Prior Community Consultation and its Impact on 4G Toll Road Projects in Colombia

Feb 01, 2016

The Fourth Generation (4G) road concessions were planned by the Colombian government as a response to the dramatic lack of adequate transport infrastructure in the country, and aligned with the goals set forth in the National Development Plan. This megaproject has allowed the government to put into practice its lessons learned during the last two decades in the contracting processes for infrastructure projects and toll road concessions in particular. 

Among other flaws of previous generations of concession projects, the government had to pay substantive down payments regardless of the concessionaires’ compliance with service standards; the investors’ capital contributions were low; and the conflict resolution criteria and mechanisms were unclear. In these prior projects, the State ended up assuming most of the risk as problems arose with environmental permitting, real estate purchases, and land use, among other issues. 

This dynamic and other difficulties created the wrong type of incentives in executing projects and significantly slowed progress. On many occasions, it led to disputes over time and money that damaged both the contractors and the State, and the objectives of successful development of a road infrastructure in the country and of reasonable returns for the contractors were difficultly met. 

To rectify these problems for the 4G projects, the Congress developed a legal framework for reaching more efficient agreements in which the risks would be assigned to the party best equipped to manage them. This framework also encouraged private capital contributions and tied payments to the progress and quality of the infrastructure being built, under so-called “functional units”. Under these guidelines, Law 1508 of 2012, which regulates public-private partnership projects, and the Infrastructure Law (Law 1682/2013) are now the Colombian government’s main instruments for promoting road infrastructure projects in the country.

Secondly, the sector has experienced a significant boost from the strengthening of the government agencies involved in infrastructure projects. For one thing, the creation of the Colombian National Infrastructure Agency (ANI for its acronym in Spanish) has made it possible to centralize management of concessions within a highly technical and qualified entity, which has already proven its competence in successfully executing these complex projects. In addition, the Office of the Vice President, the Ministry of Transportation, the National Planning Office and the National Agency for Environmental Permits (ANLA), among other entities, have gained an important role promoting road infrastructure projects. 

Even though these efforts of the Colombian government have yielded significant results, such as concession awards for the first and second waves of the 4G projects, the progress has not been sufficient. Amid the excitement brought by the 4G concessions, perceived as crucial engines for economic growth, the concessionaires and the State have already encountered serious issues in the early stages of the projects. One of these has been the required prior consultation with the ethnic communities living in the projects’ impact areas. Prior consultations are consultative processes required by the 1991 Colombian Constitution, wherever the government is considering granting concession rights and licenses to private companies in areas inhabited by recognized indigenous or Afro-Colombian ethnic groups.

The difficulties in the negotiation and agreements between the State, the concessionaires and these communities during the prior consultation process have had a significant effect not only on the projects’ schedule, but also on funding. Since prior consultation is a prerequisite for the mandatory environmental permits, it makes more difficult to obtain funding for a project until this step is completed; the lack of certainty as to when the project will produce benefits, or even as to whether it will (since it may not move forward), is a hindrance.

Furthermore, when agreements are reached with the communities, they may create high, unexpected costs for the concessionaire and/or the State. As one example, if an agreement contains a decision to change the layout of a road to minimize its effects on a specific natural resource in the area, the concessionaire will likely have a claim against the State for the increased cost of the project, since the concessionaire prepared its business plan and made its offer during the bidding state under different assumptions and terms. This more expensive version of the project would in turn have effects on its scheduled deadlines. 

The absence of a statute regulating the fundamental right to prior consultation has been one of the main impediments to a regular, continuous execution of infrastructure projects. The uncertainty caused by this lack of a legal framework becomes more dramatic still when taking into account that such law would require its own prior consultation process with Colombia’s indigenous and Afro-Colombian communities in order to be enacted by Congress.

This problem has already led to legal claims and disputes over the risks and liabilities that each party must assume and how the delay and higher costs caused by the prior consultation processes should be allocated or assigned. 

The applicable legal framework on prior consultations relies on Colombian Constitutional Court case law that, at first glance, is not controversial – as it is an important outgrowth of the communities’ fundamental rights set forth in the Constitution. However, we need to recognize that this development has meant such empowerment for the communities that it has become extremely hard to reach an agreement that satisfies their interests and needs. In practice, the prior consultation processes end up transforming to include extensive demands by the communities on the concessionaires, blurring the constitutional purpose for the process. 

Therefore, Colombia has a pressing need for clear rules on prior consultations in infrastructure projects. Presidential Guideline 10/2013 makes progress in this regard, as it states a somewhat clear methodology with deadlines and determines who the decision-makers are. This document’s intention is to guarantee efficiency, economy and administrative haste during prior consultation processes. However, since this Presidential Guideline lacks legal force and focuses mainly on coordination of the internal matters of the public entities involved, it is hardly applied; the consultation processes therefore get constantly suspended and extended over time, with no clear end.

If the prior consultation processes keep on being delayed the way they are now, successful execution of the 4G concessions in Colombia could be in jeopardy, or even in some cases come to a full stop. This could lead to massive legal disputes that affect the interests of all parties involved.

Thus, having clear and effective rules regarding the prior consultation with communities is essential to guaranteeing the success of the 4G projects, as well as other major projects in other fields such as mining. To achieve these rules, it is necessary to begin the legislative process for a statutory law (ley estatutaria) that clearly defines rules and deadlines, and that also both secures the ancestral rights of these important communities and allows economic development of the country. Such legal framework would let the public entities, concessionaires and communities come together to develop reasonable and efficient projects, which the country is in desperate need of. This would prevent ambitious projects like the 4G concessions from ending up mired in legal disputes and arbitration proceedings without ever reaching the purpose for which they were intended. 

 

Authors:

Andrés Hidalgo
ahidalgo@lloredacamacho.com

Carlos Carvajal
ccarvajal@lloredacamacho.com