Colombia: On the right road

In 2012, it’s fair to say we did not see Colombia as a notable player in the public-private partnership (PPP; P3) scene, despite its decades-long history of utilising concessions to build, operate and maintain highways. And we weren’t alone in our assessment: The World Economic Forum that same year ranked Colombia’s roads as 109th and its rail system as 99th out of 142 countries.

But with the launch of a $25 billion road and rail PPP programme late last year, and following a commitment by the country’s Agencia Nacional de Infraestructura (ANI) to up highway infrastructure investment to 3 percent of GDP from 1 percent previously, the international investment market is heating up in Colombia.

For evidence, you might look, for example, to Ashmore Colombia’s $250 million Colombia Infrastructure Fund, which has seen a 30 percent return on investment (ROI) since its 2010 inception.

But highway projects aren’t the only reason investors are eyeing Colombia. With proven crude reserves reported at 2.4 billion barrels and production capacity estimated to be roughly 1 million barrels per day at the end of 2013, investors and energy experts are watching Colombia closely to see if midstream and downstream infrastructure segments are going to be further developed, with uncertainty around whether Colombia can keep up with the pace of demand.

Market draws include what ANI referred to in a 2012 Infrastructure Investor interview as “a robust legal system that offers clear rules to investors,” coupled with the fact that Colombia has not rescheduled its foreign debt for over 100 years.

Carlos Castro, a Brookfield Infrastructure Group vice president and general manager for Colombia, says the country’s regulatory climate is “very stable”. He estimates potential for $30 billion in deal flow over the next decade, including toll road programmes, privatisation of the power sector, and projects needed to support an increase in exploration and production in the oil and gas sector.

With all this in mind, investors are gaining confidence in this emerging market, and we continue to see Colombia as one to watch.