Infrastructure for Development: Priority economic challenge

According to a dictionary's definition, infrastructure is a series of elements or services considered necessary to create an organization and make it work. The World Bank defines it as a series of basic services (electricity, telecommunications, water, waste disposal, sanitation, roads and highways, transportation, urban and interurban trains, buses, ports, navigation ways and airports).

The WB sees infrastructure as a priority condition for economic development, since it helps multiply investment profits, competitivness and the nationžs wealth. 1. It reduces costs, for example with adecuate roads and highways, transportation fares drop and one saves time. This is also true for telecommunications. 2. It offers faster information on offers and demands, since it opens markets and stimulates competition.

The most important challenge for the Guatemalan economy is the economic growth of a small country, far away from competition. Due to the globalization process and the reality of Free Trade Zones, our country shoud guide its efforts towards an open trade strategy. Sustained economic growth is only possible if exports are increased. It is important to create an adecuate infrastructure to be more efficient and competitive.

CENTRAL AMERICAN DIAGNOSIS

A recent study by the Central American and Panamanian Federation of Private Institutions (FEDEPRICAP), titled "Infrastructure Investment, Key to the Central American Future" shows that the present situation regarding infrastructure and services in the six countries of the region, with a few exceptions in particular cases, is cause for preoccupation for different reasons: Roads and highways have not been modernized since the 50's or 60's. Ports don't fulfill modern transportation standards and the cargo volume of foreign trade is greater than the current capacity. This is especially at Puerto Santo Tomás de Castilla in Guatemala, and causing serious merchandise accumulation problems. Airports show limitations and lacks as well. Electricity production isn't sufficient, and an energy crisis is a constant possibility. Except for Costa Rica and Panama, the other regional nations show important delays in telecommunications coverage.

THE GUATEMALAN CASE

Electricity: In 1995, only 41% of the population had access to electricity. The annual consumption rate of each Guatemalan was about 250 Kwh, which is equivalent to having one 100 watts lightbulb on. This rate is similar to that of some African countries and the lowest rate in the continent, after Bolivia and Haiti. According to the WB, industrialized countries consume about 20% more than the electricity they need if the inhabitants would pay the real marginal cost of the total supplies.

Telecommunications: In 1995 there were only 38 telephone lines for every 1000 inhabitants, with 85% concentrated in the capital city. The Latin American average for every 1000 inhabitants is over 50.
Telecommunication regulations only the government telephone company, Guatel, to offer the service, a public monopoly. Local fares are cheep but Guatel reports high profits from expensive international phone calls.

In general, ports show low productiviy and the lack of optimal facilities discourages businessmen who loose competitiveness in the international markets.

Highways: Our highway network in critial condition. Only one third of the 12 thousand kilometers of highways are paved. Of the unpaved roads, only 10 % are in adecuate conditions. 40% of the paved roads need maintenance, although most of them are constantly taken care of.

Trains: In the transportation sector, the most critical one is the railroad service. (FEGUA).

WHAT IS THE PROBLEM?

Current infrastructure does not cover the needs of the population, services mostly the capital city and the quality is low. There is little or no participation from private initiative. The state is the only provider of these services.

IN SEARCH OF SOLUTIONS

Infrastructure development requires a deep restructuring of the state. Some countries have developed schemes which promote private participation in a competitive environment. These enable the state to concentrate its activities on financing education and basic health needs, and on services only it can provide such as the judicial system.

On the other hand, the WB has identified three elements needed to increase investment quality and create new incentives to develop better infrastructure: These three principles are: Making social development more profitable, respecting the needs of the beneficiary groups and providing more efficient running water and drainage. There is also a constant deterioration of enviromental sanitation, especially water treatment, and the collection, disposal and treatment of various types of waste.