Latin America Cited as Not Investing Enough in Infrastructure

SOURCE: Americas Economia(Espanol)

A historical paradox. Already in the nineteenth century Karl Marx used the term “infrastructure” to refer to the economic base determines the social structure and development, and upon which the “superstructure” of political and legal institutions. This superstructure is created in the interests of the dominant groups. Any change, or “revolution” in the superstructure, which will oppose the stakeholders, can only be achieved by changing the “infrastructure”. Chinese stimulus package of 4 billion yuan (about U.S. $ 590,000 million), up 38% (U.S. $ 224,000 million) was allocated to infrastructure work in the country, including reel-ras, railways, irrigation and airports. To get an idea of size, the stimulus package U.S. launched at the end of the George Bush was U.S. $ 159.000 million, of which most would come in the form of tax exemptions.

The figures show two different strategies for economic stimulus: the U.S.-ber bet to boost consumption, China has a long term vision that infrastructure is one of his central points.

Latin America, at least in his remarks, Chinese would follow suit: their economic stimulus plans are to infrastructure as a fundamental part of its membership. Brazil has a plan called the PAC, Accelerated Growth Plan for U.S. $ 285,000 million between 2007 to 2010, Argentina has announced plans for infrastructure for U.S. $ 21,000 million and Chile, for U.S. $ 4,000 million.

Until beaten Mexico planned to invest U.S. $ 44,000 million in infrastructure in 2009 as part of their National Infrastructure Plan.

And chances are that even if economic recovery in 2010 in most of the region, infrastructure programs will continue this year to stimulate the economies. “There may be rise in commodity prices and greater fiscal slack in Latin American governments,” said Jordan Schwartz, World Bank economist specializing in infrastructure.

“But remember that unemployment is an indicator reads legacy, so high in 2010 and will be required stimuli.

But beyond specific events, programs and announcements bombastic, Latin America is investing in infrastructure less than required to sustain economic growth, as they are doing in many Asian economies. Not that the crisis would curb private investment in infrastructure, and subsequently the public sector had to pick up the gauntlet. “Over the past 10 years China has been investing on average between 4% and 6% of its GDP on infrastructure,” said Brian Blakely, who works in the field of syndicated financing from the IDB. According to a World Bank study of 2003 and then noticed the little investment, and it was said that for Latin America and the Caribbean achieved levels of infrastructure coverage similar to South Korea would have to spend a year between 4% and 6% of GDP over 20 years.

And the region is very, very far from achieving it.

This means that when Latin America’s economic machine functioning again in full, will again appear the usual problems of power outages (as we are suffering Ecuador and Venezuela), bottlenecks in seaports, and all that, on the

lack of long-term vision of our governments.

A risk that the ghost of Adam Smith hurled us in terms of infrastructure, Latin America requires an increasingly visible hand of state investment push, and he better have a long-term, and not go changing vision

each change of government, a curse that has plagued the region throughout its history.

Let them come to me. For now, governments have many vital projects in the region will be made by the private sector. The problem is that new investors to expand the infrastructure of the region will be a problem for some countries. Blakely explains that the same risk for the region’s economic recovery is that private investment in infrastructure seek to focus on those countries that have investment grade, such as Chile, Peru, Brazil or Mexico, or others like Colombia and Panama, which if while they have no investment grade, are attractive to foreign investment.

“The problem is that those countries that have the greatest need for investment in infrastructure can be ignored by investors, and that this leads to accentuate differences in development between the countries of the region,” he says.

The market consensus is that in 2010 funding for infrastructure projects will remain relatively weak. In fact, if you are considering a large project, if it has the support of some multilateral agency such IDB, World Bank, CAF and BNDES in Brazil, the possibilities of financing are drastically reduced. Only weight multinationals such as Petrobras or Odebrecht, and strong relationships with its bankers, may finance large projects without multilaterals have to put some kind of warranty. Greg Tan, New York lawyer with Shearman and Sterling, and who has participated in the process of capital raising for infrastructure projects like the expansion of the Panama Canal, believes that any project over $ 150 million or $ 200 million should

yes or yes comply with these conditions.

