Colombia - Irrigation Rehabilitation Project

Document of The World Bank FILE COPY FOR OFFICIAL USE ONLY Report No. P-3007-CO REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE INSTITUTO COLOMBIANO DE HIDROLOGIA, METEOROLOGIA Y ADECUACION DE TIERRAS (HIMAT) WITH THE GUARANTEE OF THE REPUBLIC OF COLOMBIA FOR A FIRST IRRIGATION REHABILITATION PROJECT April 29, 1981 This document has a restricted distribution their official duties. Its contents may not CURRENCY EQUIVALENTS Average Calendar 1980 Exchange Rate Effective February 2, 1981 US$1.00 = Col$47.283 US$1.00 = Col$51.45 Col$1.00 = US$0.02115 Col$1.00 = US$0.01944 WEIGHTS AND MEASURES Metric System GLOSSARY OF ACRONYMS CAJA - Caja De Credito Agrario Industrial y Minero CIDA - Canadian International Development Agency DRI - National Integrated Rural Development Program FAO-CP - World Bank Food and Agriculture Organization Cooperative Program FEDEARROZ - Federation of Rice Growers FFAP - Fondo Financiero Agropecuario HIMAT - Instituto Colombiano de Hidrologia, Meteorologia y Adecuacion de Tierras ICA - Instituto Colombiano Agropecuario IDB - Inter-American Development Bank INCORA - Agarian Reform Institute O & M - Operations and Maintenance Expenditures OPSA - Agricultural Sector Planning Office (Ministry of Agriculture) PIN - National Integration Plan R.U.T. - Roldanillo, La Union and Toro Irrigation District USAID - United States Agency for International Development FISCAL YEAR January 1 to December 31 FOR OFFICIAL USE ONLY COLOMBIA FIRST IRRIGATION REHABILITATION PROJECT LOAN AND PROJECT SUMMARY Borrower: Instituto Colombiano de Hidrologia, Meteorologia y Adecuacion de Tierras (HIMAT) Guarantor: Republic of Colombia Amount: US$37 million equivalent Terms: Repayment in 17 years, including four years of grace at 9.6% interest per annum. Project Description: The project would rehabilitate six irrigation and two drainage districts covering about 47,000 ha, includ- ing about 11,300 ha of newly equipped land. Maintenance would be improved and obsolete equipment for operation and maintenance would be replaced. Technical assistance would be provided to small farmers and lands in rice districts would be levelled to save water, reduce produc- tion costs and increase cropping intensity. The project would also strengthen HIMAT's capacity to appraise and supervise irrigation/drainage projects and train benefi- ciaries to manage their own irrigation systems. It is expected that the project would benefit about 4,700 farm families, including nearly 1,500 land reform bene- ficiaries. The major risk is that beneficiaries would be reluctant to adopt technological changes including land leveling, thus delaying or reducing project benefits. This risk, however, is relatively small, and training, technical assistance, access to credit and increased water charges are all expected to encourage farmers to adopt improved farming and irrigation practices. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. - 11 - Estimated Cost: Local Foreign Total -----(US$ Million Equivalent)---- Civil Works 11.5 8.2 19.7 Equipment 1.0 8.9 9.9 Medium-term Investment 9.0 4.4 13.4 Incremental Working Capital 8.9 3.8 12.7 Development Services 2.1 0.5 2.6 Engineering 4.0 0.4 4.4 Incremental 0 & M 2.3 1.6 3.9 Preparation Phase II 0.9 0.4 1.3 Total Base Cost 39.7 28.2 67.9 Physical Contingencies 1.7 1.2 2.9 Price Contingencies 7.9 7.6 15.5 Total Project Cost 1/ 49.3 37.0 86.3 Financing Plan: Local Foreign Total -----(US$ Million Equivalent)---- Government 17.4 - 17.4 Participating Banks 17.4 - 17.4 IBRD - 37.0 37.0 Beneficiaries 14.5 - 14.5 Total 49.3 37.0 86.3 Estimated Disbursements: Bank Fiscal Year 1982 1983 1984 1985 1986 1987 1988 -- (US$ Million Equivalent)-------- Annual 4.5 5.5 8.5 7.4 3.7 3.7 3.7 Cumulative 4.5 10.0 18.5 25.9 29.6 33.3 37.0 Rate of Return: Above 50% Appraisal Report: Report No. 3356-COa, dated April 29, 1981 1/ HIMAT is exempt from custom duties and taxes. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO INSTITUTO COLOMBIANO DE HIDROLOGIA, METEOROLOGIA Y ADECUACION DE TIERRAS (HIMAT) FOR A FIRST IRRIGATION REHABILITATION PROJECT 1. I submit the following report and recommendation on a proposed loan to the Instituto Colombiano de Hidrologia, Meteorologia y Adecuacion de Tierras (HIMAT) with the guarantee of the Republic of Colombia, for the equivalent of US$37 million to help finance a First Irrigation Rehabilitation Project. The loan would have a term of 17 years including four years of grace, with interest at 9.6% per annum. PART I - THE ECONOMY 1/ 2. An Economic Report on Colombia (3222-CO) was distributed to the Executive Directors in March 1981. This section on the economy reflects the major findings of that report. Country data sheets are presented in Annex I. Background 3. The Colombian economy made considerable progress over the past quarter century. From a largely rural and agricultural base in the 1950s, it evolved to a more integrated urban-industrial and services orientation. The productive structure of the economy was broadened appreciably and output in both the agricultural and industrial sectors became more diversified. Public sector investment and output came to play a greater role in the economy, primarily as a result of increased activity on the part of decentralized agencies and public enterprises. Also, greater reliance on foreign trade allowed the external sector of the economy to grow, with non-coffee exports, particularly exports of manufactured goods, expanding rapidly and the range of products sold abroad widening considerably. The growing urban-industrial coloration of economic activity and a rapid expansion of surplus labor in rural areas gave rise to rapid rural-urban migration as rural labor sought to take advantage of higher productivity and better paying jobs in the major metropolitan areas. Financial and capital markets evolved pari-passu with the growing financial needs of the industrial and services sectors of the economy, and Colombia has become an active participant in international capital markets. The foreign exchange shortage, from which the country suffered for many years because of sharp fluctuations in coffee prices, has moderated and the economy has grown more resilient to external shocks as a result of the structural changes that have occurred. 4. Real GDP per capita rose by 2.4% p.a. on average during the 1950-79 period, with each succeeding decade registering greater gains in per capita income. This was the result of lower population growth, combined with more rapid GDP growth. Population growth, which had remained in the 3.0% to 1/ Substantially unchanged from report for the Rural Roads Project (No. P-2992-CO, March 12, 1981). - 2 - 3.5% range during the 1950s and early 1960s, declined dramatically after 1965 as a consequence of a sharp fall in the fertility rate. Greater economic and educational opportunities for women, rapid rural/urban migration, rising per capita income and increased effectiveness of family planning programs contributed to the decline in fertility. Colombia's population is currently growing at an annual rate of 2.1%. As a result of the high proportion of women now entering childbearing years, this rate of population growth is expected to continue until the early 1990s. 5. The combination of rising per capita income and expanded public services over the past quarter century brought about a substantial improvement in the welfare of the poorest income groups in Colombia, in both absolute and relative terms. As a result of improved diets and better health care, the crude death rate fell by about 50% and life expectancy rose from 50 years to 62 years. The child mortality rate declined from 17 per thousand in the early 1960s to 9 per thousand in the mid 1970s. Infant mortality, one of the best indicators of welfare, fell to 98 per thousand in the mid-1970s, from about 124 per thousand in the early 1950s. School enrollment ratios have increased substantially at all grade levels since 1960, and by the late 1970s, 91% of urban children aged 7 to 14 were enrolled in school. The poorest income groups, including those in rural areas, have experienced the greatest increases in electricity and water services in recent years and have benefited more than the average of the population from services of the national health system. In spite of this progress, Colombia remains largely underdeveloped, with a relatively small modern sector superimposed on a broad, traditional and economically poor base. Development has been concentrated in relatively few areas of the country, public services are not available to a large proportion of the rural and urban populations, unemployment and underemployment are relatively high, and income and wealth distributions are skewed. The coverage of health care is still deficient and adequate housing is not available to a substantial proportion of the population. Rapid migration to the three major metropolitan areas has created urban development problems, with attendant social difficulties. Moreover, in spite of the steady increase in per capita income over the past quarter century, about one-third of the population enjoys today only a minimum subsistance standard of living. 6. In large part, the achievements of the past twenty five years were the result of Government efforts to stimulate the productive sectors, provide the required economic and social infrastructure and establish an effective institutional base in the economy. In the 1950s and early 1960s development policy favored import substitution supported by high tariff protection and the provision of economic infrastructure by the public sector. It was during this period that the country's major communication and trans- portation networks were completed and the transformation to semi-industrial economic structure began in earnest. By the mid-1960s the prospects for further import substitution were substantially diminished and the country was in the midst of a period of great economic uncertainty, with economic activity and the balance of payments heavily influenced by developments in the world coffee market. In 1967 the authorities adopted an outward- looking development strategy. Export promotion policies, including periodic exchange rate devaluations and export tax rebates, were introduced and the - 3 - authorities began lowering tariffs and freeing capital markets from controls as means of raising efficiency and increasing the competitiveness of Colombian goods in external markets. These measures were highly successful in relieving the foreign exchange constraint and stimulating growth. However, by the mid-1970s the economy was once again experiencing difficulties caused primarily by the world recession and by excessive Central Bank financing of domestic budget deficits. Recent Economic Developments 7. In late 1974, the Government introduced a wide range of fiscal and monetary policies designed to correct the structural and policy weaknesses pre- vailing in the economy at that time. Before these reforms were fully effective, the economy was subjected to strong inflationary pressures arising from a sharp increase in world coffee prices. The increased receipts from coffee exports, together with some official surrender of foreign exchange from illegal exports, caused a turnabout in the balance of payments. Incomes rose rapidly and stimu- lated aggregated demand; inflation accelerated. Economic growth also accele- rated and unemployment fell substantially, both in rural and urban areas. Largely as a consequence of increased coffee tax revenues, the public finances generated surpluses averaging about 5.8% of GDP during the 1976-79 period, and by the end of 1979, net official international reserves had risen to about US$4.1 billion, equivalent to nearly 12 months imports of goods and non-factor services. 8. While beneficial in many respects, the foreign exchange boom has had a somewhat negative impact on the evolution of the Colombian economy, largely as a consequence of the need for measures to stabilize the economy. Public investment was curbed, thereby delaying some badly needed additions to economic and social infrastructure. The rate of currency devaluation was lowered and the conversion of export receipts into pesos was delayed to moderate the growth of domestic demand, with some adverse effects on export expansion and diversification. Also, the Government was compelled to maintain high reserve requirements and expand controls over credit (including interest rate ceilings, directed credit, portfolio requirements, etc.), thereby reducing the financing available to the private sector via the official capital market. These controls encouraged the development of a flourishing extrabank market in which credit was available albeit at high interest rates and for short maturities. 9. The stabilization measures were virtually unchanged from early 1977 through 1979 and were moderately successful in restraining aggregate demand growth; thus relatively high inflation persisted. In 1979, consumer prices rose by nearly 30%. Nevertheless, real GDP growth remained strong, rising by about 5% for the year, led by a good performance in services, manu- facturing and agriculture. However, construction and mining activities declined. In response to the increasing stabilizing effects on aggregate demand and the troublesome financial market distortions caused by inflation and the extended period of monetary restraint, the authorities began in late 1979 to adjust the stabilization program. The rate of peso devaluation was advanced to increase export incentives and reduce borrowing abroad, and in early 1980, credit restraints were relaxed by lowering reserve requirements. At the same time, interest rates on time deposits captured by commercial banks and development finance companies - and on the lending therefrom - were freed from controls. To offset the inflationary effects of these measures the authorities further liberalized import payments and adopted the policy, supported by a new issue of short-term certificates, of not expanding the subsidized selective credit operations of the Central Bank in excess of the resources captured from private savings for their financing. The authorities also increased the surveillance and control of the illegal export trade. 