Economics

Infrastructure

  • Economics
    S&P’s Brazil Downgrade: Why it Matters
    In a widely expected move, the ratings agency Standard and Poor’s (S&P) downgraded Brazil’s long term debt from a credit ranking of BBB to BBB- on March 24, bringing the country’s sovereign bonds a step closer to losing their “investment grade status” (defined as BBB- or above) and becoming "speculative" or “junk bonds.” The rating stems from a combination of indicators—including GDP growth, inflation, and external debt—that S&P uses to measure a country’s creditworthiness and its fiscal, regulatory, and political risks. Since the turn of the twenty-first century, Latin America’s overall credit ratings have trended upward. By Fitch’s rating system, twelve out of fourteen Latin American countries have higher ratings today than a decade ago, one stayed put, and only one fell in the credit ranks. Chile sits at the top, reaching S&P’s AA- status (AAA status is the highest possible) in late 2012, on par with Japan and just above Israel. Mexico ranks next with a BBB+ rating (bumped up after its ambitious reforms passed); Peru too rates BBB+. At the bottom is Argentina with a CCC+ rating, improved from DDD after its 2001 default. Before the recent S&P downgrade, Brazil’s sovereign credit rating ranked roughly in the middle of the region, on par with Colombia and Panama. S&P justified the downgrade based on the country’s “fiscal slippage”, its controversial accounting mechanisms, and the low likelihood that it will tighten spending before the October presidential election. Does it matter? Many have questioned the importance of these scales, as well as the ratings agencies analytical independence. For Brazil, the downward shift had already been largely priced into domestic markets, and it seems to have had little effect in other nations. Further, the two other major agencies, Moody’s and Fitch, have yet to join their skeptical colleagues at S&P. But before the government waves away the opposition critiques, they should reflect on the costs. Where it can and may matter is for Brazil’s companies, as corporate credit costs often follow sovereign rankings (known as the “sovereign ceiling”). In the twenty-four hours after Brazil was downgraded, S&P also lowered the ratings for two-dozen banks including Banco Santander Brasil and Itaú Unibanco. And studies show that highly-rated companies reduce investment after sovereign credit rating downgrades (though it affects lower-ranked companies less). Dilma Rousseff may easily brush off any criticism and win a second term. Still, the downgrade could hinder her economic recovery plans. With Brazil turning increasingly to the private sector to fund much needed investments in ports, roads, and airports, a higher cost of capital for private domestic companies would give multinational firms a leg up over their Brazilian counterparts. And unlike in the recent past, Brazil’s public and development banks (BNDES and Caixa Econômica Federal) are unlikely to step in with abundant cheap loans, as they are already pulling back. The downgrade also gives fodder to those talking about the divide happening in Latin America, characterized alternatively as between East and West, between a politicized Mercosur and the new Pacific Alliance, or generally between countries embracing world markets versus those pursuing a larger state role in the economy. S&P’s analysis reflects where they believe Brazil is leaning.
    Post by Shannon K. O'Neil April 3, 2014 Latin America’s Moment
  • Infrastructure
    An Easy Way to Get Smarter on Infrastructure Finance
    “The United States has an infrastructure investment problem,” so starts CFR Senior Fellow Heidi Crebo-Rediker’s compelling new policy innovation memo released yesterday. As we lay out in our report on federal transportation policy, the country should be spending one-third more than current levels just to be able to maintain the infrastructure we alrady have. Using more private money is one way to plug the gap. But many state and local governments, who are responsible for paying for and managing most of the nation’s infrastructure, do not have the expertise of using innovative financing structures that share risk, channel private money effectively, and give taxpayers value for money. Crebo-Rediker argues there is a politically easy and inexpensive way the federal government can help to solve this “knowledge gap” by creating a small unit of experts to advise these policymakers. The unit would be called, simply, “Infrastructure USA.” The United States is late-to-game when it comes to using private finance in infrastructure. Many other countries that are further along have entites like “Infrastructure USA” to spread know-how to government officals tasked with financing infrastructure projects. Indeed, a small but hugely successful model already exists within the federal government at the Treasury Department, but the unit only advises foreign governments. And they get the job done on the cheap. If such a unit helps policymakers make decisions that have more cost-effective outcomes, the unit would pay for itself, and then some. In an added bonus, Obama potentially could get the unit up and running, at least initially, without going to Congress and having to slog through any legislative gridlock. But we can safely assume, she writes, that the unit would not generate serious political opposition; Democrats and Republicans alike want to get more private money in the game while protecting taxpayer interests. The release of Crebo-Rediker’s memo could not be more timely. Infrastructure funding has been making the headlines. In February, Obama set an ambitious goal of funding transportation spending at more than current levels for the next four years. Policymakers are thinking more creatively about how to fund transportation spending, with shortfalls predicted in coming years as gas-tax revenues continue to slide downward. Both Obama’s and Republican David Camp’s tax reform proposals recommended using revenues raised from corporate tax reform for infrastructure investment. Transportation spending could be a bright point of bipartisanship.
