Transportation and Communication Infrastructure in Asia and Latin America

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AS/COA’s Recife conference on February 8 closed with a panel discussion comparing public and private sector investments in infrastructure in Latin America and Asia. The AS/COA Online web team live tweeted the panel and Twitter highlights are included below.

Speakers:

Thiago Aracema, Director for Industrial Projects, DHL
Sam Fouad, Americas Emerging Markets Leader, Ernst & Young LLP
Barbara Kotschwar, Research Associate, Peterson Institute for International Economics
Renato Mello, Director of Transport, Odebrecht
Roberto Nigro, Marketing Manager, GE Transportes Ferroviários SA.
Christopher Sabatini, Senior Director of Policy, AS/COA and Editor-in-Chief, Americas Quarterly (moderator)

Panelists talked about the challenges Brazil faces in terms of infrastructure development as compared to Asia. Barbara Kotschwar noted that Brazil is not doing as well on hard infrastructure, but is doing better on soft infrastructure. She cited bureaucracy and insufficient port infrastructure as some of the challenges facing the country. Panelists also discussed the fact that Brazil invests the same percent of GDP in infrastructure as much smaller economies, including Bolivia, El Salvador, and Uruguay.

Speakers discussed the investment environment in Brazil and how it contributes to infrastructure growth. Sam Fouad of Ernst & Young highlighted the limitations of Brazil’s tax system, which he called “inefficient.”

Panelists pointed out that doing business in Brazil is not as easy as in other countries, and can be on par with India in terms of bureaucratic hurdles. Brazil, however, has an advantage for a number of reasons, including the government’s commitment to funding high-impact projects, a history of institutions accustomed to running a problematic economy, and increased confidence from Brazil’s growing global role.

Latin America could take some lessons from Asia, where the private sector takes on a greater role in infrastructure investments, spurring governments to increase cooperation. Asian countries also tend to have higher levels of regional cooperation in these types of ventures. Speakers noted that the United States hasn’t taken a leading role in infrastructure investments, like China has in Asia, nor have Latin American countries used Mercosur and other regional bodies to coordinate infrastructure investments. The Asian Development Bank, for example, is an important body that aids infrastructure investments on a regional scale. However, speakers agreed that governing structures in some Asian countries differ from that of many Latin American countries, in that weak rule of law and state capitalism dominate in some Asian countries, as opposed to the democratic model being followed in Latin America.

Panelists spoke about their belief that Brazil should encourage the private sector to take on a larger role, and to invest in long-term financing for infrastructure projects. Currently, there is approximately R$45 billion ($26 million) invested in Brazilian development projects, which panelists agreed was insufficient. But the Pernambuco state model could serve as an example for the rest of Brazil, demonstrating that diversifying infrastructure supports social and industry needs.

Rachel Glickhouse is the editorial associate at AS/COA Online.