I

., RETURN TO

RESTRICTED REPORTS DESK

REP 0 R T NO. Z· 6WITH 1 N ClRClIUTING COpy PART TWO

ONE WEEK _fO BE _NED TO ARCHffES DIrnION

A PROGRAM

FOR COLOMBIAN PUBLIC INVESTMENT

AND EXTERNAL BORROWING

Part Two: A PUBLIC INVESTMENT PROGRAM

FOR COLOMBIA

.. .. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

Washington, D.C.

February 1956

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Table of contents

Part 1\'[0 A Public Investment Program for Colombia

I. Methods Used in Formulating the

Investment Program 1

A. Collection of Investment Data 1

B•.Method of Reducing Investment to Level

of Resources 3

c. Questionnaire on Investment Programs of

Public Entities 6

II. Transportation 8

A. SQ~ary of Proposals and Recommendations 8

B. Highways 9

C.. Railroads 14

D.. Airports 19

E. Sea and River Ports 2Z

III. Electric Power 24

A•. Investment in 1956 24

B. Investment in 1957 and 1958-1960 26

IV. Viater..vorks 29

A.. Investment in 1956 29

B. Investment in 1957 and 1958-1960 31

V.. Municipal Services 34

A. Investment in 1956 34

B. Situation after 1956 43

VI .. Housing 45

A. Public Entities in Housing 45

B•. Investment in 1956 46

c. Investment after 1956 49

VII. Hospitals 51

A • Investment in 1956 51.. B. Investment after 1956 51

- i

- ii

VIII. Schools 54

A. Investment in 1956 54

B. Investoent after 1956 55

IX. National and Departmental ~~blic

Buildings 56

A. Investment in 1956 56

B. Investment after 1956 57

X. Industry 58

A. Investment in 1956 58

B. Investment in ~8ter Years 63

XI. Agriculture 64

A. International Bank Agricultural

r~ssion 64

B. Investment in 1956 65

c. Investment in 1957 and 1958-1960 71.

XII. CommuniC8tions 73

A. Investment in 1956 73

B. Investment in 1957 and 1958-1960 76

...

,

..

"

A PUBLIC IN',r~S'L'1.LNT PE00l\.i\M FOR COLOMBIA

1. METHODS USED IN FOh:l'1UL'TING THE Ii"VES'I'N~NT PROGRAH

A. Collection of Investment Data

Upon its arrival i.r:l Colombia, the mission "Jas confronted Nith the

fact that the available data on the magnitude ODd composition of current

ald prospective public investment 1rJere quite inadequate. In order to

obtain such information, the mission, in cooperation Hith the Comite Nacimal

de Planeacion, prepared a questionnaire (see copy at the end of this chapter)

.,hich ,-Jas sent to all public and selTli-public entities which were thought to

have investn8nt prograpls. These included seven lr).inistries, the nme

national institutes, t1rJelve o:'her official entities, sixteen deiJartments,

the tiventy-three largest municipalities Bnd four departmental 11lelfare

agencies -- altogether seventy-one entities.

The questionnaire asked for the amounts to be invested yearly, and

the source of the funds, for each project Hholly or partly financed lo1ith

public money Hithin the yeBrs 1955-1960. Information ltIaS received from the

51 most import8nt entities. In addition, partly in lieu of information

from the four agricultural entities, the mission used the recommendations

on future agricultural investment prepared by the recent International Bank

Agricultur al Nission to Colombia. 1rJhile the response to the questionnaire

tl1as incomplete, supporting information from other sources indic ates that

the investment data received by the mission include the results of virtually

all the planned investment activity Colombia.

The mission l s main attention has been directed to prepc:ring an

action progre.rn for public investment in 1956. Naturally, hOHever, this

~~ The mission consisted of the follovJing persons: fIlbert l-;aterston, Chief of Mission; Adan1 J. Hazlett, Chief Adviser on Steel Industry; Daniel R. Loughrey, !-dviser on Steel Technology; Francis Juraschek,~dviser on Steel Marketing; J. HoodrO\oJ Mathews, Adviser on Steel Industry~ccounting; o. R. Crooks, Adviser on Railroads; Gordon Grayson, Project Adviser; Neil Bass, Engineer; Clarence 1. Sterling, Jr.J, ~dviser on 'v,Jater Supply; Holfgang Jahn, Project Analyst; and Henry Heuser, l!,conornist

http:progre.rn

- 2

required mak:"ng some assumptions o.boat the future. Projects which

are to be carried out in 1956 mey commit resources in lB.ter years

and ?rojects which are to be started in the foreseeable future may require

resources to be allocated in 1956 for preparator~T T-mrk. To the extent

possible, these factors were taken into account. But aside from this,

the mission made only a prelirninar:f en alysis of the ma6nitude and

C0J11position of investr:1ent in 1957 and only the most tentative formulation

of inyestmen t in tile ye ars from 1958 through 1960.

Even for 1956, it 1,1/"as clearly iJnpossible for the mission, in the

time it had, to make 2 detailed appraisal of each oE the hundreds of

projects vJhich it was plormed to have in process of execution that year.

The mis sion hopes ths.t a iriell-orGanized and 2.dequately-staffed group in

the Comite Nacional de Planeacton can begin soon to accumulate the

information and develop the btirfJ.ate knowledge VJhich will be essential

in making a careful apprcis of t~1ese l)rojects for the 1957 public invest

ment progrE.m.

In spite of the lack of such detailed information and intimate

knoi-lledge, it Has necessary for the mission, in viet'1 of its objective, to

form judgments on all of the significal1t projects and prograns contemplated

for 1956. In order to ma~e these judgments as intelligently as possible,

members of the mission, assisted by the staff of the C01"1ite Nacional de

Planeacion, held many intervievJS ,dth officers of many official and semi

official entities. It benefited from the close cooperation of these

officials 8lld also frorl ttle Hork of the Teclmic al iVliss ion on Electric Power,

and the Interns,tional Bank I s Cauca Valley and !'gricultural Nissions; in

addition, it drew heavily on the e~perience of the Bank in the transport,

pOirIer and other economic sectors in Colombia.

- 3

B. l

..

- 4

After applying these first three tests to the planned programs

for 1956, the mission fOlh'1d that it could recommend the rejection or

curtailment of a sufficient number of projects to reduce contemplated

nublic n1vestment L'1 1956 to about 800 million pesos. The projects still

to be reyievJed were then subjected to additional tests in order to bring

the total down to the level of available resources. These tests were more

difficult to alJply and in mal1Y instances the mission felt that it needed

more information than it was able to obtain in the limited period it

sp ent in Colombia.

Applying one of these tests, the mission attempted to judge in

appropriate cases ",Jhether there existed policies and procedures designed

to secure economic ally sound and equitable sharing of the costs of the

projects among governmental entities, or bet\~ee.'1 public entities mld the

private groups benefited. It 2ppeared to the mission that many cormnunites

were making an insufficient contribution to some of the projects they were

planning and th&t they vIere relying unduly on contributions from the National

Government. In many c especially those involving municipal improve

ments, no system of assessing the private beneficiaries in proportion to

their benefits could be discerned.

"mere projects involved the production of goods and services to be

sold on the market, the mission at tempted to judge l~hether there existed

an adequate market demand and l'Jhether the anticipated costs of production

were reasonable. The scale of certain power projects could be reduced on

the basis of this examination and other projects could be rejected because

more economical methods of producing pOi-Ier to meet demand were available.

...

- 5 -

Hhile the mission could .9,.oply tl::.is test in the electric power sector

Hith reasonable assurance that it had the data to do so, in other

sectors such inforn12tion vias lacking. In the field of telephones, for

exanple, the lack of data did not permit a careful study of each project

from th is point of vievi, and the rrIission merely accepted the forecasts

Hhich had been prepared by the autonomous companies operating L.'1 this field.

Finally, some judgrl1ents had to 1.:>e made, often somelJhat arbitrarily,

on the relative priority of projects and ~rograms in different sectors in

order to bring the total plarl11ed volume of expenditures down to the permitted

level. In applying these judgments, the mission "Jas guided by its belief

that Colombia's economic development requires that large expenditures be

made for transportation, electric poi,Jer and agriculture. Hence, soundly-

conceived projects in these three sectors vIere placed first. In viet,] of

the expressed policy of the National Government to accelerate investment in

waterworks and its request that the miss ioa prepare an investment progran

for Hatenvorks, the mission also gave precedence to. investments in this sector.

As already indic ated, consideration also had to be given to the

implications of decisions take:) on investment programs in 1956 for later years.

In making provision in 1956 for preliminary engineering studies for Paz del

Rio's expansion, the mission was in effect recognizing that heavy investments

night be made for ti1is purpose in later ye ars. In turn, this prospect of

heavy investment in paz del Rio required caution in initiating programs in

1956 1rJh ich vlould c all for large continuing expenditures. For example, the

mission felt ~"lat expansion of the housing progr.9Il1 for 1956 was inadvisable,

not only because this program appeared to be of 10\'; priority in 1956, but also

because if the progrWl tv-ere permitted to expand in 1956 j.t TtJQuld be extremely

difficult to cut back in succeeding years.