Another issue is how to attract investors. And advice is to simplify. Cezary Podkul, a researcher at the financial information firm Infrastructure Investor, says that a system has been particularly well received in the private sector to attract investment model has been implemented by the Authority for Public-Private Partnerships in Puerto Rico. The idea is simple enough: with the assistance of private equity firm Macquarie Capital, the centralized authority absolutely all the needs of various government entities in infrastructure investment, what will the government is studying on his own, and list those which wants to invite the private sector in a single website for investors to study and choose the projects of interest. The island wants to attract investments of U.S. $ 6.200 billion over the next eight years and that the AAP website has a list of 108 projects offered, ranging from desalination plants, gasification of solid waste services, bus rapid transit

until the construction of a city hotel.

Another alternative in the region has been delegated the administration of investment funds in the private sector. Recently a consortium led by Ashmore was elected to administer a fund for investment in infrastructure and raise about $ 500 million, while Canada’s Brookfield will do so in Peru, together with the local firm AC Capital, a U.S. fund also $ 500 million.

As expected, both funds are sponsored by the IDB and CAF, in addition to their governments.

But not enough to be attractive for foreign investment for infrastructure projects sprout like magic. Some countries remain mired in a bureaucracy that could slow investment in 2010. “The country received more complaints which is always Brazil,” says Podkul. “Many would rather not appear in public complaining, but discontent over unfulfilled promises of government is great and all attribute it to the bureaucracy,” said Podkul. Greg Tan agrees. “Brazil has much work ahead to reduce bureaucracy,” he says. And it is a lower risk. “The paradox is that at a time when Brazil’s economy is getting better every day, we have a third world infrastructure,” complains Adriano Pires, director general of the Brazilian Center Infraestrutura or CBIE, in Rio de Janeiro. And the bureaucracy that is so harmful to Brazil, Pires cause fear another topic. “The infrastructure is not something short term.

I fear that the government end wandering in the timing necessary to comply with all the investments required for the World Cup in 2014 and 2016 Olympics in Rio, “he says.

Taking projects. To say that Latin America lacks integration is a truism. There is no land connection quality between Colombia and Panama, or between Brazil and Peru.

Throughout the entire region come to plant projects to receive liquefied natural gas as history has taught that it is “safer” to bring gas from across the world who rely on natural gas that can provide regional neighbor.

According to Daniel Montamat, former Secretary of Energy of Argentina and now a consultant on energy issues, is the lack of a consensus view on the importance of blocking the integration infrastructure. “The watershed for the energy integration is among those countries that see infrastructure as a long term thing, like Chile and Brazil at this time,” he says, “and those who adapt their infrastructure plans to meet short term needs . If not, ask the consultant, how to explain that countries without energy resources such as Chile have preferred to build LNG plants after Argentina has cut off supplies? Or that Brazil has opted for deepwater exploration to become energy power, and while many countries with energy resources such as Venezuela and Ecuador suffer power cuts due to lack of water resources?

“They have gas, but have not built just for thermoelectric power when water is lacking,” said the expert.

However, we must recognize that governments themselves are unable to agree on the issue of projects that are part of the Initiative for Integration of Regional Infrastructure in South America, or IIRSA. The list includes 350 projects considered vital, with the assistance of IDB and CAF. “The majority are road projects because it is what else was in its infancy,” says Antonio Juan Sosa, Vice President of CAF infrastructure.

“But the important thing is that they are projects that have survived the passage of various governments and continue moving forward.”

The poor state of roadside connectivity between the countries of the region is something that comes up over and over again in the discussion of the limited progress of infrastructure. “Every country in some ways is an island,” he says from Madrid Juan Antonio Vassallo, professor at the Polytechnic of Madrid and an expert on infrastructure issues.

