FILE COPY FOR OFFICIAL USE ONLY. Document of The World Bank. Report No. P-2525-CO

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FILE COPY FOR OFFICIAL USE ONLY Report No. P-2525-CO REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE EMPRESA DE ACUEDUCTO Y ALCANTARILLADO DE BOGOTA WITH THE GUARANTEE OF THE REPUBLIC OF COLOMBIA FOR A THIRD BOGOTA WATER SUPPLY, SEWERAGE AND DRAINAGE PROJECT May 2, 1979 This document has a restricted distribution and may be ued by recipients only in the performace of their official duties. Its contents may not otherwise be disclosed witbout World Dank autbeolxation.

2 CURRENCY EQUIVALENTS Average Calendar 1978 (estimate) Mid-1979 estimate Currency Unit o Peso - Col$ Col$ U$$1 - Col$ CQl$1 - US$ WEIGHTS AND MEASURES Metric System GLOSSARY OF ABBREVIATIONS AID CAR AAB EEEB IDB IDU INAS INSFOPAL Agency for International Development Corporacion Autonoma de la Sabana de Bogota y los Valles de Ubate y Chiquinquira Empresa de Acueducto y Alcantarillado de Bogota Empresa de Energia Electrica de Bogota Inter-American Development Bank Instituto de Desarrollo Urbano Instituto Nacional de Salud Instituto Nacional de Fomento Municipal GOVERNMENT OF COLOMBIA FISCAL YEAR January 1 to December 31

3 FOR OFFICIAL USE ONLY COLOMBIA THIRD BOGOTA WATER SUPPLY, SEWERAGE AND DRAINAGE PROJECT LOAN AND PROJECT SUMMARY Borrower: Empresa de Acueducto y Alcantarillado de Bogota Guarantor: Amount: Terms: Project Description: Estimated Cost: Republic of Colombia US$30 million equivalent Repayment in 17 years, including four years of grace at 7.9% interest per annum. The project would improve sanitary conditions in Bogota by providing sewerage connections for one million inhabitants, by extending sewerage interceptors and by providing storm water drainage to periodically flooded areas where 0.4 million people live. It would also increase the utilization of installed water production capacity by connecting households with about 1.1 million people to the water supply system and by extending the primary distribution network. In addition, the project would support studies to determine the least cost methods of disposing of Bogota's sewage and reducing flooding and pollution in the Bogota River. About 43% of the estimated beneficiaries of the project are expected to be among the poorest 40% of the population. The project faces no special risks and, even if delays and cost increases are encountered, would yield a high return on the investments. Local Foreign Total (US$ Million Equivalent) Water supply Sewerage Drainage Equipment and meters Sewerage treatment pilot plant Feasibility studies Engineering and supervision Base cost Physical contingencies Price contingencies Total project cost This document hs a restrictedistribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

4 - ii - Financing Plan: Local Foreign Total (US$ Million Equivalent) Net internal cash generation/ betterment levies ,r5 Bank loan Estimated Disbursements: US$ Million Equivalent (Fiscal Year) Annual Cumulative Rate of Return: The aggregate internal rate of return for the project is estimated to be 37%. Appraisal Report: Report No. 2359b-CO, dated May 2, 1979.

5 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE EMPRESA DE ACUEDUCTO Y ALCANTARILLADO DE BOGOTA WITH THE GUARANTEE OF THE REPUBLIC OF COLOMBIA FOR THE PROPOSED THIRD BOGOTA WATER SUPPLY, SEWERAGE AND DRAINAGE PROJECT 1. I submit the following report and recommendation on a proposed loan to Empresa de Acueducto y Alcantarillado de Bogota (EAAB) with the guarantee of the Republic of Colombia for the equivalent of US$30 million to help finance a Third Bogota Water Supply, Sewerage and Drainage Project. The loan would have a term of 17 years, including four years of grace, with interest at 7.9% per annum. PART I: THE ECONOMY 1/ 2. An economic report on Colombia (2235-CO) was distributed to the Executive Directors in January An updating mission visited Colombia during February 1979 and is preparing its report. Its findings are summarized below. Country data sheets are provided in Annex I. Background 3. During the past two decades, Colombia has made substantial progress in the transition from a predominantly rural and agricultural economy made up of largely self-contained regions to a more integrated urban-industrial economy. The productive base of the economy has been widened appreciably, and there has been substantial diversification of production in both the agricultural and industrial sectors. These improvements have been accompanied by rapid growth of non-traditional exports and by the development of a modern sector relying to a considerable extent on imported inputs. As a result, the country has become less dependent on coffee as a source of foreign exchange earnings, and fluctuations in domestic economic conditions resulting from unpredictable shifts in world coffee prices, while still considerable, have become more manageable. Although substantial progress has been made during the past two decades, Colombia is still only partially developed with a limited modern sector superimposed on a large, traditional and economically poor base. Per capita income is low by developed world standards, the maintenance of high employment is a persistent problem, and in 1975 an estimated 55.0% of the rural and 24.0% of the urban population had incomes under the relative poverty level as defined by the Bank's. 4. Colombia's population growth rate declined sharply in the past two decades; from well over 3% in the 1950s, to about 2.8% in the early 1970s 1/ Unchanged from President's Report, Second (Cartagena) Urban Development Project (Report No. P2472a-CO dated April 18, 1979).

6 - 2 - and to an estimated 2.1% at present. 1/ This was in large part the result of a rapid decline in the crude birth rate; one of the most pronounced declines ever recorded in a Latin American country. Rising per capita income, rapid rural/urban migration, expanded economic opportunities for women and increased effectiveness of family planning programs are included among the factors responsible for the lower birth rate. Although rural/urban migration slowed from the early 1960s on as progress was made in eliminating the widespread violence in the countryside, approximately 64% of the current population lives in urban centers and there are now 16 cities with populations exceeding 100,000 persons. Colombia's population is not considered excessive relative to the country's resource base. Economic growth will have to average around 7%, however, especially in the directly productive and service sectors, in order to increase employment at a pace sufficient to keep up with growth of the labor force. 5. Available information--while scanty--suggests that some improvement has occurred in income distribution and welfare of the lowest income groups in Colombia since the 1950s. These gains were probably the consequence of several factors, including migration of surplus labor from rural to urban areas, rapid growth of employment in high productivity jobs in industry and the services and reduced population growth. Policy efforts, particularly since 1967, have been directed increasingly toward improving the welfare of the poorest 50% of the population. These efforts have emphasized both employment generation and greater public investment in health, education, nutrition and urban development. The Bank has strongly supported these efforts. Continued emphasis on growth of the productive sectors of the economy, on industrial decentralization and on programs to encourage smallscale industry and agriculture should provide increased employment opportunities and higher real wages for unskilled and semi-skilled labor in both rural and urban areas. Further improvement in the public services provided to the poor should reinforce these trends and raise the level of welfare of this segment of the population. 6. The Colombian authorities introduced a dramatic change in development strategy in 1967, shifting emphasis from the then existing protectionist policy of import substitution to measures designed to expand and diversify exports. These policies were highly successful in expanding exports, thereby alleviating the foreign exchange constraint and making possible a substantially higher level of investment. As a consequence, real GDP rose by an average 6.5% annually between and 1974, well above the historical average. Merchandise exports in current prices expanded nearly threefold during this period, and most significantly, non-traditional exports became an increasingly important source of foreign exchange earnings, in part compensating for slow growth of receipts from coffee exports. By 1974, non-coffee exports comprised 56% of total merchandise exports, up from about 30% in / Estimated 1978 growth rate. This rate differs from that given as the most recent estimate in the Social Indicators Data Sheet (Annex I) which is an average for early 1970s.

7 7. Despite the growth of output and the diversification of exports, the country faced some potentially serious problems at the time the new administration took office in Weakening balance of payments in part related to the slowdown of growth in the industrial countries, loss of self-sufficiency in petroleum production, deterioration of the public finances, accelerating inflation, and declining investment threatened to reduce growth of output and employment. As a consequence of these developments, the Government introduced an economic stabilization program which combined basic reforms of the fiscal, monetary, and trade systems with measures aimed at accelerating long-term economic growth. 8. In an effort to strengthen the public finances, the Government undertook a comprehensive tax reform designed to improve the progressivity and elasticity of the tax system. Some of the distortions which had developed in the financial system caused by forced investment requirements placed on financial institutions and by differential tax treatment of financial instruments were eliminated. Interest rates were raised in an effort to increase private savings and improve resource allocation. In order to increase the efficiency of the economy through greater reliance on market forces, price controls on a number of industrial and agricultural products were removed, thereby providing greater stimulus for increasing production. Modifications in petroleum pricing policy aimed at regaining self-sufficiency in the production of crude petroleum by improving incentives for exploration and exploitation were introduced. Concurrently, the Government initiated policies designed to reduce the subsidy on local consumption of petroleum products, which eventually led to a 220% increase in gasoline prices by Tariff levels and non-tariff barriers to trade were reduced significantly in order to increase competition and the efficiency of domestic firms. While these reforms were successful in improving the public finances and reducing inflation in 1975, they also served to reduce economic growth and the slowdown of domestic economic activity which began in 1974 continued through most of Recent Economic Developments 9. During the past three years, the Colombian economy has been dominated by developments in the external sector. As the result of a serious frost in late 1975 affecting Brazil's major coffee producing area, coffee exports from that country declined sharply triggering a fourfold increase in the world price of coffee by mid This caused Colombia's export earnings from coffee to increase to nearly US$1.8 billion in 1977 from US$764 million in 1975, and produced an unprecedented rise in incomes and demand in the country's rural areas. Lagging supply of consumer goods, particularly basic foodstuffs--the production of which was adversely affected by drought conditions in most of the country's interior--failed to keep pace with rising demand and inflation accelerated from 24% in 1975 to 44% in the twelve months ending June Inflation in Colombia has been moderate relative to that experienced by other countries in the region, seldom exceeding an annual rate of 20%. The acceleration of inflation which took place during the period, therefore, was unprecedented in recent history, and efforts to lower the rate of inflation have dictated economic policy since that time.

