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Trade and Development
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Related Topics - A Preliminary Critique of IIRSA

The following draft for discussion takes a preliminary look at the Integration of Regional Infrastructure in Latin America (IIRSA). BIC welcome your comments and input. Please contact Adam Mendelson at amendelson@bicusa.org for further information.

The Bank Information Center (BIC) is an independent, non-profit, non-governmental organization that aims to empower citizens in developing countries to influence World Bank and other Multilateral Development Bank (MDB) activities in a manner that fosters social justice and ecological sustainability. BIC advocates for greater citizen participation, transparency, and public accountability. For more information about BIC, see www.bicusa.org.

Summary
The Integration of Regional Infrastructure in South America (IIRSA) may very well be the most ambitious plan ever for infrastructure investment on the continent. The initiative aims to increase regional competitiveness and productivity through a series of steps to physically integrate the South America region while simultaneously reforming key sectoral processes. In order to manage such a large-scale enterprise, IIRSA is being coordinated by all 12 South American governments with the technical support of three multilateral development banks (MDBs)¹, national development banks², and the private sector. Furthermore, the continent has been partitioned into 10 distinct axes of economic integration in which projects will be identified and proposed based on their relative worth towards regional integration. In IIRSA’s first portfolio, 189 studies were conducted for projects to be included under the auspices of the IIRSA initiative and 41 projects have been identified as anchor projects. These 41 mega-projects will act as the foundation for regional integration, and lead to the development of hundreds of subsequent projects. To give some sense of scope, the proposed first generation activities for IIRSA, although only funded in part, totaled US$ 23.5 billion in investment³. The lack of transparency around how projects are identified, assessed, and financed as well as the dearth of practical information regarding IIRSA projects is of serious concern to civil society groups both in the region and abroad. Similarly, the lack of an established framework for civil society participation in IIRSA has caused much anxiety and skepticism around the initiative.

I. History
IIRSA is an initiative that was launched during the August-September, 2000 meetings of the twelve Latin American presidents in Brasilia, Brazil. The vision, adopted by all 12 countries, is based on the notion that development in the transportation, energy, and telecommunications sectors will help overcome geographic impediments, strengthen markets, and promote new economic opportunities in the region. At this historic meeting, IIRSA’s technical coordination and operation was delegated to three multilateral development banks (MDBs): The Inter-American Development Bank (IDB), the Andean Development Corporation (CAF), and the Fondo Financiera para el Desarollo de la Cuenca del Plata (FONPLATA). Together, these banks produced an Action Plan with a ten-year horizon, in order to transform the aspiration of regional integration into a reality. Since its 2000 creation, the MDBs have played a very active role in financing projects and studies directly related to IIRSA, provided technical support, and facilitated private sector participation in the initiative.

II. Basics
There is much debate amongst all 12 Latin American countries around which projects contribute most to regional integration. To formalize this discussion, a South American Infrastructure Authority (ASI) was created at the ministerial level to give direction to the initiative and to identify potential projects in three key sectors: energy, transportation, and telecommunications. So far, nearly 300 investment projects have been identified in the three sectors and over 189 feasibility studies have already commenced⁴. The types of projects that will be considered within the framework of the IIRSA initiative vary tremendously from road improvement and new road construction to the development of high quality telecommunications (increased band-width) meant to make Latin American professional services more competitive in a global context. The IDB has already approved a wide spectrum of projects ranging from a program aimed at improving the roads in the mountainous Cordilleran area of Argentina to an investment in Suriname geared towards modernizing the telecommunications sector in that country.⁵

III. Decision Making Structures
IIRSA is being promoted as a long-term initiative designed to produce both physical integration and streamlined processes. To accomplish such dynamic integration amongst autonomous countries, each with distinct development priorities, IIRSA has been structured around three levels of decision-making:

• Executive Directorate Committee (CDE): The CDE is composed of high-level government officials from each country who deal with regulatory framework, policy orientation, and proposal formulation.
  
• Technical Coordination Committee (CCT): The CCT is composed of three development banks, CAF, FONPLATA, and the IDB. The banks will coordinate the implementation of IIRSA and help promote private investment. The CCT is also responsible for civil society participation and information disclosure.
  
• Technical Executive Groups (GTEs): The GTEs are composed of civil servants and experts designated by the governments of South America. They are composed for each axis of integration and for all of the sectoral processes.

