Colombia's most ambitious infrastructure programme
commenced in 2012 with the enactment of Law 1508, which
introduced public-private partnerships (PPPs). Later in 2013,
the government launched its fourth-generation toll road
programme (4G), the largest infrastructure programme in
Colombia, aimed at reducing the country's lag in toll road
infrastructure while promoting its development.
After four years of implementing the 4G toll road programme,
government officials have recently stated that the next
challenge is to develop social infrastructure programmes in
Colombia, which comprise, among other things, the construction
and financing of schools, museums, hospitals, prisons, and
water and sewage systems.
This is certainly good news, but notwithstanding the
importance of social infrastructure, there are several
challenges that must be overcome to achieve a successful
implementation of social infrastructure PPPs.
The main challenge when it comes to structuring social
infrastructure PPPs in Colombia is funding. Social
infrastructure projects lack a project-specific revenue source
(from commercial exploitation) to fund the entire project and,
therefore, they require public funding. Thus, public PPP social
infrastructure initiatives must face the financial and
budgetary constraints of the public sector, and private PPP
initiatives are limited by strict restrictions on public
expenditure, which render the latter virtually inapplicable. In
addition, given the local component of social infrastructure
projects, there is an important challenge as to the technical
knowledge and sophistication of the public entities at the
regional level (and their workforce). As such, the national
government (which now has experience structuring PPPs) must
provide technical support to the decentralised entities.
As a result, the structurers of the much needed social
infrastructure projects in Colombia face difficult challenges.
They must seek alternative and more innovative sources of
funding, coupled with suitable risk sharing and risk allocation
mechanisms in order to structure bankable and profitable social
infrastructure projects. All this while fulfilling the public
need for social infrastructure. In addition, amending the
existing regulatory framework limiting public funding on
private PPP initiatives could certainly support the development
of social infrastructure PPP projects.
||Carlos Fradique-Méndez and
Natalia Arango Botero