Efficient investment in public infrastructure is crucial for a country’s development. In fact, empirical evidence suggests that reallocating public spending to infrastructure can raise growth rates over the long run (Fournier 2016). Still, infrastructure investment should be grounded in the objective appraisal of economic capacity gaps, infrastructural development needs and sectoral/social priorities, as well as the prudent assessment of the costs and benefits of such investments. In general, LAC governments prepare development plans at the national and subnational levels that include substantial investments for the construction, renovation and maintenance of public infrastructure. The provision of hospitals, water treatment systems, schools and public housing, among other works, allows governments to deliver key public services to citizens and to create economic opportunities, while ensuring social inclusion and environmental sustainability.
The way in which works and equipment are procured is critical to ensure a cost efficient and sustainable infrastructure. At the procurement stage, following key principles such as transparency, competition, integrity and efficiency is crucial. Procurement for public investment projects raises challenges that are much more complex than those involved in the procurement of standard services or goods. For example, a major infrastructure project may require multiple contract awards for its design, additional ones for construction, and yet others for technical supervision and oversight. In such situations especially, developing policies on an ad-hoc basis hinders the application of a consistent methodology in choosing delivery modes for infrastructure projects.
The majority of LAC countries (60%), such as Brazil, Costa Rica and Ecuador, have established dedicated entities for developing policies for infrastructure projects within the central government. Another 20% of LAC countries develop policies for infrastructure projects on an ad-hoc basis. By comparison, only 39% of OECD countries have such a unit in the central government, while 54% do not have this type of permanent institutional setting at all.
Another characteristic of the LAC region is the coverage of public procurement law and regulations. These legal frameworks are fully applied to infrastructure projects in 60% of the surveyed countries and partially in the other 40%. Regulatory and legal frameworks could help to address risks of inefficiency and corruption that are often associated with the procurement of major infrastructure projects due to their complexity (as previously mentioned). However, the existence of legal instruments is not sufficient to avoid infrastructure projects from being captured by vested interests, signaling the need of additional and reinforced institutional safeguards. National frameworks and guidance on infrastructure delivery could be effective tools to further mitigate risks and potential political opportunism. Specific guidance could be additionally provided depending on specific delivery modes or based on certain thresholds.
