Introduction

In recent decades, Latin America and the Caribbean (LAC) has made significant progress in key dimensions of development. However, there are still large gaps with respect to advanced economies that pose a triple challenge for the region.

On the one hand, it must grow vigorously and continuously in order to close the per capita income gap with the developed world. On the other, it must achieve a drastic reduction in inequality and poverty. Finally, these two objectives must be achieved while preserving the environmental sustainability of the planet. These three spheres of development interact with each other, generating important tensions and synergies.

The future is challenging, but it also offers clear opportunities to close gaps and overcome underdevelopment. Certainly, some trends will condition the region’s development process: population aging, technological change and the decarbonization of the global economy. At the same time, there are still a number of structural barriers that limit the region’s ability to position itself adequately in the face of these trends. Nevertheless, viewed as a whole, the region presents favorable conditions for future challenges, including advances in macroeconomic stability and, especially, a generous endowment of natural resources.

This chapter provides the necessary context for the discussion of key policies on productivity (chapter 2), inclusion (chapter 3) and environmental sustainability (chapter 4). Chapter 5 takes a forward-looking approach, highlighting opportunities for sustainable development as well as the institutional ingredients and the role of multilateral banks in bridging development gaps.