    Post by Rebecca Strauss March 20, 2014 Renewing America
  • Infrastructure
    Infrastructure Finance in America—How We Get Smarter
    The United States has an infrastructure investment problem. A generation of roads, bridges, airports, and water and sewer pipes built half a century ago is nearing the end of its useful life. Yet traditional public resources are no longer substantial enough to foot the bill. Investors from the United States and around the world are eager to invest in infrastructure projects that can provide stable, long-term returns, through public-private partnerships (PPPs) or other innovative investments. But it takes expertise to channel this investment in a way that protects taxpayers and provides value for money—expertise that many state and local policymakers lack. The federal government should close this knowledge gap by creating a new advisory unit under the auspices of the Treasury Department called "Infrastructure USA." This unit would support state and local governments in deciding how best to use private investment to plug the infrastructure spending gap. Other countries have created special entities within, or working closely with, finance ministries or treasuries that share technical expertise and best practices with local decision-makers. A good model already exists within the federal government: a small unit in the U.S. Treasury Department advises foreign governments on how to use private investment for infrastructure projects in their own countries. This program can be replicated easily and inexpensively to encourage infrastructure investment in the United States. The Problem The American Society of Civil Engineers estimates that the United States needs to invest $3.6 trillion by 2020 to maintain its current infrastructure in a state of good repair. But such a large expansion in direct appropriations is completely unrealistic at a time when government coffers are already stretched or otherwise spoken for. The most common way states and local governments fund infrastructure projects—through municipal bonds—works well for many infrastructure projects. But municipal bond issuers are not able to take advantage of large global pools of capital looking to make infrastructure investments, due to lack of bond liquidity, bond issue size, and return for investors who do not benefit from the tax exemption. With infrastructure spending as a percentage of gross domestic product (GDP) at its lowest level in over twenty years, these traditional funding sources alone are unlikely to cover the country's mounting infrastructure needs. Using more private capital could play a large part in solving this issue. Pension fund, insurance fund, and sovereign wealth fund managers would like to invest in projects—like infrastructure—that guarantee stable, long-term returns. Their money can be channeled into infrastructure projects through innovative financing structures, including collaborative public-private partnerships. In addition to using private funds, PPPs often come together with private expertise that use creative ways to stretch infrastructure dollars further. PPPs are not always the best option. But when they are a good fit, well-designed PPPs have a better track record internationally than do publicly run projects of being completed on time and under budget. Ultimately, PPPs and other innovative financing structures that use private capital can help governments meet public needs with fewer public dollars. Yet in the United States, too few of these projects get off the ground. One barrier is the lack of basic knowledge among state and local officials about project finance and PPPs. These financing structures are often complicated and require a thorough understanding of who bears what risk, who receives what benefit, and how to weigh public and private funding options. Private investors seek a return on their investments, which often means private capital appears more costly than using municipal market finance. But for the right project, PPPs may prove to be better value for taxpayers and the public at large. The challenge is knowing how to measure their value. Some U.S. state and local officials are very adept at using innovative financing, and a few states, like Virginia, have their own PPP units that build up expertise. But most state and local officials lack the necessary skill to value, negotiate, and implement innovative financing structures in ways that maximize benefits to taxpayers. And these same officials make the lion's share of decisions on which projects move forward and how they are funded. Existing Models The federal government already offers this vital capacity-building and advisory service at the Treasury Department—but only for foreign countries. The Infrastructure Finance Unit, which is housed in the Treasury's Office of Technical Assistance (OTA), is a small team of experts that travels to foreign countries and gives hands-on technical and managerial assistance. The team advises on the entire process of infrastructure project development: project feasibility and design, risk assessment, financial structuring, tendering, fiscal oversight, debt management, and handling of long-term contracts. They even work with countries to attract project