Colombia - First and Second Development Finance Companies Projects

CULATING COPY FILE COPY TO BE RETURNED TO REPORTS DESK CONFIDENTIAL Report No. 536 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT PERFORMANCE AUDIT OF COLOMBIA FIRST AND SECOND DFC LOANS October 11, 1974 Operations Evaluation Department  PREFACE IBRD Loans 451-CO of May 1966 and 534-CO of May 1968 to the Banco de la Republica of Colombia for on-lending through five private Financie- ras for private-sector industrial projects were closed in August 1972 and December 1973 respectively. The following performance audit reviews ac- tual developments against the expectations held out in the documents on the basis of which the Executive Directors approved the loans and against the emphases adopted by the Bank in its discussions with the Colombians in con- nection with the loans. Detailed study of projects financed has not been possible, nor has any independent verification of the Financieras' accounts been carried out. But the Bank's files on the loans and the successive annual reports of the External Auditors' reports on each Financiera have been studied and data have been gathered from the Banco de la Republica and the individual Financieras on the current status of the two IBRD loans and the sub-loans made. Brief visits were made in connection with the prepara- tion of the audit in January 1974. The assistance provided by the Banco de la Republica and each of the five Financieras, in response to questions posed, is most gratefully acknow- ledged. Note: Currency Equivalent: Annual Average non-preferential Exchange Rates used in this report are as follows (in Colombian Pesos per US dollar): 1963: 9.00 1969: 17.37 1964: 9.00 1970: 18.49 1965: 10.50 1971: 20.41 1966: 13.50 1972: 22.58 1967: 14.73 1973: 24.79 1968: 16.38  PROJECT PERFORMANCE AUDIT of COLOMBIA FIRST AND SECOND DFC LOANS Table of Contents Page No. Summary i Defining the Framework 1 Macroeconomic Objectives 3 Resource Allocation 6 Institution-Building 9 Conclusion 14 Tables 1 - IBRD Lending Classified by 1972 Financial Results of Borrowers 7 2 - Financieras' Profitability 1965-72: Earnings on Equity (%) 11 Annex Tables 1 - Role of Banco de la Republica in Handling IBRD Loan 451-CO 2a- Corporacion Financiera Colombiana: Sub-Projects Financed under IBRD Loans 451-CO and 534-CO 2b- Corporacion Financiera Nacional: Sub-Projects Financed under IBRD Loans 451-CO and 534-CO 2c- Corporacion Financiera del Valle: Sub-Projects Financed under IBRD Loans 451-CO and 534-CO 2d-,Corporacion Financiera del Norte: Sub-Projects Financed under IBRD Loans 451-CO and 534-CO 2e- Corporacion Financiera de Caldas: Sub-Projects Financed under IBRD Loans 451-CO and 534-CO 3 - Private Investment Fund 4a- Corporacion Financiera Colombiana: Summary Balance Sheets (as of Dec. 31), Income Statements and Financi4l Ratios 1964-72 4b- Corporacion Financiera Nacional: Summary Balance Sheets (as of Dec. 31), Income Statements and Financial Ratios 1964-72 4c- Corporacion Financiera del Valle: Summary Balance Sheets (as of Dec. 31), Income Statements and Financial Ratios 1964-72 4d- Corporacion Financiera del Norte: Summary Balance Sheets (as of Dec. 31), Income Statements and Financial Ratios 1964-72 -2- 4e- Corporacion Financiera de Caldas: Sumary Balance Sheets (as of Dec. .31) Income Statements and Financial Ratios 1964-72 5 - Colombian Financieras: Growth of Professional .Personnel 6 - Corporacion Financiera Colombiana: Evolution of Equity Portfolio .1966-73 SUMMARY In 1962-63 the Bank made a major effort to help set up in Colombia a central fund (PIF) which would receive foreign loans and channel them on for small projects in the private sector. But those in the Bank re- sponsible for lending through intermediaries took the view that this sys- tem would not enable application of the institution-building effort to institutions specialized in long-term financing that Colombia needed and that the Bank should make in connection with its lending. Hence it was decided to make separate appraisals and have separate Bank-approved agree- ments and policy statements for each of five mainly regional Financieras, established by the leading financial institutions in the country to spe- cialize in such long-term financing operations but at that time, for lack of long-term funds, mainly focussing on medium-term lending, foreign trade financing, and equity investment in new companies. Working out the details of these arrangements, not very palatable to the Government, and carrying out the extensive appraisal work required, took some three years. Loan 451-CO, for $25 million, was finally signed in May 1966 and became effective in October; shortly thereafter the five Financieras applied for a follow-on loan, for which the Bank carried out a new round of appraisals during 1967 and which was eventually signed, as Loan 534-CO for $12.5 million, in May 1968, becoming effective in September of the same year. Despite the complexity of the arrangements Bank loan funds were committed and disbursed quite fast for the foreign exchange cost of some 140 projects (19 of them new projects and the remainder expansions), which generally seem to have been executed quite efficiently, by 115 companies and their subsidiaries; in about 12 of the projects, some of them expansions, the Financieras played an important promotional role. The projects probably accounted for some 15% of manufacturing investment in Colombia in 1967-70, and the Bank contribution for about one-third of this. The final borrowers were mainly larger companies, able to gather the necessary complementary Peso resources, usually out of internally generated resources in the absence of an effective domestic capital market, and to prepare the documentation required for long-term loans funded by the Bank. Of the $37.1 million ultimately disbursed, some $8 million or 22% went to the two largest textile companies in the country and their subsidiaries, and 36% to the textile industry as a whole, while 12.5% went to the cement industry and 12% to paper and printing; borrowing companies in these three sectors have generally shown comparatively good financial performance in recent years and many of them have played a significant part in contributing to Colombia's notable success in developing exports of manufactured goods. Less important sectors in the use of loan funds were chemicals, accounting for 11%, commercial agriculture, accounting for 7%, and various minor capital goods, and companies and projects in these sectors have gen- erally done much less well, a few having been dissolved and many showing poor financial performance; excess capacity, price control, poor coordina- tion with other investments, bad location and poor management have been among - fti - the problems. Overall, companies responsible for 58 of the projects, accounting for just over 50% of IBRD disbursements, showed reasonable prof- itability in 1972, despite inflationary circumstances, while those responsible for the remaining 82 projects (including most of those promoted by the Financieras and most of the new projects) have reported earnings on equity approximating, or falling below, the rate of inflation; the economic sig- nificance of this may become clearer as a result of an economic study presently underway reassessing a sample of past Financiera-assisted projects. Bank appraisal projections of accelerated manufacturing growth were only partially attained, and official estimates of private investment and saving in the last years of the 1960s, when the loan funds were principally disbursed, show small or insignificant increase on earlier years, raising a question whether IBRD loan funds may have substituted for others. The pace of growth of manufacturing output has however continued to increase, to reach 9-10% in 1972-73. Long-term financing, mainly on the basis of funds from the Bank and the PIF, has risen in importance among the activities of the Financieras, as the Bank expected, and the Financieras have expanded their staff commen- surately, with some additional emphasis to engineering skills as the Bank advised. The Bank found the Financieras' appraisals generally satisfactory although weak on the marketing side - which does seem in practice to have been a significant part of the problem for some of the less successful projects financed with IBRD funds. The Financieras have remained financially sound, but a major effort was required to rescue one of the smaller ones - Caldas, in a difficult region - from prospective financial collapse in 1970. By and large, except for Caldas, the Financieras met the short-term profitability targets given in the appraisal report for the second loan and, in nominal terms, profit rates have continued to rise, even though the spread on the IBRD funds was reduced from 5.5% on the first loan to 3% on the second loan (and subsequent ones). But inflation has also increased so that in 1971 and 1972, when prices were still increasing at only about 14% p.a., after-tax income adjusted for inflation ranged generally between -3% and +3% of equity for the different Financieras, low compared with most other DFCs supported by the Bank. The Bank gave a lot of emphasis to investment by the Financieras in equity form as a means of protection against inflation, even requiring the Financieras, as a condition of the second loan, to include in their Policy Statements a commitment to 'add equity features to loans to clients whenever possible'. This seems to have been a dead letter, and most of the Financieras have sharply reduced the proportion of their assets in equities, with much of whatever additions there were being in companies in which they already had holdings. Equity portfolios have been generally low yielding and seem also to show limited prospect for compensation of inflation by gain in capital value. The problems are partly poor selection of investments, partly failure of the Colombian tax system to recognize in- flation and permit corporate asset revaluation, and most importantly Govern- ment financial and fiscal policies hindering sound equity market development. - iii - In order to repay the Bank's first loan it is likely that the Colom- bian Central Bank, which took the exchange risk on behalf of final borrowers in return for a charge of only 3% p.a., will have to find more than half of the original principal amount from sources other than sub-borrowers; this required contribution would have been even greater had it not been that, with a view to encouraging easier lending terms by bilateral lenders, the loan was unusually given a 20-year fixed term, permitting the Central Bank to earn something for use of the funds between the time they were repaid by original sub-borrowers and the time they were due to the Bank; they hqve in fact mainly been used for 5- and 10-year loans at 17-19% interestl' for agricul- ture, food processing, chemical and textile industries and hotels. The Government insisted on a more adequate charge for exchange risk being made on the second loan and the Central Bank's required contribution to repayments to the Bank is likely to be much less unless i lation long continues to be more than about 10% above inflation in the US.