Colombian infrastructure remains attractive to investors – former official

Colombia’s 4G and 5G infrastructure programs have triggered a major transformation, with the latter not only focusing on highways, but also airports, river transport and rail.

These two programs are crucial for economic recovery and competitiveness.

In this interview, BNamericas talks with the former Deputy Minister of Infrastructure, Olga Lucía Ramírez, about the current state of infrastructure, regulations and investor interest, among other topics.

Numerical: How would you rate the Infrastructure investment climate and what are the prospects for 2023?

Ramirez: Colombia has a stable regulatory and institutional framework for projects development, which enabled the reactivation of 4G projects during [previous] Iván Duque and award multiple 5G projects, obtain financial closes and generate interest in the projects.

The interest of foreign investors to bet on infrastructure projects in Colombia is maintained because we have a stable legal and regulatory framework. Colombia has been recognized for its framework of public-private partnerships to such an extent that countries in the region such as Panama have wanted to replicate it, and Ecuador has sought advice to implement it.

The PPP scheme is already 10 years old, has shown its strength and therefore the interest of investments must be maintained.

It is very important for investors that contracts and established rules are respected. The message of continuity from the projects already structured makes it possible to look forward to 2023 with optimism.

However, one must be careful in the political messages of the government so as not to trigger investors alarm bells.

Numerical: What is the state of Colombia’s infrastructure and what are the main challenges ahead?

Ramirez: As a first step, infrastructure continues to be seen as the instrument for pursuing economic recovery, job creation and competitiveness.

Political change poses challenges. One of these challenges is maintaining trust to enable good project development, which goes hand in hand with stability, that contracts continue to be respected, that the rules of the game remain the same, that there is a solid institutional framework.

Colombia has made a very significant leap in infrastructure investment in recent years, which is why maintaining confidence is key to properly structuring projects.

The second challenge is obviously political. Any government should keep in mind that infrastructure is a state policy to develop projects and pursue them in good standing.

The third challenge is to continue to strengthen the institutional framework of all entities involved in infrastructure projects.

If we have an adequate institutional framework and governance, in accordance with OECD standards, projects will be better structured.

A final challenge concerns funding. We must continue to seek alternative sources because the public budget is limited and the infrastructure deficit remains significant.

Numerical: Where do institutions need to be strengthened?

Ramirez: Progress has been made in reviewing the functions of each entity so that there are standards that streamline and optimize processes so that they are not dependent on a civil servant. Dependencies have been strengthened for better project development.

In Colombia, the Transport Infrastructure Planning Unit was commissioned, whose sole purpose is to recommend the necessary planning and growth for the sector.

It is necessary to strengthen this unit and to have adequate planning, as for the intersectoral commission for transport projects.

Contract management has clearly progressed both in terms of [infrastructure agency] ANI in charge of PPPs and [highway authority] Inviasin charge of public works.

Transparency is very important, which is why information about each project should be made available to any interested party. It is also important to maintain communication with all actors, including communities, so that projects develop properly.

It is also important to maintain the roles of each entity.

Numerical: In which sectors is the current infrastructure deficit felt?

Ramirez: Colombia has made a lot of progress in terms of highways, the big main lines that connect the center of the country and the ports.

However, there is still a large connectivity gap between cities and remote small populated centers, which has a significant impact on issues such as the marketing of agricultural products and the quality of life because if there is no roads, even if they are small, there is no education, no health.

Under the last government, a lot of work was done on the issue. During 2018-22, 5 billion pesos ($1 billion) was invested in tertiary roads, but there is still a long way to go.

When it comes to rails, we have a very long way to go. A roadmap has already been created with the railway master plan prepared by the previous government, which identified potential projects. You have to keep in mind where the load is and analyze what the demand is, if there really is a load to move it.

In Colombia we have the Great Central Corridor, which is the most efficient in Latin America and connects the center intermodally with Santa Marta Port. Part of this corridor passes between Chiriguana and La Dorada and involves a project to refine this section so that it is as efficient as between Chiriguana and Santa Marta.