8 The authorities responded rapidly by introducing a broad range of fiscal, monetary and trade policies designed to gain control over the explosive increase in prices. Beginning in late 1976 reserve requirements were raised and rediscounting and public sector borrowing from the Central Bank were discouraged. The authorities temporarily suspended their nol7i-c of periodically adjusting the exchange rate and prices of petroleum products. In January 1977, a 100% marginal reserve requirement was placed on increases in commercial bank deposits exceeding the December 31, 1976 level. To delay the impact of rising foreign exchange receipts on the monetary base, exporters were required to accept 90-day US dollar denominated certificates of exchange in lieu of cash payment for their exports. In order to sterilize a portion of the increase in foreign exchange earnings from coffee exports, the Coffee Federation agreed to invest a large portion of its receipts in Central Bank bonds, the proceeds of which were frozen in a special account. To increase supplies in the domestic market, a number of measures were taken to liberalize imports. Food imports by the state marketing agency, IDEMA, were increased sharply. In addition, restrictive fiscal measures were introduced to curb growth of aggregate demand and in 1977 the Treasury registered an overall budgetary surplus for the first time in recent years. I1. As a consequence of these measures and a favorable second semester harvest, inflation declined sharply beginning in July By the end of the year, the annual rate of inflation had fallen to 29%. With inflation subsiding, periodic exchange rate adjustments and gasoline price increases were reintroduced. With few other exceptions, however, the stabilization policies were continued in effect throughout 1978 and by year end inflation had subsided to an annual rate of 17.8%. 12. Because of the lack of dynamism in world markets, slow growth in agricultural production, capacity constraints in the industrial sector and a decline in real investment, the Colombian economy expanded only moderately in 1976 and Growth of real GDP increased from 3.8% in 1975, to 4.6% and 4.8% respectively in the subsequent two years. The higher growth was a direct result of the expansion of domestic demand brought about by the rise in incomes of coffee producers. Output in the trade and personal services sectors of the economy (including transport and communications) responded strongly to the rising demand, while agricultural output, because of the drought, rose by only 2.2% p.a. on average for the period. Industrial sector output rose by only 5.4% p.a. during this period, despite the strong growth in domestic demand. Because growth occurred in the relatively labor intensive sectors of the economy -- personal services, trade, transport and communications and manufacturing -- the urban unemployment rate had declined to an estimated 8% by the end of 1977, from an average 12% during the early 1970s. In addition, there is evidence of labor shortages and rising real wage rates in rural areas during this period, and it is believed that rural unemployment also declined. 13. Preliminary estimates for 1978 show a strong increase in real GDP resulting primarily from continued stimulus to aggregate demand from high coffee receipts and from an expansion of investment. In addition, favorable weather conditions permitted a sharp recovery in agricultural

9 output. Real GDP growth is estimated at 8% for the year, with agricultural production estimated to have grown by as much as 9% over the low level of While coffee prices fell considerably in 1978 from their 1977 levels, this decline was more than offset by expanding export volume as Colombia undertook a more aggressive coffee export policy. Consequently, receipts from coffee exports rose to nearly US$2.1 billion for the year. The accompanying rise in domestic demand and a modest recovery in export markets caused manufacturing and transport and communications to grow by 8.5% each and trade (including commerce) by 9.0%. Construction activity, which had continued at a low level during the past several years, recovered strongly in 1978, partially as a result of an increase in speculative demand arising from an inflow of funds from contraband activities. Only the mining sector, in which output fell by 2.3% as a result of declining oil production, failed to show significant growth in Open unemployment in urban areas is estimated to have fallen to 7.6% by June Colombia's balance of payments was also highly favorable in 1978, continuing the trend of the previous three years. Largely as a result of the increase in coffee exports, although non-coffee exports rose modestly (7.0%) in real terms also, Colombia's net official international reserves rose by US$664 million, reaching US$2,493 million by the end of the year, equivalent to about nine months imports of goods and non-factor services. This increase in reserves occurred despite a nominal 25% increase in import payments, reflecting the rise in domestic demand, continued overvaluation of the exchange rate and liberal import policies. There were few significant modifications in trade and exchange rate policies in The slow rate of peso devaluation was continued during the first three quarters of the year, but accelerated in the fourth quarter when the pace of reserve accumulation began to slow. In general, trade and exchange rate policies were directed towards reducing the impact on the monetary base of reserve accumulation by delaying the monetization of export receipts and advancing import payments. These measures complemented monetary policies which were aimed at restraining growth of the money supply. 15. Colombia's public finances generated a large surplus in 1978 thereby permitting the Government to relax somewhat the policy of fiscal restraint which formed part of its anti-inflationary program during the previous two years. Current savings of the public sector rose to an estimated 6.0% of GDP, compared with 5.5% of GDP in 1977, and covered about 90% of public sector investment. Both the Central Government 1/ and the consolidated decentralized agencies increased their savings in 1978, the former by 29% and the latter by 153%. The strong increase in savings of the decentralized agencies, which rose to 1.4% of GDP from 0.7% in 1977, was the result of increased charges for the services they provide and of restraint on current expenditures. Large increases in customs duties and in sales taxes brought about by the growth in domestic demand were the main factors responsible for the increase in savings of the Central Government. As a consequence of this improved financial situation, public sector fixed 1/ Comprised of the National Government, the National Highway Fund and the Social Security Agencies.

10 - 6 - investment rose during the year, reaching 6.9% of GDP compared with 6.3% of GDP on average for the period. Some of the heaviest investment took place in the development of hydropower and in the petroleum sector, for both exploration and development. 16. Despite continuation of the stabilization programs largely unchanged from last year, the rate of inflation accelerated sharply in January 1979, followed by a more moderate increase in February. On an annual basis, inflation had reached 21.2% by the end of the latter month. At the same time, the international price of coffee fell sharply, prompting the Government to take measures to avoid a large financial deficit for the Coffee Federation. In the past, such deficits were financed in part through recourse to the Central Bank. The Federation, an autonomous entity which manages the domestic and external marketing of Colombia's coffee, purchases coffee from producers at a fixed price in pesos and then sells it on the world market. Since the Federation stands ready to purchase all coffee offered at the fixed price, it also bears the financial burden of stock accumulation in periods of declining world prices. After paying taxes and marketing costs equivalent to nearly 25% of the international price, the Federation could not sustain the high domestic purchase price given the lower world coffee price without incurring huge losses. To avoid this, the domestic purchase price of coffee was lowered by 12% and the exchange certificate system was abolished for coffee exports. This latter measure will result in the conversion to cash over the next several months of around Col$10 billion in outstanding exchange certificates. To offset the monetary impact of this measure, reserve requirements on term deposits of commercial banks and financial corporations are to be increased gradually over the next few months, to 25% from 20% at present, and prior import deposit requirements have been raised substantially, to 95% from 40% and 60% previously. In addition, the interest rate on dollar denominated certificates issued by the Central Bank was raised to 14% from 7% in an attempt to absorb some of the funds flowing from the exchange certificates. In a separate measure, retail gasoline prices were increased in mid-march and Sunday sales of gasoline were outlawed. Gasoline prices have been raised by 67% since September Development Strategy and Prospects 17. The development strategy embodied in the Development Plan aimed at accelerating the rate of growth of GDP and at distributing the benefits of such growth more equitably. This was to be achieved by increasing the allocative efficiency of the economy through greater reliance on market forces, by providing incentives for increasing private sector investment, by expanding economic and social infrastructure, and by improving public services provided to the poorest half of the population. Substantial progress has been made in carrying out this strategy during the past four years. Public sector investments have focused increasingly on projects designed to alleviate rural and urban poverty and on expanding and improving infrastructure. Comprehensive integrated rural development and nutrition projects aimed at increasing incomes and welfare of the lowest income groups have been introduced. Urban development projects designed to provide improved services and employment opportunities to residents of slum areas in Colombia's major cities have been initiated. These programs have been complemented by policies to encourage the development of small- and medium-scale enterprises and to decentralize industry away from the three largest cities. This latter policy, together with credit programs aimed at increasing output and employment in agriculture, have been designed to alleviate rural poverty and reduce rural/urban migration. Public

11 - 7 - sector infrastructure investments have been concentrated on improvement and extension of highway and communications systems. Special priority has been given to the development of domestic energy sources to reduce the country's growing dependence on imported oil. 18. Increased emphasis on provision of improved social services is reflected in the increased proportion of total National Government expenditure on education, health, and water and sewerage systems, which rose from 33% in 1974 to 38% in The economic dislocations caused by the coffee boom and the need to concentrate economic policy on short-term management problems have limited expansion of public and private investment and required temporary suspension of some of the measures designed to free the price system and stimulate growth of non-traditional exports. 19. The Government, which took office in August 1978, intends to continue with essentially the same development strategy as the previous administration. Under this strategy, economic growth is to be promoted through expansion of non-coffee exports and through measures to stimulate investment and increase the efficiency of resource allocation. This Government proposes to give greater emphasis to expansion of economic and social infrastructure, however, with particular stress on improving transport and communications networks. Improvement in transport and communications infrastructure is expected to encourage increased inter-regional trade which, together with alleviation of the foreign exchange constraint, should further stimulate investment and economic growth. Measures to encourage industrial decentralization have been introduced to complement the actions taken to unify regional markets. 20. Rapid expansion of domestic energy resources is to be given high priority with the view to regaining self-sufficiency in energy as early as possible. Even under the most optimistic assumptions regarding development of such resources, however, Colombia will continue to rely heavily on energy imports until the mid-1980s when exports of coal and natural gas are expected to reduce the country's net energy deficit. Small scale agriculture and industry will continue to receive strong support through credit, and low income rural areas are to be helped through rural electrification, health and education programs and through expansion of feeder road projects. Innovative programs such as the integrated rural development (DRI) and nutrition projects financed by the Bank are expected to receive continued high priority. Public investment programs in education, health, water and sewerage and urban development (especially those directed at alleviating urban poverty) are to be continued as well. 21. Given the country's strong resource base and its high level of international reserves, Colombia should be able to achieve annual real GDP growth averaging about 7% during the period. Maintenance of this level of growth will require rapid expansion of non-coffee exports and high savings and investment rates. Public sector investment is expected to expand faster than GDP during this period because of the large proposed programs for infrastructure, social services and energy development. Financial requirements for this higher level of investment will be substantial and public sector savings will have to be sustained at the current high levels. Given the expected decline in coffee revenue, improvements will be required in the administration and collection of non-coffee taxes, and additional tax measures

