Announcement of World Bank Lends Two Hundred Fifty Million US Dollars for Colombia's Agricultural Sector on March 22, 1993

FOR IMMEDIATE RELEASE World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. * Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 93/67LAC Contact: Ciro Gamarra Tel: (202) 473-8721 WORLD BANK LENDS $250 MILLION FOR COLOMBIA' S AGRICULTURAL SECTOR Washington, D.C., March 22, 1993 - The World Bank has approved a $250 million loan to Colombia to help finance a project to assist in the financing of the agricultural sector and to transform Caja Agraria into an efficient rural financial institution. The loan will be channelled through the Fund for the Financing of the Agricultural Sector (FINAGRO) - an autonomous national financial and credit institution under the Ministry of Agriculture - to be used to rediscount medium- and long-term loans to finance on-farm investments, agro-industry and related working capital. The $1.5 billion project will also help ensure the implementation of Caja Agraria's corporate plan aimed at restructuring, rationalizing and recapitalizing the institution. Caja Agraria, a government-owned institution, is Colombia's largest bank and dominant lender to agriculture. The project will help the government adjust the provision of agricultural credit to a market- based framework and facilitate the supply response of the sector to the new trade policy environment during a transitional period of two years. The project will support policy and institutional reforms in the agricultural financial sector, while meeting the financing gap for term lending during the transition. Through such measures, the project is expected to ensure that credit will be available to agriculture at a time of macroeconomic and trade policy reforms, and thereby boost the capacity for a supply response. The project will also play a central role in moving private banks more quickly towards voluntary agricultural lending, leverage FINAGRO's rediscounting towards term lending, reduce the role of FINAGRO in financing the sector, and restore Caja Agraria's viability as a specialized rural financial institution, primarily to serve small farmer credit needs. Total project cost is estimated to be $1,522 million, of which about $572 million is expected to be for medium- and long-term lending. The balance of cost will be provided by FINAGRO rediscounts ($591 million), financial intermediaries ($379 million) and the beneficiaries ($302 million). The $250 million World Bank loan is expected to be disbursed over seven years. The loan was made to FINAGRO with the guarantee of the Republic of Colombia. It is for 17 years, including five years of grace, with a variable interest rate, currently 7.43 percent, linked to the cost of the Bank's borrowings. It also carries an annual commitment charge of 0.25 percent on the undisbursed balances. NTI: Money figura arm expresmed in U.S. dollar equivalents