Document of The World Bank FOR OFFICIAL USE ONLY LE Report No. P-3192-Co REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE COLOMBIAN NATIONAL RAILWAYS WITH THE GUARANTEE OF THE REPUBLIC OF COLOMBIA FOR THE SEVENTH RAILWAY PROJECT January 27, 1982 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authoriation. CURRENCY EQUIVALENTS Currency Unit = Peso - Col$ Average Calendar 1980 Average Calendar 1981 US$1 = Col$47.280 US$1 = Col$54.414 Col$1 = US$0.02115 Col$1 = US$0.01838 WEIGHTS AND MEASURES 1 meter (m) = 3.281 feet (ft) 1 square kilometer (km2) = 0.386 square mile (mi2) 1 cubic meter (m3) = 35.315 cubic feet (ft3) = 264.2 gallons (gal) 1 kilogram (kg) = 2.206 pounds (lb) 1 ton (t; metric; 1,000 kg) = 1.00 short tons (sh. tons) GLOSSARY OF ABBREVIATIONS CNR Colombian National Railways COLPUERTOS Colombian Port Authority CONPES Social and Economic Policy Committe of the Cabinet DAAC Administrative Department of Civil Aeronautics DNP Department of National Planning DRI Integrated Rural Development ECOPETROL Colombian Petroleum Agency FAN National Aeronautics Fund FNCV National Rural Roads Fund FONADE Economic Development Fund FVN National Highway Fund IDB Inter-American Development Bank IDEMA Government Marketing Institution MOPT Ministry of Public Works and Transportation PAN National Nutrition Program PIN National Integration Plan SENA Colombian National Training Center FISCAL YEAR January 1 to December 31 FOR OFFICIAL USE ONLY COLOMBIA SEVENTH RAILWAY PROJECT LOAN AND PROJECT SUMMARY Borrower: Colombian National Railways (CNR) Guarantor: Republic of Colombia Amount: US$77 million equivalent Terms: Repayment in seventeen years, including four years of grace at 11.6% interest per annum. Project Description: The project would support the Government's objective of improving the country's transport infrastructure as well as of lowering transport costs by promoting efficiency in the national railway. The project comprises the first four years of CNR's Five-Year Rehabilitation Program (1982-86), including action targets to strengthen its overall performance. The project has been divided into two tranches, with most items under the second tranche dependent upon potential traffic. The firpt tranche or Group I of the project consists of: (a) rehabilitation of about 428 km of track; (b) acquisition of fouir, high-horsepower, diesel locomotives, and related spare parts and 100 wagons; (c) rehabilitation of 139 diesel locomotives, 1,410 freight cars and reconstitution of the stock of locomotive spares; (d) rehabilitation and upgrading of workshop; (e) rehabilitation of freight-handling equipment and purchase of forklift trucks, cranes and parts and equipment for signalling and telecommunications; and (f) technical assistance to study: (i) Bogota-Buenaventura Corridor; (ii) line capacity; (iii) signalling and telecommunications; (iv) tariff structure, cost accounting, financial planning, inventory control and statistical reporting; (v) locomotive repair and scrapping program; (vi) a traffic demand model; (vii) reduction of operating costs, and (viii) training of CNR's technical staff. The second tranche or Group II of the project comprises: (a) rehabilitation of another 83 km of track; (b) purchase of 4 additional locomotives and 100 wagons including related spare parts; and (c) signalling and telecommunications equipment. In view of CNR's checkered past peformance the project faces somewhat higher risks than are usual in projects of this type. However, the Government's strong commitment to rehabilitate and strengthen CNR, the appointment of a General Manager of proven competence to head CNR and close supervision by the Bank, should ensure the successful attainment of project objectives. IThis document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Estimated Cost: Local Foreign Total --(US$ million equivalent)- Permanent Way 35.8 30.3 66.1 Motive Power 2.4 34.2 36.6 Rolling Stock 5.6 14.9 20.5 Workshops 0.9 1.6 2.5 Freight Handling Equipment 0.2 2.9 3.1 Signalling and Telecommunications 0.1 7.2 7.3 Training and Consulting Services 1.5 2.2 3.7 Sub-total 46.5 93.3 139.8 Contingencies Physical 2.3 2.4 4.7 Price 17.6 14.5 32.2 Total Project Cost 66.4 110.2 176.7 Financing Plan: Proposed IBRD loan - 77.0 77.0 Credit from the Colombian Coffee Federation 1.9 6.9 8.8 UNDP Technical Assistance - 1.0 1.0 Government Contribution 57.4 22.0 79.5 CNR's Cash Generation 7.1 3.3 10.4 Total 66.4 110.2 176.7 Estimated Disbursements: FY83 FY84 FY85 FY86 -------(US$ million equivalent)…------ Annual 21.5 37.0 13.0 5.5 Cumulative 21.5 58.5 71.5 77.0 Rate of Return: 26% Appraisal Report: Report No. 3262b-CO, January 27, 1982 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE COLOMBIAN NATIONAL RAILWAYS WITH THE GUARANTEE OF THE REPUBLIC OF COLOMBIA FOR THE SEVENTH RAILWAY PROJECT 1. I submit the following report and recommendation on a proposed loan to the Colombian National Railways, with the guarantee of the Republic of Colombia, for the equivalent of US$77 million to help finance the Seventh Railway Project. The loan would have a term of 17 years, including four years of grace, with interest at 11.6% per annum. PART I - THE ECONOMY 1/ 2. An Economic Report on Colombia (3556-CO) was distributed to the Executive Directors in September 1981. This section on the economy reflects the major findings of this report. Country data sheets are presented in Annex 1. Background 3. The Colombian economy has become more resilient to external shocks as a result of the structural changes that have occurred over the past 30 years. Rapid economic growth has resulted in a substantial structural trans- formation of the country from a predominantly rural and self-contained eco- nomy to a more diversified urban, industrial, services and open economy. Colombia has reached a point where population pressure on land no longer increases much, if at all. Public sector investment and output now play a greater role, primarily as a result of increased activity on the part of decentralized agencies and public enterprises. Also, greater emphasis on foreign trade has allowed the external sector to grow with non-coffee exports, particularly exports of manufactured goods, expanding rapidly and the range of products sold abroad widening considerably. The growing urban- industrial-services oriented economic activity and a rapid expansion of sur- plus labor in rural areas attracted by higher wages and better services in the cities has given rise to rapid rural-urban migration. This phenomenon, together with the increased participation of women in the labor force, has been instrumental in reducing poverty and improving income and distribution over time. Financial and capital markets have evolved pari-passu with the growing needs of the economy, and Colombia has become an active participant in international capital markets. 1/ Substantially unchanged from report for the Upper Magdalena Pilot Watershed Management Project (No. P-3106-CO, November 24, 1981). -2- 4. Real GDP per capita rose by 2.4% p.a. on average during the 1950-80 period, with each succeeding decade registering greater gains in per capita income. This was the result of lower population growth, combined with more rapid GDP growth. Population growth, which had remained in the 3.0% to 3.5% range during the 1950s and early 1960s, declined dramatically after 1965 as a consequence of a sharp fall in the fertility rate. Greater economic and edu- cational opportunities for women, rapid rural-urban migration, rising per capita income and increased effectiveness of family planning programs contri- buted to the decline in fertility. Colombia's population is currently grow- ing at an annual rate of 2.1%. As a result of the high proportion of women now entering childbearing years, this rate of population growth is likely to continue until the early 1990s. 5. The combination of rising per capita income and expanded public services has brought about a significant improvement in the welfare of the poorest, in both absolute and relative terms. As a result of increased sani- tation control, improved diets and better health care, the crude death rate fell by about 50% and life expectancy rose from 48 years in the early 1950s to 63 years currently. The child mortality rate declined from 20 per thou- sand in the early 1960s to 8 per thousand in the late 1970s. Infant morta- lity, one of the best indicators of welfare, fell to 65 per thousand in the later 1970s, from about 124 per thousand in the early 1950s. School enroll- ment ratios have increased substantially at all grade levels since 1960s, and by the late 1970s, 91% of urban children aged 7 to 14 were enrolled in school. The poorest income groups have experienced the greatest increases in electricity and water services in recent years and have benefitted more than the average of the population from services of the national health system. In spite of this progress, Colombia remains largely under-developed, with a relatively small modern sector superimposed on a broad, traditional and eco- nomically poor base. Development has been concentrated in relatively few areas of the country, public services are still not available to many of the rural and urban populations and unemployment and underemployment are rela- tively high. The coverage of health care and water supply requires conti- nuous improvement and adequate housing is not available to a substantial pro- portion of the population. Rapid migration to the large and medium-sized cities has created urban development problems, with attendant social diffi- culties. Moreover, in spite of the steady increase in per capita income over the past 30 years, substantial efforts are still required to improve and ext- end the benefits of development to the poorest income groups. 6. In large part, the achievements of the past thirty years were the results of government efforts to stimulate the productive sectors, provide the required economic and social infrastructure and establish an effective institutional base in the economy. In the 1950s and early 1960s, development policy favored import substitution supported by high tariff protection and the provision of economic infrastructure by the public sector. It was during this period that the country's major communication and transportation net- works were developed and the transformation to a semi-industrial economic structure began in earnest. By the mid-1960s, the prospects for further import substitution were substantially diminished and the country was confronted with great economic uncertainty, arising from the fact that economic activity and the balance of payments were heavily influenced by developments in the world coffee market. In order to ease this constraint, during 1967 the authorities adopted an outward-looking development strategy, expanding and diversifying exports and, among the export markets, increas- -3- ingly tapping the Andean Group countries. Export promotion policies, includ- ing frequent exchange rate devaluations, export tax rebates and other export incentives were introduced and the authorities began lowering tariffs some- what and freeing capital markets from controls as means of raising efficiency and increasing the competitiveness of Colombian goods in external markets. These measures were highly successful in relieving the foreign exchange con- straint and stimulating growth and employment. However, by mid-1970s the economy was once again experiencing difficulties caused primarily by the world recession and by excessive Central Bank financing of domestic budget deficits. Recent Economic Development 7. In late 1974, the Government introduced a wide range of fiscal and monetary policies designed to correct the structural and policy weaknesses prevailing in the economy at that time. Before these reforms were fully effective, the economy was subjected to strong inflationary pressures arising from a sharp increase in world coffee prices. The increased receipts from coffee exports, together with some official surrender of foreign exchange from illegal exports, caused a turnabout in the balance of payments. Incomes rose rapidly and stimulated aggregate demand; inflation accelerated. Econo- mic growth also accelerated and unemployment fell substantially, both in rural and urban areas. Largely as a consequence of increased coffee tax revenues, the public finances generated surpluses averaging about 7% of GDP during the 1976-79 period, and by the end of 1979, net official international reserves had risen to about US$4.1 billion, equivalent to nearly 12 months imports of goods and non-factor services. 8. While beneficial in many respects, the foreign exchange boom has had a somewhat negative impact on the evolution of the Colombian economy, largely as a consequence of the need for measures to stabilize the economy. Public investment was curbed, thereby delaying some badly needed additions to economic and social infrastructure. The rate of currency devaluation was slowed and the conversion of export receipts into pesos was delayed to mode- rate the growth of domestic demand, with adverse effects on export expansion and diversification. Also, the Government was compelled to maintain high reserve requirements and expand controls over credit thereby reducing, in real terms, the financing available to the private sector via the official capital market. 