12 - 8 - may be required. Of equal importance is the continued upward adjustment in prices charged for the goods and services provided by the public decentralized agencies. Growth of non-coffee exports, especially of manufactured goods, will no doubt be strongly influenced by the rates of economic growth of Colombia's major trading partners, but appropriate domestic incentives w s also play an important role. In this regard, it is expected that Colombia will follow an exchange rate policy designed to maintain the competitiveness of Colombian exports and that additional export promotion measures will be adopted to encourage both product and market diversification. 22. Greater efforts to increase efficiency and production in the agricultural and industrial sectors will also be needed to complement incentives given to non-traditional exports. Programs to meet these needs in the agricultural sector, including integrated rural development, expansion of farm credit, improved research and extension services, and upgraded marketing facilities, are already in place and will need to be strengthened. Further development of the country's capital markets is expected to increase private savings and improve the allocation of financial resources, thereby providing the basis for more rapid growth of industry. Ongoing and future infrastructure investments by the public sector should facilitate improvements in economic efficiency and lead to more rapid growth of output and employment in both industry and agriculture. 23. Projections of Colombia's energy balance indicate a rapidly growing deficit that is expected to reach significant proportions in the early 1980s in the absence of an aggressive energy development program. To avoid the constraint on growth that large scale shortages of energy would entail, high priority is being given to the development of additional energy sources. The strategy which is being pursued is to reduce the nation's dependence on petroleum as an energy source by developing substitutes such as hydropower, coal and natural gas. Major projects are being executed and others prepared to expand hydroelectric power generation and incentives are being given to private foreign companies for accelerated exploration and development of the country's petroleum, coal and natural gas potential. Exports of coal and natural gas are expected to offset a large portion of the petroleum imports projected for the mid to late 1980s. Conservation of existing resources resulting from higher energy prices is expected to slow the growth in energy demand. While the total investment cost of future energy development is still being determined, preliminary estimates indicate that the required investment could run as high as US$8.0 billion in current prices over the next decade. Even under the most optimistic assumption regarding foreign private investment, suppliers' credits and domestic resource mobilization, external long-term financing of about US$4.0 billion would be required in this sector alone during this period. Any significant delay in implementing the country's energy development program would most likely have serious adverse repercussions on future economic growth. 24. Because of the expected continued decline in world coffee prices, accelerating oil imports and the high import content of future investment projects, the current account of the balance of payments is expected to be in deficit throughout the early to mid-1980s. Increased mineral exports including coal, natural gas, and nickel, and completion of the large investments in energy development are expected to relieve the pressure on the

13 - 9 - balance of payments by the late 1980s. Colombia is expected, therefore, to continue to be a large net importer of capital for some time to come. Its future external resource requirements reflect the need to supplement domestic savings in order to carry out the public sector investment program and to provide increasing amounts of foreign exchange to finance required imports of capital and intermediate goods. Assuming that the Colombian authorities permit a drawdown of international reserves to the equivalent of three months' imports in the years immediately ahead, gross external capital requirements are projected at US$6.3 billion between 1979 and 1983, or an annual average of about US$1,260 million. About half of Colombia's capital inflow during this period is expected to be provided by official multilateral and bilateral sources, with commercial financial credits becoming increasingly important. 25. Colombia's public external debt repayable in foreign currency amounted to US$4.2 billion at the end of 1978, of which US$2.7 billion was disbursed and outstanding. The Bank/IDA share of this external debt was 29% and is expected to rise to 31% by 1983, before declining to 29% again by Although the public debt service ratio fell during the past two years as export growth accelerated, this ratio is expected to increase from 10.3% in 1978 to about 14.7% in Balance of payments prospects beyond 1980 will depend heavily on the timely development of domestic energy sources and on progress made in executing several natural resourcebased export oriented projects currently under preparation. Given the expected continuation of sound economic and financial management and timely execution of the country's energy program, it should be possible to prevent the external sector from again becoming a constraint on economic growth and to maintain Colombia's creditworthiness for the required external borrowing. PART II: BANK GROUP OPERATIONS IN COLOMBIA 26. The proposed loan, the 79th to be made to Colombia, would bring the total amount of Bank loans to Colombia to US$2,066.7 million (net of cancellations). Of this amount, US$1,602.6 million is now held by the Bank; IDA made one credit of US$19.5 million for highways in Colombia in Disbursements have been completed on 46 loans and the IDA credit. IFC has made investments and underwriting commitments of US$53.7 million in 24 enterprises and now holds US$18.1 million. Annex II contains a summary statement of Bank loans the IDA credit as of January 31, 1979 and IFC investments as of February 28, The Annex also contains summaries on the execution of the 29 ongoing projects. 27. Since FY68, Bank lending in Colombia has become more diversified and has been concentrated on production-oriented programs and activities which emphasized social as well as economic benefits. Eight of the eleven agricultural loans have been made since then, nine of the twelve loans for industry, all three loans in the education sector, one loan for a nutrition project and one loan for an urban development project and including the proposed project, all eight loans for water supply and sewerage. This compares with only ten loans since FY68 in the power and transport sectors.

14 Bank lending to Colombia in FY78, consisted of loans for nutrition improvement, water and sewerage, urban development, power generation and interconnection, development finance companies and development of an export processing zone, totalling US$354.6 million equivalent. In addition to the proposed project, the FY79 program includes the already approved aviation development, Mesitas hydroelectric and Cartagena urban projects and proposed loans for nickel mining, power and agricultural credit for land reform beneficiaries. Work is also under way in medium-city water supply systems, vocational training, transportation, further mining development, power, including rural electrification, land settlement, further agricultural credit and small scale industry for possible consideration by the Executive Directors during the next two years. 29. The proposed Bank lending conforms closely with the Government's development strategy. To help Colombia develop domestic sources of energy, a substantial part of the proposed lending would be for hydropower. The Bank intends to assist the development of coal mines and petroleum, which hold potential in helping Colombia meet part of its energy requirements and in diversifying exports. Bank involvement in the energy sector would help mobilize additional external financing as some of the projects would require co-financing. Other future loans would finance agriculture and 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 objectives would be the proposed Bank lending for transport infrastructure. In this context, we are assisting the Government in preparing a rural and feeder roads project to integrate the more backward areas of the country into the modern economy. Other loans under preparation for highways, ports and railroads are aimed at helping Colombia handle larger volumes of nontraditional exports and the imported inputs on which the modern sector of its economy relies for expansion. Finally, a relatively large number of loans are being prepared in support of the Government's efforts to help the lowest 50% of the Colombian population. The proposed urban development and slum improvement, rural electrification, land settlement, credit for land reform beneficiaries and water supply and sewerage projects are principally designed to improve the standard of living of the poor. 30. 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 period, their share has decreased since then to approximately 50% for the period. 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 supported programs in education, urban development and small farm development. More recently, it has moved to small project loans aimed chiefly at improving the distribution of income. It expects to phase out its aid program in Colombia in 1979 with the commitment of a US$6 million nutrition loan.

15 PART III: THE SECTOR, THE CITY AND THE INSTITUTION Urban Growth 31. During the past several decades, Colombia experienced one of the highest rates of growth in Latin America. The percentage of population living in urban areas is estimated to have doubled in that period and now is close to 70%. Urban population grew at an average annual rate of 6% during the period or nearly twice as fast as the growth of total population. Although the rate of growth of urban areas has declined to 4.5%, it remains significantly above the 2.8% population growth rate for the entire country. 32. Unlike other countries of comparable size and development, Colombia has several large urban centers. Twenty-two cities have more than 100,000 inhabitants, of which eight have more than 300,000. The four largest, Bogota with 3.8 million, Medellin with 1.3 million, Cali 1.1 million and Barranquilla 800,000 account for nearly 30% of the country's population. Water Supply and Sewerage Facilities, Institutions and Past Investments 33. 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. According to a recent Bank study, I/ service levels in rural areas are far lower; in 1974, 20% of rural families had piped water and only 5% had sewerage facilities. Over the past five years, however, there has been a sharp increase in public services in rural areas and unpublished Government estimates suggest that in villages water supply coverage now reaches 40% of the population. 34. Water supply and sewerage services are provided by several types of institutions. Four municipalities own independent companies which construct, operate and maintain water supply and sewerage facilities. The Instituto Nacional de Fomento Municipal (INSFOPAL) supervises and finances the construction and operation of water supply and sewerage systems by regional and municipal entities in some 750 towns with populations of 2,500 or more. The Instituto Nacional de Salud (INAS) constructs and operates water supply systems for communities of up to 2,500 inhabitants. Also, in some departments, the regional health authorities, who are responsible for sanitation (principally the building of latrines), construct water systems under the supervision of INAS. Both INAS and INSFOPAL are autonomous public entities responsible to the Ministry of Health which together with the National Planning Department, are responsible for overall sector planning. 1/ Who Benefits from Government Expenditure? A Case Study of Colombia by Marcelo Selowsky - IBRD (RPO-296).

16 Investment outlays for water supply and sewerage have risen considerably, increasing from US$21.6 million equivalent in 1965 to US$55.8 million equivalent in 1975 and are expected to reach nearly US$100 million by In terms of total public sector investment, they have averaged about 5.5% during the past three years. In the period, water supply and sewerage invescments amounted to US$393 million, of which 72% was expended by the municipal enterprises, 20% by INSFOPAL and 8% by INAS. Financing for these investments was obtained from the national budget (35%), from external sources (20%) and from internal generation and domestic credits (45%). Government Approach 36. The Government aims to provide piped water to 90% of the urban and 80% of the rural non-dispersed population and sewerage services to 80% and 60%, respectively, by Since expansion of public services at affordable costs for low income families is also an important Government objective, all urban water supply and sewerage authorities have applied progressive tariff scales; in rural areas, water charges are based on the community's ability to pay. Another Government aim is to achieve higher levels of sector self-financing. The Government recognizes that achievement of sector objectives have been delayed principally because water and sewerage entities have not generated sufficient financial resources of their own. Bank Role in the Sector 37. Bank involvement in water supply and sewerage has been extensive and has supported the Government objectives referred to in the previous paragraph. Noteworthy is the Bank's contribution to water and sewerage programs that assist the poor, particularly through components in integrated projects targeted at the poor, and to the building and financial strengthening of institutions within the sector. The proposed loan would be the eighth for water supply and the fifth for sewerage. All told, Bank assistance for water supply and sewerage has covered all but one of the major cities, nearly all of the medium-sized urban areas and rural areas in 14 departments. Including the proposed loan, total Bank lending for water supply and sewerage which commenced only in 1968 would amount to US$211.3 million or 10% of total Bank lending thus far to Colombia. Bogota and its Water Supply and Sewerage Services 38. Besides serving as capital, Bogota is the financial, commercial and cultural center of Colombia. Also, in recent years, it has displaced Medellin as the principal industrial city. Its population has been growing at 5.8% per annum since 1970, reaching 3.8 million in In 1975, Bogota accounted for 14% of Colombia's population, 28% of industrial production and 29% of industrial employment and its relative importance is estimated to have increased since then. In spite of the Government's programs to encourage the development of secondary cities and to divert some of the increase in population and resources away from the four major cities (Bogota, Medellin, Cali and Barranquilla), it is expected that Bogota will continue to grow rapidly and have more than 7 million inhabitants by 1990.