investors. But OTA is not allowed to provide this same advice and analysis to assist U.S. state and local governments, which are confronted with the same opportunities and challenges. In other developed countries with strong PPP track records, governments offer these services domestically. "PPP Canada" provides expertise and standardizes documentation and procedures for Canadian officials on the frontlines of negotiating PPPs. Canada topped the list in a May 2012 Deloitte / PPP Bulletin International survey assessing recent and expected levels of PPP activity and quality of its infrastructure financing model. The number of infrastructure projects in Canada has surged over the past five years, due in part to the work of PPP Canada. The United Kingdom also has its own "Infrastructure UK" unit operating within the UK Treasury that supports private investment in UK infrastructure. Recommendation President Barack Obama should establish an Infrastructure USA unit, which potentially could be done through executive order, to address the PPP and infrastructure-finance knowledge gap among state and local government officials. This unit should be housed within, or be closely affiliated with, the Treasury Department, which has experience with evaluating risk, financial structuring, and public debt management. It should also build on existing expertise from in-house and outsourced experts in the foreign-focused Infrastructure Finance Unit of OTA. As a central repository for this expertise, Infrastructure USA should coordinate closely with other agencies involved in a broad cross section of infrastructure, especially ones with federal grant or lending authority for projects, such as the Department of Transportation. Infrastructure USA could start small and with a relatively modest budget. The fully functioning PPP Canada cost approximately $12.5 million in Canadian dollars ($11.4 million in U.S.) to operate in 2013. The entire OTA, which primarily runs non-infrastructure-related advisory programs, received an annual appropriation in 2013 of approximately $27 million. By starting small and leveraging existing expertise within the U.S. government, Infrastructure USA could provide immediate value. It is reasonable to assume that ongoing operating costs will not exceed those of PPP Canada. State and local governments could go to Infrastructure USA on an as-needed basis for specific project support—for example, consulting on whether PPPs are the best option, and if so, how they should be custom-tailored. Additionally, Infrastructure USA could offer the following services: Standardize template documentation for different types of PPP agreements. Well-vetted base templates allow state and local governments to know what to expect when exploring opportunities for private investment in infrastructure. This could maximize efficiency and minimize legal fees, as well as provide a neutral starting point for discussions with private investors. Assess and collate best practices. Across the world and within the United States, there is ongoing innovation in PPP best practices, from financing structures to budget management and risk sharing. The unit should conduct research on what works, collaborating with the OTA's team, the European Investment Bank, World Bank, and International Finance Corporation, as well as other development banks that have significant expertise. Host experience-sharing meetings. The unit should provide a convening space for state and local governments to share practical experience and expertise on structuring, negotiating, and implementing PPPs, particularly in collaboration with any state PPP units. This experience varies widely around the United States. Advise on existing federal funding opportunities. There are many federal grant, loan, and loan-guarantee programs currently available for infrastructure projects designed to complement other means of financing or encourage private investment, but local governments may be unaware of these resources or how best to navigate them. Feasibility The politics of creating Infrastructure USA should be easy. Democrats and Republicans agree that U.S. infrastructure needs more investment, and both parties support using more private money to make that happen. President Obama could potentially create Infrastructure USA without legislation in the initial stage to get it up and running immediately. The cost would be minimal, but the impact could be large if PPP Canada is any guide. The federal government is also well positioned to pool expertise that can then be shared broadly. An agency like the Small Business Administration is a good domestic example; it has provided advice, training, support, and capacity-building to entrepreneurs and small businesses for years. Infrastructure USA would not impose federal guidelines or priorities. Its services would be voluntary for state and local governments and by request. They could reject any recommendations to counter any fear of overreach by the federal government or political interference. Ultimately, the purpose of Infrastructure USA would be to ensure that taxpayers at all levels of government can make well-informed investment decisions and receive better value for money, and that quality infrastructure gets built.
