As this decade ends, clearly we must add environmental deterioration to the traditional problems of poverty and inequality. To achieve sustainable and equalized development in the century of increasing economic globalization, we must finally recognize our ecological limits and take stock of our ecological requirements.

It is urgent at the national level that we improve the quality of water, soil, and air, especially in urban zones, now home to three quarters of the population. In order to guarantee sustainable industries in fishing, mining, and forestry, soil erosion, expansion of desert areas, and the loss of biodiversity must be halted. By increasing production exponentially despite the fact that ecological resources are finite, we have depleted natural resources to levels that are dangerously low.

That present policies for development are non-sustainable could not be clearer. The green house effect, destruction of the ozone layer, degradation of river beds, coastal areas and oceans, the loss of arable lands due to soil erosion, and growing rates of extinction in flora and fauna attest call into question our cultural and ethical values regarding the importance of the environment and our relationship with the natural world.

To introduce environmental management as an essential aspect of sustainable development demands new public policies accompanied by new techniques and interdisciplinary know-how. However, given the conflicting interests of the economic players involved, the move to true sustainable development represents a socio-political challenge fantastic in scope and scale. Governments face the challenge of creating new institutional frameworks and instruments for environmental management, reorienting future development to ensure that patterns of production and consumption are compatible with environmental sustainability. At the same time, and equally import to sustainable development, they must address crucial social issues affecting our region.

When it comes to providing environmental services in the global economy, Latin America and the Caribbean have distinct ecological, economic and social advantages. The enormous natural and cultural diversity of the region, as well as its innovative approaches to multilateral integration achieved in sub-regions such as Central America, are examples of this privileged situation.

But overcoming the present discrepancy between official public policy and what citizens actually want is a great challenge. As witnessed at the Rio Conference, new non-state participants, including the scientific community, the private sector, and the organized civil society, have been drawn in to the debate on sustainable development. Without a doubt, in the last decade environmental issues have acquired greater relevance for politicians and citizens alike. More than ever people recognize the environment as fundamental to their quality of life, viewing the distribution of environmental costs and benefits and the appropriation of natural resources as issues of great concern.

Reinterpretations of globalization arising from the ethics and politics of sustainable development are currently raising essential questions that demand regional answers. Such reinterpretations must involve:

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• rethinking the convergence of economic growth, equity and environmental sustainability; ·
• rearticulating the comparative advantages of the region in terms of the global environmental agenda; ·
• restructuring regional and sub-regional spaces according to sustainability; ·
• understanding the need for greater solidarity and reflexive citizenship regarding environmental issues; and ·
• creating a new social contract for sustainable development.

Essential to converging economic growth, equity and sustainability is a framework of policies and institutions that allow pragmatic courses of action to phase out activities that undermine the basis for production and endanger the capacity to continue producing a steady flow of income and/or services. What must be sought are economic growth patterns that complement the goal of sustainability through effective policies to regulate conduct and encourage incentives for environmentally sound production and consumption. Policy errors and faults in the market, caused by the absence of proper pricing and property regimens as well as incomplete markets for natural resources and environmental services, must be corrected. Environmental policies and institutions that address concerns the market cannot rectify (the well being of future generations, irreversible damages, etc.) and generate correct signals to social and economic actors should allow us to achieve economic growth while protecting the quality of the environment and the integrity of capital in the broader sense. Models of economic growth with these characteristics, along with long-term vision, are necessary to achieve genuine results. The fruits of such efforts can then be reinvested to improve the population's quality of life and incorporated into those social sectors which have not benefited from former processes of development.

As Latin American and the Caribbean countries seek improved places in international commerce, and their modes of specialization exploit the regional advantages described above, a need for major investments in services, technologies, and environmental management systems will arise. In addition, as the region introduces changes to its production practices and environmental regulations in order to keep up with the demands of international markets, measure must be taken to prevent the exploitation of natural resources beyond their ability to replenish themselves.

The countries in the region do not possess the great margins of manoeuvrability required to adjust their productive systems to the environmental standards of the main export markets. Achieving change will be correlated to the types of environmental and technological management prevalent in developed nations. They are the one's dominant in world trade, exporting the majority of goods and services among themselves, and the standards and limitations they set impact all other regions; it has been the developed nations that have defined the productive, technological and environmental patterns that prevail in the rest of the world.

