The infrastructure sector would rebound in 2024, after four years of consecutive contractions. According to experts, due to lack of execution of the National Highway Institute (Invías) and the decrease in investor confidence.
Colombia's civil works sector expects a rebound in its economic growth. During four consecutive years of contractions, infrastructure GDP decreased 12.3% in 2023, 39% less than in 2019. However, this year it is expected to improve 5.8%, according to a report by Corficolombiana Economic Research.
This is the most lagging sector of the economy, the research group warned. At the beginning of 2024, construction production costs grew slowly, with April marking a difference of 3.88% compared to December 2023, mainly due to concrete, cement and topdressing. This is important because such a slowdown has not been seen since March 2022.
In the first quarter of 2024, the sector expanded 6.8%, breaking the four-year cycle, from 2020 to 2023, when consecutive negative figures abounded.
Let us remember that the Gross Domestic Product (GDP) increased 0.7% compared to the same quarter of 2023, according to the National Administrative Department of Statistics (DANE). In this same period, the civil works production indicator improved 14%, mainly due to roads, streets and railways, which increased 13.9%, as well as irrigation systems and other hydraulic works, with 87.4%. .
More specifically, among the different subclasses of the sector, bridges and elevated roads rose 223.6%.
Some of the changes that will contribute to reactivating the sector would be seven 5G concession projects, in addition to the fact that key regional works are being developed in several cities, such as the Bogotá metro, the Medellín metro and the Western Regiotram. These projects would inject into the Colombian economy, while improving mobility in cities.
Now, why has performance been affected?
According to Corficolombiana, this would be due to the lack of execution of the National Highway Institute (Invías) in recent years, added to the fact that 4G projects are ending (78%), which slows down the pace of construction. Since 2021, Invías has experienced a decrease in the resources assigned and executed to it. This is unexpected as they would have been expected to increase to compensate for the completion of 4G projects.
On the other hand, it is worth remembering that in December of last year, the balance of the Colombian Chamber of Infrastructure (CCI), the sector's union, saw a drop of 15%, added to the fact that the economic decline affected investor confidence, freezing toll rates.
Added to this is that the construction of civil works (such as roads, bridges and buildings) is vulnerable to changes in interest rates. If rates rise, it can affect construction companies that have debt and the economy in general. With a 1% drop in rates, the execution pace increases by 0.8% after 14 months. But this year, with lower rates, a recovery is expected in the construction sector.
What else would help the sector?
As of May 2024, Invías accelerated its budget execution in investment to 18.9%, higher than that accumulated in 2022 in this period and close to that accumulated in 2023, while the execution is at levels higher than pre-pandemic levels. .
In the first 5G wave, Corficolombiana mentioned that progress has been recorded in 13 works and an estimated Capex (investment expenses) of US$ 4,902 million.
Among the highways, the Santuario - Caño Alegre stands out, in a state of feasibility evaluation, with US$ 622 million in Capex, the Magdalena 1 and Magdalena 2 trunks, both in preconstruction, with US$ 408 and US$ 497.5 million, respectively.
In the airport area, the IP Nuevo Aeropuerto de Cartagena and IP Aeropuertos de Occidente, both in a state of feasibility, with US$ 740 million and US$ 19.7 million, respectively.
As for the rivers, the dam canal is in the bidding process, with US$ 562 million, the railway, La Dorada - Chiriguana, remains in feasibility evaluation, with US$ 377 million.
However, Corficolombiana stated that "although the public works plan has 50 projects, its scope is limited because the amount of budgeted resources is low for the time horizon and depends on effective execution."
On the other hand, the slowdown in production costs would positively impact the progress of highway execution. With a 1% reduction in costs, construction increases by 0.4% in the same quarter and 0.18% a quarter later. Therefore, they expect costs to close with a growth of 3.2%.
