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REP 0 R T
A PROGRAM FOR COLOMBIAN PUBLIC INVESTMENT AND EXTERNAL BORROWING Part Two:
A PUBLIC INVESTMENT PROGRAM
FOR COLOMBIA
..
..
NO. Z· 6
PART TWO
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
Washington, D.C.
February 1956
Table of contents
Part 1\'[0
A Public Investment Program for Colombia
I. Methods Used in Formulating the Investment Program
1
A. Collection of Investment Data
1
B•.Method of Reducing Investment to Level of Resources
3
c. Questionnaire on Investment Programs of Public Entities
6
II. Transportation
8
A. SQ~ary of Proposals and Recommendations 8 B. Highways
9
C.. Railroads
14 D.. Airports
19 E. Sea and River Ports 2Z
24 III. Electric Power
in 1956
B. Investment in 1957 and 1958-1960
A •. Investment
IV. Viater..vorks
V.. 29 A.. Investment in 1956
B. Investment in 1957 and 1958-1960
29 31 Municipal Services
34 A. Investment in 1956
B. Situation after 1956
34 43 VI .. Housing
45 A. Public Entities in Housing
1956
c. Investment after 1956
B•. Investment in
VII. Hospitals
..
24 26 45 46 49 51 Investment in 1956
B. Investment after 1956
A•
- i ­
51
51 - ii ­
54 VIII. Schools
A. Investment in 1956
B. Investoent after 1956
IX. X. XI. National and Departmental
Buildings
54 55 ~~blic 56 A. Investment in 1956
B. Investment after 1956 56 57 Industry
58 A. Investment in 1956
B. Investment in ~8ter Years
58 63 Agriculture
64 A. International Bank Agricultural r~ssion
B. Investment in 1956
c. I nvestment in 1957 and 1958-1960
XII. CommuniC8tions
A.
B.
Investment in 1956 Investment in 1957 and 1958-1960
64 65 71.
73 73 76 A PUBLIC
1.
IN',r~S'L'1.LNT
PE00l\.i\M FOR COLOMBIA
METHODS USED IN FOh:l'1UL'TING THE
Ii"VES'I'N~NT
PROGRAH
...
A.
,
Collection of Investment Data
Upon its arrival i.r:l Colombia, the mission "Jas confronted Nith the
fact that the available data on the magnitude ODd composition of current
ald prospective public investment 1rJere quite inadequate.
In order to
obtain such information, the mission, in cooperation Hith the Comite Nacimal
de Planeacion, prepared a questionnaire (see copy at the end of this chapter)
.,hich ,-Jas sent to all public and selTli-public entities which were thought to
have investn8nt prograpls.
These included seven lr).inistries, the nme
national institutes, t1rJelve o:'her official entities, sixteen deiJartments,
the tiventy-three largest municipalities Bnd four departmental 11lelfare
agencies -- altogether seventy-one entities.
The questionnaire asked for the amounts to be invested yearly, and
the source of the funds, for each project Hholly or partly financed lo1ith
public money Hithin the yeBrs 1955-1960.
51 most import8nt entities.
Information ltIaS received from the
In addition, partly in lieu of information
from the four agricultural entities, the mission used the recommendations
on future agricultural investment prepared by the recent International Bank
Agricultur al Nission to Colombia.
tl1as
1rJhile the response to the questionnaire
incomplete, supporting information from other sources indic ates that
the investment data received by the mission include the results of virtually
all the planned investment activity
.. Colombia.
The mission l s main attention has been directed to prepc:ring an
action progre.rn for public investment in 1956.
"
~~
Naturally, hOHever, this
The mission consisted of the follovJing persons: fIlbert l-;aterston, Chief
of Mission; Adan1 J. Hazlett, Chief Adviser on Steel Industry; Daniel R.
Loughrey, !-dviser on Steel Technology; Francis Juraschek,~dviser on Steel
Marketing; J. HoodrO\oJ Mathews, Adviser on Steel Industry~ccounting; o. R.
Crooks, Adviser on Railroads; Gordon Grayson, Project Adviser; Neil Bass,
Engineer; Clarence 1. Sterling, Jr.J, ~dviser on 'v,Jater Supply; Holfgang Jahn,
Project Analyst; and Henry Heuser, l!,conornist
- 2 ­
required mak:"ng some assumptions o.boat the future.
Projects which
are to be carried out in 1956 mey commit resources in lB.ter years
and ?rojects which are to be started in the foreseeable future may require
resources to be allocated in 1956 for
preparator~T
possible, these factors were taken into account.
T-mrk.
To the extent
But aside from this,
the mission made only a prelirninar:f en alysis of the ma6nitude and
C0J11position of investr:1ent in 1957 and only the most tentative formulation
of inyestmen t in tile ye ars from 1958 through 1960.
Even for 1956, it 1,1/"as clearly iJnpossible for the mission, in the
time it had, to make
2
detailed appraisal of each oE the hundreds of
projects vJhich it was plormed to have in process of execution
that year.
The mis sion hopes ths.t a iriell-orGanized and 2.dequately-staffed group in
the Comite Nacional de Planeacton can begin soon to accumulate the
information and develop the btirfJ.ate knowledge VJhich will be essential
in making a careful apprcis
of t~1ese l)rojects for the 1957 public invest­
ment progrE.m.
In spite of the lack of such detailed information and intimate
knoi-lledge, it Has necessary for the mission, in viet'1 of its objective, to
form judgments on all of the significal1t projects and prograns contemplated
for 1956.
In order to ma~e these judgments as intelligently as possible,
members of the mission, assisted by the staff of the C01"1ite Nacional de
Planeacion, held many intervievJS ,dth officers of many official and semi­
official entities.
It benefited from the close cooperation of these
officials 8lld also frorl ttle Hork of the Teclmic al iVliss ion on Electric Power,
and the Interns,tional Bank I s Cauca Valley and !'gricultural Nissions; in
addition, it drew heavily on the
e~perience
of the Bank in the transport,
pOirIer and other economic sectors in Colombia.
- 3 ­
B. l<1ethod of Reducing Investment to Level of Resources
As indic ated in Part One of the report, the mission estimated
that,
all
the Clssumptions given, available resources ivould p8rmit public
investment in 1956 of around 730 million pesos, whereas the investment
1/
plans of public agencies totalled no less than 1,145 million pesos.-
In
order to close this gap the mission screened the planned i.'1vestments, and
by applying a series of tests, \vent through a process of elimination.
The mission first determilled irhether the technical feasibility of
the projects planned for 1956 had been established.
Application of this
test resulted in the elimination of a number of projects, es?ecially in
electric pm'ier.
The Illission then examined the administrative readiness of
the entity involved in each case to execute the project on the scale
contemplated, including ':Jhether the necessary planning and engineering
had been or ,vas being carried out.
Application of this test resulted in
further reductions (e .g. in housing) or eliminations (e.g. certain
municipal Horks in small con1l1lunities l,hich had inadequate staffs).
The
mission next considered whether projects \cJere appropriate ones for the
government to
underta~e
under the conditions prevailing in Colombia
tod~
8nd in. the light of the traditional relationship betHeen the Government
and the private sector.
Applying this test, for excmple, the mission
recommends against planned construction of cement plants by official entities.
_Excluding investments undertaken by the Dnpresa de Telecomunicaciones,
the Flota Nercante Grancolombiana.• the Banco de la Etepublica, Empresa
Colombiana de Petroleos and the Concesion de Salinas from their own
resources. Although these are official or semi-official entities, they
are considered in this report to be in the private sector for the sake
of simplicity and because no contributions are made from the national
budget toward these investments.
- 4 ­
After applying these first three tests to the planned programs
for 1956, the mission fOlh'1d that it could recommend the rejection or
curtailment of a sufficient number of projects to reduce contemplated
nublic n1vestment L'1 1956 to about 800 million pesos.
The projects still
to be reyievJed were then subjected to additional tests in order to bring
the total down to the level of available resources.
These tests were more
difficult to alJply and in mal1Y instances the mission felt that it needed
more information than it was able to obtain in the limited period it
sp ent in Colombia.
Applying one of these tests, the mission attempted to judge in
appropriate cases ",Jhether there existed policies and procedures designed
to secure economic ally sound and equitable sharing of the costs of the
projects among governmental entities, or
private groups benefited.
bet\~ee.'1
public entities mld the
It 2ppeared to the mission that many cormnunites
were making an insufficient contribution to some of the projects they were
planning and th&t they vIere relying unduly on contributions from the National
Government.
In many c
especially those involving municipal improve­
ments, no system of assessing the private beneficiaries in proportion to
their benefits could be discerned.
"mere projects involved the production of goods and services to be
sold on the market, the mission at tempted to judge
l~hether
there existed
an adequate market demand and l'Jhether the anticipated costs of production
were reasonable.
.
The scale of certain power projects could be reduced on
the basis of this examination and other projects could be rejected because
more economical methods of producing pOi-Ier to meet demand were available.
- 5-
...
Hhile the mission could .9,.oply tl::.is test in the electric power sector
Hith reasonable assurance that it had the data to do so, in other
sectors such inforn12tion vias lacking.
In the field of telephones, for
exanple, the lack of data did not permit a careful study of each project
from th is point of vievi, and the rrIission merely accepted the forecasts
Hhich had been prepared by the autonomous companies operating L.'1 this field.
Finally, some judgrl1ents had to 1.:>e made, often somelJhat arbitrarily,
on the relative priority of projects and
~rograms
in different sectors in
order to bring the total plarl11ed volume of expenditures down to the permitted
level.
In applying these judgments, the mission "Jas guided by its belief
that Colombia's economic development requires that large expenditures be
made for transportation, electric poi,Jer and agriculture.
Hence, soundly-
conceived projects in these three sectors vIere placed first.
In viet,] of
the expressed policy of the National Government to accelerate investment in
waterworks and its request that the miss ioa prepare an investment progran
for Hatenvorks, the mission also gave precedence to. investments in this sector.
As already indic ated, consideration also had to be given to the
implications of decisions take:) on investment programs in 1956 for later years.
In making provision in 1956 for preliminary engineering studies for Paz del
Rio's expansion, the mission was in effect recognizing that heavy investments
night be made for ti1is purpose in later ye ars.
In turn, this prospect of
heavy investment in paz del Rio required caution in initiating programs in
1956
1rJh ich
vlould c all for large continuing expenditures.
mission felt
~"lat
For example, the
expansion of the housing progr.9Il1 for 1956 was inadvisable,
not only because this program appeared to be of 10\'; priority in 1956, but also
because i f the progrWl tv-ere permitted to expand in 1956 j.t TtJQuld be extremely
difficult to cut back in succeeding years.
C.
QUESTIOIJN,U:::..m ON INVES'IHENT PR.(X}RP.l\1S DF PlIBLlC ENTITIES
--
j
-
C'
'M • • if
C
srp
......
..
_
::-;:Jl'IDAD:
A - Nombre del
Proyect~
1) - Cuando se comenz~o
cuA:noC'- DC' C011ll311zarA'
(mes y ana)?
2) - Fecha probable de su terminaci6n si ya se comenz6 (mes y ano):
si no, tiempo que requiera su comp1eta
b- Inversiones
Total
1955
1956
.
.
/
eJecuc~on:
1957
1958
1959
1960
Total de inver­
siones requeridas:
Monto de bienes y servicios importa­
dos, que se utiliz­
aran:
", - Contribuci6n
'..J
de los recursos
ordinarios de
1a Entidad para
el Proyecto:
)
- Financiaci6n
adicional requer­
ida:
1- Aportes del Gobierno liJa­
cional, Depart­
amental 0 Hun­
icipal, y de Otras Entidades Oficiales 0 Semi-Oficiales.* 11- De inversionis­
tas privados .-:* [II- Pr~stamos;
I
a) 1nternos-x-l:*
b) ExternoS~HH~-
i
1
i
J
'i~ *'1~
*'1*
~H'n~*
~specifique
en hoja aparte que clase de compromisos 0 arreglos existen
o estan previstos, 0 si no hay ninguno.
- Indique 8i los inversionistas son nacionales 0 extranjeros.
- En caso de poseer informacion sobre la manera co~o obtuvieron 0 como se
van a obtener los prestamos, surninstrarla en hoja aparte.
- En caso de poseer informacion lienese el cuestionario "F1NANCIACION
EXTERNA" que se incluye en hoja separada.
-
-7­
FHJANC:::ACION EXTERUA Hombre del P.royecto.; Entidad que solicita el prestamo: Prestamista.:
*
Cantidad y discriminacion por
divisas:
Plazo del prestamo y fecha del
Ultimo ve~cimiento:
Costo del Credito:
a)
Tipo de interes
b)
Otros gastos
comisiones:
0
Sistema de arJlortizacion:
~B~
Clase de garantia, si existe:
Lstado de las
-II' -
iP~ *.,H;- -
~~~H~ -
~HH}
, del
J,.'restamo:
negociacio~es
*")HHt·
Usese hoja separada para cad a credito.
Anote la fecha de iniciacion de las amortizaciones y el sistema de pago.
Anote la Entidad que dara la garantia y si Jsta inclllYe
cion de suministrar la moneda extranjera necesaria.
0
no la obliga­
Indique uno de los siguientes estados: a) discusiones preliminares,
b) negociaciones iniciadas, c) contrato de prestamo f1rmado, d) con­
trato de prestamo firmado y aprobado por el Gobierno Nacional.
s­
A.
SUIlll1'.ary of rroposals and reconnnendatioU,§
Investments for transportation, which includes highways, railroads,
airports and ports, are greater than for any other sector, both as proposed to
the mission and as recommended by it.
In
sUIlll1'~ry,
investment for each field of
the transportation sector for 1956 as proposed by governmental entities and as
recommended by the mission is as follo\<1s:
Field
Planned
(million p;;os)
Reconnnended
(Inillion pesos)
Highways
304.6
238.0
Railroads
109.9
77.5
Airports
24.6
11.1
--.2:&
~
~
~
Ports
Total
Investment in transportation in 1957 and the annual average in 1958­
1960 as plan."1ed by governmental entities is as follO\.[s:
l22l
1958-60
Highvrays
281
288
Railroads
46
12
Airports
53
Ports
11
IS
391
322
lli14
Total
W
7Y
Entire amount in 1958
The mission expects that investment in these fields in 1957 and
1958-60 (annual average) will not exceed the fol1m.[ing amounts:
- 9. ­
1957
1958-60
Higmrays
215.0
215.0
Railroads
70.0
20.0
Airports
12.5
12.5
_..L.2
~
305.0
255.0
Field
Ports
B.