10. The effects of the above measures were not immediately noticeable. Industrial sector growth slowed during 1980, non-coffee exports weakened and construction activity, which had fallen sharply in 1979, continued to slacken. Agricultural output was affected by drought, high incidence of disease and rising fertilizer costs. Real GDP growth declined to 4% in 1980 and unemploy- ment started to creep up. With world coffee prices at relatively high levels for most of the year, in addition to rising domestic gold production and short-term capital inflows because of high domestic interest rates, Colombia's balance of payments in 1980 is estimated to have registered an over-all surplus in the US$1,300 million range. This would maintain net official reserves at about 12 months imports of goods and non-factor services. Colombia's consolidated public finances are estimated to have recorded a surplus in 1980 for the fourth consecutive year, again mainly because of increased earnings on foreign exchange holdings and large receipts from the coffee tax. Inflation continued to be a problem in 1980, however, despite the slowdown in economic activity, with consumer prices increasing by about 26% for the year. The major challenge facing the Colombian authorities over the next few years will be to bring about a reduction in the inflation rate, while at the same time raising investment to the level required for private sector expansion. Development Strategy 11. Achievement in this decade of the Government's objectives of increased productivity and maximum economic growth, increased employment, improved distribution of income and greater welfare for all Colombians will require a major effort to remove from the economy the constraints of inadequate economic and social infrastructure and insufficient demand. Infrastructure needs are most pressing in the energy and transportation sectors. 12. The Government's strategy for accomplishing its development objec- tives are set forth in the recently promulgated Plan de Integracion Nacional (PIN). This strategy continues the previous emphasis on export promotion as a means of supplementing domestic demand and assuring balance of payments stability, and on policy measures, including further import liberalization, designed to increase economic efficiency and raise institutional capacity. It proposes a large increase in public investment, giving high priority to energy projects and to the provision of transport infrastructure. Economic decentralization, regional automomy and the uniting of regional growth centers through improved transport, communication and financial links are directed towards creating an integrated national market, a strategic goal of the PIN. The Plan also places emphasis on the promotion of both small scale and commercial agriculture as a means of diversifying and increasing exports, assuring adequate domestic food supplies, holding down inflation and contribut- ing to the Government's nutrition and welfare goals. Industrial policy - 5 - objectives are to provide an environment of certainty, along with adequate credit and infrastructure, so that entrepreneurs are encouraged to invest and expand output. Because of its benefits in opening foreign markets, creating employment and bringing in new technology, private foreign investment is to be encouraged. The Government's approach to helping the poor takes on a new orientation in the PIN. Its efforts are focussed upon improving efficiency in the use of resources and strengthening the social service institutions. Programs in the health and education sectors are to be better focussed and integrated, and selected low income and economically disadvantaged groups, such as workers in the informal sector, children and unemployed youth, are singled out for special attention. Combined with extensions of the Integrated Rural Development (DRI) and National Nutrition (PAN) projects, the new direc- tions given to social programs are expected to raise significantly the welfare of low income groups in Colombia. 13. While the PIN provides a good analysis of the development issues facing the country and sets forth the general guidelines for policies and programs to resolve these issues, there are two important aspects of bringing off the development strategy that are expected to receive increasing attention from the authorities in coming months. The first involves a required deepening of the sector analyses in order to improve coordination in planning and executing sector strategies, and the second has to do with matters related to financing the PIN. Given the large investment required to carry out the PIN strategy, inadequate planning and coordination among sectors or insufficient domestic resource mobilization would be likely to result in substantial resource mis- allocation and to delay execution of the strategy. It is essential that this be avoided. The two most important sectors where additional work is urgently required are energy and transportation. 14. Colombia became a net oil importer in 1976 and by 1986 petroleum imports are projected to absorb over 30% of total merchandise exports. In the absence of rapid energy development, energy shortages will become a major constraint on growth later in this decade. Resolution of the energy problem depends on the country's success in developing its abundant domestic energy resources -- hydroelectricity, coal and natural gas -- and also upon increasing petroleum exploration and development. The strategy for doing this will require energy pricing policies that rationalize consumption with energy resource availabilities, a least cost program of investments, sufficient domestic and external financing for these investments, strengthened sector institutions, improved program execution capability and rapid carrying out of investments. Although planning and policymaking have improved substantially in many energy sector institutions in recent years, overall planning and coordination in the sector are still weak. A study initiated in 1980 by the National Planning Department is expected to provide the basis for improvements in sector-wide planning and policy-making, and recent pricing decisions have gone a considerable way towards providing the correct signals for regulating consumption and encouraging production. The prices paid to producers (primarily foreign companies) for "incremental" and "new" crude have been raised to levels which should provide adequate production incentives, and the retail prices of petroleum products, while still below international levels, have been increased substantially in excess of world oil price rises. The Govern- ment has committed itself to raise energy prices to equivalent international - 6 - levels as rapidly as politically and economically possible, and a least cost energy investment program is being prepared. Between October 1978 and October 1980, the price of regular gasoline (less than 80 octane) was raised by 125%, from US$0.40 to US$0.90 per gallon. 15. Colombia's high transportation costs and inadequate service could become a constraint on economic growth, particularly that resulting from development of the country's vast coal reserves and from agriculture. The State Railway is in poor condition and the road network needs maintenance, rehabilitation. The authorities have begun to take steps to improve the country's infrastructure and PIN assigns an important share of future invest- ments to the sector. There is, however, a need for more efficient planning to ensure that only least cost investments are carried out and that a sound policy framework for the sector is established to deal effectively with the problems of intermodal coordination and energy conservation in line with the Government's energy objectives. Investment and Its Financing 16. A substantial increase and redirection of public sector investment will be required in the next several years to carry out the development strategy outlined in the PIN. Over the 1980-85 period, such investment is expected to increase by about 12% p.a. in real terms. The energy, transpor- tation and industrial (including mining) sectors are expected to account for the bulk (60%) of this investment; however, sizeable real increases in invest- ment are also expected in the nutrition and health, small scale agriculture and industry, water and sewerage, and education sectors. Overall, public fixed investment is projected to average 9.2% of GDP during the 1980-85 period, and is expected to total Col$1,716 billion (US$22,260 million). Private investment will have to increase also during this period to provide the goods and services required by the expanding economy. 17. This increase in investment will demand a major resource mobilization effort on the part of Colombia's public sector. The buoyancy of the tax system (excluding coffee tax revenues and receipts from earnings on foreign exchange holdings), which has declined in recent years, will have to be increased through new taxes and better tax administration and the charges levied for public services will have to be raised substantially in real terms. Since this effort is expected to coincide with increased private sector demand for investment resources, the importance of measures to expand domestic savings cannot be over-stressed. The recent capital market liberalization should encourage savings. A significant increase in voluntary private savings is not likely, however, as long as inflation remains high. Consequently, stabilization remains a sine qua non for the country's future growth and development. Growth and Balance of Payments Prospects 18. Given the country's strong resource base and sound economic manage- ment, Colombia's growth prospects for this decade are good and significant advances in economic welfare are anticipated. The urgent need to relieve the pressure on aggregate demand arising from the recent growth of foreign exchange earnings and the necessity to increase rapidly imports to develop the country's resource potential and restore higher economic growth requires a turnaround in the balance of payments from a current account surplus of US$596 million -7 - (2.2% of GDP) registered in 1979 to a current account deficit projected to average US$1,150 million, over the 1980-85 period, equivalent to 2.8% of GDP. By the end of this period, net official international reserves would have fallen to a level above four months of imports of goods and services (a level which is adequate for Colombia) without prejudice to the country's credit- worthiness. This should be sufficient to support an average growth of real GDP of 5.5% during this period. Beyond 1985, the current account deficit should improve as a result of increasing export proceeds (particularly coal) and a levelling-off of imports. The current account deficit would fall to 2% of GDP in 1987 and to 1% by 1990. It is expected, therefore, that the economy will be able to achieve real GDP growth averaging about 5.5% per annum during the 1980-85 period. To reach this level of growth, gross domestic investment will have to expand to about 24% of GDP, up from 18% in the early 1970s and 21% in recent years, and to avoid too large an increase in foreign indebted- ness, gross national savings would need to average about 21% of GDP. This is about the same level of savings achieved in 1978-79, when the terms-of-trade gains from the coffee boom raised the savings coefficient, but above the level achieved in the early 1970s. 19. Gross external capital requirements (net of reserve drawdown) are projected to total US$10.0 billion in current prices for the 1980-85 period, for an annual average requirement of US$1,670 million. About 31% of this amount will be required annually for debt amortization and the rest to cover current account deficits. Multilateral and bilateral agencies are expected to provide 40% of these requirements, 48% is expected to come from foreign suppliers and financial institutions and the balance should come from private foreign investment. At the end of 1979, Colombia's public and publicly guaranteed external debt disbursed and outstanding amounted to US$3.4 billion, equivalent to 12% of GDP. The Bank/IDA share of this external debt was 25%. Reflecting the recently increased lending by the Bank and the decline by bilateral sources, this share is expected to increase to about 30% in 1983, before falling to about 25% in 1987. The debt service ratio at end of 1979 was 12% and is expected to climb to 17% by 1985, peak at about 18% in the early 1990s and then decline gradually. The World Bank's share in public debt service is expected to rise to about 24% in 1985 from about 13% in 1979. With continued sound economic and financial management, Colombia is expected to maintain its creditworthiness through and beyond the 1980-1990 period. PART II - BANK GROUP OPERATIONS IN COLOMBIA 20. The proposed loan, the 91st to be made to Colombia, would bring the total amount of Bank loans to Colombia to US$2,860.8 million (net of cancel- lations). Of this amount the Bank held, as of December 31, 1980, US$2,184.4 million; IDA made one credit of US$19.5 million for highways in 1961. Disburse- ments have been completed on 54 loans and the IDA credit. During 1972-77 disbursements averaged US$86 million equivalent per year, then declined slightly to US$82 million in 1978 but increased sharply to US$138 million in 1979 and to US$215 million in 1980. The improved performance of social sector institutions in the execution of Bank-financed projects, the gradual contain- ment of inflationary pressures which should allow relaxation of fiscal -8- restraint and the recent Bank lending for infrastructure projects, all point to higher levels of disbursements in the future. IFC has made investments and underwriting commitments of US$63.2 million in 25 enterprises and, as of December 31, 1980, it held US$17.6 million. Annex II contains a summary statement of Bank loans, the IDA credit and IFC investments as of December 31, 1980. The Annex also contains summaries on the execution of the 34 ongoing projects. 21. In response to the priority objectives established by successive Governments (self-sustained economic growth, increased employment and improved income distribution), since 1966, Bank lending to Colombia has become increas- ingly diversified and has emphasized production-oriented programs and activities which provide social as well as economic benefits. All three loans for education have been made during this period, and so have 12 of the 14 loans for industry, 11 of the 13 agricultural loans, one loan for a nutrition project, two loans for urban development projects and all nine loans for water supply and sewerage. During the same period, 17 loans were made in the power and transport sectors, while before 1966, 22 out of a total of 25 loans were made to these sectors. 