Latin America's 'Insignificant' Investment in Environment

By Néfer Muñoz

JOHANNESBURG - Latin America and the Caribbean invest less than one percent of their gross domestic product (GDP) in sustainable development and the environment, the Economic Commission for Latin America and the Caribbean (ECLAC) reports.

Environmental spending in the region rarely exceeds three percent, and if private spending is taken into account, it would not surpass one percent, says ECLAC in a new report: "Financing for sustainable development in Latin America and the Caribbean - from Monterrey to Johannesburg."

The agency, which presented its study at the World Summit on Environmental Development in Johannesburg, South Africa, noted that the last five years of the 1990s were "a lost half-decade" for Latin America and the Caribbean. Aid from the international community to the region was earmarked for just a few countries.

In the last decade, the region picked up only 12 percent of official development aid from the rich countries, that is, approximately five billion dollars. And that assistance was focused on a handful of low-income countries such as Nicaragua, Bolivia, Honduras and Peru.

By contrast, direct foreign investment increased significantly in the 1990s, growing from an annual average of 18.2 billion dollars between 1990 and 1994 to 69.5 billion dollars in the period 1995-99, according to ECLAC, a regional agency of the United Nations.

But this investment also was concentrated in few economies, like Brazil (35 percent), Mexico (20 percent) and Argentina (15 percent).

"There was a long-term effort but this document says that it was insufficient," José Antonio Ocampo, ECLAC executive secretary, told Tierramérica.

Furthermore, Latin American policies aimed at attracting foreign investment and boosting exports only marginally took into account the region's environmental problems, said Ocampo.

"A very troubling element is that in periods of crisis there tend to be very deep cuts in investment programs," he added.

The report was introduced at the Summit at an event presided by Mexico's president, Vicente Fox, and with his counterpart from Ecuador, Gustavo Noboa.

Also attending the event were the former president of Costa Rica, José María Figueres (1994-1998), now director of the World Economic Forum; Enrique Iglesias, president of the Inter-American Development Bank (IDB); and executive president of the Andean Development Corporation, Enrique García.

"We must be innovative," said Figueres in comments to Tierramérica. With a shortage of resources and very little investment in the environment, the region must take advantage of its biological diversity through the sales of environmental services, he said.

"Another strategy would be to reduce military spending. Why have such big budgets? To fight against whom, to defend ourselves from whom, if we are all brothers," Figueres said.

Fox agreed that the region must work to facilitate the creation of markets for environmental goods and services.

"Mexico urges all the businesses who have benefited from globalization to ratify their commitment to sustainable development," the Mexican leader said.

The ECLAC report also confirms the decline of international assistance from rich countries. In 1992, the industrialized world earmarked an average 0.33 percent of GDP for aid to poor countries, assistance that dropped to 0.22 percent in 2001.

But there are marked differences between the wealth nations in this regard. While the United States only sets aside 0.1 percent GDP for development aid, Denmark provides 1.01 percent.

Some experts suggest that investment in the environment can be promoted through joint public-private initiatives.

In the last decade, the United Nations Development Program (UNDP) has invested nearly 1.4 billion dollars to finance sustainable development in Latin America and the Caribbean, Elena Martínez, the agency's regional director, told Tierramérica.

Of those funds, more than 200 million was set aside for projects to develop renewable energy sources, promote rural energy and the eradicate poverty, said Martínez.

"Many of these projects were carried out through partnerships between communities, governments, non-governmental organizations, businesses, bilateral donors and financial institutions," she added.

The ECLAC report says it is a positive sign that Latin America has the support of the most complete network of multilateral banks of the developing world, such as the IDB, the Central American Bank for Economic Integration and the Andean Development Corporation, which will soon become a banking entity.

"I would like to see the same level of support for the war against poverty as for the global war on terrorism," said Ecuadorian President Noboa.

One of the greatest obstacles for sustainable development in the region is foreign debt, which now tops 800 billion dollars, states the ECLAC report.