Lenders explore more financing options for Colombia’s 4G program
Banks advocate for the government to lift the limits on dollar-denominated loans or for development bank FDN to provide loans in Colombian pesos
International banks are considering alternatives to press
ahead with financing plans for the 4G toll road concessions
program in Colombia, which has stalled in the wake of the
Odebrecht bribery scandal.
According to Angel Arevalo, the global head of project
finance at Spanish bank BBVA, lenders will likely finish
financing the second round of 4G projects with loans in local
currency but they could face constraints for later rounds,
including a growing number of unsolicited proposals.
To avoid a possible logjam, Arevalo suggests the government
increase the amount allowed for dollar-denominated financing to
The government will have to fine-tune the concession
agreements to address the increased foreign exchange risk and
the overall risk allocation for the unsolicited proposals. But
with limited financing for infrastructure projects in
Colombia's capital markets and with local banks reluctant to
allocate more money for 4G projects, a larger dollar portion
could ensure all the roads get funding, he said.
"They need dollars to bring more money to the system," he
But rather than lift the limit on dollar-denominated
financing, Colombia's national development bank FDN has said it
could lend Colombian
pesos for international lenders to provide local currency
Such onlending agreements will limit the concessionaires'
exposure to foreign exchange risk and also help develop the
market for funding in pesos, according to Willem Sutherland,
the head of infrastructure finance in the Americas for the
Dutch bank ING.
"One solution is to help foreign banks get access to local
currency," Sutherland told LatinFinance, "but the
local banks won't like it."
Colombia understood that local banks could not handle the 4G
program alone and introduced the dollar component when oil
prices were higher than they are today, he said, but now that
oil prices stand below $50 per barrel, taking the foreign
exchange risk for 4G financing could prove costly for the
"It would be tough to go to 40%, but the government will do
anything to make sure the projects are financed," he said.
ING is part of the international banking group for the Pacifico
2 toll road concession, alongside Itau BBA, Banco de
Crédito del Peru (BCP), Santander and Canadian pension
plan Caisse de depot et placement du Quebec (CDPQ). The
concessionaire La Pintada, which also counts on Davivienda and
Banco de Bogota for local currency financing, is tying up a
bridge loan to carry on with construction on the 96.5km
BBVA is structuring COP1.75tn ($593m) in financing for Ruta del
Cacao, a concessionaire led by Spanish developer Cintra,
for the Bucaramanga-Barrancabermeja-Yondo toll road, split
between an 18-year tranche in inflation-linked UVRs and a
14-year tranche in pesos.
Other foreign banks
involved in financing 4G projects include Banco Sabadell and
Santander from Spain, BNP Paribas, Natixis and Societe Generale
from France, Intesa Sanpaolo from Italy and US lender
Private investments in the 4G program are expected to reach
COP5.5tn in 2017, according to the national infrastructure