| The US is the clear regional leader in our rankings. As our colleagues from GIIA note in their afterword, the Biden administration’s Infrastructure Investment and Jobs Act and Inflation Reduction Act have had a huge impact on the US investment environment, particularly in relation to net zero-related projects. Further south, other nations in the region show a contrasting mosaic of approaches. Following the pandemic, most looked to infrastructure development as a way to promote economic recovery, and as a result are implementing programmes dedicated to improving logistics and transportation, as well as increasing access to clean water and electricity. In some cases, the geography of South America is a particular consideration in terms of infrastructure projects. Digitalisation is becoming a higher priority, with governments taking the leap to increase connectivity and take advantage of 5G capabilities. And, as Federico Torres mentions, ESG goals and net zero are very important across the region, with climate change resilience increasingly being incorporated into development plans. |
Brazilian ambition
In August 2023 President Lula da Silva of Brazil unveiled a massive ‘growth acceleration’ plan, combining USD 76 billion of government funding with broadly similar levels of investment by state- owned companies and over USD 120 billion of private sector money, to be attracted partly by an increasing use of public-private partnerships.
In total, nearly USD 350 billion of investment is envisaged, with about 80% happening between 2023 and 2026. Nearly all of the funding will be directed towards infrastructure projects, with USD 125 billion earmarked for the creation of sustainable and resilient cities, USD 111 billion for energy projects, USD 72 billion for transportation (including waterways and ports), and smaller sums for investment in areas such as education, healthcare, water, and digital inclusion and connectivity. There will also be a strong emphasis on achieving environmental goals.
While there is scepticism in some quarters about the ability of Nova Pac – as the plan is termed – to deliver fully on its goals, with concerns including capacity and potential bottlenecks, many investors have reacted positively. There is certainly agreement on the ambition of the plan, which has been widely compared with the initiatives of the Biden administration in the US.
Green Chile
There is a high level of transparency embedded in Chile’s procurement policies, and its business environment encourages private participation in infrastructure projects. The government’s most recent investment portfolio, which welcomes foreign investors, includes projects that are primarily related to roads and airports, but also includes light rail, cable cars, buses and a tsunami warning system.
Chile is also moving forward with its goal of being carbon neutral by 2050. Companies have already committed to retiring thermal power plants by 2040 and the government has set a target for 70% of power to come from renewable sources by 2030. The government is also promoting energy storage and has a green hydrogen initiative that envisions Chile as a top global exporter of hydrogen by 2050.
In May 2022, the government announced its Chile Digital 2035 strategy which aims to reduce digital inequality and to achieve 100% digitalisation of public services by 2035, up from 86% at the end of 2022.
Colombian transformations
Colombia has made great strides in providing continuity for infrastructure development, regardless of political administration. The Financiera de Desarrollo Nacional (FDN) is a development bank that promotes infrastructure projects and encourages private sector participation. However, Colombia is also a test case for some of the difficulties of the energy transition.
The government of President Gustavo Petro has ambitious plans to pivot away from fossil fuel consumption. But many investors see them as unaffordable – and are wary of the government’s aim to end new spending on fossil fuel exploration, not least because fossil fuels account for roughly half of Colombia’s exports.
Colombia’s 2022-2026 national development plan (Plan Nacional de Desarrollo) envisages USD 250bn of investment. Its funding is expected to be driven by national and subnational governments, with further contributions from the private sector and international organisations.
Unlike previous development plans, which have been based around sectors, the plan has as pillars five so-called transformations: territorial planning around water and environmental justice; human security and social justice; a human right to food; productive transformation, internationalisation and climate action; and regional convergence. What effect this innovative approach may have on implementation – or on coordination between the various public sector bodies and tiers of government which will be involved – is not yet clear.
Mexico’s planes, trains, trucks and ports
President López Obrador used his fifth annual informe in September to highlight many of the projects that have progressed under his government, including rural roads and major infrastructure projects like the Mayan Train, as well as several other rail projects and a number of airport schemes.
Other important projects include the Interoceanic Corridor (a logistics project connecting the Pacific coast with the Gulf of Mexico), and the Dos Bocas oil refinery. Much of the rest of the country’s infrastructure spending goes on electricity-related investments.
Investments related to nearshoring have been flowing into Mexico recently. UNCTAD data shows FDI of USD 35 billion in 2022, up 12% year-on-year. The increased participation of foreign investors in the economy has underscored the need for the country to upgrade aspects of its infrastructure, particularly port capacity.
Mexico’s Digital National Strategy 2021-2024 aims to bring digitalisation to the public sector and to increase broadband access throughout the country.
Sustainability in Peru
Peru’s National Infrastructure Plan for Competitiveness was drafted in 2019. Broadened to incorporate more social and environmental concerns, it has been reborn as the National Sustainable Infrastructure Plan for Competitiveness, currently focused on project goals and objectives for 2022-2025.
The revised plan includes 72 projects to be prioritised, including 26 which are to be achieved through public-private partnerships requiring some USD 19.5 billion in investment. There is a focus on sectors including water and sanitation, health and transportation.
The National Port Authority is also working with UNCTAD on embedding the UN’s Sustainable Development Goals at all the country’s ports. The projects include using solar energy for electricity at the Internacional del Sur Port Terminal and for supporting maintenance activities at the Muelle Sur Container Terminal. The port of DP World Callao is building a power supply system for ships which, when completed, will allow ships to cut their engines while in port, reducing carbon emissions.
The regional investment gap
In 2021 the Inter-American Development Bank estimated that Latin American and Caribbean nations need to invest USD 2.2 trillion in water and sanitation, energy, transportation and telecommunications infrastructure in order to meet the UN’s Sustainable Development Goals by 2030. This would equate to over 3% of the region’s GDP every year – a big step up from the average of 1.8% that was invested between 2008 and 2019. More comprehensive infrastructure investment would necessitate an even bigger step.
“Equity investors are conscious they have to comply with national and international entities regarding green financing and ESG standards.”
“ESG standards for financing are driven by the lenders and financiers. These are incorporated as the project requires.”
Case Study: Tren Maya, South-East Mexico