Hif-"hvrays
1.
Investment in 1926
The National Government and departments in Colombia plan to invest
304.6 million pesos in
million pesos in 1955.
high~,rays
in 1956 as compared to an investment of 274.0
The distribution of
hieh~rey
investment between the
l:ational Government and the departments is as follows:
1955
1956
(%)
(million resos)
(%)
National Government
229.3
83.8
235.1
77.2
Departments
~
1,6.2
~
22.8
274.0
lQQ."Q
~
100.0
(million pesos)
The cost of the National Government's program would be covered from
the national budget and from a loan (the second for highways) obtained from the
International Bank.
HOl"ever, additional foreign exchange will be needed for the
program, 1,-1hich the Government hopes to obtain from another foreign loan.
Mean­
while, foreign currency requirements are being met from an advance of U. S.
$5 million from the B::.nco de la Republica.
~rograms
The cost of the departmental
is to be met from budgetary resources, from domestic and foreign
bank loans, suppliers' credits and in some cases, valorization (benefit) taxes.
The l>iinistry of Public TJorks advised the mission that it ptoposes
to make the following investments for
ments in 1955:
hieh~'Tays
in 1956 as compared to invest­
- 1(') ­
Program
1955
Plan Vial I
Earranquilla-Cienaga Highway
Highways outside Plan Vial I
Highway lJIaintenance Program
87.1
4.8
97.6
39.8
229.3
a.
1956
(million pesos)
94.3
7.0
92.1
41...7
23S.1
Plan Vial I
The most important highway program to be carried out by the National
Government in 1956 is the continuation of YlOrk on PIHn Vial I, the program of
construction and rehabilitation of the main trunk highways of Colombia which
Was initiated in 1951 and which has to date received the assistance of two
loans from the Internat.ional Bank.
The roads included in the project are those
which connect the important centers of the country and 'Hhich must carry the most
traffic.
The mission believes that there is no project or program with a higher
priority than the Plan Vial I.
Further development of the country is dependent
on the early completion of this program, which should proceed as planned.
This
would require 94.3 million pesos in 1956, of which 17.0 million pesos (US$6.8
million) would be for foreign exchange.
b.
Barranquilla-Gienaga Highway
This project is well adv,mced in construction and when completed will
connect the important port of Barranquilla
~~th
Cienaga, the transfer point for
railroad traffic on the ,ntlantico Railroad (Magdalena Valley Railroad and the
Extension to Santa Marta) now under construction.
pesos in 1956, of which about 2 million pesos
exchange.
The highway will require 7 millicn
(us~? ..8
million) will be in foreign
This project is an essential part of the Atlantico Railroad and should
move ahead to completion as quickly as possible.
- II ­
c.
High\Jays Outside PIaLVial I
The Government has been carrying on a considerable amount of
work outside Plan Vial I.
high~my
The amcunt of this Hork has increased to a point where,
in the mission's opinion, it is impossible for the small overworked staff in the
:Hinistry of Public 110rks to supervise properly such an amount of outside vTork and
still administer effectively Plan Vial I and the Eigh'l'lay I<iaintenance Program.
During 1955, some 98 million pesos were expended for roads outside
Plan Vial I.
Aside from administrative limitations the mission considers that
some of these roads did not deserve this rriority vTithin the over-all investment
program.
This is also true vIitil respect to roads now proposed to be undertaken
in 1956.
If the Colombian Government desires to concentrate its effort on the
most productive projects and to avoid excessive and inflationary expenditures,
here is a place where important economies may be achieved.
The mission strongly
urges the Einistry to limit the level of expenditure for 1956 for roads outside
Plan Vial I to not more than 50 million Desos, including foreign exchange equi­
valent of 20 million Desos (US $8.0 million).
d.
Eaintenance Program
In conjunction ',rith Plan Vial I, the Linistry of Public -Torks has
undertaken an expanded program of I:J.aintenance for the national highways.
This
program has involved the purchase of modern maintenance equipment and the develop­
ment of an adequate maintenance organization to carry out the work.
The program
calls for exnend1tures of about 41.7 million pesos in 1956 including the equiva­
lent of 4.6 million pesos in foreign exchange (US $1.8 million).
The building up of an adecluate rr.aintenance program is of the utmost
urgency in order to protect the investment Colombia is lJ'.aking in its highway
system and to insure that the system can continue to render service to the country
over a long period.
- 12 ­
e.
Departmenta.l Highway Programs
A number of Departments have submitted information on highway constructicn
programs which are substantially in excess of their investments in this sector in
1955:
19r)C)
1956
--(million pesos;Antioquia
Atlantico
Cauca
Cordoba
CUnoinamarca
r.;Iagdalena
Norte de Santander
Santander
Tolima
Valle del Cauca
2.5
3.1
1.6
.5
4.2
.7
3.5
2.9
8.7
1.6
18.6
2.7
6.0
1.B
1.1
6.0
25.0
8.7
15.0
44.7
69.5
The mission did not study the departmental programs in detail, but a
cursory examination of the various programs leads to the conclusion that most
of them are too ambitious from the administrative point of view and that, the
priority of some of the individual projects is low.
The mission recommends,
therefore, that departmental inve3tments in 1956 not exceed the 1955 level
of expenditures for this purpose, i.e., 45.0 million pesos, including about 18
million pesos (113$7.2 million) in foreign currency.
be
It would/desirable if, in selecting departmental projects, primary
attention were given to those roads for 'which there is a demonstrable necessity
and for which the Departments have adequate plans and the administrative ability
to spend effectively the available funds.
The specific
proje~ts
should be selected
wi th the approval of the {.IIinistry of Public Works, which already has a cctordinating
committee made up of the secretaries of Public Viorks of the Departments which
cc:mld screen the projects and prepare a coordinated departmental highway program
for the whole country.
- 13 ­
The mission also recommends that the Consejo Nacional de Economia
approve the borr01ving of funds to pay for the construction of departmental
highways only upon the recommendA.tion of the Ministry of Public
f.
In
~'!orks.
Surnnary of Recommendations
sWQ~ary,
the mission recommends that 238 million pesos (of which
61.6 million pesos - uS$24.6 million) be invested in highways in 1956, as follows:
Program
Total
(million pesos)
Plan Vial I
Ba:rranquilla-Cienaga Highway
Highways outside Plan Vial I
Highway Maintenance
Departmental Highways
Total
2.
Foreign F~change Component
pesos) (mill~on doILiS
(milI~on
6.8
94.3
7.0
50.0
41.7
45.0,
17.U
2.0
20.0
4.6
18.0
1.8
7.2
238.0
61 .. 6
24.6
.8
8..0
Investment in 1957-1959
The mission envisages higlnvay expenditures by the National Government
and the departments in 1957-1959 totalling no more than 215 million pesos annually,
as follows:
Average annual
Program
1957
(million pesos)
investment in
1958 and 1959
(million pesos)
National Government
Completion Plan Vial I
Completion Barranquilla-Cienaga
highway
Highways OutSide Plan
Highway Maintenance
Plan Vial II
Departmental Highways
73
6
50
41 50 4,7,
45
45
215
215
To complete Plan Vial I in 1957 as scheduled, an investment of 73.0
million pesos would be required next year of which approximately 9.0 million
pesos would be in foreign exchange (US$3.6 million).
-14­
As to highways outside the Plan Vial I the mission feels that in view
of the heavy calls on Colombia's public resource"s, the level of investment in
•
these roads during 1957 and 1958-1960 ought not to exceed 50 million pesos.
The maintenance program will require
41 million pesos in 1957 and an
average of 45 million pesos annually in 1958-1960.
The Einistry of Public 'lorks is at present preparing Plan Vial II, a
program of highway construction and rehabilitation intended to include the major
higwNays of Colombia which are next in importance to those in Plan Vial I.
The
highways to be included in Plan Vial II have not yet been designated and no
reliable cost estimates B.re available at this time.
However, preliminary plans
envision an expenditure of some 392 million pesos on Plan Vial II, including the
equivalent of about 157 million pesos (US $62.8 million) in foreign
excr~nge.
About 75 million pesos (including the foreign exchange equivalent of 30 million
pesos - US $12.0 million) would be needed in each of the first two years.
The
mission believes that it would be desirable for the l'iinistry of Public T;Jorks to
start Plan Vial II in 1958, t-lhen Plan Vial I will have been completed.
Kot only
will this permit the limited highway staff of the linistry to concentrate on the
completion of Plan Vial I, but it would allow time needed to prepare reliable cost
estimates and speCifications for the new program.
Investment in departmental
higm~y8
during 1957-1959 should not exceed
the level proposed for 1956, i.e., 45 million pesos.
C.
~ilroad~
1.
Investment in 1926
The Eational Railroads of Colombia, a tT,overnment-owned autonomous entity,
is expanding and rehabilitating the railroad system of the country.
Costs in
Colombian currency are being financed from contributions of the National Government
and from the Railroads' own resources; foreign exchange costs are being financed
- 15 ­
by two International Bank loa.ns of US :)25.0 million and $15.9 million (the latter
loan has not yet become effective) and by contributions of the National Government.
The program consists of three parts:
a.
Construction of the hagdalena Valley Railroad (lviVRR) from
Puerto Salgar to Gamarra and rehabilitation of shops.
b.
Extension of the
~nnRR
from Gamarra to Fundacion and re­
habilitating the existing line beti-leen Fundacion and Santa
'Narta; purchase of rolling equipment for the extension and
tractor-trailer units to be used to haul freight between
Barranquilla and Cienaga; acquisition of ferries to carry the
tractor-trailers over the l'agdalena River and the construction
of ferry slips.
c.
Rehabilitation of existing lines and shops; and the acquisition
of rolling stock for existing lines and the l;fVRR.
The total investment required to complete the tl'1.ree parts of the program
and the amounts planned to be invested in 1955 and 1956 are as follows:
Planned Investment
lli~ of Program
Total
Part "a"
Part "b"
Part tic"
60.5 J/
70.8 ~
78.0
Total
209.3
1955
1956
(million nesos)
(million pesos)
26.8
6.3
~2.l
46.3
50.3
11.3
s/
,*8.2
s/
107.2
Amount required to complete project in 1956 and 1957. The project was initiated in 1955 and is scheduled to be completed in 1957. The total cost of the project is estimated at 70.8 million pesos. Estimated cost for 1955-1960. Tentative. Full benefits of the present railroad investment program
on the completion of all parts of the progra.'ll.
1~ill
depend
The mission believes that this
program is one of the most important for the economic development of the country
and that every effort should be made to move ahead with it as quickly as possible.
The mission's review of the project indicates that for several administrative and
technical reasons, investments in 1956 are not likely to reach the proposed level
of 108 million pesos.
Instead, the mission estimates that 1956 expenditures are
likely to be as follows:
Estimated Investment
in 1956
(million pesos)
Part of Program
Part flail
Part lib!!
Part Hell
40 •.0
22.5
15..0
77.5
Total
Al though expenditures in 1956 for the construction of the T·fVRR (Part !la fl
of the program) are likely to rise greatly over the level of 27 million pesos invested
in
19~5;
it is the concensus of those closely connected with the project that it
would be realistic to plan an expenditure of 40 million pesos in 1956.
In connection with Part "b ll of the program, the 6.. 3 million pesos planned
to be invested in 1955 for construction was not spent in that year.
The estimate
that 50.3 million pesos would be invested for this part of the program in 1956, in
addition to the 6.3 million pesos which were to have been spent in 1955, now appears
too optimistic for two reasons:
(1)
There have been delays in
expected to begin working on the
~fVRR
st~xting
construction.
Contractors were
extension in January 1956, but it is now
certain that they cannot get to work until later in the year.
Total expenditures
for construction in 1955 and 1956 were estimated at 16.6 million out of a total
of 56.6 mj.llion pesos (the 6.3 million pesos not spent in 1955 plus 10.3 million
pesos included in the projected expenditures for 1956).
Taking into account the
expected delay in beginning construction, the mission estimates that 1956
- 17 ­
expenditures for construction will not exceed 10 million pesos.
(2)
Most of the equipment and materials to be obtained with the
remaining 34.1 mllien pesos to be spent in 1956 for Part lib" of the rrogram
will be paid for after 1956.
It is likely that construction equipment for
5 million pesos, which is needed immediately, will be purchased and paid for
in 19j6.
In addition, the mission estimates that orders will be placed in 1956
for delivery in later years for rails, rolling stock, tractor-trailer UIiits, a
ferry, etc. for an amount not exceeding 30 million pesos.
On the assumption that
down payments of 25% would be required for these orders, expenditures for this
purpose would not exceed 7.5 million 1"'esos.
Investments for Part "b" of the
program would therefore amount to 22.5 million pesos, as follows:
Construction
Construction equipment
Deposits on additional
equipment
Ps. 10.0 million
5.0
"
"
Total Ps. 22.5 million
Part "e lt of the program was scheduled to be initiated in 1955.
Proposed
investment in 1955 for this purpose was 15.1 million pesos, but no expenditures
were actually JI'I.ade.
Proposed eJo..."Penditures in 1956 are 11.3 million pesos.
The
mission estimates that about 15.0 million pesos will be spent.
Although the total of 77.5 million pesos is
~.aller
than origfnally
planned, it would permit satisfactory progress of the program; and if expendi­
tures were increased in following years, as recommended by the mission, it would
not result in any delay in the completion date.
- 18 ­
In addition to the program of t!1e National Railroads, the City of
•
Pereira is contemplating the relocation of the raih1ay,..rithin the City.
This
is considered necessary to promote the development of the City's residential and
corr~ercial
districts.
Total investment required would be about 3.3 million pesos,
of t-rhich 2.0 million would be needed in 1956.
Although this project may be
important from the local point of view, it does not deserve high priority at
this time for the over-all development of the country.
The mission therefore
recommends that it be postponed for a later year.
2.
