RETURN TC)
REPORTS DESK                                                    R E S T R I C T E D
WITHIN                      CUICIJLAIiIICOPY
.  WITHIN                                            ~~~~~~~~~~~~Rre p o r t N o. WH_75a
ONE     WEEK          TO BE RETURNED TO ARCHIV  DIVSION
This report was prepared for use within the Bank. In making it
available to others, the Bank assumes no responsibility to them for
the accuracy or completeness of the information contained herein.
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
RECENT ECONOMIC DEVELOPMENTS AND PROSPECTS
OF
C OLOMBIA.
July 23, 1958
Department of Operations
Western Hemisphere



CURRENCY EQUIVALENTS
Effective Rate .for Imports (end of May,< 1958)
U.S. $1.00     a 7.50 pesos
I peso         * $:0.133
I million pesos * ;$133,000



TABLE OF CONT!mTS
Page
BASIC DATA                                                 i
STjUMMA9RY AND COXNCLUSIONS                                ii
I            E 3CONOMIC GROITH                             1
II     -     INFLATICN AZ\TD ITS CONTROL                   4
Credit E)mansion                          4
The Government Budget                     6
The Outlook for Domestic Financial
Stability                           8
III    _     TE BALANCE OF PAPIENTS AND EXTERNAL DEBT
SERVICING IPROBLEaS                          11
IV     -     CREDITWORTHINESS                             18
Appendices
I      _     Settlement of the Backlog                    20



Statistical ApDendix
Tables 1, 2, 3                             External Public Debt
Tables 4, 5, 6                             Economic Growth
Tables 7, 8, 9, 10                         iYIcnetary Develooments
Tables 11, 12, 13, 1l., 15                 Public Finance
Tables 15, 16, 17, 18, 19                  Balance of Payments



BASIC DATA
Area                 439,825 square miles
Population           13.2 million (1�57 estimate)
Gross National Product (1955)                       11.3 billion pesos
National Incomre (1955)                              9.9 billion pesos
Per capita Income (1955)                            about 1S5 250
Origin of National Income (d)                       1945         1955
Agriculture                                 3T.T         3ip
Industry                                    12.2         15.6
Commerce and Transport                      13.7         14.1
All other                                   35.7         31.4
I4illion pesos
Government Budget                                   l956       -1957
Expenditures (excluding debt amortization)         1,220    '    ,275
Ordinary receipts                                  1,138        i,150
Deficit                                               82          125
Central Bank financing of total public sector        237          260
Millions of U.S. dollars
Balance of Payments                    1955         1956         1957
Export Receipts                 572
Imports (c.i.f.)                669          657          450
Services (net)                  -64          -25          -40
Current Account Balance        -161          -96           20
Net Capital Receipts
(excl. short-term)            19           27           30
Foreign Exchange Reserves
(end of year)                152          144          156
Millions of U.S. dollars
External Public Debt (January 1, 1958)               442
Medium-term Credits contracted to settle
the arrears                                          214
Suppliers' Credits                                    56
I.B.R.D.                                              93
Other                                                 79



- ii -
SUMKIARY ANM CCIVCLUSIONS
i.            The Colombian economy has developed at a rapid pace since
World War II.   Aided by favorable natural resources and, until recently,
by steadily increasing export earnings, the country was able to maintain a
relativelyv high level of innvestment in both the private and public sector.
A large part of government investment was devoted to improvements in trans-
portation.   These efforts, with the heLD of substantial external loans, are
resulting in the emergence of Colombia as an integrated economy.   This has
been an importanlt inducement for the expansion of manufacturing industry.
On the other hand, progress in agriculture has tended to be slow and produc-
tion has barely kept up with population increase.
ii.           In the last two years Colombia's economic advance has slowed
dow,n below the rapid rate maintained during most of the postwar decade.  In
1956 and 1957 the environment for economic development underwent a serious
deterioration as a result of political instability and poor government
administration.   In addi-tion, in 1957 investment could not continue at its
previous high level because of the reduction in capital goods import3
necessitated by the progressive decline in export earnings.   This decline
in export earnings set in after the end of the coffee boom in 1954.
iii.          Colombia, however, disnlayad great reluctanco to r3ke the necessap
adjustments to a lower level of export earnings.   In 1955 and 1956 the
failure to cut imports and a large-scale capital flight caused by political
instability and inadequate exchange rate policies, resulted in the accumu-
lation of overdue foreign exchange payments.   Until mid-1957 when a new
Government took over, no adequate measures were taken to stop the deterio-
ration in Colombia's short-term financial position.   Bank credit continued
to expand sharply and the Government continued to incur substantial deficits.
In the absernce of any fundamental reform of the exchange system, imports
were maintained at a high level and the backlog of overdue exchange payments
continued to increase, reaching some $370 million in April 1957.   Gold and
foreign exchange reserves of the Central Bank, which were drastically reduced
in 1955, have not been replenished since then.   At the end of April 1958
they amounted to $120 million.
iv.           The Government uhich had permitted this deterioration in
Colombia's domestic and foreign financial position left office in May 1957.
In June 1957 the new Government took several firm exchange and monetary
measures which have resulted in a substantial improvement of Colombia's
economic position.   Despite a substantial decline in foreign exchange
earnings in 1957, the Government was able to reduce the backlog by net pay-
ments of S80 million from the country's own resources, made possible by a
sharp reduction in imports.   Most of the remaining backlog was settled by
contracting some q250 million in medium-term credits.   The Government



- iii -
introduced a free exchange rate mechanism which is facilitating balance of
payments equilibrimn.   Domestic credit expansion has been slowed down
drastically.   Moreover, starting last April, a new series of measures was
taken as a result of which the retention cf coffee will be largely financed
without Central Bank support - an  importa:-t reversal from previous practice.
On the other hand, however, the Government budget deficit was not reduced
but has tended to increase during the last t-.fo years.
v.            The manner in which the commercial backlro was re-financed
left Colombia WitAL an abnormally heavy debt burden over the next four years,
particularly in 1958 and 1959.   Since, in addition, coffee export earnings
have declined (and no early recovery is in sight), imports nad to be cut to
minimal levels.   To alleviate the tight foreign payments situation,
Colombia has obtained credits totalling '103 million for essential inports
in 1958 and 1959 (478 m_llion from the Export-Import Bank and $25 million
from U.S. conmercial banks).   This operation will, daring the next 12 to
15 months, enable Colombia to avoid whatever raw materials shortages aould
otherwise have arisen, to import agricultural machinery and transportation
equipment and to undertake a moderate amount of new additions to industrial
plant.
vi.           The near-tern outlook in Colombia is for a reasonable degree
of domestic stability.   Colombia has taken adequate measures to cope with
the problem of coffee retention in a non-inflationary manner.   Private bank
credit is subject to severe restrictions.   Financing of imports under the
$103 million credits to the Central Bank will, for the time being, absorb
new purchasing power created by Government deficit and other expansionary
financing in 1958 and in the first half of 1959.   However, domestic stabi-
lity will not prevail unless the fiscal position is brought into balance.
Moreover, a continuation of the restrictive credit policies will be
necessary and the present coffee-financing arrangements cannot be relaxed
since on present outlook the problem of coffee retention will grow bigger
rather than smaller.
vii.          Although the financial task over the next few years will by
no means be easy to accomplish, the outlook for Colombia's economic growth
has been strengthened.   Due to the reduced foreign exchange availabilities
for capital goods imports, investment and economic development in general
are likely to proceed at a slower pace than in the postwar decade.   However,
Colombia has sufficient dcomestic potentials to enable it to resume its econo-
mic development at a reasonable rate.   The recent improvement in political
conditions and government administration augurs well for a better utiliza-
tion of the country's resources than was achieved in 1956 and 1957.
Colombia's industrial development has provided it with a base from which the
country should be able to grov with less reliance on imports than was possible
in the past.   In addition, agriculture may become an important contributor
to economic growth as a result of the implementation of the recent land-



- iv -
utilization decree and other more positive government policies. This
would constitute an importanlt improvement over the past when agriculture
tended to lag behind other sectors of the economy.
viii.         In brief, the reversal of Cc<Ternment policies since Hay 1957
and the accoiiplisilmnents to date have improved the outlook for the ColomSbian
economr, de.spite the fact that over the next few years the expected relatively
low coffee export earnings ard the heavy debt service payments will require
that imports conitinue at a reduced level. Domestic pcl'cies have thus far
successfully coped with the problem of adjusting the economy to a lower level
of export earnings, Provided these policies continue, Colombia will have
sufficient foreign exchange resources for purchasing the necessary raw
materials and essential consumer goods as well as some capital goods imports
to support a moderate level of new investment. If Colombia follows sound
financial ani fiscal policies, the inherent strength of the economy and the
fall in the :Level of scheduled service on external debt after 1961 would
provide some margin for long-term external borrowing to finance high priority
development requirements. This margin could, however, be reduced or elimi-
nated if Colombia undertakes new private bank and supplier's credits to an
amount and on terms which would increase the present annual service burden
of that category of external debt.



I. ECO1Oi0IC GRGOTH
1.        Colombia's economic developi.ient, which iias proceeded wnith
rapid strides since l:'orld l.Jar II, i.- erhanced by an unusually strong
cornbination of favorable factors. AX r:rietv of different climates
and coils, for instrince, makes tlhe coi..try virtually self-sufficient
in all basic foodstuf'fs.  It has an ablundant supI)'ly of water, coal,
and hydroelectric potential.  It has ample oil resources which have
been developed to thie poi^t where Col.-.b-'ia, in s'dd-.tion to exporting
crude oil, is solf-sufficient in mosLt p'troleuri products,  Woroover, the
countrJ has an advanced entrepreneurial c'as: able to exploit its
resources.
2.        Transportation difficulties have long bDeen a principal
roadblock to Colormbi2.'s economic development.  High and extens;ve moun-
tain rarges  divide  thle country into separate population and production
centers, each with. its own principai city (such as Bogota, TTedollin,
Cali, Barranquilla, Ducarananga). Aware of the great need for
establishing modern links between these regirons, the Governmen-t in the
post-war decade emphasized ioprovement o-f- transportation in its develop-
ment efforts.  In recent years, expenditures on railroad and highIay
construction and rehabilitation have accounted for about one half of
capital outlays by the HTational Governrment. Aided by substantial
external loans, these efforts are resulting in the emergence of
Colombia as ar integrated econorTr. This integration is exerting a
powerful irrpact upori all sectors of tihe econoyr, which is difficult to
express in figures.    It has opened up rewi domestic markets which are
benefiting both agriculture and industry.
3.        Colombia's entrepreneurial class was quick to seize upon the
many new: opportunities resulting fror;.the wJidening of the don:estic
market.  This has been true particularly for manufacturing industry.
Besides the highway-building program, industry greatly benefited from
the steady expansion in electric pou=er generation (averaging more than
10% per annun in the last five years), and from the year-to-year increase
in foreign exchange earnings.  The coffee export boom enabled Colombia
to purchase tlhe cap'tal goods necessary to carry out a high level of
investment. Under these circumstances, the expansion of manufactlring
industry Tas the dynamic element in Colombia's post-war economic
development.  WhLile gross national product increased at the rapid pace
of 6-7% per annum in real terms, the increase in industrial.production
averaged more than 10, per annum.
4.        The expansion of manufacturing industry tookc place over a
broad front.  There was a steatr increase in production of those
industries w,.hich wzere already important at the end of World War II, such
as cement, textiles, i oes and beverages.  Toda-'r Colomabia is virtually
self-sufficient in textiles and the industry,, having kcept up with



