FILE COPY Document of The World Bank FOR OMCIAL USE ONLY Report No. P-2238-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 REPUBLIC OF COLOMBIA FOR A 500 KV INTERCONNECTION PROJECT May 17, 1978 This doeument has a resrcted distribution and msy be used by recipients only In the performance of | their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EqUIVALENTS Average Calendar 1977 March 31, 1978 Currency Unit = Peso - Col$ Col $ US$1 - Col$36.985 38.42 Col$1 = US$0.027 0.002603 WEIGHTS AND MEASUtES 1 meter (m) - 3.281 feet (ft) 1 square kilometer (kn2) 0.386 square mileCimi2) 1 cubic meter (m3) - 35.315 cubic feet (ft2) 3 264.2 gallon (gal) 1 kilogram (kg) 2.206 pounds (lb) 1 ton (t; metric; 1,000 kg) 1.100 short tons (sh. tons) 1 kilowatt (k6) 1,000 Wlatts (103 W) 1 Megawatt (Mr) 1,000 kW (103 kW = 106 W) 1 Gigawatt (GW) 1,000 MW (106 kW - 109 W) 1 kilowatt-hour (kWh) 1,000 Watt-hours (103 Wh) - 830.3 Kilocalories (keal) 1 Gigawatt-hour (GWh) 1,000,000 kWh (106 kWh) 1 Terawatt-hour (TWh) 1,000 GW1h (109 kWh) 1 kilovolt CkV) 1,000 Volts (V) 1 kilovolt ampere CkVA) 3 1,000 Volt amperes (103 VA) 1 Megavolt ampere (MVA) 1,000 kVA (106 VA) 1 Megavolt ampere reac- 1 Megavolt ampere reactive tive (MVAr) - power (COS 0 - 90°) 1 kilocalorie (kcal) 3.968 British thermal units (Btu) 1 Hertz (Hz) 1 cycle/second .**per., ...per second; ...per hour .../s; .../h ...per day; ...per year .../d; .../a GLOSSARY OF ABBREVIATIONS CHEC = Central Hidroelectrica de Caldas CHIDRAL = Central Hidroelectrica del Rio Anchicava S.A. CORELCA - Corporacion Electrica de la Costa Atlantica CVC - Corporacion Autonoma Regional de el Valle del Rio Cauca DNP = Rational Planning Department EEEB = Empresa de Energia Electrica de Bogota EPM - Empresas Publicas de Medellin GDP = Gross Domestic Product ICEL m Instituto Colombiano de Energia Electrica IDB = Inter-American Development Bank ISA Interconexion Electrica S.A. JNT m Junta Nacional de Tarifas de Servicios Publicos KfW - Kreditanstalt fur Wiederaufbau FISCAL YEAR January 1 to December 31 OR OFFICIAL USE ONLY Page 1 of 2 COLOMBIA 500 kV INTERCONNECTION PROJECT LOAN AND PROJECT SUMMARY Borrower: Republic of Colombia Executing Agency: Interconexion Electrica, S.A. (ISA) Amount: US$50.0 million equivalent Terms: Repayment in 17 years, including 4 years of grace; interest at 7.5% per annum. Project Description: The project would achieve the long-standing objective of interconnecting the country's major power systems. It includes (a) a 523 km, single circuit 500 kV trans- mission line between the Central and Atlantic regions, two terminal and two intermediate substations, and (b) consultant services for engineering, civil works and supervision. Once completed, the interconnection line would ease projected energy deficits under adverse hydrological conditions by providing thermal backup to the Central system. It would also contribute to sub- stantial fuel savings (amounting to over US$1.3 billion in end-1976 prices over the life of the project, or about US$1150 million at present value) which would result from the Atlantic system's having access to hydro-electricity during periods of normal hydrology. The project is subjesct to risks normally associated with construction of high voltage lines in mountainous terrain, but adequate safeguards have been taken to minimize them. Estimated Cost: Local Foreign Total (US$ Million Equivalent) Engineering and Study 6.1 3.3 9.4 Transimission Line 23.3 36.8 60.1 Substations 7.6 37.6 45.2 Base 'Cost 37.0 77.7 114.7 Physical Contingencies 2.1 4.0 6.1 Price Contingencies 28.1 18.3 46.4 Total Project Cost 67.2 100.0 167.2 Thi documnt has a tricted distribution and may be used by recipients only in the performance of their official dutis. Its contents may not otherwise be discosed without World Bank authorization. Page 2 of 2 Financing Plan: Proposed Bank Loan - 50.0 50.0 Proposed KfW Loan - 40.0 40.0 Government Contribution 67.2 - 67.2 Suppliers' Credits - 10.0 10.0 TOTAL 67.2 100.0 167.2 Rate of Return: The return on investment is estimated to be 35%. Appraisal Report: Report No. 1850a-CO, dated May 17, 1978. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF COLOMBIA FOR A 500 kV INTERCONNECTION PROJECT 1. I submit the following report and recommendation on a proposed loan to the Republic of Colombia for the equivalent of US$50.0 million to help finance the 500 kV Interconnection Project. The loan would have a term of 17 years, including four years of grace, with interest at 7.5% per annum. The Kreditanstalt fur Wiederaufbau (KfW) is considering a proposed US$40.0 million equivalent loan to the Government, for a term of 30 years, including 10 years of grace, at interest of 2% per annum, to finance part of the cost of the project. PART I: THE ECONOMY 1/ 2. The latest economic report on Colombia (1548-CO) was distributed to the Executive Directors in May .1977. It assesses current developments and provides a medium-term perspective of the Colombian economy. An updating report is being prepared and is scheduled for distribution to the Executive Directors in August 1978. Country data sheets are provided in Annex 1. Background 3. During the past two decades substantial structural transformation has taken place in the Colombian economy. The country has made impressive progress in the transition from a predominantly rural and agricultural economy made up of largely self-contained regions to a more integrated urban industrial economy oriented increasingly toward international trade. This broadening of the country's productive base has been accompanied by rapid growth of nontraditional exports and development of a modern sector which relies to a considerable extent on imported inputs. From 1967 to 1974 GDP rose by an average of 6.5% per annum in real terms, well above the historical average of less than 5% (1950-67). Accelerated economic growth coupled with a decline in population growth brought about a rapid increase in per capita incomes. Increased investment and relaxation of the foreign exchange con- straint were the major factors responsible for this acceleration in growth. Merchandise exports expanded more than four-fold during this period, and, most significantly, nontraditional exports became an increasingly important source of foreign exchan,ge earnings, in large part compensating for the slow growth of receipts from coffee exports. Much of this increase in non- traditional exports was the result of both product and market diversifica- tion attributable to the Government's export promotion program. Substantial medium- and long-term capital inflows to the public and private sectors for 1/ Substantially unchanged from President's Report, Second Cali Water Supply and Sewerage Project (Report No. P-2169-CO). development projects helped sustain investment levels and enabled Colombia to maintain the favorable structure of its external debt. However, despite the substantial progress made during the past two decades, Colombia still has a long way to go on the road toward modernization; it still is essentially an underdeveloped country with a limited modern sector super- imposed on a broad, traditional and poor base. 4. When the present Government took office in August 1974, the country was faced with a generally deteriorating economic situation--weakening balance of payments, loss of self-sufficiency in petroleum production, accelerating inflation, deterioration of the public finances, and reduced public invest- ment. GDP growth showed signs of slowing and unemployment was increasing, especially in the urban areas, reaching a peak of 13% in 1974. As a con- sequence, the new administration moved rapidly to introduce an economic stabilization program along with a set of reforms aimed at restoring the basis for long-term economic growth. In.line with these goals, it initiated basic reforms of the fiscal, monetary and price systems. 5. To help strengthen the public finances, the new Government undertook a comprehensive tax reform designed to achieve a substantial improvement in the progressivity and elasticity of the tax system. Steps were also taken to correct major distortions which existed in the price system. Price controls on a number of important agricultural products were removed, thereby providing greater stimulus for increasing farm production. Far-reaching modifications in petroleum pricing policy aimed at regaining self-sufficiency in production of crude petroleum by improving incentives for exploration and exploitation were introduced. Concurrently, measures were taken to reduce the subsidy on local consumption of petroleum products, with the dollar equivalent price of gasoline being raised in successive steps by 150% between August 1975 to January 1977. 6. Economic growth slowed in 1975 and 1976, with real GDP increasing by less than 5% in both years. This was the result of the stabilization measures adopted at the end of 1974, the effects of the world recession, reduced private investment, and, in 1976, a poor harvest stemming from adverse weather conditions. The stabilization program succeeded in reducing inflation from 27% in 1974 to 18% in 1975, but the expansionary impact of rising inter- national reserves caused by higher coffee prices and shortages of basic food items produced an acceleration of inflation to 26% in 1976. Private invest- ment declined in real terms during this period as a consequence of attempts to stabilize the economy through tighter fiscal and monetary measures. Public sector revenues and savings were strengthened as a result of the tax reform and of increased revenue from coffee export taxes. The balance of payments improved substantially in 1976, mainly as a result of an increasing trade surplus caused by higher world coffee prices. Consequently Colombia's net international reserves rose by nearly threefold, from US$437 million in 1974 to US$1,166 million in 1976. Recent Economic Performance 7. Growth and employment picked up significantly in 1977, largely as a result of increased internal demand generated by the income effects of - 3 - exceptionally high export receipts from coffee. GDP is estimated to have increased by 5.4%. This higher level of growth was distributed evenly over all sectors of the economy except non-coffee agriculture which was affected by the continuation of the severe drought which began in the second half of 1976. High world coffee prices during 1977 produced a record trade surplus and the balance of payments registered an overall surplus for the year of US$686 million. By year end, Colombia's net international reserves stood at US$1,852 million, equivalent to seven months' imports, the highest level in the country's history. Increased export receipts from coffee contributed to a further strengthening of public finances over that which had occurred in 1975-76. Increased receipits from taxes on coffee exports caused a substantial increase in the current su,rplus of the Central Government, more than off- setting unexpected slower growth in some of the country's other major taxes. 