US$115 million loan agreement signed for road infrastructure operation in Colombia

Enrique García, president & CEO of the Andean Development Corporation (CAF), and Alberto Carrasquilla, Colombian Minister of Finance and Public Credit, with the presence of Colombian President Álvaro Uribe, today signed in Nariño Palace, Bogota, a loan agreement for US$150 million with the Republic of Colombia,. The credit will be used to partially finance the Road Infrastructure and Regional Development Program, known as Plan 2500 whose executing agency will be the National Road Institute (INVIAS), attached to the Ministry of Transport.

Enrique Garcia said that the signing was part of the CAF loan program for the Republic of Colombia, which this year will total US$900 million, of which US$575 million has been approved so far.

Garcia said the approval was a contribution by the multilateral institution to the Colombian government’s efforts to improve road infrastructure and optimize conditions for transport, goods and services. The funds approved are intended to support Colombia’s initiative to improve levels of competitiveness and achieve the objectives of the National Development Plan which are to optimize the country’s current productive conditions for participation in international markets.

The financing of the Road Infrastructure and Regional Development Program - Plan 2500 - will improve the physical infrastructure for land transport through two components: improvement of the main corridors of the road network; paving and upgrading of 3,000 kilometers of mainly secondary and tertiary roads. The CAF loan covers the latter component.

The execution of the Program is expected to improve connections with the main road arteries, integrate productive areas with the main distribution centers for goods and services, optimizing the costs associated with their distribution. The improvements in transport conditions are also expected to have a direct economic impact on vehicle operating costs which will be transferred to the prices of goods and services, making them more competitive.

The project will strengthen environmental and social aspects by improving the transport conditions of nearby localities, offering them better road safety, less travel time, and possibilities of access to distribution centers minimizing costs and enhancing the quality of life in small localities.

Although the program will be executed by INVIAS, attached to the Ministry of Transport and responsible for the national road network which is a state responsibility, the Program also includes roads under the responsibility of provinces (departamentos) and municipalities which are expected to participate actively in the execution of the projects and future maintenance.

Due to lack of funds for road building and maintenance, the Colombian secondary and tertiary road system has been deteriorating for some years. This has generated high vehicle operating costs and long travel times which affect conditions of transport for merchandise and passengers, damaging the country's productivity. At present, Colombia’s foreign trade moves on only 80,000 kilometers of the road network, which is less than 5% of the total.

Some Colombian regions have never had adequate roads, and over 80% of the road network is unpaved. These shortcomings result in deficient communication with the main areas of supply and distribution, delaying their possibilities of integration and economic and social development. These problems have had a negative effect on rural areas where income is below the national average, and the prices of agricultural and agroindustrial goods in the main urban centers.

CAF has been supported the Colombian transport sector since 1992 through various loans totaling US$952 million destined to finance projects of national interest. The operations with greatest impact include the Buga-La Paila highway, the Roads for Peace Program, the Bogota Mass Transport Project (Transmilenio), and La Línea Tunnel.