The Barbadian Proposal Turning Heads at COP27

Welcome back to Foreign Policy’s Latin America Brief.

The highlights this week: Barbados’s innovative climate finance plan earns powerful backers at COP27, Colombia’s new president overhauls the country’s tax system, and a World Cup dispute between Chile and Ecuador is settled in court—just days before kickoff.

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Officials from Latin America and the Caribbean have been vocal participants in this year’s United Nations Climate Change Conference in Sharm el-Sheikh, Egypt, known as COP27. Colombia on Monday secured financial support from Germany and Norway to fund Amazon conservation efforts, while the Community of Latin American and Caribbean States pledged Wednesday to take a joint stance in negotiations on the conference’s final communique, which is expected next week.

But perhaps no other initiative from the region could have as much of a global impact as Barbados’s proposed climate finance plan. The Bridgetown Initiative, as it is known, was devised by a group steered by Barbadian Prime Minister Mia Mottley and her climate finance envoy, Avinash Persaud. While developing countries have long called for similar measures, Mottley’s plan earned public praise this week from figures such as French President Emmanuel Macron and Kristalina Georgieva, the managing director of the International Monetary Fund (IMF).

A perennial question hanging over U.N. climate conferences is how developing countries will finance their domestic climate mitigation and adaptation efforts. Rich countries currently provide them with a little less than $100 billion per year in a combination of grants and loans for this purpose, but their annual need is widely understood to be in the trillions of dollars. Developing countries have contributed far less to climate change than wealthy ones—but disproportionally bear the brunt of its effects.

At last year’s conference in Glasgow, Scotland, two potential climate finance schemes got particular attention. One was a pledge by a group of private sector financiers to green their portfolios and back climate-friendly projects in the developing world. The other was a plan by several rich countries to support South Africa’s transition away from coal through an $8.5 billion mix of grants and loans that was seen as a potential pilot program for other countries. A year later, however, the former has faltered amid concerns about the strictness of its climate targets, and the latter has been slow to scale.

Mottley, for her part, said in a speech in Glasgow that climate finance should come at least in part from the IMF. She called for the fund to issue the equivalent of $650 billion annually in its reserve currency, known as special drawing rights (SDRs), for 20 years to finance developing countries’ climate needs. This number has recent precedent: The IMF dispensed $650 billion worth of SDRs—albeit only once—to support the global COVID-19 pandemic recovery. The credits can be exchanged for hard currency and do not need to be paid back.

At the time, observers celebrated Mottley’s speech for its moral clarity. But her idea did not gain traction at the IMF. Now—against a backdrop of energy market chaos and a global economic slowdown that has left many developing countries facing potential debt crises—that may be changing.

Mottley and Persaud spent the past year developing their Glasgow pitch into a more solid proposal and workshopped it at a July meeting in the Barbadian capital of Bridgetown with academics, IMF executives, and the U.N. deputy secretary-general. The document that emerged from these discussions—dubbed the Bridgetown Initiative—made a one-time $650 billion request of the IMF (a departure from Mottley’s original suggestion that this amount be paid annually) and called for development banks to issue $1 trillion in low-interest loans for climate spending in developing countries. Standard borrowing costs on international markets are generally around 1 to 4 percent in G-7 countries but can be as high as 12 to 14 percent for much of the global south, Mottley said at a press conference on Tuesday.

An updated version of the Bridgetown Initiative that Persaud published this week also advocates for a tax on oil companies to finance reconstruction grants that would be dispensed to developing countries after climate disasters, though it did not specify how exactly this would work. Persaud also wrote that countries’ outstanding loan repayments should be temporarily paused after such disasters.

On Monday, Macron said he supported many of Mottley’s plans and joined her call for a task force to present detailed proposals to the World Bank and IMF ahead of their 2023 Spring Meetings. On Wednesday, Georgieva said she was broadly supportive of the Bridgetown Initiative; World Bank President David Malpass said he welcomed calls “to significantly increase our climate finance”; and U.S. climate envoy John Kerry said reforms at the IMF and World Bank to provide far more capital for climate finance in developing countries “can be done.”

Officials in both rich countries and international financial institutions may be responding to dialed-up pressure at this year’s COP to provide developing countries with loss and damage compensation, or climate reparations. The formal discussion of such financing made it onto this year’s summit agenda for the time, something host country Egypt and new U.N. climate chief Simon Stiell have pushed for.

Within the Bridgetown Initiative, the money raised from taxing oil companies’ profits would be classified as loss and damage funding, while the other finance streams would go toward climate mitigation and adaptation, Persaud wrote.

Speaking to reporters on Tuesday, Mottley recalled that Western creditors capped Germany’s annual debt payments after World War II to allow the country’s economy to rebuild. She also alluded to how the United Kingdom took out long-term debt to finance its World War I spending. London paid off the last of the debt in 2014 because “they could not handle the repayment” amid its other spending priorities, Mottley said.

Low-income countries should likewise not be forced to sacrifice their development goals for climate spending, she added. “I’m not only interested in getting through the climate crisis,” Mottley said, but also “to give our people a better chance for better lives and opportunity.”

