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INFRASTRUCTURE FOR DEEPER INTEGRATION IN SOUTH AMERICA:
IIRSA

(PDF)

Dr. Pitou van Dijck
Associate Professor of Economics
CEDLA, Amsterdam

Abstract of paper presented at  the 2006 Meeting of the
Latin American Studies Association
San Juan, Puerto Rico
March 15-18, 200

 

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INFRASTRUCTURE FOR DEEPER INTEGRATION IN SOUTH AMERICA:
IIRSA

 

1. Introduction

The paper studies the rationale and main economic features of the Iniciativa para la Integracion de la Infraestructura Regional Suramericana/The Initiative for Regional Infrastructure Integration in South America (IIRSA), and attempts at classifying the potential effect of this major region-wide initiative. The initiative was taken on 31 August-1 September 2000 in Brasilia by the heads of state of 12 South American countries: Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Suriname, Uruguay and Venezuela. The Initiative aims at contributing to the integration of infrastructure in the region in support of the region-wide strategy of so-called open regionalism, and in support of a comprehensive insertion of Latin America in world markets.

IIRSA identifies three  priorities: coordination of infrastructural plans and investment; harmonization of regulatory and institutional frameworks in the areas of transport, energy, and telecommunications, and the introduction of innovative financial mechanisms. The Initiative aims particularly at improving the interconnections among the national road networks in the countries in the region, improvement of strategic waterways and railways, related border-crossing facilities, ports and airports, as well as telecommunications and energy facilities. As of now, the IIRSA Strategic Vision 2020 distinguishes ten hubs, as shown in the map.

(1) Mercosur-Chile hub;
(2) Andean hub;
(3) Central Oceanic hub;
(4) Amazon hub;
(5) Escudo Guyanese hub;
(6) Peru-Brasil-Bolivia hub;
(7) Capricorn hub
(8)Southern hub;
(9) Paraguay-Paraná waterway hub;
(10) Souther Andean hub.   

By April 2005, the  countries have reached consensus on an implementation agenda for the period 2005-2010 involving 31 projects related to these hubs.

IIRSA is unique in its size and concept as a region-wide integrated infrastructural plan, to be implemented by an organisational and financial structure involving 12 governments, regional development banks: the Inter-American Development Bank  (IDB), the Andean Development Corporation (CAF) and  the Financial Fund for the Development of the Rio de la Plata Basin (FONPLATA). Moreover, the European Investment Bank (EIB) will be involved in view of its particular expertise in the areas of cross-border financial and legal institutional cooperation, financial constructions and related legislation. All this does not exclude that at a later stage other official financial financial flows will be involved generated by governments outside Latin America. Clearly, co-financing arrangements are actively pursued  and so are public-private partnership (PPP) arrangements.

Given the new economic context in which Latin American countries have been operating since the introduction of the neo-liberal model, and in view of the sheer size of the IIRSA programme as laid down in Strategic Vision 2020, the paper argues that the potential impact of the plan on the region’s economic geography may be significant through its stimulus to investment, production  and trade, and may stimulate the rise of new centres of economic gravity in South America. At the same time, IIRSA may speed up the transformation of land use in South America and threaten the existence of ecosystems and with it the public goods these system deliver to the local, regional and global community, including the function as a habitat for indigeneous peoples, animals and plant species. To stimulate the potential welfare- enhancing effects of IIRSA and reduce its negative side-effects on the environment and human welfare,  appropriate frameworks are required to integrate in an effective and efficient manner economic  instruments.

Section 2 of the paper focuses on the changing position of Latin America in the international economy and particularly on the rapidly increasing orientation of the countries in the region towards regional and world markets of goods, services and capital. Section 3 analyses the need to deepen integration and develop trade-related infrastructure in the new context. Section 4 presents an overview of the most significant dimensions of the IIRSA project, and gives a brief classification of the potential economic and  environmental impact roads may have, and attempts at identifying approaches to maximize the contribution of roads to welfare and limit negative side-effects.