C. QUESTIOIJN,U:::..m ON INVES'IHENT PR.(X}RP.l\1S DF PlIBLlC ENTITIES -- j - C' 'M •• if C ...... srp .. _

::-;:Jl'IDAD:

A - Nombre del Proyect~

1) - Cuando se comenz~o cuA:noC'- DC' C011ll311zarA' (mes y ana)?

2) - Fecha probable de su terminaci6n si ya se comenz6 (mes y ano):

. . /si no, tiempo que requiera su comp1eta eJecuc~on:

b - Inversiones Total 19601958 1959195719561955 Total de inversiones requeridas:

Monto de bienes y

servicios importados que se utiliz,aran:

-",'..J - Contribuci6n

de los recursos ordinarios de 1a Entidad para el Proyecto:

) - Financiaci6n adicional requerida:

1- Aportes del

Gobierno liJacional, Departamental 0 Hunicipal, y de

Otras Entidades

Oficiales 0

Semi-Oficiales.*

11- De inversionistas privados .-:*

[II- Pr~stamos; I a) 1nternos-x-l:*i 1 b) ExternoS~HH~-i J

'i~ - ~specifique en hoja aparte que clase de compromisos 0 arreglos existen o estan previstos, 0 si no hay ninguno.

*'1~ - Indique 8i los inversionistas son nacionales 0 extranjeros. *'1* - En caso de poseer informacion sobre la manera co~o obtuvieron 0 como se

van a obtener los prestamos, surninstrarla en hoja aparte. ~H'n~* - En caso de poseer informacion lienese el cuestionario "F1NANCIACION

EXTERNA" que se incluye en hoja separada.

-7

FHJANC:::ACION EXTERUA

Hombre del P.royecto.;

Entidad que solicita el prestamo:

Prestamista.: *

Cantidad y discriminacion por divisas:

Plazo del prestamo y fecha del Ultimo ve~cimiento:

Costo del Credito:

a) Tipo de interes

b) Otros gastos 0 comisiones:

Sistema de arJlortizacion: ~B~

Clase de garantia, si existe: ~HH}

Lstado de las negociacio~es del,J,.'restamo: *")HHt·

-II' - Usese hoja separada para cad a credito.

iP~ - Anote la fecha de iniciacion de las amortizaciones y el sistema de pago.

