Document of

The World Bank

FOR OFFICIAL USE ONLY

Axt >63>- co

Report No. P-4123-CO

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE

EXECUTIVE DIRECTORS

O'N A

PROPOSED LOAN

IN AN AMOUNT EQUIVALENT TO US$24 MILLION

TO THE

EMPRESAS PUBLICAS MUNICIPALES DE BARRANQUILLA

WITH THE GUARANTEE OF THE REPUBLIC OF COLOMBIA

FOR A BARRANQUILLA WATER SUPPLY PROJECT

November 8, 1985

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

Currency Unit = Peso - Col$

Average Calendar 1984

US$1 = ColS 100.8ColS = US$0.00 99

Exchange Rate Effective October 27, 1985

US$1.00 = Col$161.61Col$1.00 = US$0.0062

Weights and Measures

Metric System

FISCAL YEAR

January 1 to December 31

FOR OMCIAL USE ONLY

GLOSSARY OF U BRKVTATIONS

DNP Departamento Nacional de Planeac-on(National Planning Departme_t)

EAAB Empresa de Akueductoo y Alcantarillados de Bogota(Water and Sewerage Company of Bogota)

EPM Eapresas Publicas de nedslen(Medenlin Public Companies)

EPMB Empresas Publicas Municipales de Barranquilla(Barranquilla Municipal Companies)

FFDU Fondo Financiero de Desarrollo Urbano(Fund for Urban Development)

tNAS Inetituto Nacional de Salud(National Institute of Health)

JAC Junta de Accion Coimunal(Neighborhood Action Comuittee)

INSFOPAL Iastituto Nacional de Fomento Municipal(National Inetitute for Urban Development)

JNT Junta Nacional de Tarifas(National Tariff Board)

HSP Ministerio de Salud Publica(Mlnistry of Public Health)

This document has a resricted distribution and may be used by recipients only in the performance oftiecr official duties. Its contenst may not otherwise be discioed without World Bank authorization.

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COLOMBIA

BPARPAQUILIA UkTER SUPPLY PROJECT

LOAN AND PROJECr SUMMARY

Borrower: Empresas Publicas Municipales de Barranquilla (EPNB)

Guarantor: Republic of Colombia.

Amount: US$24 million equivalent.

Terms: 17 years, including a grace period of 4 years, at thestandard variable interest rate.

Description: Sector. The fiscal and external borrowing constraintsimposed by the Government's recently adopted macro-economic stabilization and reform program requireincreased operating efficiency and internal resourcemobilization of utilities in the water supply sector ifincreased service coverage is to be achieved. TheGovernment is consequently now reexamining sector-widepolicies and institutional arrangements and increasinglyemphasizing projects which focus on cost-recovery,rehabilitation of water works and more selective invest-ments in system expansion.

Project. The proposed project would primarily supportprograms to: (a) rehabilitate and extend water supply,sewerage and solid waste management facilities inBarranquilla, Colombia's 4th largest city. About 70percent of the beneficiaries of this program reside in thecity's lower income areas; and (b) promote theinstitutional development of EPMB by strengthening itsmanagement, administration and operating efficiency. Suchimprovements should, in turn, restore the company's finan-cial viability, enabling EPMB, by 1989, to generate suffi-cient funds from internal sources to finance a reasonableshare of its investment requirements. The project wouldinclude the provision of equipment, civil works andtechnical assistance for these purposes as well asconsultants' services for preparation of subsequentnetwork expansion to meet demand in the 1990s.

Risks Project risks center primarily around potential discon-tinuity of management staff and insufficient politicalsupport at the municipal level to fully implement thefinancial and institutional development programs. Tomitigate these risks, EPMB has as condition of loan pro-cessing already markedly increased tariffs and taken stepsto stabilize operating costs. Technical assistancesupport, legal covenants, and close Bank supervisionshould further lower the level of these risks.

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Estimated Project Costs: US$ million---Foreign Local Total

Water Supply 7.7 8.0 15.7Sewerage 0.3 0.6 0.9Solid Waste 3.6 0.4 4.0Institutional Improvement 1.8 1.9 3.7Studies/Engineering 0.1 1.3 1.4Incremental working capital 2.5 3.7 6.2

Base cost 1/2/ 16.0 15.9 31.9

Physical Contingencies 1.3 1.2 2.5Price/Exch.Rate Contingencies 2.3 0.5 2.8

Total Project Cost 19.6 17.6 37.2

Interest during construction 4.4 - 4.4Total Financing Required 24.0 17.6 41.6

Financing Plan:

EPMB Internal Cash Generation - 9.9 9.9FFDU - 3.4 3.4Department of Atlantico - 4.3 4.3IBRD 24.0 - 24.0

Total Financing 24.0 17.6 41.6

Estimated Disbursements:Bank Fiscal Year

1986 1987 1988 1989 1990 1991-US$ Hillion -

Annual 1.5 8.7 6.4 4.2 2.3 0.9Cumulative 1.5 10.2 16.6 20.8 23.1 24.0

Rate of Return: n.a.