2. The integration of Latin America in the world economy

The world economic system is moving rapidly away from a system that was strongly dominated for several decades by two major actors, the USA and the EU that are more or less equal in size when measured according to gross national product (GNP) at purchasing power parity (PPP). Moreover,  both economic actors play a dominant role in world trade flows, and the bilateral trade flow that links them still is the largest interregional trade flow in the world economy as illustrated in Figure 2. A multipolar economic system is emerging as reflected by the size of the economies in Asia, particularly of the three regional economic superpowers China, Japan, and India, as well as by the size of the trade flows between these economies. Moreover, in Latin America Brazil and Mexico are emerging as two regional economic superpowers, be it of significantly less economic weight and showing much less dynamism than the emerging economies in East and Southeast Asia do.

Gravity models of international trade, that were introduced in the 1960s and are actually enjoying a revival in economic literature and particularly in studies on the impact of regional integration on bilateral trade flows,  explain the size of bilateral trade flows by the size of the related economies measured by their overall purchasing power,  levels of income per capita, barriers to enter markets such as tariff rates and non-tariff barriers (NTBs) to trade, the tariff equivalent of transportation costs. Some models include variables reflecting similarity in import demand and export supply of trade partners. The inclusion of barriers to enter the market of the exporting economy reflects the bias against exports in the incentive structure of the exporting economy, which impact negatively on the size of the country’s export flows (Linnemann et al.1992). Hence, the most important factors in explaining the direction of trade flows are the size of markets and income levels, with trade policy and infrastructure as complementary variables (Van Dijck and Faber 2006).

 

Focusing now specifically on the position of Latin America in the world trading system, we notice wide differences in trade performance and regional orientation between the two largest trading nations in the region, Mexico and Brazil. Although the size of Mexico’s economy is about 70 per cent of Brazil’s GNP at PPP (2003 data), Mexico’s exports of 165 billion US dollars exceed by far Brazil’s exports of 78 billion US dollars. Put together, the two countries generate 60 per cent of total exports and 54 per cent of total imports of Latin America and the Caribbean.

Traditionally, Mexico’s economy has been linked strongly with the US economy through trade and FDI flows, be it that this was limited in the era of import-substitution policies by high import tariffs, frequent use of non-tariff barriers (NTBs) and strict investment regulations. However, integration has progressed rapidly since Mexico’s liberalization in the mid-1980s and more specifically as a consequence of NAFTA. Further reduction of applied MFN rates in a DDA will consequently result in significant preference erosion for Mexico, as similation of the effects of several packages of liberalisation measures – presented as possible outcomes of the negotiations on the DDA - show (Anderson et al. 2006). Although Mexico has attempted to diversify its trade and investment position by signing PTAs with the EU and other trade partners in Latin America and East Asia its orientation towards the USA is still extremely strong.

 

As compared to Mexico, Brazil, shows a more balanced distribution of trade among its partners in Latin America, the USA and the EU. Remarkably, notwithstanding the creation of Mercosur operating de facto as a CU Brazil’s trade with Argentina has declined significantly since 1997 (Van Dijck 2002b).

All the rest of Latin America shows a significantly stronger orientation towards the region than Mexico does. However, it is remarkable that notwithstanding a spaghetti bowl of numerous PTAs and bilateral investment treaties among the countries in the region, regional trade in Latin America, both including and excluding Mexico, has not increased but stagnated in absolute terms during the period under investigation (1997-2003), and even declined in relative terms from 29.9 per cent of total exports of Latin America excluding Mexico in 1997 to 20.9 per cent in 2003. A similar declining trend is noticeable in the case of Brazil, the great promoter of integration in the region.

As compared to many countries in East and Southeast Asia, Latin America does not seem to be strongly orientated towards its own region. This need not come as a surprise as the export performance of most countries in Latin America is strongly dominated by commodities, shipped particularly towards the markets of developed countries, with Mexico being the most significant exception.

Trade with Asia, and particularly with China is dynamic, but still rather limited in size. This holds for Brazil and other countries in Latin America such as Argentina and Chile. Rapidly rising demand in China for natural resources for its industry, and for food and food products including soya is directly stimulating trade between Latin America and China, and contributes indirectly to welfare in the region through an upward impact on commodity prices in international markets and consequently an upward terms-of-trade effect, contributing to overall welfare in the region.

