Boston, MA -- (SBWIRE) -- 12/28/2012 -- Colombia's underdeveloped infrastructure fleet remains its biggest obstacle to fully exploiting the country's growth potential, which stems from a booming extractive sector. However, the government continues to prioritise investment into the construction sector and President Santos has carried through several structural changes, all of which underpins our strong real growth forecast of 5.4% for 2012. The main reasons for this bullish outlook are: healthy economic growth; a free-trade agreement between Colombia and the United States that was signed on May 15 2012; continuing expansion in the resource extracting sector; the 10-year US$55bn transport infrastructure budget; the creation of a national infrastructure agency; and the passing of a public-private partnership (PPP) law to facilitate procurement and propel infrastructure growth.

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Key trends and developments in Colombia's infrastructure industry include:

- Continued strong backing from the Colombian government underpins our forecasted annual average real growth of just below 6% between 2012 and 2021.
- The infrastructure industry holds significant potential for investors, with real growth of 6.7% forecast for 2012. The residential and non-residential sector will see real growth of 4.3% - a healthy recovery from the 4.9% decline seen in 2010
- Strong economic growth - with real GDP growth of 4.5% forecast for 2012 - and expansion in coal, mining, oil and gas extraction, coupled with a recently signed US free trade agreement are creating significant demand for new capacity and better quality infrastructure. Better access to ports and adequate highways will be essential if the country is to meet the expected increase in exports.
- On the back of some crushing strikes against Colombia's Revolutionary Armed Forces of Colombia (FARC), and now renewed peace talks between the Colombian government and representatives of the FARC, we see a positive security turnaround that could open up vast areas for legitimate investment, and thus spur opportunities within the construction sector. However, our optimism is cautions; the guerrilla movement was still responsible for more than one in four kidnappings in Colombia during 2011, according to the defence ministry. Hence, although the government has partly quelled left wing guerrilla insurgencies so that insecurity no longer represents a systematic threat to the state, therefore promoting investment, the risk of violence persists.

We highlight that corruption remains a risk factor:

- Colombia scores just 3.7 out of 10 for corruption in the country risk section of our infrastructure risk/reward ratings, following several corruption scandals within Columbia's public works sector. This illustrates our concern of the impact on the country's business environment.

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