PUNTA CANA, Dominican Republic – There is a bottleneck of infrastructure development in Latin America caused by a shortage of mature projects, according to an Inter-American Development Bank (IDB) boss.
Alexandre Meira da Rosa, vice president of Inter-American Development Bank (IDB) Countries department, said before a Public-Private Partnerships (PPP) Americas Forum in the Dominican Republic that there is no lack of interested private investors.
“The bottleneck of infrastructure development in the region is not financing, there is no shortage of private resources interested in investing, projects are missing,” he told EFE.
The 2019 PPP Americas Forum, organized by IDB, will bring together public authorities and interested investors on May 15 and 16 in Punta Cana, in the northeast of the Dominican Republic.
Meira de Rosa will give the keynote speech of the conference on Wednesday along with Donald Guerrero Ortiz, Dominican finance minister.
According to IDB estimates, Latin America needs to invest five percent of GDP in public infrastructure, which means mobilizing an additional $1 billion per year.
“The problem of infrastructure is not financing, the problem is how to attract that financing and one of the key points are mature projects,” he said.
Meira da Rosa argued that the role of this type of mechanisms for the provision of services, where the state and the private sector share both investments and risks, “is especially important when closing that gap.”
He described Latin America as “one of the regions in the world where this relationship has been the most, although it seems incredible, what happens is that this participation has occurred unevenly in time and in countries.”
“In the 1990s it attracted substantial private investments, but very concentrated in some sectors, such as telecommunications, transport and energy, as well as in certain countries: Brazil, Argentina, Mexico and Colombia,” he added.
He continued that the impact of the multilateral agency “is not only to finance the project, it is above all to support the government to develop a good law and create the institutions they need to manage that private participation.”
“Normally governments approach us and tell us that they want help to finance a project,” he added.
“The advantage of the IDB, as it is a public body, is that it gives us a position of being able to tell the truth, we are not a for-profit institution.”
The main question is whether infrastructure is really “necessary” and “if the answer is yes, we see if the public-private partnership is the best option, because sometimes a public work is better traditional,” according to Meira de Rosa.
“If we believe that the PPP is a good solution, we sit down with the government to see if they have the institutional framework and the regulatory framework necessary to take the project forward, which is usually long-term,” he added.
“Throughout the process, we also provide training.”
The IDB has participated in a number of PPPs in the region, including the Reventazon hydroelectric plant in Costa Rica and the TIC rail network project in Brazil.
Meira da Rosa said that “the great challenge is to build a channel in each of the countries with good projects to attract the private sector,” since PPPs involve “more complex projects in the allocation of risks, structuring of funding and the legal framework is much more sophisticated.”
He also highlighted one of the “fundamental” roles of the IDB as “support in leveraging.”
“When we are going to finance such a project, the investors look at us, they believe that if we are entering there is a seal of quality that this project was not only well structured and also involves other aspects such as environmental or social issues,” he said.
“Where we enter with 100, there are another 500 behind who would not enter, which shows our ability to be a platform for other investors, which is another added value.”