Colombian external credit

 R~' REi" . C01'lFIDEl.JTIAL INTERNATIONAL BANK FOR RECONSTHUCTION AND DEVV,I/lP''ENT 66863 COLOliBTAN Economic Department 2, 1949 COpy NO.  COLOMBIA ZSS~TTlAL STATISTICS 450,000 square m~les Population: 10.5 mill:Z.on Currency:: Unit: pesr:: 'Pa'ri"ty: 1.95 pesos:: US$ Trade Statistics: ! Total Imports 1947: US$ 339 million Total Ex;eorts 194"7: US$ 253 million Official Exchan e ransactions on Account of: I!l!Ports 194 8:Jj US$ 262.8 million Exports 1948: US$ 227.0 million Budget 1947: Totel .@g?enditures: 374.0 million pesos .Tax Revenues: 312.4 million pesos Bu~t 1248, Estimated: Total E;penditures: 415 million pesos Tax Revenues: 350 million pesos Internal Debt of National Governillent, Sept. 1948: 369.1 million pesos External Debt, Sept. 1248: Principal, Long Term uS$ :r:ebt : 2' US$ 56.2 million Principal! Other External Debt:.:i US$ 26~5 million Lepartmental and Municipal Long Term: US$ 38.5 million E!port Il!mort Bank (as of 1/31/49): Total Loans Authorized: US$ 49.4 million Loans Di sbursed: 3' US$ 29.3 million Not Yet Disbursed;~ US$ 20.1 million Principal Outstanding; US$ 19.9 million Cost of Living Index, Bo~ota (Februar~ 1937 ~lOO): October 1947: , . 250.7 October 1948: 292.0 Total Gold and Exchange Reserves,: December 19~: US$ 114 million December 19! t estimated: US$ 82 million Y On the basis 10 months statistics, ?J Export Import Bank loans and short-term debt. )} Including US$ 9.5 million of t::ie $10 million loaned for recon- struction purposes after events of April 9, 1948.  CONTENTS Page SUMMARY .AND CONCLUSIONS • • • • • • • • • • • • • • • • • • • • • i BALAlifCE OF PAYMENTS .AND FOREIGN TRANSACTIONS . ... .. .. . ., 1 Balance of Trade • • • • • • • • • • • • • 0 .. • • • • " .. .. 1 E.xports • e _ .. • 0 • • • • It • • , • • 0 I) • • eo. • • • 1 Coffee Exports . • • . • • • . . . I) • • • t') • • () r:1 • 9 " 0 2 Petroleum Exports .... • • .. • • • • .. • " • • • • • .. •• 4 Idstribution of Exports by Countries • • • • • .. • • • • .. • 56 Import s ".O' • • • • • • • C'I • • • • • • 0 • • I) • • 0 .. • Origin of Imports o. . . " . . . . . .... ... . ... 7 Balance of Payments . . . . . . . .. • • • .. • " • • • • • .. • .. 7 Foreign J:ebt .. • G • .. • • • .. • .. • • • • .. .. • • • • • •• 9 Capital Movements '0 • • • • • • • • • • • ~ • • ~ • • • •• 10 Gold Movements • • • • • • • • • .. • .. • • • • • 0 • • • •• 10 Foreign Exchange ~~d Gold Reserves .. • • • 0 • • , .. • • •• 11 Foreign Exchange Rates .. • • • • • • 0 • • • • • .. • • • •• 12 PUBLIC FINANCE • • • • • • • • • • • • • • • • • • • • .. . .. 14 The Federal Budget .. • • • • • • • • • • • • • • • • •• 14 State and Municipal Budgets • • • • • • • • .. • • • • • •• 18 Internal Public Debt • .. • • • • • • • • • .. • • • • • • •• 19 Prospect s •• • • • • • • • • • • • • • • ~ • • • • • • •• 19 MONEY .AND PRICES •• • • • c • • ... • • • • • • • • • • • .. 21 STATISTICAL TABLES Table 1 - Foreign Trade Table 2 - Commodity Exports Table 3 - MBjor Commodity Trade Value, in Per Cent of Total Trade Table 4 - Fluctuations in Prices and Volume of Exports Table 5 - Distribution of Total Value of Trade Per Country Table 6 - Imports from the USA in Per Cent of Total Value Table 7 - Balance of Payments, 1940-48 (Official Exchange Transactions Only) Table 8 - Balance of Payment s Table 9 - Petroleum - Actual Capital Transfers Table 10 - Valuation of Petroleum Production Table 11 - Trade Transactions Uncontrolled by Foreign Exc~ Authorities Table 12 - Gold and Foreign Exchange Reserves Table 13 - Federal Government Expenditures and Means of Financing, December 1939 - June 1948 Table 14 - Federal Government Expenditures, Selected Years, 1944-1949 Table 15 - Federal Government Revenues and Borrowings, Selected Years, 1939-1949 Table 16 - Status of U.S. ~"W0rt-Import Bank Loans to Colombia as of January 31, 1949  SUEI.:Arry AIJD GOlJCLUSIONS 1. A very high proportion of Colombian exports go to the "{estern Hemisphere" and there is thus no problem of inconvertible currencies. 2. Coffee exports (US:!5 154 million in 1946) represent 75% to 80% of Col- ombian exports by value. A fall of one cent per in coffee ex- port prices carries a loss of US;'; 7 million in eXDort proceeds upon average 1944-48 coffee export volmnes. 3. Coffee export volumes have steadily increased and could increase still further, and Colombian quality enjoys a premiUl'1 market. 4. Concensus oDinion agrees on a favoral:,le us market for Colombian cof- fee over the foreseeable future. Short-terrn reactions depend mainly on levels of emplo:vment and in United s; long-term changes upon the "'"orld' su::>ply pos::tion. 5. Petroleum exports (US0 43 w~llion in 1947) represented 15% of exports by value in 1947. New petroleum investments are estimated at US~ 33 million in 1947. Maintenance of this level of e:z:change receipts de- 'pends largely upon Colol":"lbian oil Do1:icies affectinr; foreign exploi- tation, which are presently regarded as unfavorable by private inter- ests. Horeover, the world Detroleum position is currently unfavor- able to heavy new direct oil investments •• 6. Present imDorts include corrrnodi ties, notably agricul tura.l products, whose increased domestic production can be expected 'with economic ..,. i -  development. This initial import replacement would permit a cr.ange of import structure in support of continuing deva),opment even :i.f some fall of export proceeds occurs o 7~ A debt set tlemen t has been agreed with external bondholders. Exter- nal national direct and guaranteed bonds total us¢ 95 million (US$ 86 million in US Dollar bonds). Enm Bank outstanding princi,al in US$ 19.9 million with US$ 20.1 million undisbursed balances. 8. llimestic cost of external debt service is &;0 of budgeted expenditures in 1949 (total internal and external debt service is 14 e 6% of budget). When all present mm Bank loans are drawn, annual external debt service will be US$ 10.5 million, or 4.2% of 1947 exports, Transfers on account of direct investment are estimated to increase total ser- vice payments to US$ 16.5 million, or 6.5% of 1947 exports. Comparable percentages are Brazil, 7.. 0; Chile, 24.. 9; Mexico, 14.4; Uruguay, 9.1; and Ecuador, 26,8. 9. Deficit government finance is intimately related to domestic development expenditures, If these continue high, inflationary pressures will also continue unless an internal government bond market develops or tax reve- nues increase correspondingly. The last requires a revision of the tax structure which is economically feasible but politically difficult. 10. In recent years expanSion of commercial bank credi t has been a larger direct CSU$6 of monetary inflation than deficit G<;>vernrnent finance. Deficit finance, however, has indirectly contributed materially to -ii-  development. This ir:mort replacenent would permit a change of imnort structure in sup:)ort of continuing develoDnent even if f'l. some fall of export oroceeds occurs. 7. A debt settlement has been agreed with external bondholders. :sxter- nal national direct and guara~1teed bonds total uS$ 9S J:lillion (US'j 86 million in US Dollar bonds). Exim Bank outstandinG principal in US~ 19.9 million with 20.1 million undisbursed balances. 8. Domestic cost of external debt service is 6% of ex"Pendi ture s in 1949 (total internal and external debt is lLl.61, of budget). 1'1hen all nresent Exim loans are drawn, annual external debt service will be US~~ 9.h million, or 3.7% of 1947 exports. Transfers on account of direct are estimated to total ser- vice paynents to US '; .S million, or (,.l~:' of 19).+7 eX:lorts. Comparable nercentages are 7.0; Chile, 2h.9; rexico, 1),.4; Ururnay, 9.1; and ~cuador, 26.8. 9. Deficit fovernrr~nt is intimately related to donestic development expenditures. If these continue high, ill.fJ Dressures will also continue unless an internal :':'OYernrrlent bond market develops or tax reve- nues increase correspondingly. The last requires a revision of the tax structure 'which is economically feasible but poli.tically difficult. 