- While the Financieras appear to have been efficient channels for dis- bursing Bank funds to the larger-scale Colombian manufacturing industry and the direct contacts that the Bank staff has had with them may have helped to strengthen their project appraisal and control capabilities, experience does raise a question whether it would not have been more cost-effective for the Bank to devote less staff resources to analysis and supervision of each of the individual Financieras and more to the problems of national economic and financial policy that have prevented the Bank's proposed solution to their profitability problem from being useful, constrained the breadth of their clientele and dampened their development effort. Wisely though slowly the Bank has been turning to this approach, trying to give the PIF office in the Central Bank a larger role and to deepen its own understanding of the obstacles to development of a more effective domestic financial market in Colombia. 1/ Interest rates to the final borrower on this relending have recently been changed to 8% and 20%. 2/ Some contribution. - about $1.8 million at June 1974 exchange rates - is likely to be required for a different reason - changes in exchange rates between the US dollar and the other currencies disbursed by the Bank.  PERFORMANCE AUDIT OF COLOMBIA FIRST AND SECOND DFC LOANS Loans 451-CO and 534-CO were the first two in what has since become a series of five Bank loans, aggregating $163 million, to Colombian finan- cial institutions for on-lending to the private sector, mainly for invest- ments in manufacturing industry. Loan 451-CO for $25 million, signed on May 31, 1966, was made to the Banco de la Republica (BR), Colombia's Central Bank, for use to cover medium- and long-term loans for imported goods by five private Financieras. Unusually for IBRD loans to development finance institutions, it had a fixed term of twenty years, with rising annual repay- ments, like typical IBRD loans for other sectors. Loan 534-CO, in the amount of $12.5 million, was a follow-on loan, destined for similar use and signed two years later, on May 22, 1968; it was to be amortized pari passu with amortization of sub-loans by final borrowers, as usual for IBRD loans to DFCs. Final disbursements occurred in August 1972 and December 197.3 for the two loans consecutively. The Colombian private Financieras are financial institutions set up under legislation which resulted in part from advice given by the Bank much earlier, in 1952, and designed essentially to provide longer-term finance, both debt and equity, than the Colombian commercial banks could. Owned mainly by these banks and by local insurance companies, there are now more than a dozen of them in existence, but only the first five to be founded were in existence at the time Loan 451 was made. The dean of them, Corporacion Financiera Colombiana (total assets of $55 million equivalent at the end of 1965 and $57 million at the end of 1972) came into operation in 1959 in Bogota, but has a national scope of operation. In 1960 Medellin interests established Corporacion Financiera Nacional ($27 million and $44 million total assets as of the end of 1965 and 1972 respectively) which has been mainly concerned with industry in Colombia's manufacturing capital (and second city), Medellin, and surrounding areas. 1962 saw the creation of two further institutions mainly intended to assist development in their respective regions: Corporacion Financiera del Valle in Cali, whose assets have risen from $9 million equivalent in 1965 to $43 million in 1972, and Corporacion Financiera de Caldas in Manizales, with assets growing from $13 million in 1965 to $23 million in 1972. Finally, in 1964, an institution was created for the last main industrial-commercial region of the country, the North Coast: Corporacion Financiera del Norte, which has grown almost as fast as CF Valle with total assets increasing from $5 million in 1965 to $21 million in 1972. These five companies still account for the vast majority of business done by all the private Financieras and together they are only slightly less important than the Government development bank (Insti- tuto de Fomento Industrial) or the commercial banks as a source of funds for financing industrial development. Defining the Framework Selection of the Banco de la Republica and the Financieras as the channels for the Bank's funds, and agreement on the way the operation was - 2 - to be organized, were nonetheless the outcome of a long process. The idea that Colombian development could be boosted by channelling foreign loans broadly to the private industrial sector was first strongly propounded in the report of an important Bank economic mission sent early in 1962 to review the country's new ten-year Development Plan for the 1960s. Impressed by the dynamism of the private sector, the mission argued that it could put to productive use considerably more savings than Colombia itself was capable of generating and it suggested the establishment of a Private Investment Fund (PIF) in the Central Bank which would receive bulk foreign loans, mainly from bilateral sources, that could then be used to financessub-loans granted by local credit institutions for individual projects. With further Bank advice and assistance, such a fund was established in March 1963 and it drew a limited amount of foreign support, most importantly from US AID which in particular found it a convenient mechanism for channelling to the private sector part of the Peso tounterpart to the large program loans which it began to make to Colombia at that time. But it was felt that there was scope for Bank lending too; the only difficulty was that those in the Bank who were responsible for lending to financial intermediaries for industry did not consider the PIF a satisfactory channel for IBRD funds, mainly on the grounds it would prevent the formation of a direct institution-building link between the IBRD and the right sort of private intermediaries and would probably in- volve too much Government interference. There followed therefore, through 1963 and 1964, a long series of discussions in Washington and visits by senior Bank officials to Colombia, which eventually brought the matter to a point where the Bank was ready to embark on appraisal of each of the five Financieras through which it desired its funds to be channelled. This work was undertaken by a large mission in January and February of 1965, and its results were in turn distilled down to an appraisal report on the whole scheme by the end of the year, so that loan negotiations could take place in January 1966. Quite open to loans channelled through the public development bank, or through the PIF to a broad range of local financial intermediaries including commercial banks, the Government had been very reluctant to guarantee, let alone to take the foreign exchange risk on, a loan which could be used only by what it sometimes called the 'financial aristocracy' of the Financieras; but it was generally agreed that final borrowers would be few for a loan on which they themselves had to take the exchange risk, and the Bank was at the same time adamant that its loan be confined to the private Financieras which it foresaw develop- ing into specialized long-term lending institutions in accordance with their original objectives (for lack of long-term funds they had tended'in the mean- time to emphasize mainly shorter lending and especially export-import financing). After prolonged discussion of alternative possible arrangements, the Colombian authorities eventually yielded, with the proviso that the Banco de la Republica, which would act as intermediary and carry the exchange risk for a 3% addition to the annual interest rate, would also have the responsibility to ascertain whether projects proposed by the Financieras were of 'economic significance' to the country and the power to veto those that were not. The other major area of contention concerned the types of expenditure that would be eligible for coverage with loan funds: all Colombian parties - 3 - were anxious for the funds to be usable for Peso expenditures, to stimulate local industry, but the Government was worried that eligibility of working capital for loan financing could lead to loan funds simply being used to finance capital flight; by contrast, the Bank was very keen that its funds be available to finance working capital, the main shortage stressed at the time by Colombian businessmen, while it was ready to be more flexible re- garding financing of local currency expenditures. Eventually it was agreed that loans out of the Bank funds could cover a limited amount of 'permanent' working capital connected with the financing of a capital project, but senior Bank management intervened at a later stage to apply firmly to Colombia the general Bank policy of the time limiting use of loan proceeds to foreign exchange expenditures, whether for fixed or working capital. Loan negotiations broke off on this point, but in February 1966, after their return home, the Colombians agreed to accept this limitation, and the loan proceeded. Despite the somewhat complicated arrangements, the large number of parties involved and the Colombians' fear at negotiations that insufficient Pesos would be available to finance the local component of investment projects supported by a loan confined to foreign exchange, the loan became effective in October 1966, slightly ahead of schedule, and it was almost totally com- mitted against sub-projects by March 1968, nine months ahead of the due date. Final disbursements lagged, and the closing date for disbursements had to be extended three times, but this was mainly due to changes required in the components of one part of one sub-project, and 98% of disbursements were in fact accomplished within 50 months of loan signing, a relatively short period for loans of this type. Already in November 1966, following effec- tiveness of the first loan, the Financieras applied to the Bank for a second loan. They were individually reappraised through 1967. In the middle of the year the Government refused to take the exchange risk on a second loan and returned to tne issues its predecessor had stressed, particularly the need to include the public development bank and other institutions, including several newly formed Financieras, among the participants in the scheme. But the older Financieras eventually reached agreement with the Government - for the Banco de la Republica to continue to take the exchange risk but in return for a sharply increased premium of 8 percentage points to the interest rate. And the Bank argued that the small size of the loan that its overall resource position and prospects would enable it to make at the time - an expected $10 million and actual of $12.5 million - would make it unwise to try to include other participants under this loan. Signed in May, it became effective in September 1968 and, despite substantial extensions of final dates for commit- ments to sub-projects and for disbursements, some 80% was disbursed within about 30 months of signing. A further, larger loan was made in the middle of 1969. Total disbursements of IBRD funds through this series of loans to the Financieras for private-sector projects in Colombia rose from $7.5 million in 1967 to $15 million in 1970 and $24 million in 1972. Macroeconomic Objectives With the broad approach through the PIF abandoned, macroeconomic objectives were neither very explicit nor very specific in the documents relating to these loans. Nonetheless an important part of the justifica- tion presented for the first loan was that it would help to increase the pace of investment and development - in a wider context of generally im- proving Government policies with regard to the foreign exchange rate and liberalization of imports. It was suggested in particular that the growth of industrial production should rise from 6% annually between 1960 and 1964 to some 9-10% per year in the later 1960s and that this sharp improve- ment would require major increase in investment. In connection with the second loan part of the reason for keeping its size down was the stimulus that it was hoped this would provide to raising of funds for PIF from other sources, particularly bilateral. As such none of these objectives were attained, and it is impossi- ble to say categorically whether or not the production increases that have taken place would have been achieved without the investment financed by the Bank or with equivalent investment financed from other sources, domes- tic or foreign, had the Bank loan not been available. According to the official national accounts the annual rate of growth of manufacturing pro- duction rose only to some 7% in the later 1960s when these loans were being disbursed, though it did continue to accelerate and eventually reached 9-10% in 1972 and 1973. Total private fixed investment (there being no figures on manufacturing investment alone) averaged only 13.5% of the GDP in the late 1960s, slightly above the level of the middle 1960s but no higher than in earlier years. Domestic private savings tended to remain constant in real terms and even to decline as a proportion of GDP, and a study two years ago!