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Flattening Colombia’s COVID-19 Curve Without Impacting Infrastructure Investment

4 MIN READApril 27, 2020
Colombia’s infrastructure industry is starting to experience the impact of COVID-19 on its assets, with the transportation sector being the worst hit at the moment. But how will this impact development in the medium term? Colombian infrastructure sector leaders met with Luis Alberto Rodriguez, General Director of the National Planning Department (DNP), at the latest GRI Club Infra eMeeting to discuss the impact of COVID-19 on the industry. 

During the meeting, Rodriguez shared with members the role DNP is playing in flattening the curve, without damaging the infrastructure industry permanently. The decisions taken today by both the government in the private sector will impact the country’s growth in the medium term. COVID-19 has changed the game completely and everybody is trying to figure out how to adapt. The government’s priorities are to save lives and to minimize its impact on the Colombian economy, particularly provide support to the country’s informal sector. 

Members discussed the primordial role that infrastructure plays in the country’s GDP and how reactivating could help relieve some of the pain. To do this, it is necessary to look for alternatives and new solutions to isolate human capital and put their safety above all. COVID-19 can have a detrimental impact on Colombia’s poverty indexes, and if not attended properly, it could set the country back almost a decade in progress. 

At the moment it is difficult to measure or predict the impact the pandemic will have on the National Development Plans, especially since nobody knows how long this will last and how large the impact will be. Rodríguez said that the Colombian government is analyzing which sectors or lines of work will be the first to be let out of quarantine, as a way to push forward the economy. Nevertheless this requires great thought, analysis and measures to mitigate all risks that could arise. 

In this time of uncertainty, members also wanted to discuss the various options for funding infrastructure projects in the future. The tax rule, or regla fiscal, was also discussed during the meeting as to  how it will be implemented during the pandemic. Given that COVID-19 is unprecedented, governments around the world are trying to decipher its complexities, placing fiscal rule in the back seat momentarily. 

Members were worried that this may impact the country’s sovereign rating, and ultimately lower it to under investment grade. This would greatly impact the industry, reducing its attractiveness to investors, as well as increasing the cost of financing and lowering the appetite for installments. Countries around the world are unable to estimate the fiscal cost of this pandemic, and it is predicted that many will end up with a much higher fiscal cost than they estimated, therefore many will have to make adjustments to their fiscal structures. Infrastructure sectors have been impacted differently, but the transportation sectors have been hit the hardest according to some members. Airport and road traffic has decreased dramatically in the last months, while ports have also seen a change. This will impact liquidity the most, and the reserves will be more relevant, particularly highways,  in these assets in the future. 

In summary, COVID-19 may be temporary, but it will leave a long-felt mark on the Colombian economy. Members predict a U-type recovery with great uncertainty and volatility surrounding investment, credits, commodity prices and stock markets. For there to be a clear idea of how this will impact each infrastructure sector, the duration and the severity of the pandemic will have to be analyzed alongside the responses in terms of public policy and the underlying political and economic resilience.
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