washington, september 10-11 2009 managing in frastructure for social and productive development...

Washington, September 10-11 2009

Managing infrastructure for social and productive development

Pablo SanguinettiResearch Director

Corporación Andina de Fomento

IDB SeminarDevelopment Challenges and Policies in Latin America and the Caribbean: What are the issues?

Presentation Structure

• Introduction: Why infrastructure? • A brief diagnosis of the state of infrastructure in Latin

America• Main messages of the Report • Impact evaluation of infrastructure services• Improving management• Final remarks

Why infrastructure?

Infrastructure management in Latin AmericaBuilding a path to the future

In the current context of Latin American countries, improvement in the quantity and quality of infrastructure has an enormous importance:

• Declining participation in global trade (RED2005)

• Widening productivity gap with developed countries and other developing regions (Asia) (RED2006)

• Persistent poverty and inequality (RED2007-2008)

• Infrastructure is currently on the agenda of developed and developing countries and multilateral organizations.

Although its relevance is widely

recognized, infrastructure services in

Latin America are insufficient both in

quantity and quality.

State of infrastructure in Latin America


Electricity production per capita with respect to OECD Electricity production per capita (Kwh)

Source: Own calculations based on World Bank (2007)

50

100

150

200

250

300

350

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Inde

x 19

80=1

00

East Asia & Pacific

Latin America & Caribbean

South Asia

Sub-Saharan Africa

Middle income

Middle East & North Africa

Slow convergence to OECD country levels …

Fixed line and mobile phone subscribers with respect to OECD

0

200

400

600

800

1.000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Inde

x 199

0=10

0

East Asia & PacificLatin America & CaribbeanSouth AsiaSub-Saharan AfricaMiddle incomeMiddle East & North Africa

Fixed line and mobile phone subscribers (per 1,000 people)

Source: Own calculations based on World Bank (2007)


Slow convergence to OECD country levels …

The challenge of improving quality of services in Latin America

Note: The score for regions was calculated by averaging countries belonging to that regionSource: WEF 2008

NA

EM

EN

A

AP

LA

C

SS

A

0,00

1,00

2,00

3,00

4,00

5,00

6,00

7,00

sco

re (

1-7

)

NAE North America and EuropeMENA Middle East and North AfricaAP Asia and the PacificLAC Latin America and the CaribbeanSSA Sub-Saharian Africa

Infrastructure Quality Index by region / 134 countries


Source: Own calculations based on WEF (2008) and World Bank (2006)

Quality of electricity infrastructure(1 to 7 scale)

0 20 40 60 80 100 120 140

OECD

East Asia & Pacific

Europe & CentralAsia

Latin America &Caribbean

Middle East &North Africa

Sub-SaharanAfrica

South Asia

Days

Number of electrical outages by region(days)



0,00 1,00 2,00 3,00 4,00 5,00 6,00 7,00

Sub-Saharan Africa

Latin America and TheCaribbean

Asia and the Pacific

North Africa and theMiddle East

North America andEurope


Quality of airport infrastructureQuality of road infrastructure

Quality of railroad infrastructure Quality of port infrastructure

0,00 1,00 2,00 3,00 4,00 5,00 6,00 7,00

Sub-Saharan Africa





0,00 1,00 2,00 3,00 4,00 5,00 6,00 7,00

Sub-Saharan Africa





0,00 1,00 2,00 3,00 4,00 5,00 6,00 7,00

Sub-Saharan Africa





0,00 1,00 2,00 3,00 4,00 5,00 6,00 7,00


Sub-Saharan Africa




Infrastructure sector scores per region

Source: Own calculations based on WEF (2008)


Source: CAF survey (2008)

Quality indicators in Latin America (% of households)


Perceptions regarding quality of services vary widely across cities in Latin America

In the context of the previous evidence on the quantity and

quality of infrastructure in the region, how has investment evolved?


Overall infrastructure investment has decreased…

Argentina

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Public Private

Chile

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Public Private

Mexico

0,0

0,5

1,0

1,5

2,0

2,5

3,0

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Public Private

Brazil

0,0

1,0

2,0

3,0

4,0

5,0

6,0

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Public Private

Colombia

0,00,51,01,52,02,53,03,54,04,5

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Public Private

Peru

0,0

0,5

1,0

1,5

2,0

2,5

3,0

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Public Private

Infrastructure investment (public and private) as a percentage of GDP

Source: Own calculations based on Calderon and Serven (2008)



There is a correlation between fiscal adjustments and public infrastructure investment

Public investment in infrastructure and fiscal deficit as a percentage of GDP

Source: Own calculations based on Calderon and Serven (2008) and official data

Argentina

0,0

0,2

0,4

0,6

0,8

1,0

1,2

1,4

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

Pu

blic

inv

es

tme

nt

in

infr

as

tru

ctu

re (

% G

DP

)

-4

-2

0

2

4

6

8

10

12

14

16

18

Fis

ca

l de

ficit (%

GD

P)