/ found a possibly significant negative correlation between inflows of foreign capital to the Colombian private sector and domestic private saving. As regards the possible substitution of other foreign loans it is noteworthy that none of the numerous contacts made with potential foreign lenders prior to the Bank's second loan seems to have ever led to any actual commitments to the PIF, although it should be remembered that bilateral loans were ob- tained in this period for a number of other purposes and a $10 million com- mitment from US AID for the PIF was obtained late in 1969. The only other foreign loans to the PIF in more recent years have been by KfW, in 1971 and 1972, following eventual exhaustion of an earlier (1966) loan. When the Government drew attention in 1967 to the inadequate charge for the exchange risk that had been made in connection with the first loan (and consequently inadequate interest rate to the final borrower) the Bank, recalling especially the very rapid rate of commitment and early disburse- ment, raised a doubt as to whether all of the investment financed had been of high priority. What is clear is that borrowers have been significantly sub- sidized2/ and that the Banco de la Republica faces a substantial deficit 1/ IBRD Report No. Z-18, Bank Operations in Colombia: An Evaluation (May 25, 1972). 2/ Insofar as the interest rate to the final borrower under the first loan, at 14.5%, was among the highest, if not the highest, then prevailing in Colombia, it might be felt that borrowers of these funds were no more (continued on page 5) - 5 - between what it will receive in Pesos, from the sub-borrowers through the Financieras, and what it will need in order to purchase dollars at current exchange rates to pay interest and amortization due to the Bank. The burden on the BR will be reduced by the fact that, under the loan agreement, it is entitled to use funds between the time they are repaid by sub-borrowers and the time they are due to the Bank for the PIF, whose recent lending rates to final borrowers have been in the neighborhood of 18%. Even taking full account of earnings from this source, however, it is estimated that the BR will have to start making substantial contributions, from other resources, in 1981 in order to repay the Bank's loan and that these contributions will eventually amount to some $13.5 million-/ (see Annex Table 1); the BR it- self estimates that, without taking-account of earnings on relending, net contributions will have to start in 1978 and that they will amount to some $18.7 million by 1986 when the last amortization is due to the Bank. These calculations are all based on the assumptions that the 9% annual rate of devaluation of the Peso against the US dollar which has prevailed over the last few years under Colombia's continuously adjusted exchange rate system will be maintained in the coming years, although it should be noted that the differential between inflation in Colombia and the US has recently been considerably greater so that more rapid adjustment of the exchange rate may become necessary. The 8% interest rate premium adopted for coverage of BR's exchange risk in connection with the second loan has probably just been adequate so far to cover the costs to BR of devaluation of the Peso against the US dollar; it will clearly become inadequate if devaluation continues at 9% or more, as expected, but the deficit to be made up by BR (continued from page 4) subsidized than borrowers from other sources at the time. However it must be remembered that the loans funded by the IBRD were virtually unique in the country in being available in convertible foreign ex- change, repayable in Pesos and usually for 10-16 year terms. Very few other loans were (or are) available for anything like this amount of time, let alone in foreign exchange repayable in Pesos. 1/ This calculation and the following BR one do not take account of currency composition of disbursements and changes in rates of exchange between currencies disbursed; disbursements were in fact almost entirely in US dollars. Two other possible refinements would be to calculate the return on relending at 15% rather than the 18% used (since 3 percent- age points go to the intermediary, not BR) and possibly to include in BR's return on the basic lending through the Financieras the 0.5% allowed for BR administrative expenses as well as the 8.5% interest and exchange-risk coverage at least for later years when BR's related administrative costs are lower. Since the effect of the former adjust- ment would outweigh that of the latter it is clear that the cited estimate of the amount to be contributed by BR to the amortization is a minimum. - 6 - is unlikely to be nearly so great as for the first loan.- Resource Allocation The $37.1 million finally disbursed under the two loans (after can- cellations of only $0.4 million) were spread, in amounts ranging between about $20,000 and $2 million, among some 140 projects which seem generally to have been efficiently executed; Annex Tables 2a-e show that project cost overruns were generally not above 25%, quite reasonable in the in- flationary situation prev iling, and delays in project completion generally did not exceed 6 months.-1 In many cases where they were greater, the cost overruns seem to have been due either to expansion of the project beyond initial conception or to increased need for working capital. Together the projects probably account for some 15% of the total investment in manu- facturing undertaken in Colombia in 1967-70, with the IBRD funds accounting for about a third of this and the remainder being financed from other3/ sources, most importantly retained earnings of borrowing enterprises.- The projects were undertaken by about 115 companies (and their subsidiaries), most of them among the larger enterprises in the country. Through the end of 1969 78% of IBRD disbursements went to firms with 200 employees or more, which accounted for only about 60% of total manufactur- ing investment in the period. About $8 million, or more than 20% of the proceeds of the two loans, went in fact to the two largest textile enter- prises in the country and their subsidiaries, and this proportion was over 25% for the second loan. The Financieras attribute the predominance of larger enterprises among borrowers to the fact that they alone could at the time generally meet the IBRD's technical, accounting and administrative requirements for long-term loans and, in the absence of an effective domestic capital market, generate internally the Peso resources needed to complement 1/ Although some contribution will be required due to subsequent devaluation of the US dollar against some of the other currencies disbursed. About 45% of disbursements under Loan 534-Co were in currencies against which the US dollar has devalued, and this would require a Central Bank contri- bution of about $1.8 million equivalent using exchange rates prevailing June 1, 1974 (see Operations Evaluation Report: Development Finance Companies, IBRD Report No. 485 dated July 26, 1974, Annex Table 7.2). 2/ Fairly small time and cost overruns overall result partly from many of the sub-loans having been made at a late stage in project progress, as can be seen by comparison between dates of loan approval and dates of project completion in Annex Tables 2a-e. 3/ Based on estimates made in Report No. Z-18, op. cit., using Flow of Funds data, and BR analysis of projected financing plans for sub-projects approved. -7- the foreign exchange funds. The Bank urged minimum limits to loan size (mainly with a view to improving the Financieras' profitability) but not maxima. Adequate data are not currently available tol ermit judgment about the retrospective economic validity of the projects.- A positive point is that all passed screening not only by the Financieras themselves but by three other institutions - the BR, the Colombian Foreign Trade Superinten- dency and the Bank itself2/-- each of which, but particularly the Trade Superintendency, rejected a few projects submitted by the Financieras or required their substantial revision. Information available about the spon- soring firms (Annex Tables 2a-e) shows that those with pre-tax returns to equity in excess of 20% in 1972 (which might be considered a moderately good return in a year when inflation was 14%) accounted for slightly more than 50% of total lending, but this information is hard to interpret, not only because it refers to the whole companies rather than to the specific projects financed but also because Colombian taxation and hence accounting principles do not permit regular revaluation of assets in light of inflation, so that net worth may be considerably understated for some firms. As the best avail- able, information classifying lending by borrowing company's pre-tax return to equity in 1972 is nonetheless summarized in the following table: Table 1 IBRD Lending Classified by 1972 Financial Results of Borrowers Pre-tax % of each Financiera's lending Returns to Equity and total amount in $ millions Total in 1972 Colombiana Nacional Valle Norte Caldas $000 % Over 20% 42.6 63.9 51.5 30.5 72.4 19,456 52.5 10-20% 25.4 16.1 13.9 30.0 2.3 6,989 18.9 Below 10% 32.0 20.0 34.6 39.5 25.3 10,631 28.6 Total 100.0 100.0 100.0 100.0 100.0 37,076 100.0 Total in $ mlns. 11.5 11.7 4.7 4.8 4.4 1/ Data on a few of the projects should become available in the comLng months in connection with a special study of selected Financiera sub- projects being carried out by the LAC Regional Office. 