1/ Includes about US$2.0 million of value-added tax.

2/ In June 1985 prices.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

REPORT AND RECOMMENDATION OF THE PRESIDENTTO THE EXECUTIVE DIRECTORS

ON A PROPOSED LOAN TOEMPRESAS PUBLICAS MUNICIPAIES DE BARRANQUILLAWITH THE GUARANTEE OF THE REPUBLIC OF COLOMBIA

FOR A BARRANQUILLA WATER SUPPLY PROJECT

1. I submit the following report and reco mendation on a proposed loanto the Empresas Publicas Muncipales de Barranquilla for the equivalent ofUS$24.0 million to help finance a Barranquilla Water Supply Project.The loan would have a term of 17 years, including four years of grace, withinterest at the Bank's standard variable rate.

PART I - THE ECONOMY

2. An economic mission visited Colombia in July 1982 and its report(4444-CO) was distributed to the Executive Directors in August 1983. Amission to review the external sector and agriculture visited Colombia duringApril/May 1983, and its report (4981-CO) was distributed to the ExecutiveDirectors in April 1984. Macroeconomic policies were also reviewed in thePresident's Report (P4055-CO) for the Trade Policy and Export DiversificationLoan of May 2, 1985. Country data sheets are presented in Annex I.

A. Background

3. The Colombian economy has made considerable progress since theearly 1950s, evolving from a largely agricultural and rural base, integratedand industrialized, into one that is more open. The growing economicactivity, rapid rural-urban migration, increased participation of women inthe labor force, and expanded public services have contributed to reductionsin poverty and improvements in income distribution. Financial and capitalmarkets have evolved pari passu with the growing needs of the economy, andthe country has become an active participant in international capitalmarkets. The state enterprises are few, follow adequate pricing policies,and many have some form cf private sector participation. The country'senergy balance has been changing in recent years and the country is expectedto become a net petroleum exporter in 1986 and, increasingly, an exporter oftheiriial coal.

4. Export promotion has been a concern of the Colombian authoritiesfor some time. Beginning in 1967 authorities adopted an outward-lookingdevelopment strategy, expanding and diversifying exports. Export promotionpolicies, including frequent small devaluations of the peso, export taxrebates and other incentives were introduced and the authorities began lower-ing tariffs somewhat and relaxing capital market controls as a means ofraising efficiency and increasing the profitability and competitiveness ofColombian goods in external markets. These measures were successful inrelieving the foreign exchange constraint and stimulating growth andemployment.

B. Economic Performance During the 1970.

5. In the mid 1970's, the economy was subjected to strong inflationarypressures from a sharp increase in world coffee prices. The increasedreceipts from coffee exports, together with some official surrender offoreign exchange from illegal exports, caused a turnaround in the balance ofpayments. Incomes rose rapidly stimulating aggregate demand, and inflationaccelerated. Economic growth also rose, and unemployment fell substantiallyin rural and urban areas. Largely as a consequence of increased coffee taxrevenues, the public finances generated overall surpluses averaging about 1%of GDP during 1976-78 and, by the end of 1979, net official internationalreserves had risen to about US$4.1 billion, equivalent to about 12 monthsimports of goods and non-factor services.

6. While beneficial in many respects, the foreign exchange boom hadsome negative effects. The rate of currency devaluation was slowed and theconversion of export receipts into pesos was delayed to moderate the growthof domestic demand, with adverse effects on non-coffee exports. TheGovernmenc also sought to check inflation by maintaining high reserverequirements and expanding controls over credit thereby reducing, in realterms, the financing available to the private sector through the officialcapital market.

7. The 1977-79 economic program was partially successful in restrain-ing aggregate demand growth, but relatively high inflation persisted. Inresponse to increasing restraint on aggregate demand and troublesomefinancial market distortions, the authorities began in late 1979 to adjustthe program. The rate of peso devaluation was advanced somewhat, and inearly 1980 credit restraints were relaxed. At the same time, interest rateson certificates of deposit-and on lending therefrom-were freed fromcontrols. To offset the inflationary effects of these measures, the authori-ties further liberalized import payments and adopted the policy of notexpanding the subsidized selective credit operations of the Central Bank inexcess of the resources captured from private savings for this purpose. RealGDP growth decelerated to 4% in 1980 from an average of almost 6% since 1960,unemployment started to creep up, and inflationary pressures continued.

