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Here’s one example of how Big Data helps transportation in our region
Here’s one example of how Big Data helps transportation in our region

Waze helps us navigate traffic and save precious time. In partnership with the IDB Group, it’s also helping to measure the impact of transport projects and solve related challenges in Latin America and the Caribbean.

Latin-America and the Caribbean are surfing the ride-hailing wave
Latin-America and the Caribbean are surfing the ride-hailing wave

Remember what trying to get a cab used to be like? Not long ago, you would have to step into the street, wave your arm in hopes of being noticed and sometimes wrestle another would-be passenger for the coveted spot. And that was only the beginning. At times, cab drivers took you down the “tourist route,” or simply got lost finding their way. At pay time, it was a matter of luck for you to have cash or for a driver to have change.

Shared value takes off
Shared value takes off

The airport industry is key to the growth of air travel in Latin America. This industry generates 5.2 million jobs that add $167,000 million to the region’s gross domestic product annually. Projections indicate that during the next 20 years this industry will create 99 million jobs around the world. For example in Quito the Mariscal Sucre International Airport was built in 2013 as a private undertaking that,  with the IDB Group support, would play a strategic role for this industry in the region. However, modern airports are much more than air transport terminals. They have become “development hubs where other air transport-related or complementary activities converge”, as we have already discussed. A ticket to local food It is increasingly evident that more airport operators and investors realize that environmental and social sustainability has become an investment opportunity that makes financial sense, generating significant benefits for sustainable development. Quiport S.A. — the private operator of the Quito airport — has not been an exception to the rule, and they approached us with a challenge in mind: how to share the value of this development with the local community? The first step was to support the company in conducting a shared value assessment, which allowed us to determine the current and potential resources available. Based on this analysis, Quiport decided to focus on three initiatives to improve both the company and community sustainability by establishing a community-based recycling organization, creating an aviation training center, and supporting the program development of Nuestra Huerta, helping local food producers to be involved in the airport activities. Over the last two years, IDB Invest has supported Nuestra Huerta with business, marketing, and execution trainings, including orientation regarding legal permits for food vending. Thus, the cooperative went from selling fruits and vegetables on a weekly basis to only 100 direct employees of Quiport, to selling more than 36 products to the 7,500 airport workers. Growth has been such that an online platform was created to place orders. Today, this program has benefited not only farmers, but also airport workers who can purchase fruits and vegetables in their workplace. Furthermore, Nuestra Huerta expects to open a store in the airport to sell their product to tourists. Shared value, multiplying effect on profits The Quiport project clearly shows that, in addition to any efforts and work aimed at including the community for the sake of sustainability, one of the most significant outcomes from this project are seen in the company´s positive bottom line. Even though it was not an initial project goal, the upcoming opening of a Nuestra Huerta store will generate a modest return for the airport. Currently, the company is developing recycling initiatives and an aviation training center. The recycling effort will allow the company to save in waste disposal costs, and generate some marginal income from the sale of recyclable materials. As for the training center, customer service will improve at the airport. IDB Invest is committed to working with the private sector to foster sustainable development in Latin America and the Caribbean. We seek investment opportunities that will bring about benefits to communities and companies, as we have done with the shared value assessment for the Quito project. It is not always easy to identify these opportunities, and it is even more challenging to move them forward, but Quiport is a good example that every effort has its reward. So, how do you share the value of your company? Subscribe to receive more content like this! [mc4wp_form]

Four challenges facing the buildings of the future
Four challenges facing the buildings of the future

