Announcement of IFC Investment in Forjas de Colombia, S.A., Colombia on June 10, 1964

• IFC Press Release No~ 6!.:-/10 , Subject: IFC Investment in Forja.s de For Release AM Newspapers Colombia, S.A., Colombia ·wednesday, June 10, 1964 The International Fina.nee Corporation, an affiliate of the World Bank, and the Interim Organizing Committee of Atlantic Community Development Group for Latin America (ADELA), a private group formed by North American, European and Japanese interests, today announced their agreements to invest in shares of Forja.s de Colombia, S.A., a company formed to build and operate a new plant for the produc- tion of steel forgings in Colombia. IFC Will also join two Colombian finance institutions in underwriting the placement of capital stock of the company with • investors both inside and outside Colombia • IFC will invest directly in Col$10 million (approximately equivalent to US$1 million) of the company•s shares. IFC, Corporacion Financiera Colombia.na, of Bogota, and Corpora.cion Financiera Na.cional, of Medellin, will underwrite the placement of CoJ.$10 million of Forjas stock, each institution underwriting a third of the issue. This will be l'FC's first underwriting operation in Colombia, and its first combined operation with the two financieras, in each of which IFC is a shareholder. The Interim Organizing Committee of ADELA has arranged through one of its sponsoring companies to take up the subscription in the amount of Col$5 million in the shares of Forjas de Colombia, S.A. pending the forthcoming formal incorpora- tion of Adela Investment Company. This is the first announcement of an operation I in the name of ADELA since the inception last autumn of the plan to form a multi.- • national company to make equity investments in productive industrial projects in Latin America.  - 2 - Present shareholders of Forjas de Colombia include private Colombian in- vestors, the Instituto de Fomento Industrial ( the official government develop- • ment institute), Esso Colombia Investment Compa.ny, a group of Colombian oil com- panies, Rheinstahl Industrie-Pla.nung GmbH, a subsidiary of Rheinische Stahlwerke of Essen, and other German private interests. Forja.s will build and operate a forge plant in Bucaramanga., in the Depart- ment of Santander, which will provide Colombia with a. modern forge plant capable of producing 7,800 tons per year of high quality die-forged steel products, of a kind which are at present imported. The estimated annual savings in foreign ex- change ·will amount to at lea.st US$5 million. It is expected that the availability of forgings from a domestic supplier will contribute significantly to the further development of Colombia's metal working industries. The total cost of the project is estimated at US$14.2 million. tt Under the new financial arrangements, the total share capital of Forjas Will be Col$65 million. In addition, loan capital is being ma.de available to Forjas by Rheinstahl, and the Colombian Private Investment Fund, which was established by the Central B~ of Colombia in 1963 to channel foreign capital to private enterprises. Rheinstahl has provided long-term credits amounting to US$5.7 mil- lion equivalent and the Private Investment Fund is lending US$2.0 million equiva- lent. Rheinstahl, a German·firm with extensive experience in forge operations, has designed the plant. It will purchase the necessary equipment and super- vise the construction and start-up of the plant. In addition, Rheinstab.l will tr~in Colombian personnel to operate the plant, will provide Forjas with manage- ment assistance through provision of key personnel, and will supply technical know-how based on its own experience of operating forge plants in Germany. • • - 3 - The plant is expected to commence operations in 1966. Its main product line will be tractor track parts, but the forge hammers and presses a.re so selected that the manufacture of wide variety of other forged products, such as automobile components, tools and railway equipment, will also be possible. Machine shop facilities for finishing tractor parts and other forgings will form an integral part of the project. This is IFC 1 s tenth investment in Colombia, and will raise the Corpora- tions's total commitments in Colombian enterprises to more than US$10 million. I I • • ff .• ) it,, 'tf'