Investments in 1957, 1958 and 1959-60
The pattern of expenditures in 1957, 1958 and 1959-60 for the national
railroad program is expected to be as follows:
Purnose
~
12.21
Part ua " complete l''NFffi
Part "b ll Complete extension
.t!:quipment
Part "e" rehabilitation
Total
(million pesos)
1959-60
average
20
21 9
20
.2Q
10.0
70
.1&
10.0
20 Foreign exchange requirements in these years are expected to total
72 million pesos (US $29 million) as follows:
~
1957
1958
1959
1960
Eillion pesos
Nillion dollars
36
23
15
9
2.5
7
Total
.iJ.
.k.2
72
29.0
. -.19 ­
D.
Airports
1.
Investment in 1956
t;olombia t s topography has made cir transport of passengers and cargo
an important means of conveyance for many years.
Plthough surface transportatior
facilities are being improved greatly, air transport is likely to maintain its
importance in the economy of the country.
The Empresa Colombiana de onerodromos, a recently-created government-ollmed
entity which
o~ns
and operates most of Colombia's most important airports, plans
to modernize and expand the airport facilities of the country.1'he City of
M:'inizales also has under way the expansion of the municipal airport
C~antagueda).
The total 2.irport program between 1956 and 1958 calls for an expenditure of 97.2
million pesos.
"bout lEJ million pesos were planned to be invested in airports
in 1955, but actual investment probably ras lov-rer.
the investment of 24.6 million pesos in 1956.
Present plans would require
Only a small fraction of the
cost of the Empresats program can be covered from its o-vn resources;
most of
the financing will have to be provided from contributions by the National
Govern;-flent and from loans, for which no arrangements have been completed yet.
The planned expenditures for 1955 and 1956 were as follows:
.. -.. 20 '.
j\'irports completed in 195.5
Planned Investment in
19.56
19.5.5
(million pesos)
(millIO'il pesos)
.6
Tunja
Paipa
.·7
1.3
Airports under construction
to be completed in 1956
San ~.ndres
Leticia
Barrancabermeja
Araracuara
Puerto Rey
1.3
.9
1.0
1 .. 2
1.1
2..5
.8
.2
.1
.5.6
3• .5
Airports under construction to
be completed after 1956
Santagueda
Quibdo
Bogota
.1
1.0
7.0
.1
1.0
18.0
Airports to be started in 1956
2.0
Monteria
Total
2.0
24.6
15.0
The traffic potentialities of the Quibdo airport do not appear to
warrant the expenditure of 3 million pesos required to complete the airport
in accordance with present plans.
These plans should be re-examined to see
whether it is not possible to reduce the cost of this airport by
50~.
In the
meantime, expenditures in 19.56 should be reduced from 1 million pesos to • .5
million.
The eXisting airport for Bogota is too small to handle present and
future air traffic and, because of topographic conditions, cannot be enlarged.
f\.
new site has been purchased and construction of a new airport was begun in
19.5.5.
It is scheduled for completion in 1957 and would, according to present
plans, require an investment of .50 million pesos by that time.
The mission has
not studied the project, although members of the mission visited the site of
'- 21 ­
the airport and conferred with the management of the Empresa Colombiana de
Aerodromos concerning the project.
TIie mission has been informed that the new
airport is to have large terminal buildings "With the most modern appointments".
In proceeding with plans to complete all buildings immediately, the Empresa is
deviating from the practice followed by such large airports as the New York
International Airport at Idlewild and London Airport which have been operating
successfully for years with temporary facilities.
The experience of these and
other leading airports indicate that if initial investment is limited to those
items needed to accornmodate the airplanes
'~ri th
for permanent buildings can be postponed.
s afety and effi ciency, inves tment
In view of the fact that the National
Government will be called upon in the next fev·, years to supply large investment
funds for high
priori~
projects, the mission believes it is imperative to limit
investments in airports to the basic necessities and to forego expenditures in
the next few years on such postponable items as luxurious airport terminal
buildings.
If this were done, it should be possible to reduce proposed 1956
investment on the Bogota airport from 18 million to the 7 million pesos planned
to be (although probably not) spent in 195.5.
About.7 million (U~.3 million)
of this amount would be required in foreign exchange.
The mission did not study the project for a new airport for Monteria,
which is scheduled to be started in 1956 with an investment of 2 million pesos.
However, on the basis of its general knowledge of the situation in Monteria, the
mission believes that it should be possible to improve the existing airport to
'C •
the point needed to meet requirements with a much more modest expenditure.
The
mission therefore recommends that the project for a new airport be reviewed;
initiation of the project for improving the present airport or building a new
one should be delayed until the reappraisal is completed.
- 22 ­
The changes outlined above would reduce 1956 investments on airports
to 11.1 million pesos, of which about 10%, or 1.1 million pesos (us$.4 million)
would be required in foreign exchange.
2.
Investment after 1956
If the country is to proceed \vith a program of balanced economic develop­
ment in the years immediately following 1956 vvithin the limit of its available
resources, investments in airports will have to be kept at a level no higher than
12 .. ,J.lnl1Iionpeso'fFanntIA,11y.This vrill require that where airports are unsatisfac­
tory, they be improved with modest expenditures whenever possible and that the
construction of new airports be postponed..
Construction of new airports in Cali
and Barranquilla is scheduled to begin in 1957, and will require investments of
25 million and 20 million pesos, respectively.
These plans should be reviewed to
see whether the existing airports in these cities could not be improved at lower
cost.
For the Bogota airport, investment should be maintained at no more than
about 7 million pesos in 1957 and at an annual average of 5 or 6 million in
E.
195~
Sea and River Ports (and other If<Jdraulic VJorks)
1. Investment in 1956
Investments in this sector are for projects for modernizing and expanding
Colombia's major seaports and river ports and for other hydraulic works on the
coast and on the Magdalena River.
The mission received information from the
Ministry of Public Works that 34.1 million pesos were invested in such projects
in 1955 and that 42.5 million would be needed in 1956.
In view of the fact that
the 1955 national budget shows appropriations of only 6.0 million pesos for
investments in that year in ports and hydraulic works (other than for the Port
of Buenaventura), it appears that the NUnistry included current as well as invest­
ment expenditures in the data it submitted to the mission.
The mission recommends
.- 23 ­
that no more than
7.5
million pesos be invested in 1956 for ports and hydraulic
works, of which 1.3 million pesos would be for the Port of Buenaventura and the
remaining 6.2 million for the Ports of Santa Marta, Barranquilla and cartagena
and for other vvorks.
2.
Investment
af~er
1956
In view of the foreseeable heavy demands on Colombia's public investment
resources in 1957-59, annual investments for ports and hydraulic works in those
years ought not to exceed the level recommended for 1956.
-, - 24­
III.
A_
]¥-ECTRIC POWER Investment in 1956 hnnex I to this part of this report contains a detailed description and
analysis of plans for electric power development in Colombia over the period 1955­
1960, as presented to the mission by the Instituto Nacional de Aprovechamiento de
Aguas y Fbmento Electrico (Electraguas) and other official entities.
The program planned by the Government for 1956 calls for a total invest­
ment of about 181 million pesos, of which 105 million pesos would correspond to
imported goods and services.
million pesos in 1955.
This compares with a total investment of about 63
The following table shows the composition of the 1955 and
planned 1956 programs:
TA:OLE
1
1955
Project
Imports
Total
(million- pesos)
23.4
Bogota
3.2
1,iedellin
CVC
9.1
Caldas
2.0
Paipa
9.0
Anchicaya
Norte de Santander·
Sumapaz
6.8
Bolivar
Transmission-Bogota
System/l:lelgar
Rio Coello
1.0
Cali Distribution
Rio Nevada
Boyaca Transmission
1.6
and Distribution
La Cabrera
0.5
Lebrija
0.1
Rio Sonson
Cucuta
Bucaramanga Trans.
Rio Recio
Buenavista Small Projects .6
(Sincelejo etc.)
.2
Rio Negro
Pereira Distribution System -
.6
Caldas Trans. System
4.7
other projects
D'2.S
-
15.6
5.9
6.2
5. 2
0.1
1.1
.4 .3
2.5
.37.3
(US:}14.9 million)
1956
Total
Imports
--rmIllion pesos)
23.5
21.9
20.3
18.0
17.0
11.4
8.0
3.6
4.0
15.7
12.4
9.9
7.5
11.5
7.0
7.0
1.4
0.9
4.0
3.8
3.4
3.0
2.0
2.0
2.4
1.6
3.1
2.3
2.2
2.2
2.0
2.0
2.0
2.0
2.2
1.6
0.7
1.5
1.4
1.2
1.4
1.3
7.3
4.9
.5 1.5
.9
11.3
181.2
1.0
.6 5.9
10j.0
( USJ;2.0 million)
- 25­
In the light of a study of the proposed 1956 program, the mission
reconunends that some projects be eliminated.
It considers that certain areas,
for which relatively small local generating plants are
proposed~
coul d be
better served by transmission lines connecting them vdth important power­
producing centers.
This applies, for example, to the Sonson and La Cabrera
projects listed in the above table since, in the mission1s opinion, these areas
could be better served by transmission lines from plants in the 14edellin and CVC
systems.
Correspondingly, the mission recommends that the additional capacity
proposed for the Iledellin system be increased.
other projects, including those
proposed for the Departmento del Norte de Santander, have be.en excluded as in too
preliminary a stage of planning to justify inclusion in a current program.
In other cases, the
r~ssi0n
considers that further study is necessary
to determine 'whether tl1e project proposed for a given area is really the best
long run solution of its pcw/er problem.
TI1US the mission believes that the
question of the best source and form of power supply in the Boyaca area, and
for meeting increased needs at the Paz del Rio steel plant needs further study,
and that the Paipa project proposed for this purpose should be held in abeyance
until other possibilities have been studied.
Again, the mission considers it
possible that the proposed Sumapaz hydroelectric plant might be rendered
unnecessary by a transmission line from Bogota.
other projects which the mission
considers should receive further study, either wholly or in part, include Bolivar,
Rio Nevado, Buenavista, and the Timba project of CVC.
As a result of these considerations, which are presented in detail
in Annex I .to this
.program for 1?56:
re~ort,
the mission recommends the following
revis~d
- 26 ­
TABLE II Total
Imports
(million pesos)
Project
I - I
Bogota CVC I - 3 Caldas I - 4 Medellin I - 5 Anchicaya I -:2
4
5
II
II
II
II
II
-
II
II
II
II
II
II
II
-14
.16
-18
-19
- 20
-21
-22
7
8
9
-U!
Boyaca System
Bolivar
Bogota System/Melgar
Cali
Small projects
(Sincelejo etc.)
'::ucuta
Negro
Bucaramanga-Cucuta
Lebrija
Pereira
Coello
Rio Recio
Caldas
Total
23.5
16.7
18.0
23.9
9.4
15.7
6.5
7.5
15.0
5.0
3.1
2.0
4.0
3.4
2.2
0.5
3.0
2.4
7.3
2.0
0.5
2.0
2.2
1.5
3.8
2.0
0.9
4.9
1.4
0.7
1.0
2.0
1.4
0.6
126.2
71.~
l.2
(US~28.4
million)
The mission recommends that 3.0 million pesos be added to the above
amount for project planning and for the survey of
~ater
resources, thus in­
creasing the total cost of the 1956 program to 129.2 million pesos.
B. Investment in 1957 and 1958-1960
The following estimated investments in subsequent years will be required to
complete the revised 1956 program:
million pesos 1957
1958 1960
125
75
10
The aim of the Government should be to sl1pplement these investments in
1958 and subsequent years vdth the object of executing further well-prepared projects
of
dem~nstrated
need as far as financial availabilities permit.
- 21 .....
The mission believes t.ba t i t should be possible to maintain investment
at not less than the 1956-1957 level over the period 1958-1960.
A failure to attain an adequate rate of power development could arise
as much from a lack of well prepared projects as from financial stringency.
The
mission considers it essential that the planning of electric power development
be supervised by a single agency, and it therefOre welcomes the Government's
decision to centralize planning in a National Power COmmission.
strongly
reco~mends
The mission
that advantage be taken at the earliest possible moment of
the arrangement made bet1ireen the Ministry of Development and the Int.ernational
Bank whereby the latter would help the Government to obtain assistance in pre­
paring the legal and organizational bases of the Commission's activities.
It also
recommends that the allocation of 3.0 million pesos made in the revised 1956
program for additional planning and survey work be continued in subsequent years.
Central supervision and coordination of planning as proposed should
enable Colombia to realize to the full the economies of large-scale production in
the field of power.
The general aim should be, where it is economically and
technically feasible to do so, to concentrate power generation in large plants,
each serving a
~~de
area by means oi transmission lines.
systems of this kind should themselves be interconnected.
As iar as possible,
If a community cannot
at present be connected into such a system, but there is a reasonable prospect
that this will be possible in the future, a temporary diesel installation is
preferable to
substantial investment in a pL;rmanent hydro or thermal plant,
unless the latter can be shown to form part of an adequate long run development
plan.
.::..
- 28 ­
The mission strongly recommends that, in the planning, financing and
execution of power projects, Colombian agencies avoid entering into contracts
under vmich all these
f~~ction8
are placed in the hands Of a single firm pri­
marily engaged in the manufacture of electrical equipment.
Tnese contracts
seem attractive because the.y apparently relieve the client of trouble and res­
ponsibility, and provide a solution of the financing problem.
is usually illusory.
v~ben
This appearance
the firm which is to supply the equipment also designs
the plant, other considerations besides the most economical and efficient way
of meeting the clientts needs are bound to influence the designs.
competition also increases the price the client has to pay.
Lack of
Financing provided
or negotiated by a supplier is usually for a shorter term than is appropriate
to a power project, and at a higher rate of interest than could be obtained
in other directions.
It is much more efficient and economical to employ consulting engineers
to prepare designs and supervise construction, and to award contracts for con­
struction and the supply of equipment thxugh competitive bidding.
This, the
accepted procedure in all industrialized countries, gives the best assurance
of adequate design and sound construction.
In these circumstances, the fees
paid to the consulting engineers are an amply justified investment.
- 29 ­
IV. WATERWORKS
A.
Investment in 1956
At the request of
~~e
National Government, which had indicated its desire
and intention to accelerate investment in water supply, the mission studied the
water supply situation in Colombia ydth a view to drawing up an accelerated program
of investment in this sector.
The mission's analysis of the situation and its
detailed recommendations are presented in Annex II to tilis report.
