GLOBAL COMPETITIVENESS IN INFRASTRUCTURE

COLOMBIA – CHILE

Laura Lissette Mejía Fajardo

Institución Universitaria Politécnico Grancolombiano
Facultad de Negocios, Gestión y Sostenibilidad

Abstract: This report aims to explain one of the basic requirements of global competitiveness
and the way how this type of growth is measured in two important South America countries
in this worldwide ranking. The objective is to show, by means of a comparison, the quality
and type of infrastructure in Chile and in Colombia given that the information provided in the
2017-2018 report by the World Economic Forum and other companies.
Here you can find seven (7) relevant study points, in which Transport Infrastructure is
considered; quality of overall infrastructure, roads, railroads, ports, air transport and airline
seat kilometers and Electricity and Telephony Infrastructure of these countries and that
will allow us to understand the position in which they are ranked.
Journal articles, analysis of this pillar and the report delivered by the World Economic Forum
will be taken as reference.

Keywords: Infrastructure, World Economic Forum, growth, worldwide, airline seat

Objectives

a. Specific Objective

1. Analyze the economic growth of Chile and Colombia from the development and
improvement strategies in the "infrastructure" pillar and how, from this one, is it
possible to improve trade environment with the countries of the region and the
world.

b. General Objectives

2. Show those weaknesses in the infrastructure of each country and that alternatives
might be taken to improve them.

3. Propose cooperation strategies between Chile and Colombia in infrastructure to

enhance their capacities about imports and exports of their products.

4. Compare the organization in projects of civil works (highways, ports and airports)
in these countries and that strategies can adapt themselves in Colombia to obtain a
better qualification in the ranking.
INTRODUCTION

The wide range of cultural, environmental and natural resources offer of South America has
allowed it to position itself as one of the regions that are most interested in traders, investors
and tourists to explore those goods, products or services that would allow economic
expansion of these countries.

However, there are external factors such as the infrastructure and capacity of countries that,
in international business, are almost as important as the same product to trade.

This document aims to present a brief overview of the infrastructure situation in two
countries of South America, Colombia and Chile and as the strategies that have been
implemented for the construction of roads, expansion of port capacity and airport They have
positioned the Global competitiveness Report of the World Business Forum.

In addition, there want to stand out some advantages and disadvantages of the infrastructure
of each country and how, adapting models from the other country could enhance and improve
the structure presented to the world of commerce.
COLOMBIA’S INFRASTRUCTURE

At the upper end of the southern part of the American continent, with an extension of 1.142
million km2 and surrounded by two important oceans, is located the second most biodiverse
country in the world. Due to its important and privileged location on the continent, Colombia
has become an important connection destination for business, commerce and world tourism.
This makes it a country with many competitive advantages with the rest of the world.

Between 2010 and 2017, about 90 billion Colombian pesos were invested in the improvement
and expansion of the country's infrastructure, where 30 projects were built on 4G tracks with
investments in 60 billion COP1, as well as 4 billion COP in "vías para la equidad" of more 660
km; In relation to the tertiary routes, there are 3 billion of weights executed, 38 kilometers of
tracks, 1,600 kilometers of footprint plate and 114 bridges built.

In terms of Colombian airports, 7.4 billion pesos were allocated for the intervention of 91 air
terminals, and for the railroad system investments of more than one billion COP were built and
four lines were intervened: Bogotá – Belencito; Dorada – Chiriguaná; And Pacific and Atlantic
railroads. (Portafolio, 2018)

And although infrastructure growth with fourth-generation 4G pathways, expanding the

airport capacity, optimization of the spaces and the road mesh, and growth in
telecommunications networks have been representative, Colombia still needs a lot to become
part of the three most competitive economies in South America. (Revista Semana, 2018).
Understanding that there are great deals of progress, it is also very important to observe those
factors that have not allowed the complete and proper development of this pillar; The main
ones are:

1. Financing 4G Infrastructure projects

One of the biggest challenges to carry out fourth-generation projects is financing, and
this is due to the difficulty that it presents, in most cases, with the adequate
development of the pubic-private partnerships (PPPS). It takes the pace of investment
to be maintained over the next few years despite fiscal worries (Rueda, 2018)

2. Legal Framework
Thinking about the generation of new opportunities for the reduction of transport costs
and quality of life of Colombians, effective and efficient connection between cities of the
country and obviously, possibilities of interaction with other economies, it has become
necessary to seek for reforms that can accelerate project concessions.
Since the year 2012 the country has made efforts to incorporate within the Country's
legislation, instruments that facilitate private investment in infrastructure, in
conjunction with the structuring of new projects (Barth, 2014). However, the

1
COP: Colombian Pesos
 modifications tabled have generated a large deal of failures in the legality, at the time of
adjudicating civil works projects, environmental licenses and prior consultations, this
could not have another name that, Corruption.

