Analysis

British businesses can benefit from new era of peace in Colombia

A tram operated by Metro de Medellin on the 4.3 km-long line which connects two of the city’s metro lines and two new metrocable lines.

Juan Manuel Santos is making history this week, as the first Colombian president to make a UK state visit. An appropriate time then to look at potential infrastructure opportunities for UK businesses, writes Santiago Klein.

During his current visit to the UK, Juan Manuel Santos may encounter some reticence about the UK doing business with Colombia. The recent referendum, in which the president’s peace deal with the Farc rebels was narrowly defeated, could potentially reignite fears that the country is violent and drug-ridden. And despite Colombia’s burgeoning PPPs, UK plc also tends to think commercial opportunities are sewn up by Spain.

Both these perceptions are false and it would be a huge mistake for British business to ignore Colombia right now. The awarding of the Nobel Peace Prize to president Santos was intended to get the peace process moving again and despite the obvious setback, peace negotiations are on a path that seems irreversible.

 Secondly, there are many concrete reasons why Colombia is a rising star on the infrastructure scene. Big opportunities for UK constructors and financiers lie in its ambitious infrastructure programme.

Since late 2015, when Colombia’s heavy dependence on oil exports led to both higher inflation and rising interest rates, its government has placed a renewed emphasis on diversifying its industrial base.  Improvements to infrastructure such as road and rail systems are one of the quickest ways of boosting an economy and recognising this, Colombia’s government has a $70bn plan up to 2035, including more than 100 road projects over more than 12,500 km; more than 1,600 km of new rail lines; maritime projects on eight rivers covering 5,000 km; 31 airport expansions; and major port developments.

Other investments aim to reduce the housing shortage by half over the next three years, with plans for 450,000 new homes and new schools. A recent OECD economic forecast indicates growth will strengthen to 3% in 2017, largely thanks to these infrastructure plans.

It is also wrong to think that the Spanish have the Colombian business sewn up. Spain accounts for just 1.6% of Colombia’s imports, far behind UK competitors like Germany (a 4.1% share) and France (3%). If they can succeed, why not us?  Latin America is an anglophile region - the long history of many British companies is respected, and they have a reputation for fairness and high quality.

Colombia is listed by the World Bank as the easiest country to do business with in Latin America and the Caribbean. The World Bank has also rated it as a ‘top reformer’ in recent years and it is the top country in Latin America for investor protection, also boasting a tradition of stable economic growth, having a good pool of skilled workers and the second most flexible labour market in Latin America.

Fortunately, there have encouraging signs that the UK government is taking the country seriously.  The UK Prosperity Fund bilateral programme in Colombia for its first year in 2016/17 staged a competitive bidding process to allocate around £1m of funding to ten infrastructure and energy sector projects which are currently in implementation. For 2017-2021 the bilateral programme has recently announced an ambitious agenda including a revised and massively increased budget.

Opportunities exist in the transport sector, as the nation’s top five cities need new technology to integrate buses to different transport systems. Equally British experience can help in the rail sector, updating the system for passengers and cargo and playing a role in the expansion of airports. In mining and financial services, Colombian PPP offers significant opportunities for the UK advisory and financial sectors, aiding the Colombian government in the design, tender and financing of projects.

McBains Cooper, for example, has embarked on a number of PPP projects in Colombia, providing consultancy services for the development of social housing projects, inter-modal stations, museums and libraries, airports, roads, hospitals, schools and government buildings. The opportunity is there for others to do the same.

The reality of Brexit is that the UK will have to forge new relationships with progressive trade partners as it disentangles itself from the EU. There is a fresh confidence about Colombia and its economy. At this particular juncture in UK economic and political history, there has never a better time for go-ahead companies to look in Colombia’s direction. 

Santiago Klein is managing director of McBains Cooper International, a leading property consultancy with offices in the UK, Colombia and Mexico.