He wonders how it is that Brazil should bring their products to China by sea, skirting Cape Horn, and not by a train or land that connects to the Pacific coast.

And rethink the use of the train is something that governments in Latin America would do well to do. The Colombian consultant Martin Ibarra, of the consulting Araujo, Ibarra & Associates, says that the global trend in transportation, now that everyone is so aware of the carbon footprint of products, is to replace the carriage of goods by trucks by trains . “China is adopting reforms that allow the use of trucks only in the final stages of the journey. The country is building 131 kilometers of new rail tunnels to 250 kilometers per hour, “he says.

“At the same time, the United Kingdom wants to establish a 80/20 ratio for land transport, ie that 80% is by train and 20% by truck, compared to a 60/40 today.”

In this agrees Norman Anderson, president of consultancy on infrastructure CG / LA in Washington. “You must connect the east and west of the region with a freight train,” he says. “The United States did 150 years ago. But in Latin America the use of land freight trains between countries is zero. The key question is whether there is enough cargo to justify a project like a train connecting the two oceans. Whenever such approaches emerge, the economic efficiency factor becomes a major factor. During the discussion of the proposed bridge over the Chacao Channel in Chile, for example, there was criticism from the outset that the project would not be economically viable.

The project is now sleeping the sleep of the righteous.

But we must consider that if one follows only the smell of “economic viability” of infrastructure development will be maintained only in large cities, as has been the historical case of Latin America: highly developed cities, but located away from the main points

trade, with poor infrastructure to connect, and surrounding regions where the infrastructure is extremely poor.

At a time when economic recovery back to breathe life into the region, return to our role as a net exporter of commodities. “The commodities are terrible as a basis for national economies, claims Anderson. “Accentuate the differences in wealth and is a game primarily for the elite.

Governments should think how they want the region was in 2025, how it fits into the global economy and what are the projects that are required for that to happen, “he says.

And 2025 is not far off, gentlemen rulers.

