This is a best prospect industry sector for this country. Includes a market overview and trade data.
Last Published: 7/31/2017
Overview
It has been a difficult year for many sectors in the Colombian economy where uncertainty and corruption scandals have gained the spotlight, but few sectors have created more stress to the government than infrastructure. Most of Latin America, including Colombia, has been hit by scandals involving the Brazilian construction firm Odebrecht, whose employees are being investigated for bribing high ranking government officials in exchange for favors like granting of construction and environmental licenses. In addition to corruption scandals, the low price of oil will also challenge infrastructure projects since it is the main source of government revenue used to finance these projects. Moreover, with the approach of presidential elections in 2018, there might be a temporary slowdown in procurement and tenders in this sector.

One of the most notable projects in President Santo’s government has been the ambitious Fourth Generation (4G) public-private partnership (PPP) infrastructure program, which continues to advance slowly five years after its inauguration. The National Infrastructure Agency (ANI) has finally awarded 32 concessions out of 33 planned roads – where 21 are part of the 4G wave and the remaining from private initiatives presented by construction companies. Of the awarded concessions, eight projects have secured financing, enabling concessionaires to start construction, while the remaining projects are still trying to secure financing. The eventual completion of the 4G program is expected to have a positive impact on Colombia’s economic competitiveness by lowering relatively high logistical costs that hamper the country’s productivity and drive up costs of consumer goods and industrial inputs.

Current State of Infrastructure
Airports: Air travel continues to be a growing sector in Colombia, where passenger air travel grew 4.8 percent in 2016 and mobilized over 35.7 million passengers. Cargo transport grew 3.4 percent when compared to the previous year (2015). Colombians are accustomed to traveling by air between major cities due to poor roads and a mountainous topography that make driving a less appealing alternative. Car travel between Colombia’s main cities takes between seven and 18 hours compared to 30-60 minutes by plane.

There are significant projects currently underway at Colombia’s airports, with modernization and expansion of more than 25 national and smaller, regional airports. Bogotá’s El Dorado airport recently inaugurated a new terminal that will facilitate growing traffic in Latin America’s third-busiest hub for passengers and busiest hub for cargo. The substantial increase in air traffic over the last five years in Colombia has already put pressure on this new terminal and an expansion project is being planned for 2017. Additionally, the old control tower has been demolished, which has allowed for more space for jet bridges. There are also plans for an El Dorado 2 airport in Bogotá, but this project is still in the early phase of development.

Other significant projects currently undergoing execution include the renovation of the Barranquilla Airport (project value of USD 120 million), which includes terminal modernization, upgrade to the landing strip, and building new cargo areas. Similar concessions are in place for the smaller airports of Armenia, Popayan, and Cartago. The Cali Airport also recently completed a new international terminal, a project valued at over USD 65 million. The terminal was inaugurated in the first quarter of 2017 and added five new jet bridges. Additionally, the Rio Negro airport is currently undergoing a massive transformation (approximately USD 85 million), and the construction of a second landing strip is being contemplated. The Cartagena airport is also discussing expansion plans to start in 2018 that would be valued at USD 170 million. Overall, the Government of Colombia expects to spend over USD one billion over the next few years on airport modernization projects.
 

Seaports: Colombian sea terminals are at capacity and therefore continuously receiving upgrades, including the expansion of container yards, building refrigerated cargo facilities, among other modernization projects. Current ventures include a USD 250 million project for Buenaventura, a USD 180 million project for Barranquilla, and a USD 100 million project for Santa Marta. All Colombian seaport terminals are seeking to increase the efficiency of their operations. As a result, the following investments are being made:
  • Security systems (basic equipment like night vision cameras and sophisticated equipment like non-intrusive scanners);
  • Canal dredging;
  • Green technologies to lower pollution emissions affecting local populations;
  • Navigation systems.
A new terminal on the Pacific coast, known as Aguadulce, was recently inaugurated with an investment of over USD 500 million.

Riverine ports: The Brazilian construction firm Odebrecht was a stakeholder in the Navelena consortium, which was in charge of developing the navigability of Colombia’s Magdalena River. Through an investment of over USD 800 million and the dredging of more than 600 miles of river, the project envisions creating a “Mississippi River” in Colombia that facilitates commerce from the center of the country to the Caribbean port of Barranquilla. However, the recent global corruption scandal involving Odebrecht has suspended the project and revoked the company’s concession to the Magdalena River project. The project is scheduled to re-open for public tender by end of year 2017.


