Does Regulation and Institutional Design Matter for Infrastructure Sector Performance?

During the 1990s, as part of structural reform in infrastructure industries more than US$750 billion was invested in 2,500 private infrastructure projects in developing economies. Nearly half went to the Latin American region, mainly through the divestiture of public assets in telecommunications and electricity sectors and transport concessions. Six countries — Argentina, Brazil, Chile, Colombia, Mexico and Peru — absorbed more than 90 per cent of private investment. Overall, the region was the most important beneficiary of the huge flow of private investments for infrastructure worldwide with private investment finance peaking at around US$130 billion in 1997. Since then, investors’ appetites have waned, public support for privatization has decreased, and the role of public investment in the provision of infrastructure services has gained momentum again.1 While the increase of public investment is welcomed, given the magnitude of infrastructure needs in the region — roughly 4 to 6 per cent of gross domestic product (GDP) per year to catch up or keep up with countries that once trailed it, such as China and Korea — and the fiscal limitations of the public sector, private sector financing for infrastructure will always be important in Latin America.