FILECOPY Documentof The World Bank

FOR OFFICIAL USE ONLY Public Disclosure Authorized

Report No. P-2169-CO

REPORTAND RECOMMENDATION

OF THE Public Disclosure Authorized PRESIDENT OF THE

INTERNATIONALBANK FOR RECONSTRUCTIONAND DEVELOPMENT

TO THE

EXECUTIVEDIRECTORS

ON A

PROPOSEDLOAN TO

EMPRESASMUNICIPALES DE CALI (EMCALI) Public Disclosure Authorized WITH THE GUARANTEEOF

THE REPUBLIC OF COLOMBIA

FOR A

SECONDCALI WATERSUPPLY AND SEWERAGEPROJECT

February 8, 1978 Public Disclosure Authorized

This documenthas a restricteddistribution and My be used by recipientsonly in the performanceof their official duties. Its contents may not otherwLsebe disclosed withoutWorld Bank authorization. CURRENCYEQUIVALENTS

Average Calendar 1977 January 24, 1978

Currency Unit = Peso - Col$ Col $ US$1 = Col$36.985 38.04 Col$l = US$0.027 0.02629

The Staff Appraisal Report is based on US$1 = Col$51.4

MEASURES AND EQUIVALENTS

1 meter (m) = 3.28 feet (ft.) 1 kilometer (km) = 0.62 mile (mi.)

1 square meter (m2) - 10.8 square feet (sq. ft.) 1 cubic meter (m3) = 35.3 cubic feet (cu. ft.) 1 US gallon (gal) = 3.785 liters (1) 1 million US gallons per day (mgd) = 43.9 liters per second (1/sec) 1 milligram per liter (mg/l) = 0.058 gram per US gallon

GLOSSARY OF ACRONYMS

EMCALI = Empresas Municipales de Cali

IDB = Inter-American Development Bank

INAS = Instituto Nacional de Salud

INSFOPAL = Instituto Nacional de Fomento Municipal

USAID = US Agency for International Development

FISCAL YEAR

January 1 to December 31 FOR OFFICIALUSE ONLY Page 1 of 3

COLOMBIA

SECOND CALI WATER SUPPLY AND SEWERAGE PROJECT

LOAN AND PROJECT SUMMARY

Borrower: Empresas Municipalesde Cali (EMCALI)

Guarantor: Republic of Colombia

Amount: US$13.8 million equivalent

Terms: Repayment in 17 years, including 4 years of grace; interest at 7.45% per annum.

Proiect Description: The project would improve sanitary conditions in Cali by moving the discharge of raw sewage downstream from the city's main intake of water, and by separating domestic sewage from stormwaterrun-off; it would increase utiliza- tion of the installedwater production capacity by supply- ing water to the adjacent Municipalityof Yumbo; it would extend the water supply and sewerage networks to, and reduce flooding in, certain low-incomeareas; and it would increase the area availablefor orderly urban growth. All of Cali's and Yumbo's populationwould benefit from the reduction of the very hazardous level of pollution at the point of water intake from the Cauca River, and about 250,000 people, 70% of which are among Colombia's poorest 40%, would benefit directly from the other components. Although the project faces no special risks, it may not be implementedin the intended period if EMCALI fails to generate sufficient funds through timely rate increasesand betterment levies. EMCALI's and the municipal authorities' commitment to strengtheningthe entity's finances should ensure that funds will be availablewhen needed and that the project will be carried out as scheduled.

This documeni hasa rmricweddistribution and maybe usedby recipientsonly in the performance of their official dutig. Its contents may not otherwisebe disclosedwithout World Bank authorization. Page 2 of 3

Estimated Cost: Local Foreign Total -----US$ Million------

(a) Proposed Project:

Water Supply Subproject 1.39 1.14 2.53 Yumbo Subproject 1.21 1.98 3.19 Reforestation Subproject 0.35 0.13 0.48 Cauca Interceptor Subproject 3.29 2.49 5.78 Stormwater Subproject 1.71 0.57 2.28 Sanitary Subproject 1.65 0.55 2.20 Sewage Treatment Studies 0.12 0.06 0.18 Maintenance Equipment - 0.82 0.82 Engineering and Administration 0.87 0.88 1.75

Base Cost 10.59 8.62 19.21

Physical Contingencies 1.59 1.29 2.88 Price Contingencies 2.12 1.48 3.60

Total Project Cost 14.30 11.39 25.69

Interest and Other Charges during Construction 5.61 2.38 7.99

Total Funds Required 19.91 13.77 33.68

(b) Other Investments and Working Capital:

Other Investments 2.10 - 2.10 Increase in Working Capital 7.10 - 7.10

Total Funds Required for 1978-1981 Program 29.11 13.77 42.9

Financing Plan: Local Foreign Total -----US$ Million--

Net Internal Cash Generation 17.0 - 17.0 Government Loan 5.7 - 5.7 Loan from Banco Central Hipotecario 5.7 - 5.7 Proposed Bank Loan - 13.8 13.8 Other 0.7 - 0.7

Total 29.1 13.8 42.9 Page 3 of 3

Rate of Return: The aggregate internal economic rate of return for the project is estimated to be 22%.

Appraisal Report: Report No. 1679c, dated February 8, 1978.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

REPORT AND RECOMMENDATIONOF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO EMPRESAS MUNICIPALES DE CALI (EMCALI) WITH TIE GUARANTEEOF THE REPUBLIC OF COLOMBIA FOR A SECOND CALI WATER SUPPLY AND SEWERAGEPROJECT

1. I submit the following report and recommendationon a proposed loan to Empresas Municipales de Cali (EMCALI)with the guarantee of the Republic of Colombia for the equivalent of US$13.8 million to help finance a Second Cali Water Supply and Sewerage Project. The loan would have a term of 17 years, including 4 years of grace, with interest at 7.45% per annum.

PART I: THE ECONOMY

2. *Thelatest economic report on Colombia (1548-CO)was distributed to the Executive Directors in May 1977. It assesses current developmentsand provides a medium-termperspective of the Colombian economy. Country data sheets are provided in Annex 1.

Background

3. During the past two decades substantialstructural transformation has taken place in the Colombian economy. The country has made impressive progress in the transition from a predominantlyrural and agricultural economy made up of largely self-containedregions to a more integratedurban industrial economy oriented increasinglytoward internationaltrade. This broadening of the country's productive base has been accompaniedby rapid growth of nontraditionalexports and developmentof a modern sector which relies to a considerableextent on imported inputs. From 1967 to 1974 GDP rose by an average of 6.5% per annum in real terms, well above the historical average of less than 5% (1950-67). Accelerated economic growth coupledwith a decline in population growth brought about a rapid increase in per capita incomes. Increased investment and relaxation of the foreign exchange con- straint were the major factors responsiblefor this accelerationin growth. Merchandise exports expanded more than four-fold during this period, and, most significantly,nontraditional exports became an increasinglyimportant source of foreign exchange earnings, in large part compensatingthe slow growth of receipts from coffee exports. Much of this increase in non- traditionalexports was the result of both product and market diversifica- tion attributableto the Government'sexport promotion program. Substantial medium- and long-term capital inflows to the public and private sectors for developmentprojects helped sustain investment levels and enabled Colombia to maintain the favorable structure of its external debt. However, despite the substantialprogress made during the past two decades, Colombia still has a long way to go on the road toward modernization;it still is essentially an underdevelopedcountry with a limited modern sector super- imposed on a broad, traditionaland poor base. - 2 -

4. When the present Government took office in August 1974, the country was faced with a generally deteriorating economic situation--weakening balance of payments, loss of self-sufficiency in petroleum production, accelerating inflation, deterioration of the public finances, and reduced public invest- ment. GDP growth showed signs of slowing and unemployment was increasing, especially in the urban areas, reaching a peak of 13% in 1974. As a con- sequence, the new administration moved rapidly to introduce an economic stabilization program along with a set of reforms aimed at restoring the basis for long-term economic growth. In line with these goals, it initiated basic reforms of the fiscal, monetary and price systems.

5. To help strengthen the public finances, the new Government undertook a comprehensive tax reform designed to achieve a substantial improvement in the progressivity and elasticity of the tax system. Steps were also taken to correct major distortions which existed in the price system. Price controls on a number of important agricultural products were removed, thereby providing greater stimulus for increasing farm production. Far-reaching modifications in petroleum pricing policy aimed at regaining self-sufficiency in production of crude petroleum by improving incentives for exploration and exploitation were introduced. Concurrently, measures were taken to reduce the subsidy on local consumption of petroleum products, with the dollar equivalent price of gasoline being raised in successive steps by 150% between August 1975 to January 1977.

6. Economic growth slowed in 1975 and 1976, with real GDP increasing by less than 5% in both years. This was the result of the stablilization measures adopted at the end of 1974, the effects of the world recession, reduced private investment, and, in 1976, a poor harvest stemming from adverse weather conditions. The stabilization program succeeded in reducing inflation from 27% in 1974 to 18% in 1975, but the expansionary impact of rising inter- national reserves caused by higher coffee prices and shortages of basic food items produced an acceleration of inflation to 26% in 1976. Private invest- ment declined in real terms during this period as a consequence of growing investor concern over the deteriorating economic situation and tightening of credit. Public sector revenues and savings were strengthened as a result of the tax reform and of increased revenue from coffee export taxes. The balance of payments improved substantially in 1976, mainly as a result of an increasing trade surplus caused by higher world coffee prices. Consequently Colombia's net international reserves rose by nearly threefold, from US$437 million in 1974 to US$1,166 million in 1976.

Recent Economic Performance

7. Growth and employment picked up significantly in 1977, largely as a result of increased internal demand generated by the income effects of exceptionally high export receipts from coffee. Preliminary information indicates an increase in GDP of 5.4%, spread over all sectors of the economy except non-coffee agriculture which was affected by the continuation of the severe drought which began in the second half of 1976. High world coffee prices during 1977 produced a record trade surplus and the balance of payments registered an overall surplus for the year of US$686 million. By year end, Colombia's net international reserves stood at US$1,852 million, equivalent to 7 months' imports, the highest level in the country'shistory. Increased export receipts from coffee contributedto a further strengtheningof public finances over that which had occurred in 1975-76. Increased receipts from taxes on coffee exports caused a substantialincrease in the current surplus of the Central Government,more than offsettingunexpected slower growth in some of the country's other major taxes.

8. Expansion of coffee earnings combinedwith the shortages of basic food items led to an unprecedentedacceleration of inflation during the first half of 1977. For the twelve month period ending in June 1977 infla- tion reached 45%. In an attempt to reduce inflationarypressure the Govern- ment introduceda number of fiscal and monetary measures aimed at curbing growth of coffee producers disposable income, at further strengtheningpublic finances and at slowing the growth of the monetary aggregates. Legal reserve requirementswere increased,limits were placed on external borrowing,and Central Bank rediscountswere reduced. The coffee retention tax rate was doubled from 23% to 46%, and the system of delayed payments to coffee pro- ducers was used to further limit growth of coffee producers'disposable in- come. In order to increase aggregate supply and stem the rapid accumulation of foreign exchange reserves, import duties were reduced and the import licensing system was liberalized. In an effort to curb upward pressure on prices, the authoritiestemporarily discontinued their policy of periodic adjustmentsin the foreign exchange rate and in prices of petroleumproducts. The last two measures were of course only a temporaryexpedient to break the inflationaryspiral. From July 1977, the Government has resumed periodic exchange rate adjustmentsand in January 1978 increased the price of gasoline by 20%. The Government intends to continue to pursue policies that maintain Colombia's internationalcompetitiveness and that help regain petroleum self-sufficiency.

9. Another conflict between short term and long term objectives exists in the Government'sinterest rate policies. To avoid cost push effects, nominal interest rates were frozen during the period of acceleratinginflation and real interest rates declined rapidly and became sharply negative. As a consequencethere was a growing unwillingnesson the part of the public to hold medium- and long-term financial assets, and investment funds had to be increasinglyallocated by cumbersome administrativecontrols. The problem has become less serious as inflationhas abated, but will require further attentionby the Government.

