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DE RUEHBO #4243/01 3302235
ZNR UUUUU ZZH
R 252235Z NOV 08
FM AMEMBASSY BOGOTA
TO RUEHC/SECSTATE WASHDC 5749
INFO RUEHBR/AMEMBASSY BRASILIA 8526
RUEHPE/AMEMBASSY LIMA 6775
RUEHCV/AMEMBASSY CARACAS 1361
RUEHZP/AMEMBASSY PANAMA 2715
RUEHQT/AMEMBASSY QUITO 7469
RUEHLP/AMEMBASSY LA PAZ NOV OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS BOGOTA 004243 
 
SIPDIS 
SENSITIVE 
 
S/P FOR WMCILHENNY; EEB/IFD PASS TO OPIC PBALLINGER; TDA 
NYOUNGE; EXIM XCREQUE-BROMBERG 
 
E.O. 12958: N/A 
TAGS: EINV ECON ELAN EWWT EFIN PGOV CO
SUBJECT: GOC OUTLINES AMBITIOUS INFRASTRUCTURE PLAN, BUT 
WHO WILL PAY? 
 
¶1. (SBU) SUMMARY: Infrastructure has long constrained 
Colombia's economic competitiveness, geographical cohesion 
and presence of the state.  However, as security continues to 
improve and Colombia aims to position itself to compete in 
the global marketplace, the GOC is launching an ambitious 
plan to expand and modernize its transportation, 
infrastructure.  Primary focus lies in major road projects to 
link Colombia's economic centers to its coasts, followed by 
integrated efforts to improve mid-size ports and airports and 
extend Colombia's limited rail network.  The GOC intends to 
rely on private investment and concessions for the majority 
of the estimated USD 39 billion in required infrastructure 
investment over the next six years.  The role of a recently 
announced USD 500 million public investment fund that will 
tap Colombia's pension system and multilateral bank resources 
remains to be determined.  Colombian business contacts regard 
lack of infrastructure development as President Uribe's 
greatest failing to date, and wonder whether this latest GOC 
push has simply come too late given the current scarcity and 
high cost of major project financing.  END SUMMARY. 
 
Highways Top Priority 
--------------------- 
 
¶2. (SBU) According to National Planning (DNP) Director 
Carolina Renteria and Transportation Minister Andres Gallego, 
the GOC's top infrastructure priorities are three 
superhighway projects that will link Colombia's central 
industrial region to its Pacific and Caribbean coasts as well 
as interconnect the country's booming northern coast 
population centers.  The largest of the three projects, 
referred to as the "Route of the Sun" will connect Bogota to 
Santa Marta via 680 miles of divided highway at an estimated 
cost of USD 3 billion.  The Ministry of Transport, which is 
dividing the project into three segments, will begin the bid 
process on December 9 and forecasts completion of the 
project, reportedly the second largest road project currently 
planned in Latin America, by 2015. 
 
¶3. (SBU) The "New Independence Road" concession will link 
Colombia's industrial capital, Medellin, to the growing port 
of Turbo on the Caribbean Coast near the Panamanian Isthmus. 
The 340-mile road rehabilitation and new construction will 
require an estimated USD 780 million in investment and will 
open for bidding in mid-2009.  The third super-highway 
project, called the "Highway of the Americas", plans to 
interconnect Colombia's north coast from the Guajira 
peninsula to the Panamanian border via more than 1,500 miles 
of primary and secondary roads.  While an estimate of 
investment is still under development by the DNP, Director 
Renteria told Econoff the final cost would likely exceed that 
of the "Route of the Sun" project. 
 
Airports, Ports, Rail, & Mass Transit Also Planned 
--------------------------------------------- ----- 
 
¶4. (U) Beyond highways, the GOC has identified over two dozen 
priority infrastructure projects for airports, ports, rail 
lines, and mass transit.  In the air sector, the GOC plans to 
follow the 2008 issuance of 20-year operating and investment 
concessions at six airports with an additional six 
concessions (Santa Marta, Riohacha, Valledupar, 
Barrancabermeja, Bucaramanga and Cucuta) in 2009.  The GOC 
estimates USD 104 million in total investment for the six new 
concessions.  In the ports sector, the GOC extended the 
concessions for three of Colombia's largest ports 
(Buenaventura, Santa Marta, and Barranquilla) in 2008 
contingent upon respective investments totaling USD 750 
million.  In 2009, the GOC expects to finalize new 
development projects at the ports of Aguadulce (north of 
Buenaventura--USD 103 million) and Contecar (near 
Cartagena--USD 297 million) as well as issue solicitations 
for greenfield investments in the ports of Bahia Malaga and 
Tribuga on the Pacific Coast and Turbo on the Caribbean 
Coast. 
 