2/ The Bank of course did not examine separately the smaller projects, beneath the limits agreed for each Financiera. -8- Companies accounting for about 7% of the total lending and included in the 'Below 10% return' group have failed and been dissolved or are now in li- quidation, but even in these cases most of the loans were fully recovered (in Peso terms) as the assets were sold to others, presumably for productive purposes. Companies accounting for about half the lending in this lowest return group either should rise out of it in coming years or appear to suffer simply from having low prices for their outputs due either to Government price controls or to preference of owners to take profits in other parts of their combines; they may therefore be more economically viable than appears. Inspection of Annex Tables 2a-e shows that borrowing companies in the sectors which received the largest amounts of lending generally fall in the group of so-called 'good' financial performance (above 20% return to equity): Textiles, which accounted for 36% of lending, cement account- ing for 12.5% of lending, and paper and printing accounting for 12% of lend- ing. Borrowers in the category of 'poor' financial performance (below 10% return to equity) belong mainly to the chemicals sector, accounting for 11% of lending, the commercial agricultural sector, which received 7% of lending, or to the capital goods group (including items such as boilers,, ship repairs, motor vehicle components and valves). Several of the projects in these sectors seem to have suffered from inadequate preparation or bad management, as well as price control, excess capacity in the country and poor coordina- tion with other investments. It is noteworthy that by 1972/73 as many as 65 of the 115 borrowing companies were exporting at least a part of their production, and it is prob- able that many of these enterprises have begun to export since 1967, in line with the unexpectedly fast growth of Colombia's non-traditional exports from about $120 million in that year to $392 million in 1972 and $580 million in 1973. Among borrowers, much the largest exports are from textile companies but others exporting significant quantities include tanning, printing, sugar, glass tyres, agricultural machinery, packing, petrochemicals, seafood and beef processors. Funds repaid to the BR by the Financieras under Loan 451-CO and not yet required for servicing the Bank loan appear to have amounted to about Ps. 120 million over the last four years (1970-73), representing about 10% of new Peso loan commitments under the PIF (see Annex Table 3). These loans have been made mainly through the Financieras or the com ercial banks, on 5 or 10 year terms, with interest rates averaging 17-19%.17 Nearly one-quarter of the loans have been for production of cocoa or bana- nas (particularly change to a higher yielding variety of the latter), while other major sectors benefitting have been food processing, chemicals, tex- tiles, paper and hotels. The PIF loans have typically covered about 30% of total project costs, with 40% being provided from borrowers retained earnings and the remaining 30% from other lending sources, in some cases new IBRD foreign exchange loans but generally commercial bank credits. 1/ Recently changed to 8% and 20%. -9- Institution-Building In accordance with the basic policy decisions of 1963/64 principal attention in appraisal missions and appraisal reports was given to the financial and operating structure and capabilities of the individual Finan- cieras. Emphasis was given to their own project appraisal and follow-up procedures, their degree of concentration on long-term lending and financing, the composition and quality of their staffing and the adequacy of their reserves and provisions. But special stress was placed on their prdfit- ability, which was felt to be inadequate in light of the inflationary con- ditions prevailing; quantified targets, in connection with loan justifica- tion, were largely confined to this aspect. Among the Financieras' operations the relative importance of term lending has indeed greatly increased, so that this is now by far their primary activity, and the proportion of such loans with terms of five years or more has risen sharply to some 35-75%, varying cansiderably among the different companies (see Annex Tables 4a-e); this has been in accordance with the Bank's advice and it has been largely based on Bank loan funds. The Bank found the Financieras' appraisal reports for projects to be financed with IBRD funds generally satisfactory, although their treatment of marketing aspects was felt to need strengthening - seemingly a justified concern in view ofthe marketing difficulties actually encountered by several projects (see Annex Tables 2a-e) - and appraisals of projects to be supported with funds from sources other than the Bank were less thorough. To help strengthen the Financieras' project work the Bank urged them, in appraisal of both Loan 451-CO and 534-CO, to build up their staff on the engineering side. Annex Table 5, which summarizes the gradual growth of the Financieras' staff from 1965 to 1973, shows some increase in the number of engineers em- ployed, principally in 1969. As regards portfolio reserves the Bank's first appraisal found that the companies had followed prudent policies but the second expressed some concern that the ending of certain tax incentives for reserve build-up might weaken the effort in this direction. In particular special letters were required from CF Valle, reaffirming its policy to make'appropriate annual allocations, and from CF Colombiana, undertaking to allocate at least 30% of net profits each year to a reserve against losses; this com- mitment was not fulfilled to the letter, except in 1970, but overall alloca- tions to reserves were increased to 40% or more of net profits for each year after 1967. Total reserves have been held to some 10-14% of combined loan and equity portfolio for all companies except CF Norte, for which they have been in the range 7-9% for the last few years and CF Caldas which ran into a serious unexpected crisis in 1970. Emrgency measures were taken, including a sharp reduction in staff, closing of the Bogota office, write- off of over Ps. 30 million of bad loans (partly against shares in borrowing companies) and change of management, but still at the end of the year, about 30% of Caldas' loan portfolio was with clients with arrears and 30% of its equity portfolio in companies operating at a loss, as well as a further 11% in companies in liquidation; while reserves had fallen to less than 3% - 10 - of loan and equity portfolio. With very careful operation by the new manage- ment, substantial financial assistance by a major shareholding institution, and some technical advice by the company's External Auditor and the Bank, the Financiera has been able to keep afloat and to begin to rebuild its position. Loan arrears have fallen greatly, and earnings have improved. The only other Financiera to suffer substantial loan write-offs has been Colombiana, but they have so far been much smaller than for Caldas, more especially in relation to Colombiana's much larger size. Noting the Financieras' past growth in profitability in nominal terms but its relatively low level in real terms, the Bank expressed hopes that inflation would fall and profits grow to a more reasonable real level. In 1968 inflation was in fact lower, at about 6%, than it had been, but it has been rising since, to reach about 14% p.a. in 1971 and 1972 and much higher since then. The following table compares actual nominal levels of profit- ability with projected for the two years included in the forecast made in connection with the second loan, and also shows profit rates after adjustment for inflationi', averaged for 1965-72 and separately for 1970, 1971 and 1972. / By simply deducting the annual inflation rate from the nominal profit rate. Thus no adjustment has been made to maintain the value of equity since virtually all assets are monetary. Such an adjustment would clearly lower the rate of profitability further. - 11 - Table 2 Financieras' Profitability 1965-72: Earnings on Equity (%) Actual, Adjusted for In:Elational Projected Actual Average 1968 1969 1968 1969 1965-72 1970 1971 1972 Colombiana before tax 12.8 14.8 14.0 15.7 6.0 12.2 3.4 2.0 after tax 9.2 11.9 9.0 11.0 1.8 6.0 -2.0 -1.7 Nacional before tax 16.6 17.7 21.8 23.0 11.1 16.9 10.0 9.1 after tax 13.2 14.1 15.7 17.0 5.8 11.1 2.8 3.5 Valle before tax 28.6 31.7 21.4 22.3 10.7 18.6 8.8 11.1 after tax 17.1 19.0 13.1 14.7 3.5 10.7 1.7 2.3 Norte before tax 16.4 19.4 18.9 18.8 7.3 13.4 6.6 8.5 after tax 9.8 11.6 11.8 12.9 2.6 7.1 0.1 2.3 Caldas before tax 13.7 14.7 10.4 8.1 -0.5 -2.9 -11.9 -3.0 after tax 10.7 11.8 7.7 7.6 -1.9 -2.9 -11.9 -3.0 a/ Inflation at an average annual rate of 10% for 1965-72 and 6.3% for 1970, 14.7% for 1971 and 14.0% for 1972, based on December-December charges in the working class (obrero) cost-of-living index; inflation was 6.4% and 8.7% respectively 1968 and 1969. The table shows that, except for the special case of Caldas with its large arrears and write-off problems, all the Financieras came close to the projected nominal levels of profitability (the shortfall for Valle seems to have been due to unwarrantedly overoptimistic projection of earnings from special fees and commissions). But equally all the Financieras, after reaching modest levels of inflation-adjusted after-tax returns in 1970 (ranging from 6 to 12%), have been severely affected by the acceleration of inflation in recent years; tnflation-adjusted profitability ranged1from about -3% to +3% in 1972, less in all cases than average profitability 1965-72. - 12 - In the discussions leading up to the second loan and in the nego- tiations for it, principal emphasis was placed by the Bank on what it hoped would be a solution to the problem of protecting profitability against in- flation: increased purchase of.e.quities and, in particular, attachment of equity features (convertibility pr6visions, -etc.) to the Financieras' sub- loans. As a condition of the Bank's loan, all the Financieras had to change their Policy Statements to emphasize that they would.'add equity features to loans to clients whenever possible.' The BAnk'6 stress on this resulted principally from its concern that the 'interest rate formula delicately negotiated between the Financieras and the Government for the second Bank credit line (18% to the final borrower, of which 6-64% to IBRD, 8% to BR for exchange risk, 3% to Financiera,and 4-1% for BR administrative cost) left too small a margin to the Financiera, especially compared with the first line (14.5% to the final borrower, of which 6% to IBRD, 3% to BR for exchange risk and administrative cost and 5.5% to the Financiera). Despite the emphasis given during negotiations and the promises ob- tained from.the Financieras, this point never seems to have been followed up and very few loans appear in fact to have been made with convertibility features (only one $250,000 loan by CF Norte under Bank line 534-CO); the Financieras point out that borrowers' debt-equity ratios were generally satisfactory and that when they did need additional equity they usually preferred to have recourse to existing shareholders. A few loans had been made prior to 1968 with convertibility features, principally by Valle, there have been a few conversions in connection with capital restructurings for borrowers with problems (principally by Norte and Caldas), and equity sub- scriptions have occasionally been made,simultaneously with loan commitment in recent years, principally by Nacional. But the-share of equities in the Financieras' total loan and equity portfolio has been falling sharply for all except