8. Expansion of coffee earnings combined with the shortages of basic food items led to an unprecedented-acceleration of inflation during the first half of 1977. For tlhe twelve month period ending in June 1977 infla- tion reached 45%. In an attempt to reduce inflationary pressure the Govern- ment introduced a number of fiscal and monetary measures aimed at curbing growth of coffee producers disposable income, at further strengthening public finances and at slowing the growth of the monetary aggregates. Legal reserve requirements were increased, limits were placed on external borrowing, and Central Bank rediscounts were reduced. The coffee retention tax rate was doubled from 23% to 46%, and the system of delayed payments to coffee pro- ducers was used to further limit growth of coffee producers' disposable in- come. In order to increase aggregate supply and stem the rapid accumulation of foreign exchange reserves, import duties were reduced and the import licensing system was liberalized. In an effort to curb upward pressure on prices, the authorities temporarily discontinued the policy of periodic adjustments in the foreign exchange rate and in prices of petroleum products. The last two measures were only a temporary expedient to break the infla- tionary spiral. From July 1977, the Government has resumed periodic exchange rate adjustments and in January 1978 increased the price of gasoline by 20%. The Government intends to continue to pursue policies that maintain Colombia's international competitiven,ess and that help regain petroleum self-sufficiency (paragraph 25). 9. Another conflict between short-term and long-term objectives exists in the Government's interest rate policies. To avoid cost push effects, nominal interest rates were frozen during the period of accelerating inflation and real interest rates declined rapidly and became sharply negative. As a consequence there was a growing unwillingness on the part of the public to hold medium- and long-term financial assets, and investment funds had to be increasingly allocated by cumbersome administrative controls. The problem has become less serious as inflation has abated, but will require further attention by the Government. 10. The stabilization measures taken earlier in the year, the gradual decline of world coffee prices from June 1977 on, and the availability of more ample agricultural supplies on the domestic market resulting from both improved weather and increased imports, produced a dramatic slowdown in -4- inflation in the second half of 1977. For the full year 1977, inflation was reduced to 29%. Further declines in the rate of inflation are expected this year as the Government maintains tight fiscal and monetary policies. Additionally, declines in international coffee prices and rapid increases in imports are expected to further reduce inflationary pressures from the external sector. Prospects for this year's agricultural output appear good, and the Government is prepared to increase food imports substantially if needed. Development Strategy and Prospects 11. The Government's development strategy, embodied in the 1975-78 development plan, aims at creating the conditions necessary for substantially increasing employment opportunities, particularly for the poorest segments of the population. It provides incentives for private sector investment in the least developed areas of the country and for the use of more labor intensive production techniques. Public sector investment specified in the Plan concen- trates on expanding and improving infrastructure and on socially oriented projects designed to alleviate rural and urban poverty. This includes compre- hensive integrated rural development and nutrition programs which directly benefit the lowest income groups of the population. Because of the importance of commercial agriculture in generating employment and expanding exports, Colombia's development plan assigns a high priority to providing farmers with credit and technical services required to increase output. In order to alleviate urban poverty, the Plan places emphasis on reducing migration to the cities by increasing employment in agriculture and through provision of improved services in slums of Colombia's major cities. These efforts are being complemented by policies and programs to encourage the development of small- and medium-scale enterprises and to decentralize industry away from the three largest cities. Special priority is given to the development of domestic energy sources to reduce the country's growing dependence on imported oil. 12. In the past three years substantial progress has been made in carrying out this strategy despite the economic dislocations occasioned by the world recession and the need to concentrate on short-term economic management. Most of the Government's development efforts during this period have focussed on improving the standard of living of the poorest 50% of the population, with a substantial share of the benefits of public sector expenditures accruing to this segment of the population. Provision of improved social services has been a major objective of the current administration. This is reflected in the increase in expenditures on education, health, water and sewerage, which rose from 33% of total expenditures in 1974 to 37% in 1976. Preliminary estimates show an even higher share spent on such programs in 1977. 13. Projections of Colombia's energy balance indicate an expanding deficit which could reach significant proportions by the early 1980s. To avoid the constraint on growth that shortages of energy would entail, the Government is giving high priority to the development of alternative energy sources. Major projects are being developed to expand hydroelectric power generation and incentives are being provided private companies for accele- rated exploration and exploitation of the country's hydrocarbon potential. Coal and natural gas are expected to provide an increasing contribution to the country's energy needs in the future. An energy development program, which would nearly triple power generation by 1986, has been drawn up by the Government, with estimated investment requirements of between US$6.0 and US$8.0 billion in constant 1976 prices. Given the long gestation periods of power projects, their etxecution must be initiated without delay if energy constraints on future growth are to be avoided. 14. The Government is making a major effort to accelerate growth of the agricultural and industrial sectors. In the past, Colombia has been largely self-sufficient in basic foodstuffs. However, an increasing food deficit is projected for the years ahead in the absence of major advances in food pro- duction. The Government is attempting to meet these needs through integrated rural development programs directed towards small farmers, through expanded farm credit, research, extension and marketing facilities and through improved farm management practices, including farm investment planning. Industry has been singled out as the leading growth sector for the future and the Government has adopted exchange rate, fiscal incentive, credit allocation, and locational policies intended to assure that the sector fulfills its role as a major con- tributor to employment growth. 15. Based on its strong resource base and its high level of international reserves, Colombia should be able to sustain annual real growth of no less than 6% over the period 1978-82. Private sector investment is expected to recover as inflation subsides and fiscal and monetary policies are eased. Public sector investment is expected to increase as restraints on such spending are lifted and major energy projects enter the execution stage. Non-inflationary increases in public sector investment spending depends to a large degree on continuing government efforts to maintain high levels of public sector savings. In this regard, timely and adequate adjustments of tariffs on public services is especially important, and the Government has already gone a long way in the adoption of such policies. 16. Less buoyant terms of trade as world coffee prices decline from the high 1977 level and rapidly increasing imports to meet the requirements of expanding investment are expected to lead to a renewed widening of the resource balance beginning in 1978. Assuming that economic growth accele- rates in the industrialized countries and that appropriate incentives-- particularly continuation of periodic exchange rate adjustments--are provided, nontraditional exports should resume the high rate of growth achieved in the early 1970s. Colombia is projected to require gross capital inflows of about US$3.7 billion during the five year period 1978-82, of which US$340 million should be disbursed from commitments made through the end of 1976. This inflow would enable Colombia to maintain an adequate level of foreign ex- change reserves during the period. A significant increase in capital require- ments is expected in the early 1980s when major additional projects in the energy sector will have to be initiated. To achieve these targets, annual gross capital inflow will have to increase from US$600 million in 1976 to over US$1.0 billion in 1982. -6- While about half of Colombia's capital inflow is expected to be provided by official multilateral and bilateral sources, financing from commercial sources is expected to become increasingly important during the period as Colombia gains greater access to international capital markets. 17. Colombia's public external debt repayable in foreign currency amounted to US$3.3 billion at the end of 1976, or about US$2.4 billion excluding undisbursed commitments. The Bank/IDA share of this external debt was 28.5% and is expected to decline to about 25% by 1982. Although the public debt service ratio fell during the past two years as export growth accelerated, this ratio is projected to increase from 9.5% in 1976 to about 11% by 1982. Balance of payments prospects beyond 1980 will depend among other factors on the timely development of domestic energy sources and on progress made in executing several natural resource-based export oriented projects currently under preparation. As a developing country, it is normal to expect Colombia to be a net capital importer, i.e. to have a deficit in its balance of payments on current account. However, to avoid an excessive growth in this deficit over the next few years, careful management of internal demand will be required. Given such management, it should be possible to prevent the external sector from again becoming a constraint on economic growth, and to maintain Colombia's present creditworthiness for external borrowing of substantial amounts on conventional terms. PART II: WORLD BANK OPERATIONS IN COLOMBIA 18. The proposed loan, the 73rd to be made to Colombia, would bring the total amount of Bank loans to Colombia to US$1,763.2 million (net of cancella- tions). Of this amount, US$1,170.3 million is now held by the Bank; IDA made one credit of US$19.5 million for highways in Colombia in 1961. Disbursements have been completed on 46 loans and the IDA credit. IFC has made effective investments and underwriting commitments of US$53.7 million in 24 enterprises and now holds US$28.1 million. Annex II contains a summary statement of Bank loans and the IDA credit as of March 31, 1978, and IFC investments as of March 31, 1978. The Annex also contains summaries on the execution of the 23 on-going projects. 