- 2 -
modern technology and managerent, can hold its owm against foreign
suppliers.  The cement industry has expanded sufficiently that in recent
years it was able to export part of its output even though domestic demand
was at a high level.
5.        In addition, Colombian indu-+�r  entered many new fields since
1545. The relatively rapid rate of inL-istrial dev'lopment was, as else-
where, accompanied by increased imports of raw materials ard semi-finished
products. A significant part of the nelvcly establ shed iindustries are,
in fact, assembly industries relying hoavily on irported raterials.  The
rapialy growing metal fabricating indust-ry also ru�^' deperd heavily on
imports as loing as the performance of the Paz del Plo steel works
continues to be unsatisfactory.
6.        On the other hand, it is encouragirng to see that a growing
part of Colombian industryr is becoming less and less deperdent on irports.
This prccess is under way in several branches of 'ndustry such as, for
example, glass, paner, certain chemicals and building materials, food-
processing andi cann;ng.  Another important e.ample of the util.zation of
domestic raw material sources is the recent completion of a second oil
refinery (privately o-wned), which makes Colombia self-sufficient i'n most
petroleum products.  In some cases, newly established as well as existing
industries are actively;r seeking to reduce their dependence on ilmport
supplies by developing domestically-produced raw rnaterials.  This trend
toward reduction in the import component of industrual production is also
being hastened by the groiming importance of department stores seeking
domesticat ly-produced 1'oods for their outlets. It may be expected that
this process will further be intensified as a result of the present
scarcity and high cost of imports.
7.        The rapid development of manufacturing industry stands in
sharp contrast Jith the slow progress made in Colormbian agr-iculture.
Agriculture hlas been handicapped by a complexity of factors such as the
relatively low productivity of the small farm and the fact that large
parts of the fertile valley lands are taken up by cattle-grazing. As a
result, tootal agricultural production has barely kept up with population
increase and has tended to lag behind the growth of other sectors of the
econory. This general picture holds true even though some crops were
increased in response to industrial demand, or as a result of mechaniza-
tion, bet;ter seed selection, and increased use of fertilizers.
8.        In the last two years the increase in gross national product
has, in real terms, been considerably below the post-war average. The
environment for economic development became less favorable as a result of
political instability and generally poor goverilment administration.
Particularly toward the end of the previous Government (May 1957), there
were mary examples of public resources being mismaraged and used for
unproductive purposes.  IJisdirection of resources was accompanied by
intensification of inflationary pressures due to the budget deficit and
excessive creditt expansion.



-3-
9.        In addition, the decline in coffee earnings and the large-
scale capital flight in l155 and 1956 greatly reduced foreign exchange
resources available for imports. As imports of capital goods were
belatedly cut in 1957, industrial i.vestment and. expansion could not
continue at their previous pace. This factor has been largely responsible
for the recent slow-down in -the gro_i of manufacturing output and the
general slackening of the economr. I- is, moreover, likely to continue
as an importart dappening factor upon the level of investment which
ColonibLa will be able to undertake and, consequenrly, its economic growth
in the uext five years. With the present balance of naynents outlook,
Colombia w-ill have to limit its imports to the $>-Yi-2  m-llion range,
i.e., more or less the same as in the years l95- .2 and considerably
below the 19' -56 average of t$670 million.
10.       Although in the next few years economic growth will likely be
below t.],e post-war avera-e as a result of scarce foreign excharge
resources, Colombia's domestic potentials are still sufficient for a
reasonable pace of economic growth.  The recent improvements in political
conditions and government administration augur well for a better utiliza-
tion of the country's resources than was achieved in 1956-57. The present
government has, as discussed in the following chapters, takcen economic
affairs well in hand wJith beneficial effects for all sectors of the
econouy. Compared with recent rears there is a better chance that the
country ,will pursue policies designed to stimulate the development of
its own potentials on a realistic basis.  Moreover, from a longer-term
viewpoint Colombia's industrial development has provided it with a base
from which the country should be able to grow with less reliance on
imports than was possible in the past. Recent developments point to the
urgent need for strengthening the balance of payments by increasing
domestic production of rawr materials, finished goods and foodstuffs.
11.       An important step in this direction is being taken b-Y the
implerentation of the recent land-utilization decree, as a resilt of which
agriculture may become an important contributor to economic growth in the
years ahead. The decree, which largely follows the recommendatioris made
by an IBRD mission, will remove one of the principal roadbloclks to agri-
cultural development by starting to move cultivation of land from the
mountain slopes to the flat, rich valleys of Colombia, particularly the
Sabana of Bogota and the Cauca Valley. Within one year it is expected
that somre hO,OC0 HA will be converted from cattle-raising to new agricul-
tural uses. This conversion will be continued in subsequent years when
in addition prime quality land, now lying idle, will be cleared and
prepared for cultivation.  This will particularly benefit the development
of the Magdalena Valley.  Production in this important valley will also
be enhanced by the corpletion of the Magdalena railroad, important sections
of which are now nearing completion.



II.  INFLATION AND ITS COI'IROL
12.    In June 1957 the CoLombian Governmenat initiated a number of measures
in the monetary, fiscal and exchange fields with the purpose of stabilizing
the economy after two and a half years of -increasing inflation.  Within a
relatively short time these measures began to exercise a strongly stabilizing
effect upon the Colombian economy.  By the end of 1957 the Government had,
at least for the time being, come to grips with the problem of bringing
domestic inflationary pressures under corrnrol.  In th'; first half of 1958
the Government coi.tinued the vigorous credit control policy initiated in
1957.
13.    Until 1954, when the coffee boom came to an end, Colombia experienced
year-to-year increases in export earnings.  This increase in export earnings
was accor,mpanied by a steady expansion of domestic demand which remained
unchecked by effective monetary measures.  As export earnings declined in
1955, monetary policy continued to be lax and domestic demand exceeded by far
the level of goods which Colombia could produce at home or afford to purchase
abroad.   Domestic inflationary pressures were greatly intensified during
1955-57 as a result of continued bank credit expansion and government budget
deficits, as well as inflationary financing of coffee stocks in the 1954-55
season and again in 1957.
Credit Expan<ion
1h.    The developments in 1955-57 represent in many respects a sharp
reversal from those in the years immediately preceding.  It is true that
in the entire post-war decade a relatively rapid rate of economic develop-
ment in Colomibia had been accompanied by a continuous tendency towards
inflation.   The money supply has continuously tended to increase consider-
ably faster than could be justified by the rate of growth in real output.
In recent years, however, the problems of price instability and inflationary
Central Bank financing have been greatly intensified.  While in 1951-54
wholesale prices rose in total no more than 12%, the three following years
witnessed an increase of no less than 40% (Table 10).  Central Bank credit
expansion (i.e. rediscounts to banks, plus credit to the public and private
sectors) increased from an annual average of h5 million pesos in 1952-54 to
an annual average of 335 million pesos in 1955-57.  (See Table 8.)
15.    The marketing and financing of coffee played a central role in the
process of inflation.  As world coffee prices rose sharply there was hardly
any check upon the corresponding increase in domestic prices.  On the other
hand, when world market conditions weakened in 1954 and again in 1957, there
were considerable checks on the downward adjustment of domestic prices.
Incomes of coffee-growers were kept up by exchange rate adjustments and
domestic price maintenance.  This policy was supported by coffee stock
purchasing, largely financed with Central Bank credit.  Under these circum-



- 5 -
stances, exporters' income tended to lead incomes in the rest of the
economy in their steady upward trend in recent years.    Domestic coffee
prices tended to outpace the general price level.    For instance, between
1951 (a year of comparative stability) and t.he end of 1956, coffee prices
rose twice as fast a3 the general wholesal- price index. (See Table 10.)
This disparity between prices for coffee anx those for other goods induced
strong pressures for further upward movements of the general price level
which indeed took place in the course of 1957.
16.    The intensification of domestic inflationary prcssures in 1955 was
at first offset by a large balance of payments deficit and the increase in
money supply was only 5%.   In 1956,however, it exparded sharply by 25%.
17.    The new Government which took office in May 1957, recognized that
the domestic monetary situation had to be brought unlder control lest the
deterioration in Colombia's short-term foreign financial position continue.
It made a finn start with an effective monetary policy.    In June 1957
the authorities raised reserve recuirements and effectively lowered re-
discount quo-tas.  Rediscount rates were in effect increased deperdirg on
the tranche of the ouota being drawn upon.    The resulting credit stringency
was maintained by further measures in 1958.    In February 1958 rediscount
quotas of commercial banks were cut by 20 per cent and reserve requirements
for sight deposits were increased from 18 to 20 per cent.    In Piarch, re-
discount rates were doubled (the new rates range from 6 to 12 per cent
compared with the previous range from 3 to 6 per cent), and the reserve
requirements increased from 20 to 23 per cent (the increase becoming effec-
tive over a ,35-day period).
18.    The new monetary measures were reinforced by the domestic effects
of the settlement of the commercial backlog.    As the backlog was being
settled in the course of 1957, the peso counterpart of the overdue foreign
pavments was called in gradually.    The transfer of the amount involved
(some 800 million pesos) to the Central Bank exercised a poTerful contrac-
tionary effect upon the economy.    This tended to outweigh the expansionary
effect of Central Bank financing of the public sector and of coffee stocks.
19.    These policies caused the money supply to be stabilized during the
second half of 1957.   For the year 1957 as a whole the money supply
increased by 13 per cent compared with 25 per cent in 1956.    The expansion
of bank credit was slowed down drastically in 1957.    (The increase in 1957
amounted to 6 per cent compared with 22 per cent in 1956.)    The slcw-down
in monetary expansion came about as domestic prices rose sharply due to the
depreciation in the exchange rate.    The price increase intensified, of
course, the effect of the credit pinch.
20.    The overall monetary contraction had far-reaching effects upon the
economy, particularly on commerce, building activity and industrial invest-
ment.   The restrictive policies nevertheless met with wide support in