17 The quantity of the treated water in Bogota is sufficient to meet its needs. Coverage is also fairly high -- 86% of the population and 64% of the poor have water connections -- but lower than in other large Colombian cities. (In Cali, for example, 96% of households are already connected). About 66% of the water is consumed in homes, 27% by commercial and industrial users and 7% by Government. Households without connections -- amounting to 14% of the total -- are nearly all below the poverty line and are generally served by standpipes or from surface or groundwater sources. One of the objectives of the proposed project is to increase the number of water connections to these households. Reflecting the rapidly growing number of new connections to low income families, who use relatively small amounts of water, average water consumption in Bogota has fallen in recent years. Water is metered and paid for by users at progressive tariff rates which depend upon property values and individual consumption levels. The quality of water supplied in Bogota meets international public health standards. 40. About 80% of all of Bogota's households and 50% of those classified as urban poor are served by direct connections to EAAB's sewerage system. The remainder are connected to septic tanks or to private community provisional drains which discharge into ditches or small streams. Most of the sewage is discharged into the Bogota River, whose contamination and silting have become major health and flood hazards. The proposed project would deal with this problem in a number of ways: (a) through a study to determine the most feasible way to dispose of Bogota's sewage; (b) by testing a pilot sewage disposal plant in conjunction with the above study; and (c) by planning for the long run rectification of the Bogota River. The Institution 41. EAAB, which is an autonomous tax exempt public enterprise owned by the Municipality of the Special District of Bogota, is responsible for planning, constructing and operating all water supply, sewerage and drainage facilities. The Mayor of Bogota appoints the General Manager and also serves as Chairman of the seven-member Board of Directors. Although EAAB is autonomous and its Board charged with setting policy and tariffs, proposed major works must be approved by the Municipal Planning Board and the Municipal Government, and proposed tariff ceilings must be approved by the National Tariff Board. In practice, however, these external bodies have endorsed virtually all proposals of EAAB. Based on the highly regarded quality of EAAB's work and the fact that the Mayor serves as Chairman of the Board, it is expected that EAAB will, in future, continue to set all of its own policies and investment programs. 42. EAAB has developed into a mature and well-run company with a high quality professional staff. In spite of its rapid expansion, EAAB has been able to control the growth of its staff which at present totals about 2,700. It currently has one employee for every 1,200 persons served which is a highly favorable ratio compared with other Latin American water utilities. In financial terms, it is projected that in addition to meeting its operating costs and debt service, EAAB would be able to generate internally more than one-half of its capital expenditures over the next few years. This strength has encouraged the entity to seek financing for the first time on the international capital markets to finance the cost overruns for the Chingaza plant.

18 It is expected that EAAB's reliance upon the Bank for its external financing will gradually decrease. The project would continue strengthening EAAB; technical assistance would be provided to develop more effective information and financial forecasting systems. 43. EAAB has professional expertise in all aspects of water treatment and distribution as well as sewerage and storm drainage. However, it lacks competence in the area of sewerage treatment and pollution control. The proposed project would be a first effort at building such competence (paragraph 36). It is expected that future Bank collaboration with the institution would concentrate on further development in this area. Performance Under Previous Loans 44. EAAB has been responsible for executing two Bank-assisted projects (Loans 536-CO in 1968 and 741-CO in 1971) which dealt principally with water treatment and transmission mains. The projects were aimed at increasing water production to avoid the recurring water shortages and rationing which were common at that time in Bogota, and at strengthening EAAB. By and large the projects have achieved, or are achieving, their objectives. Nevertheless, construction delays occurred in both projects and coupled with unanticipated rates of inflation resulted in large cost overruns. The delays were largely the result of the poor performance and withdrawal of contractors. An expanded first project was completed successfully in With the second project, due to be completed three years behind schedule at the end of 1980, EAAB should be able to meet water demand until about The Project Performance Audit Report for the First Bogota Water Supply Project (dated March 30, 1978, SRCM ) highlighted the optimistic water consumption projections which served as the basis for the two projects. Water use did not reach anticipated levels because: (a) the rate of growth of Bogota's population declined during the 1970's; (b) EAAB's cash generation fell short of targets and construction of some distribution networks were postponed; and (c) average water use levels fell as the poor became a higher percentage of the population served. For the proposed project, more refined estimates of current population, growth trends and per-capita consumption levels were used as a basis for the demand projections. The report went on to question the Bank's emphasis on water production with less involvement in the ultimate distribution of water. The proposed project would correct the imbalance by supporting water supply distribution and thus result in increased capacity utilization of EAAB's water and a higher rate of coverage among the population at large and the poor in particular. PART IV: THE PROJECT Background and Objectives 46. The project was prepared by EAAB's technical staff with the assistance of local consultants. It comprises EAAB's investment program. The project was appraised by a Bank mission in September/October Negotiations were held in Washington, D.C. in April of 1979, with a Colombian delegation led by the Ambassador to the United States, Mr. Virgilio Barco.

19 The project aims at improving health and living conditions in Bogota by (a) providing water supply, sewerage and drainage facilities to its residents; and (b) by determining long-term solutions for the disposal of the city's sewage and for the rectification of the polluted and silted Bogota River. A significant portion of the investments under the project are aimed at increasing service coverage in the poorest barrios (neighborhoods), where the impact on health conditions would be greatest. By connecting additional households with about 1.1 million inhabitants, the project would make use of the excess capacity that will result with the commissioning in late 1980 of the Chingaza Treatment Plant financed under the Second Bogota Water Supply Project (Loan 741-CO). Also, the project would contribute to strengthening EAAB further with the objective of eventually weaning the institution from Bank support. However, before EAAB can dispense completely with Bank assistance, it will still require further Bank support to help develop sufficient expertise in the complex matter of sewage disposal and long-term strengthening of its financial position. Summary Description of the Prolect 48. The specific project components are as follows: (a) Water Supply: (i) about 27 km of primary distribution mains to supply new areas of urban development; and (ii) about 80 km of distribution networks to serve 24 low-income barrios near the city perimeter. (b) Sewerage: (i) about 17 km of interceptors to collect sewage that is currently discharged into four surface canals; and (ii) sewerage networks in 48 low-income barrios, plus combined networks in another seven barrios. (c) Storm Water Drainage: (i) about 10 km of drainage canals on three waterways; (ii) three regulating reservoirs to hold storm water; and (iii) storm water drainage networks in 18 low-income barrios. (d) Equipment: (i) procurement and installation of 215,000 water meters, equipment for leak detection, construction and maintenance equipment and vehicles. (e) Construction of a pilot sewage treatment plan;

20 (f) Project Engineering: (i) engineering services, including consultant services, for detailed design and construction supervision. (g) Feasibility Studies: (i) feasibility studies for the disposal of the city's sewage and for the design of a first stage sewerage treatment plant; and (ii) feasibility studies and designs for the first phase of a master plan for the rectification of the Bogota River. With the exception of the feasibility study for the Bogota River regulation, all components will be carried out by EAAB. The Corporacion Autonoma de la Sabana de Bogota y los Valles de Ubate y Chiquinquira (CAR) will carry out the Bogota River study according to arrangements satisfactory to the Bank to be agreed upon by CAR, EAAB.and the Empresa de Energia Electrica de Bogota. A condition of disbursement for the study would be that such arrangements have been made (Section 3.01(c) and paragraph 4 of Schedule I of the draft Loan Agreement). Costs and Financing 49. The total cost of the project is estimated at US$62.7 million equivalent of which US$30 million equivalent (48%) correspond to the foreign exchange costs. The cost estimates are based on recent bids for similar works and equipment and include physical contingencies of 10%. Price contingencies amount to 15.5% of base costs and are based on estimates of yearly domestic and international price increases. 50. The proposed Bank loan of US$30 million equivalent would finance the estimated direct and indirect foreign exchange costs. EAAB would finance from internal generation and betterment levies the remaining US$32.7 million equivalent in local costs as well as interest during construction of an estimated US$4 million equivalent. A breakdown of project costs and financing is presented in the Project and Loan Summary. Procurement and Disbursement 51. All contracts will be awarded under international competitive bidding (ICB) in accordance with Bank guidelines, except for civil works contracts under the equivalent of US$300,000 and materials and equipment contracts under the equivalent of US$100,000. These smaller contracts will be awarded under local competitive bidding procedures satisfactory to the Bank and will not exceed in total the equivalent of US$2 million. Suppliers of goods manufactured in Colombia would receive a margin of preference of 15% or the import duties, whichever is lower. Civil works contracts are expected to be won by local contractors and most equipment supply contracts by foreign suppliers. In order not to delay the benefits of the water and sewerage network extension program, advance contracting of up to 10% of the

21 total civil works costs would be financed under the loan. Consulting services for the feasibility studies and the engineering work would be let under terms and conditions satisfactory to the Bank. It is expected that contracts for consulting services expected to amount to 1,372 man-months will be awarded to local firms which, in turn, will sub-contract with foreign firms for certain specialized works. 52. Disbursements would be made for 100% of the costs of imported material and equipment, 100% of the ex-factory cost of locally manufactured goods procured under ICB, 37% of civil works and of the ex-factory cost of locally manufactured goods not procured under ICB and 50% of the total cost of consulting services. In order for network extension activities to proceed without delay, retroactive financing for expenditures made after January 1, 1979 for this purpose of up to US$900,000 equivalent (3% of the loan amount) would be provided under the loan (Schedule I, Paragraph 4 of the draft Loan Agreement). The loan is expected to be fully disbursed by June 30, Finances 53. Between 1971 and 1975, EAAB's financial position deteriorated as a result of inadequate tariff adjustments to compensate for increasing operating costs. The operating ratio consequently increased from 0.61 in 1971 to 0.75 in 1975 and the rate of return on revalued net fixed assets declined from 11.8% to 4% in the same period. Furthermore, the debt service ratio fell from 7.2 to 1.7. The financial constraint resulting from this situation forced EAAB to defer much needed network extensions. 54. In June 1976, after a careful analysis of revenue requirements, EAAB began a 24-month program of tariff restructuring and increases which improved revenue per unit by 122% compared to 72% rise in unit costs. As a result, the debt service ratio rose to 4.2 and the rate of return to 9.1% in 1977 and the institution was able to finance 37% of its capital expenditures from internal cash generation. The rate of improvement slowed somewhat in 1978 as tariff adjustments were slowed down for political reasons, a meter readers' strike resulted in the loss of some revenues and operating expenses continued to increase. Though the rate of return fell to 5.9%, this was adequate considering that, in addition to operating expenses, including debt service, EAAB was able to meet about 50% of its capital expenditures from internal cash generation. 55. EAAB has four sources of revenue. About 80% of revenues result from regular water and sewerage charges and fees for household and network connections. The remaining 20% come from betterment levies (valorization) and contributions in either cash or installed networks from consumers or developers. 56. The present tariff structure is simple, well designed and progressive. For water, residential consumers pay from Col$2.14/m 3 (US$0.054) to Col$5.36/m 3 (US$0.134) depending on their assessed property value and amount of water consumption. Water consumed beyond 60 m 3 /month is billed at Col$8.58/m 3 (US$0.215) to all residential consumers. Small industrial and commercial consumers are billed at rates 15% to 30% higher than their respective residential category; large industrial concerns are charged Col$7.07/m 3 (US$0.177). Sewerage tariffs are 30% of the water bill for all

