Transforming local and regional governments is crucial for advancing sustainable, inclusive, and resilient development in Latin America and the Caribbean. This is the core message of the 2025 Economy and Development Report (RED), published by CAF. The report emphasizes the importance of subnational governments in addressing social and territorial gaps in the region.
The report, titled "Local Solutions: The Role of Local and Regional Governments in Latin America and the Caribbean," explores how municipalities and regions can drive meaningful change within their territories. It highlights that local and regional governments are responsible for an average of 20% of public spending, reaching nearly 50% in some countries. However, these governments face institutional constraints, fragmented legal frameworks, and coordination challenges across different government levels.
Critical weaknesses are identified in formulating, implementing, evaluating, and overseeing local public policies. There is a pressing need to strengthen subnational financing and fiscal management mechanisms with clearer rules, better-aligned incentives, and greater predictability.
Among the main findings is that enhancing the institutional capacity of local governments is essential to improve services like education, health, basic infrastructure, climate change response, urban informality reduction, and violence prevention. The study also reveals significant inequalities across territories in both management capacities and outcomes achieved. This underscores the need for a more coordinated territorial development policy.
"Building sustainable, equitable, and resilient development in Latin America and the Caribbean requires looking beyond central governments. This RED shows that municipalities and intermediate governments are key actors in the transformation the region needs. CAF will continue to support efforts to strengthen their capacity, autonomy, and representation," said Sergio Díaz-Granados, CAF’s Executive President.
The report examines new forms of coordination between government levels focusing on robust multilevel governance. It stresses developing technical capacities enabling local governments to fulfill their roles effectively.
As an added value, RED introduces CAF’s Atlas of Local and National Governments—a comprehensive database on subnational development indicators in the region. It includes data on demographics, education employment infrastructure public service ethnic affiliation access to information communication technologies from 29 CELAC countries encompassing 262 regional governments 18 236 local governments.
This platform allows users to view jurisdiction status across well-being variables such as unemployment access adequate water sanitation population education levels using interactive map views illustrating indicator variations across regions within each country exploring heterogeneities relating geographic demographic characteristics jurisdictions.
The official launch of RED 2025 occurred on May 6th Brasília attended by government officials territorial development experts civil society representatives full report Atlas available free charge scioteca.caf.com Atlas accessed atlasgobiernoslocales.caf.com
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