CAF-AM
CAF Asset Management Group
By Alberto Ñecco and Andrea Chagra, CAF-AM CEO and CAF-AM Structuring and New Business Manager, respectively.
With enormous potential to be efficient and competitive on a global scale, Latin America and the Caribbean (LAC) faces significant challenges in reducing physical and digital infrastructure gaps, both necessary for regional integration and productivity.
By 2030, LAC needs to invest more than USD 2,220,736 million in the water and sanitation, energy, transportation and telecommunications sectors to expand and maintain the necessary infrastructure to meet the Sustainable Development Goals (SDGs). Of this total, 59% should be allocated to investments for new infrastructure and 41% to investments for maintenance and replacement of assets reaching the end of their useful life.
In other words, the region must invest at least 3.12% of its GDP each year and, according to the infrastructure integration and connectivity index, it lags 19.4% behind Europe, the most integrated region in the world; 7% behind Asia; and 5.4% behind the world average, surpassing only Africa.
Given this situation, investment is key to breaking the cycle of inequality, poverty and low growth. But this investment must be anchored to a development strategy that increases the productivity of the region's economies, while adopting environmentally friendly technologies and reducing CO2 emissions, in order to reach the goal of net zero emissions by 2050.
To generate these processes, countries need investors. And these, in turn, need clear signals that show the degree of commitment and financial development of the countries. One of the most widely used signals is the investment grade. Of 195 countries recognized worldwide, only 60 have this rating. In Latin America and the Caribbean, out of 33 countries, only 7 exceed the minimum grade required to be considered investment grade.
Although the macroeconomic vision of economic development through infrastructure investments is fundamental to define needs, opportunities and modalities, the micro aspect is equally important. The quality of project studies, the speed of project preparation and financial structuring are challenges faced by all LAC countries and are closely linked to the market appetite for projects in the countries' portfolios. Increased private sector participation at various stages can facilitate the closing of infrastructure gaps.
Aware of this dynamic, CAF and CAF-AM generate opportunities and provide resources from the perspective of economic and social development, as well as from the management of private resources.
CAF-AM, through the management of private funds for infrastructure financing, presents opportunities for both local and international investors, leveraging CAF's presence and experience in the region and working together with governments to contribute to the environment of private investment participation in the development of infrastructure for public use. The same challenges described for LAC become opportunities to establish long-term relationships that benefit all parties and contribute to the sustainable and equitable growth of our region.
To accelerate public policies to attract investments that will create quality jobs and enhance sustainable development in the region, CAF and CAF-AM, in partnership with the Financial Times, will be bringing together investors, asset managers, regulators and think tank leaders at an event on September 4 in New York. This meeting will explore financing models for crucial areas of infrastructure development and the growing opportunities for asset managers in the region.
