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Colombia Infrastructure Report Q1 2012
Business Monitor International, Dec 2011, Pages: 87
Business Monitor International's 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.
BMI View:
The 2011 healthy recovery of Colombia’s construction industry is in line with BMI's medium- to long- term forecast for the sector. Strong economic growth, recently agreed free-trade agreement between Colombia and the United States, expansion in the resource extracting sector, President Juan Manuel Santos new ten-year US$55bn transport infrastructure investment plan, and strong Q211 data are the factors that have prompted BMI's bullish outlook with a particular emphasis on the infrastructure sector. Main downside risks to BMI's forecasts are structural weaknesses, such as deep-rooted corruption, and thus are long-term and persistent.
Infrastructure Sector Leads Growth:
Underpinned by strong backing from the Colombian government the country’s infrastructure industry will drive growth with CAGR 8.6% (2011-2020), relative the total transport sector that is forecasted to grow at CAGR 8.3%.
The infrastructure sector holds immense potential for investors, with expected real industry growth of 4.8% in 2012, relative the gradually declining residential and non-residential sector that will see a marginal real growth of merely 1.5%.
Strong economic growth – expected real GDP growth of 8% in 2012 – and expansion in coal, mining, oil and gas extraction, are creating significant demand for new capacity and better quality infrastructure. Coupled with the recently signed free-trade agreement with the US, better access to ports and adequate highways will be essential to transport the expected increase in exports.
Roads and Railways Are The First Order Of Business:
Road infrastructure industry value is forecasted to account for the majority of infrastructure value, 40% in 2012, with a significant relative increase during the forecast period. Furthermore, BMI sees a trend of increased private interest within this sector. Ruta de Sol, the largest planned road project, as well as the largest greenfield public private partnership (PPP) project awarded in Colombia’s transport sector, has now entered the construction phase – highlighting the potential for private procurement in the Colombian infrastructure market. Railways have also received renewed attention with focus on private, as well as foreign, participation. High profile projects such as the Carare network and the Ferrocarril Central railway project, as well as China’s plans to finance and build a railway-based ‘dry canal’ to link the country’s Caribbean and Pacific coasts, are key drivers behind this revival.
Corruption Remains Underlying Risk Factor:
Following several corruption scandals within Columbia’s public works sector, Colombia scores 3.7 out of 10 for corruption in BMI's Country Risk sector of its Infrastructure Risk / Reward ratings, illustrating BMI's concern over the impact on the country’s business environment. However, a concerted effort is being made to stamp out corruption in awarding tenders – as shown by the creation of infrastructure agency ANI that will replace INCO as the official entity in charge of infrastructure concessions – which gives us some hope for future improvements.
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