Colombia's 4G road development programme back on track


The Fourth Generation (4G) road infrastructure programme forms a central part of the government’s strategy to integrate the transport infrastructure and link industrial centres to major ports. However, the plan, which originally envisioned the construction and rehabilitation of 7000 km of new roads and over 40 highway projects, has experienced delays. These have largely occurred as the result of economic slowdown, the mismanagement of some projects and financing issues. Nevertheless, with a return to macroeconomic stability and the implementation of policies aimed at the diversification of funding sources, Colombia’s road-building programme appears to be back on track.


While the first projects are nearing completion, others are still in the concession phase as the result of restructuring, providing opportunities for both domestic and international investors. The 4G road programme was launched by the government in 2014 with an aim to complete construction in eight years. However, as a result of delays, the authorities now expect the programme to be finalised by 2024. Private firms and finance have played a leading role from the outset; most of the concessions were issued as public-initiative public-private partnerships (PPPs).

Tenders were released in three stages, the first of which ended in 2014. In this initial round, 10 highway projects spanning 1630 km were awarded for a total investment of COP15trn ($5.1bn), according to the National Planning Department. Despite a slowdown in economic growth as result of lower international oil prices and the depreciation of the Colombian peso, nine further projects were awarded in 2015, spanning 1830 km. While the first two stages did not appear to be adversely affected by the macroeconomic context, the third phase faced greater uncertainty.

As a result, the government cancelled the planned third round of concessions in early 2016. Nevertheless, two concessions were released later that year. These were the 133-km Bucaramanga-to-Pamplona link in Santander and the 62-km Pamplona-Cúcuta highway, close to the Venezuelan border. In addition to the tenders announced by the government, another 11 road projects – that were not part of the original programme – have been agreed on a private-initiative basis.

“The concessions which have been awarded using the private-initiative model were usually proposed by companies already working on existing 4G projects,” Camilo Gonzalez, infrastructure lead for multinational professional services firm EY, told OBG. “Structuring projects without public involvement enables companies to gain the concessions faster, making them more attractive to developers.” While a total of 29 concessions were awarded during the first five years of the project, as of mid-2019 only 15 had reached financial closure, with a total of COP21trn ($7.2bn) committed to the programme, according to the Colombian development financing institution Financiera de Desarrollo Nacional (FDN). “The primary challenges faced in attracting investment were not due to a lack of available funds, but issues related to the projects themselves and their structuring,” Manuel de Valle, CEO of FDN, told OBG. Progress on the works were also impacted by fallout from the high-profile corruption scandal at Brazil’s construction giant Odebrecht. The concession for the 50-km second phase of the Ruta del Sol highway project had been agreed with the company in 2009 and was intended to link to the 4G network. As a result of the scandal, the contract was abandoned and as of mid 2019 the project is on hold.

Clearing the Path

In an effort to get the project back on track, the administration of President Iván Duque announced in February 2019 that it planned to achieve financial closure for a total of 22 concessions by the end of the year. In November 2018 Ángela María Orozco Gómez, the new minister of transport, announced a series of policies designed to optimise and speed up the implementation of the 4G programme. To boost transparency and reduce corruption, the government launched a project manager platform that allows citizens and state departments to monitor the development of infrastructure projects in real time. Orozco also highlighted a number of legislative and administrative bottlenecks, notably land rights. Delays to the purchase of land needed for development often occur due to informality in the ownership of real estate. The Ministry of Transport (MoT) also highlighted the issue of delays in the completion of environmental and social impact assessments, resulting from a lack of coordination between different government institutions. Other issues include insufficient access to public utilities and ICT services. In order to ensure the ongoing identification and resolution of bottlenecks to the implementation of the 4G programme and other projects, the government established an infrastructure committee made up of representatives from both the public and private sector. Under this new policy directive, 4G concessions have begun to be assessed on a case-by-case basis to determine whether contractual changes are required to make the projects viable.


Colombia is pursuing a number of policies aimed at diversifying sources of funding for infrastructure projects and attracting more foreign capital. These moves follow the implementation of Basel III guidelines across the world’s banking system, coupled with recognition of the financial exposure of local banks that have invested in infrastructure projects.

In an effort to address issues with long-term debt associated with the 4G programme, the FDN introduced the use of multiple peso-denominated mini-perm loans in July 2017. These products are used specifically to bridge the financing of the construction costs of a project until they are able to generate income and thereby provide access to longer-term financing solutions. Furthermore, the shorter terms of these products helps mitigate against the risks of currency fluctuation. In addition, the FDN introduced hedging mechanisms for 4G projects, beginning with currency hedges, in an effort to attract foreign investment. The FDN also began to securitise loans to fund the 4G programme. However, the share of these vehicles in the overall financing of these projects has decreased over time, falling from 16% in 2016 to 11% in 2018.

“By boosting the sector’s credibility and creating innovative products to attract private sector involvement, the efforts engendered by the FDN were fundamental to the survival of the 4G road building programme,” Gonzalez told OBG. “However, the national government could provide additional momentum by selling off public assets to finance its development.”

Gaining Momentum

The first two 4G projects are expected to come on-line in 2019: the Girardot-Honda-Puerto Salgar highway developed by Concesión Alto Magdalena for COP1.82trn ($622m), and the Barranquilla-Cartagena-Circunvalar de la Prosperidad ring road, undertaken by Concesión Costera for COP2.12trn ($725m). The first of these is set to open in 2019 and will connect the city of Girardot, south of Bogotá, with the river port of Salgar, reducing travel times by 50% and providing improved access for goods travelling from major industrial areas to export zones. The second is scheduled to come on-line in late 2019 and will cut travel times on the Caribbean coast by joining Barranquilla and Cartagena, two of the country’s most important ports. However, according to a public statement issued by the ANI in late 2018, only four of the 4G projects were following the construction schedule agreed in their respective contracts.

Two concessions that are proceeding on schedule are the Pacifico 2 and Pacifico 3 highways, both of which are earmarked for completion in 2020. Together with the Pacifico 1 project, the three highways are expected to add 293 km of new roads, stretching from Medellín to Pereira. Upon completion, the new highway network will significantly increase connectivity between the northern departments, the country’s coffee-growing regions and the Port of Buenaventura. Indeed, according to the MoT, the new roads will reduce transit times between Medellín to the Port of Buenaventura from 15 hours to 5 hours. The 176-km Autopista del Mar 1 project also reached financial closure at COP2.2trn ($752m) in 2019. The 176-km highway is set to link Medellín to Santafé. Financing was received in the form of a $450m credit line provided by the Japanese financial institution, Sumitomo Mitsui Banking.

While several projects are nearly completed others have fallen further behind. Most notably, three concessions that had been granted to Grupo Solarte experienced delays, compounded by investigations related to the company’s partnership with Odebrecht on the second phase of the Ruta del Sol project. As a result of these issues, the ANI rescinded its contract with Grupo Solarte in May 2019 and sought new agreements with developers. The 447-km Santana-Mocoa-Neiva concession was granted to Ethuss Group, with the project expected to cost COP3.1trn ($1.1bn). Meanwhile, as of mid 2019 the 76-km Popayán-Santander de Quilichao highway concession and the 133-km Bucaramanga-Pamplona road were both awaiting investors.

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The Report: Colombia 2019

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