Urban Transportation: Colombia’s most ambitious urban transportation project to date, the development of the Bogotá Rail Metro, has seen a number of different proposals over the last fifty years, most of which have not materialized due to a lack of funding. The latest proposal under Mayor Peñalosa involves building a system with 28 stations over 27 kilometers at above and below grade. The estimated cost of the first line is USD 7.5 billion, with a completion date of 2021. However, the project is in the initial stages and there is uncertainty regarding delivery dates and total cost, not to mention the fact that this project has a track record of not getting beyond the planning and design phase. Should it reach fruition, U.S. companies could be key players by participating in the architectural design, construction, and engineering of this metro rail project.

Roads: The Fourth Generation (4G) program envisions a USD 16 billion investment to build over 4,400 miles of new roads, 88 miles of tunnels, and 94 miles of bridges before the end of the decade. The program involves concessions for over 20 highways and roads and, over the last few years, the project’s first two phases adjudicated 19 of the 40 concessions. However, there have been issues with financing the third and fourth phases of project, due in part to lower global oil prices and dwindling government revenue.

Most of the road projects were designed to expand the country’s transportation system and include more than 30 primary road improvements and construction projects. Many planned concession projects (such as the Prosperity Corridor and the Sun Route) will link main ports with major cities to augment the current state of cargo transportation and to lessen the relatively high costs of shipping goods over land.
 
The execution of the projects mentioned above involves private and public finances from local and international banks, including Goldman Sachs, ITAÚ (Brazil), and Sumitomo (Japan). So far only a few American banks have demonstrated interest in participating in the financing of the 4G projects. Generally, American companies have not been very keen on participating in the 4G program due to the uncertainty surrounding cost recovery, the high risk associated with the construction projects (many in remote areas), and the complexities of environmental licensing and consulting with local communities. Many of these companies have found the return on investment to be too low given the risks and have preferred to participate in less risky portions of the projects, such as engineering and architectural design.


Rail: Colombia has 2,400 kilometers of narrow gauge railroad, which is divided into four different systems managed either by concessions or by one of Colombia’s thirty-two departments (states). The public railroad system is not extensive or efficient and is currently not a high investment priority for the Government of Colombia. Two mining companies privately own the only two standard gauge lines in Colombia, which are mostly used to transport coal from the mine to the seaport for export. In late 2016, the company Trafigura suddenly withdrew from the Ferrocarril Del Pacifico rail project, abruptly selling their operations and breaching their contract with the Colombian authorities (ANI). Trafigura alleges the government was at fault by not complying with several obligations, such as keeping the tracks clear of illegal squatters and the issue of illegal mining, which would put their operation and company reputation in jeopardy.

Leading Sub-Sectors
Best prospects in the transportation and infrastructure sectors include:
  • 4G project financing and financing for private sector initiatives; 
  • Aeronautical infrastructure equipment and services;
  • Complex engineering projects and services related to mass transport systems, complex seaport/riverine engineering (liquid natural gas facilities), high complexity tunnels and bridges, high security government buildings, and infrastructure/urban master plans;
  • Intelligent transportation systems equipment and services;
  • Road safety equipment and services (such as electronic toll collection);
  • Specialized construction equipment.
Opportunities
On May 15, 2017, the U.S.-Colombia Trade Promotion Agreement (TPA) celebrated its fifth anniversary. Thanks to the TPA, road and railroad construction equipment (once totaling an average import tariff of 15 percent) currently enters the Colombian market duty-free. Services such as project management, bridge design, and architecture and engineering, among others, have also benefited from the TPA.

Other gains from the TPA include strong protections for U.S. investors (Colombia ranks 6th in the world for legal stability), expanded access to the services market, market access for used goods, increased transparency, and improved dispute settlement mechanisms (arbitration). Under the National Treatment Caveat, Chapter 9 of the TPA, U.S. companies must be treated as locals when they participate in public bids, eliminating the disadvantage they used to face prior to the signing of the agreement. The one exception is public bids issued by the Colombian Civil Aviation Authority (AeroCivil).
 
Since opportunities in road construction, airport expansion, and port expansion arise from concessions and from 4G contracts based on the Public Private Partnership (PPP) law, American firms interested in offering services to construction companies in Colombia must understand how the PPP structure works. U.S. firms should also find a local representative who can support them in-country, or explore the possibility of a joint venture for engineering projects. 


Trade Events
National Congress on Infrastructure
November 22-25th, 2017
Cartagena, Colombia

Web Resources
Camilo Gonzalez 
U.S. Commercial Service Bogotá contact:
Phone: 571-275-2764
Email: Camilo.Gonzalez@trade.gov

Key Contacts
Colombian Chamber of Infrastructure
National Agency of Infrastructure (ANI)

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.



Colombia Design and Construction Trade Development and Promotion