Norte, where it has remained stable at the relatively low level of 9%. From the point of view of profitability the lack of action on this point may well have been fortunate. Most of the Financieras have been earning some 3-5% p.a. dividend income on their equity portfolios (valued at original cost), compared with 3-5 times as much in interest on their loaned funds; even Nacional, which has always shown a better record in this respect than the others, earned only 13.7% dividend return on its equity portfolio in 1972 compared with 17.2% on,funds loaned. Adjustment for realized capital gains would make a small positive difference for Caldas in recent years, but not significantly for the .others where such gains have either been non- existent or largely offset by realized losses. It might nonetheless be thought that over time equity investments would yield adequate inflation- compensating returns, whether in dividends.or capital gains, and that the problem is largely one of portfolio immaturity. This appears to have been the hope when the Bank was underlining the key role that the Financieras could play in meeting the gap in availability of equity finance for small and medium scale enterprise and advising greater emphasis on equity invest- ments. Yet- current valuationsof portfolio.as of the end of 1972 were below total original cost for all Financieras except Valle, where it was 10% - 13 - above, and Nacional, about 35% above, still insufficient to compensate for interim inflation with respect to original holdings still retained and new purchases within the period. A full analysis of why the Financieras' equity portfolios have been so low-yielding and whether they are likely to continue so would require study of each investment made, which was impossible in the course of this performance audit. But a better view on whether it was, as suggested at the time, largely a matter of the time required for the portfolio to mature can perhaps be obtained by examining, on an illustrative basis, the evolu- tion of the largest equity portfolio held by any of the Financieras, namely that of Colombiana. As of the end of 1966 Colombiana held an equity port- folio worth some $8.5 million at the then current exchange rate (Ps. 114.3 million) in 19 companies, of which, according to the Bank's appraisal reports, some 15 accounting for 90% of the equity portfolio had been 'promoted' by the Financiera. In the following years 3 small holdings, accounting for 2% of the original portfolio, were written off and 2, accounting for 5%, were sold at a profit. Six of the companies in the portfolio yielded a dividend (stock or cash) in 1967 and still only seven in 1972, only three of the latter at a rate in excess of inflation in 1972.11 These dividend-yielders accounted for most but not all of the companies, constituting a third of the portfolio by amounts, whose stock can be considered to have compensated in- vestors reasonably well for inflation, whether by high current yields or in- crease of market value of the stock. The remaining 60% of original equity holdings, in 6 companies, have substantially lost in real value. Two, ac- counting for 33% oforiginal portfolio, have suffered considerable operating problems and have barely yielded a dividend, while current capital value seems to have failed to rise with inflation. Three, accounting for nearly 20% of original portfolio, have had to be reorganized at substantial loss to original shareholders, while one, accounting for nearly 10% of original portfolio, re- quired the addition of some Ps. 35 million to cover cost overruns, and was largely sold in 1972 against a cheap loan provided by CF Colombiana itself. The large majority of Colombiana's new equity investments over the -period 1966-72 were connected with capital reorganization and expansion efforts for companies in the original portfolio which had run into difficulties, only some 10% (or a little over Ps. 16 million) of gross new purchases were in new enterprises (principally a dry-cleaning undertaking, a hotel company which ran into great financial difficulties due to very large cost ,overruns, and most recently a mortgage and construction finance company),and about another 10% were in originally held companies doing well and expanding. Despite a net.addition of some Ps. 30 million to the Financiera's equity portfolio over the period, total value at original cost converted into dollars at the end-1972 exchange rate had deteriorated to some $6.3 million (Ps.148.7 million) while market value was estimated at about $5.7 million (Ps. 133.4 1/ In 1973 eight of these original investments (or their successors in the form of reconstituted companies) yielded dividends and, for the first time, two of the more recent investments began to yield. Dividend yield relative to original cost was in excess of the rapid rate of inflation in that year (25%) in only two cases. - 14 - 1/ million). This is hardly the record of a successfully maturing port- folio or of a venturesome institution filling the gap in the availability of equity finance for new enterprise. The poor performance of the Financieras' equity portfolios seems clearly to be partly due to poor project selection and preparation - for instance as regards market, location, cost estimates and technical aspects; these factors are important in explaining why as many as 8 of the 12 Financiera-promoted projects partially financed with funds from IBRD loans 451-CO and 534-CO (compared with 37, or only about 25%, of the whole 140) fall in the category of poor financial performance (see Annex Tables 2a-e); only Norte shows a relatively successful, if still small, promotion record under these loans. But it is also interesting to note that as many as 12 out of all 19 new (as opposed to expansion) projects, whether or not promoted, financed under those loans also fall in this poor performance category, even though at least several of these seem to have suffered from no particular deficiency of planning or management. It may well be that the absence from the Colombian tax system of any provision to allow revaluation of assets and consequent higher depreciation allowances, in light of inflation, has a particularly severe effect on the rate of profit to equity of recently created enterprises, with most of their capital still at fairly high nominal values. The Bank thought about trying to take this issue up in connection with negotiation of Loan 534-CO but eventually decided it was too complicated and insufficiently understood. The other reason for the poor performance of the Financieras equity portfolios, and probably the most important, is the extreme weakness of the Colombian equity market in general, due to the tight Government regulation of institutional credit and interest rates, the forced investment regime for major financial institutions, the consequent breadth of the very high interest non-institutional credit market, tax discrimination against equity and dividends in favor of fixed interest debt, and excessively liberal standards for listing of stock. Conclusion The Financieras appear to have proved fairly effective institutions for committing and disbursing rapidly increasing volumes of IBRD loan funds to larger-scale industry in Colombia and for eventually collecting them. They handled the first IBRD loan on terms that were recognized at the time to be favorable - a mark-up of 5.5% to cover their own costs and coverage of the exchange risk by the Colombian Central Bank for a charge so small that the Central Bank is likely to have to cover from other sources more than half of the amounts to be repaid to the Bank; the 20-year fixed 1/ A further Ps. 29 million ($1.2 million equivalent) net was added to equity holdings in 1973, and the portfolio ended the year at $7.0 million (Ps.178.6 million) in cumulative original cost and $6.8 million (Ps.174.2 million) in estimated market value. Average dividend yield relative to original cost reached 13.3%, substantially higher than earlier years in nominal terms. - 15 - amortization schedule of the first loan together with the roll-over provi- sion built in, mainly with a view to encouraging easier terms from bilateral lenders to Colombia, reduce this burden on the Central Bank considerably below what it would otherwise have been. Much smaller supplementary contri- butions from the Central Bank are likely to be required for repayment of the second loan, which the Financieras have handled at a much lower mark-up of some 3%, little more than half of their overall average spread between borrowing and lending. How much the 5% of manufacturing investment covered by IBRD loan proceeds represents a net addition to the investment that would or could have taken place in their absence is uncertain, but the funds were directly disbursed for projects subject to multiple checks of their viability and apparently executed reasonably quickly and close to cost estimates. Firms responsible for 58 of the projects, accounting for just over half of IBRD funding, have been earning returns to equity that might be considered reason- ably good in the inflationary situation, and many of these firms have been important contributors to Colombia's success in developing exports of manufac- tured goods in the last few years. Firms responsible for the remaining 82 projects (including most of the new projects and of the few promoted ones) have only been earning returns to equity approximating, or falling below, 1971-72 rates of inflation. The economic significance of this may be some- what clarified by the study now underway by the Latin America and Caribbean Regional Office of a sample of past Financiera-assisted projects. Efforts to increase the Financieras' profitability to levels con- sistent with inflation, a major emphasis of the institution-building approach which the Bank adopted to lending for industry in Colombia, have had very limited success. Nominal profitability of most of the Financieras has in- creased because, despite a downward trend in overall spread on borrowing/ lending operations, the Financieras' formerly low debt-equity ratios have increased, in some cases very substantially. But inflation has also in- creased so that even in 1971 and 1972, when prices were rising at only about 14% p.a., after-tax earnings on equity, adjusted for inflation, were only in the range of -3% to +3%, low compared with most other Bank-supported DFCs. The solution to the problem of reconciling long-term financing with inflation that the Bank urged on the Financieras was never followed by them, but, had it been, it would have likely made their financial per- formance worse. While the direct contacts between Bank and Financiera staff may have played some role in helping to.strengthen the Financieras project appraisal and control capabilities - so that the mistakes with some earlier projects may be less likely to recur - it seems doubtful in retrospect whether the approach adopted in 1963, exclusively emphasizing direct rela- tions with the Financieras, was as cost-effective as would have been the alternative, relying to a much larger extent (perhaps increasingly over time) on the Bank-assisted PIF. On the one hand, the chosen approach has been costly in terms of Bank administrative resources, requiring appraisal and supervision work on five separate institutions in place of the one intermediary that is customary for this type of lending in most countries. Efforts were finally