Building Regional Infrastructure in Latin America

Apr 2005
Economic growth is often a kind of miracle because like most miracles, it is not easy to explain. Countries that have not grown for a century, at times begin to grow at a fast pace, while countries that were growing fast stop growing. From time to time economists have advanced particular theories that argue that some factors, such as investment, human capital, technological development, intangible capital, rule of law, good institutions, good policies, and so on, play a fundamental role in the growth process. The problem is that the number of these factors keeps growing. Recently some economists as well as several political leaders have suggested that infrastructure would be one of these factors. Some estimates have even been presented about how much Latin America should spend per year on the creation of infrastructure. Without addressing, at this point, the validity of these claims, or the realism of the estimated "infrastructure gap" for Latin America, it may be useful to be reminded that the term infrastructure is relatively new in economics. The focus in this paper is on regional projects. That is, infrastructure that concerns or links at least two countries. Furthermore, much of the discussion is mostly relevant for transportation projects, which, in any case absorb often an overwhelming share of total infrastructure costs and are less likely to generate incomes that make them interesting for private sector¿s investments. The discussion is much less relevant for projects related to the exploitation of material resources, including energy or for projects related to communication.