Acknowledgments xv 
1 INTRODUcnON 1 William Easterly and Luis Servén 
2 LA TIN AMERICA'S INFRASTRUCIURE IN 1HE ERA OF MACROECQNOMIC CRISES 21 
César Calderón, William Easterly, and Luis Servén 
3 THE OUTPUT COST OF LATIN AMERICA'S INFRASTRUCIURE GAP 95 
César Calderón and Luis Servén 
4 INFRASTRUCIURE COMPRESSION AND PuBLIC SECTOR 
SOLVENCY IN LATIN AMERICA 119 
César Calderón, Wil!iam Easterly, and Luis Servén 
5 MACROECONOMIC EFFECTS OF PRNATE SECTOR 
PARllCIPAllON IN INFRASTRUCIURE 139 
Javier Campos, Antonio Estache, Noelia Martín, and Lourdes Trujillo 
6 REGULAllON AND PRNATE SECTOR PARllCIPAllON IN INFRASTRUCIURE 171 
Sheoli Pargal 
Acronyrns and Abbreviations 199 
Index 205 
FIGURES 
2.1 Comparative Performance in Infrastructure Stocks 24 2.2 Power Generating Capacity by Region, 1980-97 26 2.3 Power Generating Capacity per Worker by 
Country, 1980 and 1997 27 2.4 Length Comparisons of Transportation Routes 28 2.5 Road Length per Worker by Country, 1980 and 1997 29 2.6 Access to Clean Water, 1985-93 29 2.7 Infrastructure Quality and Excess Demand 30 2.8 Power Losses by Region, 1980-97 31 2.9 Power Losses by Country, 1980 and 1997 32 2.10 Comparisons of Surface Transportation Quality 33 2.11 Total Investment in Infrastructure in Selected Latin 
American Countries, 1980-98 34 2.12 Investment in Infrastructure in Selected Latin American 
Countries, by Sector, 1980-98 35 2.13 Public Investment in Infrastructure in Selected Latin 
American Countries, 1980-98 37 2.14 Public Investment in Infrastructure and 
Noninfrastructure, by Country 40 2.15 Public Investment in Infrastructure, by Sector and 
by Country 43 2.16 Private Investment in Infrastructure in Selected Latin 
American Countries, 1980-98 47 2.17 Private Investment in Infrastructure and 
Noninfrastructure, by Country 48 2.18 Private Investment in Infrastructure, by Sector and 
by Country 51 2.19 Private Investment Per Capita around the Date of 
Reform in Selected Country, by Sector 55 2.20 Infrastructure Quality and the Private Share of 
Investment in Infrastructure 65 3.1 Infrastructure Accumulation and Growth, 1960-97 97 6.1 Annual Average Share of Private Investment in Total Infrastructure Investment in Selected Latin American Countries, by Sector 174 6.2 Average Annual Investment in Infrastructure in 
Selected Latin American Countries, by Sector 175 
TABLES 
2.1 The Contribution of Infrastructure Compression 
to Fiscal Adjustment, Average 1980-84 versus ;' Average 1995-98 37 
2.2 Regression of Public Infrastructure Investment/GDP on the Primary Balance/GDP 39 2.3 Infrastructure Reform Dates 46 2.4 Correlation between Public and Private Infrastructure 
Investment, by Sector 57 2.5 Regressions of Public Infrastructure Investment/GDP 
on Private Infrastructure Investment/GDP 58 2.6 Relationship between Physical Stocks and Investment 
Spending in Infrastructure 61 2.7 Relationship between Physical Stocks, Public and 
Private Investment Spending in Infrastructure 63 2.8 Private Participation and Infrastructure Quality 64 2A.l Telephone Service Variables 69 2A.2 Summary of Coverage and Availability of Telephone 
Service Indicators 70 2A.3 Telecommunications Indicators: Time-Series Coverage 
by Region 72 2A.4 Variables Used as Proxies for Energy 73 2A.5 Energy Indicators: Time-Series Coverage 
by Region 74 2A.6 Sanitation and Sewerage Indicators: Time-Series 
Coverage by Region 74 2A.7 Indicators for Roads 75 2A.8 Other Indicators for Roads 75 2A.9 Indicators for Irrigation 75 2A.l0 Irrigation: Time-Series Coverage by Region 76 2A.ll Roads and Railways: Time-Series Data for Selected 
Regions ' 77 2A.12 Public Sector Definitions Used in the Figures of Public 
Investment in Infrastructure 77 2A.13 Definition of the Transport Sector 78 2B.l Infrastructure Reform Laws 82 2B.2 Sale and/or Concession of Public Enterprises in 
Infrastructure Sectors 82 2B.3 Greenfield Projects in Infrastructure Sectors 83 3.1 The Widening Infrastructure Gap, Latin America 
versus East Asia 96 3.2 Sample Correlations 103 3.3 Infrastructure-Augmented Production Function: 
Alternative Estimates 104 3.4 Alternative GMM Estimates 106 3.5 First-Difference GMM Estimates of Alternative 
Specifications :' 108 

3.6 Elasticity of Output per Worker with Respect to 
Capital per Worker 110 3.7 The Infrastructure Gap and the Output Gap: 
Contribution of Various Inputs to the Change in Relative GDP per Worker, Latin America versus 
East Asia, 1980-97 111 3.8 The Infrastructure Gap and the Output Gap: 
Contribution of the Change in Relative 
Infrastructure Stocks to the Change in Relative GDP per Worker, East Asia versus Selected 
Latin American Countries, 1980-97 112 4.1 Taxes and Growth: Panel Data Regression Analysis 126 4.2 Government Spending and Growth: Panel Data 
Regression Analysis 127 4.3 Impact on the Annuity Value of Net Worth of a Cut 
in Infrastructure Investment by 1 Percent of GDP 129 4.4 Partial-Equilibrium Effect of Actual Infrastructure 
Investment Changes on the Annuity Value of 
Public Net Worth, 1980-84 versus 1995-98 131 4A.1 Panel Unit Root Tests, Government Revenues, 
Government Spending, and Real Output 135 5.1 Main Macroeconomic Variables: Levels and Ranking 146 5.2 First Year for Private Participation in Utilities and 
Transport 147 5.3 Average Value of the Institutional Variables between 
1985 and 1998 149 5.4 Effects of PPI on GDP Per Capita (Model1) 151 5.5 Effects of PPI on GDP Per Capita (Model 2) 152 5.6 Effects of PPI on Private Investment (Model1) 155 5.7 Effects of PPI on Private Investment (ModeI2) .156 5.8 Effects of PPI on Private Investment Defined 
as Gross Domestic Investment Minus Public 
Investment (Model1) 158 5.9 Effects of PPI on Public Investment (Model1) 160 5.10 Effects of PPI on Public Investment (Model 2) 162 5.11 Effects of PPI on Recurrent Public Expenditures 
(Model1) 164 5.12 Effects of PPI on Public Expenditures (ModeI2) 166 5.13 Summary of Signs of Average Macroeconomic Effects 
of PPI. 168 6.1 Data Sources 179 6.2 Country Fixed Effects Estimation " 183 6.3 Fixed Effects Regressions by Sector ' 187 
6A.1 Descriptive Statistics 189 6A.2 Descriptive Statistics if Regulatory Body Exists 189 6A.3 Correlation Matrix for Complete Data Set 190 6A.4 Correlation Matrix for Regulatory Variables 190 6A.5 Public and Private Investment before and alter the 
Passage of Reform Legislation 190 6A.6 Aspects of Regulatory Structure, by Country and 
by Sector 192