9. The stabilization measures were virtually unchanged from early 1977 through 1979 but were partially successful in restraining aggregate demand growth; thus relatively high inflation persisted. In response to the increasing stabilizing effects on aggregate demand and the troublesome finan- cial market distortions caused by inflation and the extended period of mone- tary restraint, the authorities began in late 1979 to adjust the stabiliza- tion program. The rate of peso devaluation was advanced to increase export incentives and reduce borrowing abroad, and in early 1980, credit restraints were relaxed by lowering reserve requirements. At the same time, interest rates on time deposits captured by commercial banks and development finance companies -- and on the lending therefrom -- were freed from controls. To offset the inflationary effects of these measures the authorities further liberalized import payments and adopted the policy, supported by the emission of new short-term certificates, of not expanding the subsidized selective credit operations of the Central Bank in excess of the resources captured -4- from private savings for this purpose. The authorities also increased the surveillance and control of the illegal export trade. The effects of the above measures were not immediately noticeable. Real GDP growth declined to 4% in 1980, unemployment started to creep up, and inflationary pressures con- tinued. 10. In 1981, manufacturing activity has remained sluggish, hemmed in by the slow growth in aggregate consumer demand, and limited by power shortages during most of the year. Coffee exports have fallen as a result of reduced world demand and declining prices while non-coffee export growth has weaken- ed. On a more positive note, construction activity, which had fallen sharply in 1979-80, began to recuperate toward the end of the year. In response to favorable price incentives, petroleum production is estimated to have increased by over 5% in 1981. Agricultural output has registered some gains despite decreases in the area planted resulting from a prolonged drought. Both public and private investment have expanded rapidly. Real GDP growth is estimated to have reached 3-4% in 1981. Inflation continued to be a problem in 1981, however, with consumer prices increasing by about 27% for the year. Despite world coffee prices at relatively low levels for most of the year, Colombia's balance of payments continued to remain strong, with net official reserves maintained at about one year of imports of goods and non-factor services. Development Strategy 11. Achievement in this decade of the Government's objectives of increased productivity and maximum economic growth, increased employment, improved distribution of income and greater welfare for all Colombians will require a major effort to remove from the economy the constraints of inade- quate economic and social infrastructure and insufficient demand. Infras- tructure needs are most pressing in the energy, transportation, and agricul- ture sector. 12. The Government's strategy for accomplishing its development objec- tives are set forth in the recently formulated Plan de Integracion Nacional (PIN). This strategy continues the previous emphasis on export promotion as a means of supplementing domestic demand and assuring balance of payments stability, and on policy measures, including further import liberalization, designed to increase economic efficiency and raise institutional capacity. It proposes a large increase in public investment, giving high priority to energy projects and to the provision of transport infrastructure. Economic decentralization, regional autonomy and the uniting of regional growth centers through improved transport, communication and financial links are directed towards creating an integrated national market, a strategic goal of the PIN. The Plan also places emphasis on the promotion of both small scale and commercial agriculture as a means of diversifying and increasing exports, assuring adequate domestic food supplies, holding down inflation and contrib- uting to the Government's nutrition and welfare goals. Industrial policy objectives are to provide an environment of certainty, along with adequate credit and infrastructure, so that entrepreneurs are encouraged to invest and expand output. Because of its benefits in opening foreign markets, creating employment and bringing in new technology, private foreign investment is to be encouraged. The Government's approach to helping the poor takes on a new - 5 - orientation in the PIN. Its efforts are focussed upon improving 'efficiency in the use of resources and strengthening the social service institutions. Programs in the health and education sectors are to be better focussed and integrated, and selected low income and disadvantaged groups, such as workers in the informal sector, children and unemployed youth, are singled out for special attention. Combined with extensions of the Integrated Rural Develop- ment (DRI) and National Nutrition (PAN) programs, the new directions given to social programs are expected to raise significantly the welfare of low income groups in Colombia. 13. While the PIN provides a good analysis of the development issues facing the country and sets forth the general guidelines for policies and programs to resolve these issues, there are two important aspects of bringing off the development strategy that are expected to receive increasing atten- tion from the authorities in coming months. The first involves a required deepening of the sector analyses in order to improve coordination in planning and execution sector strategies, and the second has to do with matters rela- ted to financing the PIN. Given the large investment required to carry out the PIN strategy, inadequate planning and coordination among sectors or insufficient domestic resource mobilization would be likely to result in sub- stantial resource misallocation and to delay execution of the strategy. The two most important sectors where additional work is urgently required are energy and transportation. 14. Colombia became a net oil importer in 1976 and by 1985 petroleum imports are projected to absorb about 20% of total merchandise exports. In the absence of rapid energy development, energy shortages will become a major constraint on growth later in this decade. Resolution of the energy problem depends on the country's success in developing its abundant domestic energy resources -- hydroelectricity, coal and natural gas -- and also upon increas- ing petroleum exploration and development. The strategy for doing this will require energy pricing policies that rationalize consumption with with energy resource availabilities, a least cost program of investments, sufficient d6mestic and external financing for these investments, strengthened sector institutions, improved program execution capability and rapid carrying out of investments. Although planning and policy making have improved substantially in many energy sector institutions in recent years, overall planning and coordination in the, sector is still weak. A study about to be completed by the National Planning Department is expected to provide the basis for improvements in sector-wide planning and policy-making, and recent pricing decisions have gone a considerable way towards providing the correct signals for regulating consumption and encouraging production. The prices paid to producers (primarily foreign companies) for "incremental" and "new" crude have been raised to levels which provide adequate production incentives, and the retail prices of petroleum products have been increased substantially in recent years, which on the whole reflect international levels. 15. Colombia's high transportation costs and inadequate services could become a constraint on economic growth, affecting particularly the development of the country's vast coal reserves and agriculture. The State Railway is in poor condition and the road network needs maintenance and rehabilitation. The authorities have begun to take steps to improve the country's infrastructure and PIN assigns an important share of future invest- ments to the sector. An important part of this effort is the recently approved Rural Roads and Highway Sector Projects as well as the proposed loan - 6 - for railway rehabilitation. The Highway Sector Project addresses the need for more efficient planning to insure that only least-cost investments are carried out and that a sound policy framework for the sector is established to deal effectively with the problems of intermodal coordination and energy conservation in line with the Government's energy objectives. Investments and Its Financing 16. A substantial increase and redirection of public sector investment will be required in the next several years to carry out the development stra- tegy outlined in the PIN . Over the 1981-85 period, such investment is expected to increase by about 15% p.a. in real terms. The energy and trans- portation sectors are expected to account for the bulk (59.5%) of this investment; however, sizeable real increases in investment are also expected in the nutrition and health, small scale agriculture and industry (including mining), water and sewerage, and education sectors. Overall, public fixed investment is projected to average 8.4% of GDP during the 1981-85 period, and is expected to total Col$1,603 billion (about US$20.5 billion). Private investment will have to increase also during this period to provide the goods and services required by the expanding economy. 17. This increase in investment will demand a major resource mobiliza- tion effort on the part of Colombia's public sector. The buoyancy of the tax system (excluding coffee tax revenues and receipts from earnings on foreign exchange holdings), which has declined in recent years, will have to be increased through new taxes and better tax administration, resources will have to be used more efficiently, and the charges levied for public services will have to be raised substantially in real terms. Since this effort is expected to coincide with increased private sector demand for investment resources, the importance of measures to expand domestic savings cannot be over-stressed. The recent capital market liberalization should encourage savings. A significant increase in voluntary private savings is not likely, however, as long as inflation remains high. Consequently, stabilization remains a sine qua non for the country's future growth and development. Growth and Balance of Payments Prospects 18. Given the country's strong resource base and sound economic manage- ment, Colombia's growth prospects for this decade are good and significant advances in economic welfare are expected. The urgent need to relieve the pressure on aggregate demand arising from the growth of foreign exchange earnings and the necessity to increase rapidly imports to develop the coun- try's resource potential and restore higher economic growth requires a shift in the balance of payments from a small current account deficit of US$195 million registered in 1980 to a current account deficit projected to average US$1,865 million, over the 1981-85 period. By the end of this period, net official international reserves would have fallen to a level slightly over four months of imports of goods and non-factor services (a level which is adequate for Colombia) without prejudice to the country's creditworthiness. This should be sufficient to support an average growth of real GDP of 5.5% during this period. Beyond 1985, the current account deficit should improve as a result of increasing export proceeds (particularly from coal) and a levelling-off of imports. The current account deficit would fall to about 2% of GDP in 1987 and turn into a surplus of less than 1% by 1990. To achieve real GDP growth of 5.5% per annum, gross domestic investment will have to -7- expand to about 25% of GDP, up from 18% in the early 1970s and 20% in recent years, and to avoid too large an increase in foreign indebtedness, gross national savings would need to average about 22% of GDP. 19. Gross external capital requirements (net of reserve drawdown) are projected to total US$10.3 billion in current prices for the 1981-85 period, for an annual average requirement of US$2,057 million. About 26% of this amount will be required annually for debt amortization and the rest to cover current account deficits. Multilateral and bilateral agencies are expected to provide 33% of these requirements, 50% is expected to come from foreign suppliers and financial institutions and the balance should come from private foreign investment. At the end of 1980, Colombia's public and publicly gua- ranteed external debt disbursed and outstanding amounted to US$4.3 billion, equivalent to 13% of GDP. The Bank/IDA share of this external debt was 25%. Reflecting the recently increased lending by the Bank and the decline by bilateral sources, this share is expected to increase to about 29% in 1983, before falling to about 25% in 1986. The debt service ratio at the end of 1980 was 10% and is expected to climb to 17% by 1985, peak at about 20% in 1988 and then decline gradually. The World Bank's share in public debt ser- vice is expected to rise to about 26% in 1985 from about 25% in 1980. With.- continued sound economic and financial management, Colombia is expected to maintain its creditworthiness through and beyond the 1981-1990 period. PART II - BANK GROUP OPERATIONS IN COLOMBIA 20. The proposed loan, the 95th to be made to Colombia, would bring the total amount of Bank loans to Colombia to US$3,340.9 million (net of cancel- lations). Of this amount the Bank held, as of September 30, 1981, US$2,687.5 million: IDA made one credit of US$19.5 million for highways in 1961. Dis- bursements have been completed on 57 loans and the IDA credit. During 1972- 77 disbursements averaged US$86 million equivalent per year, then declined slightly to US$82 million in 1978 but increased sharply to US$215 million in 1980 and US$249 million in 1981. The gradually improving performance of social sector institutions in the execution of Bank-financed projects, the gradual containment of inflationary pressures, which should allow relaxation of fiscal restraint, and increased Bank lending for infrastructure projects, all point to higher level of disbursements in the future. IFC has made investments and underwriting commitments of US$78.7 million in 26 enterprises and, as of September 30, 1981, it held US$23.2 million. Annex II contains a summary statement of Bank loans, the IDA credit and IFC investments as of September 30, 1981 and a brief report on the status of the 36 ongoing projects. 