Colombia - Education Project

RESTRICTED FILE X rOPY TRIC r kvz ^ Y. Report No. P-623 This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF COLOMBIA FOR AN EDUCATION PROJECT July 18, 1968  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF COLOMBIA FOR AN EDUCATION PROJECT 1. I submit the following report and recommendation on a proposed loan in an amount in various currencies equivalent to US$7.6 million to the Republic of Colombia. PART I - HISTORICAL 2. The proposed loan would be the Bank's first loan for education in Colombia. Several Bank/UNESCO preparation missions visited Colombia during 1964-68. The Project was appraised in November and December 1967 by a Bank/FAO mission. Negotiations of the proposed loan took place in Washington during the period June 27 - July 2, 1968. The Colombian Govern- ment was represented by Dr. Gabriel Betancur, Minister of Education, who was assisted by several officials of the Ministry and an outside advisor. 3. Together with the loans for the Fifth Highway Project and for the Fifth Railroad Project, which will be considered at the Board's meeting on July 23, the proposed loan would bring the Bank's lending to Colombia to US$543.1 million (net of cancellations). In addition, an IDA credit of US$19.5 million for highways was made in 1961. The fol- lowing is a summary statement of Bank loans and IDA credits to Colombia as of June 30, 1968:  -2- Loan/ Amount (US$ Million) Credit Undis- No. Year Borrower Purpose Bank IDA bursed Fully disbursed Total (less cancellations) 313.8 5 1961 Government Roads 19.5 o.6 315 1963 Acerias Paz del Rio S.A. Steel 30.0 6.o 369 1964 Empresas Publicas de NMedellin Power 45.0 26.6 448 1966 Government Agriculture 16.7 12.1 451 1966 Banco de la Republica Industry 25.0 8.7 499 1967 Empresa Nacional de Communi- Telecomunicaciones cations 16.0 14.6 502 1967 Instituto Colombiano de la Reforma Agraria Irrigation 9.0 9.0 534 1968 Banco de la Republica Industry 12.5 1/ 536 1968 Empresa de Acueducto, Water Bogota Supply 14.0 1/ 537 1968 Empresa de Energia Elec- trica de Bogota Power 18.0 1/ Total (less cancellations) 500.0 19.5 77.6 of which has been repaid to Bank and others 101.3 Total now outstanding 398.7 Amount sold 16.7 of which has been repaid 13.9 2.8 Total now held by Bank and IDA 351.149.5 Total undisbursed 77.0 0.6 77.6 1/ Agreements for these loans have been signed and they are expected to become effective prior to September 1968. 2/ Excludes US$44.5 million for Loans 534 c0, 536 CO and 537 CO which have been signed but have not yet become effective. 4. Twenty-three loans have been completely disbursed and four have been repaid in full. On the remainder, disbursements are proceeding nor- mally except on Loan 345 Co (Acerias Paz del Rio, S.A.). The Executive Directors recently approved an extension of the Closing Date by one year to October 31, 1969 to allow for further disbursements, mainly of contract retentions.  - 3 - 5. In the near future I expect to present to the Executive Directors a loan of about US$16.0 million equivalent for Power Inter- connection. 6. IFC has made 21 investments and underwriting commitments in 13 enterprises in Colombia totalling US$14.7 million. PART II - DESCRIPTION OF THE PROPOSED LOAN 7. The main features of the proposed loan are as follows: Borrower: Republic of Colombia. Purpose: Construction and equipment of ten comprehensive secondary schools to provide space on a two- shift basis, for 48,o00 students. The project would introduce a new concept of education into the Colombian school system emphasizing the basic preparation of skilled manpower for business, industry and agriculture. Amount: The equivalent in various currencies of US$7.6 million. Amortization: Loan would be for a term of 25 years, including a 10-year grace period. Repayment would be in 30 semi-annual installments from May 15, 1979 to November 15, 1993. Interest rate: 6-1/4 percent. Commitment charge: 3/4 percent. PART III - THE PROJECT 8. A detailed description of the Project is given in the attached report entitled "Appraisal of an Education Project in Colombia" (TO-660a) 9. Colombia's secondary school enrollment in public schools is projected to rise from 119,000 in 1965 to 300,000 in 1975. The Government is embarked on a program involving the construction of nineteen compre- hensive secondary schools which at full utilization would account for 28 percent