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How to grow the impact economy in Latin America and the Caribbean


How to grow the impact economy in Latin America and the Caribbean

Published 18 January 2024 in Finance • 7 min read

Latin America and the Caribbean need smarter collaboration and regulation to attract more impact investment, says Carolina Suarez Visbal.

Latin America and the Caribbean (LAC) is a region full of opportunities. In every corner, you will find outstanding individuals with warmth, resilience, and a spirit of solidarity, as well as the most beautiful landscapes and biomes housing around 40% of the world’s biodiversity. According to the UN, the region contributes one-sixth of the world’s food production and it will play a significant role in the global energy transition: The UN Economic Commission for Latin America and the Caribbean (ECLAC) points out that LAC has vast renewable energy resources, enabling us to source up to 80% of our energy from affordable renewable electricity, thanks to wind and solar energy, whose costs continue to decrease. We are host to 46.5% of the world’s forests, while only responsible for 8.1% of global greenhouse gas emissions.

Undoubtedly, these factors, among others, make the region an attractive investment destination. However, the region is also characterized by an economic paradox. Most nations sit in the middle-income category (28 out of 33 countries), with four classified as high-income and one as low-income. At the same time, income inequalities are high, with most countries’ Gini coefficient above 0.4, the level at which significant imbalances emerge between the rich and poor. The region is, therefore, deemed “too rich” to receive official development assistance (ODA) from wealthier countries, yet it still faces significant challenges due to high inequality. Investments in the region must, therefore, be made with the explicit intention of bridging these gaps and making the most of opportunities stemming from its human capital and natural resources.

If we look at this challenge through the lens of the UN Sustainable Development Goals (SDGs), the funding gap to meet LAC targets is estimated to be $650bn per year. Currently, only 24.6% of the objectives will be met by 2030. Analysis shows that, for LAC, the most significant challenges are SDG 1 (no poverty), SDG 4 (quality education), SDG 5 (gender equality), SDG 11 (sustainable cities and communities), SDG 13 (climate action), and SDG 16 (peace, justice, and strong institutions). These goals are unlikely to be achieved according to the current trend, as 50% and 80% of their targets may still need to be met. On the other hand, SDG 3 (good health and well-being), SDG 7 (affordable and clean energy), SDG 9 (industry, innovation, and infrastructure), SDG 12 (responsible consumption and production), SDG 14 (life below water), and SDG 17 (partnerships for the goals) look more encouraging, with 40% of their indicators progressing as required. This data gives valuable insights into which sectors should be prioritized, the ones in which investments can be more impactful, and where the mechanisms to invest and measure that impact have increasingly improved.

Today, generating impact in the region goes beyond the responsibility of conventional actors – government and philanthropy. There is a diversity of actors at work in the impact spectrum, from wealthy families and their family offices to foundations, corporations, and investment funds, all of which are distinguished by how they innovate in their deployment of capital strategies along the capital continuum. These actors are embracing diverse financial instruments to invest in, as well as new alliances and mechanisms, such as blended finance, that are enabling us to close the gaps in the 2030 Development Agenda at a faster rate. The diversity of actors increasing their positive-impact footprint in the region turns the Latin American paradox – too wealthy for ODA, yet extremely unequal – into an opportunity: improving collaboration between different types of capital to maximize impact.

We need more effective ways to work together

However, a lack of collaboration stands out the most when we analyze the barriers to financing development. Nearly 40% of 201 individuals representing capital providers investing in LAC highlighted this concern in the Latimpacto Industry Survey 2022-2023. Coming in close behind as the second biggest obstacle was the absence of a regulatory framework that legally and fiscally incentivizes investments to generate impact. Let’s dive into each of these aspects to see how we can overcome these hurdles.

Despite pioneering initiatives in collaborative funding and collective impact, and the obvious value of working together for actors financing development, such practices need to be adopted more widely, both across borders and across sectors.

Impact investing in Latin America
“Despite pioneering initiatives in collaborative funding and collective impact, such practices need to be adopted more widely, both across borders and across sectors. ”

Historically, LAC funders have not prioritized cross-border and regional social change efforts. It is common for successful collaborations to remain bilateral, project-driven, and non-formal because most countries prefer to focus on pressing needs in their own backyards. Multilateral actors and those from outside the region are often keener to undertake a cross-border approach, perhaps because their distance allows them to better appreciate the similarities that LAC countries share.