- 6 -
most quarters (including the Federation of H4erchants and the Manufacturers'
Association).   There is a broad understending of tihe need for the present
stabilization policies.
21.    Colombia's stabilization effort ca~nnot be complete without effective
action to finance tuhe retention of coffee in a non-inflationary manner.  In
the current year, exports are not likely to exceed 4.8 million bags.   This
will leave 1.2 -- 1.5 million bags to be kept off the market which, at the
current domestic price, amounts to 335 -- 4'0 million .osos, or 12-15 per
cent of the money supply.   Until April 195e the reten-tion of coffee was
almost entirely financed by Central Bank advances to the Coffee Federation.
Starting in April 1958, a number of measures were taken as a result of which
the retention of coffee can probably be financed in a non-inflationary
manner although Central Bank advances will still be necessary to even out
seasonal peaks.   Under the new scheme the coffee export rate was fixed at
6.10 pesos per dollar and the import rate is determined in an auction market.
The peso profits resulting from the exchange rate spread (some 270 million
pesos per annun on current, trends) will be used to finance coffee stocks.
In addition, a part -- initially fixed at 10 per cent but subsequently raised
to 15 per cent -- of export supply is set aside without compensation to
exporters.   The Government will also contribute some 60 million pesos of
budget funds in support of' the N'ational Coffee Fund.  These measures came
in addition to an existing 15 per cent export tax (introduced in June 1957),
the proceeds of which are used to service the credits contracted to settle
the backlog.
The Government Budget
22.    Central Bank financing of a substantial part of public expenditures
has been a principal cause of inflation in recent years.   During 1955 and
1956 the Yational Government received Central Bank support to the extent
of 374 million pesos, an amount equivalent to 15% of total government expen-
ditures and tvo-thirds of the increase in the money supply in these two
years.   Since 1955 the annual deficit has been in the 100-200 million
pesos range (see Tables 11 and 12).
23.    The budget has been unbalanced in recent years despite the fact that
Government revenue has been maintained at between 9 and 10 per cent of
national income (see Table 13).   Colombia's public revenue structure is
relatively strong, particularly since a large part of revenue is derived
f'rom income taxes (as much as 43 per cent of total).  On the other hand,
customs and import taxes also are an important revenue source.   This
proved to be an unstable source of income when, in the course of 1957,
imports were reduced and the system of graduated import taxes was replaced
by a single 10 per cent import tax earmarked for special debt servicing.
2L.    The optimism generated by the coffee boom, culminating in 195h,



- 7 -
together with the general tendencies of a free-spending military govern-
ment, caused government expenditures to rise considerably faster than
revenue.  W4hile government expenditures increased over a broad f'ront,
major increases took place in investment exeenditures and in military
outlays.   In one year alone (1955), nationa. government capital outlays
ircreased by 50% (see Table 14); much Or t'e increase wert into
construction and military projects which coald have been postponed without
great harm tc the economy.  I'iilitary expenditures, including army and
police, took up 27% of total 1956 and 1957 expenditures.   Reduction in
capital outlays in 1956 did not bring the budegetl into r, 'an^e since
military and currunt expenclitures continued to go up (':2c Table 15).
25.    Toward the end of 1956 the Government began serious attempts at
reducing expenditures or at least resisting any further increases.   These
efforts were intensified in ;'iay when the new Government was installed.
However, it proved impossible to bring about balance in 1957, a year when
the country experienced sharp internal price increases.   The increase  in
both military and civilian salaries granted in mid-1957, exerted an upward
pressure on the 'Level of government expenditures.  Moreover, the cuts in
unessential civilian expenditures were not accompanied 'by corresponding
reductions in current outlays by the military establishment, which actually
increased somewhat.
26.    The Government continued to have a budget deficit, but it did manage
to keep the increase in expenditures considerably below the rise in prices
and costs.   Expenditures in 1957 were about the same as in 1955 even though
the domestic price level was, on average, some 35% higher.   The reduction
in Government expenditures, in real terms, was largely achieved by cutting
out unessential investment projects.   Substantial contraction of' public
expenditures was, for instance, accomplished by drastically reducing
Government imports, cuttingf out most military construction, public housing
and Government building projects.   On the other hand, expenditures for
essential development projects, particularly in the transportation field,
were continued at only slightly reduced levels.   Thus the economy efforts
have resulted in a better utilization of available resources, thereby
mitigating the impact of the country's financial adversities upon its
economic development.   Even after the deterioration of recent years, the
Governmentts resources available for inves-tment projects continued to be
quite substantial (e.g. about 350 million pesos or some 2.5% of gross
national product in 1957).
27.    There is considerable uncertainty as to the outcome of the Government
budget in 1958.   It seems possible that the deficit will increase from
125 million pesos in 1957 to about 175 million in 1958.   However, this
being the year of elections and change in government, the budgetary progran
has been uncertain and is still subject to change.   Initially expenditures
(excluding debt amortization) were budgeted to increase from 1,275 million
pesos in 1957 to 1,325 million pesos in 1958.   The Government did not find
it possible to reduce relatively heavy defense expenditures even although
military imports were eliminated.   The most sizeable reduction was budgeted



-8-
in public works which, however, was more than offset by increases in
interest payments, education, agriculture, and public health (see Table 15).
However, in the course of the year the Gom-ernment incurred additional expen-
ditures such as the outlay to keep the barco Popular solvent and the outlay
in support of the National Coffee Fund.    It remains to be seen whether
these and other additional expenditures can be met by cuts in other items.
28.    Total revenues accruing to the budget are estimated to remain
constant at about 1,150 million pesos despite the increase in the donestic
price level.   The increase in certain 1950 revenue itekn, resulting from
the 20 per cent p;ice increase last year is being offset by reassignment of
import taxes.   These taxes (as distinguished from customs duties) were
used for ordinary Government expenditures until June 1957, when they were
earmarked for the servicing of arrears credits.
The Outlook for Domestic Financial Stability
29.    The dominant factors governing the near-term outlook for domestic
economic stability are the Government budget and the financing of coffee
stocks.   In 1958 the Goverynrient budget will exercise an expansionary effect
of same 250 million pesos, namely, as discussed above, a deficit on current
account of about 175 million pesos plus 70 million pesos ordinary external
debt amortization (assuming that interrial debt falling due will be renewed
by the Central Bank and that -- as is likely -- the servicing of arrears
credits will be met by the yield on the 15 per cent export tax and the 10 per
cent import tax).   The direction in which the budget will move after the
newly elected Government starts functioning in August 1958 is, of course,
difficult to foretell.    Undoubtedly the Government will continue to face
serious problems in limiting its consumption expenditures and necessary
investment outlays to its financial resources.    With continued pressures to
increase current expenditures, investment may, for some time to come, have to
be kept at the reduced level of last year.    While the Government may be
expected to maintain public investment at this level over a short period for
the sake of restraining total expenditures, over a longer period of time
there will be mounting pressures to increase capital outlays.    Were the
Government to exercise care in planning and coordinating current and
investment expenditures in the public sector, however, the funds available
for investment -- even at the present level (350 million pesos or some
2.5 per cent of GNP)-- should provide a satisfactory basis for financing
public projects needed to sustain economic growth.
30.    The financing of coffee stocks will cause seasonal monetary pressures
as the crop is caming to market.    However, seasonal fluctuations aside, the
present arrangements (15 per cent export tax, 15 per cent retention without
compensation, exchange rate profits used to finance coffee stocks in excess
of 15 per cent) should be sufficient to finance current coffee stocks.



- 9 -
In 1958, for example, exports i-rill probably reach some 4.8 million bags and
a total of 1.2-1.5 million bags will have to be retairned. Of the total
amount to be retained, about 720)000 bags (15 per cent of exports) will be
set aside without coTaoensation, leaving 4�000-780 o0o bags to be financed,
At the current domestic coffee price tais will amount to 135-220 million
pesos, or less than the exchange profit expected for 195B.
31,     The coffee financing arrangements are flexiblc and a number of
contingencies could lead to new inflationary coffee rot-.ati.on financing.
kinong these there are a rise in the domestic price of co:)ffee not associated
with a higher foreign price (e.g, caused by a lowering of the export tax),
a lowering of the percentage retained without compensation, and finally, a
narrowing of the exchange rate spread. Above all, the coffee stocks to be
financed may turn out to be bigger than assumed above.  On present outlook
for the coffee market, there is indeed a clhance that the problem of coffee
retention will grow bigger rather tlhan smaller over the next few years.
Thus, even though present arrangements are adequate, they may have to be
intensified in time rather than relaxed if coffee-fina.ncing will not once
more become a new source of domestic instability.
32.     The short-term domestic financial situation, as well as the external
position, of course, has been improved by the <Nl03 million loan to the
Central Bank for financing essential im-ports, contracted at the end of D'ay
1958. As discussed below, this operation is making possible a net addition
to imports of about 1p60 million in 1958 and $25 million in 1959. This will
absorb new purchasing power created by Government deficit financing and other
expansionary forces to the extent of about 420 million.pesos in 1958. In
1959, however, this amount will decline to 175 million pesos.
33.     It may be expected that in the period immediately ahead there will
be strong pressures for credit expansion. As mentioned above, private
bank credit expansion was slowed down drastically in the course of 1957 and
credit outstanding is now probably close to the level necessary to accommo-
date the economry at its present level of output and prices.  Tn the past
year demand for industrial credit abated partly because of imported capital
goods scarcities. IrJith increased availability of capital goods financed
by the new loan and more stable political conditions, industrial investment
--and with it, demand for industrial credit-may well turn u-ptard again.
Should there be a resumption of the credit expansion of 1955 and 1956
magnitudes, however, there would soon be an intensification of domestic
inflation 'iith serious complications for exchange stability and the existing
coffee-financing arrangements.
34.     A cautious policy toward industrial and commercial credit appears
particularly advisable since agricultural credit is most likely to increase
to facilitate the investmernts under the new land-use decree. The expansion



- 10 -
of agricultural credit is being induced by preferential rediscount rates
introduced by a December 1957 decree.    This decree granted preferential
rediscounts for agricultural loans withir the total rediscount ceilings.
However, it may prove to be difficult to ezpand agricultural credit by
cutting private credit for other purposes, and in the end the increase in
agricultural credit could easily lead to al:A over-all credit expansion.
35.    Tn summary, the shorter-term outlcok for the Colombian economy
is for a reasonatle degree of financial stability paa..3J;ularly because of
the current coffe'e-financing arrangements, the tight --ivate credit policy,
and the stabili2,z�g effect temporarily exercised by tile *103 million credits
for essential imports.   However, continuation of the domestic stability
expected in 1958 and the first half of 1959 will require better balance in
the fiscal position.   Moreover, the outlook of the coffee market indicates
the likelihood of increased coffee retention for the next few years.    Any
relaxation in the present arrangements would soon create a new threat to
the domestic economic situation.



