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id: 141031
date: 2/12/2008 15:13
refid: 08BOGOTA540
origin: Embassy Bogota
classification: UNCLASSIFIED
destination: 07BOGOTA7265
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UNCLAS BOGOTA 000540 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ELTN EAIR EWWT ETRD ECON CO
SUBJECT: COLOMBIA'S TRANSPORT INFRASTRUCTURE: IS IT UP TO 
THE GLOBALIZATION TASK? 
 
REF: A. (A) 07 BOGOTA 7265 
 
     ¶B. (B) 07 BOGOTA 8592 
 
 
¶1.  (U)  SUMMARY:  Colombia's demography and topography make 
transportation infrastructure development particularly 
challenging.  Security problems and constitutional earmarks 
for social services and local governments hobbled public 
investment in transportation in the 1990s.  Today the GOC is 
embarking upon construction of an integrated national 
transportation network combining public and private 
investment.  GOC plans include over USD 6.5 billion in road 
projects, a rail system between Bogota and the Atlantic 
coast, and USD 1 billion for improvements to Colombia's 
ports.  Colombia's ability to pull off a dramatic improvement 
in its infrastructure -- widely regarded as the Achilles' 
heel in the trade sector -- will be a key factor in deciding 
whether Colombia will prosper or falter in the global 
marketplace.  END SUMMARY 
 
Landlocked... 
------------- 
 
¶2.  (SBU)  Transportation expert Ignacio de Guzman describes 
the country as "effectively landlocked," despite being the 
only South American country with Pacific and Atlantic ports. 
Guzman notes that one-half of the country's population and 
production comes from a tenth of Colombian territory -- the 
"productive triangle" comprised of high Andean peaks and 
tropical valleys bordered by Bogota, Cali and Medellin. 
Guzman cited a recent World Bank study that found exporting 
goods from Colombia was slower and more costly than from 
anywhere else in the region (except Venezuela).  Mauricio 
Cardenas, head of the economic think-tank Fedesarrollo and a 
former Minister of Economic Development and of Transportation 
(MinTrans), called Colombia's roads an economic bottleneck. 
Cardenas said Colombia needs a national road system to 
successfully take advantage of globalization, including 
implementation of the U.S.-Colombia Trade Promotion Agreement 
(CTPA). 
 
And Constitutionally Blocked 
---------------------------- 
 
¶3.  (SBU)  GOC spending on roads remained low during the 
1990s.  Cardenas said the 1991 Constitution undercut 
long-term transportation development by mandating that high 
percentages of federal government revenues be delivered to 
local departments for health and education, instead of 
transportation.  Regardless, security issues made it near 
impossible to build and protect critical infrastructure in 
many rural areas that are key conduits to ports and major 
cities.  Ana Maria Pinto, Director of Transportation 
Infrastructure for the National Planning Department (DNP), 
said that between 1995 and 2002 public investment in 
transportation remained flat.  As security started improving 
in 2002, road travel increased by 10-20 percent per year, and 
GOC investment in transportation was forced to catch up. 
Pinto added that even stepped-up investment favored local 
road projects -- accounting for some 75 percent of the GOC's 
transportation investment between 2002-2006 -- and 
contributing little to an integrated national transport 
system. 
 
In Hock... 
---------- 
 
¶4.  (SBU)  Private investment in roads had a rocky start in 
the early 1990s.  Juan Martin Caicedo, head of the Colombian 
Infrastructure Association, described the private concessions 
of the 1990s as failures.  He noted that concessionaires 
built only about 2,000 miles of roads, usually of low quality 
and with high tolls.  Caicedo said the GOC was essentially 
"in hock" to investors who used security issues to leverage a 
guaranteed income for their projects from the GOC.  In the 
late 1990s private transportation investment began slowly 
rising and projects improved due to a stronger investment 
environment, the GOC's increased experience in concessions, 
and improved regulations. 
 
