IDB Launches 'South Connection' to Boost Regional Integration and Investment

The launch of "South Connection" was met with strong support from regional leaders who recognized its potential to transform South America’s economic landscape.

The Inter-American Development Bank (IDB) has unveiled "South Connection," a groundbreaking regional program designed to enhance economic connectivity, reinforce value chains, and modernize regulatory frameworks across South America. This initiative, co-created by participating countries, aims to reduce trade barriers, lower costs, and attract new investments by fostering greater integration of currently fragmented markets.

The announcement was made during the IDB and IDB Invest Annual Meetings, where the Bank’s governors and senior representatives from Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Suriname, and Uruguay joined IDB President Ilan Goldfajn to sign a declaration of support for the program. The declaration underscores a collective commitment to tackling shared challenges through a regional approach and highlights the IDB’s role in facilitating solutions that transcend national borders.

Key Pillars of 'South Connection'

The "South Connection" initiative is structured around three primary pillars, each addressing crucial aspects of regional development:

1. Connectivity: Enhancing physical and digital infrastructure by improving roads, ports, waterways, and electrical and digital networks to facilitate seamless transportation and communication.

2. Regional and Global Value Chains: Strengthening trade mechanisms, fostering local production, and boosting market integration to improve competitiveness and economic resilience.

3. Regulatory and Institutional Strengthening: Supporting the development of trade agreements, regulatory frameworks, and governance structures to enhance institutional efficiency and transparency.

IDB President Ilan Goldfajn emphasized the significance of the initiative, stating: “South Connection responds to the mandate of our governors and the shared commitment to building a larger, more integrated regional market that is attractive for investment. Through better connectivity, stronger value chains, and modernized institutional frameworks, this program will help South American countries overcome historical barriers and create new economic opportunities.”

South American Leaders Endorse the Initiative

The launch of "South Connection" was met with strong support from regional leaders who recognized its potential to transform South America’s economic landscape.

Simone Tebet, Brazil’s Minister of Planning and Budget, highlighted the program’s role in strengthening regional integration. “South American Integration Routes is an innovative political initiative that emerged from dialogue among Brazilian border states, regional countries, and the federal government. Now, through the ‘South Connection’ program, we can further reinforce regional ties and attract significant investments. Enhancing trade in goods and services within South America is essential. With support from multilateral institutions like the IDB, we have a real opportunity to generate employment, raise incomes, and create new business prospects.”

Chile’s Finance Minister Mario Marcel underscored the economic necessity of integration, pointing out South America’s high transportation costs. “Transportation costs in South America are 40% higher than in the United States, creating a significant disadvantage for businesses. Prioritizing integration is crucial, and bi-oceanic corridors represent a concrete strategy to improve strategic infrastructure. These routes will help reduce costs, enhance connectivity, and facilitate trade flows. By unifying markets, attracting investment, and fostering innovation, we can unlock the full potential for sustainable growth.”

Expanding the Integration Routes Alliance

"South Connection" will further build upon the Integration Routes alliance, which was established under the Brasilia Agreement in May 2023. This alliance, supported by the IDB, FONPLATA, Brazil’s National Bank for Economic and Social Development (BNDES), and CAF – Development Bank of Latin America and the Caribbean, has already laid the foundation for deeper cooperation in regional infrastructure projects.

Through "South Connection," the IDB will help South American countries implement infrastructure upgrades, modernize customs and trade procedures, and strengthen regulatory frameworks to create a more seamless economic environment. This effort is expected to improve the competitiveness of businesses, facilitate cross-border commerce, and attract foreign direct investment to the region.

Strengthening Collaboration with FONPLATA

During the Annual Meetings, the IDB also formalized a cooperation agreement with FONPLATA to accelerate regional integration. This agreement aims to enhance collaboration between the two institutions by exploring co-financing opportunities for infrastructure and development projects under the "South Connection" framework.

Additionally, the IDB and FONPLATA will collaborate on knowledge-sharing initiatives, institutional strategies, and risk management approaches. They will also explore innovative financial instruments, such as exposure exchange agreements, to expand funding opportunities and improve project financing efficiency.

A Vision for the Future

As South America continues to navigate economic challenges, initiatives like "South Connection" offer a strategic path toward greater economic stability, improved trade efficiency, and stronger regional ties. By addressing infrastructure gaps, fostering economic cooperation, and modernizing institutional frameworks, the program is poised to transform South America into a more interconnected and competitive economic bloc.

The IDB’s commitment to regional integration, alongside the active participation of South American governments, underscores a shared vision of sustainable development and economic prosperity. With the launch of "South Connection," South America is taking a significant step toward a more integrated and resilient future.