Growth across the Colombian freight mix is set to remain relatively strong in 2015. This trend follows the news that Colombia's real GDP growth is poised for a robust expansion in the coming quarters, though cooling slightly from the 5.4% year-on-year (y-o-y) growth recorded in H1 2014. However, while Colombia will continue to outpace much of the rest of Latin America in the coming quarters, this will be in the context of modestly slowing real GDP growth.
This year we expect the port of Cartagena to see more muted y-o-y growth compared to recent years (between 2010 and 2012 inclusive, growth came in at double figures), but it will still outperform domestic rival the port of Buenaventura in terms of annual gains (4.50% compared to 3.31%, respectively). Rail freight will also see healthy growth of 7.00%, ahead of the road and air freight modes (5.23% and 5.00% respectively).
Headline Industry Data
The port of Cartagena will see total tonnage volume increase by 4.50% to 21.63mn tonnes in 2015.
Total tonnage handled at the Pacific port of Buenaventura will be up by a more restrained 3.31% to 9.72mn tonnes.
Air freight tonnage handled will grow by 5.00% in 2015.
Road freight tonnage handled will increase by 5.23% in 2015.
Rail freight tonnage handled will rise by 7.00% in 2015.
Key Trends And Developments
Infrastructure Must Improve To Aid Freight Growth: Insufficient infrastructure network in Colombia is proving to be a key stumbling block to growth, according to a Standard and Poor's report in 2014. The report explained: 'Considering that Colombia's economy has the potential to be the third largest in the region - after Brazil's and Mexico's - the improvement of the transport network is crucial in boosting the country's competitiveness and maintaining its economic growth in the medium and long-term.'
Government Extends Port Deal Until 2017: The government of Colombia has decided to extend the Tumaco port concession contract, which was scheduled to expire in May 2014, for an additional three years to May 2017. The contract, secured by the Tumaco regional port society, has been extended to allow further infrastructure development at the Narino region port, Colombia. The regional government of Narino will use royalties to carry out impact studies of proposed port development projects and an integrated competitive strategy, to convert Tumaco into an international hub.
Finance Ministry To Study Road Proposals: Two COP2.5trn (USD1.3bn) unsolicited public-private partnership road proposals are to be studied by Colombia's Ministry of Finance and Public Credit, reported Portafolio in September 2014. The first project entails the construction of Villavicencio city's highway and four-lane roads between Ciudad Porfía and Acacias, and between Ocoa River and Apiay. Grupo Odinsa filed the COP1.2trn (USD624mn) proposal. The second project covers the expansion of a 35km stretch of road between Ibagué and Cajamarca cities. Colpatria-led consortium submitted the COP1.3trn (USD676mn) proposal.
Risks To Outlook
In terms of upside risk, Colombia has altered rules on compensation relating to state acquisitions or expropriations of property. The move is expected to boost infrastructure projects, which should help the freight industry going forward. According to the head of Colombia's geographical institute Juan Nieto the new rules could reduce transactional costs 30%-40% reported El Colombiano newspaper.
Slowing oil production growth in Colombia will weigh on exports, widening the country's current account shortfalls over the coming decade. That said, a strong business environment and sizeable number of sector-specific opportunities will ensure that the country is able to comfortably fund its external account deficits.
Colombia will run larger external account deficits in the next 10 years than it has in the last decade, as profit repatriation drives wider income account deficits and weaker oil production growth weighs on the country's trade account. We forecast an average current account shortfall of 2.5% of GDP between 2014 and 2023, compared to the 2.3% deficit recorded between 2003 and 2013.