OBELA Analysis

The rebound of the world economy was the great feature of the year 2021. Anticipated as strong rebounds, they were less strong for some than for others. Governments that injected money into public investment improved their recovery more than those that did not.

2021 has been the one with the highest inflation in the world since the 1970s with Brazil, Turkey and the United States leading the way, but followed by everyone else. The consequence is that central banks around the world initiated interest rate hikes as a way to contain inflation, so the GDP growth rate in 2022 will be very low overall.

It was a good year of economic rebound, but at the cost of high global inflation that central banks will have to face in the years to come. The recovery was rapid due to increases in government deficits and debt, and even so, spending still does not contribute to economic growth.

The energy transition in Latin America has the structural problem that has been dragging on in the region for ever: the lack of capital. To solve this, external financing has been the main driver of the change in the energy matrix. 

The main financiers are the Export-Import Bank of China, the China Development Bank, the Inter-American Development Bank (IDB), the Development Bank of Latin America (CAF) and the U.S. Agency for International Development, in that order.

It should be noted that the Caribbean Basin is mainly financed by the USA and South America by China. Although the U.S. finances renewables more than dirty energy, in terms of amounts it does not compare with the Asian economy. External financing for renewables is vital for Latin America's energy transition. It should not be forgotten that Latin America is a disputed territory and the control of renewables is key.

The last COP26, held in Glasgow, Scotland, sought to establish agreements that would define commitments to reduce greenhouse gases, and thus face climate deterioration. With not very sharp proposals and almost no action plans.

According to the latest Report on Climate Change, published by the IPCC, it is necessary to maintain the temperature increase limit at 1.5 ° C to avoid the irreversible loss of biodiversity. However, the little cooperation of the countries that pollute the most and the promises without plans of action keep the global climate issue adrift.

The countries that contribute the most to the climate crisis, through the relocation of oil production and exports, are precisely those that refuse to commit to lowering their emissions and paying for damages; which leaves countries affected by climate change in an even more vulnerable position and without the possibility of mitigating its effects.