Colombia: $20bn of roadbuilding for sale
While the Colombian economy continues to undergo rapid expansion, with GDP increasing by 5.9% in 2011, one major hurdle stands in the way of continued progress – the absence of an efficient highway network. This is about to change, however, as Colombia’s national government recently embarked on an ambitious highway construction programme aimed at attracting both domestic and international investors to address the country’s infrastructure needs.
Led by the National Infrastructure Agency (Agencia Nacional de Infraestructura, ANI), the highway building initiative will incorporate work on more than 8000 km of roadways within the next six years. New highways will account for 20%, or 1600 km, of this total. Another 20% will be the expansion of two-lane highways into four lanes, with the remaining 60% involving repairs of the pre-existing highway network. In total, planned roadworks will entail auctioning $20bn worth of roadway infrastructure and concession agreements.
Sergio Fajardo, the governor of Antioquia department, told OBG, “The Mountain Highways project, also known as ‘Highways of Prosperity (HoP)’, is Colombia’s largest project”. The HoP project primarily involves the expansion of the Antioquia highway network in an effort to better connect the department with neighbouring regions. The project is divided into four highway sections, which extend from Medellín, the country’s second-largest city, to other cities throughout the country.
In total, the HoP project will require more than $7bn in investment and include the construction of 1160 km in new highways. Fajardo told OBG that the high cost of the project is primarily the result of the region’s mountainous landscape. Connecting highways through this area will involve the construction of numerous tunnels and viaducts, including the 9.7-km Toyo tunnel.
Funding for Highways of Prosperity will come primarily through road tolls and infrastructure bonds issued by the national and Antioquia governments. Bidding for the various sections of the project will begin in December 2012 and continue through May 2013. Construction is scheduled to begin in early 2014.
To the west, the HoP will link Medellín with another major infrastructure project – the Sun Route. The Sun Route connects Bogotá, Colombia’s capital, with the Caribbean coast, as well as several other urban centres. Concessions for the three different sections of the project were awarded to a number of companies from Colombia, Argentina, Brazil and Italy.
Construction on the first section of the 1000-km Sun Route began in December 2011. The project has encountered several delays since construction began, however. The environmental impact of the first 21 km of roadway linking Villeta and Guadas has been called into question, requiring Consorcio Vial Helios, a consortium led by Colombia-based Grupo Solarte and ConConcreto, along with Argentina-based Iecsa, to present additional proposals on how to mitigate this impact.
This news should serve as a harbinger to the potential challenges of expanding road networks throughout the country. Roadway concession winners will be required to address environmental concerns. Efforts are being made, however, to confront environmental issues before they become a source of delay for highway projects.
Fajardo told OBG that previously the National Environmental Licensing Agency (Autoridad Nacional de Licencias Ambientales, ANLA), would only become involved in a project once a concession was awarded. In the case of the HoP project, though, ANLA is already meeting with ANI to identify areas of potential concern.
The government and ANI hope that a new public-private partnership law, enacted early in 2012, will continue to encourage further investment in the country’s infrastructure. According to a recent report by the National Administrative Department of Statistics (Departamento Administrativo Nacional de Estadística, DANE), investment in civil construction projects was up 20.9% in the second quarter of 2012 over the same period in 2011. Investment in transportation infrastructure was also up 4.2% over the same period.
Colombia’s desire to expand its global reach is evident in the recent passage of free trade agreements with the US and EU and leadership’s efforts to build stronger economic ties to Asia. The construction of an expansive and efficient highway network that connects urban centres on the interior with the country’s coastline will be key to taking advantage of new international trade agreements, as well as supporting the continued growth of the economy.