    Policy Innovation Memorandum by Heidi Crebo-Rediker March 19, 2014 Renewing America
  • Infrastructure
    Why We Don't Have the Aviation Infrastructure We Need...and What to Do About It
    The following post was written by Greg Principato, who was President of Airports Council International--North America, the trade association representing U.S. and Canadian airports, from 2005-2013. He was also Executive Director of the National Commission to Ensure a Strong Competitive Airline Industry (Clinton Administration) and a member of the Secure Borders and Open Doors Advisory Committee (George W. Bush Administration). From the end of the Second World War into the 1990s, the United States had the world’s best and most modern aviation infrastructure. Our airlines used that infrastructure to develop modern hub networks. We moved more people and cargo than anyone. We showed the world how to get people and products to ever more destinations and markets. But having showed the world, we grew satisfied and stopped investing. Meanwhile, much of the rest of the world, the Persian Gulf region, Asia, Australia, and even Latin America, is investing in a big way. Anyone flying from Singapore to New York’s JFK can see the difference. Hong Kong has become the world’s leading cargo airport, and Beijing (or maybe Dubai) will soon become the world’s busiest for passengers. Their airports are more modern, more efficient, and, yes, more pleasant. Our competitors are positioning themselves to be the transportation hubs of the 21st century global economy, while we remain positioned to dominate the 20th. Our competitors fund and govern their aviation industry and infrastructure with the explicit goal of competing in a global economy. We do not. We govern and finance the U.S. aviation system the same way we did when the goal was simply flying people around our own country, at a time when the federal government set routes and fares. International travel was a small slice, and U.S. carriers dominated. Our financing system dates from the 1970s and our governance system from the 1920s. It is hopelessly and irretrievably out of date, and the results show. The way we fund airports makes flexibility, efficiency, and good decision-making almost impossible. We have a federal airport grant program, funded out of the tax on tickets, with many restrictions on how it can be spent. Airports often access capital markets by floating bonds, especially for large capital projects. Sometimes these bonds are tax exempt, and sometimes not, depending on their use. Most airports around the world charge a passenger user fee. U.S. airports may do this, but federal law limits it to $4.50, very low by international standards, and places severe restrictions on its use. Airports sometimes go to the Federal Aviation Administration (FAA) to negotiate, square foot by square foot, how they pay for projects. No one likes this arrangement. Yet it does not change, because everyone thinks they will lose if we change. Airports like the “comfort food” the federal check provides. Airlines like a limited passenger user fee because it gives them more control at airports. Airports chafe under the passenger user fee limit, but then argue only for a slightly higher limit. If an airport and its stakeholders want to do a certain project and finance it a certain way, then it should be of no concern to the federal government. That is the way it works around the world, where economic freedom yields good decisions and modern infrastructure. And yet, many in the U.S. airport community really want the government to set a number, a higher number, but a set number. They would rather have that than true economic freedom. Airlines and airports have designed policy goals for short-term benefit. Neither group's goals add up to a global strategy. Combined, they leave our aviation infrastructure non-competitive. So, what should be done? First, by 2016 the thirty largest U.S. airports should be dropped from the federal grant program and the passenger user fee limit raised to $8.50 (restoring the original purchasing power of the fee when the $4.50 limit was set). By 2018 this should be expanded to the next twenty largest. Any smaller airport could opt in. The ticket tax would be reduced to account for a smaller federal grant program. Second, by 2020 the thirty largest U.S. airports should be removed from municipal governance and converted to a corporate form of governance. Many will say that some of our competitors have a strong state hand in governing. That is true. But those places are willing and able to invest, while U.S. airports are hamstrung. There are models all over the world for