10. The stabilizationmeasures taken earlier in the year, the gradual decline of world coffee prices from June 1977 on, and the availabilityof more ample agriculturalsupplies on the domestic market resultingfrom both im- proved weather and increasedimports, produced a dramatic slowdown in infla- tion in the second half of 1977. For the full year 1977, inflationwas re- duced to 29%. Further declines in the rate of inflationare expected this year as the Government maintains tight fiscal and monetary policies. Additionally,declines in internationalcoffee prices and rapid increases - 4 - in imports are expected to further reduce inflationary pressures from the ex- ternal sector. Prospects for this year's agricultural output appear good, and the Government is prepared to increase food imports substantially if needed.

Development Strategy and Prospects

11. The Government's development strategy, embodied in the 1975-78 development plan, aims at creating the conditions necessary for substantially increasing employment opportunities, particularly for the poorest segments of the population. It provides incentives for private sector investment in the least developed areas of the country and for the use of more labor intensive production techniques. Public sector investment specified in the Plan concen- trates on expanding and improving infrastructure and on socially oriented projects designed to alleviate rural and urban poverty. This includes compre- hensive integrated rural development and nutrition programs which directly benefit the lowest income groups of the population. Because of the importance of commercial agriculture in generating employment and expanding exports, Colombia's development plan assigns a high priority to providing farmers with credit and technical services required to increase output. In order to alleviate urban poverty, the Plan places emphasis on reducing migration to the citLes by increasing employment in agriculture and through provision of improved services in slums of Colombia's major cities. These efforts are being complemented by policies and programs to encourage the development of small- and medium-scale enterprises and to decentralize industry away from the three largest cities. Special priority is given to the development of domestic energy sources to reduce the country's growing dependence on imported oil.

12. In the past three years substantial progress has been made in carrying out this strategy despite the economic dislocations occasioned by the world recession and the need to concentrate on short-term economic management. Most of the Government's development efforts during this period have focussed on improving the standard of living of the poorest 50% of the population, with a substantial share of the benefits of public sector expenditures accruing to this segment of the population. Provision of improved social services has been a major objective of the current administration. This is reflected in the increase in expenditures on education, health, water and sewerage, which rose from 33% of total expenditures in 1974 to 37% in 1976. Preliminary estimates show an even higher share spent on such programs in 1977.

13. Projections of Colombia's energy balance indicate an expanding deficit which could reach significant proportions by the early 1980s. To avoid the constraint on growth that shortages of energy would entail, the Government is giving high priority to the development of alternative energy sources. Major projects are being developed to expand hydroelectric power generation and incentives are being provided private companies for accele- rated exploration and exploitation of the country's hydrocarbon potential. Coal and natural gas are expected to provide an increasing contribution to the country's energy needs in the future. An energy development program, which would nearly triple power generation by 1986, has been drawn up by - 5 - the Government, with estimated investment requirementsof between US$6.0 and US$8.0 billion in constant 1976 prices. Given the long gestation periods of power projects, their execution must be initiatedwithout delay if energy constraintson future growth are to be avoided.

14. The Government is making a major effort to accelerate growth of the agriculturaland industrial sectors. In the past, Colombia has been largely self-sufficientin basic foodstuffs. However, an increasingfood deficit is projected for the years ahead in the absence of major advances in food pro- duction. The Government is attempting to meet these needs through integrated rural developmentprograms directed towards small farmers, through expanded farm credit, research, extension and marketing facilities and through improved farm management practices, including farm investment planning. Industry has been singled out as the leading growth sector for the future and the Government has adopted exchange rate, fiscal incentive,credit allocation,and locational policies intended to assure that the sector fulfills its role as a major con- tributor to employment growth.

15. Based on its strong resource base and its high level of international reserves, Colombia should be able to sustain annual real growth of no less than 6% over the period 1978-82. Private sector investment is expected to recover as inflation subsides and fiscal and monetary policies are eased. Public sector investment is expected to increase as restraints on such spending are lifted and major energy projects enter the execution stage. Non-inflationary increases in public sector investment spending depends to a large degree on continuing government efforts to maintain high levels of public sector savings. In this regard, timely and adequate adjustments of tariffs on public services is especially important,and the Government has already gone a long way in the adoption of such policies.

16. Less buoyant terms of trade as world coffee prices decline from the high 1977 level and rapidly increasing imports to meet the requirements of expandinginvestment are expected to lead to a renewed widening of the resource balance beginning in 1978. Assuming that economic growth accele- rates in the industrializedcountries and that appropriate incentives-- particularlycontinuation of periodic exchange rate adjustments--areprovided, nonttaditionalexports should resume the high rate of growth achieved in the early 1970s. Colombia is projected to require gross capital inflows of about US$3.7 billion during the five year period 1978-82, of which US$340 million should be disbursed from commitmentsmade through the end of 1976. This inflow would enable Colombia to maintain an adequate level of foreign ex- change reserves during the period. A significant increase in capital require- ments is expected in the early 1980s when major additionalprojects in the energy sector will have to be initiated in order to avoid serious future constraint on economic growth. To achieve these targets, annual gross capital inflow will have to increase from US$425 million in 1976 to over US$1.0 billion in 1982. While about half of this inflow is expected to be provided by official multilateraland bilateral sources, financing from commercial sources is expected to become increasinglyimportant during the period as Colombia gains greater access to internationalcapital markets. - 6 -

17. Colombia's public external debt repayable in foreign currency amounted to US$3.3 billion at the end of 1976, or about US$2.4 billion excluding undisbursed commitments. The Bank/IDA share of this external debt (disbursed only) was 28.5% and is expected to decline to about 25% by 1982. Although the public debt service ratio fell during the past two years as export growth accelerated,this ratio is projected to increase from 9.5% in 1976 to about 11% by 1982. Balance of payments prospects beyond 1980 will depend among other factors on the timely development of domestic energy sources and on progress made in executing several natural resource-based export oriented projects currentlyunder preparation. As a developing country, it is normal to expect Colombia to be a net capital importer, i.e. to have a deficit in its balance of payments on current account. However, to avoid an excessive growth in this deficit over the next few years, careful management of internal demand will be required. Given such management, it should be possible to prevent the external sector from again becoming a constraint on economic growth, and to maintain Colombia's present creditworthiness for external borrowing of substantialamounts on conventionalterms.

PART II: WORLD BANK OPERATIONS IN COLOMBIA

18. The proposed loan, the 70th to be made to Colombia, would bring the total amount of Bank loans to Colombia to US$1,562.4 million (net of cancella- tions). Of this amount, US$1,179.1 million is now held by the Bank; IDA made one credit of US$19.5 million for highways in Colombia in 1961. Disbursements have been completed on 45 loans and the IDA credit. IFC has made effective investmentsand underwriting commitmentsof US$53.7 million in 24 enterprises and now holds US$28.1 million. Annex II contains a summary statement of Bank loans and the IDA credit as of November 30, 1977, and IFC investments as of December 31, 1977, and notes on the execution of the 24 on-going projects.

19. Since FY68, Bank lending in Colombia has become more diversified and has been concentratedon production-orientedprograms and activities which carried social as well as economic benefits. Eight of the eleven agricultural loans have been made since then, seven of the ten loans for industry, all three loans in the education sector and all six loans for water supply and sewerage. This compares with only seven loans since FY68 in the power and transport sectors.

20. Bank lending to Colombia in FY77 consisted of loans for rural devel- opment, agriculturalcredit, telecommunications,highways and small-scale industry, totalling US$281 million equivalent. In addition to the proposed project, the FY78 program includes the recently approved loan for nutrition improvement,and proposed loans for urban developmentand power. Work is also under way in developmentfinance companies, further urban development,urban sanitation and slum improvement,transportation, mining, power, and small farm development for possible considerationby the Executive Directors during the next two years. 21. The proposed Bank lending conforms closely with the Government's developmentstrategy. To help Colombia develop domestic sources of energy, a substantialpart of the proposed lending would be for hydro-power.The Bank would also assist the developmentof coal mines, which hold potential in helping Colombia meet part of its energy requirements. Bank involvementin the energy sector would help mobilize additional external financingas some of the projects would require co-financing. Other future loans would finance agricultureand industry to assist the Government in its efforts to raise overall productivity,income and employment and to strengthen and diversify exports. Closely related to these objectiveswould be the proposed Bank lending for transport infrastructurein more backward areas of the country to integratethem into the modern economy. In this context, we are proceeding with a project to improve domestic airports. Finally, we are preparinga relativelylarge number of loans in support of the Government'sefforts to help the lowest 50% of the Colombian population. The nutrition project, the proposed urban sanitationand slum improvementproject, and the proposed water supply and sewerage projects are principallydesigned to improve the poor's standard of living.

22. The operations of external lenders in Colombia are shown in Annex I. While IBRD, IDB, and AID provided about 75% of total external financing to Colombia in the 1961-72 period, their share has decreased since then to approximately40%. Like the Bank, IDB and AID have given increased emphasis to social projects. For instance,the IDB has assisted projects in low cost housing, urban and rural development,agrarian reform, university education, water supply, and land erosion control; in the future IDB proposes to assist Colombia in its plans to develop sources of domestic energy and to expand the activity of the productive sectors to help generate increased employment. AID has supportedprograms in education,urban developmentand small farm develop- ment. More recently, it has moved to small project loans aimed chiefly at improving the distributionof income. It is expected to phase out its aid program in Colombia in 1979 with the commitmentof a US$6 million nutrition loan.

PART III: THE WATER SUPPLY AND SEWERAGE SECTOR IN COLOMBIA AND THE CITY OF CALI

Urban Growth

23. During the past several decades Colombia experiencedone of the highest rates of urban growth in Latin America. Its urban populationis esti- mated to have reached about 70% of the total; this is more than double that of 1938. Urban populationgrew at an average annual rate of 5.5% during the 1951-64period or one-and-one-halftimes faster than the growth of total population. Growth of the urban populationhas since decreased to an annual average rate of 4.6%. - 8 -

24. Unlike other countries of comparable size and development, Colombia has several fairly large urban centers. Sixteen cities have more than 100,000 inhabitants. Bogota has about three-and-a-half million, Medellin 1.5 million, Cali over one million, Barranquilla over 700,000 and Cartagena, Bucaramanga, Manizales and Pereira each have about 300,000.

Water Supply and Sewerage Facilities, Past Investments, and Financing

25. Although Colombia compares favorably with many other Latin American countries as regards water supply and sewerage facilities, one-fourth of its urban population does not have direct access to public water supply, and about 60% lack sewerage facilities. The level of service of the rural popu- lation is much lower: in 1974, 88% of the households with piped water and 96% of those sewerage connections were in urban areas; in the rural areas, only 33% of the population had access to piped water and only 13% had access to public sewerage services.

26. Water supply and sewerage services are provided by the following institutions:

(a) Municipal Enterprises. Twenty-one of the cities with more than 25,000 inhabitants (accounting for one-third of Colombia's popula- tion) have their own municipal utilities to provide water supply and sewerage services. From 70 to 96% of this population receives water supply services and about 50 to 80% is connected to the sewerage system.

(b) Instituto Nacional de Fomento Municipal (INSFOPAL). Smaller cities with more than 2,500 inhabitants (which account for one-fourth of Colombia's population) have their water supply and sewerage systems coordinated by INSFOPAL. About 70% of this population has direct access to piped water, while 50% is connected to sewerage systems. INSFOPAL is undergoing a reorganization, with the assis- tance of the Bank under a prior project, to enhance its central planning and financing role in the water supply and sewerage sector.

(c) Instituto Nacional de Salud (INAS). Communities of less than 2,500 inhabitants have systems constructed and operated by the INAS. About 33% of this population has water supply services while 13% has access to sewerage facilities.

