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Transportation and Infrastructure
A Top Export Prospect for Colombia

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Market Estimates

Colombia has an estimated USD 26 billion worth of infrastructure projects in the pipeline, according to unofficial estimates by the Ministry of Transportation.

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Overview

As a result of inefficient infrastructure, logistical operation costs are very high and put Colombia at a competitive disadvantage as compared to its neighbors in Chile and Peru. On average, these costs account for 18 percent of the total cost of each business in Colombia, while in the United States, for example, the figure reaches only eight percent. Inadequate infrastructure is the second biggest problem for doing business in Colombia; according to October 2011 report from the World Economic Forum (WEF). Colombia ranked 108 in the quality of roads, 109 in the quality of port infrastructure, and 94 in the quality of air transport infrastructure out of 142 countries. Only 15 percent of Colombia's roads are paved, and the nation has just 1,000 kilometers of dual-lane divided highways. Colombia also has 900 kilometers of railroad, and river navigation has yet to be developed to transport goods on a large-scale. Taking these facts into consideration, the Colombian government has created an ambitious program to update the country´s infrastructure by 2014 with investments of more than USD 15 billion.

Extreme weather conditions during 2011 have affected dramatically the infrastructure of the country. Flooding and landslides have destroyed roads and millions of houses in different Departments of Colombia. The winter rains have left more than two million people without homes. Landslides have blocked several roads, which has caused dramatic consequences for transportation of good and serviced throughout the country. The economic loss caused by extreme weather conditions account for more than US$7.5 million. According to the Climate Risk Index 2011 from the European NGO German watch, Colombia was the third country most affected by weather extremes.

The Colombian government divided road infrastructure into three main categories. Roads Cat I are those that connect the main capitals (such as Bogotá, Medellin, Cali, Barranquilla-- also called the main production centers) to the ports in the Atlantic and the Pacific Ocean. Those roads will be two way highways built by the central government in association with the private sector through concessions. Roads Cat II, or “secondary roads,” connect small municipalities to the departments’ capitals (Colombia has departments instead of states as regional political divisions; there are 32 departments in the country). The government of each department is responsible for the maintenance of the secondary roads. Roads Cat III connect farms to small towns. These roads are utilized to transport agricultural production to small municipalities as the first point to gather production. The central government through the Ministry of Transportation is responsible to maintain those roads using central government funds.

By 2013, the plan is to award 5,000 km in concessions, a majority double-lane highways, and 1,000 kilometers of railroads that will connect production centers with consumption and exports centers. The investments will reach USD 26 billion. On November the 4th, 2011 the Colombian government announced an ambitious reform in which the Colombian Infrastructure Agency (ANI) was created, among other institutions. This reform is part of president Santo’s Good Governance Program. ANI, a branch of the Ministry of Transportation, will be in charge as of 2012 of all infrastructure project including roads, airports and ports replacing the current the National Institution of Roads, Instituto Nacional de Vias (INCO).

In terms of ports, the most important in Colombia are private. However, the Colombian government is responsible for investments pertaining to maritime canal access, access roads and maintenance of river canals.

The Ministry of Transportation, through its Colombian Civil Aviation Agency (Aerocivil), will investment in airport terminals and aeronautical infrastructure that includes all equipment needed to assist aircraft during flight such as: tower control equipment, radars, VHF omnidirectional radio range (VORs), GPS and ADS-B equipment, Instrument Landing systems (ILS), meteorological and communication equipment and Air Traffic Control (ATC) and information systems.

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Sub-Sector Best Prospects

Best prospects for transportations and infrastructure are:

  • Engineering and construction services
  • Bridge design services
  • Aeronautical infrastructure equipment and services
  • Intelligence transportation systems equipment and services
  • Road safety equipment and services
  • Railroad equipment and services

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Opportunities

On November 2011, Santos´ government announced the transformation of INCO into the National Infrastructure Agency (ANI). According to the Minister of Transportation, Mr. German Cardona, the current concession program created in the previous administration had the wrong structure. As of July 2011, a company awarded with a concession was responsible to obtain the environmental permits, create the designs, buy the properties along the new road, and execute the construction. For many critics of the current concession program, this is the reason why there are too many delays in the concession projects already awarded. For example, a delay in getting an environmental permit will cause financial overruns that the private sector is not willing to cover. Mr. Cardona believes that it is necessary to reform the current concession program that ANI will manage. He strongly believes that future concessions should only include the construction phase. ANI should be responsible for getting environmental permits, designing the road, and purchasing the properties along the new road. It is necessary to do all the steps phase by phase instead of everything at the same time, as it is now.

Opportunities are concentrated in road construction, airport expansions, railroad construction and ports expansion through concessions with the Colombian government.

After more than five years in the works, the USA legislative body (Senate and House of Representatives) has approved the USA – Colombia Free Trade Agreement. As of October 12, 2011, the US has agreed to enter a period of non-tariff trade that will come into action as soon as both governments finish the implementation phase in May 2012.

Over 80% of US exports of consumer and industrial products entering to Colombia will become duty free immediately (upon finished the implementation phase), with the remaining 20% of products being phased into zero tariffs over the following 10 years. With average tariffs on US industrial exports ranging from 7.4% to 14.6%, the newly signed FTA will significantly increase the competitiveness of US construction services and equipment into the Colombian market.

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Resources

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