Freezing the toll would cost the country $13.8 billion: Fedesarrollo

Fedesarrollo director Luis Fernando Mejía stated that the national government’s decision to freeze tolls this year could hit the treasury in the order of $13.8 billion by 2040, in a decision based on the high inflation that has hit the pockets of households across the country.

This was announced in the publication of the paper entitled “The Contribution of Concessions through PPPs in Transport Infrastructure to the Growth and Well-Being of Colombia”, which analyzes the role of public-private alliances (PPP) in financing major transport infrastructure projects.

According to Fedesarrollo’s director, PPP concessions are implementation programs that require institutional and legal stability.

“It is essential to deepen the PPP model in transportation as a crucial tool for national development and poverty alleviation in Colombia, given its macroeconomic contribution and ability to enable new businesses. For this, it is necessary to maintain clear rules that ensure the sustainability of the model,” said Mejía.

He added that, despite historically lagging behind in highways, Colombia has experienced a significant increase in infrastructure investment in recent decades.

“In the 20th century, average investment represented 1 point of GDP, a figure that has risen in recent years to almost 1.5% year-to-date, with the highest peak in 2012 (2.4%). This boost is largely due to private investment, which was 90% focused on highway mode. In fact, the country has become an international benchmark for the implementation of PPPs thanks to significant advances in regulation, planning and coordination over the past three decades,” stressed Mejía.

However, the leader sees with great uncertainty the signals and announcements from the government that could affect the stability of this model in the medium and long term.

“One example is the freezing of tolls through Decree 050 of January 2023, which could generate a $13.8 trillion fiscal contingency over the next few years, which is the estimated size of the eventual long-term shortfall to in favor of the concessionaires,” explains Fedesarrollo in the report.

He added that the slowdowns in infrastructure investment that would stem from the uncertainty for transport PPPs could reduce the growth of the economy by 0.5% of GDP, impacting job generation and the overcome poverty.

“The nature of the concession model has enabled the financing and optimal operation of investments that could not have been made for three decades with the available public funds. Dismantling the PPP model would reduce the supply of good quality infrastructure, as there is no fiscal room to replace public works with PPPs in the short term, would increase overall transportation costs, would reduce the rate of GDP growth and would impoverish the population, the majority of the population,” says Juan Benavides, director of the study.

Source: El heraldo