Cross-sector collaboration can be managed in different ways. Still, even though the concept of pooling resources has been around for more than a century, LAC has lagged behind in joint philanthropic efforts and needs to catch up with other regions, including across the “global south”. Some initiatives provide inspiring examples that can be replicated or expanded. One of them is Latimpacto’s Green Catalytic Fund, which brings together resources from the Inter-American Development Bank (IDB), Coca-Cola, and the Bayer Foundation, among others, with other prospective partners, to fund initiatives to decarbonize supply chains in the region, with a particular focus on the pan-Amazon region.

Another example involves collaboration across the capital continuum through blended finance, in which philanthropic resources take higher risks to reduce the risk for commercial funds looking to invest in impact-oriented projects. Take the case of Vivenda in Brazil, an impact startup tackling inadequate housing in the slums of São Paulo. With the support of partners such as Din4mo and Grupo Gaia, Vivenda was able to raise $1m through Brazil’s first impact-oriented bond issue, in which philanthropic investors bought the first-loss quotas, thus taking on higher risks, to attract further resources from private impact investors. This “structuration” approach allowed all stakeholders to achieve their aims. Vivenda could provide the credit their low-income customers needed to improve their homes, therefore meeting its impact goals. Philanthropic resources were more effective than if they had been granted separately for the same home improvement projects, and impact investors were happy to have an important social impact alongside financial returns.

Innovations such as these require trust, the effective sharing of information and resources, and an understanding of the perspectives and motivations of different stakeholders. This can be achieved through transparency in actions and decisions, open communication, and a willingness to work together toward common goals. In addition, it is critical to recognize and value the diversity of skills and experiences that each stakeholder brings to the ecosystem. Promoting a shift in mindset towards a culture of collaboration with a trust-based approach also requires the creation of platforms and spaces that facilitate the exchange of ideas, the identification of opportunities, and the joint resolution of challenges.

Regulation needs to support impact goals

On the second obstacle, we see that laws and regulations in LAC countries do not enable the impact investing market to flourish. The UN ECLAC states that “to effectively shift the trend of indicators so that the SDG targets are met, it is also necessary to change the way public policy is managed. In addition to implementing actions to solve short-term problems and challenges, public policy needs to consider its effect over longer time horizons.” In this context, legal and fiscal incentives can be powerful catalysts, encouraging local and international capital to flow toward initiatives that drive sustainable development. Governments, with the private and non-profit sectors, should create an enabling environment that facilitates and actively promotes impact investment. Brazil has made some progress, with a National Strategy for the Impact Economy established in 2017, while Colombia and other countries are beginning to move in a similar direction.

Considering these challenges and the immense opportunities in the region, there is a need to continue encouraging collaborative work to facilitate investment in the region. At Latimpacto, for example, we promote multi-actor efforts that guarantee that the market offers favorable conditions in measuring impact, balancing financial and impact goals, managing risks, building capacity, and allowing knowledgeable actors to have a say in regulation, including working with the National Advisory Boards of the Global Steering Group on Impact Investing and other ecosystem builders.

The region’s human and natural resources are its greatest wealth and represent the most attractive opportunities for portfolio diversification and impact. LAC entrepreneurs have proven that making the world a better place can be profitable and that feasible business ideas will always emerge from social and environmental challenges. Moreover, they have demonstrated that impact companies are even more resilient than conventional ones, due to their commitment to solving a specific social and/or environmental problem.

We are convinced that sharing success stories and building a track record is critical to fostering the adoption and growth of impact-oriented financial innovation and other innovative practices, which is why we host a regional repository of case studies along the entire capital continuum of capital, from ESG best practices to impact investing and venture philanthropy. We invite you to get involved in the conversation about how the promises of the LAC impact ecosystem can inspire the mainstreaming of investment with an impact lens in the region and contribute to other regions’ efforts to achieve the SDGs.


Carolina Suarez

Maria Carolina Suarez Visbal

Chief Executive Officer at Latimpacto

Carolina has 25 years of professional life, 17 dedicated to promoting private social investment and philanthropy. As a Latin American, she is the CEO of Latimpacto, the Latin America Impact Network that supports better deployment of capital toward impact.


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