Infrastructure Politics in Latin America: How are Public Goods Provided?

Ponte Estaiada, Brazil – Photo by Sergio Souza

By Maria Santarelli

As part of the Human Capital Speaker Series, Dr. Alisha C. Holland spoke about her new book project “Creative Construction” on the politics of large-scale infrastructure in Latin America. Holland is Assistant Professor of Government at Harvard University and she has conducted extensive research on social and urban politics in Latin America. The session was moderated by Rachel Brule, a faculty member of the Human Capital Initiative at the Global Development Policy Center.

There is numerous large-scale, high cost infrastructure in Latin America. However, according to Holland, many of these public goods – like the empty highway Holland rollerbladed on in Panama – are built without any apparent reason, or need from the population. In this context, Holland’s objective is to understand the appearance of “white elephants” in Latin America and how to avoid them. “Most answers in political science take the electoral accountability perspective or focus on institutional designs, but I think a critical element to consider in bureaucracy is how the government provides public goods and how it thinks about public goods,” Holland commented during the presentation.

Holland talked about the concept and the theory of “inhibitory institutions,” referring to institutional actors that have power to veto, gatekeep or obstruct public decisions prior to their realization. “The effects of inhibitory institutions are that they slow down infrastructure projects, reducing the quantity of expenditures and, by ensuring standards are being followed, they improve the quality of expenditures” Holland continued, “But these effects depend on whether the rules bind. Thus, inhibitory institutions work best only when politicians can’t change the rules.”

She continued with the illustration of two case studies on binding inhibition that form part of her preliminary research: the subway project in Bogotá, Colombia and the Interoceanic Highway in Peru.

In the Metro Case of Bogotá, the subway planning and decision-making process lasted forty years – from 1979 to 2018. Holland argues that it is clear that inhibitory institutions delayed the expenditures and she questioned whether “these actors improved the project quality in terms of social priority and corruption?” As part of her preliminary research, Holland is still exploring the effect on inhibition in the Colombian case and to what extent the long institutional reviews of the subway project were beneficial.

Another example of the action of inhibitory institutions is the Interoceanic Highway in Peru started in the early 2000s. In the first stage of the project, the Ministry of Transportation of Peru questioned its need, arguing it was not a priority and that initial studies exaggerated expected benefits and profits. Officials from the National System of Public Investment (SNIP) also advised cost minimization, given the dubious benefits of the project. However, President Alejandro Toledo issued a decree to exempt the project from institutional review in order to avoid delays. In 2005 and 2006, it became known that Toledo received millions of dollars from the notorious construction company Odebrecht to allow the project to continue. Holland used this case study as evidence that inhibitory institutions can act as catalyst to minimize corruption and affect both the quantity and quality of public good expenditures.

“What I tried to emphasize today is the importance of bureaucracy. First, institutional rules that review public goods prior to their construction may be critical for high-quality public goods. Inhibitory institutions reduce the quantity of investment as well. Third, institutions are weak for well-known reasons, but there are less studies on why the institutions often fail.”

Holland concluded that even though inhibitory institutions are challenged by politicians, they are still relevant. “They have the capacity of preventing wrong-doing, especially in the infrastructure sector, and look out for corruption. They also change the way we think about public interest and have the ability to constrain subnational politicians.”

To conclude, Holland outlined the next steps of her research project, including an exploration of the causal nexus of inhibitory institutions and public good provisions.