THE INFRASTRUCTURE FUNDING GAP The case of Latin …Colombia, on the other hand, has incurred in significant efforts lately, situation reflected in great advance regarding its position

THE INFRASTRUCTURE FUNDING GAP The case of Latin America

Jorge Mas

President Confederation of International Contractors Association

Infrastructure is the frameworkof modern life we rely upon each day

Contribution of the construction industry

to the world’s GDP is estimated at 10%

Increasing demand for new infrastructure

Increasing demand for new infrastructure

No easy task

“Just keeping pace with projected global GDP growth will require an

estimated $49 trillion in infrastructure investment between now and 2030”

US$49.000.000.000.000

40%of global infrastructure and capital project investment

is poorly spent

Global investment in infrastructure in the last 18 years

3.8% of GDP

Value of infrastructure stock in developed economies

70% of GDP

Latin America Overview

Rodovia dos Imigrantes, Serra do Mar, Brazil

Construction Industry Interamerican Federation (FIIC)

Total population: 598 million

8,1% of global population

GDP: US$ 5 trillion

6,5% of global GDP

FIIC countries: 4th contributor to construction GDP

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Infrastructure development: why is it important?

Figure elaborated from WEF Data

Global competitiveness index

Mega trends

The Mega Trend Matrix, 2025

Figure by Frost & Sullivan

The Mega Trend Matrix, 2025

Figure by Frost & Sullivan

Limitations and restrictions

1. Investment funding

2. Project complexity and uncertainty

3. Political and institutional issues

Bridging the infrastructure gap

1 2364

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Historical infrastructurespending (2000-2015)

Needed investment (2016-2030)

US andCanada

WesternEurope

DevelopedAsia

China

EasternEurope

Latin America

Middle East

Otheremerging Asia

India

Africa

Requirements in infrastructure investment (2016-2030):

Figure adapted from McKinsey data

60% of total in

emerging

economies

US$49,1 trillion

The goal:To mobilize US$ 120 trillion available from banking and

institutional investors to bridge the infrastructure gap towards 2030

27

Bridging the infrastructure gap (Latin America)

Historic infrastructure annual underinvestment:2,4% of GDP

(below global average of 3,5%)

Infrastructure requirements towards 2030:

US$ 3,44 trillion or 4,3% of annual GDP in average

The goal:To mobilize US$ 1 trillion to bridge the infrastructure gap towards 2030

Infrastructure needs by economic sector


Annual requirements in infrastructure investment

2016-2030 (US$ trillion)

Global



2016-2030 (US$ billion)

Latin America

Transport(selected countries)


2016-2030 (US$ billion)

Transport

Data from Oxford Economics, Argentinean, Chilean, Mexican and Peruvian Chambers of Construction, and McKinsey Institute.

Rail


2016-2030 (US$ billion)

Rail


Ports


2016-2030 (US$ billion)

Ports


Airports


2016-2030 (US$ billion)

Airports


Energy


2016-2030 (US$ billion)

Energy


Water


2016-2030 (US$ billion)

Water


Telecommunication


2016-2030 (US$ billion)


Telecommunication

Annual infrastructure investment 1980-2013 (GDP %)

Note: the figure includes Brazil, Chile, Colombia, Mexico and Peru. Data from CAF, BID.

Latin America:Historical under investment in infrastructure

Case of success: “East Asian Miracle”

Measures to boost infrastructure investment

1. Planning and regulatory framework

2. Private-public partnerships

3. Alternate funding sources

Come together

Infrastructure: the physical and organizational structurethat enables society to operate

The illusion that we can insulateourselves from the forces of nature

THANK YOU

Selected countries - Characteristics:

ChilePopulation: 17.909.754 (3% of FIIC countries)GDP: US $247.025 million (5% of FIIC countries)GDP per capita PPP adjusted: US $24.113 (average FIIC countries: US $13.968)Environment for Public-Private partnerships in LATAM Rank: 1° (out of 19 countries – Latin America and Dominican Republic)Infrastructure investment: In the order of 2% of GDP between 2006-2014, increasing to 2,5% towards 2016. Currently, public investment is the main source (87% of total investment). The rest comes from PPPs (concessions – BOT). In terms of infrastructure competitiveness, Chile is the best country evaluated in the region, through the Global Competitivenes Index 2017 and its infrastructure evaluation pillar.Towards 2025, most investment is required in transportation (urban and interurban). The telecom sector is also important.