3. Control and regulation of “unforeseen” risks

In this item, it important stand out two types of “unforeseen” risks:

a. Ensure the quality of the works is, without a doubt, the most important factor in the
planning, execution and delivery of any civil work. Any fault submitted are potential
risks to the safety of those involved in the construction and subsequent use of this. The
most recent case in Colombia is the fall of the "Chirajara" Bridge2 which was under
construction; Several people were killed because of the huge flaw in the calculations of
this project. What would have happened if the bridge had already been in use?

b. Corruption and inadequate adjudication of civil works. The Odebrecht case3, perhaps
the biggest scandal in infrastructure issues that splashed several countries in Latin
America like Ecuador, Colombia, Peru, Mexico and Panama.

COLOMBIAN INFRASTRUCTURE IN THE GLOBAL COMPETITIVENESS REPORT

In the Global Competitiveness Report 2017-2018 published by the World Economic forum,
Colombia is ranked 66 of 137 economies that are part of this Index. In the infrastructure sector,
with a score of 3.8 points over 7, the country ranks in the position 87; the main flaws are in the
quality of railways (1.5), quality of the roads (3.0) and quality of the infrastructure in general
(3.1). The country works better in the seats of airlines available per kilometer, and in the
infrastructure and telephony where the trend is constantly growing.

The following table presents the classified information for each of the items that are evaluated
in the index of infrastructure, with their respective classifications, scores and trends of behavior
by year.

2 On January 15, 2018, the fall of the “Chirajara” bridge on the Bogota-Villavicencio highway, which left
10 people dead, shocked the engineering. The structure, which was part of the Bogotá-Villavicencio dual
carriageway project, had to be delivered by the middle of this year with an initial cost of $ 72,000 million.
However, before its collapse it must be built again by the concessionaire, who assumed responsibility for
the event and indicated that it will not represent any cost for the State. According to the investigations
this was presented by an error in the design of the bridge.
3 Review Annexes. 1. Countries involved in the Odebrecht case.
SUBINDEX A: BASIC REQUIREMENTS

2nd Pillar: INFRASTRUCTURE

Ítem Rank/ 137 Value Trend

Transport Infrastructure 98 3.1

Quality of overall Infrastructure 109 3.1

Quality of Roads 110 3.0

Quality of Railroad Infastructure 96 1.5

Quality of Port Infrastructure 77 3.8

Quality of Air Transport Infrastructure 81 4.1

Available Airline Seat Kilometers 37 721.5

Electricity and Telephony Infrastructure 76 4.4

Quality of Electricity Supply 79 4.8

Mobile-Celular Telephone Subscriptions 68 117.1

Fixed-Telephone Lines 74 14.2

Table 1: COLOMBIAN INFRASTRUCTURE

Source: Own elaboration from the data provided by World Economic Forum.

According to the table, it is important to clarify some aspects:

 The score of the value is a scale from 1 to 7, where 7 corresponds to the most
competitive country, and 1 at least competitive.

 In Available Airline Seat Kilometers are measured the quantity of (Airline seat
kilometers (in millions) available on all flights (domestic and international service)
originating in country per week (year average)

 In Mobile-Cellular telephone subscriptions are measured the Number of mobile-cellular

telephone subscriptions per-100 population.

 The quantity of Fixed-Telephone lines is measured by the Number of fixed-telephone

lines per 100 population.
PROJECTS TO CULMINATE IN THE FOLLOWING YEARS

According to Juan Martín Caicedo, President of the Colombian Chamber of Infrastructure (CCI),
in an-interview with El Colombiano newspaper, said that President Ivan Duque receives a
sector "sturdy institutionally, the largest road program in Latin America and a port and airport
system, whose modernization is benefiting users" but there are still some previous
administration projects that are still to be finished (Graphic 1)

PROJECT NAME DESCRIPTION PROGRESSES

The approved contract for 2.5 billion in 2014,

Navigability of the was liquidated due to the Odebercht scandal.
Magdalena River It has not been possible to get a new funding
project.

