Infrastructure financing models in Latin America

Latin America and the Caribbean’s investment in infrastructure has a direct impact in the growth of the region. For this reason, financial institutions have started projects which benefit such investment with the smaller risk and promote a greater access of the population to house financing.

Within the framework of the 45 Ordinary Meeting of ALIDE General Assembly, the Infrastructure and Housing Financing Technical Committee meeting was carried out. It was chaired by Ana Salveraglio, president of Banco Hipotecario del Uruguay (BHU). The main topic was the “Mobilization of Resources for the Development of Infrastructure and Housing Projects”, in order to analyze alternatives to finance social Infrastructure and Housing Projects; as well as to agree on common interest activities and to promote more inter institutional cooperation.

In such sense, Ramón Guzmán Zapater, specialist, leader in Financial Markets, from the Inter-American Development Bank (IADB), pointed out that the investment in infrastructure in the energy, water and transportation sectors have a higher impact in growth, and that Latin America and the Caribbean need to invest 5.6% of their GDP a year, some US$280 billion to close their deficit. However, the financing gap is 2.6% of the GDP, around US$130 billion, an amount under the US$143 billion that private pension funds may orient towards fixed income instruments in public infrastructure.

To contribute to develop infrastructure, the IADB combines resources of technical assistance, loans and guarantees. For this purpose, they have launched a new policy of guarantees that maximizes leverage and return of the public capital, facilitating the private investment supporting the development banking and governments in the diagnosis, risk assessment and design of the optimal financial strategy. The guarantees cover the credit risk of the political risk; and have been underused in the past by multilateral banks. Today they are more necessary because of the infrastructure deficit, the risk aversion and the fiscal restriction in the countries.

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