The recession that’s on the way poses a formidable challenge: the scale of fiscal and monetary support required to soften the blow to personal incomes and ensure the survival of companies bereft of revenues has no precedent in recent times. Public debt levels, and probably also private debt levels, are going to soar.
Why investing in Sustainable Infrastructure? With global yields at historical lows, investing in real assets needed to fill the infrastructure gap of emerging and developing countries (UD 150bl per year in LAC) currently represent the most promising investment opportunity for investors around the world – and the continuing capital shift towards real assets seems to confirm it (Blackrock, 2020).
According to recent estimates by the Inter-American Development Bank (IADB), Latin America suffers from an infrastructure gap of around 2.5 percent of GDP, or around $150 billion per year.
The generalization of grand corruption in Brazil is a recent phenomenon, the fruit of some institutional relaxation starting in the 1990s. Grand corruption occurs in the context of large government-controlled companies and public work projects, tender processes, privatization auctions and the like, while petty corruption involves common citizens, who pay bribes to obtain documents, schedule consultations with the public health system, enroll children in school, etc.
In Latin America (LatAm), line ministries are usually responsible for sectoral policy development and in charge of infrastructure planning (long-term plans), programming (medium to short-term programs) and individual project appraisal. Furthermore, in most of LatAm countries, there are inter-sectoral development plans and programs, compiled by planning secretaries or ministries of economy and finance, which include the previous sectoral efforts.
Infrastructure is critical for economic growth and development. Recent studies show how not expanding capital stocks in infrastructure sectors in the Latin American and Caribbean (LAC) region costs, on average, about one percentage point of GDP growth in the first year; this figure could increase to up to 15 percentage points of lost growth if the policy persists over 10 years (IDB Macroreport, 2019).
Latin America and Caribbean GDP growth was sluggish in 2018 and 2019, rising respectively only by 1.1% and 0.1%. The latest IMF forecasts for 2020 point to an acceleration to 1.6%, just slightly above the population growth rate. However, the region still has the slowest pace of growth among emerging markets. In order to boost economic activity, investment in infrastructure is essential.
In a world on the brink of a global recession due to the outbreak of the new coronavirus, infrastructure is called upon to play a pivotal role for relaunching the growth of tomorrow. If it is true for developed countries it is even more so for developing areas such as Latin America whose infrastructure gap costs the region more than 1% of lost growth each year. Political instability, corruption and misappropriated public funds are some of the reasons that affect potential growth.
Amid the coronavirus pandemic, global geopolitical relations are being shaken to their roots, and Latin America is no different. The region is experiencing new transformations in political, economic, and societal terms. In turn, all these rapid changes are having an impact on how Latin American countries shape their own foreign policies, and on how they adapt to the challenges of an increasingly multipolar world.
The tensions that are unsettling South America have roots running much deeper that the demands that have unleashed the protests: they point to the need for radical economic and social change.