Table of contents
The role of public sector endorsement in infrastructure projects
In most countries, public sector endorsement of an infrastructure project streamlines the path to crucial infrastructure project grants, permits, and licenses. Public entities championing a project’s benefits often translate into stronger community support and smoother implementation.
Why public sector involvement is essential in Latin America
However, in Latin America, public sector involvement isn’t just beneficial—it’s essential. The region’s unique landscape of indigenous territories, protected areas, rural communities, and communal lands demands active government cooperation. And, with the public sector spearheading ESG initiatives across most Latin American countries, their partnership becomes even more crucial.
Balancing development and environmental sensitivity in Latin America
The complex nature of infrastructure projects in Latin America and the large amount of capital they require mean that an active market of private-sector developers is equally critical.
It’s fair to say that infrastructure development in Latin America requires a delicate balance. Rich natural resources—while vital for development—often intersect with indigenous territories and protected areas, demanding heightened sensitivity and careful planning. It’s not just about building infrastructure; but preserving the region’s natural heritage while unlocking its developmental potential.
Challenges of mining and dams in Latin America
Mining development perfectly illustrates these challenges. Environmental impacts can ripple beyond the mine itself—soil erosion can threaten local agriculture, while water pollution can compromise community supplies.
Similarly, a dam project may provide a significant energy supply but could also alter the course of rivers and impact biodiversity. Unsurprisingly, these are likely to be sensitive topics to local populations.
The importance of safeguarding indigenous and protected areas
In Latin America, the public sector plays a major role in safeguarding indigenous and protected areas. Therefore, when such areas are involved, cooperation from the relevant public sector agencies is essential to secure stakeholder support and ensure project developers minimise or offset potential damage.
Addressing the needs of marginalised rural communities
Rural communities in Latin America—often facing social and economic marginalisation—require particular attention from project developers.
Even temporary impacts on these vulnerable populations can spark significant resistance. A minor disruption can escalate into community demonstrations or, in extreme cases, lead to complete project cancellation.
Therefore, considering the unique community and environmental needs is vital to minimise the risk of dissatisfaction or negative perception.
Navigating communal lands and governance models
The existence of communal lands (tierras ejidales) in countries such as Mexico, El Salvador and Honduras might present additional complications to infrastructure projects.
For instance, a motorway might allow for better connectivity but may also require rights of way through communal lands. This could be challenging due to the communal lands’ particular governance models. For example, there may be specific conditions and regulations for the sale and lease of land.
In addition, distrust of outsiders is high. Therefore, public entities might play a significant role by helping the private sector in liaising with property owners.
How public entities facilitate private sector collaboration
Public entities take the lead in the oversight, regulation and compliance with ESG rules. With this in mind, it is essential to have their cooperation and assistance throughout the infrastructure development journey.
For example, the environmental impact of every infrastructure project must be assessed and mitigated where possible. Regulators establish a framework and set standards and guidelines for this to be accomplished appropriately. Therefore, engagement with them is advisable when performing environmental risk assessments and taking the appropriate mitigation measures.
Why financial institutions must engage with the public sector
Challenges faced by private infrastructure developers will be more easily resolved in cooperation with the public sector. Furthermore, as part of their due diligence on a project, financial institutions should consult relevant public sector entities and obtain their consent.
Finally, a project’s feasibility might rely on public sector participation in the form of grants. Grant funding may be a pre-requisite for a project to be bankable.
Summary
Next time we’ll discuss issues surrounding Latam projects’ bankability in more detail.
In the meantime, please get in touch if you’d like to discuss these issues further or find out how Gridlines can support you in the region.
