Colombia's US$3bn budget move will affect infra projects

Moving 12tn pesos (US$2.9bn) from Colombia's 2025 budget to the 2026 one will have a significant effect on major infrastructure projects.

According to the decree issued by the finance ministry, the move is necessary because the revenues to be received this year are not sufficient to cover the expenses laid out in the 523tn-peso budget, as 12tn pesos depended on congressional approval of the tax reform, which was denied last year.

The affected projects include Bogota's metro line No. 1 and Medellín's line E, the Calle 13 road in Bogotá, the Dique canal restoration, the Regiotram de Occidente light train system, the Toyo tunnel and access roads for the Santa Fe de Antioquia-Cañasgordas corridor, in addition to the Bucaramanga-Pamplona highway.

The move may imply unilateral amendments to contracts.

Bogotá will analyze legal actions to ensure that the national government meets its commitments, mayor Carlos Fernando Galán said in a video on social media. Regarding the metro, he added that the city will this year assume “the burden that this non-compliance by the national government represents,” ensuring work continues. 

National contributions to Bogotá are based on signed contracts and cannot be suspended, Galán added, saying that the metro commitment stems from a contract signed in 2017 and cannot depend on a financing law enacted in 2024.

Medellín’s mayor Federico Gutierrez framed the decision as an act of revenge against the city and Antioquia department. He said work on the metro in the city, which is 29% complete, will have to stop due to lack of funds.

In a video, Gutiérrez said the government already owes Medellín almost 500bn pesos, and, adding the latest measure, the city’s metro will face a shortfall of almost 1tn pesos.

Last February, the Gustavo Petro administration failed to implement a decree that would have allowed it to reschedule the investment budget for allocations for infrastructure projects that span various fiscal periods and do not advance according to schedule. But the government withdrew the proposal after facing criticism.

According to experts, the mechanism of future budget allocations allows for the creation of long-term contracts for infrastructure projects and provides sufficient certainty for global investment funds and the local and international financial sector to lend money to various projects by securing credits with the income received over time.