21. In response to the objectives established by successive Governments (self-sustained economic growth, increased employment and improved income distribution), since 1966, Bank lending to Colombia has become more diversi- fied with heavier concentration on production-oriented programs and activi- ties which emphasize social as well as economic benefits. All three loans for education have been made during this period, and so have 12 of the 14 loans for industry, 13 of the 15 agricultural loans, one loan for a nutrition project, two 'Loans for urban development projects and all nine loans for water supply and sewerage. During the same period, 19 loans were made in the power and transport sectors, while before 1966, 22 out of a total of 25 loans were made to these sectors. -8 - 2, L. Bank lending to Colombia in FY81 consisted of two loans for power generation and distribution projects, and one each for rural roads, irriga- tion rehabilitation and village electrification totalling US$550 million equivalent. In addition to the loan presented in this report and the one recently approved for watershed management, the FY82 program includes proposed loans for integrated rural development, highways, secondary oil recovery and rural basic education. Work is also under way on projects for petroleum development, mining, oil refining, electric power, agricultural credit, agro-industries, fertilizers, water supply and sewerage, ports and small-scale industry for possible consideration by the Executive Directors during the next two years. 23. The proposed Bank lending conforms closely with the Government's development strategy as outlined in the PIN (paragraph 12 through 15). To help Colombia develop renewable sources of energy, a sizeable part of the proposed lending would be for hydropower. The Bank intends to assist in the development of coal mines which hold potential to help Colombia meet part of its energy requirements and in diversifying exports. In support of the Government's objective to increase the supply and the recovery of domestic petroleum, the Bank plans to finance further petroleum projects as a comple- ment to investments of private firms and, for the first time, become involved in projects which promote the efficient processing of hydrocarbons. Bank financing in the energy sector would also assist in strengthening major institutions and in mobilizing external finance as some of the projects would require substantial co-financing. Other future loans would finance agricul- ture and industry to support the Government in its efforts to raise overall productivity, income and employment, and to increase and diversify exports. Closely related to these objectives would be the proposed Bank lending for transport infrastructure. In this context, the Bank is assisting the Govern- ment in preparing a highway paving and rehabilitation program in support of the increasing interregional flow of goods and services. A loan under preparation for ports is aimed at helping Colombia handle larger volumes of non-traditional exports and the imported inputs on which the modern sector of its economy relies for expansion. Finally, several loans are being prepared in support of the Government's efforts to help the lowest 50% of the Colombian population. Lending for rural electrification, rural development, agricultural credit, water supply and sewerage, irrigation and rural education projects is principally designed to improve the standard of living of the poor. 24. The operations of external lenders in Colombia are shown in Annex I. While IBRD, IDB, and bilateral sources provided about 75% of total exter- nal financing to Colombia in the 1961-72 period, their share has decreased since then to approximately 63% for the 1975-80 period and is expected to decline further to about 30% of external capital requirements during 1981- 86. Like the Bank, IDB has given increased emphasis to projects with a poverty orientation and has financed projects in low-cost housing, urban and rural development, agrarian reform, university education, water supply, rural electrification and land erosion control. In the future, it proposes to assist Colombia in developing sources of domestic energy and in expanding productive sector activities to help generate increased employment. USAID has supported programs in education, urban development and small farm deve- lopment, but is phasing out its program in Colombia. The Government of Canada, the Federal Republic of Germany and the Netherlands have also provid- ed concessional financing for basic needs and regional integration projects. -9 - PART III - THE TRANSPORT SECTOR AND THE NATIONAL RAILWAY Characteristics 25. Since the early 1950s, Colombia's transport investment policy has been aimed at national integration through efforts to overcome the regional and community-level isolation imposed by topography. The country's advantage of having coastlines on both the Pacific Ocean and the Caribbean Sea is offset by the difficulty of movement between the coasts and the interior. The three massive ranges of the Andes Mountains which run from north to south present formidable barriers to communication between the main areas of population, which until recently developed as separate and almost isolated communities. In fact, the Magdalena River provided the only overland route between the Central Region and the Caribbean coast until the 1960s. At this time, the Atlantic Railroad connecting Bogota (the capital) and Medellin (the third largest city and one of the country's most important industrial and agricultural centers) with the Caribbean port of Santa Marta, the Eastern Road connecting Santa Marta, Bucaramanga, Bogota and Neiva, and the Western Road connecting Cartagena, Medellin, Cali and Pasto were completed. The development of the country's railways, trunk highways and civil aviation has greatly improved inter-regional communication and fostered national integration. 26. The work to complete the basic transport infrastructure has required a considerable proportion of the country's total investment. Transport represented about half of Central Government investment in the late 1950s (between 10% and 15% of domestic investment). When the trunk highway system and the Atlantic Railroad were being completed, it exceeded 60% of Central Government investment. More recently, however, transport's share has declined to about 25%. In 1980, Col$19,195 million (US$430 million equivalent) were invested in the transport sector of which 86% was allocated to roads, 7% to ports and inland navigation, 5% to airports and 2% to railways. The small size of railway investment has contributed to its declining efficiency. Infrastructure and Traffic 27. Colombia has a road network totalling about 77,000 km of which about 7,900 km is paved. The railway system consists of 3,403 km (2,822 km currently in use) all single track and narrow gauge (914 mm compared with 1,435 mm in Europe and North America); there are gradients in the system of 3% or more. Although the development of road and rail transport has lessened the importance of inland waterway shipping, both the Magdalena and Cauca Rivers are navigable and account for almost all inland shipping. Over the last decade, domestic freight traffic has grown at rates close to GDP growth, 6%-7% annually. In 1979, about 21.5 billion ton-km of freight was transported; 81% by road, 8% by coastal shipping, 5% by riverway; 5% by railway and 1% by aviation. The largest share of passenger traffic is carried by road, 71%, while aviation handles 27% and railways 2%. 28. Aviation transport developed at an early date (1920) and has become a major mode of domestic and foreign travel. There are three national and eleven foreign airlines providing international service, and 10 additional, regularly-scheduled domestic carriers. Colombia has 70 airports, eight of which are equipped for international flights. The country's principal seaports are Cartagena, Barranquilla and Santa Marta on the - 10 - Atlantic Coast, and Buenaventura and Tumaco on the Pacific Coast. The ports move about 3 million tons of cargo per year, with Buenaventura handling over 1.5 million tons annually. However, goods are not evacuated from the docks in a timely way because of unsatisfactory cargo-handling operations, labor difficulties, lack of inland storage facilities and deficient transport services. A faulty system of port charges also contributes to congestion, with unenforced demurrage levies that, in any event, are too low. With UNDP-financing and the Bank as Executing Agency, consultants and the Colombian Port Authority (COLPUERTOS), have studied port operations and containerization, and are analyzing possible corrective measures. The National Railway 29. What has become Colombia's railway system began as a number of relatively short lines often of different gauges and standards, located in different parts of the country and built to meet local needs. Altogether the railways comprised in 1950 about 3,000 km of main lines, of which 2,400 km were owned by the State Railway, 400 km by Departmental Railroads and the remainder by private companies. The State Railway suffered considerable financial losses; management was weak, maintenance was inadequate and the number of locomotives and rolling stock awaiting repair was exceedingly high. Although railway tariffs were lower than truck rates, the latter were able to provide a more reliable service thus making large inroads into the railways traffic. This situation has continued to persist. 30. The Bank's General Survey Mission (September 1950-August 1951) identified the need to link the different railways under a single, fully autonomous, corporation. Consistent with this, on October 27, 1954, the Government established the Colombian National Railways (CNR) to manage the country's railway system. Three Bank loans (68-CO, 119-CO and 267-CO) supported the construction of the Atlantic Line, which served to interconnect the different networks. Two subsequent loans in 1963 and 1968 (343-CO and 551-CO) contributed to the rehabilitation of track and rolling stock, while attempting to improve management and operating practices. Performance under these loans was mixed; there were numerous achievements but also disappointments. Except for 1966 and 1969 when CNR realized net profits from operations, the Government had to finance its operating losses. Budget transfers were not always on time and the railway's plant capacity deteriorated. The problem was compounded by an amendment made to the constitution in 1968 that introduced a cost-of-living escalator in CNR's pensions as well as other fringe benefits. Personnel emoluments, therefore, rose sharply and in 1970 amounted to 67% of CNR's operating cost. The Sixth Railway Project and Recent Performance 31. In 1970, CNR, with consultants, prepared a rehabilitation program to revert the cycle of deteriorated infrastructure, numerous derailments, poor service and loss of traffic. To finance the first two years of the program, in August 1973, the Bank made a US$25 million loan to CNR. Its inefficiency and the heavy subsidy given to the trucking industry in the form of highway improvements and cheap fuel had caused CNR to lose considerable traffic (from about 20% of total freight traffic in 1960 to about 8% in 1970). For long hauls and bulk commodities, however, the railway continued to have a clear economic advantage. The main investment - 11 - items of the project were improvements to permanent way, motive power, rolling stock, and repairs to overcome the 1970/1971 winter damages (destruction by flood and landslides), the worst in history. 32. Under competent management during the first two years of the project CNR achieved impressive results. In 1973 and 1974 most of the operating targets agreed at negotiations were surpassed. Derailments were almost cut in half (from 7,116 in 1970 to 3,614 in 1974), locomotive availability was a healthy 87% and, through reliable service and aggressive marketing, freight tonnage increased by 11% over 1973 as compared with 1.4% between 1968 and 1972. In 1974, CNR obtained again an operating ratio of 98.8, thus covering its operating expenses from revenues. 33. With the change of Government in August 1974, a new management took over and CNR's performance began to deteriorate once more. A major factor contributing to this was the excesive changes made in CNR's managerial and senior staff, both by the Government and CNR, causing discontinuity of operations, failure to adhere to targets and the adoption of unsound policies, including excessive liberties in the form of social benefits being gained by the Railway Labor Union, whose power was increasing during this period. Furthermore, disciplinary actions became more difficult to enforce partly due to union intervention; even such critical actions as enforcing locomotive speed or firing reckless drivers, became virtually impossible to accomplish. In these circumstances many experienced middle-level managers and supervisory staff left, for more attractive employment opportunities in private industries and other Latin American railways. The cost to CNR's long-run institutional effectiveness which had been built up over the years was a heavy one during this period. 