BOGOTA (Reuters) - The four pension funds that operate in Colombia will invest $12.7 billion in road infrastructure projects over the next seven years, the president of the Colombian pension funds association said on Wednesday.
The funds, known as AFPs, have usually concentrated their investments in capital markets, including government-issued debt, company shares and telecommunication and energy-sector bonds.
A massive government project to expand the nation’s roadways - requiring funds of as much as $25 billion through 2020 - has offered a new opportunity for pension funds to expand their investment portfolio, Santiago Montenegro, president of Asofondos, told Reuters.
“The funds have about 20 percent of their portfolios invested in infrastructure and we want to invest more there, and in particular help to finance the new generation of road and motorway concessions,” he said.
The funds could consider infrastructure bonds that would be backed by revenue from toll booths, for example, Montenegro said. Another option would be buying up short-term bank loans to constructors and swapping them into bonds, he said.
“What we have considered up until now is investing in the operation phase of infrastructure bonds. We are also studying along with the government the possibility of getting involved ... via a new asset, a type of private capital fund for debt, and being on board from the construction stage.”
Colombia’s private pension fund business is controlled by Scotiabank’s Colfondos, Porvenir, GrupoSura’s Proteccion and Old Mutual’s Skandia, which between them manage almost $79 billion.
Investment in road construction will be gradual, Montenegro said, with much of the costs covered by the funds’ profits and new contributors, meaning the funds will not have to shift investments from other assets, Montenegro added.
Colombia, Latin America’s fourth-largest economy, badly needs updated infrastructure. The road projects will include bridge and tunnel construction.
Montenegro highlighted the example of Chile, where pension funds have financed urban and national highways, airports, public buildings and even jails.
“The relevant case is Chile, the country with the best road infrastructure in Latin America, and where pension funds play a key role in their financing.”
Reporting by Nelson Bocanegra; Writing by Julia Symmes Cobb; Editing by Chizu Nomiyama