Latin Finance - September/October 2014 - 72

Economy
The rewards are
high if Colombia
can sustain its
impressive growth

INVESTOR
REPORT
COLOMBIA

PAGE 74

Infrastructure
Financing for an
extensive network
of new highways is
coming into place
PAGE 78

On the road
Colombia is on its way to developed-market status, according to Mauricio Cárdenas, the
country's finance minister. Peace with guerillas and new roads will help.
Colombia's economy has been something
of a ray of hope for Latin America, indeed
for emerging markets, in the first half of
2014. While other Andean countries have
revised growth forecasts downwards,
largely due to the effect on exports of
lower copper prices, Colombia has been
adjusting its GDP expectations upwards.
If the pace can be sustained, Finance
Minister Mauricio Cárdenas says the
country will move up in the world. "In 12
years, Colombia could have developedcountry status, meaning per capital
income of at least $20,000, and the
eradication of absolute poverty," he says.
The crucial part of this target will be
making sure growth stays above 5%.
This already seems achievable in 2014,
thanks after the upward revisions in
forecast growth. "The main objective,
the overriding goal, is to keep economic
growth at a rate of close to 5% or higher
during the next four years," Cárdenas tells
LatinFinance.
Improving Colombia's transport links

72 L ATINFINA NCE.COM - September/October 2014

could help overcome one of the big
obstacles to higher economic growth and
reaching developed-market status. The
$25 billion fourth generation highway
concession program amounts to one of
the world's biggest infrastructure building
programs. It is much-needed in a country
where only 10% of roads are paved.
Financing this program will be difficult.
But the country is making use of another
of Colombia's achievements of recent
years: its growing private pension funds,
the AFPs.
Thanks to new rules, the Colombian
government hopes those funds will
contribute around $13 billion to the road
transport infrastructure projects over
the next six years, helping healthy but
inevitably limited capacity in the local
banking sector.
The highway program will lift
Colombia's GDP growth while the roads
are being built and also once they are
operational. Manufacturing and farming
exports too will be important, and

Cárdenas hopes trade links will mean
Colombia benefits from the US recovery
and higher US interest rates (which might
mean less upward pressure on the peso).
Questions remain, however, over
whether oil production can be sustained.
This is a crucial source of government
revenues and a big contributor to
Colombia's success story - the country
is now the region's fourth biggest oil
producer. But its battle with the guerillas,
who have sabotaged energy facilities, is a
barrier to new investment in this area.
President Juan Manuel Santos
campaigned in elections this year partly on
a ticket of promising further negotiations
with armed groups. His reelection
promised new engagement, and faceto-face talks between the rebels and the
Colombian army were held in August for
the first time in the 50-year war.
If lasting peace is achieved, perhaps
the biggest barrier of all in the way of
Colombia's development could be
removed. LF
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