Institutional Pathways Driving Circular Economy in LAC
The transition to a circular economy in Latin America and the Caribbean (LAC) demands robust institutional frameworks capable of coordinating across sectors. Transparent and accountable governance has consistently proven essential for economic development in the region, and its role becomes even more critical when tackling the multi-sector nature of circularity. The model is often misinterpreted as purely environmental, leading environment ministries to spearhead most initiatives. Yet its industrial relevance is equally significant, and siloed ministerial operations hinder progress.
Some governments have addressed this challenge through inter-ministerial cooperation. In Chile, a dedicated circular economy unit within the Ministry of the Environment has established strong ties with the state economic development agency, CORFO, and the Sustainability and Climate Change Agency (ASCC). This collaboration produced a national roadmap and financing programs for innovative circular ventures. Uruguay offers another approach, embedding circularity into the Planning and Budget Office (OPP) under the president’s office, integrating it into the National Plan for Productive Transformation and Competitiveness while leaving sectoral ministries in charge of execution.
Private-sector engagement remains a significant barrier. Many firms perceive circularity as an “environmental tax” on productivity, especially when promoted solely by environment ministries. However, in Argentina, the Association for the Study of Solid Waste (ARS) led a coalition to develop a National Strategy for the Circular Economy, urging regulatory reinforcement to aid business transitions.
Economic volatility since 2011, driven by falling commodity prices, has shifted political landscapes toward populist promises of prosperity. In some cases, new administrations have relaxed environmental protections and weakened institutional accountability, threatening progress toward social, environmental, and economic Sustainable Development Goals (SDGs). The COVID-19 crisis intensified these risks, with reduced state intervention in vulnerable communities and expanded military roles in public security, as seen in Mexico in May 2020.
Social innovation emerges as a promising driver for inclusive circularity. Defined as “a novel solution to a social problem that is more effective, efficient, sustainable, or just than existing solutions and for which the value created accrues primarily to society as a whole rather than private individuals,” it has deep roots in LAC. While many initiatives operate locally, scaling requires state support. Argentina, Colombia, and Chile have embedded social innovation into ministries, with notable successes such as Medellín’s cable car system linking hillside communities to the city, paired with education and social programs. Yet projects like Potential Chile’s biomass stove emission filter, funded by the Ministry of Energy and CORFO, highlight the need for sustained investment to reach broader impact.
Policy measures across LAC include national roadmaps, waste management legislation, extended producer responsibility (EPR) schemes, material efficiency targets, fiscal incentives, and product policies. Colombia, Chile, Ecuador, Peru, and Uruguay have formal strategies linking circularity to climate action, innovation, and job creation. Waste management laws are universal, but aligning them with circular principles and greenhouse gas mitigation is essential. EPR schemes in eight countries cover categories from e-waste to tyres, aiming to incentivize better product design and waste minimization.
Material resource efficiency remains underdeveloped, with LAC’s material intensity exceeding the global average by over 50%. Initiatives like Chile’s Plastics Pact set ambitious reuse and recycled content targets. Fiscal tools, such as Uruguay’s tax exemptions for battery recycling or Peru’s incremental tax on single-use plastic bags, can accelerate adoption, though barriers like Brazil’s double taxation on recycled materials persist. Product policies, including bans on single-use plastics in Costa Rica, are complemented by examples of modular design in Brazil’s Rio Olympic venues and integrated shared transport in São Paulo developments.
Case studies illustrate diverse pathways. Colombia’s National Strategy for the Circular Economy (2018–22) seeks to double recycling rates by 2030, building on earlier green growth policies and pioneering EPR regulations for hazardous waste since 2005. Chile’s Framework Law No. 20,920 established EPR and promoted recycling, complemented by sector-specific programs like Construye 2025 and the Circula El Plástico initiative. Uruguay’s Transforma Uruguay program, developed through multi-stakeholder dialogue, produced a Circular Economy National Action Plan operationalized via projects like Biovalor, which turns agro-industrial waste into value and supports start-ups through Oportunidades Circulares.
These experiences underscore the interplay between institutional design, private-sector participation, social innovation, and coherent policy frameworks in advancing circularity. For engineering-minded observers, they reveal how governance structures, technical standards, and fiscal levers can shape resource flows, industrial processes, and environmental outcomes across a diverse region.
