Announcement of the Bank Granting Loan to Colombia on August 19, 1949

IO O c.. • • FOR THE PRESS INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Hashington FOR IHMEDIATE REI.EASE Press Release No. 146 August 19, 1949 The International B~nk for Reconstr-uct~on and Development t9day granted a lo~n or $5,000,000 to the Gaja de Credito A~rario, Industrial y Minero of Colombia to rinance the purchase ot agricultural machinery. The loan is for a term of seven years and is g\laranteed oy the Republic of Colombia. Interest is at the rate of~%, pl~s a commtssion of 1% per annum, which, in accordance with the Bank's Articles of Agreement, :5.s allocated to its special reserve fund. Semi-annual amortizatiQn p~yments will begin oy • May 15, 1952, and are de~igned to retire the loan maturity on November 15, 1956. The agricultural machinery to be financed by the loan includes neavy 1 light and medium t~acto~s with oomplementa;ry equipment, hand tool~ and animal drawn implements, spare parts, tools and machinery for maintenance ~nd re~air centers. This equipment will enable Colombia to lncrea~e farm production and thus meet an expsnd;i.ng domestic comrumption a;nd tend to reduce importations of f'oodstui'£s and staples., which would resu.lt in -a saving of hard cm·rei1cy. In 9rder to ensure that the me.ohtnery purchased from the proceeds or the loan will make an effective addit;i.on to the present supply, the Government of coiombia has glven assurances that ;it will pursue a policy of granting high priority to the &upply of foreign exchange t:Qr the importation or addi.tional machine~J, and spare parts ano. replacements for existing machinery. • The recipient of the loan, the Caja de Credito Agrario, Industrial y Minero is a developmental institution organized in 1931 for the purpose of aiding in the development of Colombian agriculture, mining and industry. Although organized as a private corporation, nearly all of its capital stock is held by the National Government upon which it depends ultimately for finance. In connection with its activities in the ~griculturel field.,; it maintains throughout the country over a hundred branches and ag~nci~s which are sales outlets for seeds, fertilizer and agricultural implements, most of which provide credit end banking facilities to the rural connnunity. This represents still another loan in the development field and the receipt by the fourth Latin American country of financial assistance !ram the Inter- national Bank~ In making the loan to Colombia, the Bank is further fulfilling • one of its major aims - that of encouraging the development of productive facilities and resources within the territories of its member countries. As was previously announced, the Bank has a large mission in Colombia, headed by Dr. Lauchlin Currie, now engaged in making a general survey of Colombia's economy, its needs and potentialities. In the meantime, however, until a more comprehensive plan of development is m~pped, the International Benk agreed to give consideration to the financing of several specific projects, among them the importation of agricultural machinery, which had been submitted previously by the Colombian Government, and which the Government did not wish ~ to defer. I After having been previously approved by the Executive Directors, the .. : Loan and Guarantee Agreements were slgned tod~y by Eugepe R. Black, President,· ., on behalf of the International Bank for Reconstruction and Development, and by- • Don Gonzalo Restrepo-Jaramillo, Ambassador of Colombi~, on behalf of both Cajs de Credito Agrario, lndustrial y Minero and the Republic of Colombia. •, .·. I~ I • SUP:PI.EMENTAL STATEMEI'IT. ON :LOAN 'I'.0 -CAJA. DE. CREDITO AGRi~RIO, INDUSTRIAL Y .MINERO OF _COLOMBIA Recent Development,s in Colombian. I Econosv:. Durtng the War, Colombia, ·in common: with nearly all Latin JU~erioa.n count:i:•ies, shared the inflationacy experience arising chiefly from unusually favorable balances of payments. Subseqnenti,, ini'lati9n continued due to various factors. This situation, coupled with a large backlog or demanq for foreign goods which acoum~lated over the war period, ocQasioned a high level of postwar imports whioh,in turp, has resulted in a heavy depletion of foreign exchange +eserves which continued until April of l949. Latest rel)orts, however, indicate that e:xch~ge holdings have increased somewhat, due partly to the ~~ason.al movement ~ of coffee at good prices and al~o to the adoption of rigorous ~eijtr~ctioijs upon import licenses. Colombia's long-rarige f'creign exchange pro3pect~ ~ppear to be favorable, based on the expected maintenance of ·a ~table ~arket at good prices for mild coffee, her principal e~ort and doll~r earner. Evidence that the Colombia:n Government is aware of the probleme which confrapt the nation and evi4~nce also of its intention to apply corrective measures is to be fo\l,nd in the legi$lative enactments of Deoe~be~ l948~ A balanced budget w&s ~t;roduced. A new par:I,ty wt;is fixed f o,: tne Colombian pe~o. Powers were granted tQ the Government fo;t" the eftective control of impoi,.ts ~nd exports to protect diw:lndling gold and f'9reign exchange reserves. Colombian Foreign Bonds .... ······ .~ Service on all external d,e"bt of tp.e National Government is now being met. • Service on the munici:pal and departmental et·bernal bonqs w.hiGh had been suspended bas not yet been resUDled, althougb an asreemeht t:Qr so doing has be~n reached  It. • ' ~ 4~ with the Foreig:p. BondholdeJ'~ Pr,otecttve· Qouncil~ lt is understood that com- pletion Qf necessary formalitie~ is all that. stands in the way of a ~inal sett:tement •. Paym~nt of :principal, int!3rest,, a~d si:nlq.ng !und irlst~llmen~s. on. these obligations wil'l. be gv.arantet=)d by the RepubliQ of Colombia under legis~. lation already enacted by the Colomb:i:an Congress,. ~:~a.ils. of the ~tatus.:of_the :respectiv~ issues.i.2J#~~ 1 Service upon e:tternal dollar bonds of t~e. Republic, a;nd .upon dollar bonds guar.