But Now Ready to Rock 
--------------------- 
 
¶5.  (SBU)  Pinto said with increased emphasis on economic 
development in President Uribe's second term, GOC agencies 
coalesced around the idea of improving Colombia's transport 
system.  She noted that GOC efforts to improve transportation 
logistics already contributed to the World Bank identifying 
it as the region's top economic reformer in 2007 (ref A). 
 
The GOC's National Development Plan (NDP) projects an 
investment of USD 11.5 billion through 2010, including over 
USD 1 billion for road maintenance, to develop an integrated 
transport system (with another USD 15 billion through 2019). 
Pinto said USD 5.1 billion of the USD 11.5 billion investment 
will come from private sector concessions.  She and Caicedo 
agreed Colombia has a "window of opportunity" to develop 
strong concession projects now because increasing domestic 
and international trade will increase demand for better 
transportation, and economic and security improvements allow 
the GOC to negotiate far more favorable deals than in the 
past. 
 
"Grand Corridors": Roads and Rolling Stocks 
------------------------------------------- 
 
¶6.  (SBU)  The NDP makes roads, especially "Grand Corridors" 
between Bogota and Atlantic and Pacific ports, the top 
priority.  For example, Pinto said the World Bank, DNP and 
the MinTrans are collaborating on the "Ruta del Sol," a USD 
2.5 billion, 580-mile concession four-lane highway linking 
Bogota to the Atlantic coast, to be bid out in 2008 with a 
construction period of 5-8 years.  The World Bank hopes the 
project will serve as a "best practices" model for other 
concessions, sorely needed in a country known for 
inefficient, and oft corrupt, concession practices (as 
illustrated by the recent cancellation of the USD 270 million 
bid on the "La Linea" tunnel project).  Construction has 
started on a USD 1.5 billion (two-thirds private investment) 
highway to double road capacity between Bogota and the 
Pacific port of Buenaventura.  Buenaventura handles 40 
percent of Colombia's non-coal foreign trade, but Pinto said 
the road to Bogota suffers from landslides, flooding, and 
frequent traffic jams of 6-12 hours.  Other concession road 
projects include: 
 
-- the "Golfo de Uraba" project, a USD 625 million, 270 mile 
long road between Medellin and the Pacific coast port 
   town of Turbo offering the potential for a new export 
route for Colombia's second city; 
-- the "Ruta de la Montana" project, a USD 610 million, 265 
mile long road connecting Medellin with Manizales and 
   Puerto Olaya; and 
-- the "Arterias del Llano" project, a 630 mile long road 
linking Villavicencio with Arauca, Puerto Gaitan, and San 
   Jose de Guaviare. 
 
¶7.  (SBU)  Colombia is not a country of trains.  Guzman said 
high construction costs, up to twice that in the U.S. due to 
mountainous terrain and tropical conditions, slowed the 
historic growth of railroads.  In the second half of the 19th 
century, the boom era for railways in the rest of the world, 
Colombia laid down little more than 10 miles of tracks  per 
year.  Between 1900 and 1930 rail construction picked up 
slightly, mainly under the impetus of increased coffee 
exports.  But in the 193s the GOC shifted its transportation 
priorities from rail to road.  Still, privately run freight 
trains have played a significant role in moving coal from 
mines in Colombia's interior to the Atlantic coast for 
export.  The most significant GOC rail project is the 
"Magdalena Medio" rail system which parallels the Magdalena 
river between Bogota and the Pacific coast.  Approximately 
USD 225 million will be invested in private concessions for 
new construction (in part to build new tracks parallel to 
those used exclusively by coal companies) and rehabilitation 
over 3-5 years. 
 
"Points of Access": Airports and Docks 
-------------------------------------- 
 
¶8.  (SBU)  Domestic and international air passengers 
increased between 2003-2007 by 5 percent and 15 percent per 
year respectively.  One quarter of all international visitors 
came from the U.S., and a new aviation agreement should 
increase flights between the two countries by at least 50 
percent (ref B).  Janeth Benitez, spokesperson for Colombia's 
flag airline Avianca, said her company plans to invest over 
USD 4 billion in expanding its fleet over the next two years 
with the expectation that Bogota's El Dorado airport will 
become a regional hub for Latin America.  The GOC has, or is 
in the process of, privatizing all of Colombia's major 
airports.  Concessionaires are spending hundreds of millions 
of dollars on airport improvements.  Bogota's El Dorado 
international airport began a USD 650 million upgrade under a 
new concessionaire in September 2007, and private investors 
plan to spend USD 135 million to upgrade Medellin's 
international and domestic airports (together with four other 
smaller nearby airports), and a yet-to-be determined sum to 
expand and improve four major airports in Northeast Colombia. 
 