*.,H;- - Anote la Entidad que dara la garantia y si Jsta inclllYe 0 no la obligacion de suministrar la moneda extranjera necesaria.

~~~H~ - Indique uno de los siguientes estados: a) discusiones preliminares, b) negociaciones iniciadas, c) contrato de prestamo f1rmado, d) contrato de prestamo firmado y aprobado por el Gobierno Nacional.

s

A. SUIlll1'.ary of rroposals and reconnnendatioU,§

Investments for transportation, which includes highways, railroads,

airports and ports, are greater than for any other sector, both as proposed to

the mission and as recommended by it. In sUIlll1'~ry, investment for each field of

the transportation sector for 1956 as proposed by governmental entities and as

recommended by the mission is as follo\

- 9.

Field 1957 1958-60

Higmrays 215.0 215.0

Railroads 70.0 20.0

Airports 12.5 12.5

Ports _..L.2 ~

305.0 255.0

B. Hif-"hvrays

1. Investment in 1926

The National Government and departments in Colombia plan to invest

304.6 million pesos in high~,rays in 1956 as compared to an investment of 274.0

million pesos in 1955. The distribution of hieh~rey investment between the

l:ational Government and the departments is as follows:

1955 1956 (million resos) (%) (million pesos) (%)

National Government 229.3 83.8 235.1 77.2

Departments 1,6.2 ~ 22.8~

274.0 lQQ."Q ~ 100.0

The cost of the National Government's program would be covered from

the national budget and from a loan (the second for highways) obtained from the

International Bank. HOl"ever, additional foreign exchange will be needed for the

program, 1,-1hich the Government hopes to obtain from another foreign loan. Mean

while, foreign currency requirements are being met from an advance of U. S.

$5 million from the B::.nco de la Republica. The cost of the departmental

~rograms is to be met from budgetary resources, from domestic and foreign

bank loans, suppliers' credits and in some cases, valorization (benefit) taxes.

The l>iinistry of Public TJorks advised the mission that it ptoposes

to make the following investments for hieh~'Tays in 1956 as compared to invest

ments in 1955:

- 1(')

Program 1955 1956 (million pesos)

Plan Vial I 87.1 94.3 Earranquilla-Cienaga Highway 4.8 7.0 Highways outside Plan Vial I 97.6 92.1 Highway lJIaintenance Program 39.8 41 ...7

229.3 23S.1

a. Plan Vial I

The most important highway program to be carried out by the National

Government in 1956 is the continuation of YlOrk on PIHn Vial I, the program of

construction and rehabilitation of the main trunk highways of Colombia which

Was initiated in 1951 and which has to date received the assistance of two

loans from the Internat.ional Bank. The roads included in the project are those

which connect the important centers of the country and 'Hhich must carry the most

traffic.

The mission believes that there is no project or program with a higher

priority than the Plan Vial I. Further development of the country is dependent

on the early completion of this program, which should proceed as planned. This

would require 94.3 million pesos in 1956, of which 17.0 million pesos (US$6.8

million) would be for foreign exchange.

b. Barranquilla-Gienaga Highway

This project is well adv,mced in construction and when completed will

connect the important port of Barranquilla ~~th Cienaga, the transfer point for

railroad traffic on the ,ntlantico Railroad (Magdalena Valley Railroad and the

Extension to Santa Marta) now under construction. The highway will require 7 millicn

pesos in 1956, of which about 2 million pesos (us~? ..8 million) will be in foreign

exchange. This project is an essential part of the Atlantico Railroad and should

move ahead to completion as quickly as possible.

- II

c. High\Jays Outside PIaLVial I

The Government has been carrying on a considerable amount of high~my

work outside Plan Vial I. The amcunt of this Hork has increased to a point where,

in the mission's opinion, it is impossible for the small overworked staff in the

:Hinistry of Public 110rks to supervise properly such an amount of outside vTork and

still administer effectively Plan Vial I and the Eigh'l'lay I

- 12

e. Departmenta.l Highway Programs

A number of Departments have submitted information on highway constructicn

programs which are substantially in excess of their investments in this sector in

1955:

19r)C) 1956 --(million pesos;-

Antioquia 2.5 3.5 Atlantico 3.1 2.9 Cauca 1.6 8.7 Cordoba .5 1.6 CUnoinamarca 4.2 18.6 r.;Iagdalena .7 2.7 Norte de Santander 6.0 Santander 1.1 1.B Tolima 6.0 8.7 Valle del Cauca 25.0 15.0

44.7 69.5

The mission did not study the departmental programs in detail, but a

cursory examination of the various programs leads to the conclusion that most

of them are too ambitious from the administrative point of view and that, the

priority of some of the individual projects is low. The mission recommends,

therefore, that departmental inve3tments in 1956 not exceed the 1955 level

of expenditures for this purpose, i.e., 45.0 million pesos, including about 18

million pesos (113$7.2 million) in foreign currency. be

It would/desirable if, in selecting departmental projects, primary

attention were given to those roads for 'which there is a demonstrable necessity

and for which the Departments have adequate plans and the administrative ability

to spend effectively the available funds. The specific proje~ts should be selected

wi th the approval of the {.IIinistry of Public Works, which already has a cctordinating

committee made up of the secretaries of Public Viorks of the Departments which

cc:mld screen the projects and prepare a coordinated departmental highway program

for the whole country.

- 13

The mission also recommends that the Consejo Nacional de Economia

approve the borr01ving of funds to pay for the construction of departmental

highways only upon the recommendA.tion of the Ministry of Public ~'!orks.

f. Surnnary of Recommendations

In sWQ~ary, the mission recommends that 238 million pesos (of which

61.6 million pesos - uS$24.6 million) be invested in highways in 1956, as follows:

Program Total Foreign F~change Component (million pesos) (milI~on pesos) (mill~on doILiS

Plan Vial I 94.3 17.U 6.8 Ba:rranquilla-Cienaga Highway 7.0 2.0 .8 Highways outside Plan Vial I 50.0 20.0 8..0 Highway Maintenance 41.7 4.6 1.8 Departmental Highways 45.0, 18.0 7.2

Total 238.0 61 .. 6 24.6

2. Investment in 1957-1959

The mission envisages higlnvay expenditures by the National Government

and the departments in 1957-1959 totalling no more than 215 million pesos annually,

as follows: Average annual

Program 1957 investment in (million pesos) 1958 and 1959

(million pesos) National Government

Completion Plan Vial I 73 Completion Barranquilla-Cienaga

highway 6

Highways OutSide Plan 50 50

Highway Maintenance 41 4, Plan Vial II 7,

Departmental Highways 45 45

215 215

To complete Plan Vial I in 1957 as scheduled, an investment of 73.0

million pesos would be required next year of which approximately 9.0 million

pesos would be in foreign exchange (US$3.6 million).

-14

As to highways outside the Plan Vial I the mission feels that in view

of the heavy calls on Colombia's public resource"s, the level of investment in

• these roads during 1957 and 1958-1960 ought not to exceed 50 million pesos.

The maintenance program will require 41 million pesos in 1957 and an

average of 45 million pesos annually in 1958-1960.

The Einistry of Public 'lorks is at present preparing Plan Vial II, a

program of highway construction and rehabilitation intended to include the major

higwNays of Colombia which are next in importance to those in Plan Vial I. The

highways to be included in Plan Vial II have not yet been designated and no

reliable cost estimates B.re available at this time. However, preliminary plans

envision an expenditure of some 392 million pesos on Plan Vial II, including the

equivalent of about 157 million pesos (US $62.8 million) in foreign excr~nge.

About 75 million pesos (including the foreign exchange equivalent of 30 million

pesos - US $12.0 million) would be needed in each of the first two years. The

mission believes that it would be desirable for the l'iinistry of Public T;Jorks to

start Plan Vial II in 1958, t-lhen Plan Vial I will have been completed. Kot only

will this permit the limited highway staff of the linistry to concentrate on the

completion of Plan Vial I, but it would allow time needed to prepare reliable cost

estimates and speCifications for the new program.

Investment in departmental higm~y8 during 1957-1959 should not exceed

the level proposed for 1956, i.e., 45 million pesos.

C. ~ilroad~

1. Investment in 1926

The Eational Railroads of Colombia, a tT,overnment-owned autonomous entity,

is expanding and rehabilitating the railroad system of the country. Costs in

Colombian currency are being financed from contributions of the National Government

and from the Railroads' own resources; foreign exchange costs are being financed

- 15

by two International Bank loa.ns of US :)25.0 million and $15.9 million (the latter

loan has not yet become effective) and by contributions of the National Government.

The program consists of three parts:

a. Construction of the hagdalena Valley Railroad (lviVRR) from

Puerto Salgar to Gamarra and rehabilitation of shops.

b. Extension of the ~nnRR from Gamarra to Fundacion and re

habilitating the existing line beti-leen Fundacion and Santa

'Narta; purchase of rolling equipment for the extension and

tractor-trailer units to be used to haul freight between

Barranquilla and Cienaga; acquisition of ferries to carry the

tractor-trailers over the l'agdalena River and the construction

of ferry slips.

c. Rehabilitation of existing lines and shops; and the acquisition

of rolling stock for existing lines and the l;fVRR.

The total investment required to complete the tl'1.ree parts of the program

and the amounts planned to be invested in 1955 and 1956 are as follows:

Planned Investment lli~ of Program Total 1955 1956

(million nesos) (million pesos)

Part "a" 60.5 J/ 26.8 46.3 Part "b" 6.3 50.370.8 ~ Part tic" 78.0 ~2.l s/ 11.3 s/

Total 209.3 ,*8.2 107.2

Amount required to complete project in 1956 and 1957.

The project was initiated in 1955 and is scheduled to be completed in 1957.

The total cost of the project is estimated at 70.8 million pesos.

Estimated cost for 1955-1960.

Tentative.

Full benefits of the present railroad investment program 1~ill depend

on the completion of all parts of the progra.'ll. The mission believes that this

program is one of the most important for the economic development of the country

and that every effort should be made to move ahead with it as quickly as possible.

The mission's review of the project indicates that for several administrative and

technical reasons, investments in 1956 are not likely to reach the proposed level

of 108 million pesos. Instead, the mission estimates that 1956 expenditures are

likely to be as follows: Estimated Investment

Part of Program in 1956 (million pesos)

Part flail 40 •.0 Part lib!! 22.5 Part Hell 15..0

Total 77.5

Al though expenditures in 1956 for the construction of the T·fVRR (Part !lafl

of the program) are likely to rise greatly over the level of 27 million pesos invested

in 19~5; it is the concensus of those closely connected with the project that it

would be realistic to plan an expenditure of 40 million pesos in 1956.

In connection with Part "b ll of the program, the 6.. 3 million pesos planned