In the 1960s, the Jetsons showed us a futuristic city in which pollution and the use of non-renewable resources did not exist. Twenty years later, when we had already begun to hear about environmental problems, Blade Runner showed us a more pessimistic vision of 2019: a city with countless skyscrapers, over-population, and extremely high pollution levels. Today we already have much of the Jetson’s smart technology, but sustainable buildings are needed to avoid Ridley Scott’s dystopian city. In 2016, the New Climate Economy determined that the only way to grow in the future and address the current gap is with sustainable infrastructure. According to the Inter-American Development Bank (IDB) and Mercer study “Crossing the Bridge to Sustainable Infrastructure Investing. Exploring Ways to Make it Across,” the ability to develop buildings of this kind depends on overcoming at least four key challenges: 1.     Lack of familiarity What is sustainable infrastructure? Many investors still lack the information they need to clearly identify what it is and what it is not, and to identify the nature of the business opportunity. This makes it difficult to increase this type of construction. Sustainable infrastructure is planned, constructed, and operated to comply with changing governance, social, environmental, economic, and financial standards over time. For this reason, the role of multilateral and governmental organizations is to educate, inform, and provide appropriate financial products, in order to adapt current businesses to a climate change resilient economy with low carbon emissions. 2.     Limited standardization of tools and approaches As this is a megatrend in full swing, there is excessive fragmentation in sustainability standards, principles, and initiatives. In addition, there is a lack of adequate information available on what the environmental, social, and governance criteria are for companies not listed in their respective securities markets, making it difficult for investors to identify which projects are sustainable. In addition, the lack of information increases transaction costs. For this reason, the IDB Group is developing and promoting the adoption of harmonized principles and working with investors to facilitate discussions regarding currently existing barriers to sustainable infrastructure. The objective is to generate useful solutions with innovative financial instruments in local markets and public-private partnerships and concessions that facilitate private sector participation. [clickToTweet tweet="US$6 trillion investment in sustainable infrastructure per year requires #Latam and the #Caribbean" quote="US$6 trillion investment in sustainable infrastructure per year requires Latin America and the Caribbean" theme="style1"] 3.     Lack of coordinated policy Another fundamental point is to have consistent regulations and a commitment to comply with them throughout the region and in all sectors. Following guidelines like the Paris Agreement and the United Nations Sustainable Development Goals is key to maintaining investors’ interest in measures such as the adoption of clean energy. For Latin America and the Caribbean, it is essential to adopt instruments adapted to our reality. In this case, the IDB Group’s NDC Invest is a solution enabling countries to implement these guidelines through a simple platform for preparing sustainable and bankable project portfolios, and increasing access to concessional funds, among other benefits. 4.     Lack of tools and focus on climate resilience To date, priority has not been given to how climate change adaptation should be achieved, both in terms of infrastructure and the financial tools for investing in it. However, today there are various financial tools for adapting to climate change. For example, IDB Invest (formerly known as Inter-American Investment Corporation) has mixed climate financing instruments that can be used to address these challenges and adopt climate change resilient modalities with low carbon emissions. Developing the construction of the future requires investing at least US$6 trillion per year in sustainable infrastructure for our region. This will make it possible to support the economic development of Latin America and the Caribbean, grow at the necessary pace, and prevent our cities from becoming futuristic dystopias. Subscribe to receive more content like this! [mc4wp_form]

What can Latin America and the Caribbean learn from Silicon Valley
What can Latin America and the Caribbean learn from Silicon Valley

In 1984, Steve Jobs launched the first Mac. The classic film “Revenge of the Nerds” was released the same year. At the time, computers and nerds went hand in hand. During my adolescence, the impression of what seemed to be happening in Silicon Valley was “not cool.” In recent decades, the area that stretches to the south of San Francisco has become the undisputed pole of innovation worldwide. Many countries have tried to develop their own versions of Silicon Valley, but for most of them this is an elusive goal. Silicon Valley is a unique ecosystem, thanks to the clustering of the top technology companies, universities closely linked to the subject, innovation laboratories, and a very extensive private equity industry. But what really makes this valley unique is its entrepreneurial culture. They take risks, learn from their failures, and always think big: growing 10 times and not by 10%. In his recent annual letter to Amazon’s shareholders, Jeff Bezos emphasizes the importance of having an obsessive customer focus. Bezos explains how machine learning and artificial intelligence impact almost all areas of his company.  Above all, he highlights the enormous risk of becoming irrelevant if they get stuck on internal processes, if they don’t make quick decisions, and they don’t adapt to major trends. In summary, the letter is a manifesto to the Silicon Valley culture, an exponential vision of the future. The Silicon Valley recipe: New business models Last June, the directors of the Inter-American Development Bank (IDB) and the staff of IDB Invest (formerly known as Inter-American Investment Corporation) spent three days in Silicon Valley, for their first joint trip. The intense agenda included several of the most emblematic technology companies, incubators, accelerators, risk equity funds, and think tanks. Some of the most mentioned technologies were the Internet of Things, artificial intelligence, blockchain, robotics, 3D printing, virtual reality, and augmented reality. However, beyond its inventions, Silicon Valley is well-known for mainstreaming new business models. In many cases, these models have changed complete paradigms, such as the economy “uberization” and the crowdfunding. Ultimately, Silicon Valley is the window from which we glimpse the changes that will impact all areas of our lives, from our work, home, cities, and transportation to our finances, health, education, and entertainment. Computer processing costs continue to fall, so we should expect disruptive changes in every industry exposed to technology. This means nearly all industries! Silicon Valley's key for Latin America and the Caribbean Upon our return, we had many questions about Latin America and the role of development banking: What are the major development challenges emerging from these technological changes? How can we prepare to buffer the imminent impact that the most vulnerable will suffer? What kind of knowledge should we generate and how should we disseminate it? How can we ensure that regulations and laws (that by nature move more slowly than technology) favor innovation, efficiency, and inclusion? How can we deepen support for the Latin American entrepreneur? In the ICT (Information and Communications Technology) industry it is essential to support, in public and private spheres, investments in broadband in a region that has consistently under-invested in infrastructure. Mobile broadband is the great facilitator of the technology ecosystem and the great democratizer of the twenty-first century. Networks must be ubiquitous and costs need to be accessible. It is important to promote competition and entrepreneurship, and prevent market concentration. During 2017, IDB Invest has contributed to this goal/effort with loans to Telecom Personal in Argentina and to Tigo in Paraguay. Despite this, development banking must be more ambitious. In a world that is accelerating at great speed, banking must lead by looking forward and not in the rear-view mirror. The recipes from the past do not work when we are facing paradigm changes. The quantity of data circulating on the Internet doubles every year and a half. Currently, more content and information is generated per day than what was generated in entire centuries during the pre-digital age. Using landline phones, we took more than 100 years to connect all households. With cell phones, we connected nearly everyone in less than 20 years. And now, Dell, IDC, and others expect that by 2020 there will be between 30 billion and 50 billion objects connected to the Internet, helping in turn to provide feedback for machine learning and artificial intelligence. Much has changed since the release of “Revenge of the Nerds.” Now, in Silicon Valley, nerds are cool: they work in jeans and sandals, get around on skates and colored bicycles, they relax on beanbags, and are offered free meals, 24/7. In many cases, their bank accounts feature a lot of zeros, which is not surprising since the five companies with the greatest market capitalization in the world are Apple, Alphabet, Microsoft, Amazon, and Facebook.  The nerds have in fact had their revenge! Subscribe to receive more content like this! [mc4wp_form]

