Five optimistic trends for 2023
The trends will all move in the right direction for Solar, ESG, Deforestation, Tech, and Investigative journalism.
It's the "Latin America Risk Report," not the "Latin America Happy News Report," so there's generally a sense of pessimism in much of what's written here. You've already read the pessimistic trends that are likely to impact the coming year. We're in a multi-year anti-incumbent environment. The combination of a weak economy and debt payments will hang over the region. My World Politics Review column this week describes how democratic values are in dispute, a trend that will continue into next year.
For the final newsletter of 2022, instead of that, I want to offer a few positive trends to look out for in 2023 and beyond.
Solar power will boom. After years of undershooting their solar predictions, a recent report from the IEA says solar capacity will exceed both coal and natural gas by 2027. Photovoltaic cells are quickly becoming the cheapest and most efficient form of energy. Storage costs are declining rapidly as well. Because it's such a shift from the current energy matrix, it can be hard to wrap our brains around just how much this will reshape the energy landscape across Latin America. Most countries in Latin America are likely to see large leaps in electricity generated by solar energy every year for the next ten years. Cleaner and cheaper and more abundant electricity is on its way for most of the region, with the exception of governments that stand in its way (I'm looking at you AMLO).
ESG conditions will be attached to most loans. There is a big (and dumb) debate in the US over whether ESG is a positive thing. A number of rightwing politicians in the US have recently jumped on an anti-ESG bandwagon. There is no debate in Latin America and most politicians across the political spectrum are accepting ESG as a reality for the region's economies. ESG is the big thing within the region's debt markets and it's only going to continue to grow further next year. With the market driving loans and debt towards ESG conditions, Latin American governments and businesses will embrace this trend, some enthusiastically and others reluctantly. Even as the region faces other debt issues in the coming two years, expect ESG-conditioned loans to grow as a proportion of the overall total, and expect governments and businesses to be adapting their behavior to meet or exceed the conditions set by those loans. There will be some negative outcomes including some corruption and fraud that will lead to scandals and political unrest, but the positives will significantly outweigh the negatives regionwide.
The region will turn the tide on deforestation. In part due to the ESG trend, in part due to increased monitoring, and in part due to the change in government in Brazil, 2023 will be a year in which deforestation levels begin to be reduced after several years of increases. This hopefully sets up a multi-year trend in the correct direction. While some countries, particularly Venezuela, will remain behind the curve on this trend, most countries in the region including Colombia and Bolivia are likely to see improvements in 2023 compared to 2022 and add to the positive policy changes in Brazil.
2022 and 2023 will be the ground floor for Latin America's next tech boom. In the technology and startup world, there was a lot of hype in 2021 and disappointment in 2022. Economic weakness has caused layoffs, down rounds, failures, and shutdowns. At the surface level, the disappointment will continue in 2023 and this prediction may look madly wrong by the end of the year. Underneath, this past year and next year are the start of something big. It's easy to raise funds and manage a business during a hype cycle. The businesses that are built, survive, and thrive during the current economic downturn are the ones that everyone will wish they invested in five years later. While there are many sectors that will benefit, renewable energy and financial technology are going to be among the biggest.
Technology, financing, and shoe leather will lead to a new boom in investigative journalism. The growth in investigative journalism is not a new trend in Latin America, but will once again accelerate in the coming year. One driver will be the new and enhanced open source tools and methodologies that have been growing around the world, particularly following Russia's war in Ukraine. The second driver will be anti-corruption funds from foreign governments and NGOs - but also businesses based in Latin America - looking for partners and recognizing that many governments in Latin America are part of the problem, not the solution. Even amid the economic downturn and a tough environment for media companies, there is going to be increased funding for local NGOs and journalists to conduct investigations.
Thanks for reading! Links will be sent this Friday. Then we’re off until 2023.