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Folder Title: Contacts with member countries: Colombia - Correspondence 01

Folder ID: 1771010

ISAD(G) Reference Code: WB IBRD/IDA 03 EXC-10-4549S

Series: Contacts - Member Countries files

Sub-Fonds: Records of President Robert S. McNamara

Fonds: Records of the Office of the President

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Contacts with member countries · Colombia - Correspondence 01

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COLOMBIA

1. 9/24/68 Rodrigo Botero, Special Assistant to the President for Economic Affairs

Edgar Gutierrez, Head, National Planning Department Jorge Ruiz, National Planning Department

2. 1/16/69 Ambassador Misael Pastrana Borrero Rodrigo Botero, Special Assistant to the President for Economic

Affairs

3. 5/7/69 Ambassador Misael Pastrana Borrero Rodrigo Botero, Special Assistant to the President for Economic

Affairs

4. 6/13/69 Rodrigo Botero

5.

6.

7.

(Breakfast President Lleras Restrepo at Blair Ambassador Pastrana Borrero House) Bernardo Garces Cordoba, Minister of Public Works

Mayor Barco of Bogota

7/18/69 (Aspen-Eisen.Ex.)

9/12/69

6/4/70 (Bogota)

"

"

..

Alfonso Lopez Michelsen, Minister of Foreign Affairs Rodrigo Botero Montoya, Economic Secretary to the Presidency

Jaime Ayala, Assistant Director, Institute for Technological Research; Co-Director, Program of Technical Assistance to Industry, Bogota

Edgar Gutierrez Castro, Head, National Planning Department

President Carlos Lleras Restrepo

Camilo Jaramillo de la Torre, Manager, Export Promotion Fund Rodrigo Botero, Economic Affairs Secretary of the Presidency

Antonio Ordonez Plaja, Minister of Public Health Rodrigo Botero, Economic Affairs Secretary of the Presidency Javier Toro Ochoa, Director of the Human Resources Department

Hernando Gomez Otalora, Minister of Development Rodrigo Botero, Economic Affairs Secretary of the Presidency Jorge ~ Lara, Director, National Planning Department

9.

10.

11.

12.

13.

14.

15.

16.

6/4/70 (Bogota)

"

6/5/70 (Bogota)

fl

"

"

"

It

- 2 -

Abdon Espinosa Valderrama, Minister of Finance Joaquin Bohorquez, Director of Economic Studies Rodrigo Botero, Economic Affairs Secretary of the Presidency

National Planning Department Jorge Ruiz Lara, Director, National Planning Department Augusto Cano, Deputy Director, National Planning Department Javier Toro, Director, Economic Resources Department Julio Mendoza, Chief, Regional and Municipal Unit Antonio Barrera, Chief, Infrastructure Unit Guillermo Perry, Chief, Public Investment Programming Unit Rodrigo Botero, Economic Affairs Secretary of the Presidency Roberto Junguito, Agricultural and Industrial St}J ie ' /}'L.,~ Ia JJ \ , President-elect Hisael Eduardo Pastrana Borrero (_ ~ ~~ ;t:: flt&~Lz~J

Members of the Banco de Bogota and business leaders Jorge Mejia Salazar, President, Banco de Bogota Carlos J. Echavarria, member of the Conservative Party Jose Gomez Pinzon, President, Cuellar, Serrano, Gomez & Cia. (constr.) Alvaro Jaramillo, President, Corporacion Financiera del Norte Gonzalo Restrepo Londono, Senator Nicolas Escobar, Vice President, Texas Petroleum Co. Benjamin Martinez Moriones (development finance company) Jorge Mejia Palacio, former Bank Executive Director

Management of the Caja de Credito Agrario, Industrial y Minero Miguel Garcia Herreros, General Manager Roberto Villa, Manager, Agriculture Department Emilio Daunas, Administrative Director, Livestock Program Rodrigo Botero, Economic Affairs Secretary of the Presidency

Arturo Gomez Jaramillo, General Manager, National Coffee Growers Federa. Rodrigo Botero, Economic Affairs Secretary of the Presidency

Officials of Public Utilities Antonio Barrera, Director, Infrastructure Unit, National Planning

Department Hernan Borrero, Manager, Bogota Power Co. Daniel Rueda, Manager, Bogota Water and Sewerage Co. Jose M. Piedrahita, Manager, National Power Interconnection Co. Rodrigo Botero, Economic Affairs Secretary of the Presidency

INCORA Officials on Agrarian Reform: Colonization Carlos Vi~lamil, General Manager, INCORA Hernando Durana, Head, INCORA Planning Office Armando Samper Gnecco, Minister of Agriculture Rodrigo Botero, Economic Affairs Secretary of the Presidency Messrs. Sanin, Pelaez, Gutierrez, Ramirez, Velez Restrepo

and El Capitan, directors of departments and projects within INCORA

17. b/5/70 (Bogota)

- 3 -

Officials on Regional and Urban Development ~oi~e Rui~ Lara Director N~tio~al ~la~nin& De~artm~~t t\l S0 A~e~~fil~a~~rf;!&2tril\Ui\~ilt, ae81Hfit'6ii tt5~§tRimi~t¥Tth~~ Natl Gustavo Stevenson, Deputy Manager, CoJ.ombia Housing lnst·itute Samuel Botero, Manager, Colombian institute for the Construction

of School Buildings Ismael Matallana, Deputy, Colombian Institute for Construction

of School Buildings Roberto Arenas, Chairman, Municipal Council of Bogota Patricio Samper, Head, Planning Office of the Special District

of Bogota Rodrigo Botero, Economic Affairs Secretary of the Presidency

Others possibly met:

Carlos Augusto Noriega Gomez, Minister of Government Alfonso Lopez Michelsen, Minister of Foreign Affairs John Agudelo Rios, Minister of Labor Carlos 9ustavo Arrieta, Minister of Mines and Oil Bernardo Garee& Cordoba, Minister of Public Works Antonio~ Garcia, Minister of Conmunications Major General Gerardo Ayerbe Chauz, Minister of Defense Fernando Hinestrosa, Minister of Justice and Acting Minister

of Education

Planning Dept.

18. 1/7/71 Dr. Roberto Arenas Bonilla, Chief, Planning Department Ani> ass ador Douglas Botero f

2/9/71

19. 9/27/71

Rodrigo Botero, former Economic Affairs Secretary of the Presidency -­dinner at the McNamaras'

Dr. German Botero de los Rios, General Manager, Banco de la Republica Pablo Salazar, Advisor to the Minister of Finance

10/14/71 Rodrigo Botero, former Economic Affairs Secretary of the Presidency -­dinner at the McNamaras'

20. 1/22/73

21. 4/9/73

Dr. Rodrigo Llorente, Minister of Finance Ambassador Douglas Botero-Boshell

Alvaro Gomez (leading member of the Conservative Party)

5/9-12/73 Dr. Jose Felix Patino, Executive Director, Panamerican Federation of (Bellagio III Associations of Medical Schools Population Mtg.)

22. 6/1/73 Dr. Jose Felix Patino, Executive Director, Panamerican Federation of Associations of Medical Schools (Headquarters in Bogota)

Dr .• :Jorge Villareal, Chief, Division of Population, Panarnerican Federation of Associations of Medical Schools

23.

24.

25.

26. 27.

28.

1/10/74

3/14/74

4/2/74

9/30/74

12/3/74

6/2/75

9/25/75

11/2-5/75 (Bogota)

(Popayan)

(Pereira)

(Palmira)

(Bogota)

-4-Alfonso

Senator~opez-Michelsen

Rodrigo Botero

Carlos Lleras, Consultant to IADB and former President of Celombia

Dr. Dr. Dr. Dr.

Abdon Espinosa Valderrama, Governor Bank/Fund . German Botero de los Rios, Manager, Banco d: la Republ1ca Rodrigo Escobar, Economic Counselor, Colo~b1an Embassy Hernan Mejia, Adviser, Banco de la Republ1ca

Dr. German Castillo, Director, Colombian Institute for Social Development

Ernesto Lopez, Colombian Institute for Social Development Miss Bonavia, Interpreter

Rodrigo Botero, Finance Minister

President Alfonso ~opez Michelsen

President Al~onso Lopez Michaelsen Rodrigo Botero, Minister of Finance

Joaquin de Pombo, Vice Minister o~ Agriculture Miguel Urrutia, Director, National Planning Department (NPD) Cristian Mosquera, Director of Public Credit Sergio Duran, Chief, Agricultural Studies, NPD

Aurelio Iragorri, Governor of Cauca Department

Hugo Valdes, Coffee Federation

Raul Orejuela, Governor, Department of Valle John Nickel, Director of CIAT (Centro Internacional de

Agricultura Tropical) Dr. Lous Fajardo, Professor, Valle University Oscar Echeverri, Director of CIMDER (Multidisciplinary

Center for Rural Studies Alfredo Aguirre, Director of PRIMOPS (Research Program

in Health Delivery Models) Carlos Rodado, Chief, Social Studies Unit, NPD

Jorge Ramierz Ocampo, Minister of Development Clara Eugenia Lopez, Economic Adviser to the President Francisco Ortega, Deputy Manager, Banco de la Republica Eduardo Sarmiento, Adviser to the Monetary Board Juan Camilo Restrepo, Adviser to the Monetary Board Joaquin Bohorquez, Vice-Minister of Finance Guillermo Perry, National Tax Director Jorge Vasquez, Director, DANE

Jaime Garcia Parra, Minister of Communication Juan Jose Turbay, Minister of Mines and Energy

28. :{Contd)

11/2-5/75 (Bogota)

- 5 -

Luis Prieto Ocampo, Mayor of Bogota Abdon Espinosa Virgilio Barco Hernando Agudelo Villa

Dr. Haroldo Calvo, Minister of Health Dr. Rafael Pardo Buelvas, Minister of Agriculture Dr. Gonzalo Echeverri, PROFAMILIA Dr. Miguel Trias, PROFAMILIA

Dr. Roberto Junguito, Director of Fedesarrollo Father Alejando Angulo, Director of CIAS Dr. Eduardo Aldana, Director of SER Mr. Ospina, Fedesarrollo Mr. Calvo, CEDE, Universidad de los Andes

Benjamin Martinez, President, Corporacion Financiera del Valle Jorge Mejia Salazar, President, Banco de Bogota Luis F. Echavarria, President, National Industrialists Assn.

(ANDI) Francisco Mejia, Director, Azulejos Corona Jose Cortes, President, Seguros Bolivar

German Botero de los Rios, Manager, Banco de la Republica Banco de la Republica:

Antonio Jose Gutierrez Angel Maria Medina Mariano Ospina Perez (former President of Colombia) Alvaro Dugan Donado Jorge Mejia Palacio Rodrigo Munera Zuluaga Arturo Sarmiento Angulo Abel Mery Fernandez Benjamin Martinez Moriones Alvaro Aranjo Noguera (Manager, Caja Agraria)

Industrialists and Bankers: Fabio Echeverry Correa, Manager of ANDI Eduardo Goez, Stock Exchange Manager Jorge Mendez Munevar, Manager, Instituto de Fomento Industrial Jaime Michelsen, President, Banco de Colombia Hernando Echavarria Olozaga, Prominent Industrialist;

former Ambassador to the U.S.

Alvaro Gomez Hurtado, Presidential candidate of conservative party in last elections

Hernando Echeveri Mejia, Presidential candidate of UNO -leftist coalition including the communist party

(Cartagena) Nicholas del Castillo, Governor of Bolivar Raimundo Angulo, Mayor of Cartagena Douglas Oliden, UNDP Resident Representative

29.

30.

31.

32.

33.

