INTEGRATION-SOUTH AMERICA: Focus on Trans-Border Infrastructure

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Sep 6 2000 (IPS) - Geography, whose natural barriers have long separated the countries of South America, “must no longer be seen as an obstacle, but as an opportunity,” according to the president of the Inter-American Development Bank (IDB), Enrique Iglesias.

The physical, political and economic integration announced by 12 South American leaders last Friday at their summit in Brasilia is to entail the expansion and modernisation of cross-border infrastructure in transport, energy and communications, as a key factor in regional development.

The integration process in Latin America and the Caribbean — in which South America has played a leading role — enjoyed an upsurge in the 1990s, with “more than 20 new initiatives” and a sharp rise in trade and intra-regional investment flows, Iglesias pointed out in his address to the presidents gathered last week in the Brazilian capital.

That, in turn, led to heightened demand for infrastructure, which in its current state creates a bottleneck for integration, as do regulatory systems which, for example, hold up the cross- border movement of goods.

The IDB estimates that delays suffered by trucks on borders in South America cost 350 million dollars a year.

An Action Plan for the Integration of Regional Infrastructure, the guidelines of which were presented by the IDB, is to be implemented with the identification of top-priority projects for the next 10 years, in ministerial meetings to begin this year in Montevideo, Uruguay.

Among the projects considered key to the development and integration of the region figure pipelines through which Brazil will import natural gas from Bolivia and Argentina, a highway and electric power line connecting Venezuela and northern Brazil, and “inter-oceanic corridors” to be comprised of roads and rivers running across the continent, between the Atlantic and Pacific coasts.

But expanding projects already underway and implementing a number of others necessary to the physical integration of South America will require bulky investments. One figure mentioned for that “10-year horizon” was more than 200 billion dollars.

A coherent, sustainable plan will require such heavy flows of financing that some of the limitations facing South America raise concerns, said Enrique García, president of the Andean Development Corporation (CAF).

Added to the limited capacity for internal savings — which is aggravated by fiscal adjustments made necessary due to vulnerability to external shocks and under-developed financial systems — are difficulties plaguing most of the countries in the region in terms of gaining access to foreign capital at a convenient cost and with acceptable repayment periods, García observed.

In a more favourable analysis, Iglesias pointed to the high level of interest in financing the new opportunities cropping up in South America, unlike in the early 1990s, when the region’s infrastructure projects found little support among investors.

The privatisation of much of the sector contributed to that rise in interest, said the IDB official, who stressed that Latin America was the region that has made the most progress in drawing private investment in the area of infrastructure.

But up to now, the privatisation process has been primarily based on the acquisition of already existing assets, while the aim today is to draw large flows of capital into new, higher-risk ventures, he added.

The new strategy, which takes a regional, rather than strictly national, focus, must “salvage geographic spaces as fields for social development in the first place, and not only for economic growth,” said Iglesias.

Ensuring the environmental sustainability of infrastructure projects, especially given the growing global concern for the environment; promoting the participation of local communities in any new initiative; making sure communities share in the resultant benefits; and fuelling the spread of information technologies were other aspects underlined by the head of the IDB.

García, meanwhile, added that expanding the physical infrastructure of transport systems must form part of an integral process of streamlining and upgrading customs systems, telecommunications and services like freight, storage and licensing, in order to boost competitiveness and guarantee sustainability.

Among the factors that can speed up progress towards the region’s objectives of physical integration, the president of the CAF mentioned reforms to stimulate private sector participation and internal savings, and the view of foreign investment not only as a source of financing, but as technological advances and coordinated regional action as well.

The Action Plan’s big challenge will be to identify the projects that best promote integration and development without ignoring the social and environmental dimensions, and which will also be financially viable — in other words, attractive to private investors, said Ivan Cannabrava, in charge of political affairs in Brazil’s foreign ministry and one of the organisers of last week’s summit.

Brazil will play a leading role in that process, given its size and economic weight. The main spokes of South American integration all run to or from some part of Latin America’s giant, which shares a border with every South American country with the exception of Chile and Ecuador.

But besides the highways and rivers that converge in the country that accounts for nearly half of South America’s total land mass and population, Brazil has recently become a major importer of energy from neighouring countries.

With an energy deficit that threatens to limit economic growth in the next few years, Brazil is accelerating the installation of power lines running over the border from Argentina, Bolivia, Uruguay and Venezuela.

Within the next four years, imported electricity could cover nearly 20 percent of domestic demand, if the Brazilian share of the power generated by the giant Brazilian-Paraguayan Itaipú hydroelectric dam is included in that estimate.

The projection also includes the energy to be generated by thermoelectric power plants that are to run on natural gas from Bolivia and Argentina.