C. Recent Economic Developments

8. During 1981-83 the economic situation took a turn for the worse inpart on account of external factors, with real GDP growth slowing down to2.3% in 1981 and about 1% on average in 1982-83. Agricultural output washard-hit as a result of low international prices, reduced input use andadverse weather. Industrial activity deteriorated on account of depressedaggregate demand, and unutilized capacity continued to increase, particularlyin manufacturing. Unemployment reached almost 14% of the labor force at theend of the year, up from about 7% at the end of 1981. Inflation, however,slowed down in 1983 to a 20% average for the year, down from 28% in 1981 and25% in 1982.

9. After experiencing a surplus for six years, a deficit of aboutUS$1.4 billion emerged in the resource balance in 1981 and increased toaverage about US$1.8 billion in 1982-83. These deficits resulted mainly from

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a drop in exports in real terms: in addition to domestic factors, majorreasons were the slowdown in world demand, major devaluations and importrestrictions in neighboring countries, and the reduction in Colombia's coffeeexports from their previous high levels. Net foreign exchange reservesdeclined by about USS1.8 billion in 1983 to about US$3.1 billion, equivalentto about six months of imports of goods and non-factor services. On thefiscal side, a slowdown in revenue growth, together with increased currentexpenditures resulting from a system of automatic transfers and large infra-structure investments in energy and transport led to growing deficits: theoverall Central Government cash deficit grew from 2.1% of GDP in 1980 to 4.1%in 1983, while that of the consolidated public sector rose from 3.6% to 7.0%.

10. In 1983 the Government introduced policies to stimulate aggregatedemand, and expand non-coffee exports. The rate of peso devaluation wasaccelerated; the housing construction industry was provided with incentivesto mobilize more resources; and selective credit to the productive sectorswas expanded. Temporary import restrictions were introduced for stabiliza-tion in addition to measures to reduce the fiscal deficit and ease distor-tions in the financial system. These efforts were insufficient to reversethe deteriorating trends particularly in light of the tight internationalcapital market. Colombia, unlike other Latin American countries, has not hada debt problem because of the high share of official debt in total debt out-standing and the term structure of such debt. Nevertheless, the LatinAmerican debt problem produced a reduction in the credit lines available toColombia and difficulties in obtaining medium-term loans needed to completeongoing projects, which contributed in turn to further declines in foreignexchange reserves and to strains in the financial system.

11. During 1984-85 Government policy began to focus increasingly on:additional revenue and expenditure measures to contain the fiscal deficit andmonetary expansion; acceleration of the exchange rate devaluations, furtherincreased incentives to exports; measures to improve the profitability of thecommercial banking and to resolve the external debt problems of the privatesector. The policy reforms began to take hold during the second half of1984. Real GDP growth increased to 3.1%, the unemployment rate fell to 13%of the labor force at year's end while inflation was brought down to 16.4% onaverage in 1984. Merchandise exports grew at over 16% in nominal termscompared to 1983; the current account deficit in the balance of payments wasreduced by about US$1 billion to 5% of GDP. The losses in foreign exchangereserves, which had accelerated during the first half of 1984, were reducedduring the second half of 1984 and reserves remained at about US$1.8 billion(four months of goods and n.f.s. imports). The policies have been deepenedin 1985 and the results to date, on the whole, have been positive. Inflationremains under control, while economic growth has picked up modestly, althoughthe unemployment rate remains higher than in recent years. The balance ofpayments position has been stabilizing.

D. Growth and Balance of Payments

12. With further adjustments during 1985-86, Colombia's growthprospects for the rest of the decade are good. The current account deficitof the balance of payments is projected to average about US$1.3 billion peryear during 1985-86, equivalent to about 4% of GDP. The deficit is projectedto be financed bv increasing disbursements of existing and new public and

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private sector loans and by direct foreign investment. By the end of thisperiod, net official International reserves would have been maintained at alevel of about four and a half months of imports of goods and non-factorservices. This should be sufficient to support an average growth of real GDPof 2.5% during 1985-86. Total investment will have to be maintained at over18.5Z of GDP to complete energy and mining projects; and to avoid too largean increase in foreign indebtedness, gross domestic savings would need toaverage about 18% of GDP compared to 16.42 during 1981-84, with the publicsector generating a significant part of the additional savings. Beyond 1986,real GDP growth should resume at near historical rates, about 4.5% per yearon average. The current account deficit should also improve rapidly from1987 on as a result of increasing export proceeds from new non-traditionalexports (particularly crude petroleum and coal), declining to some 1.6% ofGDP by 1990.