In December 2016, Invías did not accept the

Finish "Tunel de la extension of the contract due to non-
línea" compliance. At the end of 2017 a new award
was made. It would be ready in 2019.

Both routes that connect the center of the

Award "Ruta del Sol" country with the Caribbean in a double
section 2 and 3 carriageway of 900 km are without contractor
for legal problems.

After a 15-day strike in Chocó, the government

Deliver "Medellín -
committed to end this path, historically
Chocó" route
abandoned.

Although the 3.6-kilometer "Pumarejo"

bridge, contractually, would be ready in
Finish the longest September of this year, its delivery was
bridge of the country postponed for at least one year due to non-
compliance. The civil work has an investment
of $ 1.4 billion.

Graphic 1: COLOMBIAN INFRASTRUCTURE PROJECTS TO CULMINATE

Source: Own elaboration from the data provided by El Colombiano newspaper.

4
Review Annexes. 2.
CHILE’S INFRASTRUCTURE

With a total area of 756,102.4 square kilometers and a population of 17,820,000 population,
Chile is located at southwestern South America. The country also demands about 1,250,000
km2 of Antarctica and its soils contain a great mineral wealth, mainly copper, where the country
produces one third of the world's copper.

The Chilean Chamber of Construction (CChC) prioritized two infrastructure projects by region,
one with a budget identification to execute in 2018, and another that has the favorable
recommendation of the Ministry of Social Development.

Among the main infrastructure initiatives in the country are: Cerros de Valparaíso Terminal, a
concession involving investments of US $ 500 million, but which has not been able to approve
its environmental qualification since it entered the system in 2014. In a similar situation it is
the Puente Industrial project (US $ 203 million), the Punilla Reservoir (US $ 433 million), and
the Salvador Hospital (US $ 309 million).

In total, there are about 30 concessions of civilian projects that are expected to be achieved in
the coming Years. They have a total investment projection of more than US $6.8 million (Guarda,
2018)

THE MAIN FAILURES IN THE CHILEAN INFRASTRUCTURE

Despite being the third country in Latin America with the best quality in the infrastructure, the
Austral country still has several aspects to improve on issues of distribution, organization and
execution of projects of this nature:

1. Lack of planning of infrastructure development in the medium and long term.

Despite the efforts of the sectoral ministries, a long-term vision with specific
infrastructure development goals is not implemented. There have been no
improvements in the methodologies implemented in project evaluation to incorporate
strategic political priorities, long-term development goals, cross-cutting issues, and
systemic effects on project prioritization, understanding that the management of the
budget plays a fundamental role in the planning of each work or civil project.

2. Transport Infrastructure.
There are connectivity gaps between the different means of transport. There are great
differences in quality in different areas of the country.

3. Governance of the water infrastructure.

The functions and responsibilities regarding water resources are divided among
different agencies and lack of coordination.
CHILEAN INFRASTRUCTURE IN THE RANKING: WORLD ECONOMIC FORUM

The constant and sustained growth of the competitiveness of Chile, has placed it, according to
the global competitiveness report 2017 - 2018 in position 33 of the 137 economies that make
up this ranking, with a total score of 4.7 points out of 7, thus being the country of Latin America
with the best competitiveness index.

In terms of infrastructure, Chile is doing very well. In the last published report, they ranked
41st, achieving a score of 4.8 points out of 7. The countries with the best ratings in Latin America
are: Panama (4.9) Chile (4.8) and Uruguay (4.7). Worldwide, the country with the best
infrastructure is Hong Kong (6.7 / 7) (Cámara Colombiana de la Infraestructura, Octubre,
2017).

SUBINDEX A: BASIC REQUIREMENTS

2nd Pillar: INFRASTRUCTURE

Ítem Rank/ 137 Value Trend

Transport Infrastructure 47 4.2

Quality of overall Infrastructure 35 4.7

Quality of Roads 24 5.2

Quality of Railroad Infastructure 74 2.5

Quality of Port Infrastructure 36 4.9

Quality of Air Transport Infrastructure 62 4.5

Available Airline Seat Kilometers 35 762.8

Electricity and Telephony Infrastructure 43 5.4

Quality of Electricity Supply 32 6.1

Mobile-Celular Telephone Subscriptions 48 127.1

Fixed-Telephone Lines 55 19.2

Table 2: CHILEAN INFRASTRUCTURE

Source: Own elaboration from the data provided by World Economic Forum.