The growing significance of China as an importer of Latin American commodities is also reflected by Brazil’s initiatives to strengthen cooperation with China. This would fit in with Brazil’s broader policy stance, which goes back already for several decades, to promote regional cooperation in order to reduce dependence on the North. Cases in point are Brazil’s efforts to create a regionwide PTA in Latin America, its recent initiative to strengthen the functioning of the G-20 in the WTO negotiations, and its initiatives to foster special and preferential bilateral relations with several countries in the South including South Africa and India (Morais 2002). The rise of China, however, not only contributes to Brazil’s export potential but may also jeopardize Brazil’s aspirations of becoming a platform for automobile assembly for the international market. Indeed, IIRSA’s plans for the construction of several transcontinental roads, linking the Atlantic side of the region with the Pacific, the so-called bioceánicas, not only facilitates Latin America’s export drive but may also contribute to competition in the regional market by emerging Asian exporting industries.

Reviewing fundamental changes in Latin America’s positioning in the world economy since the lost decade of the 1980s, we find that renewed economic growth, unilateral trade liberalization as part of structural reform, the lock in effect of accession to the General Agreement on Tariffs and Trade (GATT) and subsequent WTO membership, and the establishment of a spaghetti bowl of PTAs among the countries in the region have greatly contributed to the economic integration of the region and stimulated intra-regional trade. The share of intraregional trade in the overall export performance increased significantly during the 1990s. This holds particularly for trade among the member countries of Mercosur and the Andean Community, but not for the CACM group of countries. At the same time, many Latin American countries have been involved in the establishment of special and preferential trade relations with their two traditional major trading partners, the USA and the EU, as well as with the emerging economies of East Asia. Among the major initiatives in this respect are the formation of NAFTA, the continued process of establishing an FTAA, the EU-Mexico PTA as well as the EU-Chile PTA, the retarded process of establishing an EU-Mercosur PTA, the plans to establish a PTA between the EU and the Andean Community, and between the EU and the CACM countries at a later stage, and finally the process of transforming the Cotonou Arrangement between the EU and the Caribbean countries that used to participate in the ACP group. Mexico, Peru and Chile have become members of the APEC which was initiated primarily as an open economic association to exchange information and facilitate policy co-ordination and harmonization among its members, not so much to liberalize trade in a coordinated fashion, left alone to create trade preferences. Open regionalism, as the predominant approach towards trade liberalization, has distinguished APEC so far from the other trade arrangements listed above.

 

As follows from the above, Latin American countries and the region as a whole, are involved in a series of recent initiatives aiming at strengthening their economic relations and improving market accessibility. These initiatives, if successful, will increase and lock-in openness of the region, create some preferential margins in major export markets, and thus contribute to a new insertion of the region in international markets.Such a new context requires further initiatives to deepen integration, facilitate international transactions and increase competitiveness. IIRSA and related infrastructural projects are cases in point.

 

3. The quest for deeper integration: creating a level playing field


Harmonization of regulatory and institutional frameworks in the areas of transport, energy and telecommunications is among the three IIRSA priorities distinguished earlier. Some observations are in place pertaining to the potential role of harmonization in the context of trade and integration. In contrast with shallow integration, which is limited to trade liberalization only, deeper integration may be conceived of as integration that moves beyond the removal of border barriers (Lawrence 1996) In the new liberalized context, elimination of non-border barriers to trade is becoming a new focal points of policies to deepen integration and strengthen insertion in international markets. Deepening of integration has progressed particularly in the context of PTAs. This includes dealing with differences in national regulations and with inadequate infrastructure. So far, negotiations on reduction of a wide range of non-border measures that retard trade and specialisation have been slow and achievements have been limited as compared to negotiations on barriers to trade in manufactures. This holds for regional as well as multilateral negotiations.

When analysing the rationale and potential impact of deeper integration, the preliminary question is this: what is the optimal level where a regulatory regime or a rule systems should be located and maintained? There are no a priory reasons why independent nations should be the optimal providers of these public goods under all circumstances but this holds as well for potential providers at the regional or multilateral levels. In this context, the principle of subsidiarity may be helpful in determining the optimal policy level to provide institutions and regimes as will be argued below.

Standards may be conceived as a kind of public good since these rules and regulations are established for the purpose of supporting the welfare of society at large. This holds true of standards pertaining to product quality, industry-specific technical regulations and standards for production processes, including regulations pertaining to the limitation of negative external effects of production processes. If generated in an optimal manner, standards and measures reflect the preferences and endowments of society at large. Unsurprisingly though, national standards are not always set for the sake of society at large but to serve special interests of industries by increasing the costs of market access to foreign producers. In that way they may contribute to the rent of domestic producers at the expense of domestic consumers and foreign producers.

