By Enrique García
Sound 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
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
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
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 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 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
Enrique García is president of CAF - Development
Bank of Latin America