THE FDI ANGLE

•  Colombia is bringing back proposals of an interoceanic dry corridor for two main reasons: 
  • to ease the bottlenecks at the drought-hit Panama Canal;
  • to seek new growth away from coal, oil and gas. 

• Why it matters: being a conduit of global trade as been transformative for Panama. Can Colombia replicate its success? Besides, hydrocarbons have accounted for the majority of FDI in the country so far. Pivoting away will leave a major investment gap to be filled. The Turbo-Cupica corridor can possibly contribute to that.   

The government of Colombia is moving the first steps on a 75bn pesos ($19.4bn) interoceanic corridor to win container traffic away from the drought-hit Panama Canal and diversify its economy away from coal, oil and gas. 

“This is not for Colombia, it is for the whole world,” vice minister for infrastructure, Maria García, tells fDi. 

The project entails the development of a 197.8km intero-ceanic railway corridor running from Turbo, on Colombia’s Atlantic coast, to Cupica, on its Pacific coast. The railway infrastructure is budgeted at 33bn pesos, while each of the two ports at 21bn pesos. 

The government is now working to produce a pre-feasibility study by the end of the year to be in a position to launch a fully-fledged feasibility study in 2025. 

Panama Canal woes 

The idea of an interoceanic corridor cutting through Colombia’s Darien jungle is not new per se, but so far has never gained any real momentum. 

Similarly, proposals for a dry corridor in Guatemala and another one in Costa Rica have struggled to make any progress. Mexico was the only country that followed through such proposals. The 303km railway running through the isthmus of Tehuantepec has been operational since late 2023. 

But the bottlenecks the Panama Canal has been experiencing brought the Colombian corridor back to life. Last year, Colombia’s northern neighbour experienced its driest year since record began in 1951, according to figures from the Panama Canal Authority. That has limited the overall functioning capacity of the canal, which constantly needs fresh water to fill its locks. 

Overall, it handled 9% less tonnage in 2023 than in the previous year, according to figures from research firm Clarksons. The trend carried into the new year, as transits posted a 35% in gross tonnage terms in the January-February period, and another 29% in March, Clarksons figures show. 

The Turbo-Cupica corridor’s total capacity is forecast at 196m tonnes of containers per year, which slightly exceeds the container tonnage handled by the Panama Canal in 2023 (192.7m), according to government figures. It would take three hours for trains to travel the full length of the corridor. At full capacity, as many as 47 of them will run between Turbo and Cupica every day. 

TURBO-CUPICA RAILWAY 

• Location: Colombia
• Sector: transport infrastructure (railway)
• Value: 75bn pesos ($19.4bn)
• Total capacity: 196m tonnes
• Dedevelopment stage: pre-feasibility studies

Pivot away from oil 

The Panama Canal woes are not the only reasons why real momentum for the Turbo-Cupica may be building this time. The proposal also coincides with the pivot away from hydrocarbons championed by Colombian president Gustavo Petro. 

Mr Petro committed to a moratorium on all new coal, oil and gas exploration licences since coming to power in August 2022. The measure does not include those licences that have already been signed, which can still run their course and possibly get to development phase. 

Through the lens of Colombia’s post-oil push, the interoceanic corridor appears even more strategic. 

Hydrocarbons generate 40% of total exports and 20% of foreign direct investment, and have accounted for between 10% and 20% of central government revenues in recent years, according to data from credit rating agency Standard & Poor’s. 

Replacing those revenues in the long run will be a consequential endeavour for the Colombian government. Plans are underway to seek new growth and fiscal revenues in sectors like tourism, agriculture, renewable energy and manufacturing. 

The Turbo-Cupica link could become another major contributor to the diversification of the economy. However, many questions have yet to be answered. The government has yet to produce a final pre-feasibility study that shows the project can comply with Mr Petro’s ambitious environmental and social agenda. 

Besides, the same droughts that have created the strategic opportunity for the corridor might well hinder it. Colombia is on the brink of an energy crisis because of low water levels at its main water reservoirs. Assuming the train will plug into the national grid, it will add pressure to an already overwhelmed system. 

Last but not least, the Darien jungle is as thick as it gets. There is no transport infrastructure that, to date, runs across it. Many have tried, in vain. In Mr Petro’s view, securing Colombia’s post-oil economy may be worth giving it another shot.

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