The country stands out for the quality in the electricity supply (6.1), quality of the roads (5.2)
and quality of the port infrastructure (4.9); In terms of perception this year the improvement
exhibited in the last time in the Infrastructure pillar is confirmed, improving in 3 positions to
reach the 41st place. The following Graph shows that the perception variable on the quality of
the roads experienced a relative improvement of six. positions, arriving at place 24 this year. In
the case of the perception on the quality of the railway infrastructure, six positions are
advanced to reach the 74th square, although it is still an unimportant place.
Finally, this year it worsens significantly in the perception of the quality of the infrastructure of
air transport, where position 62 is occupied, retreating 15 positions over the previous year.

Graphic 2: RANKING OF SOME VARIABLES OF THE INFRASTRUCTURE PILLAR

Source: Taken from Índice de Competitividad Global – Universidad Adolfo Ibáñez

According to a recent report prepared by the Chilean Chamber of Construction (CChC), called
"Critical Infrastructure for Development", which analyzes the investments required in 12
dimensions for the years 2016-2025, the required investment was estimated at US $ 151,417
million. to avoid deficits in this area in this period (EMB Construcción, 2017)

For these periods, the Chilean Chamber of Construction (CChC) focuses its civil works projects
on the construction of urban highways, hospitals and airports. It is very important to continue
generating and expanding the vials and connection networks between the cities of the country
that, in order to continue growing economically, need an adequate, broad and secure
infrastructure.
WHAT COULD YOU EXPECT FOR THE COLOMBIAN AND CHILEAN
INFRASTRUCTURE IN THE NEXT FEW YEARS?

Colombia and Chile are part of an important economic block that is the Pacific Alliance; group
that will also be part of Mexico and Peru. In many reviewed analyzes, the importance of this
alliance for the growth and advancement of the economies of these countries is highlighted.

Next, it shows the growth at the level of competitiveness of the countries that make up this
alliance and, the growth of this.

Graphic 3. COLOMBIA AND PACIFIC ALLIANCE

Source: Taken from “La competitividad para el crecimiento sostenido en Colombia”

Colombia presents a similar growth with respect to the growth of the Pacific Alliance in general.
It is important that between these countries a plan of economic and competitive advancement
be initiated so that growth is not only an economic block but also that each country can generate
an internal impact.

It is very important to emphasize the advances and contributions that from the Colombian
Chamber of Infrastructure and the Chilean chamber of construction have been generated in
terms of planning and execution of civil works in both countries, contributing in this way to the
growth and progress of the qualifications obtained by the countries in the Global
Competitiveness Report delivered by the World Economic Forum.
However, there is still a long way to go:

1. In Colombia, it is necessary to start analyzing infrastructure growth strategies, adapting

external models that will serve the country to optimize the logistics, marketing and
distribution processes of Domestic products both inside and outside the Country.

 Expand the port capacity of the country and make access to them more accessible.

 Continue investing in road projects that connect to the furthest regions of the country,
with the center of the country or the nearest economic region that can start to boost the
economy and products of that area.

2. Combat Corruption. This is without a doubt the most important point to work;
Corruption not only affects the infrastructure, it harms each one of the economic,
cultural, political and social activities of a country.

 If resources continue to be misplaced, it is very difficult to achieve connectivity projects

between the cities of the country and much more, with other countries in the region and
the world.

3. Strengthen the work carried out by the entities of control and regulation of civil works
in the country. For example: ANIF, INVIAS, among others.

 The quality control of any civil works must be analyzed from the moment the bidding is
presented.

 We must avoid falling into the serious error of not having a control entity trained to
detect faults that may occur in calculations, execution and subsequent use of the
infrastructure implemented.

4. In Chile, the government established a foreign exchange band outside of which it would
assume the impact of devaluation of the currency. There is also a more developed long-
term insurance market in that country, which, applied in Colombia, could reduce risks
for investors and the State.

5. Think about realization projects in the medium and long term. In Chile you must work
hard in this part, considering that to do business and to be able to reach commercial
agreements, it is very important to be at the forefront of logistics processes, in which
the country's infrastructure directly intervenes.

