The Ground Work

How would you evaluate the growth and development of Colombia and its infrastructure?

The country is developing at an impressively fast pace, between 3% and 4%, and it was one of the best economic performers in Latin America during the 2008-2009 credit crisis. Therefore, in this context, Colombia has only been in a strong position to invest substantially in infrastructure for a few years. We are very positive about the future development of infrastructure projects here, however, since we observe the availability of funds and liquidity to invest in such projects. Some of the economic highlights of the past couple of years have been the restoration of the risk rating at an international level, at the same level as Brazil today, which encourages foreign investors to Colombia. Also, we have positively increased oil production to unprecedented levels. These two factors, linked to the openness of our economy and its attractive regulatory framework for foreign investors, have contributed to drive economic growth and development in the country. In the past, we had to make tax adjustments by sacrificing investment in infrastructure, a legacy of the previous two governments. This alone encourages us to be very hopeful for the future development of our infrastructure, considering also the fact that we have the support of the private sector and a public budgetary strategy geared towards its development. Additionally, as Colombia has increasingly become a global economic player (by the end of 2013, we will have signed 15 different free trade agreements), the need for infrastructure has risen. Before, infrastructure investment only accounted for 1% of GDP, and studies show that if we want to fully meet the potential growth of the country, we should increase that figure to 3.1% over the next 10 years, spelling an annual investment of between $10 billion and $15 billion over the next decade. The authorities and the nation at large have come to understand that globalization and economic development are part of this challenge, and we are all determined to address this. It is also worth mentioning that the development of the mining and hydrocarbon industries requires further infrastructure to consolidate the boom of recent years and meet the real potential of the country in this sector; we lack the capacity to transport raw materials from the center of the country to the main ports via road and rail. Overall, we have to understand that these huge investments help to drive the economy forward, confirming a determination to execute rapid development. This happened in other countries like Chile and Spain many years ago, and we need to understand that if the infrastructure locomotive moves off strongly, the economic repercussions will not be immediate, but rather be felt over the course of the next two decades. Investments always attract more investors by triggering a snowball effect that can last many years.

What is the impact of climate change on Colombia’s infrastructure development?

Colombia has a unique geography with several climates within a single country. The very severe winter we had a couple of years ago made us realize that we need advances in technology and sophistication when building new infrastructure, especially roads, as we suffer from heavy rains for many months of the year. More complex construction and engineering methods are needed due to the geography and environment of our country and the worsening effects of climate change.

In your opinion, what are the main challenges ahead for Colombia in developing all the infrastructure projects it needs?

First of all, the country needs efficient investment in infrastructure. For example, if we must build roads, let’s do it in such a manner that allows transportation vehicles to work efficiently. Furthermore, it is crucial to develop the necessary infrastructure, rather than infrastructure built for political reasons. We have already shared our concerns with the government, and proposed efficiency and competitiveness studies before actually committing resources to infrastructure. Additionally, we think that it is very important to understand the need to ease the acquisition of environmental and community licenses to develop projects, because these are two of the main reasons why many infrastructure projects are not completed. We must understand the unique moment in which we are today, and then push forward with efficient and competitive investment, because if we miss out on this opportunity, we might not be able to invest such large amounts of money in infrastructure in the next 50 years or so. To this end, Congress is debating the new Infrastructure Bill. However, we consider that some points from the Fourth Generation of Concessions Plan, which focuses on road concessions, need to be changed to properly meet the national potential and develop efficient and competitive infrastructure, especially in terms of licenses. We put considerable emphasis on these points, because many of the infrastructure projects will be developed under the public-private partnership (PPP) scheme, whereby the public authorities’ funds will cover from 70% to 90% of private investments. However, this public contribution is strictly linked to project completion, and slow licensing is among the main causes of uncompleted projects in Colombia.

© The Business Year – March 2014