19. Since FY68, Bank lending in Colombia has become more diversified and has been concentrated on production-oriented programs and activities which carried social as well as economic benefits. Eight of the eleven agricultural loans have been made since then, seven of the ten loans for industry, all three loans in the education sector and all six loans for water supply and sewerage. This compares with only seven loans since FY68 in the power and transport sectors. 20. Bank lending to Colombia in FY77 consisted of loans for rural devel- opment, agricultural credit, telecommunications, highways and small-scale industry, totalling US$281 million equivalent. In addition to the proposed project, the FY78 program includes the recently approved loans for nutrition - 7 - improvement, water and sewerage and urban development, and proposed loans for power generation (being considered simultaneously) and industry. Work is also under way in development finance companies, further urban development, water supply and slum improvement, transportation, mining, power, including rural electrification, and small farm development for possible consideration by the Executive Directors during the next two years. 21. The proposed Bank lending conforms closely with the Government's development strategy. To help Colombia develop domestic sources of energy, a substantial part of the proposed lending would be for hydro-power. The Bank would also assist the development of coal mines, which hold potential in helping Colombia meet part of its energy requirements. Bank involvement in the energy sector would help mobilize additional external financing as some of the projects would require co-financing. Other future loans would finance agriculture and industry to assist the Government in its efforts to raise overall productivity, incomne and employment and to strengthen and diversify exports. Closely related to these objectives would be the proposed Bank lending for transport infriastructure in more backward areas of the country to integrate them into the modiern economy. In this context, we are proceeding with a project to improve domestic airports. Finally, we are preparing a relatively large number of loans in support of the Government's efforts to help the lowest 50% of the Colombian population. The nutrition project, the proposed urban development and slum improvement project, and the proposed water supply and sewerage projects are principally designed to improve the poor's standard of living. 22. The operations of external lenders in Colombia are shown in Annex I. While IBRD, IDB, and AID provided about 75% of total external financing to Colombia in the 1961-72 period, their share has decreased since then to approximately 40%. Like the Bank, IDB and AID have given increased emphasis to social projects. For instance, the IDB has assisted projects in low cost housing, urban and rural development, agrarian reform, university education, water supply, and land erosion control; in the future IDB proposes to assist Colombia in its plans to develop sources of domestic energy and to expand the activity of the productive sectors to help generate increased employment. AID has supported programs in education, urban development and small farm develop- ment. More recently, it has moved to small project loans aimed chiefly at improving the distribution of income. It is expected to phase out its aid program in Colombia in 1979 with the commitment of a US$6 million nutrition loan. PART III: THE ENERGY SECTOR AND POWER REQUIREMENTS Energy Resources and Requirements 23. Colombia is endcwed with substantial primary energy resources (hydropower, natural gas, petroleum and coal), the most promising of which is hydropower, estimated at aL potential 100 GW, of which only 2.3% have been developed to date. Coal resources have been little explored, but reserves -8- are estimated to range from 20-40 billion metric tons, at which level they would be the largest in Latin America. A recent discovery of natural gas in the Guajira Peninsula, amounting to 3.5 trillion cubic feet, has brought proven reserves to a level well above 5 trillion cubic feet. On the other hand, because of insufficient exploration, known reserves of crude oil have fallen and are estimated to amount to less than nine years of 1976 output. However, only one of Colombia's nine sedimentary basins (the Magdalena River Valley) has been explored on a systematic basis, although the state oil company, ECOPETROL, in association with foreign oil companies, is now exploring other basins. Additionally, investigation of nuclear, geo-thermal and solar energy is underway. 24. Since 1965, output of primary energy has lagged behind overall economic growth, mainly because of declining crude oil output. By 1975, production of crude (321 trillion Btu) had fallen to 78% of 1965 output and 72% of the 1970 level. While over 1965-75 total energy output increased by 3.6%, from 603 trillion Btu to 625 trillion Btu, energy consumption increased by almost 80%, rising from 271 trillion Btu to 489 trillion Btu. (Exports and losses account for the difference between production and consumption figures.) By 1976, hydrocarbon imports exceeded exports by US$35.6 million equivalent. Projections of Colombia's energy balance indicate an expanding deficit that could reach significant proportions in the early 1980s and become a constraint on economic growth (paragraph 13). Energy Development Objectives and Strategy 25. As stated, the Government's objective is to overcome the energy deficit by developing domestic energy sources and by promoting rational use of them. To this end, it has adopted several measures. First, it has recast its hydrocarbon pricing and regulation policy to stimulate output of petroleum, natural gas and coal. Foreign oil companies have reacted favorably to these measures and have initiated new explorations. Second, CARBOCOL, a Government agency established to develop the country's coal resources, has concluded contracts with various foreign companies to undertake exploration and develop- ment of several coal fields, particularly the largest, El Cerrejon, in the Guajira region. Third, considerable substitution of gas for petroleum products in industry and thermal power generation is being carried out on the Atlantic Coast. Fourth, a program for expansion of power generation and transmission facilities to meet forecast demand over the 1977-84 period has been drawn up (paragraphs 33 and 34). Fifth, the Government has concluded a contract with the French Minatome Group to explore the country's uranium potential. Lastly, the Government proposes to charge the full cost of energy to consumers and, in this way, self-generate an important share of the financial resources required for investment in the sector. The Power Market, Service Levels and Institutional Framework 26. Electric power is the fastest-growing form of energy in Colombia. Its share of total energy consumption has risen from 19% in 1960 to 24% in 1976. Colombia's installed capacity at the end of 1976 was 3,300 MW, includ- ing self production; hydro stations account for 68% of total energy generated. -9- Since 1967, production of electricity has been growing at an annual rate of 10.5%, i.e., one and three-fourths times as fast as than the growth rate of GDP. Power sales have also been rising rapidly (9.2% per annum since 1972). Annual per capita electricity consumption stands at 599 kWh. 1/ Households (42% of the total), industry (35%) and commerce (13%) are the major electricity users. 27. About 60% of Colombia's 24.2 million population has electricity. The urban population, in 1977 estimated to be about 70% of the population, has greater access to electricity. 2/ In 1976, for example, 85% of households in large cities (population 50,000 or more) had electrical service while in rural towns (population between 50-2,500) the corresponding figure was 36%; in other rural areas, 16%. With the assistance of external lenders, the Government is carrying out programs to increase the supply of electricity to rural areas. 28. The Ministry of Mines and Energy is charged with formulating national policy for power generation, transmission and distribution. In defining invest- ment priorities, it shares responsibility with the National Planning Department (DNP). The Government cannot enforce its policies directly on the municipally- controlled power companies, but Interconexion Electrica, S.A. (ISA), a generating and transmission company controlled by the largest municipal power companies and by the Government-owned national power companies provides a mechanism for reaching agreement on ma;jor issues affecting the sector (paragraphs 29 and 51). 29. The developmenit of Colombia's power sector has been assisted by the gradual consolidation of isolated facilities into regional systems and the interconnection of these systems to facilitate development of low-cost hydro resources. Under the proposed project, the North Atlantic system will be tied into the national grid, thus completing the interconnection of the country's major systems. The entities which provide electricity service comprise: (a) independent municipal companies, of which the largest are Empresa de Energia Electrica de Bogota (EEEB), Empresas Publicas de Medellin (EPM), and Empresas Municipales de Cali (EMCALI); (b) entities under the National Government, the most important of which are Corporacion Autonoma Regional del Cauca (CVC), Corporacion Electrica de la Costa Atlantica (CORELCA), and Instituto Colombiano de Energia Electrica (ICEL), all of which have numerous local subsidiaries; and (c) ISA, the shareholders of which are EEEB, EPM, CVC, CORELCA and ICEL. 1/ This figure does not take account of losses. 2/ Residents of cities with 2,500 or more inhabitants. - 10 - 30. Public utility tariffs are regulated by the Junta Nacional de Tarifas de Servicios Publicos (JNT) in the DNP. JNT, which was established in the late sixties with Bank support, has the power to approve requests from the power companies for tariff increases. The power companies, however, are free to set rates lower than those approved by JNT and have sometimes done so. Power Development and its Financing 31. Colombia's power sector has developed rapidly. Between 1950-1977 installed generating capacity increased by 3,000 MW or thirteenfold. A sub- stantial part of this expansion was financed with internal cash generation (in the case of the large municipal companies, about 40% of total capital outlays) and with contributions from the National Treasury, chiefly to ICEL, CVC and CORELCA. The Bank and IDB were the main source of foreign financing for the power sector (US$607 million equivalent combined), although in recent years suppliers' credits increased their participation. From 1971 onwards, power rate adjustments lagged behind cost increases and the companies' finances deteriorated. As a result, construction of new works was delayed and the operating efficiency of the companies suffered. Particularly affected was the renovation of subtransmission and distribution networks, resulting in increased energy losses. 