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World Bank Document APPENDIX III No. E llla RESTRICTED Public Disclosure Authorized This report is restricted to use within the Bank. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT •Public Disclosure Authorized RECENT DEVELOPMENTS IN THE ECONOMY OF COLOMBIA October 19, 1950 •Public Disclosure Authorized Public Disclosure Authorized Economic Department Prepared by: Jacques Torfs COLOMBIA ESSEa~IAL STATISTICS Area: 450. 000 square mile s. Populat_ion (1949): 10.5 million. Rate of increase: 2.1% per annum. Currency: Unit: Peso. furfty: 1 .. 95 pesos equals US$. (51.3 cents equals peso). Trade: I Impo rt s 1948: ( c • i . f • ) US$ 346.0 million. Imports 1949: (c.i.f.) uS$ 252.0 million. E&Ports 1948: (f.o.b.) uS$ 286.0 million. Exports 1949: (f.o.b.) US$ 303.0 million • Budget: • --TOtal expendi tures 1948: Ps.$ 427 million. Total expenditures 1949: Ps.$ 449 million Total revenues 1948: Ps.$ 339 million~ Total reV'enues f949": PS.$ 403 million. External Debt: (IJec. 31, 1949) (including undi sbursed commitment) Principal, National Bonded Debt: .. : - US$ 47.9 million. (of '~hich Sterling bonds US$ 6.2 million) Prlncipal, otnel' National: US$ 56.1 million. (including Exim-IBRD) llipartmental and 1:".nicipal, ~ong-term debt: US$ 42.2 million. E.xport-Impo;·~ Bank Debt: (Sept. 30, 1950) Authorized (not including past operat ions) : uS$ 54.1 million. • Disbursed: US$ 36.9 million. "OUtstanding: US$ 2203 million. Balance not yet di sbursed: US$ 17.2 million, Co st-of-L1 vinE; I ndex: (Raga ta) (FeD. 1937 equals 100) December, 1948~ 285 Y December, 191.~9: 304 July, 1950: 386 Tot a1 Gol d and Exchange Be serve s: December, 1948: US$ 88 million. December, 1949: US$ 111 million. June, 1950: US$ 108 million. Y Average of eleven months. TABLE OF CONTEJ:.Jars Page n{T]1.1N8.TIOlfAL TRANSACT IONS . 2 A. Foreign Trade . " 2 1. Exports • • • • 2 Coffee • • • 2 Petroleum •••• . Other l!!J~o~ts . ~ • 2. Imports • • • • • • • . 5 B. Trade Agreements and Tariff . 5 c. External I;ebt • • • • • ~ • • • • • • • ':8 • • • • • 6 D. Balance of P~ments . 7 IHTEi.~\I.~ FI1T.A1TCIAL CO:'TDITIOES .• • • • • • • • . 9 A. Fi seal - Th~", National Goverrment .Bu.dget . 9 B. Money Supply • • • • II • • • • • • • • • • • • .'l- 00 10 c. Production . · . ~ . 12 D. Development . • · . 12 POLITIOAL SITUATION • • • • • • • • • • Q • • , • BEGnlT DEVELOPMDJTS IN THE ECONOIvlY OF COLOMBIA The economic situation of Colombia has been the subject of an Economic Department report to the Board of Directors (No. 3~56A) dated August 11, 1949 and a report by the IBRD Mission to Colombia} headed by Dr. L. Currie, issued in July, 1950. • The main trends in the Colombian econorrw have not changed since these reports. By and large, they are favorable; industrial and agricul­ tural production is increasing steadily and foreign exchange reserves ,are at al1. adequate wax-king level. Unfavor~ble factors are: th~ political si t­ uation, the tendency on the part of the Goverl1IDent to impose inappropriate economic and financial controls and to engage in capital e~enditures of low prjority, the confused leg81 situation confronting foreigu equity in­ vestment, and the denendence ''"'f the country on the e~ort of one commodity. coffee. The introduction of some of the reforms suggested in the report of • the IBRD Mission to Colombia may eliminate sr.".ae of these deterrents to economic progress. The volume of coffee production and e~orts declined during the 1949-50 season as a result of political disturba~ces as well as heav,y rainfall, but export receipts did not suffer ot-!ing to the considerable in­ crease in coffee prices at the end of 1949- Coffee still accounted for 75% of export earnings in ~949. It is clear that Colombia must promote other export lines in order to meet the antici:r:ated future demand for -2- imports. The prospects of oil exports (18% of the total in 1949) are still depend~nt on Government policies with re~ect to foreign equity in­ vestment in the petroleum industry. If there 'is no increase in prolluction, a reduction in oil export volume is expected by the second half of this decade, owing to the growing internal demand for refined products. International Transactions A. Foreign Trade • 1. ~"Cpo rt s C(1ombia' s export trade is improving steadily. o~ing to a succes­ sion of increases in coffee prices in 1949 and 1950, and intensified dril­ ling in major petroleum concessions in 1949. ¥rom a total value of $254 million in 1947, exports grew to $286 million in 1948 and reacned $303 mil­ lion in 1949. The Un.ited States took 81% of all Colombian e:X'P01'ts in that year. Coffee -- From 1928 to 1948, the volume of coffee exports grew at • a rate of 31~ per