III. TIHE BALAN CE OF PAYMENTS AND EXTERNAL
DEBT SlRVICING FROBLEIS
36.    During the coffee export boom culninating in 19-54, there was a sharp
increase in foreign exchange earnings anc in imports of both investment and
consumer goods.  IWhen coffee receipts derflined after 195h, imports were not
reduced.   They were permitted to continue at a virtually unchanged 2nd high
level for three years (195h-56).   The ba:.-ace of payments was further bur-
dened by a considerable short-term capital fLight cau-ed by political
uncertaint5, domestic inflation, and frequent changes in the foreign exchange
system.   As a consequence, gold and fore'cri exchange recerves fell sharply
(fram A269 millz'n in December 195L to %152 miilion o-e year later and
11?165 million in Lecemnber L1957) and there ias an accum.ulation of overdue
foreign exchange payments, the so-called backlog.    During this period,
Colombia also made a number of drawings on the IMF as a result of which it
has repayment obligations to the LIF totalling $35 million over 1958-61.
37.    The accunulated arrears amounted to about A310 million by December
1956, to which another 860 million was added in the first four months of
1957.   In the course of 1957, the Government negotiated various melium-
term credits to settle the backlog.   In March a start was made with the
settlement of the debts owed to banks and exporters in the U.S. on t:e
basis of 60% in l.~ash payments and 40% in notes maturing over 30 months.
After it became clear that Colombia could not meet the cash recqiremernts
under the3e arrangements, additional credits were contracted with the
Eximbank ($60 million) and U.S. ccmmercial banks (t27 million).    Most of
the debts with creditor countries other than the U.S. and Germany were
settled on the basis of 20% in cash and 80% in notes to be amortized during
1959-61.   1y the end of the year practically all of the backlog had been
settled.  ]In al!, Colombia had paid some $80 million out of its own re-
sources and had contracted some t2$O million in medium-term external
credits (see Pppendix I).
38.    In adldition to making a settlemlent of the backlog, Colombia introduced
a fundamental revision of its exchange system in June 1957.    The fixed rate
was replaced by a fluctuating rate, so that the Government was no longer
committed to support the unrealistic rate of 2.50 pesos per dollar.    Most
foreign exchange transactions were channeled through a foreign exchange
certificate market subject to Central Bank intervention.    A parallel free
market wras also established, mostly for capital transactions, tourism and
certain other invisibles, which is entirely free fram Central Bank inter-
ference.
39.    At the end of March 1958 the fluctuating certificate rate was
replaced by a fixed export rate of 6.10 pesos per dollar.    The import rate
continued to fluctuate but was henceforth determined in an auction market in
which the Central Bank is the sole supplier.    An additional element of
flexibility is maintained by the provision that the export rate will be



- 12 -
depreciated further when and if, after an initial 120-day period, the
import rate will be more than 60 points above the export rate for more than
four weeks.   (Since March 1958 the auction rate has fluctuated in a range
of about 6.50 - 7.50 pesos per dollar.)    The exchange system is supported
by imDort restrictions and prohibitions, but great re:li�nce is placed on
exchange rate changes.   The exchange syEtcr, nakes it possible for the
exchange rate and imports to adJust to the level of available foreign
exchange resources, thereby facilitating the maintenance of balance of
payments equilibrium.
40.    The severe import restrictions anO the reform of the foreign exchange
system together with the restrictivre monetary policy 'Wought about a drastic
reduction in imports in 1957 (from $657 million in 1956 to $480 million in
1957).   Hardest hit were capital goods and non-essential consumer goods
imports.   The import cut enabled Colombia to make 480 million cash payments
to reduce the backlog.
b1.    The seriousness of the balance of payments problem facing the
Colombian authorities at the beginning of 1958 was due to two principal
factors, namely, the con+tinuing decline in coffee earnings and the heavy
debt burden resulting from the re-financing of the backlog.    The prospec-
tive decline in coffee exports earnings in 1958-1959 will cause a loss of
foreign exchange receipts of $155 million in comparison with 1956 as is
evident from the following coffee export data:
Million     Million          Price
Bags        U.S.$       (cents per lb.)
1956                      5.1           480            74
1957                       4.8          390            60
1958 (projected)          4.8           325          50-55
1959 (projected)        4.8-5           325            50
On the basis of the present outlook, Colombia's coffee exports receipts
will remain well below the $h00 million level during the next several years
even if international markceting arrangements prevent a sharp decline in
coffee prices. 1/
42.    The way in which the arrears were refinanced left Colombia with a
heavy debt repayment burden during 1958 and the next few years when export
earnings are expected to increase only slightly above the 1958 level.    At
g1 Cf. "The Coffee Problem"', EC-610, April 8, 1958.



- 13 -
the start of' 1958 the unpaid balance on credits contrected to settle the
arrears amotmted to .t214 million.   This .rnount was scheduled to be repaid
during 1958-61.   The repayment burden -!ould have been heaviest during 1958
and 1959 as can be seen from the following -lobal data on debt service
payments:
Service Payments on External Debt 1/
(millions of dcol.'.ars)
Year        Total.               Arrears credits         Other debt
1956         36.7                       _                    36.7
1957         90.1                     42.8                   47.4
1958        117.8                     80.4                   37.4
1959        106.9                     70.6                   36.3
1960         72.0                     43.7                   28.
1961         58.8                     34.8                   24.0
1962         19.7                      1.1                   18.6
13.    The combination of these two adverse factors - the decline in foreign
exchange earnings and the heavy debt reoayments - required that imports be
reduced to miinimal levels.  In the absence of additional credits to allev-
iate the situation, imports would have had to be cut sharply belowT the
already low 1957 level:
Invaorts
(millions or dollars)
1953-55                                   632
1956                                      657
1957                                      48o
1958)                                    (330
1959) permitted level                    (350
In fact, during the first part of 1958 further import cuts were made.    The
authorities continued to intensify import restrictions and permitted a
further depreciation of the exchange rate.    In the first four months import
demand -- as measured by import licenses issued -- ran at an annual rate of
only $280 million (compared with $l00 million in the corresponding months
of 1957).
1/   Not including service on recent balance of payments borrowing of
$103 million.   Total service including this borrowing is shown at
the end of this Section and Table 2.
02/ In absence of additional credits.



14.    In the absence of additional external credit arrangements, imports
of consumer goods would have had to be restricted for some time to the bare
essentials and imports of capital goods and spare parts for machinery cut by
at least one half:
.953-55       1958 Imports
A.v(zerage   (In absence of
additional credits)
(Millions of dollars)
Raw Materi-s artd
Consumer P ems                         379              210
Essential                           271
Less Essential                      108
Capital Goods                          253              120
Machinery and Elec.
Eouipment                        157
Transportation
Equipment                         96
Total Imports                          632              330
The abave adjustments woul(d probably have been possible without seriously
disrupting industrial operations.   Little if any foreign exchange would
have remained available, however, to support new investment activities other
than those financed under existing external credits such as IBRD loans for
the railroads and highways.   Not only would tne authorities have had to
prohibit imports of most construction materials but the foreign exchange
position would not; permit invrestment in new industrial plant.  Above all,
no foreign exchange would have been available for road transportation
equipment, tractors and other agricultural machinery.
45.    Even though the authorities succeeded -- as noted above -- in keeping
imports in the first part of 1958 at the level necessary to meet existing
debt obligations, they felt thato imports at this minimal level would lead to
an unmanageable situation and would severely impair even a moderate growth of
Colombials industrial and agricultural sectors.   To alleviate the situation
in 1958 and 1959, they obtained credits totalling $103 million -- $78 million
frcm the Eximbank and $25 million from thirteen U.S. ccmmercial banks. These
credits can be disbursed over a 12-month period so as to ensure that total
licensed imports will run at a monthly rate of A;28 million.  On a net basis
-- after allowing for service payments on these new credits -- they will
permit imports to be increased by some A60 million in 1958 and $25 million
in 1959.   (It is also possible that somewhat less will be disbursed in 1958
and somewhat more in 1959.)   Consequently total imports (i.e. licensed



imports plus those financed by petroleum companies and external credits
such as IBRD loans, scme Point IV and sLppliers' credits) can reach about
1390 million in 1958 and $375 million in 1959.    The new credits will
enable Colombia to avoid whatever raw material shortages might otherwise
have arisen, to import agricultural machinery and transportation equipment,
and to underltake a moderate amount of new additions to industrial plant.
h6.    At a total import level of around $390 million per annum, there will
be a continued need for relatively severe inport restrictions and exchange
rate policy, in addition to cautious fiscal and credit policies.    At this
level imports of essential consumer goods and raw materials can total some
?240 million, leaving around $150 million for machinery, transportation
equipment and spare parts.   Imports of consumer goods and raw materials
totalling V2Wi0 million are considerably below the 1953-55 level (see the
Table in paragraph 44 above) and will probably leave a relatively large
segment of consumer import demand unsatisfied (including most consumer
durables).   Moreover, of the A150 million of capital goods (40% below the
1953-55 average), about one half will probably be necessary for machinery
replacements, renewals and spare parts.    This leaves only a moderate amount
(about M75 million) for new capital goods including industrial machinery,
transportation ecqipment and agricultural machinery.    Provided present
stabilization policies are continued, Colombia's exchange resources in 1958
and 1959 will be sufficient to keep the economy in full operation, and in
addition to import some capital goods in support of a moderate level of new
investment.
47.    The $103 million credits for essential imports will begin adding
to debt service payments starting in December 1958.    These credits carry
a 5 per cent rate of interest; the $25 million obtained from ccmmercial
banks is to be amortized in 6 semi-annual instalments beginning December
1958 and the $68 million in ten semi-annual instalments beginning in
December 1961..  Thus, the servicing of the $68 million ExImbank credit
will begin after most arrears credits have been repaid (cf. Table 3).
48.    As is clear from the following Table, total debt service falls
rapidly after 1959, and the ratio of debt service to projected foreign
exchange earnings will decline from 25 per cent in 1958-59 to 15 per
cent in 1960-61 and 7 per cent in 1962.



- 16 -
Service Payments on External Debt
(millions of u.S.$)
Foreign                  Debt Service                     Total Debt
Exchange                                                  Service as
Year    Earnings                                   Arrears           a % of
Total    Long    Private    Credits and        Foreign
Term    Bank &     $103 million      Exchange
Debt    Supplier   credits for       Earnings
Credits     essential
imports
1956      6iff        3607    16.9      19.8          -               5.7
1957      56o         99.l   18.0      29.5         l'8              16.1
1958      485        12h.5    1f839     18.5         8781             25.6
1959      495        1202.    18.9      17A8         83A8            24.2
1960      505         84.8    18,3      1031         56n5             16.8
1961      520         774     16.6      10.0         50c8             14.9
1962      535         W,O0    14.0      10.0         20.0              8.2
1963      545         42.0    13.9       10.0        18.1              7.7
1964      560         38.7    11.h      10.0         17.3              6.8
1965      570         37.2    10.6      10.0         16.6              6.5
Not including Colombia's repayment obligations to the IMF.,
amounting to 835 million (see footnote to Table 2).
However, in 1960 and following years the decline in debt service will not
result in a corresponding increase in resources available for imports, as
disbursement of the recently contracted credits for essential imports will
have been completed. Total export earnings will experience only a moderate
growth in the years till 1965, primarily as a result of the anticipated
decline in coffee prices. During these years no major expansion in export
volume other than coffee is foreseen. Colombia's second foreign exchange
earner, the petroleum industry, appears to be operating under difficult
geological conditions.  It enjoys, however, relatively favorable tax treat-
ment, and may be expected to expand gradually.  Thus, besides serving the
expanding domestic mark2t, it will provide for only a moderate increase
in foreign exchange earnings. Minor exports, of which bananas and gold



- 17 -
have been the most impoortant, will probably also provide for a slowly
rising contribution to export earnings, particularly if' Colombia continues
its present realistic exchange rate policy. There is, however, no evidence
at present, tlhat over the n.ext 5-10 years there will be a major break-
through in non-coffee exports. In all, total exports and other current
foreign exchange earnings, after the decline in 1957 and 1958, are expected
to show but a very gradual increase to some $570 million in 1965 (compared
with 0650 million in 1956 and 1560 million in 1957-see Table 19).   On this
basis, foreign exchange available for imports will, as calculated in Table
18, remain at the 1958-59 level in 1960 and 1961, and increase only gradually
thereafter.



