ARTICLE: “Slow! Government obstacles ahead: The public sector in Latin America is not spending enough on transport, electricity and water, but nor is it allowing private investors to help out,” The Economist, 17 June 2006, p. 41.

The real connectivity problem with Latin America:

Although the region’s economies are growing faster, thanks to an export boom [see China, says Tom], they are hobbled by poor roads and railways, clogged ports and a precarious electricity supply. In the 1990s governments slashed public investment to balance their budgets. They invited private investors to make up the shortfall. Between 1990 and 2003, Latin America accounted for half of total private-sector participation in infrastructure in developing countries. Private investment has expanded telecom networks. But the flow of private money for electricity, water and transport has dried up in many countries, partly because citizens or politicians turned against privatization.

So no surprise: a survey of businessmen there sees 55% saying infrastructure is a serious hindrance to further development, compared to only 18% in East Asia. So the World Bank says spending on infrastructure should double or even triple if the region hopes to catch up to East Asia.

The big exception in the region is Chile, thanks to a long-standing commitment to privatization. As such, the economic connectivity there is quite strong: “Only the most remote households in Chile lack running water or electricity.”

The key for Chile is a rule set for arbitration for investors when things go wrong, so investors don’t fear putting there money into Chile.

Meanwhile, caboose braking in Brazil threatens to make the lack of such infrastructure the key chokehold on future growth, with some there predicting it pretty much tops the country out at 4% and no higher until fixed. Rule-set fights abound in Brazil on utilities, and that too scares away investors.

But a bright spot emerges:

Brazil, after much delay, is launching a scheme under which private companies can build and operate roads, sewerage systems and even jails in exchange for a stream of revenue guaranteed by the government. Local firms are less queasy than international investors about risk. “Can we wait to reach the level of Chile? We need to accept a little the conditions there are (sic),” said Marcelo Odebrecht, boss of a construction firm that bears his surname.

This article reminds my of my ten commandments for globalization, or the original articulation of the military-market nexus:

1) Look for resources, and ye shall find, but …

2) No stability, no markets

3) No growth, no stability

4) No resources, no growth

5) No infrastructure, no resources

6) No money, no infrastructure

7) No rules, no money

8) No security, no rules

9) No Leviathan, no security

10) No U.S. will, no Leviathan.

Easily the best slide to come out of the NewRuleSets.Project with Cantor Fitzgerald.