Finance Ignores the Climate Crisis. Latin America Fails in Sustainable Budgets…
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Image by Germán & Co The region invests 31 times more in carbon-heavy projects than in sustainable ones, with El Salvador and Guatemala leading and Mexico and Uruguay at the bottom, as per the Sustainable Finance Index.
El País by MARÍA MÓNICA MONSALVE S. Translated by Germán & Co.Latin America's financial accounts are not aligned with sustainability goals. Despite the current climate crisis, the 20 countries in the region that emit the most greenhouse gases have not yet achieved high levels of finance that align with the situation. This is the conclusion of the latest report on the Sustainable Finance Index, which has been presented annually for the past four years by the Climate Finance Group for Latin America and the Caribbean (Gflac). The report analyzed data from 2022. According to the document, the 20 countries under study allocated $1.69 billion towards sustainable budgeting, while $62.424 billion was allocated towards carbon-intensive activities. This indicates that the region's carbon-intensive budgets exceed sustainable budgets by 31 times.
According to Sandra Guzmán, Director General of Gflac, the Index considers four factors: sustainable income, carbon-intensive income (including resources for climate change and hydrocarbons), budget for sustainability, and budget for carbon-intensive activities. Each country can receive a maximum score of four points. Moreover, even if a country receives high international resources for climate change issues, the positive impact will be cancelled out if it also invests heavily in hydrocarbons.
Of the 20 countries analysed, El Salvador leads the Index with 2.9 points out of four, followed by Guatemala and Jamaica with 2.8 points each. These countries tend to appear higher in the Index due to their limited oil resources. However, they are also investing more in climate change, which is a sign of vulnerability and indicates that climate change is costing them, according to Guzmán.
Mexico and Uruguay (with 0.7 points) and Trinidad and Tobago (with 0.5 points) are on the other side. Mexico has a medium sustainable income, but due to its significant carbon-intensive financing, resources allocated to oil production cause it to fall on the list. Mexico has a medium sustainable income, but due to its significant carbon-intensive financing, resources allocated to oil production cause it to fall on the list. It is important to note that subjective evaluations have been excluded from this analysis. This situation could be applicable to Trinidad and Tobago, which, despite being an island in the Caribbean, has a carbon-intensive budget that exceeds its sustainable budget by more than 325 times. This is because 20% of its revenue comes from carbon-intensive activities.
Guzmán adds that the goal of this index is not to blame or target specific countries. The aim is to highlight the gaps in the finances, as often the ministries themselves fail to account for them. It is necessary for them to be aware of these trends. The Index also reveals critical issues, including the types of resources allocated to address climate change. Only 12% of the resources come in the form of grants, while the remaining 88% are in the form of loans. Many countries in Latin America and the Caribbean have united at the international level to call for a change in this situation. Despite not being the main contributors to climate change, countries in the region are going into debt to deal with this crisis. This is why it is important to address the issue of climate finance and ensure that it is provided as grants rather than loans.
Furthermore, it is worth noting that countries like Argentina, Costa Rica, Paraguay, and the Dominican Republic have received all of their climate finance in the form of loans, which accentuates their dependence on this financial instrument. In contrast, Cuba is the only country that has received all of its funding in the form of donations, as stated in the document.
The process of drawing these conclusions required a significant amount of work. Guzmán explains that the team had to navigate through vast amounts of information from each of the 20 countries. The study analysed the budgets of the ministries of finance and the resources allocated to the ministries of environment. Additionally, it investigated the expenditure of each country on energy efficiency and renewable energy. To ensure accuracy in multilateral income or cooperation issues, data from the OECD (Organisation for Economic Cooperation and Development) was used. Not all Latin American countries have good data availability. The main issue is that the budgets are not disaggregated, making it difficult to determine if they are specifically for climate change. To address this, an expert eye is required.
In order to obtain more information or data where gaps were found, forms were sent to each of the countries. However, responses have not been received from Colombia, Guatemala, Honduras, or Mexico. In Venezuela, accessing information has become almost impossible. Therefore, a couple of years ago, despite being one of the most emitting countries, they removed it from the Index to avoid distorting the information.
