Infrastructure - Regional - Multilateral entities, governments must work together to combat global crisis

Multilateral financial entities should offer full risk coverage to support infrastructure development initiatives in these times of financial turmoil, the CEO of K&M Engineering, Michael Kappaz, said at the second CG/LA Global Infrastructure Leadership Forum, being held in Washington, DC from December 10-12.

The current partial risk coverage offered by multilateral banks is not enough to ensure that infrastructure initiatives continue to be carried out, said Kappaz, adding that these projects are absolutely necessary to aid in economic recovery.

Investors are being especially careful about where to invest right now, and risk is one of the key factors they are looking into before investing in a country, an infrastructure investment analyst told BNamericas.

The lack of a stable political and legal framework has taken its toll on investment initiatives in a number of Latin American countries, while many firms have seen the effect of these factors on their investments in countries such as Venezuela, Bolivia, Ecuador and Argentina, where concessions are taken over by the state without much discussion, the analyst added.

During his opening speech at an infrastructure project financing workshop, CG/LA president Norman Anderson spoke of the important role multilateral financial entities have played in the development of infrastructure in Latin America and the rest of the world, both in financing projects and in providing partial risk coverage.

However, their role must increase, he added.

While agreeing their role could increase, James Bond, COO of the World Bank's Multilateral Investment Guarantee Agency (MIGA), said his organization is quite small and cannot become fully responsible for infrastructure development in the region.

Governments should also increase their role and provide subsidies, he said.

CRISES

There is not just one but many crises currently affecting the world financial scenario, Bond said.

The official referred in particular to the financial crisis and to the credit crisis, which are having a major impact on infrastructure development.

"Banks do not trust one another," said Bond, adding that they prefer to keep money under the mattress than to lend to good projects, and this has taken its toll on the development of infrastructure initiatives.

Kappaz agreed with Bond and said multilateral backing is absolutely necessary to support A-level investment projects.

LATIN AMERICA

One of Anderson's concerns is that public and private sector representatives from Latin American countries do not seem very concerned with the crisis because the region is used to facing dramatic financial situations.

Insufficient concern in the region could lead to governments and investors not taking the necessary measures to combat the situation.

The current scenario is much more complex than anything seen before, Anderson said, calling on all players to take this issue into consideration.

Anderson also stressed the need to invest in infrastructure to confront the financial crisis, calling on sector officials to work together on long-term initiatives that will not only help solve the current situation, but will also provide long-term solutions to development.

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