22 consumers with sewerage connections. The above structure provides for substantial cross-subsidies--for example, the two lowest residential categories account for 41% of EAAB's connections, use almost 28% of the water sold and pay only 17% of monthly water and sewerage charges. Four of the seven residential categories are subsidized by the remaining consumer categories. Combined water and sewerage tariffs for the lowest income groups are considered affordable and estimated to amount to not more than 3% of family income. At the same time, average combined tariff levels are in line with the long run marginal costs of providing water and sewerage. 57. Valorization charges in Bogota designed to recover the capital costs of certain public works projects are levied according to the estimated increase in property value resulting from the project. They are collected on public works projects including roads, sewerage and drainage but not on water works for which consumers pay a fixed percentage in connection fees. Valorization for all public works are billed and collected by a city authority, the Instituto de Desarrollo Urbano (IDU). All but a 20% fee of collections for sewerage and drainage projects are transferred to EAAB. However, the transfer of these funds has not always been fully carried out and, often, is done with considerable delay. Assurances have been received, therefore, that EAAB will enter arrangements satisfactory to the Bank with IDU to ensure sufficient collection and transfer of betterment levies on the sewerage and drainage works under the project (Section 5.07 of the Loan Agreement). Valorization charges amount to less than 5% of EAAB's revenue, but could increase in importance if collected and transferred adequately. 58. EAAB has already instituted a program of 1% monthly tariff increases through 1982 and is in the process of reclassifying consumers to higher tariff categories that will result in an increase in revenues of 9% in With a further increase to 1.5% monthly in 1980, EAAB's financial performance is expected to remain satisfactory. Although, it would not permit EAAB to achieve the 10% rate of return in 1979 and 1980 stipulated under Loan 741-CO, it would allow sufficient internal cash generation after debt to meet more than 50% of capital expenditures in those years. In line with the foregoing, the minimum rates of return on revalued net assets to be achieved by EAAB would be reduced to 7% in 1979 and 1980, 5% in 1981 and 1982 and 6% in subsequent years (Section 5.05 of the draft Loan Agreement). 59. During the period , EAAB's total financing requirements are estimated at Col$13.7 billion (US$260 million) of which about three-quarters would be for capital expenditures. EAAB is expected to contract on terms and conditions satisfactory to the Bank, foreign exchange loans of US$20 million to cover expected cash shortfalls in 1979 and 1980 (Section 3.01(b) of the draft Loan Agreement). Subsequently, all requirements are projected to be met from internal cash generation and the Bank loan. Benefits, Justification and Risks 60. The proposed project would improve living and health conditions in Bogota and would provide for effective long-run planning of sewage disposal and maintenance of a clean river environment. About 1.1 million people would benefit directly from the water supply component, one million from the

23 sewerage and 400,000 from storm water drainage. By reducing flooding in some areas, the storm water drainage component would furthermore make more land available for urbanization. About 43% of project beneficiaries are expected to be below the poverty line. 61. The project works are least cost alternatives. The internal rate of return (IRR) for water supply and sewerage networks accounting for 37% of project costs is estimated at 47%. The IRR for the drainage and sewage interceptor components which account for 32% of total project cost is estimated at 21%. The return of the water supply and sewerage investments are high because the project will use existing water production capacity and sewage interceptors. Incremental revenues for water and sewerage were taken as a measure of minimum benefits, while increases in land values were used to reflect the benefits of the drainage and sewage interceptor components. The resulting aggregate IRR for 69% of project costs is estimated to be 37%. IRR's were not calculated for the studies, the maintenance equipment and two parts of the drainage component, because their benefits are not easily quantifiable and/or cannot be easily segregated from EAAB's overall operations. As mentioned earlier, the studies are important for determining least cost alternatives, while the equipment is necessary for maintenance. 62. Project works are conventional in design and well within the capability of local contractors. Nonetheless, if delay and/or cost overruns would occur, the return on investment would still be expected to remain significantly above the opportunity cost of capital. The risks associated with this project, therefore, are considered to be minimal. PART V: LEGAL INSTRUMENTS AND AUTHORITY 63. The draft Loan Agreement between the Bank and EAAB, 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. 64. Special conditions of the loan are listed in Section III of Annex III. There are no special conditions of effectiveness. A condition of disbursement for the Bogota River rectification study is that EAAB, CAR and EEEB enter into arrangements satisfactory to the Bank for the purposes of carrying out the study (paragraph 4 of Schedule I of the draft Loan Agreement). 65. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank.

24 PART VI: RECOMMENDATION 66. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President Attachments May 2, 1979

25 ANEXI Page 1 of 5 TABLE 3A COLOMBIA - SOCIAL INDICATORS DATA SHEET REFERENCE GROUPS (ADJUSTED AVERAGES COLOMBIA /a LAND AREA (THOUSAND SQ. KM.) - MOST RECENT ESTIMATE) TOTAL SAME SAME NEXT HIGHER AGRICULTURAL MOST RECENT GEOGRAPHIC INCOME INCOME 1960 /b 1970 /A ESTIMATE /b REGION /c GROUP /d GROUP /e GNP PER CAPITA (US$) ENERGY CONSUMPTION PER CAPITA (KILOGRAMS OF COAL EQUIVALENT) POPULATION AND VITAL STATISTICS TOTAL POPULATION, MID-YEAR (MILLIONS) URBAN POPULATION (PERCENT OF TOTAL) 53.0 /f POPULATION DENSITY PER SQ. KM PER SQ. KM. AGRICULTURAL LAND POPULATION AGE STRUCTURE (PERCENT) 0-14 YRS YRS YRS. AND ABOVE POPULATION GROWTH RATE (PERCENT) TOTAL URBAN 6.0 /g 5.5 /h CRUDE BIRTH RATE (PER THOUSAND) 46.1 /i 44.3 /i 40.6 /i CRUDE DEATH RATE (PER THOUSAND) GROSS REPRODUCTION RATE FAMILY PLANNING ACCEPTORS, ANNUAL (THOUSANDS) USERS (PERCENT OF MARRIED WOMEN) FOOD AND NUTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1970=100) PER CAPITA SUPPLY OF CALORIES (PERCENT OF REQUIREMENTS) PROTEINS (GRAMS PER DAY) OF WHICN ANIMAL AND PULSE CHILD (AGES 1-4) MORTALITY RATE HEALTH LIFE EXPECTANCY AT BIRTH (YEARS) INFANT MORTALITY RATE (PER TIOUSAND) /i ACCESS TO SAFE WATER (PERCENT OF POPULATION) TOTAL URBAN RURAL ACCESS TO EXCRETA DISPOSAL (PERCENT OF POPULATION) TOTAL URBAN RURAL POPULATION PER PHYSICIAN POPULATION PER NURSING PERSON POPULATION PER HOSPITAL BED TOTAL URBAN RURAL ADMISSIONS PER HOSPITAL BED HOUSING AVERAGE SIZE OF HOUSEHOLD TOTAL URBAN RURAL AVERAGE NUMBER OF PERSONS PER ROOM TOTAL URBAN RURAL ACCESS TO ELECTRICITY (PERCENT OF DWELLINGS) TOTAL 47.0 /f URBAN 83.0 If RURAL 8.0 If

26 ANNEX I Page 2 of 5 TABLE 3A COLOMBIA - SOCIAL INDICATORS DATA SHEET REFERENCE GROUPS (ADJUSTED AVERAGES COLOMBIA la - MOST RECENT ESTIMATE) SAME SAME NEXT HIGHER MOST RECENT GEOGRAPHIC INCOME INCOME 1960 /b 1970 /b ESTIMATE /b REGION /c GROUP Id GROUP /e EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL FEMALE SECONDARY: TOTAL FEMALE VOCATIONAL (PERCENT OF SECONDARY) 31.0 /k PUPIL-TEACHER RATIO PRIMARY SECONDARY ADULT LITERACY RATE (PERCENT) CONSUMPTION PASSENGER CARS PER THOUSAND POPULATION RADIO RECEIVERS PER THOUSAND POPULATION TV RECEIVERS PER THOUSAND POPULATION NEWSPAPER ("DAILY GENERAL INTEREST") CIRCULATION PER THOUSAND POPULATION CINEMA ANNUAL ATTENDANCE PER CAPITA EMPLOYMENT TOTAL LABOR FORCE (THOUSANDS) /f FEMALE (PERCENT) AGRICULTURE (PERCENT) 47.0 /f INDUSTRY (PERCENT) PARTICIPATION RATE (PERCENT) TOTAL MALE FEMALE ECONOMIC DEPENDENCY RATIO INCOME DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 41.2 /f.l 31.9 /l HIGHEST 20 PERCENT OF HOUSEHOLDS 67.7 /f.l 60.1 / LOWEST 20 PERCENT OF HOUSEHOLDS 2.1 /f.l 3.5 / LOWEST 40 PERCENT OF HOUSEHOLDS 6.8 /f,l 10.1 / POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN RURAL ESTIMATED RELATIVE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN RURAL ESTIMATED POPULATION BELOW POVERTY INCOME LEVEL (PERCENT) URBAN RURAL Not available Not applicable. NOTES /a The adjusced group averages for each indicator are populatimn-weighted geometric means, excluding the extreme values of the indicator and the most populated country in each group. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, between 1969 and 1971; and for Most Recent Estimate, between 1973 and Ic Latin America & Caribbean; /d Intermediate Middle Income ($ per capita, 1976); /e Upper Middle Income ( per capita., 1976); /f 1964; /R ; /h ; /i Official estimates based on registration data show crude birth rate for 1960 as 39.0, average as 36.0 and average as 31.0; /i Registered only; /k Includes teacher-training at the third level; /1 Economically active population. September, 1978