Given the increasing fear shared by many of the region's countries that new environmental demands will give rise to new and perhaps damaging patterns, it is necessary to formulate clear and non-evasive positions on the commerce-environment binomial within the framework of existing regimes. We must convince these countries of the need to complement the process of opening up to globalization with an appropriate environmental policy backed by solid institutional structures. Success will depend upon improvements in the systemic competitiveness of the production-export apparatus (particularly in small or medium sized companies) so that environmental policies are formulated, articulated and executed in conjunction with the economic, technological and social policies these agents must comply with.

Implicit to this objective is the promotion of the restructuring of the integration process of the regional and sub-regional spaces based on the challenges imposed by the goal of sustainable development. In response to the new international scene, the countries of the region tend to strengthen and/or create regional and sub-regional cooperation processes and mechanisms of great importance to the environmental sphere. In some cases, these are the result of extensions to existing cooperative agreements on environmental issues. Such is the case of the Amazon Treaty signed in 1978, which in turn created the Special Commission for the Environment of the Amazon in 1989. Elsewhere sustainable development has become the axis around which supranational cooperation is formed, for instance with the Action Program for sustainable development for the small island states developing in the Caribbean, approved in Barbados in 1997, and the 1994 creation of the Central American alliance for sustainable development (ALIDES). Latin America and the Caribbean possess the greatest biodiversity on the planet. Biodiversity--as crucial to sustainable development as respect for cultural pluralism--is not only a reflection of the environment, but of the people who inhabit it. The appropriation of that biodiversity for commercial purposes (evident in the expanding field of biotechnologies) is a topic of increasingly great ecological, economic and social importance and raises crucial questions. The genetic vegetable agro-biodiversity essential to today's commodities is the result of thousands of years of knowledge, including domestication, conservation and an in situ development of agricultural biodiversity. The recognition of the role of farmers in the development and conservation of biodiversity is known as the "farmer right" and forms no part of the ownership rights to vegetable innovations. The absence of mechanisms to access, appropriate and capture proceeds from the exploitation and commercialization of genetic resources could lead to social conflicts in our region and it is therefore important to clearly incorporate these righting into existing judicial frameworks.

Regarding climatic change, the scientific community has presented data showing that economic activity is responsible for the increase of gasses in the atmosphere that cause the greenhouse effect. For example, the concentration of carbon dioxide (CO2) in the atmosphere has almost doubled compared to levels that existed prior to the industrial revolution early in last century. Stabilizing the composition of the atmosphere requires the re-establishment of the balance between annual carbon emissions and the capacity of ecosystems, through growth of vegetable biomass and dilution in oceans, to absorb them. The region has an opportunity to participate in this market through projects that diminish carbon emissions by developing more efficient energy sources (solar, wind and hydraulic energy) as well as maintaining and/or enriching existing ecosystems that have the capacity to absorb emissions. Achieving this transition would require the technical and financial support of industrialized nations, but it is urgent that the region prepares itself for participation in this potential market. This means developing joint strategies and permitting competitive pricing for carbon emission interchange.

Within the framework of the Kyoto Protocol, the negotiation of the Clean Development Mechanism (CDM) would allow countries in the region better opportunities to commercialize global environmental services associated with the reduction/absorption of carbon emissions.

Beginning with the Rio conference, there have been important efforts to structure environmental management in all levels of the state. Practically all political constitutions have developed mandates regarding sustainability and environmental protection, which means that each of the three levels of government share in an overall framework, each fulfilling a particular role.

The widest role corresponds to the Executive branch with the creation, over the last decade, of environmental ministries or equivalent entities in the various countries of the region. This demonstrates that governments have accepted that environmental problems should be taken care of by the state. In the region, there are two types of maximum environmental authority, one of a ministerial nature (Bolivia, Brazil, Colombia, Costa Rica, Cuba, Ecuador, El Salvador, Honduras, Mexico, Nicaragua, Panama, Paraguay, Uruguay, and Venezuela) and the other based on collegiate bodies (Chile, Peru and Guatemala). In the Anglophone countries of the Caribbean, the environment is usually associated with a body that deals with other issues as well.