6. Protecting natural resources is fundamental for both countries. The preservation of

these will guarantee Colombia and Chile the progress and adequate implementation of
renewable energies for the coming years.
CONCLUSIONS

The Pacific Alliance has enabled countries to make it, promote business and strengthen the
competitiveness of these countries, considering the capacity of their economies and growth
projections in commercial terms with each other. To achieve this, it is very important to expand the
infrastructure capacity that allows new traders, investors and tourists from each country to get
motivated to build and achieve trade agreements with proposals and alternatives Highly competitive
for the country, the alliance and the region in which X types of activities are developed in each
country.

For its important and strategic geographical location in South America, Colombia and Chile must
rethink and enhance the countless benefits that both countries would obtain in the economic and
commercial field by supporting new infrastructure projects, especially in ports and airports since,
they are countries that have a great importance in the passage of important loads of merchandise
that could monopolize with a greater and better capacity in infrastructure.

What is there to stand out? Mainly, Chile and Colombia have different specific skills in the planning
and execution of infrastructure projects that increase the ideas of innovation to carry out projects of
great relevance in roads, ports, airports and others:

a. In Colombia the infrastructure projects are quite ambitious that, if carried out, would be the
booster master for the transportation of products, goods, services and people. This will no
doubt enhance the capacity of the country.
Nevertheless, in Colombia there are very serious problems at the time of the projects
awarding that in several cases jeopardize the quality of projects and therefore the security of
the population.

b. Meanwhile, the Chilean infrastructure, although is very solid, does not have large-scale
projects or constant improvement objectives because, the planning that develops there is of
projects to 4 years. This does not allow the oxygenation of ideas for new concepts that are at
the forefront.

In view of the foregoing, it is possible that cooperation activities can be established between the two
countries to improve those flaws in infrastructure. For example, we could talk about land research
activities for construction with the help of public and private institutions, so it could be covered and
improved in another pillar of the ranking.

Also, the strengthening of institutions and contractors in terms of quality and business ethics must
be a constant work in both countries. This can depend on the continuity of many projects and the
veracity of what as infrastructure can be offered to the world in terms of trade, exports and imports
or, serving as intermediaries of these processes.
 ANNEXES

1. Countries around the world involved in the Odebrecht case and the amount of money
that they received.

Source: Caso Odebrecht: Conoce cuáles son los montos y países involucrados
(EMOL, 2017)
2. Navigability of the Magdalena River and Tunel de la Línea

Source: El Rio (El Espectador, 2015)

Source: (El País, 2017)
 REFFERENCES

Barth, L. F. (12 de junio de 2014). Asuntos Legales. Obtenido de

https://www.asuntoslegales.com.co/analisis/luis-f-barth-510976/nuevo-marco-legal-para-
infraestructura-del-siglo-xxi-2133266

Cámara Colombiana de la Infraestructura. (Octubre, 2017). ¿Cómo estamos en competitividad?

Bogotá.

El Espectador. (16 de abril de 2015). El Rio. Obtenido de

http://blogs.elespectador.com/actualidad/el-rio/cientificos-arremeten-contra-la-idea-del-
magdalena-navegable

El País. (05 de julio de 2017). El Valle saldrá ganador con la reactivación del proyecto del Túnel de
la Línea. Obtenido de El País: https://www.elpais.com.co/economia/el-valle-saldra-
ganador-con-la-reactivacion-del-proyecto-del-tunel-de-la-linea.html

EMB Construcción. (Enero de 2017). Inversión en INfraestructura: Grandes desafíos para Chile.
Obtenido de EMB Construcción:
http://www.emb.cl/construccion/articulo.mvc?xid=3724&edi=171&xit=inversion-en-
infraestructura-grandes-desafios-para-chile

EMOL. (10 de febrero de 2017). Caso Odebrecht: Conoce cuáles son los montos y países
involucrados. EMOL.

Guarda, P. (04 de febrero de 2018). Construcción plantea apurar 37 grandes proyectos por más de
US$ 4 mil millones. La Tercera.

Portafolio. (04 de mayo de 2018). 'En dos años Colombia estará a la vanguardia en infraestructura
vial'. Potafolio.

Revista Semana. (2018). ¿Cómo estamos en calidad de infraestructura? . Revista Semana.

Rueda, A. C. (2018). ¿Qué hay y qué falta en infraestructura vial? Semana.

World Economic Forum. (2017-2018). Global Compettiveness Report. Obtenido de World

Economic Forum: http://reports.weforum.org/global-competitiveness-index-2017-
2018/competitiveness-rankings/