|Luis Gabriel Morcillo|
The two largest Colombian private pension managers belong to the two local largest financial conglomerates, which also control the two most important local investment banks. These two investment banks have structured or hold important positions in several concessionaires, which were in turn granted with the first wave of 4G toll road concessions (investments on the first nine projects came to $12 billion). These projects, and the planned second wave of nine other projects expected to be awarded in 2015 (estimated at $15 billion), are at the financial closing stage. They require that local banks, pension funds and insurance companies participate in the financial efforts made by the state-owned local development bank (Financiera de Desarrollo Nacional – FDN) to attract international development banks and foreign financial institutions to participate in this huge $27 billion infrastructure plan.
Therefore, the Ministry of Finance has increased the individual debt quota for local banks from 10% to 25% of their technical capital when the financing is made to infrastructure projects. As well as the new five percent bucket created for pension funds and insurance companies to invest in 4G toll road concessions and private and public partnerships (calculated over the total assets under management of local pension funds which raise up to $80 billion and grow almost at an annual rate of 15%), the government recently announced that the provision prohibiting local pension funds' funded by private equity funds from investing in projects owned, guaranteed or financed by affiliates to such pension fund managers is no longer applicable when such private equity funds invest at least two-thirds of their funds into infrastructure PPP toll roads.
These modifications are expected to significantly push local pension funds to deploy their growing public savings into the government's infrastructure plan, leveraging international and local banks' efforts to put in the funding required for these projects. In the short term, restrictions on long-term project bonds offerings are being softened so that pension funds are also able to invest in capital markets financing to facilitate the take-out of banks' positions.
Luis Gabriel Morcillo
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