27. Investment outlays for water supply and sewerage have risen consider- ably, increasing from US$21.6 million equivalent in 1965 to US$55.8 million equivalent in 1975. In the 1965-75 period total investments amounted to US$392 million equivalent, of which 72% was expended by the municipal enter- prises, 20% by INSFOPAL, and 8% by INAS. About 35% of the total investment was financed from the national budget, 20% from external sources, and the remaining 45% from internally generated funds and domestic credits. Six Bank loans supported the improvement of water supply and sewerage systems in Bogota, Cali, Palmira and, through INSFOPAL, in 15 medium-size cities and 30 urban communities. Additionally, two recently approved loans for integrated rural development and nutrition improvement have water and sewerage components. -9-

GovernmentObjectives

28. One of the Government'sobjectives is to improve living conditions in the urban sector. A major componentof this objectiveis to provide water and sewerage facilities to about 80% of the urban populationby 1980. With the support of external sources of finance, the Government has been financing several water and sewerage programs throughoutthe country. In some cases, however, progress is being slowed down by the inabilityof the enterprisesto generate sufficientfinancial resources. Rate increases to compensatefor raising costs have lagged and the increasesnow required are such that they have to be implementedgradually. Nevertheless,the Government is determined to strengthen the finances of the water and sewerage sector and it has began to conditionassistance from the National Treasury to the enterprisesadopting adequate rate increases.

The City of Cali

29. Cali, Colombia's third largest city (para. 24), is the capital of the Departamentodel Valle del Cauca, the economyof which is based on a highly mechanizedagricultural sector (mainly sugarcane)and manufacturing industry (chemicals,food processing, paper, textiles,clothing, printing and electricalproducts). Cali is linked by railroad and highway with major cities to the Northeast and with the Pacific port of Buenaventura. Cali has also a major internationalairport.

30. In the 1950's, Cali mushroomed to become an importantcenter of economic activity. This encouraged large rural migration. During the period 1951-64Cali's populationgrew at an annual rate of 7.2%, i.e., two-and-one- half times faster than the growth of total population. Growth of Cali's population has since decreasedto an annual average rate of 4%.

31. Of Cali's total population,96% is servicedwith water and 80% has shelterwith sewerage connections. Only 18% of the area of Cali, however, has separate sewerage,while the remaininghas combined sanitary sewerage and stormwater drainage which is considered a health hazard (see para. 41 below). Cali's low-incomeneighborhoods are located predominantlyin the flood lands of the Cauca River. During the rainy season, extensive flooding makes it difficult,and sometimes impossible,to provide these neighborhoodswith services such as garbage disposal,street cleaning,police and fire protec- tion, public transportation,and maintenanceof the water supply, sewerage, telephone and electricity distribution systems.

32. The role of the local public agencies is very important in Cali, albeit substantially dependenton Central Government financialsupport. Of total public expendituresin Cali, local agencies contributed49% (compared to 16% for all Colombia), while the National Government contributed45% (20% directly and 25% through its decentralizedagencies) in 1975. The remainderwas contributedby the DepartmentalGovernment. Of the 49% contributedby local agencies,Empresas Municipales de Cali (EMCALI),the proposed borrower, contributed60%. A MlunicipalPlanning Board, established in early 1975, provides policy guidance to the Municipal Planning Office which, in turn, is responsiblefor preparing the city's four-yearplans and for supervisingthe municipal agencies. - 10 -

The First Project

33. In 1970 the Bank made a loan of US$18.5 million equivalent (Loan 682-CO) to EMCALI to finance half of the costs of the investment program in water supply, sewerage and drainage which the company proposed for the period 1970-73. The largest component of the project was the Puerto Mallarino Water Treatment Plant (about 58% of total project costs), which was to take care of maximum daily water demand from 1973 onwards.

34. Project implementation was slow; the project was completed four years behind schedule, in 1977. Institutional problems, derived in large measure from the unique political situation that prevailed in Colombia in 19 7 0Q and operating deficits adversely affected project implementation. An increased politization of the Board, a high turnover of general managers and inaction to raise rates to compensate for rapidly increasing costs caused EMCALI's finances to deteriorate.

35. EMCALI's financial situation was affected by two other factors. In the first place, project costs (excluding the two components mentioned in para. 36 below) rose from the original estimate of US$29.8 million to US$49 million equivalent. Higher domestic and international prices accounted for most of the increase. EMCALI had to resort to medium-term borrowing at high interest rates to finance the overrun. Secondly, water demand fell short of projections. Foreign and local consultants, retained by EMCALI to prepare the 1970-73 investment program, had projected that daily per capita water consumption would rise from 230 liters in 1969 to 300 liters in 1976. Water consumption, however, was only 224 liters per day in J976. Total water sales were estimated to increase from 76 to 135 million m /year bstween 1971 and 1976, but actual sales in 1976 amounted only to 82.1 million m /year. The shortfall is due both to the slower rate of population growth (Cali s population had been expected to reach 1.3 million in 1975 but reached slightly less than 1 million) and to increased connections to low income recipients, who normally have lower water consumption. The rate of return of EMCALI's Water and Sewerage Division deteriorated sharply and became 0.1% negative in 1974. As a result of substantial increases in rates, in 1976 the rate of return has improved but is still below the level agreed upon in the loan agreement (2.9% against 6% required for 1976). It does not appear reasonable, in the light of the lower volume of water sales under forecast, to expect EMCALI to comply with the current agreement. Therefore, new and more realistic financial targets have been established in connection with the proposed loan (para. 55).

36. In view of the foregoing, the Bank agreed in 1974 that the Bank loan proceeds not be used for two components of the project, the Aguablanca sanitary interceptor (total cost US$2 million equivalent) and the Napoles stormwater drainage canal (total cost US$1 million equivalent). As a con- dition, EMCALI agreed to start construction of the two components of 1976, with its own resources, but the tight financial situation precluded it from - 11 - doing so. In many ways this can be consideredfortunate. Changes in urbani- zation patterns and sharply increased seweragewastes now make the Aguablanca interceptorinadequate. Likewise, if built, the Napoles canal would have put additionalstress on an already congestedstormwater drainage system. Under the proposed project, therefore, a larger and more efficient interceptor and a redesigneddrainage canal, which are consideredto be the least costly solutions,would be built.

37. Notwithstandingthis, the first project was successfulin many respects. First, it contributedto increase the percentageof Cali's popula- tion that is served by water (from 77% in 1970 to 96% at present). Second, it assisted in providingwater supply to Cali's marginal neighborhoods. Four poor neighborhoods,in which about 32,000 low-incomefamilies are living, receivedwater supply facilities.1/ Third, it assisted EMCALI to strengthen its operations. EMCALI simplified its tariff structureand improved water meter repair and maintenance,record keeping, billing and collections. While EMCALI's financialperformance has been poor, it has begun to improve. The increasedutilization of the Puerto Mallarino treatmentplant and the financ- ial measures (paras.51, 52 and 53), which are proposed under the second project, should help strengthenEMCALI's finances.

PART IV: THE PROJECT

Background and Objectives

38. The project was prepared by EMCALI with the assistanceof Colombian consultants. It comprises most of EMCALI's 1978-81 investmentprogram. The project was appraised by a Bank mission which visited Cali in October 1976. Supplementarywork was performedby missions which visited Cali in February,April and Septemberof 1977. Negotiationswere held in Washington, D.C. on the week of December 12, 1977, with a Colombiandelegation led by Mr. Gabriel Turbay, Director of Public Credit, Ministry of Finance.

39. The objectivesof the project are: (i) to increase utilizationof EMCALI's installedwater production capacity by extendingthe distribution network in Cali and supplyingwater to the adjacent Municipalityof Yumbo; (ii) to improve sanitary conditions in Cali by moving the discharge of raw sewage downstream from the city's main intake of water, and by separating domestic sewage from stormwaterrun-off; (iii) to improve living standards in certain low-income areas by providing facilities to reduce flooding, and by extendingwater supply and sewerage networks; (iv) to increase the area availablefor orderly urban growth; and (v) to strengthenEMCALI's financial and management operations.

40. Given the lower water demand (para. 35), with the commissioningof the Puerto Mallarino Water Treatment Plant in early 1978, a great part of

1/ The poor neighborhoodsare: El Rodeo, Union de Vivienda Popular, Siloe and Terron Colorado. - 12 -

EMCALI's installedwater production capacity would remain unused through the mid-eighties. By extending the distributionnetwork to unserviced low-income areas, and by supplyingwater to the adjacentMunicipality of Yumbo, where most of the new industry is located, the excess capacity would be reduced.

41. Although about 93% of Cali's area and 80% of its population is connected to the sewerage system, the quality of the service is poor, and constitutesa health hazard, for several reasons. Firstly, about 75% of the city is serviced by a combined system of sanitary sewerage and stormwater drainage. Concentrationof recent populationgrowth in the southern zone, where 40% of Cali's populationlive, has rendered inadequatethe existing system, so that often sewage backs up and out into the surface stormwater drainage canals. Secondly,about 200,000 inhabitantsliving in the south- eastern zone dischargesewage directly into a stormwaterdrainage canal which traversesa densely populatedarea. Thirdly, another 200,000 inhabitants living in the southern and southwesternzones dischargesewage into a storm- water drainage canal which flows into the Cauca River upstream from the intake for two water treatmentplants that supply about 85% of Cali's potablewater. The contaminationlevel of the Cauca River has reached about 500 times normal health standards. The proposed Cauca Interceptorsubproject, Sanitary sub- project, and Stormwatersubproject will remedy these situations. The Stormwater subprojectaims at stabilizing535 hectares already urbanized,as well as 1,500 hectares that will enable orderly growth of the city.

SummaryDescription of the Project

42. The project consists of the following:

I. Water Supply Subproject

(i) Constructionof a pumping stationand a 7,500 m3 water storage tank; and

(ii) constructionof distributionnetwork in the low income neighborhoodsand installationof house connections,including 20,000 water meters.

II. Yumbo Subproiect

(i) Constructionof a 12-km water transmissionpipeline to transportwater from Cali to the Municipalityof Yumbo, and constructionof service pipes for connecting indus- trial consumersalong the route; and

(ii) rehabilitationof the existingwater distributionsystem, establishmentof a leak detectionand repair program, pitotmetricinvestigations, and installationof house water meters. - 13 -

III. ReforestationSubprolect

Purchase and planting of about one million trees in the Cali, Canaveralejoand Pance River basins to increase water reten- tion in the surroundingarea.

IV. Cauca InterceptorSubproject

(i) Constructionof two sewage collectorsand a main sewage interceptorand a lateral collectorto receive sewage and convey it by gravity into a sewage pumping station;

(ii) constructionof pumping facilitiesand a pressure line to convey sewage from the pumping station to a point 300 m downstreamfrom the intake of two existing water treatment plants; and

(iii) rehabilitationof two regulatorystormwater drainage lagoons, and constructionof stormwater-sewagestructures.

V. StormwaterSubprolect

(i) Excavation and constructionof 2.5 km of concrete lined stormwaterdrainage canal;

tii) rehabilitationof 8.0 km of stormwaterdrainage canal and separationof storDwaterdrainage between gravity dischargeand pumping discharge;and

(iii) constructionof 22 km of stormwaterdrainage network in various low income neighborhoods.

VI. Sanitary Sewers Subproject

(i) Rehabilitationof old sewers; and

(ii) constructionof sewerage laterals and trunk lines in various low income neighborhoods.

VII. Preparationof appropriatestudies and preliminarydesigns for sewage treatmentfacilities I

VIII. Purchase of equipmentfor maintainingthe water, sewerage and stormwater drainage systems

IX. Engineeringservices for the detailed design and construction supervisionof the project - 14 -

Costs and Financing

43. The total cost of the project is estimated at US$25.7 million equivalent, of which US$11.4 million equivalent correspond to the foreign exchange component. There will also be required US$8 million equivalent for interest during construction. During the period of project execution (1978 through 1981), EMCALI plans to carry out other investments at a cost of US$2.1 million equivalent, and will require an increase in working capital of US$7.1 million equivalent.

44. The proposed loan of US$13.8 million equivalent would finance 54% of total project cost, i.e. all the foreign exchange costs of the project, and interest and other charges on the Bank loan during construction (41% of EMCALI's requirements during the period of project execution). Financing of interest during construction is justified in view of EMCALI's cash flow position. The remaining cost would be financed from ENCALI's internal cash generation (US$17 million equivalent) and from domestic credits (US$11.4 million equivalent) (see para 54). Retroactive financing of up to US$200,000 the preparation of final designs for the project (Schedule 1, para. 4(i) of draft Loan Agreement).

