Colombia Infrastructure Report 2007

The Colombian construction sector growth logged 28.2% y-o-y in the second quarter of 2006, taking H106 growth rate to 17.3%. Private sector's performance has been impressive at 12.5%. The industry's journey on the road to recovery, since 2001, has been led by large investments in public infrastructure in the shape of highways, roads and bridges. BMI's newly released Colombia Infrastructure Annual Report 2007 forecasts average industry growth of 11.9% over 2006-2010. Government capital investment is expected to reach US$23bn over the forecast period.

The Colombian economy grew by 6% in Q206, continuing from the first quarter growth of 5.5%. Bolstering private investment, household spending and the resuscitated construction sector have contributed to the economy's steady performance. Colombia has a relatively open investment climate, which makes it a lucrative foreign investment destination. Further, if the free-trade agreement signed with the US is approved by the legislature, the Colombian economy will benefit a lot from the increased trade between the two countries.

The country's estimated shortage of 1.5mn housing units represents a key opportunity for growth. Major projects on the anvil in Colombia include: the US$2.2bn Bogota-Cienaga road project; the US$1.2bn modernisation of the Cartagena refinery; the US$1bn El Descanso coalmine development; and the US$650mn expansion of the El Dorado airport.

However, Colombia's high external debt burden still remains a major concern for the economy. Fiscal problems could also have a bearing on construction growth. The construction industry's heavy dependence on foreign investment is a relevant potential risk as the industry may not be able to sustain any decline on this front. The high government fiscal deficit, exacerbated by large military expenditure, is delaying investment in the National Development Programme. Even as the internal security situation has improved, crime levels in the main cities are unsettlingly high.

The Colombian construction industry's growth is likely to be stimulated by government-subsidised housing and commercial projects in conjunction with renewed investment in transport infrastructure. The nation is currently ranked fifth on BMI's Business Environment Rankings matrix for the Americas region. The industry is expected to be worth about US$12.4bn by 2010, contributing over 7.5% to the nation's Gross Domestic product (GDP).