32. Beginning with 1975, rate adjustments have been accelerated, with average yearly increases through 1977 marginally exceeding average annual inflation. Investment outlays have once again increased and in 1975 totalled US$187.6 million equivalent, i.e., 31% over the preceding year. The Govern- ment and the major power companies have initiated a program of tariff increases with the aim of achieving and maintaining satisfactory rates of return on revalued assets. This should generate an adequate portion of investment funds for planned expansion. In line with this, average tariff levels in companies accounting for the bulk of sales in the sector have been increased by some 37% for 1978, with further increases of 33% already approved for 1979. Power Requirements and Proposed Investments 33. Over 1977-84, power requirements in the interconnected system are projected to grow at 10.6% per annum, i.e. slightly faster than in the past. To meet this demand, about 4,300 MW in effective generating capacity would have to be added to the present system; of this, about 540 MW were completed in 1977 and 1,500 MW are under construction. 34. Investments in generation and transmission during 1977-84 are expected to amount to about Col$250 billion in current prices (about US$5 billion in 1976 prices), some 60% of which would be foreign exchange. This includes the start of construction of projects that will form part of the 1985-90 expansion program. To provide for an orderly expansion of the sector, the Government and ISA have agreed under the San Carlos I Project to prepare a Power Sector Development Master Plan covering the period 1980-90 in detail, and 1991-2000 in more general terms. - 11 - Bank Participation in the Power Sector 35. Since 1950, the Bank has made 18 loans to Colombia's power sector, totalling US$350 million. Sixteen loans have assisted the expansion of generating capacity in the systems serving Bogota, Medellin, Cali, Cartagena, Bucaramanga, and Manizales. The most recent loan (874-CO, 1973) included expansion of electricity distribution to low income areas. In addition, the Bank is currently supporting rural electrification under the Integrated Rural Development Project (1352-CO, 1977). 36. ISA has received two Bank loans, totalling US$70.3 million. The first (575-CO, 1968) was to interconnect the central regional systems and was completed ahead of schbedule at lower-than-estimated cost. Remaining funds were used to construct an additional transmission line which began operation in 1976. The second loan (681-CO, 1970) was used to construct ISA's first generating facility, Ghivor I, which came into operation two years behind schedule in 1977, with a US$86 million cost overrun (for further details see Annex II, page 3). 37. One of the objectives of Bank assistance has been the strengthening of power sector institutions and finances. Through the late sixties, Bank efforts at institutional strengthening were most successful in the cases of EEEB and EPM. The late siLxties also saw the creation of two new institutions, ISA and JNT, in which the Bank played a critical role. The establishment of the central interconnected system has promoted economic efficiency and, at the same time, stimulated greater cooperation among the regional power companies. The proposed project would complement this effort and would contribute to more economical operation and development of the national power system. 38. Bank attempts to strengthen sector finances have had mixed results, chiefly because of the Government's reluctance, prior to 1975, to press for tariff increases under inflationary conditions and the unwillingness of local authorities to increase rates to compensate for rising costs. However, the Government, ISA and the shareholders intend to maintain in the future tariffs at an adequate level in order to finance an important share of investments from internal cash generation and have already taken steps toward this goal (paragraph 32). 39. Past Bank lending to Colombia's power sector was reviewed in the OED report entitled "Bank Operations in Colombia, an Evaluation" (Report No. Z-18) of May 25, 1972. The report concluded that Bank financing was successful in assisting t]he power companies to develop hydroelectric plants at lower unit cost than t]hey otherwise would have been able to do. In turn, this permitted greater urban coverage as well as cheaper and more reliable electricity supply to industry. The report commended Bank efforts in the establishment of JNT and the central interconnected system which facilitated the rational development of the power sector. Among other things, the report recommended that in the future the Bank pay increased attention to the compa- nies' financial planning, tariff structures and energy losses. - 12 - PART IV: THE PROJECT Background and Objectives 40. The project, prepared by ISA with the assistance of consultants, forms part of its 1977-82 Power Expansion Program and would link the country's two largest power systems, the 100% thermal North Atlantic and the predomi- nantly hydro Central systems. The project was appraised by a Bank mission which visited Colombia in March-April 1977. Supplementary work was under- taken by missions which visited Colombia in August and September of 1977. Negotiations were held in Washington during the weeks of March 6 and 13, 1978, with a Colombian delegation led by Mr. Gabriel Turbay, Director of Public Credit. 41. Project objectives are to: (a) promote efficient operation and development of the national power system, (b) permit lower cost expansion of the national power system, and (c) support the Government's policy on reduction of fuel subsidies. Description 42. The project comprises construction of a single circuit, 523 km long 500 kV transmission line with two terminal and two intermediate substations aggregating 1,200 MVA, and a shunt-reactive compensation system. 43. Transmission Line. The 210 km southern section of the transmission line between the San Carlos and Cerro Matoso substation, would cross a moun- tainous region at elevations of up to 2,000 m over its first 130 km. Over the 313 km northern section between Cerro Matoso and Sabanalarga the line would follow slightly rolling terrain as far as the Chinu substation (km 342 from San Carlos), then continuing over similar terrain to a marshy area (at Dique Canal) which it would cross for a distance of 15 km. The last part of the line would be on solid and flat terrain. 44. Substations. The San Carlos substation would have a transformer bank consisting of six 75 MVA single-phase units, with a 75 MVA reserve unit. At Sabanalarga the transformer bank would consist of three autotransformers of 150 MVA and one reserve unit. The transformer capacity in both substations could be doubled at a later stage, for full utilization of the transmission capacity of the line (900 MVA). A three phase autotransformer of 150 MVA would be installed in the Cerro Matoso and Chinu substations. 45. Voltage Selection. The Colombian firm of Salgado, Melendez y Asociados (SAMEL), ISA's consultants for the 500 kV Interconnection line, carried out the studies to determine the service voltage for the future national interconnection network. The voltage of 500 kV was selected as the most economic. In its comprehensive system design study, SAMEL was assisted by Kennedy and Donkin (UK) which jointly with Westinghouse (USA) carried out detailed transient-switching studies. ISA has also engaged SAMEL, assisted by Kennedy and Donkin, for detailed design and supervision of the line and substations. At the same time, ISA proposes to hire the services of Integral - 13 - (a Colombian consulting firm) to assist in the supervision and administration of project works. The hiring of qualified consultants for project works would be a condition of loan effectiveness (Section 7.01(d) of the Loan Agreement and Section 2.02 of the P'roject Agreement). 46. Land Acquisition. ISA, which has not previously encountered major problems in acquiring right-of-way for construction of its transmission lines, has prepared a satisfactory program for obtaining permits to ensure that the contractor can enter the various work sites at the appropriate time. ISA has already acquired the lands on which the substations would be built and expects to complete the land acquisition program by June 30, 1979 (Section 2.04 of the Project Agreement). Cost and Financing 47. Total project cost is estimated at US$167.2 million equivalent, of which US$100.0 million equivalent correspond to the foreign exchange component. 48. The proposed loan of US$50.0 million equivalent would finance 30% of total project cost, i.e., 50% of the project's foreign exchange cost. The remaining foreign exchange costs would be financed by a proposed US$40 million equivalent loan from KfW and suppliers' credits of US$10 million equivalent. All local costs, US$67.2 million, would be provided by the Government. Retro- active financing of up to US$200,000 is proposed for engineering services paid after January 1, 1977 (Schedule 1, paragraph 4 of the Loan Agreement). 49. The Bank loan would finance the total foreign exchange component of the transmission line and related consulting services. KfW would finance part of the foreign exchange component of the substations, with remaining foreign exchange requirement covered by suppliers' credit. Satisfactory arrangements for the balance of foreign exchange financing would be a condi- tion of effectiveness of the proposed Bank loan (Section 7.01 of Loan Agree- ment). The Borrower and Direct Beneficiaries 50. The borrower for the proposed Bank and KfW loans would be the Government, and the main beneficiary would be CORELCA, which would rely on the 500 kV line for hydro energy to replace fuel-based generation. (ISA's other shareholders would also benefit, through reduced investments made possible by pooling their reserve capacity with CORELCA's.) The Government would cover all debt service under the project and, in this way, assist the power companies in meeting the heavy financial obligations which they are confronting in connection with required investments to meet forecast demand. By December 31, 1981, approximately six months after completion of the works, the ownership and operation of the transmission line and substations would be assumed by ISA, at no cost (Section 3.02 of the Loan Agreement). - 14 - 51. ISA. The entity, established in 1967, is a stock corporation formed to interconnect the systems of its shareholders and to construct, own and operate new generating plants required for the interconnected system. It is governed by a Board of Directors, representing the five major share- holders (EEEB, EPM, CVC, CORELCA and ICEL). Day to day operations are managed by a General Manager (appointed by the Board), assisted by four departments (Technical, Operations, Finance and Administration). ISA has competent staff and its pay levels are satisfactory. 