22. Bank lending to Colombia in FY80 consisted of two loans for power generation and distribution projects, and one each for a nickel project, telecommunications, and credit to small-scale industry and to development finance companies for medium- and large-scale industry, totalling US$518.0 million equivalent. In addition to the loan proposed in this report, the FY81 program includes loans for railways, village electrification and power gen- eration and the already approved loans for hydropower development and rural roads. Work is also underway on projects for petroleum development and mining, watershed management, rural development, ports, highways, oil refining, electric power, agro-industries, fertilizer, water supply and sewerage, basic education and urban transport for possible consideration by the Executive Directors during the next two years. 23. Proposed Bank lending conforms closely with the Government's development strategy as outlined in the PIN (paragraphs 12 through 15). To help Colombia develop domestic sources of energy, a sizeable part of the proposed lending would be for hydropower. The Bank intends to assist the development of coal mines which hold potential in helping Colombia meet part of its energy requirements and in diversifying exports. In support of the Government's objective to increase the supply and the recovery of domestic petroleum, the Bank proposes to finance further petroleum projects and, for the first time, become involved in projects which promote the efficient processing of hydrocarbons. Bank financing in the energy sector would also assist in strengthening major institutions and in mobilizing external finance as some of the projects would require substantial co-financing. Other future loans would finance agriculture and industry to support the Government in its efforts to raise overall productivity, income and employment, and to increase and diversify exports. Closely related to those objectives would be the proposed Bank lending for transport infrastructure. In this context, the Bank is assisting the Government in preparing a highway paving and rehabilitation program in support of the increasing interregional flow of goods and services. - 9 - Other loans under preparation for ports and railroads are aimed at helping Colombia handle larger volumes of non-traditional exports and the imported inputs on which the modern sector of its economy relies for expansion. Finally, several loans are being prepared in support of the Government's efforts to help the lowest 50% of the Colombian population. Lending for rural electrification, rural development, water supply and sewerage, basic education, irrigation and urban transport projects is principally designed to improve the standard of living of the poor. 24. The operations of external lenders in Colombia are shown in Annex 1. While IBRD, IDB and bilateral sources provided about 75% of total external financing to Colombia in the 1961-72 period, their share has decreased since then to approximately 50% for the 1976-79 period and it is expected that during the period 1980-85 will decline further to about 35% of external capital requirements. Like the Bank, IDB has given increased emphasis to social projects and has financed projects in low cost housing, urban and rural development, agrarian reform, university education, water supply, rural electrification and land erosion control. In the future, it proposes to assist Colombia to develop sources of domestic energy and to expand the activity of the productive sectors to help generate increased employment. USAID has supported programs in education, urban development and small farm development, but is phasing out its aid program in Colombia. The Governments of Canada, the Federal Republic of Germany and the Netherlands have also provided concessional financing for social and regional integration projects. PART III - THE AGRICULTURE SECTOR AND IRRIGATION Characteristics 25. Agriculture is a key sector of the Colombian economy from several points of view. It is important in terms of its participation in GDP (29%) and employment (30%) and its contribution to exports (two-thirds of merchan- dise exports in 1978 and 1979). Colombia is self-sufficient in practically all basic foodstuffs, the major exception being wheat. Climatic conditions are unstable in the highlands, with periods of drought alternating with periods of excessive rainfall. Consequently, agricultural production is subject to wide swings. The record of long-term growth in agriculture, however, is good (4.6% per annum in the 1970s), driven especially by increased production of commercial export crops (rice, coffee, bananas, sugar, tobacco, flowers and palm oil) which have benefitted from intensive research programs. 26. In 1978, the gross value of production amounted to about Col$266 billion (US$6.8 billion), of which about one-half was provided by crops, 37% by livestock, and the remainder by forestry, fishing and hunting. Within the crop subsector, seven basic staples--rice, cassava, plantains, potatoes, maize, sugarcane for panela (non-centrifugal sugar) and beans--account for about 45% of the value of production with coffee's share amounting on average for another 30%. Most of the export crops are grown on large commercial farms, as is about half of the potato crop. The remaining five major staples are produced predominantly by small farmers. - 10 - Land Use and Distribution 27. Colombia'a land resources total 114 million hectares, of which an estimated 17 million are in pasture and nearly 50 million under forest. Of the remainder, just over a million hectares are under coffee and nearly four million are in other crops. The 860,000 farms which are of 10 ha or less amount to over 70% of Colombian farms but cover only 7% of the farm area. On the other hand, 80% of the land is farmed in the 4% of the units which are larger than 50 ha. Farms are far more evenly distributed for crops alone--26% of the land in units up to 10 ha and 44% in units over 50 ha. Livestock farms are generally large, with nearly 80% of the land in holdings of more than 100 ha and 50% in units of more than 500 ha. Seventy percent of the farms and 75% of the land is farmed directly or indirectly by its owner, the remainder being farmed wholly or in part by sharecroppers, renters and squatters. Institutional Framework and Credit 28. The formulation and execution of public sector agricultural policy and programs involve a sizeable number of institutions -- at latest count, 18 in all. The control center of the sector is the Ministry of Agriculture and within it, the Agricultural Sector Planning Office (OPSA), which has the responsibility for planning and coordinating sector activities. OPSA main- tains a close relationship with the agriculture and budget divisions of the National Planning Department, since they have to approve the sector's development plan and investment program. The Colombian Agricultural Insti- tute (ICA) is responsible for agricultural research and extension. ICA also works with other agencies, particularly credit institutions, that also provide technical assistance and extension to individual farmers. The Agricultural Marketing Institute (IDEMA) promotes the rational marketing of crops and intervenes where necessary, by procuring at home and abroad agri- cultural commodities to influence prices to the consumer and the producer. Other key agricultural institutions include: the Agrarian Reform Institute (INCORA), which carries out programs of land distribution and farm support; the Natural Resources Institute, (INDERENA), which is mainly responsible for conserving virgin land, river basins and national forests; and the Colombian Institute for Hydrology, Meteorology and Land Improvement (HIMAT), which is in charge of irrigation works and associated land improvements in addition to hydrology and meteorology (paragraphs 36 through 40). 29. Two principal sources, Caja Agraria (CAJA) and the Fondo Financiero Agropecuario (FFAP), account for the vast majority of the agricultural credit in Colombia. FFAP is a rediscount window of the Bank of the Republic (BOR), from which funds are on-lent by banking institutions to commercial farmers. FFAP's resources are obtained principally from low yielding bonds which banking institutions are required to hold in lieu of reserves. While FFAP provides more than half of the resources on-lent to agriculture, it supplies funds to less than 3% of the farms--principally medium- and large-scale enterprises. CAJA, with about 850 branches spread throughout the country, is the principal source of credit to the small farm sector. CAJA, a mixed public-private bank (89% Government owned) lends funds raised principally from savings deposits and FFAP rediscounts. In addition, there are other sources of agricultural credit such as the Banco Ganadero which finances - 11 - principally livestock; the Banco Cafetero which finances coffee and crop diversification; the Corporacion Financiera de Fomento Agropecuario y Exportaciones which lends principally for export agriculture and agro- processing; and INCORA which, through banking institutions, makes available credit to and reform beneficiaries. 30. Agricultural credit in Colombia is generally linked to technical assistance--without an approved plan by an authorized extension agent, a farmer is denied credit from the major channels. Interest rates are gen- erally lower for agriculture than for other productive sectors. For FFAP resources nominal interest rates are currently 21%, though effective rates are 24-26% as a result of additional charges and the collection of interest quarterly in advance. CAJA's rates average slightly lower, since a portion of its lending is directed to small-scale farmers at somewhat lower rates of interest. Since 1978, effective rates of interest for most agricultural credit have on average been slightly positive in real terms. Bank Role in the Sector 31. Bank lending for agriculture has focussed principally on supervised agricultural credit and support for irrigation/drainage and colonization projects which have involved some form of land distribution. Since 1966, the Bank has made 11 loans totalling US$250.6 million equivalent to Colombia for agriculture. Five have been for agricultural credit, two for colonization, three for irrigation/drainage and one to support the first stage of the National Integrated Rural Development Program (DRI). Bank efforts in agriculture have aimed at increasing agricultural production, and at strengthening public sector institutions concerned with agriculture. Most of the projects have focussed on increasing productivity, incomes and welfare of small farmers. The first irriga- tion and colonization projects, which were both area specific integrated rural development projects, have provided valuable experience to the Government for the development of DRI. The Bank played a major role in initiating this successful national program targeted at small farmers and has recently appraised a second stage of this program. DRI, with the support of the IDB and CIDA as well as the Bank is expected to benefit almost 150,000 small farms by 1987. Future Bank efforts in the sector would continue to concentrate on institution building, water resource management and on improving productivity, especially among small-scale farmers. Irrigation 32. Land under irrigation and/or drainage accounts for only about 600,000 ha or roughly 12% of Colombia's cultivated area. Irrigation/drainage areas are concentrated mainly along the Magdalena and Cauca Rivers in the central and coastal regions. While climatic conditions and, hence, the require- ments for irrigation, vary among areas, generally, irrigation is used to provide an extra crop during a prolonged dry season and to supplement rain during the remainder of the year. Drainage has been developed primarily in locations which previously remained flooded or swampy for large portions of the year. - 12 - 33. Irrigation developed rather slowly in Colombia, with a number of privately developed schemes for sugarcane and then cotton in the initial 40 years of this century. Public sector involvement commenced in the 1940s and was spurred in conjunction with the land reform program during the 1960s. Today, about 80% of irrigation occurs in schemes developed and managed by private farmers, the vast majority of whom are highly productive large-scale entrepreneurs. The public schemes by contrast have benefitted a variety of farms, the majority of which are small-scale (up to 5 ha). Land reform beneficiaries account for about one-third of the approximately 20,000 farmers in such districts. 34. Rice is by far the most important irrigated crop, accounting for more than 60% of the land under irrigation. From a highland, rain-fed small farm crop, rice production became an irrigated commercial operation--about 90% of rice production is now grown under irrigated conditions. Yields are high by any standards, averaging nationally five tons/ha/crop. Increased rice production was accompanied by a major change in consumption: between 1950-54 and 1970-74, rice consumption per capita doubled to about 50 kg per annum and has replaced corn as the major grain in the Colombian diet. Other irrigated crops include sugarcane, bananas, plantain, cotton, maize, sorghum, soybeans, vegetables, fruits, flowers and pasture. 