For Latin America and the Caribbean, Yesterday’s Infrastructure Won’t be Enough

 

For years experts have agreed that the fundamental role of infrastructure in enhancing productivity becomes clearest when measured against the consequences of low-quality service.

For example: with total electricity losses in Latin America and the Caribbean (LAC) reaching $17 billion in 2014, the region has had to cope with a huge financial burden on utilities and a significant opportunity cost for society. Put that figure in context, the estimated annual cost of electricity losses in Mexico was around $4.4 billion in 2011 (CICM), a figure equivalent to the investment in the country’s Prospera program, the largest social program in Latin America.

In the transportation sector, as the saying goes, time is money. We need to understand the cost implications of the fact that Latin Americans living in the largest cities of the region spend, on average, 90 minutes a day in their daily commute. This is the equivalent of ten working weeks per year – up to 50 days that could be used productively in business or enjoying free time with our families.

In Latin America, 34 million people still don´t have access to safe water, and 106 million people do not have adequate sanitation services.  The numbers are much worse among the most vulnerable segments of society and in the most remote areas of our continent. This situation impacts directly on people´s health, children´s education, and family dynamics, as women have to spend large amounts of time traveling to access these services.

As we continue working to close the gap in infrastructure investment, we now face the unavoidable need of including climate change adaptation in development projects.

While sustainable infrastructure encompasses all aspects of the famous triple bottom line of social, environmental, and economic sustainability, we feel that closing this gap in particular, is of key importance. We stand no chance of successfully delivering infrastructure services if we fail to consider the impacts of climate change that are likely to affect our region in the future.

Investment in infrastructure in LAC is still low, averaging 2.4 percent of GDP (IDB, 2013). The shortfall in infrastructure investment in Latin America and the Caribbean surpasses $ 150 billion, a number does not include the investment required to mitigate and adapt to climate change, which is estimated at approximately $30/40 billion per year.

But there might be some light at the end of the tunnel. Only in 2013 Latin America and the Caribbean received nearly $4.7 billion in climate financing from the multilateral development banks (MDBs); the IDB was responsible for mobilizing 52 percent of that total.

While countries and MDBs have made significant progress in understanding and addressing the mitigation part of climate change, adaptation remains a challenge.

The preparation of infrastructure projects can be extremely complex. Not only the level of technical detail, but also the cross-links to other sectors, questions of sustainability and the financial structuring have to be taken seriously as they demand critical processes.

Since investment in infrastructure often requires significant resources and has long-term impacts, it is essential to incorporate an integrated vision from the early stages of project planning,, moving from assets to infrastructure services and incorporating sustainability throughout the whole life cycle of infrastructure. This requires that we also emphasize climate change adaptation and disaster risk management. In this way, climate change must be understood as a development challenge.

If you are attending this week´s Global Infrastructure Forum at the Inter-American Development Bank (IDB) in Washington DC, you will have the opportunity to learn how the multilateral investment banks of the world are advancing in their commitment to sustainable infrastructure.

In our case, the IDB is presenting our understanding of the commitment to climate resilient infrastructure projects as a three-legged effort: appropriate policy, regulation and incentives from the public sector, investment from private corporations and the integration of sustainability considerations. Last year the IDB Group took strategic steps to take on this challenge: with the Inter-American Investment Corporation we created a unique and powerful window for the private sector.  We also established a department, the Climate Change and Sustainable Development Sector, and we refocused the efforts of the Infrastructure and Energy Department.

In regards to promoting efficient management of infrastructure projects, it’s necessary to keep making room for private investment. Nowadays, the technological leap that’s taking place in most sectors has opened up interesting opportunities for private sector participation in areas such as energy efficiency and use of smart technologies. In terms of wastewater treatment, for example, there’s ample room for the private sector to contribute, not only through its know-how, but by providing technology and investment.

Make sure to join us online this Saturday April 22^nd, and watch the presentations that will help to define the challenges of sustainable infrastructure in Latin America and the Caribbean.