Latin America has been on a strong growth trajectory for the last decade, resulting in impressive improvements in social and environmental outcomes. Millions of people have been lifted out of poverty and strong national action on deforestation and renewable energy investment by several countries has resulted in steady progress on climate change.
The region’s continued growth is at risk though, due to China’s decelerating growth. That’s forcing Latin America governments and companies to focus on more immediate local concerns rather than providing a strong regional roadmap for long-term sustainability. But there is a silver lining. A new localized approach to corporate sustainability is resulting in a wave of innovative solutions to entrenched social problems.
Sustainability under fire
The Latin America region experienced strong growth throughout the 1990s and early 2000s on the back of voracious demand for raw materials and food crops from China. But the region was struck hard by the 2008-2009 global financial crisis and has been reeling ever since. Sluggish recovery in several countries has been exacerbated by the slowing down of the Chinese economy in 2014-2015, especially with reduced demand for Latin American exports. RegionalGDP growth has dropped from 6% in 2010, to an estimated 0.8% in 2014,according to the World Bank.
Local companies have also been grappling with the seismic effects of a series of devastating corruption scandals across the region. The Petrobras scandal is damaging the Brazilian economy. The presumed killing of more than 40 studentsin Iguala, Mexico, and the high profile escape of infamous drug baron Joaquín ‘El Chapo’ Guzmán, have illustrated that corruption has infiltrated public institutions in Mexico. Government corruption debacles are rocking Guatemala and Colombia. Recent scandals involving FIFA are resulting in the erosion of public trust more broadly in Latin America. “If you look at polls in country after country in Latin America, not only are governments losing the popularity contest, but all kinds of institutions: political parties…private sector institutions…are facing challenges of credibility and legitimacy,” stated Andrés Velasco, Professor of International Practice in International Development at Columbia Global Centers, earlier this year at the World Economic Forum on Latin America 2015. Latin Americans are fed up.
Focusing closer to home
It is not particularly surprising that the current political and economic turmoil in the region has resulted in a more localized, internally focused sustainability agenda. Whilst current European and North American sustainability conversations are centered around climate change and the outcomes of the imminent international climate talks in Paris, COP21 barely touches the corporate radar in Argentina, according to Pablo Benavides, a consultant in Sustainable Communication at Buenos Aires-based consultancy, Urban, and one of the lead organizers of 2015’s Sustainable Brands Conference in Buenos Aires: “COP21 is entirely off the corporate sustainability agenda here. We are much more focused on social innovation in corporate sustainability. With so many people struggling to access basic resources like food and clean water, education, healthcare — environmental issues really have a back seat,” Benavides said in a recent interview with SustainAbility.
A recent study by the World Bank found that one out of every five Latin Americans continue to live on less than US $4 per day despite dramatic improvements in poverty rates over the last 15 years. This means that as economies in Latin America worsen, critical long-term environmental sustainability concerns are sidelined by more immediate social and economic challenges.
Building a more human economy
Whilst global environmental concerns may not resonate in a region facing so many critical challenges closer to home, new conversations are emerging about how Latin Americans can build a more human economy at a local level – one that’s central aim is to create a sustainable, flourishing society that meets the needs of local people. And local multinational and medium-sized corporations are rising to the challenge with creative solutions to social challenges.
For example, in Mexico, national cement company CEMEX has been lauded for offering building materials and technical support to DIY homebuilders in exchange for regular fixed payments, enabling many working class Latin Americans to own their own homes for the first time. Nearly half a million families across Latin America have built Cemex-supplied homes at one-third the average time and cost. Now CEMEX is expanding into renewable energy investment with the launch of CEMEX Energia. The new energy arm of the company has created a joint venture with renewable-energy company, Pattern Energy Group, to develop 1,000 megawatts of renewable-power capacity over the next five years.
Astrid y Gastón, a successful global Peruvian restaurant chain, has committed to improving the well-being of everyday Peruvians. Astrid y Gastón promotes indigenous agricultural products by using traditional and locally sourced ingredients in its restaurants. The company also trains local street vendors to encourage a thriving, healthy, low-cost food sector in Lima and invests in disadvantaged Peruvian youth by giving them free training at its highly regarded culinary school in Lima.
But whilst some Latin American companies are beginning to fill the void left by inadequate public services and infrastructure, many others continue to struggle with short-term financial necessities at the cost of long-term strategic planning. According to Pablo Benavides, “We [Latin Americans] often don’t know what’s going to happen in a month with our governments. We need to combine our long-term and short-term visions so that they work in harmony. And we need to integrate our local sustainability goals into broader global goals for a sustainable future.” Delaying long-term action may result in compounded future costs and challenges so a bold vision is essential. This is particularly true of issues such as climate change resiliency, which will continue to impact water, agriculture and energy sectors in Latin America, as discussed in our previous blog. Whilst climate change is often seen as a purely environmental issue, the most severe of the impacts will likely be social and economic.
While governments in Latin America continue to grapple with corruption and credibility issues into 2016, it’s encouraging to see a new movement of local businesses stepping into the leadership gap with creative solutions to entrenched social and economic challenges.