The circular economy: blueprint for a sustainable future in Latin America?

As Latin America continues its economic recovery from COVID-19, countries in the region are increasingly looking towards the circular economy as a platform for sustainable future growth.

A counterpoint to the linear "take, make and throw away" model, the circular economy denotes an economic system in which products and materials are kept in circulation for as long as possible. By designing things to be as durable, reusable and recyclable as possible, the model places a high premium on ecological efficiency and sustainability, and relies on a shift towards renewable energy sources.

While it has been gaining ground for some time, notions derived from the circular economy have been reinforced by the pandemic, as the traditional supply chains associated with the linear economy faced significant disruption.

In addition, the pandemic has been accompanied by an increase in waste. As detailed by OBG, COVID-19 has led to an increase in the production of single-use plastics, and reports of plastic masks and gloves washing up on beaches have been a common occurrence over the past year.

In light of this, emerging markets around the world, including Latin America, are turning to circular economy solutions, not only to improve sustainability, but also to provide a more resilient foundation for future economic growth.

An important step in this direction came in February this year with the launch of the Regional Coalition on Circular Economy, a Latin America and Caribbean-wide initiative led by the United Nations Environment Programme, which aims to increase access to finance for sustainable projects.

The coalition is a welcome initiative, as only 2.2% of COVID-19 stimulus funds in Latin America and the Caribbean were spent on environmentally sustainable projects, according to research by Oxford University and the UN.

While the establishment of initiatives at the intergovernmental level has marked a shift in focus towards the circular economy, a number of private sector and community organisations across the region have become involved in a number of smaller circular economy projects in recent years.

A central focus is on recycling and resource efficiency. For example, a 2019 report published by the UK-based Ellen MacArthur Foundation estimated that while transitioning to renewable energy and improved energy efficiency could help reduce 55% of global emissions, adopting a circular economy approach for five industries - steel, cement, plastics, food and aluminium - could reduce emissions from the production of key materials by 40%, or 3.7 billion tonnes, by 2050.

To this end, Coca-Cola has implemented a number of initiatives in recent years to improve the reuse and recycling of its packaging. "Returnable bottles help reduce costs, and in Chile we even offer consumers logistics services to bring returnable bottles to our plants when purchased directly from our website," Miguel Peirano, CEO of Coca-Cola Andina, which operates in Argentina, Brazil, Chile and Paraguay, told OBG.

Another key Coca-Cola initiative in the region is the "universal bottle". First launched in Brazil in 2018, the design, which uses bottles of the same colour, shape and size for different products, has been implemented in several Latin American countries, including Argentina, Chile, Colombia and Mexico.

The bottle accompanies a system that has customers return empty bottles to retailers, who then send them back to Coca-Cola upon receiving a new order. Coca-Cola then cleans the bottles, removes the labelling, refills them and renames them with a new label.

The strategy has proven to be hugely effective in reducing plastic waste. The company says the bottles are reused up to 25 times, reducing overall plastic use by 90%.

"Launching a universal bottle type helps us expand returnable offerings for low-volume brands, which is otherwise difficult, as they don't sell as much," Peirano said.

Elsewhere, efforts are also underway to improve the sustainability of materials used in beverage packaging.

"Inevitably, the beverage production industry will need to consider reducing plastic use as part of our commitments to the UN Sustainable Development Goals. While PET bottles will not disappear, they would have to move to recycled PET bottles," Augusto Bauer, deputy general manager of Peruvian beverage producer Grupo Aje, told OBG.

While there has been progress on this front, Bauer noted that significant investment was needed for the industry to meet its sustainability goals.

"While facilities are being built throughout the region to process plastic bottles, the biggest challenge is to strengthen the capacity and capability of underdeveloped recycling systems in Peru and other countries."

Another key factor in improving resource efficiency and meeting the goals of the circular economy is the technological development associated with the Fourth Industrial Revolution (4IR).

With an estimated 113 million people living in slums or substandard housing across the region, 3D printing of low-cost houses, a process that uses a mixture of concrete, water and other materials to build a house for as little as US$4,000, is increasingly seen as a viable option to address the housing shortage.

In El Salvador, pilot projects using this approach have been launched to build affordable housing for low-income families who have lost their homes due to natural disasters, while in Mexico a completely new neighbourhood for 50 low-income families is being built using the 3D printing method.

The efficient use of building materials in 3D printing provides a stark counterpoint to more traditional methods. For example, in Chile, 7.1 million tonnes of waste is generated annually from the construction of licensed buildings alone, equivalent to all municipal household waste.

Elsewhere, circular economy solutions can also play a role in meeting other everyday needs, such as drinking water and sanitation.

For example, at the Atotonilco Wastewater Treatment Plant in Mexico, treated water is used to irrigate some 90,000 ha of agricultural land in the Mezquital Valley, while the sludge derived from the process is reused to produce electricity and thermal energy, and the by-product biosolids. The products are used to improve soil in forests and agriculture.

The issue of water, in particular, will be crucial in the future, with all but six countries in Latin America and the Caribbean expected to be classified as water-scarce by 2025, according to the UN.

In addition to the environmental impacts, advocates of the circular economy also point to the significant economic benefits of adopting more sustainable economic models.

In a region hit hard by the economic consequences of the pandemic, the circular economy is seen as a way to build a more sustainable, diverse and resilient economic recovery.

While there will undoubtedly be changes in the workforce as countries move away from high-polluting industries, research by the Economic Development Division of the UN Economic Commission for Latin America and the Caribbean estimated that adopting a circular economy scenario could generate up to 4.8 million jobs across the region by 2030, through the development and expansion of recycling, repair, waste management and remanufacturing industries, among others.

Another report, published by the United Nations Environment Programme, estimates that Latin America and the Caribbean as a whole could save up to $621 billion annually and generate 7.7 million new jobs if the energy and transport sectors achieved emissions neutrality by 2050.

Meanwhile, at the level of a single country, Chile has set a target of creating more than 180,000 formal jobs in the circular economy by 2040, while the World Bank has calculated that achieving carbon neutrality would boost the country's GDP by 4.4% by 2050.