Public infrastructure Fiscal deficit

Colombia

0,0

0,5

1,0

1,5

2,0

2,5

3,0

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

Pu

blic

inv

es

tme

nt

in

infr

as

tru

ctu

re (

% G

DP

)

-2

0

2

4

6

Fis

ca

l de

ficit (%

GD

P)


Chile

0,0

0,5

1,0

1,5

2,0

2,5

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

Pu

blic

inv

es

tme

nt

in

infr

as

tru

ctu

re (

% G

DP

)

-16

-14

-12

-10

-8

-6

-4

-2

0

Fis

ca

l de

ficit (%

GD

P)


Peru

0,0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

0,9

1,0

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

Pu

blic

inv

es

tme

nt

in

infr

as

tru

ctu

re (

% G

DP

)

-2

1

3

5

Fis

ca

l de

ficit (%

GD

P)


1. Since infrastructure is such an important element for the development process, one needs a better understanding of the factors underlying the link between infrastructure and:

• Households’ quality of life,• Productivity of firms and industries and international trade, • Environment

It is important to undertake rigorous impact evaluations analyses. This will provide: better information for decision-making; enrich public debates; improved ex-ante evaluations and more efficient public spending.

Main messages of the report

2. Improve management process both at the public and private level. This implies:

• To have a comprehensive vision of the different intervention mechanisms:

- New investment

- Maintenance

- Administration of existing infrastructure facilities

• Strengthening institutions associated with planning, evaluating, regulating and supervising infrastructure services.

Main messages of the report

Detailed content of the book

1. Managing infrastructure for social and productive development (intro chapter)

2. Infrastructure and welfare: reaching households

3. Paths for productive transformation

4. Environmentally sustainable infrastructure?

5. Options for the provision of infrastructure: Latin America experiences (regulatory models)

6. Access and equality

7. Partnering with the private sector: risk sharing and efficiency

8. Achieving prosperity: the role of institutions

Impact analysis

Management

Impact of infrastructure

• Proper impact evaluation will ensure better infrastructure project selection. However, causality remains an important challenge.

• Sector complementarities must be considered (e.g. water and electricity) and tradeoffs among different types of policies must be analyzed (e.g. new investment vs. maintenance).

Impact of infrastructure

Electricity generation in Brazil

Yellos dots: Actual location (1967) of hydroelectric generating plants

Red dots: Model-predicted location based on geological factors

- This model helps to measure the impact of electricity generation linked to supply-related factors (geology and technological restrictions)

- Electricity generation improves productivity and attracts a larger population (population density may double each decade)

Natural gas in Buenos Aires

Yellow border: Cuartel V

Blue border: study area

Treatment group

Control group

- Treatment and control groups were similar, at least until the program was applied

- Direct access to natural gas resulted in lower incidence of respiratory and gastrointestinal diseases

- Complementary factors: social capital, housing improvements

Improving Infrastructure management

Improving Infrastructure management

• An adequate management of infrastructure depends on the nature of the established institutional and regulatory framework. The private sector has been and could be a key player.

• The public sector should be capable of planning, evaluating, regulating and overseeing infrastructure investments, both public and private.

- Examples of planning institutions: multiyear planning in Brazil; “Botton Up” Territorial Planning in Colombia

- Examples of evaluating schemes : SNIP legislation in Peru.

Public Private Partnerships

• Public Private Partnerships (PPP) have had an increasing role in infrastructure provision

- Intermediate approach between outright privatization and traditional public provision (pubic work contracts).

- They can be applied even for projects that user tariffs would not cover all cost. Public sector could participate co-financing the project. Example: highways.

- PPP´s main advantage is enabling better risk distribution (allocation rules) and efficiency gains (bundling).

•

Public Private Partnerships

• Institutional scheme for better management of PPPs:

- Strategic planning and project identification: sector ministries (transport, etc.)

- Priorization or coordination: Finance ministries or National Planning Departments (fiscal consequences)

- PPP agencies in charge of attracting private sector participants and designing contracts

- Independent regulatory agencies: Contract enforcement and information on service provision

- Monitoring: ex-post impact evaluation by NSPI in collaboration with local universities.

Regulatory aspects

• Infrastructure characteristics justify regulation and determine specific regulatory schemes:

• Size and maturity of investments• Scale and scope economies• Network effects

• There is no single regulatory model.

• Regulation encompasses a broad scope of variables and parameters: prices, quality, investments, public subsidies, procurement, property schemes, etc.

• Regulate quality standards when cost efficiency may lead to quality reduction.

• Regulation should not limiting competition in those segments/markets that this is feasible (electricity generation). It may also meeting social objectives.

• Infrastructure plays a key role in development. That is why we need to have a better understanding of the factors underlying this link, and the mechanisms through which this relation takes form. This will ultimately lead to better selection of projects and evaluation methods.

• Need for improving infrastructure service management both in the public and the private sector.

• This requires strengthening institutions associated with planning, evaluating, regulating and supervising infrastructure services.

• A well designed PPP regimen and legislation could improve the social gains associated with private sector participation in infrastructure.

Final Remarks

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washington, september 10-11 2009 managing in frastructure for social and productive development...

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