In the context of a PTA, differences between domestic standards, technical regulations and measures among the member countries may result in a sub-optimal allocation of economic activities and have a trade-distorting effect. Differences in technical barriers may inflict several types of costs upon producers and society at large, including expenses on research and development, reduced options to exploit potential economies of scale and the related loss of cost competitiveness in regional and world markets as well as higher inventory and distribution costs. Consumers may suffer from higher production costs that have been passed on to them, and from less competition in the domestic market. The public sector may suffer from additional complications related to the multitude of requirements. Harmonization of standards in a PTA may then have an effect on allocation equivalent to the reduction of policy-induced market distortions at the border

Improvement of customs procedures and other forms of trade facilitation, as well as trade-related physical infrastructure may play a crucial role in the process of deepening integration and enhancing the capability of nations to exploit trade opportunities. Indeed, the issue of trade facilitation has traditionally been a key component of enlargement schemes of the European Union with structural funds and regional funds contributing to the improvement of physical infrastructure in relative backward areas. Recently, the issue of trade facilitation for least developed and other African countries in particular has become a crucial factor  in the negotiations on the DDA in the WTO.

 

4. The potential of IIRSA: opportunities and risks

The first priority in IIRSA is coordination of infrastructure plans and investments.  Infrastructure, defined broadly, plays a key role in stimulating economic growth by facilitating production and trade, thus generating income and employment. The concept of infrastructure is somewhat ambiguous. The World Bank defined infrastructure as ‘long lived engineered structures, equipment and facilities, and the services they provide that are used in economic production and by households’(World Bank 1994). Other definitions include institutional arrangements, and the availability of financial, intellectual and legal services that are required for production  to be efficient.

As indicated in Section 2 of this paper, unilateral and groupwise liberalisation has stimulated integration among countries in the region as reflected by the increasing values of  trade flows among countries. At the same time trade with other regions in the world economy has been stimulated by reduction of applied MFN rates and interregional PTAs. Rising demand for food products and minerals has boosted particularly export to the Pacific Rim. As scenario studies of liberalisation packages in the DDA show, comprehensive liberalisation of markets of agricultural products may stimulate particularly export volumesfrom Latin America and, moreover, improve the region’s terms of trade. In the near future, increased demand for alternative energy sources may boost biomass exports. Although changes in trade flows as measured in monetary values do not necessarily correspond with changes in volumes of goods to be transported by the road, demand for infrastructural services is increasing with the growth of bulk exports.

The process of identification priority trajectories, the so-called development hubs or ejes de desarrollo, has so far resulted in the identification of 10 trajectories as illustrated in the maps and tables included below. The actual state of trajectories as well as their envisaged future functioning differs widely among the hubs. Many parts of most trajectories already exist as unpaved or paved road, but need improvement, reconstruction, or additional infrastructural works such as bridges, border crossings, and international connections. In many cases, IIRSA’s contribution is particularly in making or improving the cross-border linkages between already existing national road systems.

The major hub in terms of transport flows and traffic is the Mercosur-Chile hub, which links the industrial and economic centres of South America. Apart from the metropoles, the hub connects the industrial area in the south of Brazil and the north of Argentina, the development of which has particularly been stimulated by the formation of Mercosur. Several other proposed hubs also link the Atlantic with the Pacific Oceans: in the north the Amazon hub, linking Colombia, Ecuador, Peru and Brazil; the Peru-Brazil-Bolivia hub; further to the south, the Central Interoceanic hub, linking the north of Chile with Bolivia, Paraguay and Brazil; the Southern Andean hub, through the south of Argentina and Chile. Other hubs aim at integrating countries in the northwest of the continent, the Andean hub, in the northeast, the Escudo Guyanese hub, or in the south, the Capricorn hub. Although the envisaged  hubs link existing infrastructure, the precise trajectories are in most cases not yet determined but are being investigated or negotiated among interested parties.