started two years ago to give the Banco de - 16 - la Republica a much larger role in appraising the Financieras and approving their sub-projects but they are proving slow to yield results, partly because of BR's difficulty in paying the salaries re uired to attract enough staff of sufficient caliber for this particular job.1 On the other hand, the Bank's efforts have had very limited effectiveness in attaining the closely linked objectives of reasonable Financiera profitability, so stressed in this case, and broader domestic capital market development, a major - even the dominant - underlying theme of all Bank activity in the DFCs field. The particular institutional approach adopted in this connection was clearly inappropriate, and the Financieras showed wisdom in not pursuing the course so strongly urged by the Bank. Government policy and legal reforms were required to enable more effective mobilization and more equitable and effi- cient distribution of domestic private savings. While the Bank did begin to negotiate constructively with the Government on macroeconomic kpolicies about the same time as it began lending to the Financieras (the first Memo- randum of Understanding on Economic Policies was signed late in .1965 and it was followed by similar agreements almost annually for the next five years), these concentrated mainly on foreign exchange rate policy and fiscal perfor- mance, and little attention.was given to private savings and other factors affecting the private financial market - despite the rather unique provision in the first loan agreement of the valuable rollover feature, the efficiency of which in contributing to development must depend even more than in the case of first-round lending on the efficiency of the capital market as a whole. Here again-some efforts have been started in the last two or three years - to study,more specifically the'problems obstructing the growth of an efficient financial,market and to encourage the Financieras more effectively to issue Peso bonds. But,many of-the issues are very difficult and progress is inevitably slow. Devotion to them of some of the budgetary resources spent by the Bank on,analysis of the individual Financieras through the latter half of the 1960s would likely have contributed to identifying and promoting practical solutions to them more rapidly. 1/ This difficulty is not yet connnected with the big losses on the first Bank loan, which it is apparently expected the Government will help to cover, but with rigidity of salary structures. Annex Table 1 ROLE OF BANCO DE LA REPUBLICA IN HANDLING IBRD LOAN 451-CO (all figures in thousands) Totals 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1981 (1967-67) I. Disbursements (US$) Pesos 89,290 205,063 52,765 43,691 4,179 5,508 - - - - - - - - - - - - - - 400,496 II. Comitment Charges paid to BR (Pesos) 733 684 280 108 12 - - 40 - - - - - - - - - - - - - 1,857 paid by BR (Psos 733 636 287 110 38 24 - - - - - - - - - 1,828 III. Direct Interest Charges (Pesos) paid to BR (8.5%) 2,896 19,603 27,027 29,430 27,891 24,532 21,016 15,609 11,934 8,705 5,861 3,996 2,564 1,764 1,116 593 307 116 14 6 2 204,982 paid by BR (6.0%) 1.383 11,251 19,252 25,919 28,590 30,400 31,594 33,982 34919 35,805 36,3700 36,169 36,22 3,415 33Ja2l 31 332 27,740 22,812 16,7 ,81 - 537,571 . differential 1,513 8,352 7,775 3,511 - 699 - 5,868 -10,578 -18,378 -23,025 -27,100 -30,509 -32,573 -33,723 -33,651 - 32,705 - 30,739 - 27,433 - 22,696 - 16,259 - 7,806 2 - 332,589 IV, Direct Amortization (Pesosl paid to BR - 3,084 9,321 32,965 47,576 43,012 46,131 45,573 43,013 36,429 31,031 20,162 15,029 8,823 7,038 5,377 2,946 2,062 730 91 82 400,495 paid by BR - - - 8,608 19,390 22,693 2 6,00 29,965 34974 48,093 46,327 53,73 62,313 71, 83,42 96,589 111,746 129,475 149,501 172847 - 1,159,284 differential - 3,084 9,321 24,356 28,186 20,319 20,126 15,608 8,439 - 3,664 -15,296 -33,557 -47,284 -63,175 - 76,382 - 91,212 -108,800 -127,413 -148,771 -172,756 82 - 758,789 V. Net Differential (Prson1 1,513 11,436 17,096 27,867 27,487 14,451 9,548 - 2,770 -14,586 -30,764 -45,805 -66,130 -81,007 -96,826 -109,087 -121,951 -136,233 -150,109 -165,030 -180,562 84 -1,091,378 VI. Max. Feasible Relending (@ 18%) Cumulative values (PesosN 1,785 2,106 2,485 2,932 3,460 4,083 1,549 13,494 15,923 18,789 22,171 26,162 30,071 21,044 20,173 23,804 28,089 33,145 39,111 46,151 42,989 32,883 38,802 45,786 54.027 63,752 75,227 85,445 22,792 32,435 38,273 45,162 53,291 62,883 74,202 87,558 34,625 17,052 20,121 23,743 28,017 33,060 39,011 46,033 - - - 11,267 13.295 15,688 18,512 1,84 23 ,76 11,332 Total 1,785 15,600 38,581 78,408 124,957 164,501 202,108 221,276 224,804 211,219 171,205 106,434 11,337 VI1. Uncovered Balance Due IBRD in Pesos 97,750 121,951 136,233 150,109 165,030 180,491 - In US0 dollars 1,979 2,265 2,321 2,347 2,367 2,375 - 13,654 Memo Item: Peso/Dollar Echange Rates, Actual or Projected 14.73 16.38 17.37 18.92 20.41 22.58 24.79 27.02 29.45 32.10 34.99 38.14 41.57 85.31 49.39 53.84 58.69 63.97 69,73 76.01 82.85 Source: based on data provided by Banco de la Republica.  O oD -'t r). 0 '00 00L¯2 . 0000o 0<0<0-' ' '-1-0<0 .0 -<0 <0 4-1 -011 e , e .0<1 014<0< 00 <0 00 000 <. 00<<00 0N 0! <0 1| 0< 0l<0< -.0 0< 0 0 .. . .r-' . .. 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N0 00 0-0 0 0 0 0 .0 0 e0 0 0 0 0,0 4 -0 > ¯< '-I'- 3 I I I i I i i E I 0 00 o o,o0 oo4,.<~ 0 .000- 0<0<r00†-,0 0 .l - c 00 0 o .- .-N as to 04 1 .e 00 0 0< 0<O0 <0 0 .00 4 -0..0i 0< o 00t 0ni o - 0 - m000rs . 0o OOot t o 000 0 s -004N<000 - -,-4,-0. 000,- <0,- e00<.N 0o - <0 0 0< 0 00 0 00 0 00 0 <0 0 00 0 0 0 0 00 0 0 0 04 0 0 00 0 . 0. 0 0 0 .0 0 0. 0 0 0 0 < < <0 <0< < <-0< < < < 4 4 4 04< < <4-00 0 00 < 0400OOo0I -  .-0 *0-' -j -.·0O 1 0 MC 1-4 00 , e> 41C >003 4444 4444 >044.000004 -00 44 4 4444 4400 > 000 40000 O03 L >, Q.Þ r ooo 0 0 00 0 0 0 0 00 00 0 0 00 00ti> 00 4 44 >.4C4-000000r00000 4000000000 00 00 -e 000 00.000.0 4-1 4 00- 00' O 0 .O> O 0 m03 -0 00404(00 4-. 0.40040044 4040044000 4 O0 Þ04 000000 Þ-.0 4 0000 0 C 0 00 4 44 . - -4 40 04 00-04 4-4 0 40 0-0a 04 00 0 00 0000 40 0 0 00 0 0 000 0 >0 0 0 0 -0 -00 -00 000 4-u0 0 0 0.04 -00 o 4-0 400 0 0 0 0000>00 0 00 0o 00 .0 0 00 0 0. 0 > 0 00000 0. 400-00 000·, 00- .0-0040. 4 00 > 0.00 .00 S 0 0 4 4 >0 0 0 0 00 I r- 003 0 -I40 000 0 000 000 0- 00 00 04 I , 0.- 0-00 . 000000 - 000 000 00 000 00 -0 00-, 00a. I>- .00 40404040>040>000 i4440> 0 J 0000 00 0- 00000400-000>00>00 000-000 00 O-00 00 - 00000-00.0000>-l0r- 00 0 0-l000 H0.'0 ,-l00 0- 0'>00 00-O OOOo 000 004 ' 00 0'000000000400 4 0.0 0 0 0 . 044 444444 03>00r oI•-  o I >2-2>0,2< 2 >2-o l I 2> , '2 0 O >2222>2020> .0 000 ··2 - >2 0 20"0 -d . >2 id 0 I 22 I O 2 O.o 0 2222>2>22 >2222E >20'' No >2 >2 >2 200 20, 20 0,022 go >2 0,•00, >2>20 00 0O200oo 0-02-2 0 0..02 0 0,0 -:0 0 -1> .01.2r-2102101 2  Annex Table 2d CORORACTON -INANCIERA DEL 'ORTE: SUB-PROJECTS F NANCE, UNDER DIP LOADS 451-CC AND 534-CO Date of Pnoject Compayo Company's Cost of Project Date of Completion Epot L a a e Pre-tax Clas of Actual Loan Months AmunL To erm Grace Amount External Return to Product Location P ar 00 Peso) % Overrnu Approval- Actoal Oerrun Year _(000) (YearsL Y S (Y000) Auditing Enuity 1972 Remarks Companies with Good Fiuancial Performance Textiles IIL Nedellin E (J) 131,810 34% 4/67 2/67 2 1973 16,666 12 2.7 282 26% Slsughterhouse!cold stora arranquilla 3p 6,633 71 5/67 11/68 9 1973 17,000 Croneted to Equity 162 & 29% Idea of 1FN which put together ingredients. Unde,clothing Cali E (J) 36,580 12% 2/67 11/68 3 1977 119 13 3 228 J 36% Textiles I Medctlin E(J) 144,825 4% 3/69 12/69 6 1973 25,014 12.3 1 401 - 27% Synthetic fibers (foreign co.) Bogeta E 2,539 - 10/68 12/68 - 1973 5,161 11.3 2.2 73 J 21% Pha-maceuticals Barranquilla E 1,805 1% 2/69 1/70 - 1973 56 5 1 35 - 25%* Plactis Barranq'illa E 1,979 -'4 2/69 12/69 10 1972 4 6.5 25 66 - 21% Poultry Banaequilla N 21,311 190% 11/69 12/73 - noe 13.2 1.3 23 - 29% Project expanded with rapid market growth. Elastic tape/ribbon Medollin E 5 261 -23% 7/70 n.a. n.a. 1973 80 12.5 3.5 139 - 31% Marble tiles Soacha N (2,639)-/ n.a. 3/69 n.a. n.a. noone 11.5 3 43 - 60%C 1.451 Companies with Modest Financial Performance Plastic toys/pipe Barranquilla E 5,593 23% 2/67 5/70 11 1972 355 10 3.5 235 - 15%0 Textiles I - polyester fiber subsidiary Medellin E (J) 34,171 28% 8/67 7/69 4 1972 837 10 3 427 - 12% Low return due rapidly growing debt service. Cold storage of fish & fishing Barranquilla EP 3,586 -18% 12/66 6/67 2 1973 2,520 Converted to Equity 44 13.7% Major CFN intervention in 1967/68 to reorganize. PVC Cartagena E 2,626 - 12/66 2/67 1 1972 1,142 7.5 3 47 - 10.2% Technical and market problems being overcome. Polypropylene sacks/tubes Santa Marta E 9,622 4 0% 11/68 6/69 1 1972 222 8 2.7 97 - 10.2% Textilen I - polyester fiber subsidiary Medellin E (18,445)- o. 2/70 n.a. n.a. 1972 855 12 2 101 - 12.0% Textila & appanel Bogota E 29,000 1% 4/70 12/70 - none 12.2 2.2 407 - 13.0%0 Wood prodocts Atlantico E 2,777 -16% 11/69 6/70 6 1973 100 8.2 2 70 - 10.0%* 1,426 Companies with Poor Financial Performance Candies and c.oo xear Dali 0 (3) 36,910 16% 6/67 10/68 8 1972 931 10 2.3 310 - 4.3% Subsidiary of sugar combine: tnancfer price question. Cloth weaving Oaooanquilla E 7,161 9% 2/67 12/68 4 none 10.5 4 295 - 3.0%* Transfer price queston. Stationary Cartagena E 3,825 11% 8/67 2/69 14 1972 195 15 3.0 177 - 2.8% Reovering from near bankruptcy. Hennequenacks Popayan N (J) 31,622 15% 9/67 12/69 3 none 11.5 2.5 346 - 4.8% 0Oercoming serious management and labor problems and low labor productivity. Mtal working or shipbuilding Barranquilla E (J) 21,990 -8% 10/67 9/70 9 1972 46 11 4.7 422 - 0.1% Small-scale, new technology difficulties bet hope, Ceea.l. tiles Baoranq,illa E 1,240 39% 4/67 3/69 6 nona 9 2 37 -8.9% Bneakage problens and tonpetition with tnradi ioal tiles. Plastic rolls/bags Barranquilla E n.a. n.a. 4/67 11/67 4 none 7 2 40 - 4.9% Taken over by another company. Sea Fishing Bueaventara E 4,290 - 2/70 8/69 - 1972 900 8 3 249 - negative Loan had convertibility clause, under which nearly 10% of loan so far converted to equity. Enterprise hoped to become profitable in 1975. a/ E = expansion, N - new project, P m major promotional role played by pimanonera, (J) = jointly finanoed by several inanct-eas. b/ by I0D: i.e. date of appoval of projecte above the free limit and of nrediting to Doan aount of projoet belw free limit. c/ btween date of IED .appoal and final amortizati neow xpected. d/ calculated on the basis of total amortizatione to date and average monthly rate of repayment; does not correspond ex atly to details of Jndi,idal les which are, for instance, sometimes combined in this table. a/ Romam neonrals against major textile companies indicate their rank in the country. f/ Forecast capical cost; actual not available. * Profits may be underestated.  Annex Tablo 2e CORPORAC-ON FINANCIIRA DE CALDAS: SUB-PROJ=CTS FINANCED UNDER IBRD LOANS 451.-C0 .ND 534-CO Date of Proc t Company's -,om"pay Gost of Frolert Date of Comleti-. Exnort L 0 a n Pre-t-x Class o- Atual -oa Months Amoont Term Grace Amount Extoral Return to Product Location Project- ($000 Pasos) % Overrun Aprovalb/ Actual Overrun Year ($0C0) (Years) (Years) ($000) Auditing Equity 1972 Remarks Companies with Good Financial Perforrance Woollen tetls Pereira E 3,448 87. 