Proposals to Revive the Roads Sector

While both the coverage and quality of road infrastructure have been improving in recent years, significant gaps remain. Current road investments reach USD 28.5 billion a year, representing 1 percent of the GDP, but the region requires three times that amount—or about USD 100 billion annually—to compete with global averages by 2040.

In this sector in particular, it is clear that there are very marked deficits related to identifying, prioritizing and designing road projects. Similarly, construction efficiency is low. It is estimated, for example, that building just one km of road in Latin America can be up to five times more expensive than in the European Union. All the above, combined with insufficient funds allotted to the management, conservation and maintenance of existing infrastructure, are an important consideration.

The global COVID-19 pandemic has led to a sharp decline in consumption and investment. The World Economic Forum predicts an average GDP fall of 8.1 percent in the region, a more pessimistic figure than expected for most countries worldwide. Latin America is also estimated to see an average recovery of 3.6 percent of GDP in 2021, a slower rate than in other emerging economies.

This new juncture requires substantial efforts to carry out a new sustainable infrastructure agenda as a driver of growth, particularly as its multiplier effect on the economy is well known: infrastructure is estimated to have an economic return of 20 percent of the GDP on average. Studies have found that in the context of transport the greatest economic return is generated by road construction projects, as they contribute up to three times more to growth than investment in other modes such as ports, airports or railways.

The above makes it is essential to develop proposals aimed at identifying sustainable road construction projects, prioritizing those that create a greater impact the short-term economic recovery. In this sense, it is important to focus investments on necessary projects that may be executed rapidly and create jobs. This involves selecting projects that:

• aim to improve existing infrastructures instead of building new ones, as they usually need a shorter preparation time
• have low technical complexity, which is cheaper in terms of cost and analysis time
• have largely resolved property and environmental licensing issues
• were awarded but stopped due to a lack of funds reallocated to the health emergency

Our proposal for economic recovery for the first six to nine months covers different levels of intervention depending on the hierarchy of the roads and their degree of development, understanding that the most mature thoroughfares require strategies that allow them to improve their quality compared to those whose lines of action will be more aimed at improving existing standards.  

1. Intervention in terms of digitalization and climate change in high capacity roads, which account for one percent of the total road network in Latin America. The goal is to adapt this type of road to the new models of connected mobility and incorporate resilience criteria that allow to build more robust routes, that is, incorporate climate adaptation measures that help maximize their residual functionality in the face of adverse weather events.
   
   In terms of digitization actions and Intelligent Transport Systems (STIs), the Safe Roads Plan, Green & Connected presented by the Spanish Road Association in 2020 suggests the installation of appropriate horizontal and vertical signage, weather quality information, effective real-time incident warning systems, communication and positioning throughout the route, circulation monitoring, autonomous emergency stop areas, fiber optics and 5G coverage, among others. European Union studies indicate that the unit cost of adapting a high-capacity road for autonomous mobility is around EUR 230,000/km
   
   In order to improve the resilience of high-capacity roads, work must be done to identify risks and propose specific solutions for each road, especially in aspects such as slope stability, improved drainage, structure protection and resurfacing.
   
   br />The Public-Private Partnership model for the procurement of like projects could be an interesting tool in cases where private sector knowledge and experience can be key in optimizing the proposed solutions with respect to the technical knowledge of public administrations, where the possibility of working with pilot sections for new technological elements could also be considered.

2. Actions to make primary roads more productive and efficient. The proposal seeks to improve the quality and safety standards of the main road network—which represents as much as nine percent of the region’s total—and those that countries recognize as strategic corridors.
   
   In terms of quality, improving the IRI (International Roughness Index, an indicator used to measure the evenness of pavements and associated with the level of road conservation) is paramount. There are numerous studies that show a clear correlation between IRI and the operational costs of vehicles. The U.S. NCAT (2015) notes that IRI values greater than 2.7 m/km represent an increase of over 25 percent of the operational costs of vehicles. On the same subject, the conclusions of a new study using 2019 data presented in Brazil shows that the country is estimated to spend an extra 28.5 percent transporting goods due to problems related to pavement deterioration.
   
   In order to improve road safety we propose a series of interventions that help reduce the severity and number of accidents, including road widening, adding entry and exit lanes, building shoulders, lighting sections and improving signage.
   
   This type of projects may entail both contracting as public works, like Ecuador’s Result-based Maintenance Program, as well as implementing Uruguay’s Public-Private Partnership model proposal.

3. Projects that prioritize territorial balance and social cohesion in secondary and tertiary thoroughfares, which account for 90 percent of Latin America’s total road network. The proposal intends to help improve connectivity between regions, as well as infrastructure reliability by implementing the necessary actions to create drivable roads 24/7 through minor rehabilitation interventions coupled with periodic and routine conservation and maintenance actions.
   
   This type of interventions can have a high potential for creating direct and indirect jobs in the short term. Investment in rural road maintenance projects is estimated to create between 200,000 and 500,000 direct jobs per year for every billion dollars spent, compared to 40,000 that could be created through other infrastructure types in Latin America and the Caribbean. Average costs are estimated at around USD 125,000/km for minor interventions, with USD 30,000/km for annual maintenance plans. In this sense it is interesting to point out the Road Infrastructure Program for Regional Competitiveness, an initiative that seeks to intervene about 15,000 km of Peru’s departmental road network distributed across 42 corridors in order to improve roads connecting production centers in regions with export potential with collection centers and national transport corridors. The Program is divided into three phases. The first is currently being tendered as public works, encompassing almost 5,000 km distributed across 18 corridors.

4. For urban road projects , the proposal suggests incorporating the concept of Complete Streets into urban planning, promoting equity and coexistence in public spaces. These “complete streets” are designed to guarantee safe access to all users, offering greater mobility options and efficiently connecting people with roads and generating safety and coexistence, considering all the necessary elements from an integral view of the space, including sidewalks and urban fixtures, bus stops and lighting; parking, bike lanes, green infrastructures, parking lots, and service networks.
   
   According to the economic evaluation of a Complete Streets project in Santiago de Chile, active cities may be good business. The study assessed urban dynamics by observing Pocuro Street over the past 30 years, and found that real estate activity grew by 224 percent compared to parallel streets, becoming a highly desirable place for commercial and residential uses. In a series of Brazilian municipalities such as Fortaleza and Teresina, urban interventions with this more comprehensive vision are generating positive impacts at a cost of no more than 15 percent of the initial project’s budget. Moreover, with the current restricted mobility measures, the time is right for these interventions, as impact on service and people is minor.
   
   Economic and social development in Latin America requires transport networks that facilitate the efficient commute of the more than 500 million people on as many as 150 million existing vehicles. It is clear that the region must invest better, as well as seek formulas to do so in such sectors that can have the greatest impact on the economy and employment. For this reason, the suggested proposal for the short term—i.e. interventions designed for the next six to nine months—is to prioritize projects that make the existing infrastructure more productive.
   
   However, it is essential to work in tandem in the development of strategic plans for the medium and long term, through identifying a portfolio of projects that include building new infrastructures and maintaining of existing ones. Prioritization of these projects should consider variables such as an increased connectivity and road coverage, improved network redundancy to strengthen system resilience, and reduced operating costs, among others.  A second stage should define how to finance the portfolio of such prioritized projects, setting estimated turnaround timetables for investments and considering how much of this can be done using public budgets and how much it could be supplemented through private participation.
   
   It is important to start as soon as possible toward the goal of reactivating the sector in order to contribute to the region’s economic growth. It is necessary to present reasonable, achievable and balanced investment programs to help restore the trust of citizens and investors, as well as allow us to believe in the future again.