of this enrollment. The Project represents the first phase of this program and comprises the construction and equipment of ten of the nineteen schools. Apart from accommodating part of the projected increase in secondary school enrollment, the schools will serve as means of introducing a new educational concept to Colombia. The syllabi at the  - 4 - new schools will be designed to overcone the unpopularity which now attaches to vocational training at the secondary level. The schools will prepare students for employment or further technical training, but also offer sufficient academic education to enable students to proceed to post-secondary institutions or universities. 10. The Government is establishing a unit for the implementation of the Project. This unit will function under a Project Director within the agency responsible for planning and coordinating school construction programs, which is attached to the Ministry of Education. The unit will take charge of construction of the ten schools. It will also be responsible for curriculum revision and the coordination of teacher training in prep- aration for the new syllabi. The Ministry would employ consultants for the design of the schools and supervision of construction. 11. The Government's plan for the operation of the ten schools on a double-shift is an essential aspect of the Project. It justifies the inclusion of more extensive facilities than would be feasible for a single- shift operation. Expected utilization of the facilities is correspondingly high, while the cost per student of each space compares favorably with similar projects in other countries. 12. The total cost of the Project is estimated to be Ps 246 million (US$15.2 million equivalent), with a foreign exchange component of US$5.4 million equivalent. The proposed loan would represent 50 percent of the Project cost. It would cover the estimated foreign exchange com- ponent plus 22 percent of the local currency cost. The other half of the Project cost would be covered out of the Government's budget allocations to education. 13. The proposed loan would finance the cost of equipment and furniture, site preparation and development as well as construction of the school buildings, and architectural consulting services. Under the loan, the Bank would cover in full the foreign exchange cost of equipment and furniture procured abroad and disburse on a percentage basis for civil works, professional fees and locally procured furniture. Equipment and furniture would be procured, and construction contracts would be let, on the basis of the Bank's bidding procedures. PART IV - LEGAL INSTRUMENTS AND AUTHORITY 14. The draft Loan Agreement between the Republic of Colombia and the Bank and the Report of the Committee provided for in Article III, Section 4(iii) of the Articles of Agreement are being distributed to the Executive Directors separately. 15. The draft Loan Agreement contains provisions generally used for education projects. The Borrower would undertake to operate the Project schools on a double-shift basis and agree to make adequate pro- vision for the maintenance of the Project schools (Section 5.01(c) and (d) of the Loan Agreement).  -5- PART V THE ECONOMY 16. The Judgments provided in the section on the Colombian economy, in the recent President's Report on the Development Finance Companies Project (P-592, May 2, 1968) continue to be valid. PART 7I - COPLANCE WITH ARTICLES OF AGREEMENT 17. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VII - RECCMMENDATICN 18. I recommend that the Executive Directors adopt the following resolution: RESOLUTION No. Approval of Loan to the Republic of Colombia in the amount of the equivalent of US$7.6 million for an Education Project. RESOLVED: THAT the Bank shall grant a loan to the Republic of Colombia, in an amount in various currencies equivalent to seven million six hundred thousand United States dollars (US$7,600,0oo), to mature on and prior to November 15, 1993 to bear interest at the rate of six and one-quarter percent (6-1/4%) per annum, and to be upon such other terms and conditions as shall be substantially in accordance with the terms and conditions set forth in the form of Loan Agreement (Education Project) between the Republic of Colombia and the Bank, which has been presented to this meeting. Robert S. McNamara President Attachment Washington, D.C. July 18, 1968