The first concession in Colombia’s $24 billion plan to revamp its highways drew offers from two out of ten potential builders, as the government failed to entice the other bidders by offering sweetened terms.
The road, a 133-mile highway between Puerto Salgar and Girardot in central Colombia, drew proposals from groups led by local builder Mario Alberto Huertas Cotes and a unit of Empresas ICA SAB, Mexico’s largest construction company. None of the eight other eligible bidders, which included Grupo Odinsa SA and Andrade Gutierrez SA made offers even after the government agreed to boost the amount it will pay builders and the fraction it pays in dollars instead of the local currency.
“Getting very few bidders means simply that you have to sit down again to see what they didn’t like, and that means delaying the projects even more,” Munir Jalil, head analyst at Citigroup’s Colombia unit, said in a phone interview. Potential bidders may have been put off by high building costs, high financing costs, or fears that traffic on won’t be enough to justify this route, Jalil said.
President Juan Manuel Santos, who is running for a second 4-year term in elections this year, has made infrastructure a centerpiece of his agenda, saying that removing transport bottlenecks can help the country achieve “Asian” growth rates. The highway program aims to cut travel times between Colombia’s major population centers by as much as 47 percent while slashing the cost of transport between industrial zones in the Andes mountains and the nation’s Caribbean and Pacific ports.
“For now, we’re not going to change the conditions, which are in line with what we think is the government’s best interest,” Luis Andrade, the head of the Colombian infrastructure agency ANI, told reporters today in Bogota. “Obviously, we’ll always listen to the market and if we find the need to modify something, then we will.”
The start of Santos’s program, which calls for 8,000 kilometers (4,970 miles) of highway construction, had been delayed by two months as would-be builders struggled to line up financing. The country forced bidders to line up their own financing after stopping its prior practice of making upfront payments, which had led to allegations of corruption and inefficiency.
Colombia ranks 130th out of 148 economies in terms of the quality of its roads on the World Economic Forum’s global competitiveness index.