to be invested in 1955 for construction was not spent in that year. The estimate

that 50.3 million pesos would be invested for this part of the program in 1956, in

addition to the 6.3 million pesos which were to have been spent in 1955, now appears

too optimistic for two reasons:

(1) There have been delays in st~xting construction. Contractors were

expected to begin working on the ~fVRR extension in January 1956, but it is now

certain that they cannot get to work until later in the year. Total expenditures

for construction in 1955 and 1956 were estimated at 16.6 million out of a total

of 56.6 mj.llion pesos (the 6.3 million pesos not spent in 1955 plus 10.3 million

pesos included in the projected expenditures for 1956). Taking into account the

expected delay in beginning construction, the mission estimates that 1956

- 17

expenditures for construction will not exceed 10 million pesos.

(2) Most of the equipment and materials to be obtained with the

remaining 34.1 mllien pesos to be spent in 1956 for Part lib" of the rrogram

will be paid for after 1956. It is likely that construction equipment for

5 million pesos, which is needed immediately, will be purchased and paid for

in 19j6. In addition, the mission estimates that orders will be placed in 1956

for delivery in later years for rails, rolling stock, tractor-trailer UIiits, a

ferry, etc. for an amount not exceeding 30 million pesos. On the assumption that

down payments of 25% would be required for these orders, expenditures for this

purpose would not exceed 7.5 million 1"'esos. Investments for Part "b" of the

program would therefore amount to 22.5 million pesos, as follows:

Construction Ps. 10.0 million Construction equipment 5.0 " Deposits on additional

equipment " Total Ps. 22.5 million

Part "e lt of the program was scheduled to be initiated in 1955. Proposed

investment in 1955 for this purpose was 15.1 million pesos, but no expenditures

were actually JI'I.ade. Proposed eJo..."Penditures in 1956 are 11.3 million pesos. The

mission estimates that about 15.0 million pesos will be spent.

Although the total of 77.5 million pesos is ~.aller than origfnally

planned, it would permit satisfactory progress of the program; and if expendi

tures were increased in following years, as recommended by the mission, it would

not result in any delay in the completion date.

- 18

In addition to the program of t!1e National Railroads, the City of•

Pereira is contemplating the relocation of the raih1ay,..rithin the City. This

is considered necessary to promote the development of the City's residential and

corr~ercial districts. Total investment required would be about 3.3 million pesos,

of t-rhich 2.0 million would be needed in 1956. Although this project may be

important from the local point of view, it does not deserve high priority at

this time for the over-all development of the country. The mission therefore

recommends that it be postponed for a later year.

2. Investments in 1957, 1958 and 1959-60

The pattern of expenditures in 1957, 1958 and 1959-60 for the national

railroad program is expected to be as follows:

Purnose 12.21 ~ 1959-60 (million pesos) average

Part ua" complete l''NFffi 20 Part "bll

Complete extension 21

.t!:quipment 9 20

Part "e" rehabilitation 20 .2Q 10.0

Total 70 .1& 10.0

Foreign exchange requirements in these years are expected to total

72 million pesos (US $29 million) as follows:

~ Eillion pesos Nillion dollars

1957 36 15 1958 23 9 1959 7 2.5 1960 .iJ. .k.2

Total 72 29.0

. -.19

D. Airports

1. Investment in 1956

t;olombia t s topography has made cir transport of passengers and cargo

an important means of conveyance for many years. Plthough surface transportatior

facilities are being improved greatly, air transport is likely to maintain its

importance in the economy of the country.

The Empresa Colombiana de onerodromos, a recently-created government-ollmed

entity which o~ns and operates most of Colombia's most important airports, plans

to modernize and expand the airport facilities of the country.1'he City of

M:'inizales also has under way the expansion of the municipal airport C~antagueda).

The total 2.irport program between 1956 and 1958 calls for an expenditure of 97.2

million pesos. "bout lEJ million pesos were planned to be invested in airports

in 1955, but actual investment probably ras lov-rer. Present plans would require

the investment of 24.6 million pesos in 1956. Only a small fraction of the

cost of the Empresats program can be covered from its o-vn resources; most of

the financing will have to be provided from contributions by the National

Govern;-flent and from loans, for which no arrangements have been completed yet.

The planned expenditures for 1955 and 1956 were as follows:

..

-.. 20 '.

Planned Investment in 19.5.5 19.56

j\'irports completed in 195.5 (millIO'il pesos) (million pesos)

Tunja .6 Paipa .·7 1.3

Airports under construction to be completed in 1956

San ~.ndres 1 .. 2 1.3 Leticia 1.1 .9 Barrancabermeja 2..5 1.0 Araracuara .8 .2 Puerto Rey .5.6 .1 3 • .5

Airports under construction to be completed after 1956

Santagueda .1 .1 Quibdo 1.0 1.0 Bogota 7.0 18.0

Airports to be started in 1956

Monteria 2.0 2.0

Total 15.0 24.6

The traffic potentialities of the Quibdo airport do not appear to

warrant the expenditure of 3 million pesos required to complete the airport

in accordance with present plans. These plans should be re-examined to see

whether it is not possible to reduce the cost of this airport by 50~. In the

meantime, expenditures in 19.56 should be reduced from 1 million pesos to • .5

million.

The eXisting airport for Bogota is too small to handle present and

future air traffic and, because of topographic conditions, cannot be enlarged.

f\. new site has been purchased and construction of a new airport was begun in

19.5.5. It is scheduled for completion in 1957 and would, according to present

plans, require an investment of .50 million pesos by that time. The mission has

not studied the project, although members of the mission visited the site of

'C •

'- 21

the airport and conferred with the management of the Empresa Colombiana de

Aerodromos concerning the project. TIie mission has been informed that the new

airport is to have large terminal buildings "With the most modern appointments".

In proceeding with plans to complete all buildings immediately, the Empresa is

deviating from the practice followed by such large airports as the New York

International Airport at Idlewild and London Airport which have been operating

successfully for years with temporary facilities. The experience of these and

other leading airports indicate that if initial investment is limited to those

items needed to accornmodate the airplanes '~ri th safety and efficiency, inves tment

for permanent buildings can be postponed. In view of the fact that the National

Government will be called upon in the next fev·, years to supply large investment

funds for high priori~ projects, the mission believes it is imperative to limit

investments in airports to the basic necessities and to forego expenditures in

the next few years on such postponable items as luxurious airport terminal

buildings. If this were done, it should be possible to reduce proposed 1956

investment on the Bogota airport from 18 million to the 7 million pesos planned

to be (although probably not) spent in 195.5. About.7 million (U~.3 million)

of this amount would be required in foreign exchange.

The mission did not study the project for a new airport for Monteria,

which is scheduled to be started in 1956 with an investment of 2 million pesos.

However, on the basis of its general knowledge of the situation in Monteria, the

mission believes that it should be possible to improve the existing airport to

the point needed to meet requirements with a much more modest expenditure. The

mission therefore recommends that the project for a new airport be reviewed;

initiation of the project for improving the present airport or building a new

one should be delayed until the reappraisal is completed.

- 22

The changes outlined above would reduce 1956 investments on airports

to 11.1 million pesos, of which about 10%, or 1.1 million pesos (us$.4 million)

would be required in foreign exchange.

2. Investment after 1956

If the country is to proceed \vith a program of balanced economic develop

ment in the years immediately following 1956 vvithin the limit of its available

resources, investments in airports will have to be kept at a level no higher than

12 .. ,J.lnl1Iionpeso'fFanntIA,11y.This vrill require that where airports are unsatisfac

tory, they be improved with modest expenditures whenever possible and that the

construction of new airports be postponed.. Construction of new airports in Cali

and Barranquilla is scheduled to begin in 1957, and will require investments of

25 million and 20 million pesos, respectively. These plans should be reviewed to

see whether the existing airports in these cities could not be improved at lower

cost. For the Bogota airport, investment should be maintained at no more than

about 7 million pesos in 1957 and at an annual average of 5 or 6 million in 195~

E. Sea and River Ports (and other If

.- 23

that no more than 7.5 million pesos be invested in 1956 for ports and hydraulic

works, of which 1.3 million pesos would be for the Port of Buenaventura and the

remaining 6.2 million for the Ports of Santa Marta, Barranquilla and cartagena

and for other vvorks.

2. Investment af~er 1956

In view of the foreseeable heavy demands on Colombia's public investment

resources in 1957-59, annual investments for ports and hydraulic works in those

years ought not to exceed the level recommended for 1956.

-,

- 24III. ]¥-ECTRIC POWER

A_ Investment in 1956

hnnex I to this part of this report contains a detailed description and

analysis of plans for electric power development in Colombia over the period 1955

1960, as presented to the mission by the Instituto Nacional de Aprovechamiento de

Aguas y Fbmento Electrico (Electraguas) and other official entities.

The program planned by the Government for 1956 calls for a total invest

ment of about 181 million pesos, of which 105 million pesos would correspond to

imported goods and services. This compares with a total investment of about 63

million pesos in 1955. The following table shows the composition of the 1955 and

planned 1956 programs:

TA:OLE 1 1955 1956

Imports Total ImportsProject Total (million- pesos) --rmIllion pesos)

Bogota 23.4 15.6 23.5 15.7 21.9 12.41,iedellin 3.2 20.3 9.9CVC 18.0 7.5Caldas 9.1 5.9

Paipa 2.0 17.0 11.5 Anchicaya 9.0 6.2 11.4 7.0

8.0 7.0Norte de Santander· 3.6 1.4Sumapaz

5.2 0.9Bolivar 6.8 4.0 Transmission-Bogota

4.0 2.0System/l:lelgar 3.8 2.0Rio Coello

2.4Cali Distribution 1.0 0.1 3.4 3.0 1.6Rio Nevada

Boyaca Transmission and Distribution 1.6 1.1 3.1 2.2

2.3 1.6La Cabrera 2.2 0.7Lebrija 0.5 2.2 1.5Rio Sonson 0.1 2.0 1.4Cucuta 2.0 1.2Bucaramanga Trans. 2.0 1.4Rio Recio 2.0 1.3Buenavista

Small Projects

7.3 4.9(Sincelejo etc.) .6 .4

Rio Negro .2 .5

1.5 1.0Pereira Distribution System -

Caldas Trans. System .6 .3 .9 .6

11.3 5.9other projects 4.7 2.5

181.2 10j.0D'2.S .37.3- (US:}14.9 million) ( USJ;2.0 million)

- 25In the light of a study of the proposed 1956 program, the mission

reconunends that some projects be eliminated. It considers that certain areas,