11/2-5/75

10/5/76 (Manila)

12/1/77

6/22/78

7/5/78

9/27/78 Annual Meeting

6/25/79

10/1/79 Belgrade

9/30/80 Annual Meeting

- 6 -

EMcN Notes { 'tJd ~ L )JJ{_ ~~) . Rodrigo Botero, Minister of Finance Hernan Mejia, Director, Research Department, Banco de la Republica Eduardo Sarmiento, Adviser, Monetary Board Mrs. Maria Mercedes de Martinez, Adviser to the Minister of Finance

Rodrigo Botero, former Minister of Finance -- Member of the Brandt Commission

Rodr-igo B'otero~ Editor and Publishe:r, Estratezia Economica Y · Firtanctera~ Member, Brandt Commission

(Dinner at tracy Place)

Ambassador Virgilio Barco

Jaime Garcia Parra, Minister of Finance Eduardo Wiesner, Director of National Planning Dept. Francisco Ortega, Dep. Manager of Banco de la Republica Dr. Hernan Mejia, Dir. of Research, Banco de la Republica Dr. Franco, ED

Rodrigo Botero (as member of the Brandt Commission)

Eduardo Wiesner, Director of National Planning Dept Mr. Gama

Jaime Garcia Parra~ Minister of Finance Rafael Gama Quijano, Gen. Mgr of Banco de la Republica Eduardo Wiesner Duran~ Chief~ Natl. Planning Dept. Mrs. Leonor Montoya de Torres, Dir.Gen. of Public Credit Hernan Mejia, Subsec. of External Financing & Intl Org. Mr. Mapa (ED), Mr. Constain (Alt ED)

FORM No . 57 ~:: Bv:: FO~~/)~~ERNATIONAL FINANCE RECONSTRUjf/j ON ~ AD ; EVELOPMEN f I CORPORATION

!(IS~ ta 'lb OFFICE MEM RANDUM

TO: Memorandum for Record DATE: October 15, 1968

FROM: Gerald Alter 1~ suBJECT: Meeting with Colombian Delegation on Program Loan

At the request of President Carlos Lleras of Colombia, Mr. McNamara met on September 24 with a Colombian delegation consisting of Rodrigo Botero, Edgar Gutierrez and Jorge Ruiz who supplemented a written statement proposing that the Bank make program loans to Colombia. Messrs . Knapp, Friedman and Alter were also present.

Mr . Botero, speaking on behalf of the Colombian delegation, emphasized in his oral presentation the efforts being made by the Colombian Government to promote exports and improve the financial capacity of the Government for undertaking developmental expenditures. He emphasized that they regarded program assistance as essential over the next few years for the achievement of their broader economic objectives, not as a substitute for but as a complement to the substan­tial project assistance that they would also re~re . In the discussion that followed, it was made clear that the President of the Bank was willing to give careful consideration to Colombia ' s case but that if we were to present a recommendation to the Board on program assistance for Colombia, we would want to have an even more thorough understanding with the Colombi an Government on their development policies.

After the meeting with the Colombians, it was agreed that the Western Hemisphere Department would prepare a paper b.Y November 1, putting forward the case for a program loan to Colombia .

GAlter:pa

FoRM No. 57 INTERNATION AL DEVELOPMENT I INTERNATIONAL BANK FOR ASS OC IAT ION RECONSTRUCTION AND DEVELOPMENT I

IN TE RNATIONAL FINANCE CORPORATION

OFFICE MEMORANDUM TO: Memorandum for Record DATE: January 21, 1969

FROM: Gerald Alter j/-SUBJECT: Meeting of Mro McNamara with .Ambassador of Colombia,

·Dr. Misael Pastrana Borrero , · Janj.aty 16, · ]969

Mr. McNamara met with the new Colombian .Ambassador, Dr. Misael Pastrana Borrero and Dr. Rodrigo Botero, Special Assistant for Economic Affairs to the Presidento Mro Alter was also presento

There was a general discussion of the Bank's relationships with Colombia during which the .Ambassador thank~d Mr. McNamara for the Bank's special assistance in its role as leader of the Consultative Group. Mr. McNamara mentioned that he would not be able to act on the req_uest of the Colombian Government for program assistance from the Bariko He pointed to the recent Board meeting on program assistance for India emphasizing that there was need for educating the Board on program assistance. The Colombian representatives indicated that they were planning to visit several European capitals and would take advantage of this opportunity to explain their case for program assistance to the governmental authorities. They asked whether the Bank would indicate at the Consultative Group meeting that it was unable to give a positive response to the Colombian req_uest for program assistance. It was explained that we would not raise the Colombian req_uest to the Bank at the Consultative Group meeting. Our economic report gave support to the Colombian req_uest for program assistance and we would continue to do so in the discussions of the Consultative Group. Mr. McNamara req_uested that he be kept informed of the reactions given by the European govern­ments in the private discussions with the Colombian representativeso

cc: Messrs. Knapp, Weiner, Frost.

GAlter:pa.

r FORM No. 57 I INTERNATIONAL ~ NK FOR I INTERNATIONAL FINANCE

RECO . STRUCTION AND DEVELOPMENT CORPORATION 1

OFFICE MEMORANDUM TO: Memorandum for Record

FROM: Gerald Alter#

DATE: May 8, 1969

SUBJECT: Meeting of Mr. McNamara with the Ambassador of Colombia, Dr. Misael Pastrana Borrero

The Ambassador of Colombia, Dr. Misael Pastrana Borrero, called on Mr. McNamara on May 7 to inform Mr. McNamara of the State visit of President Carlos Lleras Restrepo planned for June 12 and 13. He said that President Carlos Lleras Restrepo would like to invite Mr. McNamara and some of his colleagues to a breakfast at Blair House on Friday, June 13. Mr. McNamara accepted the invitation, suggesting that Messrs. Knapp and Alter might also participate. The Ambassador suggested 8:00 or 8:30 a.m. with the exact time to b~ confirmed later.

cc: Mr. Knapp

GAlter:pa

• FORM No. 57 INTERNATIONAL DEVELOPMENT I INTERNATIONAL BANK FOR I INTERNATIONAL FINANCE ASSOCIATION RECONSTRUCTION AND DEVELOPMENT CORPORATION

OFFICE MEMORANDUM TO: Memorandum for Record

FROM: Gerald Alter~ DATE: June 16, 1969

SUBJECT: Meeting of Mr. McNamara with the President of Colombia, Mr. Carlos Lleras Restrepo

Mr. McNamara met the morning of June 13, 1969 at Blair House with President Carlos Lleras of Colombia. Also present were: Bernardo Garces Cordoba, Minister of Public Works; Misael Pastrana Borrero, Ambassador of Colombia; Alfonso Lopez Michelsen, Minister of Foreign Relations; Rodrigo Botero Montoya, Economic Secretary to the Presidency; Virgilio Barco, Mayor of Bogota and IBRD Executive Director; Messrs. Knapp and Alter. Most of the items mentioned in my briefing paper of June 11 were touched upon during the discussion with the Colombians, who placed major emphasis on the importance of moving forward more rapidly with one of the projects in our lending program, namely the highway loan now scheduled for fiscal year 1971.

The Colombian authorities did not press their plea for program lending or for a wider and more substantial financing of local currency expenditures by the Bank after Mr. McNamara. explained the difficulties which he faces on the financing side in increasing the level of Bank activity. He stated that he personally thougllthe Colombians had a strong case for program lending and for the financing of local currency expenditures, but there was a limit as to the extent to which he could innovate in the face of the reaction of the people upon whom the Bank depended for its financing.

The Colombian authorities requested that the Bank give consideration to increasing its projected lending level from US$100 million to US$130 million and that the Bank establish 25 years as the standard term for Bank loans to Colombia. Mr. McNamara agreed to give consideration to these two proposals.

Ambassador Pastrana raised a question concerning the possibility of expanding IDA assistance to Latin America. Mr. McNamara described the present status of the IDA legislation in the U.S. Congress, emphasizing the uncertainty facing all soft term assistance from the developed countries in todays' world. He stated that while IDA assistance to Latin America is expanding in absolute terms, it was not feasible to envisage a level of IDA assistance which would make any significant difference to most of the Latin American countries. He stated that Colombia, however, could count on a substantial volume of assistance from the Bank so long as their own performance continued to improve.

President has. see ~

Memorandum for Record - 2 - June 16, 1969

The Colombian delegation placed primary emphasis on the need to accelerate the proposed highway loan, giving both economic and political reasons. With respect to the Barran~uilla bridge, it was pointed out that when the Lleras Administration took office, Barran~uilla was ready to go ahead with the construction of the bridge on an unsatisfactory basis and this was stopped only with great difficulty. They could not leave office without assuring the financing of this bridge. The economic importance of the bridge was well established. and recent experience with e .. ferry demonstrated ·that their traffic estimates were underestimated. Moreover, the bridge was vital to the future industrial development of Barranquilla, with a new port area new· industrial site being projected for the other side of the bridge. It also served to integrate the northern part of Colombia and to facilitate integration with Venezuela. With respect to the paving component of the proposed loan, it was argued that the economic return was high and was being firmly established. in feasibility studies now under way. Colombia had fallen behind in the paving of many roads, some of which had been improved und.er previous Bank highway loans. Elections were coming up and it was an advantageous feature of this project that it would be widely dispersed over the country. The Minister of Public Works stated that both these components of the project, the bridge and paving, would be ready for appraisal by September although it wa.s not clear whether this was on the assumption that appraisal could proceed on the bridge on the basis of the studies which would be completed by that date. He hoped that the Bank would be able to permit the Colombians to go ahead with the project even before the Bank loan was approved by the Executive Directors. It was agreed that should the project develop as rapidly as stated by the Yrinister, the Bank could probably accept the award of contracts prior to .presentation of the loan to the Executive Directors, although financing of past disbursements would be more difficult. Mr. McNamara agreed to look into this matter and to give high priority to this project in the assignment of Bank staff.

cc: Messrs. Knapp, Sadove, Frost ~

,~

FoRM Nc-. 57 INTERNATIONAL DEVELOPMENT I INTERNATIONAL BANK FOR I INTERNATIONAL !NANCE ASSOCIATION RECONSTRUCTION AND DEVELOPMENT CORPORATIO

OFFICE MEMOR DUM TO: Mr" Robert S. McNamara (through Hr o DATE: June

FROM:

SUBJECT:

Gerald Alter tf. COLOMBIA - Briefing for Visit of President Carlos Lleras

Status of Arrangements

You have agreed to meet with President Lleras for breakfast at Blair House at 8:00 a.m. on June 13, accompanied by Mr . Knapp and myself. You will recall that President Lleras had also mentioned a meeting with the Bank's Executive Directors. We postponed a decision on this, following your instructions, and it now appears that the President 1 s schedule does not permit such a meeting. A biography of~ President Lleras and brief particulars of the members of his party ·2j/ are given in the attachments to this memorandumo

We understand from I~ . Jose D. Teigeiro, our resident economist in Bogota, that the issues which the President may raise are likely to be among those described below.

Bank Program Lending

You may wish to brief yourself on our most recent discussions with the Colombian authorities on this subject by referring to Mro Knapp's conversations with the President and with other Government officials during his recent visit to Colombia ( see attached memoranda of March 24, entitled respectively "Hr . Knapp's Meeting with Dr. Edgar Gutierrez, Chief of Planning Department", paras 11- 18, and ''Mr. Knapp 1 s Meeting with President Lleras Restrepo", paras 6 and 7) .

In replY to President Lleras you may wish to say that such infor ­mation as we presently have from U.S. authorities suggests that there are good prospects for a substantial program of UoS. assistance to Colombia in FY 1970, including program lending. In rep~ President Lleras might say that these prospects are still uncertain and that he would like the Bank to consider reducing the scale of its lending for projects, by pc sing certain projects to sources of export credit, in order to make room for possible Bank program lending in case the UoS. does not come through with this kind of support . You may wish to reply that we cannot give any assurance of being able to replace with program loans,project loans now on the Bank ' s list which the Government may decide to finance elsewhere.

Scale of Bank Lending to Colombia

In your letter to President Lleras of May 7, you indicated that the Bank would lend about $100 million for projects in Colombia in FY 1969, 1970 and 1971; that this was three times the annual rate of

Mr. McNamara -2- June 11, 1969

lending in the previous five years; and that it was a level of lending which would prevent any further increase in the Bank's holding of Colombia's external public debt, which was already equivalent to one­third of that debt. The Bank is, in fact, approximately maintaining its share of Colombia's external debt at this proportion.

Should President Lleras press you for an increase in the total of Bank lending above the limit of approximately $100 million annual~, you may wish to indicate that we see every prospect of Colombia being able to mobilize the capital it requires without resorting to the Bank for lending on a larger scale. If problems should emerge in the mobil­ization of external financing for Colombia ' s development program, we are prepared to make greater efforts as the Chairman of the Consultative Group to help Colombia deal with these problemso

Cost Sharing Formula on Ban_k Projects

We understand that President Lleras may suggest that the Bank's share of project costs should be standardized at a minimum of 6o per­cent, to the extent consistent with the $100 million annual limit on Bank lending. This would first require an increase in the amount of Bank lending projected for those projects with a low proportion of foreign costs, as we are presently proposing to lend for such projects between 42 and 6o percent of project costs. In this connection, the Government's interest is of course in increasing the extent of local currency financing under Bank loans.

