- MULTILATERAL DEVELOPMENT BANKS’ COLLABORATION: INFRASTRUCTURE INVESTMENT PROJECT BRIEFS Colombia: 4th Generation Toll Road Program Overview In the past decade, Colombia has seen remarkable economic growth. Per capita incomes have more than doubled to $2,424 per year in 2014, foreign direct investment inflows are now ten times what they were and the country is ranked highest in the World Bank’s Doing Business report amongst Latin American and Caribbean (LAC) countries. However, public investment in infrastructure stands at a paltry 1.3 percent of GDP, the effects of which are manifest in its poor standing relative to LAC peer countries in infra- structure indices. The country is ranked 103 out of 140 in the Business Environment and Infrastructure Index of the World Economic Forum and, 130th out of 140 for transportation infrastructure. The Government of Colombia (GoC) has established the 4th Generation Roads Concession (4G) as one of the mainstays of its National Infrastructure Development Plan 2014-2018. This series showcases how the Multilateral Development Banks’ collaboration supports the development and implementation of infrastructure investment. This support comes in the form of public sector loans, private sector finance, sector and transaction advice, guarantees, and output-based aid. - MULTILATERAL DEVELOPMENT BANKS’ COLLABORATION: INFRASTRUCTURE INVESTMENT PROJECT BRIEFS - APRIL 2016 Colombia4GTollRoadProgram_WBG_IDB.indd 1 4/6/2016 3:36:59 PM Background Funding 4G is an ambitious $24 billion (as of original estimates) • Improved pricing benchmarks (government bonds) near-decade long investment plan to create a nationwide developed through technical advisory support from the toll road network through up to 40 different public- IBRD private partnerships (PPPs). This investment represents • Standardized project bond structure with a AA+ shadow a doubling of the public spend on infrastructure and rating and a project bond construction therefore requires capital markets financing to bridge the guarantee from IFC expected financing gap. To help achieve this, the World • $70 million IFC equity investment in the Fondo de Bank Group (WBG) developed the Colombia Capital Desarrollo Nacional (FDN, Colombia’s infrastructure Market Deep Dive (DD) to bring together investment, development bank) advisory, and treasury support from the International • $50 million IFC investment in a local infrastructure Bank of Reconstruction and Development (IBRD), debt fund that helped mobilize over $400 million in the International Finance Corporation (IFC) and the debt financing, mainly from pension funds Multi-Lateral Investment Guaranteed Agency (MIGA). • MIGA cross-border risk guarantee for foreign The Inter-American Development Bank (IDB) has also investors supported the Colombia 4G investment works through Technical Assistance and Advisory Services (i) financing of the project Perimetral del Oriente de Cundinamarca which is part of the “first wave” of 4G • IBRD, IFC and IDB support for the creation of new highways that represent the pilot operations for the new regulations for issuing and investing in infrastructure PPP framework of the GoC, and (ii) the $210 million bonds, including creation of debt funds to facilitate pen- Colombia Ashmore Infrastructure Fund making available sions investments and training for the pension funds on equity and debt investments for toll projects. the infrastructure asset class • IFC and IBRD support to FDN to strengthen their Project Description ability to address market failures • IFC and IBRD support to improve the PPP legal, regu- With very limited and dated rail networks, Colombia latory, and institutional framework as well as improved depends on its road network for more than 80 percent project preparation by standardizing PPP documents of internal transport. Therefore improvements to roads, bridges and tunnels are the top priority for and structures the 4G program. Over the next eight years 4G is Outcomes expected to deliver 5,892 kilometers of roads in three waves of PPP projects. Previous attempts to To date, 19 out of 40 projects planned under 4G overhaul transport infrastructure, under the second have been awarded representing over $10 billion of and third generation programs, were fraught with investment mobilization. The 4G program is expected construction and maintenance delays and/or a lack of to reduce transport costs by 28 percent, increase GDP funding especially from local pension funds. The 4G by 1.5 percent per annum once completed (closer to 3.0 project will have to span strengthening bond markets, percent during construction), and generate significant attracting new financing partners, strengthening the benefits for improved trade, job creation, and business local investment capacity, and bringing an additional growth. The Colombia 4G exemplifies how WBG and level of predictability and certainty to the PPP laws IDB collaboration and a programmatic approach were and frameworks that will cover the 40 or so planned able to leverage capital markets and advisory support to transactions. strategic financing needs. Multilateral Development Banks’ Role For more information please contact: IBRD, IFC, IDB and MIGA were able to come together World Bank Group: Nadine Ghannam and support the 4G Program in a variety of ways, which Email: Nsghannam@worldbankgroup.org included among other things: Inter-American Development Bank: John P. Ferriter Email: johnfe@iadb.org Photo Credits Front: Chris Lawrence/CC BY SA 2.0 iadb.org @the_IDB ifc.org @IFC_org miga.org @MIGAWorldBank worldbank.org @WorldBank Colombia4GTollRoadProgram_WBG_IDB.indd 2 4/6/2016 3:36:59 PM