for which relatively small local generating plants are proposed~ coul d be

better served by transmission lines connecting them vdth important power

producing centers. This applies, for example, to the Sonson and La Cabrera

projects listed in the above table since, in the mission1s opinion, these areas

could be better served by transmission lines from plants in the 14edellin and CVC

systems. Correspondingly, the mission recommends that the additional capacity

proposed for the Iledellin system be increased. other projects, including those

proposed for the Departmento del Norte de Santander, have be.en excluded as in too

preliminary a stage of planning to justify inclusion in a current program.

In other cases, the r~ssi0n considers that further study is necessary

to determine 'whether tl1e project proposed for a given area is really the best

long run solution of its pcw/er problem. TI1US the mission believes that the

question of the best source and form of power supply in the Boyaca area, and

for meeting increased needs at the Paz del Rio steel plant needs further study,

and that the Paipa project proposed for this purpose should be held in abeyance

until other possibilities have been studied. Again, the mission considers it

possible that the proposed Sumapaz hydroelectric plant might be rendered

unnecessary by a transmission line from Bogota. other projects which the mission

considers should receive further study, either wholly or in part, include Bolivar,

Rio Nevado, Buenavista, and the Timba project of CVC.

As a result of these considerations, which are presented in detail

in Annex I .to this re~ort, the mission recommends the following revis~d

.program for 1?56:

- 26 TABLE II

Project

I - I Bogota

I -:2 CVC

I - 3 Caldas

I - 4 Medellin

I - 5 Anchicaya

II - 4 Boyaca System II - 5 Bolivar II - 7 Bogota System/Melgar II - 8 Cali II - 9 Small projects

(Sincelejo etc.) -U! '::ucuta

II -14 Negro II .16 Bucaramanga-Cucuta II -18 Lebrija II -19 Pereira II - 20 Coello II -21 Rio Recio II -22 Caldas

Total

Total Imports (million pesos)

23.5 16.7 18.0 23.9

9.4

3.1 2.0 4.0 3.4

7.3 2.0 0.5 2.0 2.2 1.5 3.8 2.0 0.9

126.2

15.7 6.5 7.5

15.0 5.0

2.2 0.5 3.0 2.4

4.9 1.4

l.2 0.7 1.0 2.0 1.4 0.6

71.~

(US~28.4 million)

The mission recommends that 3.0 million pesos be added to the above

amount for project planning and for the survey of ~ater resources, thus in

creasing the total cost of the 1956 program to 129.2 million pesos.

B. Investment in 1957 and 1958-1960

The following estimated investments in subsequent years will be required to

complete the revised 1956 program:

million pesos

1957 1958 1960

125 75 10

The aim of the Government should be to sl1pplement these investments in

1958 and subsequent years vdth the object of executing further well-prepared projects

of dem~nstrated need as far as financial availabilities permit.

- 21 .....

The mission believes t.batit should be possible to maintain investment

at not less than the 1956-1957 level over the period 1958-1960.

A failure to attain an adequate rate of power development could arise

as much from a lack of well prepared projects as from financial stringency. The .::..

mission considers it essential that the planning of electric power development

be supervised by a single agency, and it therefOre welcomes the Government's

decision to centralize planning in a National Power COmmission. The mission

strongly reco~mends that advantage be taken at the earliest possible moment of

the arrangement made bet1ireen the Ministry of Development and the Int.ernational

Bank whereby the latter would help the Government to obtain assistance in pre

paring the legal and organizational bases of the Commission's activities. It also

recommends that the allocation of 3.0 million pesos made in the revised 1956

program for additional planning and survey work be continued in subsequent years.

Central supervision and coordination of planning as proposed should

enable Colombia to realize to the full the economies of large-scale production in

the field of power. The general aim should be, where it is economically and

technically feasible to do so, to concentrate power generation in large plants,

each serving a ~~de area by means oi transmission lines. As iar as possible,

systems of this kind should themselves be interconnected. If a community cannot

at present be connected into such a system, but there is a reasonable prospect

that this will be possible in the future, a temporary diesel installation is

preferable to substantial investment in a pL;rmanent hydro or thermal plant,

unless the latter can be shown to form part of an adequate long run development

plan.

- 28

The mission strongly recommends that, in the planning, financing and

execution of power projects, Colombian agencies avoid entering into contracts

under vmich all these f~~ction8 are placed in the hands Of a single firm pri

marily engaged in the manufacture of electrical equipment. Tnese contracts

seem attractive because the.y apparently relieve the client of trouble and res

ponsibility, and provide a solution of the financing problem. This appearance

is usually illusory. v~ben the firm which is to supply the equipment also designs

the plant, other considerations besides the most economical and efficient way

of meeting the clientts needs are bound to influence the designs. Lack of

competition also increases the price the client has to pay. Financing provided

or negotiated by a supplier is usually for a shorter term than is appropriate

to a power project, and at a higher rate of interest than could be obtained

in other directions.

It is much more efficient and economical to employ consulting engineers

to prepare designs and supervise construction, and to award contracts for con

struction and the supply of equipment thxugh competitive bidding. This, the

accepted procedure in all industrialized countries, gives the best assurance

of adequate design and sound construction. In these circumstances, the fees

paid to the consulting engineers are an amply justified investment.

- 29

IV. WATERWORKS

A. Investment in 1956

At the request of ~~e National Government, which had indicated its desire

and intention to accelerate investment in water supply, the mission studied the

water supply situation in Colombia ydth a view to drawing up an accelerated program

of investment in this sector. The mission's analysis of the situation and its

detailed recommendations are presented in Annex II to tilis report.

The mission found that the projects to be continued or begun in 1956 fell

into two main groups:

(a) Those of the large cities which finance their own water supply S,ystems with

out grants from nat,ional funds. In this category, the cities of Bogota,

Cartagena, lVledellin, Cali, Armenia, Aanizales, Palmira, Cucuta and Bucara

manga have projects which will require a total expenditure of 35.6 million

pesos in 1956, including the equivalent of 21.75 million pesos in foreign

exchange. Of the 35.6 million pesos, 15.9 million pesos is covered by

financing already arranged, leaving 19.7 million pesos ~f additional loans

t() be obtained.

(b) Those of the smaller urban communities (nucleos urbanos) ~Jhere water supply

systems are financed with the help (to an extent depending on the size of

community as indicated by its annual budget) of national grants. These

grants have hitherto been administered by the Instituto Nacional de Fomento

Municipal (mFOPAL), "Jhich vras recently incorporated in the newly established

Corporacion de Servicios Publicos as the Departamento de Fomento Municipal

(DFM). In 1955, I~TOPAL, with the help of an appropriation of 12 million

pesos, made grants of 10.2 million pesos tovJards the execution of a 12.9

million pesos program in such communities.

- 30

The mission, ta~~ng into account the national desire to accelerate

investment in water supply, has considered how far the national program

for these smaller urban cormmmities can be expanded in 1956, having regard

to the need for adequate planning and to the available resources. The

mission recommends that in 1956 total investment in waterworks in these

swaller urban communities (defined as having between 1,000 and 50,000 inhab

itants, rather than in terms of their annual budgets) be increased to 22.5

million pesos, of which 19.5 million would be provided in the form of grants

(on the basis of population) and 3 million in the form of loans. Both

grants and loans would be made available from national funds administered

by DFM as described in Annex II. It is estimated that, of the 22.5 million

pesos required for the program of assistance to smaller urban communities,

the equivalent of about 10 million pesos (US $4 million) would correspond

to ~ilported goods and services.

The mission recommends that, in order to enable D~~ to carry out this

program, funds be provided on a continuing basis from:

(a) Departmental purchases of bonds of the Corporacion de Servicios

Publicos to the extent of 2% of their annual budgets, a source

,mich should yield about 8 million pesos in 1956. There should

be no attempt to match investment in any Department against that

Department's purchase of these bonds.

(b) National appropriations, >,[hich would amount to about 17.5 million

pesos in 1956 (including 14.5 million pesos for financing the

programs and 3 million pesos for amainistrative expenses). In

order to provide additional revenue for this purpose, the National

Government, acting on the mission's reconnnendation, imposed a new

liquor tax at the rate of 1 peso per 720 gr. "Iv-hich should yield

about 30 million pesos in 1956.

- 31

'While endorsing the Government r s intention to raise additional tax

revenue to finance developnent, the mission considers that revenues from

this tax should not be earmarked for particular purposes, and it recommends

that the announced intention of investing in each Department the amount it

has contributed to'~rds this tax be abandoned as opposed to the conception

of a national program. The mission believes that the program it has out

lined in Annex II to this report wi1l result in national contributions to

most Departments 1m.ich '\dll exceed their contributions.

Investment in 1957 and 1958-60

To continue the programs of the nine large cities, as now envisaged,

will call for the follovnng investments in subsequent years:

l-'Iillion Pesos

Total 1957 1958 1959 1960

82 37 20 15 10

To make these planned investments, these cities vdll require new loan financ

ing of 26.5 million pesos in 1957 and a total of 25 mi1lion pesos for the

three follo,·Jing years, in addition to financing already arranged. These

estiInates do not take account, hOii€Ver, of later expansion in these planned

investments, or of the needs of the three other large cities in this category,

1,;Thich are not currently carrying out water supply projects. The mission

has therefore assumed that water supply investment by the cities in this

group will not fa1l belm-r 25 million pesos annually in the period under

revie\{.

The mission reconmends that the national program of assistance to the

srnaller urban communities be increased in order to attain, as nearly as

possible, the target of provision of adequate water supplies in all commu

nities of more than 1,000 inhabitants by the end of 1961. This would require

- 32

a total contribution by ioJay of grants and loans to these communities of

