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backLATINtalk July, 2012
After Decades of Neglect, Latin America Tackles Bigger, More Ambitious Infrastructure Projects
Last week, news website Infrastructure Journal and audit, tax and advisory firm KPMG released the Infrastructure 100 – a report showcasing the world’s top infrastructure projects judged on their scale, feasibility, complexity, innovation and impact on society. The 18 Latin American entries in the report showcase a region facing up to the serious obstacles it faces if it is to forge a path of sustainable growth. Nevertheless the projects also clearly demonstrate how Latin America has a long road to travel if it is tackle the multitude of deep rooted issues left by years of underdevelopment and corrupt governance and create an environment that is both investor-friendly and meets the needs of its people.
Thinking Big
The Latin American projects range from the spectacularly ambitious, such as widening the Panama Canal, to the desperately needed, like the Falcón Matamoros Aqueduct, which will provide drinkable water in northern Mexico.
The projects were judged by members of the Mexican state development bank Banobras. According to Banobras’ Ricardo De Vecchi, quoted in the report, infrastructure investment in the region is being led by Brazil and Mexico, while Chile, Colombia, Peru and Argentina are also pushing ahead with a number of eye-catching projects after a slow start to the decade.
De Vecchi highlighted energy sector diversification, the environment and managing natural resources as the biggest challenges facing Latin America. However, he added, “the regional challenges are manifold” and include a number of areas of increasing concern to investors in the region, including transport infrastructure and education.
In the field of education, Latin America has only one entry – the San Luis Potosí University in Mexico. The project will provide a much needed boost to Mexico’s education system – a serious concern for many outsourcers and other investors – with an all new 16-hectare campus providing teaching, research, administration, sports and ancillary accommodation facilities for an estimated 5,000 students and 500 academic staff. According to the report, the project “has the potential to serve as a marker for a series of regional polytechnic universities currently in the pipeline.”
However, in transport, the report provided a glut of projects designed to ease the crippling congestion that has plagued cities across Latin America – especially those that have witnessed rapid growth, which are often outsourcing hotspots – and improve the often torturously slow inter-city connections in the region.
Transport Priorities
In this area, Brazil is leading the way with a pair of highly ambitious projects. The first, the Trem de Alta Velocidad (TAV), will link the economic hubs of Rio de Janeiro and São Paulo with the continent’s first high-speed rail connection. The railway will reduce the inter-city journey time from its current five hours to a mere 90 minutes with trains reaching speeds of up to 215mph. The second project is a planned ring road skirting the periphery of São Paulo – a popular outsourcing destination blighted by some of Latin America’s most grinding traffic.
Elsewhere in the region, Venezuela and the Dominican Republic were praised for new public transport initiatives designed to tackle congestion. In Venezuela, an innovative new horse-shore cable car system will link San Agustin in Caracas to some of the city’s poorest neighbourhoods, while in Santo Domingo a new Metro is already carrying 200,000 commuters a day with a planned expansion for five further lines.
Colombia was also singled out for its plans to improve the country’s often dire inter-city transport with the Autopistas de La Montaña project, which will cross 125 municipalities with 777 miles of road. However, while the Infrastructure 100 praised the project for its potential to “bring huge social benefits and help increase trade and commerce in Colombia and the surrounding region,” in Colombia, the project is mired in controversy over spiralling costs and planning irregularities.
In other areas considered by the judges, Latin America also registered a high number of projects related to cutting edge innovations in energy production. Some are in the field of renewables, with new hydro-electric facilities planned in Brazil, Ecuador and Chile and a new wind farm in Chile, while Brazil and Peru were also praised for innovative management of fossil fuels with liquefied gas initiatives.
Two of the projects on the list, the San Luis Potosí University and Pernambuco Prison in Brazil, were also singled out as examples of the increasing number of Public Private Partnership (PPP) initiatives in the region. According to De Vecchi, PPP investments are key to developing the region’s infrastructure. “On the financial side, consolidation of PPPs in the area should be a priority,” he said. “This must take place via innovations, with specific structures that adapt better to Latin America’s business and thought processes.”
However, private sector involvement in what has traditionally been government territory is not without controversy. “Increased private investment will create problems within a society of nations because of the historical context of colonialism embedded into the idiosyncrasy of the peoples of Latin America and a reticence to use the private sector in infrastructure projects,” said De Vecchi.
In the long term future, De Vecchi believes infrastructure projects like these are not only key to the development of individual countries but also to regional integration. “The decades ahead could also see inter-country projects,” he said. “Infrastructure holds the potential to bring the region together, even though it is conventionally a region with a lot of historical differences.”
Source: NearshoreAmericas.com - GAI
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