Announcement of Thirty Million US dollars Loan for Colombian Roads on June 21, 1963

() ... ,,, • . INTERNATI6!\IAL BANK FOR RECONSTRUCTl:ON _AND QEVELOPMENT -1818 H ST'REET., N.W., WASHINGTON 25 1 D. C. TELEPHONE: EXECUTIVE 3-6360 Ii Baril?~/ P,ress Release No. ,63/ 24 Subject: $30 million loan for J'J!le 21, 1963 t' Colom})ian __ Railroads -""-._ ) The World Bank todB.y made a loan equivalent to $30 million to the Colombian Na.tfonal' Railways ( CNR) for further improvement in the country's newly integrated railway systeme The loan w:J.'11 be used fo:;::, the purchase abr9ad of equipment and eng,}nee;ring services during the first two years of a ten-year CNR program to mod.ernize"the railrc.,ads of Co16mbia. This is the ,_fourjih ~loan from the Ban_k for the railrbads and brings the total to over $76 million. Eleven commercial banks a.re participati~g iB the loan, without the World • t;lank's guarantee, for a total amount of $790,009~ representing the first maturity and part of the second maturity whic..1:J. fa].l due between November 1, 1966 and May 1, 1967.. The participating banks a.re The Firpt Pe.wsylvania Banking and Trust Com- pany, Philadelphia; Grace National Bank of New York; First National City Ba.pk, New York; The Fidelity-Philadelphia Trust Company; First Western Bank and Trust Company, Los Angeles; Bank of America National-Trust and. Savings Association, San Prancisco;c Southern Ari~ona Bank and Trust Company, Tucson; Crocker-Anglo National Bank, San Franc::!;,$CO; the New York Agency of The Royal Bank of Canada; The First Wisconsin National Bank of Milwa~e~,~-:a.l'l.d The' Philadelphia National Bank. The fir.st step to provide Colombia with an integr~ted rail network was taken eleven years ago y when work began on the new Atlantic Railroad from central Colombie. to the Caribbean. At that time a number of small railroads serving separate regiom; r,'.. ,rer,e in operation, but they were not all connected to each other and provided no  ,!. - 2 - route to the Atlantic coast. As a result, all freight and passengers traveling between the Atlantic and central Colombia, including the principal cities of ••• Bogota, Medellin and Manizales, had to make the journey o.f almost 500 miles by boat and barge on the Magdalena River. This traffic was frequentJy interrupted by adverse conditions on the river, leading to long delays and to spoilage of perishable cargoes. Because of the d.ifficult~fs of the terrain, the new Atlantic Railroad took nine years to construct. 0 It was opened for traffic in 1961 and runs 48o miles from Puert;o Salgar in central Colombia to the Port of Santa Marta: on the Caribbean. 'i1he new Railrqa.d accomplishes three important purposes. Fif.St~j it has reduced the , journey from the principal cities of Colombia to the sea from a number of days to less than 24 hours. Second, it interconnects at various points along its length {> with the older regional railroads, thus providing the main stem of an integrated national. railroad system. Third, the Atlantic line has penetrated fertile but previously inaccessible areas of the Magdalena Valley and has already led to the • rapid settlement and cultivation of large new areas of land. The problems now facing CNR are twofold. Carrying capacity of the whole system must be greatly increased to cope with the demand created by the rapid overall economic growth ot Colombia -- including the large-scale production of cotton, rice, livestock, etc. from the newly opened lanc1s in the Magdalena Valley. The greater number of locomotives and freight and passenger cars are obsolete and must be replaced with modern equipment as rapidly as possible. An indication of the state of the railroads is the fact that there were almost 700 train derail- ments i:p. 196o. The new carrying capacity must come from heavier,trains :pulled • by diesel locomotives. Consequently, pa.rt of the funds from the new Bank loan i,1ill be used for the purchase of' 1, 150 new freight cars and 37 diesel locomotives. ,... ..• .. 3 - ! • . 0 Components will also be.__ bought\ for, ano~.h$r 200 fr°eight cars and adequate supplies o:e. spare parts for the diesels. The second immediate need is to bei:in the;, re: :abilitati~n of what were the ,, regional railroads. Most of these were· built many years ago, to standards inade- .q,la.te for to-day' scheavy traffic, and most. of the lines need to be relai.d a.1.1d 1 , ,·, ' 1 ballasted to moder,n standards . Funds from the new Ba.nk loan will tllerefore ~e used., to buy rails and accessories for the renewal of about 130 miles of track a.~ring the first two years of~the program, steel for bridges and a variety of' j', other railroad equipment and materials. Provision is also being made for the training /ibroad or· selected railroad personnel and the services of consultants ~ 0 to assist CNR is setting up workshops and procedures for the----=ccrcaintenance of diesel locomotives. The expectea: higher traffic volume and the operating economies'-' att1·ibuta.ble to the rehabilitation:, program should enable the CNR to progressively reduce its { operating costs and improve its financial position. The Government recently authorized substantial increases in railw~.y tariffs and has taken steps to make ,, possible further adjustments in the CNR's tariffs as needed to compensate for in- creases in wages and costs of materials. It is expected that the CNR, by about 1967, will ~arn a net income after covering all its costs including depreciation. The ten-year railway improvement' program was drawn up with the cooperation of CNR and its consultants by a group of experts who, under the sponsorship of the Bank and the Colombian Gover'runent, undertook a survey of all modes of transport in Colombia. The total cost of the first five years of the rail~ program is' esti-,::, mated at- $74 million. The Bank's loan, which will be applied to the cost of the first two years, is for a term of 20 years an,d bears interest of 5# a year in- • cluding the zation will begin November 1, 1966. Colombia. ' \ ,._,,\ J 1-: 1% commission which is allocated to' the Bank's Special Reserve. The loan is guaranteed by the Government of Amorti-