34. Together with the slowing down of the economy in 1975, CNR's marketing efforts slackened and freight traffic declined by 14%. The Government was unable to provide CNR with the financial support it needed; consequently, in 1975 when the Pacific network was severed by track washouts, it was never repaired and at this writing is largely skeletal with several lines closed (491 km in total), thus preventing CNR from transporting freight from the Central Region to the Pacific coast. Other sections of the network fell into disrepair as well and newly laid, low-grade, untreated sleepers deteriorated rapidly in the humid, tropical climate. Equipment received substantially less maintenance than was normal; because of a lack of funds, spare parts were not ordered. Locomotive availability, therefore, dropped from 87% in 1974 to an all-time low of 30% in 1980. Furthermore, since negotiations, the preliminary results for 1981 indicate that locomotive availability has declined even further to 27%. Of the 169 locomotives in CNR's fleet, 28 are 6-10 years old, 60 are 11-15 years old, 63 are 16-20 years old and 18 are 21-25 years old. Fifteen locomotives are beyond repair and are being scrapped. An even greater number of locomotives should be scrapped since the scrapping program for the older locomotives under the Sixth Railway Project had to be postponed and was never implemented in view of the declining motive power availability. The 88 locomotives purchased from Spain under a barter arrangement (which constitute the backbone of the locomotive fleet), have proven unsuitable for high altitude conditions with steep grades.l/ The diesel engines (Caterpillar D-398) overheat and fail 1/ Locomotive GE-U-lOB, with 1,050 horsepower. - 12 - to give sufficient margin of power for acceptable reliability of service, when exposed to sustained heavy loading at high altitudes. The problem has been particularly serious on the Facatativa-Bagazal section where CNR has had to resort to using trios of locomotives to make the grade, further stretching the already scarce motive power. Under these conditions, CNR's financial performance worsened; between 1974 and 1980 its operating ratio increased to 163 and the resulting financial losses (about US$30.9 million equivalent in 1980) had to be covered by the Government and, to lesser extent, by domestic credit. Future Railway Traffic and the Government's Program 35. In 1980, CNR still transported 862 million ton-km, less than 5% of the country's domestic freight and the lowest level of traffic in its history. In terms of ton-km, the most important commodities were coffee (15%), fertilizer (13%), coal (6%), crude oil (9%) and wheat (8%). Well over two-thirds of the railway traffic is concentrated in the Atlantic network between Santa Marta and Bogota/Medellin, involving 1,287 km or 48% of the railway system. The remaining lines have low traffic densities and in the instance of the Pacific Network, economic justification is becoming doubtful. It may be possible that if connected again with the Atlantic Network, the Pacific Network could provide an outlet through the port of Buenaventura for bulk cargo to and from foreign markets on the Pacific Ocean. This alternative would be studied under the proposed project (paragraph 43). 36. The relevance of passenger traffic on CNR's operation has been decreasing over the years. In 1980, CNR transported 2.2 million passengers, down more than 2 million since 1974. The decline has been the result of the much improved bus service in Colombia, the closure of non-remunerative services, as well as the need to divert CNR's scarce motive power to more profitable freight traffic. This situation is likely to continue since CNR will have to reduce further its passenger services to allow for sufficient motive power to haul its freight traffic until the working locomotive fleet is increased (Section.4.09(a) of the Draft Loan Agreement). 37. The policy which the Government is pursuing with respect to the consumer price of hydrocarbons is improving gradually the competitive position of CNR. The already mentioned price increases for gasoline and diesel fuels has reduced the implicit economic subsidy to road users from US$435 million or 1.6% of GDP in 1979 and US$189 million or 0.7% of GDP in 1980 to US$44.8 million or less than 0.1% of GDP in 1981.1/ As stated, the Government's policy is to maintain domestic prices at the international c.i.f. Barranquilla level; this will have a greater effect on highway transport than on CNR. Provided CNR improves its plant and its service, higher domestic fuel prices will be an incentive for bulk freight to return to the railways. A commodity review carried out by the Ministry of Public 1/ Estimate based upon an equivalent import price at the pump of US$57.84 per barrel or US$1.01 per gallon of regular gasoline (US$0.96 is the price of low octane regular gasoline being sold in Colombia) and estimated annual consumption of 26.0 million barrels. - 13 - Works and Transport (MOPT) estimates a demand growth for railway services far beyond CNR's carrying capacity. With the proposed project CNR would only be able to satisfy 44% of this in 1982 and 60% in 1986. The forecast excludes the potential demand from coal, copper, bauxite and phosphate mining investments now in gestation. Colombia is only beginning to exploit its mineral wealth, much of which is unexplored. Coal, with potential reserves of over 16 billion tons, of which 11 billion are proven or semiproven, will depend heavily on CNR for its development. The same is likely for some other minerals. The Government, therefore, is giving high priority to the rehabilitation of CNR as an initial step to its eventual conversion to a minerals carrier. When this-comes about, CNR will require considerable investments to modernize its facilities, particularly in motive power and rolling stock. To provide CNR with financial resources for track and rolling stock upkeep, as well as high-priority investments, the Government has modified Law 64 of 1967 which established the National Highway Fund (FVN), to the effect that 10% of FVN's revenues will be given to the railway. The principal revenue source of FVN is an ad-valorem, ex-refinery tax on gasoline and diesel fuel. The Bank's Role in Transport Development 38. The Bank has played an important role in the development of Colombia's transport sector. Overall since 1950, the Bank has lent over US$400 million equivalent for highways, rural roads, railways and one airport project to assist the Government in developing basic transport infrastructure to facilitate economic and social integration, as well as overall growth of economic activity. 39. The highway projects, although beset with delays and cost overruns, resulted in the reconstruction or upgrading of 3,200 km of roads and contributed to the development of a unified trunk road system as well as to the emergence of road transportation. They also fostered the development of local consulting and construction industries, and have directly supported Government efforts to improve engineering practices and contractual procedures as well as transport investment and planning. 40. The already mentioned six railway loans were aimed at integrating the railway network and at strengthening CNR. The review of the first five loans carried out by Operations Evaluation Department (OED), concluded that past railway investments had a low return, particularly the Atlantic Railroad.l/ It recognized, however, that the Atlantic Railroad had an important developmental impact on the Magdalena and Cesar Valleys. It regarded the rehabilitation projects as well-conceived but criticized the lack of operational targets to monitor progress and the heavy emphasis placed by the Bank on the financial aspects of CNR during supervision. Starting with the Sixth Railway Project, therefore, operational targets were set, but these were useful for gauging performance only as long as CNR had a management team committed to them. Under the proposed project, operational targets have been agreed with the Government and CNR, to which loan disbursements would be conditioned (paragraph 52). In the event that there is in the future a new management in CNR, the proposed loan's conditionality element is expected to ensure continuity of effort. Lastly, the Bank 3upervision of CNR has been placing greater emphasis on technical aspects; I/ "Bank Operations in Colombia: An Evaluation," Report No. Z-18, 1972. - 14 - the work done by the Bank to assist CNR to resolve the problem of motive power is an example of this. The consultants to be retained in connection with the project, would complement this work (paragraph 43). PART IV - THE PROJECT Background 41. The proposed project was prepared by CNR with the assistance of UNDP-financed consultants (ITALCONSULT). It was appraised by a Bank mission in September 1980. Negotiations were held in Washington, D.C. during the week of May 7, 1981 with a Colombian delegation led by Dra. Leonor Montoya de Torres, Director of Public Credit, Ministry of Finance and Public Credit, and Dr. Alfonso Orduz, General Manager of CNR. In view of the delay experienced in receiving confirmation from the Government with respect to the supplemental domestic financing for CNR, two follow-up missions in October and November 1981 visited Colombia to update traffic and financial forecasts as well as the agreed performance targets in the Program of Action. The Staff Appraisal Report (No. 3262b-CO of January 27, 1982) is being distributed separately to the Executive Directors. Project Objective and Description 42. The proposed project would support the Government's aim of improving the country's transport infrastructure, as well as of lowering transport costs by promoting efficiency in the railway system. The project comprises the first four years of CNR's 1982-86 Rehabilitation Program, and its major goal is to strengthen the institution's overall performance. The project is focussed upon essential investments and actions needed to produce safer, more reliable and faster railway service for carrying existing and potential traffic. It is divided into two parts, with Group I comprising the components urgently needed and Group II dependent upon potential traffic, including the signature of user agreements on two sections of the network (Secion 3.01(e) and Schedule 1 of the draft Loan Agreement). 43. Group I of the project consists of: (a) Rehabilitation of 428 km of track in the Atlantic network where traffic demand is high, track conditions poor and derailments frequent; (b) Purchase of rails and switches, prestressed concrete and pretreated wooden sleepers, rail-screw fastenings, base plates, materials for drainage structures, bridges, and crushed ballast; (c) Purchase of four, high-horsepower locomotives to operate in the steep grades and sharp curves of the Facatativa-Bagazal section, and spare parts for the rehabilitation of 139 locomotives; (d) Purchase of 100 wagons (gondolas) for coal freight, spare parts for the reconditioning of 1,410 freight cars; - 15 - (e) Acquisition of signalling and telecommunications equipment; (f) Procurement of machinery for workshops; (g) Rehabilitation of freight-handling equipment and purchase of 16 forklift trucks and six cranes; and (h) Technical assistance aimed at improving CNR's cost accounting, internal auditing, financial planning, tariff structure and statistical reporting; studies of a traffic demand model, reduction of operating costs, signalling and telecommunications, a locomotive scrapping program and the feasibility of linking Bogota with the port of Buenaventura and of the line capacity of the proposed Saboya-Carare Bypass, which would avoid the difficult gradient between Facatativa and Bagazal; and, overseas and local training of operational staff. This assistance is also expected to contribute to improved overall transport sector planning. Group II of the project consists of: (a) Rehabilitation of another 83 km of track if agreements with potential coal and petroleum users can be reached; (b) Purchase of four additional, high-horsepower locomotives and related spares, after a year of testing the first batch of four in the difficult gradient section; (c) Purchase of 100 wagons (gondolas) for coal freight and spares, provided additional coal shipments from the Lenguazaque region develop; and (d) Purchase of additional signalling and telecommunications equipment. Project Costs and Financing 44. Total project cost is estimated at US$176.7 million equivalent, of which US$110.2 million equivalent, or 62%, corresponds to the foreign exchange component. Project costs are based upon estimates prepared by CNR/ITALCONSULT and include physical contingencies amounting to 5% and price contingencies amounting to 23% of base costs (Loan and Project Summary). Consultant services for technical assistance and training are estimated to be US$11,000 per man-month for expatriate staff and an average of US$2,600 per man-month for local staff, including foreign and local travel and local subsistence. All such services would be provided by consultants whose qualifications, experience, and terms and conditions of employment would be satisfactory to CNR and the Bank (Sections 3.02, 3.03 and 3.04 of the draft Loan Agreement). 45. The proposed loan of US$77 million represents about 43% of total project cost and would finance about 70% of the total foreign component of the project. The Government's contribution of about US$79.5 million equivalent would finance 73% of the local costs of the project and 28% of the foreign element. CNR, the Colombian Coffee Federation and UNDP would finance the remaining local and foreign cpsts. -16 - CO. Organization, Management and Staff 46. CNR is a semi-autonomous, public enterprise headed by a five-member Board of Directors with the Minister of Public Works and Transport, ex-officio, as chairman. The other members are appointed by the President of the Republic from a list submitted by private interests representing trade, industry, banking and agriculture. The General Manager is also appointed by the President. The Board controls the railways operating and financial policies. Building or abandonment of railway lines and changes in personnel conditions rest with the Government. CNR is organized into five divisions headed by a manager: Atlantico (Santa Marta), Antioquia (Medellin), Central (Bogota), Pacifico (Cali) and Santander (Bucaramanga). 