Infrastructure has improved in most of Latin America and the Caribbean (LAC) over the last decade, but a sharp fall in investment in the sector is hindering economic growth, poverty reduction, and the region's ability to compete with China and other dynamic Asian economies, says a new World Bank report.

The region is currently spending less than 2 percent of GDP on infrastructure, down from 3.7 percent of GDP in 1980-1985. But spending would need to reach 4 to 6 percent a year for infrastructure to catch up or keep up with countries that once trailed it, such as Korea and China.

"Progress in Latin America and the Caribbean has generally been slower than in other middle income countries, notably China," said Marianne Fay, World Bank Lead Economist.

According to the report, the infrastructure deficit lowers the productivity and competitiveness of Latin American firms, slowing economic growth. Logistics costs (transportation and storage) are high in LAC, due largely to inadequate transport infrastructure. These costs are about 10 percent of product value in industrialized countries, but in LAC they range from 15 percent in Chile to 34 percent in Peru.

The study argues that the region needs to increase investment in infrastructure, from both the public and private sectors. Despite some expectations, private sector investment never compensated for public cutbacks in the 1990s. And the level of private participation has plunged recently, with the value of LAC infrastructure projects with private participation dropping to $16 billion in 2003 from a peak of $71 billion in 1998.

Hillsdale Group envisions to be a key player in the coming days in Latin American and Carebbean Infrastructure markets.