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Colombia Infrastructure Report Q4 2010
Business Monitor International, Oct 2010, Pages: 73
The Colombia Infrastructure Report provides industry professionals and strategists, corporate analysts, infrastructure associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Colombia's infrastructure industry.
Following a global downturn-defying increase of 12.8% in real terms in 2009, we expect 2010 to be another year of double-digit growth for Colombia’s thriving construction sector. Indeed, with BMI anticipating around 10.6% real growth in construction industry value in 2010, the South American country will remain one of the region’s top performers over the medium term (2010-2014) thanks to an attractive business environment and a government committed to high levels of infrastructure investment.
Major developments the previous quarter support our strongly positive forecast:
- A recent improvement in the country’s political risk profile bolsters our already positive outlook. The landslide victory of the centre right party of Juan Manuel Santos removes a key concern regarding political risk in the country and the policy continuity it creates bodes well for the country’s investment climate. We believe the infrastructure sector will be first in line to benefit from the anticipated surge in investments in fixed capital formation as the new government continues along the investment-friendly path of the previous government.
- In August 2010, President Santos gave his endorsement to the Bogota Metro project with a view to launching a tender in the first half of 2011. As one of the largest urban transports project in Latin America, the support of the new president provides vital impetus for the project and supports our bullish view for the sector. Preliminary studies put the cost of the project at an estimated US$3bn.
- The awarding of the final contract for the Ruta Del Sol toll road concession to Yuma Concesionaria marked the end of the tendering process for the US$2.7bn one of the country’s largest infrastructure projects. The completion of the tendering process underlines the broader investment appeal of Colombia’s infrastructure market, as well as highlighting our view that large highway tender will continue to dominate the country’s transport sector over the shortterm.
Falling levels of political risk following the presidential election will likely see further improvements in Colombia’s business environment. Indeed, this quarter saw Colombia usurp Chile to take the top spot in our Infrastructure Business Environment Ratings, scoring 62.2 out of 100. Furthermore, with a recovery in the banking sector under way, foreign construction firms will be among those most likely to benefit from an increase in bank lending. Despite these improvements, investor risks remain within the country’s project finance environment, with currency volatility and contract enforceability in particular contributing to the country’s poor score in our Project Finance Ratings; however we believe that overall, risks remain to the upside.
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