35. Colombia possesses potential for expanding significantly its irrigation and for reclaiming seasonally flooded land with drainage. Pre- feasibility and feasibility studies have already been conducted for projects involving more than 200,000 ha and it is estimated that another two to three million hectares can be feasibly irrigated and/or drained. Although the PIN has noted the benefits of expanding the area under irrigation and has endorsed the use of credit channels to encourage development of private irrigation schemes, it places high priority on improving efficiency and rehabilitating existing publicly financed and managed irrigation districts. Some of the 20 public sector districts built since 1940 have never been fully completed and even those which are fairly efficient require improve- ment because they have been poorly maintained. The proposed project would support this objective by rehabilitating and improving maintenance in six irrigation and two drainage districts. The Borrower - HIMAT 36. Between 1962 and 1976, public sector irrigation and drainage investments were the responsibility of INCORA and carried out in conjunction with land reform. INCORA developed several irrigation/drainage schemes, but, as a result of declining political support for agrarian reform and INCORA, management and maintenance of the irrigation districts grew weak. Construction and rehabilitation programs were delayed; funds were not made available for equipment replacement; collections of water charges and payments for invest- ments were inadequate, and other agencies did not provide adequate supporting services, e.g., for credit and training. In addition, INCORA's efforts in irrigation were hindered by private farmers who viewed its staff suspiciously and feared that they would be forced to sell their land. - 13 - 37. In an effort to stimulate irrigation and to separate its develop- ment from that of land reform, the Government established HIMAT in 1976 to take charge of public sector activities in irrigation and drainage. INCORA's functions and personnel related to irrigation and drainage were shifted to HIMAT. Like INCORA, HIMAT is an autonomous public entity attached to the Ministry of Agriculture, with a Board of Directors composed largely of repre- sentatives of various public sector institutions. Its General Manager is appointed by the President of the Republic and he is supported by an adequate technical staff in various disciplines. 38. HIMAT has obtained approximately 83% of its revenues from Government transfers, with the rest emanating largely from water charges to farmers in the irrigation and drainage districts. On average, HIMAT's tariffs cover roughly one-half of the direct costs of operating and maintaining the dis- tricts. By project completion, this situation is expected to be changed; districts to be rehabilitated would pay for all operating and maintenance costs plus a portion if not all of the investment costs under the project. 39. Although the proposed loan would be the first to HIMAT, the entity has been participating in two on-going Bank projects. After some initial delay, HIMAT has performed satisfactorily in the Cordoba Agricultural Devel- opment Project (1163-CO), having managed efficiently civil works for drainage, flood protection, roads and bridges. The Second Atlantico Project (Loan 849-CO) encountered serious technical and social problems prior to HIMAT's creation and involvement. HIMAT, with Bank encouragement, is employing consultants to determine an appropriate engineering solution to the design errors made years ago. 40. In its short life, HIMAT has developed into a responsible technical agency. Perhaps HIMAT's major shortcoming is its concentration on day to day management of the irrigation areas to the exclusion of long term planning. Under the proposed project, therefore, steps would be taken to develop HIMAT's appraisal and supervisory capacity as well as the capability of users to manage their own districts, so that HIMAT can concentrate on planning and providing for an orderly expansion of irrigation. PART IV - THE PROJECT Background and Objectives 41. The project was prepared by HIMAT with the assistance of three FAO-CP missions. It was appraised in September/October 1980. Negotiations were held in Washington, D.C. in April 1981, with a Colombian delegation led by Messrs. Armando Olarte Reyes and Humberto Arias Pabon, Director of External Credit of the Ministry of Finance and General Manager of HIMAT, respectively. 42. The principal objective of the project is to prevent deterioration and prolong the useful life of existing physical infrastructure in six irriga- tion and two drainage districts covering 36,000 ha through a program of rehabilitation and improved maintenance. In addition, the project would maximize the use of existing investments and water by expanding the facilities - 14 - to a further 11,000 ha. The project also aims at: (a) promoting increased efficiency in the use of water and farm inputs, primarily through increased volumetric water charges and the introduction of basin irrigation for rice cultivation; (b) introducing improved crop and livestock farming practices and increasing yields; (c) strengthening HIMAT's capacity to appraise and supervise irrigation projects and to manage water; (d) encouraging the district farmers to assume increased responsibility for managing districts themselves; and (e) preparing a second phase project to rehabilitate additional irrigation districts. Project Description 43. The project provides for: (a) the design and construction of numerous small rehabilitation works in all of the eight districts; (b) the replacement of obsolete equipment for operation and main- tenance; (c) technical assistance, demonstration plots and credit for improving crop and livestock management practice and for rice basin cultivation; (d) training of technical personnel in water management and extension activities and representatives of user associations in management and accounting; and (e) consulting services for preparing feasibility studies, designing a second phase project, and initiating a monitoring and evaluation program. 44. The project is expected to be carried out over a five-year period. The vast majority of consulting services for engineering designs, agricultural technical assistance and preparation of the second phase project would be procured locally. About 9 man-months of foreign consulting would be contracted in specific engineering disciplines, monitoring and evaluation, and cattle improvement. Engineering designs for civil works to be carried out during the first year of execution have been largely completed. Since the works are small and dispersed, the remaining designs would be prepared gradually during the project period. Project Areas 45. The eight districts were chosen among 15 based on their state of readiness, estimated economic rate of return and urgency of rehabilitation. They are located in seven different departments (Putumayo, Huila, Tolima, Valle, Boyaca, Santander and Norte de Santander), vary significantly in altitude, soil and climate. Four of the districts (Rio Recio, El Juncal and neighboring San Alfonso and Zulia) are rice growing areas, while the two drainage districts (Sibundoy in the extreme South and Lebrija in the North- Central region) have major livestock components and miscellaneous rain fed - 15 - crops. Soybeans, cotton, sorghum and grapes are important crops in R.U.T. (Roldanillo, La Union and Toro Irrigation District); Samaca is a major producer of vegetables along with wheat and potatoes. In total, the districts cover 76,000 ha, of which 47,000 ha would be fully equipped for irrigation and/or drainage at project completion. 46. The distribution of land also varies substantially among districts: in Samaca, 70% of the land is made up of plots of less than 10 ha, while in Rio Recio over 80% of the land is held by farmers with more than 50 ha. In the district with the most equal land distribution, there are no previous land reform beneficiaries, while in three others the vast majority are farmers who benefitted from the agrarian reform program. The average holding for all irrigation areas is 9 ha, though in one the average is 40 ha. The two drainage districts also have differing land use and tenure patterns. In total, land reform recipients account for 30% of the beneficiaries and 37% of the land area. 47. In Rio Recio and Samaca, water is obtained from small dams; in Zulia through a diversion weir; in San Alfonso, from a river intake by gravity; and in El Juncal and R.U.T. by pumping from Colombia's two most important rivers, the Magdalena and Cauca, respectively. In three of the six irrigation dis- tricts, water is in short supply and therefore rationed. In two rice districts, efforts to level land and save up to 40% of water per hectare along with increased volumetric water charges are expected to result in more efficient utilization of the available water supply. In the third district, Samaca, the storage capacity of the existing dam would be increased by 70% to five million cubic meters. As a result of the project, cropping intensity would be increased on average from 123% to 176% in irrigation districts and from 110% to 122% in the drainage districts. Costs and Financing 48. The total cost of the project is estimated at US$86 million equiva- lent of which US$37 million equivalent (43%) correspond to the foreign exchange costs. Since final engineering designs for the latter years of the project have not yet been prepared, physical contingencies for civil works of 15% have been included. Price contingencies amount to 21% of base costs and are based on forecasts of yearly domestic and international price increases. 49. The proposed Bank loan of US$37 million would cover the estimated direct and indirect foreign exchange costs. Local costs would be financed as follows: approximately US$17.4 million equivalent (or 20% of project costs) would be financed by the banking system, including FFAP, US$17.4 million equivalent (or 20% of project cost) by HIMAT from Government budget- ary transfers; US$14.5 million equivalent (or 17% of project costs) by beneficiaries. A breakdown of project costs and financing is presented in the Loan and Project Summary. - 16 - Procurement and Disbursement 50. Contracts for equipment and vehicles, estimated to cost about US$11.2 million equivalent would be procured under international competitive bidding in accordance with Bank guidelines. Contracts for items such as motorcycles, topographic, office and workshop equipment, and small mobile pumps, each not exceeding US$50,000, and in aggregate no greater than US$500,000 equivalent, would be eligible for procurement by quotation from at least three suppliers or manufacturers. Civil works contracts would be relatively small, numerous and dispersed and unlikely to attract international firms. They would be procured through acceptable local competitive bidding procedures. Procurement for civil works contracts estimated to cost in excess of US$200,000 would receive prior review and approval by the Bank. Contracts for consulting services would be awarded on terms and conditions to firms or individuals whose qualifications and experience are acceptable to the Bank (Section 3.02 of the draft Loan Agreement). 51. Disbursements would be made for 100% of the foreign expenditures for equipment, vehicles, and foreign consultants and training, 90% of expen- ditures for locally procured equipment and 69% of expenditures for civil works and local consultants and training. In order to advance work on engineering designs and the large amount of small civil works, contracts for a total not exceeding US$400,000 equivalent would be eligible for retroactive financing. 52. In an effort to facilitate rapid project execution, a working fund would be established with US$3 million equivalent to cover about six months of expenditures for civil works and local consulting and training (but not direct foreign exchange expenditures). The establishment of a special account for such a fund and the approval by the Government of the release of US$1 million equivalent would be a condition of disbursement of US$2 million equivalent from the Loan Account to the fund (Section 2.03(b) of the draft Loan Agreement). In order to allow for the necessary time to complete the budgetary process, the Government would have up to 30 days to deposit the monies in the special account. Subsequent disbursements to replenish the fund would be carried out according to standard Bank procedures, but provided that the Government has already approved the release of HIMAT's share of the replenishment (Section 2.03(c) of the draft Loan Agreement). Every six months, the Government, the Bank and HIMAT would review the operation and size of the fund and agree on any necessary changes (Section 2.03(f) and Part 4(b) of Schedule 1 of the draft Loan Agreement). As required by Colombian law, all project expenditures would be subject to ex-ante control and approval of the Controller General's staff, but in any case they would also be subject to standard reviews by the Bank. The above procedure is expected to speed the execution of the project and aid in completing loan disbursements by June 30, 1988. Project Organization and Execution 53. HIMAT would be responsible for carrying out the project. All civil works and most technical assistance, studies, designs and engineering super- vision would be contracted to firms and individuals. HIMAT is sufficiently staffed to carry out some of the engineering work and to supervise the various - 17 - contracts efficiently. Training and technical assistance would be provided to HIMAT on new water management techniques and project appraisal. In order to aid project execution, as condition of effectiveness, HIMAT would set up a project coordination unit with duties and responsibilities acceptable to the Bank and assign a senior HIMAT staff member to be full time project coordinator (Sections 3.06 and 7.01 of the draft Loan Agreement). 54. Credit for incremental on-farm investment and land leveling would be provided through the banking system and financed entirely with local resources. The medium- and large-scale farmers in the districts generally have little difficulty obtaining their requirements through normal banking channels. At times, however, small-scale farmers (below 10 ha in irrigated areas) who lack the financial capacity to contract technical assistance have limited access to credit. The project, therefore, includes the necessary extension services: HIMAT would contract the expertise, in accordance with the requirements of FFAP, from institutions such as the Federation of Rice Growers (FEDEARROZ), under arrangements satisfactory to the Bank (Section 3.01(b) of the draft Loan Agreement). These services would be provided gratis to small-scale farmers-- defined as those with assets of less than US$30,000 equivalent who derive at least 70% of their income from farming. The Government would ensure that the necessary credit would be made available by FFAP through financial inter- mediaries (Section 3.01 of the draft Guarantee Agreement). FFAP has already committed itself to HIMAT to accept the proposed technical assistance to be provided under the project as a basis for farmers to obtain credit for on farm investments and land leveling. Since farmers in the irrigation areas are generally better than average credit risks, they are expected to be able to meet their credit needs. Production, Marketing and Financial Analysis 55. The annual value of incremental production generated by the project, about US$35 million equivalent in 1980 pesos, is expected to be distributed among a variety of crops (including rice, vegetables, soybeans, sorghum, potatoes, peas, cotton, grapes, wheat) and livestock products. Consequently, the incremental production of each individual commodity is expected to be small relative to total production nationally and, with the possible exception of rice and soybeans, on a regional basis as well, and would be insufficient in itself to affect the price of any of them. None of the commodities is expected to face demand constraints and marketing channels are adequate to absorb the increased production. Increased rice production which constitutes nearly one-half of the value of incremental output under the project, would result in higher exports, while soybeans, wheat and milk production would substitute for imports. 