Standardization of the Bank's share of project costs at some per ­centage which is known in advance to the Colombian authorities, may have some convenience to them as a basis for their own planning. From the point of view of planning operations in the Bank, it would also be convenient to have it known in advance of appraisal that a certain per­centage of project costs would be acceptable .

The projects with a low proportion of foreign costs in FY 1970 would be the Second Livestock, Secondary Education, and Water SupplY for Medium­size Cities . The Second Livestock Loan has recentlY been approved by the Loan Committee and is thus too far down the road to alter at this time from its present 42 percent share of project costs . To increase Bank financing planned for the other two loans to 6o percent of project costs would imply adding $11 million to the Bank lending program for FY 1970. On the other hand, standardization at a 50 percent share, excluding the Second Livestock Project, would only implY an increase of $3 million in Bank lending in FY 1970 which could probablY be absorbed in reductions in the amount of Bank financing for other projects (such as the Bank's participation in the external financing of the Chivor aydro Project). Turning to FY 1971, we have already planned a 6o percent Bank share in the costs of the largest element in the Sixth Highway Loan, namely the paving project.

Mr • McNamara -3- June 11, 1969

If you feel inclined to concede some advantage to a more uniform approach to cost sharing in Colombia, I suggest that you propose, in the case of projects where foreign costs are less than 50 percent, to finance at least 50 percent of total costs, unless there are overriding project considerations (such as those presented by the financial posi­tion of the borrower) which dictate a higher share for Colombiao

Terms of Bank Lending

President Lleras may raise with you the question of standardizing the terms of Bank lending to Colombia at 20-25 years This question has come to a head recent~ in Colombian government circles on account of the two loans to be considered by the Board on June 17, one of which is at 15-year repayment terms (the Agricultural Credit Loan), while the other is for a maximum of 15 years (the Third DFC Loan). Apart from these, our lending to Colombia in the past five years has been in gen­eral on terms of 20-25 years, and in 1964 we made a loan at 35 years.

Thus to lend on terms of at least 20-25 years would be in accord with our usual practice in Colombia. Where project considerations require shorter terms for the project, this can be dealt with by lending to the Government, and having the Government relend to the project exe­cuting agencyo I would recommend our establishing such minimum repay­ment terms on Bank loans as being consistent with the Baruc's position and responsibilities as a development financing institution, and as Chairman of the Consultative Group for Colombia.

Project Questions

We understand from Mro Teigeiro that some of President Lleras 1

advisors are suggesting to him that he raise questions regarding the amount and timing of specific Bank projects. I consider it unlikelY that he would use the opportunity of his meeting with you in this way. However, should he do so, it would be on account of some strong under­~ng reason, such as the political associations of a particular project; in which case I would suggest that you endeavor to elicit from him the precise nature of his preoccupation, deferring a replY on the project as such.

Economic Performance

While this is not an appropriate occasion on which to press President Lleras about Colombia's economic performance, not to allude to performance at all may leave the impression that this is no longer of significance for the Bank's view of Colombia's creditworthiness, which is far from being the case. The principal aspects of Colombia's performance which we have told the Colombians are critical for our continuing to recommend to the Consultative Group the very large borrowing program now planned, are:

Mr. McNamara -4- June 11, 1969

(a) The maintenance of adequate incentives - the exchange rate in particular - to encourage the growth of exports other than coffee.

(b) The carrying out of tax reform measures to be presented to the Congress in JulY 1969 to raise the additional revenues neede~beginning in 1970, for the development program.

(c) Continuing improvement of public utility tariff regulation.

Attachments

cc: Messrs. Wiese Weiner

FINAL REVISION

FY 196$ and Prior

AGRICULTURE 2/10.0 Livestock II Livestock III Livestock IV Agricultural Credi. t II Agricultural Credi. t III Land Settlenent I

Atlantico Irrigation II Cesar Irrigation

EDUCATION Secondary Education II .Education Project II Education Project III

POWER lS/20$.6 Chi vor I Hydro

· InteroOJUWotion Hydro

TRANSPORTATION 8/162.7 Highw~ VI { Barranqullla

Bridge and Paving Project) Highw8iY VII Highw~ VIII Urban Transport I

Railway VI

WATER SUPPLY AND SIWERA.GE Medium-sized cities

Medi~sized cities II

Medium-sized cities III Bogota II

DEVEU>PMENT FINANCE COS. DFC ~IFI! IV DFC (DFC) V DFC (IFI) VI DFC (DFC) VII DFC ( IFI) VIII

INDUSTRY .AND MINING l/30.0

TKLECOMMUNICATIONS Telecom II

POPULA.TION (X)NTK)L !'llbl.ic t!ej!..l th

TOTAL _408 • .5 (of which IDA) (l/19.5)

Western Hemisphere Department June ll, 1969

1966 1967 1968 1969

l/16.7 l/9.0 l/17 .o

l/7.6

l/18.0 l/18.0

2/35.5

l/14.0

l/25.0 l/12.5 1/25.0

l/16.0

41.7 2.5.0 44 • .5 103.1

COLOMBIA

Bank(IDA Lend.i.Ifi Program (us $ millions)

Total to FY 1969 1970 1971

5/52.7 1118.0 2/l$.0 fff.o

. s.o

10.0

l/7.6 l/10.0 10.0

l7/2JA.8 l/45.0 45.0 y

10/198.2 2/$5.0

28.0 27.0

lllL..O 1/27.0 1/25.0

1/27.0

2$.0 b

3/62.$ l/5.o l/2$.0 ~.0

25.0

l/30.0

1116.0

l/3.0 J.u

39/622.8 6/108.0 6/120.0

To Be Revised 1972 1973 1974

2/35.0 l/15. 0 111~.0

1$.0 1$.0

20.0 1$.0

(l$.0) .v 1/10.0 l/10.0

10.0 10.0

l/30.0

30.0 y

2/25.0 l/20.0

20.0 15.0

10.0

l/20.0 l/2'i.O

20.0

25.0

l/5.o l/30.0 l/10.0

5.0 30.0

10.0

7/95.0 4195.0 4/60.0

y Has been postponed from FY 1971 to FY 1972. However, as this would imply revision of lendi.ng program in FY 1.972, and possibly subsequent yeEtrs, this loan has not been added at this time to the total for FY 1972, and has been excluded from the $-year period, pending such revision.

y With parallel financing

Total FY 1970 to 1974

7/96.0

3/30.0

2/7$.0

S/loo.o

4/97.0

'i/75.0

l/3.0

27/47!j.O

Attachment

Biographical Notes (1)

The Presidential Party

President Carlos LLERAS Restrepo

The Minister of Foreign Relations, Alfonso LOPEZ Michelsen

The Colombian Ambassador, Misael PASTRANA Borrero

The Minister of Public Works, Bernardo GARCES Cordoba

b. 1908; educated Colombia's National University Law School; accompanied by his wife, Sra. Cecilia de la Fuente Cortes de Lleras; his son, Dr . Fernando Lleras de la Fuente, b. 1937; educated Harvard University, single; and his daughter, Sra. Clemencia Lleras de Vargas, b . 1938, married to German Vargas, a senior executive in Banco de la Republica. (See attachment 2 for a biography of President Lleras.)

b. 1913; educated London, Paris, Brussels, Santiago de Chile, G.W. Foreign Service School; accompanied by his wife, Sra. Cecilia Caballero de Lopez . The Minister is son of Alfonso Lopez, President of Colombia in 1934-38 and 1942-45 . Formerly leader of the left-of-center Liberal Party faction, the MRL, outside the official Liberal Party and the National Front. Two years ago, he and his followers rejoined the official Liberal Party. He may be a contender for a future Liberal Presidency.

b. 1923; educated at Colombia's Javerian University; accompanied by his wife, Sra. Maria-Christina de Pastrana . Held posts as Minister of Public Works, Minister of Development, Minister of Finance, Minister of Government and in private sector was President of Celanese de Colombia . He is presently the front runner for the Conser­vative Party nomination for the Presidency in the 1970 elections, with the full backing of President Lleras, who regards him as the guardian of continuity of policy.

b. 1919; educated Paris, and Fletcher School . From major landowning family of the Cauca Valley with tradition of public service . Was director of Regional Development Corpo­ration for the Cauca Valley for more than a

The Mayor of Bogota and IBRD Executive Director, Virgilio BARCO Vargas

The Mayor of Medellin, Dr . Ignacio VELEZ Escobar

The Economic Secretary to the Presidency, Rodrigo BarERO Montoya

The Director of the Colombian Agricultural Institute (ICA), Jorge ORTIZ Mendes

Colombian Representative to the United Nations Commission of Science and Technology and private industrial consultant by profession, Dr . Oliverio PHILLIPS Michelsen

The President of the Pan-American Federation of Universities, and personal physician to President Lleras, D.r . Jose Felix PATINO

The Chief Military ADC to the President, Colonel Gustavo MATAMOROS d'Acosta

-2-

decade ending 1966, where he initiated long relationship with the Bank. Although a Conservative, has long-standing personal and political connection with President Lleras, including helping maintain the latter financially during difficult period of military government.

b . 1921; educated Colombia's National University, MIT, Boston University; Liberal Mayor of Colombia's capital city; fo~erly Senator, .Ambassador to London, Minister of Public Works, Minister of Agriculture; po­tential future Liberal candidate for Presi­dency .

b. 1918; educated University of Pennsylvania and Mayo Clinic; Conservative Mayor of Colombia's second city; a former Senator, Governor of Antioquia, Dean of Medicine of Uni varsity of Antioquia .

b . 1934; educated MIT and G.W.; former Executive Director of Magdalena Valley Regional Authority; protege of President Lleras.

b . 1921; educated Agronomy School at Colombia's National University . We under ­stand that Mr . Ortiz is travelling to New York only to speak with Rockefeller Foundation, which has been working with ICA for many years.

b. 1928; educated MIT; unofficial science advisor to President Lleras .

b. 1927; educated Yale Medical School; winner of Borden Prize for Medical Research at Yale; Dr . Patino is knowledge­able on medical and also agricultural education, and is a friend of U.S. Agr i ­culture Secretary Hardin .

b. 1928; educated Colombian Military Academy, Colombian National War College, Fort Knox Armor School.

...

1936-38

1938-42

Attachment

Biographical Notes ( 2)

President Carlos Lleras Restrepo

Year of birth.

Entered politics as leader of the University Students Federation. From this position he was catapulted into national politics, becoming second chairman of the Liberal Party .

Elected to the House of Representatives, where he started his activities by introducing Agrarian Reform Legislation . His struggle for agricultural reform lasted through 1961, when as a Senator, Dr . Lleras headed the commission that drafted the agrarian reform law of 1961 that created the Colombian Institute for Agrarian Reform (INCORA) .

Elected President of House of Representatives . At the same time, he was serving in the House of Representatives as chairman of the Taxation Committee . Dr . Lleras drafted and achieved congressional approval for the tax reform of 1935 . This was the first time in history that a Latin­American country introduced progressive income taxation, which from then on became the cornerstone of Colombia's fiscal policy. Played a leading role in the ConstitutioP~l Reform of 1936, guaranteeing the freedom to strike, the freedom of religion, the freedom of education, and other social benefits .

While continuing as congressional leader, Dr. Lleras was elected by Congress to serve simultaneouslY as Controller General of the Republic . In this position Dr . Lleras modernized the nation's accounting methods and organized its current statistical system.

Appointed Minister of Finance . Reorganized systems for internal and external credit . He was his country's delegate before the Foreign Bond Holder's Committee of the United States, and negotiated the conversion of 6 per­cent 10-year maturity bonds, into 3 percent bonds payable in 30 years . During his tenure, Dr . Lleras also originated the following institutions: Institute de Credito Terri­torial (Housing Development Institute) , Fonda de Fomento Municipal (The Municipal Development Fund), the Geographical and Cadastral Institute, the Livestock Development Fund, the Industrial Development Institute, the National Coffee Fund, the Grancolombian Merchant Fleet, the Coffee Bank, the Agrarian Insurance Co . , and revamped the Caja Agraria (Agricultural Development Bank) into its present form.

