Boston, MA -- (ReleaseWire) -- 05/05/2014 -- We remain optimistic towards the construction industry in Colombia in the short to medium term. As such, we forecast solid 8.4% real growth in 2014, when we expect the awarding of large infrastructure projects to take place. This positive outlook is supported by an improving business environment and a strong pipeline of projects, particularly in the transport sector - which continues to represent the highest proportion of infrastructure projects - and the energy and utilities infrastructure segment. Strong growth in 2014 is a continuation of a trend that emerged in 2013, when the industry experienced double-digit growth estimated at 10.5%.
Key Trends And Developments
- With continued strong backing from the Colombian government for the sector, we maintain our outlook of a healthy annual average real construction growth of 6.1% between 2014 and 2018.
- Strong economic growth - with real GDP growth of 4.3% forecast for 2014 - and expansion in coal, mining, oil and gas extraction, coupled with the multiple signed free trade agreements are creating significant demand for new capacity and better quality infrastructure. Improved access to ports and adequate highways will be essential if the country is to meet the expected increase in exports.
- New rules regulating tax changes and force majeure will significantly reduce the risk of investing in Colombia's ambitious road infrastructure programme. These measures will facilitate access to financing and will also strengthen the Public-Private Partnership (PPP) model in the country.
- These regulatory changes follow a new infrastructure law that was approved in November 2013 and empowers the ANI to alleviate the existing bottlenecks. The new law comprises 73 articles that aim at facilitating land acquisition and the expropriation of grounds considered to be needed in the public interest. Furthermore, according to the new law, as of January 2014, infrastructure permits will be prioritised over mining permits.
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Corruption And Security Remain Risk Factors
- Colombia scores just 3.7 out of 10 for corruption in the country risk section of our infrastructure Risk/ Reward Ratings, following several corruption scandals within Colombia's public works sector. This illustrates our concern of the impact on the country's business environment.
- That said, a concerted effort is being made to stamp out corruption in awarding tenders. This has been shown by the creation of the new National Infrastructure Agency (ANI) - which replaced INCO as the official entity in charge of infrastructure concessions. In addition, the government has started implementing the OECD Transparency Mechanism for contract procurement (High Level Reporting Mechanism - HLRM). This gives us hope for future improvements.
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