With the exception of sub-Saharan Africa, Latin America and the Caribbean spends less on infrastructure than any other world region. According to a World Bank report, however, the region should not spend more to boost development – it just needs to spend more wisely.
The recommendation comes at a critical time in the region’s fiscal history, according to Jorge Familiar, World Bank vice president for Latin America and the Caribbean.
“Infrastructure investment can be a powerful engine for growth in Latin America and the Caribbean as the region emerges from six years of slowdown, including two of recession,” he said in a statement.
If policymakers invest in the region’s most neglected sectors – sanitation, modern cooking fuels and transportation – improved services could allow more equal economic growth and lift people out of poverty, according to the report.
“It remains to be seen whether spending better will be sufficient for the region to fully achieve what it aspires to,” the report says. “But there is sufficient evidence that spending better and focusing scarce public resources on what matters would significantly narrow the service gap.”
Compared to its peers, Latin America scores well in terms of water-supply coverage, but its quality is inadequate. The report says some 20 million households still lack access to improved water sources, and are concentrated in middle-income countries, indicating that full coverage is well within the region’s financial capacity.
The report also says Latin America is wasting its water supply by only treating a third of its wastewater.
“A case in point is Lima,” the report says, “a city of nearly 8.5 million in the middle of a desert, that discharges its used water into the ocean and disposes of its sludge in expensive sanitary landfills instead of allowing it to be used for agriculture.”
Inadequate sanitation is just one public health challenge emphasized in the report. Policymakers should also address the widespread use of solid cooking fuels, which the report says has serious health implications for people across the developing world. More than half the people of Guatemala, Honduras and Nicaragua still use fuel sources like wood or biomass, according to the report, and some 87 million people across the region lack access to modern cooking fuels.
Latin America’s transportation system is also expensive and often unsafe, said the report.
“In urban transport, a number of cities have modern, well-functioning bus rapid transit systems, but most struggle with high congestion, pockets of inaccessibility, inefficient and often inequitable pricing, and continuing reliance on informal public transport providers,” it said.
Looking forward, the authors say Latin America’s investments in infrastructure will also need to stand the test of climate change. Climate-related shocks such as droughts could be increasingly devastating for water-stressed cities like Sao Paulo and pose additional problems for the many regions of Latin America that rely on hydropower.
Unnaturally heavy rainfall this year already underlined the desperate need for improved drainage systems in countries like Peru and Colombia, where flooding and mudslides led to unnecessarily high number of deaths and displacement in some of the most vulnerable communities.
“It’s becoming increasingly visible that it’s necessary to make infrastructure more resilient,” said co-author Marianne Fay, chief economist with the World Bank’s sustainable development division, reported Reuters. “We need to figure out what future you have to prepare for.”