-2-

Dr. Lleras was elected National Chairman of the Liberal Party, a position that he was to take several times more. While in tnis position, the President of the Republic, Dr . Lopez, resigned the Presidency . Dr . Lleras was nominated to the Presidency by unanimous proposition of congressmen belonging to the Liberal Party . He resigned this nomination when President Lopez withdrew his resignation .

Reappointed Minister of Finance, serving in this position for one year . When he left the Ministry he was elected president of the National Coffee Committee, a position in which he served for 7 years .

Led Colombia's delegation to Bretton Woods, writing a book entitled "International Monetary Fund" on the proceedings and conclusions of the conference .

Delgate to the first General Assembly of the United Nations and in 1947 headed the Colombian delegation to the Employment and Trade Conference of Havana, Cuba .

While being National Co-Chairman, jointly with ex-presidents Lcpez and Santos, of the Liberal Party, he had to take political asylum in Mexico while the Government of Colombia was taken over by the military dictatorship of General Gustavo Rojas Pinilla .

After having been at the United Nations working on the theory of planning economic development and on studies for the devel­opment .of river bank resources, he was appoin-r,ed member of the Bipartisan Institutional Readjustment Committee by the Military Junta that overthrew the Rojas Pinilla regime . In this position he was one of the leading members of the Committee ' s group drafting the constitutional reform that lead to the creation of the National Front, the political system that has since ruled Colombia .

Dr . Lleras withdrew from politics until 1960 when Congress elected him Vice-President of the Republic . Also in 1960, as a Senator, proposed and led the drafting of the Agrarian Refo~ Law.

Appointed by the United Nations' Economic Commission for Latin-America to head one of the technical groups in charge of preparing working papers and recommendations for the United Nations Trade and Development Conference that took place in 1964. Dr . Lleras was the head of the Colombian delegation to that meeting .

-3-

Dr . Lleras accepted the nomination for the Presidency, which he resigned in May because of opposition principally from groups of the Conservative Party. In October a bi­partisan Committee headed by ex-president Lleras Camargo, asked him to accept again the nomination.

Elected President of the Republic on May 1, 1966

.. •' I FoRM No. 57 I NTERNA Tl ONAL DEVELOPMENT I INTERNATIONAL BANK FOR I INTERNATIONAL FINANCE

ASSOCIATION RECONSTRUCTION AND DEVELOPMENT CORPORATION

OFFICE MEMORANDUM

FROM: Jose D. Teigeiro p{~ t" ~ r . DATE: March 24, 1969 TO: Files

suBJECT: COLOMBIA: Mr. Knapp 1 s Meeting with Dr. Edgar Gutierrez, Chief of Planning Department

0

1. On February 28, Messrs. Knapp, Alter, Frost and Teigeiro met with Dr. Edgar Gutierrez, the Chief of the National Planning Department; Dr. Augusto Cano, his Deputy; and Dr. Omar Botero, the Director of FONADE, the external financing branch of the Planning Department and also a member of the Public Utility Tariff Commission.

Central Government Savings

2. The meeting opened with the discussion of the Memorandum on Economic Policy, which Mr. Teigeiro had been negotiating with the Govern­ment. Mr. Alter said that the Memorandum had two weak points, with respect to central government savings in 1969, and also government policy in public utility tariffs.

3. The fiscal projections for 1969 show only~ a small increase in the central government's surplus on current account in current pesos, im­plying a slight decline in real terms. Even granted that the central government savings had risen substantially in each of the three preceding years, a lapse in performance on this count in 1969 would undermine the ;.; justification for large scale external support, including support by pro­gram lending. Mr. Alter understood that the administrative reform had raised the central government's operating expenditures to a nai plateau in 1969 on a once for all basis, but nevertheless a continued improvement 1 in central government savings was necessary. He further understood that the decision before the government with respect to raising additional revenues was to move towards unification of the exchange rate for purchases of crude petroleum for refining for the domestic market. (This special rate was Ps. 9 per US$1, as compared with the general exchange rate of Ps. 17. Any increase in the special rate would increase the base price on which the ad valorem fuel tax was calculated, and with this, the yield of that tax).

' 4. Dr. Gutierrez replied that the Government had already taken the decision in principle to move towards unification of these two rates, but the recent riots in Cali over higher bus fares and electricity tariffs had given them pause. Mr. Knapp replied · that he could understand this reaction to higher public utility tariffs, as these directly affected the family budget; but the impact of higher gasoline prices could be made much less direct. First, its effect upon transportation costs was widely diffused; and its effect upon bus fares could be compensated by subsidies (a policy alreaqy in employment in Colombia at the current level of gas pric~s). 0~

t

_;. ·,, ,

''

s •

0

- 2 -

Files March 24, 1969

the more affluent group which owned private automobiles need feel a direct effect of higher gas prices upon their personal budgets. Dr. Gutierrez agreed with l1r. Knapp 1 s views and said that the Goverrunent was already thinking along the same lines.

Tax Reform

5. Hr. Alter said that although disappointed with the fiscal pro-jections for 1969, he was glad to learn that the Government was planning to introduce proposals of structural tax reform, arising out of the report of the Musgrave Commission, in 1970 (actually sending the propos~s to Congress in 1969). This implied that the Government would set in motion a year earlier than expected the arrangements required for a steady increase in public savings over the years to come.

Public Utility Tariff Policy

6. Last December, the Government had issued a Decree establishing a new Public Utility Tariff Commission which would regulate tariffs accor­ding to criteria which had been agree-d with the Bank. While welcoming this, Mr. Alter expressed some concern that no steps ~ had been takep. to have the Commission start work. Dr. Gutierrez replied that after ~stab­lishing the Public Utility Tariff Commission in December, the Goverrunent had intended to set it to work according to the new criteria in January, but this program had been interrupted by the Cali riots. Mr. Alter re­plied that we expected continuing progress towards implementation of the nevt regulatory criteria. To start with, there were already 90 applica­tions for tariff increases at the end of 1968, and these would have to be dealt with in an ad hoc manner, together with any new applications that might accumulate in the next few months. We would expect the Tariff Commission to continue the Government 1 s previous flexible policy on this ad hoc basis with respect to these current applications for rate increases, while the Commission was elaborating the rate of return criteria.

1. Dr. Botero then intervened to emphasize the political considera-tions that would make a rational tariff policy difficult for the first six months of 1969 because of Cali; and for the first six months of 1970 because of the presidential elections to be held in May 1970. He then suggested the ' " Commission undertake a work program exclusively oriented on studies • . 8. Mr. Frost pointed out that this program of Dr. Botero's left only six months out of the next 18 months in which the Government could execute a rational tariff policy, which was not a satisfactor,y program. Further, if the introduction of the new Decree and the establishment of the Public Utility Tariff Commission was to result in nothing but studies, then the new Decree could bar~ be regarded as progress towards a more rational and effective policy. What we wanted was not decrees and studies, but action.

;

••

• •

(~ \ . ..._JJ)

- 3 -

Files March 24, 1969

9. Dr. Gutierrez then replied that there had been progress and there would continue to be progress towards this objective. Not only had the Decree been issued, but the members of the Public Utility Tariff Commission had been appointed and a staff was being collected. In the next six weel<:s, regulations would be issued under the nevr Decree to put the Commission's terms of reference in operational terms.

10. Mr. Alter then indicated that while this sounded more satis-factory, the Baru<: would be compelled to relate its lending for water supply and power projects to progress in the execution of the new public utility tariff policy by the Commission. Before sending our next, appraisal for a public utility tariff project (which would be next August for water supply projects in medium-sized cities) we would need to be assured that the regulations referre~ to by Dr. Gutierrez had been issued; and that ad hoc decisions on pending rate increases and regulations were being pro­cessed expeditiously and flexiblY. The further development of our lending for public utili ties would depend on f'urther progress towards the estab­lishment of the promised new policy. Mr. Teigeiro would keep the Bank informed of the steps being taken in Colombia.

Program Lending

11. Dr. Gutierrez then asked 11r. Knapp about the Bank's attitude towards program lending in Colombia - a matter of significance to the Colombian Government in view of the uncertainties about continuing assis­tance of this kind from the United States.

12. Mr. Knapp replied that the Bank had to be very careful to main-tain a sound image in the world 1 s capital markets, from which it derives its financing. As the Bank was created to finance projects, has been doing this for 20 years, and knows how to do it well, the soundness of its image in the capital markets is associated with project lending.

13. This should not be taken to mean that the Bank does not know how to do progrrun lending. As an institution dealing with development problems, the Bank needs flexibility in its methods of providing resources to developing countries. The management of the Bank has been seeking this flexibility by sending policy papers to the Board on local currency finan­cing and on program lending, which are similar as methods for giving countries free foreign exchange, differing from each other only in their manner of administration and in the timing of their disbursements.

:14. Mr. Knapp explained that the management of the Bank had received a fairly strong reaction from the Board to the paper on program lending. To illustrate this, Mr. Knapp said that the Bank has a very strong manage­ment which, within the framework of policy guidelines, negotiates loans with borrowers, before presenting these loans to the Board. HOwever, the Board was so uneasy about the paper on program lending that it required

).

I'

.. ••

0

- 4-

Files March 24, 1969

the Bank 1 s management to present the justification of future program lending operations to the Board, in advance of negotiations with the borrower - and this was a situation which the management of the Bank did not like.

15. With respect to the specific Colombian request, Mr. Knapp indicated that this had come in the midst of difficulties about program lending to India, where the Bank found itself imprisoned in the need for continuing program lending, irrespective of whether it wanted to or not. Thus the Colombian request came at the wrong time. Mr. Knapp added, however, that he did not regard the Colombian situation as rea~ suit­able for Bank lending, as it did not present the parallel to the Indian situation of balance of payments emergency. Rather, he was in favor of exploiting project lending techniques so far as was feasible to meet Colombia's program type requirements, including the use of local curren­cy financing to the greatest feasible extent.

16. The Colombian request had certain other unattractive features. ~ The program with which it was associated included an increase of $20 1) million in exchange reserves - precisely the amount of the loan which the Bank was being asked to provide. Further, the situation suggested that the Bank was being asked to put up the balance of the bill which the U.s. Goverrunent was ini tia.J.:cy ready to pay in full, but was now no longer ldlling to cover.

17. Mr. Knapp added that there were further technical considera-tions, such as that the Bank's management did not know how a program loan to Colombia would be devised and set up, what kind of imports it .would finance, and how control of counterpart funds would be exercised.

18. Dr. Gutierrez then said that the Government did not really attach so much importance to the $20 million program loan from the Bank in 1969, as to the Bank's unde~~ting their position in 1970, when per­haps $65 million will be required. Mr. Knapp replied that while nothing was in the cards for 1969,- 1970 was always another year.

Cleared and cc : cc:

Mr. Alter .•

Mr. Knapp Messrs. Weiner

Gabriel Lehbert

JDTeigeiro/RMFrost/gmtf/mcw

, .. .

(file)

r

v

'•

FoRM No. 57 , INTERNATIONAL DEVELOPMENT I ' INTERNATIONAL BANK FOR ASSOCIATION RECONSTRUCTION AND DEVELOPMENT I INTERNATIONAL FINANCE

CORPORATION .

OFFICE MEMORANDUM TO: FII.ES q~ y, DATE: March 24, 1969

\\I/~ I FROM: Jose D. Teigei~p I

SUBJECT: COLO¥~IA - Mr. ~app's Meeting with President Lleras Restrepo

1. On February 28, Hessrs. Knapp, Alter, Frost and Teigeiro, met with President JJleras Re·strepo and Dr. Rodrigo Botero, the President's private secretary for economic affairs.

2. Y~. Knapp began by congratulating President Lleras on the success that his administration has had in improving the environment for economic development. He then reviewed with President J~eras the main outlines of · his meetings ~th other Government officials, especi~lly.the discussion with I Drl) Edgar Gut1.errez o·f the need for an early alterat1.on l.n the exchange rate / f or oil; the introduction of tax reforms proposed by the Musgrave Commission; publ ic utility tariff policy; the Bank's difficulties about program lending, vi and its desire to help Colombia by using project lending, including local currency financing, to the greatest possible extent.

3. In reply, President Lleras said he had just received from Professor Musgrave a set .of concrete proposals for tax reform, including draft legislation. His first impression was that, although he coQ~-·;j have some small differences regarding the approach to certain problems, he was very well impressed with the report in general. The President confirmed the Government's intention of introducing tax reforms to the Congress in 1969, with a view to having these reforms in operation by 1970.

