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The Conexión Norte 4G toll road in Colombia. (Photo: ANI)
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Perspectives

Infrastructure in Latin America: A Necessity

Infrastructure in the region is not a whim, but a necessity.

BY OLGA LUCÍA RAMÍREZ

The world economy, and in particular the economies of emerging countries, have been strongly affected by the effects of Covid-19. However, it is no less true that the world economy is still going through a complex moment due to different factors such as the almost simultaneous increase in interest rates by central banks to respond to inflation and the war in Ukraine, among others.

The infrastructure sector has been a great power for the economic recovery and to face the negative effects derived from the aforementioned situations.

The infrastructure sector generates direct and indirect jobs, encourages domestic and foreign investment by different actors, and is directly related to the development of other social sectors, but mainly generates a dynamization of the different local economies and the global economy. Infrastructure is quality of life.

Multilateral banks are no strangers to this reality, and therefore have set the magnifying glass on this sector, financing various projects worldwide, but especially in Latin America. Likewise, it has put on the table issues of total relevance such as regional integration driven by multimodality in the different countries of the region. The Atlas of Integration Infrastructures in Latin America and the Caribbean of the Inter-American Development Bank (IDB), highlights the most recent projects that have received technical or financial support from this entity in the region, and how, as a result, exports have increased, and the main supply chains have been strengthened.

KEY PROJECTS

Some of the projects worth highlighting are the following, among others: (i) Puerto Limón-Moín - San José - Puerto Caldera Bioceanic Corridor in Costa Rica, with an estimated investment of $1.8 billion, (ii) Las Leñas border crossing between Chile and Argentina with an estimated investment of $1.6 billion, (iii) the new highway connecting Quito and Santo Domingo in Ecuador with an estimated investment of $1.575 billion, and (iv) Deepwater Port in Guyana with an investment in the range of $450 million to $800 million. In Colombia, the 4G projects were reactivated with a CAPEX of $10.1 billion, which are currently at 70 percent completion, in addition to the 5G projects already awarded. These types of projects favor the import and re-export of products and increase productivity and economic development not only in the countries where they are executed, but also in the region, making it a global benchmark. 

On another front, the development of green infrastructure with sustainability criteria in Colombia and the region has gained momentum in recent years. In the Colombian case, the CONPES 5G is a clear example of this, as it sets out public policy guidelines for implementing ESG sustainability criteria in upcoming projects, including from the structuring phase. The recent efforts of governments together with the private sector and local and multilateral banks have led to a significant increase in investment on this front. This also raises innovative financing structures for this type of projects, such as sustainability-linked bonds.

In a recent document of the IDB, Sustainable Financing of Economic and Social Infrastructure in Latin America and the Caribbean, it presents several examples of alternative financing sources in Latin America for infrastructure projects, in a broader spectrum than transportation infrastructure.

A clear example to highlight, is the case of Chile, which is the first country to issue a sovereign bond of $2 billion in 2022, for the transition to renewable energies. This means that not only transportation infrastructure projects are sparking interest throughout the region, but also social infrastructure and renewable energy projects are the “plat du jour,” with important developments that have been reached in terms of financing structures.

The above sets a challenge of important dimensions for all the players involved in the development of these types of projects and invites us to reflect on the agility that must be present in these processes, particularly in government institutions to adapt to the new realities. 

Olga Lucía Ramírez is a Partner in the Infrastructure, Projects and Public Law area of DLA Piper Martinez Beltran in Colombia. She has led major projects, both in the private sector and as a government officer, serving as Director of Infrastructure and then as Vice-Minister of Infrastructure of the Ministry of Transportation for about three years. Ramirez is also the founder and president of the Colombian Association of Airport Law in Colombia (ACDDA).

 

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