US$400 million for electricity infrastructure projects and competitiveness programs in Colombia

The Andean Development Corporation (CAF) today approved US$400 million to finance projects in Colombia for expansion of the utility Interconexión Eléctrica S.A. E.S.P (ISA), and for the Reform Program for Competitive international Trade Presence, executed by the Ministry of Finance.

The loan to support the Reform Program contributes to the efforts by the National Government to execute a multiple action agenda designed to guarantee the materialization of the benefits of the free trade agreement – currently in negotiation – through the adoption of decisions related to improving the country’s trade infrastructure, introducing incentives for private investment, and developing capacities in the area of innovation and technology.

CAF President & CEO Enrique García explained that the approval formed part of the actions that the institution was taking to stimulate an integrated development agenda. "CAF has programs that promote competitiveness in the countries of the region, aimed at generating and disseminating knowledge on the fundamentals of competitiveness, and contributing to their understanding and adoption by the main economic agents, with a view to producing lasting changes in the creation of competitive companies and organizations."

Specifically, the program to be executed by the Colombian government is structured into three categories: strengthening of the logistics support platform for competitive trade presence, opening and adaptation of the financial platform, and improvement of the support instruments for the technology platform.

Financing and promotion

The second operation approved for Colombia for US$150 million represents 52% of the total cost of a project for building, operating and maintaining two new high-tension 500-kV electricity transmission lines for the utility Interconexión Eléctrica S.A. E.S.P. (ISA). The project will reduce the costs associated with additional generation required to guarantee stability in the system and safe exchanges by increasing Colombia’s transmission capacity, permitting generators to dispatch at the lowest marginal costs.

This project, with a total cost of US$287.3 million, finances the Bacatá-Primavera (293 km) and Primavera-Bolívar (641 km) 500-kV transmission lines, which will reinforce the capacity of the National Interconnected System and meet the objective of the transmission system expansion plan to minimize investment costs, guaranteeing standards of quality and reliability of service, and cutting costs for the final user.

The president & CEO of the multilateral organization said that its relation with the ISA utility dated from 2003. "All this is in line with CAF’s institutional objectives, which are to promote and finance sustainable infrastructure programs and projects, both public and private, in favor of physical integration, production and logistics in the region." The CEO added, "CAF also exercises a catalyzing role through the A/B loans scheme which attracts substantial long-term funds into the region, with the participation of commercial banks."

CAF contribution to Colombia

In response to Colombia’s need to promote its development process, CAF has approved operations for around US$3.90 billion in the last five years for public and private sectors, and has disbursed around US$2.80 billion, 27% of all disbursements made by the institution in the region. These funds have formed a portfolio consisting of 74% for basic needs, environment and infrastructure; 15% for improvement of competitiveness, productive sectors and MSMEs; 7% for strengthening macroeconomic stability and structural reforms; and 4% for the financial system and capital markets. In 2004 Colombia received the highest share (26%) of all approvals for Andean countries.