Who Funds Well-Being in the Global South? New Partnerships to Sustain Social Protection in Latin America

Paula Ballesteros

Latin America and the Caribbean face an increasingly pressing dilemma: how to finance robust social protection systems amid fiscal constraints, structural inequality, and multidimensional crises. The pandemic both intensified and exposed the urgent need to effectively guarantee social protection systems that respond to new risks, as well as the limitations of the traditional international financial architecture to sustain them. In a world marked by new geopolitical tensions, rethinking the financing of well-being in Latin America is not only an economic debate but a political and strategic issue that should engage international actors.

Inequality: The True Obstacle

Over the past decades, the region has not only seen persistent economic indicators, but some have even regressed. In 2023, poverty reached 27.3%, the lowest level since 1990, yet it still represents 172 million people, 10.6% of whom are living in extreme poverty—a figure higher than a decade ago (ECLAC, 2024). On the other hand, the new Multidimensional Poverty Index for Latin America (MPI-LA), presented in April 2025, shows a drop from 45.8% in 2008 to 25.4% in 2023, driven by improvements in internet access, education, and sanitation (ECLAC & UNDP, 2025).

These figures reveal the paradox of inequality in the region: while poverty is declining, structural inequality has become the main obstacle to development. This reality is best illustrated through the Gini coefficient (a tool used to measure income inequality), which shows that over the past three years, inequality has remained close to 50%. This confirms that inequality remains structural, despite progress in reducing monetary poverty (Our World in Data, 2025).

Table 1: Inequality in Latin America

Sources: SEDLAC/ECLAC + WB (2025).

Now, if instead of income we look at the accumulation of wealth, the picture becomes even starker: the richest 10% of the population concentrates 66% of the region’s total wealth (ECLAC, 2024). These metrics show that inequality in Latin America is not only explained by current income but also by a profoundly regressive distribution of accumulated assets, reinforcing historical structures that perpetuate inequality.

Can Well-Being Be Sustained with New Sources of Financing?

Expanding the scope of social protection to include care and new forms of risk cannot be sustained without a solid material foundation. Any broad definition of social protection requires the resources to make it viable. That is why the financing debate is central. Recognizing rights is no longer enough—there must be capacity to guarantee them in practice, and under current conditions, achieving this goal is highly unlikely.

According to the Social Panorama of Latin America 2024 (ECLAC), reaching protection levels comparable to those of developed countries would require an additional investment of between 1.5% and 2.5% of GDP (ECLAC, 2024). The experience of the COVID-19 pandemic showed that when emergency coverage expands, social demand increases and does not recede, generating long-term fiscal pressure.

However, discussing financing is not merely an abstract debate about sustainability. It requires directly confronting what the current sources of funding are, which ones could be viable in the short and medium term, and how they align with existing international commitments. In this context, the Seville Summit in late June 2025 highlighted the urgent need to mobilize new financial flows to sustain social policies, especially in regions like Latin America and the Caribbean. There, the idea of strengthening South-South cooperation emerged strongly as a complementary strategy to traditional financing, recognizing that countries in the region cannot remain trapped in dependency on uncertain or conditional resources (Cascante, 2025).

Official Development Assistance (ODA) directed to Latin America has declined in real terms over the past decade, while contributory systems continue to erode due to persistent informality and ongoing labor market transformations. According to the OECD, in 2024 global ODA dropped by 7.1% compared to 2023—the first decline in six years—with further reductions projected for 2025 (OECD, 2025). Within this scenario, Latin America receives the lowest share of ODA in the world—less than 1% of Gross National Income (GNI)—and the trend is downward (OECD/CAF/EU, 2025: 185). These figures confirm that the region faces a dual challenge: traditional international cooperation is retreating, and domestic social financing systems are already weakened. As Díaz Langou (2025) puts it: “No social protection system can be sustained if it’s financed on a fragile and unequal economic base.”

Beyond the internal political and institutional dynamics of Latin America, domestic financing of social protection systems is strained after years of mounting debt that can no longer be sustained. In six regional economies (Brazil, Chile, Colombia, Mexico, Paraguay, Peru, and Uruguay), average public debt reached approximately 55% of GDP in 2024, a sharp increase from 34% in 2013 (IMF, 2024). This level of indebtedness limits the fiscal space available for urgent social policies—such as healthcare, education, or labor protection—and exposes countries to cycles of vulnerability that perpetuate inequality.

Rethinking Financial Multilateralism

Reforming social protection financing in Latin America—while recognizing the need to rethink domestic systems—does not mean abandoning multilateralism, but rather redesigning it to meet the challenges of the 21st century. In a context where international organizations are increasingly questioned for their bias toward orthodox policy prescriptions, the region has the opportunity to push for a renewed, more democratic multilateralism that is sensitive to power asymmetries.