It should be noted that apart from IIRSA other transnational road projects are under constructio that may or may not link up with IIRSA trajectories in the region. Case in point is the so-called Arco Norte road project designed and created by Brazil, linking the northern part of Brazil with the three Guianas: Guyana, Suriname and French Guyana, and with the Caribbean Sea. The road is under construction, be it that the link along the coast between Georgetown, Paramaribo and Cayenne exists already for a long time and has partly been repaired fairly recently. The road project is part of a larger programme to integrate the state of Roraima with Guyana through the construction of a deep-water port, a hydro-electricity facility in Guyana and the development of high-speed dependable communications systems in the region. Transmission lines will follow the course of the new road and so will the fibre optic cable that will link Boa Vista, and at a later stage Manaus, with the intercontinental fibre optic cable, which passes north of Georgetown. Improved infrastructure is expected to contribute to investment in the region in food crops, the tourism sector and particularly in the development of an industrial zone in Boa Vista.

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All IIRSA hubs have in common that they are transnational, and financed through regional financial institutions: IDB, CAF and FONPLATA.

Transnational roads are a form of transnational public goods. More specifically, the roads as envisaged by IIRSA  may be identified as  regional public goods as benefits are expected to accrue particularly to countries in the region. Hence, regional public goods such as the IIRSA trajectaries generate positive and negative spill-over effects or externalities in a specific regional context, be it that the distribution of these welfare effects may differ widely among the countries in the region. Moreover, third countries that are not partners of the regional association, may nevertheless benefit significantly from such public goods. This may even create a condition in which the outsider may be interested in co-financing the regional public good to speed up or facilitate its realisation. Essentially, the concept of coordination of infrastructural plans and investments includes the possibility for financial institutions involved to attract foreign financial flows through more or less innovative financial mechanisms.

Pure public goods are characterized by non-rivalry of benefits and non-excludability of users. In the case of roads, waterways and other forms of infrastructure, relevant in the context of IIRSA, benefits may rival in case of congestion, and users may be excluded by applying a toll system. IIRSA roads may be cosidered ‘regional club goods’when exclusion is relatively easy and costless and use can me monitored and controlled (Sandler 2002)

Public investment in infrastructure may trigger private investment in directly productive activities, thus generating a crowding-in effect. Essentially, when constructing roads in economically underdeveloped regions, this external effect may be the principle objective of  investing in roads. This holds particularly for paved roads in areas where alternative means of transportation are of significantly less economic significance, as is the case when only unpaved roads are alternatively available. In such circumstances, the financial revenues generated by the road through incomes from tolls do not fully reflect the economic benefits of the roads. By penetrating underdeveloped regions, roads make land more accessable, hence cheaper, and link  far away production sites to markets.

At the same time, however, roads may also generate negative external effects resulting in a loss of welfare. Cases in point are air pollution and noise, particularly when roads pass through urbanized areas, or loss of environmental services, particularly when roads pass through environmental ‘hot spots’. The latter case essentially refers to a situation in which a public good, or club good, a regional road, traverses an area generating public goods. Hence, such areas often produce environmental services as joint products. Put differently, it is typical of the multifunctional character of such areas that they provide a combination of global or regional pure or unpure public goods or club goods. Consequently, negative external effects of infrastructural works may not be confined to the local or regional level, but may also affect welfare at the global level. This may specifically be the case with roads penetrating pristine and highly vulnerable eco-systems that contribute significantly to the world’s stock of genetic resources and to the sequestration of carbon. The extent to what this is relevant in the case of IIRSA projects depends, of course, primarily on the specific location of the trajectory, and on the degree of change of the environment induced by the future road. 

Building new roads and moving the geographical frontier of economic activity , particularly in pristine forests, may have a lowering impact on land prices by making new land available, hence stimulates colonisation, while, on the contrary, improvement of existing roads may increase land prices by stimulating intensification of land use (Andersen et al., 2002, pp. 145-147). Thus, investment in network expansion results in more deforestation than investment in network improvement as the former type of infrastructural investment will enhance the likelihood of deeper penetration into the forest (Gascon, 2001, p. 25). Statistical studies of deforestation in Amazonia show a high concentration along the expanding road network. In the period 1991-95, 33 per cent of deforestation was concentrated in an area within 50 kilometers of the eastern road network, 24 per cent  within 50 kilometers of the central road network, and 17 per cent within 50 kilometers of the western road network. All together, 74 per cent of deforestation was concentrated within a range of 50 kilometers around roads, creating long corridors through the forest.  Most new clearing takes place in areas adjacent to areas already cleared, on a moving agricultural frontier, often according to a so-called fish bone pattern (Alvers 2002, Andersen et al., 2002, p. 55).