The mission found that the projects to be continued or begun in 1956 fell
into two main groups:
(a) Those of the large cities which finance their own water supply S,ystems with­
out grants from nat,ional funds.
In this category, the cities of Bogota,
Cartagena, lVledellin, Cali, Armenia, Aanizales, Palmira, Cucuta and Bucara­
manga have projects which will require a total expenditure of 35.6 million
pesos in 1956, including the equivalent of 21.75 million pesos in foreign
exchange.
Of the 35.6 million pesos, 15.9 million pesos is covered by
financing already arranged, leaving 19.7 million pesos
~f
additional loans
t() be obtained.
(b) Those of the smaller urban communities (nucleos urbanos)
~Jhere
water supply
systems are financed with the help (to an extent depending on the size of
community as indicated by its annual budget) of national grants.
These
grants have hitherto been administered by the Instituto Nacional de Fomento
Municipal (mFOPAL), "Jhich vras recently incorporated in the newly established
Corporacion de Servicios Publicos as the Departamento de Fomento Municipal
(DFM).
In 1955,
I~TOPAL,
with the help of an appropriation of 12 million
pesos, made grants of 10.2 million pesos tovJards the execution of a 12.9
million pesos program in such communities.
- 30 ­
The mission,
ta~~ng
into account the national desire to accelerate
investment in water supply, has considered how far the national program
for these smaller urban cormmmities can be expanded in 1956, having regard
to the need for adequate planning and to the available resources.
The
mission recommends that in 1956 total investment in waterworks in these
swaller urban communities (defined as having between 1,000 and 50,000 inhab­
itants, rather than in terms of their annual budgets) be increased to 22.5
million pesos, of which 19.5 million would be provided in the form of grants
(on the basis of population) and 3 million in the form of loans.
Both
grants and loans would be made available from national funds administered
by DFM as described in Annex II.
It is estimated that, of the 22.5 million
pesos required for the program of assistance to smaller urban communities,
the equivalent of about 10 million pesos (US $4 million) would correspond
to
~ilported
goods and services.
The mission recommends that, in order to enable
D~~
to carry out this
program, funds be provided on a continuing basis from:
(a) Departmental purchases of bonds of the Corporacion de Servicios
Publicos to the extent of 2% of their annual budgets, a source
,mich should yield about 8 million pesos in 1956.
There should
be no attempt to match investment in any Department against that
Department's purchase of these bonds.
(b) National appropriations, >,[hich would amount to about 17.5 million
pesos in 1956 (including 14.5 million pesos for financing the
programs and 3 million pesos for amainistrative expenses).
In
order to provide additional revenue for this purpose, the National
Government, acting on the mission's reconnnendation, imposed a new
liquor tax at the rate of 1 peso per 720 gr. "Iv-hich should yield
about 30 million pesos in 1956.
- 31­
'While endorsing the Government r s intention to raise additional tax
revenue to finance developnent, the mission considers that revenues from
this tax should not be earmarked for particular purposes, and it recommends
that the announced intention of investing in each Department the amount it
has contributed
to'~rds
this tax be abandoned as opposed to the conception
of a national program.
The mission believes that the program it has out­
lined in Annex II to this report wi1l result in national contributions to
most Departments 1m.ich '\dll exceed their contributions.
Investment in 1957 and 1958-60
To continue the programs of the nine large cities, as now envisaged,
will call for the follovnng investments in subsequent years:
l-'Iillion Pesos
Total
1957
1958
1959
1960
82
37
20
15
10
To make these planned investments, these cities vdll require new loan financ­
ing of 26.5 million pesos in 1957 and a total of 25 mi1lion pesos for the
three follo,·Jing years, in addition to financing already arranged.
These
estiInates do not take account, hOii€Ver, of later expansion in these planned
investments, or of the needs of the three other large cities in this category,
1,;Thich are not currently carrying out water supply projects.
The mission
has therefore assumed that water supply investment by the cities in this
group will not fa1l belm-r 25 million pesos annually in the period under
revie\{.
The mission reconmends that the national program of assistance to the
srnaller urban communities be increased in order to attain, as nearly as
possible, the target of provision of adequate water supplies in all commu­
nities of more than 1,000 inhabitants by the end of 1961.
This would require
- 32 ­
a total contribution by ioJay of grants and loans to these communities of
nearly 200 million pesos over the period 1957-60, i.e., at an average rate
of nearly 50 million pesos annually.
These investments should be financed
by the annual departnental purchase of bonds of the Corporacion de Servicios
Publicos and by contributions from the national budget.
The mission
recomrnends, hmrever, that this average be attained by allocating about 34
million pesos for this purpose in 1957 and increasing amounts in subsequent
years as described in Annex II.
To the extent necessaI"J, DFH should also provide the loans required
by the larger cities.
On this basis, the total financing to be provided
by the National Governrnent and the Departments in the form of both grants
and loans would rise from about 60 million pesos in 1957 to about 80 lnillion
pesos in 1960.
1{iell under half of the expenditures would be in foreign
exchange.
The mission It.r:ishes to emphasize that the above scale of investment
will not produce adequate results unless it is accompanied by wise plan­
ning and improved organization.
It believes that the procedure \lhereby
the functions of preparing plans, supplying materials and equipment, and
executing the
project are placed in the hands of a single manufacturing
company, llhich iil8.y also offer med.:i..um-term credit facilities, is unsatis­
factory and i'l'asteful and regrets that some ITnlnicipalities in Colombia
have entered into such contracts for the provision of "I';ater'.lorks.
These
contracts also mean neglect 01 Colombian sources of supply and an urmec­
essary loss of foreign exchange.
The mission strongly recommends
- 33 ­
adherence to tIw normal procedure of entrusting the preparation of plans
to experienced consultinc engineers and of a1'1e,rding contracts for supply
and construction on the basis of intemational competH,ive bidding.
The mission recommends that, in designing watervrorks, primary
eraphasis be laid on the quality of the 'Vater.
It believes that more
attention should be given in Coloniliia to groUIlc water supplies, Which
provide small cOlIllJ.11Jnities ,dth a more economical source of water than
treated surface 'Vater.
In the sInaller urban comnrunities in Colombia, 'NaterHorks fre­
quently lapse into disrepair through the lack of skilled personnel to
operate them and of management to collect and adnunister vJater revenues.
To rer:1edy this situation, the nUssion recomra2:nds the e stablisb,,;nent in
each Department of an agency Hhich l:,fOuld undertake these functions on
behalf of the smaller urban commurlities.
v.
MmaCIPAL SERVICES
Investment in 1956
A.
1.
In~roduction
A very large expansion is proposed in 1956 for municipal services other
than waterworks, which
i~cludes
sewers, slaughter houses, markets, paving and
construction of streets, public health centers, urban transport, garbage disposal;
construction of puhlic buildings, stadia, prisons and hotels; and slum clearance.
Expenditures are plarJ.led to reach almost 98 million pesos in 1956, compared with
25.4 million pesos in 1955.
The decision of the Colombian Government to accelerate the eX'pansion of
waterworks and the nead
~or
high priority investments in other sectors severely
limits the financial resources vlhich governnental entities - national, departmental,
and municipal - can contribute to investment in other municipal services.
The mission vIas cOlilpelled, therefore, to recolnmend a substantial reduc­
tion in the investment pla.--med for 1956, even though it felt that it did not have
sufficient
info~ilation
about illffily specific projects in this sector.
The mission's
recommendations are compared -vrith the proposed investment by major fields and with
1955 investlnents 'Hi thin this sector in the following table:
TABLE III .!?vestments in" 1955 and 1956 (mil~ions of pesos) 1956
1955
Investment
.
~
1.
2.
3·
4.
5.
6.
7.
8.
9.
10.
11.
12.
13. if
Sewers
streets
Markets
Slum Clearance
Slaughter-houses
Municipal Buildings
Public Health Centers
Stadia Hotels Miscellaneous Projects
Urban Transport Garbage Disposal
Prisons
Total
No investment reported
12~I-
7.4
1.0
a/
-08
1.3 a/
~
.7
.6 1.5
a/ y
25 .. 4
Planned
32.7
20.1
14.0
9.0
1.9 3.8
1.7 2.2
.9
6.6
1.9
.2
2.0
-'97.0
-Recommended
ItS·. 0
6.1
1.5
3.5
~3
1.7
.3
0
.4
1.3
1.9
.2
2.0
35.2
- 35 ­
2.
Se'f,ers
In 1956, investments planned for set...rer "iJorl:s amount to 32.7 million pesos
compared to investnents of 12.1 million in 1955.
The
inves~~ents
planned for 1956
are shown in the follOltJing table:
TABLE IV Investment in Sewer~'Planned for 1956 (millions of pesos) Larger Cities:
Bogota
Barranquilla
PalMira
Barrancabermej a
Pasto, Neiva and Pereira
Cartagena
Cucuta and Tulua
Cali
Sub-total 5.6 2.2 1.3 .5 1.1 304 7.3 6.0 Smaller tmms:
Valle del Cauca
Antioquia
Norte de Santa.'1der
Huila
Caldas
Choco
Instituto de Fomento
l'Iunicipal
Sub-total
TOTAL
2.0
.4
.3
.4
1.0
.2
1.0
The mission was unable to undertake a careful analysis of the planned
projects.
In most of the larger cities,
wh~re
other methods of sewage disposal
may not be feasible, investaents in sewage are generally defensible.
It does seem,
however, that all of the investment (5.3 million pesos) proposed for the smaller
«
•
municipalities has a low priority.
The building of sel"ers for tOltms of small size
is a luxury 10Ihich the country cannot afford \-,hen it is expanding investr.1ent for
waterworks.
Uhile sewers serving small portions of such towns may be justified
when restricted to business areas, they should only be undertaken if the property
owners directly concerned are prepared to finance such systems through special
- 36 ­
assessments.
It \lTOuld seem tl:at most
0:;:'
the progra.i11. outlined in 1956 for the
smaller municipalities does not conform to these
pr~nciples.
Unless a demonstra­
tion can be made that certain projects do conform, it is advisable to postpone
sewer construction activity in the smaller municipalities.
The desirability of the proposed expansion in Cucuta
a~d
Tulima, envisag­
ing total expenditures of 7.3 million pesos in 1956 is also questionable.
Both
Cucuta and Tulua are pla.nning to rely to the extent of 907; on the national govern­
mente
This scarcely seems an equitable arrangement for sharing costs and it
suggests that these cities do not have a sound system of financial charges to
impose on the beneficiaries.
The mission believes that these programs could be
reduced to .9 million pesos, of i<\1hich .8 million pesos would be for Cucuta and .1
million for Tuluae
In the case of Cali it is also questionable i-vhether the planned expansion
of sevrer Horks is justified in view of the fact that the mlli'1icipality is not now
prepared to make a substantial contribution from its O1rm resources.
must continue to be regarded as
prL~arily
a local responsibility.
Sewer works
On these grounds,
the mission questions the proposal of Cali to invest 6.0 million pesos and suggests
that Cali might well reduce its progran for 1956 to 1 million pesos.
Hith the eliminaticn of the sevrer program in smaller municipalities and a
reduction of the programs in Cucuta, Tulua, and Cali, investment for sewer works
would be limited to 16 million pesos, as follo1rTs:
Recommended Invest.Llent in Sewer irlorks in 1956
(millions of pesos)
Cities:
Bogota
5.6
Barranquilla
2.2
Palmira
1.3
Barraneabermeja
.5
Pasto, Neiva and Pereira
1.1
Cartagena
3.4
Cueuta and Tulua
.9
1.0
Cali
16.0
Total
- 37­
Barranquilla,
Pasto and Barr&ncabermeja vrill finance the total cost
l~eiva,
of their programs from current
resources~
Bogota, Palmira, Pereira and Cartagena
intend to finance a Gre&t part of their programs from current resources with less
than half of the total cost of the works to be covered by internal loans.
On the
basis of inadequate inforr.1ation, the mission estimates that foreign exchange require­
ments for sewer construction will approximate 1.6 million pesos (US$.64 million).
30
Paving and construction of streets
A very large expansion is planned for street paving and construction by
the municipalities and departments reporting.
cities throughout the
count~J
Although the majority of medium-sized
must have programs for paving and construction of
streets, only two departments and seven cities have actually advised that they have
such programs.
The Department of Hagdalena invested 0.4 million pesos on street
construction in Santa Barta in 1955 and is considering investing the same amount in
1956.,
Cundinamarca invested 0.3 million pesos in 1955 for the paving of streets
in small muniCipalities, but it has not submitted its plans for 1956.
Bogota,
Barranquilla, Cartagena, Aanizales, Popayan and Bucaramanga invested
6.7 million
pesos in 1955 for paving.
Tnese cities (except Bucaramanga)
a~d
Pereira and Neiva,
are planning to invest 19.7 million pesos in 1956, of which amount 14.0 million is
for Bogota and 2 million pesos for Cartagena.
It appears that many of the projects included in the programs of Bogota
and Cartagena are secondary streets 1rJhich have a low priority compared with other
municipal needs.
.. • Both programs are scheduled to be fiLanced entirely on credits;
in the case of Bogota, 1rri th foreign and internal credits and in the case of Carta­
gena with internal credits.
In vim.r of the difficulty vIhich these municipalities
are having in meeting all the financial demands upon them, they must be particularly
careful not to undertake works of secondary priority unless property Olmers bene­
fited by a project contribute to the financing.
~lith
these considerations in mind,
it is recommended that Bogota and Cartagena reduce their proposed investment in 1956
to the amounts which can be financed from their own resources, i.e., 2 million
pesos for Bogota and
.5
million for Cartagenao
The mission has not revievled the programs in Barranquilla., Manizales,
Pereira, Bucaramanga and Neiva.
'de suggest that the programs in these cities be
exa'11ined to determine "\.,hether adequate charges in the form of special assessments
or otherwise are being imposed on the property mmers directly benefiting from the
construction.
The paving program of the Departments of l'1agdalena and Cundinamarca might
well be eliminated because the beneficiaries are not contributing and because it is
doubtful that traffic densities justify paving.
Under the recommendations contained here, expenditures in street paving
and construction would total
6.1 million pesos, as outlined below, on the assumption
that a favorable finding is made vU th respect to the system of financial charges in
the five cities cited above.
Foreign exchange requirements vlOuld be negligible.
