Interview with Luis Andrade – President of Colombia’s National Infrastructure Agency

October 16, 2013

The man behind Colombia’s infrastructure plan:

How do you respond to criticism that the infrastructure plan is delayed?

“What is being said is not true. If you look at the federal budget for infrastructure and take a historical perspective you’ll see that the country was investing very little in transport infrastructure until 2010. You see a gradual increase before then but the numbers really shoot up in this government. In the last four years of the previous government the average spend was COP2.5trn (about $1bn). But last year it reached COP8trn. The expectation for this year is even higher.”

“In the previous decade 600km of four-lane roads were built, so on average they were building 60km a year. But in 2011 we built 100km of four-lane highways, another 202km in 2012 was 202km and in this year it should be almost 300km – five times what the previous government used to build.”

But haven’t environmental licenses have caused some delays?

“The specialised environmental licence agency is going through a learning process. Like us they are a new agency but with every month that goes by they are getting better and faster. There is also a new strategy where we work with them when our engineers are planning new routes to make sure that there are no surprises further down the line. When it comes to new transport infrastructure I am confident that environmental licences won’t be a big problem.”

What about community relations?

“I am concerned about the community consultations. They have led to significant delays in some cases, and that worries us. But the president is working on new methodology for social consultations that sets time limits to avoid excesses and abuses. The idea is to guarantee rights but avoid abuses of rights. We are very hopeful that this will help.”

“Moreover it is important to realise that social consultation issues only apply in certain parts of country. Around two out of ten projects need social consultation so while there may be problems or delays in 20% of projects that won’t affect the other 80% in areas that don’t need it.”

How can British investors get involved in the programme?

“As an equity investor in a road concession, an insurer covering the project risk, as a debt holder or an equipment provider.” For example, Ashmore plc, a British fund manager that specialises in emerging markets funds is part of a consortium for a road concession. We’ve also seen interest from reinsurance syndicates in Lloyd’s. There are a lot of construction and performance risks likely to come with these concessions and we’re expecting a lot of cover to come from the UK.

“We’re having interest from some British countries in rail. Holdtrade teamed up with Transnet from South Africa to present a plan for the main north/south railway line running through the centre of country next to the Magdalena River.

“British firms may not be bidding for concessions right now, but once a particular consortium wins [British institutional investors] will bid for equity. After all, some of these developers do not have all of the equity that is required so there will be an opportunity for investment groups to come in and take a slice. Of course, the advantage at that point is that the risks and rewards will be better defined. With a specific road, the decision to invest is easier, so I would hope that large UK investor groups get involved then.”

“At the moment the official rate of return is expected to be around 13% per annum over the 20-year life of the concessions although we expect that to be bid down.