International Bank for Reconstruction and Development     87319
                  International Development Association
                     International Finance Corporation
                Multilateral Investment Guarantee Agency
                        FOR OFFICIAL USE ONLY
                        CONFIDENTIAL
                                                                      EDS97-407
                                                                 November 5, 1997


Board Meeting of November 6, 1997
Statement by Mr. Enzo Del Bufalo
                Colombia: Country Assistance Strategy
     We welcome Colombia's Country Assistance Strategy and commend the
management and the staff for its preparation, especially the
consultative process by which it was developed.
     The document presents a thoughtful analysis of the recent
economic and social development in the country, as well as an
extensive discussion of the difficult challenges remaining ahead. The
paper assesses frankly the economic and political risk associated with
the economic development of the country in the coming years and the
new program of Bank assistance.
     We are pleased to note that the economic achievements in the
country during the past four decades have been remarkable with an
average 4.5% growth rate.       Nevertheless, they still face many
challenges, such as    (i)   high fiscal deficit, due to structural
causes; (ii) poverty, a critical problem with incidence three times
higher in rural than in urban areas; and,        (iii) the high and
pervasive level of violence in the country, recognized as a
significant obstacle to improve the living conditions of the average
Colombian.     Therefore,  this   Chair   agrees with  and  supports
management's six strategic priorities, to help reduce the level of
violence.
     In reference to page 10 paragraph 21, which reads:          “Both
government authorities and civil society representatives agreed that
promoting peace and addressing the socio-economic determinants of
violence should now be the number one development priority in
Colombia", we believe that the Colombian society needs and deserves
bilateral and multilateral support in this endeavor.     Therefore, we
greatly welcome the Bank efforts in defining alternative solutions and
intervention mechanisms to promote peace in the country, as those
measures described in paragraphs 21 and 22.
     Considering that new authorities will take office in the summer
of 1998, we share the Bank’s envisaged base case scenario as the most
likely.    Integral to the outcome is the necessary participation of
the private sector investment in infrastructure projects. Therefore,
the
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Bank Group direct involvement is much needed in removal of barriers to
private sector participation; strengthening the legal, regulatory and
institutional framework and enhancing the development of sound
financial markets.
     Current legislation on banking reform is pending in Congress.
The World Bank and IFC intend to play a "catalytic role" on improving
efficiency of financial intermediation.   In this context, we notice
that the Colombian financial system has an average spread between
lending and deposit rates of about 11%, one of the highest in Latin
America.   One of the reasons is the lack of outside competition,
although the number of foreign banks attracted to do business in the
country is increasing. We would like to have some comments from staff
on the World Bank Group's role in the Colombian financial sector
development.

     The CAS states that the "structural roots of the deficit will be
tackled during the projection period", and that the "overall fiscal
deficit is projected to decline from 3.6% of GDP to 2.4% in 1998".
The political uncertainties of the forthcoming presidential and
congressional  elections  may   indicate   that  no   further  fiscal
adjustments are possible.  Thus, further deterioration of the fiscal
deficit is a possibility. Comments from management would be useful in
this area.
     The 1993 CAS established three main strategic areas: (i) private
sector development; (ii) poverty alleviation; and (iii) environmental
management. We would like to receive from the staff a more organized
and detailed presentation of the advances made in those broad
development objectives, and of the role of the Bank Group.
     Finally, as the CAS rightly recognized, there is a need to expand
non-lending services in developing areas, such as:        market-based
approach to land reform, financial sector, determinants of violence,
environment, and decentralization. We fully support the expansion of
these services, and also believe they could be extended to other Latin
American Countries.
Basic Education Project   - Antoquia, and Education Project - Pasto

     We strongly support the two education projects in the cities of
Antioquia and Pasto, as well as World Bank further involvement in
these relevant areas.      Both projects address, partly, the major
challenges facing basic education in Latin America, namely its lack of
quality.    They recognize the country's unequally low levels of
educational attainment and coverage, mainly between rural and urban,
and public and private. The key performance indicators defined in the
annexes seem to us adequate to monitor implementation, at least at
this stage of the project.