56. Financial rates of return for eleven farm investment models vary between 31% and above 100% in constant 1980 prices, demonstrating that in all cases, the private returns to farmers are expected to be substantial. Per capita incomes would also be raised substantially, according to the models from US$67 to US$1,000 per capita without the project to US$700 to US$2,700 in constant 1980 prices with the project. The present average per capita income of project beneficiaries is estimated at US$530 rising to an estimated - 18 - US$1,330 at full development. Average projected income levels compare favor- ably with the 1980 national average per capita income level of US$1,010 and the estimated relative poverty level of US$329 per capita. Clearly, however, some of the very small farmers in each of the districts will remain below the poverty level, though in far better condition than without the project. Water Charges, Cost Recovery and District Independence 57. In each of the irrigation districts, HIMAT levies a fixed per hectare charge as well as a volumetric tariff based on water use. The tariffs are in general low, though in three of the six districts the collections have covered the direct operation and maintenance expenditures (O&M) actually incurred. No allowance, however, is made for major repairs or equipment replacement. The richest district (Rio Recio) with the lowest tariffs recovered 168% of 1979 O&M and had a 98% collection ratio. In irrigation areas, generally, collection ratios (percentage collected of amount billed) are high, in part because HIMAT can and will shut off the tap, if beneficiaries fail to pay. 58. In the two drainage districts, however, the situation is quite different. The system in both districts are only partially complete; but even for the portions completed, collections have been lax. In Sibundoy, no charges have been levied thus far, and in the second, Lebrija, the collection ratio fell to 20% in 1979. In Sibundoy, the practice is to be reversed, while in Lebrija the situation is in part a reflection of poor service and inadequate billing procedures. HIMAT is convinced that once rehabilitation works are initiated and billing improved, users will begin paying water charges on a timely basis and, with Lebrija in mind, has provided assurances that an 80% collection ratio will be maintained in each district beginning 1981. If in any district such percentage is not achieved, according to an audited report to be furnished to the Bank by April 30 of each year beginning 1982, then HIMAT and the Bank will exchange views on the reasons for the failure to reach 80% collections and agree on actions to be taken to collect the charges. If no agreement is reached or a justification, satisfactory to the Bank, for the failure has not been provided, then, after notice by the Bank, HIMAT will refrain from using funds from the special account (paragraph 52) for civil works in that district (Section 5.05 of the draft Loan Agreement). With this provision it is expected that HIMAT will improve its collection record in the two problem districts. 59. The general policy on cost recovery followed by the Government corresponds closely to that generally endorsed the Bank; namely, farmers who benefit from the proposed public investments should, in general, pay for them. Given the high returns to farmers from project investments, a high rate of cost recovery can be expected. Based on an analysis of farmers' capacity to pay once expected project benefits are realized, it is estimated that in five districts all or nearly all of the investment costs will be recoverable with farmers retaining a large share of the project's net benefit. For the purposes of recovering investments, users would pay for equipment over ten years at the market rate of interest for agricultural credit (including insurance) and for civil works over 15 years, generally, at the same interest rate. In the remaining three districts, farmers would have a more limited capacity to pay, and only O&M plus a small portion of investment costs would be recoverable. - 19 - 60. The structure of tariffs as they currently stand does not adequately reflect the need to conserve water and promote more use of existing facilities. HIMAT, therefore, in consultation with the Bank has developed a set of princi- ples for establishing the level and structure of tariffs in each district, which include, inter alia, the following objectives: (a) The level of charges would be set to recover the entire cost of investments under the project as well as the O&M, subject to the farmer's financial capacity to pay. (b) In irrigation districts where water supply is limited, the structure of tariffs would be set to encourage water conservation. (c) In districts where farmers are not making adequate use of existing infrastructure, tariffs would be set to encourage such use. (d) An automatic mechanism for adjusting charges to take account of increasing O&M would be incorporated into the system. Assurances have been provided that, by January 1, 1982, HIMAT would establish a schedule of water charges based on a system incorporating the above objectives and satisfactory to the Bank (Section 5.04 of the draft Loan Agreement). 61. In two irrigation districts which are not a part of the project, HIMAT has handed over management of the districts to farmers' users associa- tions. The experience has been positive and the associations have apparently operated the district efficiently. In both cases the districts are financially self-sufficient. HIMAT intends to encourage other districts to manage increas- ingly their own affairs. In order to further this effort, HIMAT would develop programs, including training of user association representatives, and would submit to the Bank a plan of action for transferring part or all district ment responsibility to the beneficiaries of the project, and promptly thereafter put it into effect (Section 4.04 of the draft Loan Agreement). 62. A major goal of the proposed project is to ensure that the management of the districts is effective enough to preclude the need for a similar project for the same districts 15 or 20 years from now. Project provision of increased user responsibility for paying for and managing their own districts as well as training for both HIMAT and users in water management techniques should provide a basis for the long run viability of the districts. Nevertheless, without adequate equipment--the situation which has prevailed over the past decade--canals can be expected to silt up, and infrastructure generally, to deteriorate. Consequently, HIMAT has provided assurances that it would make budgetary provisions sufficient to meet the costs of replacing machinery and equipment promptly when necessary (Section 4.03(b) of the draft Loan Agreement). The above provision would remain in effect beyond the project period. - 20 - Benefits, Justification and Risks 63. The project would increase productivity, employment and incomes on about 4,700 farms, 30% of which are farmed by land reform beneficiaries. It would also expand agricultural production significantly and contribute to export growth and import reduction in roughly equal amounts. The project would generate the equivalent of about 5,000 additional jobs, of which only an estimated 1,000 would be filled by family labor, thereby increasing employment opportunities. Once the full benefits were realized, incomes of farm family beneficiaries would be on average more than double those without the project, with the vast majority living above the poverty level. 64. The economic rate of return calculated on 98% of project costs (i.e., excluding the Phase II studies) is estimated to exceed 50%. Economic rates of return computed for each of the eight districts range between 18% for one of the drainage districts (Sibundoy) to 50% or greater for five of the districts. The calculations are based on financial costs which are converted to economic costs on the basis, where appropriate, of border prices and an estimated shadow price of labor. The high returns result principally from the large sunken investment in the districts as well as the increased cropping intensity and land to be brought under irrigation or drainage for relatively small investments in infrastructure and land levelling. Sensitivity analysis indicates that for the project as a whole a 126% increase in costs or a 56% reduction in benefits would bring the rate of return below the opportunity cost of capital estimated for Colombia (11%). With regard to the individual districts, Sibundoy is the only one for which sensitivity analysis indicates some risk: a 25% increase in costs or 20% decrease in benefits results in a return below 11%. However, if the estimated economic price for fresh milk (the principal commodity produced in the district) were reduced by 20%, i.e., to about the current estimated economic price of reconstituted milk, the rate of return remains an acceptable 13%. The risks of a return lower than 11% are small, and are well worth taking since Sibundoy is by far the poorest district populated by an indigenous tribal group. 65. Project risks relate principally to potential farmer reluctance to obtain credit or to adopt new technologies. The project has built in various incentives--demonstration plots, technical assistance and increased access to credit, training programs--as well as increased water charges appropriately adapted to each district to help convince the farmers of the utility of adopting and investing in the new techniques. These risks are thus expected to be minimal and pale in front of the high project returns. PART V - LEGAL INSTRUMENTS AND AUTHORITY 66. The draft Loan Agreement between the Bank and HIMAT, the draft Guarantee Agreement between the Republic of Colombia and the Bank, and the report of the Committee provided for in Article III, Section 4(iii) of the Bank's Articles of Agreement are being distributed to the Executive Directors separately. - 21 - 67. Special conditions of the loan are listed in Section III of Annex III. A condition of effectiveness would be that HIMAT has established a project coordination unit with duties and responsibilities acceptable to the Bank and has assigned a senior staff member to be full time project coordinator (Section 7.01 of the draft Loan Agreement). Conditions of dis- bursement would be that: (a) For the advance of the working fund, that the fund had been established and that the Government had approved the transfer of its corresponding share (Section 2.03(b) of the draft Loan Agreement); and (b) For subsequent replenishments to the fund, that the Government, the Bank and HIMAT had reached agreement on the size of the fund for the subsequent period and that the Government had approved the transfer of its corresponding share (Part 4(b) of Schedule 1 and Section 2.03(c) and (f) of the draft Loan Agreement). 68. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 69. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President Attachments April 29, 1981 Washington, D.C. ANNEX I -22- Pae1rof5 COIZIMIA - SOCIAL INDICATORS DATA SHEET COLOMBIA REFERENCE GROUPS (WEIGHTED AVEtCES LAND AREA (THOUSAND SQ. EM.) - MST RECENT ESTIMATE) TOTAL 1138.9 AGRICULTURAL 230.6 MOST RECENT MIDDLE INCOME MIDDLE INCOtE 1960 jb 1970 /b ESTIMATE /b LATIN AMERICA & CARIBBEAN EUROPE GNP PER CAPITA (US$) 250.0 400.0 1010.0 1562.9 2749.5 ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) 491.0 606.0 700.0 1055.9 1641.,4 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (MILLIONS) 15.8 21.3 25.6 URBAN POPULATION (PERCENT OF TOTAL) 48.2 59.8 68.3 63.4 53.9 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (MILLIONS) 39.0 STATIONARY POPULATION (MILLIONS) 57.0 YEAR STATIONARY POPULATION IS REACHED 2070 POPULATION DENSITY PER SQ. KM. 14.0 19.0 22.0 28.1 77.2 PER SQ. EM. AGRICULTURAL LAND 71.0 93.0 111.0 81.7 129.5 POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS. 47.0 46.8 40.7 41.4 30.6 15-64 YRS. 50.0 50.5 56.3 54.7 61. 1 65 YRS. AND ABOVE 3.0 2.7 3.0 3.9 8.2 POPULATION GROWTH RATE (PERCENT) TOTAL 3.1 3.0 2.3 2.7 1.6 URBAN 6. Of 5.2 3.9 4.1 3.3 CRUDE BIRTH RATE (PER THOUSAND) 46.0 37.0 31.0 34.8 22.8 CRUDE DEATH RATE (PER THOUSAND) 14.0 10.0 8.0 8.9 8.9 GROSS REPRODUCTION RATE 3. 2 3. 2 1. 8 2. 5 1. 5 FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) .. 115.4 142.0 USERS (PERCENT OF MARRIED WOMEN) .. .. 35.9 FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 100.0 99.0 120.0 106.9 113.1 PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) 97.0 88.0 102.0 107.4 125.3 PROTEINS (GRAMS PER DAY) 54.0 48.0 52.0 65.6 91.0 OF WHICH ANIMAL AND PULSE 28.0 24.0 26.0 33.7 39.6 CHILD (AGES 1-4) MORTALITY RATE 17.0 13.0 9.0 8.4 4.3 HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) 53.0 58.5 62.0 63. 1 67.8 INFANT MORTALITY RATE (PER THOUSAND) .. 98.0 .. 66.5 55.9 ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL .. 63.0 64.0 65.9 URBAN .. .. 73.0 80.4 RURAL .. .. 46.0 44.0 ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL .. 47.0 48.0 62.3 URBAN .. 75.0 73.0 79.4 RURAL .. 8.0 13.0 29.6 POPULATION PER PHYSICIAN 2400.0 2170.0 1970.0 1849.2 1030.1 POPULATION PER NURSING PERSON 3740.0 2040.0 1250.0 1227.5 929.4 POPULATION PER HOSPITAL BED TOTAL 363.0 449.0 620.0 480.3 289.7 URBAN RURAL ADMISSIONS PER HOSPITAL BED .. 23.0 25.0 17.0 HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL .. 5.7/d URBAN .. 5.5/d RURAL .. 5.9/d AVERAGE NUMBER OF PERSONS PER ROOM TOTAL .. 1.8/d URBAN .. 1. 6/4 RURAL .. 2.4/d ACCESS TO ELECTRICITY (PERCENT OF IWELLINGS) TOTAL 47.0/e 58.1/d URBAN 83.07 87.5 .* RURAL 8.0/e 13.2/d Annex I Page 2 of S COLOMBIA - SOCIAL INDICATORS DATA SHEET COLOMBIA REFERENCE GROUPS (WEIGHTED AVERAGES - MOST RECENT EST-MATZ) - MOST RECENT MIDDLE INCOME MIDDLE INCOME 1960 /b 1970 /b ESTIMATE /b LATIN AMERICA & CARIBBEAN EUROPE EDUCATION ADJUSTED ENROLLMENT RATIOS PR IMARY: TOTAL 77. 