IV.   CREnETWORTHIMFSS
h9.    As discussed in the previous section, Colombia's foreign exchange
earnings over the next few years wrill - after servicing existing debt --
not permit an increase in imports during 1959-61 and only a gradual increase
in subsequent years.   Provided that adequate policies are pursued -- in
both the monetary and budgetary field -- the reduced level of imports will
permit a moderate rate of economic growth.    However the relatively tight
payments situation will tend to limit Colombia's ability to service additional
exterrnal debt, with only moderate additions to debt service appearing possible
after 1961.
50.    The decline in foreign exchange resources available for inports since
1�57 made drabtic adjustre!nts in Colombia's economy necessary.   Several
measures were taken to accomplish the necessary adjustments, including:
(a) :1:easures to ccpe with the problem of coffee retention in a
rion-tirflat-:;n'.rv manner;
(b)  A progressively rectrictive private credit policy;   and
(c)  Lh  iuntroduction of a free exchange rate mechzinism facilitating
bcfrri2e of p .yi:TIents equilibrilm'n
51.    The Government budget deficit continues, however, as a principal
source of monetary expans.on.   For the time being new purchasing pot-:r
created by defici-; fine--ncing is absorbed by the `m.03 million credits to the
Central Balk for essential irnorts.    Domestic stability and continued
adjustment to the low level of foreign exchange resources will, however,
require the fiscal position to be brought into balance.    The foreign credits
which have been secured only provide some time in which to bring the fiscal
situation under control.
52.    In addition to the improved outlook for financial stability, the
prospects for economic growth have also been strengthencd.    After the
drastic slow-down in 1957-58, Colombia should be able to resume its economic
growth at a moderate pace.   Due to the reduced foreign exchange resources
available for imports, economic growth will proceed at a slower pace than in
the post-w ar decade.   On the other hand, the recent improvement in   politi-
cal cr,nditions 2nd government administration augurs well for a better
ut2-i'-. L%on of the country?s resources than was achieved in 1956 and 1957.
Colcmtia's industrial development has provided it with a base from which the
courtry should be able to grow with less reliance an imports than was
possible in the past.   In addition, agriculture may become an important
contributor to economic growth as a result of the implementation of the
rece;-t 1pn-.utilization decree and other mo-re positive governmient policies.
This wvould constitu3te .n important improvement over the past when agricul-
ture tended to lag behiad other sectors of the economy.



- 19 -
51t.    Anticipated foreign exchange resources will not permit imports in
excess of `390 million during 1958-61. At this level cautious financial
and fiscal policies will be necessary to avoid dissipating scarce foreign
exchange resources and to avoid the accumulation of new debt. Provided
present stabilization policies are continued-and steps will be taken to
bring balance in the fiscal position-the country will be able to utilize
available imports for keeping the economy in full operation and in addi-
tion, to maintain a moderate rate of economic growth.
55.     ThusP the reversal of Government policies since May 1957 and the
accomplishments to date have improved the outlook for the Colombian econom.y,
despite the fact that over the next few years the expected relatively low
coffee export earnings and the heavy debt service payments will require that
imports continue at a reduced level.  Domestic policies have thus far
successfully coped wfith the problem of adjusting the econonry to a lower
level of export earnings, Provided these policies continue Colombia will
have sufficient foreign exchange resources to purchase the necessary raw
materials ancd essential consumer goods as well as some capital goods imports
to support a mode.rate level of new investment. If Colombia follows sound
financial and fis;;al policies, the inherent strength of the economy a:Id the
fall in the -Lev.-J. of scheduiled service on external debt after 1961 would
provi.de some margin for .o-ng-term external borrowing to finance high
priority development requirements.  This margin could, however, be reduced or
eliminated if Colombia urdertakes new-. private bank and supplier's cre-lits
to an amount and on terms which would increase the present annual service
burden of that category of external debt.



APPENDIX I
Settlement of the Backlog
The backlog of both commercial and non-commercial payments at
the end of 1956 has been estimated at around $310 million (net of
payments effected via the free market). In the first four months of
1957, pryments for imports ordered in the second half of 1956 were
falling due, adding new arrears to the backlog.
The total of approved foreign exchange payments waiting to be
effectedI at the end of 1956 together with those accumulated during
January-April, 1957, amXounted to -$463.7 million.  The actual foreign
exchange debt of Colomrbia to other countries, however, never reached
this toltal, -ince  ,[ring the first- four months of 1957 payments were
made on the backlog; outst'anding at the end of 1956, while in addition
some $.9C) million o:' the h46; million "backlog" had been paid Twith free
market doollars.  As of December 5, 1957, arrangements for the settle-
ment of -311 but some $21 million of the backlog had beeni made.   Th?
comilpo-it_cn ocf the settled and the unsettled parts of the backlog may
be sunmarized as follow-s:
US$' Million Equivalent
Commercial backlog, April 30, 1957 ..............           391.2
Non-commercial backlog, April 30, 1957:
Freight payments ................       ........  21.0
Capital and dividends..... ............,*.*307            51.7
Total bELcklog settled as of December 5, 1957....           41h2.9
Remaining unsettled as of December 5, 1957 (of-
ficial estimates):
Debt with:  U.S. (accumulated in 1956) .......   8.9
U.S. (accumulated Jan.-April/57).   5.2
Switzerland ...................      2.6
Canada ....                          1.1
Othler. ... ...               .     3.0       20.8
Total Backlog ....................... 0                     463.7



- 21 -
The various arrangements by which $442.9 million of arrears
were settled may be summarized as follows:
US$ 1lillion Equivalent
Foreign exchange payments made by Colombian
importers and banks acting on their own
account with dollars purchase in the free
market prior to May 1,1957 i      .   ....................   89.5
Medium-term credits contracted to refinance
arrears:
30-month notes with U.S. (authorized) ......... 85.0
30-month notes, other countries .............. & 11.7
Oil  ccmpanies  .................................  18.5
Shiporing copmpanies..               .      ..... 12.0
European creditors. ........................... a 27a5
Settl' ment of caDital and dividends ........... * 6.8
Eximbank loan ................................. 60.0
Credit; frorm U.S. commnercial banks ............ . 27b0
Total clrddits..     .    . ................... 248 5
Settlement in coffec shipments made
with a .wredish comnany .................... 3.4
Totrl notes issued    /..................**.*               251.9
SettlemnerLts made in pesos with foreign creditors.          21.5
Settlements in foreign exchange from the
Central B3ank's own resources .....................          80,0
Total Settulements .........................    . *         4 *42.9
In computing the service payments on credits contracted to
settle the arrears, it has been assumed that the full $85 million of
30-month notes authorized in the U.S. will be utilized and that the
unsettled debt with Canada, Switzerland and other non-U.S. creditors
will be financed on the same terms as have been agreed on with most
Subsequently settled by the Stabilization Fund in pesos at 4.95
per U.S. dollar. Colombian banks, however, were reimbursed in
dollar cash and notes to the extent of $8.2 million.
/ As of December 5, 1957, $25 million was unutilized, namely,
,t15.6 million of 30-.month notes and $9.4 million of the Eximbank
Credit.



- 22 -
European creditors (20% in cash, 80% in 36-month notes beginning
February 1959). Accordingly the following external public debts to
re-finance the arrears have been added to the debts which were out-
standing as of December 1956:
(1)  $60 million Eximbank credit, bearing interest
at 5- 2% per annum, repayable in 12 quarterly
instalments beginning December 1958;
(2)  $27 million from U.S. commercial banks, at 4%
interest plus 12% commission for discounting
the bills, repayable in 6 quarterly instalments
beginning December 1957;
(3) $85 million in notes issued to U.S. banks and
expcrters, bearing interest at 4% per annum,
repayable in 30 monthly instalments begirning
April 1957;
(4) $11.7 mill.ion in 30-month notes issued to
banks in Germany ($8.9 million), Canada ($0.9
million), Sweden ($1.3 million), Austria
($0.3 million), and Switzerland ($0.3 mil-
lion)0 The terms are the same as for the
notes mentioned under the previous point;
(5) $18.5 million credit from oil companies
bearing.no interest and repayable in 48
equal monthly instalments beginning
August 1, 1957;
(6) Credits from shipping companies, as follows:
(a)  $5.3 million, bearing no interest,
repayable in 16 equal monthly
instalments beginning September 1, 1957
(Gran Colombian Merchant Fleet),
(b)  $1.8 million, bearing no interest, re-
payable in 9 equal monthly instalments
beginning December 1, 1957 (Gran
Colombian Nlerchant Fleet),
(c)  $4,862,000 bearing no interest, re-
payable in 10 equal monthly instalments
beginning September 1, 1957 (other
companies);
(7) Settlement of arrears in transfers of capital
and dividends: $8,543,000 notes bearing
irterest at 5% per annum, repayable in 36 equal
monthly instalments beginning February 1959;



- 23 -
(8)  Credits received from European and other
non-U.S. creditors: $32.8 million in notes
bearing interest at 5' per annum And repay-
able in 36 equal monthly instalments
beginning February 1959. This represents
settlement of 80% of the following debts with
countries which have accepted 20% in cash:
$3.2 million (Sweden), $2.6 million (Nether-
lands), $3.5 million (Belgium), $5.0 million
(France), $10,0 million (Germany), and $10.0
million (U.K.). It also includes similar
credits assumed to be contracted in settlement
of debts with Switzerland ($2,6 million),
Canada ($1.1 million), and other countries
(?3.0 million).  In all, the debts subject to
the 20-80 settlement amount to $410 millicn.
The total of credits contracted (or assured to be contracted)
for the settlement of the backlog amounts to dV`255-5 million of which
$2M8.5 million had been definitely contracted and. $223.5 million
utilized as cf December 5, 1957. The part of these credits applied
to the eettle.r .ent of the backlog outstanding at the end of 1955 c nnot
be exactly stated. However, for the purpose of 1957 balance of per-
ments accouititing, it hlas been assumed that of the $310 million ban- -log
at the end of 1956 all but $15 million has been settled as follows,-.
US$ Million Equivalent
Medium-term credits ..................        200
Settlements made in pesos with
foreign creditors....... ......***             15
Settled in foreign exchange with
the Central Bmnkts own resources .....         80
Total Settlement .....................        295



STATISTICA-L APPENDIX
Tables 1 - 19 inclusive



T.ABL,E 1
TFY -~~t oUBLIC DEBT: BOICIB CU3STAHDIIM, 1950-65
.TlifiTons OI' uisY)
Credits
Credits     contracted
F,xport-    Private      Contracted  i.n 1958 to  Other
Debt Outstanding        Total       'ublicly                 Import      Bank and     in 1957 to  finance
issued       IBRD        D Bank  2/  Suppliers    settle the  essential
Bonds        Loans       Loans       Credits      arrears     imports
Past
January 1, 1950         155.2         90.2          5.0        39.7        19.9          _     -                0.4
1951         157.0         84.6         11.1        38.5        22.8          -           -          0.1
1952         211.5         81.9         30.0        55.7        43.9          -           -
1953         260.6         78.5         53.9        59.5        68.7          -           -
1954         250.0         75.5         67.2        36.2        71.1          -           -
1955         260.9         72.4         69.8        33.0        85.7          -           -
1956         274.1         69.8         86.7        23.7        38.8          -           -
1957         267.8         65.2         98.2        22.3        82.1          -           -
t'rojected
January 1, 1958         442.2         61.3         92.6        18.2        56.0        214.1         -
1959         437.9         57^5         86,2        14.2        39.8        141.4        98.8         -
1960         333.7         53.5         78.2        11.6        24.0         75.8        90.5         -
1961         261.0         49.5         69.8         9.6        14.9         35.0        82.2         -
1962         194.9         45.2         62.5         7.6         8.2          1.1        70.2         -
1963         162.3         40 .7        57.3         5.9         3.8                     54.6         -
1964         134.5         37.3         51.9         4.2         2.1                     39.0         -
1965         110.1         34.1         48.4         2.4         1.3                     23.4         -
v/ Including   'articioations.
2/ Excluding Exnort-Import Bank credits to settle the arrears ('I$6@ million) and to finance essential imports
($68 million, May 1958).
Sources:   IBIED Statistics Division on the basis of data received from the Banco de la Resublica. Balances com-
puted for debt obligations as of the end of 1956 except for credits contracted to settle the arrears
(cf. Annendix 1) and for the Mliay 1958 credits of $103 million to finance essential imports.



