Date: July 10 and 11, 2008 Location: Lima, Peru Exact venue: Swissôtel Lima - Via Central 150, Centro Empresarial Real, San Isidro, Lima Target audience: Investment banks, public development banks, infrastructure operators, risk rating agencies, international consulting firms, international financial institutions and policy makers. Overview:  During July 10 and 11, 2008, ProInversión Perú and the Office of the Chief Economist for Latin America and the Caribbean Region of the World Bank jointly organized the international conference on Alternative Approaches for Increasing Infrastructure Investments in Latin America and the Caribbean. The purpose of this conference, which was held in Lima, Peru, was to explore new mechanisms to foster significant increases in infrastructure investments in Latin America. Total investments in the sector are below 2% of GDP in LAC, compared to almost 7% of GDP in East Asia. Among the more than 150 participants were policy makers from several countries of the region as well as representatives from private and public banks, infrastructure operators, risk rating agencies, think tanks, and international financial institutions. Main Outputs:  World Bank estimates suggest that in order to meet the growing demand for infrastructure services of consumers and producers, while attaining universal coverage of basic services, Latin America would have to double its total investments in infrastructure, to at least 4% of GDP. In this context, the discussion underscored the fact that both the public and the private sector will have critical roles to play in order to reduce Latin America’s infrastructure gap. Public resources, however, need to be managed more efficiently that in the past and service providers (private and public) need to be better regulated so as to promote competition and enhance accountability and transparency. In addition, Governments need to make sure that user fees are affordable while also allowing for recovering costs and generating profits for investors. In this respect, it is critical to improve the targeting of our social tariffs and access subsidies, so as to protect poor consumers while avoiding quasi-universal subsidies. Since many public services cannot be financed exclusively through user charges it is clear that the additional investments that are required for reducing Latin America’s infrastructure gaps will not be achieved without a strong commitment of public resources. However, it is critical to balance the increasing public investment needs with the goal of maintaining hard gained macroeconomic stability. To that end, policy makers should take into account the growth enhancing potential of infrastructure investments when designing fiscal adjustment programs. Indeed, to the extent that some of those investments could help sustain higher rates of growth, they could also raise future tax collection and increase the public sector’s borrowing capacity. Incorporating these effects in the design of fiscal policy is not trivial and requires considerable creativity on the part of policy makers, for instance in order to estimate the impact of infrastructure investments and other expenditures on public sector solvency and long term liquidity. Conference participants also emphasized the need to improve the integrated planning and implementation of public investments, taking into account the strong complementarities that exist across the various sectors, as well as the social and environmental impact of different alternative approaches. In particular, there is a clear need for improving and strengthening the processes and institutions used to identify, select, implement, monitor and evaluate new investment projects. A good starting point is to build the capacity of sector ministries and, when applicable, sub-national entities, to perform the strategic planning of their investments as well as to enhance their borrowing capacity and take advantage of private financing. Second, it is critical to improve the procedures used to prioritize investments and, in coordination with finance ministries, to decide on the use of public or private financing and implementation. This requires taking into account the potential benefits of private participation but also the sometimes hidden fiscal costs and risks associated with this modality. Once decisions are made on the projects that will be developed and the public, private or hybrid modalities that will be used in each case, there is a clear need to accelerate their gestation period, including by taking advantage of standardized processes and contracts. Moreover, in the case of public investments a greater emphasis needs to be given to maintenance expenditures, so as to avoid service interruptions and the high costs associated with delayed rehabilitation expenditures. Finally, in order to reduce the costs and increase the quality of public infrastructure investments it is critical to continue improving the public sector’s procurement processes – by means of fostering competition and transparency – as well as to institute better mechanisms to monitor and evaluate the results achieved through past and current investments. While participants pointed to the growing evidence supporting the higher efficiency of private provision of many public services, the discussion also emphasized the fact that in the experience of Latin American countries these benefits have not been automatic. In particular, in order to take advantage of the private sector’s ability to reduce the costs and increase the quality and coverage of public services it is critical to improve the public sector’s regulatory and policy making capacity. Indeed, in the presence of weak legal frameworks for the concessioning of public services, and when the state regulatory capacity is limited, the increased efficiency of private providers may not necessarily translate into lower costs and better services for users. In this context, it is critical to reduce the incidence of conflicts and costly contract renegotiations, by means of improving the design of contracts, instituting independent and technically sound mechanisms to solve disputes when they arise and using competitive biddings when the decision is made to implement substantial changes in existing projects. There is also a need for increasing the technical capacity and financial autonomy of regulatory agencies, as well as for instituting additional checks and balances on service providers, for instance through independent evaluations of service quality. Finally, it is critical to improve the governance of state owned enterprises and to strengthen the mechanisms through which the civil society can monitor the performance of public entities. Program Organizers:
Pablo Fajnzylber, World Bank (pfajnzylber@worldbank.org)
Luis Guasch, World Bank (jguasch@worldbank.org)
Contact:
Ruth Delgado, World Bank (rdelgado@worldbank.org)Â  Â Â Agenda:Â Â Click on the link to get the latest version of the conference agenda.
  Presentations Opening Remarks:  Pamela Cox (Vice President, LAC, World Bank)
Plenary Session I: Where do we stand and why? A pragmatic approach for increasing investments in infrastructure in Latin America
Luis Guasch and Pablo Fajnzylber (World Bank)
Plenary Session II: Lessons from successful international experiences: the role of contract design in concessions and public-private partnerships
Eduardo Bitran (former Minister of Public Works, Chile)
Richard Cabello (Sr. Investment Officer, IFC)
Plenary Session III : Bringing the private sector back to infrastructure: what are investors looking for?
David Lemor (Director, ProInversion)
Juan Andres Marsano (Investment Director, Odebrecht, Peru)
Mario Alvarado Pflucker (Corporate General Manager, Graña Group, Peru)
Jordan Schwartz (Lead Economist, World Bank)
- Plenary Session IV : New financial mechanisms to reduce the cost of capital
Luis Lucena (Director of Structured Finance Americas, BBVA)
Pablo Sanguinetti (Director of Research, CAF)
Edith Quintrell (Director of Guarantee Operations, MIGA)
Marta Castelli (Managing Director, Standard and Poor’s Argentina)
Plenary Session V : Increasing public investment: regulatory and fiscal space challenges
Juan Carlos Zevallos (President, OSITRAN)
Luis Serven (Research Manager, World Bank)
Plenary Session VI : Strengthening the role of sub-national and non-sovereign public agents in the financing of infrastructure
Giovanni Majnoni (Executive Director, World Bank)
Alonso Garcia Tames (Director, Banobras, Mexico)
Jose Guilherme Reis (Lead Private Sector Development Spec., World Bank)
Plenary Session VII: Accounting for Social and Environmental Issues in the Provision of Infrastructure Services
Maximo Torero (Division Director, International Food Policy Research Institute)
Guang Chen (Sector Manager, World Bank)
Jordan Schwartz (Lead Economist, World Bank)
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