Colombia Freight Transport Report 2007

The government was unsuccessful in its first attempt to privatise state natural-gas transporter Empresa Colombiana de Gas (Ecogas). In late September, the government halted the privatisation, citing as too low the lone bid of US$823mn, made by a group of six local pension funds. Arguably Ecogas is worth more; not least because of its potential strategic importance in joining South America's gas grids with North America. Ecogas distributes 45% of Colombia's gas through 3,233km of trunk lines located predominantly in north-east and central Colombia. Although the prospect of a pipeline through Central America to North America is still a way off, Colombia's geographic importance is self-evident. The government intended to hold a new auction within 45 days, and was expected to open the company up to a broader range of potential bidders. In our latest Colombia Freight Transport Report, BMI concludes that pipeline throughput (both oil and gas) will grow by an annual average of 3.5% over the next five years.

Various factors support this prediction. The economy will grow by an annual average of 3.3% in 2007- 2011, a little slower than the preceding five-year period (an average of 4.1%), partly as a result of a cooling cycle for commodity exports. At the same time, however, oil and gas demand will remain strong, and there are growing opportunities for Colombia to act as a transit corridor, particularly for Venezuelan hydrocarbon exports out to the Pacific, on their way to China and other markets. Lawlessness and guerrilla insurgencies, which have targeted pipelines, will continue to be a factor, but the overall security situation is set to improve

Overall prospects for the freight sector are relatively encouraging. We are expecting freight turnover to grow by an average of 4.6% during 2007-2011, significantly ahead of the economy's general growth rate. We believe President Uribe's emphasis on restoring a strong central government based on the rule of law is gradually improving the operating environment and slowly encouraging a pick-up in investment levels. This implies a scenario in which some of Colombia's ageing transport infrastructure will gradually be modernised and upgraded and some of the country's 'no-go' rebel areas will be slowly brought back to normality with the re-establishment of transport links. We do not, however, see the country's deep-rooted problems of social and political violence coming to an early end - in that sense there are few 'quick wins' to be had. Airfreight growth will average 5.9%, followed by rail freight traffic growth at 5.9%, road freight at 5.3%, inland waterways at 3.7%, pipeline throughput at 3.5% and maritime freight at 2.6%. Overall, Colombia scores 36.0, out of a possible maximum of 70.0, in our freight transport business environment matrix. It comes in a little bit below the average regional score. The country scores relatively well on freight transport growth, long-term economic risk and the competitive environment. Areas of relative weakness include long-term political risk (largely a reflection of the poor security situation as a result of long-running guerrilla insurgencies), patchy infrastructure growth and aspects of the regulatory environment. The transport intensity index, a measure of the dynamism of foreign trade, has also been relatively low.

According to our latest estimates, the total value of transport and communications GDP will rise to US$14.96bn in nominal terms by 2011, representing 9.0% of Colombia's GDP. The transport and communications sector employed an estimated 1.192mn people, or 6.5% of the labour force, in 2006. We see that figure rising to 1.296mn by 2011, although it will remain at 6.5% of the total labour force.