Latin Finance - May 2008 - 30

colombian infrastructure Rebuilding Colombia by Ben Miller ong associated with political, economic and physical risk, Colombia’s economy has broken ahead in the last five years. Prudent management, strengthening debt ratios and a track record of increased stability have the markets asking about an investment-grade move in the next 12 months. A popular government seeks to interest the buyside in a vast and growing infrastructure pipeline to build Colombia to the next level. Colombia’s GDP grew 7.5% last year, the highest growth spurt in 30 years, according to the finance ministry. Foreign direct investment has meanwhile leapt to 5.5% of GDP from about 1.0% in 2002. “The main word for Colombia now is confidence,” says Finance Minister Óscar Iván Zuluaga, who cites appreciation in the peso and a reduction in kidnappings and killings as the main factors spurring heightened foreign investment. “The numbers speak for themselves,” says David Ramirez, special representative in Colombia for Mizuho Corporate Bank. “Compare indexes of security, for murders robberies of main capitals in Latin America and you will see how Bogotá and Medellín are in a much better place compared to other cities visited by foreign investors.” L Firm commodity prices, fiscal reforms and reduced violence has Colombia planning for an infrastructure buildout. The sovereign is targeting the private sector. includes a highway to linking Bogotá to Buenaventura on the Pacific coast. The road incorporates an ambitious nine kilometer tunnel, known as La Linea, which will greatly reduce travel time through a difficult mountainous area on the way to a crucial trading port. Bids were expected to open in April to international and local builders. A public power auction is meanwhile set for May, explains Rentería, to further encourage private investment to meet Colombia’s energy needs. “There is a public commitment and we are putting in money from the budget, but we are inviting all investors for what we think will be great opportunities,” says Rentería. “Latin America is now a safe haven for investors,” says Ramirez. “Money is still out there as long as you want to pay the increased spreads, but at the same time the base rate has gone down, so the actual cost hasn’t changed that much. If things continue as they are, we could see investment flow into Latin America for project finance, and Colombia is in a good position.” Tapping the Private Sector Public funds will, of course, not be enough. Colombia’s finance ministry is considering starting a national infrastructure fund similar to Mexico’s Fonadin, Zuluaga explains. Encouraged by the recent appearance of private equity money in the country, the government would like to start a vehicle that channels public and private money to infrastructure developments. Colombia is in discussions with Starting new infrastructure fund: Zuluaga The government recently extended concessions on ports to allow the owners to make upgrades. Rentería says a package of six airports in the country were recently snapped up by a group of Chinese and Colombian investors. “We are becoming known to different investors in the world,” says the minister. “This is very good because it’s a new source of investment.” The next large ticket item on the agenda is the 1,000 kilometer Ruta del Sol highway connecting Bogotá with the Caribbean coast, at a cost of $2.0-$2.5 billion. Bidding should be open before the end of the year, and Rentería expects plenty of international interest. More than 15 road concessions are expected to hit the block in 2008. This Fonadin del Sur? The first place this investment will be channeled to is roads, airports, ports, and other projects crucial to the logistics of the country’s exports. Colombia wants $18 billion in private capital to build infrastructure, explains Carolina Rentería, Colombia’s minister of planning and development. This is part of a $38 billion infrastructure investment plan for 2007-2010, a cornerstone of the second Uribe administration. 30 LATINFINANCE May 2008
Latin Finance - May 2008

Table of Contents for the Digital Edition of Latin Finance - May 2008
