Concrete progress: Colombia's builders step out of a deep hole on cheap credit and surging demand.

Colombia is a country under construction. Building sites have become common throughout the capital and the rattling sound of drilling is omnipresent. Building now accounts for about 5% of Latin America's fifth-largest economy, bouncing back after passing through the worst crisis in its history between 1996 and 2001.

The recovery in the manually-intensive labor of making buildings has been a boon for the job market, helping to bring the urban unemployment rate down from 20.4% in January 2002, one of the highest rates in Latin America, to 14.7% by the end of 2003.

Industry leaders, meanwhile, estimate the construction of private buildings rose by 20% in 2003. Although the business of building is booming at the moment, construction leaders say that it's mainly a recovery from a crisis of the last few years.

That crisis was the result of a combination of high interest rates and changes to the mortgage system, both of which choked off credit for ordinary Colombians to buy homes. The industry was further hit by the worst national recession in more than 50 years. Seventy percent of Bogota's construction companies went bankrupt during the period.

As interest rates fell and the overall economy rebounded, the sector two years ago began to recover. Raising new apartment buildings, especially in the wealthier neighborhoods of the country's major cities, is fueling the boom. The government has played its part in supporting the sector, in particular by boosting spending on low-income housing. Non-military government spending on building projects amounts to US$150 million a year.

"The recovery has also been aided by greater investment in the sector as a result confidence coming from the security policies of the president," says Carlos Agudelo, general manager of AR Construcciones, one of Bogota's largest, construction companies. Investors and private businesses have applauded the tough line adopted by Colombia's president, Alvaro Uribe, in facing the country's four-decade civil war.

In fact, the biggest threat to the country's recovering construction sector may be complacency on the part of builders themselves, says Agudelo. "Many of these companies don't make any sort of business plans when times are good and make no preparation for any slowdown," he says.

The construction boom comes as Bogota has undergone a facelift over the past decade, as a succession of mayors sought to clean up one of Latin America's more dangerous and dirty capitals. A new transportation system runs through the city, and the capital's most infamous slum has been torn down. Trickle down. Construction has been one of Colombia's major motors of the economic growth. Eduardo Jaramillo, president of Colombian Construction Chamber, which represents the largest construction companies, contractors and manufacturers of construction equipment, estimates that of Colombia's 3.5% growth in 2003, a bit more than half can be accounted for by construction and related sectors, including the manufacture of construction equipment.

Jaramillo dismisses speculation that the current building boom might he linked to money laundering, as happened in Colombia's major cities in the 1980s and 1990s.

"It seems like drug money was responsible for much of the construction in the 1990s in some of Colombia's cities," he says. "But we never really had a chance to measure the impact. This time it seems the recovery is much more connected with lower interest rates."