Colombia Infrastructure

Colombia Infrastructure

Introduction

Colombia's economy is gaining strength as a result of a surge in spending on infrastructure and record levels of foreign direct investment. Sustained investment is necessary to modernize and expand Colombia's overburdened transport network, particularly if it is to take full advantage of its pending new Free Trade Agreement (FTA) with the USA (Country Watch, 2012). Quality transport infrastructure is critical for the functioning of an economy and key for long-run growth and competitiveness. It also facilitates economic activity for businesses and consumers.

Infrastructure Issues Analysis

Colombia's economic and geographical features mean that it has complex logistics needs. Its main cities and industrial zones are located in the country's interior, at lengthy distances from the main ports, making it heavily reliant on road and multi-modal transport. Increased traffic on the main transport networks has exacerbated supply bottlenecks (EIU, 2012a). For businesses, this raises logistics costs, reduces profits, erodes competitiveness and also leads to higher prices for consumers. Inadequate infrastructure means that consumers can suffer from reduced access to employment and essential public services, leading to higher poverty and regional inequalities (Economist, 2012).

Importance

A more stable Colombia is enjoying renewed GDP growth, driven by exports and strengthening domestic demand:

Real GDP growth averaged 5.4% annually in 2003-2007;

Exports rose 20.4% to reach an estimated US$26.8 billion in January-November 2007, while imports were up 26.1% to an estimated US$28.1 billion (EIU, 2012a)

Economic activity is concentrated around the main urban zones:

According to the World Bank, the country's main metropolitan areas (Bogotá, Medellín, Cali, Barranquilla, Cartagena and Bucaramanga) accounted for more than 80% of Colombia's external trade and 75% of its GDP in 2005/2006 (Country Watch, 2012). Bogotá, Cali, and Medellín, the main centers of production and consumption, are located in the highlands, at considerable distances (up to 1,000 kms) from the principal ports on the Atlantic and Pacific coasts. Given the large distances and varied geographic conditions between the main economic zones and the ports, the quality of the main transport network is very important (Economist, 2012). Infrastructure development needs are also rising amid regional demand for continued government presence in conflict areas.

While it compares well in the provision of social infrastructure, Colombia lags behind its regional peers in the development of productive infrastructure, in particular paved roads. In 2007, 15% of Colombia's road network was paved, compared to 21.8% in Chile and 33.6% in Venezuela. Of the large South American economies, only Brazil fares worse (12.3%) (EIU, 2012a).

Oil is the major legal export commodity of Colombia. The country has 1.3 billion barrels of proven oil reserves. These deposits represent the fifth-largest in South America. Substantial unexplored areas remain, however, many of them on the border with Venezuela (EIU, 2012b). The government claims that the heavy oil deposits near the border could hold up to 20 billion barrels of recoverable resources (EIU, 2012b). This would give Colombia more reserves than major producers such as Mexico or Algeria.

Proportion of Paved Roads in Selected Countries: 2010

Paved Roads as % of Total Roads

Source: (Economist, 2012 -International Road Federation/national statistics)

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