OBG talks to Luis Fernando Andrade, President, National Infrastructure Agency

Interview: Luis Fernando Andrade

How is the road infrastructure programme going?

LUIS FERNANDO ANDRADE: Fourth-generation road concession programmes are moving forward. Apart from the nine projects approved for delivery earlier in 2014, we have 10 pre-qualified projects that we hope to award before the year ends. These represent around COP$40bn ($20m) of the COP$57bn ($28.5m) that we forecast will be invested in this wave of concessions.

We also plan to expand rail infrastructure by 1200 km to reach 1700 km by the end of 2015, and we are currently trying to rehabilitate 3000 km of rail corridors that were abandoned long ago. We have seen much interest in this from private firms, particularly in three projects, Valle de Magdalena, Valle del Río Cauca (led by Swiss company Trafigura), and a link between Bogotá and Boyacá, led by a consortium between local companies and General Electric. Trafigura is also working on a rail project north of Barrancabermeja.

We separate these projects, both road and rail, into short-term effects (construction phase) and long-term effects (operating phase). The most immediate effect will be a cut in the unemployment rate of one percentage point, as we will hire more than 200,000 workers. The most significant long-term effect will be a drop in transport costs of around 30% and a 20% reduction in transport times. In the next five years the transport sector will be the principal driver of the economy, accounting for GDP growth of 1.5%; however, we will not begin to see these effects until 2015.

The private sector is concerned about the financial structuring of the fourth-generation projects. Do you think it has any reason to be?

ANDRADE: We have been discussing financial structuring since September 2012, aiming to adjust it to market needs. Now we can confidently say we have reached a point of equilibrium in the distribution of financial risks. It was a long process, in which we had to agree not only on financial risks, but also on risks of political changes, land expropriation, acquisition of environmental licences, delays in previous consultations with local communities and availability of public services. We have now transferred sufficient risk to the private sector, though there may still be room for improvement. With regard to the financial structuring of the projects, we still face obstacles related to high costs. We are working with the Ministry of Finance and the National Development Fund (Fondo de Desarrollo Nacional, FDN), which is structuring credits and subordinate loans to reduce risks. We increased the proportion of dollars to allow more participation from multilateral organisations and foreign banks. Currently, 45% of the debt is financed by the FDN (15%) and foreign investment (30%). The remaining 55% must come from local banks and institutional investors, such as pension funds. The current scheme is not complete, but at least it will allow us to finance the first nine projects while we continue working on the necessary financial structure for the rest.

What problems does the new Infrastructure Bill solve, and which remain unaffected?

ANDRADE: The bill will reduce operational issues, as it facilitates the expropriation of property, expedites environmental licences and clarifies how issues with public services, which are very common, are solved. The one issue that is not yet resolved is that of prior consultations with local communities. This is more difficult for mining and oil and gas projects, though sometimes it delays infrastructure projects too. Of the nine projects we have already approved, only three have prior consultation issues and, among those, there were delays in only one section. Prior consultations are important, as local and indigenous populations should have a say in the development of their regions, but we need rules to protect the interests of developers. While improvements are still needed on this issue, President Juan Manuel Santos has issued a decree stipulating a maximum of 30 days to resolve consultations, which gives confidence to investors.