To make a comprehensive assessment of the  welfare effects of a road, all costs and benefits need to be included fully. In view of the sheer size and scope of the road projects, an assessment of its probable economic and non-economic impacts exceeds by far the traditional framework for project assessments and evaluations, as provided by costs-benefit analysis. Essentially, a comprehensive ex-ante assessment would require a regional computable general equilibrium model which would allow simulation runs. It should be noted, however, that the capability to simulate or generate the real-world dynamics of such a major investment programme in selected regions has strict limits. Moreover, the  time span of such models does not allow for inclusion of environmental effects and their (second round) economic repercussions. At this stage such such model studies have not been prepared in the context of IIRSA.

Environmental assessments, as made for World Bank projects since 1989, suffer from limitation in case of economy-wide or region-wide infrastructural projects. To correct for these inadequacies, so-called Strategic Environmental Assessments (SEA) were introduced, but experience with the application of the new methodology by multilateral financial institutions in developing countries so far is limited (World Bank 2002). A comprehensive assessment of the economic value of the environment is required not only  in investment procedures, but also as a base for a regional or global payments system for the collective goods a region provides. This requires a comprehensive inventory of the many different functions of the forest including the array of direct and indirect use values as well as optional and existence values of the environment. However, methodological problems make it very hard to assess accurately the positive and negative welfare effects of interventions.

To start with, many of the markets involved are imperfect, and for many of the eco-services provided markets do not even exist. The problems of the non-existence of markets is particularly urgent when dealing with the economic valuation of biodiversity. These complications must be tackled in order to make a comprehensive valuation of alternative options for the exploitation of the forest. Moreover, longer-term forecasting of variations in direct and indirect use values, resulting from future patterns of demand and supply in markets of natural resources and ecological services, are hard to make (Trindade de Almeida and Uhl, 1999; Van Beukering and Van Heeren, 2003).

Second,  the economic response of subjects to new opportunities, created by, for instance, improved access to a region, in terms of  investment and expansion of economic activity such as nutrient mining and mineral mining, and the implications of such activity for the region’s ecology, depends on a large number of interrelated and geographically dispersed factors, which are very hard to integrate in a regional development model with economic and environmental dimensions. For further discussion of these and related  methodological problems see May (ed), 1999. For a review of potential effects of road construction in forest areas see Andersen et al., 2002.

Third, the measurement of deforestation, fragmentation, and edge effects, which are due to improved area access and to investment in economic activity, may, in itself, be complicated and expensive. The Sistema de Vigilância Ambiental (Sivam) may be useful in the future for monitoring changes in forest coverage. However, combining information from satellite images with land surveys may be complicated. However, at least some of these complications must be tackled in order to design rational payment systems, based on some sort of costs-benefit analysis related to the eco-services that are provided by northern Amazonia and the Guiana Shield.

In view of the methodological problems refered to above, one may question whether  there are alternatives available for applying the economic principles and more specifically the price mechanism in order to come to a rational way of exploiting an environment. An alternative may be discretionary decision making applied in the context of a zoning policy. The concept of zoning was introduced in Brazil in 1990 by presidential decree. National and state-wise zoning commissions were installed but these have been largely inactive (Hall, 2000). Thus, so far zoning has offered little in terms of an optimal use of areas of high ecological value. Zoning as such does not solve the problem stated above if it is not based on a rational assessment of alternative values of regions. Mahar (2000) has shown how zoning in Rondonia, which was introduced to protect specific regions with high ecological values, was opposed by farmers, ranchers and loggers, who could not find compensation for lost opportunities, while the positive income effects of zoning were restricted to  civil servants and others in charge of implementing and maintaining the zoning policy. Obviously, there were too few local winners while the losers were not compensated by offering them alternative opportunities. Following Schneider (1995, p. 27) zoning will only be of little use if at the same time accessability to land is improved and land development is stimulated by complementary government policies.

Moreover, the political economy of decision-making  complicates an optimal use of natural resources.. Interest groups and politicians at the local level usually prefer exploitation of direct use values and improved links with markets. To tip the local decision-making process in favour of sustainable development and protection of an environment, will require another balance between economic gains and costs, and the creation of winners at the local level. Introduction of the market mechanism to the extent possible, including payments for environmental services and  taxes on negative external effects of specific economic activities, and provision of  incentives at the local level may contribute to a more accurate assessment of the welfare effects of different options for the functioning of land areas that are traversed by the development hubs that arenvisaged.

 

 

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