¶5. (U) Although Colombia has traditionally placed low 
priority on developing its rail network, the GOC has two 
railroad renovation projects presently under concession 
(Santa Marta-Chiriguana and Buenaventura-La Felisa), and 
 
plans to begin the bidding processes for three more 
concessions in early 2009.  The largest of the three proposed 
concessions will link the northern Santa Marta-Chiriguana 
line to central Colombia and the outskirts of Bogota via 650 
miles of new and rehabilitated rails.  The 30-year concession 
will require an estimated USD 437 million of investment.  The 
GOC is also preparing studies to offer the construction 
concession for a completely new 345-mile line to link coal 
fields in Boyaca and Cundinamarca to existing lines running 
north to Colombia's Caribbean coast. 
 
¶6. (U) The GOC also plans to significantly increase 
investment in urban mass transit infrastructure, following 
the success of Bogota's TransMilenio Bus Rapid Transit System 
(BRTS).  The national and local governments will cover up to 
70 percent of the infrastructure investment and private 
concessionaires will provide the balance of investment and 
operate the systems in 17 major metropolitan areas.  The 
first five new BRTS (Cali, Cartagena, Barranquilla, 
Bucaramanga, and Medellin) are scheduled for operation by 
¶2010.  The GOC has also prepared plans for a 65-mile commuter 
railway network for Bogota and anticipates soliciting bids in 
mid-2009. 
 
In Search of Investors 
---------------------- 
 
¶7. (SBU) The GOC expects to fund these infrastructure 
projects primarily through the granting of long-term toll and 
operating concessions to private investors and construction 
firms.  On the margins of Colombia's Infrastructure Congress 
in Cartagena November 20, President Uribe met with more than 
30 such international investors to encourage bidding on the 
GOC's priority projects.  While several of the assembled 
investors, including companies from Spain, Mexico, Portugal, 
Brazil, and the United States, expressed particular interest 
in the highway projects, most underscored the current 
international credit crunch greatly complicated the financial 
viability of such investments. The investors urged the GOC to 
make available domestic sources of financing, such as public 
pension funds, as part of the concessions. 
 
¶8. (SBU) In response, Finance Minister Oscar Zuluaga agreed 
to examine such mechanisms, while President Uribe suggested 
the GOC could provide certain minimum toll receipt guarantees 
to enhance concession terms. GOC officials also highlighted 
plans to utilize new public-private investment vehicles to 
augment private direct investment. 
 
New Investment Fund Role Still in Development 
--------------------------------------------- 
 
¶9. (SBU) In October, the GOC signed a letter of intent with 
the Inter-American Development Bank (IDB) and Andean 
Development Fund (CAF) to establish a public-private 
investment fund focused on infrastructure.  The fund will be 
capitalized with initial contributions from the IDB and CAF 
as well as GOC fiscal appropriations and investments by 
Colombian public pension funds totaling approximately USD 500 
million.  In order to maximize transparency for potential 
private investors, the GOC plans to contract a private 
administrator with independent authority to select 
infrastructure projects in Colombia to support.  Projects 
will pay investors back through a combination of tolls and 
usage fees. 
 
¶10. (SBU) While the GOC is touting the fund as an important 
new mechanism for infrastructure development in Colombia (and 
expressed hope to Econoffs that U.S. investors and 
development agencies such as the Overseas Private Investment 
Corporation could support the initiative), current 
participants and potential investors note that the initial 
fund size is inadequate to support even one major project. 
Separately, the new World Bank Resident Representative told 
EconCouns that the World Bank would likely not contribute to 
the fund due to concerns about moving such public investment 
activities off GOC books.  At present, fund coordinator and 
Director of Public Credit Viviana Lara acknowledged to 
Econoff November 20 that it would take several more months to 
fully define the fund's role in the GOC's overall 
 
infrastructure plan. 
 
Comment: Too Late, and Now Too Expensive? 
----------------------------------------- 
 
¶11. (SBU) After years of systemic underinvestment in 
infrastructure exacerbated by access limitations from the 
civil conflict, Colombia is now focusing on the importance of 
infrastructure for economic competitiveness, national 
integration, and provision of government services.  The GOC's 
plans are ambitious given the investment requirements and its 
fiscal pressures, but reflect both the priority the Uribe 
Administration is now placing on infrastructure development 
and its commitment to finding private investment solutions to 
Colombia's development needs.  The question that many in 
Colombia are asking is why it has taken so long.  Our private 
sector contacts -- who usually have little negative to say 
about the President's performance -- generally cite lack of 
infrastructure development as his greatest failing to date. 
Transportation Minister Gallego is widely regarded as among 
the most ineffective members of Uribe's Cabinet, and is 
routinely blamed for not having moved these projects sooner 
when international financing was plentiful and less costly. 
BROWNFIELD