how to finance airports, from the Crown corporations in Canada, to various forms of concession agreements, to outright privatization. Each community can decide which is best for its situation. Airports outside the thirty largest that left the federal program would have until 2025. Once this is accomplished, federal rules limiting passenger fees would be eliminated and airports would also be able to make more competitive decisions on their retail and food and beverage offerings. This model has proven around the world to actually enhance airport-airline cooperation. Finally, the current system of taxes and fees that fund aviation infrastructure should be reformed. It is inefficient and costly. The Secretary of Transportation would appoint a joint stakeholder/government panel to recommend reforms to be enacted when the FAA is reauthorized in 2015. Some may see these proposals as extreme or impractical. If we do nothing we can limp along, fighting the same old fights, secure in the knowledge that our domestic market will keep a certain number of airlines and airports afloat. And that may be good enough for some. But we will no longer be a hub of international activity. Cargo will flow through other places, taking with it the businesses and services that locate in such hubs. International travelers will increasingly avoid the United States, first for connections and then to even visit at all. (Our visa and immigration processes have something to do with this as well).  Our airlines, which once led the world, will be reduced to feeders for the big international players of the future. If you don’t believe this can happen, ask anyone old enough to remember when Pan Am and TWA dominated international travel. Other countries have managed this because they better understand the role of air transportation in the global economy. Why can’t we?
    Post by Guest Blogger for Edward Alden December 9, 2013 Renewing America
  • Infrastructure
    New Energy and U.S. Economic Vulnerability
    One of the promises of the fracking revolution that has sharply increased oil and gas production in the United States is that it might help to free this country from the economic ups and downs associated with a volatile world energy market. But a new Council on Foreign Relations Energy Brief, "The Shale Gas and Tight Oil Boom: US States' Economic Gains and Vulnerabilities," suggests that promise is over-stated. Even as U.S. reliance on foreign oil has diminished, it is still vulnerable to price shocks that could result from events in the Middle East or elsewhere. The paper, by Stephen Brown of the University of Nevada, Las Vegas and Mine Yücel of the Federal Reserve Bank of Dallas, underscores that even with the recent boom, oil and gas production matters less in the United States than it once did. At the height of the last energy boom in the early 1980s, oil and gas production hit 4.3 percent of total GDP; today it is 1.6 percent, up from a low of 0.6 percent in 1999. The good news here is that most state economies are more diversified, and thus would be more insulated from the impacts of a sudden rise in world oil prices. The bad news is that the potential for damage is still considerable; a 25 percent increase in oil prices, for example, would produce a loss of 550,000 jobs nationwide, with 42 states and the District of Columbia being hurt. Some states—Texas, North Dakota, Wyoming, and five others—would benefit from rising oil prices. But their gains would not come close to offsetting the wider losses in the economy, with those eight states adding an estimated 100,000 jobs under the 25 percent increase scenario. The flip side is that those states would be hit hard by an oil price decline, even as the rest of the country would benefit. The most encouraging new development is the decoupling of natural gas from oil prices due to huge increases in domestic gas production. Low gas prices mean that the petrochemical industry in Texas and Louisiana, for instance, could actually benefit from rising oil prices. And as more U.S. power generation comes from gas-fired plants, electricity prices would be less affected than when the United States relied more heavily on coal, which tends to move with oil prices. The overall picture painted by the study is that the shale gas and tight oil revolutions, while they have in no way insulated the United States from global energy markets, they have certainly helped. And with all the other uncertainties currently facing the U.S. economy, that is a positive development.
    Post by Edward Alden October 15, 2013 Renewing America
  • Sub-Saharan Africa
    How Do the African States Compare to Each Other?
