INFRASTRUCTURE REMODELING

Colombia 2018 | CONSTRUCTION & REAL ESTATE | FOCUS: INFRASTRUCTURE CHALLENGES

Infrastructure will play a catalytic role in Colombia's economic growth, but only if the new administration addresses the structural gaps effectively.

Colombia's infrastructure is lacking in fundamental foundations and best practices, and it is neither functional nor efficient. As a matter of fact, the World Economic Forum has repeatedly labeled it as one of the worst infrastructure systems in Latin America. Colombia needs roads, railroads, ports, and airports. It takes nine hours to cover 400km—the distance from the capital of Bogotá to the second-largest city, Medellín—by car. It is even harder to connect the inland stretches to the coasts.

During his first year as president, Juan Manuel Santos committed to boosting competitiveness and social economic development through infrastructure projects and investment. The economic deceleration due to the oil crisis that hit the country in the last few years have spurred new hopes in infrastructure as the sector that will play a major role in the economic development of the country. The creation of the National Infrastructure Agency (ANI) served to establish a coordinating institution in charge of fostering economic growth through structural projects identified as catalysts.
Santos' administration demonstrated its commitment to its intentions and set out a USD70-billion plan through 2035 focused on improving regional and international connectivity, strengthening development and improving competitiveness through lower transport costs. Cutting transport costs is essential to Colombia's manufacturers, such as coffee farmers whose main struggle boil down to increasing production costs.
Moreover, infrastructure can play a relevant role in targeting inequality by connecting the big cities to the most isolated areas. Isolation is at the core of Colombia's social and economic inequalities. The majority of the population lives in the country's largest cities—Bogotá, Medellín, and Cali. Outside of these, rural areas, jungle, and mountain ranges remain largely uninhabited with poor infrastructure. The resulting economic inequality throughout rural areas is severe, and for this reason, it always favored criminal organizations and guerrilla soldiers that took advantage of the lack of state presence to recruit supporters and expropriate land.
Indeed, 4G infrastructure projects would play a critical role in this regard by helping the government to tackle the socioeconomic problems affecting the poorest areas of the country and giving the state a bigger and more positively regarded presence. According to financial analysts, 4G investments should boost the country's GDP by 1% while creating 200,000 direct jobs and 250,000 indirect ones.
However, Santos' administration is over and there is still a great deal of work to be undertaken to assure that Colombia will make strides on this path to continuous economic growth. Among all, assuring continuity of those 4G projects already awarded, achieving financial closures, and consolidating the public policy surrounding infrastructure are some of the main challenges facing the new administration.
Another challenge will be assuring a more resilient and regulated sector. In this regard, the Colombian Chamber of Infrastructure (CCI) has been working toward the creation of a stronger framework of regulations in which businesses, especially the financial sector, will be offered guarantees that they need for their investments. Other regulations include the implementation of standardized contracts after the reform of the law on public procurement is approved. The reform, once passed by the House of Nariño, will streamline bidding processes and support greater SME participation.
Aside from the financial and regulatory challenges, the multiple logistical bottlenecks that significantly affect the transshipment or the transit of the merchandise must be overcome.
For all this to become reality, the next government has to keep implementing the Intermodal Master Plan 2015-2035, for which it is vital that the railway lines are revived and that the cargo and passengers are mobilized through the main rivers. Regarding this, ANI President Dimitri Zaninovich Victoria has recognized the importance of the continuous efforts in creating logistics areas within which transport is organized and optimized. Creating logistics platforms in main Colombian nodes will guarantee the reductions in transportation time and costs, increasing efficiency and continuity in transport.