10. In recent years exnansion of co{'!][ercial bank has been a larger direct cause of nonetaI"J inflation than deficit Government finance. :c:eficit finance, however, has indirectly contributed materially to ii  t.his':.res1..l1t threugh support of the dOl<I[;stic cash reserves of cornner- cia1 banks. 11. PO'wer to vary commercial bank minimum legal reserve requirements up- wards h,as recently been estnblished, but it is doubtful whether this will in fact be used as an effective control. 12. Only part of the actual increase of money sU'Jply has been inflationary in a developing and e)..,})andinrr economy. !:bnetary manaeement should not be, divcrced ;from development policies. 13. Hecent exchange rate revisions, wi. th an external clevaluation apnrox- imating 10%, have been accepted by the Fund; the exchanGe certificate feature of the new s;),stem has been neither approved nor condermed by the Fund, which would, however, welcome its desappearance. The revisions effected are not those the Flffid manage!:1ent 1>'Tould have re- commended had there been no problems of political acceptance. 14. Further devaluation of the peso is likely should export receipts fall; it is also likely that the Fund objective of unified exchange rates will, if attained, be by revision of rates to the upper end of the multiple rate scale rather then the lower. 15. Present data suoports the conclusion that Color.lbia should be able safely to assume debt service on new borrovrings of US;"; 10 million with US~') 5 million at short-term (round 7 years) 1'rith eveI';'! Drobabili ty of addi tional bOl~rowing capaci t~r. iii 16. The scale of advisable borrrn~ing depends Dartly upon the domestic impact of development proeress, notably upon financial institutions and labor resources. The present situation is one to cause concern on these points, and the advisability of foreign developmental borr~w­ ing beyond US::> 10-15 million would clepend par-ely upon execution of suitable domestic development policies. iv -  Fluctuation of the Colombian balance 0:;:' l}a:n:ents are la.rs:ely detennined by the value of: (a) coffee exports, (b) r01d sales, (c) capital imports on the nart of the fo:c-eign-ovrned 1,etroleum cOTJ1>'anies. These :c-eceipts also partly determine the effective rate of capital :~or­ mation in Colombia, which is heavily dependent upon imports of capital goods. Balance of Trade Colombian foreign trade has consickrably increased in value since pre-war. Exports in 1937 were valued at us,:~ 86 million. They are estimated to have reached $273 million in 1948. Imports increased from US~ 95.9 million to uS$. 354 million in the same neriod. Aggregate trade values, given in Table 1, indicate that large trade surpluses from 1942- 19uu resulted from s210rtage of available foreign im'")orts. Exnorts As shovffi in Tables 2 and 3, coffee and petroleLL'11 are the export leaders. Gold is third in the value of eX~Jorts, but is not :.l1:mally in- cluded in trade statistics as it leaves the counb'y ih !1onetary ~~OrT:1. In 1929 coffee accounted for 63% of all exports and petrolewn for • A~proximately the same ratio was 1'mintained until 1939 y;hen the conbi!1ed value of both products represented 87% of all the war shortace of tankers reduced the importance of Colombian oil eXp0rts l!;hieh never entirely regained their Dosition, Cl.S in 19u7 coffee accounted for 77% and petroleum for only IS;; of total exports. - 1 -  - 2 - other export products are minor. Hides and skins have never accounted for more than 3% of total eA~orts. Sales of bananas and platinum decreased with the inception of Trorld 1'[ar II. However, as ahoi'm in Table 2, Golombia displayed an ability to develop new eX]Jort lines and succeeded in increasing considerably its sales of cattle, cotton textiles and qui- nine during the war. Coffee Exports The volurae of sales of Colombian coffee has increased steadily since the be[';lnninr:: of the century. Period Annual :0xl)orts (miJJ.ionsbags ~f bO kr,s.) 1909-13 • • • • • • • • • • • • • 0.8 1914-18 • • • • • • • • • • • •• 1.1 1919-23 • • • • • • • • • • • • • 1.8 1924-28 • • • • • • • • • • • • • 2.3 1929-33 • • • • • • • • • • • •• 3.1 1934-38 •••••••••••• e 3.8 1939-43 • • • • • • • • • • • •• 4.1 1944-48 • • • • • • • • • •• 5.3 Major world events have introduced only minor variations in this trend. During the world crisis of the thirties sales decreased 10% to 3.0 million bags in 1931 and again in 1934, and during 1I101'ld 1'T&r II ex:po1't voluIne fell 5n only one year, 191+1. This insensitivity of sales volune to the state of the world cycle is not matched by coffee , which, from a level of 28.54 US¢ ,er pound ClF New York in 1926, dro'Jped to 22.81¢ in 1929 and to 10.26¢ in 1935, a decline to 35% of former • The effects of such nrice decrease on foreign trade VIere ::lost drastic. The value of coffee exports of Colonbia in 1929 'were the equiv-  - 3 - alent l)f US,~ 87.29 million. In 1935 they "vera us:~ 51.4 rniJ.lion. statis- tics of total exports reveal an increase froJ1l 1210 7 ~esos in 1929 to only 123.6 million in 1935. In dollar value thc:'r fell from US.": 118 million (1929 parity) to Us:!; 70 million (1935 parity). The devaluation of the Colombian peso from a quasi parity to the in 1929, to a new rate of 1.7S peso per US~~ assisted in maintaining the ,?eso value and the volune of exports" Its magnitude was in e;reater part determined by the fall of coffee prices, just as devaluation in other aericultural exporting countries 'was related to the price fall of their main exports. Thus Colombia, during the crisis of the thirties, lost a large part of its foreign purchasing pOWer, owing to fall of coffee prices. The possibility of a repetition of such phenomenon still exists, but coffee nrice drons of past magnitudes are most imnrobable. Although the VolUl;le of Colo,:lbian coffee exports alnost attained an all-tiEle high in 1948, and although Drices reached unprecedented levels, coffee prices in spite of weak~ning in the Itfutures" did not suffer the severe reduction incurred by most commodity prices at the beginning of 1)49. The reason seems to be partly that the coffee market in the United states steadied by the Coffee !i'ederation which has at dispositton funds for the stabilization short-term "Jrices, and Dartly that the world statistical coffee position is sound. However, it may be that this position be weakened in the future by either a sizable curtailn;ent in demand part- icularly for high-grade coffee, or (a longer-run posSibility) an increased world production.  - 4- Petroleum Exports The value of netroleura exports has fluctuated between 32 and 42 million pesos (US~) 18 to 24 million) between 1937 and 19J.t1 and 19).+4- 46. Shortage of tankers and drilling equipment reduced it severely in 191:2 and 19'43, 'while booming crude nrices increased export values con- siderably 1947 and 1948. The current decrease in rc:.w material nrices and consumption volur:les may 1'(ell in the short-run reduce sales of Co10nbian nctro1eur:l, and this is all the more possible since forcie;n ei1 COYi1;Janies already show serious distrust of official Colombian intentions tOYJards foreign oil investors. The !Ide Llares ll field concession to the Standard Oil of New Jersey expires in 1951, and the administrative fate of this area, accountable for one half of Co1m:lbian production, is current1~r the object of political negotations of doubtful outcome. The recent curtailnent of Venezuelan production by 10% does not indicate a likelihood of increased Colombian production. However, the short-run i:~!Dortance of potroleum nroduct .ton for Color:Jbia cannot be ueasured in terms of exports alone. In fact, CJetro- lelL'n production in Colombia te still in its infancy. The foreign comp- anies have to invest heavily in exploitation and exploration if Colombia.."l fields are to provide any future nrospects at all, and the size of these foreign exchange investments vrell as important for Colo~bia as the income from oil eA~orts.  - 5- It is unfortu.'lately al;:lost imoos to assay Id th any degree of accuracy the real size of these investments. The only statistics avail- able are provided by the Banco de la Renublica, and conceal under the item !lCa~ital imports of foreign netroleum connanies ll the net result of a com- plex made from exports oil, -profits outflows, purchases of foreign material, capital inflows, etc. An inde1')endent attempt was therefore made to disentangle these various elements (see Tables 9,10,11 am their cO:8Inents). The relative imp"rtance of petroleum exports and net capital i'1flo1rf resulting from petroleum exploitation are estinated as fo110yr8 (mil15.on pesos): Exports 1944 37.3 - 1945 36~9~ - 19h6 41.7 1947 75.2 Total - 193.1 Net Capital Inflows of Petroleum Cos. 14.8 53.6 28.7 58.4 155 .. 5 In four years the capital contribution of the ljetroleum industry may thus have amounted to about USC'; 38 r::.illion, waking the third source of exchan[e revenue for Coloubia, after and ;")etroleum exnorts. Distribution of EA'lJo!'ts~_bJ Countries As shown in Tables '2 and:;;, the ted States 2nd other hard currency countries are the major clients of Colombia. Defore the war, !';uropean, and especia11y Gernan, der:Jand for platinUJrl, coffee, bananas and leather VfaS important, although it never cn!'l'Jared with the 63% of total exports absorbed by the United states and Canada in 1938. The picture after the war is still more favorable to Colo;c:lbia. In 19Lt 6 C and the United States absorbed 87% of its expr;rts; the balance '!'Tent rrrail11y to Mexico, the Canal Zone and Venezuela. There is, therefore, no convertibility problem  - 6- in Colombia, and there is no eXl'1ectatir;m of such a '1roolen bian coffee seems to be well established in tho unUed as a quality Droduct and most of the petroleum is taken r;~,nada and the United states. Even in the event of a future world crisis, the replacencnt of European export and its markets by North Arr:erican countries shou16 not be to the disadvantage of Colombia. Imnorts 'ihe distribution Golo;,bian inmorts categories seems to be at least as rigid as the distribution of its eX.Dorts. Before the 'war, as shovm in Table 3, manufactures accounted for 9l;~ of aJl lnl'Jorts. Of these manufactures, most were finished goods. Aertcultural products then accounted for only 6;; of iUDorts. In the peri.od 1940-h.5 the share of manufactures in the total value of imnorts diminished slightly to 84%, a proportion which vms mainta;ined until 19h8, if vm aS8UJ.~e that the dis- tribution of the trade va th the United states shovm in Table 6 is repreli- sentative of the trade distribution wtth the world. In the Deriod 1940-1945 agricultural irrmorts accounted for about ll/~ of the total value of ir~lports. They decreased in iJ;!portCLnce only slightly by 191!8 as the result of an unprecedented der:1a.nd for indus- trial T)roducts. About one half of industrial ;-;oods imports in recent years can be clas sifi.ed as capi tal Goods. As i~:1Dortinf': is nractically the only effective method available to Colonbia for il:mortant types (gross) capital formation capital goods imports, although high (a.ppro~cime"tely  - 7 - 270 million pesos in 1948), do not seem unduly so when compared to roughly estimated national incolTle in that year 0,750,000,000 pesos), particularly when replacement requirements are taken into account. Ar:ricultural imports may seem unduly large, and their past relative e;ro'.'lth unjustified in a country which is mainly agricultural and could produce locally r.1ore of the slirar, the cotton and the vrheat which constitute their bulk. But, if economic development increases popular living and nutrition standarcs, imports may remain a con- tinuously inmortant source of agricultural Droducts de increased domestic production of similar commodities. ~igin of I~ports As shovm in Table 5, 63% of all imports from the Uni ted States in 1947 as against 68% in 19b.6 and 50% 1938. Although many European countries seem to be attel'!pting to re- enter the Colombian market and to substitute themselves for Gerfllan;' (which provided 17% of Colombian imports in 1938), it is doubtful that the States I share . .yil1 return to the pre-war 50)':; of import trade, as (a) a1thour:h there is an exchan(';e in Colorrbia, all exchange available is usually U.S. dollars, and (b) American firms have utilized the opportunity afforded by the war to the!Tselves firmly in the country~ Balance of Pa:~ents Table 7 and Table 8 ryresent two aSDects of the balance of payments of Colombia~  - 8 - transactiors only are described, as seen from the point of vieYl of the Office of Exdlar.ge Control of the Banco de la Republica. The exports recorded are the cnes which res'_~l ted in foreign exchange receipts for the exchange control authorities. They do not include exports of petroleum and exports of packages of miscellaneous goods. The imports recorded do not include those ",.ace by the foreign-aimed lJetroleum and gold companies nor those made by Colombians rvith their own foreign exchange resources. A net item labeled tlReceints of Capital by Petroleu.rn Companies" reveals the r,lobal effect of operations concerning petroleum on the exchange receints of Colombia. yrhile this statement accounts aui te satisfactorily for fl1.1c- ." t tuation of exchange reserves of the country, it obscures the role played by sales of ':letroleum an6 conceals the real tude of invest- ments made by foreign capital in Colombia. It was therefore necescary to establish a nore comnlete account of transactions on the basis of total o~eration on the pa;yments and receints side. This statement (Table 8) indicates that non-trac~e receipts accounted in 1947 for about 23% of total receipts, while non- trade pa;yments were 19;~ of all paylTIents. As shO'rm in Table 7, nOll- trade recei~ts on current account a.re rather small and do not balance t:1e payments for dividends (petroleum and gold excluc,ed) and miscel- laneous expenditures on insurance, remi..ttances, etc. The main elements Df disequilibrium on this account, l':Jwever, are the Da;,ments for the service of the consolidated nationaJ..' de?artment3.1 alL" T:'mnicipal debt, and of the intergovernmental debt.  Fo~eign Deb~ On December 31, 1948, the structure of the foreign debt could be estimated as fol10Hs (in US~n: National Consolidated Long-Term and Guaranteed Debt (Agricul- 40,190,000 (3-70) 11 tural Mortgage Credit) 24,043,600 (Banks) Intergovernmeiltal Debt (Ex:port- 40,608,599 (EX:Im) Y Import Bank) 636,976 (O'k .L.C.) i Deparunental and Muniei~Ql tong- I:D, 622,520 (ne\[ par) :JJ Term 1.500,700 (Barransuilla) Total 147,602,395 Recent figures from the Foreign Bondholders Protective Council, along \lith late information from the E::qJort-Import BanI: give reasonably accurate data on uhieh to base interest and aI:lOrtization payments. They are estinmted as fo11ous; (in r;).i1lion US(~) Steriing---Erlmbank ----"--Departnent De~ & O':y.•,k.C. HationfJ. & liuniciDal Total 1949 0.5 4.3 2.7 1.5 9.0 1950 0.5 5.1 2.7 1.5 9.8 1951 0.5 5.7 2.7 1.5 10.4 1952 0.5 5.8 2.7 1~5 10.5 1953 0.5 5.2 2.7 1.5 9.9 1954 0.5 1".8 2.7 1.6 9.5 1955 0.5 4.1 2.7 1~6 8.8 19cO 0.3 1.4 2.7 1.6 6.0 1965 2.7 1~6 4.2 The "peak load ll burc.en of the debt service ll111 occur in 1952, ",hen it Hill reach US$10.5 million. This fiGure is 4.3% of the official current accoU11t balance of paynlents receipts of Colombia in 11 Figures as of Dec. 31, 1948. Y Includes funds drmm c101.m as of Decenber 31, 1948 of ~~20,358,406 and authorized but unutilized fU11ds (yet to be disbursed) of ~~20,250,+93. II Based on the assumption that the neu debt adjustment plan "rill be put into operation early in 1949 and that all bondholders assent to the plan. Note: This page has been revised in accordance iIith late information received after this report 't-las compiled.  - 10 - 1947, and about 30% lower than the val :18 of the solei tion in 19hii-L.7. Capita~ Novements Major capital recei~)ts of Colo;]oia have al::,eady been c:is- cussed under the heading "PetroleUt'1l :Sxportsll. I.E) smo'm in Table 8, are accoDuanied by sizeable investments various , or of which are gold mines. Very ttle official capital outflows ;-,atch the steady inflovr of US~~ 6 to 16 million a year on that account, and as shown in Table 11, capital evasions whieh may oecu::, are rather sma1l. It is to be hoped that a relative pol:Ltical tranquility and a fair treatment foreir,n calJi tal 11fill maintain a favorable balance on t1::i.s capital account. Gold Lovements -----.