27 -23- ANNEX I DEFINITIONS Oy SOCIAL INDICATORS Page 3 of 5 Nats: The adjuated group average. for each indicator are population-weighted geometric means, excluding the extre_m values of the indicator and the most populated country in each group. Coverage of countries sxong the indicators dapende on eaylability of data end is not uniform. Due to lack of data, group averagee for Capital Surplus Oil Exporters end indicators of acces to water end excrete disposal, housing, income distribution end poverty are simple populationwighted geometric mns without the exclusion of extreme velue. LAND AREA (thousand sq. km) Population per hospital bed - total urbn, end rural - Population (tota1, Total - Total surface are comprising land area nd inland waters. urben, and rural) divided by their reepective number of hospital beds Agricultural - Moet recent estimat of agricultural area used temporarily available in public and private general end specialized hospital and reor permanently for crops, pastures, market and kitchen gardens or to habilitation centers. Hospitals are establishments permanently staffed by lie fallow. at least one physician. Eetablishaonts providing principally cuotodial Tcre are not included. Rural hospitals, however, include health and medi- GNP PER CAPITA (USS) - UNP per capita estimates at current market prices, cel centers not permanently stffed by a physician (but by a medical as calculated by seie conversion method as World Bank Atlas ( basis); sistant, nurse, midwife, etc.) which offer in-patient accomnodation and 1960, 1970, and 1977 data. provide s limited range of medical facilities. Admissions per hospital bed - Total nueber of admissions to or diucharges ENERGY CONSUMPTION PER CAPITA - Annual coneumption of commercial enrgy from hospitels divided by the number of beds. (co-l and lignite, petroleum, natural ges and hydro-, nuclear and geothermal electricity) in kilogreas of coal equivalent per capita. HOUSING Averaxe sixe of household (persons per household) - total. urban, acd rcral - POPULATION AND VITAL STATISTICS A household consists of a group of individuals who share living quarters Total population, mid-veer (millions) - As of July 1; if not v-iable, and their main eals. A boarder or lodger may or may not be included in average of two end-year estimates; 1960, 1970, end 1977 data, the household for staaistisial purposes Statistical definitiona of hoone- Urban population (percent of total) - Ratio of urban to total popula- hold vary. tion; different definitions of urban areas my affect comperability Averags number of persons per room - total, urban. and rural - Average nunof date among countries. ber of persons per room in all, urban, and rural occupied conventional PopuLation density dwellings, respectively. Dwellings exclude non-permanent structuros and Per sq. k.. - Mid-year popultion per square kilometer (100 heotares) unoccupied parts. of total are. Access to electricity (percent of dwellings) - total., urban, and rural - Per sq. kh. aiculture land - Computed a bove for agricultural land Conventional dwellings with electricity in living quart.rs as percentago only. of total, urban, end rural dwellings respectively. PopuDltion axe structure (percent) - Children (0-14 ycars), working-age (15-64 years), and retired (65 years end over) as percentages of mid- EDUCATION year population. Adjusted enrollment ratios Population growth rate (percent) - total., nd urban - Compound nnual Primary school - total, and female - Total and female enrollent of all ages growth rates of total and urban mid-year populations for , ot the primary level as percentages of respectively primary school-age , and populations; normally includes children aged 6-11 years but adjusted for Crude birth rate (per thousand) - Annual live births per thousand of different lengths of primary education; for countries with universal edomid-year population; ten-year arithmetic averages ending in 1960 and Cation enrollment may oxceed 100 percent since some pupils are bhlow or 1970 and five-year average ending in 1975 for most recent estimate, sbove the official school age. Crude death rate (per thousand) - Annual deaths per thousand of mid- Secondary school - total, and femleu - Computed *s above; secondory educayear population; ten-year arithmetic averages ending in 1960 and 1970 tion requires at least four yesrs of approved primry instruction; proand five-year average ending in 1975 for mst recent estimate. vides general vocational, or teacher training instructions for pupil6 Gross reproduction rate - Average number of daughters a woman will bear usually of 12 to 17 years of age; correspondence courses are generally in her normal reproductive period if she experiences present ege- encluded. specific fertility rates; usually five-year averages ending in 1960, Vocational enrollment (percent of secondary) - Vocational institutions in- 1970, and clde technical, industrial, or other programs which operate independently Family planning - acceptors, annual (thousands) - Annual number of or as deptrrments of secondary institutiros acceptors of birth-control devices under auspices of national family Pupil-teacher ratio - prinary, and secondary - Total students enrolled in pl-ning program. primary and secondary levels divided by numbers of teachers in the corre- FPmily planning - users (percent of married women) - Percentage of sponding lvels. married women of child-bearing age (15-44 years) who use birth-control Adult literacy rate (percent) - Literate adults (able to read and write) s devices to a11 married women in seine age group a percentage of total adult population aged 15 years and over. FOOD AND NUTRITION CONSUMPTION Index of food production per cepitr ( ) - Index number of per Passenger cars (per thousand population) - Passenger cars conprisr motor onro capita annual production of *11 food commodities, seating less than eight persons; occludes ambulances, hearses and military Per capita supply of calories (percent of resuiremants) - Computed from vehicles. energy equivalent of net food supplies -vailable in country per capita Radio receivers (per thousand population) - All types of receivers for radio per day. Available supplies comprise domestic production, imports less broedcasts to general public per thousand of population; excludes unlicensed exports, and changes in stock. Net supplies exclude animll feed, seeds, receivers in countries and in years whan registration of radio sets wan in quantities used in food processing, and losses in distribution. Re- effect; dats for recent years may not be comparable since most countries quirements were estimated by FAD based on physiological needs for nor- abolished licensing. al activity and health considering environsental tempersture, body TV receivers (per thousand population) - TV receivers for broadcast tc genera weights, age sod ea. distributions of population, and allowing 10 per- public per thousand population; escludes unlicensed TV receivers in councent for waste at household level, tries and in years when registration of TV sets was in effect. Per capita supply of protein (grams per day) - Protein content of per Nowspaper circulation (per thousand population) - Shows the average circulacapita net supply of food per day. Net upply of food is defined s tion of "daily general interest newspaper", defined as a periodical publiabove. Requirements for all countries established by USDA provide for cation devoted primarily to recording general news It is considered to a minimum allowance of 60 grams of total protein per day and 20 grams be "daily" if it appoars at least four tines a week. of animal and pulse protein, of which 10 grams should be animal protein. Cinem annual attendance per capita per year - Bnsed on the number of ticketo These standards are lower than those of 75 grams of total protein and sold during the year, including adsissions to drive-in cineman and nobile 23 grame of anial protein as an aver-ge for the world, proposed by unit. PAo in the Third World Food Survey. Per capita prstain supply from anil and pulse - Protein supply of food EMPLOYMIENT derived from animals and pulses in grs per day. Total labor force (thousands) - Economically active persons, including armed Child (ases 1-4) ortality rate (per thousand) - Annual deaths per thous- forces and unemployed but eocluding hosuseives, tudents, etc. Drfiniand in age group 1-4 years, to children in this age group. tioms in various countries are not coparabie. Feale (percent) - Female labor force as percentage of total labor force. HEALTH Agriculture (percent) - Labor force in farming, forestry, hunting and fishing Life expectancy at birth (years) - Average number of years of life as percentage of total labor force. remaining at birth; usually five-year averages ending in 1960, 1970, Industry (percent) - Labor force in mining, construction, manufacturing and and 1975 electricity, water and gas as percentage of total labor force. Infant mortality rate (per thousand) - Annual deaths of infants under Participetion rate (percent) - total, male, and female - Total, male, and one year of age per thousand live birhts. female labor force as yercentges of their respectivr popouitions. Access to safe water (percent of population) - total, urban, and rural - These are ILO adjusted participotion rutes reflecting age-sec Number of people (total, urban, end rural) with res.nnable access to structure of the population, und long tie trood. safe water oupply (includes treated surface waters or untreated but Econ..ic dependency ratio - Ratio of population under 15 and 65 and ovur to uncontaminated water such as that from protected boreholes, springs, the labor force in ago group of years. and usnitary wells) as percentages of their respective populations. In an urban aresa public fountain or standpost located not more INCOME DISTRIBUTION than 200 meters from a house may be considered s being within rea- Percentage of private income (both in cash and bind) received by richest 5 sonable access of thet house. In rural areas reasonable access would percent, richest 20 percont, poorest 20 percent, and poorest 40 percent imply that the housowifa or members of the household do not have to of households. spend a disproportionate part of the day in fetching the family's water aeeds. POVERTY TARGET GROUPS Access to excrete disposal (parcent of population) - total, urban, and Estimated absolute poverty income level (US$ per capita) - urban and rural - rural - Ncmber of people (total, urban, and rural) served by excrete Absolute poverty iocome level is thbt income level below which a oioimal disposal as percentages of their respective populations, Excreta nutritionally sdequate diet plus essential non-food requirements is cot disposal may include the collnctio sod disposal, with or without affordable. treatment, of human excreta and waste-watnr by water-borne systens Estimated relative poverty once level (ti) per capita) - urba and rural - or the use og pit privies and similar installations Relative poverty inco=e level is that income level less than one-third Population per physician - Population divided by number of practicing per capita persosal income of the country. physicians qualified from a medical school at university level. Estimatod population below poverty income level (percent) - urban and rutrl - Population per nursing person - Population divided by nsmber of Percont of population (urban and rural) who are either "absolute poor" or practicing male and female graduate nurses, practical nurses, and "relative poor" whichever is greater. assistant nurses. E conomic andl Soci Datn Divioce n Eoonomic Anu1ysis and Projections Dopart-et