The Borrower: EMCALI

45. EMCALI is a decentralized municipal agency in charge of construc- tion, administration and maintenance of the water supply, sewerage, power and telephone facilities in Cali. EMCALI will continue to provide power and telephone services, and has recently agreed to provide also water supply services, to the adjacent Municipality of Yumbo. Tentative plans call for EMCALI taking over the operation and maintenance of Yumbo's water system. Investments in the Yumbo Subproject (para. 42) will only be made after EMCALI and the Municipality of Yumbo reach an agreement satisfactory to the Bank on the terms and conditions of such takeover (Section 5.07(b) of draft Loan Agreement).

46. Since 1972, ENCALI is governed by a seven-member Board of Directors appointed for a two-year term by the City Council. The Mayor of Cali is the ex-officio Chairman of the Board, and is appointed by the Governor of the State of the Valle del Cauca, who is appointed by the President of Colombia. The General Manager is appointed by the Mayor subject to ratification by the Board of Directors. Although in recent years there have been frequent changes of General Manager, the next level of management has undergone little change and is competent. EMCALI is adequately staffed. At present, it has 2,506 staff members, of which 988 work in the water and sewerage division, 308 work in the energy division and 609 work in the telephone division.

47. Effective March 1, 1977, EMCALI's organizational structure was decen- tralized into three self-contained operating units for water and sewerage, energy, and telephones, which function independently and report directly to the General Manager. Previously, each division was responsible for physical production and distribution only. - 15 -

48. As stated, EMCALI's management has improved considerably under the first Bank-supported project. However, further improvement is needed regarding coordination and financial planning. EMCALI has therefore agreed to prepare by June 30, 1978, a program to improve EMCALI's management information, budget- ary and internal control systems and to strengthen the coordination of its administration and operation units, and promptly thereafter to carry out such program, with the assistance of consultants to the extent that such assistance is required in the opinion of the Bank (Part C.2 of Schedule 2 and Section 3.02 of the draft Loan Agreement).

49. EMCALI has also agreed to employ engineering consultants, to the extent required in the opinion of the Bank, to prepare detailed designs for the project and to assist in the supervision of construction. The consultants will also carry out studies of future sewerage treatment requirements (Section 3.02 of draft Loan Agreement). The average man-month cost of these consultants is estimated at US$5,000 equivalent.

Finances

50. As stated, EMCALI's financial performance deteriorated from 1972 through 1974. Consolidated income, which in 1973 was of Col$70 million, decreased to Col$59 million in 1974. Substantial tariff increases were ob- tained in 1975 and 1976, raising EMCALI's net income to Col$78 million and Col$92 million, respectively. Such increases were insufficient, however, for EMCALI to service its debt, finance its investments, and meet its working capital needs. EMCALI, therefore, had to resort to heavy medium-term borrowing at high rates of interest. By the end of 1976, EMCALI had accumulated US$15 million equivalent of such loans.

51. Automatic monthly increases in the water and power rates became effective on January 1, 1976. Water rates have been increased by 1.5% per month on consumption over a certain quantity. (Of total consumption within each of the 13 progressive rate categories, about 60% is subject to the excess consumption surcharge.) Power rates have been increased by 2.2% per month. Effective May 1, 1976, telephone rates for local calls were increased from Col$0.10 per impulse to Col$0.16; effective October 1, 1977, they were increased to Col$0.25 per impulse and to Col$0.30 per impulse on January 1, 1978. Assurances have been obtained that rates for water and sewerage, and power services will continue to be increased monthly, auto- matically, at current rates until December 31, 1981 for water and until June 30, 1979 for power (Sections 5.04(a) and 5.05 (a)(ii) of draft Loan Agreement, and Section 3.02 of draft Guarantee Agreement).

52. About Col$340 million (about US$6.7 million equivalent) of addi- tional revenues for water supply and sewerage operations will be obtained from a program of reassessment of property values, started in early 1977, which moves the affected properties into higher rate categories. The new assessment, for which no further decision is required, will be gradually implemented over three years. EMCALI agreed fully to implement its reassessment program by June 30, 1979 (Section 5.04(b) of draft Loan Agreement). The automatic monthly increases in water rates plus the reassessment of property values will cause average water and sewerage rates to increase by 22% in 1977, 28% in 1978, 15% in 1979, 10% in 1980 and 13% in 1981. - 16 -

53. In Colombia, as in some other countries, certain investment costs are recovered through a betterment levy (impuesto de valorizacion) imposed on the owners of property which benefit from public infrastructure works. Such levies have been particularly successful in Colombia, especially regarding urban road and sewerage systems construction. Assurances were therefore obtained that EMCALI will charge and collect during the 1978-1984 period not less than a proportion agreed with the Bank of the cost of certain sewerage works included in the project (about US$15.5 million equivalent) (Section 5.09 of draft Loan Agreement). Disbursements of the proposed Bank loan on account of expenditures for each subproject in respect of which valorizacion must be collected, will be made only after the Bank receives satisfactory evidence that all necessary authorizations and approvals required to charge and collect valorizacion in respect of such works have been obtained (Para- graph 4 (ii) of Schedule I to draft Loan Agreement). Storm water drainage facilities and certain other works (but in the latter case only to the extent that their cost has been recovered through valorizacion) will be excluded from the base on which the rate of return is calculated.

54. EMCALI will also receive a loan of Col$300 million (US$5.7 million equivalent) from the Government, and a loan of Col$300 million to be partly financed by the mortgage bank (Banco Central Hipotecario). The proposed Bank loan will only become effective after arrangements satisfactory to the Bank are made to provide EMCALI with these loans on terms and conditions, including the schedule of disbursement, satisfactory to the Bank (Sections 3.01(b) and 8.01(a) of draft Loan Agreement and Section 2.02(i) and (ii) of draft Guarantee Agreement).

55. EMCALI would continue to obtain an acceptable rate of return for water and sewerage, though lower than agreed under Loan 682-CO. The latter provided for targets requiring tariffs higher than the marginal cost of water. In addition, assets in operation of the water and sewerage division will almost double in the near future. EMCALI therefore agreed to obtain annually, starting in 1978, operating revenues sufficient to achieve a financial rate of return of not less than 3% in the water and sewerage division, increasing to 4% in 1982, 4.5% in 1983, and 5% thereafter; 8% in the power division; and 5.5% increasing to 8% in 1979 and thereafter in the telephone division, such returns to be computed on the revalued cost less accumulated depreciation of fixed assets in service of each division (Section 5.05 of draft Loan Agree- ment). An additional condition of effectiveness will be that all decisions on rates necessary to enable EMCALI to achieve the agreed 1978 return on its telephone divisions shall have been taken (Section 8.01(b) of draft Loan Agreement.) For purposes of calculating the rate of return, fixed assets will continue to be revalued in accordance with methods satisfactory to the Bank (para. 5 of Schedule 5 to draft Loan Agreement). The proposed annual rates of return would place EMCALI in a satisfactory financial position, i.e. would generate sufficient funds to cover its debt service and its working capital requirements, and to contribute to finance its investment program.

56. EMCALI has also agreed: (a) not to undertake any investment not included in the financing plan on the basis of which this proposed loan is presented, through any of its divisions, without the concurrence of the Bank, until the project is completed, if the aggregate cost of all the investments - 17 - in the same division exceed the equivalent of US$1 million in any year (Section 5.07(a) of draft Loan Agreement); (b) not to incur any long-term debt without the Bank's concurrence,unless the projected net income before interest and depreciationin respect of the division for the benefit of which the debt is to be incurred (excludingincome derived from valorizacion) is at least 1.3 times its maximum debt service in respect of such division (Section 5.06 of draft Loan Agreement);and (c) to continue to have its financialstatements and accounts audited by independentauditors acceptable to the Bank (Section 5.02 of draft Loan Agreement).

57. Until mid-1977, EMCALI used in an unrestrictedmanner funds gener- ated in one division to finance expendituresof other divisions. Transfers were made to the water and sewerage division even hampering the financial position of the power and telephone divisions. EMCALI has agreed that in the future such inter-divisiontransfers will be made only in cases where the division originatingthe funds does not require them for its operations,debt service, and investments. Furthermore,after June 30, 1977, the transfers will be treated as loans from one division to the other, on commercial terms (Section 5.08 of draft Loan Agreement).

Procurementand Disbursement

58. All contractswill be let under internationalcompetitive bidding in accordancewith Bank guidelines,except for civil works contracts under US$300,000 equivalent,up to an aggregate of US$2 million equivalent,which will be let under local competitivebidding procedures satisfactoryto the Bank. Suppliersof goods manufactured in Colombia would receive a margin of preference of 15% or the import duties, whichever is lower.

59. The loan would be disbursed over a four-year period. Disbursements would be made against (i) 100% of the foreign expendituresfor imported goods; (ii) 25% of the ex-factory cost of Colombian goods which represents the esti- mated foreign exchange cost of such goods; (iii) 25% of civil works, which represents their estimatedforeign exchange cost; (iv) 100% of foreign expendi- tures or 40% of total expendituresfor consulting services; and (v) interest and other charges on the Bank loan during project construction. The loan is expected to be fully disbursed by June 30, 1982.

Benefits and Risks

60. The proposed project aims at improving the living conditions of the residents of Cali and Yumbo. About 250,000 people would benefit directly from the project, of which 70% are among the lower forty percent of income recipients. The sewerage subprojects (Cauca Interceptor, Stormwater and Sanitary Subprojects) have benefits that can not be measured exclusively against the expected incrementaloperating revenues; the land affected by the subprojectswould appreciate in value, and EMCALI proposes to tax part of this increase (see para. 53). For the purpose of computing the increased land values and the revenues thereon, two assumptionswere made: (a) the value of land presently subject to frequent floodingwould be equal to the value of nearby land free of flooding and (b) the value of unimproved land - 18 - in the southern zone would be equal to the value of improved land in the same area, but the increase would be reflected over a 10-year period to take account of market fluctuations. On this basis, the aggregate internal rate of return for the sewerage subprojects, which account for 59% of total project cost, is estimated to be 21%. The estimated internal economic rate of return of the Water Supply Subproject, whose revenues would come directly from water sales and which accounts for 14% of total project costs, is 36%. The Yumbo Subproject, whose revenues would come from water sales and valorizacion and which accounts for 18% of total project costs, has a rate of return of 13%. The weighted average internal rate of return of these subproj- ects, which account for 91% of total project costs, is estimated to be 22%. Internal rates of return were not computed for the remaining components of the project because of the predominance of non-quantifiable factors.

61. The project is technically feasible and offers limited risk. The water supply component is based on the increased utilization of production facilities constructed under the prior project. The sanitation components do not present any major engineering difficulty, as they take into account the experience gained under the prior project. The only risk is that the project may not be implemented in the time proposed if EMCALI, because of inaction to raise rates, would be unable to mobilize the required local currency resources. Given the assurances obtained from EMCALI that rate increases and betterment levies will be implemented in a timely fashion (paras. 51 and 53), and, more importantly, the general acceptance by all political sectors of the need to strengthen EMCALI's finances, it is expected that the project will be carried out in the intended period.

PART V: LEGAL INSTRUMENTS AND AUTHORITY

62. The draft Loan Agreement between the Bank and EKCALI, the draft Guarantee 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 Bank's Articles of Agreement are being distributed to the Executive Directors separately.

63. Special conditions of the loan are listed in Section III of Annex III. Additional conditions of effectiveness would be the finalization of arrangements for the Col$600 million loan to EMCALI (para. 54) and all action necessary to enable EMCALI to obtain in 1978 the agreed rate of return on its telephone division (para. 55). Disbursements for each subproject in respect of which valorizacion would be collected would be made only after all autho- rizations required to charge it have been obtained.

64. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. - 19 -

PART VI: RECOMMENDATION

65. I recommend that the Executive Directors approve the proposed loan.

Robert S. McNamara President

Attachments February 8, 1978

ANNEX I TABLE 3A Page I of 4 pages COLOMBIA - SOCIAL INDICATORS DATA SHEET LANU AREA (THOU KM2) ------COLOMBIA REFERENCE COUNTRIES (1970) TOTAL 1138.9 MOST RECENT AGRIC. 223.9 1960 1970 ESTIMATE TURKEY BRAZIL MEXICO**

GNP PER CAPITA (USS) 210.0* 350.0* 640.0*/a 500.0* 550.0* 690.0*

POPULATION AND VITAL STATISTICS ____-______POPULATION (MID-YR, MILLION) 15.4 20.6 24.2/a 35.6 92.8 50.4

POPULATION DENSITY PER SQUARE KM. 14.0 18.0 21.0 46.0 11.0 26.0 PER SO. KM. AGRICULTURAL LAND 71.0 93.0 108.0/a 65.0 49.0 52.0

VITAL STATISTICS CRUDE BIRTH RATE (/THOU, AV) 46.1** 44.3** 40.6** 40.6 38.4 43.8 CRUDE DEATH RATE (/THOU.AV) 14.7 11.0 8.8 14.4 9.9 10.2 INFANT MoRTALITY RATE (/THOU) 100.0JA 70.0/a 153.60/a 110.0 68.5 LIFE EXPECTANCY AT BIRTH (YRS) 54.7 58.5 60.9 54.4 59.4 62.4 GROSS REPRODUCTION RATE 3.2 3.2 3.1 2.6/b,c 2.6 3.1

POPULiTION GROWTH RATE 3.2 2.9 2.8(X TOTAL 32 29 .82.5 2.9 3.4 OURAN 6.0/b 5.s/b 4.6 4.9/d 5.0 4.8

URBAN POPULATION (% OF TOTAL) 53.0/c 60.0 70.0 fb 38.7 56.0 58.7

AGE STRUCTURE (PERCENT) 0 TO 14 YEARS 46.6LC 46.6 44.1 41.7 42.0 46.2 15 TO 64 YEARS 50-4 C 50.4 52.7 54.0 55.0 50.1 65 YEARS AND OVER ,3.37 3.0 3.2 4.3 3.0 3.7

AGE DEPENDENCY RATIO 1.0/c 1.0 0.9 0.9 0.8 1.0 ECONOMIC DEPENDENCY RATIO 1. c 1.6/c 1.6/c 1.1/e 1.5 2.0

FAMILY PLANNING ACCEPTORS (CUMULATIVE, THOU) 0.5 306.9 955.1 *. 250.0 55.5 USERS (X OF MARRIED WOMEN) .. .. 31.0 8.2 1.6

EMPLOYMENT

TOTAL LABOR FORCE (THOUSAND) 5100. c 6300.0 6B00.0 .0/f 29400.0 13000.0 1 4 5 67.00 0 40.4 45.0 LABOR FORCE IN AGRICULTURE (%) 4 7 .0 - 39.0 ,, UNEMPLOYED(% OF LABOR FORCE) 8°0/d,e 7.0 10.2/d 4.0 7.5

INCOME DISTRIBUTION

% OF P::lVA7Z INCOME RECD Y- -/ HIGHEST 5% OF HOUSEHOLDS 41.iy?Lf 31.9 M *- 32.8/h 35.0/a 2if. 6 HIGHEST 20% OF HOUSEHOLDS 67.7/c.f 60.1/d * - 60.6/h 2.0/a 58.3 LOWEST 420%F O OUSEHOLDS 2.cf 3.5/d *- 2.9/h 3.0oa 3.4 1 0 1 6-/c.f . 9.4./h lO.O1a 10.5

DISTRIBUTION OF LAUGDNERSMIP

X OWNED BY TOP 10% OF OWNERS .. .. 80o/o e 53.0 45.0 37.1 % OWNED BY SMALLEST 10% OWNERS .. .. o.2/e 0.9 1.5 0.3

HEALTH AND NUTRITION

POPULATION PER PHYSICIAN 2400.0 2110.0 2100.0/f 2250.0 1910.0 1480.0 POPULATION PER NURSING PERSON 3520.0 j .. 1450.0 7 1770.0/i 3220.0/b 1620.0/a POPULATION PER HOSPITAL BED 580.0 430.0 470.0F 500s. 260.0 960.0

PER CAPiTA SUPPLY OF - CALORIES (X OF REQUIREMENTS) 94.0 97.0 97.0g 110.0 109.0 114.0/b 64.0 65.0 PROTEIN (GRAMS PER DAY) 50.0 51.0 51 .07 278.02 0 -OF WHICF ANIMAL AND PULSE 28-0/h 29.0/e .. * L1 3 9.0 28.0/c DEATH RATE (/THOU) AGES 1-4 16.3 8.4 .. 14.7/k .. 9.8

EDUCATION

ADUUSTED ENROLLMENT RATIO PRIMARY SCHOOL 77.0 100.0 106.0 109.0 87.0 104.0 SECONDARY SCHOOL 12.0 23.0 36.0 28.0 ., 22.0 YEARS OF SCHOOLING PROVIDED (FIRST AND SECOND LEVEL) 11.0 11.0 11.0 11.0 11.0 12.0 VOCATIONAL ENROLLMENT (% OF SECONDARY) 31 2 14.0 17.0 24.0 ADULT LITERACY RATE (%) ./ 73.0 74.0-f 55.0/1 64.0 76.0

HOUSING

PERSoNS PER ROOM (URSAN) .. .- .- 1.9 1.0 2.2 OCCUJPIED DWELLINGS WITHOUT PIPED WATER (X) 59.0L *- *- 64.0 73.0/C 1.0/d ACCESS ELECTRICITY TO 59.0 (X OF ALL DWELLINGS) 47.0/c .- .. 41.0 48.0 RURAL DWELLINGS CONNECTED 28.0 TO ELECTRICITY X) 8.0 j .. 18.0 8.0

CONSUMPTION

RADIO RECEIVERS (PER THOU POP) 139.0 105.0 117.0 89.0 60.0 276.0 PASSENGER CARS (PER THOU POP) 7.0 11.0 13.0 4.0 25.0 24.0 ELECTRICITY (KWH/YR PER CAP) 244.0/e 414.0 599.0 247.0 491.0 567.0 NEWSPRINT (KG/YR PER CAP) 2.4 2.7 2.1 0.7 2.7 3.2 …------_____----__------SEE NOTES AND DEFINITIONS ON REVERSE dOSNEDI Page 2 of . pages NOTES Ulsotherwise noted, data for 1960 refer to any year betwee 1959 and 1961, for 1970 betoo- 1968 and 1970, -rd for Mon,, Re.eo- Estimate betwee 1973 and 1975.

GNP per capita data are based o the World Bank Asian methodology (1976-76 basin). enOffioial n-tinone based on neitrt s,so erode birth rtet for 1960 As 39.0, averge oode birth rtet Ier 1961-70 a 36.0 and far 1971-74 as 31.0.

nnn ieso bas been selected As An ebjenti-e ne..ntrybe-us Colembia in sew in the stage ef ecn development that Plenbi wa In ten year ago. Beth o-utrina aim At a GD? growth rtet of about 7 percet aed At a aubta-tial redootio- of ...enplnynt.

COLOMBIA 1960 Ln Regiatered only; lb 1951-64; Ic 1964; /d Begota only; Ie 1963; IfE....n.nically aetive pnpnlatiio; li, 1965; /b 1961-63; /0 Petal -oedory inclde- teac.hertraining at tbe third leve; /I Water piped inside.

1970 /A Rate base.don banal1 permits; lb 1964-70; /c Ratio of popelatin sod-r 15 and 65 and snot in ntal labor force; Id Ecan..nleellyactive population; Ie 1964-66.

POJSTRECENT ESTIMATE: fs 1976; /b 1977; It Ratio of popiatin nader 15 and 65 end ove no total labor force Id Harri 1977, -vrgeeseply ..t rate In seven largest nines; /e 1971; /f 1972; i& 1970-74 avenge; /6h 1969-71 veruge.

TURKEY 1970 Ia 1967; /b REclade 170.retets provisena; /c 1965-67; /d 1965-70; /n Ratio of po,psiettn under 13 and 65 and ove to labor 15 yeme and ever; If 15 yeas and evr, -nludes -nplnyed; I_g Regist-rd esly; lb Dispo..eblnincom; 1i Ineluding assistant nurse and midwive; /1 1964-66; /k 1967-6f; /1 Persona sin years and ove who tell the cessn..takers that they -ne rad and write.

BRAZIL 19710 I Esa....icallyaetive popalation; /b Wsplia1 persnnl; Is Inside only.

MEXIOc 1970 /aIn-Iding ...siatast nuse; /b 1969-71 averge; _Ic 1964-66; Id Inside only.

R12, January 31, 1978

DEPINMOITOSOF SOCIAL INDICATOBS 2 Land Area then as ) PPalatiam Pr -rsina Persee - Pepulatian divided by snber of prrsicie Total Totl -sfaee aree mprising land area and inland waer. al ad fms1l gradsate ene "trained or certified' nurses, and mginis -Mo tneont nanimats af agricultural se sand tmsperarily -r pnm-_ aafliary ptrsean1 with training or neperle-. netly for craps, pastures, markt & kitehen gardn- or no lie fallsc. P.p.latian pa hasnita1 bed - Pepulatian dieided by mb-r of hespita1 beds Aesfiable in peblie and priosne gsnsral1 AM, spetalised haspLtal end GNP net -apisa (US$) - GNP Per -apita eatbte at currant macket pricas, teshbilitaien ea1eulated eneter; emeIdes sensing h-A.s and estblilaseta fer by .e ...cnetiar sthad as Warld as-k -as (1973-75 baals) ; cualadial sed prevatnlv ear. 1960; 1970 and 1975 data. Psr..Pit.a Keenly of nlrs % attfCtme l -Copeted fram enegy qai-alset ef met fead sapplias Pealation and nita1 atnsie.vilable avilable in sanr. e aiepr dy sepplies .- tapine d-seais prod-ction,imparts1 lass tem.porse, PPan1laian fold-veer tnilln A f Joly if an;d first: sa available, averge changes in stek; net supplies netleda asi.los fesd, seeds, qsatitise ftwen-year snntse; '6i, sand 1970 and 1975 data,i edpaesn n lsr ndatbte;tqernat ar siae by PAD Base.d en physielagisal meed far nAra asnitity and health e- id- PPoelaIot daen rtssre ksa - Hid-yea popalation pee squre kilat-t (100area.PePelatie, bestates) sting envirs tmsa tnsp-tst.e bedy nights, age and s.. diattibtions at of tonal and aleing10%far wase t bsaheld 1a-e. Ppeelation denaicy - ear a-t be of Agric. lend - Camputd As abov-o.e -e aia ed Weuen erdvi-P.etein agi ItrLlad only. content ef per -apita netteapply at fond pat day; ass sepply of food is defimed as shav; rquitt- Vital statistics mAstsfWe all nentrtes established by UDAD Eononie Rsearsb Serrisea peavide far a iim alwac at hi grm f rteS1 protein Ps day, and Grade birth -ate eat th-Asa. avegan - dance fine bitha Pat theoaad of 2i gta o aimel and palan protei, of whisk IDrm ho1d be mid-year papelaties; ten-year a-itintis animal averages ending in 1960 sad 1970, protein; tbesetendeeds are lowr than those of 75 gra of adfi_e _a.avrtgo endin is !:19175 get _et total preteis reset esti_sat ed 03 gram ef animal prtni As an averge for the asr1d, prepesd by PAl n de.deah rate per thudsand, area - omsl deeths Par thasand ef aid-yea in the Third Wenld Peed Deny. population; sen-year anitnetie vtae ending in 1960 end 1970 and five- Peaine n"tie sanely fton animal and noise - Protein sepply of food ye avraga ending is 1975 foraa5 ee tnethte Infantmentaltytat derived tram aniala end psLas ia grams pet day flnhal - anue dAth= of1 ifti nader at yeas ft age Death tate 0/ha) .. 1-4 - nAnnea deah Per thaedi petr naad live births. g re - yets to shildran in this g gru;egeas ne indictor of Life asnectansyas birth fytel - average n,abar ofyasofY lf.rmiin n_antriti_n. birth; osasily fiv-y-a -nrges ending in 1960, 170 and 1975 tot develp- lag nosattias. Edosation erserentdei rntate -n rge easber of live da-ghtereAwoA. . n ill heat adinete.d enrollmen rthia. - nea eshal - Enrollmnt at all ages as in her noma repredutiv- if pa- period eke enpeti-ne present age-epefiti nasg tpiey e laeppltion; isciedee hildre fertility rto te; us slly fivs-yea- ge -i er vatgas ending is 1960, 1970 and 1975 bet edjeatd for different lnngtha of priany Adeca.tin; for developing fee eamtriA with s tren,nsie unvrAl .d.tion, enrellaet may emed100% populatin ifesa a pupils are below snownbrate (7, _-trena - Campeod a-sa growth rocee sf id-y-ao above the etf,isi1 shmeI ag.. populetias far 1950-60, 1960-70 and 197D-75. Adiatsd enralloset r-tia -eetondatv sehas - Ceepsted as abov; esondery Poenltion as-tb rate 1%) - aches - tampered like growth rate of total dec..ion aqires an least face years at approvd panslacion; differet dafinition pri-ay iarcin of er_aeare maY affect oparability of peevid. geerl vstioml or teacher tiriann inatsatias far papils data among censtte.- o.f 12 to 17 years of age; cerreapandene Uehem eaeulatien (% of tato1 - Batie wsg are generally etiwded. of ahon E total pepsiation; diffetrt Yerst. ehele eeided foirt t essed ssl-lo - PenAl yacee a definition of arhn areas -y fftant enparahility at data o-mg -ttansiea. sbaig tsnsir Ael veaiem1 iasarriam my ha partialy o