4. Regarding fuel taxes, the President indicated that it continues to be a very important element of the Government's financial program to produce additional collections by changing the exchange rate base for this tax. He agreed not only with the fiscal need for these additional collections but also with the need to introduce a better pricing system for the transport sector. The Pre-sident indicated that the Transport Institute is carrying out a study which will give the Government orientation about tariff policy for urban transportation, which would then be used as a basis for going ahead with changes in the system of fuel taxation. He expressed his expectation that these changes will take place during 1969.

~ ~· 5. Regarding public utility tariffs the President indicated that he f~~ - ~/ was very well aware of the need to initiate soon the application of the

1 j,t--1 ~ policy principles contained in the Memorandum of Understanding. He indicated that the Government has already achieved substantial progress in the field of public utility tariffs and remarked that today there is no major public utility ente~rise having financial difficulties because of inadequate rates. This is, he emphasized, quite a different picture from the one that this Government found when it took office.

f

FilES - 2 - March 24, 1969

6. President Lleras then referred to his expectations about the continuity of the same economic policies that his administration has been pursuing after he leaves office in August 1970. He said that the Bank could have a lot to do with helping the Government consolidate the country's economic situation to enable the next administration to maintain the present sound economic policies. He explained his thinking in the following way:

Colombia's external financing program depends on program assistance. The Government is working to reduce this dependence a.s fast as possible by means of an acceleration of project preparation efforts, a crash program for the diversification and enlargement of minor exports, and by intensifying the effort at import substitution. He also welcomed Mr. Knapp's suggestion about the possibility for Bank financing of an increased share of local currency expenditures. These efforts notwithstanding, there is still a critical period ·through which the Colombian economy has to go and for which external financing in the form of program lending will still be required. He identified this as the last three quarters of 1970 and probably the first half or first nine months of 1971. There is still considerable uncertainty whether the U.S. will provide program assistance in this period, and after the Colombian delegation 1 s European tour prior to the Consultative Group meeting, it was evident that there are no European sources for this ,type of financing. This forces the Colombian Government to turn to the Bank as the source of the program assistance to bridge that critical period.

7. Mr. Knapp replied that if for 1969 a program loan from the Bank 11_ was not in the cards, the future was still open. If Cleared & cc: Mr. Alter

cc: Messrs. Knapp Weiner Gabriel Lehbert/DF

JDTeigeiro/~1Frost/bds

,

.. .

Dr. Edgar Gutierrez Castro

Date of Birth:

Nationality:

Family Status:

Education:

Career to date :

September 12, 1969

May 7, 1933

Colombian

Married

Universidad de Antioquia B.Science (Economics)

Graduate Studies : '1955-57 London School of Economics 1962-64 Harvard University, Master Public

Administration

1958-59 Economic Adviser to the Minister

1959-60 ~960-62 1964-66

1966 to date

of Finance Head of National Budget Head of National Planning Department Vice President of National Association of Manufacturers Again Head of the National Planning Department.

FORM No. 57 INTERNATIONAL DEVELOPMENT I INTERNATIONAL BANK FOR I IN TERNATIONAL FINANCE ASSOCIATION RECONSTRUCTION AND DEVELOPM EN T CORPORATION

OFFICE MEMORANDUM TO: Memorandum for Records DATE: June 25, 1970

FROM : Jose D. Teigeiro -

SUBJECT: Meeting of Mr. McNamara with the Manager of the EXport Promotion Fund of Colombia, Dr. Camilo Jaramillo de la Torre

The meeting took place on June 4 in the office of Dr. Jorge Ruiz Lara at the National Planning Department. The meeting was also attended by Messrs. Alter and Teigeiro from the Bank. Dr. Rodrigo Botero was also present.

Mro ~fuNamara started the meeting by expressing to Dr. Jaramillo the Bank's deep concern with the process of export diversification and promotion, and indicated that he was keenly interested in obtaining a ve~ clear view of the activities of Dr. Jaramillo's agency, its pro­gress, problems, and prospectso

Dr. Jaramillo started his presentation explaining briefly the process leading to the establishment of the EXport Promotion Fund in 1967, and the main sources for financing its activities, which he indicated to be a one and a half percent sur-charge on imports. In addition the Export Promotion Fund discounts external letters of credit and borrows from the central bank. He said that the main objective of his agency is to work with the private sector, to facilitate the process of exports of commodities other than coffee and petroleum. His agency has 15 overseas branch offices, with a total operating budget of between 2 and 3 million dollars that t~ to open up new markets and expand existing ones. Secondly, EPF works with domestic producers, teaching them quality requirements, packing, and above all, alerting them to the existence of export opportunities. Thirdly, EPF provides financing resources. In car~ng out these activities it was learned that one item required was to provide export credit insurance. In 1969, therefore, an insurance agency was set up under the EPF with the collaboration of private insurance companies. Another item that was required for a good salesmanship job was to produce information for exporters on the availability of financing, sales opportunities, transport systems available, etc. as well as good catalogues of domestic products. The EPF is now producing all of this type of material and distributing it to exporters. Mr. Jaramillo gave Mr. McNamara samples of the different pamphlets produced by the EPF.

Regarding the performance of minor exports, Mr. Jaramillo explained the actual results for 1969, compared with 1968. Both Mr. McNamara and Mr. Alter asked Mr. Jaramillo about results in the first months of 1970, to which Mr. Jaramillo replied that these results are not as good as in previous years, for which he gave the following reasons: first, there is a ve~ sharp expansion of domestic economic activity which means increased demand for several of the commodities in the export list. Secondly, the future expansion of minor exports

- 2 -

has now to rely on manufactured products, because the expansion in prima~ products-principally cotton, sugar and banana-can not continue at the same ~hm as in the past. At the end of this part of the discussion, Mr. McNamara remarked that if the objective of the Govern­ment is to sustain growth rates for exports of commodities other than coffee and petroleum similar to those of the past few years and simultaneously to rapidly accelerate domestic economic activity, an improvement in incentives for export is required, in addition to the excellent salesman services provided by the EPF.

7

7

/I

17

FoRM No. 57 INTERNATIONAL DEVELOPMENT I INTERNATIONAL BANK FOR I INTERNATIONAL FINANCE ASSOCIATION RECONSTRUCTION AND DEVELOPMENT CORPORATION

OFFICE MEMORANDUM TO: Memorandum for Records DATE: June 25, 1970

FROM: Jose D. Teigeiro r SUBJECT: Meeting of Mr. McNamara with the Minister of Public Health

of Colombia, Dr. Antonio Ordonez Plaja

The meeting took place on June 4 in the office of Dr. Jorge Ruiz Lara at the National Planning Department. The meeting was also attended by Dr. Ochoa from the Ministr,y and Messrs. Alter and Teigeiro from the Bank. Dr. Rodrigo Botero was also present.

Dr. Ordonez presented Mr. McNamara a set of tables showing the major overall population trends and projections, as well as some indicators regarding family planning programs.

After reading the tables, Mr. McNamara said that he was impressed with the tremendous pressures building up for an acceleration of the growth rate of population over the next 10 to 15 years. He referred specifically to two aspects of Colombia's demographic problem: the large proportion of population under 15 years of age, and the tremendous increase in the number of women in child bearing age. He commented that he had been given at a previous meeting with officials of the National Planning Department the expectation that the growth rate of population might start to decline in future years, even before 1985. In order to know whether it was possible to sustain that expectation realistically, Mr. McNamara asked the Minister for indicators of the trend of the birth rate by age specific group. The Minister said that although the type of indicators that Mr. McNamara was asking for was not available, there are other indicators, rough as they may be, which suggest that there is a substantial change going on in the behavior patterns of the Colombian population. For example, the Minister mentioned that 30 percent of the maternity cases treated at one public hospital in Bogota, were to take care of damage produced by deficient abortion interventions. The Minister considered that the total proportion of abortions could be substantially higher than the percentage mentioned. After remarking on the need for the type of statistics that he had asked for, not only to be aware of population trends, but also to be able to introduce changes that could be required in family planning programs, Mr. McNamara asked the Minister which in his view were the reasons for the change in behavioral patterns that he had pointed out before.

Dr. Ordonez Plaja started to answer by explaining that Colombian family planning programs are based in the concept that the couple is free to ask for, and use, family planning information and services. Moreover, it was in his view the responsibility of the National Government to offer information so that couples could make their choice on a best information basis possible. Within this framework the Minister emphasized the work

- 2 -

carried out by ASCOFAME (Colombian Association of Medicine Faculties) and PROFAMILIA (a private concern that has established family planning centers in the major cities of Colombia), and held them responsible for a large degree of the progress achieved. In addition to the efforts by these two groups, the Government itself is carrying out family planning activities through several of its agencies, such as INCORA, the Social Security Institute, etc. The activities of these agencies, however, had been carried out quietly because of what the Minister called the "POPAL-LATION" explosion. Now, Dr. Ordonez said, these activities are becoming aggressive again and are using infrastructures already established such as the malaria control service in the Magdalena River Valley and food programs, such as those of CARE and CARITAS. In all cases, however, family planning information and services are provided only to those who want them, with unwillingness to accept not being cause for disqualification for receiving inoculations or food services. In addition, the Ministr,y is accelerating its program of training of "promotoras" (district health nurses) which, from a normal of 900 per year has been increased to 2,500 in the current year.

Mr. McNamara suggested that the Minister might organize an evaluative group that would be in charge of obtaining statistics and facts about the family planning program, its progress, problems and trends. The Minister indicated that this is one of the last things that he will do while he is in office over the next two months, and said that he is already getting one international expert to help him in this program.

Mr. McNamara indicated to the Minister that the Bank stands ready to help Colombia in her efforts at any time that the Colombian Government may consider the Bank's collaboration useful. Dr. Ordonez indicated to Mr. McNamara that help from the Bank in the for.m of financing for his Ministr,y's hospital and health center programs would be welcome at any time, and Mr. McNamara explained to the Minister the constraints that the Bank has to finance an straight-forward health program.

FoRM No. 57 INTERNATION AL DE VEL OPMENT I INTERN ATIONAL BANK FO R I I NTERNAT I ON AL F I NANCE ASS OCIAT ION RECON STRUCT ION AND DEVELOPMENT CORPORATI ON

OFFICE MEMORANDUM TO: Memorandum for Record

FROM: Jose D. _J'eigeiro 'I· DATE: June 25, 1970

SUBJECT: Meeting of Mr. McNamara with the Minister of Development of Colombia, Dr. Hernando Gomez Otalora

The meeting took place on June 4 in the office of Dr. Jorge Ruiz Lara at the National Planning Department. The meeting was also attended by Messrs. Alter, Clark and Teigeiro from the Bank. Dr. Rodrigo Botero, Economic Secretary of the Presidency of the Republic was also present.

The Vrlnister started by describing to Mr. McNamara the activities of his Ministry, and explained its participation in industrial planning, housing, price regulation and foreign trade.

Turning to industrial development the Minister indicated that progress in the past has not been sufficient. Industrial growth rate had been in the order of 6 to 7 percent per year, but in 1969 it had accelerated to about 8 percent, and preliminary indicators for the first quarter of 1970 suggest a further acceleration to over 11 percent. This growth rate he still considered low, especially to help absorb unenployment. The Minister then indicated that some bottlenecks to industrial growth in the past had been broken and others relaxed. For example, he indicated that imports had doubled between 1967 and 1970, when it is expected that they will reach the record level of US$900 million. other important bottle­necks that have been recently overcome were shortfalls in the supply of electric power and deficient transport infrastructure. Regarding the lat­ter, the Minister expressed a great interest in the completion of the Pan-American Highway, which would greatly facilitate trade and tourism with Central America.

Nothwithstanding the progress made in the last three years, Dr. Gomez indicated that Colombian industry is still working at a very low level of capacity utilization which he estimated at around 60 percent, and considered that the main constraint to raise rapidly this percentage is the insufficiency of working capital (Mr. McNamara expressed his sur­prise in view of this percentage and doubted that capacity utilization could be so low).

Dr. Gomez, however, found the current situation stimulating: there is a large increase in demand, both for imports and exports; agricultural production is rising steadi~ and efforts are being made to resolve the deficiency of working capital. His Ministry's undertaking in the current year is to establish a system to provide administrative and technical assistance for small and medium enterprises. This, together with the scarcity of working capital, are the two principal remaining bottlenecks to expand industrial production at the rate required to make an impact upon unemployment (12-14 percent).

-2- June 25, 1970

Regarding unemployment, the Minister indicated that he supported the efforts to develop handicraft industries and other similarly rrlgh labor intensive industries, but without disregarding industry with modern technology. He emphasized the indirect employment effects of the latter type. It was in this modern part of the industrial sec­tor where the Minister said the largest and best opportunities for industrial development in the future are. This, in his view, includes principally petrochemical, steel and metalworking industries. He in­dicated that the development of these industries would require access to markets larger than the Colombian, and emphasized the efforts of the Colombian Government to develop the LAFTA, agreement, as well as the Andea sub-regional trade agreement. In connection with LAJTA, he underlined the fact that the Caprolactam Project is being developed joint~ with Venezuela. Regarding metalworking industries, Dr. Gomez explained that Colombia is now undertaking officially the construction of an assemb~ plant for 15,000 automobiles, which has a program for the integration of local components of up to 40 percent. Mr. McNamara asked what would be the price penalty on the locally assembled automobiles at the 40 percent degree of integration, and the Minister explained that his estimates were a 60 percent overcharge, excluding import duties. Mr. McNamara was doubtful about the possibilities of reaching this result.

Regarding Bank activities in the industrial sector, the Minister expressed his satisfaction with the support given by the Bank to private development banks (financieras), and expressed his hope that the nego­tiations currently going on for a US$5 million loan to IFI may come to an end successfully. Mr. Alter indicated that, in this connection, he was handcarrying a letter for the ¥tinister, expressing the views of the Bank on the points still under discussion, which he would deliver to the l~nister in the afternoon.

Finally, the Minister referred to the nickel project that Colombia expects to undertake in collaboration with Hanna Mining Corporation and Chevron, for which Colombia needs financial assistance from the Bank group.

FORM No. 57 INTERNATION AL DEVELOPMENT I INTERNATIONAL BANK FOR I INTERNATIONAL FINANCE ASS OCIAT ION RECONSTRUCTION AND DEVELOPMENT CORPORATION

OFFICE MEMORANDUM TO: Memorandum for Record DATE: June 25, 1970

FROM:

SUBJECT:

Jose Do Teigeiro ~\ Meeting of ~ . McNamara with the Minister of Finance of Colombia, Dr . Abdon Espinosa Valderrama

On June 4, Nr o · cNamara paid, along with Messrs • .Alter, Clark, Frost, Christoffersen and Teigeiro a visit to the. "nister of Finance, who was joined by Dr . Joaquin Bohorquez, Director of Economic Studies at the l"linistry . Dr . Rodrigo Botero was also present.

Mr. McNamara complimented the Minister on his achievements and ex­pressed appreciation for his cooperation in matters relating to Bank loan negotiations . The inister of Finance thanked Mr . McNamara for the cooperation received by Colombia from the Bank, and expressed his satis­faction with the good relationships maintained over the last four years .

Mr . McNamara asked about the attitude of newspapers and intellectuals towards raising domestic savings . The Minister explained to Mr . McNamara the actions taken towards increasing interest rates for savings deposits in the banks, as well as term deposits. Then he said that, in spite of a storm about the usgrave Report on Tax Reform, the people are now beginning to understand that there is a need to pay for social change, especially for more education . He indicated that the Government has submitted to Congr ess a bill to authorize municipalities to increase the real estate tax up to 3 per thousand, earmarking the resour ces for education. He also explained that although earmarking increases the rigidities in the budg­etary process, it helps people understand why resources are requir ed and raised .

FoRM No. 57

TO:

FROM :

SUBJECT:

INTERNATIONAL DE VEL OPMENT I INTERNATIONAL BANK FOR I INTERNATIONAL FINANCE ASS OCIATION RECONSTRUCTION AND DEVELOPMENT CORPORATION

OFFICE MEMORANDUM Memorandum for Record

Jose D. Teigeiro 1 COLOMBIA, - Meeting of Mr. McNamara

Planning Department

DATE: June 25., 1970

with Officials of the National

The meeting took place on June 4 and was attended by Dr. Jorge Ruiz Lara, Director of the National Planning Department; Dr. Augusto Cane, Deputy Director; Dr. Javier Taro, Chief Human Resources Unit; Dr. Julio Nendoza, Chief Regional and Municipal Unit; Dr. Antonio Barrera, Chief Infrastructure Unit; and Dr. Guillermo Perry, Chief Public Investment Programming Unit, all from the National Planning Department; Messrs. Alter, Clark, ~ost, and Teigeiro from the Bank; and Dr. Rodrigo Botero, Economic Secretary of the Presidency of the Republic.

Dr. Jorge Ruiz Lara started the meeting by making a brief recollection of the Bank's relations with Colombia since 1950 and the good collaboration that Colombia has always received from the Bank. Then he referred to the major items of his Department's activities, emphasizing that in this work his Department faces problems of immediate action and others that require long range planning. Among the first he cited the gradual exchange adjust­ment process, the effort to diversify and enlarge exports other than coffee and petroleum, monetary and wages policy to help control .inflationary pressures, and fiscal policy. The main points mentioned by Dr. Ruiz Lara in this part of the discussion were, regarding Colombian policy, that ex­ports other than coffee and petroleum must grow at an annual average rate of at least 20 percent over the next 5 years if a new exchange crisis is to be prevented in 2 or 3 years when coffee prices come down. Regarding Bank policy, Dr. Ruiz Lara considered that the Bank should continue to finance a large proportion of local currency expenditures and to widen to the ex­tent possible the margin of preference for local suppliers. Dr. Ruiz Lara emphasized that these two policies would greatly help Colombia in meeting her short-term problems and in preparing to face those arising in the future. He established the connection with the future by indicating that financing local currency expenditures would help Colombia meet the need for larger savings now, as well as to increase domestic production and employment, whereas widening the margin of preference would discourage im­ports of capital goods in which domestic producers are marginally compet­itive, and would help tremendously to increase employment, because these lines of production are highly labor intensive. Dr. Ruiz Lara also empha­sized that if Colombia is going to be able to resolve the immediate and long-term problems that she faces it is indispensable to moderate increases in salaries and accelerate improvementsinnuxa~ucture, especially trans­porto He also mentioned the need to provide working capital for industry in adequate amounts and terms, as lack of working capital has been the reason for slow industrial growth. The Government has now established the Industrial Financing Fund at the Banco de la Republica for this purpose, and he hoped that this new financing intermediary would go a long way in helping ameliorate the existing shortage. Mr. McNamara doubted that in­dustrial growth was seriously restrained by lack of working capital, lack of markets being a more likely cause.

-2- June 25, 1970

Then Dr. Ruiz Lara focussed on improvements recently introduced into Colombia 1s planning process. He started by mentioning that since 1968 the planning process has been built into the national constitution, and now constitutes a solid basis for development. Since for this to actually take place extremely good policy coordination is needed, the National Planning Department is represented either by himself or by some of its senior officials at the Board of Directors of the main economic and social Co~ncils or Institutes. Dr. Ruiz Lara then indicated that the question receiving first priority in the planning process now is how to accelerate the reduction in unemployment. He said that since 1967 open unemployment has been reduced in Bogota from 13 percent to 8.5 percent at the end of the first quarter of 1970.

At this point Mr. McNamara asked him to focuss on the problem of unemployment: trends, size, and its relationship with the demographic problem. Dr. Ruiz Lara, after indicating that no one had really a good prescription to take care of the unemployment problem, asked Dr. Toro, from his staff, to give Mr. McNamara a summary of the problem as seen by the National Planning Department.

Dr. Toro described the main characteristics of Colombia 1s demographic problem: high birth rate, high - though declining - mortality rate, a high proportion of people under 15 years of age, high dependency rate, and intense migratory movements from the country-side to the cities. Regarding the expectations for the future, the birth rate may start to decline soon, and the mortality rate will continue to decline. As a result, Dr. Toro foresaw a decline in the overall growth rate of population, combined with lower dependency rates. He also indicated that official projections sug­gest a continuation of migratory movements, because it is not possible to generalize satisfactory living conditions for the rural population to stay in the country-side. In his view this requires basically an improvement of the education provided in the rural areas, but, as he pointed out, the fi­nancial effort required is beyond the capacity of the country. In this connection, Dr. Toro hoped that the lli&M project will help to modernize the education system and raise its technological standards. Summing up his remarks, Dr. Toro indicated that the population is growing at an annual rate of about 3.3 percent, and labor force at 2.4 percent. Mr. McNamara doubted that the labor force could be growing so much less rapidly than population, and asked for a written note on projections of population and the labor force.

Dr. Toro continued his presentation indicating that the overall demo­graphic trends discussed above, put strong pressure on the economy 1s pos­sibility to absorb unemployment. These pressures are compounded by excessive use of imported technology, which has been favored by overvalued exchange rates and low interest rates. Furthermore, he said that deficiencies in land distribution, income distribution, and a very low purchasing power for the average of the population in the modern sector, strongly limit the ex­pansion of the domestic market. This results in that industry operates at a low and inefficient scale and production costs are high. Industry requires

-3- June 25, 1970

therefore, a high degree of protection, which in many cases results in monopolistic situations. ~ . McNamara remarked at this point that the description given by Dr . Toro of the situation of the industrial sector had given him the answer as to why the growth rate of the industrial sector's output had been so low in the past.

Dr. Toro went on to say that the lack of competition in the in­dustrial sector also explained the fact that the majority of the Colombian exports are primary products, and why the external sector is not able to generate enough foreign currency to sustain the growth rate of GDP. He emphasized that the external sector had been the main limitation to growth, agg~avated by low domestic savings . Summing up, Dr . Toro indicated that the current rate of unemployment is around 13 percent.

The discussion then shifted to the budgetary activities of the National Planning Department . Dr . Guillermo Perry explained the budg­etary process, and the relationships of the National Planning Department with other agencies of the Colombian Government involved in the budget making processo He emphasized in his presentation the need to provide local currency counterpart for externally financed project s.

II

'C/

FoRM No. 57

TO:

FROM:

SUBJECT:

INTERNATIONAL DEV ELOPMENT I INTERNATIONAL BAN K FOR I I NT ERNAT IONAL FINANCE ASSOCIATION RECONSTRUCTION AND DEVELOPMEN T CORPORATION

OFFICE MEMORANDUM Memorandum for Records DATE: June 25, 1970

J os€l D. Teigeiro 7· Meeting of Mr. McNamara with Members of the Banco de Bogota

1. Mr. McNamara was given a lunch at the Banco de Bogota, hosted by Dr. Jorge .Mejia Salazar, President of the Banco. The lunch was attended by Messrs. Carlos J. Echavarria, Jose Gomez Pinz6n, Alvaro Jaramillo, Gonzalo Restrepo, Nicolas Escobar, Benjamin Martinez Moriones, and Jorge Mejia Palacio, representatives of Colombia's business and financial community. Messrs. Alter, Clark, Frost and Teigeiro, from the Bank, also attended.

2. Dr. Mejia Salazar, taking the floor in the name of his Colombian colleagues, made a presentation in which he covered the main difficulties facing industrial development, the need for additional financing, and the main areas for future investment and expansion of the activities of the private sector. Among the first he indicated that Colombian indust~ suffers from lack of equity, high taxation, lack of savings instruments, under-utilization of installed capacity (which he estimated at about 40 percent), a prohibition to revalue assets, and lack of new industrial projects. He considered that investment is taking place only for the expansion of existing plants, and contradicted observations made at all previous meetings by indicating that there is no lack of working capital for indust~. Dr. Mejia Salazar said that one of the main problems facing Colombia's industrial sector is that the next phase of industrial development calls for highly intensive capital investments and large markets, and does not generate much employment. Furthermore, he con­sidered that indust~ also faces substantial marketing problems.

3. Mr. McNamara asked what are typical rates of profitability in the Colombian industrial sector. After a discussion among the Colombians as to what these rates actually were, during which rates of between 18 and 25 percent were quoted by same and questioned by others, Mr. McNamara expressed his puzzlement in view of the conflicting indicators he had been giveno

4. Messrs. Alvaro Jaramillo and Benjamin Martinez Moriones, repre-senting Colombian development finance companies, explained to Mr. McNamara that the Bank's last loan of US$25 million for development finance compa­nies had been committed in the nine months ending May of this year, or half the time originally forecast. Another DFC loan was in the Bank's lending program for the end of fiscal 1971, implying that there will be a gap of about one year between the utilization of the old loan and the appraisal of the new, just when demand for capital fram Colombian indus­t~ was particularly strong. They asked Mr. McNamara if the FY 1971 loan could not be accelerated. (Mro McNamara later asked Mr. Frost to convey to Mr. Diamond that such acceleration was desirable.)