nearly 200 million pesos over the period 1957-60, i.e., at an average rate

of nearly 50 million pesos annually. These investments should be financed

by the annual departnental purchase of bonds of the Corporacion de Servicios

Publicos and by contributions from the national budget. The mission

recomrnends, hmrever, that this average be attained by allocating about 34

million pesos for this purpose in 1957 and increasing amounts in subsequent

years as described in Annex II.

To the extent necessaI"J, DFH should also provide the loans required

by the larger cities. On this basis, the total financing to be provided

by the National Governrnent and the Departments in the form of both grants

and loans would rise from about 60 million pesos in 1957 to about 80 lnillion

pesos in 1960. 1{iell under half of the expenditures would be in foreign

exchange.

The mission It.r:ishes to emphasize that the above scale of investment

will not produce adequate results unless it is accompanied by wise plan

ning and improved organization. It believes that the procedure \lhereby

the functions of preparing plans, supplying materials and equipment, and

executing the project are placed in the hands of a single manufacturing

company, llhich iil8.y also offer med.:i..um-term credit facilities, is unsatis

factory and i'l'asteful and regrets that some ITnlnicipalities in Colombia

have entered into such contracts for the provision of "I';ater'.lorks. These

contracts also mean neglect 01 Colombian sources of supply and an urmec

essary loss of foreign exchange. The mission strongly recommends

- 33

adherence to tIw normal procedure of entrusting the preparation of plans

to experienced consultinc engineers and of a1'1e,rding contracts for supply

and construction on the basis of intemational competH,ive bidding.

The mission recommends that, in designing watervrorks, primary

eraphasis be laid on the quality of the 'Vater. It believes that more

attention should be given in Coloniliia to groUIlc water supplies, Which

provide small cOlIllJ.11Jnities ,dth a more economical source of water than

treated surface 'Vater.

In the sInaller urban comnrunities in Colombia, 'NaterHorks fre

quently lapse into disrepair through the lack of skilled personnel to

operate them and of management to collect and adnunister vJater revenues.

To rer:1edy this situation, the nUssion recomra2:nds the e stablisb,,;nent in

each Department of an agency Hhich l:,fOuld undertake these functions on

behalf of the smaller urban commurlities.

v. MmaCIPAL SERVICES

A. Investment in 1956

1. In~roduction

A very large expansion is proposed in 1956 for municipal services other

than waterworks, which i~cludes sewers, slaughter houses, markets, paving and

construction of streets, public health centers, urban transport, garbage disposal;

construction of puhlic buildings, stadia, prisons and hotels; and slum clearance.

Expenditures are plarJ.led to reach almost 98 million pesos in 1956, compared with

25.4 million pesos in 1955.

The decision of the Colombian Government to accelerate the eX'pansion of

waterworks and the nead ~or high priority investments in other sectors severely

limits the financial resources vlhich governnental entities - national, departmental,

and municipal - can contribute to investment in other municipal services.

The mission vIas cOlilpelled, therefore, to recolnmend a substantial reduc

tion in the investment pla.--med for 1956, even though it felt that it did not have

sufficient info~ilation about illffily specific projects in this sector. The mission's

recommendations are compared -vrith the proposed investment by major fields and with

1955 investlnents 'Hithin this sector in the following table:

TABLE III

.!?vestments in" 1955 and 1956

(mil~ions of pesos)

1955 1956

Investment Planned -Recommended 1. Sewers 12~I- 32.7 ItS·.0 2. streets 7.4 20.1 6.1 3· Markets 1.0 14.0 1.5 4. Slum Clearance a/ 9.0 3.5

. ~ 5. Slaughter-houses -08 1.9 ~3 6. Municipal Buildings 1.3 3.8 1.7 7. Public Health Centers a/ 1.7 .3 8. Stadia 2.2 0~ 9. Hotels .7 .9 .4 10. Miscellaneous Projects .6 6.6 1.3 11. Urban Transport 1.5 1.9 1.9 12. Garbage Disposal a/ .2 .2 13. Prisons y 2.0 2.0

Total 25 ..4 -'97.0 35.2 if No investment reported

- 35 2. Se'f,ers

In 1956, investments planned for set...rer "iJorl:s amount to 32.7 million pesos

compared to investnents of 12.1 million in 1955. The inves~~ents planned for 1956

are shown in the follOltJing table:

TABLE IV

Investment in Sewer~'Planned for 1956

(millions of pesos)

Larger Cities:

Bogota 5.6

Barranquilla 2.2

PalMira 1.3

Barrancabermej a .5

Pasto, Neiva and Pereira 1.1

Cartagena 304

Cucuta and Tulua 7.3

Cali 6.0

Sub-total

Smaller tmms:

Valle del Cauca 2.0 Antioquia .4 Norte de Santa.'1der .3 Huila .4 Caldas 1.0 Choco .2 Instituto de Fomento

l'Iunicipal 1.0 Sub-total

TOTAL

The mission was unable to undertake a careful analysis of the planned

projects. In most of the larger cities, wh~re other methods of sewage disposal

may not be feasible, investaents in sewage are generally defensible. It does seem,

however, that all of the investment (5.3 million pesos) proposed for the smaller « •

municipalities has a low priority. The building of sel"ers for tOltms of small size

is a luxury 10Ihich the country cannot afford \-,hen it is expanding investr.1ent for

waterworks. Uhile sewers serving small portions of such towns may be justified

when restricted to business areas, they should only be undertaken if the property

owners directly concerned are prepared to finance such systems through special

- 36

assessments. It \lTOuld seem tl:at most 0:;:' the progra.i11. outlined in 1956 for the

smaller municipalities does not conform to these pr~nciples. Unless a demonstra

tion can be made that certain projects do conform, it is advisable to postpone

sewer construction activity in the smaller municipalities.

The desirability of the proposed expansion in Cucuta a~d Tulima, envisag

ing total expenditures of 7.3 million pesos in 1956 is also questionable. Both

Cucuta and Tulua are pla.nning to rely to the extent of 907; on the national govern

mente This scarcely seems an equitable arrangement for sharing costs and it

suggests that these cities do not have a sound system of financial charges to

impose on the beneficiaries. The mission believes that these programs could be

reduced to .9 million pesos, of i

- 37

Barranquilla, l~eiva, Pasto and Barr&ncabermeja vrill finance the total cost

of their programs from current resources~ Bogota, Palmira, Pereira and Cartagena

intend to finance a Gre&t part of their programs from current resources with less

than half of the total cost of the works to be covered by internal loans. On the

basis of inadequate inforr.1ation, the mission estimates that foreign exchange require

ments for sewer construction will approximate 1.6 million pesos (US$.64 million).

30 Paving and construction of streets

A very large expansion is planned for street paving and construction by

the municipalities and departments reporting. Although the majority of medium-sized

cities throughout the count~J must have programs for paving and construction of

streets, only two departments and seven cities have actually advised that they have

such programs. The Department of Hagdalena invested 0.4 million pesos on street

construction in Santa Barta in 1955 and is considering investing the same amount in

1956., Cundinamarca invested 0.3 million pesos in 1955 for the paving of streets

in small muniCipalities, but it has not submitted its plans for 1956. Bogota,

Barranquilla, Cartagena, Aanizales, Popayan and Bucaramanga invested 6.7 million

pesos in 1955 for paving. Tnese cities (except Bucaramanga) a~d Pereira and Neiva,

are planning to invest 19.7 million pesos in 1956, of which amount 14.0 million is

for Bogota and 2 million pesos for Cartagena.

It appears that many of the projects included in the programs of Bogota

and Cartagena are secondary streets 1rJhich have a low priority compared with other

municipal needs. Both programs are scheduled to be fiLanced entirely on credits;

.. • in the case of Bogota, 1rri th foreign and internal credits and in the case of Carta

gena with internal credits. In vim.r of the difficulty vIhich these municipalities

are having in meeting all the financial demands upon them, they must be particularly

careful not to undertake works of secondary priority unless property Olmers bene

fited by a project contribute to the financing. ~lith these considerations in mind,

it is recommended that Bogota and Cartagena reduce their proposed investment in 1956

to the amounts which can be financed from their own resources, i.e., 2 million

pesos for Bogota and .5 million for Cartagenao

The mission has not revievled the programs in Barranquilla., Manizales,

Pereira, Bucaramanga and Neiva. 'de suggest that the programs in these cities be

exa'11ined to determine "\.,hether adequate charges in the form of special assessments

or otherwise are being imposed on the property mmers directly benefiting from the

construction.

The paving program of the Departments of l'1agdalena and Cundinamarca might

well be eliminated because the beneficiaries are not contributing and because it is

doubtful that traffic densities justify paving.

Under the recommendations contained here, expenditures in street paving

and construction would total 6.1 million pesos, as outlined below, on the assumption

that a favorable finding is made vU th respect to the system of financial charges in

the five cities cited above. Foreign exchange requirements vlOuld be negligible.

Investment Planned Reco:tn."1lended 1955 1956 1956

(millions of pesos) imillions of pesos) (millions of pesos)

Magdalena 0.4 none Cundinamarca not furnished none Bogota cartagena

14,,0 2.0

2..0 0 ..5

Barranquilla, Y~izales) ~/

Pereira, Bucaramanga ) 6~7~ 3.7 3.6'91

Neiva and Popayan )

20~1 6.1

a/ Includes Bogota and Cartagena as well. §( On condition indicated above.

4. I1arkets

One city, Barranquilla, is constructing ne'tV" markets and in 1956 pla,ns

to i..'1vest 1.0 million pesos. Popayan, Quibdo and Bucara.vnanga intend to make altera

tions and improvements to their present markets, for which an investment of 0.5

million pesos in 1956 is envisaged. A decentralized and autonomous national entity,

..

- 39

La Corporacion de Defensa c.a Proc'.c.ctos Agricolas - INA - inten::ls to invest 12~5

million pesos in 1956 in wholesale markets for agricultural products in various

cities throughout the country.

No justification has been presented to support the plavned INA invest

ment in wholesale markets. EA~erience in Colombia has demonstrated that private

markets aYld warehouses operate efficiently. In vie"'l of the prevailing policy of

the Colombian Government to stimulate private investment in those fields where

private investors and operators can perform a useful function, and also because

of the more important call on governn~ntal resources from other sectors, the

mission recommends that construction of wholesale markets be reserved for the

private sector.. Excluding the INA project, investment in 1956 "rould be reduced to

1.5 million pesos. Foreign exchange requirements are estimated at approximately

0 ..5 million pesos (US:;:i~ 2 million).

5. Slum Clearance

Barranquilla and Cartagena, both vdth financial assistance from the