Friday, Nov. 18, to Saturday, Nov. 19: The leaders of Chile and Peru attend a meeting of Asia-Pacific Economic Cooperation nations in Thailand.

Wednesday, Nov. 23, to Friday, Nov. 25: Mexico’s president, Andrés Manuel López Obrador, hosts a meeting of Latin American leaders.

Petro’s legislative hurdle. Colombian President Gustavo Petro’s proposed tax reform has cleared the country’s Congress. It is Petro’s first major legislative effort since taking office in August, and, true to his campaign pledges, the new law imposes substantial levies on both personal wealth and fossil fuel firms’ earnings. Coal companies will be hit with new taxes of up to 10 percent, and oil companies with new taxes of up to 15 percent, when international prices for those goods rise above a certain level.

The bill also imposes taxes on people earning over $2,000 per month, single-use plastics, sugary drinks, and ultra-processed foods. Colombian Finance Minister José Antonio Ocampo called it Colombia’s “most progressive” tax reform in history.

While the reform was slightly watered down during the legislative process—it will generate $4 billion, or around 1.4 percent of GDP, rather than the initially proposed $5 billion in new state revenues each year—it is still a significant win for Petro’s agenda.

Nicaraguans opposed to the government of President Daniel Ortega march against the municipal elections held in their country and to demand the release of political prisoners, in San José, Costa Rica, on Nov. 6. EZEQUIEL BECERRA/AFP via Getty Images

Nicaraguan elections. Nicaragua’s ruling party swept to victory in local elections early this week and now controls all of the country’s 153 municipalities. Human rights groups and opposition parties denounced the vote as neither free nor fair and criticized low turnout. Last Friday, just days before the elections, the government of President Daniel Ortega announced that it had shuttered around 100 civil society organizations.

The vote prompted harsh criticism from Chilean President Gabriel Boric, who said it occurred without freedom and reliable electoral justice. He called for a multilateral international effort to restore democratic freedoms in Nicaragua.

Start the tally. After a long legal dispute between Chile and Ecuador over the alleged forged nationality of a soccer player on the Ecuadorian national team, the Court of Arbitration for Sport ruled this week that Ecuador will be allowed to play in this year’s FIFA World Cup, which begins on Nov. 20. Ecuador is set to play in the opening match against host Qatar.

While the court did not honor Chile’s request to kick Ecuador out of this year’s tournament, it did say that Ecuadorian player Byron Castillo was born in Colombia and that his Ecuadorian identity document included incorrect information. The court did not dispute Castillo’s Ecuadorian citizenship or the validity of his identity document.

As a penalty, Ecuador will be required to start the qualifying tournament for the 2026 World Cup with a three-point deficit. Teams earn three points for a win, one for a draw, and zero for a loss.

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Soldiers enter the Litoral Penitentiary in Guayaquil, Ecuador, after new clashes erupted there on Nov. 7.GERARDO MENOSCAL/AFP via Getty Images

Ecuadorian President Guillermo Lasso declared a state of emergency in three provinces last week following a string of car bombings and assassinations that he attributed to drug gangs. It was only the latest response to the high levels of violent crime that Ecuador has experienced in recent years. By October, the country had already registered its highest number of annual homicides on record. That follows a 180 percent increase in homicides between 2020 and 2021.

A new report from the International Crisis Group looks at factors behind the rise in violence, including Ecuadorian gangs’ growing links to international drug trafficking operations. Mexican organized crime groups have increasingly subcontracted portions of their smuggling routes to Ecuadorian gangs, the report said.

Investments in the Ecuadorian prison system under both Lasso and his predecessor, Lenín Moreno, have also been limited by national austerity targets. In 2019, the Moreno government eliminated Ecuador’s Justice Ministry amid sweeping budgetary cuts and established a government body for managing prison populations; in 2020, its budget was cut by 43 percent, news site GK reported. Amid poor prison conditions and overcrowding, some incarcerated Ecuadorians have been pushed to joining gangs to obtain bedsheets and medical supplies inside prisons, according to a Human Rights Watch report released in July.

Moreno’s predecessor, Rafael Correa, presided over an economic boom that allowed him to spend more on social programs for youth violence prevention and community policing. Under his presidency, the country’s homicide rate dropped from around 15 murders per 100,000 people in 2011 to around 5 per 100,000 in 2017.

Criminologists do not look back on all of Correa’s policies positively, however. A 2019 InSight Crime investigation found that Correa had turned the nation’s security and intelligence forces away from targeting drug traffickers to targeting his political opponents. In recent years, Ecuador has increasingly become home to cocaine production rather than just cocaine transit, investigative journalist Arturo Torres told the El Hilo podcast.

The International Crisis Group noted that some Ecuadorians favor a harsh crackdown on violent crime similar to the detention campaign being carried out by Salvadoran President Nayib Bukele. But a hard-line approach, the report warned, is an unproven and overly simplistic response to a complex problem.