LatinFinance - Special Edition - August 2013 - 96

2
THE
FUTURE
OF LATIN
FINANCE

If Latin America is to meet its demand for infrastructure, it must invest at least $250
billion annually over the coming years – double the amount of the last decade. This
can only be done through multilateral cooperation. By Enrique García

Infrastructure finance
Closing the gap

ound macroeconomic policies and the positive effects of high commodity
prices over the past decade helped latin america make important progress on a number of
fronts: price stability, external balances, economic growth and poverty reduction.
Yet today, if the region wants to improve the lives of its citizens while becoming more
relevant in the global economy, complacency is not an option.
the old comparative advantage approach, based on commodities and low wages, is no
longer relevant. Governments must adopt a more sophisticated growth model based on efficiency, productivity, innovation, creativity and environmental sustainability.
infrastructure, alongside education and institution building, is a central part of this new
strategy to make economies more efficient, diversified and competitive. the process of
developing infrastructure can help advance, and even internationalize, related businesses;
physical infrastructure can also promote social inclusion by linking isolated communities; it
can help the goals of both internal mobility and decentralization; and it is fundamental for
both national and regional integration.
Unfortunately, infrastructure development in latin america lags behind that of other
emerging regions; in some sectors and countries, the gaps are acute. although there is no
single “hard” indicator that reflects the situation of all infrastructure sectors, data show that
latin america’s comparative performance is weak – only exceeding that of africa.
the situation varies widely by sector, country, and even regions within countries. However, “the region’s infrastructure needs call for a minimum investment of 6% of GDP in the
coming years – even without considering maintenance costs” this implies annual investment
levels of between $250 billion and $300 billion, double what the region has invested in the
last decade.
neither the public nor the private sector alone is able to guarantee that such sums are
mobilized. at the same time, national savings are inadequate. the solution, therefore, must
lie in public-private efforts and national-international sources of financing. Here, cooperation
between national and local governments and private investors will prove crucial. at the same
time, countries must also be able to attract foreign investment and other sources of external
financing.
national, regional, and global multilateral development banks can play an important
role, not only in providing direct financing but in helping mobilize other relevant parties, for
example, to implement and operate infrastructure projects. across the life of a project, such
assistance can take the form of technical cooperation, advisory services, co-financing and
innovative financing mechanisms.
Regional integration infrastructure, particularly in South america, is of paramount importance. caf has approved over the last decade close to $30 billion in loans, grants, guarantees,
equity and other instruments to support infrastructure, including more than 60 regional

96 l atinfina nce.com - 25 Years - August 2013

cross-border integration projects in roads,
ports, pipelines, energy and other modes
of connectivity for an amount of $8 billion.
over the next decade, latin america
must implement a comprehensive development strategy if it wants to converge more
rapidly with the industrialized countries;
infrastructure development is central to
any such medium-term strategy.
in order to close the infrastructure gap,
the following factors are essential: significantly increase investment in all types of
infrastructure; frame policies and projects
in a paradigm of sustainable development
and territorial vision; strengthen institutions in their various dimensions; optimize
the use of both national and international
financing; promote the development of
enrique garcÍa

“The regIon’S InfrASTrucTure needS
cALL for A mInImum
InveSTmenT of 6% of
gdP In The comIng
yeArS – even wIThouT conSIderIng
mAInTenAnce coSTS”
businesses linked to infrastructure; and
promote the exchange of experiences between governments, regions, and cities.
caf is ready to continue to support its
member countries in responding to the
challenge of regional infrastructure. closing this gap in the next decade will help in
building a more stable, efficient, integrated,
sustainable and inclusive region. LF
Enrique García is president of CAF – Development Bank of Latin America

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