(The above statistics are unofficial estimates in billions of USD)
Sources: Ministry of Transportation
As a result of inefficient infrastructure, logistical operation costs are very high which situates Colombia at a competitive disadvantage compared to its neighbours in Chile and Peru. On average, these costs account for 18 percent of the total cost of each business in Colombia, while in the United States, for example, the figure reaches only 8 percent. Inadequate infrastructure is the second biggest issue for conducting business in Colombia; according to October 2011 report from the World Economic Forum (WEF). Colombia ranked 108 in the quality of roads, 109 in the quality of port infrastructure, and 94 in the quality of air transport infrastructure out of 142 countries. Only 20 percent of Colombia's roads are paved, and the nation has just 1,200 kilometers1 of dual-lane divided highways. Colombia also has 900 kilometers of railroad, and river navigation that has yet to be developed to transport goods on a large-scale. And a World Bank Study which was published in December stated that Colombia is the 2nd highest in cost for transportation infrastructure in all of South America. It gave the example of one ton of cargo from Shanghai to Cartagena is USD 60 as opposed to Cartagena to Bogota of that same amount. Taking all of these factors into consideration, the Colombian government has created an ambitious program to update the country´s infrastructure by 2014 with investments of more than USD 15 billion, which poses significant opportunities for U.S. infrastructure firms.
The Colombian government is working to update the current infrastructure by passing a Public Private Partnership (PPP) law that allows international companies to invest through build-operate-transfer concessions that will expand infrastructure investment to levels not seen in Colombia since the 1950’s. The GOC has also unveiled plans to increase its spending on national infrastructure projects from one to three percent of GDP over the next few years. This is an increase from the current investments of USD 3 billion per year to USD 9 billion. New concession opportunities are valued at over USD 20 billion.
On September 18, 2012, The National Infrastructure Agency (ANI) launched a new generation of transportation infrastructure concessions2. For these projects, ANI will award more than U.S.20 billion worth of concessions by 2014 for the improvement and expansion of the country’s road system. Many planned concession projects link ports with major cities to improve the current state of cargo transportation and to lessen the perceived tax applied to all goods shipped over land. In addition, the GOC is planning concessions for rehabilitating and upgrading railroads, ports, river transport routes, and airports.
By 2013, the plan is to award 5,000 km in concessions, a majority double-lane highways, and 1,000 kilometers of railroads that will connect production centers with consumption and exports centers. The investments will reach USD 26 billion3. On November the 4th, 2011 the Colombian government announced an ambitious reform in which the Colombian Infrastructure Agency (ANI) was created, among other institutions. This reform is part of president Santo’s Good Governance Program. ANI, a branch of the Ministry of Transportation, will be in charge as of 2012 of all infrastructure project including roads, airports and ports replacing the current the National Institution of Roads, Instituto Nacional de Vias (INCO)4.
The National Infrastructure Agency (ANI) has plans for a 100 percent increase in four-lane highways, 50 percent increase in load capacity at ports, 50 percent increase in the total length of railways in operation, and 35 percent increase in air passenger capacity by 2014. ANI also plans to restore navigability to the Magdalena River to make it capable of transporting coal and oil. Therefore, key sectors for U.S. investment include:
Best prospects for transportations and infrastructure are:
Given the tremendous opportunities for U.S. exporters in Colombia, it is appropriate that on October 21, 2011, President Obama signed the United States-Colombia bilateral trade agreement (U.S.-CTPA) following its approval by the U.S. Congress. On May 15, 2012 the FTA agreement entered into effect finishing the implementation phase. Road and railroad construction equipment (which were previously at 15% in average) currently have zero tariff to enter into the Colombian market as result of the United States-Colombia bilateral trade agreement (U.S.-CTPA)6. Services such project management, bridge designs, architecture and engineering design, among others, have also huge advantages as a result of the United States-Colombia bilateral trade agreement (U.S.-CTPA). Other provisions include strong protection for U.S. investors (legal stability), expanded access to service markets, greater intellectual property rights protection, market access for remanufactured goods, increased transparency and improved dispute settlement mechanisms (arbitration). Under the National Treatment Caveat, Chapter 9 United States-Colombia bilateral trade agreement (U.S.-CTPA), U.S. companies must be treated as locals when they participate on public bids eliminating the disadvantage they used to have prior to the signing of the agreement. The one exception to this is all public bids issued by the Colombian Civil Aviation Authority (AEROCIVIL) which was excluded from the FTA.
Opportunities are concentrated in road construction, airport expansions, railroad construction and ports expansion through concessions with the Colombian government and through the Public Private Partnership (PPP) law.
U.S. Commercial Service Bogotá contact: Juan Carlos Antía, Senior Commercial Specialist
Tel: (571) 383-27-64
Departmento Nacional de Planeacion (DNP): www.dnp.gov.co
Ministry of Transportation: www.mintransporte.gov.co
National Administrative Department (DANE): www.dane.gov.co
El Tiempo Newspaper: www.eltiempo.com
Semana Magazine: www.semana.com
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5 As reported by the Economical section of the U.S.Embassy in Bogotá on Nov 2012
6 As mentioned in the Construction best prospect section
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