Latin America: From Resource Curse to a Green Power
By Lourdes Casanova, Anne Miroux, and Shailja Bang Shah
The convergence of the Rio Negro and the Rio Solimões in Brazil’s rainforest, where they form the Amazon River (photo by Lourdes Casanova)
Latin America, a region of striking contrasts and immense potential, home to 8 percent of the world’s population, boasts immense natural wealth, harboring half of the planet’s biodiversity and a quarter of its forests. However, this abundance comes with challenges, including mismanagement of the Amazon, deforestation, wildfires, and illegal mining. It has long grappled with what economists call the “resource curse,” where natural riches paradoxically hinder economic development and good governance.
These issues have overshadowed the region’s progress and potential in environmental stewardship. The region performs well in the Economic Growth (D), Environmental (E), Social (S), and Governance (G) country rankings published in the Emerging Markets Institute’s Emerging Market Multinationals Report 2022 (EMI D-ESG rankings 2022) due to their energy mix (primarily hydropower), low population density, rich biodiversity, and the presence of the Amazon rainforest. It holds over half of the world’s lithium reserves and produces more than a third of the global copper supply and over half of the silver used in solar panels. It produces under four tons of carbon dioxide (CO2) emissions per capita, the lowest emitter among developing areas. Latin America is emerging as an unexpected leader in environmental progress within the emerging economies.
Latin America is a renewable energy powerhouse, with over a quarter of its primary energy coming from renewable sources; that’s double the global average. While fossil fuels still play a role, they account for about two-thirds of the overall energy mix, compared to the 80 percent global average. Six of the top 20 economies with the highest share of renewable energy in primary energy are in Latin America. The region could boost its utility-scale solar and wind power capacity by over 460 percent by 2030 if all planned projects are realized.
One of the world’s cleanest electricity producers
By 2023, an impressive 62 percent of the region’s electricity came from renewable sources, including large hydroelectric plants. Hydropower accounted for 45 percent of total generation, giving the region one of the lowest emissions profiles globally. In recent years the region has turned sharply towards wind and solar photovoltaic. Costa Rica and Paraguay rely almost entirely on renewable sources for electricity.
The region is pushing clean energy boundaries, particularly in biofuels and green hydrogen production. Brazil is set to unlock billions in investment through new regulatory frameworks while Chile aims to be among the top three hydrogen exporters by 2040. The International Energy Agency projects Latin America will become a key clean hydrogen export zone by 2030.
A strong commitment to achieving net-zero emissions
As of January 2024, 15 countries in the region had established net-zero goals, covering more than 60 percent of regional greenhouse gas emissions. Targets range from 2030 (Dominica and Barbados) to 2050 (Colombia, Chile, Argentina, and others), with Panama and Guyana already achieving net-zero status.
With an urbanization rate of 82 percent, Latin America faces unique challenges in balancing development with environmental conservation; however, this presents opportunities for innovative, sustainable urban planning and green technology implementation.
Pioneering climate finance innovation
In 2022, Chile made history by linking its Nationally Determined Contribution to a sovereign bond framework, raising $2 billion through a sustainability-linked bond. Private companies lead in green debt issuance, with government contributions above the global average and increasing.
The path forward
Despite these advancements, Latin America faces considerable hurdles. Income inequality remains a pressing issue, with the wealthiest 10 percent responsible for 40 percent of total emissions. Energy access disparities persist, as 17 million people lack electricity and 74 million are without clean cooking facilities. These challenges underscore the need for equitable access to affordable, modern energy sources.
The transition to clean energy presents both opportunities and obstacles. While it could potentially lower household energy costs and facilitate the phasing out of fossil fuel subsidies, the initial investment for clean technologies may be prohibitive for lower-income groups without adequate support. By strategically leveraging its natural wealth of resources and biodiversity and embracing clean technologies, Latin America can transform its historical “resource curse” into a competitive advantage in the global green economy. Enhanced regional and international partnerships will be crucial in overcoming existing challenges and expanding the region’s role in the global energy landscape.
The preservation of the Amazon, in particular, calls for international support. As emphasized by President Lula da Silva of Brazil and other countries with significant portions of the Amazon rainforest, such as Peru and Colombia, the protection of the Amazon is a matter of global interest; not just the responsibility of these countries.
The coming years will be critical as the region navigates the complex balance between economic development and environmental stewardship. If it can successfully address its socioeconomic challenges while capitalizing on its environmental progress, the region could redefine itself as a true green powerhouse, setting a compelling example for other developing regions to follow.
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About the Authors
Lourdes Casanova
Lourdes Casanova is senior lecturer at the Samuel Curtis Johnson Graduate School of Management and Gail and Rob Cañizares Director of the Emerging Market Institute at the Cornell SC Johnson College of Business and coauthor of the Emerging Markets Institute Annual Reports.
Anne Miroux
Anne Miroux is a faculty fellow at the Emerging Market Institute and coauthor of the Emerging Markets Institute Annual Reports. She has 30 years’ experience at United Nations Trade and Development (UNCTAD).
Shailja Bang Shah
Shailja Bang Shah is a research analyst at the Emerging Market Institute, specializing in thematic research and managing composite indices and focused on sustainable development in emerging markets. She coauthored chapter four of the Emerging Markets Report 2022, “Emerging Markets Economic Growth and ESG (EMI D-ESG) Country Ranking 2022.” She previously worked at J.P. Morgan in geopolitical and macroeconomic research.