The roads in my neighborhood were paved this week.
According to my 86-year-old WWII veteran neighbor, it’s the first time it’s been done since the mid-1970s. And it showed…
Blacktop was uneven and patched in numerous places around stormwater drains and manhole covers — the ironic aftereffects of years of “repairs.”
In some areas, tree roots were starting to periscope through, no longer contained by the decades-old asphalt.
This isn’t the case just in my neighborhood.
My eight-mile commute from North Baltimore to downtown is littered with shock-busting stretches.
Maybe you’ve noticed it, too.
Others certainly are.
Decline
A litany of reports has highlighted the decay of infrastructure both in the United States and abroad. And it isn’t just roads…
Last year the Urban Land Institute, in conjunction with Ernst & Young, chronicled the world’s infrastructure needs.
It concluded the U.S. needs to invest $2 trillion to rebuild bridges, water lines, sewage systems, and dams — in addition to roads — that are reaching the end of their life cycles, noting:
In contrast with its global competition, the United States is lurching along a problematic course — potentially losing additional ground. After more than 30 years of conspicuously underfunding infrastructure and faced with large budget deficits, increasing numbers of national and local leaders have come to recognize and discuss how to deal with evident problems.
But a politically fractured government has mustered little appetite to confront the daunting challenges, which include finding an estimated $2 trillion just to rebuild deteriorating networks.
That report comes on the heels of another out of the Miller Center at the University of Virginia by 80 infrastructure experts, led by former Secretaries of Transportation Norman Mineta and Samuel Skinner.
It found the U.S. needs to be spending $262 billion every year to update its infrastructure.
This deterioration of our infrastructure comes with a cost.
The American Society of Civil Engineers (ASCE) has calculated infrastructure deficiencies add $97 billion a year to the cost of operating vehicles and result in travel delays that cost the economy $32 billion.
It will only worsen if nothing is done.
The ASCE says, “Within 10 years, U.S. businesses would pay an added $430 billion in transportation costs, household incomes would fall by more than $7,000, and U.S. exports will fall by $28 billion.”
For you fiscal hawks out there, $458 billion per year in infrastructure-related costs and losses is more than the $262 billion a year we need to make repairs.
Without any investment at all, the ASCE predicts 870,000 jobs would be lost and economic growth would be stifled to the tune of $3.1 trillion by 2020.
Having adequate infrastructure is a crucial part of economic growth, something we’re badly in need of right now…
The question isn’t if it will have to happen, but when.
The Urban Land report pegs the date “in the next five to 10 years” as “public concerns will grow over evident declines in the condition of infrastructure.”
Road Forward
Infrastructure woes aren’t monopolized by the United States. Many countries have declared infrastructure construction and repair as high investment and strategic priorities.
But funding large projects is always a challenge, especially in these times of limited credit.
In response, new models are emerging that will allow both developed and developing nations to address their infrastructure needs, which are crucial to further success and expansion.
These models are creating investment opportunities for you — mostly abroad right now, but coming to the United States soon.
In anticipation of the 2014 World Cup and 2016 Olympics, Brazil is spending $1.25 trillion on energy, sanitation, and transportation infrastructure. (Right now only 1/7 of the country’s roads are paved.)
India is coming to the end of a five-year plan started in 2007 that will spend $500 billion on highways, water, and the grid. The next five-year plan, which runs through 2017, will double the amount spent to $1 trillion.
Despite severe austerity measures, even the UK has committed $326 billion to rail transit, energy, and broadband access over the next five years.
The list goes on.
Some of these projects are being financed through Public-Private Partnerships, which help leverage public dollars. Others are getting more creative…
Chesapeake, Virginia, for example, sold an 80-year-old bridge to and investment group called American Bridge Partners.
The price? Ten dollars.
But the city will reap much more than that — and the investment group will turn a profit.
The group will demolish the bridge, build a brand-new one with only private money, and then charge a $2.00 toll.
Chesapeake Mayor Alan Krasnoff called the deal “a Christmas gift for the city.”
Other options include large pension funds investing directly in private infrastructure projects.
And you’ll be able to invest right alongside them by investing in the companies that will carry these projects out…
According to the Organization for Economic Cooperation and Development (OECD), global infrastructure requirements through 2030 will be $50 trillion, give or take a trillion.
Merry Christmas.
Call it like you see it,
Nick Hodge
@nickchodge on TwitterNick is the founder and president of the Outsider Club, and the investment director of the thousands-strong stock advisories, Early Advantage and Wall Street’s Underground Profits. He also heads Nick’s Notebook, a private placement and alert service that has raised tens of millions of dollars of investment capital for resource, energy, cannabis, and medical technology companies. Co-author of two best-selling investment books, including Energy Investing for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world. For more on Nick, take a look at his editor’s page.
