Crisis in Latin America : Infrastructure Investment, Employment and the Expectations of Stimulus

Abstract

Infrastructure investment is a central
 part of the stimulus plans of the Latin American and the
 Caribbean (LAC) region as it confronts the growing financial
 crisis. This paper estimates the potential effects on
 direct, indirect, and induced employment for different types
 of infrastructure projects with LAC-specific variables. The
 analysis finds that the direct and indirect short-term
 employment generation potential of infrastructure capital
 investment projects may be considerable - averaging around
 40,000 annual jobs per US$1billion in LAC, depending upon
 such variables as the mix of subsectors in the investment
 program; the technologies deployed; local wages for skilled
 and unskilled labor; and the degrees of leakages to imported
 inputs. While these numbers do not account for substitution
 effect, they are built around an assumed "basket"
 of investments that crosses infrastructure sectors most of
 which are not employment-maximizing. Albeit limited in
 scope, rural road maintenance projects may employ 200,000 to
 500,000 annualized direct jobs for every US$1billion spent.
 The paper also describes the potential risks to effective
 infrastructure investment in an environment of crisis
 including sorting and planning contradictions, delayed
 implementation and impact, affordability, and corruption.