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Transport development unlocks Latin American growth

By Adina Solomon on October 30, 2013

Transportation, including air cargo, can improve Latin America’s economy – but right now, it is an obstacle to growth in the region.

“Our transportation and our cargo logistics are not up to par. There’s a lot of room for improvement,” says Esteban Diez-Roux, principal transport specialist at the Inter-American Development Bank (IDB). “To have inefficient transport systems, this obviously puts in a very big additional burden, so transportation is actually one of the biggest impediments for growth in the region.”

Established in 1959, IDB is the largest source of development financing for Latin America and the Caribbean. The organization lends money to governments in order to promote economic development, including initiatives in transportation and aviation.

This year, IDB, which is headquartered in Washington, D.C., has spent more on transportation than on almost any other sector, totaling more than US$1.2 billion (884 million euros) year-to-date.

Diez-Roux says Latin America needs to focus on developing its transportation.

“Making sure that we have efficient transportation systems, and the cost of getting things in and out as low as possible, would make the region a lot more efficient and more productive,” he says.

Historically when it came to transportation, IDB mainly used to finance roads. That changed about a decade ago.

“We’re starting to focus much more on other types of transport, especially on logistics, and when we talk about logistics, obviously we have to talk about different modes of transport,” Diez-Roux says. “Logistics and cargo platforms and airfreight play an important role.”

IDB has financed airport infrastructure projects in Quito; San Juan, Puerto Rico; Costa Rico and Bogota, Colombia, which has relatively large cargo movements for Latin America, Diez-Roux says. IDB has also supported projects for air sector reform.

In June, IDB announced that it will lend US$73.5 million (54.4 million euros) to Bolivia to upgrade the infrastructure and equipment at two regional airports, Trinidad in the Beni department and Cobija in the Pando department. This will enable the airports to offer international service.

Diez-Roux says logistics costs in Latin America are higher than most other countries in the world.

“For Latin America, it’s actually even more serious because we’re pretty far away from all the big centers of consumption or production in the world, so basically, the stuff that we export or import tends to travel long distances,” he says.

At the same time, Latin American air transport has mushroomed over the past few years, Diez-Roux says. This could potentially benefit air cargo development in the region.

“There’s been an incredible explosion. Theoretically, we should have capacity to improve air cargo. There’s a lot of excess belly capacity, empty belly capacity, in these planes that could be used to transport cargo,” he says. “There’s a lot of room for growth.”

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