52. ISA's bylaws have been recently amended to the effect that in future the entity will: (i) be responsible for planning expansion of the interconnected system; (ii) construct and own all future plants in the system, except for plants of regional interest which may be undertaken by the share- holders after approval by ISA; and (iii) set tariffs to achieve adequate annual returns on its revalued assets. As a result of these revisions, ISA will play an important role as a major planner, coordinator and dispatch agency in the power sector. 53. Between 1972 and mid-1977, ISA's assets comprised only a 230 kV transmission system (financed under 575-CO). In September 1977, ISA's first generation asset, the Chivor I power station (681-CO), entered into operation. Thus, the company has been unable to generate a significant amount of funds and has relied upon shareholders' contributions to finance its investments. The shareholders, however, often were late in their contributions to ISA because of their financial difficulties, a consequence of inadequate power rates. Since 1975 this situation has changed and in the future the share- holders propose to obtain a satisfactory rate of return on revalued assets. This should allow them to make timely contributions to ISA. For its part, ISA's objective is to earn a rate of return on its assets (other than the proposed project) of 5.5% in 1978, 8% in 1979, 9% in 1980, 11% in 1981, and 9% from 1982 onwards; and on the interconnection line to be constructed under the project, 3% in 1982, 2% in 1983, 2.5% in 1984, 4% in 1985, 6% in 1986, and 9% in 1987 (the first year of full utilization) and thereafter (Section 4.04 of Project Agreement). Through the shareholder's contributions and internal cash generation, ISA proposes to finance 36% of its 1978-82 investment program. 54. CORELCA. The entity is an autonomous corporation established in 1967, which became operational only in 1972. It is responsible for power generation and transmission in seven departments on the Atlantic Coast and sells bulk electricity to distributors ("electrificadoras"), which it partly or wholly owns. CORELCA and the "electrificadoras" have an installed capacity of 425 MW (all thermal) and serve about 184,000 consumers. CORELCA is com- pleting construction and installation of (a 132 MW steam station). It is administered by a seven-member Board of Directors and a Managing Director. - 15 - CORELCA has made a good beginning in the relatively short time it has existed; its major weakness is thatL while the other power companies have been estab- lished for sometime and have developed sufficient management and technical expertise, CORELCA is in ithe midst of this process. It is expected that the institutional strengthening program to be developed and carried out in connec- tion with the San Carlos Project will permit CORELCA to develop its operational capability faster. 55. Since inception, CORELCA has experienced financial difficulties. Its rate of return on revalued assets in 1977 was only 2.3%. The entity has had to rely upon the National Treasury, including fuel subsidies, and borrow- ings to finance operations and investments. The Government and CORELCA, therefore, have decided t'hat the entity should strengthen its finances and earn satisfactory rates of return on revalued assets. The proposed minimum rates of return CORELCA is expected to obtain are: 4% in 1978, 5% in 1979 and 1980, 6% in 1981, 7% in 1982 and 9% thereafter. At the same time, the Government has decided to reduce gradually the fuel subsidy to CORELCA, so that by 1982, when the proposed project would be completed, CORELCA's fuel cost would exceed the cost of energy purchased through the 500 kV Inter- connection Line from the central system, which is mostly hydro-power (Section 4.03 of the Loan Agreement). Implementation, Procurement and Disbursements 56. ISA would be responsible for carrying out the project. In accor- dance with this, ISA and the Government would enter into a subsidiary agree- ment, the finalization of which under terms and conditions satisfactory to the Bank would be a condition of effectiveness of the proposed Bank loan (Section 7.01(b) of the Loan Agreement). 57. Procurement undier the proposed loan would be in accordance with international competitive bidding consistent with the Bank's Guidelines for Procurement. (Procurement under the proposed KfW financing would be through unrestricted internationaLl competitive bidding.) Local bidders, who did not bid on the transmission line contract, would receive a preference margin of 15% or the applicable customs duty (whichever is the lower) on the minor equipment still to be procured. Bid documents and the bid evaluation report for the transmissi-on line have been reviewed by the Bank and are satisfactory. After Bank approval of the proposed loan, the contract would be awarded, to a consortium comprising Sul Americana de Energia (Brazil), Sociedad de Electrificaci'on (Venezuela) and Societa Anonima Electrificazone (Italy). Project works would begin in the third quarter of 1978, and be completed by April 1981. 58. The loan would be disbursed over a three-year period. Disbursements would be made against (a) 100% of the foreign expenditures for civil works and erection; (b) for equipment and materials, 100% of foreign expenditures or 94% of the ex-factory cost of locally-manufactured goods; and (c) for consul- tant services, 100% of foreign expenditures or 50% of total expenditures. The loan is expected to be fully disbursed by June 30, 1982. - 16 - Benefits and Risks 59. The proposed project would achieve the long-standing objective of interconnecting the country's major power systems. Substantial fuel savings (amounting to over US$1.3 billion in end-1976 prices over the life of the project, or about US$160 million at present value) would be realized by enabling the 100% thermally-based Atlantic system to substitute less expensive hydro-based electricity from the Central system for fuel during periods of normal hydrology. On the other hand, during dry periods the availability of thermal capacity from the coastal system would assist in avoiding outages in the rest of the predominantly-hydro, national system and would considerably reduce otherwise required reserve capacity. Furthermore, the planned Cerro Matoso nickel project (which has proven deposits of about 25 million tons of high-grade nickel ore) would be the site of one of the line's intermediate substations, which would provide electricity to the ferronickel smelters at considerably lower cost than by building a separate transmission line to the mine area. 60. Comparison of alternative power development programs, using border prices for construction, labor, operating and maintenance costs, including fuel, indicate that the 500 kV interconnection line should be completed as soon as possible. The return on investment, or the discount rate at which the present value of the cost attributed to the project is equal to that of the benefits over its life, is about 35%, based upon quantified: (a) costs, com- prising the capital and operating cost of the interconnection line, together with the cost of thermal energy transferred from the Atlantic to the Central region; and (b) benefits, consisting of fuel cost savings and reduced reserve capacity needed in the national system. 61. The project is not subject to significant risks. ISA has taken adequate safeguards in design and would ensure the availability of sufficient specialized staff to operate the line, the first of its kind in Colombia, through a training program to be prepared by end-1978 (Section 3.04 of the Project Agreement). Ecology 62. No environmental problems are anticipated as the line would cross a partly mountainous rural area which has few inhabitants, little farming activity and sparse woodlands. Compensation would be provided for any property or crop damage and for rights-of-way. Radio and television inter- ference will be minimized. PART V: LEGAL INSTRUMENTS AND AUTHORITY 63. The Loan Agreement between the Republic of Colombia and the Bank, and the Project Agreement between ISA 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. - 17 - 64. Special conditions of the loan are listed in Section III of Annex III. Additional conditions of effectiveness would be (a) the engagement of qualified consultants for project works under satisfactory terms and condi- tions (paragraph 45), (b) satisfactory arrangement for the balance of foreign exchange financing for the project (paragraph 49), and (c) the execu- tion of a satisfactory subsidiary agreement between ISA and the Government (paragraph 56). 65. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI: RECOMMENDATION 66. I recommend thaLt the Executive Directors approve the proposed loan. Robert S. McNamara President Attachments May 17, 1978 ANNEX I Page 1 of 4 COLOMBIA - SOCIAt INDICATORS DATA SHEET LAND AREA (THOU KM2) ------ TOTAL 1136.9--- COLOMBIA REFERENCE COUNTRIES (1970) TOTAL 1138.9 MOST RECENT AGalC. 224.8 1960 1970 ESTIMATE TURKEY BRAZIL MEXICOt* _| -- _- --- -- -- -- - - _- - - - _- -------- - _-----_- -- _-- -- -_- _- _-- -- -_----- GNP PER CAPITA (USs) 210.0 350.0 640.0 500.0 550.0 690.0 POPULATION AND VITAL STATISTICS _ _ _ - -- -----_____ __ - -_ --- _-- _-- POPULATION (MID-YR, MILLION) 15.4 20.6 24.2 35.6 92.8 50.4 POPULATION DENSITY PER SQUARE KM. 14.0 18.0 21.0 46,0 11.0 26.0 PER So. KM. AGRICULTURAL LAND 71.0 93.0 108.0 65.0 49.0 52.0 VITAL STATISTICS CRUDE BIRTH RATE (/THOU, AV) 46.1 44.3 40.6 40.6 38.4 43.8 CRUDE OEATH RATE (/THOU,AV) 14.7 11.0 8 14.4 9.9 10.2 INFANT MORTALITY RATE (/THOU) 100.0/a 70.0/a .. 153.0/a 11D.0 69. LIFE EXPECTANCY AT BIRTH (YRS) 54.7 58.5 60.9 54 4 59.4 62.4 GROSS REPRODUCTION RATE 3.2 3.2 3.1 2.6/b,c 2.6 3.1 POPULATION GR0WTH RATE (%) TOTAL 2,9 2.9 2.8 2.5 2.9 3.5 URBAN 6so/b 5.S/b 4.9 4.9/d 5.0 4.8 URBAN POPULATION (X OF TOTAL) 53.0/C 60.3 70.0/a 38.7 56.0 59.7 AGE STRUCTURE (PERCENT) 0 TO 14 YEARS 46.6/C 46.6 44.1 41,7 42.0 46.2 15 TO 64 YEARS 50.4/? 50.4 52.7 54.0 55.0 50.1 65 YEARS AND OVER 3.0/r 3.0 3.2 4.3 3.0 3.7 AGE DEPENDENCY RATIO 1.0/c 0 0.9 0.9 0 0 ECONOMIC DEPENDENCY RATIO 1.8/? 1.6/C 1.6/b 11/e t.5 2.0 FAMILY PLANNING ACCEPTORS (CUMULATIVE, THOU) 0.5 306.9 955.1 . 250.0 55.5 USERS (x OF MARRIED WOMEN) .. .. 31.0 8.2 1.6 EMPLOYMENT TOTAL LABOR FORCE (THOUSAND) 51100.0/C 6200.0 6800.0 14000.0/f 29400.0 13000.0 LABOR FORCE IN AGRIC JLTURE (%) 47.0/-c 39.0 .. 63,4 - 40.4 45.0 UNEMPLOYED (s OF LABOR FORCE) 8.0/d,. 7.0 10.2/c 11.9/y 7.5 INCOME DISTRIBUTION % OF PRIVATE INCOME RECD BY- HIGHEST 5% OF HOUSEHOLDS 41 .2/C f 31.9/d 27.2 32,8 /h 35.0/a 27.2 HIGHEST 20% OF HOUSEHOLDS 67.7/?cT 60.1/ 54.4 60.6 /h 62.0/? 56.3 LOWEST 20% OF HOUSEHOLDS 2.1 f 3.5I 5.2 2 9 /_ 3 o/? 3.4 LOWEST 40% OF HOUSEHOLDS 6-i /? 19:4 3 9 100 .t 10.5 DISTRIBUTION OF LAND OWNERSHIP % OWNED BY TOP 1OX OF OWNERS . .. 80.0 39.0 /i 45.0 37.1 % OWNED BY SMALLEST 10% OWNERS .. .. o.2 0.7 /i 1.5 0.3 HEALTH AND NUTRITION POPULATION PER PHYSICIAN 2400.0 2110.0 2100.0ld 2250.0 1910.0 1480.0 POPULATION PER NURSING PERSON 3520.0/1 * * 1450.0// 1770.0 /_ 3220.o/b 1620.o/a POPULATION PER HOSPITAL BED S80.0 430.0 470.0 500.0 260.0 - 960.0 PER CAPITA SUPPLY OF - CALORIES (% OF REQUIREMENTS) 94.0 92.0 94.0 112.0 109.0 1OS.0 PROTEIN (GRAMS PER DAY) 50.0 51.0 47.0 78.0 64.0 65.0 -OF WHICH ANIMAL AND PULSE 280/h 29.0/e 24.0 22.0 /k 39.0 29.0/b DEATH RATE (/THOU) AGES 1-4 16.3 8.4 .. 