Colombia - Highway (Plan Vial I) Project

R E S T R I C T E D Report No. P 111 FIE COY This document was prepared for internal use in the Bank. In making it available to others, the Bank assumes no responsibility to them for the accuracy or completeness of the information contained herein. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATIONS of the PRESIDENT to the EXECUTIVE DIRECTORS on a PROPOSED LOAN to the REPUBLIC OF COLOMBIA for a HIGHWAY PROJECT in COLOMBIA May 31, 1956  IiIT]RI.A TIO'L RXu: FOR hL.CC<7iThUTIO> iXND DEVELOPR"DIT RfiEPORT IND ' IA E!J> iT DL?I0,J' TSUP TIE -LrIDTUT T TIE TL-TCJ TIVER I ;R7YPi CL LRCL7O,',. P Ln;J T1 T'HT; '.L C 10Oif1T h 1. I subm.,it tlhe following report and reco.mmendations on a proposed loan of 16: 51 -illion or its equivalent in other currencies to the Republic of Colombia to finance a 'hif.ghway construction and reconstruction oroject. P..`T I - HISTO3II.'AL 2. The Bank's General Surveyi Uissio TtPhich visited Colombia in l949 found that a bettor highwwy network wJas of boasic _rnoortace to furtner econoinic development and strong,ly recoxmmended the improvement of the major highways. The country's roacts were then in serious cdisrepoJdr and many were imp,-ssabI.e following periods of particularly heavy rains. Therefore, in A-pril 1951, tWhe Bank mlrade a loan of ,16.5 million for rehabilitation of some 3,000 kiloneters of Colorqbia's principal highw,ays. This work of an emergency nature was undertaken in late 1951 by five experienced foreign firms (later reduced to four) con-tracted by the 2.ixiistry of Public '.orks. 3. As experience wa,es gai ned with local construction problems, it was found advis.,ble fro.m a teciinical point of view to pave somne 82ea of the roads, instead of the 15% origin a'lly plantned. Also, as the work orogressed and deta-led plans were developed, additional eouipment was found necessary to handle tihe amrount of earth-moving Lnvol-ved. The Banik therefore made a second loan, in the amount of ";l14.35 iiillion in September 1953, to assist the Program. The loan Jicluded q3.1 miillion for equipment to be used in connection iwith thie P;inistryls exC?an.led maintenance program for the national highw,;ay sys-tem. Thle maintenance o fraa formed an inopotant addition -to thie revised oroject. 4. As the roads were improved, t:-affic quickly developed beyond exoectations and th e Pin.istry -wias forced to reise the earlier plans in order to provide for roads of hli<ner standards -which wiould be more capable of handling heavier traffic. By Imid-1955 these plans were completed to a point where it iwas possible to detenmine the amounrt of additional funds which were required to co!mplete the croject to the revised standards. The re- habilitation program as revw-sed in 1953 was estir'mated to cost sore 275 million pesos, including the )eso eluivalent of the ';16.5 rillion loan grented in -April 1951 -nd the ?14.35 million loan granted in September 1953. The cost of the final program as now agreed upon is expected to total about 535 million pesos, including the peso equivalent of the `47.4 maillion in foreign exchange (113.5 million pesos) to be covered by the two earlier loans from the Bank and the proposed loan.  5. Bank consideration of a thIrd lorn to hel n meothe foreign ex"change costs of the oro-frn_1 .s it hlad evolved w.Jas lie'd in abeyance pending the completion of discussions wiLich had ;er-an n July 1955 between thie Gove;nnmlent n,d the B1ankc corcoruin -ng C olor,bi et s invest.ient and ext,erral borrow..-,ing orogram. The Benk of' the Eepublic bherefore advenced h,6.3 million to the Ninistry of Public J;r.s to enable piogress to continue in -thle interval. . As the Executive Directors have already been iniormed, azsuraences haJe recently been received regarcd.ng the Colormbian Government's economic and filancial policies mad intentions wLhichi are considored by the Manage- r,,ent as adeqluate to justify resruming the orocessing of Colombian loan applications. The twvo loans wlhich I propose for imniediate consideeration are this one and the '13 million project of the Bo:G>ota Power Company, on Which we expect to corimence negotiations in the near hiture. 60 Since a short tine after the inaugurition of work on the project, tile Baunk has had a highw!aPy en-incer stationed in ColomLbia to advise and assist the Nilistxy of Public orsL and to report to the B