Announcement of Colombia Receives Eighty Million for Development Finance Companies on March 18, 1976

Ii •world Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A. • Telephone: (202) 393-6360 BANK NEWS RELEASE NO. 76/23 MARCH 18, 1976 COLOMBIA RECEIVES $80 MILLION FOR DEVELOPMENT FINANCE COMPANIES Industrial development in Colombia will be assisted by a loan of $80 million from the World Bank. The proceeds of the loan to the Banco de la Republica, Colombia's central bank, will be re-lent to development finance companies (financieras) for investments in productive private enterprises -- mainly in the industrial iector. The Inter-American Development Bank is making a parallel loan of $30 million toward the project. • Industry, which now accounts for one-fifth of Colombia's GDP, has been a leading growth sector. The growth of industrial output, averaging about 9% annually since 1967, consistently exceeded GDP growth of 7% a year. Manufactured goods exports rose from $58 million in 1968 to $380 million in 1974. With limited prospects for further efficient import substitution, exports represent an increasingly important factor in the future growth of industrial output and employment. The project being assisted by the Bank will provide urgently needed investment financing for a broad cross section of Colombian industry, with preference for export- oriented and industrial decentralization projects. Since 1966, five World Bank loans totaling $162.5 million have been made to Banco de la Republica for re-lending to the financieras -- Colombiana, Nacional, Valle, Norte, Caldas, Occidente and Santander. These financieras are now the most important institutional source of term credit for private industry. Their operations have made an important contribution to the rapid growth of industrial output and employment in recent years. The seven financieras now provide about 12% of the financing for industrial • investment, besides offering seed capital for new ventures and fostering more efficient resource allocation through their role in project preparation and evaluation. (More) Note: Money figures are expressed in US dollar equivalents.  - 2 - The World Bank has just completed a study of projects financed by the financieras under previous Bank loans. financieras had assisted sound investments. The study demonstratea that the The projects funded by the • financieras had favorable economic and financial rates of return and were relatively labor intensive. The study covered a representative sample of 29 financiera-funded projects. The sample showed average economic and financial rates of return of 32% and 18% respectively. The average cost of investment per job created was around $7,000. These projects appeared to be progressive in income distribution terms since the Government, through the tax mechanism, received by far the largest share of net economic benefits from the projects. The project comprises the financing of the foreign exchange component of the investment projects of productive enterprises in the private sector, principally manufacturing firms; upgrading or adaptation of technology by the firms; and equity investments by the financieras in new enterprises to be established outside Colombia's present major industrial centers. The World Bank loan to the Banco de la Republica will be for a term of • 17 years, including 3 years of grace. It will carry interest at 8-1/2% per year. It will be repaid according to a fixed scheduled based on the Bank 1 s projection of the expected aggregate of the amortization schedules of the individual sub-loans to be made. - 0 - •