The hell of urban mobility in Latin America: impacts, costs, and solutions (Note)

Purpose of this article: To take stock of urban mobility in Latin America in order to understand its economic consequences and propose solutions.

Summary:

• Latin America is the^second most urbanized region in the world according to the World Bank, where urban mobility is a major challenge.
• The direct costs of traffic congestion (lost time) represent nearly 1% of GDP in some cities. Added to this are indirect costs: pollution, poor allocation of resources in the labor market, respiratory diseases, road accidents, etc.
• To remedy this, at least $223 billion would need to be invested between 2021 and 2030, according to the Inter-American Development Bank, or 0.3% of the region’s nominal GDP each year. If the goal is more ambitious and aims to meet the standards of developed countries, the bill would rise to $578 billion (0.65% of GDP/year).
• The region must continue its infrastructure efforts, but also completely rethink its mobility policy (restricting car use, reducing public transport fares for disadvantaged social classes, urban planning, soft mobility, teleworking, etc.).

Who has never been stuck in traffic? Who has never complained about the time wasted on public transport on the way to work? Probably very few of us. Yet taking the bus, subway, or car in large Latin American cities is an experience that bears no comparison to the difficulties encountered in France, for example.
The urban mobility nightmare in Latin America reduces citizens’ quality of life and represents a net economic loss, forcing countries to rethink their strategies.

1. Getting around Latin American cities: a daily battle

Latin America and the Caribbean (LAC) is the^second most urbanized region in the world (81% of its population lives in cities, compared to an average of 43% for middle-income countries, according to the World Bank). It has six cities with more than ten million inhabitants (Sao Paulo, Mexico City, Rio de Janeiro, Buenos Aires, Lima, and Bogota), compared to only two in Europe[1].

Population growth has led to urban sprawl in remote and poorly connected residential areas, as well as the emergence of slums where more than 20% of Latin Americans live[2]. Unfortunately, the development of transport networks has not been as dynamic, while the average number of vehicles per capita has exploded (391 per capita in Mexico compared to 223 in China), without reaching the levels of developed countries.

As a result, the average commute time is 77 minutes (more than 90 minutes in large megacities) compared to 65 minutes in developed countries, even though the distances traveled are shorter (2 km less). Of the fifteen most congested cities in the world, four are located in Latin America (Bogotá, Lima, Mexico City, and Recife).

2. The economic impact of poor urban mobility

According to the Inter-American Development Bank (IDB), the direct cost of traffic congestion (lost time) amounts to 1% of annual GDP for the city of Buenos Aires, 1% for Santiago, and 0.9% for Rio and Bogota[4]. In Buenos Aires, the losses generated are 2.3 times higher than the city’s education budget and 1.9 times higher in Mexico City. The annual cost per driver is USD 474 in Montevideo, USD 409 in Santiago, and USD 341 in Bogota (amounts that exceed the minimum wages in these countries).

However, the consequences of travel difficulties are not limited to time lost in traffic jams. There are many knock-on effects: poor allocation of resources in the labor market (employees prefer not to travel far from home), lower productivity, air pollution, health problems (asthma and depression), exclusion of poor neighborhoods on the outskirts, road accidents, and so on.

As a result, assessing the economic loss is particularly complex, especially since the impact is not uniform. There is indeed a major issue of social equity. Public transportation is less developed in disadvantaged areas with low purchasing power and high unemployment rates, thus contributing to the poverty trap. As such, urban mobility is fundamental to integration into the labor market, as opportunities are generally located far from poor suburbs. Women are more vulnerable because they are more affected by unemployment. They also represent 93% of the 17 million home-based workers in the region, which forces them to make multiple trips every day to visit their various clients, often in affluent neighborhoods.

3. Investing heavily despite numerous structural obstacles

According to the IDB, taking into account only cities with more than 500,000 inhabitants, the investment required to align with OECD country standards is $578 billion over the period 2021-2030 ( 0.65% of regional GDP). This would require, in particular, the construction of an underground metro network, which is still underdeveloped in Latin America, where Bus Rapid Transit (BRT) is more common (a hybrid between a tram and a bus with its own infrastructure).

A more realistic goal would therefore be to bring the entire region up to the standards of Latin American cities with the best transport systems. The investment would then amount to only $223 billion (0.31% of annual regional GDP). Added to this is USD 11 billion over the period 2020-2030 to convert 20% of the public transport fleet to electric, including USD 3.7 billion for the deployment of charging infrastructure. The fight against pollution is particularly essential in Mexico City, Lima, and Bogota, which are among the 50 cities in the world with the worst air quality.