--~ The fourth largest SO'~lrce of foreil:n resources for Colombia is currently the local [lroG.uction of 1jf1:2.ch must in its entirety be devolved to the Danco de 1a l~epublica, anc. is e:·::ported in monetary form when so needed. Gold oroduction has decreased since the beginning of the war, 'Jartly because [old l ms not considered as essential ':'far tlaterial (and i therefore little machinery ',vas made available for its explojtation), and partly because the overvaluation of the peso discouraged cold pro- ducers who had to sell their Droduction at the official rate. The recent devaluation the 1)880 b~r 10% reduce the omm- lmrd trend in r:old nroduction. If' 1. t coef, not f?ve this effect  - 11 - other measures may be necessary J as Color:'"bia cannot well afford such steady deterioration of a main source of exchange revenues. Foreign Exchange and Gold Reserves Table 12 shows that the foreign exchange reserves of Colombia fnolnoUSeci from US'~ 25 million in December 1939 to Us'~, 180 million in Decem.ber 1946. Gold, was nur~hased from local nroducers and was not exported, accounts for the major Dart of the increase. U.S. dollars: constituted practicall:! the 1shole of the balance. In 1946 Colombia up with the backlor of capi- tal Goods iI:lports. Larger vrere to a d.rop in re- serves by about ust 67 million in 1947. At the beginnine: of 1948 a fur- ther deficit of 35 million was anticipated for the year. Colombia managed, fortunately, to maintain a hi~th level of coffee exports, rece:l.ved a loan froIn the Export-Im.rort after the poli tical events of the ninth of April, and benefi teo. froTa relatively large capital imports by petroleun companies. These increased total balance of payments receints, and permitted up to abc-ut AUfust 19}.18 an • unprecedented level of imports '·ri thout danr:erous deter:i.oration of the reserves. The sl10rtage of exchanf~e, however, became r;rave enou€,h to justify then the introductioCl a new multiple exchance rate syster::. It is doubtful that the reform by ted in the import reduc- tion ens1.1ed; it is likely that the contraction YJas attained through the simultaneous introduction of 1:10re stringent import  - 12 - restrictions. As a total result, the loss of foreir,n exchanr;e for the year amounted to only ::;28 million, which compares very favorablY'fr:i_th the perforr:J.ance of most Latin Ar.lerican countries. It has been reported tllat the 'Hhole of the backlop; of licenses on which nayment had been deferred was cleared bci'nre the end of 19)-1-8. ColO!Jbian reserves at the beginning of 19)-1-9 are thus :'oughly the equiva- lent of US5 86 million and prospects are that, given strict administra- tion of import licensinp;, they r!ill remain at approxi::lately that level for the balance of the year. Of these reserves, US"; 65.1 million can be considered as ear- marked. They represent reserves of 25;: against notes of the Banco de la ,-, . 1 " [~,epub_lca " In " ClrCl'.. -lon, 1/ 1 a t" - or Cl.~4 rr.illion ( the liabilities tonard the Internatior:al l\lonetary Fund, or US~~ 13 million, are 5 ncluded in the note reserve), and reserves of 25% against demand deposits of the Banco de la Republica, or US,:) 20.8 million. The presently disposable TIarf,in is thus only slightl;? greater than US;~ 20 million. Colombia could, however, probably decrease re- serve requirements in case of need.,' No more than us::~45 to 50 million rray be necessary as working reserves. Foreil3n Exchange Rates Followin[ requests of the International Honetary Fund, Co'. . c:l.lua- tion and modification of the mul ti1)lo e}:chan[,G rate system was decreed by 1<1'-' IT o. 90 on Decernbe I' 15, 1948. 11 October 19L8.  - 13 - The official rate of the colombian :'1eso was changed from 1.75 to 1.95 pesos per An export bonus 10 points granted to exporters of coffee and certain other proc~ucts 11{as eliminated. Or. the side, transactions were, as before, submitted 4% stamp tax, which makes the effective import rate 2.03 pesos per ust~. The tax of 10% levied on most cssentj..s.1 imports (Group 1), payment of r(walties for motion pic- tures, etc., V;Jas decreased to 61,. T 16% surtax on imports of ner- chandise of Group 2 was rec~uced to 12%, while the 26,b on sales of exchange for unchanred. The of eXChanB'8 unc:er 'Nhich foreign exchange proceeds of minor imports can be sold on the (snb- ject, however, to the j.m:posi tior;. of the taxes described above) lI{as I1air:: - tained. Hovrever, the use of exchange certificates was ment for machinery imports, travpl funds and remittances residents abroad. The Fund has not yet 8.1")proved of this feature of exchange structure. A number of rates rer:lair: thus effective, which range from 1.96 to 2.63 pesos Der US~~ for the rate. It is that this solution has been accepted by the International Ho Fund only be- cause a vreater devaluation, vrhich the Fund nanavement would have .I. • approved, '[rus represented as poli ti.cally impos sible at "line.  -14- PUBLIC FINANCE The Federal Budget Official presentation of Colombian public finance statis- tics is inadequate, delayed and confusir~. Public finance data are apparently released by at least three different agencies which have not agreed on definitions, accounting practices or fiscal periods.1 / Since 1942 deficit financing has been standard practice, apparently averaging about 18% of total means of financing federal expenditures during the years 1943~47. Table 13 shmvs Fed.eral Government expendi tures and revenue sources (including barrot-rings) from 1939 through June 1948. ]'rom this table it appears that total federal expenditures increased from 104 million pesos in 1939 to 374 million in 1947. a percentage increase of about 260% over the period. During the same period revenues from taxes increased from about 102 million pesos to about 312 million, an in- crease of about 207%. (in millions of pesos) 1947 & increase 1939 (~ Expenditures 104 374 260 Tax receipts 102 312 207 Credit operations (cumulative 1939-47) 338 1/ Previous to fiscal 1945 there Illere t\'lO federal budgets, Itordinary" and ffextraordinaryfl; since 1945 there has presumably existed only one budget, but inasmUch as this contains a large segment of "ear- marked ll revenues, the change has been largely fictitious. Colom"oian budgetary practice, furthermore, appears to permit the shifting of allocated revenues from one purpose to another l'fithin a given year, and from one year to the next, as ~'lell as the addition of supple- mentary administrative and legislative expenditures during the course of the fiscal year.  -15- The excess of expenditures over receipts from customary revenue sources during this period amounted to JJ8 million pesos and was financed by borrowings from the Central Bank (43?), the commer- cial banks (15%), Eximbank (10%), and others, including autonomous government agenCies, state governments and private industries, both foreign and domestic. Total federal government expenditures for 1948 have been estimated at 415 million pesos, against revenues from tax sources estimated at about 350 million. It is estimated that 20 million of the deficit was financed by the Banco de la Republica, 25 to 30 mil- lion by private banks and the public, and 20 million by utilization of loans from the U.S. In part the hea~J expenditures in 1948 resulted from de- struction caused by the civil disturbances in Bogota in April and to this extent may be viewed as abnormal. The latest available overall budgetary estimate for 1949 is given as about 384 million pesos. This estimate compares with an estimated 1949 national income, adjusted for price changes to 1948, of about 4 billion pesos, and is thus less than 10% of the 1948 level of national income. It is conceivable, hOi-leVer, that expenditures in 1949 may run above the present budget figures.  -16- A breakdovm of federal expenditures by functions 1944-49 is given in Table 14.1/ The table indicates only moderate changes from 19J9 to 1949 in the relative distribution of expenditures except in the case of military police and administrative services. Public vlOrks throughout this period has represented the largest item of outlay (22% in 1949) being primarily for roads, railroads, port terminal facilities and military construction. Military expenditures (16%) and the cost of public administration (12%) show some increase since 19J9 but military expenditures on a relative basis are noticeably smaller than in come other Latin American countries. A slight decline in the relative cost of the debt (14.6% in 1949 of 1:;,hich about 61~ for the foreign debt) re- flects (1) resumption of full service on the national foreign debt, offset by (2) adjustments mad.9 with dollar and sterling bondholders in 1942-44. Allocations for public educEt.tion and health amount to about 12.6% in 1949, slightly more percentagewise than in the earlier period but still low for a country desiring development. Specific allocations for agricultural and commercial planning and orientation are in.tll'lvations in 1949 .. . Ti th provision If these innovations are taken in conjunction 1 for public \\forks and mines, approx:bna.te1y 27% of budgeted federal ex- pendl tures in 1949 are directed tm'rards development. 11 Unfortunately, no presentation of this breakdo-vm is maintained in the statistics made currently available, Therefore, the taole pre- sents actual expenditures 1944-46; for following years, in the absence of actual expenditures, it presents latest available budget- ary estimates so as to offer some idea of relative allocations to the various functional units. Furthermore, since the source of this table is not the same as the source of the Table I}, the figures even for the years 1944-46 do not exactly coincide.  -17- Deficits appear to reflect inadequate tay~tion, rather than overzealous government spending; if in fact federal expenditures for 1949 represent only about 10% of the 1948 level of national income. The breakdown of the sources of govermnent income, 1939......49 appear in Table 15.1/ It indicates in addition to the appearance of defici t financing during the \\Tar years, an increas ing dependence on income taxes as the major source of tax revenue. ~nereas in 1939 im- port duties provided 38.6% of revenues and income taxes 18.5%, in 1949 the budget anticipates obtaining only 15.6% from imports as against 38.6% from income (including natrimony and excess profits taxes). This shift not only reflects the falling off of imports dur- ing the early war years, but increased domestic economic activity and improved a~ministration since 1945. Under uresent conditions of con- trolled imports, channelled largely into developmenta.l purposes, the imnort tax is not geared to act as the main revenue source. The Table also shm\Ts government income from petroleum to have increased somewhat on a relative basis; and such income may probably be ex- pected to increase further if the government reaches an agreement acceptable to the petroleum industry. In other respects, the Table indicates little change in the relative productivity of the components of the tax structure; this sUbgests that most other ta.x revenue is collected on a percentage-of-value basis. 1.1 -This te,ble :)resents d.ata o~ nctual receints through Octobe,: 1948, -though the data for 1947 artd1948 do notner)nit br~aking out"thc deficit financing component (credit operations). The figures for 1949 are estimated.  -18- The inadequacy of reve~ues from taxes to meet current ex- penditures has been criticized in many quarters, and not least vigor- ously among the Monetary Authorities of the government itself. The reasons for this inadequacy probably reflect institutional forces, as well as administrative problems and theoretical justifications. The difficulty of finding substitutes for decJhlingiI:pcrt d.:l..tl.ee (bring ".Jhs war years, combined perhaps ':Jith the fear of deflationary factors, and the apparently obvious need of development, may have seemed to justify a program of deficit financing and inflation in the depths of the "Ja.r years. The present continuance of such a program, at the e~?ense of a progressively increasing inflationary s:Jiral, hOi-rever, seems less susceptible of economic justification. As noted earlier, the current rate of government expenditures \,roulcl 8.1)pear to be \'fell l,>fithin the possibilities of taxation as reflected in the magnitude of the national income, unless political pressures make taxation of the heavy concen- tration of wealth invested in land impracticable. state and l'1unicipal Budgets In addition to the national budget, there are departmental budgets 1,'1-nich in 1946 totalled 121 million pesos t and municipal bud- gets totalling in the same year 75 million pesos, making a total for national, state and municipal budgets of about 42s11 million pesos in 1946. AllO"!ing for a 50% increase in state and municipal budgets since 1946, the total of national, state and municipal budgets in 1/ This total probably overstates the facts, since there appears to be some overlapping the extent of \'Ihieh is not easy to determine.  -19- 1949 "'ould cone to about 690 million uesos. On the basis of a present national income estimated at about 4 billion pesos, the total of these governmental expenditures would re~resent about 14% of estimated na- tional income. Internal Public Debt As a result of deficit financing, Colombia's national inter- nal debt (funded and floating) grew from 90 million pesos at December 31, 1937 to 369.1 million at Se]Jternber 30, 1948. Annual service re- quirements amount to more than 30 million pesos, or 8% of the estimated expenditures for 1949. The combined burden of debt service on the foreign and local debt v!ill reach about 15% of 1949 ex:oeniitures. J,iost of this debt is held by the ~anco de la Republica. Aside from the na- tional debt, there are more than 80 million pesos of state and. munici- pal internal a.ebt representing bond issues for road construction and other development activities. Al;Qut half of this debt is held by the banks. Prospects Large scale, Government sponsored development projects are now being planned. ~'lere even the foreign exchange resources available, it remains t:t1at the local currency cost of the Steel p/lill in Paz de Rio, of the new hydro-electric plants, of the ambitious road and rail- road, irrigation and river control plans are heavy, and their execution "Jould increase the burden on a oudget \'111ich already knows deficits.  -20- If inflation from growing deficit finance is to be avoided and it remains impossible to sell Government bonds to non-bank in- vestors, reform of the taxation system is needed to balance increased expenditures with tax receipts. All indications are that Colombia could by this means avoid deficit financing. It is doubtful, however, whether any heavy tax increases would be politically acceptable; increased taxation of corporations and on high income groups may, under present conditions in Colombia, discourage establishment of ne,-, industries, i-Ihile ne'fl personel taxes upon lm'fer income groups might occasion strife. The solution seems on one side to reside in modest but progressive increase in revenues Q This may be accomplished by a great number of minor reforms of the tax and credit structure rather than by sweeping measures. On the expenditure side, the postponement of overly ambi- tious projects may prove the only t'fay to avoid grave inflationary pressures in the long run. The rate of development must be related to available resources.  -21- MONEY .AJ.'fD PBI CES In September 1948, money supply reached 801.3 million pesos. This represents an increase of almost five times over 1939. MONEY SUPPLY Y (in million pesos) December December D3cember September 1939 1945 1947 1948 Notes and Currenqy 88~5 234.8 332.6 345.7 of whi9~ Notes 60.4 204.9 297.9 310g 4 Othersf:t 28.1 29.9 34.7 35.3 Demand Depo sit s 64.2 261 3 0 344.9 419.2 Government Deposits 15.2 79. 