~teed by the Republic, was resumed in i941 and 1942. In June, 1941,. the :Repqblic offered exehange of its two 6% i~~ue s into new J% 1970 dollar bonds, on. a p0:r· f.or par busis as regards princip~l, w!th additional new 3% bonds for 50% of unpa~d i:n te:rest coupons. Thi~ offer has been e:x:tended from time to time, en:d now •• f.)~.pires December 31, 1949~ ln June, 1942, the tgrie?ultural Mortgage Bank of.f.'e:red exchange of its bonds. (guaranteed by the Repu,blig) intc;> the new 3% 1940 GovernmeD:t bonds, on a basis of $1,000 to $1,lOO in settlement. o~ pr~nqipal apd ipterest ~rrears. At the same tj.me, exchapge of bq~ds of three other Colomb:\an rqortg~ge banks (not. guaranteed by the Republic) into the s1;1i;ne.p.ew 3% 1970 G9ve1;nme~t bonds was 7.50 offered, on ~ basis or ~~1,000 ot old bonds tor ~~~ of new. These offers now expire July 1,. 1950s An agr~ement concerning the sterling debt or the Rep~bliQ became operative in January, 1944, and ~ervice has been ~ince maintained, In December, 1947 a plan. for·resumption of ~erviQe l)pon Dep~r,tmentgi and Municipal d'ol~ar indebtednesa (not guaranteed by t,he Republiq) was approved by the Colombian Congre~s, a~d in necembe~,.1948 it wa~ officially announced that agreement had· been reached Wl. th the·· Foreign Bondh<"'lde:rs P:;rptect;ive Gounci+, ~,, ' '- • Incorporated, New Yo~k, upon the terms of settlement. e~change ot outstand:tn~ bopcls for new - 3% 1978 rhe plan provides for 'bonqs bearing the guarantee of. th~ Republic. For each *~1,000 principal amount of' old bonds swrendered, with all unpaid interest coupons ~ttached, new bonds in the principal amount or $1,200 will be issued. Settlement under this offer now awaits final registration formalities. The Caja de Credito Agrario, Industrial y Minero is an institution established in 1931 under Colombian la~ to aid in the development and expansion of agricul- ture, mining and industcy, princj.pally in the field of finance. Its financial structure is that of a private corporation. The total authori~ed capital is 50 million Colombian pesos. Of this, 3~.9 million pesos has been paid up, and, • of the total stock, more than 99% is held by the Colombian Government which is empowered, in certain circumstances, to guarantee Caja I s obligations.. Caja is administered by a manager and board of directors elected by the stockholders. Assets and liabilities, as of June 30, 1948, were stated to be 264.6 no.llion pesos a While having the status of a private corpor~tion,. Cs1ja must l;,e consi- dered largely as a governmental development institution, ultimately dependent upon government for its finance. In the agricultural field, Caja~s three-fold f~ction of providing banking facilities for the small depofJitor, loans to farmers, a~<l sales outlets for seed~ tertiJ.izere, ~nd agric1.lltural implements both in the princip$l cities and in the small communities which ~re not reached by the larger conimer~ial banks and£ar~ suppliers 1 co~ends ~his institution as a logioal r~cipient or the loap.. 1- • Distribution of Agricultµral 'Machine;ry . . . - - ( Only part or the agricult~r:al machinery to be pµr.chased from the proceeds or the loan will be distribu~ec;l dire~tly py Caja~ It is expected that most of  .. \ - 6- • the heavier equipment will be sold thrc;>ugh the established commercial dealers who will also provide s~rvice and maintenance facilities in accordance with present practice. The Loan Agreement also Qontains a provision whereby up to 20% of the machin- ery purchased will go to the Colomb:i.an Ministry of Ag~icul ture which opera·tes equipment pools~ These pools provide macµine~y and trained operators who perform ~ar~ work on a fee basis for the small farmer who~e financial resources or small land holdings prevent his acquiring machinery of his own. The Ministry now operates ~everal of these pools and desires to expand its operations. Mechanization of Agriculture MeQhanized _agricultur.e has been receiving attention in Colombia. during the past decade ~nd the impQrtation of mechanical equipment, which was greatly reduced during World War II, has been unusually hec;lvy during the post!'9war years, • Expanding industry, which o;f,'fers higher wages and more attract:i.ve working conditions, has caused in part the w~thdrawal of labor from rural districts. This, coupled with an intensification of agrio~l t~al prop.ucM,.ou a.tld an increase in tha areas under cultivation, has resulted in a ijhortage of farm labo~ in many regions, which can be compensatec;l only by additional mechaniz1;1tion. Even in those ar.ea.s where labor i~ still rel~tively abundant, traditional methods of prepai:-i.ng the soil, planting, and harvesting, have be.come unduly costly, and the use of machine~ is relied upon to reduce these costs. The acceleration ot mechaniiation has, it is true, resulteq in a sho~tage of trained tractor operl;lto:r·e and competent. repa~men, but eteps h~ve already been taken to overcome this deficiency. The Army now give~ 1;1 special course in tractor oper,tion and maintenance and the inst:ruc.tion a.coorc;led is cons;i.dered to be excel- lent. The cour~e of in$tru.ction was set up with the a~d of United States agri- • cl.llt\lral engineera., some. ot whom re~ined· as instructorf?. In addition, the Colombian Government·has ma4e arrangements with one of the lerger agricultural mach:l,nery mant4'act~ers in the {l~ited States to instruct both f'arm.e~s and person• nel of appropriete government agencies in t~e efficient use of farm mach:inery,