Strong fiscal frameworks are essential for attracting private investment, reducing risk, and signaling reliability to markets. A new analysis highlights five opportunities for finance ministries in Latin America and the Caribbean (LAC) to deepen synergies with the private sector and mobilize capital for resilient, sustainable growth.
Public investment in LAC has declined by more than 30% between 2014 and 2024, widening infrastructure gaps and limiting development prospects. To reverse this trend, ministries of finance are advancing reforms that integrate climate risks, strengthen debt sustainability, and build credible systems for sustainable finance.
The report identifies five key opportunities. Governments can position resilient public investment management as a market signal by incorporating climate and disaster risk into project systems, as seen in Panama and Costa Rica. Fiscal incentives and public-private collaboration can enhance disaster risk management, with examples like Peru’s Obras por Impuestos and Colombia’s housing resilience programs. Incorporating contingent disaster liabilities into sovereign balance sheets is another priority, ensuring climate-related risks are factored into debt sustainability analyses. Building sovereign sustainable finance architecture, as Chile has done with green bonds and expenditure tagging, expands investor bases and lowers capital costs. Finally, empowering ministries of finance to enable public-private partnerships for resilient infrastructure ensures risk-sharing and bankability, with Chile’s Decree No. 956 serving as a model.
Together, these measures form a mutually reinforcing system. By integrating resilience into investment, quantifying climate liabilities, and building sustainable finance frameworks, LAC countries can mobilize private capital while advancing fiscal sustainability.
