Spotlight: Colombia's Magdalena river project takes step forward

One year after Colombia's Magdalena river corporation Cormagdalena ratified its decision to declare void a 2.5tn-peso (US$916mn) contract awarded to consortium Navelena, a project to maintain navigation conditions on the river reached a milestone, as the finance ministry approved the new PPP's financial model.

"What's next is to forward a short review of the PPP and an associated socio-economic study to the National Planning Department, in order to proceed to Confis [higher fiscal policy council], which will secure the resources" for the new contract, Cormagdalena said in a press release.

NAVELENA'S CONTRACT

The original contract, awarded in 2014, was voided after Navelena failed to present its financial closure in time, at the height of the Odebrecht bribes scandal, although problems started already a year before contract termination.

In March 2016, following the conviction of former Odebrecht CEO Marcelo Odebrecht, the government decided to examine the contracts awarded to the Brazilian construction giant, which also affected Navelena due to both company's relationship.

A month later, Odebrecht's dire financial state as a result of the Lava Jato probe caused concern for the Magdalena river project, and Navelena sought loans to obtain the funds for the financial closure. By May Odebrecht was seeking to cede its stake in the project as part of a process to divest billions of dollars across the region.

At one point, Japan's second largest bank, Sumitomo Mitsui Banking, agreed to provide US$250mn to help get the works started, which had been stuck in the pre-construction phase since 2014. Meanwhile, daily El Colombiano reported that China's Sinohydro was interested in fully taking over the project.

But financial closure never materialized, and Cormagdalena declared the contract void on March 24, 2017, and Colombian business regulator Supersociedades started Navelena's judicial liquidation process in early 2018.

NEW PPP PROBLEMS

After the contract was voided, Cormagdalena began developing a new PPP for the project, although then-acting director Luis Andrade had admitted that the project had suffered a two-year delay due to the cancellation and wouldn't be completed before 2022.

In November, Cormagdalena's current head, Alfredo Varela, said that the corporation was waiting for the finance ministry to release the necessary resources, which won't happen, though, until Confis also approves them. Only then, the firm may launch a tender.

The project is considered key for exports for a large part of Colombia, as it entails maintaining shipping conditions on a 908km stretch of the river, including dredging the section between Barrancabermeja and Barranquilla, in addition to channeling works between Barrancabermeja and Puerto Salgar.

In the meantime, Barranquilla, one of Colombia's main ports on the Atlantic coast, has been dealing with severe dredging problems in its main access canal, which leads into the Magdalena river. By March, ships still couldn't use the canal due to heavy concentration of sediments.

In this situation, Atlántico department's government together with national highway authority INVIAS agreed earlier this month to implement a "shock plan" to maintain navigation conditions in the canal.

By last week, ships could regain access as 55,000m3 of sediments were dredged, a press release from Atlántico's government said.

The department's governor, Eduardo Verano, said that his administration was in talks with the presidency to advance in obtaining the resources for the PPP. Last month he said that "if there's no river (navigation project), there won't be a modern evolution of our country's infrastructure. The real revolution of our economy is at the Magdalena river."