REPUBLIC OF , through the National Planning Department and CORPORACIÓN DESARROLLO Y PAZ DEL MAGDALENA MEDIO 2001 Public Disclosure Authorized International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Re: Colombia: Loan No. 7078-CO (Second Magdalena Medio Regional Development Project – Monitoring Indicators, Municipalities comprising the Magdalena Medio Region and Description of activities to be financed under Subproject).

Excellency: Please refer to the above captioned Loan Agreement. The several terms defined in the Loan Agreement have the respective meanings therein set forth.

With respect to paragraph (m) of Section 1.02 of the Loan Agreement and paragraph (b) of Section 2.10 of the Implementation Agreement, kindly find attached hereto the Monitoring Indicators. Public Disclosure Authorized With respect to paragraph (n) of Section 1.02 of the Loan Agreement, kindly find attached hereto the municipalities comprising the Magdalena Medio region.

With respect to paragraphs (u) and (v) of Section 1.02 of the Loan Agreement, kindly find attached hereto the description of the type of activities to be financed under Productive and Social Subprojects.

Please confirm your agreement with the above and with the annexes by signing this letter in the space provided below.

Very truly yours,

REPUBLIC OF COLOMBIA, Corporación Desarrollo y Paz del (through National Planning Department) Magdalena Medio Public Disclosure Authorized

By /s/ Authorized Representative

AGREED AND CONFIRMED:

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Authorized Representative Date: ANNEX I

Public Disclosure Authorized MONITORING INDICATORS Outcome/Impact Indicators: · % of leaders and members of community organizations involved in the project who consider that they have increased their capacity to influence public affairs · % of municipalities that have incorporated projects from the Municipal Proposal of the nucleo into their municipal development plan

· number of municipal administrations that produce, at least once a year, reports on the implementation of the municipal development plan that are made available to citizens

· increased capacity and autonomy of organizations as measured by the Participation and Organization Index (IPO)

· Increase in the revenues and assets of households which are members of productive associations being supported by the LIL

Output Indicators: · % of persons involved in the project who perceive an increase in their participation in important decisions of the CDPMM

· # of agreements and contracts made by community organizations with entities other than the CDPMM

· At least 5 subregional community development teams (ETPs) have mechanisms established and operating well for representation and shared decision-making between the CDPMM and representatives of community organizations and public/private entities of the subregion

· Annual plans of nucleos, ETPs and CDPMM use information generated by the M&E system

· At least 10 municipalities have access to data bases generated by the project managed by local civil servants

· At least 15 nucleos have norms on representation and decision-making that are formalized and operating well

· At least 10 nucleos have formulated and agreed on elements of the Municipal Proposal with municipal authorities and other public entities

· At least 5 health oversight committees have broadened their actions to other areas of public administration

· At least 20 nucleos and 15 organizations preparing periodic self-evaluation reports

· # of agreements between CDPMM and municipalities, and amount of resources contributed by municipalities

· Increase in financial resources (not those of CDPMM) for productive subprojects · # of agreements between CDPMM or the producer organizations and public or private entities for the provision of critical factors for productive subprojects

· At least 2 social subprojects of integrated attention for communities affected by the armed conflict carried out in partnership with other entities

· At least 3 social subprojects demonstrate links to a long-term development process

ANNEX II MUNICIPALITIES COMPRISING THE MAGDALENA MEDIO REGION Department Sub-Region Municipalities Antioquia Magdalena Medio Puerto Berrio, Puerto Antioqueno Nare y Yondo Bolivar Sur Sur de Bolivar Sur de Bolivar, Santa Rosa, Simiti San Pablo, Cantagallo, Morales, Rio Viejo, Arenal, Regidor Cesar Aguachica, Gamarra, San Martin, La Gloria, San Alberto Santander Mares Norte , , Bajo Rionegro Mares San Vicente de Chucuri, Carmen de Chucuri, Betulia, Velez Landazuri, , Bolivar, Penon Barrancabermaja Barrancabermeja ANNEX III ACTIVITIES TO BE FINANCED UNDER PRODUCTIVE AND SOCIAL SUBPROJECTS

Please find below an indication of the types of subprojects to be financed under Project components 3 and 4. This is not an exhaustive list and other types of productive and social subprojects may be agreed from time to time between the Borrower (through DNP), CDPMM and the Bank. All subprojects will be governed by the provisions of the Operational Manual.

Productive Subprojects Productive subprojects will be related to 4 thematic areas identified under the first project as being economic activities which involve the poor and/or which hold out good potential for widespread economic and social benefits in the region: small peasant farms (finca campesina), agro-industrial production, small town economies, and integrated approaches in strategic regions/micro-regions.

· Subprojects for small peasant farms would aim to improve the economic viability and standard of living of small farmers (organized in associations) through funding of technical advice, inputs, small equipment, and capacity building to consolidate their organization and business knowledge (e.g. managing the purchase of inputs, access to credit and marketing their products).

· Agro-industrial subprojects would aim to improve incomes and employment by supporting organizations of small farmers to embark on new productive activities (e.g. palm oil, industrial yuca) or improve the productivity of existing activities (e.g. cacao) through funding of: technical studies, technical assistance, purchase of inputs and equipment, and capacity building to improve business skills and to consolidate their organization so as to establish partnerships with agro-industrial firms.

· Subprojects for small businesses in small towns aim to improve the productivity, profitability and sustainability of these businesses (e.g., brick producers, furniture makers) by providing organizations of producers and businesses funding for training in business skills, technical advice including access to market information, seed capital, equipment and inputs.

· The type of subprojects to be supported in strategic regions (primarily rural with peasant farming) will be defined in greater detail during project implementation but may include technical support for land titling, productive inputs (seeds, equipment), technical assistance and training to improve the productivity of small farms, and capacity building of farmers organizations.

The beneficiary contribution for each subproject would be no less than 10-20% and, unless otherwise agreed with the Bank, no transfer provided by the CDPMM to finance an individual subproject will exceed US$100,000.

Social Subprojects Social subprojects aim to increase the capacity of the community groups living in isolated rural areas, and to address critical basic needs including: · food security through funding of projects to increase food production including seeds, tools, technical assistance, capacity building of the organization;

· primary health through funding to reactivate and strengthen a network of community leaders interested in health matters, provide training in preventive health practices and provision of simple services and advice, provision of small lot of simple medicines and, in some cases, basic equipment like scales for weighting babies; and

· basic education through funding for training of primary school teachers, teaching materials, activities with students such as establishment of a school garden to serve as a teaching vehicle, and, in some cases, some minor improvements in school facilities (e.g. latrines).

These subprojects are expected to be quite small ranging from US$5,000 to US$20,000 and include a beneficiary contribution of no less than 10%, primarily in kind.