By: Staff Writer
May 13, 2025
The Development Bank of Latin America and the Caribbean (CAF) said in a recent report that local governments can help the Latin American and Caribbean (LAC) region to move towards sustainable, inclusive and resilient growth.
The report, “Local Solutions: The Role of Local and Regional Governments in Latin America and the Caribbean,” examined the capabilities, limitations, and opportunities of municipalities and regions to drive meaningful change from within their territories.
The report also said: “The number of subnational administrations has expanded significantly over the past halfcentury, primarily due to the creation of new local governments. While this trend continues today, its pace has slowed. In contrast, the number and boundaries of regional governments have remained much more stable over the same period.”
The new 2025 Economy and Development Report (RED), published by CAF, places subnational governments at the heart of the solutions to close the region’s social and territorial gaps.
The RED builds on a striking fact: local and regional governments are responsible for an average of 20% of public spending in the region, reaching nearly 50% in some countries. However, they operate under institutional constraints, fragmented legal frameworks, and serious coordination challenges among different levels of government.
The report also said: “Understanding the current challenges faced by subnational governments in Latin America and the Caribbean is key to identifying the areas where capacity development efforts should be prioritized. These challenges are shaped by the region’s unique territorial characteristics. LAC is distinguished by vast, sparsely populated land areas alongside a highly urbanized population.
“This pattern means that many local governments manage territories with low population densities, while a smaller number administer urban areas with millions of residents. In numerical terms, half of the region’s local jurisdictions have fewer than 10,000 inhabitants, whereas just 20 percent of them account for two-thirds of the total population.”
It added: “Digitalization presents subnational governments with the challenge of harnessing its benefits while preventing it from becoming another driver of widening inequalities.
“Implementing digital technologies requires investments in infrastructure, software, and human resources—barriers that are particularly significant for smaller jurisdictions and less developed regions. National governments play a crucial role in ensuring that subnational administrations can harness the full potential of these technologies.
“This process begins with digitalizing administrative operations and expands to more advanced applications, including machine learning and artificial intelligence. Central administrations should take the lead in establishing common platforms and standards to integrate national and subnational management systems, helping to lower implementation costs.”