4 41.0 36.4 Total 167.9 575.5 718.5 801.3 • Index 1939 = 100 100 342 427 476 y. Revista del Banco de la Republica. ~ Silver, copper coins, National Barj( Notes, Silver Certificates. Although analysis is obscured by a change in 1943 in the statis- tical and accounting methods of Colombian banks, it seems that during the early war years, heavy inflows of gold and foreign exchange, on account of balance of payments surpluses, combined with some expro sion in business credi t, were the main causes of the increased money supply. This is illus- trated in the table on the following page. In 1942 and 1943, the Government instituted a vigorous anti- inflationary campaign, by introduCing compulsory savings, by freezing prices, and by exchange controls. But, beginning in 1944, political pressure, coupled with the problem of financing budgetary deficits and  - 22- COLOMBIA " BANKING. CHANGES (million pesos) Jan. 1940 Jan.1944 Jan. 1946 Jan. 1947 Jan. 1948 to to to to to Dec.1943 Dec.1945 Dec.1946 Dec.1947 Sept. 1948 Central Bank Loans to Government f 19.8 t 8.6 f 21.5 t 39.9 f 15.5 Central Bank Loans to Public - 3.1 - 3.0 t 0.1 I- 4.7 I- 16.4 Loans by Other Credit Insti- tutions to Government f 9.2 f 7.2 t 9.3 t 32.2 Loans by Other Credit Insti- t 24.1 tutions to Public I- 53.3 f1 47.2 t120.4 f128.0 t 79.2 f160.0 1-151.3 f204.8 I- 56.0 Net Bank Foreign Exchange 1-155. 4 1-113.8 f 0.4 - 93.2 - 54.3 1-234.6 1-273.8 1151.7 /-111.6 , /- 1.7 L7 Notes in Circulation I- 65. 4 t 79.5 f 55.2 t 37.8 f 12.5 '" Public Monetary Deposits n.a. t 99.3 t 72.6 I- 41.0 f 86.3 Government Deposits t 27.0 f 37.2 - 11.3 - 27·1 , ,. ( - 4.6 -... n.a. f216.0 1116.5 1 51.7 1 94.2 Public Time Deposits n.a. I- 30.0 .f- 13.5 .f- .0 - 1.0 /-246.0 1130.0 /- 62.7 t 93.2 Increase in Capital Banking System n.a. /- 19.5 I- 33.9 f 39. 4 - 11.5 Absorbed by Ba:n.king System t 8.3 - 12.2 /- 9.5 - 80.0 /-273.8 1-151.7 fl11.6 .;. 1.7 • I I .:"3_ ~!lI;- . , ~. :' ZI ~ 11111: :: :::'!; ,I!: I 1Ei;.;! =: ::z 11111 .. " agricultural and industrial development program, forced abandonment of much of the program. wring 1944 and 1945 monetary inflation stemmed from two major factors, the first being the continued growth of foreign exchange holdings and the second and larger cause a considerably increased rate of commercial bank lending to the public. In this period, Government resort to bank finance was relatively negligible. In 1946 the situation changed significantly. Foreign exchange holdings remain virtually unchanged, and expansion of money supply was due wholly to domestic factors. Of these, the most important was heavy com- mercial bank loans to the public, although at the same time official borrowing increased considerably. Such borrowing from the Central Bank affected the position partly through its own directly resulting monetary expansion, but mch more by easing commercial bank credit expansion through improvement of commercial bank reserve position. In 1947 the position again changed. The rate of monetary infla- tion was about half the annual level of 100 million pesos customary in recent years. Its reduction, however, was due wholly to external factors; exchange holdings fell heavily in the year. By itself, this fall would have occasioned domestic monetary deflation of equivalent magnitude. Domestic banking action more than offset potential deflation to result in net monetary inflation which, if less than customary, was still sizeable. In tillS, commercial bank expansion again .made the largest statistical con- tribution. Government borro".rings from domestic banks (the largest in recent years) added directly about one half as much as commercial bank  - 24 - credits to the public, and again indirectly contri.buted to commercial bank: expansion. In 1948 (to September) loss of foreign exchange holdings con- tinued, yet net domestic monetary inflation increased to customary levels. Increase 1'1 of Central Bank loans to Government were less than in previous years, while Central Bank loans to the public increased markedly. Taking these two together, Central Bank lending fell only slightly. Comrnercial bank lending as shown in the statistics fell very markedly in rate, and change of "other i terns I! in consolidated balance sheets suggests this apparent decrease was more the result of account reclassification than change of policy. Public monetary deposi ts rose to an extent confirming this impression. At October 1948 the inflation potential had not been seriously reduced. The Banco de la Republica carried a foreign exchange and gold reserve of 41t~b against its note circulation, while only 25% is requested by law. Note circulation could thus increase from 310 to 518 million pesos. Commercial banks in September carried reserves of 102 million pesos against sight and time deposits of 480 million pesos, legal reserve re- quirements being only 70 million pesos (15% against demand deposits - 5% against time deposits). The future of inflation therefore rests VITi th the banking and government authorities. No existing automatic control is likely to effect any contraction in a previsib1e future. According to the terms of a decree of January 1949. the board  ;.. 25 - of directors of the Banco de la Republica is now empowered to change (within limits) the reserve requirements of the commercial banks with the assent of seven of its members, including the Minister of Finance. This could be a useful measure. However, the past record of both holders of the new powers (the Banco and the Government) does not lead to optimistic expectations of a stiffening of requirements. The Banco de 1a Republica, beginning in January 1948, re-entered the field of loans to business and industries, while the Government is, if anything, likely to increase deficit financing. Li tt1e info:nnation is available upon the price changes asso- ciated with inflation in Colombia. The official cost of living index for a working class family in Bogota increased to 247 in October 1948 (1937 = 100), while the index of money suppj.y reached 476. From this and other contributory indications, it seems probable that part of the increase in money supply has been absorbed by growth of both total and employed popu- lation, greater production, and increased commerce, reducing the inflation of monetary prices and incomes. Nevertheless, the total situation sug- gests that net inflation is likely to continue.  Table 1 COLOMBIA 11 FOREIGN TRADE (millions of pesos) 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 194;P i94&t,r~ Exports, excluding Gold 152.2 144.4 136.5 126.0 133.5 170.9 218 •.5 227.1 246.2 351.8 444.4 468 Imports, C. I.F. 169.7 159.3 183.4 148,2 170.0 105.0 146.7 174.7 281.2 403.0 .596_0 620 Balance (f or -) -17.5 . . .14.9 -46.9 -22.2 -36.5 165.9 {-71 .. 8 /52.4 -35.0 ....51.2 -163 -152 Gbid Exports 32 .. 0 18.8 40.6 41.8 42,.6 21.0 0.2 0.2 0.6 38,.4 (millions of US$)~ Exports, excluding Gold 86.1 80.8 77.9 71.9 76.1 97.5 125.1 130.1 140.5 200.9 253.3 273 Imperts, 0 .. I.F. 95.9 89.0 104.7 84 •.5 96.9 59.9 83.9 100.0 160.5 230.1 339.7 354 Balance fJO -20 -JO -8t Gold Exports 18.1 10.5 23.2 2:,.9 24.3 12.0 0.1 0.1 0.3 21.9 1/ Anuario de Comeroio Exterior -- except when otherwise indicated. ~ IMF. Financial Statistics No. 12. J/ Same source, projected on 9 months basiS. ~ Oonversio~ at 1~75 pesos per US$.  Table 2 COLOIIl1BIA COMMODITY EXPORTslI (in million pesos) 1917 1918 1919 1940 1941 1942~__ 1941 1944 1945 1946 1947 Bananas 6.9 6.9 6.7 .5 ..6 2.9 0.3 0 • .5 1!9 3.9 Coffee 99.2 88.8 87.1 74~,d 83~3 144.7 176.1 164.7 182.1 269~8 Leather (cuero de res) .5.0 3.9 3.6 1.5 1.5 2., 2.7 2.9 2.3 4.2 Pet ro l~Ulll 35.1 37.2 31.9 39.9(~) 40.5 14.1 20.0 37.3 38,9 41 ..7 75.2 Platinum 2.7 1.6 1.1 1.7 1.7 2.3 1.9 1.8 1.7 3.7 Cattle 0 .. 2 1.-3 2!) 2.7 2.' 3.0 Cotton Textiles 0.6 3.2 4.5 4.6 .5.9 quinine 100 1.7 0.4 0",.5 Gf::1d 32.0 18.7 40.5 41~8 q·2 •.5 20.9 0,,2 0,,2 ~OTAL EXPORTS e;old excluded _152.2 144.4 136.'5 126.0 113.'1 170.9 218.S 227.J. 246.2 3S1.B 444.4 DESTINATIONS OF COW40DITIE~1 1917-1940 1941~1944 1945:=194' Bananas us - Germany - Netherlands !!§. us - Sweden - Benelux Coffee Y.§. - Ge rmany .... Canada - US - Canada US - Canada Leather Germany - Belgium Mexico - US - UK MexiCo - US Petroleum Curacao - Canada - France Canada - Curacao - US Canada .... US Platinum - Germany US US .