    A hat tip to John Kelle for bringing to my attention an interesting and useful interpretive infographic, “Scoring Africa.” Using a matrix, each country is scored on health, stability, economy, infrastructure, education, biodiversity, rights, and size. Each of these categories is in turn broken down into four sub-categories. Under "health," for example, the sub-categories are HIV/AIDS, medical persons, life expectancy, and under five mortality. There is a composite score for each country and also country scores for each category and sub-category, based on a scale of zero to one hundred. The scoring is based on data from UN agencies, non-governmental organizations (including the Mo Ibrahim Foundation), and international financial institutions, such as the Africa Development Bank. The data is presented via a map of Africa. A user clicks on a country, then on a category or subcategory as desired to access a score. The presentation is especially clear and attractive. “Scoring Africa” was developed by Great Business Schools and is available for use by everyone. It is a great introductory tool to a host of African issues. It also provides a fascinating overview of the differences among the various African countries—and the differences within a single country—from one category to another. John Kelle, a part of the development team, is a graduate student in research psychology at the University of Tennessee, Chattanooga, and also works as a researcher/marketer for a private firm.
    Post by John Campbell September 12, 2013 Africa in Transition
  • Infrastructure
    Transportation: Overhyped “Can-Do” States and P3s
    Advocates for more U.S. transportation spending are accustomed to discouraging news. So it is understandable they would claim a resounding victory when a handful of (small) “can-do” states manage to buck the national trend and raise taxes and revenues dedicated to transportation spending. More private dollars than ever before are being funneled into infrastructure projects, too. But the underlying, fundamental problem remains: the federal government and the vast majority of states are failing to raise enough public funds to pay for upkeep on the nation’s road and highway system, not to mention make new capital investments. The United States is no global leader when it comes to infrastructure spending, as we lay out in the Renewing America report on the competitiveness of the U.S. transportation system. The rest of the developed world spends about 50 percent more of its GDP on transportation than the United States. And while the United States used to be ranked fifth in the overall quality of its infrastructure in 2002 by the World Economic Forum, it has since tumbled to twenty-fifth. Given current tax revenues available for transportation spending, the United States’ free fall in the rankings will likely continue. A 2008 independent federal commission warned of the dire fiscal outlook for “surface” transportation (e.g., highways, roads, transit) budgets. Just to keep up on maintenance, the country would have to spend 60 percent more than what projected available revenues would cover. Add in necessary capital investments on new highways and roads, and the price tag would be 100 percent more. Everyone agrees the main way the country funds its highway and road system—with gas taxes—is a mess. Gas taxes, which are generally a fixed cent amount and unpegged to inflation, have been extraordinarily politically difficult to increase and so their real value has declined over time. The federal gas tax, for example, has been 18.4 cents since 1993. The same story can be told of most state gas taxes. A combination of three (generally positive) trends has led to declining gas tax revenues: steady and normal inflation levels, Americans are driving less, and cars are more fuel efficient. Meanwhile, upkeep and replacement costs are set to skyrocket as a whole generation of infrastructure built in the 1950s and 1960s nears the end of its useful life. Worsening congestion in metro areas, in large part fueled by simple population growth, screams for expanding highways and transit. Policymakers are up against the wall to do something. In the last year, five states—Virginia, Maryland, Arkansas, Vermont, and Wyoming—figured out a way through the political impasse and significantly raised gas taxes or rejiggered elevated sales taxes to go directly to surface transportation. For these states, revenues should now allow for investment levels closer to those recommended by the federal commission. Public-private partnerships, or P3s, are the other big idea on the block. By using more private resources for financing, designing, and constructing projects, governments could stretch scarce public dollars further. More states are embracing the possibility of P3s, reworking laws to enable and streamline P3 partnerships. There has been explosive growth in P3 projects over the last decade, especially for complex and expensive urban projects for which it makes the most sense to bring in private-sector expertise. And indeed, such P3s have a better track record of finishing projects on-budget and on-time than purely public undertakings. But the United States’ massive transportation financing problem is nowhere close to being solved. The five “tax-raising” states are minor players in the overall context of transportation spending. Big, populous states like California, Texas, New York, and Florida are still stuck in a fiscal hole. During the Great Recession, highway and road spending was cut by 31 percent in California and by 8 percent in Texas. For every state that has passed a tax-raising initiative, two others have failed. According to one estimate, public construction spending as a percent of GDP is now at its lowest level in more than 20 years. P3s alone cannot fill the yawning investment gap. They can be good financing and project delivery tools, but they aren’t substitutes for public revenues and funding. Only a sliver of transportation projects involve large enough traffic flows to be profitable for private parties. This is why most P3s are isolated to urban congestion-relief projects. Even in Canada, which has long been the trailblazer with P3s, only 15 percent of all infrastructure projects are P3s. In the words of Bill Reinhardt, one of the brightest minds in P3 finance, “P3s are like charter schools. They offer a great lesson when they work well, but they are still rare and will never be a system-wide solution.” Transportation infrastructure is a public good, and public dollars must make up the lion’s share of the investment gap. Ultimately, Americans will have to stomach higher taxes to pay for their roads and transit. Five states are leading the charge. Now for the remaining states—and the federal government—to follow suit.
