In a critical year for the region, the leaders of Latin America’s flagship development bank, the Inter-American Development Bank, asserted at its annual general meeting that it would lend its financial influence to the hemisphere’s reformers.
Announcing bank guarantees of $500m for the government of Argentina, to be devoted to public-private infrastructure projects, IDB President Luis Alberto Moreno remarked: ‘We’re betting on the transformation process here in Argentina, and we are truly confident about the outcome.’
Latin American governments spend barely 3% of GDP on infrastructure, a marked difference from the investment in Asia or the Middle East, and little more than sub-Saharan Africa. That translates into more than half of Latin America’s roads being unpaved, two-thirds of sewage untreated, and the fatal combination of poor sanitation and dirty water killing the most vulnerable, children under five. One European finance minister, in Argentina earlier in the week, called it ‘the semi-secret, unknown tragedy of a part of our world that has squandered so much for so long’.
Later, in conversation with OMFIF, Moreno said: ‘This is such a pivotal year for all of us, with elections in leading countries, Brazil, Mexico, Colombia. Supporting Argentina this way, through desperately-needed infrastructure, represents our hope that governments will heed the message of so many Latin Americans seeking change.’
The emphasis on infrastructure investment came at the end of a week when the Argentine government, chairing a meeting of G20 finance ministers in Buenos Aires, put forward an agenda focusing on ‘historic’ investment in infrastructure.
‘We have so much to do as a region,’ said Luis Caputo, Argentina’s minister of public finances, as he welcomed the IDB move. ‘From energy, to transport, to health, Latin America just does not spend anything remotely close to what it needs to – on the infrastructure, for example, that can move our product to market, and our workers to their jobs.’
IDB leaders insist the moment has come to confront this crisis, before democracy is called into question by electorates that increasingly voice disillusion. In a global survey conducted last year by the Pew Research Centre, more than half of all Latin American respondents said their quality of life has not improved over the last 50 years.
‘One bright spot going forward is that public-private partnerships represent a future that works for governments and for investors if we get behind the project in question,’ declared James Scriven, head of the Inter-American Investment Corporation, the IDB’s private sector arm. ‘And it’s positive that we can agree on two prime areas to target – renewable energy and transport.’ The economic team of Argentine President Mauricio Macri, whose number one goal is to confront poverty, is glad to hear such statements from the bank.
At their meeting in Buenos Aires, G20 finance ministers glimpsed the agenda that Argentina will promote at the main summit in December. ‘Infrastructure and jobs, the two go hand in hand,’ according to one of Macri’s top advisers. ‘What we’re seeing is a global shortfall on infrastructure investment of $5tn-$6tn, over the next 15-20 years. And private capital boasting tens of trillions at the same time. Putting the two together is a win-win, we believe.’
‘We have to ask big questions of ourselves when we see people in Latin America, unlike any other region on earth, saying things are worse for them now than when this bank was founded, 59 years ago,’ concluded IDB President Moreno.
David Smith is a Member of the OMFIF Advisory Board and represented the United Nations Secretary-General in the Americas between 2004-14.