Is circularity profitable in Latin America?

The economic model problem is global, and Latin America makes it worse: landfill costs USD 7 to 14 per tonne, while in Belgium or the United Kingdom the tax alone exceeds USD 100; capital is expensive for MSEs and terms are short; and recycling targets are poorly verified. Well-designed finance solves the ramp-up and the cost of capital, but it does not create a market that does not exist.

Is the circular economy profitable in Latin America?

Yes, when the circular option is cheaper than the linear one for whoever pays and operates at scale. Almost never when it depends on creating a new market. Profitable circularity exists, but with thin margins. It concentrates in businesses with scale, a cheap input or a service that can be charged for, and it rarely matches the most publicized cases. 4 of 15 cases viable with own capital: All of them large companies, at the discount rate of each size. At a medium-sized company’s rate, 2 micro and small enterprises (MSEs) would break even and a third would sit on the edge, while 2 other cases only work with a grant and 9 are not viable. With ±10% on price or cost, viable cases range from 3 to 7.

Why don’t micro and small enterprises make it?

At the rate for each company size, 4 cases create value with own capital, 2 only with a grant and 9 are not viable. At 13% and 10 years, like a medium-sized company, 2 of the 7 MSEs would break even, including the gold mining association, and a third would sit on the edge, while at 20% none of the four viable cases would work. For MSEs, the cost of capital weighs as much as scale. With a loan at 7.5% and up to 7 years, an MSE needs a grant covering 33% to 36% of the investment, and 55% under prudent assumptions, while with debt at 13% to 16% it needs 42% to 46%. The missing instrument is a loan of USD 5,000 to 35,000, 5 to 37 times smaller than the typical minimum ticket of impact debt.

What kind of finance makes a circular project viable?

With a loan at 7.5% and up to 7 years, an MSE needs a grant covering 33% to 36% of the investment, and 55% under prudent assumptions, while with debt at 13% to 16% it needs 42% to 46%. The missing instrument is a loan of USD 5,000 to 35,000, 5 to 37 times smaller than the typical minimum ticket of impact debt. A term aligned with the equipment’s life, up to 7 years and 10 for long-lived assets; a grant for pre-investment and ramp-up; a guarantee that replaces collateral; staged blending; and verified measurement. The specific offer changes over time, while the principles follow from the model and should be validated with portfolio data.

Why does almost no one publish the profitability of the circular economy?

None of the eight reporting frameworks reviewed requires the profitability of a circular initiative. Across 132 cases in four databases, 87 corporate reports and 58 award-winning companies, none reports a realized margin or return, and only one case publishes a projected return. In the companies reviewed, circular targets for 2025 were partly met and, when they expired, several disappeared from reports; in Colombia, what most often stops being published are the figures in money. Targets tied to bonds hold, and mentions of the circular economy double or triple.

Is it a regional problem or a problem of the model?

Cheap virgin material hits Europe too, and the region adds landfill at USD 7 to 14 per tonne, expensive capital for MSEs, incomplete extended producer responsibility (EPR) and recycled-content targets with little public verification. The economic model problem is global, and Latin America makes it worse: landfill costs USD 7 to 14 per tonne, while in Belgium or the United Kingdom the tax alone exceeds USD 100; capital is expensive for MSEs and terms are short; and recycling targets are poorly verified. Well-designed finance solves the ramp-up and the cost of capital, but it does not create a market that does not exist.