Even though such high level institutions have been created, the principles of environmental protection and sustainable development continue to be regarded in great parts of the business sector and economic areas of government as an externally imposed hindrance to development. In addition, most decisions affecting the environment do not correspond to guidelines originated by environmental bodies but to decisions made by economic authorities, resulting in policies with implicit environmental implications that are not discussed in an explicit way. Even today, theories of sustainable development occupy only a secondary role. In practice, both public and private investments remain limited and the political will to resolve environmental issues, given the enormous deficit we face in terms of environmental degradation and the depletion of natural resources, is totally insufficient. This reflects the great frailty and instability of the environmental institutions created by the Executive branch, institutions which are subject to constant changes in administrations and the political tendencies of each country.

Public policies have been centred on the Executive branch, but few advances have been made in determining the roles of the judicial and legislative branches. While special environmental commissions created in each country's Parliament have contributed to legislative debate on environmental issues, there is still the need to examine and strengthen the capacities of the legislative branch to respond to citizens' demands and to bring greater legal support to environmental policies and international agreements subscribed to by the executive branch. One way to reinforce the complementary roles of these branches is to develop institutions, such as an Ombudsman or citizen-led legislative initiative, to control the executive branch by reporting to the legislative branch with an expressed or implicit focus on the environment.

Recent evaluations of public institutional organizations dealing with the environment made by the World Bank and the Inter-American Bank of Development have made it clear that strong political will from the three branches of government is required to meet the challenges of creating economic and social policies for environmental development. This implies concerted efforts to strengthen regulatory mechanisms (command and control), including those of a reactive nature as well as combative actions to control pollution and diminish the negative effects of production and consumption. Further efforts of a preventive nature, such as environmental impact studies and general environmental surveys of the territory, are also necessary. We can add to this the issue of environmental vulnerability, an urgent and emerging theme arising from recent natural disasters, as a variable to be considered in national and local planning. In addition to modernizing state environmental policies, our challenge is create innovative instruments that promote economic competitiveness, social equity, and that reform and/or complement the region's existing environmental policies, both the few that are explicit and others that are implicit. In recent years, there has been a relative emphasis on these matters in the form of indirect economic or regulatory instruments. These instruments offer flexibility, allowing agents to minimize the cost of complying with regulations and diminishing the total cost that society must pay to achieve its environmental goals. But this has resulted in a lack of prestige for direct regulations. The success of indirect regulations depends upon the efficiency of the market, which in turn depends upon the level of institutional development.

There are opportunities for implementing extensive charges, taxes and tariffs on natural resources and/or the emission of various forms of pollution. The success of pilot efforts in these areas suggests they can contribute significantly to achieving improved environmental objectives, financing local environmental infrastructures, and strengthening local environmental management institutions by creating self-financing opportunities. Given the very real need to reinforce environmental institutions in the region, this category has increasingly important potential for generating revenue that could be used to improve environmental management and strengthen responsible institutions. This would require revenues to be designated to specific institutions, those responsible for environmental management in the areas that generated the revenues, rather than allowing them to be recycled throughout the state. It is necessary to determine whether a more systematic application of such levies can make a significant contribution to the strengthening and development of environmental management institutions and to see if they could play a more direct role in the administration of economic incentives and self-financing strategies for environmental infrastructure.

Fiscal incentives and development instruments that offer financing and lines of credit to investors proposing activities with positive environmental effect are the counterpoint to levies and taxes applied to environmentally negative ones. Generally, these are used to create incentives and promote investments in cleaner production technologies, environmental infrastructure, technical training, conservation and environmental improvement activities such as reforestation and techniques for pollution prevention. This type of instrument works best when directed toward environmental investments in small and medium sized companies which, by the nature of their cost structures and technical support needs, respond better to funding strategies rather than the imposition of taxes and levies. Countries such as Chile have stimulated clean production in small and medium sized companies through lines of credit and funding strategies as part of a package of public policies developed by the Ministry of Economy to support competitiveness in the country's production apparatus. Overall, the region has relatively little experience with utilizing such instruments for environmental management, creating an important space to test their application, especially in countries with greater institutional development.

