Investments in Critical Infrastructure: The Road Ahead
Wednesday 7th April 2010 - 12:30pm - 2:00pm
Investments in Critical Infrastructure: The Road Ahead
Investments in critical infrastructure, such as telecommunications, transportation and energy, are key for the region to increase its productivity and trade, as well as to reduce poverty and social inequality.
What are the main priorities and risks in critical infrastructure?
What innovative models have been achieved where multilateral organizations, governments and private investors have collaborated to fund them?
• Meeting Latin America’s growing infrastructure needs will require tripling current investments, according to some estimates, and upgrades will need to focus not only on roads, electrical grids, and water systems, but also on telecommunications and education.
• Funding such projects will require tremendous capital investments from governments and the private sector.
• Nations that are most likely to attract this type of investment are those with transparent rule of law and a stable regulatory framework that can enforce contracts and offset concerns about risk.
• Outside investors gauge trust based on a government’s existing track record in fostering stable regulatory environments, and there are few shortcuts to bypass establishing a long-term record. International institutions such as the World Bank can help encourage the private sector when this foundation of confidence might be lacking.
• Integrating Latin American stock markets and altering regulatory frameworks to encourage pension fund investments can also help increase depth of markets to invest infrastructure development.
Latin America will need to triple its infrastructure investment in the coming years in order to remain competitive for business and to support demographic and market demands on roads, ports and electric grids, for example. From widening the Panama Canal to preparing Rio de Janeiro for the 2016 Summer Olympics, many Latin American nations have announced major infrastructure projects. Ensuring spending is properly allocated requires that nations establish a vision for long-term infrastructure development and utilize proper investment models.
Because infrastructure projects tend to be large scale and long term, the private sector’s involvement is essential. To attract outside investors, nations must establish strong track records of regulatory enforcement and stable rule of law. Without measures of legal stability, investors distrust the business environment. High risk assessments mean that dollars are more expensive to access, so governments can increase their access to capital by strengthening the rule of law. Investors tend to base trust on a nation’s previous track record in supporting business, but in absence of such a historical record, nations can invite participation of international oversight agencies. The World Bank played such a role in supporting infrastructure investing in Liberia.
Pension funds can also provide valuable capital to invest in infrastructure. Mexico, for example, has adopted mechanisms to allow funds to invest in specific projects, such as tollbooth revenue streams, and in larger infrastructure funds. Another way to increase the supply of capital for infrastructure is to increase the interconnectedness of stock markets in the region. Such integration of markets would allow pension funds, insurance companies and international investors easier access to regional infrastructure projects.
Though lack of funding has limited the ability of Latin American nations to upgrade infrastructure, the consensus among investors was that the greatest barrier to making these improvements has been the lack of transparent legal frameworks. Strengthening regulatory systems and establishing long-term plans for infrastructure development will be essential for Latin America to create jobs and encourage business in the years ahead.
Luis Fernando Alarcón Mantilla, Chairman and Chief Executive Officer, Grupo Empresarial ISA, Colombia; Co-Chair of the 2010 World Economic Forum on Latin America
Joaquim Levy, Secretary of Finance, Government of the State of Rio de Janeiro, Brazil
Javier López Madrid, Chief Executive Officer, Grupo Villar-Mir, Spain
Ricardo Martinelli, President of Panama
Alex Moczarski, President, International, Marsh (MMC), USA
Juan Quirós, President and Chief Executive Officer, Grupo Advento, Brazil; Global Agenda Council on the Future of Sustainable Construction
Federico Restrepo Posada, Chief Executive Officer, Empresas Públicas de Medellín-EPM, Colombia
Reuben J. September, Chief Executive Officer, Telkom Group, South Africa
Michael Till, Partner, Infrastructure, Actis, United Kingdom
Jaime Vallés, President, Latin America, Cisco Systems, USA
Alejandro Werner, Undersecretary of Finance and Public Credit of Mexico; Young Global Leader
Norman Anderson, President and Chief Executive Officer, CG/LA Infrastructure, USA; Global Agenda Council on the Future of Sustainable Construction
This summary was prepared by Mary Bridges. The views expressed are those of certain participants in the discussion and do not necessarily reflect the views of all participants or of the World Economic Forum.
Copyright 2010 World Economic Forum
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Luis Fernando Alarcón Mantilla
Chairman and Chief Executive Officer, Grupo Empresarial ISA, Colombia
Civil Engineer and MSc in Economics, Universidad de los Andes; PhD in Planning of Hydraulic Resource...
President and Chief Executive Officer, Grupo Advento, Brazil
Degree in Industrial Engineering, University of Miami; MBA, Fundação Getúlio Vargas, Brazil; PhD ...
- Federico Restrepo Posada
Chief Executive Officer, BRAM - Bradesco Asset Management, Brazil
BSc in Naval Architecture; MA in Economics, Fundação Getulio Vargas; PhD in Economics, University ...
Javier López Madrid
Chief Executive Officer, Grupo Villar-Mir, Spain
Master's in Economics and Master's in Law, ICADE University, Spain. Currently, CEO, Grupo Villar-Mir...
Partner, Infrastructure, Actis, United Kingdom
Degree in Economics, University of Durham, Chartered Accountant. Formerly: economic analyst, South K...
President, Asia-Pacific, Japan and Greater China (APJC), Cisco Systems, USA
Bachelor's in Electronic Engineering, Universidad Anahuac, México. Over 20 years' leadership experi...
President of Panama
1973, degree in Marketing, University of Arkansas, US; 1977, MBA, INCAE-MAE IX, San José, Costa Ric...
President, International, Marsh (MMC), USA
BA in Economic and Social Studies, Manchester University, UK; Executive Programme, Stanford Graduate...
Director, Western Hemisphere Department, International Monetary Fund (IMF), USA
1990, BA in Economics, Instituto Tecnológico Autónomo de México; PhD in Economics on Exchange Rat...
Reuben J. September
Chairman and Chief Executive Officer, Reuben September Consulting, South Africa
BSc in Electronic and Electrical Engineering , UCT; National Technicians Certificate; Senior Managem...
President and Chief Executive Officer, CG/LA Infrastructure, USA
Graduate, University of Virginia and Harvard University. Founder, Guarani Foundation. Member, Bretto...