yeex, and reached 5.6 million bags of 60 kilos in the latter ~Tear. In 1949 t this trend was broken; exports fell to 5.4 million bags, and in the year ending in June 1950 were probably 5.3 million bags. The recent decline in output can be ascribed to political unrest, and to heavy rainfall in the rrinter 19'+9-'50. However, exports in the calendar year 1950 should not be much below 5.5 million bags, and from the scant data available on plantings. it is expected that the former rate of growth in export volume will be resumed after this year. -3- The price of Colombian coffee is at a~ all time high. In 1947. tile price climbed above JO¢' c.i,~f. Nev: York for the first time since the twenties, and han advanced to 50¢ by the end of 1949. After a brief de- cline it climbed again eteeply after the outbre9k of the Korean war. On October 19, 1950, the price of Colombian coffee in New York was 56¢. While • the present peak may not be maintain~d, even at an average price of 47¢t the value of coffee exports in 1950 could reach $330 million, or more than • the total value of al~ exports in 1949. The current high prices of coffee are clearly due to ~'Vorld shortage, and the long-run prospects are less favorable, Since 1949. major producers;. sucn as Brazil, Guatemala and Colombia have e}.'Perienced droughts, floods, aud political upsets which have kept production down. It is reported, how- ever, that new planting of coffee trees has taken place in Brazil, and to a lesser extent in CentrAl America and Africa, and that the rate of planting has been at least maintained at former levels in Colombia. While it takes • new trees four years to produce. world coffee output is likely in time to expand faster than world demand for coffee at current prices. In this case, Colonbia and Central American c01mtries, 1.,"lJhich have Ii ttle but coffee to export. may experience serious balance of p~ents difficulties. Petroleum -- E~orts of petroleum reached a new ~igh in 1949~ Pro­ duction Was 29.7 million barrels of crude compared with 23.8 million bar­ rels in 1948, and exports attained 24.2 million barrels valued at $58 mil- lion. ~he principal reasons for this increase were the intensified dril- lings on the Barco, Yondo and IUficil concessions, and the fact that the -.4 - De Mares concession and the Barco experienced virtually no labor difficul­ ties. It is not believed that this volume of exports can be maintained after 1950. One reason is that foreign companies e~"ploiting petroleum in Colombia lack confidence in the treatment accorded to private foreign capi­ tal and, are ei theI' leaving the country or reducing exploration acti vi ties. Althou@l decrees aimed at improving Colombia's petroleum legislation. were issued in 1949, they were not satisfactory to the companies. A E;)econd rea­ son is that the internal demand for refined products has increased to such • an extent that Colombia Jl1Ust cUJ.~rently import more than 50% of its requ.ire­ ments. Hence; a new petroleum refinery is to be built, and internal con~ sumption of crude oil may attain 10 to 15 million barrels per year 1!iithin the next decade o Even assuming maintenance of crude output at the 1949 levels, this would reduce crude e:x.ports to roughly 15 million barrels a year.. However, Colombia will c;.t the same ttme realize important savings on lILported refined products. Other Exports - Coffee and petroleum exports accounted for about • 93% of all Colombian export s in 1949. Bananas, gold, platinum, hides and skins constituted most of the remainder. The most promising fields in which other exports might be developed are ~ood products, cattle, cement, sugar, and perhaps textiles. Also certain areas bordering Venezuela and Panama could beGome suppliers of foodstuffs and light industrial goods to those countries~ Ho~evert considerable structural cbanges in production, market­ ing and t r a.'1sportation will have to occur before exports to these countries become po ssible .0 2. Imports Imports into Colombia in 1949 amounted to only US$ 252 million, or almost US$ 100 million below the 1948 level. In the first six months of 1950 they amounted to US$ 140 million. The great success achieved by Colombia in securing this drastic reduction is clearly not due simply to 1/ ' the moderate devaluation of the peso at the end of 1948,-'- and can be only partially ascribed to the introduction of heavy exchange taxes on non- essential categories of import$. Essentially, it resulted from the imposi- • tion of strict import control regulations, and these, in turn, proved enforceable oruy because of large increases in local output of important raw materials or foods, such as sugar, rice, cotton and r,rheat.
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