47. The strengthening of CNR's management is the central issue of the project. CNR has capable and dedicated people in its ranks, but staff morale overall, suffers from a severe lack of motivation. Both the Government and CNR are aware of this problem and are beginning to take corrective measures. CNR is now preparing proposals for revising the salary structure of key personnel to bring it in line with competitors, and enable it to attract and retain qualified staff. It has hired a labor attorney to review the legal implications of limiting salary increases to certain positions and enforcing disciplinary action. The Government has agreed to assist CNR in its dealings with the Railway Union during project implementation (Section 3.02(a) of the draft Guarantee Agreement). Further, CNR is preparing a program to increase staff in technical areas and gradually abolish redundant positions in the administrative area. In the short term this includes hiring pensioned mechanics on a contract basis to accelerate the reconditioning of locomotives. CNR is also preparing a program for foreign and local training, the latter to be undertaken possibly with the Colombian National Training Center - SENA (Section 3.06 of the draft Loan Agreement). Financial Forecast 48. Much of CNR's network is underused; the poor quality and reliability of its service limits the entity's ability to raise revenues. The proposed investments and Program of Action (paragraph 52) would enable CNR to improve its operations and, consequently, traffic and revenues. Even so, CNR would have to control its costs and also effect tariff increases in order to strengthen its finances. CNR has raised its tariffs every year but the increases have not kept pace with the growth of operating costs. (While operating costs increased by 587% between 1969 and 1979, freight tariffs increased by 519% and passenger fares by 448%). During negotiations, therefore, agreement was reached with CNR that it would (a) increase tariffs as shall be necessary to meet working and operating ratio targets and (b) raise tariffs by 10% in real terms in January 1983, 1984 and 1985, after the quality and reliability of its service has improved (Sections 5.05(a) and (b) of the draft Loan Agreement). It was also agreed that CNR would not incur any debt not provided for in the Financing Plan, a covenant which was not included under the previous Sixth Railway Project (Sections 5.06 and 7.01 of the draft Loan Agreement). 49. The financial forecast based on projected traffic and the above tariff increases, debt service charges and the financing plan, would result in an improvement in the working ratio from about 175 in 1981 to 96 in 1985, - 17 - before normalization payments (paragraph 51). In line with this, the Government's financial contribution to CNR would decline from an estimated US$102 million in 1982 to about US$48 million in 1986 or by 60%. The Government is already contributing 70-80% of CNR's pension and debt service payments. 50. Pensions represent about 40% of CNR's salary costs and are paid almost entirely by the Govenment. CNR has no adequate pension scheme. The Government would continue paying past pensions and indemnities to retired employees, but pension obligations to the existing employees would be the responsibility of CNR. Strong resistance from the Railway Union to a contributory pension scheme within the railways can be expected. The Government and CNR have, however, agreed to carry out a study with the assistance of actuaries with a view to establishing such a pension scheme no later than January 1, 1985 (Section 5.08 of the draft Loan Agreement). 51. A burden to CNR are the non-remunerative freight lines and passenger services. Since 1973, CNR has closed six branch lines and six passenger services as well as a number of stations. There are several services which do not cover their cost. CNR is being encouraged to increase fares and to reduce services where adequate alternative transport is available. Where non-remunerative passenger service is required for social reasons, the Governient would subsidize them through a normalization payment scheme to encourage CNR to minimize the cost of providing such service. All freight services and four out of five existing passenger services in the Pacific Network are financially non-remunerative. As stated, traffic potential indicates that a transverse connection of the Atlantic and Pacific Networks between Ibague and Armenia (Bogota-Buenaventura Transport Corridor) may correct this situation. A decision, therefore, on the future of the Pacific Network would await the outcome of the study of this connection (Section 3.05 of the draft Loan Agreement). The Program of Action 52. Success under the project depends upon integrated improvements in operations, management and finances. Delays in one area could affect action on the others; progress, therefore, would be followed closely and would be measured against time-phased targets (Program of Action). The targets have been set at six-month intervals and comprise: increases in locomotive and freight car availability, improvements in average net load per train and car, reduction in wagon turnaround time, track rehabilitation, staffing, management, operations and financial results (Annex 4). CNR has agreed to these targets and to prepare quarterly reports to help monitor progress (Section 3.01(b) and 3.11(b) and Schedule 5 of the draft Loan Agreement). Furthermore, on September 30, 1983, or when 40% of the loan would have been disbursed whichever comes first, commitments would be discontinued and 'the Government, CNR and the Bank would review the progress achieved, including the financial contributions the Government has made to CNR. Commitments/disbursements would resume if CNR reaches the June 1983 targets; if not, disbursements would resume only after CNR has prepared an acceptable plan aimed at bringing about corrective actions (Section 3.08 of the draft Loan Agreement and Section 3.03 of the draft Guarantee - 18 - Agreement).l/ This arrangement is expected to contribute to sustained improvement in CNR's performance. Procurement and Disbursement 53. All items to be acquired with the proceeds of the proposed loan would be subject to international competitive bidding, in accordance with Bank guidelines. These items include locomotives, freight cars, rails, fittings, track maintenance equipment, railway switches, workshop machinery, forklift trucks, signal and telecommunication equipment and spare parts for locomotives and freight cars. Local bidders would be granted a margin of preference by adding 15% or the relevant prevailing level of custom duties, whichever is lower, to the CIF value of foreign bids. 54. Disbursements would be made on the basis of: (a) 100% of foreign expenditures for imported equipment and material; and/or (b) 100% of ex-factory cost of locally manufactured equipment and material if local bidders are successful; and (c) 100% of the foreign component cost of technical assistance and training. In order to advance the improvement of locomotive availability, contracts for a total not exceeding US$6.0 million equivalent for locomotives and spare parts would be eligible for retroactive financing (Schedule 1 of the draft Loan Agreement). The loan is expected to be fully disbursed by June 1986. Benefits and Risk 55. The proposed project would support the rehabilitation of CNR and prepare the institution to assume a greater role in the future, particularly in facilitating development of mining. The six sections of track to be rehabilitated --- Facatativa-Mexico, Mexico-Garcia-Cadena, La Caro-Chiquinquira, La Caro-Belencito, Mexico-Buenos Aires and Medellin-Grecia --- are all located in the important Atlantic Network. Three segments have the potential for carrying substantial amounts of traffic resulting from the construction of a cement plant and the possibility to transport petroleum products (not transported via pipeline) and coal. However, two of these, La Caro-Chiquinquira and Mexico-Buenos Aires would be deferred to Group II of the project, until contracts are finalized with prospective shippers. The rates of return for the track investments range from 13% to 32%. The benefits include reduced track maintenance, less wear and tear of locomotives and rolling stock, fewer derailments and savings resulting from faster trains. The rates of return on the rehabilitation and purchase of locomotives and rolling stock range from 22% to 61%. The new locomotives and the rehabilitation and scrapping programs for the existing ones are crucial for CNR's strengthening. On this basis, the overall rate of return on the components of the project that can be quantified (86% of the 1/ By June 1983, CNR would have to have increased locomotive availability to 48%, freight car availability to 80% and average load per train to 307 tons, and reduced the wagon turnaround time to 15.5 days and the operating ratio before normalization to 159. Also, altogether CNR would have to have rehabilitated 231 km of track as well as taken several operational and administrative actions. - 19 - first three years of the 1982-86 Rehabilitation Program) is 26%, i.e., well above the estimated opportunity cost of capital in Colombia. 56. Sensitivity analysis carried out on the project showed that even under the adverse scenario, i.e., traffic would materialize less than projected, CNR would fail to adjust its tariffs and/or costs would increase by 10%, the rate of return of each of the components would still be above the estimated opportunity cost of capital in Colombia (11%). Moreover, the tranching of procurement into two groups wotld allow deletion of those items which as a result of deficient performance, would no longer be justified. Within the range of the sensitivity analysis, the remaining items would have satisfactory rates of return. 57. The project presents somewhat higher risks than are normally usual for railway projects. CNR's past performance is a checkered one, although with some salient, positive achievements. In view of this, the Government's commitment to the rehabilitation of CNR is of paramount importance. This commitment recently resulted in the passage of legislation which will provide the railways with revenues from the FVN (paragraph 37). Further, the appointment of a competent General Manager who has a proven record of accomplishment, the conditionality element of the loan and the close supervision of the project envisaged by the Bank, should all help to ensure the attainment of project objectives. PART V: LEGAL INSTRUMENTS AND AUTHORITY 58. The draft Loan Agreement between the Bank and CNR, the draft Guarantee Agreement between the Republic of Colombia and the Bank and the report of the Committee provided for in Article III, Section 4(iii) of the Bank's Articles of Agreement are being distributed to the Executive Directors separately. 59. Special conditions of the loans are listed in Section III of Annex III. 60. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI: RECOMMENDATION 61. I recommend that the Executive Directors approve the proposed loan. A. W. Clausen President Attachments Washington, D.C. January 27, 1982 Annex I Page 1 of 5 COLUMBIA - SUCIAL INDICATORS DArA SHEET COWMBXA 9EFEUNCE GROUPS (WEIGHTED AVE,AGES LAND_ __ & (THOUSAb_ __ K -_DST _RlCENT ESTIMATE) ITrAL 1138.9 MST RECENT NIDDLE INCCUz 41DDLE INCOME AGiCCULTURAL 232.0 1960 /b 1970 Lb ESTIlAE Lb LATIN AMERCA 4 CARIBBEAN EUROPE GNh PER CAPITA (US$1 250.0 400.0 1010.0* 1616.2 2609.1 ENERGY CUNSUMPTIUN PR CAPITA LLLUGRAIMS UF COAL EQUIVALENT) 310.2 659.7 937.9 1324.1 2368.4 PUPULATION AND VITAL STATISTICS POPULATION. MID-YEAR (THOUSANDS) 15754.0 21266.0 26122.0* URBAN PUPULATIUN (PERCENT UP TUTAL) 48.2 39.8 69.1 64.2 53.2 POPULATLUN PRUJECT IUS POYULATION IN YEAR 2000 (MLLLIONS) 39.9 STATluNARY POPULATIUN (MILLIONS) 6 L .0 YEAR STATIONARY POPULATION IS REACHED 2070 PUPULATIUO DENSITY PER sq. Km. 13.8 18.7 22.9 34.3 80.6 PEL SQ. KL, AGRICULTURAL LAND 72.5 95.7 110.2 94.5 133.9 PUPULATIUN AGE STRUCTURE (PERCENT) U-14 YRS. 46.8 46.2 38.2 40.7 30.1 15-64 YRS. 50.3 51.0 58.6 55.3 61.5 65 YRb. AND ABOVE 2.9 2.8 3.2 4.0 8.3 PUPULATIUN GROWTH RATE (PERCENT) TOTAL 3.1 3.0 2.3 2.4 1.5 UKBAN 5.7 5.2 3.9 3.7 3.1 LRUDE BIRTH BAIE (PER TIuUSAND) 45.5 36.3 30.1 31.4 22.9 GRUDE UEArH BATE (PER THOUSAND) 14.0 9.5 7.9 8.4 9.1 GRUSS REPRODUCTION RATE 3.3 2.6 L.9 2.3 1.6 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. 115.4 142.1 USERS (PERCENT OF MARRIED WOKEN) .. .. 46.1 FUUO ANh NUTRIIOUN INDEX UF FOOQ PRUOUCTION PER CAPITA (1969-7L-100) L10.0 99.0 124.0 108.3 119.8 PER CALIA SUPPLY UF CALURIES (PERCENT OF RLQUIRIEENTS) 97.0 88.0 102.0 107.6 125.7 PRUTEINS (GRAMS PEA DAY) 54.0 48.0 52.0 65.8 92.5 OP WHICH ANIMAL AND PULSE 28.0 24.0 26.0 34.0 39.7 CHILD (ACES 1-4) URTALITY BATE L9.8 12.0 8.3 7.6 3.4 HEALTH LIFE EXPECIANCY AT BlRTai (YEARS) 53.3 59.1 62.7 64.1 68.9 hFANTr ?BRTALITY RATE (PEE THOUSANh) 77.0 .. 65.0 70.9 25.2 ACCESS TO SAFE WATER (PERCENT OF PUPULATION) TOTAL 30.o . . 64.0 65.7 URBAN 54.9sd .. 73.0 79.7 R.URAL 6.Sjd .. 46.0 43.9 ACCESS u EXCXrETA DISPOSAL (PERCENT UO POPULATlON) TOTAL 47.0 44.4 59.9 U_AN .. 75.0 60.0 75.7 RURAL .. 8.0 14.0 30.4 POPULAIlON PER PHYSICIAN 2638.9 2189.5 1966.7 1728.2 973.3 POPULAIION PER NURSING PERSON 3740.0 1923.4 1250.0 1288.2 896.6 PUPULATION PER HUSPIrAL BED TOTAL 362.9 449.4 6L9.1 471.2 262.3 URBAN .. 377.5 540.3 558.0 191.8 RURAL .. .. AUOISSIONS PER HOSPITAL BED .. 22.9 29.8 *- 18.2 BOUslNG AVERAGE SIZE OF HOUSEFOLD TOTAL .. 5.7/c URBN .. 5.5c RURAL .. 5.9/ AVERAGE NUMBER UF PERSUNS PER ROOM TOAL .. 1.8/c URBAN ..6 RURAL 2. 4/c ACCESS To ELECTRICITY (PERCENT UF DWELLINGS) TUTAL 47.0" 58. 1 ... URBAN 83.OLd 87. 