Planned
Reco:tn."1lended
1956
1956
imillions of pesos)
(millions of pesos)
0.4
none
none
Investment
1955
(millions of pesos)
Magdalena
Cundinamarca
Bogota
cartagena
Barranquilla, Y~izales)
~/ Pereira, Bucaramanga
) 6~7~
Neiva and Popayan
)
not furnished
14,,0
2.0
3.7
20~1
2..0
0 .. 5
3.6'91 6.1
a/ Includes Bogota and Cartagena as well.
§( On condition indicated above.
4.
I1arkets
One city, Barranquilla, is constructing ne'tV" markets and in
to i..'1vest 1.0 million pesos.
1956 pla,ns
Popayan, Quibdo and Bucara.vnanga intend to make altera­
tions and improvements to their present markets, for which an investment of
million pesos in
0.5
1956 is envisaged. A decentralized and autonomous national entity,
- 39 ­
La Corporacion de Defensa
c.a
Proc'.c.ctos Agricolas - INA - inten::ls to invest
12~5
million pesos in 1956 in wholesale markets for agricultural products in various
cities throughout the country.
No justification has been presented to support the plavned INA invest­
ment in wholesale markets.
EA~erience
in Colombia has demonstrated that private
markets aYld warehouses operate efficiently.
In vie"'l of the prevailing policy of
the Colombian Government to stimulate private investment in those fields where
private investors and operators can perform a useful function, and also because
of the more important call on
governn~ntal
resources from other sectors, the
mission recommends that construction of wholesale markets be reserved for the
private sector..
Excluding the INA project, investment in 1956 "rould be reduced to
1.5 million pesos. Foreign exchange requirements are estimated at approximately
0 .. 5 million pesos
5.
(US:;:i~ 2
million).
Slum Clearance
Barranquilla and Cartagena, both vdth financial assistance from the
national government" and the foriner 1,rith the additional collabora.tion of the
Department, are planning to invest in 1956 in slum clearance" Barranquilla" 1
million pesos, and Cartagena, 2 million pesos.
These projects appear to be justified since they involve the reclamation
of land y,lith a potentially r.igher value and since they would also contribute to
the solution of an acute social problenl.
The slma areas which would be cleared
have particularly serious characteristics, located as they are in swampy areas.
.. It does not appear, however, that plans for slum clearance are sufficiently lfell
advanced to permit the investment of 9 million pesos in 1956.
tentatively suggested for Barranquilla and
.5
3 million pesos is
lnillion for Cartagena.
exchange requirements are likely to be negligible.
Foreign
Since this type of program
involves many difficult problems, it is suggested that detailed
~lans
for the
execution of the program be prepared before the national government provides finan­
cial assistance.
-JJJ­
6.
•
Slaughter-houses
Two cities have slaughter-houses under construction:
Manizales and
The first mentioned" with a total investment of 2.0 million pesos" is
Popayan.
considering the investment of 0.3 million pesos to terminate the work in 1956, and
the second, having corrooenced in 1955, is considering investing a total of 0.6
million pesos, 0.1 million of which to be invested in 1956.
sidering commencing construction of slaughter··houses in 1956:
Three cities are con­
Cali, 1-Jhich in
1956-57 '\1;'111 invest 2.8 million pesos" approximately 0.6 million of which to be
invested in 1956:
Pereira, 1-J11ich in the three years 1956-58 will invest in con­
struction works 1.2 million pesos, approximately 0.4 million of which to be in­
vested in 1956, and Tulua which in 1956
~dll
invest 0.5 million for the construction
of a slaughter-house.
In view of the fact that Hanizales has already invested 1. 7 million pesos
in its slaughter-house and must invest only 0.3 million in 1956 to complete it, the
mission CaQDot
recon~end
against this investment.
municipal slaughter-houses cannot be recomr.'lended.
However, further expansion of
Uhile completion of projects
already underway is advisable, a completely new approach to the problem must be
attempted.
This is a field in lJhich investment by private enterprise on an effi­
cient basis should be encouraged.
The present municipal system of taxing slaughter­
ing impedes the development of efficient private enterprises serving a broader
market since each muniCipality, no matter how small considers its own slaughtering
house a necessity in order to increase its tax revenues.
The desirability of a tax
on meat is questionable, but if municipalities can find no better source of revenuesJ
it could be collected from slaughtering houses in private hands.
The mission
recommends that the National GoverrdUent attach as a condition to the granting of aid
to the municipalities in other fields, a change in the
system.
m~Dicipal
slaughtering tax
On the basis of the recommendations made above, proposed investments in
slaughtering houses in 1956 would be reduced from 1.9 million pesos to 0.3 million.
-41­
Foreign exchange requirements would be approximately .2 million pesos (US$.08
million).
7.
Public Buildings
Pereira and Hanizales are constructing public buildings for H"hich they have
invested in 1955 1.3 million pesos and for which they are proposing to invest 1.7
million in 1956.
Cucuta
~~d
Bucaramanga are proposing to initiate construction of
buildings with an investment of 2.1 million pesos in 1956.
Completion of the buildings in l1anizales and Pereira, which are in an ad­
vanced stage of construction, is advisable.
However, the investraent of 2.1 million
pesos in Bucaramanga and Cucuta appears to have a low priority relative to other
municipal needs, and the mission therefore recomnends that it be eliminated.
would reduce investment for public buildings
an estimated
8.
L~
This
1956 to 1.7 million pesos, of which
.4 million pesos (US$.16 million) l'll'ould be in foreign exchange ..
Public Health Centers
Bogota and Bucaramanga have prograras for the construction of public health
centers and are planning to invest in 1956 1.6 and 0.1 million pesos, respectively.
The proposed expenditure for Bogota appears to be excessive.
The mission
believes that 0.2 million pesos would be sufficient to take care of essential needs.
This would reduce total expenditures in this field to 0.3 million pesos.
exch&~ge
Foreign
required would be .1 million pesos (us$.04 million).
9. stadia Armenia, 1tJith an invest.l1ent of 2.0 million pesos, and Barrancabermeja, wit!: 0.2 million pesos, are planning to initiate construction of stadia in 1956.
The
n~,
stadium in Armenia is planned for the Departmental Olympic games to be held in 1956.
While the mission has not reviewed the plans for these stadia, such invest­
ment is clearly of low priority relative to other needs.
The investment in Armenia
would be 30% higher than the total amount collected in municipal taxes in 1954.
mission recommends that these investments be eliminated.
Th~
42­
10. Hotels
The Department of Magdalena, in order to promote the touri3t trade, is con­
Having invested 0.3 million
structing a hotel on the outskirts of santa llarta.
pesos in 1955 it
~vill
b3 completed in 1956
~;i.th
an investl.llent of 0.4 million, of
which foreign exc:1.ange .L'equlr.;;nents Hill be .12 million pesos (us$.05 million).
K2~i?ales,
also as an attraction to tourists, is constructing a hotel to be com­
pleted in 1759 on the outs.ldr:'s of the city" in which it invested 0.4 million :L'1
1955 and will invest 0.5 million in 1956.
It is recommended that construction of the hotel in
l~'1izales
be suspended
unless a demonstration can be made that there are good prospects for the sale of
this hotel to private interests after it has been cOliLpleted.
There is no justifi­
cation for government to enter this field in view of the many responsibilities which
it must assume elsewhere.
In view of the advar:ced stage of construction of the
hotel in Santa Marta, tDis hotel should be completed, but an effort should be made
to sell it to private interests.
11. Urban Transport
Bogota is planning to invest 1.9 million pesos in 1956, principally for the
acquisition of buses and the improvement of garage installations, etc.
Contracts
have already been negotiated for these purchases and will require about 1.5 million
pesos:
foreign exchange (US.6 million) in 1956.
The mission did not review this
project.
12. Garbage Disposal
Pereira is the only city which is planning to invest in this category for
the acquisition of 0.2 million pesos worth of equipment in 1956.
The mission did
not review this project.
13.
Prisons
Popayan, with the financial assistance of the national government, is con­
sidering the investment in 1956 of 2.0 million pesos for the construction of a
prison.
The mission has not reviewed this project.
- 43 ­
14.
Miscellaneous
Depa~~ntal
Projects
Cundinamarca and Valle del Cauca have programs for the construction of
facilities such as slaughter-houses, markets, etc., in the poorer
Cundinamarca invested
o~6
million pesos in 1955 but it is not
Department is consider::.ng inV'esting in 1956.
municipalities~
knOlfn
what amount this
Valle del Cauca is considering the
investment of 6QO million in 1956, but the amount invested by this Department during
1955 for this saGle purpose is not Imovm.
There are also t"vo small projects, one in
Bucaramanga and another sponsored by a national official entity (SENDAS), totalling
0.6 million pesos.
Hhile the mission did not have detailed information on the projects in­
cluded in these programs, they should be carefully revievled in the light of the
comments made above on
sL~ilar
projects.
In particular, the investment planned by
Valle del Cauca appears eJ:cessive in view of the contribution which this Department
will be called upon to mru{e for high priority projects undertaken by the Cauca Valley
Corporation.
One million pesos is tentatively reco,mnended for the Valle del Cauca
prograra and 0.3 million for the
B.
Cundin~narca
projects.
Situation after 1956
It is verJ unlikely that sufficient resources will be available in later
years to maintain investment in other municipal services at the levels proposed for
1956. The emphasis given by the national
goverp~ent
to the expansion of waterworks,
the need for improvement and expansion of educational facilities, etc.
will reduce
resources available to the government at all levels for financing the municipal
services discussed here.
There are some
t~~es
of projects in this field already cited above where
the justification for government investment is very slight.
Reduction of government
invesunent in such fields as municipal slaughter-houses, hotels, etc. will not,
however, release very much for investment in those municipal services where govern­
ment must assume a primary responsibility.
If
:i~portant
muniCipal services such as
-44­
streets and sewers are to advance with the further growth of urban areas, measures
...
•
will have to be taken to increase mWlicipal
The present s.ystem of
mQ~icipal
ta~es
and other revenues •
taxes and service charges is woefully
inadequate, as repeatedly observed in many studies of Colombia1s financial problems.
The rate of real property taxes is at present only four per thousand,
exception of some three or four cities.
~~th
the
Even more serious, the system in effect
since 1953 provides for property evaluation to be made by the owner of the property.
In a great number of Colombian Cities, special improvements such as street paving
and sewer construction are carried out vnthout the beneficiaries being charged in
any way.
In the majority of cities one or more of the municipal services which
were intended to be self-supporting are being run at a loss.
The mission recolTh1'lends that financial assistance or guaranties extended
by the national government to aid in the construction of municipal facilities be
made conditional upon a demonstration by the municipality concerned that measures
are being taken to
~nprove
municipal finances.
- 45 ­
VI.
A.
:ruu:::;nrG
Public Entities in Housing
A high percentage of housing construction in Colombia is financed privatelJ'
The most important semi-official institution
grant~g
long-term loans to finance
the purchase price or construction cost of houses, is the Banco Central Hipote­
cario,
~rllich
was founded 20 years ago.
of its bonds.
It obtains its funds mainly from the sale
Savings barnes and insurance companies are required by law to invest
a part of their deposits and reserves in these debentures.
housing construction field in 1954.
It constructs houses valued up to 30,000 pesos
and finances their purchase to tIle extent of
of 20 years.
The Banco entered the
75
It also makes construction loans.
percent of their value over a period
The Banco has about 30 million
pesos per annum available for this purpose, or enough to finance the construction
of about 1,000 houses a year.
The National Government, the Federaci6n Nacional de Cafeteros and a
fe~
municipalities also have organizations for constructing and financing housingo
The
mission does not have information regarding Federaci6n Nacional de Cafeteros and
the municipal housing entities, but their annual investments on housing cannot
amount to mucho
The Institute de Credito Territorial, which was recently incorporated into
the newly-created Corporacion de Servicios Publicos, is the national entity respon­
sible for constructing and financing housing.
It ifas founded fifteen years ago,
initially for the purpose of constructing rural housing.
••
Later it took over respon­
sibilities for urban housing as Hell ..
With respect to rural housing, the Instituto makes loans up to 5,000 pesos,
at interest rates of 3 percent and ,..i th mortgages up to 30 years, provides pla.l1S
and supervises construction. vJith respect to urban housing it constructs housing
developments and sells individual dwellings on liberal terms with a 15 percent down
payment and mortgages of 20 year maturities.
Interest rates on urban mortgages
- 46 ­
vary but go up to 8 or 8-1/2 percent.
Urban housing is divided into two categories,
one for the low-income groups and one for the medium-income groups.
Dwellings cost­
ing from 4,000 pesos to 12,000 pesos have been constructed for low-income groups
and dwellings costing from 15,000 to 30,000 pesos have been constructed for the
medium-income groups.
Up to the end of 1954 the
Ins~ituto
had constructed 9,662
urban houses with a total cost of 86.8 million pesos and 8)948 rural houses with a
total cost of 40.6 million pesos.
B_
Investment in 1956
--
The Instituto
pl.ans
a substantial increase in its invest.ment in housing
from a planned level of 56.8 million pesos in 1955 to 80 million pesos in 1956.
The planned investment for 1955 was at a much higher level than in previous years,
but the mission received indications that actual expenditures in 1955 would not
increase in accordance ,>lith the plan.
Nevertheless, the Instituto is preparing to
invest even more in 1956 than planned for 1955.
:n 1956, the Instituto wants to
build 9,000 urban houses in fifty different projects, varying in size from 20 to
over 1,000 houses, and to continue construction of rural houses.
Host of the Instituto's capital is provided by the National Government . .
Savings banks have been required to invest 25 percent of their deposits in the
Instituto's bonds.
In 1955, the Goverrunent made a grant of 60 million pesos
financed by a loan from the Banco de la Republica to the Instituto to retire its
indebtedness to the savings barJ(s.
Hm'1ever, savings banks are still required to
invest 25 percent of their total deposits in the Instituto's bonds, which will pro­
vide the Instituto with about 75 million pesos over the course of the next year.
For a five-year period beginning in 1957, the Instituto is also to benefit from a
requirement that all corporations must invest in non-interest bearing bonds of the
Instituto a sum equal to that which they used to pay as a capital tax.
requir~~ent
This
is expected to provide the Instituto with 30 million pesos a year
beginning in 1957.