14.7 /1 . 9.8 EDUCATION ADJUSTED ENROLLMENT RATIO PRIMARY SCHOOL 77.0 98.0 105.0 109.0 87.0 104.0 SECONDARY SCHOOL 12.0 23.0 36.0 26.0 , 22.0 YEARS OF SCHOOLING PROVIDED (FIRST AND SECOND LEVEL) 11.0 11.0 11.0 11.0 11.0 12.0 VOCATIONAL ENROLLMENT (x OF SECONDARY) 31.0/i 21.0 17 0 14 0 17 0 24.0 ADULT LITERACY RATE (x) . 73.0 74:0/d 55,0 /m 64.0 76.0 HOUSING PERSONS PER ROOM (URBAN) . .. .. 1.9 1.0 2.2 OCCUPIED DWELLINGS WITHOUT PIPED WATE- (%) ss.o/C,i * * . 66.0 73.0/C 61o0/c ACCESS TO ELECTRICITY (% OF ALL DWELLINGS) 47.0/C .. .. 40.0 48.0 59.0 RURAL DWELLINGS CONNECTED TO ELECTRICITY (%) 8.0/c .. .. 18.0 8.0 28.0 CONSUMPT ION RADIO RECEIVERS (PER THOU POP) 139.0 105.0 117.0 89.0 60.0 276.0 PASSENGER CARS (PER THOU POP) 7.0 11.0 15.0 4.0 25.0 24.0 ELECTRICITY (KWH/YR PER CAP) 244.0/e 414.0 599.0 247.0 491.0 567.0 NEWSPRINT (KG/YR PER CAP) 2.4 2.7 2.1 0.7 2.7 3.2 SEE NOTES AND DEFINITIONS ON REVERSE ANNEX I Page 2 of 4 Unless otherwise noted, data for 1960 refer to anky year between 1959 and 1961. for 1970 between 1969 and L971, and for Hset Recenmt 1etiete betwee 19 73adI1976. Official estinctee base.d on ragisteretiona. show erode birth rate for 1960 ae 39.0, average crude birth rate for 1961-70 as 36.0 end for 1971-76 ao 31.0. 00Macire has been Selected as an objective country becauee Colombia is en. in the stage of econoic denelopaent that Nenico -ac in ten yacre ag.. Both coun tries ate at a GNP growth rats of about 7 percent and at a eubetenci.el reduction of unemployment. cotOuNiOA 1960 /A Regietered ocly; /b 1951-64; lc 1964; /_d Bogota onLly; Is 1963; /f Economically active population; /A 1965; /it 1961-63; /_1 Total Secondary includee teacher trai7ning at the third level; 4.J Water piped melds. 1970 In Rats base d oo burial permits; /b 1964-70; /c Ratio of PoPelaties coder 11 ted 65 ned oven to ctal. labor force; /d Rcoeonicclly active population;, /a 1964-6G. Miost nRiCnX zSTImAT: 1977; /b Oatie of population undr 15 and 65 and ever to tetal labor forces; lc March 1977. average __apleymeot rate to sens largest cities; Id 1972.0 moxPK'Y 1970 / 1967; lb SEclude 17 eastern provincee; Is 1965-67; /4 1965-70; IaRatio of population under 15 and 65 aod ovr tc labor 15 year. end "ovr; If 15 yeers and ever, excludes employed; /jL Regietered only; /h Disposable incons; /I Agricultural load. iSgeeriog landlees heuseholds: /_t Including aesistent nurses sad midwve_~s; lk 1964-66; /1 1967-68; /et Persons sic years and "ovr who cell tbe rosue. takere that tbey can read end -rite.. BRAZTL 1970 /0EcoonIcally active populetioo; /b H-opitel personnel; Is Inside enly. smXioi 1970 Ia oiodiof.. assitant nures; lb 1964-66; /c Inside only. 013. May 0, 1978 Iotd Brra5Lhc0 ~~~~~~~ Popelet~~_ion s p nrersie rcraoo - Population divided by oub.ro rctcn total- Totl ocfac rea Preoprisic Isod Sroa end Ro1sod waters, eesadfa .grduate nurses, craisod" or 'cortifiod nren n M.yc Mot terro. stiosc ofoniuioe .eo used temporarily or Parma- aumilisry persone1 with traisieg orsproe. crony for crpo, pasturos canke & biorhee gardens or no if. fall1,. Peoulation par hoeital. bed - Populanien diwidad by eseahr of hepiral beds .svilsblo in publie end private geelsd apocislisd hospital cod cNp pe aita (il)- N? pot napit. estistee at correoc mearht prine., r-bbilitetion ceters; secldes oorina homes Sed setablialheenr for calc1lcod by some covr inmthod as world nBea Atlee (1974-76 baeis); custodial sod preventive care. 1966; 1970 and 1976 data. Per capita supply of calories (% ef -.resieneets) - Competed frna -orgy equiwaleet of set food Supplies a-ileble in nontry per capita Pot day; pryclatian end vital oraniouico sweila~~~-Ubl. supplies comprise domestic productian, isport less onons,ad IPMILIttio -od-ctilo) A. 1of July firer: if eot aveilable, average changas in stok; set auPplie senlude nia feed, seeds, quntitins oned two nod-poet notiite;1960, 1970 and 1976 data. icfnd processing sod leases in distribu.tion; req.tcreeote wer es-titd by FAf base.d on physiologisl amed. fon norma activity sod health ncnotd- P.olrc dksr -nnegeoh - mid-yea population pet square kilsoer erie esiratal temperature, body onighte, age and sex dietrlb,,tio-o of (iii hoctarro) of raisi oroc. ~~~~~~~population, sod s11viog lOt for waste at household leve... Panaatio dnoity noneoaoe hoof anic.laud- Computed as shor for aesot suesy of orotein faree oar day) - Protein costeotcfprrnapie a p1c1 craltee ony. nt suppl of food par day; oat sepply of food is defined aS above; r ie co.ts for all coctr'i. sateblfahed by USDA nEcoamin Resea.rch Sernic- Via `aattico provide for a edasimm loseeof 60 ares of total protein Pet d-y, end Crudebirt toreperthouo-d. Svere - omeua lire births per thnusn.d of 20 gras of aofm1an cd pulse pneteie, of whiob 10 greas Should be -oimal mid-ear apaitioo to-yea r itb-tic a-ogse ending to 1960 end 1970, protein; theae standards are lowr thee those of 75 grasm of total prt.ori aod fim-pst vn oreding in 1975 for weSt recent estimate. and 23 gras, of animal protein asa. en-vrsge for the world, propoed by fiG irod deah rao co thb..o. td . vreo. Ansas deoths per thousaod of mid-year io tbo Thir wlrld food Surve. popolatica; too-yea o-ith-etic soraseding in 1960 end 1970 sod five- Pe oetappti soly from sniml sod males - Protein supply of food .nr rrteo coding in 1975 for coot recen.t estima te, derived from it enieecd pulses in grase per day. Infectmoraltyrate I/thea) - Aneoul destha of iefaets under -on year of age Death rete f/thou) ages 1-4 - Aceucl deaths per thouoaod in age grep 1-4, pot theon-d Lire birtho. years, to hbildren in this age group; seggested es So indiot-r of :QpsfyS- gp tb.lrth1li! - Average otbhr of tears of life remining St malnutrition. "I'tll "," ,olly fiva-yoor gsorfr ending in 1960, 1970 end 1975 for develp- icf cooncnico. t~~~~~~~~~~~~~~due.tion ctoo irootl0 nato-vrao mebot of !lv dughters a woman will bear Adjusted eerol~Lte r.tie - or heysncl - REroilmet of oIl ageea po- Inhe_ane rprdantiv ponriod iohs operiooeno Pr e..ent age-s-cifio oto fpiaysho-g pulti_on; eludes children age h-lper fertiity tcco; eoaly fir-poaraverges ending is 1960, 1970 Sod 1975 hot adjusted for different lengths of primary education; for -nt~ie- cith for d-oclapiof coun.tries. uowmaa eduction, esoleat aysoed 100% since .- pupils ore below fooltio croh roto (7 - to~tal - Compoud ennoal growth rates of nid-yasr or above the official school ege. pccalnfor 1950-60, 1960-70 sod 1970-75. Adjusted enrollment ratio -.somar school - imputed as abov; -todory pooltco gath nato (.f- utha- - ronpetd ihe growth rate o1f total dedoction reqeiras tlct fou yar of opproved primary itoencti-o; poycI~l-tom dcifefr_r dolitin ofL_ce myS affect conprability of poiegara,vctnloreehrtraining inetroti... f.r popla. data aocng cooctrire. of 12 to ~~~~~17 yaS ofSge crrrepo.de..e eoursee are gSoeraly -rcidod. r o pooltio- 17.of -total - Ratio at ub,. to total popolatiool diff-rot yeone of schooing orfvIdmd fa endsecnd level) - local y-ro of docfinitiaco of orbon cr0 may affect comparability of data among covtries. schooling; at Secondary lewel, vocational instruction may be partiol1y a reaplftaly aneAded. ARe aruct-r (pearcent) - Childran (0-14 yeace), wekieg-eSa (Is-620san), TocatiMe erlle= t at fSecondaryl - Vecatiol institutions imeldad and rtti-d (65 ysars and over) se peroentagas of mid-yean pegm14Icio. noecL, iducre or oth. programs hitit operate indepede-tly or so icc doeodrcc na ti - ai fppooinodr 5ad6 n ovr to these depsrtawete of secondary i-teitottooc. of ia il tbh-oi 64. Adelt 1itorccr rate fl) - Littersta adulC (chic no red and nonto) as pe-- _Froci_dt rdoc on - f.tie of population under 15 and 65 cod ovr to . netege of totol adult population aged 11 year ccd Oman. ,h. Ici-efr.Pnc in age groop of 15-64 yeane. -C jt-nme f. po ~ H. n of Mot-ranOOl drrtsooorrauopicrO of national tally pison.ing Program Person Pr room furbaol - Average ember of pe--n per noon in -ccplod 0mm iccoprioc. ewevoo~~~~~~~~= tional dwel1ioae in urhee areas; dwIliings enlod. non-per.ooct Family plcic-or 7efmred Swomn - "eretages of married -ame of otcuen cd unoccupied Parte. ohild-bor oo(5lbyas :ho us birth-con:trol devices to all married 0 ..upied dueIlienas ithont piosdwce (7)- Boe.pied convetional dur1liofe I 000 c oroop. is erbao and rura eyes tithont insido or outside piped eater f-cilitc- cs parosotage of slI occupied doelliege. cooio-cc Arcas to electricity (7, of all dwslileoe) - C-ocetional dweIlingo tth roc abrfrc t-ood - c.oonfoiclly active persons, iocluding coned electricIty in livig quartera s eparoe..t of tota duslItogs Be orbon cod focoadaonlyd o Weldiog h Saove students, etc..; definitions -rurlre1 -ocraecetrloo See oat ceaperable. Rural dwellinae omoented to electricity (%) - Computed ao shore for rura Lehor face to anlnoltar (I) -AgnicoIto-l labor force -(Re famieng, forestry, dwellings only. -ooto.p ond fiobiog) 00 po-ontage oftoa labor fore.. 'r_onloyd (%_gf labo9rforce - Uineplyd are ucealy defined as peraons who Consumption ar blc o vicn o te a job o f c a on a give day, remined net Rodiocc cn (per tbn tee) - All typor of neci-ers or radio br-dr-t. at a ob. cd cocieR wrk oraepofied mieon period not s....ediog one to gOonal poblic per thousdo. pplto; nlde oiesd ee.r ank; oyotb cosparable bocoso00 -ttie d.s to differeot defoiritonai otnieS sod in years hen rogi.trotion of radi aeswsi f t; of cr-plopod aod --c of data, e.g., msployenet office atatiatie, seeple dote fotr: neoat Years may not he comparable since moot c-ntries abliahed narropa, -opolc-y ooopley-.et i..ur..... Ifacig Ps,aseoaetr easr (per than Pop) - Pe9senger cars conptise motctoars a.oaticf Tnpon dicrihtionPer.netage of privote incom (both in oaah sod kind) eas te sight pereone; e.celdes aobal.cne, h-enec and aiitcty recoi-d by richest 5%, richest 201, paoreet 201, and poorest 40Y% of houee- v-hioles -"d Eletiiy(bob/yr per ceo) - Annual coutaptioo of iodootrisl. coemmerciali pabricsodprvt electricity in khilwatt boone per capita, generally Didat-ihtla- of land -nsahio_- Per-etages of lend ownd by wealthiest 107, be..ed on prodartioe data, without all--ec for Loa ai grids hot allac edpoc-o lit of land owoa.. mng for imports aod .eporta of elactricity. Niewprint (kht/eygeecae4 - Per capita anusl c-ounptior in kilograms ~J.IaLth aod Bottition astinated fron domestic produotion plus not imports of neveprie.t Poctoi o ct rysola -Population divided by ntber of praotioisg ,hy,ciunqoslifiod fron a mad1co1 sehool at omiversity ioyel. ECONOMIC OLEPLODIME TM (In million, of US dollars) ActualT Es.timated ProesadAvenuce Asmual Growth Rates As Pesront of GDP 1967-69 Aaso 1974 1975 1976 1977 1978 1982 (1967..69)-74 1975-77 1978-92 1974 1977 1941 NATIONAL ACCOUNTS - 1976 Nines. and Emnhanas Rate.- iroas Dometic Product 9,795 14.262 14.993 15,565 16,406 17,406 22.079 6.5 5.0 6.1 100.0 100.0 100.0 Gains from Terms of Trade i. -751 -403 -4535 600 264 .102 -- - 2.8 3.7 0.5 Cross Domestic Income 175K 13,859 ~~~~~~14-,45 8 f5f 5-6553M 1-7,62-0 227,181 7. 