The economics of climate change in Latin America and the Caribbean, 2025: climate action to overcome development traps

The manifestations of climate change are becoming increasingly evident, and their negative effects are already being felt. The Latin American and Caribbean region is no exception and, in fact, is one of the most vulnerable regions of the world. Droughts, forest fires and powerful storms are intensifying and becoming more frequent. This is unfolding in a context in which the region is facing a number of development traps that could jeopardize the progress it has made thus far and limit the countries’ ability to overcome the challenges of improving their population’s well-being on a sustainable basis. At this critical juncture, climate action offers an opportunity for spurring growth and innovation, creating jobs and enhance the region’s international positioning. The investments, plans and policies needed to address the climate crisis can, at the same time, also help the region to advance its economic and social goals. This document discusses the aggregate economic impacts of climate change and their relationship with the development traps faced by the region. It then goes on to examine the specific policies being deployed in the region to help countries to overcome these development traps.