national government" and the foriner 1,rith the additional collabora.tion of the

Department, are planning to invest in 1956 in slum clearance" Barranquilla" 1

million pesos, and Cartagena, 2 million pesos.

These projects appear to be justified since they involve the reclamation

of land y,lith a potentially r.igher value and since they would also contribute to

the solution of an acute social problenl. The slma areas which would be cleared

have particularly serious characteristics, located as they are in swampy areas.

It does not appear, however, that plans for slum clearance are sufficiently lfell

advanced to permit the investment of 9 million pesos in 1956. 3 million pesos is

tentatively suggested for Barranquilla and .5 lnillion for Cartagena. Foreign

exchange requirements are likely to be negligible. Since this type of program

involves many difficult problems, it is suggested that detailed ~lans for the

execution of the program be prepared before the national government provides finan

cial assistance.

-JJJ

6. Slaughter-houses

• Two cities have slaughter-houses under construction: Manizales and

Popayan. The first mentioned" with a total investment of 2.0 million pesos" is

considering the investment of 0.3 million pesos to terminate the work in 1956, and

the second, having corrooenced in 1955, is considering investing a total of 0.6

million pesos, 0.1 million of which to be invested in 1956. Three cities are con

sidering commencing construction of slaughter··houses in 1956: Cali, 1-Jhich in

1956-57 '\1;'111 invest 2.8 million pesos" approximately 0.6 million of which to be

invested in 1956: Pereira, 1-J11ich in the three years 1956-58 will invest in con

struction works 1.2 million pesos, approximately 0.4 million of which to be in

vested in 1956, and Tulua which in 1956 ~dll invest 0.5 million for the construction

of a slaughter-house.

In view of the fact that Hanizales has already invested 1.7 million pesos

in its slaughter-house and must invest only 0.3 million in 1956 to complete it, the

mission CaQDot recon~end against this investment. However, further expansion of

municipal slaughter-houses cannot be recomr.'lended. Uhile completion of projects

already underway is advisable, a completely new approach to the problem must be

attempted. This is a field in lJhich investment by private enterprise on an effi

cient basis should be encouraged. The present municipal system of taxing slaughter

ing impedes the development of efficient private enterprises serving a broader

market since each muniCipality, no matter how small considers its own slaughtering

house a necessity in order to increase its tax revenues. The desirability of a tax

on meat is questionable, but if municipalities can find no better source of revenuesJ

it could be collected from slaughtering houses in private hands. The mission

recommends that the National GoverrdUent attach as a condition to the granting of aid

to the municipalities in other fields, a change in the m~Dicipal slaughtering tax

system. On the basis of the recommendations made above, proposed investments in

slaughtering houses in 1956 would be reduced from 1.9 million pesos to 0.3 million.

-41

Foreign exchange requirements would be approximately .2 million pesos (US$.08

million).

7. Public Buildings

Pereira and Hanizales are constructing public buildings for H"hich they have

invested in 1955 1.3 million pesos and for which they are proposing to invest 1.7

million in 1956. Cucuta ~~d Bucaramanga are proposing to initiate construction of

buildings with an investment of 2.1 million pesos in 1956.

Completion of the buildings in l1anizales and Pereira, which are in an ad

vanced stage of construction, is advisable. However, the investraent of 2.1 million

pesos in Bucaramanga and Cucuta appears to have a low priority relative to other

municipal needs, and the mission therefore recomnends that it be eliminated. This

would reduce investment for public buildings L~ 1956 to 1.7 million pesos, of which

an estimated .4 million pesos (US$.16 million) l'll'ould be in foreign exchange ..

8. Public Health Centers

Bogota and Bucaramanga have prograras for the construction of public health

centers and are planning to invest in 1956 1.6 and 0.1 million pesos, respectively.

The proposed expenditure for Bogota appears to be excessive. The mission

believes that 0.2 million pesos would be sufficient to take care of essential needs.

This would reduce total expenditures in this field to 0.3 million pesos. Foreign

exch&~ge required would be .1 million pesos (us$.04 million).

9. stadia

Armenia, 1tJith an invest.l1ent of 2.0 million pesos, and Barrancabermeja, wit!:

0.2 million pesos, are planning to initiate construction of stadia in 1956. The n~,

stadium in Armenia is planned for the Departmental Olympic games to be held in 1956.

While the mission has not reviewed the plans for these stadia, such invest

ment is clearly of low priority relative to other needs. The investment in Armenia

would be 30% higher than the total amount collected in municipal taxes in 1954. Th~

mission recommends that these investments be eliminated.

42

10. Hotels

The Department of Magdalena, in order to promote the touri3t trade, is con

structing a hotel on the outskirts of santa llarta. Having invested 0.3 million

pesos in 1955 it ~vill b3 completed in 1956 ~;i.th an investl.llent of 0.4 million, of

which foreign exc:1.ange .L'equlr.;;nents Hill be .12 million pesos (us$.05 million).

K2~i?ales, also as an attraction to tourists, is constructing a hotel to be com

pleted in 1759 on the outs.ldr:'s of the city" in which it invested 0.4 million :L'1

1955 and will invest 0.5 million in 1956.

It is recommended that construction of the hotel in l~'1izales be suspended

unless a demonstration can be made that there are good prospects for the sale of

this hotel to private interests after it has been cOliLpleted. There is no justifi

cation for government to enter this field in view of the many responsibilities which

it must assume elsewhere. In view of the advar:ced stage of construction of the

hotel in Santa Marta, tDis hotel should be completed, but an effort should be made to sell it to private interests.

11. Urban Transport

Bogota is planning to invest 1.9 million pesos in 1956, principally for the

acquisition of buses and the improvement of garage installations, etc. Contracts

have already been negotiated for these purchases and will require about 1.5 million

pesos: foreign exchange (US.6 million) in 1956. The mission did not review this

project.

12. Garbage Disposal

Pereira is the only city which is planning to invest in this category for

the acquisition of 0.2 million pesos worth of equipment in 1956. The mission did

not review this project.

13. Prisons

Popayan, with the financial assistance of the national government, is con

sidering the investment in 1956 of 2.0 million pesos for the construction of a

prison. The mission has not reviewed this project.

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14. Miscellaneous Depa~~ntal Projects

Cundinamarca and Valle del Cauca have programs for the construction of

facilities such as slaughter-houses, markets, etc., in the poorer municipalities~

Cundinamarca invested o~6 million pesos in 1955 but it is not knOlfn what amount this

Department is consider::.ng inV'esting in 1956. Valle del Cauca is considering the

investment of 6QO million in 1956, but the amount invested by this Department during

1955 for this saGle purpose is not Imovm. There are also t"vo small projects, one in

Bucaramanga and another sponsored by a national official entity (SENDAS), totalling

0.6 million pesos.

Hhile the mission did not have detailed information on the projects in

cluded in these programs, they should be carefully revievled in the light of the

comments made above on sL~ilar projects. In particular, the investment planned by

Valle del Cauca appears eJ:cessive in view of the contribution which this Department

will be called upon to mru{e for high priority projects undertaken by the Cauca Valley

Corporation. One million pesos is tentatively reco,mnended for the Valle del Cauca

prograra and 0.3 million for the Cundin~narca projects.

B. Situation after 1956

It is verJ unlikely that sufficient resources will be available in later

years to maintain investment in other municipal services at the levels proposed for

1956. The emphasis given by the national goverp~ent to the expansion of waterworks,

the need for improvement and expansion of educational facilities, etc. will reduce

resources available to the government at all levels for financing the municipal

services discussed here.

There are some t~~es of projects in this field already cited above where

the justification for government investment is very slight. Reduction of government

invesunent in such fields as municipal slaughter-houses, hotels, etc. will not,

however, release very much for investment in those municipal services where govern

ment must assume a primary responsibility. If :i~portant muniCipal services such as

http:consider::.ng

-44

streets and sewers are to advance with the further growth of urban areas, measures ... • will have to be taken to increase mWlicipal ta~es and other revenues •

The present s.ystem of mQ~icipal taxes and service charges is woefully

inadequate, as repeatedly observed in many studies of Colombia1s financial problems.

The rate of real property taxes is at present only four per thousand, ~~th the

exception of some three or four cities. Even more serious, the system in effect

since 1953 provides for property evaluation to be made by the owner of the property.

In a great number of Colombian Cities, special improvements such as street paving

and sewer construction are carried out vnthout the beneficiaries being charged in

any way. In the majority of cities one or more of the municipal services which

were intended to be self-supporting are being run at a loss.

The mission recolTh1'lends that financial assistance or guaranties extended

by the national government to aid in the construction of municipal facilities be

made conditional upon a demonstration by the municipality concerned that measures

are being taken to ~nprove municipal finances.

••

- 45 VI. :ruu:::;nrG

A. Public Entities in Housing

A high percentage of housing construction in Colombia is financed privatelJ'

The most important semi-official institution grant~g long-term loans to finance

the purchase price or construction cost of houses, is the Banco Central Hipote

cario, ~rllich was founded 20 years ago. It obtains its funds mainly from the sale

of its bonds. Savings barnes and insurance companies are required by law to invest

a part of their deposits and reserves in these debentures. The Banco entered the

housing construction field in 1954. It constructs houses valued up to 30,000 pesos

and finances their purchase to tIle extent of 75 percent of their value over a period

of 20 years. It also makes construction loans. The Banco has about 30 million

pesos per annum available for this purpose, or enough to finance the construction

of about 1,000 houses a year.

The National Government, the Federaci6n Nacional de Cafeteros and a fe~

municipalities also have organizations for constructing and financing housingo The

mission does not have information regarding Federaci6n Nacional de Cafeteros and

the municipal housing entities, but their annual investments on housing cannot

