Role of Infrastructure in the Development of Latin America - Literature review Example

Role of infrastructure in the development of Latin America

Introduction

Infrastructure entail permanent engineering equipments, structures and physical facilities which are the base for provision of energy, telecommunications, sanitation, water and transport services to the productive households and sectors. It is the facilities, systems and structures serving an area, entailing the facilities and services for the functionality of its economy. A sufficient supply and accessibility of infrastructures have been for a long time seen by both policy makers and academicians as a main ingredient for social inclusion and economic development. Latin America has greatly invested in infrastructure in order to enhance, sustain and enable the living conditions of the population.

Role of infrastructure in the development of Latin America

Infrastructure enhances development

Infrastructure along with the services that it provides has a considerable impact on the economies of Latin America and the quality of living of the people residing in the region. Economic infrastructure entailing transportation and communication are vital for the attainment of millennium development goals. They enhance access to prolific centers at a reduced social and economic cost as well as improving the mobility and connectivity of the whole populace particularly the deprived and rural areas residents needs so as to attain access to basic health care and education services( Hulten, 15).

As the global economy expands and production turns out to be increasingly international, basic infrastructure should be upgraded and expanded so as to meet the global technological standards and to also to widen coverage in national regions in order to efficiently the needs of the population as well as productive needs Calderon and Serven (50; 2011) argue that infrastructure influences the productivity of Latin America and also positively influences Latin America countries. With sufficient infrastructure together with the associated services, Latin America countries can recompense for absence of particular natural resources. Infrastructure development are advantageous because then enhance greater level of production specialty, generation of economies of scale and integration of territorial and economic systems of the region. In addition, infrastructure development reduces the costs connected with utilization of services, enhances better market access for inputs and goods, improved quality and coverage of services offered to the populace and increased and improved social well being (Calderon & Serven, 55; 2011).

Improvement and availability of infrastructure service gauged on basis of transport , road and telecommunications services, generation, distribution and transmission of energy and supply of clean water and sanitation along with making them increasing widely accessible promotes productivity and reduces costs of production for producers. The improved profitability promotes investment and thus raises potential growth of gross domestic product. Improved growth subsequently increases the income for the population, generating positive second round impacts on the region’s economy (Straub & Terada-Hagiwara, 127).

According to Straub and Terada-Hagiwara (132) infrastructure support s poverty reduction and growth both directly, through acting as a factor of production and indirectly, through enhancing technological progress. A rise in the infrastructure capital stock has a direct effect on the productivity of the other economic development factors. For instance, improved communication and transportation technologies tends to promote productivity of labor, permit superior economies of scale and promote access to health and education services(Straub and Terada-Hagiwara, 133). Calderon and Serven (5; 2009) point out that the quantity and quality of infrastructure positively influences the economic growth of Latin America countries. Improvements in infrastructure have the probability of improving the income distribution of a region or country through improving the well being of the underprivileged population. Superior access to sanitation and roads, which is only seventy four percent as efficient in the Latin America as in industrialized regions mean, reduces the nation’s Gini coefficient.

According to Calderon and Serven ( 7;2009)Gini coefficient is the marker of the parity of a nation’s distribution of revenue and it varies from the extreme parity value of zero, whereby all individuals in the society have similar revenue, to extreme disparity of one, whereby only a single person have all the revenue. Improvement in infrastructure raises the access to the economic activity, thus easing income disparity. Utilizing a wide range of econometric methods, Calderon and Serven (75; 2009) approximates that if all countries in Latin America were to be in a similar position with the infrastructure leader in the region, they are supposed to lessen their growth benefits by between 1.1 to 4.8 percent per year and lower their Gini coefficient by 0.02 to 1.0. Getting to the infrastructure development levels of a mean East Asian nation would offer even more benefits such as tremendous growth increases.

Infrastructure as a vehicle for social, economic and territorial cohesion

Infrastructure along with its associated services functions as vehicles for social, economic and territorial cohesion through uniting and integrating the territory, thus making it easily reached by other countries and regions and permitting people to make connections with their surroundings. In addition, they improve the distribution of income and assist in reduction of poverty within the region. Fay and Morrison, (27) note that infrastructure enhances social development, particularly when it is incorporated social cohesion and connectivity policies meant for the highly economically and socially deprived regions, whilst additionally assisting in the reduction of distributional inequalities.

Maintenance of suitable degrees of investment in infrastructure over period is thus a socially enviable objective that leads to excellent economic performance and assists in the improvement of living conditions of the populations in the region. The absence of adequate nationwide infrastructure is capable of hindering growth or making it hard to hold a position within the global markets if supply of the infrastructure services is not adequate to support to support development and expansion of additional segments of the Latin America economy and make sure that the scheme is sufficiently adequate (Fay, & Morrison, 42).

