Colombia: Privatizations And Infrastructure Projects In Colombia

Last Updated: 10 July 1998
The Agreement between the Nation and the capital city of Bogota for the construction of the massive underground transportation system (the Metro) was executed on February 12 of this year, with the previous authorization of Santafe de Bogota's Council. In order to assure both a successful bidding process and financial scheme, consultancy from investment bankers in association with both technical and legal experts will be sought. The official invitations to present these assessment proposals will occur this upcoming July.

After the experience of Medellín, which is the only city in Colombia with a fully operational Metro system, other cities such as Cali and Bogota began to consider and debate the structure of future projects related to the construction of Metro systems. The "Master Plan of Transportation for Santafe de Bogota", financed with resources offered by the Government of Japan, showed that some traffic corridors present a demand which is superior to the capacity that single-lane bus systems can efficiently handle (35, 000 passengers/hour/lane)- thus, the necessity for the construction of alternate massive transport systems in Bogota was an urgent matter that deserved all the attention of the government.

The first line (1998-2006) will have an extension of 29,34 Km., with 23 passenger stations located each 1000 metres or so and will travel at an average speed of 38,3 km/h (see endnote 1). Lines 2 and 3 will have an extension of 24.7 and 24.8 Km respectively and will be constructed from 2007 to 2016. Other estimates calculate the average fare of a single way ticket at around USD (1998) $0.45 (equivalent to Col$ 600) and would transport about 56,000 persons on rush hour (barely 8.6% of the total demand). The cost of the first tranche of the Metro is at an estimated USD (1998) $3.041 million (an equivalent to Col$ 4 billion plus), of which the Nation will provide 70% and the District will provide for the missing 30%.

The preparation of the bylaws and incorporation of the company which is to develop the project, is currently on the way. Additionally, the estimated date for the public bid for the construction of the massive transportation system will probably take place around December this year, and the construction will hopefully begin by August 1999.

On the other hand, the local administration, has been developing a project plan that, together with the Metro, will ease even more massive transportation throughout the city and its vicinities.

In addition to the already mentioned Metro, the city will undertake the construction of a 29.1 kilometers main way, with separate bus lanes, which will be distributed in the following way : 8 kilometers over the Southern Highway (Autopista del Sur), 14.6 kilometers over the Carrera 68, and 6.5 kilometers over the Northern Highway (Autopista Norte).

These main ways will integrate with the existent ones as well as with the Metro System, for the purpose of providing access to all the zones of the city.

It is also expected that an additional 1,100 kilometers of minor streets will be paved and constructed during the ongoing administration.

Although the city is expected to finance part of these works with the funds that will receive as a result of the privatization of their telephony provider, Bogotá Telephone Company (ETB), part of the mentioned projects will have to be financed through international loans. In this sense, the upcoming financing terms of these projects are expected with interest by international investors.

On the other hand, the above mentioned sale of 51% of the Bogota Telephone Company (ETB) was finally approved by the Santafe de Bogota Council on the 8th of June. Once the ETB is privatized, the entity will work as a Public Utilities Company, under the terms of Law 142 of 1994, and in this sense will be subject to private law regulations.

The controlling interest that will be sold in this opportunity will be offered, pursuant to Law 226 of 1995, first to the sector solidario (actual and former workers of the company, members of pension funds and severance payments funds and others). Afterwards, it will be offered to the private sector, including international investors, through a bidding process.

Sergio Regueros, current managing director of the company, announced its interest in entering into a partnership with an strategic foreign investor, which would help to turn the company into a more competitive entity.

Although the current appraisal of the company amounts to US$2000 million, it is expected that such a price increases once a new appraisal and due diligence process is made by investment bankers and private consultants.

Finally, Mr. Regueros also stated that the remaining shares will be offered during the next two or three years following the sale of the 51% of the shares. This transaction promises to be one the largest deals of the year in Colombia. Bell South, Bell Canada, Telefonica de Espana, Telecom Italia and AT&T are among the foreign companies that are mentioned as interested in participating in the purchase of shares of the ETB.


1 Study contracted by the National Fund for Development Projects (FONADE) to the Ingetec-Bechtel-Systra Consortium.

Prepared by Jaime Robledo, Julian Santos and Alejandro Villegas from Gomez Pinzon & Asociados, Bogota ,Colombia.

The content of this article is intended to provide a general guide but specialist advice should be sought about your specific circumstances.

Carrera 9 No. 73-24 Pisos 1,2,3 y 5
Santafe de Bogota, Colombia

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