The Pacific Corridor needs to be restructured as it has had many problems. We also have the Bogotá-Belencito corridor, which connects the central areas.

Passenger [rail] is developing, in particular within the framework of regional initiatives which are part of a national funding scheme: the region contributes 30% and the nation 70%.

Numerical: How are the river and airport transport sectors doing?

Ramirez: In the river mode, we have a huge gap, which is why the message of the current government is that it will focus on rail and river transport.

Although great Magdalena River project was structured for four years, with a very good result, it was declared void by the last government.

The execution is being analyzed as there are already studies and a structured design. Work has started along 600 km of the river.

The river crosses many municipalities, the impact is significant, which is why the government is analyzing the concession of part of the public works.

In addition, work is underway on the Colombian river program, which was launched by the last government with the aim of investing in rivers, in the waterways of certain areas, where there is no other transportation fashion.

Significant investments are necessary, but progress has already been made with a budget to continue to bet on the river mode.

In the airport sector, I think Colombia has seen a transformation of investments in recent years through concession contracts. However, we are already seeing airports reaching their [limits] in the main cities, therefore, approvals are underway and regulatory and procedural analyzes are underway to continue the private initiatives of El Dorado airport, the current airport of Cartagena and a new one between this city and Barranquilla, which is part of from a group of Southwestern airports, covering Cali to Buenaventura and San Andrés Airport.

Private initiatives will continue to advance these airport infrastructure projects.

Numerical: What projects will move forward in 2023?

Ramirez: In 2023, for sure, the Dorada-Chiriguana rail will be opened, the structuring of regional passenger and cargo projects will continue. In river transport, the Colombian river program should continue. By the end of this year, the Río Magdalena and Canal del Dique project could be defined, which, in addition to transport, is crucial in terms of sustainability since it is an ecosystem protection project with a component fairly significant environmental.

Numerical: How have 4G and 5G projects progressed under the Duque administration?

Ramirez: Ten 4G motorway concessions have started their activities. In 2018, the 4G program was delivered with a 16% lead. In June 2022, progress was 68%.

By August, 750 km had been built, including secondary four- and six-lane highways; 25 tunnels were completed, the same number as in almost 30 years; 442 bridges and viaducts were built. In public works contracts, more than 362 km of secondary roads have been built, four times more than was built from 2011 to 2018.

The railway master plan has been published to recover the freight network. In 2018, there was barely 467 km in commercial operation, and in October 2020, 1,077 km were active. The Bogotá-Belencito and La Dorada-Chiriguaná corridors, which are executed through public works, had no active commercial exploitation, but under the government of Iván Duque, more than 160,000 t and 110,000 t were were mobilized, respectively.

Three logistics corridors have been created (Dorada-Santa Marta, Dorada-Barranquilla, Dorada-Cartagena). The technical documents for the reactivation of the Pacific Rail Corridor have been prepared to obtain the best alternative for a connection between the port of Buenaventura and the productive nodes and load attractors near the corridor, among other actions.

Numerical: What about ports?

Ramirez: Colombia has a very good installed port capacity, but the needs are beginning to be identified by sectors, for example, in terms of bulk in certain port areas, investments in infrastructure may be necessary in one or two years, but for the moment is very good.

From now on, we will no longer talk about port expansion, now the concern is efficiency. We have to see how to make the port infrastructure we have much more efficient.

Numerical: What infrastructure issues do we need to address now to prepare for the long term?

Ramirez: There is a key issue: exploring specialized logistics infrastructures or modal exchange centers.

In Colombia, freight can start by road, then it is transported by train or by river. Talking about intermodality is not only moving projects forward but also thinking about exchange zones and this is associated with logistics.

It is not possible to speak of intermodality if we do not have these zones where the modes change. There is no clarity in the structure, who funds them and according to what model, but a regulation will be released soon.

Robert D. Coleman