This report investigates the nature and consequences of conflict in
infrastructure projects in Latin America and the Caribbean (LAC). To the best of the authors’ knowledge, this is the first study on this scale at the infrastructure industry. A hybrid quantitative and qualitative research approach provided the data for the study. 32 interviews were conducted with 42 sustainability experts involved in the development of infrastructure in LAC. Then, a database of 200 conflict-affected infrastructure projects across six sectors was created to assess the nature and drivers of conflicts, the companies’ response to conflicts, and the material implications for projects, companies, and societies.
Our analysis demonstrates that the nature of conflicts is multidimensional, and more dynamic than traditionally conceived by both firms and governments. Most conflicts materialize through the interaction of environmental, social, governance, and economic drivers over a long period. Overall, deficient planning, reduced access to resources, lack of community benefits, and lack of adequate consultation were the most prominent conflict drivers. In many cases, conflicts escalated because grievances and community concerns accumulated, going unresolved for many years. In general, conflicts may arise during any phase of an infrastructure project, but our analysis shows that the earliest phases are increasingly vulnerable to conflicts. Most projects in the database that were cancelled or postponed faced conflicts before operations. The consequences of such conflicts are increasingly detrimental for companies, investors, and national governments as conflicts cause projects to fail and harm national economies. Of the 200 projects in the database, 36 were cancelled because of conflicts, while 162 projects faced delays, and 116 faced cost overruns. Although all six infrastructure sectors evaluated in this research saw conflicts, resource, energy, and waste projects saw a disproportionate share. Furthermore, conflicts escalated more often in countries that lack the institutional capacity to manage them effectively. However, conflicts can be addressed effectively and on time, as well planned sustainable projects mitigate risks that lead to conflicts. Each firm addresses conflicts differently, but those committed to develop sustainable projects and take comprehensive action to mitigate conflicts in advance are more likely to face less significant consequences and to implement their projects to the end. Firms that fail to consider conflicts proactively or choose to remain unresponsive to conflicts when they arise usually face substantial consequences and are more likely to see their projects cancelled or abandoned. Yet, even though in certain sectors firms have
changed their approach and implemented good practices for anticipating and managing conflicts, the implementation of such practices in most infrastructure projects is still limited. Many firms choose to remain unresponsive to conflicts, or do not respond adequately and on time. In most cases, risk and conflict management systems are ignored while community engagement is regarded as a secondary requirement which needs to be fulfilled in order to comply with regulations. Their crucial function for preventing conflicts is often not seen. Our research concludes with a set of strategies and policy recommendations for governments, investors and developers that are
effective in mitigating risks and containing conflicts. Governments should enhance regional upstream planning to generate better-prepared projects that are not sited in conflictive locations. Developers should implement proactive risk management systems, engage communities with targeted
programs and build trust early on. Lenders and investors should help
national governments enhance their institutional capacity, and establish
requirements for proactive risk and conflict management through funding mechanisms. Such actions will provide the foundation for continuous efforts to collaborate, disseminate good practices, and align incentives that will lead to effective conflict resolution in infrastructure.