- UK Cattle Canal Zone Canal Zone - Curacao - Venezuela Cotton Textiles Venezuela - Ecuador Venezuela - Ecuad.'Ilr Quinine US - France Gold us US US. 1/ Anuario de Ccmercio Exterior, unless other'tJise indicated. 2J Main purchaser is underlined. (*) Also reported as 0.2  Table 3 COLOIVIBIA MAJOR COlvfi.10DITY TRADE VALUE. IN PER CENT OF TOTAL TRAllE Per Cent of Total Value of Exports? Excludin~ Gold, 1929~1946 1929 1932 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 Coffee 63 64 62 64 59 62 85 81 74 74 77 77 Bananas 7 9 6 6 4 2 1./ JJ JJ 11 1 Petroleum •. Crude 21 22 26 23 32 30 8 9 16 16 12 15 Hide s and Skins :3 1 :3 3 1 2 1 1 1 1 1 Platinum 2 1 1 1 1 1 1 1 1 1 1 Other 4 3 2 :3 :3 :3 5 8 8 8 8 Total 100 100 100 100 100 100 100 100 100 100 100 Gold as Per Cent of Total Exports 4 4 11 23 25 24 11 . ; Per Cent of Total Value oj'~:r:II!Po_rtSt 1917-19 and 1940-45 ~. . _ .. 0 . 1917-39 1940-45 1945 . _~ Manufactures .2l Finished M 84 78 68 69 Semi-Finished 13 17 15 Agricultural Products Q 11 11. Foodstuffs :3 4 5 Ra'>I Materia.ls 3 7 6 Other .1 ~ ..5.. Total 100 100 100 11 Less than 1%.  Table 4 COL 0 M :B I A FLUCTUATIONS IN PRICES AND VOLUME OF EXPORTS 1929 _ 1930 _. __. _1932 191'3 1914 193.5 19.36 1937 PRICES in New York. in US¢ per lb. Manizales 27.26 22.81 17.24 15.55 11.35 10.46 1).70 10.26 11.26 11.60 Santos No. 4 n.a. 'n.a. 12.88 8.75 10.59 9.12 11.11 8.88 9.45 11.,04 VOLUME of Exports in million bags of 60 kgs. 2.9 3.1 3.0 3~2 3.3 3.0 3.8 3.9 4.1 4.2 per 5-year period t - -------- -3.1- - - - - - - - - - ~ -E:- -:- - - - - - - - - -3.8- - - - - - - - - - aT m nr-- ';;;;;=-==' (Con'tinued) . 918 _~ 1939 1 --~--.--- .... 1940 1941 1942 194'3 1944 1945 1946 ~__ __l2!tL 1948 PRICES in ,New York, in US¢ per lb. , ~anizales 10.97 11.60 8.34 14.99 15.87 15.87 15.87 16.22 22.5 30.11 3~.3~ Santos l~o. 4 7.66 7.38 7.10 11.34 13.37 13.37 I}. 37 13 .. 72 19.78 26.7 27 ..lJ~ VOLUME of Exports :inmj.l1ion,bags 'of 60' kgs. 4:.2 3.7 4.4 2.9 . 4 4.3 5.2 4.9 5.1 5.7 5.4 5.6 'per .5-y'ear period -, " ~ ~------ ---.~---------~ ~. - - - - - - - - - '~5.3- -- - - - - - - - 7 --"!"!". . . ]j October.  Table 5 COL 0 ~',: B I A 1/ DISTRIBUTI01J OF TOTAL VALUE OF Tr:.ADE PER COUNTRY- 1938 1946 1947 Per Cent of Total Exports (gold excluded) United states 53 82 Germany 15 Netherlands YJ" I. 12 1 Canada 10 5 Per Cent of Total Imports United States 50 68 63 Germany 17 n.a. United Kingdom 11 h n.a. Y Source: rw Fina!1cial Statistics No. 12, unless othervvise indicated.  Table 6 COL 0 1,1 B I A II:PO~~TS FRO}; THE USA Y III :!~HCJ::NT 0F TOTAL VALUE -27 1946 1947 1948 - . -----.---- A~ricultural Food 4 6 4 others . _l_ 4 1+ sub-total 11 10 8 Industrial Semi-processed or raw materials 17 16 19 ~;;Ianuf ac t ure s 6S 67 66 Sub-total 82 - 83 -85 others 7 7 7 Total Value in million US$ 143.7 215.5 226.4 !I Source: Revista del Banco de la Pe~ubliea, November, 1948. ~ On 6 months basis.  Table 7 COLOlvIB IA BALANCE OF PAYMENTS, 1940-48 (OFFICIAL EXCHAl\fGE TRAl\fSACTIONS ONLY) (millions of U.S. dollars) 19~O ~941 1942 19~3 1944 1945 1946 1947 194af1 I. Current Account A. Race ipts: 1. Merchandise Exports 46.7 57.4 76.7 111.0 102.9 113.6 193.3 216.2 200.8 2. Gold Purchases 23.5 27.6 32.9 19.2 18 .. 9 17.8 15.5~ 13.7 10.4 3.- Services 6.1 5.6 4. Residents in Colombia 11.6 9.0 5.9 11.6 1.0 5.' Total 70.2 85.0 109.6 130.2 133.4 140.4 220.8 241.4 217.8 B. Payments: 1. Merchandise Imports 73.3 82.0 67.9 74.8 88.3 138.2 220.6 299.1 247.6 2.. Residents 4.4 3 .. 8 5.5 5.4 7.6 8 .. 0 11.9 13.9 6.8 3.* Other Payments: 15.6 14.6 13.5 ·zJ.8 18,;7 (23.3) (29.7) a. Government Transactions (1) Service on Public Debt 11.3 10 .. 2 8.0 8.8 (2) Other Expenditures 2.3 7.9 7.4 5.0 b. Private Debt 0.4 1·3 0.4 0.4 c. Dividends 4.8 4.3 4.5 2.0 d. Royalties (use of patents and trademarks) 0.2 1.2 1.7 1.1 e. Insurance and Re-Insurance 1.0 0.9 1.9 0.7 f • .t-lis ce llaneous Expenditures 3.3 3.9 6.5 5.6 4. Total 93·3 100 .. 4 86.9 104.0 114.6 16~.,.5 262.2. 343.5 278.0 • ( COP t. i mJed,1  Table 7 - Continued 1940 1941 . . 1942 1941 1944 __ 194.5 1946 1947 194f5:.F I. Current_Account_ (Cont inued) c. Surplus cor Deficit on Current ~ccount -23.1 -15.4 /-22.7 /26.2 118 . 8 -29,1 -41.4 -102.1 -60.2 II. Capital Account A.. Receipts of Capital: 1. Petroleum Companies 20~1 31;.9 33'1 2 37-.1 30.1 2. Other Industries 1.9 3.2 8.4 2.6 0.6 3. Agencies of the U.S. 2·3 3·3 1.0 4. Loans 1.4 6.0 2.,9 0.2 0.3 5. Other Sources -;.. - 0.9 0.8 3.7 5.3 2,8 6. Total f15.4 /15.0 -/-21.4 +32.0 /26.7 -/-45.2 /-49.3 45.2 33.8 :B. Outflow of Canital 1.5 5.6 2.4 1.6 O~ Net Recei~ts on Ca~ital Account -/-15~4 -/-15.0 -/-21.4 /3 2 • 0 /26.7 i43'.7 +4'3.1 142,.8 1-32,.2 III. Surplus or Defied t on P.recedine: Items - 7~7 - 0.-4 1-44.1 -/-5 8 .2 .j.45.5 114'1 6 I- 2.3 -61.8 -28..0 IV. Errors and Items Unaccounted for .;.. 3.0 - 2.1 f 4.7 I- 6.6 + 0.6 1 3.9 - 2,,8 -- 2.4 n~a. V. Ch~nge in Official Monetary Reserves -10.7 - 2.5 1-39.4 /51.6 /44.9 1-18..5 - 0.5 -64.2 -28 .. 0 ¥ ..ea sese tf:-SN& -,"AM MS.' tea ¥ WM5«¥'~iSi'·AQ9J'r«~WS1!m.t ** -,,,41'02 :-WildiS S' ,·2P,pi,·" " Note: Use of the dash indicates unava.i1ability of data. Source: Banco de la Republica, Oficina de Control de Cambios, Importaciones, yExportaeiones. Bolottn .d~In,formacion. Mensual. 1/ Basis: First half of 1948.  Table 8 C o Lon n I A BALANCE OF PATI'IFNTS (in millions US~') (at the rate of exchange 1.75 pescs =1 US') -"- .. -, --..II-~ 1944 19LI5 191+6 19117 19h8 ---- Roceipts y a) Exports - Gold Excluded 130.1 140.S 200.9 253.3 273.0 I b) Gold Purchases 18.9 17.8 15.5 13.7 10 l?j c) Invisible Trade 11.6 9.0 12.0 11.6 • -6.6_ ~~I d) Capital 2eceipts Non-Petroleum 6.6 13.3 16.1 8.1 e) Capital Peceipts Petroleum 8.4 30.6 16.4 33.3 f) Pri vate Cani tal l',lovements 2.1 2.1 Sub-total Receipts 175.6 211.2 263.0 322.1 tayments II g) Imports 100.0 160.5 2)0.1 339.7 35'4.0- I h) Invisible Trade 26.3 31.3 '11.6 44.t~ 30.4~1 i) Capital Payments 1.5 5.6 2.4 1.6~ j) Paynents of Petroleum Companies 0.5 0.6 0.7 0.8 k) Capital Evasion 3.6 2.7 Sub-Total Pa~~ents 130.4 196.6 278.0 387.3 1) Surplus or Deficit 145.2 114.6 -15.0 -65.2 m) Actual rxchange Fluctuation 11.~6 120 ....66 ~I On basis 9 months. ~I On Lasis 6 nonths.  Table 9 C o LOU BI A PETROLEUliI - ACTUAL CAPITAL TR·,j:,TSFfRS (in million Colombian Pesos) ': 4 i 1944 -- 1945 1946 19L7 - a) Fxnorts of Petroleum 37.3 38.9 41.7 75.2 b) Foreign Exchange Needed for Equipment 16,0 35.5 11.3 67.3 c) Foreign Exchanre Needed for Personnel 0.9 1 .. 0 1.1 1.3 d) Foreign Exchange Available (a - b - c) 20.4 2.4 29.3 6.6 e) TI.ecorded napi tal Receipts 35.2 56.0 58.0 65.0 f) Actual Capital Inflow .-'0 4 (d - e) 14.8 53.6 28.7 )u. g} Sarne - in US$ 8.b 30.6 16.4 33.3  Table 10 C Cl L 0 1-.1 B I A 1/ VALUA'I'In~I :'\F ?:rTROLEm= :JRODFC';ION- 1944 194~ 19h6 19h7 ,------------------------------------------------.----- V,ol ume (thous and bb1 s. ) Production: after consQ~Dtion issues 22,543 22,595 22,280 24,830 Local Consumption 3,982 3,108 4,471 5,230 Exports 18,561 19,487 17,809 19,6CO Value (million peso~) Exports 37.3 38.9 41.7 75.2 Price per bbl. 2.0 2.0 2.34 3.83 Ystimate Value Local Consumption 7.9 6.2 10.4 20 .. 0 Total Value 45.2 L5.1 S2.1 95.2 !! Source: Revista del Raneo de la Republica, November, 1948.  Table 11 COLOMBIA TRADE TRANSACTIONS illlCONTR011ED BY FOiGIGN EXCHANGE AUTlIORITIEsll (in million pesos) 1940 1941 1942 1943 1944 1945 1946 1947 1) Exports - Excluding gold 126.0 133.5 170.9 218.5 227.1 246.2 351.8 444.4 2) Foreign Exchange - Receipts regulting from Exports (gold excluded) 81.5 100.0 134.0 194.0 180.0 199.0 338.0 378.0 j) Foreign Exchange Not Re- turned to Central Bank 44 • .5 33 •.5 36.9 24.5 47.1 47.2 13.8 66.4 4) Petroleum Exports 19.9 40.5 14.1 20.0 17.3 38.9 41.7 75.2 5) Other Exch~nge not remitted l 4.6 - 7.0 122.8 t 4.5 f 9.8 8.3 -27.9 8.8 - -== .6.) Imports - Total 148.2 170.0 10,5.0 146.( 174.7 281.2 403.0 596.0 7) Sales of Foreign Exchange for Imports 128.0 143.0 119 •.0 111.0 _ ISt).O 242 .. 0 388.0 1)25.0 8) Imports Paid Out of Free Exports Proceeds or Capital 20.2 2'7.0 -14.0 15.7 19.7 39.2 15.0 71.0 9) 10) Non-Petroleum Free Exchange Proceeds of Trade Capital Evasion 4.6 0.9 - 3.7 22.8 19.1 4.5 0.8 9.8 6.1 8.3 4.6 - 3.7 - - 3.7 11) Ncn-Petroleum Imports with Free Exchange 3.7 3.7 3.7 3.7 3.7 3.7 3.7 3.7 12) Imports Uncovered by Legal Purchase of Exchange 20.2 27.0 -14 .. 