In post-COVID Latin America, investment in infrastructure can bring back tourism – and rebuild the economy

The COVID-19 pandemic came late to Latin America relative to other regions, but damage to public health and the economy was no less severe.

As the worst of the outbreak is contained, countries in the region will join others around the world in search of a strategy to reignite their economies. Travel and tourism present a lucrative opportunity for revival, but the industry was hit particularly hard in Latin America and the Caribbean according to the World Economic Forum’s recent report, Latin America and Caribbean Travel and Tourism Competitiveness Landscape Report: Assessing Regional Opportunities and Challenges in the Context of COVID-19. In the region, the industry is projected to take a $110.2 billion loss due to the crisis, adding up to an expected drop of more than 30% in travel and tourism GDP compared to 2019.

Doubly distressing is the fact this hit comes as the region was starting to make strides in terms of the competitiveness of its travel and tourism industry. More than half of the 21 countries surveyed for the Forum’s report improved their competitiveness from 2017, in categories including the air, land and sea infrastructure that supports both the industry and the broader economy.

In the wake of the pandemic, focusing on infrastructure could not only help bring back Latin America’s tourism sector but also strengthen the entire economy.

Finding financing

Lack of adequate financing is a major obstacle to developing infrastructure. Unfortunately, Latin American governments’ expenditure of public funds on infrastructure as a share of GDP has fallen steadily since the late 1980s, largely due to public spending cuts to ease budget constraints. Given the ballooning economic costs of containing COVID-19, it is increasingly likely the private sector will need to finance infrastructure in the coming years. This will require leveraging public-private partnerships, the various collaboration models between public entities and private organizations to finance, build and operate infrastructure projects.

This strategy is one the region is already familiar with and has implemented successfully. Colombia’s 4G toll road program is leveraging public-private partnerships to build 5,892 kilometres of roads, to the tune of $24 billion. By 2016, nearly half of the projects planned under 4G had secured financing, with $10 billion of investment mobilized. When complete, the program will open up entire new areas of the country for tourism while reducing commercial transport costs by 28%.

Crowdfunding is another increasingly popular financing alternative. In the United States, the 2012 JOBS (Jumpstart Our Business Startups) Act paved the way for crowdfunding platforms to issue debt and equity investments, typically for real estate and energy infrastructure projects. In 2019, French infrastructure investor Meridiam closed on a clean energy project that raised €3.5 million from 2,200 individual investors near the French city of Reims. Allowing communities to invest in infrastructure projects can provide them with both a sense of ownership and a financial return.

Tourism 4.0 meets Infrastructure 4.0

Increasing the technological capabilities of infrastructure could also help Latin America and the Caribbean improve both tourism competitiveness and economies. Contactless payment and ticketing options in airports, buses and subways save time and money. They also allow passengers to avoid touching surfaces that may host disease, slowing their spread.

It is also important to invest in technologically transforming the development and operation of infrastructure assets themselves, not just the user-facing aspects. More technologically advanced infrastructure can improve quality and decrease cost across the infrastructure asset lifecycle. The region could also improve its competitiveness by investing more heavily in digital infrastructure. Throughout the region, 58 million users are expected to be connected to 5G networks by 2025. Investment in the latest information and communication technologies can help more SMEs connect with customers while allowing Latin America to take advantage of the increased mobility of workers, leading to longer stays and more money for local economies. In the post-COVID world, 74% of CFOs anticipate allowing some employees to work remotely permanently. Why spend February in frigid Philadelphia if you can work remotely from sunny Peru in the same time zone?

Resilience for the long term

Infrastructure resilience has become more relevant with COVID-19, but has long-term implications as the world adapts to climate change. As noted in the Forum’s report, improved healthcare infrastructure will increase tourism competitiveness; a focus on resilient hospital design is key. The ability to operate in the midst of a natural disaster or handle patient surges resulting from a flare-up of disease would benefit tourists, but – more importantly – would also benefit locals who have long suffered from inadequate health systems.

However, the benefits of planning infrastructure with resiliency in mind extend far beyond improving healthcare. According to the World Bank, the average net benefit of investing in more resilient infrastructure in low- and middle-income countries would be $4.2 trillion, with $4 in benefit for each $1 invested. In the Netherlands, the “Room for the River” plan helped the city of Nijmegen improve water management by radically rethinking traditional flood-control design. Instead of building taller dikes to contain higher river waters, the designers moved them back and increased space for the river to flow, allowing nature to control the water flow. This preserved both city life and natural integrity. The program is considered so successful that representatives from Bangladesh, China, the Philippines and Vietnam have visited the Netherlands to learn how it can be applied in their home countries.

Building better destinations

Characterized by diverse cultures, stunning natural assets and vibrant cities, Latin America and the Caribbean have much to offer tourists from within and outside the region. Improving infrastructure will not only help more people travel to and around Latin America but will also lay the foundation for long-term economic success.

When the COVID crisis ends, the world has a chance to build back better. Countries that seize that opportunity will not only provide positive experiences for visitors but will also deliver sustainable, inclusive and prosperous futures for citizens.