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Latin America's financial accounts are going in the wrong direction.
Despite living in times of climate crisis, none of the 20 countries that emit the most greenhouse gases in the region have managed to achieve high levels of finances that are in line with the current situation.
This is concluded by the latest report on the Sustainable Finance Index that analyzed data from 2022 and which has been presented annually for four years by the Climate Financing Group for Latin America and the Caribbean (Gflac).
“Together, the 20 study countries allocated 1,690 million dollars in sustainable budgets, while the resources that reached carbon-intensive activities reached 62,424 million dollars,” the document says.
In other words, this means that the region's carbon-intensive budgets exceed sustainable budgets by 31 times.
The index, comments the Mexican Sandra Guzmán, General Director of Gflac, takes into account four factors: the sustainable income of each country, the carbon-intensive income (that is, how much they receive from resources to combat climate change, but also for activities such as hydrocarbons), the budget that is allocated to sustainability issues and the budget that goes to carbon-intensive activities.
Each country can add up to four points.
And even if a country receives high international resources for climate change issues, if it also invests a lot in hydrocarbons, the positive will cancel out the negative, and it will go down in the ranking.
In fact, of the 20 countries analyzed, it is El Salvador – although with only 2.9 points out of four – that positively leads the Index, followed by Guatemala and Jamaica with 2.8 points each.
“These are countries that tend to appear higher in the index because, by themselves, they do not have many oil resources.
But they are also beginning to spend and invest more and more in climate change, and that is a sign of vulnerability, that climate change is costing them,” says Guzmán.
On the other side, however, are Mexico and Uruguay (with 1.7 points), and Trinidad and Tobago (with 0.5 points).
“Mexico, for example, has medium sustainable incomes.
But since it also receives so much carbon-intensive financing, resources that go to oil, that makes it fall on the list,” adds the expert.
A situation that could be transferred to Trinidad and Tobago which, despite being an island in the Caribbean, its carbon-intensive budget exceeds its sustainable budget more than 325 times, since 20% of its income comes from carbon-intensive activities. .
“Our goal with this index is not to blame or target certain countries,” adds Guzmán.
“What we want is to show them the gaps that exist in their finances, because many times not even the ministries themselves are accounting for it, and we believe that it is necessary for them to see these trends.”
Storage tanks at the Ecopetrol refinery in Barrancabermeja, Colombia.Ivan Valencia (Bloomberg)
The index also sheds light on key issues, such as, for example, the types of resources that are coming to the region to confront climate change: while only 12% come in the form of donations, the remaining 88% come as loans. .
Which is precisely why many countries in Latin America and the Caribbean have united on an international level to ask that this situation change, because despite not being primarily responsible for climate change, the countries of the region – with finances already in suspense – they continue to go into debt to face this crisis.
What's more, countries such as Argentina, Costa Rica, Paraguay and the Dominican Republic have received all of their climate financing in the form of loans, accentuating their dependence on this type of financial instrument.
In contrast, Cuba is presented as the only country that has received all of its financing in the form of donations,” the document states.
Achieving all these conclusions was not an easy task.
Guzmán says that the team had to navigate seas of information from each of the 20 countries.
They looked at the budgets of the Finance Ministries, the resources assigned to the Environment Ministries and also explored how much each country spends on energy efficiency and renewable energy.
For issues of multilateral income or cooperation, they used data from the OECD (Organization for Economic Cooperation and Development).
“It is true that not all Latin American countries have good availability of data, but what cost us the most is that the data, the budgets, are not disaggregated, they do not specifically say if they go to climate change, so in order to do our work “You have to have an expert eye.”
Even to obtain more information or data in which they found gaps, they sent a series of forms to each of the countries, but only received a response from Colombia, Guatemala, Honduras and Mexico.
From other countries, such as Venezuela, it has become almost impossible to access information, so a couple of years ago – despite being among the most emitting countries – they decided to remove it from the Index, so as not to distort the information.
The Index, Guzmán repeats, rather than generating competition between countries, seeks to shed light on how the region is doing on the issue.
In addition, they will help inform decisions such as the one that will be made at the next Climate Summit, COP29, to be held in Azerbaijan.
One of the important points of that meeting will be to present a climate financing objective.
And it would be good, in the Mexican's eyes, for Latin America to not only demand that the countries most responsible for climate change give them resources, but also for the region's own internal budgets to be aligned with climate change.
Both articles the Paris Agreement talks about.
“We, as Latin America, have all the money in one bag, that of development through fossil fuels, and now that the world is transitioning to another model, we cannot be left behind,” says Guzmán.
As the report points out, “the region needs to inject financing and investments in low-emission activities to generate jobs in new industries that in turn generate new income.
The above must come from instruments other than debt to avoid deepening debt levels such as those currently experienced.”