Creating More Opportunities: Engaging the Private Sector on Infrastructure

Western Hemisphere Support for Katrina

I am happy to be in New Orleans, in this city of renewal. I want to thank Norm Anderson in particular for organizing this conference, and having the vision to host it in New Orleans.

In the aftermath of Hurricane Katrina, the outpouring of assistance worldwide was unprecedented. We accepted varied offers of material and monetary assistance from 120 countries and others. For example, Chile and Mexico gave truckloads of supplies. Trinidad and Tobago gave funds to NGOs. The Dominican Republic, host of the next OAS General Assembly, pledged funding. The Organization of American States made a contribution from its Emergency Fund, and approved a resolution expressing its solidarity with the United States. To all, thank you.

Our aid and support for Western Hemisphere

We in the United States, also look to help our friends in need in our Western Hemisphere neighborhood. In response to three hurricanes that struck Central America and Southern Mexico last fall, President Bush announced at the Summit of the Americas in November that three distinguished private sector leaders had agreed to launch a nationwide effort to encourage private donations for relief and reconstruction. This is in addition to the U.S. government contribution of over $21.5 million for the hurricanes in Central America and Mexico.

The United States is the largest donor of emergency humanitarian relief. We are also the world’s largest donor of official development assistance.

In Latin America and the Caribbean, the Bush administration has doubled its official foreign assistance since coming into office ($862,452,000 in FY2001 to $1,819,423,000 in FY2005), and the figure has tripled since 1997 ($681,426,000).

On top of these levels, we are making new funds available through the Millennium Challenge Account. The MCA builds on the Monterrey Consensus, which was articulated at the International Conference on Financing for Development in Monterrey, Mexico in March 2002. All eight compacts negotiated by the Millennium Challenge Corporation, except for one, include an infrastructure component of some kind, demonstrating the tremendous need for infrastructure investment. For example, the U.S. signed a 5-year, $215 million MCA compact with Honduras on June 13, 2005 to improve road infrastructure and agricultural diversification and market access. The U.S. also signed a 5-year, $175 million MCA compact with Nicaragua on July 14, 2005 to improve property rights, infrastructure and competitiveness of rural businesses.

Link between Democracy and Development

U.S. policy in the Western Hemisphere is rooted in the link between democracy and development. Sustained development needs the stability of democratic institutions that people can believe in.

Does this change if so-called "leftists" are elected? Let me quote from Secretary of State Rice’s remarks to the inaugural session of last year’s OAS General Assembly: "The divide in the Americas today is not between governments from the Left or the Right. It is between those governments that are elected and govern democratically—and those that do not."

These democracies need to deliver benefits to their people—as every democratically-elected leader knows. Democracy is strengthened by economic systems that serve peoples’ primary interest: jobs and opportunities for their families—and social safety nets for the poorest.

The challenge is that governments, working intelligently and creatively with the private sector in their countries, deliver concrete benefits to ordinary citizens, and in this major way, put their countries on the path to sustainable and job-creating economic growth.

Working with the Private Sector

We also want to work more closely with the private sector in our activities at the OAS. We started at the OAS General Assembly last year, where the accompanying private sector forum called for public-private alliances to improve competitiveness. Then, we made a significant step forward at the Summit of the Americas in Argentina with the launching of the Private Sector of the Americas network. At the Summit, the private sector made three recommendations: 1) Tear down barriers (or "red tape") to entrepreneurship; 2) Open trade; and 3) Enhance competitiveness.

When we consider entrepreneurship, we put a special focus on small and medium-size enterprises. The IDB reports that SMEs account for 20-40% of all private sector jobs in the region and 60-80% of net new jobs in the U.S. One venue for promoting SMEs is through the SME Congress, being held in Mexico City May 8-9.

On our trade agenda, I’m happy to report progress; we recently closed agreements with Peru and Colombia, in addition to our agreements with NAFTA, Chile, and CAFTA-DR. In all, this represents over 85% of our trade with the Hemisphere. We are still in the process of negotiating with Panama and Ecuador.

