Germany is also engaged as a bilateral donor in most Latin American countries.
Supporting indigenous peoples
About ten per cent of the people living in Latin America belong to one of the indigenous peoples. In Bolivia and Guatemala this group in fact makes up the majority of the population. They are particularly badly hit by poverty and marginalisation. In 2006, the BMZ adopted its Strategy for Development Cooperation with Indigenous Peoples in Latin America and the Caribbean, with the aim of supporting the self-determined development of indigenous people.
Cooperation with emerging economies
Germany supports the dialogue between the industrialised countries and leading emerging economies agreed upon in 2007 at the G8 summit in Heiligendamm and re-affirmed in 2009 at the L'Aquila G8 summit meeting. In Latin America, Mexico and Brazil are the two emerging countries that, thanks to their economic and political weight, play a key role in solving regional and global issues, for example when it comes to fighting poverty, giving globalisation a social dimension and protecting the environment.
One development policy instrument used in cooperation with Latin American emerging economies is development partnerships with industry, known as Public-Private Partnerships (PPPs). They are used to mobilise additional private capital.
Further funding can be mobilised using instruments such as development or promotional loans. These loans at close-to-market-conditions are a particularly good option for more advanced Latin American countries and for sectors like energy, industrial environmental protection, micro-credit and water supply.
Triangular cooperation is another instrument that should be used more. It consists of Germany and a Latin American emerging economy making their pooled experience available to other countries, in this case in Latin America, and implementing joint projects with third countries. Mexican experts for example, assisted by Germany, are building up a network of environmental advisors for the waste management sector in Guatemala.
Cooperation with other donors
Germany coordinates its activities in Latin America closely with those of other donors such as the European Union and the World Bank. This helps to raise the effectiveness of the funds deployed as called for in the Paris Agenda. A successful example of this multilateral cooperation is the international Pilot Programme to Conserve the Brazilian Rain Forests (PPG7). In addition to bilateral cooperation, Germany also acts via regional, multi-country approaches. This is a better way of tackling topics such as HIV/AIDS, renewables, protection of tropical forests and regional integration.
The BMZ also supports Latin American non-governmental organisations (NGOs).
