Drive the Distance

Colombia’s Road Networks and 4G

International investment in infrastructure is improving logistics in Colombia, a country whose challenging geography has left areas of economic potential off the map.

In April 2018, President Juan Manuel Santos inaugurated a 26-kilometer section of a road project designed to connect Medellí­n, the Coffee region, and the Pacific. It was one piece of a larger puzzle that makes up the 4th Generation Roads Concession (4G), a USD18 billion plan for improving national infrastructure and attracting more private investment to developing Colombia’s roads.

Despite being launched amid the Odebrecht scandal in Brazil, the 4G program remains on track.

Concerns over potential corruption, which slowed construction down to a halt in 2017, have already pushed the 2021 4G completion date back two years or more.

However, Colombian policymakers have been quick to respond with new legislation that protects all entities investing in Colombia’s roads, should contractors or other shareholders be compromised at a later date.

Nevertheless, investor activity has fully resumed in 2018, and is increasing as time goes on.

The government has awarded 30 highway concessions under the project, with 14 of them already in financing.

Two of these projects, which will require an investment of USD600 million in total, recently entered the planning and development stage, with international participants from Spain, Austria, South Korea, Costa Rica, and Israel on board.

Chinese investors are also among the most recent parties interested in obtaining a part of the multi-billion-dollar pie.

To date, Colombia has secured funding of USD6.7 billion toward the 4G program.

Although more than 1,000km of double-lane highways were added to Colombia’s growing road network between 2010 and 2017, public investment in infrastructure only stands at 1.3% of GDP, affecting Colombia’s rank in Latin American indices.

In terms of worldwide rankings, Colombia came in at the 103rd position out of 140 countries in terms of business environment and infrastructure, and 130th out of 140 for transportation infrastructure, according to the World Economic Forum.

S&P has expressed concern about the pace of infrastructure projects, noting that upcoming 2018 elections may also present setbacks in achieving goals set out by the Santos administration.

Still, bottlenecks in the transportation network continue to be one of the main constraints to economic growth, especially in rural areas, and presidential candidates will be expected to describe their plans for tackling the issue in the run-up to the elections.

It is primarily the cost of transport that has been a challenge to doing business in Colombia.

In addition, there are vast agricultural areas of the country that remain underutilized due to a lack of road network connectivity.

Linking the 65% of unused farmland with the national road network could be what Colombia needs to not only lift underperforming areas into economic prosperity, while simultaneously becoming a breadbasket for the region.

According to a World Bank analysis, the key factors for the success of future road projects will be “reasonable timelines, quality control, more careful selection of technically-viable projects as PPPs, coordination through multi-stakeholder steering committees, and global promotion.” It is, however, clear that a platform for investing in and improving Colombia’s transport sector has been created and is already taking root.