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LatAm countries should focus on ‘service gap’: World Bank

The author of a World Bank report said Latin American and Caribbean countries should identify how to more efficiently invest in infrastructure.

Latin American and Caribbean countries can improve infrastructure by investing more efficiently rather than simply increasing allocations, according to a report published by The World Bank.

The report, Rethinking Infrastructure in Latin America and the Caribbean – Spending Better to Achieve More , states that the key to improving infrastructure in Latin America and the Caribbean (LAC) is to prioritise areas that need specific improvement and invest funds efficiently.

LAC countries spend an average of around 3 percent of gross domestic product on infrastructure, the second lowest among emerging market regions including East Asia, sub-Saharan Africa and the Middle East, according to the World Bank. The global finance institution suggests countries in the region should focus on addressing “service gaps” rather than filling financing gaps.

Marianne Fay, the World Bank's chief economist for sustainable development, said on a call with reporters that LAC countries should identify infrastructure sectors in need of increased funding and decide how to best meet those needs.

“Instead of focusing on the financing gap, we need to shift that focus on the service gap,” Fay said. “What we know is that by spending better and spending on the right things, we can close that gap.”

She added that more private sector investments will allow governments to deploy funds over a wider range of projects. “On average, having the private sector involved improves efficiency,” Fay said, but good regulation and corporate framework will be needed to attract investments.

The World Bank offered examples of where LAC countries should focus investments. It said the region is lacking in proper sanitation, as one third of wastewater is treated and 87 million people cook on open wood stoves. It also said investments in transportation would improve congested roads and increase competitiveness.

“In today's tight fiscal context, it is essential that investments are as efficient as possible, and that the full potential of the private sector be tapped,” Jorge Familiar, the World Bank's vice present for Latin America, said in a statement.