Construction challenges in Colombia (International construction market survey 2018)

Colombia’s strides towards building a more peaceful nation, following the 2016 agreement with FARC (Revolutionary Armed Forces of Colombia), are expected to deliver an economic premium. Greater economic growth and more political stability are strong platforms for investment in the built environment.

While the potential opportunities this suggests are attractive to international clients and the professionals that support them, it does not mean that progress in Colombia is without significant challenges.

On the positive side there is currently a ready supply of skilled workers. There are also many skilled professionals, but they need to be trained so that they are more au fait with and adept at dealing with the processes and practices adopted by international clients.

For international organisations entering the Colombian market and seeking to work under international practices, government red tape and bureaucracy present hurdles. These not only lead to the frustrations of delayed approvals for projects, but they also make it a hard slog for international operations to establish themselves within the country.

The Colombian law relating to public work is very bureaucratic. To bid for work, firms and individuals need to demonstrate their experience and professional status with certificates signed by former clients and employers, which poses a major problem for incoming international companies.

It is essential for firms looking to operate in Colombia to anticipate this issue with good forward planning. Furthermore, they need to appreciate that the contractual and legal conditions present potential hazards for those who are used to the local laws.

Taxes and insurances present another potential pitfall for the unwary. Taxes are very complex not just because they are levied at national, regional and city level, but there are also frequent rule changes, while insurance can be equally as puzzling to those not familiarised with the Latin American market.

At a project level, while construction inflation is under control by historic Latin American standards, at around 5 percent to 6 percent annually, it still makes sense for international companies mostly to work in US dollars.

More pressing issues are low workplace productivity, inefficiency and outdated work practices. Part of the challenge is to deal with the cultural norms. Colombians tend to be very polite and often avoid challenges. This can mean not questioning why something went wrong in pursuit of seeking better ways to proceed in the future. This means treading a delicate path to find ways to respect the politeness while inculcating a more questioning “no-blame” culture.

The potential peace premium is attracting many large international companies and consultancies to Colombia eager to exploit opportunities to deliver energy, road, airport and railway infrastructure. This is leading to many contractors chasing too few projects. However, with a history of economic volatility, contractors are having difficulty finding sufficient credit.

So, while opportunity appears built into the future of Colombia, it comes with a price tag of hard work, diligence and attention to detail.

 


This content is part of the International construction market survey 2018

Go back to the main ICMS 2018 page

 

For further information, contact:

Raul Hernandez
Colombia Country Manager

t: +55 11 4766 7170
e: