Conformed Copy - L3278 - Public Sector Reform Loan - Amendment

Page 1 February 20, 1992 Mr. Rudolf Hommes Minister of Finance and Public Credit Ministerio de Hacienda y Credito Publico Bogota, Colombia Re: Loan No. 3278-CO (Public Sector Reform Loan) Dear Mr. Minister: 1. In connection with the Loan Agreement for the captioned Loan between Republic of Colombia (the Borrower) and International Bank for Reconstruction and Development dated December 28, 1990 (the Loan Agreement), I am pleased to inform you that the Bank has "agreed to your request of introducing certain changes to the Loan Agreement, all related to the technical assistance program provided for under Section 3.03 of the Loan Agreement. The changes are as follows: (a) The following introductory paragraph shall be inserted after the title of Schedule 8 to the Loan Agreement (the Schedule) as paragraph 1 thereof. "1. Objectives The Technical Assistance program will, in general, aim at assisting the Government in the analysis, formulation and implementation of policy and institutional reforms to improve the productivity in the use of public sector assets and rationalizing the role of the public sector in the economy. The specific objectives pursued under this program will be: (i) assist in the preparation and implementation of performance plans for public entities; (ii) support the Borrower's efforts to improve, its fiscal performance and to strengthen the public sector financial management and monitoring of its operations; (iii) assist in the preparation of the technical, economic and legal basis for the formulation and implementation of reforms in the railways, telecommunications, port, shipping and agricultural, marketing, and in other areas or fields dominated by the public sector that may be agreed from time to time between the Borrower and the Bank pursuant to Section 3.03 (c) of this Loan Agreement; (iv) assist in the preparation of restructuring programs for public entities which will operate in a competitive sector environment; and (v) assist in the definition or implementation of privatization/divestment strategies for such publicly-owned enterprises as may be agreed between the Borrower and the Bank pursuant to the provisions of paragraph (c) of Section 3.03 of this Loan Agreement." (b) Paragraphs 1, 2, 3, and 4 of the Schedule shall be hereby re-numbered as paragraphs 2, 3, 4, and 5 thereof, and further modified as follows: "2. Preparation and Implementation of Performance Plans (i) Technical assistance for purposes of the preparation of performance plans for decentralized entities which are subjected to the PPES and specific sector reform programs; Page 2 (ii) Technical assistance for the preparation of a restructuring program for the Borrower's Empresa Colombians de Telecomunicaciones (TELECOM), including the development of a cost accounting system, review of its current tariff structure and the review of its managerial and corporate structure to enable it operate on a commercial basis; and (iii) Development of a management information system for the Borrower's Instituto Colombiano de Hidrologia y Adecuacion de Tierras (HIMAT). 3. Improvements in the fiscal performance of the public sector and strengthening the latter's financial management and monitoring. (i) One or more studies on an integrated financial system for the public sector operations, and for the development of such system; (ii) One or more studies on the rationalization of public sector salaries and personnel costs; and (iii) One or more studies fur purposes of identifying, quantifying and analyzing the current levels and beneficiaries of subsidies granted by the Borrower. 4. Preparation and implementation of sector reforms: (i) Technical Assistance to the Borrower's ministry of communications to strengthen its planning and regulatory role in the sector; (ii) Studies to define the institutional and regulatory framework, including tariff, compensation, and licensing for the ports sector; (iii) Studies to define the tariff system for the provision of rail infrastructure services and to review the economic and technical justification of the proposed investment program for the rehabilitation of the rail system; (iv) Overall review of the recently introduced reforms in the shipping sector so as to enable the assessment of their impact on the cost and quality of the shipping services rendered in Colombia; and (v) One or more studies aimed at defining the technical and economic work required to implement the reforms proposed in the agricultural marketing sector, including the possible establishment of a system of variable tariffs and price bonds and the restructuring of the Borrower's Instituto de Mercadeo Agricola (IDEMA). 5. Definition of privatization/divestment strategies for specific public enterprises: (i) "A study top define a strategy for the privatization/divestment of the Borrower's Banco de Colombia." (c) A new paragraph 5 is hereby added t the Schedule, to read as follows: "5 New Activities. Such other activities as my be agreed from time to time between the Borrower and the Bank pursuant to the provisions of paragraph (c) of Section 3.01 of this Loan Agreement." (d) A new paragraph (c) is hereby added to Section 3.01 of the Loan Agreement, to read as follows: Page 3 "(c) The Bank, at the request of the Borrower and acting through its representative under Section 7.01 of this Agreement or through the head of the Borrower's Departamento Nacional de Planificacion or the person or persons appointed thereby, may accept to include as part of the aforesaid Technical Assistance Program, studies, expert, advisers, training, provision of equipment or other technical assistance activities which, in the Bank's reasonable opinion, will further the objectives set forth in, or expanded pursuant to, the provisions of Schedule 8 to this Agreement, as such Schedule may be changed from time to time or expanded pursuant to the provisions thereof. Any such request shall be presented not later than June 30, 1993, in such scope and detail as the Bank shall reasonably request, and shall be deemed accepted, and the corresponding activity included in the aforesaid Schedule, by means and as of the day of the notice to be sent by the Bank for purposes of such acceptance." 2. Additionally, the Bank, pursuant to Section 2.03 of the Loan Agreement, is hereby extending the Closing Date to December 31, 1993. This will enable additional disbursements for the aforesaid technical assistance program. If you agree with the changes referred to in 1. above, please sign, date and return to us on behalf of the Borrower the attached form of confirmation. The amendments stipulated hereby shall become effective on the date on which said form is received by the Bank. Sincerely yours, International Bank for Reconstruction and Development By /s/ Yoshiaki Abe Country Director Latin America and the Caribbean Region AGREED: REPUBLIC OF COLOMBIA By /s/ Rudolf Hommes Minister of Finance and Public Credit