TABLE 2
EXTER1NAL PUBLIC DEBT: ESTIIf I.ED SERVICE  1950-65
i i -ns 0of U.S. s
CrediGs
Cont racted
to settle
the Arrears All debt             Debt Service in Relation to
(1957) and Except               Foreim gn xcharge Earnings
Export-  'rivate        to finance  Credits   Current       (percen
Publicly          Import   Bank and       essential  Contracted Foreign   All    Credits for All
Issued    IBRD    Bank    Sup-)liers'    imports     to settle Exchange   Debt   Settling the Other
Year      Total   Bonds     Loans ' Loans    Credits  Other (1958) -2/ the Aears Earnings            Arrears
'ast
1950     10.9     3.3      0.1      4.2     2.9     0.3        -       10.9      441       2.5        -       2.5
1951     13.5     3.7      0.3      4.8     4.6     0.1        -       13.5      467       2.9        -       2.9
1952     16.4     3.9      1.7      5.2      5.5     -         -       16.4      483       3.4        -       3.4
1953     29.4     3.8      2.2     13.0    10.4      -         -       29.4      621       4.7        -       4.7
1954     27.8     3.9      3.8      6.3    13.8      -         -       27.8      668       4.2        -       4.2
1955     38.2     4.0      5.6      6.0    22.7      -         -       38.2      615       6.2        -       6.2
1956     36.7     3.7      7.3      5.9    1.9.8     -         -       36.7      646       5.7        -       5.7
1957     90.1     4.2      8.8      5.0     29.5     -       42.8      47.4      560      16.1       8.4      7.7
.rojected
1958    124.5     4.0     10.2      4.7    18.5      -       87.1      37.4      485      25.6      18.0      7.6
1959    120.1     4.0     11.8      3.1    17.4      -       83.8      36.3      495      24.2      17.3      6.9
1960     84.8     3.9     11.9      2.5    10.1      -       56.5      28.3      505      16.8      11.2      5.6
1961     74.8     3.8     10.5      2.3     7.4      -       50.8      24.0      520      14.3       9.8      4.5
1962     38.6     3.8      8.1      2.1     4.6      -       20.0      18.6      535       7.2       3.7      3.5
1963     33.8     3.8      8.1      2.0     1.3      -       18.1      15.7      545       6.2       3.3      2.9
1964     29.1     3.6      5.9      1.9     0.3      -       17.3      11.8      560       5.2       3.1      2.1
1965     27.5     3.6      5.9      1.1      0.3     -       16.6      10.9      570       4.8       2.9      2.9
1/ this table does not indude Colombia's repaymnrrt obligations to the IMF. These amount to pi35 million, falling
due in December 1958 ($5 million), June 1959 ($5 million), December 1959 ($10 million), December 1960 ($  million)
and February 1961 ($10 million). Under the present stand-by agreement with the IMF, which remains effective until
June 1959, Colombia nay refinance, for one-year periods, its obligations as they fall due, ard draw an additional
$15 million.



Yol1e 2 (contld)
/ Including participations.
3/ Cf. Appendix 1.
Sources and Notes:   IBRD Statistics Division on the basis of data supplied by the Banco de la Reoublica.
Current Foreign Exchange Earnings af Table 19.



TXBLE 3
EXTERNAL PTBLIC DEBT:  ESTIMATED SERVICE PAYMENTS ON
DEBTS C::' I-,T   T, D S1,TTSE TT1Z ARKEAES
Ontililons of US@)
Export-                              Credits   Credito
Import          U.S.     Credits    from       to settle
t      Total Credits     '   30-month      Bank         commercial  from oil    European   arrears on
tAmorti-                 I    Notes        Credit     banks' credit & shipping & other     capital &
Per cd        tzation   Interest Total   (396,700,000) ($6 oo=0,00c) ($27,000,000) companies  creditors  dividends
1st half 1957       90-      0.9    10.6        10,6                        -          -
2nd half 1957      30.0      2,2    32.1        20.8          -             5.9        5.4          -
Full year 1957     39.6      3.1    42.8         31.4         -             5.9        5.4               -
1st half 1958      37.8      4.2    41.9        20.5          1.6          10.4        8.4         0.8         0.2
2nd half 1958      34.9      3.5    38.5        20,1          2.7          10.0        4.7         0.8         0,2
Full year 1958     72.7      7.7    80.4         4F,.6        4.3          20.4       13,1         1.6         0.3
1st half 1959      38.0      2.9    40.9        19.7         10.6           1.8        2.3         5.3         1.1
2nd half 1959      27.6      2.1    29.7          9.7        10.3           -          2.3         6.1         1.3
Full year 1959     65.6      5.0    70.6         29,4        20.9           1.8        4.6        11.4         2.4
1960               40.8      2.9    43.7                     24.8                      4.6        11.8         2.5
1961               33.9      0.9    34.8                     18.5                      2.7        11.3         2.3
1962                1.1       -      1.1                                                           0.9         0,2
Sources:  Cf. Table 1 and A-ppendix I.



TABLE 4
GRCSS NAT'IONAL PP&ADUCT IUV�Z?PWIT AND Q)NSUMPTION  1948S7
(millions of pesos
1948     1949    1950     1951     1952     1953     1954     1955    1956     1957
Gross Nationnl Product        4424     5267     6316     7112     7864    8903    10338    11279    12200   13400
% Increase in Real Terms    4.8    11.4      3.6      5.1      8.8     6.1      5.2      8        48       2.0
Gross Domestic Investment       428     496      649      916      880    1189     1365     1413
% of GNP                    9.7     9.4     10.3     12.9     11.2    13.4     13.2     12.5
Personal Consumption
Expenditures -                 3642    4182     5016     5413     6042     6614    7708     8204
Gover nment Purcha ses of
Goods and Services -           485      523      656      832      932    1123     1414     2009
Net Foreign Investment -     - 131.      65     -  5     - 49       10    - 23    - 149    - 348
Swurces and Notes: Banco de la Republica, 1948-55. The 1956 and 1957 estimates are based on the assumption that
real product increased by 4% in 1956 and 2% in 1957, and that price increases affected gross product by 4% in 1956
and 8% in 1957.
Government purchases of goods and services include investrrert goods. The latter amounted to 541 million pesos
in 1955 but no separate figures are available for earlier years. According to the expenditures classification of the
Budget Bureau, Central government capital exTenditures anounted to 570 million pesos in 1955. Capital outlays by
departments and municipalities may be estimated at sona 220 million  pesos (cf. a compilation of data in the IBED
report "A Program fcr Colombian Public Investment and External Bcrrowing", Feb. 1956). These public investnent data
are different from those used in the national inccme accounts in that, amorg others, the latter exclude maintenance
expenditures. AltogetYer gross private and public investment amounted to 2,000-2,200 million pesos or 18-19 percent
of GNP in 1955.  This percent age was probably somewhat lower in 1956 due to the decline in public investment outlays
(cf. Table 14 ).



TABLE 5
INDICATORS CF PrRDUCTIO.' M_ECONOMIC ACTIVITY, 1951-1957
(19)- = 1W20)
Items                             1951       1952       1953       1954       1955       1956       1957
Electric Power Generation           100.0      107,6      121,9      136.4      153.7      171.5      190.5
Cement                              100.0      108.8      134.8      148,6      161.5      189.8      190.0
Building Activity                   100.0      120.3      146,8      150.1      165.8      214.0      218.8
Crude Oil                           100.0      113.6      115.8      117.5      116.7      129.7      134.4
Gasoline                            100.0      lo806      106.1      135.5      237.9      260.6      256.2
Transport:
Railroads                       100.0       99.5      101.3      102.6      101.6      103.6       na.
Air freight                     1.00.0      88,9       88.8       95.5       89.0       90.3       79.6
Rio Magdalena traffic           100.0       94.4       99.0      104.6      -18.0      122.0      112.7
Dept. Stc e Sales 1                 100.0      113,5      126.2      139,8      128,8      137.7      119.e
2/ Deflated by consumer prices (employees, Bogota)
Sources: Monthly Stat. Bulletin and Revista, Banco de la Republica. 1957 data are averages for first 9 months,
except electric power generaticn (8 months) and transport (7 months).



TABLE 6
AGRICULTrJRAL PRO"VTTON, j251-1957
(thousands of metric tons)
1951       1952       1953       1954      1955       1956       1957
Barley                                 56        61         65         60         65         70         75
Cotton (fibre)                          6.5      10.6       17.0       27.9       24.7       22.5       20.6
Sugar (mill output)                   146.4     142.0      148.6      217.9        -        254.8
Cacao                                  -                -                                    1
Corn                                   _           _                             740        640        710
Rice (milled)                          _           _                             300        220        290
Potatoes                               -           -                             630        400        680
Beans                                                                             69         50         72
Wheat                                  -                                         160        125        150
Tobacco                                                                           32         37         38
Cattle C OMO slaughtered heads)      1431       1414       1336       1313      1331       1522
Pigs   ( "        "           )       576         613        700       783       832        786
1/ Average for 1955-57. Production is declining.
-   Means "not available".
Sources: Based on estimates prepared in the Ministry of Agricultube.
Cotton production: Cotton Development Institute.
Meat production: Bulletin of Statistics.