• :.. 47 ­
The need for more housing in Colombia is very great, both in rural and
urban communities.
Eighty-five percent of rural houses have dirt floors and are
without windovTs or sanitary facilities.
Sixty percent of Colombia's families live
in rural areas and have aJ:IDual cash incomes of less than 1,200 pesos a year.
The housing problem in urban centers is also acute because of the rapid
growth of the cities.
According to the 1951 census, 25 percent of the families
living in the 26 most populated cities were in need of housing.
The situation is
particularly critical in Bogota and Cali, where ti'TO out of every three families are
obliged to share a single dwelling.
In spite of the great housing shortage, hmvever, the mission believes that
the proposed acceleration of the Instituto's program is ill-advised.
The increased
schedule for this year is not based upon clear and practical policy objectives and
is not supported by clearly-defined operating procedures.
staff, which consists of only
5 architects, 5 draftsmen
The technical and design
and 2 engineers, does not
have the personnel needed to carry out a program of the size planned.
Moreover,
despite the obvious social need for Lmproved housing, the mission does not believe
it is wise or necessary at this stage of the country's economic development, given
the other investment requirements which the government must meet, to accelerate the
government housing program.
If funds available to the Instituto were utilized more
efficiently, a greater number of houses could be built with less money.
The Instituto's approach to housing appears to be based simply on the fact
that there is a need for more and better housing.
The Institute has not clearly
identified the type of Colombian family which a government-sponsored credit program
can serve without involving the Government in financial losses on a recurring basis.
In spite of the critical need for housing, the Instituto has constructed houses
which are unoccupied because it cannot find bqyers with the necessary funds.
The
cost of much of the Institute's housing has turned out, in fact, to be much higher
than many families could afford and mortgage
p~ent
delinquencies have been
excessive, mling partly &lso to poor collection procedures, particularly in
rural
•
areas~
'l'11e .mortJ;age c.elinquemcy r3.te, l':hich is about 5$ per cent,
clearly re'fi.ects the c.bsence
sound polL:y objectives, careful program'11ing
of construct.i. en, ane'. adequate administrative procedures.
Ji1. 1955, t;18 Instituto contracted to purchase from Finland 3,000 pre­
fabricated h'Ooden houses for uS ,,,3 lIl2.llion (7.5 million pesos) payable in
coffee.
S~.nce
Colombi& has been able to sell all its coffee to date,
coffee payments may be considered equivalent to dollars.
Originally planned
for rural areas, the present plan is to use them in Barranquilla and Cartagena.
The problem created by the introduction of
1;.)0 0
den houses
sreat.
A masonry
house of similar size requires a frontage of 6.50 meters; in order to pro­
vide fire protection, the frontage for a h'Ooden house must be increased to
10.75 meters.
vlliile such an increase in the amount of land for each house
may be unimportant in rural areas,
house in Barranquilla and Cartagena.
ivill greatly increase land costs per
Besides, there are the problems of
termite protection and of educating people accustomed to masonry houses to
live in 1;JOoden ones.
The Instituto is also purchasing from a foreign com;Ja.ny, 3,200 pre­
fabricated aluminum houses of four different sizes, at a total cost of US $3
..
million (7.5 million pe sos) •
ivtembers of the mis sion visited a model alwninUlIl.
house displayed near Bogota.
The houses, vJhich ca,.'1 be erected in a few
hours, are of light construction uithout any equipment or facilities, and
have no floor.
Because of the way the houses are constructed, it i'rould
be almost impossible to make them insect-proof.
Originally intended for
use in the Llanos, 500 of the houses are to be diverted to help rehabilitate
- 49 ­
the burned-over area of nunaco.
The mission finds it difficult to under­
stand ,!>illy Co10mbh.., which has a wealth of indigenous building materials, and
a prefabricating factory of its own in Hedellin, should find it necessary
to use scarce foreign exchange resources to import prefabricated houses, at
a cost per house 'which cannot be considered inexpensive.
It seems clear to the mission that the Instituto is not prepared, dur­
ing 1956, to undertake a housing pr03ram of the size planned.
In the judg­
ment of the mission, the funds available to the Instituto should be sharply
curtailed so that expenditures on housing in 1956 will not exceed 50 million
pesos.
In view of the fact that the Instituto has funds of its own and
obtains additional funds from the national budget (12 million pesos in 1956),
from mu..'1icipalities (2.5 million) and from buyers of houses, the &'11ount
required to be invested by the savings banks should be reduced.
There are
other projects of high priority which would have a much stronger claim on
these savings bank resources.
C.
Investm~
after 1956
In the next fevJ years, if large amounts of investment funds are to be
found for Paz del Rio t s expansion, as 1:1e11 as for l'later,.,'Or..cs, transportation,
electric power and agriculture., public investment in housing vfill have to be
reduced to essentials.
The mission believes this would require that public
investment in housing be limited to about 20 million pesos annually.
At the level of frulU1y incomes currently prevailing in Colombia, there
is a ve'r1J definite limit on the rents that can be paid or on the mortgage
service payments that can be met.
The prograrr. of the Instituto in the
- 50 ­
"101fT
cost!! housing field should be carried out only as a complement to
specific government projects \\!here housing accommodations must be provided,
or in emergency areas such as
'i'UTllB.CO,
vJhere fire recently razed a large
area"
-v~1ile
a government housing program designed to serve families in the
middle income groups might be formulated on a sound financial basis, the
government must seriously consider 1-Thether it would not be more practical
to provide government guarantees to private credit institutions for such
housing; than to extend credit directly through a government institution.
Such a program might be devised in such a vlaY that the
Q01rm
payment require­
ments and the mortgage payment requirements could actually increase private
savin:3s by inducing certain income groups to save for a specific purpose •
.. - -51­
A.
Investment in 1956
The construction of hospitals in Colombia is generally financed
from the income of departmental charity organizations (beneficencias) which
obtain most of their income from lotteries, but also from certain ne.tiona1
taxes on entertainment, etc.
Information was received of the following hospi­
tal construction and expansion projects, either planned or under way.
Location
Totsl Cost
(millions of pesos)
Valle del Cauca
Bahia de Solano in Choco
Barranquilla
Expansion of Fental Hospital
in Antioquia
Total
1926 Investment
(millions of pesos)
6.0
24.0
0.2
8.0
0.2
0.8
11&
Foreign exchange expenditures for 1956 are estimated at 3.5 million pesos
(us $1.4 million).
There is a strong possibility that the beneficencia of Cundinamarca,
the largest in Colombia, also has some plans to construct or expand hospitals
in that Departffient., but no information was received from the Cundinamarca
beneficencia.
None of the projects for 1956
'~ere
studied by the mission.
In
view of the great need for hospitals in Colombia the mission is not recommend­
ing
tt~t
B.
fnvestment after 1956
the proposed investment for 1956 be reduced.
Although there is a great need for more and better hospital care
in many parts of Colombia, improved conditions will have to come in the next
few years from more efficient use of investment funds rather than from an
incr-ease in the amounts in7ested.
Indeed" some of the funds invested in
- 52 ­
hospital buildings should be di'lEt'ted to increasing facilities for training
doctors and nurses, since existing hospitals are poorly staffed in both fields.
Between
1956 and 1959, when investment resources
~~ll
be subject to heavy
pressure from many high priority projects, it is unlikely that more funds vull
be available to invest in this sector than are to be invested in
1956.
But
nmch could be done to get greater benefits from investment expenditures for
hospitals if the administration of hospitals were made more efficient.
The
National Government should make proceeds from the special taxes for hospitals
available only to those hospitals vmich set up effective administrations in
accordance vnth modern standards.
Something should also be done to bring about a better distribution of
hospital facilities throughout the country.
Under present conditions, public
hospitals are constructed aLllost exclusively in the llealthier depa.rtments.
In these departments, beneficencias run large lotteries ,mch yield sub­
stantial surpluses.
or
10\'1
On the other hand, departments vJith small lotteries
budgets (they usually go togethed have little hope for improving
their hospital facilities.
A proposal to merge the departmentc.:.l beneficen­
cias into a national organization to pennit
lottery and tax proceeds has been shelved.
m.Ol'C
equitable distribution of
The mission suggests that at
least in the case of contributions from taxes by the National Government,
account be taken of the fact that some beneficencias have a greater need
of such funds than oth ers.
- 53 ­
resources i..rill be s'-l.bject to
hea~r
pressure from many high priority projects,
it is unlikely that more funds will be available to jnvest in this sector
than are to be invested in 1956.
But much could be done to get greater
benefits from investment expenditures for hosritals if the administration
of hospitals were made more efficient.
The National Goverrunent should make
proceeds from the special taxes for hospitals available
or~y
to those hospi­
tals which set up effectj.ve administrations in accordance with modern stan­
dards.
Something should be done also to bring about a better distribution
of hospital facilities
tr~oughout
the country.
Under present conditions,
public hospitals are constructed almost exclusively in the wealthier depart­
ments.
In these departments, beneficencias run large lotteries which yield
substantial surpluses.
On the other hand, deDartments l ..rith small lotteries
or low budgets (they usually go together) have little hope for improving
their hospital facilities.
A proposal to merge the departmental beneficen­
cias into a national organization to permit more equitable
lottery and tax proceeds has been shelved.
distrib~tion
of
The mission suggests that at
least in the case of contributions from taxes by the National Government,
account be taken of the fact that some beneficenciaa have a greater need of
such funds than others.
,
.
Some of the funds invested in hospital buildings should be diverted
to increasing facilities for training doctors and nurses, since existing
hospitals are poorly staffed in both fields.
:"' 54
"'!
-,
Six Departments and six
~u~icipalities r~ve
advised the mission that
they have plans for the construction of schools to a total value of 5.9 million
pesos in 1955 and
tt~t
they intend to invest 15.0 million pesos in 1956.
The
projects for 1956 are the following:
Millions of pesos
Primary Schools
2.5
Department of Cundinamarca
II
"Norte de Santander
II
II
Valle del Cauca
II
II
jvlagdalena
II
"
Cauca
lilunicipality of Bogota
" Bucaramanga
"
II
Tulua
"II
II
Armenia
It
i'ianiz&les
0.7
0.7
5.0
0.5
n
fl
Barrancabermeja
Secondary Schools
0 ..1
2.0
2.0
0.4
0.3
0.2
"
Department of Santander
"
"Barrancabermeja
Total
Some increase in expenditures in the field of education appears to be
justified.
It appears, hOl·rever, that plans are not sufficiently well advanced
to permit an increase
o~
the magnitude planned for 1956.
In particular, it is
doubtfu.l that architectural plans and other arrangements are sufficiently well
advanced to permit the investment of more than 0.5 million pesos in Norte de
Santander, 0.3 million pesos in Gauca, and 2 million in Bogota.
"
.
Taking these
adjustments into account, expenditures for schools 1.1Quld total 10.1 million
pesos in 1956.
Foreign exchange requirements are estimated at 1.0 million
pesos (US $.4 million).
55 ­
B.
In"estment angr 1956
In later years the contInuation of a hieher level of expenditures on
scbool construction would be in order.
There are no indications, however, that
plans for school construction are being formulated as part of a well-rounded
program.
Until teachers' salaries are raised it will be difficult to retain
trained teachers in the profession and to attract rersons of desirable caliber.
Until teaching offers an attractive career it would be difficult to plan for
an increase in teacher-training facilities.
Until such facilities are constructed
and the number of trained teachers permanently attached to the profession is
augmented, school construction must continue on a modest scale despite the
evident need for a more ambitious program.
Data supplied to the mission indicate that 90 percent of the children
of school age are not receiving even the minimum of four years schooling.
From
the economic standpoint only, substantially greater effort is required in the
field of primary education if the country!s economic development program is not
to be retarded.
In addition the International Bank 1 s Agricultural Mission to Colombia
has recommended an increase of univerSity and agricultural school facilities in
order to provide for a satisfactory system of agricultural education, 1rThich at
present falls short of actual requirements.
ated as soon as detailed plans are prepared.
Such a program ought to be initi­
- 56 ­
A.
Investment in
1952
Three projects are plenned for the construction of public office
"
buildings in 1956, involving the expenditure of 18.2 million pesos.
The
Departments of Tolima and Cordoba plan to invest in 1956, 2.8 million pesos
and 0.4 million, respectively, to
official offices.
co~~lete
construction of buildings to house
The National Government, Hith an investment of approximately
4.9 million pesos in 1955 and a proposed investment of 15.0 million pesos in
1956, is corililiencing the construction of an official administrative center, in
which '.Jill be situa ted all the departments of the National Government in Bogota
on the west side of the City of Bogota.
The total cost of the works is calcu­
lated at approxirrately 80.0 million pesos.
Since the buildings of Tolima and Cordoba are in an advanced stage
of construction, the mission did not review these projects.
The mission is not
convinced that the proposed Administrative Center in Bogota has a high priority
and it recormnends tlmt construction be postponed until more important projects
are completed.
national
The mission also suggests that plans for meeting needs for
gover~~ent
office space be reviewed.
Such a review is likely to reveal
that the future needs of the National Government can be more economically fUl­
filled by construction in parts of the city where urban transport and other
public facilities, as well as the necessary private facilities which are comple­
mentary to the proposed buildings, B,lready exist.
If construction on the proposed Administrative Center is postponed,
as recommended, expenditures in this sector should not exceed 3.2 million pesos
in 1956.
Foreign exchange requirements are estimated at .9 million pesos (US
M, ':16 !lU
'II'~on.
)
qp.,.I
~.
B.
Investment after 1956
It is
"
~~likely
that more
tl~n
a few million pesos per year will be
available for national and departmental administrative buildings in 1957-59
if high priority projects in other sectors are to be carried out.
It will
require great restraint on the part of the National Government and careful
study to reduce unnecessary investment during these years by assuring
t~~t
existing office space is utilized to the maximum and that neu office space is
provided in the most economical
.,
F.Br~er •
-·58 ­
"
A.
Investment in 1956
Seven projects in which public expenditures are involved in 1956 were
.. submitted to the mission.
1hey include the expansion of the
del Hio steel
mill, a fertilizer plant and a coal mining project sponsored by the Instituto
de Fomento Industrial, three cement plants and a liquor distillery.
Total
investment for these projects between 1955 and 1959 is estimated at 32.1.5 mil­
lion pesos •.