13 50 72 103.7 Th53 Import (Intl. NFS) 1,491 2,306 2.152 2.318 2,939 5,365 4,496 7.5 16.9 7.5 16.2 17.9 20.4 nnonto ' (Impor,t Capacity.) 1.4_19 _2.066 2.297 _2.92 3 501l 3.199 4.237 6.5 23.5 7.3 14.5 21.5 19.2 Reuocelp 72 20 -145 -574 .!1 166 259 -- - 1.7 3.12 Consum ption Enpsnditures 5,441 10,877 11,663 11,812 12,955 17,916 17,223 6.5 5.4 5.7 76.5 79.0 78.0 Invetment " (cI.. Stocks) 1,661 3,222 2,650 3.179 3,497 4,020 5,217 1i.7 15.3 6.7 22.6 21.3 23.6 Do-etit Savings 1,589 2.982 2,775 3,753 4,059 5,854 *4,958 11.1 20.9 6.5 28.9 24.7 22.5 NationaI Savings 1.865 2,854 2,544 5,551 3,969 3,742 4,776 7.2 249 63 19.9 242 1. Annual Data at Current Priosa . ~~~~~~~~~~As Percent of Total ImportsI Capitl1 Gondo 290 525 510 575 724 895 1,455 10,4 19.1 12.9 34.7 30.5 27.5 Inpt-mdistm Gmod (Eccl. PosIe 254 813 785 803 1,193 1,475 2,481 21.4 30.0 13.8 53.6 50.3 46.9 Pods an' d R'olatmid Materials 3 6 14 73 153 109 766 12.3 - 41.9 0.4 0.4 14.5 of stich: Petro"Iu (5 (5 (14) (73) (153) (109) (766) - - (41.8) (.5 (6.4) (14.5) Co...o ption Goodo 61 167 166 214 304 376 ..9.. 18.3 35.3 12.0 11.1 12.8 11.2 Total Merchandise ImPorts (POB) 608 1,111 1,595 1,665 2,37-4 373 .9 6.4 30. 5 15.9 100.0 100. 0 100.0 Primary Products (fad1. PueloS 418 1,001 1,202 1,776 2,404 2,490 5,971 15.7 43.9 12.4 67.0 88.2 74.9 of thich: teffes (341) (662) (672) (1.316) (1,753) (1,360) (1,431) (11.7) (61.5) , (1.3) (56.6) Pools end Selated Macscielo ~~71 95 87 87 93 90 173 5.0 3.4 17.7 6.4 -3.0 3.3 ofwich: Ferrolo. (56) (4) (-5 - - - - - - - (0.3) (-) (- Mamufa~tturd Goods L117 398 420 515 520 458 1.160 22.5 11.2 26.1 26.6 16.8 21.8 Tots1 Meohandine Enport (rOB) 606 1,494 Y.7 1-7 -27378 3-,09-7 3,038 5,304 16.2 3.3 1fl iO.0 100.0 100.0 St-rhandi.m Trade Indice Enport Prico m.dc 21.2 72.4 74.5 100 .0 136.6 129.9 160.0 Import Price Indnn 54.0 90.0 93 .0 100.0 107.7 116.3 154.9 Terms of T-um Indes 62.3 80.4 800.1 100.0 126.8 111.6 103.3 VALUE ADDED BY SECTOR (rector Cost) Annua Datas 1976 -Pti-e and Ench-nge Rates____ Anerge, Annua roth Rates An Percet of Total Agricolt-r 2,951 5,959 4,191 4,244. 4,324 4,450 5,017 4.9 1.7 3,0 29.7 38.4 24.7 Indootry sod Mlinig 2,44.4 4,015 4,087 4,210 4,501 4,923 6,299 8.6 5,0 6,9 30.3 29.5 51.0 Sericie 4.439 5,305 5.641 6.028 6.425 6.864 8.997 5.0 6.7 7.0 40.0 47.1 44.3 Total 9,834 13,257 15.909 14,402 15,258 16.145 20,313 5.1 4.7 5.9 100.0 100.0 100.0 PUBLIC FINANCE Annua Data at Current Price Ao Percet of CDP (Cnntral G-vernot) Cnrron t Receipts 413 1,194 1,402 1,509 2,010 3,220 3,308 19,4 20.0 10.5 9.5 10.0 9.3 torrent Ependituren 262 640 702 821 919 999 1.637 16.0 14.4 13.1 5.1 4.5 4.4 Bodgetary Saying. 151 554 700-o 7638 I'm 1,221 1.671 24.2 25.3 0.2 4.4 3, 3737 Other Public 5Se1cr Savin,gs 434 150 394 354 410 481 925 -16.2 3.0 17.0 1.2 2.1 2.6 Public l_ctor TIvms.n.nt 612 1,109 1,302 1,496 1,550 1,975 5,453 11.7 5.9 15.0 9.4 7.7 9.7 SELECTED INDICATORI 1965-70 1974-7f 1979-B) DETAIL ON PU511C SECTOR As % of Total INESDTMENT PRIOGRAM AND FINANCIBG Actual Planned (Averge for Period Show) 1975-76 1977-92 Av-rgn ICOR (Saso.d en Fined Inv---ant 3.17 3.77 3.36 Import Elesticlty 1.16 1.83 1.25 Socia iSetorn 35.5 30.2 Margina Son-ic Savingo Rate 0.20 0,54 0,24 Agriculture 10.2 12.0 Marginal Natio...l OSyingo Rate 0.14 0.31 0.23 Industry sod Mining 9.5 9.7 Power 6.5 9.5 Transport and C-itouiatio.. 20.2 14.0 LABOR FfRCE AND OUTPUT ff1 WORKER Tota Labor Forc Other 20.1 15,0 In Millions 7. of Total Groth Rate Total Expenditures 100.0 100.0 1964 1973 1964 ~ 1973 1964-73 Agriculturo ~~~~~~~2.427 2.057 47.3 50.2 -1.9 FIN5ANCINGC loduntry ~~~~~~ ~~0.950 1.212 10.7 17.8 2.7 ler.vice 1.749 3.542 34.0 52.0 4.2 Public lecton Savings 62.7 69.5 Total 51-34 6.012 100.0 100.0 5.2 Internal Source 15.1 24.6 Othsr 22.2 6.9 Vslo. Added pe.tkWoie (1976 Prices and Encheoge Rate) Total Finaning 100.0 100.0 In US Dollar 7. ofA_ae Ooth Rte 1964 1973 164 1973 1964-75 Agricultur 903 1,517 66.4 80,4 5.9 Industry 1,037 2,552 135.2 148,6 5,7 lervice 1.730 1,546 127.:3 90.0 -1.2 Total 1,559 1,717 100.0 100.1 2.6 BALNCE OF PAYM=11T. WXEROAL ASSISTANCE AND DEBT (Ao-Nt in iliN of LS dola11 a . ron pico Actual lOi-Otd frolec-d 1901 1972 1973 1974 1973 1976- 1977- 1978 1979 1980 1991 1992 972 1,205 1.544 1.961 2.137 2.992 3,711 3.720 4.301 4,903 5.687 6.563 ijili 10Z1 1.422 2.077 2.002 2.318 3_165 3.913 4.551 5_262 6.056 _6 -313 -27 122 -216 135 576 546 -193 -250 -359 -369 -4oOl factor -oI.o- -1019 -191) -223) -1573) -243) -2703 -1208) -25 6) -351l -~386 -42 -468 NoE c (fl (-0) (-0 (- (-69) (-3 -00 1-11 (17 -64) 1-72) (-191) Otbr (991 (-121) 1-133) 1-018) 1-175) 1-220) (-1091 (-139) 1-194) (-222) (-2541 (-297) SjNIofO...irwfrot.Iho.) 29 ~~~ ~~ ~ ~~29 26 39 28 71 112 135 138 152 167 184 r. m: Rq M (moll --m2 t90 -55 __3 3 -:S5- I352 ~ -A43 -593 -628 -695 PrOnto DIrec 4ootmo0 17 23 35 35 69 12 39 57 8% 74 83 Public MLT LOON Di b-reoot 222 254 412 390 383 258 277 480 601 793 849 941 -t.ea,.c. ~~~ ~ ~~~~~ ~~-92 -96 . -132 -211 -124 -010 -191 5195 -215 -255 -295 -339 Oot liebnreoors ~~~~ ~~~~130 258 290 269 249 -T W285 386 52 556 602 Etobnnanto 145 139 60 50 76 425 - - ---- -"Mum .A9 -64 -58 -A9 :87 4189 .1 mul- 6 5 2-8 1- - CapItal srao.acio... 6.0.1.. 216 39 478 83 -98 676 109 ----- Cchn.. to Wo.Ro, e 2 -179 -172 91 -95 -654 -6864 1- - _-oc.) GEIAR?AD101m eu Actual Offica Oroo&OBt16 - - D- 00T AND DOT SERICE 1971 1972 1 9753 1974 1975 1976 Public lobo.b_ MU.tl 06.T Loan. Ocoadu &O.ood 1,381.6 1,650.0 1,936.0 2,117.4 2,31.2 2,649.1 138.D 153 74 182 0 80 s0 tn.rocccPblic blo 49. 79 7. 103. 11. 125.4 084- - - - Rapusoat.,or 2.0 95.9 131.9 214 124. 150.0 Ocia oclitacorol 42 41 29 64 - 62 T-1o Pulc otoSrcc 14.2 153.8 210.4 315.1 268.2 275.4 G- =rino. 110 114 67 55 65 052 DOlor Debo Soc'ilc (Not) 123.1 155.1 126.6 118.6 108.2 160.0 tupior 5 37 31 45 74 44. Total loot Senico (Not) 274.3 308.9 337.0 432.7 354.2 435.4 Poicooc lanka so~~~~~~~~3 84 190 58 165 170 Rondo - - ~~~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~45 - - odno _c OnorE-ri-i 15 Tcif841416E.Ane27 33 2 24Zi Pblic bloSt -Io.i. 14.7 12.7 13.6 16.9 01.6 9.5 Total 0.67 Service 28.2 25.6 21.0 23.3 16.7 15.1 Fo-igoI .n...tco 35.5 31.6 26.5 26.6 09.9 17.6 UTURIL PIIBLIC OUT outitto-dio on12/31/76 rynyalo t"Yo Pra Curooy) Stiboca onto P-r.e, A--t.0 Torn of Poblic Dolt World lank 671.6 27.4 ID 122.3 0.9 Itt_rooto Pro Soo D040 1.9 4.2 4.6 1.5 5 .4 5 3 OthN tctltri1 4 6.5 04ocioa lot .. % Pior Soa tovontaota ~~~~~~~~~935.6 30. D04 1.4 6.9 8.0 60.9 6.4 6.4 Oupplair. 10~~~~~~~~~~35. 16.5 Pront Ja6 552161RD olt Put. & Dieb.red 39. 4 53. 54.51 56I1 633.5 671.6 Boud 50.4 2.1 70ae,PbI 5472026.S71 2. 65 2. 2 7.4 ublic 0b.66 n.ei 32.3 1.3 000.D 7, Se.oio 29.4 30.9 29.9 25 6 52.5 2,.0 Tota Public 061T Io-t. 2,449.2 100.2 00D4 nb, Got. 4 Dheburtd 19. 20.9 23. 221. 22. 22.59 10DA 7, Pblic Doblt 014 1. 12 ,1 00 0. DA 00eric .0 02 .1 - 02 I I ANNEX II Page 1 of 7 THE STATUS CIF BANK GROUP OPERATIONS IN COLOMBIA A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of March 31, 1978) (US$ million) Loan Amount (less Cancellation) Number Year Borrower Purpose Bank IDA Undisbursed Fully disbursed loans and credits 718.8 23.5 /1 -- 680 1970 Colombia Roads 32.0 3.9 681 1970 Interconexion Electrica, S.A. Power 52.3 .2 738 1971 Empresas Municipales de Palmira Water Supply 2.0 .3 741 1971 Empresa de Acueducto y Alcantarillado de Bogota Water Supply 88.0 16.1 849 1972 Instituto Colombiano de la Reforma Agraria Irrigation 2.2 1.5 860 1972 Instituto de Fomento Municipal Water Supply 9.1 3.5 874 1973 Empresas Publicas de Medellin Power 56.0 16.5 903 1973 Banco de la Republica Industry 60.0 2.2 920 1973 Colombia Education 21.2 12.3 926 1973 Ferrocarriles Nacionales Railways 25.0 .8 971 1974 Colombia Pre-Investment Studies 8.0 4.7 1071 1975 Banco de la Republica Industry 5.5 .4 1072 1975 Instituto Nacional de Fomento Municipal Water Supply 27.0 21.0 1073 1975 Empresa NacLonal de Telecomunicaciones Communications 15.0 2.3 1118 1975 Colombia Rural Settlement 19.5 13.2 1163 1975 Colombia Agriculture 21.0 19.8 1223 1976 Banco de la Republica DFC 80.0 47.9 1352 1977 Colombia Rural Dev. 52.0 50.8 1357 1977 Banco de la Republica Agricultural Cr. 64.0 64.0 1450 1977 Empresa Nacional de Communications 60.0 60.0 Telecomunicaciones 1451 1977 Banco de la Republica Industry 15.0 15.0 1471 1977 Colombia Highways 90.0 90.0 1487 1978 Colombia Nutrition 25.0 25.0 TOTAL 1,548.6 23.5 Of which has been repaid 354.1 1.5 Total now outstanding 1,194.5 22.0 Amount solcl 48.8 Of which has been repaid 19.8 29.0 TOTAL NOW HELD BY BANK AND IDA 1,165.5 22.2 TOTAL UNDISBURSED 471.4 /1 Includes exchange adjustment of US$4.0 million. ANNEX II Page 2 of 7 B. STATEMENT OF IFC INVESTMENTS (as of March 31, 1978) Type of Amount in US$ million Year Obligor Business Loan Equity Total 1959 Laminas del Caribe, S.A. Fiber-board 0.50 - 0.50 1960-1965 Industrias Alimenticias Noel, S.A. Food products 1.99 0.08 2.07 1961 Envases Colombianos, S.A. Metal cans 0.70 - 0.70 1961-1968 Morfeo-Productos para el Hogar, S.A. Home furniture 0.08 0.09 0.17 1961 Electromanufacturas, S.A. Electrical equipment 0.50 - 0.50 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 0.15 2.13 1968-1969 Tejidos, S.A. 1964-1970 Corporacion Financiera de Development Caldas financing - 0.81 0.81 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 0.58 1.58 Colombiana, S.A. 1967-70-74 ENKA de Colombia, S.A. Textiles 5.00 2.60 7.61 1969 Compania de Desarrollo de Tourism - 0.01 0.01 Hoteles y Turismo, Ltda. (HOTURISMO) 1969-1973 Corporacion Financiera del Development - 0.45 0.45 Norte financing 1969 Corporacion Financiera del Development - 0.43 0.43 Valle financing 1970 Promotora de Hoteles de Tourism 0.23 0.11 0.34 Turismo Medellin, S.A. 1970-1977 Pro-Hoteles, S.A. Tourism 0.80 0.25 1.05 1973-1975 Corporacion Colombiana de Housing - 0.46 0.46 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 - 2.43 Total Gross Commitments 40.31 13.35 53.66 Less cancellations, terminations, repayments and sales 26.56 8.14 34.70 Total commitments now held by IFC 13.75 5.21 18.96 Total undisbursed - 0.03 0.03 ANNEX II Page 3 of 7 C. PROJECTS IN EXECUTION 1/ 1. Ln No. 680 Highways VI; US$32 million, June 1970. Effective date: March 29, 197,1 Closing date: original - November 30, 1974 current - November 30, 1978 The largest component of the project, the paving program, has experienced considerable cost increases and delays. As of this writing, six sections in the program are still under construction, requiring about 190 km of paving. Project completion is now expected for end-1979. The other compon- ents of the project were completed with much less delay. The Ministry of Public Works is seeking ways of hastening project execution and strengthening the performance of contractors. 2. Ln No. 681 Chivor ELydroelectric Power; US$52.3 million, June 1970. Effective date: September 1, 1970 Closing date: Original - June 30, 1977 Current - June 30, 1978 The project wcls completed and commercially operational in mid-1977, two years behind schedu:Le, with a cost overrun of about US$86 million (65%). The delay is mainly attcibutable to geological problems encountered during construction of the dam and tunnel. The cost overruns resulted from these geological problems, from higher than anticipated bids, and local and foreign inflation. 