MexicoPopulation: 127.540.423 (21% of FIIC countries)GDP: US $1.042.002 millones (20% of FIIC countries)GDP per capita PPP adjusted: US $18.938 (average FIIC countries: US $13.968)Environment for Public-Private partnerships in LATAM Rank: 6° (out of 19 countries – Latin America and Dominican Republic)Infrastructure investment: 75% public, 25% private (2015). In terms of economic sectors, public investment is traditionally focused on transportation and energy. Meanwhile, private funds finance mainly ports and highways. Mexico has maintained an investment level around 1,8% of GDP (2009-2014). In terms of competitiveness, it has staggered according to the global competitiveness index – infrastructure pillar (ranked 60th-70th). Currently, Mexico holds the third best position of the región (57° globally, behind Chile and Uruguay).

ColombiaPopulation: 48.653.419 (8% of FIIC countries)GDP: US $282.357 millones (20% of FIIC countries)GDP per capita PPP adjusted: US $14.130 (average FIIC countries: US $13.968)Environment for Public-Private partnerships in LATAM Rank: 1° (out of 19 countries – Latin America and Dominican Republic)Infrastructure investment (2015): 37% public, 63% private. Public investment focuses mainly in highways and water. Private investment also focuses in roads and highways. Colombia, on the other hand, has incurred in significant efforts lately, situation reflected in great advance regarding its position within the GCI. However, it is ranked 9th at a regional level currently and 84th globally.

Costa RicaPopulation: 4.857.274 (0,8% of FIIC countries)GDP: US $58.109 millones (1,2% of FIIC countries)GDP per capita PPP adjusted: US $16.436 (average FIIC countries: US $13.968)Environment for Public-Private partnerships in LATAM Rank: 11° (out of 19 countries – Latin America and Dominican Republic)Infrastructure investment (2015): 63% public, 37% private. Investment by economic sector: public investment focuses mainly on highways and energy. At a lower level, it also participates in telecommunications and water sectors. On the other hand, private investment focuses in ports and energy sectors.Costa Rica has been improving its relative position within the GCI – infrastructure pillar Rank, as it has sustained a high level of infrastructure investment in the 2008-2015 perios (over 3% of GDP). Currently, it is the fourth best evaluated country in the región (67 global).

PeruPopulation: 31.773.839 (5% of FIIC countries)GDP: US $195.140 millones (4% total países FIIC)GDP per capita PPP adjusted: US $12.903 (average FIIC countrines: US $13.968)Environment for Public-Private partnerships in LATAM Rank: 5° (out of 19 countries – Latin America and Dominican Republic)Infrastructure investment (2015): 38% public, 62% private. The first one focuses mainly in highways and water sector. Also, but less intense it also participates in telecomm sector. Private investment focurses in railways and energy sector. Peru has kept a sustained high level of infrastructure investment (around 5% since 2009). This has been reflected in significant improvement regarding the country’s Rank within the GCI index - infrastructure pillar, specially between 2009 and 2011. However, it is currently stagnated, and holds the 11th position at a regional level (89 global).

BrazilPopulation: 207.652.865 (34% of FIIC countries)GDP: US $1.798.622 millones (36% total países FIIC)GDP per capita PPP adjusted: US $15.242 (average FIIC countries: US $13.968)Environment for Public-Private partnerships in LATAM Rank: 3° (out of 19 countries – Latin America and Dominican Republic)Infrastructure investment by source of funding (2015): 74% public, 26% private. The former focuses on highways, energy and the water sectors, the latter, focuses in the energy sector mainly.Brazil has been relatively more volatile regarding resources allocated to infrastructure investment, which in turn has implied significant loss in competitiveness –measured by the GCI index – infrastructure pillar. It currently holds the 7th position in regional terms (72 globally).

ArgentinaPopulation: 43.847.430 (7% of FIIC countries)GDP: US $545.124 millones (11% of FIIC countries)GDP per capita PPP adjusted: US $20.047 (average FIIC countries: US $13.968)Environment for Public-Private partnerships in LATAM Rank: 17° (out of 19 countries – Latin America and Dominican Republic)Infrastructure investment (2015): 100% public. Argentina suffers from a similar situation as the brazilian case, although less intense in terms of resource allocation and loss of competitiveness. Currently, it holds the 10th best evaluation in the región (84 worldwide).

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THE INFRASTRUCTURE FUNDING GAP The case of Latin …Colombia, on the other hand, has incurred in significant efforts lately, situation reflected in great advance regarding its position