The elevated cost of the infrastructure services within developing nations negatively impacts their incorporation in global trade. The effect is equivalent to the effects of customs duties and exchange rate deformations. In addition, the elevated costs of telecommunications, sanitation, and electricity services, and also their quality have a negative effect on factor productivity, business as well as export competitiveness. Therefore, the lack of sufficient infrastructure along with ineffective services signifies huge hurdles to the efficient execution of civic policies, the complete attainment of social and economic development objectives and the accomplishment of integration goals (Fay & Morrison, 50).

Calderon et al, (2010) note that infrastructure together with its services comprises a major factor for the improvement of the quality of livelihood of people, enhance social inclusion and promote equality. The infrastructure quality and its services have an impact on the education and health of income persons and is vital to promote their access to the employment opportunities.The ability to access sanitation and water is vital for good health and well being because the diseases gotten form drinking unhygienic water or as a result of lack of sanitation and water are amid the key causes of infant deaths. The availability and accessibility of electricity, access of individuals to communications and transport networks promote opportunities and inclusion for the isolated communities in both rural and urban areas (Hulten, 11).

Infrastructure promotes trade

Infrastructure along with its associated services has an impact on trade and development. Calderon et al (2010) argues that under suitable conditions, improvements and development in infrastructure might have a considerable positive effect on growth, development and trade. Improved infrastructure raises the capability to move services, ideas and goods within regions and to move services and goods from one Latin America countries to other regions. It lessens costs of transport and reduces logistical and inventory cost, thus expanding markets for goods and services across Latin American region and beyond.

Better infrastructure has been beneficial to both consumers and producers and raise the attractiveness of Latin America for the foreign direct investment. Improved infrastructure also permits for a highly impartial distribution of resources and income through enhancing the capability of the population to fully utilize the significant education and health services fundamental for development and growth. Infrastructure plays a significant role in the reduction of rural poverty through linking small business owners and farmers in cut off geographic regions to mainstream business opportunities and markets. Infrastructure within Latin America has assisted in combating economic and social exclusion (Calderon et al, 67).

International supply chains have been highly integrated in the last decades and production has increasingly being segmented across continents and countries. Infrastructure of poor quality might efficiently exclude numerous nations from global supply chains and greatly composite manufacturers who apt to have a greater added value. Hummmels (4) argues that doing trade across borders takes a long time in developing nations than in developed nations as a result of reasons, entailing procedural coordination, corruption and infrastructure type. Tariff comparable of trade holdups; the holdups associated with inland transport and customs and the duration goods take waiting within ports surpass tariffs in each section of the globe. These delays are caused by both the soft and hard features of infrastructure.

Whilst the physical constituent of infrastructure is significant, the efficiency is partly conditioned by software or soft infrastructure. Soft infrastructure refers to the institutions and procedures associated with moving services and goods. Improvement of soft infrastructure is the major goal of Latin America trade facilitation plan, which intends to promote the administrative and bureaucratic effectiveness of customs ports as well as investment gateways and the general speed of movement of products. Apart from the physical transport infrastructure, additional factors that might cause these delays include distance from ports, poor coordination, poor information management and poor communication, unskilled inspection and customs staff as well as corruption. Latin American governments have ensured that the measures are put in place to enhance infrastructural development (Hummels, 7).

Infrastructure enhances competitiveness

The quantity and quality of infrastructure is a significant aspect in explicating the disparity in growth and development of East Asia and developing nations. Hulten (14) argues that the efficiency in the utilization of infrastructure is useful in explaining the growth difference amid East Asia and Latin America and over forty percent of the discrepancy amid high and low growth nations. Latin Americas dreary infrastructure investment performance considerably determines the growth and trade under performance of the region comparative to East Asia in the 1990s. Elevated transport costs act to restrain potential for effective producers to develop and export, whilst safeguarding ineffective domestic producers. The cost delays is in obstacles to trade in subsisting products, and also in opportunity cost of goods that aren’t exported due to elevated costs of transporting these products (Hulten, 16).

Conclusion

Infrastructure is the key to the social and economic development of Latin America. Infrastructure along with its connected services represents an essential condition for development of Latin America as result of social inclusion, improved quality of life, territorial integration and competitiveness of the region’s economy. The availability of adequate infrastructure promotes productivity, reduces production costs, increases generation of income and attracts foreign direct investment. Infrastructure also improves the mobility and connectivity of the whole population of the whole population especially the underprivileged individuals and rural residents enhancing them to access the basic services such as health care and education.