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Colombian government successfully expedites 4G road-building programme, but some individual project delays remain likely

11 Jul 17

On 8 July, President Juan Manuel Santos signed a new USD485-million contract with Spain's Sacyr to construct a highway between Cúcuta and Pamplona in north-east Colombia.

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Outlook and implications

Government prioritisation of fourth generation (4G) developments, and legislative moves to improve prior consultation procedures, has helped restore investor confidence and improved international financing prospects.

Overall, progress with the 4G construction programme will likely lead to a gradual reduction in the current high level of domestic cargo transit costs in Colombia.

Ongoing complications with a small number of developments, including roads around Manizales, Meta, and Puerto de Hierro, will likely result in further construction delays.



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President Juan Manuel Santos has announced several measures to expedite the 4G programme.


Under its ambitious fourth generation (4G) road and infrastructure construction programme, Colombia aims to construct or upgrade 11,000 kilometres of highway by 2020. Execution of the USD25-billion programme, overseen by the National Infrastructure Agency (ANI), has proved problematic in previous years, with numerous projects falling substantially behind their original financing and construction timetables. Bottlenecks particularly emerged around the issuing of environmental licences, which in 2013 took an average of 14 months to secure. In addition, a lack of agreed procedures and timescales for the more than 100 prior consultations – required for any project that may affect indigenous or other ethnic minority groups based nearby – for these projects has also led to costly delays and produced legal risks. On 18 occasions, concessionaires have been forced to initiate new consultation procedures even after securing all permits and beginning work at the site. Some developments, notably the proposed dual carriageway in the Córdoba-Sucre corridor, have faced successive consultation demands that have held back work significantly. Further difficulties arose on the back of a corruption scandal involving Brazilian construction firm Odebrecht, which led the government to cancel the firm's contract for the Ruta del Sol II project (a planned toll road between Puerto Salgar and San Roque) in February. A decision by Sumitomo Mitsui Banking Corporation in January to withdraw financing for a project to make the Magdalena River navigable also appeared to signal escalating difficulties in securing international finance for 4G developments.

Improving investment environment

However, since this stage the prospects for the 4G projects have again improved. In part, this is because the Santos administration appears to be prioritising this programme along with the peace process legislation that is in the last months of its term (due to end in mid-2018). Rapid intervention by both the ANI and the central government has, for instance, helped minimise the delays to the Ruta del Sol II project: on 22 June, Congress authorised the transfer of USD35.5 million to finance the continuation of work on the project and issue a new medium-term tender for its construction. Current projections are that the project will resume by the end of the year. The ANI has also concentrated its efforts on restarting the long-stalled Mulaló to Loboguerrero highway – a major project for cargo transit between the country's main port in Buenaventura and the rest of the country – and reached an agreement with nearby communities in May to allow work to resume. The creation of a new government-backed infrastructure fund will also improve project financing prospects. This will allow international financial institutions to issue loans in Colombian pesos for 4G projects, thereby minimising currency risks. Shortly after, US firm Blackrock announced the creation of its own USD280-million Colombian infrastructure investment fund, and reportedly is considering investments in three 4G projects. By the end of the year, the government aims to have secured full financing for 10 additional 4G projects, and for another five by mid-2018.

Also anticipated are other legislative reforms in the pipeline to improve the infrastructure construction outlook. The most significant of these is planned legislation to streamline and standardise prior consultation procedures and, importantly, to prevent concessionaires from being subject to further consultation orders once they have gained all government approvals. To push through this measure, the government is seeking to include it within a package of legislative measures related to the peace agreement with FARC insurgents that are eligible for special 'fast-tracked' approval in Congress. Other notable measures include a draft law, sent to the legislature in June, which aims to modify the disbursement of royalties from mining projects and make USD419 million available for the upgrade of the tertiary road network. These funds are due to be spent on upgrading the network between Gambita and Vado Real, Oiba and Guadalupe, and Carmen to Yarima, as well as for the construction of new bridges in the province of Vélez, and improving the access road to the airport in San Gil, Santander. Also in June, Transport Minister Jorge Eduardo Rojas announced plans to expedite approval procedures for these projects by sending teams out to inspect sites, rather than requiring firms to pass everything through the Ministry of Transport's central office in Bogotá.

Outlook and implications

Government prioritisation of 4G projects has helped bolster investor confidence and improved the overall outlook for the planned developments. In turn, faster completion of these projects will help reduce the extended cargo transit times and costly delays that currently result from the current deficiencies in Colombia's road infrastructure network. However, individual projects will remain susceptible to delays, not least because of the unexpected challenges related to Colombia's difficult climatic conditions and terrain. Moreover, government decisions to award several large contracts to Colombian firms with limited experience of executing simultaneous projects on this scale also presents some risk of delay. For example, the government assesses that only 30% of concessionaires for the 46 projects along the Magdalena River are currently up-to-date with their contractual obligations and agreed schedules. Accordingly, the start date for this work may be pushed back beyond the planned date in April 2019. Elsewhere, several important developments are already facing delays related to ongoing disputes and licensing problems. For example, work on upgrading the road network in Meta has been delayed by contractor complaints that a marked decline in energy-sector traffic has affected the project's viability. Spain's Sacyr has also stopped work on the 202-kilometre stretch between Puerto de Hierro and Cruz del Viso following the discovery of 30-kilometre section of unstable clay along the proposed route. Progress with construction of a highway between Cambao and Manizales has also been limited following opposition and permit delays related to the proposed route traversing a national park. These developments are likely to impose further delays and cost increases in spite of the improving overall environment for Colombia's 4G projects.

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