3. Ln No. 738 Palmira Water Supply and Sewerage; US$2 million, May 1971. Effective date: December 29, 1971 Closing Date: original - March 1, 1975 current - December 31, 1979 As of June 30, 1977, about 85% of the loan amount was disbursed. Adequate tariff measures recently adopted will enable the utility to utilize the remainder of the loan proceeds in further works, as originally contemplated. 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. ANNEX II Page 4 of 7 4. Ln No. 741 Water Supply (Bogota II); US$88 million, May 1971. Effective date: August 16, 1971 Closing Date: June 30, 1980 Disbursements up to February 28, 1978, amounted to nearly 80% of this loan. Slow progress in the construction of the vital Palacio - Rio Blanco Tunnel is the main reason for the project's delay; the original contractor was replaced by another firm which is performing satisfactorily. 5. Ln No. 849 Irrigation (Atlantico II); US$5 million, June 1972. Effective date: November 14, 1972 Closing Date: March 31, 1978 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 were cancelled in February 1977. Work is continuing on additional feeder roads, tertiary canal drains, waterfronts, land clearing, subsoiling and leveling. A second contractor has defaulted and work on the main drainage canal has temporarily stopped, though a new contract is expected to be signed soon. Settlement of farmers within the project areas and the provision of technical assistance and farm credit have been making inadequate progress. The Government is carrying out a detailed review of the project in order to find a solution to these problems. 6. Ln No. 860 Medium-Size Cities Water Supply and Sewerage Project; US$9.1 million, October 1972. Effective date: March 7, 1973 Closing Date: original - September 30, 1976 current - September 30, 1978 As of February 28, 1978, about 60% of the loan amount was disbursed. Management problems affected the initiation of the project, but progress has since improved. 7. Ln No. 874 Guatape II Hydroelectric Power Project; US$56 million, January 1973. Effective date: March 13, 1973 Closing Date: December 31, 1979 The progress of the work has been generally satisfactory except for delays in the resettlement of El Penol and Guatape villages because of the villagers' reluctance to move into the new cities. This problem is now re- solved and filling of the Santa Rita reservoir will be started by mid-1978, three years behind schedule. The revised project cost is substantially above appraisal estimate, mainly occasioned by higher cost of the works at El Penol and Guatape. The Borrower experienced serious financial problems but recently adopted tariff increases should allow it to overcome them. ANNEX II Page 5 of 7 8. Ln No. 903 Development Finance Companies V; US$60 million, May 1973. Effective date: November 9, 1973 Closing Date: June 30, 1978 The loan is almost fully committed. Disbursements are expected to be completed within the next few months. 9. Ln No. 920 Education III; US$21.2 million, July 1973. Effective date: January 10, 1974 Closing Date: original - June 30, 1977 current - December 30, 1979 The execution of the project had been suspended in mid-1975 pending redefinition of sector priorities by the Government. Project execution resumed in 1977 but suffered delays as a result of inadequate budgetary resources of the Government. The Government is preparing a proposal to cancel a large portion of the Loan. 10. Ln No. 926 Sixth Railway Project; US$25 million, August 1973. Effective date: December 6, 1973 Closing Date: original - June 30, 1976 current - June 30, 1978 Declines in freight traffic in 1975 and the first six months of 1976 (because of an economic slowdown and lower imports), combined with steep cost increases, resulted in a deterioration of the railway's financial situa- tion. Since then, the financial position of the railway has been improving as a consequence of sharp increases of ton-km of freight traffic, and freight tariff hikes of about 19% in 1976 and 50% in 1977. Improvements have been registered in other areas although locomotive availability is severely con- strained largely because of manufacturer defects in over 40% of 88 relatively new locomotives. Efforts are underway to resolve this problem but early resolution is not anticipated. Project works are progressing and a substantial portion has been completed. 11. Ln No. 971 Preinvestment Studies Project; US$8 million, March 1974. Effective date: June 27, 1974 Closing Date: December 31, 1978 Commitments are proceeding at a satisfactory rate. The Bank has approved 26 sub-projects. 12. Ln No. 1071 Small-Scale Industry; US$5.5 million, January 1975. Effective date: May 20, 1975 Closing Date: June 30, 1978 A change of management in Corporacion Financiera Popular (CFP), the beneficiary institution, delayed the initiation of the project. Commit- ments are now moving well and progress is satisfactory. The Bank agreed to release the second tranche in view of CFP's satisfactory performance. The loan is fully committed. ANNEX II Page 6 of 7 13. Ln No. 1072 Second Multi-City Water Supply and Sewerage Project; US$27 million, January 1975. Effective date: April 14, 1975 Closing Date: June 30, 1980 There were substantial delays in making the eight subloans effective. The last subloan (Barranquilla) was made effective on September 9, 1976. After a slow start, project implementation is progressing satisfactorily in most cities. 14. Ln No. 1073 Telecommunications III; US$15 million, January 1975. Effective date: April 14, 1975 Closing Date: December 31, 1978 Contracts for all Bank-financed goods have been awarded, and work is proceeding satisfactorily. 15. Ln No. 1118 Caqueta Rural Settlement Project; US$19.5 million, June 1975. Effective date: April 1, 1976 Closing Date: October 31, 1979 The loan became effective on April 1, 1976, after a six-month delay. Projection execution has proceeded rapidly and some of the lost time regained. Road and bridge construction is well ahead of schedule (79 km have been completed). School construction, however, is behind schedule, while the credit program is lagging as a result of inadequate budgetary flaws. 16. Ln No. 1163 Cordoba 2 Agricultural Development Project; US$21 million, September 1975. Effective date: March 30, 1976 Closing Date: December 31, 1980 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. Implementation is now proceeding satisfactorily, but still behind schedule. 17. Ln No. 1223 Sixth Development Finance Companies Project; US$80.0 million, March 1976. Effective date: September 1, 1976 Closing Date: June 30, 1980 The loan is proceeding satisfactorily and is virtually fully committed. ANNEX II Page 7 of 7 18. Ln No. 1352 Integrated Rural Development Project; US$52.0 million, January 1977. Effective Date: August 26, 1977 Closing Date: December 31, 1982 Works are now proceeding as scheduled. 19. Ln No. 1357 Second Agricultural Credit Project; US$64.0 million, February 1977. Effective Date: September 6, 1977. Closing Date: December 31, 1981. The loan is being committed faster than anticipated. Withdrawal applications for US$3.1 million equivalent have recently been received. 20. Ln. No. 1450 Telecommtnications IV; US$60 million, July 1977. Effective Date: October 3, 1977. Closing Date: June 30, 1982. Works are proceeding as scheduled. 21. Ln. No. 1451 Second Smnall-Scale Industry Project; US$15 million, September 1977. Effective Date: February 14, 1978. Closing Date: December 31, 1980. 22. Ln. No. 1471 Highways VII; US$90 million, July 1977. Effective Date: November 28, 1977. Closing Date: December 31, 1982 The Rehabilitation Program is underway, about three months behind schedule. Stabilization works are being carried out, with work totalling US$35.4 million completed; conditions for disbursement of loan funds for this program are expected to be fulfilled shortly. Implementation of the maintenance program is in process, about six months behind schedule. Prepara- tion of studies is proceeding satisfactorily. 23. Ln. No. 1487 Integralted. Nutrition Improvement Project; US$25 million, September 1977. Effective Date: March 9, 1978 Closing Date: June 30, 1982 Works are proceeding rapidly and coordination among institutions is effective. ANNEX III Page 1 of 2 COLOMBIA 500 kV INTERCONNECTION PROJECT SUPPLEMENTARY DATA SHEET Section I: Timetable of Key Events (a) Time taken to prepare project: 44 months (b) Agency which prepared project: ISA/CORELCA (c) First presentation to Bank: September 1, 1975 (d) First mission to review project: April 20, 1976 (e) Departure of appraisal mission: April 13, 1977 (f) Completion of negotiations: April 17, 1977 (g) Planned Date of Effectiveness: September 1978 Section II: Special Bank Implementation Actions In view of the experience gained under the first two projects executed by ISA, no special implementation actions are required. Section III: Special Conditions The following special assurances have been obtained: (a) by December 31, 1981, the Government would transfer ownership of the project facilities to ISA, at no cost to the entity (paragraph 50); (b) ISA would earn rates of return of 3% in 1982, 2% in 1983, 2.5% in 1984, 4% in 1985, 6% in 1986, and 9% in 1987 and thereafter on the interconnection line; and for all other assets, 5.5% in 1978, 8% in 1979, 9% in 1980, 11% in 1981, and 9% from 1982 onwards (paragraph 53); (c) the Government would gradually reduce the fuel subsidy to CORELCA by 1982, thereby ensuring that the cost of self- generation will exceed the cost of hydro-energy through the 500 kV line (paragraph 55); and ANNEX III Page 2 of 2 (d) ISA would prepare by December 31, 1978, a satisfactory program for the training of staff to operate the project facilities (paragraph 61). Conditions of loan effectiveness would be: (a) engagement of qualified consultants for project works under terms and conditions satisfactory to the Bank (paragraph 45); (b) satisfactory arrangements for the balance of foreign exchange financing for the project (paragraph 49); and (c) the execution of a satisfactory subsidiary agreement between ISA and the Government (paragraph 56). 8 R C 3948R I - ~~~~~~~~~~~~~~76' C vrrv 9 sMBIAB A V , ELECTRIC POWER SYSTEM INTERCONEXION ELECTRICA SA (ISA) S O U T H / A M E R I C A , -ltC' ,2s X,g' ~~ATLAWS .> A A' -~~~~~~~~~~~~~~ A, c *, fiJ A,.A8;-:r C+o~~~~52 e w y X X c a fi 8 na<> a n / ,< X t$_i ut- Arwc ON /0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ O C E A N Qu do SY.E tz 'Ff°CO / v~~~~~~~~~t-A S A Ni', R E f RISARAt-DA )CUrN ~~~~~' TI A lo =AC FIC A A I/ ISA'S POWER FACILITIES: TS \ P C P; / #,f ~~~~~~~~~~~~~~~~~~~~PROPOSED . OCEAN~~~~~~PPk TASISINLN * 50 00 150 / A%8 _ E20 kV RANSMISSION LINE , R L E t -SAN CARLOS HYDROPOWER PROJECT / . oorn,A. R 1 1 TAT ONS CENTRAL SYSTEM ER* EBERtE tE tttRECIE A S EEtEEHESE ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ALATI CAS (OR LA ER'E ~~~~~~~EISATINGRFAIITE' - -N RI N 0 230 kV TRANSMISSION LINES NORTHEAST(ICELI CORELCATRANSMISSION SYSTEM DEPARTMENT BOUNDARIES Mo; .\ cX °kE X | POWER 'LAN INTERNATIONAL LOUNDARIES EPIANNED ~~~/~~~]~~~% ~~~ ~ . 235 ,VTRANSMISStON LINES ECUADOR 71 2T'