International investment in infrastructure projects continues to be insufficient. This is the conclusion reached at the B20 summit where global companies provided guidance to the G20. According to the task force charged with studying growth and infrastructure financing, the infrastructure investment gap needs to be resolved to exploit the sector's enormous potential and drive more inclusive development.
Currently there is a $2.5 billion annual worldwide investment in infrastructure projects related to transportation, energy, water, and telecommunications. Additionally, $7 billion is invested each year in social infrastructure projects (hospitals, schools, and urban development), public service networks, and housing. Nonetheless, this amount continues to be insufficient and translates into lower economic growth and a lack of basic public services.
José Manuel González-Páramo, BBVA executive board member and vice president of the B20 working group, which analyzes the financing of growth and infrastructure, believes that "closing the investment gap that exists between the need for infrastructure and the enormous availability of pertinent funds” is one of the global economy’s fundamental challenges.
The importance of addressing this disparity lies in three fundamental points. Firstly, because infrastructure plays a crucial role in long term development. Additionally, building infrastructure increases job creation. And finally, because infrastructure is a market with considerable, yet unexploited, business opportunities. Despite this, the numbers show that since the financial crisis, infrastructure investment has fallen as a percentage of GDP in 11 of the economies that make up the G20.
In this respect, José Manuel González-Páramo stresses that is necessary “to address regulatory hurdles and obstacles that impede cooperation with multinationals and constrains innovation and digitalization.” According to BBVA’s executive board member, once these problems have been resolved, progress in bridging the current infrastructure investment gap will have been made.
B20: the global voice of business
The B20 is a forum of private international companies, which provides recommendations to the G20 governments with the aim of tackling the most important economic challenges of the day. It is a global mechanism through which businesses promote dialogue between governments, society-at-large, and companies. It works in parallel with the G20, providing recommendations for decision-making related to corporate, economic, and social matters.
The G20 is an international forum that seeks economic, financial, and political cooperation. Currently it is made up of the European Union and 19 countries: Germany, Saudi Arabia, Argentina, Australia, Brazil, Canada, China, South Korea, the United States, France, India, Indonesia, Italy, Japan, Mexico, the United Kingdom, Russia, South Africa, and Turkey. It was established in 1999 when the members of the G7 recognized a need for a larger, more inclusive discussion group. The first meeting was held in 2008 in Washington, D.C., with Argentina assuming the rotating presidency.
Since the 2010 summit in South Korea, the G20 has counted on guidance from the B20. Belonging to this forum, presided by Argentina this year – in addition to the G20 – there are representatives of private international companies, like BBVA, that support and advise the global discussion group on matters related to corporate, economic, and social topics. With this objective, the different task forces meet regularly.
This year the task forces were organized by eight key themes related to the global economy: employment and education; energy, climate, and resource efficiency; digital economy and industry 4.0; financing growth and infrastructure; agreements and investments; food system sustainability; small and medium sized business development; and integrity and compliance. Since 2015, BBVA has played a notable role in the forum. This year, in specific, José Manuel González-Páramo, BBVA executive board member, is the vice president of the task force dedicated to financing growth and infrastructure.
According to the B20, the main discussion topics for the working group in which González-Páramo participates are: the promotion of public-private sector collaboration; the promotion of cross-border financial regulation consistency; developing infrastructure as an asset class; and increasing access to affordable housing. Its primary goal is to promote a regulatory framework that fosters innovation and digital transformation in the financial sector and achieves inclusive, sustainable growth. In this context, José Manuel González-Páramo emphasizes that BBVA decided to become involved in this forum because “inclusive development is part of BBVA's DNA.”