1/67 1967 - 1973 050 10.5 2 182 - 27% Tetiles 11' Medellin E (J) 131,810 547, '/67 12/67 2 1913 _6,666 13.5 2 468 - 26% Candies Bogota E (4,890)/ n.a. 6/67 1968 8 one 13 4.2 98 - '00. Ghooolte drinko MoioloTITeOs 3 00 - K, 6/67 16 o 000 - 217 - n.a Loan prepaid after one year. Cement Caldas E (25,924) n.a. 9/67 1970 12 none 10 5.5 690 - 27% PVC battery oeparat ors Manioalrs E 503 8% 3/67 1968 10 1970 19 9 3.3 23 - 35% Briekorks Bogoa E (1,3.1) 0.a- 7/67 1967 - none 8 3 46 - 32% Te lphore cables Bogota E (2,604) n.a. 12/67 1968 6 n.a. 5 n.a. 50 - .. Textires 7 Modeln E (.0) 145,000 47% 3/69 11/69 5 1973 25,033 12 2.8 250 - 275 Knives 6 scios MaonIales £ L1,400 77. 2/69 5/70 6 1973 457 13 4.5 310 - 20% Textiles IV Manizales E 59,100 17% 10/69 1970 12 1973 3,100 14 4 353 - 31% Brickworks B ogota E 1,700 227 4/70 7/70 0000 8 1 41 - 32% Abestos Cement Manizales EP 23,100 -27. 12/71 6/73 -6 1973 61 12 3 491 - 48% 3,219 Compnies with Modest Vinancial Performoance General printing Bogota E 635 205 12/66 1967 - 0000 10.5 2.3 30 - 14%* Got marble Bogota E 680 It 3/67 1160 10 none 5 0.a. 35 - 12.3%* Candies iaels E 520 507 6167 1967 - nooe 10 1.5 18 - 17.87. Springs Maniaeles 0 505 137. 5/69 10/69 - 1973 27 12 3.5 20 - 15.4 123 Com anaies with Poor Financial Performance Newspaper I other printing Maniaelc E 5,000 43% 12/66 1969 12 0000 17 3.2 160 - 9.0. GCottn eloLh Bogota E 430 8% 1/67 1967 - 0000 5 n.. 25 - 4. Return to nquity lo for 1971 Polthene bag 8080ta E 500 101/ 3/67 1967 10 0000 5 n.a. 26 - 2.8%. Nylon hoa Oanlzaleo EP (1,970) n.a. 3/67 1967 n.a. none 15 4.4 31 - - Bad management caused failre -nd-'71; loan may be recovered Cheicals & bleaches Manizales NP 58,000 1197 7/67 1969 12 1973 376 20 5 641 - 38% Poor preparation and very large east 00000000 together with marketing difficultis cass.ed company ro bo liquidated in septmber 1971, with 70% of equity written off, and recon- stitutd as Derivados del Azfre ahich is neo enjoying full oapacity operation atdhigh prices, Ieading to theetuo 00 redoced euity as quoted, for 1973, Full transport Santander IP 9,600 32 1/70 6/70 - 0000 0 3.5 100 - - Loses sffered dur to small supply of fuel fron rinery. Newspaper & other printing Manozalre E 2,400 14 4/71 10/71 06 0000 10 1 31 9.07* Ball-point 0000 Maniales NP 6,700 3% 2/69 9/69 3 none 15 2 71 - l liquidatlion: production and marketing problem, led to loos of all nzt worth by 1972. Valves Mnizales EP n.a. n.0. 2/69 n.a. 0.a. 0one 0.. 0.a. 38 - Liqildaed after losing half paid-up capital. 1,123 a/ 0 = expansion, N 0 ne 0pojc, P major promotiooal rolo played by Financiera, (J) - jotnly finaned by tevero] Financierat, h/ by 180D ta, date of approval of projeots aove e the fr limio and oG crediting 1, lojt ount of projecto belowt fr e l0it. c/ Denaarn date of 1BRD opproval ond f1nol amorti 0 ow ,rexpected. d/ calculated on the basis of total amortizations to date and average monthly rata of repay-rnt: does tot correspond exactly 1o detoi.s of individual loons which are, for instance, -oetimes combined in this table, n/ Roan onumerals agalnst mjor textile ompanoies indice. their rank in the country. j/ Forecast oapital cott; atual not 001 ble. - Profi- t-y b0 ,nderstated.  Annex Table 3 Private Investment Fund Peso Loan Commitments Total 1970 1971 1972 1973 !970-73 No. of No. of No. of No. of No. of Loans P. mins Loans P. mIns Loans P. mins Loans P. inns Loans P mIns Agriculture & Livestock 132 87.2 84 55.6 69 62.5 87 90 1 372 295.4 Mining & Quarries 1 21.4 - - - - - - 1 21.4 Food Products 3 21.2 9 82.0 4 45.3 5 24.0 21 172.5 Textiles 4 25.7 2 25.7 - - 2 53.4 8 104.8 Apparel & Shoes - - - - 1 3.1 8 29.7 9 32.8 Wood & Furniture - - 2 23.2 2 5.3 - - 4 28.5 Paper 1 55.5 1 20.0 1 6.2 - - 3 81.7 Printing 1 29.7 - - - - 1 3.5 2 33.2 Leather Products - - 1 1.8 - - - - 1 1.8 Rubber Products - - 1 1.4 - - 1 10.0 2 11.4 Chemicals 6 66.5 1 12.8 2 10.8 6 55.4 15 145.5 Non-metal Minerals 4 26.4 - - 5 24.4 5 49.9 14 100.7 Basic Metals - - - - 3 22.8 1 1.4 4 24.2 Metal Products 3 5.5 1 0.2 2 3.0 - - 6 8.7 Non-Electric Machinery 2 7.1 - - - - - - 2 7.1 Electrical Equipment - - - - 1 6.3 3 12.5 4 18.8 Transport Equipment 1 1.0 1 1.0 - - 2 11.0 4 13.0 Miscellaneous Mfg. 1 2.0 1 3.3 - - - - 2 5.3 Transport - - - - 2 24.0 - - 2 24.0 Warehousing 2 15.0 - - - - - - 2 15.0 Tourism Hotels 5 20.2 3 26.4 5 15.8 2 9.0 15 71.4 Total 166 384.4 107 253.4 97 229.5 123 349.9 493 1217.2 BY economic justification: Export 93 212.9 94 227.5 85 180.0 115 318.3 387 938 7 Import-Substitution 68 90.7 12 5.9 9 30.0 7 11.6 96 138.2 Bottleneck 4 25.3 - - 2 18.0 1 20.0 7 63.3 Mixed Export/Import-Subst. 1 55.5 1 20.0 1 1.5 - - 3 77.0 Weighted ave. interest rate 17.5% 18.9% 16.7% 17.5% Annex Table 4a CORPORACION FINANCIERA COLOMBIANA: SUMMARV BALANCE SHEETS (as of Dec. 31), INCOME STAIEMENTS AND FINANCIAL RATIOS 1964-72 1964 1965 1966 1967 1968 1969 1:70 1971 1972 1973 Loans outstanding 196.4 227.1 249.3 333.5 465.8 565.5 649.5 688.1 918.5 Export/ import financing 186.4 292.7 267.1 194.5 127.4 100.2 197.9 2L8.2 157.3 Equity investments (at cost) 79.5 103.5 129.3 143.0 156.0 156.7 160.1 176.3 153.5 Other assets 51.6 95.7 51.4 48.7 73.7 65.8 95.3 90.1 109.0 TOTAL ASSETS/LIABILITIES 513.9 719.0 697.1 719.7 822.9 88.2 Q1,18.3 Share capital .aid-an 114.2 118.3 118.3 118.3 127.8 131.3 137.8 139.8 144.0 Reserves & retained earnings 27.5 56.7 72.3 71.2 78.8 84.0 96.2 118.0 135.0 Bonds 28.1 37.3 54.3 58.6 74.2 93.6 141.9 161.8 191.7 Debt to IBRD/BR - - - 34.2 99.3 135.7 188.1 213.1 338.1 Other debt to BR (incl. BID) 144.7 168.0 185.7 213.0 254.1 264.4 339.4 355.7 385.9 Debt to foreign & other banks 153.1 272.4 222.1 177.8 124.3 113.2 118.8 146.6 55.4 Other liabilities 46.3 66.3 44.4 46.6 64.4 66.0 80.6 67.3 88.2 Income from loans 37.6 41.9 61.4 57.6 74.7 86.4 108.1 125.8 144.4 Dividend income 0.6 1.9 3.9 2.3 0.8 2.2 4.0 6.8 10.5 Capital gains - -0.3 1.9 2.4 -1.5 0.7 - 1.6 1.4 Other income 7.4 9.8 4.0 1.5 5.1 5.2 1.7 2.1 5.2 TOTAL INCOME/EXPENDITURE 40.6 53.3 71.2 63.8 79.1 94.5 113.8 136.3 161.5 Financial costs 13.1 19.7 29.3 30.4 39.0 47.5 56.9 7z.7 96.8 Administrative & general 7.0 8.0 9.5 10.5 12.4 13.8 15.3 17.1 21.7 Income Tax 0.6 0.4 7.9 10.8 9.9 10.0 13.9 13.2 7.4 Dividend - 13.0 9.5 10.2 13.1 16.5 16.8 19.0 Appropriations: Reserve for losses 24.5 8.5 0.8 4.4 5.8 6.9 9.4 7.3 Other reserves 0.4 2.9 1.7 3.2 4.2 4.4 5.1 9.3 Income from loans aa average loan portfolio 9.3 11.9 11.0 13.3 13.7 14.3 14.1 14.4 Di,idend income as % average equity portfolio 2.1 3.4 1.7 .5 1.4 2.5 4.0 6.4 Gross income as 7. average total assets 8.6 10.1 9.0 10.3 11.0 11.4 11.8 12.7 Financial cost as % average oroig4.9 6.2 6.4 7.5 8.2 8.2. 9.0 10.5 Admin. cost as % average total assets 1.3 1.3 1.5 1.6 1.6 1.5 1.5 1.7 Net income-as % average total assets 4.2 4.6 3.2 3.6 3.9 4.2 3.9 3.4 average net worth 16.2 17.7 12.0 14.0 15.7 18.5 18.1 16.0 average share capital 22.0 27.4 19.4 22.5 25.6 30.9 32.1 30.4 Incoms tax as % net income 2.9 1.6 24.4 47.2 35.7 30.1 33.4 29.7 17.2 After tax income as % average total assets 4.1 3.5 1.7 2.3 2.7 2.8 2.7 2.8 average net worth 1S.9 13.4 6.4 9.0 11.0 12.3 12.7 13.3 average share capital 21.7 20.7 10.2 14.5 17.9 20.6 22.6 25.2 IBRD/BR as % loans outstandingd/ - - - 10 21 24 29 31 37 Debt-equity ratioe/ 2.3 2.7 2.4 2.6 2.7 2.8 2.6 3.4 3.5 Dividend payout ratio - .53 .79 .57 .56 .60 .54 % New lendingd/over 5 years d/ 26 38 81 39 35 44 50 68 Equities as % total loan and -qui,y portfolio 28.8 31." 34.2 30.0 25.1 21.7 19.8 20.4 14.3 Reserves as % total loan and equity portfolio- 10.0 17.2 19.1 14.9 12.7 11.6 11.9 13.7 12.6 Arrears as % total loan portfoliod' 1.1 4.7 0.4 6.3 1.6 % of loan portfolio affected4/ 2.4 19.3 1.6 7.4 8.7 Book value as % par value 124 148 161 160 162 164 170 184 194 Increase on previous year 19.3 8.8 (.6) 1.3 1.2 3.7 8.2 5.4 Rate of inflation 8.5 14.3 12.7 7.0 6.4 8.7 6.3 14.7 14.0 Rate of devaluation against US dollar - 50.0 - 16.9 7.1 5.5 6.9 9.4 9.0 a/ i.e. loans and export-import financing outstanding. b/ excluding 'other liabilities'. c/ before taxation. d/ excluding expirt-import financing. e/ excluding 'other liabilities' from debt. Annex Table 4b CORPORACION FINANCIERA NACIONAL: SUMMARY BALANCE SHEETS (as of Dec. 31). INCOME STATEMENTS AND FINANCIAL RATIOS 1964-72 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 Loans outstanding 147.8 181.1 201.8 249.6 348.0 418.5 523.2 645.0 829.6 Export/import financing 50.7 83.4 69.1 30.8 18.7 12.7 23.2 34.7 39.7 Equity investments (at cost) 33.7 70.0 73.3 79.4 81.3 90.2 96.8 109.5 119.8 Other assets 8.1 14.0 15.4 16.8 15.2 22.2 23.1 31.1 37.1 TOTAL ASSETS/LIABILITIES 240.3 348.5 359.6 376.6 463.2 543.6 666.3 820.3 1,2. Share capital paid-in 73.6 84.3 84.3 91.3 91.3 98.9 115.8 129.7 147.0 Reserves and retained earnings 13.0 24.1 30.2 36.8 46.1 57.1 76.8 98.9 122.4 Bonds 7.1 19.6 25.5 26.5 21.6 15.0 14.5 22.1 69.2 Debt to IBRD/BR - - - 31.9 84.8 133.2 208.3 263.7 366.2 Other debt to B1 83.9 115.5 139.7 145.9 168.8 171.8 180.0 233.2 227.3 Debt to foreign banks & IFI & Proexpo 50.7 73.8 62.7 25.1 29.2 39.5 37.9 40.2 57.2 Other liabilities 12.0 31.2 17.2 19.1 21.4 28.1 33.0 32.5 36.9 Income from loans 17.5 22.5 23.9 29.4 45.6 59.1 74.7 101.4 133.6 Dividend income 0.8 6.9 4.2 6.1 6.2 6.6 8.7 11.9 15.7 Capital gains (net) - 0.2 .. - - 1.3 1.7 0.7 -3.4 Other income 0.3 0.2 0.4 0.3 2.0 0.8 0.1 1.1 0.5 TOTAL INCOME/EXPENDITURE 18.6 9.8 25 35.8 3.8 67.8 85.2 15.1 146.4 Financial costs 3.7 6.6 7.1 10.6 20.0 28.3 37.7 55.0 79.0 Administrative and general 2.4 3.4 3.6 4.4 4.9 5.7 7.0 8.0 9.8 Income Lax 5.5 A.3 3.2 5.5 8.1 8.8 10.1 15.2 14.0 Dividend 2.9 8.4 8.4 9.1 12.0 12.9 20.4 28.0 Appropriations: Reserve for loans 2.0 4.7 3.9 - - - - Other reserves 5.1 1.5 2.3 7.5 10.6 10.0 8.9 Income from loans as % average loan portfolios/ 9.7 8.9 10.7 14.1 15.0 15.3 16.5 17.2 Dividend income as % average equity portfolio 1.3 5.9 8.0 7.7 7.7 9.3 11.5 13.7 Gross income as % average total asg?ts 10.1 8.0 9.7 12.8 13.5 14.1 15.5 15.9 Financial cost as % average borrowings- 3.8 3.3 4.6 9.2 8.5 9.4 11.0 12.4 Administrative qost as % average total assets 1.2 1.0 1.2 1.2 1.1 1.2 1.1 1.1 Net income- as % average total assets 6.7 5.0 5.7 6.9 6.7 6.7 7.0 6.2 average net worth 20.3 16.0 17.1 21.8 23.0 23.2 24.7 23.1 average share cap;:al 25.1 21.1 23.7 31.7 35.5 37.7 42.4 41.6 Income tax as % net income 44.0 21.7 18.0 26.4 28.0 26.0 24.9 29.2 24.3 After-tax income as % average total assets 5.3 4.1 4.2 4.1 5.0 5.0 5.0 4.7 average net worth 15.9 13.1 12.6 15.7 17.0 17.4 17.5 17.5 average share capital 19.6 17.3 17.4 22.8 26.3 28.3 30.0 31.5 IBRI)/BR as % loans outstanding - - 13 24 32 40 41 44 Debt-equity ratioe 1.6 1.9 2.0 1.8 2.2 2.3 2.3 2.4 2.7 Dividend pay-o t ratio .41 .54 .58 .59 .58 .52 .67 .76 % New lending_over 5 years 18 7 47 35 38 28 47 43 Equities as % total loan or equity portfolio4d 18.6 27.9 26.6 24.1 18.9 17.7 15.6 14.5 12.6 Reserves as % total loan and equity portfolio- 7.2 9.6 11.0 11.2 10.7 11.2 12.4 13.1 12.9 Arrears as % total loan portfo1- 0.1 0.2 .2 0.1 0.1 % of Loan portfolio affected- 0.1 0.6 .2 1.7 0.1 Book value as % par value 118. 129. 136. 140. 150. 158. 168. 176. 183. Increase on previous year 9.3 5.4 2.9 7.1 5.3 5.1 6.0 4.0 Rate of inflation (obreros) 8.5 14.3 . 12.7 7.0 6.4 8.7 6.3 14.7 14.0 Rate of devaluation against US dollar 50. 