Experts call to increase regional infra investment amidst industry pessimism

Governments across Latin America must drastically increase infrastructure investment to boost GDP growth and avoid taking extreme measures that foster uncertainty among investors, experts told a BNamericas webinar.

The BNamericas 2022 Infrastructure Survey found that the industry outlook has deteriorated compared with the 2021 edition, in the wake of political uncertainty after the election of new left-leaning governments in Chile and Colombia, the impacts of high global inflation and growing fears of a worldwide recession.

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The survey, which can be seen here, found that 34% of respondents believe that public budgets for infrastructure will “increase slightly” in 2023, while 21% believe they will “decrease slightly” and 18% that they will “not vary greatly” compared with 2022. 

On that front, Carlos Ortega Lead Partner, Capital Projects S-LatAm at Deloitte, said during the webinar to discuss the survey results that this means most of the industry believes the status quo will remain for the next year. 

“I wish reality would surpass these perceptions and for the governments to really make changes so that we really start investing in infrastructure,” said Ortega.

He emphasized that GDP growth in developing countries is closely tied to infrastructure investment, and that Latin America should aim to invest between 5% and 7% of GDP in infrastructure to close the gap with developed nations. 

The survey also found that Chile and Brazil are jointly seen as the countries best prepared to invest in infrastructure with public funds over the next 12 months, each named by 25% of survey respondents. 

However, this was a drastic drop for Chile compared with the 2021’s survey, when 37% of those answering said it was best placed for these investments.

Carlos Cruz, former public works ministry and executive director at infrastructure think tank CPI, said during the webinar that this is mostly due to recent political uncertainty linked to the presidential elections and the constitutional process in the country. 

“All of that was a boiling pot of uncertainty, which has been alleviated very well. In that sense, the management by the government’s economic authorities has been very reassuring and I believe that we look to the future with a lot of optimism,” he said, highlighting Chile's recently updated concessions agenda, which includes 43 tenders worth some US$13.3bn for 2022-26.

On the subject of private investment, Brazil surpassed Chile as the country with the best opportunities for 26% of respondents, as the latter was highlighted by only 13% of those surveyed, down from 25% last year.

On this subject, both Cruz and Ortega admitted that concessions generally have a problem with public perception, while investors are also very sensitive to abrupt policy changes.

Ortega cited the case of Colombia, where President Gustavo Petro recently announced a tax reform that would hike taxes for those with higher incomes and remove corporate tax exemptions, among other measures.

“When you have abrupt changes, people get uneasy,” Ortega stated, adding that this makes obtaining financing more difficult.

Meanwhile, Cruz pointed out that Chile’s concessions system could operate hand in hand with its private pension fund system, given that there are Canadian and Australian pension funds that already finance infrastructure in the country. 

“If we manage to link pension funds, meaning people’s savings, with infrastructure development, and make people understand this, a lot of the criticisms of Chile’s private pension system wouldn’t exist,” he claimed.