TBY talks to Emilio Uquillas, Country Representative of Development Bank of Latin America (CAF), on developmental challenges in Mexico, the Gini coefficient, and climate change.

What challenges does Mexico face in terms of development? What are the priorities of CAF in Mexico?

Mexico is one of the most developed countries in Latin America. However, there are some challenges to be addressed. According to UN reports, Chiapas, for example, has a Human Development Index 20% lower than Mexico City. Development banks like CAF are here to help reduce this gap. We need to provide the best tools and knowledge our countries have in order to overcome this poverty and inequality phenomena. Mexico has improved significantly in this area though there still is plenty of work to be done.

Mexico has the second-highest Gini Coefficient among OECD countries—0.46. What policies does CAF support to reduce income inequality in the country?

First of all, it's important to mention that Mexico, as a part of public policy, has created an adequate frame to increase private investment, which has been a powerful tool to fight poverty considering the sustainable income-generation activities developed, which reduce the dependence on public expenditures. It is something like a public-private alliance against poverty. Although rural issues are no less important, with a large urbanization rate (80% by 2015) Latin America has become the region with the highest urban growth in the world where exclusion, low productivity and climate change coexists and are deepening referred inequalities. In this light, one of our priorities is to contribute with the countries to build the best answers to solve the urban deficiencies. We work with the “Cities with Future” initiative, where CAF accentuates the need to focus on vulnerable populations' quality of life regarding access to services and infrastructure improvement with focus on resilience. I think that this approach could have a great impact on Mexico.

How does CAF support the country's productive sector amidst the uncertainty linked to the NAFTA renegotiation?

Our focus has been on transitioning from macroeconomic issues to microeconomic aspects because the macro stability is not sufficient condition to reach sustainable growth. Currently, one of the important challenges for Latin America is something we have called productive transformation. A good example is what happened in some Asian countries where development could take a radical turn by improving the productivity. Considering that a key factor was the transformation of educational levels and human talent, as CAF we promoted the improvement in skills for work as a source of long-term change. We promote working skills reinforcement in young people to assure them better conditions and opportunities to access the labor market and improve the economy's competitiveness. On the other hand, our mission at CAF is to promote regional integration and sustainable development. That being said, we could encourage a deeper integration between Mexico and South America while stimulating productive transformation. Given our experience in the region, we believe there are clear opportunities for Mexico in the economies of the south.

How does CAF frame poverty in the region?

Poverty as an inter-temporal phenomenon of comprehensive welfare, which not only affects one person or family, but also future generations. Therefore, we have to consider factors other than family income, such as housing quality, access to public facilities, and education levels that can be passed on. This is a more realistic and comprehensive way to approach poverty.

How do Mexican cities fare in terms of climate change adaptation compared to the rest of the region?

In the Paris Agreement, countries adopted several measures to fight climate change. Mexico has significantly advanced regarding its policy commitments to reduce its greenhouse gas emissions. Mexico's approach is transversal and comprehensive, including all stakeholders and factors. Environmental policies are not only about climate behavior and conservation; they are embedded in all economic, productive, and social areas. It is a transversal issue that must be taken into account when designing educational, health, industrial, and transportation policies. The environment is no longer an important issue; it is a vital one. The Latin American region needs to generate a regional, organic, and comprehensive approach to manage environmental decisions.

How does CAF support the Mexican government to upgrade its water infrastructure and improve its water governance?

In general terms, water is one of the most critical and important issues amongst CAF programs. We are part of the Global Water Council and we recognize there are many challenges regarding water. Water governance must be included in all development agendas. Mexico does have a shortage of water resources; however, we are on time to generate a national water governance program that we are keen to be a part of. We can share other countries' experiences like Spain's which has been extremely successful in this matter, and we could contribute with Mexican authorities in policy design in this respect. . Both, public and private sectors must cooperate in order to reach a sustainable water usage.