BUILD IT BIGGER

Colombia 2016 | INFRASTRUCTURE & CONSTRUCTION | REVIEW: CONSTRUCTION

One of the main drivers of economic growth in Colombia over the last decade, construction continues to power on, supported in large part by public housing projects and transportation infrastructure.

One of the nation's key sectors, construction has played a significant role in the performance of the economy in Colombia over the last few years. In 4Q2015, the economy grew 3.3%, led by great performances in agriculture, construction, industry, and financial services, Colombia's National Administrative Department of Statistics (DANE) reported. GDP growth in 2015 was 3.1%, the second highest of the major economies in Latin America after Peru (3.3%), and coming in ahead of Mexico (2.5%), Chile (2.1%) and Brazil (-3.8%). The construction sector in Colombia was a significant contributor of these positive results, growing 3.9% in 2015 from the previous year. In 2014, the sector grew by 7% YoY, driven in large part by public investments of $29 billion in new homes. Finance Minister Mauricio Cárdenas noted that the government expects the Colombian economy to grow approximately 3% in 2016, led mainly by the industrial and the construction sectors. Hays Colombia declared construction to be the largest employer in the country at present, moreover being one of the few industries in the country with growing employment rates and job stability, and possessing a positive ripple effect on its related value chain and sub-sectors. The sector is expected to receive another boost in the coming months with the implementation of the second phase of a government-housing program that aims to construct 400,000 social houses by the end of 2016.

Pivotal to this growth will be the $18 billion in infrastructure investments outlined in the 'fourth generation' (4G) program launched in 2014 by the government of President Juan Manuel Santos. The three phases of the program over a period of six years entail 47 projects spanning 8,000km of roads and 3,500km of four-lane highways as well as the expansion of ports and railways. The program is the largest investment plan of its kind in Colombia and will have a significant impact on not just the sector but on employment as well, expected to generate between 180,000 and 450,000 jobs during the construction period.

The housing sector also looks set to remain an important engine of growth in the coming years. The construction of social housing provided the bulk of the momentum in the sector in 2015, after President Santos pledged to reduce the housing shortage in the country by 50% in three years' time. The government aims to have 450,000 houses constructed between 2015 and 2018 via four different housing programs that target various population segments. In addition to low-cost housing, the government initiated a subsidy program for minimum wage earners, allowing them to purchase a home without spending more than a portion of their income on debt. The significance of the social housing program for the construction sector will also have a wider impact, as President Santos announced that $6 billion will be invested to construct new schools, parks, and daycare centers to accompany the houses. Elsa Noguera, the Minister of Housing, City, and Territory, told TBY that the housing programs have been successful across the country, with sales of new homes growing 6.9% in 1Q2016. At the regional level, Boyacá, Nariño, and Santander experienced growth in home sales of 198%, 51%, and 49%, respectively, while regions such as Antioquia, Valle, and Norte de Santander also saw positive figures. Noguera also pointed out that the housing programs have had an extremely positive effect on the economy, resulting in the employment of 3.1 million people in the sector, while permits to build housing rose by 5% in the last 12 months, all of which will play a big role in generating greater economic growth. In addition, with the armed conflict in the country coming to an end, there will also be additional investments in housing for those affected. Noguera told TBY the government will invest COP2.2 billion in its Free Housing Program framework to house victims of the armed conflict, benefiting about 60,000 households in more than 220 municipalities and 28 regions in addition to Bogotá. Noguera also added that the government's key aim is to ensure that rural areas are well integrated together with large urban development poles, and it has consequently made this an explicit objective of the National Development Plan 2014-2018.
Similarly, the construction sector has seen a boom in commercial property development, with Colombia coming in third place in the region behind Mexico and Brazil in terms of the total number of shopping malls in the country. There have been no less than 60 commercial projects over the last few years, with Colombian Association of Shopping Centers (ACECOLOMBIA) estimating that by the end of 2016 there will be 30 new malls under construction that will be completed in 18 different cities. The largest projects are located in Chía, outside of Bogotá, Medellín, and Cali.

GOING GREEN

Sustainable construction looks set for major growth in the region, with Colombia being the fourth-largest market for Leadership in Energy and Environmental Design (LEED) building in Latin America. According to Colombia's green building council, CCCS, as of November 2015 there were 59 LEED-certified projects in the country—most of them in Bogotá and Medellín—comprising almost 11 million sqft of space and another 140 projects underway, making up a total of over 44 million sqft. The boom in green building has been driven in part by new guidelines outlined by the government for new construction projects that require 10-15% percent savings in energy and water use compared to the national average. Rafael Mojica, the manager of Mojica Constructora, told TBY in an interview that the company's new developments almost always include features that encourage water and energy savings, and the proper management of waste. Building developers in particular are taking notice, as more LEED educational resources have been translated into Spanish and there is greater awareness in the market. Notable examples of certified buildings include the 600,000sqft Tierra Firme, ALPASO Plaza, and Centro Empresarial Colpatria Torre 2. With international companies coming to Colombia in larger numbers, the construction of eco-friendly and sustainable office buildings has been in high demand, with new hotels operated by American brands coming in a close second.

CEMENT

The projected growth of Colombia's construction market over the next several years is based largely in the expected boost that the 4G infrastructure program will provide to the sector, with the Business Monitor predicting the value of the construction industry in Colombia to almost double to $52 billion between 2015 and 2020 and Asogravas estimating that the 4G projects will require a total of 74 million tons of aggregates such as sand and gravel. The government's program to build 450,000 new houses alone will require approximately 16.5 million tons of sand, 14 million tons of aggregates, 8 million tons of ceramic products, 6.8 million tons of cement, 200,000 tons of steel, and 53,000 tons of PVC. Cement producers are subsequently amping up production and upgrading their existing production capacities. Two expansion projects that are currently under way include Cementos Argos' new plant at Sogamoso in Boyacá, with an expected capacity of 1.4 million tons per year, and Cemex's cement plant at Maceo in Antioquia with a capacity of 1 million tons annually.