    Post by Rebecca Strauss August 15, 2013 Renewing America
  • Infrastructure
    Policy Initiative Spotlight: NYC Zoning and Competitiveness
    The debate over skyscrapers and their place in the American city has endured for over a century, and New York City has often led the conversation. In 1913, the Equitable Life Assurance Society unveiled its controversial proposal to build a hulking new corporate headquarters in lower Manhattan after its former Wall Street home—the “city’s first skyscraper”—dramatically burned down. Completed just two years later, the new 1.4 million square foot, 40-story neo-classical colossus blocked the sun like few other man-made structures of its day. Much of the local business community feared that the Equitable Building’s seven-acre shadow, and those of other rising downtown towers, like the 57-story Woolworth Building, would threaten the neighborhood commons and long-term real estate values if development was left unregulated. As a result, a coalition of industry leaders pushed through the 1916 Zoning Resolution, establishing the first government restrictions on building height and bulk. The landmark measure would set the stage for a new era of setback skyscrapers in the 1920s. In 2013, commercial district zoning is once again back in the Manhattan spotlight. The outgoing Bloomberg administration has proposed a major rezoning of the East Midtown office district, a top business address and one of the city’s largest employment centers, fed by the Grand Central transportation hub. The mayor’s office contends that the district’s aging office building stock—on average the roughly 400 buildings are 73-years old—will undermine the city’s ability to compete with other global business centers for Fortune 500 companies. Bloomberg says his plan, if approved by the City Council, would relax building restrictions on the 73-block space, in effect cultivating the investment needed to grow a denser, taller, more modern forest of office spires to rival those sprouting up in London, Paris, Shanghai, and other cities. The city fears that if existing zoning regulations are left in place, a trend of converting office space to residential and hotel space will continue and eventually “erode the [district’s] commercial core.” Unsurprisingly, the plan has the enthusiastic support of developers and real estate executives eying a profitable construction boom. The ambitious rezoning of Hudson Yards on Manhattan’s far West Side—the last piece of underdeveloped real estate on the island—is oft cited as a relative city-planning success for the Bloomberg administration, despite the challenges of the recession. The mayor originally proposed the rezoning in order to develop the site for the 2012 Olympics bid, but the plan was later restructured. Since 2005, more than a dozen towers have been built, with many more on the way. In July 2013, it was announced that Time Warner may move its Midtown headquarters to a planned 80-story skyscraper in Hudson Yards. The new proposal has also attracted a wealth of criticism. In an April op-ed for the New York Times, renowned architect Robert A. M. Stern faults the plan for not making the necessary transportation infrastructure improvements before the redevelopment, and argues that preserving rather than rezoning East Midtown is a better economic stimulant. “Our diversity, and the fact that we don’t look like Pudong [Shanghai], is the reason many creative types choose New York over the bland banalities of Silicon Valley, just as in London, they’ve chosen Clerkenwell over Canary Wharf, and in Paris, just about anywhere over La Défense,” Stern writes. Another op-ed by NYT’s architecture critic Michael Kimmelman takes the Bloomberg plan to task for foolishly trying to win a race to the heavens with international rivals. “If New York wants to learn from London, Tokyo and Shanghai, the lessons aren’t about erecting new skyscrapers. Big cities making gains on New York are investing in rail stations, airports and high-speed trains, while New York rests on the laurels of Grand Central and suffers the 4, 5 and 6 trains, which serve East Midtown. They carry more passengers daily than the entire Washington Metro system,” he writes. (A 2nd Avenue subway line that will also service East Midtown is currently under construction, but has been plagued for decades by delays.) At least for the moment, New York is still a global leader in the realm of tall buildings, second only to Hong Kong in the number of skyscrapers, according to Emporis. It also remains a premier place to live and do business, taking the top spot in a 2012 Price Waterhouse Coopers report on the social and economic performance of top global cities.
