Due to the pandemic, Latin America and the Caribbean faces a crisis without precedent in its history. For a sustainable recovery to be possible—one that reduces the infrastructure gap and inequality while addressing the climate and ecological emergencies—we need to improve planning of infrastructure projects.
Closing the quantitative, qualitative and efficiency gap in infrastructure requires not only developing more and better roads, solar farms and water treatment systems, but also a transformation of how assets are planned, developed and operated, while considering the different dimensions of sustainability (social, environmental, institutional and economic-financial) of assets.
Capturing the huge benefits of sustainable infrastructure is possible with adequate planning
Infrastructure services are the backbone of economic development, competitiveness and inclusive growth. Similarly, sustainable infrastructure (SI) is recognized as an essential foundation for achieving inclusive and sustainable growth, meeting the Sustainable Development Goals (SDGs) as well as the goals of the Paris Agreement.
However, Latin America and the Caribbean has a significant lack of infrastructure assets, while existing ones are poorly maintained, resulting in low-quality services that impact the quality of life of citizens as well as the competitiveness of its economies. Low-income families spend 15% of their income to pay for services such as water and public transport, which is almost 5 percentage points of income more than in emerging economies in Asia.
If the region does not invest more and do better in developing and maintaining infrastructure, it could forfeit up to 15% of potential GDP growth over the next 10 years. To close the sustainable infrastructure gap will require around USD 250 billion per year according to different estimates.
Public-Private Partnerships are tools that allow for improved project preparation and efficiency in the development of sustainable infrastructure
Traditionally, public investment in the region has not only been insufficient to cover the infrastructure needs but also high in carbon and low in resilience, and inefficient in terms of using available resources well. The traditional bias against public investment in capital in the region, as well as the fiscal challenges it encounters, shows that the space to close the infrastructure gap through public sector investment is very limited.
It is essential to enhance the participation of the private sector to close the sustainable infrastructure gap, and for this, well-prepared and structured Public-Private Partnerships (PPPs) are an impressive tool. They also bring the potential to generate great benefits and savings through improvements in efficiency in public spending.
Through proper planning, PPPs can guarantee better development, operation and maintenance of infrastructure assets and services in times of crisis as well as preserve adequate investment levels during fiscally constrained periods including the current one. Meanwhile, putting particular emphasis on the dimensions of sustainability, such as the social, environmental, institutional and economic-financial of assets is a must.
Therefore, properly considering and planning environmental, property and social dimensions has a major impact on the proper development of sustainable infrastructure projects. Closing the sustainable infrastructure gap requires knowing what the main barriers are in these areas of development, identifying their causes, and minimizing their consequences.
Sustainability is a saving rather than a cost
The IDB has published an in-depth analysis on the main reasons why the central pillars of sustainability have not materialized in the life-cycle of infrastructure projects by trying to understand the barriers that hinder implementing sustainable infrastructure assets, while offering actionable recommendations for sustainable infrastructure.
This study is based on the evaluation of 65 infrastructure projects spread across five countries: Colombia, Costa Rica, Chile, Mexico, and Peru. The main objective of the analysis is to understand the cause-effect relationship of non-compliance with environmental regulations, non-compliance with management measures, impact on communities and distrust in the process.
It also looks at preconceptions, contractual and regulatory modifications, delays in environmental licensing, in the release of properties and resettlement activity, and possible discrepancies regarding the fair price in land acquisitions, among others. The results show the high cost associated with inadequately planning infrastructure development from an environmental, social, and property management perspective.
The study also demonstrates how the consequences of inadequate environmental management in infrastructure projects, from the conceptual phase to the design and construction, operation, and decommissioning phase, can produce delays and increases in initial budgeted costs.
The consequences of ignoring sustainability aspects in the development of infrastructure projects are reflected in cost overruns and delays in construction. In the cases analyzed, property conflict can lead to cost overruns close to 80% of the total budgeted, environmental conflicts in a project can generate cost overruns between 15% and 70%, and delays ranging from 12 months to 13 years. Finally, an inadequate management of social aspects in infrastructure projects can produce approximate cost overruns of between 11% and 68% of the total budgeted.
Table 1- Sustainability is a Savings rather than a Cost
The study identifies solutions for improving the development of sustainable infrastructure in the region and how to boost existing positive aspects between public and private sectors for developing projects.
It also proposes transversal actions at different levels ranging from the correct integral incorporation of the environmental, social, and property perspectives in the strengthening of the normative and institutional frameworks for an adequate development, supervision, and monitoring of projects. We call for adequate identification, evaluation, and assignment of environmental, social, and property risks from the early stages of the project and their consideration throughout the life cycle of the assets.
It is critical to remember that infrastructure investment policies and decisions made now will determine whether we can limit global warming to 1.5 degrees Celsius or not given 70% of the forecasted growth in emissions in developing countries will come from infrastructure that is yet to be built.
The promotion of smart and sustainable development will be key to determining whether the SDGs and the Paris Agreement remain viable, or if we will face a worse future. Here we find a direct and tangible space for how we can act in the face of climate change. Not to take advantage of it would be a great missed opportunity.
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