United States Treasury Secretary Henry Paulson has announced a new proposal
to increase investment in infrastructure projects in Latin America and the Caribbean.
The United States will partner with the International Finance Corporation (IFC),
the private sector arm of the World Bank Group, to create a program to catalyze
private investment in infrastructure in Latin America. The initial $17.5 million
infrastructure project development program will include a $4.6 million US contribution,
and a $1.9 million contribution from Brazil. The IFC is prepared to seek an
increase in funding over time if warranted by demand for its services.
"The United States' interest in the Americas is strong. We are committed
to helping the region reduce poverty, fight corruption, build a middle class,
and generate more opportunities, including for those who currently feel excluded
from the region's growing prosperity," stated Paulson. He continued:
"Last month I announced an initiative to catalyze market-based bank lending
to small businesses in Latin America and the Caribbean. The initiative involves
a combination of new lending models, sharing part of the lending risk, and technical,
regulatory assistance so that more banks can finance options for small businesses."
"The Americas face another serious constraint to economic growth –
that is a lack of critical infrastructure. Latin America, for example, currently
spends less than 2% of GDP on infrastructure annually. Under investment in electricity,
transport, and potable water hamstring the region's entrepreneurs and citizens."
"I am pleased to announce a new initiative aimed at addressing this constraint.
This initiative will attack the information, technical capacity, and regulatory
barriers which block the flow of private finance."
The program, to be managed by the IFC, will help to identify productive infrastructure
projects suitable for private participation, make information about these projects
publicly available, and provide technical assistance on structuring projects,
tendering concessions, and improving regulatory regimes.
Project proposals can be made to the program by sovereign governments, sub-sovereign
governments (including municipal governments), or private sponsors. The program
will provide assistance in two phases: first, identifying and analyzing projects
through feasibility assessments, and, second, advising project sponsors on how
to structure, market, and tender projects successfully.
Once a project reaches contractual closure, the investor will reimburse the
program through a cost-recovery fee. The program can also assist private investors
in identifying possible sources of financing, in order to move projects to financial
closure and implementation. A project manager will be responsible for overseeing
all aspects of this process. The program is expected to be fully operable in
one year.
The IFC estimates that the program's impact could be as much as $800 million
to $1 billion in the creation of new investments and $300 to $400 million in fiscal
savings to local governments.
President Bush called for this program in 2005 at the Summit of the Americas.
The $4.6 million grant from the US comes from FY06 and FY07 State Department
Economic Support Fund appropriations.
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