Colombia: A social revolution

In 2010 it was roads making the headlines in Colombia, notably when the 1,071-kilometre Ruta del Sol highway project reached a $900 million financial close. This year, it may be the turn of social infrastructure such as housing, day care and court buildings.

Infrastructure Investor recently met with Hernando José Gómez, director of national planning in the Juan Manuel Santos-led government, whose Social Party of National Unity was voted into power last summer. “Social infrastructure has always been owned by the government in the past,” he says on a visit to the Colombian Embassy in London. “Now we want to take a big leap forward with large-scale public-private partnerships (PPPs).”

Gómez describes daycare centres as a “priority” while adding that the government is also keen to expand the country’s university network. However, the first social infrastructure PPP likely to see the light of day in 2011 is for a judicial courthouse in the capital city of Bogota. Gómez says he envisages the “experimental” project being launched sometime in the first quarter.   

Housing deficit  

Another major priority is social housing, where, according to Gómez, there is a deficit of two million units – half of which he wants to see built in the next four years with the help of the private sector. “There is a major issue in relation to land availability, but now an alliance has been forged with local mayors to release land and get it connected to utilities,” he says.

Attracting the private sector is an essential aspect of Colombia’s infrastructure plans and Gómez believes the country has plenty to offer investors. He points to good financial and regulatory standards (“not one Colombian financial institution went bankrupt during the Crisis”), a well-functioning stock market and a reputation for business-friendliness (ranked 39th globally last year in a World Bank survey).

Against that, there have been disputes over existing contracts and accusations of corruption in the past.  Gómez also acknowledges that there have been problems in structuring deals properly. “There is upside for the private sector in Colombia,” he says. “We just need better structures, and we are learning from what Chile has done. The Ruta del Sol was much better structured and the risk well assigned.”

In recent years Colombia has lacked investment grade status following a fiscal crisis in the country a decade ago. However, with Santos seeking to rein back the country’s fiscal deficit, hopes are high that it may be awarded investment grade status by the end of this year. Gómez says he does not expect this to happen within the next six to nine months, “but, in any case, we tend to be treated as if we’re investment grade so we’re able to compete well with the likes of Brazil and Mexico.”

While social infrastructure would be a step into the unknown for infrastructure investors in Colombia, there are plenty of more typical projects in the offing. Gómez says he wants to see “a good portfolio of projects over the next year”. He points to the need for new rail to transport coal for the Brazilian market from Colombia’s eastern mountain ranges; a river port concession on the Magdalena River (“we are working on dredging issues to make that feasible”);  the expansion of pipelines to carry oil from the oriental plains; and a new airport for Bogota.