atstone pm tlen - Children (0-lb years), wokig-ge(1-hh4yeara) , seinlerLdadt o f ea adrtire (65 dayl -.Vnaiana inatituni,m i-elde yearsed oe)a prsetrgee at mid-yat pouaion.1 tanhaisea, idotria1 at other p-g-a whIch ass oPerate nsadat depaedo-y rat.so .rtio of papolotio under 15 and 65 end ave te tho.o deparlets of secondary isstirtrtna of egna 15 hthroh 64. dei litersty rtet 01 - Lit.retai adults (able Eionami depeadnec taia Ratio of eoread and write) As Pe-- - poplation ader 15 and 65 and nea to Atage of total adlt population aged 15 yearn an ove. the labor farce Is age goop of 15-64 years. Family.1.eaieo-a.e.....t.. (etmoa.dye then) - Conniativ soake of a...eptors Hassing of htt-seatol1 device under ... picas of national fily plameing program Persoa netro.am (,tbe) - Average nenhe of pnrson per roa in aeapied mince icPtion covniona Idwellings in othbar dwellings e-slde aen-pennett FamilY ela..aina-"ets 0 ofmtrihd wes-Protgeof martind eae of st_uctote aed onsePied parts. child-bearing age (15-44 et) h n birth-conto1 deviosm to all married ot.npind d-wellag withst rind water-% Ot-upied etnIs,sam af group. sonvensioe1 dwellings in urban and rurAl-ra witha- iomide --nride piped w-ter fcil itiJ.a

Total labor tome fthb...andl) cnnclyatv persona 1s ding armed elec%tricity in living quaters as paents. o,f tatal dwellinga In sehanhand fsrcnn an. npad tdae s..;thteroigbuenvs definiti_n na arna. In vaiaa nirie Are son coparable. Rural dwell1ina s-neted to e1letticity )- Campoted as above tot rara labor fensi arintueT - Agri-elto1 labor force(in farming, fotna-ry, dwlings only. hostingen faiag ) Amecnaeo tonal labor fates Innrd(0% of laborfre)- nlyd7 ate wesally defined as person she tonsaPtio ore7 abeadwligrHaeajo,eto o eagn day, remined ens Radi,reevf ettennn l yesa eevr o tadla brs- s at A Job, and seehing wth tar A specified mieon period sot asedigon o n Irpublicrper thensad of ptapultifa sldenvlss eevr saak; ma o b apaal etenconne due so different definitinsin tn-t1ie end in years when regiration of unmploydan aente atdata, e..,_playn of radio ete wa in effact; officstiere,ams dot fatisn yersmy nor be -ap-bahi sinc mas..t betie1aainhed _nvys, s_peleary s__playeat inea .licensing. PIasenoer earn Instshoe pee) - Passenger sate I-n diateibstien - P-t-otoge emprise amt- sees seating at pivate insn (bath is sash end kiod) les than eight para ; -mldes embeleona, h-erse end military received by richest 5%, rieheet 20D%,poorest 207%,and poorest b0T of beem- vehicle.. ba1de. Elne.trWit,Okb/blr Parsar - A--Ja ssa,ptin af indsartal, --etisl, .f d b I..d-. Ithi.t-. Ipubli and Pri-ate a1esteisity in kilowat lictbeia a lndoanshn-ntenaes beers per naplntgenegrally flad wnd y ebsinet 0' base.d on producion dens,itheet ell--n far lasses in grds bet alie- aed poarest 10% at lend onrs,p agEa imparts and.enp-ts of lee.trisiny Bewnerit fits/yrea )- Per sPira a--Ia e-Am-Ption Health aed Ntsition in kiiegr- estimated from d_metis Predastie le men- Bmpt t-a-. newsprintt. PaeIlaien earphvsieie - Papelatio divided bY-aber of Pt..tisieg phyisas qe1ified ftra A medical ashoal at oninesity level A8NEX I

ECONDMICDEVILOPMNT DATA

(In millioms of US dollars)

d Po1ddtt Arul_othRt __LIggP,rcet of CDP 1967- 69 1979 Actual _Estimt Averag L974 1975 1976 1977 1978 1982 (l967-69)-74 1971-77 1978-82 1974 1977 1982

IIAT1O01L ACCOUNTS 1976 Prices end Exchange Rates

Croos Do estic Product 9,795 14,262 14,893 15,i65 16,406 17,406 22.079 6.5 5.0 6.1 100.0 100.0 100.0 Gains fro Terms of Trade (+5 -751 -403 -456 - 608 264 102 - - - 2.8 3.7 0.5 Gross tooestic Incoe 13,859 04,4381 57565 17, 0 17,66014 2 2 73 97.2

Import (Incl. NFS) 1,491 2,306 2,152 2,318 2,939 3,365 . 4,496 7.5 16.9 7.5 16.2 17.9 20.4 Exports ' (mpot Cpacity) 1.419 2.066 _2.297 2,992 351 3,199 4.237 6.3 35 7,3 14. 2.13 .192 Re-oorca Gop 72 240 4 -574 t 166 259 - - - 1.7 3.4 1.2

ConatteprionDapeodivurat 7,445 10,877 11,663 11,812 12,955 13,806 17,223 6.3 5,4 5,7 76.3 79.0 79.0 I-veatwont ' (1od. Stocko) 2,101 3,223 2,630 3,179 3,497 4,056 5,217 7.4 15.3 6.5 22.6 21.3 23.6

Docstic S-vings 1.589 2,982 2,775 3,753 4,059 3,854 4,958 11.1 20.9 6.5 20.9 24.7 22.5 National Savings 1,865 2,834 2,544 3,531 3,969 3,742 4,776 7.2 24.9 6.3 19.9 24.2 21.6

MEROtGISE TEADE Annual Data t Corrent Prices Ao Percoct of Total

- Imnport s Capital Goods 290 525 510 575 724 895 1,455 10.4 19.1 12.9 34.7 30.5 27.5 Intertoediste Goods (Earl. Puels) 254 813 705 803 1,193 1,475 2,481 21.4 30.0 13.8 53.8 50.3 46.9 fuels and Related ateriuls 3 6 14 73 153 189 766 12.3 - 41.8 0.4 6.4 14.5 of tcich: Pctruleos (-5 (-5 (14) (73) (153) (189) (766) - - (41,8) C-) (6.4) (14.5) Comaumoption Goods 61 167 166 214 304 376 591 18.3 33.3 17.0 11.1 17.0 11.2 Total Merchsodie Iports (FOB) 6S 1,511 1,395 1,665 2,374 2,935 5,293 16.4 30.5 15.9 100.0 10. 100.0

foports Prixers Poodu-ts (Earl. FPols) 418 1,001 1,202 1,776 2,484 2,490 3,971 15.7 18.4 12.4 67.0 80.2 74.9 uf ohirt! Coffas 341 662 672 1,316 1,753 1,360 1,431 - -22,4 1.3 - 56.6 - Fuels and Related Materials 71 95 87 87 93 90 173 5.0 - 3.2 17 7 6.4 -3.0 3.3 of J.hici Petroloma (56) (4) (-5 (-5 (-) (-) (-) (-35.5 _ (0.3) (-) j ) Mamnufactured Goods 117 398 420 515 520 458 1,160 22.5 11.9 26.1 26.6 16.8 21.0 Total Merchandisa Eaporco (rOn) 606 1,49 1,717 2,378 3,097 2,948 5,304 16.2 -4.8 15.8 iOO .0 10 0

Sterchandise Trade Indices I.port Price Indas 21.2 72.4 74.5 100.0 136.6 129.8 160.0 I.port Prite Ioden 34.0 90.0 93.0 100.0 107.7 116.3 134.9 Ten-e of Trade Index 62.3 80.4 00.1 100.0 126.8 111.6 103,3 VALUE ADDEDBY SECTOR (Factor cost) Annu-l Data at 1976 - Frices and Exchangte Rat.s Average Ano-xi Growth Rate. As Percent of Total

Agriculture 2,951 3,939 4,181 4.244 4,328 4,458 5,017 4.9 1.7 3.0 29.7 28.4 24.7 6,299 8.6 5.0 6.9 30.3 29.5 31.0 Industry sod Mining 2,444 4,013 4,087 4,21021 1 4,505 4,823 service 4,439 5.303 5.641 6,0 6.425 6.864 8,997 3.5_ 6.7 7,0 40.0 42,1 44 3 Tota1 9.834 13,257 13,909 14,482 15,250 16,145 20,313 5.1 4.7 5.9 100.0 100.0 100.0 PUBLC FINANCE Annual Data at Current Prices As P-rcent of GDP

(Central Govaruneut) Current Receipts 413 1,194 1,402 1,589 2,018 2,220 3,308 19.4 20.0 10.5 9.5 10.0 9.3 Corrsnt Expenditures 262 640 702 821 919 999 1,637 16.0 14.4 13.1 5.1 4.5 4.6 Budgetary Savings 151 554 700 768 1,099 1.221 1,671 24.2 25.3 8.2 4.4 5.4 4.7 Other Pbhli Sector Savings 434 150 394 334 418 481 925 -16,2 3.0 17.8 1.2 2.1 2.6 fublic Sector Iousatteot 612 1,189 1,382 1,496 1,550 1,975 3,453 11.7 5.9 15.0 9.4 7.7 9,7

SELECTED INDICATORS 1965-70 1974-77 1979-82 DETAIL ON 1UBLICSECTOR A. % of Total INVESTMENTPROGRAM AND FINANCING Actual Planned (A-rerge for Pariod Shtv) 1975-76 1977-82 A.vcgs- ICOR (BEsed en Fixed Ivasmtent) 3.17 3.77 3,36 Inport Elasticity 1.16 1.83 1.25 social Sectora 33.5 38.2 Marginal Doneatir Savirga Rets 0.20 0.34 0.24 Agriculture 10.2 12.0 Marginal NRtional Savings RNte 0.14 0.35 0.23 Id-ustry and Mining 9-5 9.7 Pover 6.5 9.5 Transport aod C-ir.coiti... 20.2 14.0 1ABOR FORCE AND OFJT7UTPER WORKER Total Labor Force Other 20.1 15.8 Io Milion7s 7I of Total Gr-th Setr Totl Expendituren 100.0 1OO.D 1966 1973 1964 1973 1964-73