The elimination of subsidies for activities with negative environmental effects has been a topic of discussion. However, the possible total elimination of such subsidies (including those associated with incomplete payment for environmental services) presents insurmountable barriers. The most telling case is water. Not only should costs include the cost of service, but the cost of water treatment and (as the Environment Ministries were arguing) the maintenance of water sources. In many of the Latin American countries aqueducts do not have full coverage, especially sewers, water treatment is still a relatively new development, and where water sources have experienced a great degree of deterioration, financing needs are considerable. Even with good long-term lines of credit, the tariffs required for water service are much higher than those corresponding to energy services, gas or telecommunications. For this reason other resources are required to fully finance activities with more positive environmental effects such as the protection of water sources and the treatment of sewage.

It is interesting to observe that in other cases, restrictions on the establishment of environmentally correct prices come from the world market. Tourism is a notorious case. Here external competition establishes prices insufficient to finance environmentally sustainable activities and services, while such costs are reasonable in small island countries. Furthermore, it is significant that international competitiveness has reduced mining concessions to extremely low levels. Both cases involve not only problems of efficiency, but also problems of distribution that can only be addressed adequately through changes in international norms. Of course, such problems are not unknown to industrialized countries, as exemplified by the complex negotiations regarding carbon emissions.

The establishment of subsidies that explicitly support positive environmental activities has seen exciting developments. One example, coming under Chilean leadership, involves forestry incentives where exemptions are given to profits from reforestation and clean technology and equipment receive duty and tax benefits. Other significant examples of forestry incentives include the extension of benefits to Colombia in 1997 for native forest conservation activities, the system introduced by Costa Rica, and Guatemala in 1996 to pay for the use of environmental forest serves. The latter was, in fact, the first attempt at direct payment for environmental services.

Forestry funds that serve to provide incentives to forestry, environmental projects carried out by public institutions or civil society, can be considered part of a wider grouping of important experiments. Such funds are financed by state resources that originate from government budgets or charges of legal origin through agreed contributions in the form of bilateral or multilateral cooperation (including the exchange of debt). Contributions also come from private organizations that channel environmentally oriented international community resources. Governments may be responsible for such funds with organizations of the civil society. The government may exercise full responsibility for the funds, delegate responsibility to organizations of the civil society, or these organizations may have direct responsibility themselves. Such funds include the National Environmental Fund and the ECOFONDO in Colombia. This second fund, managed by organizations of the civil society, channels resources originating from the Americas Initiative negotiations on bilateral debt with the U.S. Similar instruments include the Americas Fund in Chile and the Integrated Pro-Nature Fund of the Dominican Republic, also channelling resources originating in the Americas Initiative. The Environmental Fund of El Salvador (FONAES) supports small environmental projects. In Costa Rica there are several funds, most emphasizing forestry, including the fund created by the forestry law of 1986, the product of revenues drawn from forestry activities, a fund for reforestation which originated in the Netherlands, and the soft credit funds managed by the Banco Cooperativo.

Finally, the challenge facing Latin American governments and societies is the resolution of environmental conflicts and negotiations regarding sustainable development through the creation of transparent, decentralized, informed and participative processes for debate and decision-making. These processes should encourage the active involvement of local citizens, the private sector, and the civil society.

In conclusion, the democratic process is enriched by an environmental culture with a strong citizen base. Political pluralism fosters not only human rights linked to sustainable development, but social democracy as well. Indeed, sustainable development requires a deepening of democracy and the profound involvement of social processes in all spheres (macroeconomic, commercial, industrial, agricultural, energy, territory order, education and health among others). Sustainable development has an enormous potential to become a fundamental project of a more modern state with an involved citizenship. The big challenge in every country is to allow society and governments to see the value of the political and structural transformations involved with sustainable development. This requires long-term vision and public policies that mobilize the primary social and economic actors toward achieving the goals of sustainability in all of its economic, ecological, social, and political dimensions.