How sustainable infrastructure can decide Peru’s future
How sustainable infrastructure can decide Peru’s future

Last March, Peru experienced extreme weather conditions in the north of the country. This resulted in numerous physical, economic and human losses with costs associated at over US$3 billion, or 0.5% of GDP. Planning for reconstruction, the country found itself at a crossroads: it could focus solely on meeting immediate construction needs or rebuild with a long-term vision. The latter option, to adapt the new infrastructure to the uncertainty of weather conditions, represents an opportunity to incorporate sustainability in highways, bridges, water distribution and management systems, as well as to leverage public-private partnerships and rebuild Peru’s economy to compete in the global market. The government of Pedro Pablo Kuczysnki has launched a reconstruction plan called “Reconstruction with Changes” which has two phases. The first seeks to invest up to US$3 million in immediate reconstruction and resettlement. The second, projected to last five years, focuses on the development of modern, climate-resilient public works that represent an additional investment of US$6 billion. A private sector opportunity A large part of infrastructure losses is absorbed by private markets, and for this reason the private sector has a lot to gain from reconstruction. For example, a new highway can allow products to reach their markets more quickly, lowering the cost of doing business for companies.   The private sector not only benefits from reconstruction. It could also be part of its development. Estimates from the World Economic Forum suggest that for every dollar of public capital that is mobilized to close the infrastructure gap, five dollars of private capital should be mobilized. However, financing alone is not enough. Key tools for reconstruction IDB Invest (formerly known as Inter-American Investment Corporation), the IDB Group’s private sector arm, has experiences in technical assistance that can serve as a reference for Peru. In Mexico’s Port of Manzanillo, we found ways to adapt the design of the port to unpredictable weather conditions. This included ensuring reforestation and measuring the port’s carbon emissions. We made sure that the terminal operators have the tools and training necessary to replicate the environmental assessments every year. We also use the Envision methodology, developed by Harvard University’s Zofnass Program for Sustainable Infrastructure and the Sustainable Infrastructure Institute. The methodology focuses on quality of life, leadership, resource allocation, the natural world and climate, and risk. The tool has helped our clients measure sustainability, particularly during project planning and design phases.   Environmental and social safeguards promote minimum quality in infrastructure investments. In June 2014, during the review of a loan to a local cement plant, our environmental models predicted atypical rains in Asunción, Paraguay. Our environmental specialists needed a contingency plan. When flooding occurred, the plant mitigated damage although there were some construction delays. The project’s sponsor recognized the importance of the environmental safeguard measures and invested in additional water studies, new internal routes with barriers and protected storage facilities. [clickToTweet tweet="For every dollar of public capital in #infrastructure, US$5 of private capital should be mobilized" quote="For every dollar of public capital that is mobilized in infrastructure, five dollars of private capital should be mobilized" theme="style1"] Corporate governance safeguards and attention to integrity also strengthen infrastructure sustainability. Although Latin America is a middle income region, two-thirds of its countries fall in the bottom half of Transparency International’s “corruption perception index.” According to this organization, 26% of Peru’s population has been the victim of corruption. IDB Invest maintains the highest standards of integrity, and we are confident that with our support for the RCC we will reduce this rate. Finally, investments in sustainable infrastructure can attract institutional investors. Investing in socially and environmentally responsible companies is increasingly considered a fiduciary responsibility and a means for increasing the value of company assets over the long term. We have witnessed the interest of such investors when we presented sustainable and bankable investments. The Reventazón hydroelectric dam in Costa Rica and the Campo Palomas and Colonia Arias wind farms in Uruguay have been pioneer projects in attracting financing from local institutional investors. In Peru, we seek to leverage local money and our capacity to advise public-private partnerships to attract more local stakeholders. This is a critical moment, but Peru is well positioned to convert its losses into opportunities. Investments in sustainable infrastructure are the only guarantee for building a more inclusive, less vulnerable, and more competitive future in the 21st century. Subscribe to receive more content like this! [mc4wp_form]