0 103.0 103.0 99. 7 105.9 MALE 77.0 101.0 100.0 101.0 109.3 FEMALE 77.0 105.0 105.0 99.4 103.0 SECONDARY: TOTAL 12.0 24.0 39.0 34.4 64.0 MALE 13.0 24.0 39.0 33.5 71.1 FEMALE 11.0 24.0 40.0 34.7 * 56.9 VOCATIONAL ENROL. (% OF SECONDARY) 31.0/f 21. 0 17.0 38.2 28.8 PUPIL-TEACHER RATIO PRIMARY 38.0 38.0 30.0 30.5 29.4 SECONDARY 11.0 17.0 19.0 14.5 26.1 ADULT LITERACY RATE (PERCENT) 63.0 73.0 81.0 76.3 CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION 7.0 11.0 18.4 43.0 8-.6 RADIO RECEIVERS PER THOUSAND POPULATION 124.0 100.0 107. O045.3 192. 2 TV RECEIVERS PER THOUSAND POPULATION 9.0 37.0 64.0 44.2 119.5 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION 56. 0 .. 69. 0 63. 3 93. 0 CINE2A ANNUAL ATTENDANCE PER CAPITA .. .. 4.1 .. 5.7 LABOR FORCE TOTAL IABOR FORCE (THOUSANDS) 4726.5 6353.3 8174.0 . FEMALE (PERCENT) 18.9 24.6 25.0 22.2 30.4 AGRICULTURE (PERCENT) 51.4 37.9 30.0 37. 1 37.0 INDUSTRY (PERCENT) 19.2 21.0 23.0 23.5 29.3 PARTICIPATION RATE (PERCENT) TOTAL 30.6 29.7 29.7 31.5 40.9 MALE 49.8 44.9 44.7 48.9 55.9 FEMALE 11.6 14.6 14.6 14.0 26.2 ECONOMIC DEPENDENCY RATIO 1.6 1. 7 1.4 1.4 1. O INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 41.2 e 31.9 .* HIGHEST 20 PERCENT OF HOUSEHOLDS 67.7/e.& 60.1/ . LOWEST 20 PERCENT OF HOUSEHOLDS 2. 1/.& 3. 5 ... LOWEST 40 PERCENT OF HOUSEHOLDS 6. 8 /_ 10. 1 j. POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 214. 0 RURAL .. .. 197.0 190.8 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 267.0 474.0 RURAL .. .. 122.0 332.5 385.8 ESTIMATED POPULATION BELOW ABSOLUTE POVERTY INCOME LEVEL (PERCENT) URBAN .. .. 34.0 RURAL Not available Not applicable. NOTES /a The group averages for each indicator are population-weighted arithmetic means. Coverage of countries among the indicators depends on availability of data and is not uniform. lb Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1974 and 1978. /c 1951-64; /d 1973; /a1964; /f including teacher training at the third level; /a Economically active population. Most recent estimate of GNP per capita is for 1979. October, 1980 - 24 - ANIEX I Page 3 of 5 DEFINITIONS OF SOCIAL INDICATORS Note: Although the dato are droan fro souore geneally judged the eaost authorittive ad reltable, it should alec be toted that they cap not be ter- tationallp coaparable becaousel othe lack of otataardlzed definitieos etd concepte used by difterent countries tn collecting the rara. The dato ar, tnoe- theles., useftl to describe orders of tagtude, indbcated trend, atd characteriae cet major differencs betweenrountrtea. TtC roferene tronpt are nbc saebr country group of the subject honty and (2) atcutr group obth tomewhat hithet aveagt bncome that the country group ef the subject country (etept for Capital Surplus Oil oportert" grou where "Middle Icome Nort Afrtoa aod lMddle ast " ts osen becar of stronger soco-oultural affinttiet). In ot reference group data the averages are population e.igted ritmetl means for tach indictor and shown etlyahetet beat halt of the cot.es in a group hao dota fot that todtoatot. Stnce te coverge of contrec among the iodicator, depend, on the atatlability of data and la too unifrtov. cauton must b exercie int relatn tg averaaes of e indioator to another. Thee avetages att only uefoul to compartng the alu of ene indicator at a titt among rhe country and referenc groups. LAND AREA (thousana q.km.) Popuato er Physican-opulaton tovided ny nurner et prartcing poy- Total - letal curtace oeec compriting land are and inland waters. atotas quallftad from a medical etheoo at university bevel. Aricultural - Etrmte of egrirultureareansd temporarily or perranently Popultio ec Nursing Person - oplation divided by numbe of practicng tor orop, pasturas, mroket and kltchen gardae or to lIe fallow; 1977 data. sale and female graduatt nurses, practocal nurses, tnd asiactant ourses. Poulatton or Hospital Bed - total, orrban, and rural - Population (t.ta., cap tog CAPITA (US) - GNP per cpta estimates at current market prhes, tal- huran, and rural) divided by their respective numher of hspital bed culated hy «a converstoo aethod as borld tank tlas (197-79 hasta); 1960, aalable te public and private genarl and pecializead hspital and re- 1910, aod 1979 data. hahtbilitato enters. H-pitta are etahbhment. permanetly atafed hy at teat oe phpatctan. Etatbhlishaots providing prtincipally cstedb ENERGY CONSUMPTrON PER CAPITA - Ainab rcasumtin ef tomerotal eergy (coe care are n Co lncluded. Rural hosptals, howeter, include heath sed .edical atd birnite, petroleon, natural gas and hPdro-, eurlear ad geothermal star- eters ett permanently staffed by a physician (but by a medical aGistant, tricty in kiograns et roel equivalent par capita; 1960, 1970, and 1978 eurse, midwefe, ett.) which offer in-pattaoodaton and prooide data. limited ranga of medtcal farilte. Fat statistiral purpeaa orbat hespi- tala inlude WHO& principal geeab and ecialtzed hospitale, sed rurab PPpLATtON A.nD VIdT STATITIC hoapital local er rtat hospital end medical and matenity center. Total Polatiot, Mid-Tear (milons) - As of Jn1y 1; 1960, 1970, and 1978 Adssions er Hosptal ted - Total tomtar of admlsstota te er discharges date. fram hospita iveded bhp umber of beda. Utran Popniont (ercent of rott) - Ratio of urba to tota. polation; differenz definitions oh urhan arens may fftect rboabrlty oT data HOUSING arong cuntries; 1960, 1970, urd 1978 date. Aerage es ofHoehtld (persota ler household) - tal, uron, and rurat- Popuatlio Pro'ections A household consists of a group of individuals who sharc blivig quartere Population te year , 000 - Current populatin projectons a based et 1980 and thetr mejt meals A boarder er 10dger map or cap not he included te total population by ae and sca and teir moroolty aod fertility rats. the honhueld for stattical pnrposes. roetin rparmeters ton ortalory satta comprise l th eelasum- Aeeraenumber cf person per room-total, urban, and rurcl -- A g u tog life expectancy at birt reasing wet ountry's per capita inomse br of pereons par roo n all urbat, o-d utoal oocupted coanen toenal Ieval, nd femala ltfe expectanohy stbililing an 77.5 pears. The para- dellings, repectively. twellings - udenon-permanevt atorc res and etert or f ertility oe also ret three ls~ee assumtng detltne no uoccupied parts. fertlty ordig to eroe letel ord test faily plahnig perteoraet. Access to Electriclty (peroent of dwelliny.s - total, urhat. and rural - tach contry ha hen assigod onet thane cmbinations tf mrtalety Conventional dweeltngt with electrbctyb Inving quatte at peeretagt and fertyty trends for projectio proses. of total, urhan, and rural dwellingsrespectively. ttatioary populato-In a stationary populaton there s no growh sinceo the blIrth rate isequal to the death tate, and alan the age structore r- EDUCATION nas cntatt. This le orhieved only etter ferte Ilit as decline te Adiusted Enrollrent tatios etc tpler~enbete of lt r,pr,dontao rtae, chen nch g de r e d t e et ann ~eplao, Italf xeactly. The ~estiet..r pepulation s..as ea cclee falae nd bc . per laval as 1 rr lnae eta reato1 ln ate year 2000, and the tate of docltne et fertlityraetorelace- years hot adjusted le atffereat lepgtsl et primaredeation; for Y tetoney popuation te teached - The year when statonry population sie sat psch, anr bed ob ehveeol tc hol age. ize has bete reahoed. econda ol a-ltota male ademale - omutedas abovesecodary er o - d-year populatin per squae klometer 0 hectares f pe-d nr red aear frt'err tro proetr d at" fo etota ea. narcluaean optdasaoefrariutrllnally et 12 to 17 peers of a ge: correspondence courates are geelly ool. teVostl etrollment (rerce tf strelcrm) - tectonel instttioeen topulation bge tructure (peroent) - Chhldren (0-14 ytars), trkieg-age (15- tnclude technca, industrial, er other programe ehch operate g ndepen- 64 yeors), and rettred (hl yeare eod over) es perentags et eid-pear foto- dentlp er as departrents of ateodary tnstitutions. lation; 1960, 1970, aod 1976 feta. Puput- teacher rario - peromary, end ecoondry- Totel stnudenta enrolled bo Population nroeth Rate (oercent) - hotel - Annal gerwth reaes tt totel med- primary sed tecondary levels divuded ty nuomers of teaohers be the ysopulation fetsi or 1950-6l, 1969-PI, and 1970-78. correspomding levele. Populateon Crowth tate (percen.t) - nrbat - nnal groweth ratee of urban pepu- Adut leiteracy rea (peet) - Itnersa odolts (ableetored and wrte) lateote ter 1950-60, 1960-PI, atd 1970--7. s aperentage of total adut ppoplation aged 15 ypear and orer. Crude nrir Iata (per phopundl - qnal biote ietb per thoused of mid-year populatbor; 1960, t970, end 197t data. C212SUMION Crude teath tate (rar thousand) - A,nul daea per thosand of ed-pear Pateger Care lottlthousand popultion) - Pasaenger oeec romprise motor opolateon; 1960, 1900, and 1979 data. care seattng lesa that eight persones; exctludes ambulances, heartes sed Grose Reproduction Ratt -verage number et daughtaeraeomatewll hear tt miltary nehicles. p e tu 1t, a -yn ro gd nd gd 1 7 harmeof eepelderingeR a be yertaoe birat n evet of Td eeter (er tousand poputato) - 0TV o rece rs for bracatt allt arrie wom ely e a r oneralpublicde r tottI pol tat ed ofratton; exlde unltn ds PF meD A TTIcl onoa en:(boedl -Aonaltme feoftr tense c trer t eet a td et years whnrgsr t h afTV egset a n effdo et of trt-oeerr detre ndarnapctof atttelfailyplesee pegeo. Nesapee ice;lataon pr reousan population) ha Showpsrthe aeae ciua-- Inext ofaFo-odution (peroeto Caiaertad9--71-10) - tndexeteg pet caritenuad tionof"deailytenad intertnewppr,dfge.sapridclpb Er o f of ll oe a s (1-0 tperd eb o st t. - ludyh-oeos s o peef to a t e v (t f ht e ta sto d ge T eerkt . fr b oed sde ed ati n rrtad osgar) w h n re eibl. and c n td em l tte nae peoap tope Yer-- ae nted t e ene rf t 1te . are ex)l A o tio o a ch cutr is b tonalcet s s du t e ee art, inclu,n of os toss e- et nema nt-tation verage producer price wehghts 1961 1 7 , 1 t oertob di ne-. Pderatp of too0 alrd oiesv (rent - rel -Ieet o pted rom .t reet etuialln fofd neeod sles avadolabeoleacoutr sed capted LAdORtFORCEe ete err orcreggorloo.I eoelee hanouanttesednfotod otot s proesn,ad losery diribto. Requirse- a ednitin tf Itvar couties or otoprable;e96,190n meto oer andeo eogthee lgonfest et litn qz at.ne est Cri ar tAp-lha nenth foor n 'tya'rlndedt osdege pnronmttal o teoprature, t wheihts a et perceng a f total abot nordrivs- goe.a ouaeold aeve ; 1961-6> 0 1977 aa d f9s da n a and1978data. ter capita an tprot ei of (rr1a p nett suy ofta n f ot r d Net pply ofea oodt is efontrdas a ietRe e a nd to t rii ae n a a ecnaeotoallbrfre 90 Ireed ntoll ounts etsdb D prote: pr le fT ei ent t1r (iu thosaed. rene re -, roto alloanc of 0 gams f tal rotin pr dy an 20gram ofaniml ad Prmtic repatio Ratepepent) totl,dae,nd fooemae- Pardetcatio eec pualsetproein,e ofohc p10 tgra shoud bese n poteihn. Teetnd- actityates levre contee ae tot maeadfale tl Ar freas ro ts eare oo taan tyh uef 75e gram p bptot l rote fet g~~,al aof.- prt dae sp va n l reprt o ta d erio r o thetol pros ed y iAfgneh IT a960, ( t97, n d 9 f ae ta. Tee are IL..p apr.ttiipatt atef e flt i ortld os; 196-6, 1970 ad 1977 data. aeexg s p7t rete of te l oplabon and 1961, 197e trend. A dat. ter capita pnrot n oh o (anmal anda us - Pote i netupl of per d test fldo retfro at ior fourcesoo. ld (ages of tor ay. te peousand ta deth s ethosn te- tod~stttotl lor ce oh t åagea grou 1- yeas, tob chlde ..n thist agese group;r for most%ý'- r devloin coun-ri f aioc ftre dat frse rootte 2t b 1 d 1970 . pdf1977 ft.i. -r 197M ndT TOd lPerentoae of P terre (both tnlas ond tema)-tRtivtelby res pola pocce, f mti,10 ran abol beettel rotto.Theteed- ac percent rcesat 20apedcet pool,resa2eet, an mb peoet 40orrent L rfe Exp e tyet Biroth n (yers -- tverae numberta f yroetrsof lif emaiin offuehl Wr b t; 16,97p; 1978 1970 ond d data. 9a 1971 f,. a of ag perthousnd lve biths.EgtimaterAbolute Poferhe pneome elotg peineta)d- ura tco rurl- Accers toSa ate per ent To eener ted a -usont population)upra n ofo - Ne Aotie o noe lenth elee bow c Numb erofe peopl total,t Oecurba and> -it rnnesonble pcesr ton sae ho cotritonall aeetatedet lsesnilnnfo eurmnsi o oaterouppl-y (pnclude t retede In surf a wate gr p; untreat t un c ntaite d or a rene Ato deRid revn lpie to lah1on. a ur date. R rltl ioneid cofra p i foutai orstadpot lcatd nt mre han200metrs roma husemaybe perstatt ivatao thre (beentoy trath seed is( tervedom tohettra uonsdrda igwti n esnbl cesofta oue nrrp ra eewit.hutet rerr her cosret oflivn p inrr urnares.pren t Inoav t setd (arction rage pr tt ea y ettn rtet o ra - P e h u i u a r w alu p orduoi h tth 1960 t769 en edl dato.t feateaml t tate eeds. nd eob eteO btoeeeroete ttlT 110 lb Aeteta d lv etf. oftatin d-oepulat --np to, urreb- brrae tNber r of olaniot, - t .ta, and rcre an ta pt toniry t to tt teon . l en o dipoa as percen agsrof.thei prespeti ve fp.hcct b -opulations.n Excet di- C nict a n So Y- - cial D t Divisi o pt"a" 't pnclude rotollerter, ad ispsal et or n wtots te e9f8 eatmn tita . dente ict PiAl0gseil os an Proj ti en eottbr f hetrun ply eceaude wtreaer bt ter-ore tysted t eoftOctobern19b0 t enso andeorot fad s a tall a then 0 n ,,rtrons. be pR t hh e b r o a e t to r e t l t o e e u e r e o f o v n a b o - o t l o h e n total trhe of peopleo- .toal utar fer rlaai setre by, fdt-odom:-ettttI pand cap isr ibutheon-fPlstio ar d ep al - Ot 1t Parhalt erasr ..