Pressure to remain high on Chile public infra spending

Even though Chileans rejected the proposed constitution that would have enshrined social rights, persistent demands for social spending will remain and affect infrastructure investment capacity, former public works minister Carlos Cruz (pictured) told BNamericas.

“As we have said before in our infrastructure report, we believe that we can expect infrastructure resources coming from the national budget will remain around 2.5% of GDP. The expansion of required infrastructure will have to come from private funds,” he said.

In this scenario, the concessions system will be key, Cruz added.

Private players are becoming impatient, however, as no concession tenders have been launched since Gabriel Boric took office in March.

Industry representatives, including Cruz, who is executive director of the Infrastructure Policy Council think tank, expressed concerns last week, but the public works ministry (MOP) said the concessions calendar will be published this month.

Cruz said much of the uncertainty affecting the sector has been addressed with the constitutional vote. But the private sector won’t be fully satisfied with the result.

“Neither option [approve or reject] gives certainty, but that’s normal in the world ahead of us,” Cruz said. 

Inflation is the other big problem hindering Chile’s infrastructure sector. Prices for construction materials have grown faster than the general price index, with likely adverse effects on investments this year.

Cruz said the price hikes will continue regardless of the constitutional process, but the MOP and the housing ministry (MINVU) are supporting firms. The MOP is working with state lender Banco Estado to provide financial assistance to construction firms that are working with the ministry.

But more government action will be needed, as “this is a major crisis,” Cruz said.