Infrastructure development in Latin America is a key factor for economic growth, poverty reduction and improving people’s quality of life. However, Latin America faces major challenges in this area, such as the investment gap, low quality, lack of planning and inefficient management.
What is infrastructure development?
Infrastructure development refers to all activities that seek to expand, improve and maintain physical systems that facilitate transport, communication, energy, water and sanitation, among other essential services. These systems are fundamental to the functioning of the economy, trade, regional integration, competitiveness, innovation and social welfare.
Why is infrastructure development important in Latin America?
Infrastructure development in Latin America is important for several reasons:
- It contributes to economic growth. According to a World Bank study, a 1 per cent increase in the per capita infrastructure stock is associated with a 0.15 per cent increase in gross domestic product (GDP) per capita. In addition, infrastructure has multiplier effects on production, employment, income and tax collection.
- It reduces poverty and inequality. The infrastructure facilitates people ' s access to basic services, such as education, health, safe drinking water and sanitation, which improves their living conditions and development opportunities. Infrastructure also reduces transport and communication costs, which promotes social inclusion and citizen participation.
- Improves the quality of life. Infrastructure has a positive impact on people’s health, environment, safety and culture. For example, better electrical infrastructure reduces greenhouse gas emissions, improved road infrastructure reduces traffic accidents and better cultural infrastructure promotes diversity and identity.
What are the main challenges for infrastructure development in Latin America?
Despite its importance, the development of infrastructure in Latin America faces several challenges, including:
- The investment gap. According to the Economic Commission for Latin America and the Caribbean (ECLAC), the region invests about 2.8 per cent of its GDP in infrastructure, while the global average is 3.8 per cent and that of the Organization for Economic Cooperation and Development (OECD) countries is 3.6 per cent. It is estimated that the region should invest at least 5 per cent of its GDP to close the infrastructure gap with developed countries.
- Low quality. According to the Global Competitiveness Index of the World Economic Forum, Latin America ranks 86th out of 141 as infrastructure, below the global average and other developing regions. Low quality is due to factors such as deterioration, obsolescence, lack of maintenance and vulnerability to natural disasters.
- Lack of planning. According to the Inter-American Development Bank (IDB), the region lacks a long-term strategic vision for infrastructure development, which is reflected in the absence of national, regional and sectoral plans, the lack of coordination between levels of government and the low participation of social actors. This creates problems of prioritization, articulation, complementarity and sustainability of projects.
- Inefficient management. According to the Organization for Economic Cooperation and Development (OECD), the region has shortcomings in the management of infrastructure projects, such as lack of transparency, corruption, bureaucracy, contractual rigidity, low technical capacity and limited impact assessment. This affects the quality, cost, time and benefit of the works.
What can be done to improve infrastructure development in Latin America?
To improve infrastructure development in Latin America, a joint effort is required by Governments, the private sector, civil society and international cooperation. Some of the actions that can be implemented are:
- Increase and diversify investment. There is a need to increase the level and efficiency of public expenditure on infrastructure, as well as to mobilize private resources through mechanisms such as public-private partnerships, investment funds, infrastructure bonds and guarantees. The potential of unconventional sources, such as remittances, South-South cooperation, triangular cooperation and decentralized cooperation, should also be harnessed.
- Improve quality and maintenance. The design, construction, supervision and control of infrastructure projects, as well as the implementation of asset, information and risk management systems, should be strengthened. Adequate and timely resources should also be allocated for the preventive and corrective maintenance of existing infrastructure.
- Plan ahead of the future. National, regional and sectoral infrastructure plans should be developed and implemented, based on the diagnosis of the needs, opportunities and challenges of each context. Intergovernmental, intersectoral and inter-agency coordination, as well as the participation of social actors, should also be promoted to ensure coherence, complementarity and sustainability of interventions.
- Manage with transparency and accountability. Governance and institutionality of infrastructure processes should be improved through the adoption of international standards, simplification of procedures, digitization of procedures, training of officials and the prevention of corruption. Monitoring, evaluation and communication of project results and impacts, as well as accountability to citizens, should also be strengthened.
References
- ECLAC (2020). The infrastructure in the integral development of Latin America.
- OECD (2019). Getting Infrastructure Right: The 10 Key Governance Challenges and Policy Options. [Report]
- Calderon, C. and Servén, L. (2014). Infrastructure, Growth, and Inequality.
- Perrotti, D. and Sanchez, R. (2011). The infrastructure gap in Latin America and the Caribbean.
- Estache, A. and Fay, M. (2007). Current Debates on Infrastructure Policy.
- World Economic Forum (2019). The Global Competitiveness Report 2019.
- ECLAC (2018). The social dimension of infrastructure.