ý , F ml.F taro o O oayete ad toeee s c ptee d-. ~ ~ ~ ~ ~ ~Otoe MrclurItr-tOLb. ocei . ptt. pr.orsetembr nslehe - 25 - Annex I Page 4 of 5 ECONOMIC INDICATORS Population: 26,670,000 (mid-1980) GNP Per Capita: US$1010 a/ Amount Average Annual Increase (%) Share of GDP at Market Prices (Z) Indicator (million US$ (at constant 1970 prices) (at current prices) at current prices) 1980 b/ 1960-70 1970-75 1975-80 1960 1970 1975 1980 NATIONAL ACCOUNTS Gross domestic product c/ 32,075 5.3 6.1 5.8 100.0 100.0 100.0 100.0 Agriculture 7,660 3.5 5.2 4.0 34.1 28.6 29.3 24.0 Industry 8,590 6.2 6.1 4.4 25.7 26.6 28.3 29.2 Services 12,655 5.9 7.3 6.4 40.2 44.8 42.4 46.8 Consumption 23,978 5.9 6.6 5.6 79.4 79.6 81.6 74.7 Gross Investment 7,844 5.1 0.6 8.5 20.5 22.0 17.8 24.4 Exports of goods and NFS 5,542 3.1 5.9 10.0 15.6 14.2 15.1 17.4 Imports of goods and NFS 5,290 4.3 1.1 12.7 15.5 15.8 14.5 16.5 Gross national savings 7,952 5.2 5.3 10.8 19.4 18.0 16.8 24.8 Composition of Merchandise Trade (%) (at current prices) 1960 1970 1975 1980 MERCHANDISE TRADE Merchandise Exports (FOB) 4,428 3.3 1.4 10.8 100.0 100.0 100.0 100.0 Major primary 2,871 2.8 -4.6 12.8 72.5 69.4 51.2 64.8 Major manufactures 686 - 23.8 6.5 - 9.0 24.5 15.5 Other merchandise imports (CIF) 871 - 3.8 5.4 - 21.6 24.3 19.7 Merchandise 4,533 3.5 -2.3 9.1 100.0 100.0 100.0 100.0 Food 364 10.0 -0.1 13.4 2.4 4.5 4.8 8.0 Petroleum 750 -21.4 70.6 43.5 2.0 - 2.0 16.5 Machinery and equipment 1,750 5.2 -8.5 11.0 42.7 50.6 36.4 38.6 Other 1,669 1.8 2.4 5.4 52.9 44.9 56.8 36.9 1974 1975 1976 1977 1978 1979 1980 b/ PRICES AND TERMS OF TRADE GDP deflator 27.6 20.8 23.6 28.3 17.1 23.9 24.5 Exchange rate 27.1 31.2 35.0 36.9 39.7 43.1 48.2 Export price index 155.4 159.7 214.5 303.6 260.2 262.2 289.4 Import price index 210.3 217.3 233.5 254.3 202.0 220.6 247.4 Terms of trade index 73.9 73.5 91.9 119.4 128.8 118.8 117.0 As % GDP (at current prices) 1970 1975 1980 f/ PUBLIC FINANCE d/ Current revenue 10.6 11.3 12.2 Current expenditure 5.7 5.3 8.9 Surplus (+) or deficit (-) 4.9 6.0 3.3 Capital expenditure 1.8 1.1 4.6 Foreign financing t/ 3.3 2.9 4.0 1960-70 1970-75 1975-80 OTHER INDICATORS GNP growth rate (Z) 5.10 6.30 6.00 GNP per capita growth rate (%) 2.00 3.90 3.70 Energy consumption growth rate (%) 5.00 4.00 4.00 ICOR R/ 3.54 3.43 4.00 Marginal savings rate h/ 0.13 0.13 0.16 Import elasticity 1.17 0.16 2.20 a/ World Bank Atlas Method. b/ Estimated. cI At market prires: Components are expressed at factor cost and will not add because of exclusion of net indirect taxes and subsidies. d/ Central Government. el Gross disbursements of external loans to the entire public sector. f/ Includes Social Security and Fondo Vial. y/ Lagged one year. h/ Increment to gross domestic savings/increment to gross dome tic product. April 24, 1981 - 26 - Anne. I Page 5 oP 5 3ALANCE OP PAYMENTS, EXTERNAL CAPITAL AND DEET Polation : 26,670,000 (mid-1980) GNP Per Capita: US$1010 a/ (1979) (rullion US$ at cuerre prices) gAsal Protected 1974 1975 1976 1977 1978 1979 1980 /) 1981 1982 1983 1984 1985 BALANCE OP PAYMENTS Exports ef goods and nen-factoeservnces 1000 2165 2782 3404 4059 4910 5327 5502 5912 6410 7467 8649 Imports f goods and non-f-actrerices 1149 2030 2302 2730 3722 4191 5376 6255 6997 7644 8618 9884 Retoutce balance -149 -135 480 674 337 719 -49 -753 -4005 -0234 -1151 -1235 Net factor pents -180 -263 -279 -235 ý247 -127 -172 -105 -166 -264 -375 -487 Net ue t,ed traesfera 27 48 21 6 7 4 26 4 5 6 6 6 Curent Account 3alance -302 -80 222 455 97 596 -195 -854 -1246 -1492 -1520 -1716 Net crect foreign invesent 39 32 14 43 56 124 234 12 150 250 250 350 Mediue and long reter oan (net 202 308 131 192 72 703 838 179 996 940 070 1166 en pablic sentor (160) (254) (109) (195) (92) (603) (781) (550) (911) (846) (8603 (1018) oprae secr (42) (54) (20) (-3) (-20) (100) (57) (-21) (85) (96) (110) (148) Othen captal 55 -12 193 100 391 -158 264 - - - - Capital Ancont Balance 296 219 340 397 519 669 1338 634 1146 1192 1220 1516 C-ange in Reserves (-= increase) 6 -139 -560 -832 -616 -1265 -1141 209 100 300 300 200 Intenatina - Reeres (tffncal 152 147 1166 1830 2482 4106 5247 5047 4947 4647 4347 4147 Reseresasnths of imports 1.6 3,2 6.1 8.0 8.0 11.8 11.7 9.7 8.5 7.3 6.0 5.0 GROSS D1SBURSEMENTS c/ Official grta - - - - - - - - - Intet disburteeants nf MLT Ioans 235 390 062 371 319 1036 CocessionaI 102 39 47 27 80 36 Bilateral (100) (37) (44) (21) (53) (28) IDA - (-) (-) (-) (-) (-) Otner Yultilateal (2) (2) (3) (6) (7) (S) Non-concesaional 133 351 215 345 260 1000 Official expert credits (26) (14) (0) (14) (19) (47) Ihr (58) (106) (76) (85) (82) (138) Otere ultlateral (14) (19) (27) (31) (33) (31) Priv(33) (212) (112) (214) (125) (783) E0TERNAL DEBT (end tf period) ej Debtoustaeding and ftsbursed 1249 2348 2453 2670 2803 3426 Offil 1074 1716 1785 1862 1999 2151 1BR (354) (634) (672) (716) (751) (838) 0D (20) (22) (22) (22) (22) (22) Oer (700) (10 ((019) (1124) (1225) (1291) Prniane 174 632 668 808 804 1275 Undisbursed Debt 602 663 908 1040 1516 1993 DEB2 SERVICE c/ TItal deb service papmente of hinh 119 249 278 313 398 664 Interet 44 114 125 137 171 231 Pnyments at . exports nf gods and tll Sernices 1.6 11.1 9.5 8.8 9.5 12.5 YMet as % GNP 1.7 1.9 1.9 1.6 1.8 2.4 Anerage interest rate on in ans (%) 5.8 7.4 6.5 7.4 7.9 10.3 Offiial (5.1) (6.1) (5.8) (7.3) (7.6) (7.8) Privatn (6.9) (9.2) (7.5) (7,6) (6.6) (12.0) Average ,atnrity Of n ints (years) 02.4 5.1 14.8 16.0 14.1 12.6 ofiital (30.1) (26.1) (20.0) (17.9) (16.2) (16.8) (9.7) (8.23 (7.4) 7,6) (9.1) (10.0) BA0R GROUP EXPOSURE (%) cl 1BRD DOD/total DOD 28.4 27.0 27.4 26,8 26.8 24.5 IBRD d-sburseentstotal grose disbrsements 24.6 27.1 28.9 22.9 25.7 13.3 IBRD debt servie/atotal debt ervice 34.4 28.9 13.7 14,3 8.8 13.1 IDA DN/total DD 1.6 1.0 0.9 0,8 0.8 0.6 1DA disbueenats /ttal gense disbursements - - - - 1DA debt sernice/t.nal delt seeince - 0.1 0.1 0.1 0.1 0.0 As . ef Debt Oetstanding at lad ef 1979 TERM STRUCTURE Meturity structure of debt utseanding (1) Maeeturitas due within 5 pea 32.3 MLaturties dne within 10 years 68.6 Interet strtre nf delt otalading (1) Ictaresn due within fst year 5.4 a/ World Bank Atlas Method / Prelieinary Pablin and Pnblicly guartaneed debt April 24, 1981 Colebia Diviso.n - 27 - ANNEX II Page 1 of 12 THE STATUS OF BANK GROUP OPERATIONS IN COLOMBIA A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of December 31, 1980) (US$ million) Loan Amount (less Cancellation) Number Year Borrower Purpose Bank IDA Undisbursed 54 fully disbursed loans and one IDA credit 918.4 23.5 /1 -- 741 1971 Empresa de Acueducto y Alcantarillado de Bogota Water Supply 88.0 .6 849 1972 Instituto Colombiano de la Reforma Agraria Irrigation 2.2 .6 860 1972 Instituto de Fomento Municipal Water Supply 9.1 1.9 874 1973 Empresas Publicas de Medellin Power 56.0 .3 920 1973 Colombia Education 21.2 9.0 1072 1975 Instituto Nacional de Fomento Municipal Water Supply 27.0 9.0 1118 1975 Colombia Rural Settlement 19.5 6.7 1163 1975 Colombia Agriculture 21.0 12.8 1223 1976 Banco de la Republica Industrial Cr. 80.0 3.0 1352 1977 Colombia Rural Dev. 52.0 26.9 1357 1977 Banco de la Republica Agricultural Cr. 64.0 21.5 1450 1977 Empresa Nacional de Communications 58.3 50.7 Telecomunicaciones 1451 1977 Banco de la Republica Industrial Cr. 15.0 1.5 1471 1977 Colombia Highways 90.0 65.1 1487 1978 Colombia Nutrition 25.0 20.4 1523 1978 Empresas Municipales de Cali Water Supply 13.8 12.6 1558 1978 Colombia Urban Develop- ment 24.8 23.5 1582 1978 Interconexion Electrica, S.A. Power 126.0 101.1 1583 1978 Colombia Power 50.0 20.0 1593 1978 Zona Franca Industrial Industrial y Comercial de Cartagena Export 15.0 12.4 1598 1978 Banco de la Republica Industrial Cr. 100.0 32.9 1624 1979 Colombia Airports 61.0 50.4 1628 1979 Empresa de Energia Electrica de Bogota Power 84.0 60.5 1694 1979 Colombia Urban Develop- ment 13.5 13.5 1697 1979 Empresa de Acueducto y Alcantarillado de Bogota Water Supply 30.0 29.1 /1 Includes exchange adjustment of US$4.0 million. - 28 - ANNEX II Page 2 of 12 A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of December 31, 1980) (Continued) Number Year Borrower Purpose Bank IDA Undisbursed 1725 /1 1979 Interconexion Electrica, S.A. Power 72.0 72.0 1726 1979 Instituto Nacional de Fomento Municipal Water Supply 31.0 31.0 1737 1979 Instituto Colombiano de la Reforma Agraria Agriculture Cr. 20.0 20.0 1762 1979 Cerro Matoso, S.A. Mining-Nickel 80.0 74.3 1807 /1 1980 Empresa de Energia Electrica Power 87.0 87.0 de Bogota 1825 /1 1980 Empresas Publicas de Communications 44.0 44.0 Medellin 1834 /1 1980 Banco de la Republica Industrial Cr. 32.0 32.0 1857 /1 1980 Banco de la Republica Industrial Cr. 150.0 150.0 1868 T1 1980 Empresas Publicas de Medellin Power 125.0 125.0 TOTAL 2,705.8 23.5 Of which has been repaid 508.4 2.2 Total now outstanding 2,197.4 21.3 Amount sold 50.9 Of which has been repaid 37.9 13.0 Total now held by Bank and IDA 2,184.4 21.3 Total undisbursed 1,206.9 /1 Not yet effective. - 29 - ANNEX II Page 3 of 12 B. STATEMENT OF IFC INVESTMENTS (as of December 31, 1980) Type of Amount in US$ million Year Obligor Business Loan Equity Total 1959 Laminas del Caribe, S.A. Fiber-board .50 - .50 1960-1965 Industrias Alimenticias Noel, S.A. Food products 1.99 .08 2.07 1961 Envases Colombianos, S.A. Metal cans .70 - .70 1961-1968 Morfeo-Productos para el Rogar, S.A. Home furniture .08 .09 .17 1961 Electromanufacturas, S.A. Electrical equipment .50 - .50 1962 Corporacion Financiera Development Colombiana financing - 2.02 2.02 1962-1963 Corporacion Financiera Development - 2.04 2.04 Nacional financing 1963-1967 Compania Colombiana de Textiles 1.98 .15 2.13 1968-1969 Tejidos, S.A. 1964-1970 Corporacion Financiera de Development Caldas financing - .81 .81 1964-1968 Forjas de Colombia, S.A. Steel forging - 1.27 1.27 1966 Almacenes Generales de Warehousing 1.00 - 1.00 Deposito Santa Fe, S.A. 1966 Industria Ganadera Livestock 1.00 .58 1.58 Colombiana, S.A. 1967-70-74 ENKA de Colombia, S.A. Textiles 5.00 2.60 7.60 1969 Compania de Desarrollo de Tourism - .01 .01 Hoteles y Turismo, Ltda. (HOTURISMO) 1969-1973 Corporacion Financiera del Development - .45 .45 Norte financing 1969 Corporacion Financiera del Development - .43 .43 Valle financing 1970 Promotora de Hoteles de Tourism .23 .11 .34 Turismo Medellin, S.A. 1970-1977 Pro-Hoteles, S.A. Tourism .80 .25 1.05 1973-1975 Corporacion Colombiana de Housing - .46 .46 Ahorro y Vivienda 1974 Cementos Boyaca, S.A. Cement 1.50 - 1.50 1975 Cementos del Caribe, S.A. Cement 3.60 - 3.60 1976 Las Brisas Mining 6.00 - 6.00 1977 Promotora de la Interconexion de los Gasoductos de la Costa Atlantica S.A. Utilities 13.00 2.00 15.00 1977 Compania Colombiana de Clinker, Cement and S.A. Construction Material 2.43 .30 2.73 1980 Leasing Bolivar Leasing 9.00 .19 9.19 Total Gross Commitments 49.31 13.84 63.15 Less cancellations, terminations, repayments and sales 36.63 8.88 45.51 Total commitments now held by IFC 12.68 4.96 17.64 Total undisbursed 3.00 .19 3.19 - 30 - ANNEX II Page 4 of 12 C. PROJECTS IN EXECUTION 1/ 1. Ln. No. 741 Water Supply (Bogota II); US$88 million, May 28, 1971. Effective date: August 16, 1971 Closing Date: original - June 30, 1978 current - December 31, 1980 Completion of the Chuza-Ventana tunnel section, which was delayed by two methane explosions, is expected to be completed by mid-1982; all other project elements will be completed by the end of 1981. Borrower's financial performance has deteriorated; recently, however, large tariff increases were put into effect and additional ones are being contemplated which should help to improve overall finances and bring Borrower's performance closer in line with targets. Disburse- ments up to December 31, 1980, amounted to about 99% of the loan amount. 2. Ln. No. 849 Second Atlantico Development; US$5 million, June 30, 1972. Effective date: November 14, 1972 Closing Date: original - March 31, 1978 current - September 30, 1981 The project is the second phase of a scheme to develop about 17,000 ha of seasonally inundated land for agricultural production. At the request of the Government, US$2.8 million of the loan of US$5.0 million was cancelled in February 1977. Settlement of farmers within the project areas is behind schedule and the provision of technical assistance/farm credit needs improve- ment. Because heavy seasonal rainfall in 1979 resulted in severe flooding in the project area, civil works construction has been halted and a study is being carried out to reassess the flood protection and drainage requirements of the area. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense, and with the under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution. - 31 - ANNEX II Page 5 of 12 3. Ln. No. 860 Medium-Size Cities Water Supply and Sewerage Project; US$9.1 million, October 10, 1972. Effective date: March 7, 1973 Closing Date: original - September 30, 1976 current - May 31, 1981 As of December 31, 1980, about 75% of the loan amount was disbursed. Management problems affected the initiation of the project, but execution has since improved. Delay in receiving budgetary funds as a result of the Government's economic stabilization measures also slowed down project execution; however during 1980, execution improved. INSFOPAL prepared a new implemen- tation program for each city and works are now contracted and under construc- tion, with no further delays foreseen. All works are expected to be completed by May 1981. 4. Ln. No. 874 Guatape II Hydroelectric Power Project; US$56 million, January 12, 1973. Effective date: March 13, 1973 Closing Date: original - December 31, 1978 current - June 30, 1980 The project is virtually completed. After considerable delay in resettling the people of El Penol and Guatape, filling of the Santa Rita reservoir was carried out in May 1978, three years behind schedule. The revised project cost is substantially above appraisal estimate, mainly occa- sioned by higher cost of the civil works and resettlement. As of December 31, 1980, loan funds were fully committed and US$55.7 million or 99% of the loan amount had been disbursed. 5. Ln. No. 920 Education III; US$21.2 million, July 19, 1973. Effective date: January 9, 1974 Closing Date: original - June 30, 1977 current - December 31, 1981 Project execution had been suspended in mid-1975 pending redefinition of sector priorities by the Government. It resumed in 1977 but suffered continuous delays. In June 1978, the Government submitted a proposal to reduce the scope of the project and to cancel a large portion of the loan. However, the new administration, which came to office in August 1978, retracted the proposal and decided to proceed with the project as originally conceived. Since reactivating the project, the Borrower has made progress in planning, construction, educational programming and personnel training, and project execution is proceeding normally. Nevertheless, because of the delay and higher costs the scope of the project may have to be reduced. - 32 - ANNEX II Page 6 of 12 6. Ln. No. 1072 Second Multi-City Water Supply and Sewerage Project; US$27 million, January 16, 1975. Effective date: April 14, 1975 Closing Date: December 31, 1981 In spite of the fiscal restraint imposed by the Government's economic stabilization measures, project implementation is progressing satisfactorily in most cities. With the exception of the ground water component and Barranquilla water treatment plant which would be completed by December 1981, all works are expected to be completed by June 1981. Sub-borrowers have not been implement- ing tariff adjustments as agreed, therefore, INSFOPAL is proceeding to take corrective measures. As of December 31, 1980, US$18.0 million or 67% of the loan had been disbursed. 