amount to mucho

The Institute de Credito Territorial, which was recently incorporated into

the newly-created Corporacion de Servicios Publicos, is the national entity respon

sible for constructing and financing housing. It ifas founded fifteen years ago,

initially for the purpose of constructing rural housing. Later it took over respon

sibilities for urban housing as Hell ..

With respect to rural housing, the Instituto makes loans up to 5,000 pesos,

at interest rates of 3 percent and , ..i th mortgages up to 30 years, provides pla.l1S

and supervises construction. vJith respect to urban housing it constructs housing

developments and sells individual dwellings on liberal terms with a 15 percent down

payment and mortgages of 20 year maturities. Interest rates on urban mortgages

--

- 46

vary but go up to 8 or 8-1/2 percent. Urban housing is divided into two categories,

one for the low-income groups and one for the medium-income groups. Dwellings cost

ing from 4,000 pesos to 12,000 pesos have been constructed for low-income groups

and dwellings costing from 15,000 to 30,000 pesos have been constructed for the

medium-income groups. Up to the end of 1954 the Ins~ituto had constructed 9,662

urban houses with a total cost of 86.8 million pesos and 8)948 rural houses with a

total cost of 40.6 million pesos.

B_ Investment in 1956

The Instituto pl.ans a substantial increase in its invest.ment in housing

from a planned level of 56.8 million pesos in 1955 to 80 million pesos in 1956.

The planned investment for 1955 was at a much higher level than in previous years,

but the mission received indications that actual expenditures in 1955 would not

increase in accordance ,>lith the plan. Nevertheless, the Instituto is preparing to

invest even more in 1956 than planned for 1955. :n 1956, the Instituto wants to

build 9,000 urban houses in fifty different projects, varying in size from 20 to

over 1,000 houses, and to continue construction of rural houses.

Host of the Instituto's capital is provided by the National Government ...

Savings banks have been required to invest 25 percent of their deposits in the

Instituto's bonds. In 1955, the Goverrunent made a grant of 60 million pesos

financed by a loan from the Banco de la Republica to the Instituto to retire its

indebtedness to the savings barJ(s. Hm'1ever, savings banks are still required to

invest 25 percent of their total deposits in the Instituto's bonds, which will pro

vide the Instituto with about 75 million pesos over the course of the next year.

For a five-year period beginning in 1957, the Instituto is also to benefit from a

requirement that all corporations must invest in non-interest bearing bonds of the

Instituto a sum equal to that which they used to pay as a capital tax. This

requir~~ent is expected to provide the Instituto with 30 million pesos a year

beginning in 1957.

• :.. 47 The need for more housing in Colombia is very great, both in rural and

urban communities. Eighty-five percent of rural houses have dirt floors and are

without windovTs or sanitary facilities. Sixty percent of Colombia's families live

in rural areas and have aJ:IDual cash incomes of less than 1,200 pesos a year.

The housing problem in urban centers is also acute because of the rapid

growth of the cities. According to the 1951 census, 25 percent of the families

living in the 26 most populated cities were in need of housing. The situation is

particularly critical in Bogota and Cali, where ti'TO out of every three families are

obliged to share a single dwelling.

In spite of the great housing shortage, hmvever, the mission believes that

the proposed acceleration of the Instituto's program is ill-advised. The increased

schedule for this year is not based upon clear and practical policy objectives and

is not supported by clearly-defined operating procedures. The technical and design

staff, which consists of only 5 architects, 5 draftsmen and 2 engineers, does not

have the personnel needed to carry out a program of the size planned. Moreover,

despite the obvious social need for Lmproved housing, the mission does not believe

it is wise or necessary at this stage of the country's economic development, given

the other investment requirements which the government must meet, to accelerate the

government housing program. If funds available to the Instituto were utilized more

efficiently, a greater number of houses could be built with less money.

The Instituto's approach to housing appears to be based simply on the fact

that there is a need for more and better housing. The Institute has not clearly

identified the type of Colombian family which a government-sponsored credit program

can serve without involving the Government in financial losses on a recurring basis.

In spite of the critical need for housing, the Instituto has constructed houses

which are unoccupied because it cannot find bqyers with the necessary funds. The

cost of much of the Institute's housing has turned out, in fact, to be much higher

than many families could afford and mortgage p~ent delinquencies have been

excessive, mling partly &lso to poor collection procedures, particularly in

rural areas~ 'l'11e .mortJ;age c.elinquemcy r3.te, l':hich is about 5$ per cent,

• clearly re'fi.ects the c.bsence sound polL:y objectives, careful program'11ing

of construct.i. en, ane'. adequate administrative procedures.

Ji1. 1955, t;18 Instituto contracted to purchase from Finland 3,000 pre

fabricated h'Ooden houses for uS ,,,3 lIl2.llion (7.5 million pesos) payable in

coffee. S~.nce Colombi& has been able to sell all its coffee to date,

coffee payments may be considered equivalent to dollars. Originally planned

for rural areas, the present plan is to use them in Barranquilla and Cartagena.

The problem created by the introduction of 1;.)0 0 den houses sreat. A masonry

house of similar size requires a frontage of 6.50 meters; in order to pro

vide fire protection, the frontage for a h'Ooden house must be increased to

10.75 meters. vlliile such an increase in the amount of land for each house

may be unimportant in rural areas, ivill greatly increase land costs per

house in Barranquilla and Cartagena. Besides, there are the problems of

termite protection and of educating people accustomed to masonry houses to

live in 1;JOoden ones.

The Instituto is also purchasing from a foreign com;Ja.ny, 3,200 pre

fabricated aluminum houses of four different sizes, at a total cost of US $3

million (7.5 million pe sos) • ivtembers of the mis sion visited a model alwninUlIl.

house displayed near Bogota. The houses, vJhich ca,.'1 be erected in a few

hours, are of light construction uithout any equipment or facilities, and .. have no floor. Because of the way the houses are constructed, it i'rould

be almost impossible to make them insect-proof. Originally intended for

use in the Llanos, 500 of the houses are to be diverted to help rehabilitate

http:com;Ja.ny

- 49

the burned-over area of nunaco. The mission finds it difficult to under

stand ,!>illy Co10mbh . ., which has a wealth of indigenous building materials, and

a prefabricating factory of its own in Hedellin, should find it necessary

to use scarce foreign exchange resources to import prefabricated houses, at

a cost per house 'which cannot be considered inexpensive.

It seems clear to the mission that the Instituto is not prepared, dur

ing 1956, to undertake a housing pr03ram of the size planned. In the judg

ment of the mission, the funds available to the Instituto should be sharply

curtailed so that expenditures on housing in 1956 will not exceed 50 million

pesos. In view of the fact that the Instituto has funds of its own and

obtains additional funds from the national budget (12 million pesos in 1956),

from mu..'1icipalities (2.5 million) and from buyers of houses, the &'11ount

required to be invested by the savings banks should be reduced. There are

other projects of high priority which would have a much stronger claim on

these savings bank resources.

C. Investm~ after 1956

In the next fevJ years, if large amounts of investment funds are to be

found for Paz del Rio t s expansion, as 1:1e11 as for l'later,.,'Or..cs, transportation,

electric power and agriculture., public investment in housing vfill have to be

reduced to essentials. The mission believes this would require that public

investment in housing be limited to about 20 million pesos annually.

At the level of frulU1y incomes currently prevailing in Colombia, there

is a ve'r1J definite limit on the rents that can be paid or on the mortgage

service payments that can be met. The prograrr. of the Instituto in the

- 50

"101fT cost!! housing field should be carried out only as a complement to

specific government projects \\!here housing accommodations must be provided,

or in emergency areas such as 'i'UTllB.CO, vJhere fire recently razed a large

area"

-v~1ile a government housing program designed to serve families in the

middle income groups might be formulated on a sound financial basis, the

government must seriously consider 1-Thether it would not be more practical

to provide government guarantees to private credit institutions for such

housing; than to extend credit directly through a government institution.

Such a program might be devised in such a vlaY that the Q01rm payment require

ments and the mortgage payment requirements could actually increase private

savin:3s by inducing certain income groups to save for a specific purpose •

..

http:i'UTllB.CO

- -51

A. Investment in 1956

The construction of hospitals in Colombia is generally financed

from the income of departmental charity organizations (beneficencias) which

obtain most of their income from lotteries, but also from certain ne.tiona1

taxes on entertainment, etc. Information was received of the following hospi

tal construction and expansion projects, either planned or under way.

Location Totsl Cost 1926 Investment (millions of pesos) (millions of pesos)

Valle del Cauca 24.0 6.0 Bahia de Solano in Choco 0.2 0.2 Barranquilla 8.0 Expansion of Fental Hospital

in Antioquia 0.8

Total 11&

Foreign exchange expenditures for 1956 are estimated at 3.5 million pesos

(us $1.4 million).

There is a strong possibility that the beneficencia of Cundinamarca,

the largest in Colombia, also has some plans to construct or expand hospitals

in that Departffient., but no information was received from the Cundinamarca

beneficencia. None of the projects for 1956 '~ere studied by the mission. In

view of the great need for hospitals in Colombia the mission is not recommend

ing tt~t the proposed investment for 1956 be reduced.

B. fnvestment after 1956

Although there is a great need for more and better hospital care

in many parts of Colombia, improved conditions will have to come in the next

few years from more efficient use of investment funds rather than from an

incr-ease in the amounts in7ested. Indeed" some of the funds invested in

- 52

hospital buildings should be di'lEt'ted to increasing facilities for training

doctors and nurses, since existing hospitals are poorly staffed in both fields.

Between 1956 and 1959, when investment resources ~~ll be subject to heavy

pressure from many high priority projects, it is unlikely that more funds vull

be available to invest in this sector than are to be invested in 1956. But

nmch could be done to get greater benefits from investment expenditures for