5-LS RURAL 8.0/d 13.2/c -21 -Annex 1 21 - Page 2 of 5 COLOMBIA - SOCIAL INDICATORS DATA SHEET COLOMBIA REFERENCE GROUPS (WEIGHTED AVERAGiS - HOST RCCENT ESTIMATE) - HOST RECENT MIDDLE UICCB MIDDLE IJCEHt 1960 /b 1970 /b ESTIMATE lb LATIN AMERlCA 6 CARIBBEAN 0UR0P! EDUCATI.N ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 77.0 103.0 124.0 101.7 105.9 MALE 77.0 101.0 122.0 103.0 109.6 FEMALE 77.0 105.0 127.0 101.5 102.2 SECONDARY: TOTAL 12.0 24.0 43.0 35.3 66.3 MALE 13.0 24.0 43.0 34.9 73.2 FEMALE 11.0 24.0 44.0 35.6 59.5 VOCATIONAL ENROL. (1 OF SECONDARY) 31.0/e 20.0 22.0 30.1 28.4 PUPIL-TEACHER RATIO PRIMARY 38.0 38.0 33.0 29.6 26.8 SECONDARY 11.0 17.0 21.0 15.7 23.6 ADULT LITERACY RATE (PERCENT) 63.0 80.8 .. 80.0 75.4 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 7.0 11.2 18.1 42.6 83.9 RADIO RECEIVERS PER THOUSAND POPULATION 125.1 104.3 117.1 215.0 181.6 TV RECEIVERS PER THOUSAND POPULATION 9.5 38.1 74.0 89.0 131.1 NEWSPAPER (DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 56.0 .. 54.4 62.8 123.8 CINEMA ANNUAL ATTENDANCE PER CAPITA .. .. 4.1 3.2 5.7 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 4726.5 6353.4 8652.7 FEMALE (PERCENT) 19.2 24.8 24.7 22.6 32.9 AGRICULTURE (PERCENT) 51.4 37.9 27.1 35.0 34.0 INDUSTRY (PERCENT) 19.2 21.0 21.1 23.2 28.7 PARTICIPATION RATE (PERCENT) TOTAL 30.0 29.9 33.1 31.8 42.3 RALE 48.8 45.1 49.8 49.0 56.5 FEMALE 11.5 14.8 16.4 14.6 28.5 ECONOMIC DEPENDENCY RATIO 1.7 1.6 1.2 1.4 0.9 INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 41.2/d f 31.9/f HIGHEST 20 PERCENT OF HOUSEHOLDS 67.77 60.17/f . LOWEST 20 PERCENT OF HOUSEHOLDS 2.1 3 3.57 .. LOWEST 40 PERCENT OF HOUSEHOLDS 6.8 10:17 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 214.0 RURAL .. .. 197.0 187.6 ESTIMATED RELATIVE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN .. .. 267.0 513.9 RURAL .. .. 122.0 362.2 385.1 ESTIMTED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. 34.0 RURAL .. .. Not available Not applicable. NOTES /a The group averages for each indicator are population-weighted arithmetic means. Coverage of countries aOng the indicators depends on availability of data and is not umifor . /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recont Estimate, between 1976 and 1979. /c 1973; /d 1964; /e Including teacher training at the third level; /f Economically active population. * The updated 1980 GNP per capita and population estimates to be shown in the 1981 World Bank Atlas are $1180 (at 1978-80 prices) and 26.7 million. May, 1981 22 - ~~~~Annex 1 -22- ~~~~~Page 3of 5 DEFINITIONSOiF SOCIAL INDICATORS Nones- Aliooo,gh the data one Jroa fine Iooecgnealy joged the -oe -h-b l-ttin end -re.lal., on h..od also he -.tt tot they ear no be lt-et nanlota..lly oosarble beo.e.. f --he loot of standardized deiftitoon and otopta. uIce.d by doff-ereo tonote in dlettg o oat.. The data arc ot.... ohe1l..ee.. sfo.l to dem..rohe rder, of -eegilnde. toolorair-d. IIW. d tha-atetoae ...t. i.aJ., diffa.an.. . e. nee.oI onhrI.. . Thotafenanna donure ore (I; the eas on -fgra of no~..cb fet co...ry cad (20 a onnty rop tIth aoeahe hgiste a-ereg locat tit- nbc ou-y groaP 000 leto; ao dInt.oioht oEd he eIrledI rna Igneaso o lodcatt nte.Te.aeae Io :toEyaflI ortn holeo haiti AREA tlhooa aq.k.) Hrtltonnt oPltal fad - ltoal ..ha, and oo.-a - Ptlt tnl Toa ou osrfet ara_cran edae o naoetr.uban, and torc) diradad byIba rtnteoebto ottlbd T.lolrra tIanet of oghnn de area need Wepoatl or- - arcl ntal atbi e rtaetrrlodeecledIeia n a Se ~CPT fj e psn oslta- cen- eane at tarten neek- prnee, e... iol tare are nolt lodlpaded. mod otatcl.d b-ee1n-. uo-pute healt colated by oe orreccn he d ae UtI .ak AeIss 1.977-79 haste); 1960. and "edi,a Ia IrenrIeI reti enifd hr a h'yaoi&n bu- bya 1970, sod 1979 date. sedlcecelent Ione, nuoifa. tt. hil.hoffen Id-neootnIO--ti factor and -tooda a lleitud tenet 111- o0 -ealcs i fa ollth ....o ea .l- tNERGYt COONStMPTEDN ?ff CAPITA -oAnnu. I -ot-letlot of to -caleegy 'teal oloal na 12tses uran ontutal onolde Who printI pa1/peters hopotat., and Oloite. annolec. tatonal ge and o0odn-, ucea and gr-tet-l a1- _n onlheptl total n rurI otethal On osia ano ealer...oy orootr) It hlogne.s a coal qouneene ~r -arta; 1960, 1970. cod 197 t ..en. noaldbatioo reotud onY ndernoent.1 Itoe h.o.ronals ditodd bt toe tude o beoc, O'PAT.ItO1 AtNh VITAL STACCPOICS TRSy~ult0on. A.OTs oooadt-O nO July 1; 1900, 1970, ood 1979 7019091 lets. Iomega Ilte of t.ooaebbtllo"'I V'llil; (oonr ret otue hoi, d).I -. otno- oim g, an.d arL- didf_oeo97ttoo-hne 9furhuh.opsanooletoatnatlhyfftIddttonootrlo. Aolti-1.o logrotratt ettuel tota ittuto hy ob e ac .d e.. otd oeIt eot aotrt tyrte dec11 ge Ierectey.iollteottdeo-Ponre t tOrosaad le,ooe In If on, fantety arttlco orld 77. yearI..1, The.....o..otlnd .el. loe0t totltyI ttn oraaepret netets forarrtlloy atcaleohaetbtei terl_eeaontgdeolltel ofooc,uttos..u.ldelhPgneIethoty .ettlltacooott on otoe lnaI od ast asty olnnin pTfon. ne Dao trr flIa haastna one of. IIaIe n-ne tobotonto of1 notelc CIOICOTIOIN. . . P~ y anfertillutyt Ieode' t Idoon p -roae uduseyillontstt rileal 0 onIII Thebet tf rh rjne htnettt fthe pdolaInolnfeneIIotnireIelt or boo th of Ichlal-mr tot ag.. 1 1It_ nbIys 1101, etd tlhe raeoMelt o enh a tat noterle,.o- Secodar no b l - btr 1- . et and fel -K ffnpuel aa-brl ;ersd.. ner lah eI_ edoatuonroolteeat teat Coo fears o-atI...e prt-aary. totrtIatd sloeh. bar ..e teethed. u-aail of12to 17 -rr of age; o--ep-ndene roarse are .gnerlit total ot 9s: 6011.1970 otd 1979 dana. ldttldercbthcial, Iderot Iroher rr-rstc oto perte... red o-it: 1960. 1970 sa' 197-8 data. PoOPl-tnb rt - tenr..ad sonlr-torI tent rer1lld ia forotanlot se Stoonnae frorn-nr - Childre (0-14 yeete), tebn-g 15- .rsryad o...ordny In-1l diooded by toekn of teanhera ia the hoyereI., adrtns1)pce00tr)s enasr fedya do - tnr-pondira Le-ete lantr: 960,197. sa657 data. hal iaen oeOenen-l ltn fit- l sIte hored aed nt yea 9pp60tot tot0 15-6 d.1907,ad17-9 poplatonIt ho Rate lonnoent - 1 -other -ueI growl tales of orban tpsP- COeNSUPtT OS tathorebr f 95-90 107. sd 1970-09 ..aoa ae(a hnan noair .eese tae...eec Crude ttncb -tat lIa nios...d) - --Ias Lio birohe yen thouscn of and-yea tar rentn lace hen aighe pereote; noldesbalao-., bhare sta o 1oluot 60l. 197. sod .979 date, sot tt,ty tennlee.: tooatt:1060, 1970 . cd (9t9 daa.lorene.n eee rte e tencee,,, ad.n ,osateP etaa n iroes Orproononton rane~~~~--norga noabar ofduhe. a -na rill bean or ltredroctea n oerca ndO.yar.be.eeara te fre teG oraI epouotenrlsIfeeeaatenepesn aerenfnfa-seroaOnefet atfo roo pee o onb tLea .erm tlltynne--I sOl Cre-ea ifrae canIng Ia16. 1970, so 99 oe erncebOeel onlc taslntcnOa-o.et re-oo- al......e.daf-tetasloosb of atnereor -ynen'lol e(etoso oactn-TPrnfeefrpaoe of trnoo ocolfatue ude serne o naIoaliatl yanan prge. eeclrbinpnahued tlnutHotueorlese freenr Featir~~~~~~~~ ~ ~~~~ P ttr-yce ornb fericsen. freng of ....ic to oo trie en nyce hnrtsceino 2T see I fen FOWD AND0 PiTITICO on bedaIy If it apteae e ler 1onnic- ak orodotio of aPlld- "I lood..111 EX . oeotoe Ptdttoniea ededtcond;ncsc od. dent toefet tcadrgatoct omiel ut-c-a- Ins-tead of ene;eho reetl and no_atroerloenakle.g. tofee en nenetuue).ugedI- nnono of- ralo o-ry he-d loae. o AJffl. ret doy OtalOabla~~c. s -rllc o 'rts donttoproanIen tap7r9 lernn ottai:160 00 n 97 a lo-atod. _(coal; 911,17,edo7 da-ta. 1970 end 1979--bl. data. 7 .d199d.. Per oo tc e rel ofh . ro.ein ere per da'-Poenotrnifpnnr f erret.d -1 toartor Ffte nernn toa, as,fcad Ie.a.-ycItoectb- no- sloaoso 0 rt of.. toc., i noee yt dy nd grass of anima sd19t.17, n 1079date Thre ene bae o.f.' rttP eeaa lor-f,tcd tor- y 1991-60. 197 sod 1977 data to9 b 9o79 labr trne oloed fre antees sod poes. ha rass pa f.dsp; 19 f1-69 197 an 107dn.- ft-, itfn Chl lse1-)nrtln -Rc (a blnsh.dO -by sa dSD echeid far tonan s Fi-an f nneeIco bohi ose sod kInd) - 1fneedbrchs ac to - ar,1 oblldren in-tis . ag grut fot wandenis9ognon- t ern richest11 20lren ere 0pren,adpeetd ann mOre otta depOned Pine (Ifs ables: 0910. 1070 and 1979 Ots, of he1-iabotdeh oceen Oi,.teIsnr of ot.la.ont Vn.I_ otc .sdptoly -f nottoclyIcocefa ladeenaleafedrdtedeei-m lier E 0f -1 -doplett ..a . orbaa. eon'g1-6 tonal)0oltd ne77eadleatoIeeneafDISTfor UTION rate o pl inlds raadcafeceeao ooana a otnd_ nh mle- ced .ennaso altnetenytrt -.n h (IS d ear dsetnRl i- arba sO.1 mel traeeoabieecnaee wolf Imply ., then th Ibacnef to. eesr of the. -ocabl sad fatl -fets ofpplco obcedrua)aeea"ielt roteacot eoneea Diaro ts '....o ofAcoetldclor - fbna.forb. ced.ree ...dA.I ., . - d -- rarcrrcea f thcteatn oflnes arta diwea say 1nyldd ber f rpt.oar Ily ase- ri yna ortneos ofpaptr. d- efefIettc mlyd ad t) nieePecte -st tocrel.at.oe..nay 19g tines qualifIed froc a eatica_nela P. oret ia.d it 1 R I.i-P-tI . M t. -h.nlarote or Nubcine Preonb- Popteti-t d-nifehby ancdje fdpfaonlIrn fsl and,,T tp. Ieee. creos - nures peotna nura0 ted ahsdceanatah, aser_ce, - - 23 - ANNEX I ECONOMIC INDICATORS Page 4 of 5 PopulIati " 26,670,000 (mid-1980) GNP Per Capita: US$1010 a/ Amount Average Annual Increase (x) Share of GDP at Market Prices ) Indicator (million US$ (at constant 1970 prices) (at current prices) at current prices) 1980 b/ 1960-70 1970-75 1975-80 1960 1970 1975 1980 NATIONAL ACCOUNTS Gross domestic product c/ 32,686 5.3 6.1 5.8 100.0 100.0 100.0 100.0 Agriculture 8,197 3.5 5.2 4.0 34.1 28.6 29.3 25.2 Industry 8.799 6.2 6.1 4.4 25.7 26.6 28.3 29.2 Services 12,559 5.9 7.3 6.4 40.2 44.8 42.4 45.6 ConSomption 24,435 5.9 6.6 5.6 79.4 69.6 81.6 74.7 Gross Investment 7,994 5.1 0.6 8.5 20,5 22.0 17.8 24.4 Exports of goods and NFS 5,648 3.1 5.9 10.0 15.6 14.2 15.1 17.4 Imports of goods and NFS 5,391 4.3 1.1 12.7 15.5 15.8 14.5 16.5 Gross national savings 8.103 5.2 5.3 10.8 19.4 18.0 16.8 24.8 Composition of Merchandise Trade (x) (at current prices) 1960 1970 1975 1980 MERCHANDISE TRADE Merchandise Exports (FOB) 4428 3.3 1.4 10.8 100.0 100.0 100.0 100.0 Major primary 2,871 2.8 -4.6 12.8 72.5 69.4 51.2 64.8 Major manufactures 686 - 23.8 6.3 - 9.0 24.5 15.5 Other 871 - 3.8 5.4 - 21.6 24.3 19.7 Merchandise Exports (CIF) 4.533 3.5 -2.3 9.0 100.0 100.0 100.0 100.0 Food 364 10.0 -0.1 13.4 2.4 4.5 4.8 8.0 Petroleum 750 -21.4 70.6 43.5 2.0 - 2.0 16.5 Machinery and equipment 1,750 5.2 -8.5 11.0 42.7 50.6 36.4 38.6 Other 1.669 1.8 2.4 5.4 52.9 44.9 56.8 36.9 1974 1975 1976 1977 1978 1979 1980 kI PRICES AND TERMS OF TRADE GDP deflator 27.6 20.8 23.6 28.3 17.1 23.9 24.5 Exchange rate 27.1 31.2 35.0 36.9 39.3 42.6 47.3 Export price index 155.4 159.7 214.5 303.6 260.2 262.2 294.9 Import price index 210.3 217.3 233.5 254.3 202.0 220.6 252.2 Termas of trade index 73.9 73.5 91.9 119.4 128.8 118.8 117.0 As 7 of GDP (at current prices) 1970 1975 1980 f/ PUBLIC FINANCE d/ Current revenue 10.6 11.1 12.1 Current expenditure 5.7 6.6 8.2 Surplus (+) or deficit (-) 4.9 4.5 3.9 Capital expenditure 1.8 4.6 4.6 Foreign financing e/ 3.3 2.9 3.2 1960-70 1970-75 1975-80 OTHER INDICATORS GNP growth rate (7) 5.10 6.30 6.00 GNP per capita growth rate (7) 2.00 3.90 3.70 Energy consueption growth rate (%) 5.00 4.00 4.00 ICOR f/ 3.54 3.43 4.00 Marginal savings rate h/ 0.13 0.13 0.16 Import elasticity 1.17 0.16 2.20 a/ World Bank Atlas Method. h/ Estimated. c/ At market prices: Components are expressed at factor cost and will not add because of exclusion of net indirect taxes and subsidies. d/ Central Government. e/ Gross disbursements of external loans to the entire public sector. f/ Includes Social Security and Fondo Vial. j/ Lagged one year. h/ Increment to gross domestic savings/incremant to gross domestic product. April 24, 1981 Annex I Page 5 of 5 BALANIC OF PAYMNTS, EXTERNAL CAPITAL AND DE35 Population 26,670,000 (.ld-1980) GNP Per Capita: US$1010 */ (1979) (millioc 0S4 *t current price.) A.t..l Proi..t.d 1974 1975 1976 1977 1978 1979 1980 b/ 1981 1982 1983 1984 1985 BALANCE OP PA358!NTS Eaport of good. .d .o--fector .oroic 1000 2165 2782 3404 4059 4910 5327 4932 5660 6367 7323 8193 Inp4rta of good. cod coo-factor ervice. 1149 2030 2302 2730 3722 4191 5376 6361 7369 8401 9446 10415 ieto-rce 8 alce. -149 -135 480 674 337 719 -49 -1429 -1709 -2034 -2123 -2222 Net f ctt p-yn.ta -180 3 -279 -235 -247 .127 -172 331 143 -1 -175 -319 Net oor.q.lrad tree..cr, 27 48 21 16 7 4 26 35 40 45 50 45 Correct Accooct BIce- -302 -80 222 455 97 596 -195 -1063 -1526 -1990 -2248 -2486 Net direct foreign i-veat.ent 39 32 14 43 56 124 234 150 175 300 450 600 Medim cd 1og te. I.ee. (oet) 202 308 131 192 72 703 838 713 951 1240 1448 1596 to public a.ctor (160) (254) (109) (195) (92) (603) (781) (691) (912) (1164) (1335) (1463) to private .ecior (42) (54) (22) (-3), (-20) (100) (57) (22) (39) (76) (113) 0fl) Other capital 55 -121 195 162 391 -158 264 - - - - - Capit.l Account Baelce 296 219 340 397 519 669' 1336 863 1126 1540 1898 2196 Cheee ic leerv.- (- ic-ee..) 6 -139 -562 -852 -616 -1265 -1141 200 400 450 350 300 Intern ti-1 RI.r- (official) 152 547 1166 1830 2482 4106 5416 5216 4816 4366 4016 3716 Reprve a. ooth. of ioport. 1.6 3.2 6.1 8.0 8.0 11.8 12.1 9.8 7.8 6.2 5.1 4.3 GROSS DOSI0SBUR NT8 c/ Offoicil greet. Gro-. diaboreeeent of hLT lo.. 235 390 262 371 319 1036 1131 Conce.on l 102 39 47 27 60 36 53 B01 t.r.l (100) (37) (44) (21) (53) (28) (16) 0D6 (-) (-) (-) (-) (-) (-I (-) Other 5iultiltera1 (2) (2) (3) (6) (7) (8) (37) NIoo-cocceeeion.1 133 351 215 345 260 IOW 1078 Official eport cr.dit. (26) (14) (0) (14) (19) (47) (113) N) IBRD (58) (106) (76) (85) (82) (138) (218) P Other -ltil.tir.l (14) (19) (27) (31) (33) (31) (82) Private (35) (212) (112) (214) (125) (783) (665) EXTERNAL DEBT (ecd of period) c/ Debt omtatodiag .od dihoreed 1249 2348 2453 2670 2803 3426 4295 Officil 1074 1716 1785 1862 1999 2151 2446 ISi (354) (634) (672) (716) (751) (838) (1035) IDA (20) (22) (22) (22) (22) (22) (21) Other (700 (1060) (1019) (1124) (1225) (1291) (1390) Priv-t. 174 632 668 808 804 1275 1849 Uodi.b... d Debt 602 663 908 1040 1516 1993 2409 D8eT SERVICE SI Total debt aervice ppoeta of hbich 119 249 278 313 398 664 568 Interest 44 114 125 137 171 231 268 Ppm-te a. e rport of good, cd 11 Serice. 