The Fourth Generation (4G) road concessions were planned by the Colombian government as a response to the dramatic lack of adequate transport infrastructure in the country, and aligned with the goals set forth in the National Development Plan. This megaproject has allowed the government to put into practice its lessons learned during the last two decades in the contracting processes for infrastructure projects and toll road concessions in particular.
Among other flaws of previous generations of concession projects, the government had to pay substantive down payments regardless of the concessionaires' compliance with service standards; the investors' capital contributions were low; and the conflict resolution criteria and mechanisms were unclear. In these prior projects, the State ended up assuming most of the risk as problems arose with environmental permitting, real estate purchases, and land use, among other issues.
This dynamic and other difficulties created the wrong type of incentives in executing projects and significantly slowed progress. On many occasions, it led to disputes over time and money that damaged both the contractors and the State, and the objectives of successful development of a road infrastructure in the country and of reasonable returns for the contractors were difficultly met.
To rectify these problems for the 4G projects, the Congress developed a legal framework for reaching more efficient agreements in which the risks would be assigned to the party best equipped to manage them. This framework also encouraged private capital contributions and tied payments to the progress and quality of the infrastructure being built, under so-called "functional units". Under these guidelines, Law 1508 of 2012, which regulates public-private partnership projects, and the Infrastructure Law (Law 1682/2013) are now the Colombian government's main instruments for promoting road infrastructure projects in the country.
Secondly, the sector has experienced a significant boost from the strengthening of the government agencies involved in infrastructure projects. For one thing, the creation of the Colombian National Infrastructure Agency (ANI for its acronym in Spanish) has made it possible to centralize management of concessions within a highly technical and qualified entity, which has already proven its competence in successfully executing these complex projects. In addition, the Office of the Vice President, the Ministry of...