A Hemispheric Policy Focused on Strategic Infrastructure Capacity Norman F. Anderson CG/LA Infrastructure LLC & The Latin American Leadership Forum World Economic Forum Financing for Development Initiative June 23 & 24, New York

Where We Are A Confidential Report on Progress & Directions

The Source Code The Weakness –Uncertainty –Bad Design –Slowness –Destructive Lobbying –Public Works Sub-optimal design Sub-optimal perform. Sub-optimal finance The Solution –Performance Know. Financial Physical –Strategic Know. Finance-ability Competitiveness –Regional Results Competitiveness OPPORTUNITY CREATION Strategic Capacity HISTORICALLY VERY BAD PERFORMANCE - COUNTRY/TYPE OF PROJECT

Bad to Good to Great Project Concept Project Concept Good Bad Feasibility CRITERIA 1. Vision/Capacity 2. Physical 3. Financial 4. Opportunity RESULTS 1. Rapid Finance 2. Performance 3. Track Record 4. Competitiveness

Focus of Policy - 4 Benefits Central to Country Competitiveness Central to Equity - Opportunity Creation Each $1 Billion Invested Creates 15,000 Jobs Each $1 Billion Invested/Country yields.75 GDP Critical to the Political Agendas of Every Government Brazilian & Mexican PPP Programs Optimal Project Design & Financing Imperative for the Creation of Long-term Cooperation & Strategic Positioning Currently 1-2% of GDP goes to Infrastructure; Needs 3-4% - China is 9%

Basis for a Rich, Sustained, Policy Region’s Infrastructure Cast of Mind is Market-oriented Rate of return conscious The Chilean Model is Successful Priority projects, based on competitive vision Domestic origination, control, investment International participation -- as critical catalyst Brazilian PPP Model is Teetering Other Countries are Searching/Troubled Don’t Impose Chilean Model, BUT note that it 7% of GDP Invested p.a.

Timing & Structure Convergence of Four Factors = Right Timing Market consensus STRONG felt need/receptivity Local model creation Requirement for national + international partnerships Structure Success Strategic Competitiveness not Public Works Exceptional Performance - Physical & Financial Sustained Wins for Equity/Economic Opportunity Structure Rich Policy on top of a Four Factor Convergence

The Action Items Immediate Actions - Create Fund/Show Results Signal the Central Role of Infrastructure Generate Rapid High Quality Financial Investment Begin to Rate Projects - Physical + Financial Medium-term Actions Bond Fund Equity Fund Create the Conditions for Infrastructure, based on Performance

Seven Key Questions 1.Where does the money come from? 2. How is the agency structured? 3. Where does the agency reside? 4. Who does the work? 5. Who participates? 6. What is the professional structure? 7. What are the measurable benefits? Objective: Get Projects Running; Create Jobs; Competitiveness

1. Where Does the Money come From? There are a Series of Options –US Agency –MDB Initiative Under US Leadership –Public/Private Partnership US Catalytic Support Latin Private Sector Support (Leadership) Latin MDB Participation –US/Spain Partnership Need: Leadership; Speed; RESULTS -- No Large Board

2. How is the Agency Structured? The Private Equity Model is “Good Enough” –Small group of investment professionals –Rapid decisions –Scoring based on Projects going forward Performance of those projects Jobs created by those projects Competitiveness improvements - country/region Need: Results, not Bureaucrats; Risk, not Caution; Relationships

3. Where Does the Agency Reside? It’s a Global, Digitized, Results-Expectant, World Need: Dynamic Free Market Attitude, Close to Market Leaders Brazil/Chile Washington Mexico Metrics Railroads Ports Leaders Airports Highways The Future Water Bndes CAF Cabei Banobras

4. Who Does the Work? Work must be done by local firms, under the guidance of multidisciplinary team of people who know finance –Local engineering firms –Local financial houses/executives –Local competitiveness brains –Local job creation brains Top level, world-class, oversight –Project decisions –Critical coaching Need: Draw and Guide Local Talent; Manage for Results

5. Who Participates? Has to be a significant public sector component - Credibility - Vision Has to be a significant private sector component - Market Logic - Discipline - Action Strategically a Public/Private Partnership Might Work - BOARD

6. What is the Professional Structure? Public Private Board –Strictly Limited - Oversight & Performance Reviews –50% Public & 50% Private –50% Latin America & 50% ROW Professional Staff –Multidisciplinary & Eclectic –Great Conceptual Capability –First-class Technical Staff Structure Like a Private Equity Fund - But Blue Collar

7. What are the Measurable Benefits? 1.Gross Increase in Infrastructure Investment as a Percent of GDP 2.Increase in Pace of Project Creation 3.Documentation of Physical Performance 4.Documentation of Financial Performance 5.Dynamic Increase in Opportunity Creation Objective: Create a Track Record of Results for the Region

Results Growth * Projects * Markets Transparent Metrics Efficiency Velocity Quality Performance Competitiveness GDP Jobs Opportunity GrowthProjectsMarkets Halo Effect: Knowledge, Experience, Market Confidence

The Halo Effect Catalyze Monitor Decide Catalyze Monitor Decide Bond Fund Pension/ Equity Feasi- bility Fund Current Efforts = 50% Current Efforts = 50% Additional Efforts = 50% Additional Efforts = 50% Good Projects Strategic Capacity Good Job Creation 1% GDP Growth Improve Equity Performance Rating Physical Financial Results Plus Market Confidence & Plus Improved Regional Reputation

Window of Opportunity Best Performance in Decades + New Leaders -8.3% +17.3% 5.5% 4.0% 0.6%/2.1% $30 MM = $200K/Study

The Infrastructure Gap o“The 1980s and 1990s saw a widening of the infrastructure gap between Latin America and other successful developing economies like those in East Asia. The World Bank o“…the private sources that were supposed to meet the investment needs, have lost their appetite for infra-structure at a time the public sector is investing less rather than more - less than 1 percent of GDP in most LAC countries compared to the 3 percent needed. The World Bank