.Y For
1.
1956, 126.8 million pesos are to be invested. ?:,./
Paz del Rio Expansion
Acerias Paz del Rio S. A. has been considering a large expansion
during the next tr,xee years, for nhich a total investment of approximately
242
million pesos is envisabedj 80.6 million pesos were proposed to be invested in
1956.
At the request of the Colombian Government, the mission undertook a
special review of the technical, commercial, economic, financial and managerial
phases of the enterprise.
detail in Annex
Its findings and recommendations are reported in
of this report; they may be summarized as follows:
The mission found that action was urgently necessary to rehabilitate
the present property and to improve the quantity and quality of its steel
production.
It emphasized tile importance of obtaining the assistance of ex­
perienced outside management at the earliest possible date.
Vnlile it believes
that the Paz del Rio enterprise can be made into an effective operation under
skilled adrainistration and with proper operating and inarketing policies, the
present condition of the Company makes it apparent that the venture was
launched with inadequate preparation
&
nd on a scale well below 'Lhe economic
size for a successful integrated steel operation.
17--rTICluding 12.6 million pesos private contributions for cement plants in
Caldas and Boyaca.
?:,./ Including 7.2 million pesos private contributions for cement plants in
Caldas and Boyaca.
- 59
During its stay in Colombia, the mission recolll111ended the transfer of
the ownership of the Company from the Government to the Banco de la Republica.
The mission is very £:clad to note that this step has now been l..aken since
it believes that this was an essential prerequisite to the rehabilitation of the
enterprise and its development on a sound business basis.
The mission recom­
mends accelerating the Colombian Govermnent's present program for transferring
the Company's shares into private hands.
In its full report the mission presents a detaimd appraisal of the
existing facilities and makes a number of sug!:,estions reearding their more
effective operation.
The mission emphasizes throughout, however, the over­
riding importance of obtalning experienced outside management Vih ich, under
the direction of the President of the Company, would provide the necessary
top-level executive talent required in all phases of the operation.
The mission found the Company to be in a very precarious financial
position and points out that immediate measures must be taken by the Govern­
ment to provide additional funds to meet the Company's operating losses and
to cover the costs of certain immediate rectifications which the miss:J.on con­
siders to be necessary in the present plant.
The mission points out the in­
consistency between some Governmental measures taken to protect the Company
against outside competition, and others which have the effect of subsidizi ng
competing imported products.
The mission recommends studies of this problem",
and of the Ccmpany's marketing, pricing, and promotional procedures.
The mission believes strongly that rehabilitation must procede expan­
sion, and that no expansion program should be initiated until the new and
strengthened mSEgement has mastered the
plant.
proble~of
operating the present
At the same time the mission recognizes that the present plant is
too small to support a fully integrated operation without continued heavy
Government subaidy.
Among other things, this means that without expansion,
- 60 ­
hopes of setting tr.e COTJpany on a financially self-supporting basis and of
transferring it to private ownership would be frustrated.
'.
After reviewing tte adequacy of the available rmy materials and fuel
reserves, and after conducting a careful inquiry into the prospective mar­
ket for steel products in Colombia, the mission has come to the tentative
conclusion that from a commercial point of view the Company would be justi­
fied in raising Paz del RiolS annual ingot capacity from 162,000 to 522.,500
tons.
The suggested expansion program would also involve the addition of
finishing facilities, including a rolling mill, which would increase capacity
for producing finished products from 122.,000 to 366,000 tons.
The estimated
cost of the program, including minor sums for rectification of the present
plant, is 221 million pesos, of which 145 million pesos
be required in foreign exclwnge.
«(~58
million) would
The mission I s report presents detailed sug­
gestiohs regarding this expansion program, subject to later review by the
n€w and strengthened management with the aid of consulting engineers.
The TJission concludes that if the Colombian
Goverrn~ent
is prepared to
keep its total investment expenditures within the lin1its consiGtent with
internal stability and external solvency, and if
~ithin
this level of invest­
ment it decides to give the necessary priority to the expansion of the Paz del
Rio steel plant, an expansion program along the lines which the mission recom­
mends should be undertaken, but only after
(a) experienced executive management assistance has been obtained
and has shovm its capacity to master the problems of operating
the present plant,
(b) experienced consulting enf::ineers have prepared the necessary
studies and engineering designs, and
(c) a final determination has been made regarding the character of
the exr~ansion on the basis of the opera ting and marketing ex­
perience obtained in the interval.
The mission considers that until much further progress has been made
in, establishing the necessary bases for an expansion program and in estimating
- 61 ­
its cost,. the Colombian Government and the Company should refrain from becom­
ing involved in any further financial commitments with respect to this problem.
2.
Projects of the Instituto de Fomento Industrial
The Ccrrejon coal mining project is planned to open up a new
to produce steam coal for export.
co~l f~
Geological surveys have shown the reserves
to be extensive and chmnical analyses indicate the quality to be suitable.
There is expected to be a good market for the product.
1956 and
19~8
is expected to amount to 16 million
~esos,
Total investment between
of which 5 million
pesos will be invested in 1956.
The fertilizer plant is designed to manufacture ammonium
urea from natural gas available from oil fields in the area.
ni~rate
The Italian firm
of Montecatini is serving as the engineering consultant to the preject.
are complete and the total cost is estimated at 30 million
and
~)esos,
Plans;
of which
3 million was invested in 1955 and 22.5 million is planned for investment in
1956. Total foreign exchange required for the projects will be 17.5 mUlion
pesos (us
~7
million), of which 13 million pesos (US $5.2. million) would be
needed in 1956.
The project is to be financed by a foreign loan of US
~3.9
million and from the Instituto's ovm resources.
3.
Cement Plants
The 32 million !)esos to be invested in these pJa nts include private
investments.
The public contribution is expecteci to be 55% of total capital
for the B oyaca plant and 20% for the Caldas plant.
plant is still under discussion.
The financing of the Cauca
In 1956, private and public investment in
these plants will total 18 million pesos.
In recent years Colombian cement production has been increasing at a
rate of over 10% a year, and there are indications that there is still a con­
siderable unsatisfied demand.
This is particularly true in areas where there
is little or no local production and lNhere the transport from distant mills,
- 62 ­
when cement is available from such sources, represents a large proportion of
the value of the product.
industry by
The proposed mills will increase the capacity of the
30 to 40% between 1955 and 1958. This rate of increase is consis­
tent with the recent experience of the industry.
But more specifically the
Caldas and Cauca plants will be able to 'tap new and important
heretofore been inadequately supplied.
appears less advantageous.
marl~ets
that ha\.e
The location of the Boyaca plant
The local marl:et may not be able to absorb the out­
put end the ne&rsGt large market, Bogota, '!.D1J;J' be more economically supplied froo
the other locations.
4.
Liquor Distillerz
This small prcject has been under w2y for some time.
completed in
It will be
1956 with an invesunent of 0.7 million pesos.
5. Recommendations
As far as Paz del Rio is concerned, the mission points out in Annex
III th8t considerable time 'it'ill be needed to prepare properly for the expansion.,
In 1956, therefore..,_ the mission
(;8
alloc2 tine only 2.5 rniiUibn pesos to fim.'ll'lca
the cost of prepera.tory work.
In considering other planned industrial investraents, the mission be­
lieves that an :L.'nportant criterion should be the availability of priv2.te funds
for such projects.
If projects vihich a re not government monopolies by natUl'e
or long tradition Ciln be financed by private funds, government resources can
be released for further inve::;tIJent in areas of government responsibility where
it is neither possible nor desirable to 'J.se private funds.
Using this criterion the mission cannot recommend the use of public
funds in the cement plant projects.
A private cement industry exists and
flourishes in Colombia and private funds are available to completely finance
these projects.
Public funds could better be used elsevvhere.
- 6,3 ­
The mlssion did not study tee coal and fertilizer projects and does
not know whether private capital is available to finance these projects.
view of this, and since both projects already are under way, the mission
no recommendation to reduce these investr.1ents.
In
~~kes
Ho',,,ever, the mission believes
that the National Government shculd eX):'lore the nossibility of putting these
projects on a basis which would permit private capital to participate in the
financing and that attempts should be made to dispose of these projects
entirely to private interests as quickly as possible.
Governt~ent
investment
in fields normally left to the private sector not only deter foreign and
domestic private investment in these fields, but in other industrial fields
as well.
Elimination of the cement projects and reduction of the amount to be
invested for Paz del Riols expansion in 1956, brings estimated investment
expenditures for industry to ,30.7 million pesos, as follovlS:
Project
troposed
(millions of pesos)
Paz del Rio Expansion
Cerrejon Coal Project
Fertilizer Project
Cement Plants
Liquor Distillery
B.
Recommended
(millions of pesos)
80.6
5.0
2.5
22.5
-9.J.
22.5
0.0
0.7
126.8
.:ill..t1
18.0
5.0
Investment in Later Years
1.
Paz del Rio EppaDsion
In view of the considerable tlIlcertainty as to how long the neces­
sary rreparatory steps may take, the mission is hesitant to suggest a specific
scheduling for the investment in the Paz del Rio exransion program.
Attention
should again be called to the fact, ho'/rever, that if the program is undertaken
- 64 ­
on the scale suggested hy the :!1ission's report, it vlOuld require the very
considerable
of
~~58
SUI!l
of 221 rni11i(")n pesos (including a foreign exchange component
million).
Aside from the 12 million vesos eXlJenditure on the sinter­
•
J.
ing and flotation plants, 1-lhich the mission recoDI1ends be given special
priority, the p-alance of the expenditure ivould :;;robably be spread over three
years, i.e. at the rate of about 70 million pesos per anrnun.
2.
FaDer and Pul£ Plant
The Instituto de Fomento Industrial is planning the construction of
a paper and pulp plant in 1957 ",11ich 1.<Jill obtain the bulk of its raw material
from the tropical forests of the l':a.gdalena River Valley.
Tests have not been
completed on the suitability of the local wood for paper production but it is
expected that imported pulp 1-1111 have to be used to supplement the local pro­
duct for some
t~les
of paper.
The necessary technical and economic stUdies
have not been reade for this rroject and the location has not been selected.
\:Jhat has been said above about the desirability of seeking nrivate initiative
a~1d
canital for the coal and fertilizer projects applies as ',lell to the pulp
and paper project.
XI.
A.
AGEl Ct:LTTJRE
In.ter!1ptional Bank Agricultural hission
An Agricultural }:Iission organized by the International Bank: spent
three months in Colombia early in 1955 studying the potentialities of Colombian
agriculture.
The report of the Agricultural Eission makes recoJll.1'flendations for
stimulating agricultural development in Golornbia in the next decade and esti­
mates the expenditures required for this purpose.
Colombia must
~~ke
The report stresses that
investments of 438 million pesos in the next ten years in
order to meet the foreseeable requirements of an expanding population which is
- 65 ­
becoming increasingly urbanj.zed.
The mission preparing the present report Y
believes the req'uirements of balanced economic development in Colombia; place
investments for increasing agricultural output high on the list of priorities.
In analyzing projects presented by official entities, the General hission has
followed the advice and recommendations of the Agricultural bission.
In
other cases, the General Fission includes projects recommended by the Agri­
cultural 1viission which '<lere not proposed by any Colombian entity.
B.
Investments in 1926
The General
i"~ission
received proposals from official entities fer
public investments in agriculture for 1956 which totalled 60.6 million pesos.
The General Hission recommends that these agricultural investments be reduced
to 38.0 million pesos, of which 6.9 million (US ~~28 million) will be required
in foreign exchange.
Table V summarizes planned and
recon~ended
investments
for these projects in 1956, the recommended reductions being due mainly to
the lack of adequate preparation on many agricultural rrojects.
11
To distinguish it from the Agricultural hission, the present mission
,,,Ul be referred to in this chapter as the General Fissj.on.
- 66 ­
T!'.BT...E V
Pla'1Led & '::::ecommended Investrllen ts for Agriculture in 1956
(Inillions of pesos)
Official
Entity
P1211ned
Project
E:;...:penditure
.
•
CVC~/
Irrige.tioi1
I'tecommended .&xDenditure
Tctir
Including Foreign
---Exchange
Equivalent
6.2
6.2
1.4
"
Flood Control
.1
.1
"
Deep '!,-lells
.1
.1
3.7
3.7
2.2
.5
.2
2.0
1.0
Grain storage
II
"
Agriculture::.!
"
13.8
Pilot Projects
Cattle importation
10.0
Caj a Agraria
Liming
Colonization
Institute
Carrare Lend
Development
2.5
"
Rio Mira Lend
Development
1.2
II
Puerto {ssis Land
Development
1.4
II
No del f 2rrns
2.2
d!
Electraguc-s-'
If
Dept. of Norte
de Santander
Caja Agraria
Bogota S 8b ana
Flood Contro 1
Tuta & Sogamosa
Irrigation 8;. Draina(;~
Valle del Zulj_8
Irrigation
2.5
2.2
.3
2.0
3.7
10.0
Irrigation.
4.0
ETc:.:!cn Control.,.· 'L
1.7
Increase in capital
1.7
.1
15.0
JQ.O
a/ The Autonomous Corporation of the Cauca
de Defensa de Productos Agric01os.
0/ Corporacion
'C/ }Unistry of
(I/
-
J~griculture.
Instituto Nacional de FOlnento Electrico y Aprovechamiento de Aguas, recently
absorbed into the newly-created Corporacion de Servicios Publicos.
67 ­
·.
1.
Gauca Cort'cration Pr.:ojE;cts
The AutonOMOus Corporation of the Cauca
(eve),
the official entity
concerned l-lith int.egrated development of the Upper Cauea Valley, plans to invest
a total of 6.4 million pesos in 1956 for irrigation, flood control and diggiP4
of deep vater \']el1s.
Eost of the planned investuent is for irrigation projects
1-lhich the Agricultural Liss:1.on has endorsed.
In 1956, the Corporation plans to
invest for tl:is purpose 6.2 million pesos, of which 1.4 million pesos (US $.6 mil­
lion) would be in foreign exchange.
In 1956,
ling floods on the Upper Cauca Eiver.
1:fil1 be required for rrepar:::tory Hork.
eve
will start a program for control­
An expenditure of only 0.1 million pesos
The Corporat.ion also plans to lnvest 0.1
million pesos in 1956 for a program of drilling deep 'Water wells in various parts
of the Valley.
