Colombia's fourth generation of toll-road projects, which
the government initially launched in 2013, has started to
materialise over the past two years. At the time of writing, 18
projects have been awarded to public-private associations.
Approximately 10 of these projects have already reached
financial close; the remaining eight are currently negotiating
the required financing. The government's investment in these
projects is expected to exceed 20 billion Colombian pesos.
International and local financing is expected to exceed 30
Although the Colombian government has lent considerable
support to these toll-road projects, concessionaires and
sponsors have encountered several challenges when looking to
obtain enough funding to complete the projects.
Fourth generation infrastructure projects require financing
for 20 years or more. This impacts the interest rates that
banks will offer and may also affect the liquidity and cash
flow of the local banks. Consequently, the parties involved in
these projects have had to seek alternatives that will appeal
to both the local and international financial institutions that
have the capacity to finance these projects. This has also led
to the participation of multilateral international institutions
and the Financiera Nacional de Desarrollo (FDN).
Additionally, recent market fluctuations have resulted in
the devaluation of Latin American currencies, among others,
including the Colombian Peso. This has created a foreign
exchange risk that will have to be addressed through hedging
policies and other risk allocations. The increasing foreign
financing element in these projects means that foreign exchange
matters and hedging policies are important considerations.
Another key challenge for these fourth generation
infrastructure projects will be matching the financing acquired
by each concessionaire and the income that they will receive.
As currently structured, concessionaires and sponsors expect to
receive sufficient income from toll-road revenues and what is
known as the vigencias futuras (future income)
allocated by the Colombian government.
Notwithstanding the presence of this and other challenges in
financing fourth generation infrastructure projects, the
Colombian government and all other stakeholders are optimistic
about what these toll-road projects will contribute to
Colombia's development and growth.
Carlos Fradique-Méndez and Laura Clara