CAF and Roads: Allies against COVID-19 in Latin America

All sectors have experienced a significant shock as a result of the COVID-19 epidemic. Health, education, economics, SMEs are just some of the hardest hit sectors. But little has been said about our roads, our old-time allies, responsible for more than 90% of theregion’s transport. Sometimes called into question, they have proven reliable in transporting medicines, food and basic supplies to the people during lockdown and in the context of impacted public services.

Roads have ensured continuity of usual activities, but authorities have also had to implement health prevention measures and additional controls on cargo freight and passenger transport. Despite idled administrative activities, the sector has maintained connectivity while complying with contracts on conservation, service in case of incidents, tunnel control and winter maintenance. Some agencies have even gone further and have performed some works, taking advantage of the low traffic.

We must acknowledge the hard work put in roads and appreciate them as we should. Like those friends who are always there for us when we need them. We should not take them and their reliability for granted. Behind them is the effort of an entire sector that must be valued and which deserves our recognition and praise.

Since that first loan to build a bridge over the Limón River back in 1972, roads are the infrastructure most commonly funded by CAF, with 20% of the USD 188 billion of accumulated funding throughout its history, which is consistent with its mission of regional development and integration. Although it is one of Latin America's main assets, with an estimated value of USD 1.2 billion, it represents merely a USD 2,180 per capita investment. This is one-third of the world average and we rank last compared to other regions of the world.

At a meeting of the World Road Association Advisory Group (PIARC), several agencies such as WB, IDB, ADB, AIIB and CAF discussed road prospects in the face of a crisis that has led to a 35% drop in global freight traffic and a 75% reduction in vehicle traffic. Everything points to a decline in demand that will last for a year, followed by a slow recovery until a new—yet unknown—mobility paradigm emerges.

Therefore, three distinct stages are identified in the process:

A first stage consisting of tackling urgent challenges such as ensuring road traffic, by providing the necessary management resources, whether publicly or privately. Reducing traffic impacts public accounts and concessionaire companies. To help our countries cope with this stage, CAF has the best tools for financing road infrastructure: customer closeness, flexibility and vast knowledge of the sector in the region, without losing sight of its mission of sustainable development and regional integration.

A second stage, already underway, focuses on combating the economic crisis. Countries need projects that will help revive their economies, with rapidly actionable investments and that lead to significant job creation. And to develop countercyclical public policies, nothing like our old allies the roads, with an excellent multiplier effect of investment on the economy and an extraordinary ability to create up to 500,000 jobs per USD 1 billion invested.

Faced with these new needs, Latin American governments are revising their pre-crisis road investment plans, assessing whether they remain relevant and which projects they should prioritize. At CAF, we can support them with funds, methodologies for analysis and transfer of regional experiences that help identify these high-impact projects and how to prioritize them.

The third stage is to assume a “new normal” associated with new development models. This presents itself as an excellent opportunity to address structural deficiencies in the region’s road infrastructure, accelerate the fight against climate change, increase resilience, reduce transport demand, boost local supply chains and adopt new forms of territorial organization.

Using CAF’s strengths, we can support the road sector in the challenges facing the region in this last stage, proposing our approach for:

• Improving productivity and competitiveness with sustainable roads, focused on planned and efficient supply chains.
• Physical integration of Latin America, to improve its productive resilience and ensure supply chains in the face of a likely period of deglobalization.
• Boosting new technologies in transport demand management and dynamic road operation, based on ITS, Big Data, V2V, C-ITS, CTC, etc.

In short, CAF will continue to support roads as a promoter of Latin America’s social and economic development, offering itself as allies of the countries of the region to overcome the crisis caused by the COVID-19 epidemic and going one step further.