Latin America, which has a large infrastructure deficit compared to emerging markets in Asia, desperately needs a post-pandemic building boom. Indeed, hundreds of billions of dollars of infrastructure will be needed to help Latin America take full advantage of its incredible clean energy resources. The irony is that the very same green forces driving the transition, will also push back against infrastructure projects with negative environmental impacts. That means successful projects will have to overcome the usual regulatory and institutional hurdles, plus prove that they are implementing environmental best practices. As the pandemic made its way west from China, Latin America had plenty of time to prepare. As a result, it went into lockdown at a far earlier stage in its coronavirus cycle than other regions. Guatemala was the first country in the Americas to shut its international borders and infrastructure projects were also shuttered quickly.
Latin America’s energy transition also needs new infrastructure. As we have discussed elsewhere in this report, the region needs to upgrade everything from transmission lines to public transport, to make the most of its incredible renewable energy resources. Indeed, infrastructure is also required to help the region protect itself from the climate change that is already underway. Latin America’s infrastructure need is obvious yet wanting something and getting it are two different things. And, with the exception of Chile and Panama, the region has a poor track record of building infrastructure. The commodity super cycle at the start of this century boosted economic growth across the Latin America, so that by 2010 most governments had the money to fund public works. Infrastructure programmes – with a combined value totaling hundreds of billions of dollars – were announced in Colombia, Peru, Brazil and Mexico. Yet very little of it was built. The Inter-American Development Bank estimates Latin America’s infrastructure deficit at $150billion – about 2.5% of regional GDP – per year. In many ways Latin America has already done a lot of the hard work for the energy transition. It has the greenest electricity grid in the world, with almost two thirds of its power coming from renewable resources. But taking full advantage of that clean power will require massive infrastructure upgrades. Whether it’s taking the power to remote communities, or electrifying public transport systems – there is a lot of building to be done. And for those projects to pass in this new age of protest, developers need to mitigate the environmental impact. Capital will start flowing to the firms that manage it best.