The Corporation plans to finance these projects initially from
contributions from the Nntional and Departmental Governments In the Valley and
eventually, from payments by farmers who benefit from the \V'orks.
2.
Grain Storage
A plan for providing additonal grain storage facilities is now being
carried out on a modest scale by the Corporaci6n de Defensa de Productos Agricolos,
the government entity charged
1,~th
such programs.
At a cost of 3.7 million pesos
in 1956 (including the foreign excp~nge equivalent of 2.2 million pesos), it will
be possible to complete two additional silos.
These should continue, but the Agri­
cultural }lission urges that before embarking on a further extensive 40-million peso
grain storage program now under conSideration, an economic survey should be made
of the benefits which may result from such a program.
No expenditures for this
broader program are included for 1956.
3.
Agricultural Pilot Programs
The Agricultural Eission strongly supports the idea of pilot projects
to be carried out by the lviinistry of Agriculture for practical demonstrations in
the application of modern agricultural practices.
An expenditure of .5 million
- 68­
pesos (including the forei!:'n exchange ecuivalent of .2 million pesos) l·JQuld be
required in 1956 to launch this program.
4.
Imnortation of Cattle
The Einistry of A:riculture has under consideration a project to spend
some 10 million Desos in 1956 for the impol-tation of blooded cattle into Colombia.
The report of the Agricultural Mission advises against an extensive program of
importation of cattle and, instead, urges the taJdng of a DU..'llber of other steps
to achieve more intensive livestock production as of greater priority and as
promising more satisfactory results for the years immediately ahead.
In the
light of the Agricultural Nission I s views, it 1tmuld be advisable not to go ahead
with a costly importing program for the present and, instead, to concentrate on
other programs suggested by the Agricultural Jvlission.
5.
~~~ing
Program
The Agricultural Nission recommends undertaking a program for establish­
iug plants in different parts of the country to produce agricultural lime, which
is much needed on the highly acid soils in Colombia.
estimated cost of 0.5 million pesos each.
These plants would lave an
The Agricultural l'lission propos ed that
6 million pesos be s!)ent annually for a five-year :reriod.
In order to nrovide more
time for planning the program, the General Mission recollh"llends that in 1956 only 2
million pesos be invested in this program.
required in foreign exchange.
About
r~lf
of this amount would be
This expenditure would get the program under way
by providing four lime plants.
6.
Colonization and land Development Programs
The Instituto de Colonizaci6n has several projects for settling new
lands.
One of these, the Carrare land development project, is already under way.
In 1956, 2.5 million pesos will be required, none of it in foreign exchange.
The Instituto plans to spend 1.2 million and 1.4 million pesos, respectively,
.,
- 69 ­
in 1956 to start the Rio Eira and Puerto Assis land development projects.
amounts would be required in succeeding years through 1960.
Similar
The General Nission
recommends that these projects be postponed until studies have been made of the
benefits which may reasonably be expected from these projects.
If these studies
are favorE!ble, expenditures should still be deferred"until adequate plans have
been prepared.
The Agricultural Nission supports the plans of'the Instituto for
establishing model farms in the new regions which are being opened up.
This
program \<,ill require about 2.2 million pesos per year (td th no foreign exchange
cost) beginning in 1956.
7.
:§Ol!otl! Saba,na Flood Control
A project \·,hich has been given much study and vrhich the Agricultural
:tUssion considers important and worthwhile is that for extensive flood control
in the Bogota Sabana area.
Before an effective program can be carried out,
however, a period of further study and preparation of plans will be required.
Expenditure of about ., millicn pesos in 1956 and the same amount in 1957 is
estimated as adequate for this preliminary work.
The General Hission recommends
that this preparatory 1"rork be started in 1956 although no official entity proposed
it.
8.
Tuta and Sogamosa Irrigation and Drainage
The Instituto de
Aprovecp~miento
de Aguas y Fomento Electrico has made
studies and carried out prelLminary work in the Tuta-Sogamoso area on irrigation
and drainage works.
The Agricultural
recommends it continue.
l~ission
considers this work important and
An expenditure in 1956 of 3.7 million pesos would
t~
required (including foreign exchange costs of the equivalent of 2 million pesos).
- 70 ­
9.
Valle del Zulia & Huila Irrigation Pro,jects
~JO
departmental irrigation projects, one in the Valle del Zulia
in Norte de Santander a'1d the ct!1er in Build, have SCheduled expenditures of
10 million and
4
million pesos, respectively, in 1956.
Neither of these
projects, for Ivhich inadequate plans .:md cost estimates exist, is considered
of high priority by the Agricultural Hission.
10.
Bucaramanga Erosion Control
The I,gricultural Hission has noted that measures need to be taken to
control the serious erosion problem in various parts of Colombia, among them
in the Department of Santander.
The Mission did not have occ as ion, hmJever,
to examine in detail the project nm. undenvay at Bucaramanga.
This project
1iJill reouire expenditures of some 1. 7 111illion pesos per ye ar for the ye ars 1956
through 1960 (including an amount in foreign exchange equivalent to .1 million
pesos per year) •
11.
Increase i...'1 Caj a Agraria s Financial
'
~esources
The 19ricultural I1ission h28 recorrD'llended that the Caj a Agraria should
receive annual contributions to its capital thrOUg:1 noS-tional budget appropri­
ations and has sug2,ested that these should gradually increase from 15 million
resos per year to
25
million pesos per
ye~~
to achieve an eventual total
increase in capital of some 200 million pesos.
The General
~:ission
has adopted
the Agricultural r'lissionls proposal and recomr;lends that 1.50;.f;lillion pesos be
approprided in 1956 and that the a'1nual contributions be increased until a
tota.l increase of 200 million pesos is CI.chieved by 1965 •
•
C.
Investment in 1957 and 1952-1960
Agricultural investments 1:ilill have to rise greatly in 1957 and more
than double the 1956 rate in 1956-1960 if Colombia is to sUP'P1y most of
its food requirements in the next ten yeers.
unless investments in this sector
increase greatly over current levels, Colombia will have to spend large
quantities of scarce foreign exchange to inlport foodstuffs.
avoided, and if some
expected
decl~les
inc:;.~ease
If this is to be
in agricultural exports is to compensate for
in coffee earnings, the preparation of sound agricultural
projects must begin without de12Y.
On the basis of the data submitted to
the General Mission by Colombian official entities a..'1d by the Agric 111tur
~Hssion
"
the follovJing investments may be expected in 1957 and 1958-1960:
- 72 ­
T,' BLS VI
Partial List of Agricultural InvestIllent
1957 end 1958-1960
----------------------------
(millions of pesos)
Pgency
Project
Average Annual
Investment in
I958 - 1900
11
eve
Irrieation
,,8
eve
Flood Control
.2 4
eve
Drainage Progran
2.5 2
eaj a :'graria
Expansion of Coello &. Sandan::!.
Irrigation projects
5 b/
2/
1.5 2
Liming Frogr am
6.0 6
• of
Rio Cesar Lc1l1d Development
Colonization
3.0 5
"
"
"
2.5 2
2.2 2
of
Agricultural Pilot
Agriculture ?rojects
Electraguas
Nodel F2xrn.s
.5
Llanos Project
Bogota 2,,;n8na Flood
t!
Tuta-Sog2rllOSa Irrigation
and Drainage
II
Bucarar'12nga Soil Erosion
"
So i l ,':':1J:rvey ~/
Caja
3.5 Cont:i.~ol
12.1
Capital Increase
Tot
a/
Endorsed by the At,ricultural Hission
only
For 1958 only
b l For 195J and
i/
1 ::./
4
9
1.7 2
.4
:1
17.0 18
66.9 74
--
-
- 73 ­
XII.
A.
CO~.1J':UNICATIONS
Investment in 1956
1.
Introduction
The Empresa Nacional de Telecomunicaciones (a government-owned entity
handling radio and long-distance telephone services), the municipal and depart­
mental autonomous telephone companies (which are concerned vlith local telephone
systems) and the :&npresa Nacional de Correos y Telegrafos (now in the Ministerio
de Comunicaciones, but soon to become an autonomous agency) propose to invest a
a/
total of 39.5 Lullion - pesos in 1956.
This contrasts 1;'dth an estimated 32.2
b/
a/
million - pesos invested in 1955 and 34.3 million - pesos which the mission
recommends be invested by these entities in 1956.
2.
Emnresa
Nacional de Telecomunicaciones
.
The Empresa is engaged in a modernization and expansion program which
is expected to be completed by the end of 1958.
The mission was informed that
existing facilities are inSUfficient and too old to meet the needs of Colombia's
expanding economy.
It is estimated that the program will require a total expend­
iture of 69..0 million pesos, about half (US:,.U.O million) in foreign exchange.
The Empresa expects to finance 31.1 roillion pesos of the program from its current
earnings in 1955-1958, and the ba.lance from domestic bank loans or medium-term
suppliers' credits.
F'rom information submitted to the mission, it was estimated
that the Empresa invested about 15 million pesos on the expansion in 1955;
in
1956 it expects to invest about 12 million pesos, of which 6.8 million vlil1 come
from current earnings.
.
pesos
(us~2.4
million).
Foreign exchange requirements in 1956 would be 6.0 million
Revenues are expected to rise as a result of the expansion
and modernization and the Company expects little difficulty in liquidating its loans
a/
b/
-
InclUding 6.8 million pesos investment financed from Empresa de Telecomuni­
caciones' ovn resources.
Including 6.3 million pesos investment financed from Empresa de Telecomuni­
caciones' O~TI resources.
- 74 ­
from revenues by 1961•
.3. :Municipal and Departmental Telephone Compcmies
Several municipal and departmental telephone companies are expanding or
improving their telephone systems or are planning to initiate such programs soon.
These programs vdll be financed from the companies! ov/n resources, from
banl~
loans and suppliers! credits.
do~estic
In 1955, 17.2 million pesos was invested by
these companies and in 1956, 21.2 million is planned to be spent.
The 1955 and
1956 expenditures are divided among the companies in the various cities as follows:
1956
1955
Telephone Company
in:
Bogota
Medellin
Cali
Cartagena
l!Ianizales
popayan
Pereira
Bucaramanga
Norte de Santander
Investment
(million pesos)
8.7
Investment
(million pesos)
4.1
9.9
5.8
•.3
.1
.9
•.3
.1
1.2
1.6
1.1
2.8
1.4
.1
21.2
Total
The mission had no opportunity to investigate the merits of each of these
projects, but it has been informed that the execution o£ these projects is based
cn:comprehensive technical and financial studies, except for the program in
Bucaramanga, "where no detailed plans have yet been prepared.
The mission there­
fore recommends that the Bucaramanga program be postponed until 1957, which will
give time to prepare adequate plans.
If this is done, total investment in these
programs in 1956 would amount to 19.6 million pesos, of which about 11.8 million
..~
pesos
(US~p4. 7
million) will be in foreign exchange.
- 75 -
·...
4.
•
Ernpresa Nacional de Correos
The Empresa is planning to start tViO programs in 1956 v'li th a total
investment of 28.3 million pesos.
The first program 1.vill require a total of 16.4
million pesos, of whtch 25 percent or about US;,yl.6 million will be in foreign
exchange.
In 1956, 2.7 million pesos will be invested in this progran.
The
second program is for the purchase of a fleet of aircraft and the necessary
auxiliary equipment to establish the Empresa1s own airmail service.
A total
investment of 11.9 million pesos, mostly in foreign exchange, w"Quld be needed
until 1960 for this purpose;
in 1956, 3.6 million is to be spent.
lvhile the first program is designed to meet urgent needs of the Empresa,
the second program appears unnecessary, and the mission strongly urges that it
be abandoned.
The planned airline
\~uld
largely duplicate existing facilities
of Avianca, a Colombian airline in 'which the National Government has a financial
interest.
In view of the fact that the Government does not have the funds needed
to meet all the urgent calls upon it for financing important development programs,
this project cannot be justified, even if, as the Ministry of Communications has
said, the new line would also provide airmail service to places which Avianca
does not yet serve.
If this project is eliminated, total investment by the
Empresa in 1956-1960 would be reduced to 16.4 million pesos, and in 1956, to
2.7 million pesos.
Foreign exchange requirements in 1956 would amount to about
.7 million pesos (US;,p.3 million).
In summary, investment in communications in 1956, as proposed and as
.
the wission recommends would be as fo11ow"8:
- 76 ­
Recommended
(million pesos)
Prot!o§.ed
(million pesos)
.:'
1.
Empresa Nacional de
Telecomunicaciones
12.0 ~
12.0
21.2
19.6
2. tfunicipal & Departmental
Telephone Comranies
.3.
Empresa Nacional de Correos
y Telegrafos
§;./
2:.J
.39.5
§;./
Including 6.8 million pesos from own resources.
Jl.bout 53.9 percent of the 34.3 million pesos, or 18.5 million pesos (US C,7.4
million), which the mission recor.~ends be invested in the communications sector
in 1956, would be required in foreign exchange.
B. Investm~nt
in lC£57 and 1958-1960
On the basis of
eliminat::ons already discussed, but Hithout allow-
for any ne'd rrojects, public investment in communications vmuld be 43 mil­
lion pesos in 1957 and an annual average of 24 million pesos in 1958-1960 as
follO\.)'s:
1957
(million pesos)
Annual average
1928 - 1 960
(million pesos)
1. Empresa !'acional de Telecomunicaciones 2. E'unicipal & Departmental
Telephone Companies
.3.
Enpresa Eacional de Correos y Telegrafos
Total
.
II,
7£1
19
14
...2 43
24
§;./
Including o'm resources of 8 million pesos in 1957 and an annual average
of 3 million for 1958-1960.
Q/
Entire amount of 21 million pesos to be invested in 1958.
- 77 ­
These totals include the Bucaramanga telephone project beginning
in 1957, but as already indicated, do not take into account future but
projects of these entities, or of others in this sector.
lic investment commitments
~~y
u!L~notn1
Although other pub­
permit investment in this sector in 1957 and
1958-1960 to proceed &t the proposed levels, the mission believes trat high
priority needs in transportation, electric power, agriculture and possibly
for Paz del Rio's expansion will require that no additional conuuunications
projects be started in 1958 and 1959, assuning that Paz del Riots expansion
is in process •
•