And we are pressing forward on the Competitiveness agenda. At the Summit of the Americas, President Bush called for the first ever joint Commerce, Industry and Economy Ministerial to bring high-level officials together to focus on competitiveness. Our Secretary of Commerce, Carlos Gutierrez, will host a meeting of his colleagues focusing on the issues such as the entrepreneurial environment and workforce development.

Obstacles to Doing Business: Infrastructure

In our dialogue with the private sector, you have identified some of the major obstacles to creating more jobs. In Latin America and the Caribbean in particular, 58% of firms reported that access to electricity, telecommunications, or transportation as "major" or "severe" obstacles to the operation and growth of their business.

This situation has put the issue of infrastructure investment in the forefront of the economic agenda in many Latin American countries. Since public investment cannot provide all the answers, efforts to catalyze private finance are essential.

Infrastructure Facility of the Americas

So how do we do a better job of catalyzing private investment in infrastructure? Many people, including Norm Anderson, tell us that a top deterrent is the lack of independent and reliable assessments of infrastructure project proposals.

To meet this challenge, at the Summit of the Americas last November in Argentina, President Bush proposed the creation of an Infrastructure Facility of the Americas. The Facility, when operational, will catalyze private sector investment in infrastructure projects by rating project proposals from private and public sponsors based on rigorous feasibility analysis. The ratings would give private investors an objective basis for assessing projects, and create opportunities for public private partnerships.

I’ll let Francisco Parodi from the US Treasury, our next speaker, give you the details: the who, what, where, and how. I can tell you that the U.S. government is consulting actively with the IDB on this.

Obstacles to Doing Business: Human Capital

It is one thing to develop the physical infrastructure of our communities. We also recognize that to attract investment, it is important that our communities also invest in human capital.

In this regard, we applaud the efforts of Mexico, Brazil, Chile, and Colombia to deliver aid directly to poor families that commit to keeping children in school. And to contribute to quality education in the region, the U.S.-funded Centers for Excellence in Teacher Training in the Caribbean, Central America, and the Andes have trained over 12,500 teachers—so much due to partnerships with the private sector. Universities in the region can also work with the private sector to improve education in science, technology, and engineering.

President Bush highlighted in Brazil the importance of the choices we make for our children: "Ensuring social justice for the Americas requires choosing between two competing visions. One offers a vision of hope—it is founded on representative government, integration into the world community, and a faith in the transformative power of freedom in individual lives. The other seeks to roll back the democratic progress of the past two decades by playing to fear, pitting neighbor against neighbor—and blaming others for their own failures to provide for their people. The choices we make will determine which vision will define the Americas our children inherit—and we must make tough decisions today to ensure a better tomorrow."

Opportunity Zones

This President believes fervently in opportunity. At this year’s General Assembly in Fort Lauderdale, he said "When the people of the Americas see that opportunity and social mobility are real… the only limit of how far they can go is the size of their dreams…"

After Hurricane Katrina, President Bush announced the creation of the Gulf Opportunity Zone to attract businesses and investment to this devastated area. And we aren’t just promoting opportunity along the Gulf Coast. For example, in the Renewal Community of Yakima, Washington, local leaders have targeted tax incentives and other economic development resources, including HUD resources and private banks, to the city’s most distressed areas.

We are looking to bring this and other stories of success at the local level, these "Opportunity Zones" or "Renewal Communities" to Latin America and the Caribbean. The Inter-American Foundation is currently drafting MOUs with the governments of Guatemala and Nicaragua, has begun conversations with Argentina, and has received indications or interest from Honduras and Ecuador. We intend to push these focused approaches hard because we think public-private partnerships work.

Public-private partnerships in "Opportunity Zones" and "Renewal Communities" is a concept that makes sense, is working, and with hard work, creativity, and some thinking outside the box, can create tangible opportunities for poor people throughout our Western Hemisphere neighborhood. And all of these efforts will depend on infrastructure—where you all come in. That is why those of us in government look forward to exploring further partnerships with the private sector in Opportunity Zones and Renewal Communities.

Working together, we can create concrete, tangible opportunities for the people of this Hemisphere.

Thank you.