TABLE 7
MONETARY DEVELOPMENTS: SUM4IARY OF I-RINCTPAL FACTORS AFFECrING THE MONEY SUPPLY
(m',s~ns of pesos)
1952      1953      1954      1955      1956         1957
1.  Changes in ForeLgn Exchame Position            77.5      65.0     100.0     -295.0    _ 10.0       -3`t0
2.  Central Bank Operaticns                        89.2      26.0      93.8       52.3     256.0        023 .
a. Financing of Public Sector               19. 5    103,4    - 15.2      162.8     236.6        4
b.  Credit to Private Sector                69.7    - 77.4     109.0    - 110.5      19.4        362.g
(incl. Nat'l Coffee Federation)
3. Expansion of Bank Credit                       177.7     173.8     362.9      399.9     379.1         83.5
Private Ccmmercial Banks                    85.5     104.4     223.2      258.1     312.4         g3.2
Government Banks                            92.2      69.4     139.7      14a.8      66.7          0.3
4. Increase in Savings Accounts and
Bank Capital                                 - 96.1    - 80.1    -212.6     -173.1    -191.6       -181.6
a. Savings Depcsits                       - 37.8    - 30.0    - 56.-     - 45.0    -797 57 _8-4
b.  Capital and Reserves of Banks         - 58.3    - 50.1    -156.0     -128.1    -132.0       -113.2
5.  Other Factors                                - 50*2      69.5     151.4       79.1     386.1       -311.2
6.  Changes in Supply o _Funds                    198.1     254.2     495.5      163.2     819.6
a.  Term Deposits                            8.6      14.9     197.3       76.3     338.1       -2TC.7
b.  Changes in Money Supply                189.5     239,3     298.2       86.9     481.5        329.1
(Current Account Deposits,
Notes and Currency)
Sources and Notes (on foUloWirg page)



Table 7 (contld)
Sources and Notes:
Factors with a contractionary effect have been designated
vith a minus sign. Computed from data published by the Banco de la
Republica exoept for lines 1 and 5. Line 1, cf. Table 16 (Balance
of Payments), Changes in Central Bank position, converted at 2.50 pesos
per U.S. dollar until June, 1957; for 1957 the foreign exchange
reserve position of the Central Bank has been used. After June 1957,
the conversion rate used is the average certificate rate and allowance
has been made for the difference between effective buying and selling
rates of exchange. Line 5 is a balancing item reflecting operations
not taken ii,to account elsewhere such as certain security transactions
and various inter-bank operations. Line 5 also includes certain trans-
actions raported under "non-monqtary liabilities" in the Central Bank
balance sheet? particularly in 1956 and 1957. The important positive
(expansionary) item of line 5 in 1956 largely reflects the peso
counterpart of the commercial backlog accumulation; the calling in of
this peso counterpart in 1957 is partly reflected in the corresponding
negative item under line 5.



TABLE 8
MONETARY DEVELOPM4ENTS: SUT1MARY CF CENTRAL BANK OPERATIONS
TITi|  i ofSO pesos)
1952       1953       1954       1955       1956         1957
Operations writh Banks:                    6X6         5e7      _13.2      298.6      -21.4        176.C
Connercial Banks                      3.5       -6,3     -109.3       219.6      -88.7        149.2
Government Banks                     14.0        3.7       19.3        51.4       65.4         -.3
Banco Popular                    -270 -13.2                                   2  54        22.2
Agricultural Banks               16.0       16.9        26,9       43.0       38.9        -18.9
Financing of Public Sector                19.5      103,4       -15.2      162.8      236.6        46o.9
Credit to Private Sector                  69.7      -77.4      109.0      -11 0.5      19.4        362.8
Total                                     95_8        31_7       10.6      350.9      234.6        99Y.7
iJ  The total is derived from the balance sheet of the Central Bank and the breakdown from those of commercial and
government banks. The breakdown does not add up to the total since in the calculations "deposits in the Central
Bank" include banks' own cash holdings.
2/ See Table 12.
Source:  Banco de la Republica, Monthly Bulletin.
This table presents the annual changes in the Central Bank's position vis-a-vis the Banking system, the public
sector and the private sector. Changes with a contractionary effect are shown with a minus sign and vice versa.
Operations with banks is the net addition of changes in banks' deposits and rediscounts with the Central Bank.
Financing of the public sector is explained in more detail in Table 12.



ThBLE 9
MCNTETARY DEVEL0ThEji'1TS: EX?PANSION yF OP NQEY S3U`LY 0\D BANK CREDTr, 1952-1957
(imillions oT oesos)
End of Year:                1951         1952         1953         1954         1955         1956         1957
Commercial Banks  /             700.3        785.8        89o.2       1113.4       1371.5       1683.9       1767.1
Government banks:                L578.2                           741.0             913,6       10>.1         19.6
Danco PoDular                  5.2         33.4         62.4        103.4        159.7        159.5        130.8
Mortgage Banks     3         168.2        202.3        238.6        261.7        292.5        399.3        500.3
Agricultural Banks  .        172.8        236.8        277.2        375.9        461.4        529.3        558.5
Total Bank Credit              1046.4       1258.3       1468.4       1854.4       2285.2       2772.0       2956.7
Money Supply                  1119.9       1309.4       1548.7       1846.9       1933.8       2415.3       2744.4
% Increase                                 18           18           19            4           25           13
1/   Including small amounts of credit from "other institutions" (namely orivate savir-gs banks, Banco Prendario
Nacional and, until liay 1955, Banco Trendario Municipal de Barranquilla).
g/   Until May 1954, Banco Central Hipotecario.  Thereafter including Banco Hipotecario -opular.
S/   Until M!;arch 15 6, Caja de Credito Agrario, inmustria y Iinero. TIhereafter including Banco Ganadero.
Source: Banco de la Republica, lMonthly Bulletin.



TABLE 10
'RL^E D1VETL,C?I INTS SINCE 1951
1951        1952         1953        1954         1955         1956         1957
Cost of Living (Bogota)
Middle Class                 100        101.1        105.5       112.2        115.1        121.6        137.7
,I orke rs                   100         97.6       104.8        113.9        113.1        120.3        139.0
WKholesale " rices
General                      100         98.8       104.7        112.0        113.7        125.2        157.5
Non-Food                     100         99.7        98.4         99.4        109.5        125.4        161.3
Coffee Pricesi/
Domestic                     100        108         116          158          133          173          203
External (New York)          100         97          102         136          108          126          109
Rate of Fxcharae  2
Ccffee Export Rate           100        104         109          109          114          145          195
Brincipal Tmport Rate        100        100          100         100          100          100          231
M/ ianizales, Pergamino corriente.
?/ End of period.
Source:   Banco de la Republica, Revista (Monthly Bulletin)



TABLE 11
PUBLIC FINANCE: 1ERFORPANCF, OF _ATTGTAL G0VPRN1bNT BUDGT, 1951-1958
(nlillions of oesos)
19~ 1     1952      1953      1954      1955       1956       1957    1958
(Estimate) (Estimate)
Exoenditures                       630       663       839       1066     1273       1220       1275     1325
(excl. amortization nayments)
Ordinary receipts                  669       704       840       1043     1132       1138       1150     1150
Balanc e                           -39        41         1        -23     -141        -82       -125      175
Changes in Government Debt:
Internal                                    11.3      22.4     112.9     -98.7 )    144        251.7
External                                    20.6      -5.9       17.8      1.2 )     LL5 .
Other                                       -0.4       -         63.1      9.2       31.3       50.0
Total                                    31.5      16.5      193.8    -88.3      176.1      301.7
Changes in Treasury Balances 1/                   3.7     -37.5       73.3    -16.9      -38.7       55.9
Changes in Net Government Position              -27.8     -54.0    -120.5      71.4     -214.8     -245.8
-/ For 1957, first eight months only.
Sources: Expenditures and Receipts data, cf. Tables 13 and 14. 1952 and 1953 Exnenditures data from Cortroller
General after adjustment for debt amortization nayments as roublished in Bulletin of Budget Bureau.
Changes in Government debt 1952-55, from Budget Bureau data; thereafter from Controller General. 1956
and 1957 data for "other" government debt are changes in Central Bank credit to National Government.
Changes in Treasury Balances from Controller General.
Tlhese data give only an a oroximate picture of the government oosition since, among other reasons, not
all exoenditure figures are on a cash basis and in sane years certain goverrnment funds were held
outside the Treasury.



Table 11 (Conttd)
Notes : 1957 revenue estimates include 1,050 million pesos of
revenue from sources foreseen in original budget plus
100 million pesos from extra-profits tax (Decree 108 of
June 1957), and drawings against the 10% import tax account.
:L958 revenue is estimated to remain the same as in 1957, the
120 million pesos loss resulting from the elimination of the
old import stamp tax being offset by the gain resulting from
the 20% price increase in 1957.    (The 1150 million pesos
estimate compares with the Government's own estimate of
1025 million pesos.)
The expenditures data exclude debt amortization payments.
For ordinary GovJernment debt these are bu geted at ,140
million pesos in 1958.   The 1958 expenditure estimate also
excludes both interest and amortization payments on the
arrears credits, totalling U.S. $80 million.    These pr.yments
are financed with the 10% import tax and the 15% export tax,
both of which are excluded from the revenue estimates for
1958.   The service payments for the arreers credits, on the
one hand, and the receipts from export and import taxes on the
other, are estimated to be about equal in 1958 (560 million
pesos).



TABLE 12
P'UBLIC FINAN2'.CE: CE,NTA  L BA! FI`AJICICDG T  \CF fONIVEWPTT SECTOR
(millions of pesos)
1952          1953         1954          1955          1956         1957
National Govermment:
Changes in Credit                        -             -           31.7         43.3          31.3          50.0
Purchase of Government Bonds           18.7          81.5          45.7        114.7         119.8         114.3
18.7          81.5         77.4         158.0         151.1        164-.3
Changes in Deposits                     4.7         -41.0          73.5        -18.6         -46.9           9.2
Net Central Bank Financing             14.0         122.5           3.9        176.6         197.0         155.1
Other Gfficial Entities:
Credit                                 21.5         -21.5            --                       22.5         314.11/
Deposits                              1]6.0          -2.4          19.1         13.8         -17.1         -8.3
Net Central Bank Financing              5.5         -19 1         -19.1        -13.8          39.6         305.8
Central Bank Financing of Total
Public Sector                             19.5         103.4        -15.2         162.8         236.6         460.9
2/ liostly refinancing of loans extended by Exchange Stabilization Fund in rurevious years.
Source:  TRevista del Banco de la Republica.



TABLE 13
'UBLIC FITANCE: NAT>i`J.tL GOv\EY'1iENT IEVEITUE, 1950-57
(millions of pes 7
1950     1951     1952     1953     1954       1955        1956        1 957       1958 2/
(budget)   (estinrate)
Total Revenue              515       669     704       840    1,043      1,132       1,138       1,227       1,025
Direct Taxes           233      290      324      341      450         551         604         554         610
Income Tax          211      257      286      287      396         468         499         505         560
Indirect Taxes         212      296      282       359      502        484         456         589         n.a.
Taxes on Imports    135      223      226      293      429         408         351         500         200
Other                   70       83       98      140        89         97          78          84
Revenue, % of GNP            8.1       9.4      9.0      9.4     10.1       10.0         9.3        10.1
Note:  1957 taxes on imports include 180 million pesos customs receipts and 320 million Desos for special import
taxes.  In June, 1957, the latter were replaced by a uniform 1C% import tax whose yield was kept on snecial
account with the Central Bank.
Source: I.lin. of Finarnce, Bureau of the Budget Bulletin
2/ Total Government revenue (1360 million Desos) including receipts from 1Q% import tax and 15% export tax.
g/ Estimates by the Government; imoort taxes (200 million) include customs receipts only; Receipts frcm the
1Q0 import tax and the 15% export tax are extra-budgetary revenues and are earmarked for servicing the
arrears credits.



