Announcement of Bank-IDA Highway Transaction in Colombia on August 29, 1961

FO,R IMMEDIATE RELEASE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION 1818 H STREET, N.W. WASHINGTON 25, D. C. TELEPHONE: EXECUTIVE 3-6360 Bank Press Release No. 709 SUBJECT: Bank-IDA highway trans- IDA Press Release No. 8 action in Colombia August 29, 1961 The World Bank and its a.:ffiliate, the International Development Associa- tion (IDA), ha.ve agreed to provide the equivalent of $39 million to Colombia for a highway improvement and maintenance program. The World Bank loan and the IDA development credit each amount to $19-5 million. The project to be assisted consists of the reconstruction or new construction of about 800 miles • of roads which form part of the main road. network of Colombia, the preparation of designs for about 300 miles of additional roads, a reappraisal of maintenance operations and prccurement of maintenance equipment. The IDA credit will be used to finance construction work, and the Bank loan will be used for both construction and maintenance equipment. This is the third IDA credit in Latin America. The earlier credits were al30 for highway development and consisted of a $9 million credit to Honduras and a $19 million credit to Chile. Today's IDA credit is for a term of 50 yea.rs, interest-free. It is repayable in foreign exchange, a..mortization to begin after a 10-year period of grace. Thus, the first payment will be due in June 1971. Thereafter, 1% of the principal will be repayable annually for 10 years and 3% will be repayable each year for the final 30 years • A service charge of 3/4 of 1% annually on the amounts withdrawn and outstanding will be made to meet IDA's administrative costs. '  - 2 - • The Bank loan is for a term of 15 years and. bears interest. of 5-3/4% per annum including the 1% commission which is allocated to the Bank's Special Re- serve. Amortization will begin in September 1965. Irving Trust Company and Wells Fargo Bank American Trust Company a.re participating in the loan, :-without the World Bank's guarantee, to the extent of $200,000 representing part of the first maturity. For the past ten years Colombia has been. engaged in a program to recon- struct, improve and extend its national highway network, in particular the 1,860 mile.3 of highways providing connections between the main cities and the principal ocean and river ports. The program was based on the recommendations of a r~orld Bank General Survey Mission to Colombia in 1949 wich found that inedequate transportation facilities, particularly the highway system, were the greatest single obstacle to Colombia's economic development. Work first began as an emergency rehabilitation measure but has since developed into a comprehensive construction and reconstruction program, largely necessitated by the spectacular rise in the volume of traffic as roads were imI)roved. During the first five years, the registration of motor vehicles a~~ gasoline consumption more than doubled and have since increased steadily. I~ addition to the unforeseen rise in the volume of traffic requiring much higher standards of road design than had. been originally planned, construction has been prolonged because of technical problems caused mainly by heavy rain- fall and frequent landslides on precipitous, unstable terrain. These factors greatly increased the amount of work to be done as well as the cost of the program. The World Ba.nk made three earlier loans for highway development totaling the equivalent of $47,350,000, of whkh $3.1 million was used for • road maintenanc,e operations. Although the program has not yet been completed,  - 3 - it has already ma.de a vital contribution to the development of Colombia during • the past dee: e, h'3.ving kept open, improved and stabiJ.ize'd the highways: that serve all the major cities. A large part of the finance ma.de available today by the Bank and IDA will be used to complete about 450 miles of roads started with the help of previous Bank lending. The funds will also help to finance the construction of eight new r0ads having a total length of about 340 miles which will complement the roads under construction, the design of an additional 300 miles of roads, and the engineering services required for the construction and design work. About $7.6 million of the Bank loan will cover the cost of additional. equipment to meet the immediate needs of the Highway Department for maintenance operations, and a reappraisal of Colot.:bia' s road maintenance requirements as a whole. The construction and maintenance work now being undertaken will take four • years to complete and will cost the equivalent of $100 million. The Bank loan and. IDA credit will cover the foreign exchange costs and the local currency funds req,1ired will be provided by the Government of Colombia. Construction contracts will be awarded and purchases of equipment will be made on the basis of inter- national competitive bidding. Add.itional plans for the development of Colombia's highways will await the fii:idings and recommendations of a Transport, Survey being sponsored by the Govern- ment of Colombia and the World Bank. The consultants carrying out the survey 't·rill recommend a coordinated program for investment in highways, railways, ports and. airports, indicating the priorities of specific projects in each sector and preliminary views on their costs and benefits. The survey is scheduled for com- pletion in November 1961. After having been approved by the Executive Directors of the World Bank and • the International Development Association, the agre.ements for the Bank loan and. the IDA credit were signed by Dr. Misael Pastrana Borrero, Minis·cer of Public Works, on behalf of the Government of Colombia, on August 28, 1961.  - 4 - supplemental Statement on the International Development Association The International Development Association was created by member countries of the World Bank in the fall of 1960. As of' Aug. 25, 1961, IDA had 52 members and initial subscrtptions equivalent to $906.57 million. The Latin .American countries which have so far become members are Bolivia, Chile, Colombia, Costa Rica, Guate- mala, Haiti, Honduras, Mexico, Nicaragua and Paraguay. IDA is an independent legal entity with financial resources separate from those of the world Bank. It is intended. to assist countries which for reasons beyond their control are not able to achieve a satisfactory rate of economic development on the oasis of their own resources and conventional external financing,. The terms of IDA's rlnancing are not specified in its charter, which prescribes only that they shall be flexible and shall bear less heavily on ~he balance of payments of under- c1eveloped countries than do conventional loans. The terms of the credits so fa.r • anriounced, while not necessarily indicative of the general pattern of future IDA credits, a.re strikingly dif"f'erent from the terms on which development funds have hitherto been available. IDA is presently investigating projects situated in countries of Africa, the MiC:.d}_c East, South Asia and the Fa.r East, as well as in Latin America. They in- clude not only projects of the type the World Bank finances, such as road develop- mePt, port facilities and irrigation works, but a much broader range, such as industrial estates, municipal improvements and technical training programs. IDA is specifically designed to finance projects which contribute most to the develop- me!lt of the country concerned, whether or not they are directly productive. In determL'ling which projects to firmnce, IDA will apply the same standards of project preparation a.nd execution as the Bank does. This w'i.11 be facilitated by the fact an.a: • that its affairs those of the Bank are joint:'...y administered. Mr. Eugene R• Black as Presi9,ent of the Worle. Bank ls ex officio Pl·esident of IDA, and the officers and staff of the :Sank se:i.·ve in their same capacities in IDA.  COLOMBIA ' • PROJECT ROADS National road TJ.etwork Existing 1·ailways H ++ +-+ H+++- Railway:; under constru:ction 0 50 100 150 200 KM VENEZUELA t • N ,--- --; _.,..,--------~-- ---- -- j _,/ \ "\ \ \ , .... _____ , (., I / Roads ir earlier Bank projects • a) Already completed b) To be completed in this Project c) Not included in this Project Additional roads in Project JULY 1961 IBR0-861R