IV. Pillars of Integration
A) Axes of Economic Integration
The IIRSA initiative is composed of 10 “axes of economic integration” that transcend national borders and act as the basis for harmonization amongst the Latin American countries. The axes of integration were determined by both current and potential flows of commercial concentration. Each axis will establish a minimum standard of infrastructure services related to the transportation, energy, and telecommunications sectors. The axes serve as the fundamental instrument for the IIRSA initiative to attain its development objectives. In regard to IIRSA priorities, projects will be evaluated by importance, established by the proposing country, and relevance to the axis of integration.

The 10 axes of integration are (See Annex 2):

• Eje Andino
  
• Eje Andino del Sur
  
• Eje del Amazonas
  
• Eje de Capricornio
  
• Eje del Escudo Guayanés
  
• Eje de la Hidrovia Paraguay-Paraná
  
• Eje Interoceanico Central
  
• Eje MERCOSUR-Chile
  
• Eje Perú-Brasil-Bolivia
  
• Eje del Sur

In their current state, the axes of integration have been separated into three distinct stages of development. The axes of Eje Andino and Eje MERCOSUR-Chile have been characterized as key examples of the highest level of integrated development. The second stage of development can be characterized by high growth potential. An example of an axis at this developmental stage would be the Eje Interoceanico Central. The third stage of infrastructure development can be most aptly described as an emerging economy. The axis, Eje Escudo Guayanés, is currently in this stage of development.

B) Sectoral Processes of Integration
The sectoral processes of integration represent the second pillar of IIRSA. Typically, these processes will be designed to harmonize and converge regulatory frameworks in each of the 12 countries involved in IIRSA. An example of this would be the improvement of national border crossings, making the flow of goods more efficient between countries.

The 7 sectoral processes are:

• Maritime transport operative systems
  
• Aerial transport operative systems
  
• Multimodal transport operative systems
  
• Border crossing facilitation
  
• Information and communication technology
  
• Instructive frameworks for regional energy markets
  
• Financial instruments

V. Role of IDB
It must first be noted that although the IDB plays a pivotal role in IIRSA, it is only one of the many actors involved in the initiative. Other financial institutions involved in IIRSA include CAF, FONPLATA, the National Bank of Brazil (BNDES), and many private sector partners. This paper will focus on the IDB’s role in IIRSA, however it will not go into great detail regarding other financial institutions’ involvement in IIRSA.⁶

The IDB is involved with IIRSA on a variety of levels. Beyond offering technical assistance and funding for IIRSA projects, the IDB is also responsible for providing the public with up-to-date information on IIRSA and its progress. The IDB has staff dedicated to coordinating IIRSA amongst the different actors involved, as well as an IDB staff person acting as the current Secretariat of the CCT located in Buenos Aires, Argentina.

The IDB has not created new lending instruments for IIRSA projects nor will there be a separate project pipeline. Projects that are considered to be a part of the IIRSA initiative must therefore follow the same set of guidelines that govern any other financing activity of the Bank. IIRSA projects will have to meet the same standards as other projects and information must be disclosed to the public in a similar fashion. However, IIRSA will be incorporated into Country Papers therefore making it a lending priority. The recent Paraguay, Brazil, Argentina, and Bolivia Country Papers all contain references to IIRSA.

VI. Key Civil Society Concerns
Many civil society organizations (CSOs) in the region have voiced numerous concerns regarding the implementation of IIRSA. These concerns range from the lack of transparency and accountability, to a more fundamental critique of linking mega-projects with poverty alleviation.⁷

A) Linkage to Poverty Reduction
There is active debate amongst many circles in the development community as to whether or not mega-projects actually help bring people out of poverty in developing nations, or merely enrich those that are already privileged. IIRSA is an initiative intended to increase investment in large-scale infrastructure projects. Serious questions regarding the link between investments in infrastructure, increases in economic growth, and a reduction in poverty persist. Experience has often indicated that the benefits of infrastructure investment bypass the local communities living in or around these projects. Moreover, the indirect link to reducing poverty overall through higher economic growth has also been challenged by a variety of studies (e.g. Extractive Industries Review). Therefore, the development impact of the proposed infrastructure initiatives in IIRSA should be explicitly stated and discussed in an open forum before the IDB —a public “development” bank — decides whether or not to be involved.

B) Environmental and Social Impacts
The IIRSA initiative is primarily focused on large-scale infrastructure projects. These types of projects— pipelines, hydropower dams, power transmission lines, highways, etc.— have historically caused significant negative impacts on local communities and the environment.

Experience has shown that this occurs because of:

• Inadequate environmental, social, and cultural standards to address the complex dimensions of infrastructure development.
  
• Governments and/or MDBs have historically shown a lack of commitment to fulfill these standards.
  
• Lack of government and/or IDB capacity to meet standards.
  