T.uT�E 14
PUBLIC FINANCE: NATICNf 7OVE N_ENT_EXPE;NDITURES    j 1954-1958
(;!'! i ions of pesmY
1954      1955      1956      1957       1957        1957 3/        1958
(budget)              Jan.-Sept.
Current Expenditures                      537J'    545        599       564                  414.2
Purchases of goods & services                   187        186       138                   84.8
Salaries                                         358       413       426                  329.4
Capital Eenditures                       382       572       440        404                  228.0
Roa ds                                           223       181       178                  118.1
Railroads                                        48         57        43                   25
Corimunications                                  12         9          7                    2.7
Muunicipal Development                            17         2        13                    9.7
Ccnstruction (incl. housing)                    143?/       84        61                   29.(:W
Public Utilities                                 11         29        10                    6.5
Industries                                       14         10         637
Other                                           104         68        86
Transfer Payments                         146       129       149       140                   84.2
Interest Payments                         - 1/       27        32        39                   19.8
Tot el                                  1066      1273       1220      1147      1273        746.2          1325
Debt Amocrtization                         84       381        40        80        77         41.6          140
Total incl. amortization of debt         1150      165L      1260      1227      1350        787.8         1465
17  For  T5lItherest payments are included under Current Expenditures.
2]  Including 60 million pesos for refinancing of debt of Instituto de Credito Territorial incurred with savings banks.
3/ Net C expenditures financed against 1956 appropriations. Total expenditures in Jan.-Sept. were 895 million pesos.
Source: MAinistry of Finance.



T;kBLF 15
PUBLIC FINANCE:  (PMENDITURES AF_ PFRITCIAIL GOVERNMENT MINISTRIES
(;llions o-f n9.eso)
1952      1953     1954      1955      1956       1957         1958
( budget)    ( e s timAte)
Total Expenditures                    733       931      1110      1649     1357       1356          1465
of whi ch :
IMinistry of Finance         108       121       147       207      137        11]1         122
War and Police               151       252       308       307       327       3/5          335
Development                   11        20        24        40       46         48           40
Education                     46        56        66        70       81         80          146
Communications                19        22        23        25       33         34           36
Public Works       1         136       196       275       389       397       380          310
Public Debt Service -/        99       105        81       397       101       120          204
Expenditures (excl. amortization        8.4       9,4      10c3      11.3     100o        9.5          -
payments), % of GNP
lJ Including amortization ard interest payments.
Source:  Controler Ger. ral for 1952-56 data which are different from cash e-qenditures estimated by the Budget Bureau
(Table14 ).  1957 Budget as revised by Budget Bureau through October, 1957. January-August 1957 are
appropriations data.



TABLE 16
BALA\NCE OF P Y\ENTS. 1951-56
(millions ol U,sv. collars)
1951     1952     1953     1954     195,      1956
(p relim 7L M
I.  Current Account                                   -i2      -15      - 40      - 91   -161        - 42
A. Credit                                          &i_      483       621      668      615       700
1. Exports (f.o.b.) (incl. gold)                   145       458      592      640      572       640
2. Transportation, Travel & Insurance               12       14       13         9       29        36
3. Other                                            10       11        17       20       14        24
B. Debit                                            515     498       661      759      777        2
1. Imports f.o.b.                                  390       384      524      622      621       605
2. Transportation, Travel & Insurance               47        62       74       72       81        87
3. Direct Investment Incane                         20       15       11         8       15        16
4. Interest (incl. official)                         6        4       12         7        7    )
5. Other                                            42        34       39       50       52        34
II.  Capital Account                                     32        53       52      10
A. Long-term Capital Movenents                      31       78        45       68       19        _
1. Private Loans and Investments                    22        31       34       58       20        17
For eign Oil Compani es                             21        25       22        8         9
Other                                               10         9       36      12          8
2. Official Loans                                   17       59        35       35       33        41
3. Amortization of Official Loains                 - 8     - 12     -23       - 25     - 34      - 31
B. Short-term Capital Movements                      1      - 26        7       62        14
1. Private individuals and enterprises                4     - 17        6       33     - 27      -  5
2. Banks and Goverrnment (except                   - 3     -   9        1       29       13        55
Central Bank)



Table 16 'cont'd)
1951     1952     1953     1954      1        1956
(prelim.)
III.  Changes in Central Bank Position                  21     - 31     - 26     - 40      118        4
IV.   Net Errors and Omissions                                            14 - 7  __  1     38
;/ Increase in foreign assets (-);   reduction (+). Includes changes in gold and fcreign exchange holdings,
position with IMF and position under payments agreements.
Sources and Notes: Based on IMF and Banco de la Republica data. Exports of oil and petroleum products are not
included on a gross basis but on the basis of cost reckoned at 60 percent of gross (net export return to the
country). Direct investment by oil companies is estimated as the excess over net export receipts over companies'
imports of products and equipmert plus inward foreign excharge transfers (all on net basis).



TABLE 17
BALANCE OF PAYEENTS, 195h-1958
(millions of U.S. dollars)
195h    1955     1956    1957    1958
Current Account
Exports f.o.b.                      6h0      572     586     500      425
Coffee                           550t U9          481     390     325
Other                             90       83     105     110     100
Imports c.i.f.                      672      669     657     480      390
Trade Balance                      - 32     - 97    - 71      20       35
Balance of "Invisible" Payments    - 59     -64                      - hO
Current Account Balance            - 91     -16i    _ 96    _ 20    -   5
Financing of Cr-rent Account,            91     16i      76 60
Net Long-term and 1'1edium-term
Capital (excluding credits for
refinancing arrears)                 68       19      27      30       90
Changes in Central Bank Position
(including drawings on I1F)        - LO     118        4    - 12       0
Arrears of overdue Foreign
Exchange Payments                     85      55     170    -295     - 15
Official Capital to refund
Arrears (net)                                                185     - 70
Other short-term Capital Movements    -114       69)
)   -105     112        0
Errors and Omissions                   1      38)
Sources and Notes (see following page)



Table 17 (i)
Sources and Notes:
1.     This t�ble is a rearrangement of Table 16 with the purpose of
showing the impact of the accumulation and the settlement of the arrears
in foreign exchange payments upon the financing of current account balance
of payments transactions.
2.     Sect_on II-B, of Table 16 (Short-term capital movements) has been
changed to distinguish between the receipt of short-term credits in the
form of backlog accumulation (estimated from exchange control tabulations)
ancl "other" short-term capital movements.  The only other difference with
Table 16 is that in the present table, $54.6 million contraband coffee
shipments have been excluded from 1956 coffee exports (Banco de la Republica
estimate).   Were these contraband shipments included in exports, the
combined ou'flow of short-term capital and the item tterrors and anissions"
would amount to $160 million instead of $105 million.
3.     The table suggests that the accumulation of arrears uo to $310 million
at the end of 1956 was accompanied by a large-scale capital flight during
195L-56, estimated at close to 9300 million.   On the other hand, there appears
to have been a reflux of capital in 1957.   (No exact statements can be based
on this table since the 1956 and 1957 estimates include the item t"errors and
omissions").
4.     The settlement of the commercial backlog outstanding at the end of
1956 is discussed in Appe~ndix 1.  It has been assumed that tne unsettled
balance of $115 million will be settled in 1958.  The A185 million official
capital receipts for refunding the arrears in 1957 are net of amortization
and interest payments made in 1957 on these credits (estimated at around
$30 million).   The negative 1958 item for official capital to refund the
arrears represents amortization and interest payments (estimated at around
80 million) net of credits expected to be received for' re-financing the
portion of the backlog which remained unsettled in December 1957 (namely,
$10 million net receipts frcm the U.s. under the 30-month notes arrangement
and A5 million from European and other non-U.S. creditors under the 80-20
settlement (see Appendix 1); it also includes $7 million service payments
on the 103 million loan for essential imports contracted in IlNay 1958.
5.     All interest payments are included under the current account, except
that those on credits contracted to settle the arrears have been included
with the amortization payments concerned.   In this manner the 1957 and 1958
current accounts become forthwith comparable with those of previous years.
6.     The 1958 balance of payments estimates are based on an export projec-
tion (see Table 19), anticipated capital receipts and estimated repayment
schedule for the recently contracted credits for refinancing the arrears.
Net capital receipts of $90 million include $64 million for financing
essential imports under the Miay 1958 loan.  The $?385 million import estimate
is a balancing item indicating the total import level which Colombia can



Table 17 (ii)
afford within its available foreign exchange resources, (assuming it will
meet its present debt repayment obli-ations and it will experience no or
only a minor reflux of capital), as follows:  A330 million from exchange
earnings and credit arrangements existing at the start of the year plus
$67 million from the Export-Import Bank and U.S. commercial bank loans to
finance essential imports.   The $385 million level compares with an
average import level of $417 million (cif) in 1951 and 1952, and $666
million in 1954-56.



TABLE 18
BALANCTEl OF PAYMENTS PROJECTION 1958-65
(millions of U.S.$)
1958    1959    1960    1961     1962    1965
Total Current Exchange
Earnings                     485     495     505     520     535     570
Net Capital                         25      30      40      40      ho      50
Credits contracted to
settle arrears             - 20    - 45     - 55    - 50    - 20    -15
Foreign Exchange available
for current tran-
sactions                    490      480     490     510     555     605
Payments for Services
and Interest on
Existing Debt             100     105     110     120     130     1h0
Imports (cif)               390      375     390     390     h25     465
Sources and Notes:   Cf. Tables 16, 17 and 19.    Net long-term capital
receipts include both public and private capital and
are assumed to increase gradually over the period.
"Credits contracted to settle the arrears" include
service payments on these credits net of disbursements
under the 4,103 million loans for essential imports
(t6! million in 1958 and $39 million in 1959) plus
service payments on these loans.



TABLE 19
BALA1' E OF -AYMENTS: PROJECTICi'T OF CU.R Y?ENT FOREIGI EXCHAiN\E EARNINGS
(millions oflJ.S7 2:)     
1951    1952    1953    1954    1955     1956     1957     1958     1965
Exports:                                  445     458     592     640     572      586      500      425      490
Coffee (millions of 60 kg bags)           4.8     5.0     6.6     5.7     5.9      5.1      4.8      4.8      5.5-6
(New York price c/lb)   J         58.7    57.0    59.9    79.9    64.4     74.0     60.0    50-55    45-50
Value                            356     38O     4$2     550     489      481      390      325      360
Other Products:                          89      78     110      90      83      105      110      100      130
letroleum (net)  j                44      43      46      45      37       42       47       50       60
Bananas                            8       9      11      13      17       28)
Gold                              15      15      15      13      13       15)
Tobacco                            2       2       3       2       2        3)      63       50       70
Sugar                              7       -       -       -       2        4)
Other  3/                         13       9      35      1-7     12       13)
Transport, Travel, Insurance               22      25      30      29      43       60       60       60      _80
and other Exchange Income
Total Current Foreign Exchange Earnings   467     483     621     668     615      646      560      485      220
Sources and Notes:  1951-57 cf Tables 16 and 17. Breakdovm of "other" export products based on official trade
statistics.
/ ,Average -,rice for Mliaizales variety.
2/ Cf. notes to Table 16.
3/ Including, =mong others, -platinun, hicies, cement and textiles.