16.9 7.1 5.5 6.9 9.4 9.0 a, i.e. loans and export-import financing outstanding. b/ excluding 'other liabilities'. c/ before taxation. d/ excluding export-import financing. e! excluding 'other liabilities' from debt. Annex Table 4c COP,PORACION FINANCIERA DEL VALLE: SUMMARY BALANCE SHEETS (as of Dec. 31), INCOME STATEMENTS AND FINANCIAL RATIOS 1964-72 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 Loans outstanding 88.2 84.2 115.1 152.2 237.2 332.4 441.3 593.8 772.4 Export/import financing - 4.4 20.1 13.3 63.9 54.7 111.3 126.0 139.3 Equity investment (at cost) 9.4 19.7 24.4 25.7 26.1 35.3 33.4 36.1 41.4 Other assets 3.8 2.9 9.5 10.9 21.0 21.5 36.1 48.2 63.7 TOTAL ASSETS/LIABILITIES 101.4 11 169.1 202.1 348.2 43.9 22.1 804.1 1906. Share capital paid-in 33.7 37.7 38.8 46.3 56.0 82.8 99.5 115.0 130.0 Reserves and retained earnings 6.7 11.7 15.8 18.4 23.0 32.6 50.0 64.4 82.2 Bonds - - 4.8 12.3 17.8 16.3 19.2 27.1 64.5 Debt to IBRD/BR - - - 5.7 38.7 60.6 103.8 186.8 271.7 Other debt to BR (incl. IFI) 46.7 46.7 76.1 87.2 121.7 158.5 189.6 226.1 231.5 Debt to foreign banks - 4.2 17.2 11.1 61.5 53.0 110.3 125.8 141.4 Time deposits 10.0 4.2 5.6 7.1 10.5 13.5 9.8 5.5 17.5 Other liabilities 4.3 6.7 10.8 14.0 19.0 26.6 39.9 53.4 78.0 Income from loans 8.4 11.2 13.9 22.4 32.4 47.8 7L.8 102.7 143.0 Dividend income 0.2 0.4 0.2 0.9 1.2 1.6 L.2 1.0 1.3 Capital gains - - - - - - - Other income - - - - 0.1 0.5 5.7 1.8 0.4 TOTAL INCOME/EXPENDITURE 8.6 11.6 14.1 23.3 33.7 49.9 78.7 105.5 144.7 Financial costs 2.2 2.8 3.6 7.6 13.2 21.7 37.3 55.9 80.5 Administrative and general 1.8 2.1 3.3 4.1 5.1 6.5 8.4 11.0 15.1 Income tax 1.1 2.3 2.6 4.3 6.0 7.4 10.5 11.6 17.1 Dividend - - 4.7 3.7 4.5 8.3 12.0 16.6 Appropriations: Reserve for losses 4.0 -1.6 3.6 1.5 1.0 5.0 0.6 Other reserves 0.4 1.5 - 3.4 5.0 5.5 9.8 Income from loans as % average loan portfolioa/ 12.7 12.4 14.9 13.9 13.9 15.3 16.1 17.5 Dividend income as 7 average equity portfolio 2.7 .9 3.6 4.6 5.2 3.5 2.9 3.4 Cross income as % average total assets 10.9 10.1 12.6 12.2 12.6 14.8 14.8 15.9 Financial cost as % average borrowings- 5.0 4.5 6.7 7.1 7.9 10.2 11.1 12.4 Adm. cost as % average total assets 2.0 2.4 2.2 1.9 1.6 1.6 1.5 1.7 Net incomec/ as % average total assets 6.3 5.1 6.3 5.6 5.5 6.2 5.4 5.4 average net worth 14.9 13.8 19.4 21.4 22.3 24.9 23.5 25.1 average share capital 18.8 18.8 27.3 30.1 31.3 36.2 36.0 40.1 Income tax as % net income 23.9 34.3 36.1 37.1 39.0 34.1 31.8 30.1 34.8 After-tax income as % average total assets 4.1 3.3 3.9 3.4 3.6 4.2 3.8 3.5 average net worth 9.8 8.8 12.2 13.1 14.7 17.0 16.4 16.3 average share capital 12.3 12.0 17.2 18.4 20.6 24.7 25.2 26.1 IBRD/BR as % loans outstanding- - - 4 16 18 24 31 35 Debt-equity rati 1.4 1.1 1.9 1.9 3.2 2.6 2.9 3.2 3.4 Dividend pay-opt ratio - - 1.0 .51 48 8 3 .61 - % New lendingd over 5 years d/ 32 6 15 19 39 280 30 3f/ Equities as % total loan and equity portfolio- 9.6 19.0 17.5 14.4 9.9 9.6 7.0 5.7 5.1 Reserves as % total loan and equip portfolio- 6.9 11.3 11.3 10.3 8.7 8.9 10.5 10.2 10.1 Arrears as % total loan portfolio- 1.2 1.6 1.6 1.4 % of loan portfolio affectedd/ 1.2 2.2 5.2 3.6 Book value as % par value 120. 131. 141. 140. 141. 139. 150. 156. 163. Increase on previous year 9.2 7.6 (.7) .7 (.7) 7.9 4.0 4.5 Rate of inflation 8.5 14.3 12.7 7.0 6.4 8.7 6.3 14.7 14.o Rate of devaluation against US dollar - 50.0 - 16.9 7.1 5.5 6.9 9.4 9.0 a/ i.e. loans and export-import financing outstanding. b/ excluding 'other liabilities'. c/ before taxation. d/ excluding export-import financing. e/ excluding 'other liabilities' from debt. f/ based on loan disbursements, not approvals. Annex Table 4d CORPORACION :TNANCIEIRA DEL EOREIt SLMARY BALANCE sHE,iTs (as of Dec. 31), INCOME STATEMENTS AND FINANCIAL RATIOS 1964-72 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 Loans Outstanding 25.4 42.4 52.3 71.4 110.0 167.3 190.9 244.8 324.0 E6Iport/Import Financing 6.4 19.1 19.4 26.4 34.5 33.2 31.7 49.1 83.7 88.1 1quiLy Investments (at cost) 0.1 4.4 5.5 8.4 10.1 17.5 19.1 24.8 32.5 Other Assets 0.9 2.1 6.1 8.8 10.1 16.8 27.5 35.5 42.9 InTAL Aq;ETq/LIABTI'1S 32.8 68.0 83.3 115.0 164.7 234.8 269.2 354.2 483.1 Share Capital PaLd-in 16.2 22.7 23.1 24.2 25.6 43.0 46.4 48.7 56.4 teserves & 'etained earnings 0.5 3.0 6.1 8.7 11.3 14.7 18.5 22.8 25.0 Ponds - - - 7.5 8.1 5.8 7.4 12.2 22.9 Debt to JBRD/BR - - - 10.8 37.9 54.0 73.1 129.1 200.9 Other debts to BR 9.1 20.4 30.7 27.9 35.8 58.6 64.5 68.6 71.8 Debt to foreign banks (& Proexpo) 6.4 18.3 18.8 25.3 32.2 32.4 31.0 44.8 73.0 Other liabilities 0.6 3.6 4.6 10.6 13.8 26.3 28.3 28.0 33.1 Income from loans 1.7 5.6 7.9 9.7 16.4 22.5 38.0 45.0 60.5 Dividend income - - - - 0.2 0.1 0.8 1.0 3.0 Capital gains - - - - - 1.1 - - Other income 0.1 0.1 0.1 0.1 0.5 0.3 0.5 0.8 1.0 TOTAL INCOME/EXPENDITURE 1.8 5.7 9.0 9.8 17.1 24.0 39.3 46.8 64.5 Financial costs 0.2 1.6 2.4 2.7 6.5 10.9 21.2 25.1 38.5 Administrative & General 1.0 1.6 2.3 2.9 4.0 4.2 6.0 7.2 8.8 'income tax .. .. 0.1 1.6 2.5 2.8 3.9 4.4 4.7 Dividend - - - 1.4 2.5 4.3 5.6 6.4 Appropriations. Reserve for losses - 2.5 2.8 0.4 0.4 0.3 0.5 0.5 Other Reserves 0.6 - 0.4 0.8 1.2 1.5 2.1 3.1 Income from loans as 1 average loan portfolioi 12.0 11.9 11.4 13.5 13.0 18.0 17. 17.2 Ovidend income as % average equity portfolio - - - 2.2 0.1 4.4 4.5 10.5 Cross income as % average total asgts 11.3 10.6 9.9 12.2 12.0 15.6 15.0 15.4 Financial cost as 7 average borrowings- 5.9 5.4 4.5 7.0 8.2 13.0 11.7 12.4 Administr.tive79ost as % average total assets 3.2 3.0 2.9 2.9 2.1 2.4 A 3 1.8 Net income- as % average total assets 5.0 4.4 4.2 4.7 4.5 4.8 4.7 4.1 average net worth 11.8 12.0 13.5 18.9 18.8 19.7 21.3 22.5 average share capital 12.8 14.4 17.7 26.5 26.0 27.1 30.5 32.7 Income tax as Z net income - 3 38 37.9 31.5 32.2 30.3 27.3 After-tax income as % of average total .ssets 5.0 4.2 2.6 2.9 3.1 3.3 3.2 3.0 average net worth 11.8 11.7 8.4 11.8 12.9 13.4 14.8 16.3 average share capital 12.8 14.0 11.0 16.5 17.8 18.3 21.2 23.8 IBRD/BR as % toans outstanding- - - - 15 34 32 38 53 62 Debt-Equity Ratioe 0.9 1.5 1.7 2.2 :.1 2.6 2.7 3.6 4.5 Dividend Pay-5yL Ratio - - - 54 61 70 68 63 7 New Lending- over 5 yers 8 20 70 47 41 64 61 80 Equities as 7. Total Lo-in & Equity Portfollo .. 9.4 9.5 10.5 8.4 9.5 9.1 9.2 9.1 Reserves as 7, Total Loan & EquitydFortfolioi 0.2 6.4 10.6 10.9 9.4 8.0 8.8 8.5 7.0 Arrears as % Total Loan Portfo1i 1.9 1.0 30 5.3 3.4 7 of Loan Portfolio affected- 10.0 3.3 36 8.9 7.5 Book Value as % of par value 113 113 126 136 144 134 140 147 144 Increase on previous year 9.7 11.5 7.9 5.9 -7.0 4.5 5.0 -2.0 Rate of inflation (obreros) 8.5 14.3 12.7 7.0 6.4 8.7 6.3 14.7 14.0 Rate of devaluation against US dollar - 50.0 - 16.9 7.1 5.5 6.9 9.4 9.0 a/ i.e. loans and export-import financing outstanding. b/ excluding 'other liabilities'. c/ before taxation. d/ excluding export-import financing. e/ excluding 'other liabilities' from debt. Annex Table 4e CORPORACION FINANCIERA DE CALDAS: SIRIMARY BALANCE SITETS (as oi Dec. 31) INCOME STATEMENTS AND FINANCIAL RATIOS 1964-72 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 Loans outstanding 84.6 100.3 144.7 159.7 198.6 215.9 199.5 241.9 323.3 Export/import financing 12.8 31.4 27.7 23.2 9.3 15.6 43.0 22.2 29.2 Equity investments (at cost) 11.4 26.0 48.3 60.7 75.5 101.8 137.6 131.7 119.7 Other assets 11.4 12.2 21.3 27.1 32.2 53.6 57.5 67.1 TOTAL ASSETS/LIABILITIES 127.8 169.1 232.9 264.9 310.5 365.5 433.7 453.3 539.3 'hare capital paid-in 51.5 55.8 64.4 69.4 79.0 89.6 96.4 116.2 116.3 Reserves & retained earnings 8.3 16.0 20.7 23.8 24.7 13.4 9.9 10.1 11.1 Bonds 1.9 9.3 14.9 26.4 28.6 24.5 27.6 24.7 44.5 Debt to IBRD/BR - - - 6.5 27.1 39.0 48.6 53.0 129.3 Other debt to BR and IFI 32.9 36.7 67.2 72.7 92.3 100.0 114.2 126.8 107.1 Debt to foreign banks and other entities 8.9 24.7 18.7 25.0 24.3 54.4 82.3 79.5 102.7 time deposits 20.6 15.9 28.0 24.8 17.5 19.6 22.7 15.6 2.2 Other liabilities 3.7 10.7 19.0 16.3 17.0 25.0 32.0 27.4 26.1 Income from loans 10.2 17.2 20.3 24.9 32.3 33.9 40.1 37.8 5).6 Dividend income 0.6 0.7 1.1 1.9 2.1 4.3 5 9 5.5 5.6 Capital gains - -0.7 0.6 0.2 -1.0 -1.1 0.4 4.0 4.2 Other income -.. .. 0.9 0.1 0.5 0.5 1.6 1.0 TOTAL INCOME/EXPENDITURE 10.8 17.2 22.0 27.7 33.5 37 6 46.9 48.9 63.4 Yinancial costs 3.0 4.4 5.9 10.3 14.4 192 0.9 76-3- 40.1 Administrative and general 2.5 3.4 5.1 6.8 8.9 10.0 12.4 9.4 9.3 Income tax 1.7 2.3 2.4 2.6 0.5 - - - Dividend 3.9 5.2 5.6 6.3 7.2 - 0.2 - Appropriations: Reserve for losses 4.0 3.1 - 1.3 0.7 3.6 - 8.9 Other reserves -0.2 0.4 2.7 - - - - Income from loans as % average loan portfolio 15.0 13.4 14.0 16.5 15.4 16.9 14.9 17.1 Dividend income as % average equity portfolio 3.7 3.0 3.5 3.1 4.9 4.9 4.1 4.5 Gross income as % average total assets 11.6 10.9 11.1 11.6 11.1 11.7 11.0 12.8 Financial cost as X. average loan savingse/ 5.8 5.5 7.2 8.3 9.0 11.6 12.2 11.7 Administrauve cost as % average total assets 2.3 2.5 2.7 3.1 3.0 3.1 2.1 1.9 Net income- as % average total assets 6.3 5.5 4.3 3.5 2.5 .9 .7 28.2 average net worth 14.3 14.0 11.9 10.4 8.1 3.4 2.8 11.0 average share capital 17.5 18.3 15.8 13.7 10.0 3.9 3.0 12.0 Income tax as % net income 18.1 20.9 22.6 25.5 6.0 - - - After-tax income as % average total assets 5.2 4.3 3.3 2.6 2.3 .9 .7 28.2 average net worth 11.7 11.1 9.2 7.7 7.6 3.4 2.8 11.0 average share capital 14.3 14.5 12.3 10.2 9.4 3.9 3.0 12.0 IBRD/BR as % loans outstandingg/ - - 4 14 18 24 22 40 Debt-equity ratioh 1.1 1.2 1.5 1.7 1.8 2.3 2.8 2.4 3.0 Dividend pay-ouL ratio .51 .60 .68 .83 .91 - .1 - 7. New lendingV over 5 years 12 1 36 30 45 56 61 35 Equities as 7 total loan and equity portfolioF 11.9 20.6 25.0 27.5 27.5 32.0 40.8 35.3 27.0 Reserves as % total loan and equity portfolio&/ 8.6 12.7 10.7 10.8 9.0 4.2 2.9 2.7 2.5 Arrears as % total loan portfolioi/ 0.2 0.5 0.6 0.1 5.8 4.5 7 of loan portfolio affected&/ 0.5 1.9 5.3 0.3 30.0 17.1 7.8 Book value as % par value 116. 229. 132. 134. 131. 115. 110. 109. 110. Increase on previous year 11.2 2.3 1.5 (2.2) (12.2) (4.3) (.9) .9 Rate of inflation 8.5 14.3 12.7 7.0 6.4 8.7 6.3 14.7 14.0 Rate of devaluation against US dollar - 50.0 - 16.9 7.1 5.5 6.9 9.4 9.0 a/ including Ps. 0.7 million exchange loss. b/ including Ps. 3.5 million exchange loss. c/ including Ps. 4.6 million exchange loss. d/ i.e. loans and export-import financing outstanding. ea excluding 'other liabilities'. f/ before taxation. g/ excluding import-export financing. h/ excluding 'other liabilities' from debt. Annex Table 5 COLOMBIAN FINANCIERAS: GROWTH OF PROFESSIONAL PERSONNEL 1965 1966 1967 1968 1969 1970 1971 1972 1973 Colombiana Lawyers 5 2 6 8 8 6 7 7 7 Economists 10 10 7 9 5 8 11 12 12 Bus. Admin. 2 2 - - 1 2 3 3 2 Accountants 2 2 2 3 3 3 3 3 3 Engineers 7 4 4 4 7 6 6 7 7 Total 26 20 19 24 24 25 30 32 31 Nacional Lawyers 3 3 4 5 5 6 5 6 6 Economists 3 4 3 5 5 6 7 7 7 Bus. Admin. - 1 1 - - - - - Accountants 2 2 2 2 2 2 2 2 2 Engineers - 1 1 - 1 1 1 1 L Total 8 11 11 12 13 15 15 16 17 Valle Lawyers 2 1 4 3 2 2 2 L 4 Economists 5 5 10 8 9 10 10 12 13 Bus. Admin. - - - - - - 1 1 2 Accountants 3 3 3 3 4 3 3 3 3 Engineers 1 1 1 - 2 3 7 8 9 Total 11 10 18 14 17 18 23 28 31 Norte Lawyers 2 2 2 2 2 2 5 4 4 Economists 5 5 5 6 6 7 6 7 7 Bus. Admin. - - - - - - - 2 4 Accountants 1 2 2 2 1 2 2 3 3 Engineers 1 2 2 3 2 2 2 3 2 Total 9 11 11 13 11 13 15 19 20 Caldas Lawyers 5 7 8 8 7 7 5 5 5 Economists 7 5 6 8 6 5 3 3 4 Bus. Admin. - - - 1 3 2 - 1 1 Accountants 1 1 1 1 1 1 1 2 2 Engineers 4 3 3 5 6 2 2 3 4 Total 17 16 18 23 23 17 11 14 16 Note: Data are as of December 31.  〕’!&:!.:!!&!!!&!:!!;&!!:&!”〕”!！一”&!&．、！、 /:：、屈：匕；;：響；:；、：：〕！〕〕 ：、：、、基：#：、、；、：、〕〕〕I 取：、：。：〕〕：,;;：邑：：、；;:!！〕l! 一華一―,．。一：一＿_；一＿＿一二一二一：：、 :：纏“牘’一■：〕。；.＿一、：::;.:“〕個、、〕一、〕〕〕！ ：藪煙’‘〔‘■■。：。。。■■：;：〕“：合：:::：〕！〕 汪：&“忽悻’〕〕〕；。〕〕〕＿。■一：以〕。．:“〕〕：:：〕〕〕〕〕！