7. Ln. No. 1118 Caqueta Rural Settlement Project; US$19.5 million, June 2, 1975. Effective date: April 1, 1976 Closing Date: Original - October 31, 1979 Current - December 31, 1981 The loan became effective on April 1, 1976, after a six-month delay. Project execution has proceeded rapidly and some of the lost time regained. Road and bridge construction is well ahead of schedule (168 km have been completed). School construction and the provision of sufficient credit are lagging because of slow transfer of funds by the Treasury; the Government is attempting to correct the situation. As of December 31, 1980, US$6.7 million or 34% of the loan remained undisbursed. 8. Ln. No. 1163 Cordoba 2 Agricultural Development Project; US$21 mil- lion, September 12, 1975. Effective Date: March 30, 1976 Closing Date: June 30, 1981 A few months after effectiveness, the Government decided to give responsibility for project civil works to another agency. This decision delayed the initiation of the project and implementation is still behind schedule. One of the project's main problems continues to be inadequate budget allocations to carry out project works and to provide sub-loans to farmers. Maintenance of roads and drains constructed under the loan, technical assistance to farmers and rate of land transfer to beneficiaries are inadequate; the executing agencies have now agreed to take corrective measures. As of December 31, 1980, US$8.2 million of the loan amount had been disbursed. - 33 - ANNEX II Page 7 of 12 9. Ln. No. 1223 Sixth Development Finance Companies Project; US$80.0 mil- lion, March 31, 1976. Effective Date: September 1, 1976 Closing Date: June 30, 1981 The project is proceeding satisfactorily and virtually all loan funds are committed. As of December 31, 1980, about 96% of the loan had been disbursed. 10. Ln. No, 1352 Integrated Rural Development Project; US$52.0 million, January 7, 1977. Effective Date: August 26, 1977 Closing Date: December 31, 1982 The project is now in its fourth year of implementation and proceed- ing satisfactorily in spite of its complexity. The project's components of credit, technical assistance and training are proceeding satisfactorily, while institutional coordination continues to be effective. The forestry and water supply components have suffered some delays. Administrative procedures, such as procurement and disbursement, continue to present some difficulties, but they are much less serious than initially. Control and monitoring of project execution is comprehensive, and first stage evaluation is currently underway. As of December 31, 1980, US$25.1 million, or 48% of the loan had been disbursed. 11. Ln. No. 1357 Second Agricultural Credit Project; US$64.0 million, February 4, 1977. Effective Date: September 6, 1977 Closing Date: December 31, 1981. The funds originally assigned to medium and large farmers were fully committed and disbursed and the $2.0 million reallocated to this component will be fully committed soon. However, only 28% of subloans allocated to small farmers have been disbursed, but commitments have increased recently. Concern over possible diversion and substitution of subloan funds led the Borrower to increase substantially its end-use supervision. About 51% of loan funds for credit to agroindustries have been committed for 116 subprojects. As of December 31, 1980, US$42.6 million, or 67% of the loan had been disbursed. 12. Ln. No. 1450 Telecommunications IV; US$58.3 million, July 7, 1977. Effective Date: October 3, 1977. Closing Date: June 30, 1982. The project has been delayed as a result of several personnel changes in the Borrower. Current activities are concentrated on the procure- ment of project goods, the planning of cable networks, trunk exchange expan- sion, and design of buildings to house equipment. Good progress is being made in the acquisition program of smaller local telephone companies. As of December 31, 1980, US$50.7 million, or 87% of the loan, remained undisbursed. - 34 - ANNEX II Page 8 of 12 13. Ln. No. 1451 Second Small-Scale Industry Project; US$15 million, September 27, 1977. Effective Date: February 14, 1978. Closing Date: March 31, 1981 After initial delays in loan effectiveness mainly due to management changeover, project implementation is proceeding well and loan funds are fully committed. As of December 31, 1980, US$13.5 million had been disbursed. 14. Ln. No. 1471 Highways VII; US$90 million, July 5, 1977. Effective Date: November 28, 1977. Closing Date: December 31, 1982 The Project comprises three main programs: rehabilitation, main- tenance, and vehicle weight control. After initial delays, the project is now developing satisfactorily. All rehabilitation works have been contracted and 25% of the roads completed. The maintenance program began in March 1980; consultants to assist MOPT in carrying out the program have been retained and the bulk of the maintenance equipment has been purchased. The vehicle weight control program is about to begin after a 28-month delay. As of December 31, 1980, about US$25.0 million had been disbursed. 15. Ln. No. 1487 Integrated Nutrition Improvement Project; US$25 million, November 10, 1977. Effective Date: March 9, 1978 Closing Date: June 30, 1982 Significant progress has been achieved in the major components of health, nutrition education and water supply but execution is running about a year behind schedule. Initial delays occurred in two subsidiary components-- home food production and food quality control--but activities are now underway. Project management and coordination have been sound, flexible and effective. Project monitoring and evaluation systems are operating effectively. 16. Ln. No. 1523 Second Cali Water Supply and Sewerage Project; US$13.8 million, June 20, 1978. Effective Date: January 31, 1979 Closing Date: June 30, 1982 Because of EMCALI's failure to comply with some of its obligations under the Loan Agreement dealing with the finances of its Water and Sewerage Division, on January 29, 1981, the Bank suspended disbursements under this loan. Disbursements will be resumed once EMCALI has taken corrective measures. As of December 31, 1980, US$12.6 million or 91% of the loan remained undisbursed. - 35 - ANNEX II Page 9 of 12 17. Ln. No. 1558 Urban Development Project; US$24.8 million, July 21, 1978. Effective Date: December 1, 1978 Closing Date: June 30, 1982 While project execution and coordination has recently improved, overall progress is still running behind schedule. Project implementation plans in 16 of the 23 cities have been approved by the Bank. The new Directora General of SIP intends to accelerate project implementation and has established a working unit to monitor progress and evaluate the project. 18. Ln. No. 1582 San Carlos I Hydro Power Project; US$126 million, July 14, 1978. Effective Date: April 5, 1979 Closing Date: June 30, 1984 Project works are proceeding on schedule and main contracts for equipment have been signed. As of December 31, 1980, US$24.9 million or 20% of the loan had been disbursed. 19. Ln. No. 1583 500 kV Interconnection Project; US$50 million, July 14, 1978. Effective Date: October 17, 1978 Closing Date: June 30, 1982 Project works have recently been initiated. The Bank-financed component (transmission line) is proceeding on schedule, at lower-than- anticipated cost. However, project completion is likely to be delayed by about two years as a result of KfW's objection to the contract award for substations (KfW was originally to finance this component). The Government is now exploring other sources of finance. 20. Ln. No. 1593 Cartagena Industrial Export Processing Zone; US$15 million, August 1, 1978. Effective Date: January 30, 1979 Closing Date: December 31, 1983 After an initial delay due to procurement problems, project implemen- tation is now running smoothly. Construction and the promotional campaign are both well under way, but there have been delays in contracting the water supply works and in construction of a portion of the access road. Difficult soil conditions encountered at the site will require substantial soil investigations. - 36 - ANNEX II Page 10 of 12 21. Ln. No. 1598 Seventh Development Finance Companies Project; US$100 million, July 27, 1978. Effective Date: November 28, 1978 Closing Date: December 31, 1982 The project is proceeding satisfactorily and by the end of December 31, 1980, 99% of the loan funds, or about US$99.1 million had been committed. 22. Ln. No. 1624 Airports Project; US$61 million, December 29, 1978. Effective Date: July 24, 1979 Closing Date: December 31, 1984 Project works are well under way. Because of poor soils, there is a construction delay at the future Rio Negro airport and a solution to this problem is currently being investigated. 23. Ln. No. 1628 Mesitas Hydroelectric Power Project; US$84 million, April 9, 1979. Effective Date: August 21, 1979 Closing Date: December 31, 1982 Project works are well under way, although at higher-than-anticipated cost. Performance by the Borrower continues to be satisfactory, although early next year it will have to take additional tariff measures if its finances are not to deteriorate. 24. Ln. No. 1694 Second (Cartagena) Urban Development; US$13.5 million, August 31, 1979. Effective Date: June 20, 1980 Closing Date: December 31, 1984 Physical works are about one year behind schedule, but the implemen- tation programs for 1980 and 1981 have been accelerated in an endeavor to make up the time lost and complete the project in 1983. , 25. Ln. No. 1697 Third Bogota Water Supply; US$30 million, November 30, 1979. Effective Date: April 22, 1980 Closing Date: June 30, 1983 Project implementation is proceeding slowly. As mentioned in paragraph 1, the borrower is taking additional tariff measures to improve its finances. - 37 - ANNEX II Page 11 of 12 26. Ln. No. 1725 San Carlos II Hydro Power; US$72 million, November 30, 1979. Awaiting resolution of the problem of heavy arrears in payments to ISA from ICEL, a shareholder, the Bank has not yet agreed to the effectiveness of this loan. 27. Ln. No. 1726 Third Water and Sewerage; US$31 million, November 30, 1979. Effective Date: February 28, 1980 Closing Date: June 30, 1984 Project implementation is under way with the final designs for 16 of the 23 subprojects approved and with designs for the remaining subprojects in final stages of preparation. 28. Ln. No. 1737 Third Agricultural Credit; US$20 million, November 30, 1979. Effective Date: October 1, 1980 Closing Date: June 30, 1985 This loan became effective on October 1, 1980 and project implementa- tion is underway. 29. Ln. No. 1762-CO Cerro Matoso Nickel; US$80 million, December 20, 1979. Effective Date: July 3, 1980 Closing Date: June 30, 1983 While some awards of construction contracts are lagging behind schedule, procurement of equipment and materials is progressing well and the Borrower is confident that the project will be completed by April 1982. 30. 1/ Ln. No. 1807-CO Bogota Power Distribution; US$87 million, February 6, 1981. This loan is not yet effective. 31. 1/ Ln. No. 1825-CO Fifth Telecommunications; US$44 million, December 19, 1980. This loan is not yet effective. 32. 1/ Ln. No. 1834-CO Third Small-Scale Industry; US$32 million, December 10, 1980. This loan is not yet effective. 1/ Loan signature took longer than expected because of a delay in obtain- ing Congressional approval for an increase in the external debt ceiling. - 38 - ANNEX II Page 12 of 12 33. Ln. No. 1857-CO Eighth DFC; US$150 million, December 10, 1980. This loan is not yet effective. 34. Ln. No. 1868-CO Guadalupe IV Hydro Power; US$125 million. December 19, 1980. This loan is not yet effective. March 12, 1981 - 39 - ANNEX III Page 1 of 2 COLOMBIA SUPPLEMENTARY PROJECT DATA SHEET Section I: Timetable of Key Events (a) Time taken to prepare project: 1-1/2 years (b) Agency which prepared project: Instituto Colombiano de Hidrologia, Meteorologia y Adecuacion de Tierras (HIMAT), assisted by FAO-CP. (c) First presentation to Bank: April 1979 (d) Departure of appraisal mission: September 1980 (e) Completion of negotiations: April 1981 (f) Loan effectiveness planned: November 1981 Section II: Special Bank Implementation Actions After effectiveness, the Bank would make a US$2 million equivalent disbursement from the Loan Account, to a working fund sufficient to cover approximately six months of local expenditures for civil works, consultants and training under the project. The fund would ensure project liquidity and prompt loan disbursement. Section III: Special Conditions 1. Assurances were obtained that: (a) Contracts for consulting services would be on terms and conditions satisfactory to the Bank (paragraph 50); (b) HIMAT would contract agricultural technical assistance in accordance with the requirements of FFAP and under arrangements satisfactory to the Bank (paragraph 54); (c) The necessary credit would be made available by FFAP through financial intermediaries (paragraph 54); (d) At least 80% of charges billed would be collected in each district; where it is not, agreement would be reached on actions to be taken to collect water charges, but where no agreement is rached, no withdrawals will be made from the special account for civil works (paragraph 58). - 40 - ANNEX III Page 2 of 2 (e) Based on a system of water charges, satisfactory to the Bank, HIMAT would put into effect a schedule of tariffs for each district by January 1, 1982 (paragraph 60); (f) By June 30, 1982, HIMAT would furnish the Bank a plan of action for transferring district management responsibilities to the users and thereafter, put it into effect (paragraph 61); and (g) HIMAT would make adequate provisions in its budget for the prompt future replacement of worn out machinery and equipment (para- graph 62). 2. A special condition of effectiveness would be that HIMAT has estab- lished a project coordination unit and has assigned a senior HIMAT staff member to be full time project coordinator with duties and responsibilities acceptable to the Bank (paragraphs 53 and 72). Conditions of disbursement would be: (a) For the advance to the working fund, that the fund had been established and that the Government had approved the transfer of its corresponding share (paragraphs 52 and 67); and (b) For subsequent replenishments to the fund, that the Government, the Bank and HIMAT had reached agreement on the size of the fund for the subsequent period and that the Government had approved the transfer of its corresponding share (paragraphs 52 and 67). 〔BRD一3638RI ,’才｀&&“不‘一！；。！一一、兀 一 -..~.,,．、＇．二r:＇一： 一‘、一門一，。一‘:．一化一俗一」