Conformed Copy - L4196 - Financial Markets Development Project - Supplemental Letter 2

Page 1 July 29, 1997 International Bank for Reconstruction and Development 1818 H Street, NW Washington, D.C. 20433 United State of America Re: Loan No. 4196-CO (Financial Markets Development Project) Loan Agreement: Sections 3.01 (b) (i), 3.03 (a) (iii) and 3.03 (b) Monitoring and Evaluation Indicators Dear Sir/Mmes: We refer to the Loan Agreement of even date herewith entered into by and between the Republic of Colombia (the Borrower) and the International Bank for Reconstruction and Development (the Bank). With reference to the provisions of the Loan Agreement, and in particular the Borrower’s obligations under Sections 3.01 (b) (i), 3.03 (a) (iii) and 3.03 (b) thereof, we wish to advise you that the indicators referred to therein are those set forth in the attachment to this letter which we understand are satisfactory to the Bank. The specific number will be inserted in the first Six-month Program (see Section 1.02 (q) of the Loan Agreement. Very truly yours, REPUBLIC OF COLOMBIA By ___________________________________ (Authorized Representative) CONFIRMED: INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By _________________________ (Authorized Representative) Date: ________________________ FINANCIAL MARKETS DEVELOPMENT PROJECT MONITORING INDICATORS 1) Market Capitalization: Yearly average of equity market capitalization / GDP 2) Size of the Formal Securities Market: Total yearly transaction volume on the stock exchanges / GDP 3) Size of the Total Securities Market: (when available in the future) Total yearly transaction volume (exchanges + OTC) / GDP Page 2 4) Growth of Government Securities Market Yearly volume of TES traded in the public markets / GDP 5) Volume of rating activity: Number of securities and/or issuers rated (number of ratings) per year 6) Growth of Institutional Investors, in size: Yearly average of total assets of institutional investors / GDP 7) Development of anti-trust capacity: Number of cases of anti-competitive practices investigated and for which a decision by the Superintendency of Industry and Commerce has been taken. 8) Institutional Capacity Building in Control of Fraudulent Practices Number of persons trained in money laundering and other fraudulent practices 9) Institutional Capacity Building in Supervision of Financial Markets Number of persons trained in supervision of credit/deposit and securities markets