13. Total gross external medium- and long-term capital requirements(including the private sector) are projected to total about USS5.6 billionfor the 1985-86 period. Net foreign investment is expected to account forUS$750 million during 1985-86, most of which would be to complete existingenergy projects. About US$3.9 billion is expected from multilateral,bilateral and other sources, while about US$1 billion will be the new m6neyneeded from commercial banks mainly to complete petroleum and coal projectsfor export. At the end of 1984, Colombia's public and nublicly guaranteedmedium- and long-term external debt, disbursed and outstanding, amounted toUS$8.0 billion (22% of GDP). The Bank/IDA share of this external debt i.e.excluding non-guaranteed private was 22.8% which is expected to reach lessthan 25% by 1986. The public debt service ratio in 1984 was 23.5% and isexpected to peak at about 30% in 1987 and then decline gradually to below 30%in 1990. The World Bank's share in M&LT public debt service (excluding non-guaranteed private) is expected to be less than 24% during 1985-86. Withsound economic and financial management and the development of new exportactivities, Colombia is expected to maintain its creditworthiness through andbeyond the 1985-90 period.

PART II - BANK GROUP OPERATIONS IN COLOMBIA

14. The proposed loan, the 116th to be made to Colombia, would bring thetotal amount of Bank loans to Colombia to USS5,029.2 million (net of cancel-lations). Of this amount the Bank held, as of September 30, 1985, USS3,758.3million; IDA made one credit of US$19.5 million for highways in 1961.Disbursements have been comple'.eJ on 72 loans and the IDA credit. Before1979, disbursements averaged US$86 million equivalent per year, but hadincreased to US$286 million in FY84 and to USS591 million in FY85, reflectingin part the higher level of commitments in the late 1970s and efforts tobuild the pipeline. While disbursements in Colombia have been slower thanthose recorded in the Latin American Region for similar projects,concentrated efforts to overcome problems and to speed the initiation ofproject execution have resulted Ait a significant increase in disbursementsduring FY84 and FY85. Improving performance of social sector institutions in

the execution of Bank-financed projects, the gradual containment ofinflationary pressures and the effects of the recently-introduced fiscalreforms, which should improve counterpart funding, all point to a higherlevel of disbursements in the future. IFC has made investments andunderwriting commitments of US$144.2 million in 29 enterprises and as ofSeptember 1985, it held US$67.3 million. Annex II contains a summarystatement of Bank loans, the IDA credit and IFC investments as of September30, 1985.

15. Since the initial loan was made in 1949, Bank lending to Colombiahas become quite diversified. Although through the mid-1960s, 88X of theloans made were for power or transport, since then the Bank has broadened itsparticipation in lending for agriculture and industry, and initiated lendingfor irrigation and watershed management, education, water supply, telecommu-nications, urban development, l)etroleum development, export diversification,nutrition and health. By the late 1970s, 53Z of the loans made to Colombiawere for projects other than transport and power. Of the loans made since1978, 37% were for power and transport, 15Z for industry, 18Z for agricultureand irrigation, 8% for water supply, 6% for urban, 4% for telecommunications,2% each for petroleum development and export diversification and 8% foreducation, nutrition and multipurpose projects. The diversification hasindeed helped provide close contact with a broader range of Colombia'sdevelopment problems. The experience gained has served to identify areas inwhich the Bank's role can be a marginal one and, thus, to enable lending tobe focused upon sectors in which the Bank's presence can have a meaningful -impact.

16. The Bank's dialogue with the Government through its lendingactivity has focused upon the need to mobilize additional domestic resources,to diversify and expand exports, to develop rapidly the country's energyresources, and to free the economy from excessive controls. The discussionsinvolved fiscal, interest rate and pricing policies, as well as incentivesfor exports and reduction in the level of effective protection. Positiveresults have been obtained particularly in the power sector, where powerrates were increased sharply and a least-cost expansion was formulated andlaunched. Similar results have been achieved in respect of some other publicservices, including appropriate charges for water for irrigation and domesticuse and petroleum prices.

