Announcement of World Bank Group Lends Forty-Two Million Eight Hundred Seventy Thousand US Dollars for industry and Agriculture in Colombia on June 20, 1969

International Bank for Reconstruction and Development International Finance Corporation t l Jf( I ·1;:;... 1818 H STREET.NW, WASHINGTON 25, D. C. TE!..EPHONE: EXECUTIVE3-6360 ,j . 1 t~- . 0+ - --~ .. "'ii. f. J ,\: A:-Oc~· Bank Press Release No. 69/47 Subject: World Bank Group lends IFC Press Rei'ease No. 69/11 $42,870,000 for industry and June 20, 1969 agriculture in Colombia The World Bank Group announced today that it has approved financing equivalent to $42,870,000 for the development of private industry and agriculture in Colombia. The World Bank is making a loan equivalent to US$25 million to assist five development finance companies (financieras) in their effort to support Colombia's industrial development. The financieras are Corporacion Financiera Colombiana in Bogota; Corporacion Financ.'.iera Nacional in Medellin; Corporacion Financiera de Caldas in Manizales; Corporacion Financiera del Valle in Cali; and Corporacion Financiera del Norte in Barranquilla. • T~e World Bank affiliate, the International Finance Corporation (IFC), is also ~aking equity investments of $435,000 each in the Valle and Norte financieras. pre•1iously made equity investments in the other three financieras. It A Bank lo&n of $17 million will assist a four-year agricultural credit pro- gram for the development of approximately 2,500 medium-sized farms in the Depart- til~nts of Tolima and Valle. l&an for Financieras Industry now accounts for about 20% of Colombia I s gross domestic product, corn·· pared with 14% in 1950. Industrial growth has been hampered, however, by limited Jmport capacity and scarcity of long-term investment resources. The financieras have been partially filling the gap and have become major sources for medium and 1.01.1.g-term loans, as well as equity financing for the private industrial sector. They have provided finance for textiles, metals, engineering, food and beverages. Pi:•.p,er and printing, chemicals and other industries, and have also undertaken com- mitments in agriculture and livestock. Their operations include medium and long- term loans, import-export financing, equity participations, promotions, under- • WTiting and guarantees to private business. By December 1968 their aggregate p~tt.¥ folj_os had risen from 1.5 billion Colombian pesos (US$87 million) in 1966 to CoH2.1 billion (US$122 million), and their equity participation portfolios from Coli293 million (US$17 million) to Col$383 million (US$22 million). Bank PoR. 69/47 - Colombia .. In:lustry and Agr:f.culture IFC P~R .. 69/11 - 2 - • The Bank loan announced today will cover direct foreign exchange expenditures for pirojects to which the financieras commit funds. Of the $25 million, $15 mil- lion will be shared equally by the five companies, and the balance will be avail- able for joint operations of all of them and to those among the financieras that have committed their fixed allocation. The financieras derive their resources mainly from their equity, from credit lines with the Banco de la Republica and foreign commercial banks, and from loans from the Private Investment Fund (PIF), a special fund within the Banco de la Repcblica established in 1963 to mobilize capital from various external sources to finance private investment activities in Colombia. The present loan, as in the case of two previous Bank loans totaling $37.5 million, will be channeled to the financieras through the PIF. The loan will be made to the Banco de la Republica and will be guaranteed by the Government of Colombia. Interest will be at the rate of 6-1/2%. Repayment to the World Bank will conform approximately to repayments received by the financieras on their sub-loans financed out of Bank funds which will not extend for periods be- yond 15 years. Loan for Agriculture The loan will be made to the Government of Colombia, for a term of 15 years, including 5 years of grace, with interest at 6-1/2%. The Government will re- lend the proceeds of the loan to the Colombian Institute for Agrarian Reform (INCORA), which has primary responsibility for implementing the project. INCORA is an autonomous public institution established in 1961 to carry out a program to redistribute land, to settle and develop potentially valuable but uncultivated land~ and to increase agricultural production and productivity. Colombian agricultural production other than coffee has increased in recent years at an average rate of over 4% annually, mainly through the extension of the • cultivated area. Yields hav,e increased more slowly, however, due in major part to the lack of credit facilities to finance modern inputs and to improve tech- nologyo Credits to be provi.ded under the INCORA-administered project will con- trfoute substantially to rai.sing the level of productivity. The total project cost is estimated at $42.5 million equivalent, of which the Balilk loan of $17 million will cover 40%. Private participants farmers 1.nd contractors providing s,=rvices to farmers -- will provide 41'7o, and the Colombian Government the remaining 19%. Of the estimated total cost, $39 million will be for a credit program to in- crease productivity of crops such as long-staple cotton, rice, corn, and soya beans, on about 2,500 medium-sized farms in developing areas in the Departments of Tolima and Valle, which comprise some of the country's most fertile lands. Investments wil: be made for on-farm improvements to land, buildings and roads; acquisition of tractors, combine harvesters, crop spraying aircraft and ancillary equipment; and the purchase of fertilizers and pesticides. • The Bank loan also iI1Lcludes funds for the services of consultants to assist INCORA 0 s management in administering the project, and to carry out a feasibility study of irrigation in the Cesar River Valley which may eventually result in the irci~ated development of about 148,000 acres. The Fcod and Agriculture Orge.rd:ati<m of the UnH.e.d Nationti (FA()) as~istt~d in the pre::p,~:ration aud appraisal of the projec.t under the Bank/FAO Cooperative Program.