The Strategic Infrastructure Initiative Addressing Latin America s Infrastructure

The Strategic Infrastructure Initiative; Addressing Latin America’s Infrastructure Gap CG/LA Infrastructure LLC & The Latin American Leadership Forum

The Infrastructure Gap o “The 1980 s and 1990 s saw a widening of the infrastructure gap between Latin America and other successful developing economies like those in East Asia. The World Bank o “…the private sources that were supposed to meet the investment needs, have lost their appetite for infrastructure at a time the public sector is investing less rather than more - less than 1 percent of GDP in most LAC countries compared to the 3 percent needed. The World Bank

Definite Actions 3+1 ü ü Create a Professional & Aggressive Feasibility Assessment Fund Generate ‘Performance Confidence’ of Infrastructure Projects to Mobilize Pension Fund Monies Organize a $10 Billion Bond Fund to Catalyze Project Finance Ensure that Each Project Maximizes Equity Opportunities for Poor People and Mid-sized Business Aim is to Take Existing Pieces and Support New Initiatives

Action #1 - Deploy a Feasibility Fund High Quality Infrastructure Projects Must Be Developed & Brought To Market At A Rapid Pace ü ü Re-deploy $20 -30 million/ 75 feasibility studies Create small, disciplined, staff Select a leader who is disciplined and action-oriented Set and achieve performance goals Quality and Velocity of Projects is Key

Action #2 - Mobilize Pension Funds Pension Fund Monies Must Be Made Available On A Systematic Basis For The Highest Quality Infrastructure Projects ü ü There is over $200 billion potentially available Local ‘savings’ is critical to re-engage international equity Market performance must be the driver, not guarantees The potential for moral hazard is extreme Create a Strong Ratings (S&P) Function, Using IIF as Model

Action #3 - Create a Bond Fund Debt Of The Appropriate Term And Pricing Must Be Made Available, Through IFI Or Treasury Support ü The Creation of a $10 billion fund should be the target priority ü The fund could be backed by Treasury or by one or more of the IFI’s, and would be tax exempt ü These would be ‘Latin American Infrastructure Bonds’ ü Once again, performance would be key Lack of Long-term Debt Financing in Latin America

Action #4 - Focus on Equity Infrastructure Projects Have A Pent-up Capacity for Generating Opportunities for Small and Medium. Sized Business, As Well As The Poor ü Projects should require an Equity Impact Assessment ü Go beyond the $1 billion in investment equals 15, 000 new jobs equation to stress good jobs, new opportunities, new investments ü Example: Port of Suape - 70 new companies, $1. 7 billion in investment, 5, 570 direct jobs, 21, 830 indirect jobs benefiting 45, 674 families

Objectives Bond Fund Pension/ Equity Results Current Efforts = 50% Additional Efforts = 50% Strategic Capacity Good Job Creation Catalyze Monitor Decide 1% GDP Growth Physical Feasibility Fund Good Projects Performance Rating Financial Sustained Equity/ Opportunity Creation Improve Equity