L

INTERNATIONAL DEVELOPMENT I INTERNATIONAL BANK FOR I INTERNATIONAL FINANCE ASSOCIATION RECONSTRUCTION AND DEVELOPMENT CORPORATION

OFFICE MEMORANDUM TO: IY em or an dum DATE: June 2~., 1970

FROM:

SUBJECT:

Alberto J. Favilla

COLOMBIA -Meeting of ir. McNamara with the anagement of the Caja de Credito Agrario, Industrial y Minero.

The meeting took place on June 5 at the Natinnal Planning Depart­ment. For the Caja, there were present Messrs. Miguel Garcia Herreros, General 1anager, Roberto Villa, Manager of the Agriculture Department, and Emilio Daunas, Adminlstrative Director of the Livestock Program. lViessrs. Alter, :b'rost, Teigeiro and Favilla also attended from the Bank. Messrs. Rodrigo Botero and Virgilio Barco were also present.

Mr. Garcia Herreros outlined briefly the history and activities of the Caja Agraria. He then mentioned that, though favorably impressed with the results and prospects of the livestock development program which was being carried out with the assistance of Bank Loans 448 and 651 CO, certain improvements were required, some of which needed the Bank ' s consent. He then read a memorandum to the Bank, recommending the changes the Caja had in mind; a copy of this memorandum is attached .

In the subsequent discussion the question arose as to why 21 per­cent of the sub- loans under Loan 448 CO were in arrears . Mr . Garcia Herreros and his staff explained that this reflected the poor financial condition of the ranchers concerned. He attributed this to the insuf­ficient allowance for the purchase of breeding cattle under the first loan, which had been remedied under the second; this condition of the second loan should be applied to the balance of the first . Mr . Favilla commented that the need appeared to be for additional credit for fattening steers rather than for the purchase of breeding cattle, because the ranchers' current profitability and liquidity depended on his turn- over of fattened steers for sale . Under Loan 448 CO the Loan Agreement specified that the Caja would provide such fattening credit, but it had not done so . Some of the project ranchers had also over - invested in fixed assets of low productivity .

There was also some discussion of the areas covered by the second loan, and whether this coverage should not be extended to the further areas defined in the Caja's memorandum. Mr . McNamara said that presum­ably when the Government and the Caja had signed the Loan Agreement with the Bank, they had done so in full agreement with the conditions of the Loan including the regions in which it was to be used . If the Bank was imposing loans with conditions and in areas to which the Government and the Borrower did not agree, then this was not the way in which the Bank should be operating .

Att .

President has seen

----- - - - - - -· - - -- ~~--=---~------=--=~

Fr nu G n r a 1 l!una on ant .;ot . ~ c.Tune 4!1 0

To: ID~1D

Re:

" 'biG onn io ca1•ryi1 (J o t ·he first ot ee of the cattle dev(ilop·· ment plan •

.. t~rt of' Pro:~l4 f'm.t: li'i ·ot. q·u.a••t r of 1967 . ~_,- ~....,..,.,. ot·:a~

.Avoi ::. i. itioL; U~ ''H>8 million, cont,· 1 ·.buted aQ folJ.a~L; .L-RD U3~11.6 .'{ mil-ion; Cnja ~8t!f.;~) .6.S million; r anch· l1 S of t he s b-lo~ ns US~:)5 .6S million .

§.-~:lt;±'3 -~fJ:.roJ.s~£n 1: X_ .2,.L].97Q: I' 01.2 proje~ts "'Pf>l1 0 re~. by th . 0cocutivo Co:uinitte fo a tot,al of u;:;~~l5 , 212,o5.,.co, of l .hich 85 ,77 po;;}cent has been disu trs<Jd . The total amou.u'- cor.'lUitted by C~ja-ICRD vJ.as :3$16 ~"(51;144 .• 00.

Ean.~ loan.

Procer;s for 0:r'.:;_:~:L~;.L.~.9l'vdit : The ex.oerience of t his f irst st. ._ge deli.onr:r'lit"ates thatth l oan h:ts not. rno, d suf'i"icientl· l'upi ly -· u. t.o:

{1) Too nt..any strY'.l.S in the tecllt"lica 1 revie\- · and not enough reGI.)O::.(}Si il:i.t for docisi o~1 l~ith -!-b_;} r ~sJ.o:ual chi ~rs e All 1 ns r~va t o P..llV- t hs npp!'073l of the te ... r,~...'Ylica 1 dir(?'.::to:r in Bogota .

( 2) The b .... n.:~i!lG aspect.s of t he l oans Pl'oceod too sl oH1y iu the b1,1anches a~1d in Bogot3·. !!1 tha 0.aja ·H:. agr~e·'·t.ru:rt t h...e!h)e bu '~ina i\..nctio:n~ s 1ou1 d be d lega·ted to b1'a:.1ch m l'l..3e;ers. :

( 3) Lo't-1 profita ility o£ t .. 1c lna jo:rity of t ha p:rojec-tn , on accOJ"nt. of the 1•igid pe::ce!lt~~GS t• xed for i11v•3Z.~-l!lent in c ~t·vle, ha s Sit;nificantly a minish.:;.d -tho de:'l:lnd f or ere it.

(1) Th CoJ. o:·;1 ian t echmcians ha ~a d'3-i.!Onst::rrtod a t: ·o~ .... iv~· ty to ClSsir.rl.lP a ne 1 les.sonn an ~ e.?~_;:.'E:l~ie:n~e . Ths Horld Ba~ 1.- t c ~ 1:-1:tci~L C! therefo ·e "lava a f .ortile f. el.:t ro:• tr~ns:nitt:L~ tL:ts ""SCJ mo1 ~ ~? • .:t .rhic the count,~'Y nsads in th.., field Of cattle de~"'elop T\ nt • !I017EY'TB.,., f l.• thi . trans:ni ttd, of t echnolo37 :tt is noce~83l' t .. at th foro:.g-.:1 pe~so;u. al put its best efforts

-· - -- - - - · - - -- ~-- ·-----..:=""<---:.. --·

-2-- __ : :_----:_-:::::;.=:.--:..-- - -

- ----- ~- - - - - -

~lin~ in ·vh:J .a.'i ~.:~chr~ nt.JP'G of. 't.h r · i ~10d ,

( ?) lnC4 .. G300 t\'le p l'C

perc ::rt in 0 1.1dGl~ to ·i f!.)r o-..r ···he 1 i.e. ra~ ~ it o thtJ s .la pG.!.'cont stag p ... ogrun .

l• t O:J0o Col .. ..J~~-n n

can o do o: .:to

- -~~~

,

St3:rt of Pl~o ·;ram • I t i s bo?:inn:il·_..,. Jith t h3 eQtnbl· DhJ.'ila:\'~lJ of t 10 ne·-7 zo· eo ~ ___ ;;;_..,r___ ~

nd 8 ne\J centors of op l•a n. Xn total 11e nm1 nve f:t e zol'!vs ond 25 ce t, vr3 att.w1 "" d by 45 tc~~1icin·u1 e

CO:,_·~. l' ; 'llhe a r.r~Va b .... e-'1 excln 1<3d fl'Oi. t h:ts stage zonfOL of 0~' · at otozic.inl 11·· .aftle ckn'elop:·19l t. sT;h 1s Ural)3 n Da jo CPuca, ~ r~u.ca, l:!.c..:·1ada

C· sarwr e ; Caq et~ ~nd H il~. ( In t he latter ctSwe the project h . s been l imitod to a s";lall strip-Q5 l~r .... on both si. :Js o:f the ·b~d~ ··ena l'i:u:t' u:, to ei 'd excluding ;h c.c.z truly apt for cattle de~-ela-I:iJ:t.~.lJ .)

1·E-r., SECO~·. 'TAGl~~ ... ~-- -~-~-...-.....---~---

{?) Deleeate to t e E:{e uti.,. a Co:m · -~t e--3the p o~.JOl! of s oloct .... ng· nm·J ar~as ·t,o be i nclu sd i n t ·;.a pl1 0gtarr in f xture .

{3) Cr;)·te fl' wnt __ 3 eso1rcr-.s of-'·na n~ l ·nt. r e1o1\:1.":1t fv.:nd f.'or f~tterng, c BBsl"lto whioh 7·1ill be grantod to ·th.G l1 a: c'1c o H~-Lc~'l h1·:'o 'l} -~ c v:>d fi­

nc:i f? for br ... e i.ng . This i.s a \J~Y o"" g1'an·t.::~n~ i.1 ~ ... O\U"CO.a for t .1e payro. - t of i nt.e ·e-s t .

These sugg stions will be .n effc~ti e :Lnst.::."ume"1t i:o; t? .. o s·u-~nr !:h dization and f'acilitut.:on of the pr gr·-mo

Sincerely,

MIGUEr, GARCIA HE~~~OS Ger ent Gene,al

i'

FoRM No. 57

TO:

FROM:

SUBJECT:

INTERNATIONAL DEVELOPMENT I INTERNATIONAL BANK FOR I INTERNATIONAL FINANCE ASSOCIATION RECONSTRUCTION AND DEVELOPMENT CORPORATION

OFFICE MEMORANDUM Memorandum for Records DATE: June 25, 1970

Jose D. Teigeir~~ Meeting of Mr. ~Namara with Dr, Arturo GOmez Jaramillo

1. On June 5 Mr. McNamara met with Dr. Arturo G6mez Jaramillo, the General Manager of the National Coffee Growers Federation. The meeting was also attended by Messrs. Alter and Teigeiro from the Bank. Dr. Rodrigo Botero was also present.

2. Dro Arturo Gomez Jaramillo explained to Mr. McNamara the current situation of the international coffee market, the International Coffee Agreement, and the problems associated with coffee production in Colombia.

3. Dr. G6mez Jaramillo started by complimenting Mr. McNamara on the quality of the Bank's report on the creation of a buffer stock for regulating international coffee prices. In his view this is the best report that has been written on the subject. Regarding the question of how to build up these buffer stocks, he said that the only way with a possibility of helping regulate production and prices is by creating in all coffee producing countries a system of taxes payable in kind. This is because this type of taxes is the only one that will force these countries to establish retention systems similar to those existing in Colombia and Brazil. Mr. McNamara asked whether this idea had already been discussed with consuming countries, and Dr. G6mez Jaramillo said that it had been suggested last March, but that the consumers had refused discussing it, the reason being that the consumers did not want to reach an understanding on prices with producers at a level such as the one suggested by Colombia, that is to say, to keep the composite price system between 52 and 48 US cents per pound (the composite price is the basis for the operation of the existing selectivity and prorata system, for expanding and reducing quotas to be exported by producers).

3. Mr. McNamara asked about the relative competitive position of Colombia producing coffee and how much net income a medium coffee farm would leave to its owner. Dr. Gomez Jaramillo explained that, excluding taxes, Colombia can produce profitably at about 20 US cents per pound. This is similar to the situation of Brazil, favorable with regard to Central America and Mexico, and unfavorable in relation to Africa. Re­garding the net income of a medium size coffee farm in Colombia, which was defined by Dr. Gomez Jaramillo as a 30 hectare coffee farm, a quick computation on the spot indicated that the net income after taxes would be in the order of US$3,500.

