It is difficult to imagine multinational giant Nestlé saddling up mules or packing canoes with chocolate bars and biscuits for sale in headquarters-based Switzerland. Yet that is exactly what Nutresa, Colombia’s largest food producer and confectionary extraordinaire, has sometimes resorted to when distributing among remote villages in the Andean nation. While the example is extreme, it reflects the abysmal state of Colombia’s transport infrastructure. Despite ready access to funds and opportunity, the sector has not kept up with economic growth and its shortcomings are now a major threat to competitiveness at home and abroad.
Only three months into the Santos presidency, his administration formed a new national infrastructure agency, ANI. Today it is responsible for securing over US$50 billion in investment between 2011 and 2021 for transportation development through government cooperation with the private sector. New regulation of concession agreements aims to combat political patronage and inefficiency, but their continued ubiquity in Colombia leaves room for doubt.
Colombia is in desperate need of better roads, railroads, ports, airports, and logistical hubs if it wishes to compete in the world economy. Its cities are poorly connected to both internal and external markets, in part due to one of the most rugged terrains on the planet. The World Economic Forum ranks Colombia tenth among the twelve largest Latin American economies in terms of infrastructure quality, beating out only Perú and Bolivia. Argentina, for example, boasts more than 1600 kilometers of paved roads per million people, while just over 300 per million run through Colombia.
Deficiencies in both the quantity and quality of infrastructure are borne out by transportation costs. A recent World Bank report reveals that it is significantly more expensive to ship products from Bogotá to the Caribbean coast than from the port of Cartagena to Shanghai. The National Business Association of Colombia (ANDI) has equated the infrastructure deficit with a 10 to 15 percent tax.
Colombia’s transport infrastructure crisis is not for lack of resources or opportunities. Indeed, the supply of both domestic and foreign funds has surged over the last decade. As Santiago Montenegro, president of the Colombian non-profit pension fund association (ASOFONDOS) has pointed out, Colombia’s consolidated financial sector amounted to $8 billion pesos in 1995, and leapt to $376 billion pesos by 2012. Last year Colombia received nearly US$15.5 billion of Foreign Direct Investment (FDI), up from $13 billion in 2011.
In the early 1990s, Congress revolutionized the economic model by permitting the private sector to help provide public services, traditionally the prerogative of the state, in part by passing the first framework for Public-Private Partnership (PPP) schemes. More recent regulations, like those in the 2009 Financial Sector Reform, have allowed pension funds, fiduciary institutions, and insurance companies to channel even greater resources towards infrastructure projects.
Yet as institutional investors rapidly expanded Colombia’s electricity, oil and gas, and telecommunications infrastructure, the transport sector stagnated. Partly to blame was the corruption of the Ministry of Transport and its associated bodies, such as the former Institute of Concessions (INCO). Political appointees infiltrated both entities, and were sometimes recommended by the very concessionaries whom they were responsible to supervise. Between 2002 and 2008, eight out of nine INCO directors found themselves in jail or in court.
Political patronage and clientelism were compounded by general ineptitude. The Ministry of Transport would oversee open-bidding processes before issuing studies to estimate the cost of the projects and their associated risks during the construction process. Winning parties habitually renegotiated their contracts to obtain greater public resources, to reduce the size of their projects, and to lengthen periods of concessions. Worse still, the model permitted companies to receive payment prior to any construction.
In November 2011, shortly after President Santos took office, the government replaced INCO with the National Infrastructure Agency (ANI) to manage concessions. Congress approved a new Public-Private Partnership law in 2012 that eliminates the former model’s loopholes and seeks to stimulate the participation of the private sector in constructing, financing, and maintaining the nation’s infrastructure. The current administration plans to overhaul the transport sector, and expects a four-fold increase in four-lane highways, a three-fold extension of railways, and a respective 100 percent and 50 percent increase in ports and airport capacity, by 2020.
There is much excitement surrounding Colombia’s flurry of Free Trade Agreements and participation in the Pacific Alliance trading bloc. Yet as President of the Inter-American Dialogue Michael Shifter says, “In order to turn that promise into reality, it needs to focus on its infrastructure.” While under Santos the transport sector is “certainly higher on the agenda, it’s just not moving along as quickly as it needs to.” Despite infrastructure project proposals by foreign heavyweights such as General Electric, the collapse of emerging markets bonds this past June may set Santos scrambling to raise funds for a commendable vision with a price tag of US$50 billion.