However, the financing and deployment of these investments face numerous obstacles. First, with an average public debt of 72% of GDP, regional budgetary margins are limited, while poor economic forecasts and rising interest rates offer little hope of improvement. There are also fears of embezzlement, since with a few exceptions (Chile, Uruguay, and Costa Rica), Latin American countries perform poorly in terms of corruption, with Venezuela ranking as^{the fourth} most corrupt country in the world. In addition to corruption, the overall business climate is not very attractive to private investors, especially for long-term transport infrastructure projects. According to the World Bank’s Ease of Doing Business ranking, Mexico, the highest-ranked Latin American country, comes in at only^60th out of 190 countries. Political instability in many countries can also discourage investors.

4. Rethinking urban mobility strategy

4.1 Restrictions on vehicle use (private transport)

The aim is to reduce traffic by encouraging users to take public transport. However, in practice, poorly calibrated policies have had the opposite effect. In Bogota and Mexico City, for example, the ban on driving on certain days based on license plate numbers has led to a massive increase in the purchase of second, cheaper, and more polluting vehicles to circumvent the legislation. Recognizing this failure, the Colombian capital has offered a more economical alternative to drivers, who since 2020 can pay to be exempt from the ban (USD 600/semester). This money is then reinvested in the transport system. In contrast, the city of Santiago has been more successful in encouraging city dwellers to purchase cleaner vehicles that are exempt from traffic restrictions.

Some cities have opted for paid parking, but the rates are so low that public transport remains more expensive. Similarly, there are many tools available to reduce road traffic, but they are generally very poorly accepted by society because public transport, given its shortcomings, does not always offer a credible alternative to the car.

4.2 Developing public transport: a challenge that goes beyond infrastructure.

Latin America has been a pioneer in the deployment of Bus Rapid Transit (BRT). In 2019, the region accounted for more than 60% of global traffic using this mode of transport. In Bogota, the Transmilenio (local BRT) has reduced average daily travel time for its users by 52%, with an estimated economic gain of USD 1.8 billion. In addition to BRT, bus lanes are also generally very effective, but only 1% of streets are equipped with them. As for the underground metro network, it is very limited, as the cost is often prohibitive. Across the region, it covers only 900 km (less than the metro network in Shanghai). Furthermore, this mode of transport is not suited to the topography of certain hilly neighborhoods, where cable cars have been successfully favored (certain districts of La Paz and Medellin).

In Latin America, public transport policy focuses on infrastructure, while there are other equally important factors where the region has failed despite its efforts[10]:

• Price. The cost of passes is too high for the working classes and remains higher than the cost of car parking. Bogota has therefore introduced the SISBEN subsidy program for the less well-off. Public transport use then jumped by 56% among beneficiaries. Fare integration is also essential (in Buenos Aires, the SUBE pass provides access to several modes of transport throughout the city).
• Quality of service is a strategic issue. To see this, the region can look to the Chicago subway, where improvements in comfort, safety, and cleanliness have resulted in an increase of 15 million trips per day. Similarly, real-time information (waiting times, diversions, works, etc.) encourages the use of public transport, yet few stations and stops are equipped with this. Finally, Bogota and Santiago are among the only cities to conduct regular satisfaction surveys.
• Urban planning. The region could take inspiration from Scandinavian countries, the Netherlands, and Germany, which limit low-density urban sprawl and favor densification around public transport stations. Curitiba (Brazil) is one of the only cities in Latin America to have placed urban planning at the center of its mobility policy.
• Soft mobility.The top Latin American city in the Global Bicycle Cities Index 2022 ranking is only in^58th place (Santiago). With a few rare exceptions (Rosario and Bogota), bicycles account for less than 5% of journeys, despite numerous incentive programs for schoolchildren and workers and the installation of self-service bicycle systems (particularly in Brazil). Some cities have pedestrianized their historic city centers (-25% fine particulate matter and carbon monoxide in the center of Quito).
• Other possible tools (teleworking, advertising campaigns, free travel, electrification, etc.).

Conclusion

The cost of difficult urban mobility in Latin America justifies massive investment in the public transport network. Investment is needed, but not just any investment, given the level of public debt and corruption in the region. In addition to continuing its infrastructure efforts, Latin America must take a holistic view: restricting car use (learning from past failures), subsidizing passes for the poorest, improving the quality of public services, urban planning, promoting soft mobility (cycling and walking) and teleworking, etc.

Bibliography

The Infrastructure Gap in Latin America and the Caribbean, 2021, IDB (Inter-American Development Bank)

Urban Transportation Policies in Latin America and the Caribbean, 2019, IDB

Urban Congestion in Latin America and the Caribbean: Characteristics, Costs, and Mitigation, 2021, IDB

Ease of Doing Business rankings, 2022, World Bank

Population living in slums (% of urban population) – Latin America & Caribbean (World Bank)

Corruption perceptions index, 2021, Transparency International

Largest World Cities by Population 2022 Metro Area Rankings (Macrotrends)

Traffic Index results 2019 (Tomtom)

Air quality and pollution city ranking, 2022, Iqair

Latin America’s 17 Million Domestic Workers Need Better Transit. Direct Lines Can Help, 2020, The Cityfix