11.6 11.1 9.5 8.8 9.5 12.5 9.9 P.ynte a. 7 GNP 1.7 1.9 1.9 1.6 1.8 2.4 1.7 Average i.tereat rate on c_lo bu (1) 5.8 7.4 6.5 7.4 7.9 10.3 10.2 Official (5.1) (6.1) (5.8) (7.3) (7.6) (7.8) (-5 Privt. (6.9) (8.2) (7.5) (7.6) (8.6) (12.0) (12.3) Av-ag aturity of wo I... (yecra) 22.4 15.1 14.8 16.0 14.1 12.6 13.7 Official (30.1) (26.1) (20.0) (17.9) (16.2) (16.8) () Private (9.7) (8.2) (7.4) (7.6) (9.1) (10.0) (10.2) DBD DOD/UTotlDMOD1%) SI28.4 27.0 27.4 26.8 26.8 24.5 24.1 IMD di.borae t./iottl Sre.. di.bor.-t 24.6 27.1 28.9 22.9 25.7 13.3 19.3 IBID debt aervice/tottl debt .-rvlca 34.4 28.9 13.7 14.3 8.8 13.1 25.4 IDA wOD/tota1 DOD 1.6 1.0 0.9 0.8 0.8 0.6 0.5 IDA di.bereat/tot.l gro.. di.br.-ct. - - - - - - - I d1b servical/ttl dit aeri.. - 0.1 0.1 0.1 0.1 0.0 0.0 a/ W'rld Back Atla. MNthod b/ Prelieiecry c/ Poblic cd publily g.cr*eteed debt Nove,vbr 11, 1981 Colnbia livicioi - 25 - ANNEX II Page 1 of 11 THE STATUS OF BANK GROUP OPERATIONS IN COLOMBIA A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of September 30, 1981) (US$ million) Loan Amount (less Cancellation) Number Year Borrower Purpose Bank IDA Undisbursed 57 fully disbursed loans and one IDA credit 1,070.6 23.5 /1 -- 849 1972 Instituto Colombiano de la Reforma Agraria Irrigation 2.2 .6 920 1973 Colombia Education 21.2 7.6 1072 1975 Instituto Nacional de Fomento Municipal Water Supply 27.0 6.3 1118 1975 Colombia Rural Settlement 19.5 4.1 1163 1975 Colombia Agriculture 21.0 10.8 1223 1976 Banco de la Republica Industrial Cr. 80.0 2.0 1352 1977 Colombia Rural Dev. 52.0 16.5 1357 1977 Banco de la Republica Agricultural Cr. 64.0 14.9 1450 1977 Empresa Nacional de Communications 58.3 50.1 Telecomunicaciones 1451 1977 Banco de .la Republica Industrial Cr. 15.0 1.0 1471 1977 Colombia Highways 90.0 39.6 1487 1978 Colombia Nutrition 25.0 18.2 1523 1978 Empresas Municipales de Cali Water Supply 13.8 11.6 1558 1978 Colombia Urban Develop- ment 24.8 22.3 1582 1978 Interconexion Electrica, S.A. Power 126.0 87.3 1583 1978 Colombia Power 50.0 15.9 1593 1978 Zona Franca Industrial Industrial y Comercial de Cartagena Export 15.0 9.8 1598 1978 Banco de la Republica Industrial Cr. 100.0 14.4 1624 1979 Colombia Airports 61.0 32.9 1628 1979 Empresa de Energia Electrica de Bogota Power 84.0 41.3 1694 1979 Colombia Urban Develop- ment 13.5 12.6 1697 1979 Empresa de Acueducto y Alcantarillado de Bogota Water Supply 30.0 27.9 /1 Includes exchange adjustment of US$4.0 million. - 26 - ANNEX II Page 2 of 11 A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of September 30,1981) (Continued) Number Year Borrower Purpose Bank IDA Undisbursed 1725 1979 Interconexion Electrica, S.A. Power 72.0 72.0 1726 1979 Instituto Nacional de Fomento Municipal Water Supply 31.0 31.0 1737 1979 Instituto Colombiano de la Reforma Agraria Agriculture Cr. 20.0 18.6 1762 1979 Cerro Matoso, S.A. Mining-Nickel 80.0 18.3 1807 1980 Empresa de Energia Electrica Power 87.0 87.0 de Bogota 1825 /1 1980 Empresas Publicas de Communications 44.0 44.0 Medellin 1834 1980 Banco de la Republica Industrial Cr. 32.0 29.6 1857 1980 Banco de la Republica Industrial Cr. 150.0 150.0 1868 1980 Empresas Publicas de Medellin Power 125.0 125.0 1953 /2 1981 Empresas Publicas de Medellin Power 85.0 85.0 1966 /1 1981 Colombia Rural Roads 33.0 33.0 1996 /2 1981 Instituto Colombiano de Irrigetion 37.0 37.0 Hidrologia 1999 /2 1981 Corporacion Electrica de la Power 36.0 36.0 Costa Atlantica 2008 /2 1981 Empresa de Energia Power 359.0 359.0 Electrica de Bogota TOTAL 3,254.9 23.5 Of which has been repaid 561.5 2.3 Total now outstanding 2,693.4 21.2 Amount sold 51.0 Of which has been repaid 45.1 5.9 Total now held by Bank and IDA 2,687.5 21.2 Total undisbursed 1,573.2 /1 Not yet effective. /2 Not yet signed. - 27 - ANNEX II Page 3 of 11 B. STATEMENT OF IFC INVESTMENTS (as of September 30. 1981) Type of Amount in USS million Year Obligor Business Loan Equity Total 1959 Laminas del Caribe, S.A. Fiber-board .50 - .50 1960-1965 Inoustrias Alimenticias Noel, S.A. Food products 1.99 .08 2.07 1961 Envases Colombianos, S.A. Metal cans .70 - .70 1961-1968 Morfeo-Productos para el Hogar, S.A. Home furniture .08 .09 .17 1961 Electromanufacturas, S.A. Electrical equipment .50 - .50 1962 Corporacion Financiera Development Colombiana financing - 2.02 2.02 1962-1963 Corporacion Financiera Development - 2.04 2.04 Nacional financing 1963-1967 Compania Colombiana de Textiles 1.98 .15 2.13 1968-1969 Tejidos,. S.A. 1964-1970 Corporacion Financiera de Development Caldas financing - .81 .81 1964-1968 Forjas de Colombia, S.A. Steel forging - 1.27 1.27 1966 Almacenes Generales de Warehousing 1.00 - 1.00 Deposito Santa Fe, S.A. 1966 Industria Ganadera Livestock 1.00 .58 1.58 Colombiana, S.A. 1967-70-74 ENKA de Colombia, S.A. Textiles 5.00 2.60 7.60 1969 Compania de Desarrollo de Tourism - .01 .01 Hoteles y Turismo, Ltda. (HOTURISMO) 1969-1973 Corporacion Financiera del Development - .45 .45 Norte financing 1969 Corporacion Financiera del Development - .43 .43 Valle financing 1970 Promotora de Hoteles de Tourism .23 .11 .34 Turismo Medellin, S.A. 1970-1977 Pro-Hoteles, S.A. Tourism .80 .25 1.05 1973-1975 Corporacion Colombiana de Housing - .46 .46 Ahorro y Vivienda 1974 Cementos Boyaca, S.A. Cement 1.50 - 1.50 1975 Cementos del Caribe, S.A. Cement 3.60 - 3.60 1976 Las Brisas Mining 6.00 - 6.00 1977 Promotora de la Interconexion de los Gasoductos de la Costa Atlantica S.A. Utilities 13.00 2.00 15.00 1977 Compania Colombiana de Clinker, Cement and S.A. Construction Material 2.43 .30 2.73 1980 Leasing Bolivar Leasing 9.00 .19 9.19 1981 Petroleos Colombianos Ltd. Chemicals and Petrochemicals 12.15 3.42 15.57 Total Gross Commitments 61.46 17.26 78.72 Less cancellations, terminations, repayments and sales 46.65 8.91 55.56 Total commitments now held by IFC 14.81 8.35 23.16 Total undisbursed 8.54 .42 8.96 - 28 - ANNEX II Page 4 of 11 C. STATUS OF PROJECTS IN EXECUTION As of September 30, 1981 1/ 1. Ln. No. 849 Second Atlantico Development; US$2.2 million, June 30, 1972. Effective date: November 14, 1972 Closing Date: original - March 31, 1978 current - September 30, 1981 The project is the second phase of a scheme to develop about 17,000 ha of seasonally inundated land for agricultural production. At the request of the Government, US$2.8 million of the loan of US$5.0 million was cancelled in February 1977 and as of September 30, 1981, US$0.6 million remained undis- bursed. Settlement of farmers within the project areas was only partially carried out and the provision of technical assistance/farm credit needs improvement. Because heavy seasonal rainfall in 1979 resulted in severe flooding in the project area, a study is being carried out to reassess the flood protection and drainage requirements of the area. The project comple- tion mission will take place in March 1982, once the report by the hydrologic consultants has been completed. 2. Ln. No. 920 Education III; US$21.2 million, July 19, 1973. Effective date: January 9, 1974 Closing Date: original - June 30, 1977 current - December 31, 1981 Project execution was suspended in mid-1975 pending redefinition of sector priorities by the Government. It resumed in 1977 after the Bank agreed to redimension of the project to give greater emphasis to primary education, but suffered continuous delays. In June 1978, the Government proposed to the Bank to reduce the scope of the project and to cancel a large portion of the loan. However, the new administration, which came to office in August 1978, retracted the proposal and decided to proceed with the project as modified in 1977. Since reactivating the project, the Borrower has made progress in planning, construction, educational programming and personnel training, and project execution is proceeding normally. Nevertheless, because of the delay and higher costs, the scope of the project has been reduced. The closing date of the loan will be extended by an additional three months. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense, and with the under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution. - 29 - ANNEX II Page 5 of 11 3. Ln. No. 1072 Second Multi-City Water Supply and Sewerage Project; US$27 million, January 16, 1975.- Effective date: April 14, 1975 Closing Date: December 31, 1981 Project implementation slower during the first semester of 1981 because of managerial problems and the ground water component and subprojects in Bananquilla, Cartagena and Villavicencio are now expected to be completed by the end of 1982. Despite the delays, works on the other four subprojects are expected to be completed before December 31, 1981. INSFOPAL's management has been urged to strengthen project supervision and to accelerate project execution and disbursements. As of September 30, 1981, US$20.7 million or 77% of the loan has been disbursed. 4. Ln. No. 1118 Caqueta Rural Settlement Project; US$19.5 million, June 2, 1975. Effective date: April 1, 1976 Closing Date: Original - October 31, 1979 Current - December 31, 1981 Project implementation is behind schedule and the closing date will need to be extended by one year to December 31, 1982 in order to complete project targets. A recurring problem, which imposes serious operational constraints, is the slow transfer of counterpart funds to the project. As of September 30, 1981, US$4.1 million or 21% of the loan remained undisbursed. To facilitate the completion of the project, the closing date of the loan will be extended for one year. 5. Ln. No. 1163 Cordoba 2 Agricultural Development Project; US$21 mil- lion, September 12, 1975. Effective Date: March 30, 1976 Closing Date: June 30, 1983 A few months after effectiveness, the Government decided to give responsibility for project civil works to another agency. This decision delayed the initiation of the project and implementation is still behind schedule. One of the project's main problems continues to be inadequate budget allocations to carry out project works and to provide sub-loans to farmers. Maintenance of roads and drains constructed under the loan, technical assistance to farmers and rate of land transfer to beneficiaries are inadequate; the executing agencies are taking corrective measures. The project's social component, schools, domestic water supply and health, is progressing satisfactorily. As of September 30, 1981, US$10.2 million or about 49% of the loan amount had been disbursed. -30 - ANNEX II Page 6 of 11 6. Ln. No. 1223 Sixth Development Finance Companies Project; US$80.0 mil- lion, March 31, 1976. Effective Date: September 1, 1976 Closing Date: June 30, 1981 The project is proceeding satisfactorily and virtually all loan funds are committed. As of September 30, 1981, about 98% of the loan had been disbursed. 7. Ln. No, 1352 Integrated Rural Development Project; US$52.0 million, January 7, 1977. Effective Date: August 26, 1977 Closing Date: December 31, 1982 The project is now in its fifth year of implementation and proceed- ing satisfactorily in spite of its complexity. The project's components of credit, technical assistance and training are proceeding satisfactorily, and institutional coordination continues to be effective. The forestry and water supply components have suffered some delays. Administrative procedures, such as procurement and disbursement, continue to present some difficulties, but they are much less serious than initially. Control and monitoring of project execution is comprehensive, and first stage evaluation is currently underway. As of September 30, 1981, US$35.5 million, or 68% of the loan had been disbursed. 8. Ln. No. 1357 Second Agricultural Credit Project; US$64.0 million, February 4, 1977. Effective Date: September 6, 1977 Closing Date: December 31, 1981. The US$25 million assigned to medium and large farmers has been fully committed and disbursed. However, only 39% of subloans allocated to small farmers have been committed, and no satisfactory arrangement has yet been found to speed up commitments. Concern over possible diversion and substitu- tion of subloan funds led the Borrower to increase substantially its end-use supervision. About 85% of loan funds for credit to agroindustries have been committed for 160 subprojects. As of September 30, 1981, US$49.1 million, or 77% of the loan had been disbursed. 9. Ln. No. 1450 Telecommunications IV; US$58.3 million, July 7, 1977. Effective Date: October 3, 1977. Closing Date: June 30, 1982. The project had been delayed as a result of several key personnel changes in the Borrower. Current activities are concentrated on the procure- ment of project goods, the planning of cable networks, trunk exchange expan- sion, and design of buildings to house equipment. Satisfactory progress is being made in the acquisition program of smaller local telephone companies. As of September 30, 1981, US$50.1 million, or 86% of the loan, remained undisbursed. - 31 - ANNEX II Page 7 of 11 10. Ln. No. 1451 Second Small-Scale Industry Project; US$15 million, September 27, 1977. Effective Date: February 14, 1978. Closing Date: September 30,1981 After initial delays in loan effectiveness mainly due to management changeover, project implementation is proceeding well and loan funds are fully committed. As of September 30, 1981, 93% of the loan had been disbursed. 11. Ln. No. 1471 Highways VII; US$90 million, July 5, 1977. Effective Date: November 28, 1977. Closing Date: December 31, 1982 The Project-comprises three main programs: rehabilitation, main- tenance, and vehicle weight control. After initial delays, the project is now developing satisfactorily. All rehabilitation works have been contracted and 25% of the roads completed. The maintenance program began in March 1980; consultants to assist MOPT in carrying out the program have been retained and the bulk of the maintenance equipment has been purchased. The vehicle weight control program is about to begin after a 28-month delay. As of September 30, 1981, about US$50.4 million had been disbursed. 