The Seville Summit introduced a bold idea: South-South cooperation as a real alternative to Northern dependency. Strategic partnerships with powers like China and India have gained relevance as potential funders of social infrastructure, technology, and logistics—approaching these partnerships with more horizontal dynamics. For instance, China’s Belt and Road Initiative has expanded its presence in Latin America and the Caribbean, with more than 20 countries now involved in direct investments and credit for ports, railways, and trade routes (Green Finance & Development Center, 2025). India has begun building strategic ties with Brazil and Argentina that go beyond commodity trade and now include cooperation on technology, green energy, and joint infrastructure development (The Diplomatist, 2024). If these collaborations focus on human development—and not merely economic or logistical growth—they could inject fresh resources into Latin American social protection systems and contribute to their consolidation without relying exclusively on traditional donors.

Still, beyond international financial instruments, the real challenge is political and lies within Latin American governments themselves. It is essential to shield social spending from economic cycles and political transitions. This means implementing medium-term fiscal frameworks with clear goals to guarantee an integrated social protection system, and building broad social consensus that views well-being not as an expense, but as a strategic investment. As ECLAC (2024) warns, “Social investment not only reduces poverty, but increases economic resilience and strengthens democratic governance.”

Latin America already has successful experiences, institutional capacity, and above all, a historic opportunity to redefine the relationship between financing and well-being. The question is no longer whether the region can sustain its social protection systems—but whether it is willing to fund them with its own resources and new alliances, without traditional external oversight, or whether it will accept new financing models at the cost of ceding decision-making sovereignty. If the region succeeds, it could open a new era—one in which the Global South sustains its own social state.

Ultimately, what is at stake is not just the financing of isolated social programs, but the very definition of Latin America’s role in the international order. Sustaining social protection with domestic resources, integrated systems, progressive fiscal pacts, and strategic alliances with the Global South^[1] is not merely an issue of distributive justice—it is also an act of power and sovereignty.

If the region manages to transform this opportunity into stable institutions and effective cooperation mechanisms, it will not only reduce internal inequalities but also redefine its place in a multilateralism that can no longer revolve around Northern prescriptions. The paradox of being an upper-middle-income region and the most unequal in the world can only be resolved with strong political decisions—ones that protect well-being as a strategic investment and position the Global South as a group with its own voice in shaping the international order of the 21st century.

References

• Inter-American Development Bank (IDB). (2024). Social Financing Deficit in Latin America. IDB.

• Cascante, K. (2025, July 10). A Fish Out of Water: Seville and the Global Financing Crisis. Gate Center. https://gatecenter.org/el-pez-fuera-del-agua-sevilla-y-la-crisis-de-la-financiacion-global/

• CEIC. (2022). Colombia: Gini Coefficient – World Bank Estimate (2022).

• CEIC. (2023). Costa Rica: Gini Coefficient – World Bank Estimate (2023).

• ECLAC. (2024). Social Panorama of Latin America. ECLAC.

• ECLAC & UNDP. (2025, April 2). Multidimensional Poverty Index for Latin America. Forum of the Countries of Latin America and the Caribbean on Sustainable Development. https://foroalc2030.cepal.org

• Seville Summit. (2024). Final Declaration. Spanish Presidency of the G20.

• Díaz Langou, G. (2025). Taxation and Equity in Well-Being Financing. CIPPEC.

• El País. (2025, March 27). CAF promotes development in Latin America and the Caribbean with new USD 1.445 billion funding. El País.

• García Parra, G. (2025). Global Tax Justice and Social Protection. Oxfam.

• Gratius, S., & Mongan, M. (2023, December 14). The Global South: Building a Post-Western World. Gate Center. https://gatecenter.org/el-sur-global-construyendo-un-mundo-postoccidental/

• Green Finance & Development Center. (2025). China Belt and Road Initiative – Investment Report 2025 H1.

• International Monetary Fund. (2024, December 18). Why Latin America Needs Lower Deficits and Stronger Fiscal Rules [Blog post]. IMF.

• OECD. (2025, April 16). International Aid Falls in 2024 for First Time in Six Years, Says OECD. OECD.

• OECD. (2025, June 26). Cuts in Official Development Assistance. OECD Policy Brief.

• OECD, CAF, EU. (2025). Latin American Economic Outlook: Financing Sustainable Development 2024. Paris.

• Reuters. (2024, July 18). CAF Development Bank Loans $2.7 Billion Across Latin America, Caribbean. Reuters.

• Reuters. (2025, May 14). China, Colombia Sign Belt and Road Cooperation Pact. Reuters.

• Secretariat for Social Communication of Brazil. (2025, August 15). Partnership with BRICS Bank Targets BRL 2.7 Billion for Infrastructure, Logistics.

• SEDLAC (ECLAC & World Bank). (2024). Income Inequality: Gini Coefficient in Latin America [Data]. Our World in Data. (Last updated: April 1, 2025).

• The Diplomatist. (2024, November 30). The Untapped Potential of India–Latin America Relations.

• UNCTAD. (2025, April 9). Aid at the Crossroads: Trends in Official Development Assistance. UNCTAD.

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^[1]It is also important to clarify that the Global South is not a uniform bloc: it consists of countries with diverse trajectories, but which share common vulnerabilities within the international financial system. By building alliances with Africa and Asia through South-South cooperation and initiatives such as global tax justice, Latin America can amplify its voice and negotiate more equitably within a shifting multilateral landscape.