	Nombre del proyecto Project Name	País Country	Sector Sector	Inversión Investment US$ Millones U.S. $ Millions
1 1	Nuevo tren de refinación* New refining train *	México Mexico	Hidrocarburos Hydrocarbons	7.464 7,464
2 2	Hidroeléctrica Río Madeira*** Rio Madeira Hydroelectric ***	Brasil Brazil	Energía Energy	6.200 6,200
3 3	Ampliación del Canal de Panamá*** Panama Canal Expansion ***	Panamá Panama	Transporte Shipping	5.250 5,250
4 4	Proyecto Ferroviario Los Andes* Railway Project Los Andes *	Argentina-Chile Argentina-Chile	Transporte Shipping	4.800 4,800
5 5	Centrales Hidroeléctricas HidroAysén* Hydroelectric HidroAysén *	Chile Chile	Energía Energy	3.200 3,200
6 6	Concesión vial “Transversal de las Américas” Concession road “Transversal of the Americas”	Colombia Colombia	Transporte Shipping	3.050 3,050
7 7	Corredor bioceánico Chile-Argentina* Bi-oceanic corridor Chile-Argentina *	Chile-Argentina Chile-Argentina	Transporte Shipping	3.000 3,000
8 8	Concesión “Autopistas de la Montaña”* Concession “Motorways of the Mountain” *	Colombia Colombia	Transporte Shipping	2.800 2,800
9 9	Ruta del Sol** Ruta del Sol **	Colombia Colombia	Transporte Shipping	2.600 2,600
10 10	Reconfiguración de la Refinería de Salina Cruz** Reconfiguring the refinery in Salina Cruz **	México Mexico	Hidrocarburos Hydrocarbons	2.517 2,517
11 11	Topolobampo I, II y III y terminal de carbón*** Topolobampo I, II and III and coal terminal ***	México Mexico	Energía Energy	2.164 2,164
12 12	Hidroeléctrica Binacional Bolivia – Brasil** Binational Hydroelectric Bolivia – Brazil **	Bolivia-Brasil Bolivia-Brazil	Energía Energy	2.000 2,000
13 13	Reconfiguración de la Refinería de Tula** Reconfiguring ** Tula Refinery	México Mexico	Hidrocarburos Hydrocarbons	1.937 1,937
14 14	Central Termoeléctrica de Pécem*** Thermoelectric Power Station Pecem ***	Brasil Brazil	Energía Energy	1.853 1,853
15 15	Hidroeléctrica de Garabí** Hydroelectric Garabí **	Argentina-Brasil Argentina-Brazil	Energía Energy	1.700 1,700
16 16	Punta Colonet – Mexicali *** Punta Colonet – Mexicali ***	México Mexico	Transporte Shipping	1.639 1,639
17 17	Rodoanel Oeste*** West Rodoanel ***	Brasil Brazil	Transporte Shipping	1.500 1,500
18 18	Ampliación Aeropuerto de Campinas*** *** Campinas Airport Expansion	Brasil Brazil	Transporte Shipping	1.400 1,400
19 19	Pavimentación Iñapari – Puerto Maldonado*** Paving Iñapari – Puerto Maldonado ***	Perú Peru	Transporte Shipping	1.393 1,393
20 20	Duplicación del tramo vial Belo Horizonte -São Paulo**** Doubling the road section Belo Horizonte-São Paulo ****	Brasil Brazil	Transporte Shipping	1.300 1,300
21 21	Represa Hidroeléctrica de Yacyretá*** Yacyreta hydroelectric dam ***	Argentina-Paraguay Argentina-Paraguay	Energía Energy	1.200 1,200
22 22	Duplicación del tramo Palhoça – Osorio*** Doubling the stretch Palhoça – Osorio ***	Brasil Brazil	Transporte Shipping	1.200 1,200
23 23	Hidroeléctrica Cachuela – Esperanza* Hydroelectric Cachuela – Esperanza *	Bolivia Bolivia	Energía Energy	1.200 1,200
24 24	Tren del Carare* Train Carare *	Colombia Colombia	Transporte Shipping	1.200 1,200
25 25	Tren interurbano de Guanajuato*** Guanajuato Mainline ***	México Mexico	Transporte Shipping	1.121 1,121
26 26	Instalación de planta de regasificación GNL*** Installation of LNG regasification plant ***	Uruguay Uruguay	Energía Energy	1.090 1,090
27 27	Central termoeléctrica Termomaranha Thermal Power Station Termomaranha	Brasil Brazil	Energía Energy	1.087 1,087
28 28	Proyectos de movilidad para Bogotá (tren de cercanías)* Mobility Projects for Bogota (commuter rail) *	Colombia Colombia	Transporte Shipping	1.050 1,050
29 29	Transmisión entre hidroeléctricas del Río Madeira*** Transmission between the Rio Madeira hydroelectric ***	Brasil Brazil	Energía Energy	1.000 1,000
30 30	Gasoducto noreste argentino*** *** Northeastern Argentina Gas Pipeline	Argentina Argentina	Energía Energy	1.000 1,000

^{*En estudio / **Aprobado / ***En Licitación / ****Pre Ejecución / *****En Ejecución} ^{* Studio / ** Approved / *** In Tender / Pre Implementation **** / ***** Underway}

_{Fuentes: IIRSA; BID; DNP Colombia; MOP Chile; Programa Nacional de Infraestructura México 2007- 2012} _{Source: IIRSA, IDB; DNP Colombia; MOP Chile Mexico National Infrastructure Program 2007 – 2012}

The paradox is that, when Marxist ideas seemed in retreat and in the midst of the largest capitalist crisis of recent decades, is just a communist country like China which push the global economy.

And that the strength of the global locomotive comes precisely from the investment in infrastructure.

Then the government stimulus plan of Barack Obama expanded the nominal amount of the bailout dramatically to U.S. $ 759,000 million, but the allocation for infrastructure was only U.S. $ 80.900 billion, just over one third of Chinese investment.

Latin American infrastructure