South American Real Estate News

Latin America’s infrastructure grows fast

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Latin America’s has long been considered a laggard in terms of global infrastructure development, but that perception should be changing. Countries such as Brazil, Mexico, Chile, Peru, and Puerto Rico have all begun major long-term infrastructure projects ranging from roads to dams to telecommunications towers to airports. Infrastructure development in the areas of energy, transportation and telecommunications have seen the greatest recent growth, with estimates ranging as high as $450 billion, to be spent on infrastructure in the area between 2011 and 2015.

Up until 2009, Latin American infrastructure spending was on a rapid growth track and there were dozens of major projects planned in almost every country in the hemisphere. The global recession has put a little damper on the pace of the growth, and a number of projects have been delayed or revised, but overall the impact of the recession on infrastructure expenditures does not seem to have been as bad as feared. Several countries such as Brazil and Chile have just announced new projects and updated schedules for planned and ongoing projects in 2012 and beyond.

Public Sector vs Public-Private Initiatives

Large-scale private-public partnerships for infrastructure development have been rare in Latin America until relatively recently due to a combination of cultural and business factors. There is a deep suspicion of private involvement in large public infrastructure projects in many places in Central and South America due to the fact that graft and misappropriation of public funds has been endemic in many such projects in the past. And in some countries such as Venezuela, there is outright hostility toward private enterprises being involved at almost any level in government projects.

The other side of the coin is that historically many public sector infrastructure projects in Latin American countries have also been inefficient graft-plagued projects where a few politicians or their friends and family greatly enriched themselves at the public expense.

But all of this is changing as the 21st century gets under way, and many countries like Brazil, Chile, Puerto Rico, and Peru have crafted innovative new regulations to encourage public-private partnerships (PPPs) for infrastructural development. A few have even created quasi-governmental agencies to encourage PPPs, such as the Puerto Rico Public-Private Partnerships Authority.

That said, there are still a good number of ongoing and planned Latin American infrastructure projects such as airports that are deemed to be of sovereign interest, and are being developed solely with public funds.

Energy Infrastructure Supplanting Telecom

The development of telecommunications infrastructure has been a high priority throughout Latin America since the late 1990s, and there were more projects and more money spent on telecommunications infrastructure in Lain American countries than any other category for almost a decade. The trend continued until 2009, when investment in telecommunications declined by 37% compared to 2008, and no major new projects were undertaken.

The energy sector has seen rapid growth in the last few years in many Latin American nations, with energy infrastructure investment jumping by 127% with 43 new projects from 2008 to 2009. Brazil has been especially active in the energy sector since 2008 with two new hydroelectric plants and half a dozen major electrical transmission-related projects.

Source: Clayton Browne

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