Announcement of Largest World Bank Loan to Colombia will Assist Industrial Development on May 29, 1980

FOR IMMEDl,\ TE RELEASE • World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.• Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 80/107 May 29, 1980 LARGEST WORLD BANK LOAN TO COLOMBIA WILL ASSIST INDUSTRIAL DEVELOPMENT The World Bank has approved a loan of $150 million to support an industrial development project in Colombia. This is the largest World Bank loan to Colombia in 30 years of operations. It will help finance nearly 300 subprojects in a wide range of enterprises and will expand productive capacity in the industrial sector. The loan will be the eighth made for industrial development in Colombia, with private development finance companies acting as intermediaries. It will raise to $492.5 million the Bank's total lending to Colombia's development finance companies since 1966. The loan will be made to Banco de la Rep6blica, Colombia's Central Bank, for re-lending to the development finance companies. The loan is expected to support the government's efforts to promote exports, decentralize industry, and expand medium-size and small private enterprises. It also aims at better capitalization of industry, improved technology, and containment of industrial pollution. It will also strengthen the capability of Banco de la RepGblica to review projects and exercise supervision, and help the development finance companies to continue operating as sound and effective long-and medium-term lending institutions . • About 85% of the loan amount will be used by the development finance companies to make subloans for industrial investment, 10% to invest in equity, and 5% to finance technology development and pollution control. It is expected that about 300 subloans and equity investments will be made to finance projects involving a capital investment of abotit $485 million. A large part of this amount is to be provided by the development finance companies from their own resources and through borrowing in the domestic and foreign capital markets. Among the industries financed in the past by the development finance companies, under Bank loans to Colombia,were textile, food and beverage, chemicals, non-metallic minerals, and paper and printing enterprises. The loan will help to fill a critical gap in the available financing for expanding the sector's productive capacity, which in recent years has become the most important factor restricting industrial growth. The project is expected to generate between 11,000 and 12,000 direct jobs, with additional indirect employment equal to half those figures. In making subloans, Banco de la Republica will grant preferential treatment to medium and small enterprises (with total assets not exceeding $3.3 million). The projects assisted by the loan are expected to generate net export earnings of about $900 million during the first five years of operation. Eight development finance companies, or financieras, will participate in the loan: Colombiana of Bogota, Nacional and Aliadas of Medellin, Caldas of Manizales, Valle • of Cali, Norte of Barranquilla, Occidente of Pereira, and Santander of Bucaramanga . The $150 million Bank loan to 8anco de la Republica has the guarantee of the Republic of Colombia. It has a term of 17 years, including four years of grace, with interest at 8.25% per annum. NOTE: Money figures are expiessed in U.S. dollar equivalents.