Latin America urged to speed infrastructure plans

Fri Apr 29, 2011 10:53am EDT

* Region still lags on infrastructure despite big plans

* Lack of planning, transparency seen as major barriers

* Private companies say they need a level playing field

By Stuart Grudgings

RIO DE JANEIRO, April 29 (Reuters) - High-speed trains bolting between Brazil's two biggest cities; a vast network of highways connecting farmers and factories to ports; top-notch airports where overcrowding is a thing of the past.

Welcome to the future of Latin America, a region that has long lagged in providing its businesses and people with the basic infrastructure that Western countries and much of East Asia take for granted.

That's the dream, anyway. The reality is that while much of the fast-growing region has the foundations and the funds for infrastructure growth, poor implementation is holding it back.

Participants at the World Economic Forum on Latin America in Rio de Janeiro said governments must think more radically to tackle infrastructure bottlenecks, including reducing bureaucratic barriers and improving coordination and transparency to encourage private sector involvement.

"The bottleneck is not so much the funding as it used to be; the bottleneck is the implementation capacity to design projects, to execute them," said Mauricio Cardenas, director of the Latin America initiative at the Brookings Institution.

"Our governments are showing they are tremendously weak in terms of the ability to have a pipeline of projects ready."

Despite big infrastructure projects during the coming years, many focused on the 2014 FIFA World Cup and 2016 Olympics in Brazil, Latin America underinvests in a sector that is behind only education and health in improving people's lives. The region invests about 2 percent of its gross domestic product on infrastructure, compared to more than 4 percent in China.

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Among the region's most glaring infrastructure gaps are the lack of a road connecting Colombia to its neighbor Panama and routes between the energy-rich northeast of South America and energy-poor Chile. Dire rail and road networks are a drag on economic growth, jacking up export costs and food prices.

Norman Anderson, the president of U.S. consulting firm CG/LA Infrastructure, said the region achieves infrastructure projects worth $60-70 billion each year, whereas it should be putting in place $200 billion worth.

Even Brazil, in many ways a regional leader in project implementation, is struggling to meet its ambitious infrastructure targets ahead of the major sports events.

COORDINATION LACKING

Governments from the national to the local level must coordinate better to ensure transparency and a level playing field for private-sector partners, participants said.

Projects in the region are too often vulnerable to politicians whose priority is to get reelected rather than build for the long term. Maze-like bureaucracy means it often takes longer to get approval for projects than to build them.

"Lack of coordination kills most of these projects. The really bad thing is that it kills them after they have been born so a lot of money has already been put in place," said Renato Augusto Villela, finance secretary for the Brazilian state of Rio de Janeiro.

Rio, which will host World Cup games and the Olympics, has in recent years got its finances in order, improved security and offered improved transparency to private contractors.

"The good news is that there is capital available," said Henrique Meirelles, the former Brazil central bank chief who is now head of Brazil's Olympic Public Authority coordinating investments for the games.

"It's prepared to invest, number one where there is predictability and, number two, where's there's growth and, a very important thing, fair rules of the game."

Aside from Brazil, Peru and Colombia were cited as two countries whose investor-friendly governments are improving the prospects for infrastructure growth.

"When you put this together, it is really fascinating how fast you can transform a country ... Colombia is going through a major shift," said Felipe Jens, the investment director of Brazilian infrastructure conglomerate Odebrecht.

"Once you give a minimum framework in terms of stability, investors will deploy capital." (Editing by Todd Benson and Robert MacMillan)