Latin America and the Caribbean's Challenge to Reach the MDGs : Financing Options and Trade-Offs

With less than 10 years to go, much still remains to be done in order to achieve the Millennium Development Goals (MDGs). The present study analyzes the feasibility of reaching the goals in 18 countries in Latin American and Caribbean. The analysis is based on a comparative economy-wide model framework that accounts for both the microeconomic determinants of needs satisfaction in education, health and basic sanitation, and macroeconomic trade-offs in the financing of public spending directed at satisfying those needs. It further considers synergies between degrees of progress towards education, health, basic sanitation, and poverty reduction goals. At difference from other assessments, the analysis shows that the region is off track towards many of the goals in a scenario of unchanged public policies. Efforts in social spending will have to be stepped up in comparison to quot;business as usualquot;. Furthermore, achieving the goals is quite affordable for most countries in the region, but it is found that these countries will need a change in their existing financing strategies. Tax increases and reforms result as the strategy which in most cases would minimize macroeconomic trade-offs and the increased debt distress associated with the alternative of domestic or external public borrowing