28 ANNEX I ECO90O6C DEVELOPMNIIT DATA Pag 4 of 5 Pages (In mil11i. of S Dollars) oj baieted Projected Avaroot boocal G-eth eat-s A. P-racna of GDP Mera- a L ( ) A-T0NoC ACCOUNTS 19cco76 Pri-e ood E-oh-ooe Eooenot ½ocos D m )n ic odorl 9,660 14,567 15,236 15,971 17,249 18,391 23, OO N00.0 k:!n Ft-p Pococ of P-edo _ _ It-).:ross 138,96 qe[i n 15,236 16,668 17,671 10,469 23, D cm I poro ritni. MF) 1,491 2,047 2,302 2,441 2,882 3,187 4, Tot,octo Intl. UPS) (Irp Cocoit) _ b138A Ooon,,nnt Cop 72 ~~~ ~ ~~~ ~ ~~~~~-250 Cno..osupioo Eopo.oditoeo" 7,320 10,908 11,579 12,360 13,309 14, IrvesCmeDt E, pendioo res (Incl, 1,601 2,740 3,177 3,427 3,976 4,302 5, Dnteotesic osoing, ,000 3,637 4, 108 4,3362 4,253 S ,914 3,309 3,06l 4,206 4,084 5, ie2chahdise rhade A-nq1l Current C.-- at ri... A. Petteot of Total TO.410 Accoal gate at CorrsoO Friose ~~~~~~~~~~~ 0 47: apitolr 2ondo9700 5d ,281 1,494 1, r.nooeodoote Coodo (Eol. Fool,) ,005 1, Cuol, and Rolootd. SataOal, Coodo Co---aptlot Total Oo--ondla ,425 1,747 2,126 2,704 3,239 5, eporto (CIF) 0f ONIon Pnlmot- Prodt,ont , , flOlot: Corfee (341) (764) 71,792) (1,760) (7,064) (1,771) (2,044) 111.7) (27.0) ( ) (63.2) (43.4) O,--faotorad Goods S Ttol Mtn-h-ndio- Eorcstt (170) 606 1,717 2,255 2,796 3,298 1F 4, I '.C Eoport Price Indcc oporto Price OoId , Tennof T_ode lndoo VALUE A2DED BY SEC3O0 A-nooI at 1976 and Eochoo.e Rates (Fsctor Coot) Data - Pri-oo A -Etags Aoool Oto-th Rat.. Ac PerFe-t Of Total Agnlcoloote 4,145 4,224 4,330 4, ,923 4,953 6, It-dootto and hinine 2,427 a333 3,933 4,7 4,434 4,744 6, Serol-t 4,249 5, , otal 9,599 13,536 14,102 14,764 15,962 16,932 22, IO PuBLIc FIRANCE Annual Date Otrosot Otosa Peto.ot 01 As of GDP Poettral Conerooneot) Crnet-n Osos lpto 1,670 2, ,302 2,548 3,335 5, , C.onet. Etptsdi-oocc , , Bodgetoto Savioga 151 E ,119 1,439 1,603 2, D 5.0 Otte- Public So-t ta-logo rtilio Solon Jo s_et ,135 1,123 1,636 2,003 3, S31E1CT0 7RDI10D1R (Anoetot Ion Poelod Shoot) Operate 7006 ltaatd 0m Groco Dotaeetlt I-oretst, 1booed Ot YSeat) lopoct EloaoloOtn toegltol Dqmteotlc SlVnlga tote Matgloal Mtioool. a.. go toot ,20 01OR FORCE ARD OUT0 0T Ff8 WOR1R ttal Labor Fetes DETAIL O PF761C 967TOR IN7ESTMXST X T tt Millionos 0 of Total Grqeth tate PROGRAM AM6 FINANCING Actq ledased , SI OgeIooltore Indusrry 0.95B t-I7 2,7 lodoatro cod ololg R B.2 Pe-ter Soroico 34.7 To-ol Trenaport and Cen-icat-i-p ,5 Other 1~~~~~~~~~~~~~~~~~~~I I gloo Added -ea -orkor Pr bee atd toohatos Ratee Total Ep-eod.t.eee ID 01 DRoloro 7, of bocoaca ecegth Acts D FINANCING ogronoltone i6d9 1, iis.4 5,9 Poblic leotor leltga Ooduottt- 1,037 2, a,9 3.7oOsetoel Soottac Soonioc 1, ,0-1.2 DInr- 168u 10.6 Totol 7,359 1, O T-oIct-o oat..g Apt-l 2, 1979

29 'C CO S on 00 ox on 00~~~~~~~ CC ~TV-.0l 00 I oCI'll It, I., 1~ ~~ ~~~~ o0000 'XCI '' non ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0000~~z ~~~~t 0000 VOCO' ~~~IR '<C ~<~009o TI-,- '" no'00 00' "I. 00 (6t R, ~~~~90 UTC 0'0 0' ~~~~~~~~~~~~How 000. Ononooo0.o ~zl n000000n 0900' It0C' toc IT ' non ~~~~~~~~~~~-)... 0'00 0'0 0' *00 z, ~ ~ ~ ~ ~ ~ ~ ~ ~ ~t 0000

30 ANNEX II Page 1 of 11 THE STATUS OF BANK GROUP OPERATIONS IN COLOMBIA A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of January 31, 1979) (US$ million) Loan Amount (less Cancellation) Number Year Borrower Purpose Bank IDA Undisbursed 46 fully disbursed loans and one IDA credit / Colombia Roads Interconexion Electrica, S.A. Power Empresas Municipales de Palmira Water Supply Empresa de Acueducto y Alcantarillado de Bogota Water Supply Instituto Colombiano de la Reforma Agraria Irrigation Instituto de Fomento 874 Municipal Water Supply Empresas Publicas de Medellin Power Banco de la Republica Industrial Cr Colombia Education Ferrocarriles Nacionales Railways Colombia Pre-Investment Studies Banco de la Republica Industrial Cr Instituto Nacional de Fomento Municipal Water Supply Empresa Nacional de Telecomunicaciones Communications Colombia Rural Settlement Colombia Agriculture Banco de la Republica Industrial Cr Colombia Rural Dev Banco de la Republica Agricultural Cr Empresa Nacional de Communications Telecomunicaciones Banco de la Republica Industrial Cr Colombia Highways Colombia Nutrition Empresas Municipales de Cali Water Supply Colombia Urban Develop ment / 1978 Interconexion Electrica, S.A. Power Colombia Power

31 ANNEX II Page 2 of 11 A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of January 31, 1979) (Continued) Number Year Borrower Purpose Bank IDA Undisbursed Zona Franca Industrial Industrial y Comercial de Cartagena Export Banco de la Republica Industrial Cr / Colombia Airports / Empresa de Energia Electrica de Bogota Power TOTAL 2, Of which has been repaid Total now outstanding 1, Amount sold 49.7 Of which has been repaid TOTAL NOW HELD BY BANK AND IDA 1, TOTAL UNDISBURSED /1 Includes exchange adjustment of US$4.0 million. /2 Not yet effective. /3 Not yet signed.

32 ANNEX II Page 3 of 11 B. STATEMENT OF IFC INVESTMENTS (as of February 28, 1979) Type of Amount in US$ million Year Obligor Business Loan Equity Total 1959 Laminas del Caribe, S.A. Fiber-board Industrias Alimenticias Noel, S.A. Food products Envases Colombianos, S.A. Metal cans Morfeo-Productos para el Hogar, S.A. Home furniture Electromanufacturas, S.A. Electrical equipment Corporacion Financiera Development Colombiana financing Corporacion Financiera Development Nacional financing Compania Colombiana de Textiles Tejidos, S.A Corporacion Financiera de Development Caldas financing Forjas de Colombia, S.A. Steel forging Almacenes Generales de Warehousing Deposito Santa Fe, S.A Industria Ganadera Livestock Colombiana, S.A ENKA de Colombia, S.A. Textiles Compania de Desarrollo de Tourism Hoteles y Turismo, Ltda. (HOTURISMO) Corporacion Financiera del Development Norte financing 1969 Corporacion Financiera del Development Valle financing 1970 Promotora de Hoteles de Tourism Turismo Medellin, S.A Pro-Hoteles, S.A. Tourism Corporacion Colombiana de Housing Ahorro y Vivienda 1974 Cementos Boyaca, S.A. Cement Cementos del Caribe, S.A. Cement Las Brisas Mining Promotora de la Interconexion de los Gasoductos de la Costa Atlantica S.A. Utilities Compania Colombiana de Clinker, Cement and S.A. Construction Material Total Gross Commitments Less cancellations, terminations, repayments and sales Total commitments now held by IFC Total undisbursed - - -

33 ANNEX II Page 4 of 11 C. PROJECTS IN EXECUTION 1/ 1. Ln No. 680 Highways VI; US$32 million, June Effective date: March 29, 1971 Closing date: original - November 30, 1974 current - November 30, 1980 The largest component of the project, the paving program, has experienced considerable cost increases and delays. As of this writing, six sections in the program are still under construction, requiring about 190 km of paving. Project completion is now expected for end The other components of the project were completed with much less delay. The Government is actively considering taking several actions to complete the program. As of January 31, 1979, US$29.0 million (91% of the total) had been disbursed. 2. Ln No. 738 Palmira Water Supply and Sewerage; US$2 million, May Effective date: December 29, 1971 Closing Date: original - March 1, 1975 current - December 31, 1979 As of January 31, 1979, about 85% of the loan amount was disbursed. The original project works were completed at lower cost than originally estimated. The savings in the loan of about US$450,000 are being used to finance supplementary sewerage works which were already identified during project appraisal. 3. Ln No. 741 Water Supply (Bogota II); US$88 million, May Effective date: August 16, 1971 Closing Date: original - June 30, 1978 current - December 31, 1980 All works are progressing satisfactorily and expected to be completed by the end of Completion of the Chuza-Ventana tunnel section, however, is expected to be completed by mid Disbursements up to January 31, 1979, amounted to about 90% of the loan amount. 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 understanding that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution.

34 ANNEX II Page 5 of Ln No. 849 Irrigation (Atlantico II); US$5 million, June Effective date: November 14, 1972 Closing Date: March 31, 1978 The project is the second phase of a scheme to develop about 17,000 ha of seasonally inundated land for agricultural production. At the request of the Government, US$2.8 million of the loan of US$5.0 million were cancelled in February Work is continuing on additional feeder roads, tertiary canal drains, waterfronts, land clearing, subsoiling and leveling. Two contractors defaulted delaying work on the main drainage canal though a new contract was recently signed. Settlement of farmers within the project areas and the provision of technical assistance and farm credit have been making inadequate progress. The closing date would be extended once the Government provides appropriate assurances that the above delays and problems will be resolved. 5. Ln No. 860 Medium-Size Cities Water Supply and Sewerage Project; US$9.1 million, October Effective date: March 7, 1973 Closing Date: original - September 30, 1976 current - September 30, 1978 As of January 31, 1979, about 70% of the loan amount was disbursed. Management problems affected the initiation of the project, but progress has since improved. Delay in receiving budgetary funds as a result of the Government's economic stabilization measures also slowed down project execution. Postponement of the closing date to September 30, 1980 is under consideration. 6. Ln No. 874 Guatape II Hydroelectric Power Project; US$56 million, January Effective date: March 13, 1973 Closing Date: original - December 31, 1978 current - December 31, 1979 The progress of the work has been generally satisfactory except for delays in the resettlement of El Penol and Guatape villages because of the villagers' reluctance to move into the new cities. This problem is now resolved and filling of the Santa Rita reservoir was carried out in May 1978, three years behind schedule. The revised project cost is substantially above appraisal estimate, mainly occasioned by higher cost by the civil works. The Borrower experienced financial problems but, since the start of 1978, adopted substantial tariff increases and has been able to overcome them. Project completion is now expected for June As of January 31, 1979, US$46.6 million or 83% of the Loan amount had been disbursed.