• Absence of independent accountability processes to provide appropriate redress when standards are not met.

Evidence illustrating these weaknesses from recently approved IDB projects includes the Cana Brava dam in Brazil and the Camisea pipeline project in Peru. Civil society groups continue to be concerned that IIRSA, which aims to dramatically increase investment in mega infrastructure projects, will lead directly to further negative environmental, social, and cultural impacts.

C) Civil Society Participation
Civil society groups have been summarily excluded from participating in IIRSA since its inception in September, 2000. A set of guidelines for disclosure and citizen participation was approved on December 5th 2003, however that document lacks specific benchmarks to help move the participatory process forward. Many groups in the region believe that a formal mechanism to promote civil society participation in project identification, evaluation, and execution should be incorporated in IIRSA. There is much concern that without involving a broader range of actors in the development of IIRSA projects, crucial input will be overlooked and projects may have negative effects on both the environment and indigenous groups. At a minimum, the participatory approach should include the following elements:

• Government responsibility for implementation of a strong participatory standard in IIRSA
  
• Quality and proactive information dissemination around IIRSA projects and the axes of economic integration
  
• Timeliness of information disclosure to ensure meaningful participation in IIRSA
  
• Consistent accountability and mediation around IIRSA activities
  
• Inclusiveness such that participation is not only a internet-based activity therefore precluding many groups from participating
  
• Responsive and appropriate methodologies to address civil society concerns around IIRSA
  
• Participation in all phases of program development including the identification of regional integration priorities
  
• Adequate resources devoted to increasing civil society participation in IIRSA

Also, groups have voiced concerns that all countries and financial institutions taking part in IIRSA should follow the same participatory standards so that projects follow a consistent set of guidelines.

D) Transparency
Currently, there is very limited transparency in the decision-making processes of IIRSA. Although it has been over four years since IIRSA’s launch, the current IIRSA website contains minimal practical information to help educate the public about the initiative. In May of 2002, the CDE mandated that the IDB open discussion with civil society and create a comprehensive website containing up-to-date project information. This mandate is yet to be fulfilled. Civil society groups have expressed significant concern regarding the absence of transparency around the decision-making processes of IIRSA. Without timely access to unambiguous information, meaningful participation from civil society is effectively precluded. Ultimately, a more robust disclosure policy and standards need to be developed, but at a minimum, the initiative should include the following elements to improve the transparency of the operations:

• Disclosure of the project selection process in IIRSA. For instance, civil society organizations would like to have a better understanding of who determines the anchor projects in each axis of integration.
  
• A clarification of the decision-making structure.
  
• Greater transparency around decision-making in IIRSA. Currently, the public does not know who sets integration priorities and what those priorities are.
  
• Explicit information regarding private sector participation in IIRSA
  

VII. Conclusion
Although IIRSA has been in effect since 2000, it is still in its infant stages. Investment spending has indeed commenced, but only a small fraction of what is to come has been committed. Also, IIRSA policies and new integration axes are still being created. This presents a strategic opportunity for civil society groups to engage the IDB and challenge their rhetoric regarding proposed poverty reduction impact, environmental, social and cultural impacts of investments, and participation and transparency standards that should be central to the process moving forward.

VIII. Next Steps
Currently, there is an inexcusable lack of information regarding IIRSA and its implications for the region. As mandated by the Action Plan, the CCT is responsible for updating the website and keeping the public informed about the most recent developments regarding IIRSA. The IDB has promised that information disclosure will be significantly improved with the release of a new IIRSA website. This website should be available to the public by March of 2004.

According to the IDB, the following information should be found on the new IIRSA website:

• Comprehensive project information broken down per axis of integration. Information regarding the project’s current stage and funding information.
  
• Identification of the 41 anchor projects including specific project information.
  
• A methodology for territorial planning that was approved in October, 2003. This document presents a set of guidelines for project evaluation and proposal before inclusion in the IIRSA initiative.
  
• A space for comment from civil society

IX. Further Information
Civil Society Groups in the Region Focusing on IIRSA:

• Sobrevivencia (Paraguay)
  
• FASE (Brazil)
  
• FOBOMADE (Bolivia)
  
• Taller Ecologista (Argentina)
  
• Foro Ecologista de Paraná (Argentina)
  
• ILSA (Colombia)
  
• Amigos de la Tierra (Peru)
  
• Rios Vivos (Various NGO’s throughout Latin America)
  
• Rede Brazil

Key Contacts at the IDB:

• Mauro Marcondes-Rodrigues is the Task Manager of IIRSA at the IDB in Washington, DC and he can be reached at maurom@iadb.org.
  