Agriculture 2.427 2.057 47.3 30.2 -1.9 F7TIANCING Industr- 0.958 1,212 18.7 17.8 2.7 Srvicre 1.749 3.542 34.0 52.0 8.2 PFblic Sector Savings 62.7 68.5 Total 5.134 6.812 100.0 100.0 3.2 Esternal Sources 15.1 24.6 Other 22.2 6.9 VPle Added pmr Worker (1976 Prices and Exchange R tes) Total Finascing 100.0 100.0 In US Dollarn 7 of Averae. Growth Rate 196h 1973 1964 1973 1964--73

Agriculture 903 1,517 66.4 88.4 5,9 Industry 1,837 2,552 135.2 148.6 3.7 service 1.70 1,546 127.3 90070 -1.2 Total1.1 1,717 100. 100,0 2.6 ANNEX

BALANCE OF PAYMENTS, EXTERNAL ASSISTANCE AND DEBT

(Amounts in millions of US dollars at current prices)

Actual Estimated Projac5e 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982

SUtlARY BALANCE OF PAYNEIiTS Exports (Incl. NFS) 972 1,205 1.544 1,861 2,137 2.892 3,711 3,720 4.301 4,903 5,687 6,563 IMwrto (Incl. NFS) La- 1.232 1.422 2.077 2.002 2,.31 3.165 3.913 4.551 5.262 6.056 6.964 Resource Balance (X-M) -313 -27 122 -216 135 574 546 -193 -250 -359 -36i9 -401

Factor Services -169 -191 -203 -173 -243 -293 -209 -256 -331 -386 -426 -468 Profits (-71) (-70) (-70) (-55) (-68) (-73) (-100) (-117) (-137) (-164) (-172) (-181) Other (-98) (-121) (-133) (-118) (-175) (-220) (-109) (-139) (-194) (-222) (-254) (-287) Current Tr fer. (Net) 28 28 26 39 28 71 112 125 138 152 167 184 Balance on Currn Accountst -190 -55 -350 -80 352 443 5-93 -628 -685

Private Direct Investment 40 17 23 35 35 49 32 39 57 65 74 83

Public M< Loans Diabursaments 222 354 412 380 383 250 277 U0 601 783 849 941 -Repayvents -92 -96 -132 -211 -134 -150 -179 .95 -2.5 -255 -295 -339 Net Disburaseents 130 258 280 169 249 100 96 285 386 528 554 602

Other M< Loans Disbursments 145 139 60 50 76 125 ------Repkayents 79 -84 -58 -58 -87 -168 --- -- Net Disbursments 66 55 2 -8 -11 ------

Capital Transactions n.e.i. 216 39 -78 63 -98 176 109

Change in Net Reserves 2 -179 -172 91 -95 -634 -686 (- - Increase)

GRANT AND LOAN CO!KTIES Actual Official Grants & Graet-like - - - - - DEBT AND DEBT SERVICE 1971 1972 1973 1974 1975 1976 Public Debt Public M< Loans Outatanding & Disbursed 1,385.6 1,650.0 1,936.0 2,117.4 2,351.2 2,449.2 IBRD 153 74 162 8 88 80 Interest on Public Debt 49.2 57.9 78.5 103.7 113.5 125.4 IDA - - - - Repay-ents on " 92.0 95.9 131.9 211.4 134.7 150.0 Other Multilateral 42 41 29 64 - 62 Total Public Debt Service 141.2 153.8 210.4 315.1 248.2 275.4 Governments 110 114 67 55 65 132 Other Debt Service (Net) 133.1 155.1 126.6 118.6 108.0 160.0 Suppliers 35 37 31 45 74 44 Total Debt Service (Net) 274.3 308.9 337.0 433.7 356.2 435.4 Private Banks 38 84 190 58 163 170 Bonds - - 45 - - - Burden on Export Earnings (7) Public Loans n.e.i. - 8 1 4 1 - Total Public M< Loans 378 358 525 234 391 488 Public Debt Service 14.5 12.7 13.6 16.9 11.6 9.5 Total Debt Service 28.2 25.6 21.8 23.3 16.7 15.1 Total Debt Service Plus Foreign Invest. Income 35.3 31.6 26.5 26.6 19.9 17.6 EXTERNAL PUBLIC DEBT Outstanding on 12/31/76 (Repayable in Foreign Currency) Disbursed only Percent Average Terms of Public Debt World Bank 671.6 27.4 IDA 22.3 0.9 Interest as % Prior Year W&D 3.9 4.2 4.8 5,3 5.4 5.3 Other Multilateral 158.4 6.5 Amortisation as % Prior Year Governments 935.6 38.2 DD&D 7.4 6.9 8.0 10.9 6.4 6.4 Suppliers 183.4 7.5 Private Banks 395.2 16.1 IBRD Debt Out. & Disbursed 390.8 453.4 504.5 561.7 633.5 671.6 Bonds 50.4 2.1 IBRD as 7. Public Debt O&D 28.2 27.5 26.1 26.5 26.9 27.4 Public Debts n.e.i. 32.3 1.3 IBRD as % " " Service 29.4 30.9 28.9 23.6 32.3 25.8

Total Public M< Loans 2,449.2 100.0 IDA Debt Out. & Disbursed 19.4 20.9 23.0 22.8 22.5 22.3 IDA as 7 Public Debt O&D 1.4 1.3 1.2 1.1 1.0 0.9 IDA as % * " Service 0.2 0.3 0.2 - 0.2 0.1 ANNEX II Page 1 of 7 THE STATUS OF BANK GROUP OPERATIONS IN COLOMBIA

A. STATEMENT OF BANK LOANS AND IDA CREDITS (As of November 30, 1977)

(US$ million) Loan Amount (less Cancellation) Number Year Borrower Purpose Bank IDA Undisbursed

Fully disbursed loans and credits 700.8 23.5 /1 --

575 1968 Interconexion Electrica, S.A. Power 18.0 .0 /4 680 1970 Colombia Roads 32.0 3.9 681 1970 Interconexion Electrica, S.A. Power 52.3 .2 738 1971 Empresas Municipales de Palmira Water Supply 2.0 .3 741 1971 Empresa de Acueducto y Alcantarillado de Bogota Water Supply 88.0 21.7 849 1972 Instituto Colombiano de la Reforma Agraria Irrigation 2.2 1.5 860 1972 Instituto de Fomento Municipal Water Supply 9.1 3.6 874 1973 Empresas Publicas de Medellin Power 56.0 18.0 903 1973 Banco de la Republica Industry 60.0 4.8 920 1973 Colombia Education 21.2 12.8 926 1973 Ferrocarriles Nacionales Railways 25.0 1.1 971 1974 Colombia Pre-Investment Studies 8.0 6.6 1071 1975 Banco de la Republica Industry 5.5 .5 1072 1975 Instituto Nacional de Fomento Municipal Water Supply 27.0 21.7 1073 1975 Empresa Nacional de Telecomunicaciones Communications 15.0 4.2 1118 1975 Colombia Rural Settlement 19.5 14.4 1163 1975 Colombia Agriculture 21.0 20.2 1223 1976 Banco de la Republica DFC 80.0 56.2 1352 1977 Colombia Rural Dev. 52.0 52.0 1357 1977 Banco de la Republica Agricultural Cr. 64.0 64.0 1450 1977 Empresa Nacional de Communications 60.0 60.0 Telecomunicaciones 1451 1977 Banco de la Republica Industry 15.0 15.0 /2 1471 1977 Colombia Highways 90.0 90.0 1487 1978 Colombia Nutrition 25.0 25.0 /3 TOTAL 1,548.6 23.5 Of which has been repaid 340.0 1.3 Total now outstanding 1,208.6 22.2 Amount sold 48.8 Of whicb has been repaid 19.3 29.5 TOTAL NOW HELD BY BANK AND IDA 179.1 22.2 TOTAL UNDISBURSED 497.7

/1 Includes exchange adjustment of US$4.0 million. /2 Not yet effective. /3 Signed on November 10, 1977. A US$1,304.19 remained undisbursed at November 30, 1977. ANNEX II Page 2 of 7

B. STATEMENT OF IFC INVESTMENTS (as of December 31, 1977)

Type of Amount in US$ million Year Obligor Business Loan Equity Total

1959 Laminas del Caribe, S.A. Fiber-board 0.50 - 0.50 1960-1965 Industrias Alimenticias Noel, S.A. Food products 1.98 0.08 2.06 1961 Envases Colombianos, S.A. Metal cans 0.70 - 0.70 1961-1968 Morfeo-Productos para el Hogar, S.A. Home furniture 0.08 0.09 0.17 1961 Electromanufacturas, S.A. Electrical equipment 0.50 - 0.50 1962 Corporacion Financiera Development Colombiana financing - 2.02 2.02 1962-1963 Corporacion Financiera Development - 2.04 2.04 Nacional financing 1963-1967 Compania Colombiana de Textiles 1.98 0.15 2.13 1968-1969 Tejidos, S.A. 1964-1970 Corporacion Financiera de Development Caldas financing - 0.81 0.81 1964-1968 Forjas de Colombia, S.A. Steel forging - 1.27 1.27 1966 Almacenes Generales de Warehousing 1.00 - 1.00 Deposito Santa Fe, S.A. 1966 Industria Ganadera Livestock 1.00 0.58 1.58 Colombiana, S.A. 1967-70-74 ENKA de Colombia, S.A. Textiles 5.00 2.61 7.61 1969 Compania de Desarrollo de Tourism - 0.01 0.01 Hoteles y Turismo, Ltda. (HOTURISMO) 1969-1973 Corporacion Financiera del Development - 0.45 0.45 Norte financing 1969 Corporacion Financiera del Development - 0.43 0.43 Valle financing 1970 Promotora de Hoteles de Tourism 0.23 0.11 0.34 Turismo Medellin, S.A. 1970-1977 Pro-Hoteles, S.A. Tourism 0.80 0.25 1.05 1973-1975 Corporacion Colombiana de Housing - 0.46 0.46 Ahorro y Vivienda 1974 Cementos Boyaca, S.A. Cement 1.50 - 1.50 1975 Cementos del Caribe, S.A. Cement 3.60 - 3.60 1976 Las Brisas Mining 6.00 - 6.00 1977 Promotora de la Interconexion de los Gasoductos de la Costa Atlantica S.A. Utilities 13.00 2.00 15.00 1977 Compania Colombiana de Clinker, Cement and S.A. Construction Material 2.43 - 2.43 Total Gross Commitments 40.30 13.36 53.66 Less cancellations, terminations, repayments and sales 19.89 5.63 25.52 Total commitments now held by IFC 20.41 7.73 28.14 Total undisbursed 21.33 0.74 22.07 ANNEX II Page 3 of 7

C. PROJECTS IN EXECUTION 1/

1. Ln No. 680 Highways VI; US$32 million, June 1970. Effective date: March 29, 1971 Closing date: original - November 30, 1974 current - November 30, 1978

The largest component of the project, the paving program, has experienced considerable cost increases and delays. As of this writing, seven sections in the program are still under construction and about 200 km still to be paved. Project completion is now expected for 1979. The other components of the project were completed with much less delay. The Ministry of Public Works has taken several steps to hasten project execution and strengthen the performance of contractors.

2. Ln No. 681 Chivor Hydroelectric Power; US$52.3 million, June 1970. Effective date: September 1, 1970 Closing date: Original - June 30, 1977 Current - June 30, 1978

The project was completed and commercially operational in mid-1977, two years behind schedule, with a cost overrun of about US$86 million (65%). The delay is mainly attributable to geological problems encountered during construction of the dam and tunnel. The cost overruns resulted from these geological problems, from higher than anticipated bids, and local and foreign inflation.

3. Ln No. 738 Palmira Water Supply and Sewerage; US$2 million, May 1971. Effective date: December 29, 1971 Closing Date: original - March 1, 1975 current - March 1, 1977

As of June 30, 1977, about 85% of the loan amount was disbursed. The Bank is now awaiting detailed proposals from the company as to the use of about US$300,000 still undisbursed.