0 15.7 19.7 39.2 15.0 71.e 13) Purchases of Petroleumcles 16.5 2J~3 -~ 12.0 16.0 35·5 11.3 67.3 (Explanation of Table on fol1~wing page)  EXPLJdTl-iTION OF TABLE 11 Source: Other tables. Item 5: Negative totals are assumed to mean that netroleurn companies have returned at least these amounts to the Exchange authorities. Item 8: Negative total rreans that sup~ly was unavailable and that imports resulting from exchange sales occurred in later years. Item 9: Reproduction of line 5. V\inen negative total, it is assll.:"'!'1.ed that non-petroleum e~~orters have not received any free exchan~e. Item 10: 9 - 11 Item 11: Line 9 suggests that So million pesos were i'reeJ.y available for imports or capital evasion between 1940 and 1947. In 19!~7 pri- vate holdings- of Colombians in the United States were US~;~ lI~ million::: 24.5 million pesos, Assuming that of these 24.5 mil- lion pesos, 20 were accumulated during the war years, only 30 million pesos could be dedicated to imports, at an annual rate of 3.7 million per year. Item 12: Reproduction of Item 8. Item 13: 12-11  Table 12 COLOf.JIBIA GOLD AND FOREIGN EXCHANGE RESERVES Y (in equivalent million US$) Dee. Dee .. Dec. Dee. Dec. Dee. Dec. Dec. Dec. Dec. June Nov. Dec. 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1948 1948 Bank: of the Republic Gold 24 21 17 16 25 59 92 127 145 83 65 Foreign EXchange~ :3 :3 7 6 37 54 66 50 31 28 30 Of which, ear- marked for IMF (12.5) (12.5) (12.5) (12.5) Colombian Banks y Foreign Exchange 1 2 1 2 1 2 3 4 3 3 Total Assets 27 25 26 23 64 114 160 180 180 114 98 Fluctuations during Year -2 t1 -3 -/-41 f50 -/-46 120 -66 -16 11 It4F Financial Statistics No. 12 unless otherwise specified. y Virtually all US$.  Table 13 COLOMBIA :FEDERAL GOVERNrviEl'JT EXPE~lDITUBES AHD IvlEANS OF FINANCING DECEMBER 1939 - JUNE 1948 (millions of pesos) 1939 1940 194~ 1942 1943 1944 1945 1946 1947 1948~ E;[Qenditures Ordinary 89.0 83.7 81.0 86.3 87.7 113.8 151.7 210.1 281.3 136.9 Extraordinary 11.5 28.9 11.6 43.6 57.6 46.1 45.7 60.3 67.7 40.4 Semi-Fiscal Agencies 3.2 19.6 20.6 33.·4 43.1 26.7 14.8 14.4 25.0 Total 103.8 132.2 113.2 163.2 188 •.5 186.6 212.9 284.8 374.0 177.3 Receints Taxes 101.6 98.1 109.7 118.1 140 .. 8 137.4 166.6 23 6 .. 2 312.4 138.9 Surplus {I} Deficit (-) - 2.2 -34.1 - 3.5 -45.1 -47.7 -49.2 -46.3 -48.6 -61.6 -38.4 Borro\'tlings Central :Bank 1.9 33.4 4.4 14.4 25.9 4.3 21.6 21.6 17.6 25.8 Credit Institutions 2.9 2.5 1.5 3.2 2.3 5.9 1.3 9.3 32 .. 2 1.1 Others 0.2 1.3 11.0 15.0 3.4 10.2 11.3 6.1 Eximbank 19.6 0.2 10.0 5.:1 Residual Deficit or Surplus 2.6 1.8 2.6 6.9 8.2 14..0 14.9 7.5 0·5 5.4 (s) ( s) ( s) ]j Six months only. (s) Surplus Source: Ministry of Finance -- Budget Department.  Table 14 COLOMBIA FEDERAL GOVERNMENT EXPENDIT'tJRES, SELECTED YEARS. 1944-1949 11 (millions of pesos) 1939-43 Y %of %of %of Average 1; '~_19~ ..'rotal 1945 1946 Total 1947 1948 ~49.. Total Government Administration ~ 4 ~ 4 ~ 8 ~ 18.2 23.2 6.0 Justice and Interior 1'06 {1S.4 19•4 {2 .2 ~30. ~10. (33.5 18.2 23.4 6.1 Foreign Affairs 1·3 2.1 1.1 2.6 6.8 2.4 4.6 4.7 5.2 1.3 Finances (Ordinary) 7·3 47.7 29.0 30.8 39.2 13.9 29.6 38.5 38.5 10.0 Public Debt 15.6 20.? 14.1 32.7 45.5 16.2 41.2 42.0 55.9 14.6 War 11.0 21.5 10.9 26.2 28.6 10.1 31.8 44.6 61.3 16.0 Agriculture 10.3 2.7 Labor Hygiene ~409 ~906 1500 ~1209 1150 ? 1 506 1 2001 2.6 17.6 4.3 18.8 1.1 4.9 Commerce 6.8 1.8 Mines 0.6 0.3 0.8 0.8 0.3 1.1 1.1 2.0 0 • .5 Education 5.0 9.5 5.0 12.8 16.2 507 21.3 20.6 25.2 6.6 Post Office 5.0 7.8 4.0 10.2 13.5 4.8 15.4 16.6 19.1 5.0 Public Works 38.5 3.5.7 18.5 42.8 69.2 24.5 78.6 86.6 85.6 22.3 Budget 1.6 0.8 2.0 3.0 1.1 3.0 3.1 6.6 1.7 Economy 3.6 2 .. 0 7.2 13.1 4.6 11.5 11.0 P reviolis Budge tary Defi ci t s 7.8 186.6 205.2 282.0 100.0 291.7 325.4 386.2 100.0 Source: ContraloTia General de la Republica: Informe Financiero (annual). 1l Data of actual expenditure are tak:en from the annual reports covering the year in question. Because of the accrual element involved in these data they may be slightly at variance with later revised figures. y It has not been considered pra.cticable to present a complete ser-ies for this period because changes in nomenclature between this period and. later years make complete reconciliation doubtful.  Table 15 COLOM:BIA FEDERAL GOVERNMENT REVENUES AND :BORROWINGS, SELF.iCTED YEARS, 1939-1949 11 (millions of pesos) %of %of %of y %of 1939 Total 1943 Total 1944 1945 1946 Total 1947 1948 1949J/ Total Import Duties 40.6 38.6 21.7 12.1 26.0 41.3 49.0 17.7 65.8 52.1 60.0 15.6 Income. Patrimony and Excess Profits Taxes 19.4 18.·5 42.5 23.6 48.6 59.2 77.8 28.1 95.9 127.4 148.0 38.6 Inheritance and Gift Taxes 1.7 1.6 3.8 2.1 4.0 4.6 5.5 2.0 8.,5 5.7 10.5 2.7 Stamp Taxes 5.5 5.2 5.3 2.9 6.4 8.3 10.5 3.8 13.4 12.0 18.5 4.8 Gasoline Consumption Tax 4.4 4.2 4.4 2.4 4.8 5.4 8.2 3.0 14.9 12.7 16.5 4.) Other Taxes 8.6 8.2 14.9 8.3 17.2 24.1 7.4 2.7 8.5 7.3 31.1 8.1 Total Taxes 80.2 76.3 92.6 51.4 107.0 142.9 158.4 57.1 207.0 217.2 284.6 74.2 Revenue from Participation in Petroleum Exploitation 1.3 1.2 0.5 0.3 1.9 3.8 4.4 1.6 6.0 6.6 10.5 2.7 Revenue from Salt Mines 2.6 2.5 1.9 1.1 2.6 3.5 3.0 1.1 3.3 2.4 4.0 1.0 Revenue from Communications Revenue from Other Sources 3.6 12.4 3.4 11.8 4.0 33.6 2.2 18.7 4.8 10.0 5.5 16.3 4.7 54.9 1.7 19.8 4.:;u 129. 4. 112. ?)±I 5.0 79.4- 1.3 20.7 Total Revenues 100.1 95.3 132.5 73.7 126.3 172.0 225.4 81.3 n.a. n.a. 383.5 99.9 Credit Operations 4.8 4.6 47.4 26·3 44.024·2 ~1·2 18.7 n.a. n.a. n.a. n.a. Total 104.9 99.9 179.9 100.0 170.3 196.9 277.3 100.0 350.5 342.4 383.5 99.9 Sources: Banco de 1a Republica: Reviste (monthly) • Contraloria General de la Republica: Informe Financiero (annual). 11 In order to present a consistent series. the data used here are those carried monthly in the Banco de la Republica's monthly bulletin. though it is believed that these data are frecruently subject to revision and adjustment. It has not been attempted to separate ordi- nary and extraordinary revenue sources since the extraordinary budget was in theory at least discontinued in 1945. £/ First ten months. J.I Estimated. !±! Includes "credit operations ll •  Table 16 COLOMBIA STATUS OF US EXPORT-IMPORT BANK LOANS TO COLOMBIA AS OF JANUARY 31. 1949 Gross Net }~cunt Amount Name N1.lJllber Purpose Authorized Cancellations Authorized Repaid" Outstanding 'TUndi&bursed ~/Jl/49_ IJ)~L49 Republic of Colombia 296 ~Various--paving. highways, $ 9,947,716 $ 9.947,716 $4,200.949 $ 5,746,767 Republic of Colombia 296 ~military supplles t docks. etc. 10,052,284 10,052,284 3,151.925 6,900.359 Caja de Credito Agrario, 346 Rubber development, construc- 10,000,000 10,000,000 446,500 193,500 $ 9,360,000 Indus. y Minero (Re- tion of a dam. machinery for public of Colombia) irrlgation project, fertilizer and other purposes Empresa de Energia 351 Equipment for electrical plant Electrica. S.A.(Banco una110tted 875,000 $ 875,000 de la Republica et al) Baldwin Locomotive Works 367t380 36,738 330,642 55,107 275,535 The Kerite Company 157,523 157,523 23,628 47,256 86,639 ~aylor Forge & Pipe Works 450,807 45,080 405,727 c7,620 338.107 U.S. Steel Export Company 326,693 21,855 304,.838 59,815 245.023 Westinghouse Elec. Int. Co. 1,322,598 1,322,598 214,725 760,112 347,761 Republic of Colombia - 352 Railway Equipment ~2,OOO,OOO 2,000,000 846,607 1.153,393 Consejo Adm. de Ferro- 352 {3. 000 ,OOO 3.-000,000 16),441 2,341,131 495,428 carriles Nac. de Col. Ferrocarril de Antio- 389 Locomotives 517,800 41,150 474,6.50 258,900 215,7.50 quia S.A. (Banco de Ia Repub- lica et al) Baldwin Locomotive Works Republic'vf Colombia 438 Seagoing hopper dredge 1,978,609 1,978,609 1,200,000 778.609 (George Wagner Associates) Republic of Colombia 442 Construction steel, cast and gal- 10,000,000 500,000 9,500,000 .500,000 9,000,000 vanized ~ipet agricultural eqUipment, electrical equipment, plumbing fixtures, paint and var- nish, and other purposes. 50.996,409 1,521,823 49,474,586 9,489,217 19,916.932 20,068,417