The Inter-American Development Bank (IADB) has launched a new project preparation fund that will catalyse the development of critical infrastructure projects in Latin America and the Caribbean, as part of its effort to lend US$12bn for such projects in the next five years.

Latin America and the Caribbean suffer from a dearth of investment in infrastructure that compromises the region’s economic and social progress and its ability to compete in a globalised world. While countries like China are investing in the order of 9% of GDP annually in infrastructure, most countries in the region are dedicating 2% or less of GDP to this crucial sector. The IADB has identified the lack of funding for project preparation as a major bottleneck for the much-needed scaling up of infrastructure investment in the region.

In order to address this challenge, the IADB has committed US$20mn for the creation of a new Infrastructure Fund (InfraFund). The InfraFund will assist private, public and mixed-capital organisations in Latin America and the Caribbean in the identification, development and preparation of bankable and sustainable infrastructure projects with real potential for achieving financial closure.

“There are plenty of infrastructure needs in the region, as well as potential financial resources that could address these needs,” says IADB president Luis Alberto Moreno. “The problem is that these needs often aren”t translated into viable projects that can be financed. This fund is intended to help close this gap.”

The resources of the InfraFund, which are available to companies, governments and other entities in all 26 IADB regional member countries, can be used to hire specialised consulting services, conduct feasibility and other technical studies, and carry out other activities directed to preparing infrastructure projects for financing and completion.

While proposals for financing can be submitted for all sectors, the bank is particularly interested in supporting projects that mobilise private financing and promote public-private partnerships, target high social impact sectors like water and sanitation and transportation, and have a high probability of reaching financial closing. Resources will be available both on a reimbursable and a non-reimbursable basis.

The InfraFund is open to funding from other donors, including governments and state and multilateral agencies as well as private concerns interested in investing in the infrastructure sector in Latin America and the Caribbean.

The IADB expects that its initial commitment to the InfraFund will have an important catalytic effect in mobilising additional resources for the preparation of infrastructure projects in the region.