35 ANNEX II Page 6 of Ln No. 903 Development Finance Companies V; US$60 million, May Effective date: November 9, 1973 Closing Date: original - June 30, 1977 current - June 30, 1979 The loan is fully committed. Disbursements are expected to be completed within the next few months. As of January 31, 1979, only US$1.0 million equivalent remained undisbursed. 8. Ln No. 920 Education III; US$21.2 million, July Effective date: January 10, 1974 Closing Date: original - June 30, 1977 current - December 31, 1979 The execution of the project had been suspended in mid-1975 pending redefinition of sector priorities by the Government. Project execution resumed in 1977 but suffered continuous delays. In June 1978, the Government submitted a proposal to reduce the scope of the project and to cancel a large portion of the loan. However, the new administration, which came to office in August 1978, retracted the proposal and decided to proceed with the project as originally conceived. Project execution is now expected to proceed normally and total project cost is projected to remain close to the appraisal estimate. 9. Ln. No. 926 Sixth Railway Project: US$25 million, August Effective date: December 6, 1973 Closing date: original - June 30, 1976 current - August 31, 1979 The freight traffic in ton-km has increased by 6% in 1978 over 1977, whereas pass-km of passenger traffic is likely to show a decrease of about 12% due to the discontinuance of several uneconomic passenger train services. Freight tariffs increased by 25% in 1979; passenger fares are expected to increase by 25% shortly. CNR's operating ratio improved to in 1978 from 147 in Average long-haul and train load have increased; staff has been further reduced to 10,895 by September 1978 as against the last appraisal target of 11,200 in Locomotive availability has deteriorated to an all-time low of 55% due to engine failures in certain types of locomotives and the shortage of urgently required spare parts. At the same time, an acute shortage of cash to buy spare parts, together with high debt service charges and increasing operating costs aggravated the situation. The Government is assisting the railways financially and is studying corrective measures. As of January 31, 1979 only about US$800,000 of the loan amount remained undisbursed.

36 ANNEX II Page 7 of Ln No. 971 Preinvestment Studies Project; US$8 million, March Effective date: June 27, 1974 Closing Date: original - December 31, 1978 current - December 31, 1979 In spite of slow start, commitments are now proceeding at a satisfactory rate. The Bank has approved 26 sub-projects and all sub-loans are now underway. As of January 31, 1979, US$4.5 million or 56% of the loan had been disbursed. 11. Ln No Second Multi-City Water Supply and Sewerage Project; US$27 million, January Effective date: April 14, 1975 Closing Date: June 30, 1980 There were substantial delays in making the eight subloans effective. The last subloan (Barranquilla) was made effective on September 9, After a slow start, project implementation is progressing satisfactorily in most cities, although rapid project execution has been affected by the Government's economic stabilization measures. Works under this loan are expected to be completed by March As of January 31, 1979, US$9.9 million or 37% of the Loan had been disbursed. 12. Ln No Telecommunications III; US$15 million, January Effective date: April 14, 1975 Closing Date: Original - December 31, 1978 Current - June 30, 1979 Contracts for all Bank-financed goods have been awarded, and work is proceeding satisfactorily. Though many of the project works have been commissioned and are earning revenue, project completion is not expected until June 1981 because of slow procurement and delays in building construction. As of January 31, 1979, only US$1.4 million equivalent or 9% of the Loan remained undisbursed. 13. Ln No Caqueta Rural Settlement Project; US$19.5 million, June Effective date: April 1, 1976 Closing Date: October 31, 1979 The loan became effective on April 1, 1976, after a six-month delay. Project execution has proceeded rapidly and some of the lost time regained. Road and bridge construction is well ahead of schedule (79 km have been completed). School construction, however, is behind schedule, while the credit program is lagging as a result of inadequate budgetary flows. As of January 31, 1979, US$11.2 million or 57X of the loan remained undisbursed.

37 ANNEX II Page 8 of Ln No Cordoba 2 Agricultural Development Project; US$21 million, September Effective Date: March 30, 1976 Closing Date: June 30, 1981 A few months after effectiveness, the Government decided to give responsibility for project civil works to another agency. This decision delayed the initiation of the project. Implementation is now proceeding satisfactorily, but still behind schedule. As of January 31, 1979, US$3.7 million equivalent of the Loan amount had been disbursed. 15. Ln No Sixth Development Finance Companies Project; US$80.0 million, March Effective Date: September 1, 1976 closing Date: June 30, 1980 The loan is proceeding satisfactorily and is virtually committed. As of January 31, 1979, about 64% of the Loan had been disbursed. 16. Ln No Integrated Rural Development Project; US$52.0 million, January Effective Date: August 26, 1977 Closing Date: December 31, 1982 The project is now in its third year of implementation and is fully operational. The core components of credit, technical assistance and training are exceeding targets and institutional coordination is effective. The forestry and water supply components have suffered some delays. Administrative procedures, such as procurement and disbursement, continue to present some difficulties, but these are much less serious than in the first year. Control and monitoring of the physical and financial progress of the project is comprehensive, but there is not yet a sound basis for evaluation of the project; special studies are scheduled for the fall of 1978 to improve this situation. As of January 31, 1979, only US$5.9 million equivalent, or 11%, of the Loan had been disbursed. 17. Ln No Second Agricultural Credit Project; US$64.0 million, February Effective Date: September 6, Closing Date: December 31, Nearly all the funds assigned to medium and large farmers have been committed. The Borrower has recently taken steps to speed up the commitment of funds to small farmers which should be fully committed by Concern

38 ANNEX II Page 9 of 11 over possibilities of diversion and substitution of funds led the Borrower to substantially increase its end-use supervision. Also, inflation has come down and interest rates have been recently raised to levels at which real interest rates are positive. About half of funds for credit to agroindustries have been committed for 48 subloans. 18. Ln. No Telecommunications IV; US$60 million, July Effective Date: October 3, Closing Date: June 30, The project has been delayed as a result of a series of personnel changes of the Borrower. Current activities are concentrated on the procurement of project goods, the planning of cable networks, and design of buildings to house equipment. 19. Ln. No Second Small-Scale Industry Project; US$15 million, September Effective Date: February 14, Closing Date: December 31, After initial delays in loan effectiveness due mainly to management turnover, project implementation has gone smoothly and by March 1979 about US$7.3 million of Bank funds had been committed. As of January 31, 1979, US$1.3 million had been disbursed. 20. Ln. No Highways VII; US$90 million, July Effective Date: November 28, Closing Date: December 31, 1982 The Project comprises three main programs: rehabilitation, maintenance, and vehicle weight control. The rehabilitation program has slipped by about 18 months. Preliminary stabilization and drainage works are complete; contracts for 14 of the 34 construction lots have been signed and some works have commenced. The maintenance program has slipped 21 months and has yet to commence. Proposals from consultants to assist MOPT in executing the program are being evaluated. The vehicle weight control program has experienced a 9-month delay but progress is now satisfactory. No disbursements have yet been made but documentation to disburse about US$4.0 million are being processed by the Ministry of Finance.

39 ANNEX II Page 10 of Ln. No Integrated Nutrition Improvement Project; US$25 million, September Effective Date: March 9, 1978 Closing Date: June 30, 1982 Significant progress has been achieved in the major components of health, nutrition education and water supply. Initial delays occurred in two subsidiary components--home food production and food quality control--but activities are now underway. Project management and coordination have been sound, flexible and effective. Management and evaluation systems are operating effectively. 22. Ln. No Second Cali Water Supply and Sewerage Project; US$13.8 million, June Effective Date: January 31, 1979 Closing Date: June 30, 1982 Progress in design and tendering is slow and project implementation has been delayed one year. EMCALI's financial position deteriorated during the second half of 1978; the recent tariff increase will not be sufficient to cover the forecast cash deficit in 1979 and the 3% rate of return for water supply and sewerage covenanted for 1979 may not be reached. E1CALI's management is considering the action which should be taken to solve this problem. 23. Ln. No Urban Development Project; US$24.8 million, July Effective Date: December 1, 1978 Closing Date: June 30, 1982 The 1978 changes in Government led to corresponding staff changes in the executing agency and to slow project start; implementation is now running about 12 months behind schedule. Work is under way in six out of the 23 cities and it is expected that ten more will come on stream this year. 24. Ln. No San Carlos I Hydro Power Project; US$126 million, July This loan was signed on July 14, 1978, and became effective on April 5, Ln. No kv Interconnection Project; US$50 million, July Effective Date: October 17, 1978 Closing Date: June 30, 1982 Project works have recently been initiated and are proceeding on schedule.

40 ANNEX II Page 11 of Ln. No Cartagena Industrial Export Processing Zone; US$15 million, August Effective Date: January 30, 1979 Closing Date: December 31, 1983 Project implementation has been delayed because of procurement problems; now that a number of contracts have been signed, work is expected to proceed without delay. 27. Ln. No Seventh Development Finance Companies Project; US$100 million, July Effective Date: November 28, 1978 Closing Date: December 31, 1982 About US$7 million has already been committed for subproject financing, and an additional US$30 million is presently being processed. 28. Ln. No Airports Project; US$61 million, October This loan was signed on December 29, 1978 but has not yet become effective. Implementation is off to a good start and if effectiveness is achieved before May, disbursements should be made as estimated. 29. Ln. No Mesitas Hydroelectric Power Project; US$84 million, November This loan was signed on April 9, 1979, but has not yet become effective. April 10, 1979

41 ANNEX III COLOMBIA THIRD BOGOTA WATER SUPPLY, SEWERAGE AND DRAINAGE PROJECT SUPPLEMENTARY DATA SHEET Section I: Timetable of Key Events (a) Time taken to prepare project: (b) Agency which prepared project: Two years EAAB (c) First presentation to the Bank: January 1978 (d) First mission to review project: March 1978 (e) Departure of Appraisal Mission: September 1978 (f) Completion of Negotiations: April 1979 (g) Planned date of effectiveness: August 1979 Section II: Special Bank Implementation Action None. Section III: Special Conditions 1. Assurances were obtained that: (a) Betterment levies for the sewerage and drainage works under the project would be charged and collected according to arrangements, satisfactory to the Bank, between EAAB and IDU (paragraph 57). (b) EAAB would maintain tariffs sufficient to provide a rate of return of 7% in 1979 and 1980, 5% in 1981 and 1982, and 6% thereafter on its average revalued assets (paragraph 58). (c) EAAB would contract foreign exchange loans of US$20 million on terms and conditions satisfactory to the Bank (paragraph 59). 2. There are no special conditions of effectiveness. A condition for disbursement for the Bogota River Rectification Study is that EAAB, CAR and EEEB enter into arrangements satisfactory to the Bank for the purpose of carrying out the study (paragraphs 48 and 64).

42

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