Announcement of Thirty Million US dollars Loan in Colombia on June 28, 1963

t . INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT 1818 H STREET. N.W., WASHINGTON 25, D. C. TELEPHONE: EXECUTIVE 3-6360 Banlc Press Release No .. 63/26 Subject: $JO million Loan in June 28, 1963 Colombia The World Bank today made a !ban equivalent to $30 million to Acer!as Paz del Rio, S.Ao, a private corporation which operates the only ;1integrated steel mill in Colombia. The loan will assist in financing a program to improve, increase and diversify the company's output of steel products, thereby reducing Colombia's dependence on steel imports and effecting an annual net foreign exchange savings equivalent to approximately $10 million. • Four commercial banks are participating in the loan, without the World Bank's guarantee, for a total amount of $325,000 representing part of the first ),1aturity which falls due in April 1968. The participating banks are Bank of America, National Trust and Savings Association; the New York Agency ~f the Bank of Montreal; Grace National Bank of New York; and J. Henry Schroeder Banking Corporation. The Paz del Rio steel mill is located at Belencito, about 160 miles north- ; , east of Bogota. The mill started operations in 195.5 and in 1962, produced 126,000 tons of finished items which consisted of heavy structurals, rails, I ,,\ merchant products and wire. Exce~-~ -ror some minor i terns, the company produces all its raw materials. The project now being undertaken does not include any new basic iron and steel-making facilities. It is designed to make possible maximum utilization of the existing plant and fuller use of raw materials and • scrap, and to broaden the range of finisted products. It includes the con~ struction of a blooming and slabbing mill, a 48-inch steckel mill, a sinter plant, ingot. soald.ne; pits., an oxygen plant and auxiliary, facilities, and the  - 2 - pu~chase of heavy mobile and other equipment. The slabbing and blooming mill and the steckel mill can provide the basis for a cold rolling plant and a tinning • line. The new installations will enable the coi:nPanY to increase its annual output of finished products to 220,000 tons by 1968, including 67,000 tons of flat pro- ducts which it does not now manufacture, and to reduce unit costs and improve the quality of its products. The Colombian steel market is expected to grow from about 250,000 tons to at least 400,000 tons by about 1970, and Paz del Rio should be able to increase its share of the market to 55% as a result of the project. Acerias Paz del R10, organized in 1947 as a quasi-governmental corporation, is now a private corporation with 80% of its capital owned by private share- holders. Arrangements have been made whereby the balance of shares, now held by the Central Bank, will be transferred to the private sector during the next few years. Paz del Rio has retained the services of consulting engineers to supervise • the procurement and installation of most of the facilities included in the proj- 1 ect. The company itself will undertake direct responsibility for items requir- ing only local currency, principally the building of additional housing and community facilities at Belencito to reduce the high rate of tuniover among supervisory and professional personnel and skilled workers. The total cost of the project is estimated at the equivalent of $58.7 million. The Bank loan of $30 million will cover most of the foreigp exchange requirements; the remaining costs will be met by Paz del Rio from its own resources. Imported equipment will be purqha.sed on the basis of internati<;>nal competition •. The loan is for a term o.f 15 years and bears interest at the rate of 5-1/2% annually including the 1% commission which is allocated to the Bank's Special ~ Reserve. Amortization will begin on April 15, 1968. The loan is guaranteed by the Republic of Colombia.