Challenges

The social and economic well-being of countries in Latin America and the Caribbean, as in many regions, depends heavily on regional cooperation and the protection and sharing of regional public goods. These can range from economic development projects in transport, energy, telecommunications, trade facilitation and competitiveness to social development projects in health, disaster risk management, environment, housing, and food and nutrition. By tackling these common challenges together, the countries can improve the quality of life of the region’s populations.

Toward a Solution

In 2004, the Inter-American Development Bank (IADB) created the Regional Public Goods Initiative to respond to this need. The Initiative aims to finance projects that have the potential to generate significant shared benefits and positive spillover effects through the production of regional public goods, defined by the Initiative ”as goods, services or resources that are produced and consumed collectively by the public sector and, if appropriate, the private, non-profit sector in a minimum of three borrowing member countries of the IDB”. Such a regional approach will be a key contribution to achieve several SDGs, such as climate change, since shared seas such as the Caribbean, river basins such as La Plata or shared forests such as the Amazon are regional public goods that need to be managed and protected by neighbouring countries.

The Initiative is based on the premise that Latin American and Caribbean countries share development challenges and opportunities that they can address more effectively and efficiently through regional collective action and cooperation, producing benefits that they cannot achieve individually or only at a higher cost. The Initiative does not finance projects exclusively for the unilateral transfer of capacity, experience and knowledge from one country to another country or group of countries and is therefore a prime example of a Southern-grown horizontal cooperation model.

The methodological approach seeks to ensure: (a) the competitive allocation of funds; (b) a demand-driven focus; (c) the aims of South-South cooperation, especially horizontal innovation, knowledge transfer and institution-building in the region; (d) a focus on operational value chains that generate regional solutions that are mainstreamed into national reforms or investments; (e) use of the Initiative as a laboratory of ideas for regional collective action; (f ) collective action whereby partner countries and institutions together decide their goals and how to achieve them, with equal access to the products generated collectively; and (g) strategic allocation of resources and thematic focus. Selection criteria for projects include alignment with the IADB goals, objectives and priorities (reduce inequality, increase productivity, deepen economic integration), with cross-cutting issues such as gender, equality and diversity, environmental sustainability and enhancement of the rule of law considered a plus.

To date, the Regional Public Goods Initiative has financed more than 130 projects in Latin America and the Caribbean for more than $100 million. Several projects have had an outstanding impact in different areas:

• Leveraging and linking software (regulatory frameworks) and hardware (investments in infrastructure) interventions in integration through the Mesoamerican Observatory for Freight and Logistics that informs the design of public policies to improve the efficiency of cross-border transportation systems that has led to $650 million in IADB investment loans;
• Responding to demand in integration beyond the free movement of goods, services and capital by establishing a regional engineering accreditation system for the Greater Caribbean, generating a single marketplace and economies of scale;
• Addressing asymmetries and promoting cohesion through South-South cooperation through the creation of a single social security database in the Southern Common Market (MERCOSUR), which allows migrant workers to accumulate pension benefits across countries and enjoy the benefits in their country of retirement;
• Promoting the accumulation of knowledge and innovation through cooperation to design solutions for the management of high-cost medications to improve efficiency and generate savings among public health agencies;
• Generating regional strategies for joint action in global forums by establishing the Financial Stability and Development Group among the central banks of Brazil, Colombia, Peru, the Plurinational State of Bolivia and Uruguay; and
• Achieving efficiency and quality of public services through the creation of a regional protocol for the procurement and quality control of 37 pharmaceuticals in Central America that is also saving millions of dollars each year for public hospitals.

Countries work together to conceive innovative regional development solutions suited to their development contexts and, in the process, partner with institutions and organizations from inside and outside the region, including donors, to inform and enrich the process of regional decision-making.

The Initiative builds sustainability into its model, with countries generating development solutions through collective action, forging regional partnerships, and building local capacities for long-term sustainability through national development reforms and investments.

Financed regional public goods projects have spillover effects in scale and scope as they allow countries to join during execution and adapt development solutions to different contexts. The model can be replicated in other regions and applied across regions (e.g., trans-Pacific public goods) or at the global level.

The Regional Public Goods Initiative partners include: (a) the public and private non-profit sectors of Latin American and Caribbean countries; (b) international or hemispheric organizations, foundations and cooperation agencies outside Latin America and the Caribbean that may serve as strategic partners, advisers and/or co-financers; and (c) IADB, which acts as financier, broker and technical adviser.