4. Mr. McNamara asked Dr. Gomez Jaramillo how he foresees the future. Dr. Gomez Jaramillo said that all producing countries are carrying out new plantings which will come into production in about three years, and that,

- 2 -

unless a buffer stock such as the one discussed above could be created within the next two years, he foresaw a repetition of the same old cycle, but with the characteristic that the low could become even deeper than in the past. In this connection Dr. Gomez Jaramillo asked Mr. McNamara for the Bank's collaboration in order to make it possible to reach an agreement between consuming and pro­ducing countries. Mr. McNamara explained that this is an area outside the domain of the Bank activities, for which there already exists an international organization, which makes it even more difficult for the Bank to enter it. Mr. McNamara said that unless the Bank receives a request from the parties concerned, he did not see it feasible for the Bank to collaborate in this area, in spite of the fact that remaining out of it was against his own personal inclinations.

f FoRM No . 57 INTERNATIONAL DEVELOPMENT I INTERNATIONAL BANK FOR I I NTERNATIONAL FIN ANCE ASSOCIATION RECONSTRUCTION AND DEVELOPMEN T CORPORATION

OFFICE MEMORANDUM TO: Memorandum for Record DATE: June 2.5, 1970

FROM: Jos€> D. Teigeiro t SUBJECT: Meeting of Mr. McNamara with Colombian Officials on

Public Utilities

1. On June .5 Mr. McNamara met with Dr. Antonio Barrera, Director of Infrastructure Unit of the National Planning Department; Dr. Hernan Borrero, Manager of the Bogota Power Company; Dr. Daniel Rueda, Manager of the Bogota Water and Sewerage Company; and Dr. Jose Ma. Piedrahita, Manager of the National Power Interconnection Company. The meeting was also attended by Messrs. Alter and Teigeiro from the Bank. Dr. Rodrigo Botero was also present.

2. Dr. Antonio Barrera initiated the presentation explaining to Mr. McNamara how the National Planning Department carries out its responsibilities of programming the development and investment in public utilities, the cooperation received from the Bank, and some of the specific techniques, such as the Harvard simulation model for power development, and instruments, such as public utility rate policy, used in this work, Dro Barrera delivered to Mr. McNamara a written copy of his presentation.

3. Mr. McNamara asked about the existence of multiple purpose projects in the field of public utilities. Dr. Rueda explained that in the Bogota area his company is now preparing a project to increase the supply of water by 20 cubic meters per second, for which they expect to receive financial assistance from the Bank. Dr. Rueda said that this project will also increase the supply of water for the production of power at the south end of the Sabana of Bogota. Dr. Borrero explained the project on a model of Bogota's watershed, emphasizing that in only 20 miles the change in altitude at the south end of the Sabana of Bogota is a drop of 1,700 meters and that therefore any additional water supply available to Bogota would produce a strengthening of the potential to produce power, by installing additional generating plants in the El Colegio- Canoas system. Dr. Borrero explained that since Bogota's power system is interconnected, this multiple purpose aspect would save Colombia the investment in a big hydroelectr~c plant, for which the construction of a masive darn would be otherwise required.

4. Mr. McNamara asked whether the rate structure of public utilities in Bogota and other cities was a differential one. Both Dr. Rueda and Dr. Borrero, explained that not only it is differential but there is a large spread between the rates charged to the high income sectors of the city as compared to the poorest ones. They explained that this was applied in relation with cadastral assessments.

- 2 -

5. Dr. Piedrahi ta explained to Mr. McNamara the current system of power interconnection and its future projections. He emphasized in his presentation the immediate need to interconnect with the eastern part of Colombia (the Santander and North Santander Departments) through a line linking this section to the Medellin power system. He said that another natural extension of the interconnected system would be the link with the Atlantic Coast system, within the next ten years, as an out growth of providing power to the Cerro Matoso nickel project. He also mentioned the future generation projects that his company has under consideration for further expansion of installed generation capacity, after Alto Anchicaya and Chivor.

, FoRM No. 57 INTERNATIONAL DEVELOPMENT I INTERNATIONAL BANK FOR I INTERNATIONAL FINANCE ASSOCIATION RECONSTRUCTION AND DEVELOPMENT CORPORATION

OFFICE MEMORANDUM TO: Memorandum DATE: June 25, 1970

FROM: Jose D. Teigeiro

SUBJECT: Meeting of Mr. McNamara with INCORA Officials on Agrarian Reform: Colonization

On June 5 Mr. McNamara visited INCORA to receive an explanation on INCORA as an agrarian reform agency, which was given by Dr. Carlos Villamil, General Manager of INCORA, and to a presentation of the Caqueta colonization project made by Dr. Hernando Durana, Head of INCORA's planning office. In addition to Dr. Durana, Dr. Villamil had invited Messrs. Sanin, Pelaez, Gutierrez, Ramirez, Velez Restrepo, and El Capitan, all directors of departments and projects within INCORA. The Minister of Agriculture, Dr. Armando Samper Gnecco, had also been invited. The meeting was also attended by Messrs. Alter, Clark, Frost and Teigeiro from the Bank. Dr. Rodrigo Botero was also present.

Dr. Carlos Villamil made a brief presentation of INCORA as an organization, explaining how the technical departments at headquarters relate with the project directors, the autonomy of these directors of projects to move within the budgets approved by INCORA, and what Colombian agrarian reform basically consists of. Originally this was to be land distribution combined with credit and technical assistance. Recently, over the last two years, marketing and education have been added because, as he said, marketing has been found the largest problem for small farmers. To solve it, 30 cooperatives have been founded under CECORA (the central of agrarian reform cooperatives - a subsidia~ of INCORA). The results of agrarian reform for the period 1962-69 are that INCORA has extended 100,000 new titles and provided supervised credit to 4o,ooo farmers in an amount equivalent to US$60 million. Sales of agricultural products by CECORA amount to 215 million pesos.

Dr. Villamil introduced the subject of colonization saying that same years ago the first colonization experiment was carried out at the Department of Quindio. This experiment was based on a system of colonization with direct selection of the farmers who were to settle in the colonized land. This experiment was highly unsuccessfUl because a large proportion of farmers soon became drop-outs. The lesson from that experience was that colonization should be carried out with spon­taneous settlers who start by themselves to work in extending the frontier.

Dr. Villamil gave the floor to Dr. Durana who explained that the Caqueta colonization project, as well as the colonization projects being carried out in Sarare and Ariari, follow the spontaneous settler pattern, and, after three years of work on these three areas, INCORA feels happy with the results being obtained. Dr. Durana explained that colonization is now becoming ave~ important item within INCORA's

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budget, that is expected to take about 23 percent of INCORA 1 s investments funds by 1974. This percentage compares with 19 per­cent in 1970, and lower percentages in previous years.

In relation to the Caqueta project, Dr. Durana explained its main physical characteristics, area covered, roads to be built, number of farmers settled in the area, number of agronomists and supervisors required, supervised credit to be extended, and output and financial results expected.

Following Dr. Durana's presentation, Dr. Villamil introduced to Mr. McNamara three farmers from the Caqueta project area, two of whom had lots of slightly over 100 hectares,and the other in one with 350 hectares. Two of the farmers were settlers in the area and another was a native of Caqueta. Mr. McNamara held a dialogue with each, asking questions about their reasons for moving to a colonization area, their way of living, size of family, schoQLfacilities, etc. The outcome of these interviews was that the three farmers were basically men that felt that their way of living was improving rapidly, and had found something to fight for in life. They unani­mously presented two requests: more credit at better terms, and more roads.

Afterwards, Mr. McNamara was shown a set of aerial photographs of the Caqueta project area.

· FoRM No. 57 INTERNATION AL DE VEL OPMENT I INTERNATIONAL BANK FO R ASS OC IATION RE CONSTRUCTION AND DEVELOPMENT I

I NTERNATIONAL FINANCE CORPORATION

OFFICE MEMORANDUM TO: Memorandum for Record DATE: June 25, 1970

FROM:

SUBJECT:

Jose D. Teigeiro ~

COLO}ffilA - Meeting of Mr. McNamara with Colombian Officials on Regional and Urban Development

The meeting took place on June 5 in the office of Dr. Jorge Ruiz Lara at the National Planning ~partment. Mr. McNamara met with Dr. Julio Mendoza, Director of the Regional and Urban Development Unit of the National Planning Department; Dr. Virgilio Barco, former Mayor of Bogota; Drs . Luis A. Villegas and Gustavo Stevenson, General and Deputy Managers, respectively, of the Colombian Housing Institute (ICT); Drs. Samuel Botero and Ismael Matallana, Manager and Deputy of the Colombian Institute for the Construction of School Buildings (ICCE); Dr. Roberto Arenas, Chairman of the Municipal Council of Bogota; and Dr. Patricio Samper, Head of the Planning Office of the Special District of Bogota. The meeting was also attended by Messrs . Alter, Frost, Clark, Christoffersen and Teigeiro for the Bank. Dr. Rodrigo Botero was also present .

Dr. endoza explained the broad outlines of Colombia's regional and urban development problems and programs . He said that there are four cities with a very rapid rate of growth: Bogota, Medellin, Cali and Barranquilla, which double their population every 7 to 10 years. By contrast, there is a large group of cities with population between 20,000 and 200,000 that show serious characteristics of stagnation. The first four cities generate about 68 percent of industrial value added, while the second group generates only 13 percent. Industrial value added per capita in the first group is about 2,000 pesos whereas in the second group it is only about 900 pesos.

In addition, there are large disequilibria in other aspects such a s the provision of education, health and housing services, which jointly provide strong stimuli for population to move from the second group of cities to the four largest ones. In order to modify these disequilibria the Colombian Government has decided to follow four basic lines of policy: (1) rationalization of the growth of the larger cities; (2) to make of the larger cities the nuclei for providing services to their respective areas of influence; (3) to stimulate the development of the second group of cities in order to reduce migration flows and preserve the current urban structure, which is found to be highly favorable for future economic and social development; (4) to decentralize planning activities. In ad­dition, the Government has created at the central bank an urban develop­ment fund to discount loans given to municipal governments by the banking system.

Dr. Virgilio Barco expressed his doubts as to the feasibility of reducing the growth rate of the large-r cities, which in his view can only be done by making miserable the living conditions in the largest cities . He considered that this would be politically impossible . Dr . Barco went on to explain the characteristics of Bogota's urban develop-

-2- June 25, 1970

ment over the last three years and his views for the future. He said that although the birth rate i s declining, the growth rate of the city will continue to increase fast because of migration. .Among the principal motivations for migration he mentioned education, tax struc­ture, and public services.

Regarding education, Dr . Barco said that Bogota is the only city in Colombia that has capacity to provide primary education to the total of population in the corresponding age group. Taxation, however, is in the hands of the National Government; all the big taxes are col­lected and spent by the National Government, including fuel and sales taxes, which leaves municipal governments with only the property tax and the valorization tax (this is a tax to capture part of the increase in value of real estate because of improvements produced by public works). Regarding public services, Dr. Barco said that with only relative defi­ciencies in telephones, Bogota is now supplying adequate power, water and sewerage services. Furthermore, he considered that because of works going on, Bogota can look ahead with confidence to the next 10 years from the point of view of the availability of basic services .

This does not mean, Dr. Barco said, that Bogota has now resolved all of its problems . There is a substantial employment problem; there is also a housing deficit; and there are 1,000 kilometers of streets, out of a total of 2, 000 kilometers, that urgently require pavement . In order to face these problems the municipal council changed last year the system of planning. Instead of a physical master plan, the city is now working with an overall economic development plan which should help establish priorities and coordination for the future . Dr. Virgilio Barco concluded his presentation by remarking that in his view the absorption of investment resources by the large cities is one of the best ways to improve the lot of the rural areas because of two effects: it increases the demand for agricultural products, and provides an escape valve for the excess rural population.

Mr. McNamara asked how the problem of municipal taxation could be solved . Dr . Barco said that the National Government has to share with the local governments some of its taxes . In this connection, the rele­vant recommendations of the Musgrave Report were mentioned, in the sense that the National Government should share the sales tax with the local governments and should authorize them to raise real estate taxation, with a matching funds program, as long as the additional tax resources are allocated to improve education and health programs.

Dr. Stevenson, the Deputy Manager of the Housing Institute (ICT), explained to I~ . McNamara that ICT had been created 30 years ago and built 60,000 dwelling units at a cost of 600 million pesos. In carrying out this program ICT has received financial assitance from the Inter­.American Development Bank and US/AID . External credit, however, is now disappearing, and ICT is trying to obtain additional domestic financial resources. In spite of the best effort of the ICT, the housing deficit is still growing fast because to absorb it would require building 120,000 dwelling units per year, whereas ICT is building currently only 40,000.

-3- June 2 ,), 1970

Mr. McNamara asked whether ICT has a m~n~um service housing program, to which Dr. Vtllegas replied that ICT is now building in cooperation with the municipality of Medellin 6,000 units under this type of program at a unit cost of US$300 per dwelling. A similar program is being prepared for Bogota. Dr. Villegas explained that one of the principal constraints facing this type of program is the high cost of land.