It's the Environment, Stupid.

Wednesday, January 25, 2006

Infrastructure Investment

Infrastructure is important to a city’s economy. With the ever increasing pressure to open up trade, low and middle income countries around the world are forced to be players in the global marketplace if they want their economies to grow. However, in many of these countries infrastructure has been neglected, and in some cases is holding back the move forward. A New York Times article from October 2004 highlights Brazil, one place that is facing this dilemma. Even though exports are increasing, the aging railways, roads and ports can’t accommodate the traffic – bottom line: Brazil loses unless it upgrades its infrastructure. If Brazil were to do that, it could potentially increase trade traffic and boost its economy. But it costs money to upgrade infrastructure, and such investments would more than likely take a country into a deficit – a practice frowned upon by donor agencies such as the International Monetary Fund. And even when new infrastructure projects are undertaken, such as roads or water treatment systems there often isn’t money left to invest in maintaining them. Numerous studies have shown that performing regular maintenance – fixing or repairing things, and preventive maintenance - costs far less in the long run. This is true not just of transportation infrastructure, but of things like water, drainage and sewage systems, and electricity grids.

The lack of proper maintenance calls out for disaster, take New Orleans for example. Had the levy not broke, would the city have flooded? Who knows, but the levy would have had a better chance of not breaking had it been properly maintained. That is a dramatic example of course, but it is happening all around the world, in high and low income countries. The same can be said of social infrastructures like education (schools) and healthcare (hospitals). The lack of investment in these things only hurts the economy in the long run.

The article referred to: New York Times "Drive for Global Markets Strains Brazil's Infrastructure" October 27, 2004 - By Todd Benson.

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