12. Ln. No. 1487 Integrated Nutrition Improvement Project; US$25 million, November 10, 1977. Effective Date: March 9, 1978 Closing Date: June 30, 1982 Progress has been achieved in the major components of health, nutrition education and water supply but execution is running about a year behind schedule. Initial delays occurred in two subsidiary components--home food production and food quality control--but activities are now underway. Project management and coordination have been sound, flexible and effective. Project monitoring and evaluation systems are operating effectively. 13. Ln. No. 1523 Second Cali Water Supply and Sewerage Project; US$13.8 million, June 20, 1978. Effective Date: January 31, 1979 Closing Date: June 30, 1982 Because of EMCALI's failure to comply with some of its obligations under the Loan Agreement dealing with the finances of its Water and Sewerage Division, on January 29, 1981, the Bank suspended disbursements under this loan. Disbursements were resumed on September 4, 1981 once EMCALI has taken corrective measures. As of September 30, 1981, US$11.6 million or 84% of the loan remained undisbursed. - 32 - ANNEX II Page 8 of 11 14. Ln. 1558 Urban Development Project; US$24.8 million, July 21, 1978. Effective Date: December 1, 1978 Closing Date: June 30, 1982 While project execution and coordination has recently improved, overall progress is still running behind schedule. Project implementation plans in 16 of the 23 cities have been approved by the Bank. The new General Manager of SIP intends to accelerate project implementation and has established a working unit to monitor progress and evaluate the project. For some time, the Bank has been recommending a review of the project scope to ensure its completion on time and recently SIP has presented a proposal which, while not changing the basic concept of the project, involves design modifications in most components. This proposal is currently being reviewed by the Bank. 15. Ln. No. 1582 San Carlos I Hydro Power Project; US$126 million, July 14, 1978. Effective Date: April 5, 1979 Closing Date: June 30, 1984 Project works are proceeding on schedule and main contracts for equipment have been signed. As of September 30, 1981, US$38.7 million or 31% of the loan had been disbursed. 16. Ln. No. 1583 500 kV Interconnection Project; US$50 million, July 14, 1978. Effective Date: October 17, 1978 Closing Date: June 30, 1982 Project works have recently been initiated. The Bank-financed component (transmission line) is proceeding on schedule, at lower-than- anticipated cost. However, project completion is likely to be delayed by about two years as a result of KfW's objection to the contract award for substations (KfW was originally to finance this component). The Government is obtaining other sources of finance. The line is to be energized temporarily at 220 kV in 1982, pending full completion of the works. 17. Ln. No. 1593 Cartagena Industrial Export Processing Zone; US$15 million, August 1, 1978. Effective Date: January 30, 1979 Closing Date: December 31, 1983 After an initial delay due to procurement problems, project implemen- tation is now running smoothly. Construction and the promotional campaign are both well under way, but there have been delays in contracting the water supply works and in construction of a portion of the access road. Difficult soil conditions encountered at the site require that substantial soil investigations be carried out before site preparation is initiated. -,33 - ANNEX II Page 9 of 11 18. Ln. No. 1598 Seventh Development Finance Companies Project; US$100 million, July 27, 1978. Effective Date: November 28, 1978 Closing Date: December 31, 1982 The project is proceeding satisfactorily and loan funds are virtually fully committed. As of September 30, 1981, 87% of the loan, or about US$85.6 million, had been disbursed. 19. Ln. No. 1624 Airports Project; US$61 million, December 29, 1978. Effective Date: July 24, 1979 Closing Date: December 31, 1984 Project works are well under way. Because of poor soils, there is a construction delay at the future Rio Negro airport and instrumentation has been installed in order to estimate amount of camber necessary to compensate for' future settlement. As of September 30, 1981, about 54% of the loan had been disbursed. 20. Ln. No. 1628 Mesitas Hydroelectric Power Project; US$84 million, April 9, 1979. Effective Date: August 21, 1979 Closing Date: December 31, 1982 Project works are well advanced, although with a 3-6 month delay. Higher-than-anticipated costs (estimated at US$62 million) are expected as a result of higher bids than forecast at appraisal. As of September 30, 1981, 49% of the loan had been disbursed. 21. Ln. No. 1694 Second (Cartagena) Urban Development; US$13.5 million, August 31, 1979. Effective Date: June 20, 1980 Closing Date: December 31, 1984 The project is about 18 months behind schedule, with cost overruns, which are mainly due to inflation, of about 39%. As of September 30, 1981, US$12.6 million, or 97% of loan funds remained undisbursed. 22. Ln. No. 1697 Third Bogota Water Supply; US$30 million, November 30, 1979. Effective Date: April 22, 1980 Closing Date: June 30, 1983 Significant progress has been made on the Bogota River sewage treatment and rectification study, the construction of water and sewerage systems in low- income barrios, the purchase of meters and of maintenance equipment. Implementa- tion of major civil works, however, has been slow. Loan disbursements are only - 34 - ANNEX II Page 10 of 11 8% of appraisal projections and project completion is now scheduled for December 31, 1983, one year later than the scheduled appraisal completion date. EAAB is presently taking adequate measures to implement all project components and further delays are not anticipated. 23. Ln. No. 1725 San Carlos II Hydro Power; US$72 million, November 30, 1979. Effective Date: June 19, 1981 Closing Date: June 30, 1985 Project works are proceeding well, with good performance by the Borrower. 24. Ln. No. 1726 Third Water and Sewerage; US$31 million, November 30, 1979. Effective Date: February 28, 1980 Closing Date: June 30, 1984 Project implementation is under way with the final designs for 21 of the 23 subprojects approved and with designs for the remaining subprojects in final stages of preparation. INSFOPAL has agreed on a master contract amendment for subsidiary loan agreements which, when executed, will allow accelerated construction and loan disbursements. The general performance of the Borrower (INSFOPAL) is not yet fully satisfactory. Corrective measures will need to be taken and a supervision mission is scheduled to review the problem. As of September 30, 1981, the loan remained undisbursed. 25. Ln. No. 1737 Third Agricultural Credit; US$20 million, November 30, 1979. Effective Date: October 1, 1980 Closing Date: June 30, 1985 Disbursements are lagging, even taking into account the one year delay in effectiveness, mostly because of slow on-lending commitments. The revolving fund for credit is working well, but overall financial management of INCORA needs strengthening. As of September 30, 1981, 9% of the loan had been disbursed. 26. Ln. No. 1762-CO Cerro Matoso Nickel; US$80 million, December 20, 1979. Effective Date: July 3, 1980 Closing Date: June 30, 1983 The project is expected to be completed by April 1982. Cost overruns will require a revision of the financing plan and, possibly, additional commitments from the sponsors. 27. Ln. No. 1807-CO Bogota Power Distribution; US$87 million, February 6, 1981. Effective Date: September 25, 1981 Closing Date: December 31, 1983 This loan became effective on September 25, 1981 and project imple- mentation is underway. 35 - ANNEX II Page 11 of 11 28. Ln. No. 1825-CO Fifth Telecommunications; US$44 million, December 19, 1980. Effective Date: October 30, 1981 Closing Date: June 30, 1985 This loan became effective on October 30, 1981 and is proceeding satisfactorily. 29. Ln. No. 1834-CO Third Small-Scale Industry; US$32 million, December 10, 1980. Effective Date: July 9, 1981. Closing Date: June 30, 1981. This loan became effective on July 9, 1981, and project implementa- tion is underway. 30. Ln. No. 1857-CO Eighth DFC; US$150 million, December 10, 1980. Effective Date: July 9, 1981. Closing Date: December 31, 1984. This loan became effective on July 9, 1981 and is proceeding satis- factorily. As of September 30, 1981 US$8.9 million had been committed to sub-projects. 31. Ln. No. 1868-CO Guadalupe IV Hydro Power; US$125 million, December 19, 1980. 'Effective Date: June 29, 1981. Closing Date: June 30, 1985. The project is proceeding satisfactorily. 32. Ln. No. 1953-CO Playas Hydro Power; US$85 million, November 6, 1981. This loan -is not yet effective. 33. Ln. No. 1966-CO Rural Roads; US$33 million, September 24, 1981. This loan is not yet effective. 34. Ln. No. 1996-CO Irrigation Rehabilitationl US$37 million. This loan was approved on May 19, 1981 but is not yet signed. 35. Ln. No. 1999-CO Village Electrification; US$36 million. This loan was approved on May 21, 1981 but is not yet signed. 36. Ln. No. 2008-CO Guavio Power; US$359 million. This loan was approved on May 28, 1981 but is not yet signed. - 36 - Annex III Page 1 of 2 COLOMBIA RAILWAYS VII SUPPLEMENTARY DATA SHEET Section I: Timetable of Key Event (a) Time taken to prepare project: 12 months (b) Agency which prepared project: Colombian National Railways (ITALCONSULT (Consultant) (c) First presentation to Bank: October 1978 (d) First mission to review project: February 1979 (e) Departure of Appraisal Mission: September 1980 (f) Comnpletion of Negotiations: December 1981 (g) Planned date of Effectiveness: September 1982 Section II: Special Bank Implementation Actions The project would be monitored closely and the targets included in the Program of Action (Annex IV) would be reviewed every six months with disbursements linked to the achievement of targets. A mid-project review would be undertaken in September 30, 1983 before proceeding with Group II of the project. Section III: Special Conditions During negotiations, assurances were obtained that: (a) CNR would reduce further its passenger services in order to free locomotives for freight traffic (paragraph 36). (b) Group II of the project is conditional upon signing contracts with potential shippers (paragraph 42). (c) The terms and conditions of employment for consultants would be satisfactory to CNR and the Bank (paragraph 44). (d) The Government would assist CNR in its dealings with the Labor Union (paragraph 47). - 37 - Annex III Page 2 of 2 (e) CNR would carry out improvements in its conditions of employment in order to retain and attract qualified staff (paragraph 47). (f) CNR would increase tariffs in order to meet agreed working and operating ratio targets, including an increase of 10% in real terms in January 1983, 1884 and 1985 (paragraph 48). (g) CNR would set up a contributory pension scheme (paragraph 50). (h) Loan disbursements would be conditioned to CNR achieving agreed targets of the Program of Action (paragraph 52). Annex IV Summary Description of the Program of Action 1982-1986 The nato features of the Progran of Action are the: Acklevewent of quantitative targets to accordnce with the table giveo below 1979 1980 1981 IQR' 1948 1985 1986 JU1NE DECEMBER JUNE DECEMBER JUNE DECEMBER JUNE DECEMBER JuNE DECEMBER 1.1 Availability of diesel locoI otives a. a 58 32 30 36 39 48 53 58 64 67 73 76 80 % of total fleet 1.2 Availability of freight cars as a % of 75 75 75 77 78 79 80 81 82 84 85 86 87 total fleet 301 322 N/A 305 305 307 307 308 308 309 309 309 309 1.3 Average net load per train (tons) 29.5 30.3 30.5 32.8 32.8 32.8 32.8 32.9 32.9 33.0 33.0 33.0 33.0 Average net load per car (tons) 15.6 18.2 N/A 16.5 16.0 15.5 15.0 14.5 13.5 13.0 12.0 11.5 11.0 1.4 Wag.ne turnaround time (days) 1.5 Pronreament of Ties N/A N/A N/A 100,000 101,700 120,000 134,700 130,000 124,900 160,000 162,257 160,000 162,480 1.5.1 Woodan treated ties N/A N/A N/A 15,000 18,400 24,000 26,000 26,000 32,500 12,000 13,000 12,000 13,000 1.5.2 Concrete ties 1.6 Track Rehabilitation (kn) N/A N/A - 70 71 90 92 90 98 100 108 100 108 1.7 Average Staff 1.71 Administration N/A N/A N/A 2,027 1,987 1,952 1,922 1,887 1,857 1,822 1,792 1,757 1,727 - Administration N/A N/A N/A 123 123 123 123 123 123 123 123 123 123 1 - Engineers Operations N/A N/A N/A 2,150 2,110 2,075 2,045 2,010 1,980 t,945 1,915 1,880 1,850 1.7.2 Operations: N/A N/A N/A 1,813 1,813 1,968 1,968 2,011 2,011 2,011 2,011 2,011 2,011 -Wark hops N/A N/A N/A 2,938 2,938 3,088 3,088 3,238 3,238 3,288 3,288 3,338 3,338 1 - Transportation N/A N/A N/A 3,285 3,285 3,285 3,285 3,305 3,305 3,355 3,355 3,370 3,370 - Traconsoricationa N/A N/A N/A 422 422 4,44 444 466 466 466 466 466 466 T ebtotai OperatIons aNIA N/A N/A 8,458 8,458 8,785 8,785 9,020 9,020 9,120 97T! ,185 9,185 10,345 10,392 10,328 10,608 10,568 10,86 10,830 11,030 11,000 11.065 11 035 11,065 11,035 Total Average Staff f. 1.9 0381,0 058 1 8 ___ ...... a-- .J. ___ 1.8 Before Nornalioatico 1.0.1 Working Ratio (X) 175 170 143 112 96 86 1.8.2 Operating Ratio (3) 181 175 159 124 107 94 I.? After Nor-1malatioo 1.9.1 Working Ratio i%) _ 148 127 104 91 82 1.9.2 Operating Ratio (2) - 153 142 115 103 90 1.10 Freight tariff iocros.e (in real terns) 7 10(J.an) 1l(Jan.) 10(Jan.) 1.11 Implementation of Staff Improvemect PI.o Janoary 1, 1983 1.12 Co=encenent of Training Program October 1, 1982 1.13 Completion of Acturial Studien December 31, 1983 1.14 Implemontation of Pension Plan J January 1,1985 1.15 Izplmenotation of Inpro-ed Procurement Procedures October 1, 1982 1.16 Icplementotion of Di-ciplienry Acti.o. October 1, 1982 1.17 Revaloation and Updated Doprociation of Fixod Assets December 31, 1983 Actual; 1979.1981 Forecast: 1982-1986 s-rce: ITALCONSULT, CNR and Mission January 1982 IBRD 3667RI --: S. AMERICA b . ,. 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