 
 
¶9.  (SBU)  Colombia's four major ports, Buenaventura, 
Cartagena, Barranquilla, and Santa Marta, have operated under 
private 20-year concessions since 1993.  The port of 
Cartagena, currently in the process of a USD 300 million 
expansion, owes much of its success to having negotiated an 
additional 20-year concession in the late 1990s that allowed 
it to make long-term investments.  Cartagena also hosts 75 
percent of Colombia's increasingly lucrative cruise business; 
in 2008 each of the expected 125 ships will generate about 
USD 200,000 for the economy.  Guzman said the other three 
ports are getting new 20-year concessions, which has sparked 
new investments.  Barranquilla plans to spend USD 178 million 
to improve facilities and dredge its access canal, and Santa 
Marta will invest USD 125 million to develop as a general 
container port as it eliminates coal exports in the next two 
years (coal exports from Santa Marta are expected to move to 
Barranquilla and to Cienaga to reduce pollution and protect 
Santa Marta's tourist industry).  Buenaventura has had 
inefficiencies resulting from multiple companies 
independently operating different sections of the port. 
Still, Buenaventura plans to invest USD 450 million plan to 
improve container handling, strengthen infrastructure, and 
maximize space usage. 
 
The Magdalena River:  Building Levees and Locks 
--------------------------------------------- -- 
 
¶10.  (SBU)  The Magdalena river, which runs from the center 
of the country to Barranquilla, served as the main link to 
the outside world for most Colombians until the twentieth 
century.  Although its relative importance has declined, it 
still moves about two million tons of goods from Northern 
Colombia to the Atlantic at 70 percent the cost of road 
transport.  Cormagdalena (a public company charged with 
development of the river) wants to see the river's 
navigability increased and extended.  The MinTrans estimates 
that an investment of USD 1.2 billion in river improvements 
(dredging, canal construction, sedimentation control, levees, 
and locks) would cost USD 1.2 billion dollars, but could 
increase the river's capacity to ten million tons, extend 
navigability South to the heart of Colombia's productive 
triangle, and reduce transportation costs almost ten-fold. 
 
¶11.  (SBU)  Still, developing the Magdalena will not be easy. 
 Pinto said logistic and environmental problems could easily 
outweigh financial issues.  Pinto thinks the Magdalena can 
ultimately evolve into a major transport route between Bogota 
and the Atlantic, but said such a development is at least a 
decade away.  The USG, through the Army Corps of Engineers, 
will soon provide Cormagdalena with technical assistance in 
identifying issues related to development of the Magdalena. 
Once such issues have been identified, the USG could assist 
in the design phase of developing the river through 
environmental studies, construction plans and bid package 
preparation.  Finally, the USG could provide assistance in 
the construction phase through OPIC loan guarantees and other 
financial instruments. 
 
COMMENT:  Key to Success in Globalized Marketplace 
--------------------------------------------- ----- 
 
¶12. (SBU)  Colombia, blessed with a superb resource base and 
geographical location, has been historically hampered as a 
trading nation by an inward-looking business class, leaden 
bureaucracy and inadequate infrastructure.  Globalization 
realities have taken care of the first factor, and a series 
of reforms have set the nation on the path to a greatly 
improved (though still lacking) business regulatory 
environment.  The Achilles' heel of infrastructure remains, 
and the Uribe government is focusing heavily on this weakness 
for the remaining 2 years of the administration.  This 
process -- expensive and lengthy -- holds the key to 
Colombia's ability to emerge as more than another bit player 
in the global marketplace. 
Brownfield 

=======================CABLE ENDS============================