4. Ln No. 740 Telecommunications II; US$15 million, May 1971. Effective date: August 16, 1971 Closing Date: June 30, 1977

Contracts for all Bank-financed goods have been signed; technical and financial consultants have been retained. As a result of initial delays in the procurement of project equipment, some of the project's works will be completed 18 months behind original schedule. The loan is almost fully disbursement.

1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution, and in particular to report any problems which are being encountered, and the action being taken to remedy them. They should be read in this sense, and with the under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution. ANNEX II Page 4 of 7

5. Ln No. 741 Water Supply (BogotaII); US$88 million, May 1971. Effectivedate: August 16, 1971 ClosingDate: June 30, 1978

Disbursementsup to November 30, 1977, amounted to 75% of this loan. Slow progress in the constructionof the vital Palacio - Rio Blanco Tunnel is the main reason for the project's delay; the original contractorwas replaced by another firm which is performing satisfactorily.

6. Ln No. 849 Irrigation (AtlanticoII); US$5 million, June 1972. Effectivedate: November 14, 1972 Closing Date: March 31, 1978

The project is the second phase of a scheme to develop about 17,000 ha of seasonallyinundated land for agriculturalproduction. At the request of the Government,US$2.8 million of the loan of US$5.0 million were cancelled in February 1977. Work is continuingon additional feeder roads, tertiary canal drains,waterfronts, land clearing,subsoiling and leveling. A second contractorhas defaultedand work on the main drainage canal has temporarily stopped, though a new contract is expected to be signed soon. Settlementof farmerswithin the project areas and the provision of technicalassistance and farm credit have been making inadequateprogress. The Governmentis carrying out a detailed review of the project in order to find a solution to these problems.

7. Ln No. 860 Medium-SizeCities Water Supply and Sewerage Project;US$9.1 million, October 1972. Effectivedate: March 7, 1973 Closing Date: original - September 30, 1976 current - September 30, 1978

As of November 30, 1977, about 60% of the loan amount was disbursed. Managementproblems affected the initiationof the project, but progress has since improved.

8. Ln No. 874 Guatape II HydroelectricPower Project; US$56 million, January 1973. Effectivedate: March 13, 1973 ClosingDate: December 31, 1979

The progress of the work is generally satisfactoryexcept for delays in the resettlementof El Penol and Guatape villages because of the villagers' reluctanceto move into the new cities. This problem is now re- solved and filling of the Santa Rita reservoirwill be started by mid-1978, three years behind schedule. The revised project cost is substantiallyabove appraisalesti*ate, mainly occasioned by higher cost of the works at El Penol and Guatape. The Borrower experiencedserious financialproblems but recentlyhas adopted substantialtariff increases. ANNEX II Page 5 of 7

9. Ln No. 903 Development Finance Companies V; US$60 million, May 1973. Effectivedate: November 9, 1973 Closing Date: June 30, 1978

The loan is almost fully committed. Disbursementsare expected to be completedwithin the next few months. tO. Ln No. 920 Education III; US$21.2 million, July 1973. Effectivedate: January 10, 1974 Closing Date: original - June 30, 1977 current - December 30, 1979

The executionof the project had been suspended in mid-1975 pending redefinitionof sector prioritiesby the Government. Recently,project execu- tion has resumed after the Bank agreed to reallocatepart of the loan to finance rural primary schools instead of rural secondaryschools as originallyproposed. As the number of primary school graduates increase,the primary schools will graduallybecome secondaryschool centers.

11. Ln No. 926 Sixth Railway Project; US$25 million, August 1973. Effectivedate: December 6, 1973 Closing Date: original - June 30, 1976 current - June 30, 1978

Declines in freight traffic in 1975 and the first six months of 1976 (becauseof an economic slowdown and lower imports),combined with steep cost increases,resulted in a deteriorationof the railway'sfinancial situa- tion. Since then, the financial position of the railway has been improvingas a consequenceof sharp increases of ton-km of freight traffic, and freight tariff hikes of about 19% in 1976 and 50% in 1977. Improvementshave been registeredin other areas although locomotiveavailability is severely con- strained largely because of manufacturerdefects in over 40% of 88 relatively new locomotives. Efforts are underway to resolve this problem but early resolution is not anticipated. Project works are progressingare a substantial portion has been completed.

12. Ln No. 971 PreinvestmentStudies Project; US$8 million, March 1974. Effective date: June 27, 1974 Closing Date: December 31, 1978

Commitmentsare proceedingat a satisfactoryrate. The Bank has approved 26 sub-projects.

13. Ln No. 1071 Small-ScaleIndustry; US$5.5 million, January 1975. Effectivedate: May 20, 1975 Closing Date: June 30, 1978

A change of management in CorporacionFinanciera Popular (CFP), the beneficiaryinstitution, delayed the initiationof the project. Commit- ments are now moving well and progress is satisfactory. The Bank agreed to release the second tranche in view of CFP's satisfactoryperformance. The loan - is-atot --futlr-cmuitted. ANNEX II Page 6 of 7

14. Ln No. 1072 Second Multi-City Water Supply and Sewerage Project; US$27 million, January 1975. Effectivedate: April 14, 1975 Closing Date: June 30, 1980

There were substantialdelays in making the eight subloans eff-,tive. The last subloan (Barranquilla)was made effective on September 9, 1976. After a slow start, project implementationis progressing satisfactorilyin most cities.

15. Ln No. 1073 TelecommunicationsIII; US$15 million, January 1975. Effective date: April 14, 1975 - Closing Date: December 31, 1978

Contracts for all Bank-financedgoods have been awarded, and work is proceeding satisfactorily. US$8.9 million has been disbursed.

16. Ln No. 1118 Caqueta Rural Settlement Project; US$19.5 million, June i97. Effective date: April 1, 1976 Closing Date: October 31, 1979

The loan became effective on April 1, 1976, after a six-month delay. Projection execution has proceeded rapidly and some of the lost time regained. Road and bridge constructionis well ahead of schedule (79 km have been completed). School construction,however, is behind schedule,while the credit program is proceeding well.

17. Ln No. 1163 Cordoba 2 AgriculturalDevelopment Project; US$21 million, September 1975.

Effective date: March 30, 1976 Closing Date: December 31, 1980

A few months after effectiveness,the Government decided to give responsibilityfor project civil works to another agency. This decision delayed the initiation of the project. Implementationis now proceeding satisfactorily,but still behind schedule.

18. Ln No. 1223 Sixth Development Finance Companies Project; US$80.0 million, March 1976.

Effective date: September 1, 1976 Closing Date: June 30, 1980

The loan is proceeding satisfactorilyand will be fully committed during the first quarter of 1978. ANNEX II Page 7 of 7

19. Lu No. 1352 IntegratedRural Development Project;US$52.0 million, January 1977.

Effectivedate: August 26, 1977 Closing Date: December 31, 1982

Works are proceeding as scheduled.

20. Ln No. 1357 Second AgriculturalCredit Project; US$64.0 million, February 1977.

Effectivedate: September6, 1977. ClosingDate: December 31, 1981.

The loan is being committedfaster than anticipated. Withdrawal applicationsfor US$3.1 million equivalenthave recently been received.

21. Ln. No. 1450 TelecommunicationsIV; US$60 million, July 1977.

Effectivedate: October 3, 1977. ClosingDate: June 30, 1982.

Works are proceeding as schedule.

22. Ln. No. 1451 Second Small-ScaleIndustry Project;US$15 million, September 1977. Not yet effective.

23. Lu. No. 1471 Highways VII; US$90 million, July 1977.

Effectivedate: November 28, 1977 ClosingDate: December 31, 1982

The RehabilitationProgram is underway, about three months behind schedule. Stabilizationworks are being carried out, with work totalling US$35.4 million completed;conditions for disbursementof loan funds for this program are expected to be fulfilledshortly. Implementationof the maintenanceprogram is in process, about six months behind schedule. Prepara- tion of studies is proceeding satisfactorily.

24. Ln. No. 1487 Integrated NutritionImprovement Project; US$25 million, September 1977. Not yet effective. ANNEX III Page 1 of 3

COLOMBIA

SECOND CALI WATER SUPPLY AND SEWERAGE PROJECT

SUPPLEMENTARYDATA SHEET

Section I: Timetable of Key Events

(a) Time taken to prepare project: 18 months

(b) Agency which prepared project: EMCALI

(c) First presentationto Bank: April of 1976

(d) First mission to review project: May of 1976

(e) Departure of appraisal mission: October of 1976

(f) Completion of negotiations: December 19, 1977

(g) Planned Date of Effectiveness: May 31, 1978

Section II: Special Bank ImplementationActions

In view of the experience gained by EMCALI with the first project, no special implementationactions are required.

Section III: Special Conditions

The following special assurances have been obtained:

(a) EMCALI will make investmentsin the Yumbo Subprojectonly after reaching an agreement satisfactoryto the Bank with the Municipalityof Yumbo on the terms and conditions under which EMCALI will take over the operation and maintenance of Yumbo's water supply system; and that said agreement will provide that new industries in Yumbo will be required to connect to the system (para. 45);

(b) EMCALI will prepare, by June 30, 1978, a program to improve its management information,budgetary and internal control systems, strengthen the coordinationof its administration and operation units, and promptly thereafter to carry out such programwith the assistance of consultantsto the extent such assistance is required in the opinion of the Bank (para. 48); ANNEX III Page 2 of 3

(c) EMCALI will employ engineeringconsultants to prepare the detailed designs for the project and to assist it in the supervisionof constructionand in carrying out the studies of future sewage treatmentrequirements to the extent such assistance is required in the opinion of the Bank (para. 49));

(d) EMCALI's rates for water and sewerage and for power services will continue to be increasedmonthly, automatically,at the current rates of increase, through the end of 1981 and mid-1979 respectively(para. 51);

(e) E14CALIwill fully implement its property reassessmentprogram by June 30, 1979 (para. 52);

(f) EMCALI will charge and collect, for certain sewerage works includedin the project, as valorizacionduring the 1978-1984 period, a proportionagreed with the Bank of the cost of such works (para. 53);

(g) EXCALI will obtain annually,starting in 1978, operating revenues sufficientto achieve a financialrate of return of not less than 3% in the water and sewerage division, increas- ing to 4% in 1982, 4.5% in 1983, and 5% thereafter,8% in the power division, and 5.5% increasing to 8% in 1979 and thereafterin the telephonedivision, of the revalued cost less accumulateddepreciation of fixed assets in service of each division (para. 55);

(h) For purposes of calculatingthe rate of return, EMCALI's fixed assets will continue to be revalued in accordance with methods satisfactoryto the Bank (para. 55);

(i) EMCALI's investmentthrough any of its division, in excess of those included in the financingplan, will not exceed, without the Bank's concurrence,and until completion of the project, the equivalentof US$1 million in any year (para. 56);

(j) EMCALI will not incur long-term debt without the Bank's concurrence,unless the projected net income before interest and depreciationin respect of the division for the benefit of which the debt is to be incurred (excludingincome derived from valorizacion)is at least 1.3 times its maximum debt service in respect of such division (para. 56); and ANNEX III Page 3 of 3

(k) EMCALI will transfer funds generated by any of its divisions to another of its divisions only if the funds to be transferred are in excess of those required for the operations,debt service, and investmentsof the division originating the funds, and it will treat such transfersmade after June 30, 1977, as loans from one division to the other, on commercial terms (para. 57).

Conditions of effectivenessof the proposed loan would be that EMCALI make appropriate arrangementsto obtain loans in the amount of Col$600 million, and that all action necessary to enable EMCALI to obtain in 1978 the agreed rate of return on its telephone division be taken (paras. 54 and 55).

A condition of disbursementsfor each sub-projectin respect of which valorizacionwould be collectedwould be that the Bank receives satis- factory evidence that all necessaryauthorizations and approvals required to charge and collect valorizacionin respect of such works shall have been obtained (para. 53). IBRD-3638RI OCTOBER1976 7Ze 795' 79? 74,

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