Priority for the government since the early 2000s, Colombia increased transportation infrastructure investment almost by 50 percent of GDP from 2000 to 2014, using an effective public-private-partnership (PPP) program. The government is now in the process of undertaking the fourth generation of concessions—the 4G—investing 50 trillion Colombian pesos* (equivalent to US$13.6 billion) over six years to create a nationwide toll road network. Additionally, the government announced the template of the concession agreement for the 5G in Spring 2020. such megaprojects also create significant fiscal risks. As a part of the PPP agreements, the government faces two critical sources of risk. One of them is a cost overrun, which can materialize if the project goes beyond the estimated budget during the implementation phase due to land acquisition, environmental factors, or utilities. This cost creates direct, explicit liability. risk is the low toll-road tariff collection rate, where the government pays the difference between the actual revenue and the estimated revenue to the partners in the PPP. This type of risk also includes the payment of differential tariffs for people living near the toll road. These payments by the government to close the revenue gap create an explicit contingent liability as the cost is incurred when the income is lower than expected in the project.
Colombia advocated for including the development of the new methodology as a topic under the GDRM umbrella. The program had previously supported Colombia in revising and refining its methodology for quantifying the contingent liabilities of sovereign guarantees for state-owned enterprises and lawsuits against the government. In 2019, the Ministry of Finance and Public Credit developed a new methodology for improving risk assessment and mitigation of contingent liabilities across the infrastructure sectors to increase fiscal resilience to crises and spur investment. The ministry worked with the project-implementing institutions, such as the National Infrastructure Agency (ANI), to apply the new methodology for proposing more accurate budget allocations to the contingency fund. The GDRM program team provided topical expertise through peer reviews, acted as a sounding board for the development of the new methodology, and supported the dissemination to the public. The government will conduct a series of training sessions for the local authorities, such as cities and municipalities, for incorporating the new methodology into their plans as they move forward with their public-private partnership projects. Ultimately, all these efforts will contribute to Colombia’s macroeconomic and fiscal management and reducing Colombia’s vulnerability to risks through strengthened fiscal risk management.