    Post by Jonathan Masters July 30, 2013 Renewing America
  • Mexico
    Investment is Vital on the Long and Potholed Path to Prosperity
    Mexico faces many challenges in improving its overall competitiveness. In an opinion column in today’s Financial Times, I argue that investing in the country’s infrastructure will be a vital step for creating a more competitive future. Take a trip to see the famed monarch butterfly’s winter grounds, one of Mexico’s most prized tourist destinations and a Unesco world heritage site, and the desperate straits of Mexican infrastructure come into full view. The first stretch of the trip from Mexico City to the western state of Michoacán begins smoothly enough. But once you turn off the main highway, the potholes multiply, slowing drivers to a crawl. On reaching the final road to the butterfly sanctuary, only the sturdiest of vehicles can pass, forcing visitors to hire local drivers for the four-mile, 45-minute drive along the narrow dirt road, steering hard lefts and rights to miss the huge potholes and other obstacles along the way. Though just one hundred miles from Mexico’s capital, it takes nearly four hours to reach the site. This trip is not an anomaly. According to the World Bank, less than 40 percent of Mexico’s roads are paved, unchanged over the last decade. To read the rest of the article, click here.
    Post by Shannon K. O'Neil June 28, 2013 Latin America’s Moment
  • Infrastructure
    U.S. Broadband Policy and Competitiveness
    Experts agree that broadband internet is a critical piece of 21st-century infrastructure. The Federal Communications Commission has stated that “broadband is a foundation for economic growth, job creation, global competitiveness and a better way of life.” As analysts continue to debate how U.S. digital infrastructure stacks up against its international peers, policymakers need to understand the potential economic benefits and costs associated with emerging broadband technologies. This Backgrounder examines some of these issues and their implications for U.S. competitiveness.
    Post by Steven J. Markovich May 15, 2013 Renewing America
  • Infrastructure
    U.S. Broadband Policy and Competitiveness
    With the economic benefits of broadband access rising, experts continue to debate how U.S. digital infrastructure compares to its international peers.
    Backgrounder by Steven J. Markovich May 13, 2013 Renewing America
  • United States
    Foreign Policy Begins at Home: The Case for Putting America's House in Order
    Play
    Please join Council on Foreign Relations President Richard N. Haass for a discussion of his new book, Foreign Policy Begins at Home. He describes a twenty-first century in which power is widely diffused, the result of globalization, revolutionary technologies, and power shifts. Haass argues that the biggest threats to U.S. security and prosperity come not from abroad but from within. He puts forward a new foreign policy doctrine of Restoration, in which the United States limits its engagement in foreign wars and humanitarian interventions and instead focuses on restoring the economic foundations of its power.
    Event with Richard Haass and E.J. Dionne May 6, 2013
  • United States
    "Foreign Policy Begins at Home: The Case for Putting America’s House in Order"
    Play
    Richard N. Haass discusses his new book, Foreign Policy Begins at Home, in which he puts forward a new foreign policy doctrine of Restoration, where the United States limits its engagement in wars of choice and humanitarian interventions abroad, and focuses on restoring the foundations of its power at home.
    Event May 6, 2013
  • United States
    Foreign Policy Begins at Home: The Case for Putting America's House in Order
    Play
    Related Reading: Foreign Policy Begins at Home
    Event with Richard Haass and George Stephanopoulos May 1, 2013
  • United States
    Foreign Policy Begins at Home: The Case for Putting America’s House in Order
    Play
    CFR President Richard N. Haass discusses his new book, Foreign Policy Begins at Home.
    Event May 1, 2013