Now the real work starts

Brazil arguably doesn’t need much of an excuse for a party, so when Rio de Janeiro was named as the location for both the 2014 soccer World Cup and 2016 Summer Olympics, it was reason enough for the biggest party of all time.  But it wasn’t only sports fans celebrating the announcement. With infrastructure projects linked to the two events expected to be worth around $50 billion, infrastructure investors were also entitled to dance a joyous samba.

Evidence of infrastructure-related gains is already becoming apparent. In December last year, the Brazilian government drew up a draft concession agreement for a planned R29 billion (€11.3 billion; $16.3 billion) high-speed rail line linking Rio de Janeiro with Sao Paolo. The project had been at the planning stage for several years, but the Olympics announcement appears to have provided the kick-start it needed. Officials now hope work on the line will commence in 2011, allowing it to be completed in 2015, the year before the Games.

Of course, sporting fervour is not the sole explanation for Brazil spearheading Latin America’s infrastructure push. The Brazilian government’s infrastructure investment plan, the Programa de Aceleracao do Crescimento was put in place in 2007 and is expected to have resulted in R504 billion of investment in areas such as transport, energy and logistics by the end of 2010.

Among the sectors seeing significant growth is roads. Ecorodovias, one of Brazil’s largest toll road operators, on 9 February announced plans to raise $1.1 billion from an IPO in order to finance existing projects and as a platform for further expansion.

Brazil is not an unequivocal good news story, however. In November last year, the country’s infrastructure found itself the subject of some unwelcome scrutiny when a huge power cut left tens of millions of people in the country’s south-east without electricity for more than five hours – a problem apparently linked to a malfunction at the country’s Itaipu hydro-electric dam. It was not the first time that Brazil had suffered a serious power cut and left many to reflect that the country’s big spending plans are much needed.

Assistance on the way

The same sense of urgency is being felt across Latin America, where infrastructure is generally not viewed as a strong point. Help is forthcoming, however. In April last year, multilateral development banks committed to invest as much as $90 billion in Latin American infrastructure over the following two years. This is seen as a tremendous opportunity to close the infrastructure gap with other regions. Perhaps the best live example of Latin America’s infrastructure ambition is represented by the widening of the Panama Canal, a $5.25 billion project backed by lenders including the European Investment Bank, Inter-American Development Bank and Japan Bank for International Cooperation. Construction work began in September 2007 and is expected to complete in 2014.

Elsewhere in Latin America, significant announcements have been made recently. In Colombia, for example, state-backed electricity firm ISA signed a seminal agreement with the Colombian government to design, build, finance, operate and maintain roads in a project worth just less than $3 billion – the first time ISA had signed up to build and operate a road contract.

Following recent elections in Uruguay, meanwhile, president-elect Jose Mujica will be pondering how to rehabilitate the rail sector – with the private sector expected to be awarded a role through concession contracts. And in Peru, public-private investment in infrastructure is expected to reach $2.3 billion this year, according to governmental investment agency ProInversion.

In other words, in the context of Latin America’s infrastructure, much work is underway – but plenty still needs to be done. In the following pages, we shall consider further some of the key developments and challenges.