Activity in Latin America and the Caribbean (LAC) was adversely affected by the sluggish performance of the US economy, the recession and debt crisis in Europe, slower growth in China, and softening domestic demand in countries with previous policy tightening. Growth moderated to 3.2% in 2012, from 4.5% in 2011, with inflation easing to 3.2% in tandem with the decline in commodity prices. However, these aggregate figures mask large differences among countries and sub-regions. Whereas the pace of growth slowed to 2.9% among South America’s commodity exporters, overall growth in Central America was resilient at 4.3%. The economic performance of the Caribbean remained lackluster at 2.8%, reflecting elevated public debt, and slow recovery in tourism, remittances and external demand, due to stronger linkages with the advanced economies and unfavorable terms of trade.

Countries in the LAC region have reached several MDGs, including halving the proportion of extremely poor people, primary education completion and gender parity in secondary education, and access to safe water. While important headway has also been made in reducing under-5 child mortality, more needs to be done in the area of maternal mortality. With 36.8 million people existing in extreme poverty and 29 million people living without access to electricity, serious challenges of poverty and inequality remain.

In 2012, OFID worked to boost socio-economic development in 18 LAC countries with the provision of US$101.3m. in financing across a range of mechanisms. The largest share (US$59.8m.) was delivered in public sector lending, mostly in support of transportation projects to foster regional integration. Private sector investment accounted for US$15m., with a focus on agribusiness and financial sector development. Under OFID’s Energy Poverty Grant Program, efforts were stepped up during the year to fight energy poverty in 17 countries in the region under a joint Energy for the Poor Projects Preparation Facility, which was launched in partnership with CAF. With an initial allocation of US$1.6m. – an amount shared equally between the two partners – the Facility aims at identifying and preparing projects that will improve energy access among the region’s poor.