Colombia: One single farecard to ride 12,000 buses and 500 routes
The city of Bogota’s urban transit system is a chaotic network with long bus routes and an old fleet. Its 4.5 million daily passengers often face lengthy travel times, poor service, pollution, and frequent accidents. The Colombian capital contracted with Recaudo Bogota S.A.S to overhaul this system by developing and operating the fare collection, fleet management, and real-time information technology for its Integrated Public Transportation System (SITP). The SITP has the potential to transform Bogota, and the service provided by Recaudo is critical to the success of the entire operation.
IFC has facilitated a $176 million financing package to Recaudo, which is expected to make public transit in Bogota more affordable and convenient through the efficient management of a complex system of 12,000 buses running 500 routes.
IFC committed US$55 million (a peso-linked A loan of US$30 million and a peso-linked C loan of US$25 million) and co-arranged and mobilized and additional US$121 million from multiple parties, including Korean Exim Bank, HSBC and Korean commercial banks. IFC also provided the swap to hedge these loans into local currency.
The international financing package is the largest in the history of Bogota’s public transportation. It is also IFC’s first loan to a transport payment system, drawing on IFC’s expertise in both the public transit and electronic payment sectors. It will enable Recaudo, among other things, to introduce an easy-to-use electronic-payment mechanism using smartcards that will eliminate cash from the system, increasing security and efficiency. Already, 1.5 million smartcards have been distributed for free to low-income people. In the future, Recaudo plans to use the smartcards as a payment platform for additional goods and services, such as supermarket or drugstore purchases, or to distribute social benefits to customers who are unbanked or under-banked. This will help provide those at the base of the pyramid with greater access to the financial system.
Recaudo Bogota has been recognized as “Deal of the Year” by Trade Finance Review Magazine and Trade Finance Magazine in the Export Credit Agency Category. The project is expected to have a substantial development impact by (a) optimizing the entire route system and improving the overall quality of service; (b) implementing a unified fare collection system based on electronic payments through rechargeable cards valid throughout the entire SITP; and (c) overhauling the current bus fleet.
The use of information technology and electronic payments in mass transportation systems increases ease of access, convenience and transparency while reducing cash in circulation, thereby limiting theft, evasion, and crime. Once the smartcards cards have been adopted in mass transit, other applications meant to change commuting behavior can be deployed with ease and flexibility. For example, employers can subsidize the monthly transportation costs of their employees and governments can do the same for the poor, pensioners or students, thus encouraging wider use of public transportation.
Financing the first international concession of this type in Colombia and in emerging markets required persistence, hard work, strong client and government coordination, and excellent collaboration with the parallel banks and export credit agency. The team helped Recaudo strengthen the legal framework for the concession while structuring the protection needed by all investors.