Contacts: In Washington:
Alejandra Viveros (202) 473-4306
Aviveros@worldbank.org
In Buenos Aires:
Ramiro Agis (5411) 5217-4710
Ragis@bice.com.arBuenos Aires, April 14, 2004 – With the infrastructure stock declining, the countries of Latin America and the Caribbean need to increase investment in transport, telecommunications, electricity, and water and sanitation, in order to reverse inequality and improve per capita income growth, according to new World Bank research. “The under-investment in infrastructure is hampering long-term economic growth and competitiveness, leaving the region behind,” said Danny Leipziger, World Bank Director of Financial, Private Sector and Infrastructure for Latin America and the Caribbean. “This has to stop. As the most unequal region in the developing world, Latin America and the Caribbean needs to invest much more in infrastructure to increase income levels and improve income equality. The impact of infrastructure on economic growth, competitiveness and inequality, are some of the topics to be discussed at the Latin American Conference on Infrastructure Financing, to be held in Buenos Aires on April 15-16. The conference is being co-sponsored by the Investment and Foreign Commerce Bank of Argentina (Banco de Inversión y Comercio Exterior, or BICE), the Peruvian-based Latin American Association of Financial Institutions for Development (Asociación Latinoamericana de Instituciones Financieras para el Desarrollo, or ALIDE), and the World Bank. Delegates and experts from some 30 countries are expected to attend. According to the World Bank report, Investing in Infrastructure: What is Needed From 2002 to 2010?, to be discussed during the two-day event, Latin America and the Caribbean (LAC) needs to invest about $70 billion a year over the next five years to build, improve and maintain roads, railroads, telecommunications, electricity, water and sanitation. But the private sources, that were supposed to meet the investment needs, have lost their appetite for infrastructure at a time the public sector is investing less rather than more –less than 1 percent of GDP in most LAC countries compared to the 3 percent needed. “It is very troubling to see how governments cannot increase pro-growthinvestment because of lack of fiscal space,” said Mr. Leipziger. “But there can be no sustainable prosperity in the region unless wefocus attention on the weakstate of country infrastructure. Without new investments, the region will keep lagging behind and the poor waiting longer and longer for basic services.” As a result of the generalized decline in public and private investment in the sector, LAC is lagging behind regions like East Asia, with tremendous costs on competitiveness. Because of poor infrastructure logistics, the region’s business losses-en-route- are 20 times higher than in industrialized nations, logistic costs 2.5 higher and inventory levels 3 times higher. In addition to the impacts on growth and competitiveness, infrastructure has a key impact on poverty both directly and indirectly. Directly, because improvements in coverage and quality tend to benefit the poor most since they are the ones least able to afford alternatives. Indirectly, because better infrastructure services have been shown to significantly reduce inequality. Improved access to safe water, in particular, has an additional positive impact on income inequality, according to new World Bank data. The new World Bank study, The Effects of Infrastructure Development on Growth and Income Distribution, to be analyzed at the conference, indicates that since infrastructure both raises growth and lowers income inequality, infrastructure development can be “a key win-win ingredient” for poverty reduction. “In addition to raising society’s overall level of income, it would help rise the income of the poor more than proportionately,” the report says. “This suggests that infrastructure development should rank at the top of the poverty reduction agenda.”
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