• Juan Jose-Tacone is the Executive Secretary of the CCT located in Buenos Aires, Argentina. He works for INTAL (Institute for the Integration of Latin America and the Caribbean), the IDB department of integration. He can be reached at juantac@iadb.org.

For More Information:

• www.iirsa.org (official IIRSA site)
  
• Contact: Adam Mendelson
  Consultant with the Latin America Program
  Bank Information Center
  amendelson@bicusa.org
  Telephone: (202) 624-0629; Fax: (202) 737-1155
  

List of IIRSA projects in execution or preparation⁸

• Corredores de Integración del Occidente de Paraguay (en ejecución)
  
• Modernización de la Carretera Florianópolis-Osorio en Brasil (en preparación)
  
• Corredor de Integración Santa Cruz-Puerto Suárez en Bolivia (recientemente aprobado)
  
• Protección Ambiental y Social Santa Cruz-Puerto Suárez en Bolivia (recientemente aprobado)
  
• Programa de Mejoramiento de Pasos Cordilleranos en Argentina (aprobado)
  
• Infraestructura Vial del Uruguay (en preparación)
  
• Marco Regulatorio de Servicios Eléctricos de Uruguay (en preparación)
  
• Marco Institucional y Regulatorio SW Telecomunicaciones en Uruguay (en preparación)
  
• Mejoramiento Institucional en Pasos Fronterizos en Argentina y Chile (en preparación)
  
• Estudio sobre pasos de fronterizos en la región andina (concluido)
  
• Estudio de integración energética en los países del MERCOSUR ampliado (concluido)
  
• Apoyo a la Privatización y Concesiones en Infraestructura Fase 1 en Colombia (en ejecución)
  
• Apoyo a la Privatización y Concesiones en Infraestructura Fase 2 en Colombia (en preparación)
  
• Programa Sectorial Eléctrico en Colombia (ejecutado)
• Central hidroeléctrica Porce en Colombia (ejecutado)
  
• Apoyo a la Inversión Privada en Ecuador (en ejecución)
  
• Programa Sectorial de Inversiones en Ecuador (en ejecución)
  
• Programa Sectorial Eléctrico en Guyana (ejecutado)
  
• Marco Regulatorio Sector Eléctrico en Guyana (ejecutado)
  
• Programa Carreteras 3 en Perú (en ejecución)
  
• Marco Regulatorio Sector Transporte en Perú (en preparación)
  
• Marco Regulatorio Sector Energía en Perú (en preparación)
  
• Modernización de las Telecomunicaciones en Surinam (en ejecución)
  
• Programa Vial 3 en Venezuela (en ejecución)
  
• Central hidroeléctrica Caruachi en Venezuela (en ejecución)
  
• Estudio Interconexión Eléctrica Colombia-Venezuela (en preparación)
  
• Estudio Integración Energética en los Países Andinos (en preparación)
  
• Telecomunicaciones y tecnología de la información en Guyana (en preparación)

The IIRSA Task Manager at the IDB noted that some of these projects were approved prior to the IIRSA initiative, however because these projects have a direct link to regional infrastructure integration, they have been considered a part of the IIRSA initiative.

Bank Information Center Draft for discussion http://www.bicusa.org/bicusa/issues/IIRSA piece.pdf)

Footnotes:

1 The Inter-American Development Bank (IDB), Andean Development Corporation (CAF), Fondo Financiera para el Desarollo de la Cuenca del Plata (FONPLATA)
2 The initiative is being led in part by the Brazilian Development Bank (BNDES)
3 According to the IDB, many studies and project evaluations have commenced, however very little, if any, actual committed funding has gone to IIRSA projects. The US $23.5 billion represents the desired amount of investment that Latin American countries proposed to the MDBs as first generation IIRSA projects.
4 Some of the 300 identified IIRSA projects were financed by the IDB prior to the 2000 IIRSA launch and have subsequently been identified as critical to regional infrastructure development. It is quite difficult to establish which projects have been “adopted” under auspices of IIRSA and which projects are being appraised as a direct result of IIRSA’s 2000 launch.
5 See Annex 1 for a complete list of IDB-funded IIRSA projects to date.
6 For more information regarding other financial actors involved in IIRSA, please check out Rios Vivos at www.riosvivos.org.br and FOBOMADE at www.fobomade.org.bo.
7 Initial concerns are summarized based on BIC perspectives but discussions in Lima will help identify and describe broader range of civil society concerns.
8 Taken directly from the publicly available IDB document “ANEXO III Informe del Comité de Coordinación Técnica (CCT) “Iniciativa para la Integración de la Infraestructura Regional Suramericana.”

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