Luis Alberto Moreno, president of the Inter-American Development Bank, says regional economies should double investment in infrastructure to boost economic growth. - File
Regional economies have under-invested in infrastructure for years, limiting economic growth in the process, Inter-American Development Bank (IDB) Chief Luis Alberto Moreno has said.
Now to catch up with boomers in Asia, Caribbean and Latin American governments have to at least double their spend, from the current 2 per cent of GDP.
But countries of the region will also have to sustain that level of investment over a 20-year span to recover from decades of under-investment in infrastructure and perform at the level of South Korea and China, Moreno said in his year-end report to the IDB Board of Executive Directors.
"They need to spend between 4 per cent and 7 per cent of GDP per year for the next two decades in order to have high-quality infrastructure that can become the backbone of our development," he said, in his outlook for the year ahead.
In 2007, the IDB approved funding assistance for projects and programmes, totalling US$9.6 billion, its highest level since 1999 and 50 per cent more than the US$6.4 billion approved in 2006.
The report also highlighted:
US$486 million of funding for 53 projects by the Inter-American Investment Corporation, the IDB Group affiliate specialised in financing for small and medium-size businesses, up from 48 projects for US$337.7 million in 2006.
The Multilateral Investment Fund, the IDB Group programme that focuses on micro enterprises, approved 117 projects totalling US$134.3 million, of which nearly US$100 million were grants. Last year it approved US$125 million in new projects.
Moreno also described as 'historic' the IDB's decision to grant US$4.4 billion in debt relief to Bolivia, Guyana, Haiti, Honduras and Nicaragua, saying that unlike other multilaterals, the bank was bearing the cost of cancellation without additional contributions.
The 2007 performance, said Moreno, reflects the bank's attempts to be more flexible in its dealings with the region that has "diverse visions and different development models."
In his comments to the board, which represents the IDB's 47-member countries, Moreno said the bank's financing assistance for infrastructure and competitiveness projects rose to US$5.7 billion.
The year-end report, in its the outlook for Latin America and the Caribbean for 2008, projects growth of 4 per cent to 4.5 per cent, down from 5 per cent in 2007, saying the decrease would largely stem from a slowdown in the United States economy and a possible weakening of prices for Latin American exports.
Regional inflation, which in 2006 was at a historical low of 5 per cent, was 5.3 per cent in 2007, and is expected to climb in key Latin American markets in the new year.
Similarly, fiscal controls are expected to loosen.
"On the fiscal front, several countries that posted primary surpluses this year could slide into deficits next year," said the IDB, "since very few have taken steps to strengthen public sector revenue and offset increased spending."
In the year ahead, the IDB will launch new projects under its Opportunities for the Majority initiative, which seeks to expand access to tools and services for low income groups.
business@gleanerjm.com.
