Latin America has a notoriously large infrastructure gap, and to fill it individual governments would have to ramp up their annual spend by tens of billion of dollars. This means that in most countries, attracting private sector funds is essential. But while most countries have made progress in improving the international appeal of their infrastructure programmes by updating legal frameworks and softening certain risks, a series of external issues are now threatening to undo much of this good work.
Lower commodities prices are – directly or indirectly – affecting most of the infrastructure projects currently operational in Latin America, as well as the cash-flow projections of those in the pipeline. The income of these projects is often tied to trade and commodities-related activities, while the economic pressures on the companies carrying out these projects are making it harder to repay financial obligations, even in cases where governments have provided extra financial coverage during the early stages of development. However, reduced tax revenues because of the slump in the prices of oil and raw materials are raising doubts over governments’ ability to provide such financial support in the future.