17. The Bank has been supporting the Government's efforts to iv -easeeconomic growth and exports with financial stability, raise utilization ofdomestic energy sources, provide key infrastructure, and improve the livingconditions of the poor. More recently, in response to Colombia's adjustmentprocess the thrust of the Bank's support has shifted towards loans to financedirectly productive activities, such as agriculture and industry, supportefforts to raise productivity, income and employment, increase and diversifyexports and help develop renewable sources of energy through lending forhydropower and arranging associated cofinancing. Loans recently approved bythe Board and in advanced stage of preparation reflect the emphasis on:(i)increasing output rapidly; (ii) reorienting production towards exports andefficient import-competing goods; (iii) suporting quick-yieldinginfrastructure investments, particularly those that enable the use ofexisting facilities more intensively; and (iv) increasing resourcemobilization.

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18. The Bank's lending in FY85 consisted of loans for agriculturaldiversification, small-scale industry, petroleum, development banking, watersupply and sewerage and trade policy and export diversification, totallingJSS707.5 million. Thne trade policy loan is designed to support the first1hase of trade policy adlustments in Colombia. Besides the already approvedT.ublic health, port rehabilitation and electricity distribution projects,work is underway on projects for irrigation rehabilitation, agriculturaltechnology transfer, and financial sector management. In infrastructure, theBank is stressing rehabilitation, modernization and a more intenslve use ofthe existing facilities in ports rehabilitation, water supply and ruralfeeder roads. Finally, several projects in preparation will also support theGovernment's efforts to help the poorer segments of the Colombianpopulation. Proposed lending for further rural development, agriculturalcredit, and water supply and waste, will help improve the standard of livingof the poor, while being designed to make better use of existing capacity andreduce losses.

19. The operations of external lenders in Colombia are shown in AnnexI. While IBRD, IDB and bilateral sources provided about 75% of totalexternal financing to Colombia in the 1961-72 period, their share hasdecreased since then to some 49% for the 1975-82 period and is expected todecline further to about 40% of external capital requirements during theeighties. IDB has given increased emphasis to energy-related projects, inaddition to those for low-cost housing, urban and rural development, agrarianreform, university education, water supply, rural electrification and landerosion control, which are aimed at improving living standards of thelower-income population. In the future, it proposes to assist Colombia indeveloping sources of domestic energy and in expanding productive sectoractivities to help generate increased employment. USAID has supportedprograms in education, rural development and small farm development, but isphasing out its program in Colombia. The Governments of Canada, the FederalRepublic of Germany and the Netherlands have also provided concessionalfinancing for basic needs and regional integration projects.

PART III - WATER SUPPLY AND SEWERAGE SECTOR

The Setting

20. Colombia's population (28 million in 1983) is currently growing atan annual rate of 2.1%, down from 3.0% in 1964, due primarily to a rapidfertility decline since 1964. The spatial distribution of the population hasalso changed considerably in recent years. As a result of high rural-urbanmigration, the share of the urban population has more than doubled,increasing from 31% in 1938 to over 66% currently. The four largest cities(Bogota, Cali, Medellin and Barranquilla), each with more than a millionresidents, now account for about a half of the total urban population. Thesmall (10,000-50,000) and intermediate-size (50,000-500,000) cities, eachaccount for about a quarter of the total urban population.

21. About 83% of Colombia's urban population has access to piped waterthrough house connections, and about 65% is served by a waterborne seweragesystem. In rural areas about 182 of the Population has access to piped water andonly about 10% to adequate sanitation facilities. Although, with these servicelevels, Colombia compares favorably with most middle-income countries in theRegion, the quality of service remains deficient, particularly in poor urbanneighborhoods and rural areas where water- and sanitation-related diseases rankamong the principal causes ol illness and death. Water pollution is rapidlybecoming a major problem in rivers and streams downstream of most large citieswhich discharge their sewage without treatment. In 1982, infant mortality, whichcan be partially attributed to poor water quality and sanitation conditions, was54 in 1,000 live births in Colombia, as compared with 27 in Chile, 39 inVenezuela, 44 in Argentina and 53 in Mexico.

Sector Organization

22. The water supply and sewerage sector in Colombia is under the responsib-ility of the Ministry of Public Health which, in coordination with the NationalPlanning Department, formulates national sectoral policies. The NationalInstitute of Urban Development (INSFOPAL) and the National Institute of Health(INAS), are responsible for implementing these policies in urban and rural2/areas, respectively, and along with the Fund for Urban Development (FFDU) of theCentral Mortgage Bank, they provide financing for investments in the urbansector. On the local level, municipal public works companies, independent of theCentral Government, are in charge of water and sewerage services in principalcities, and in many instances also provide other municipal services such as solidwaste collection and disposal. Tn most smaller towns, water supply and sanitationservices are provided by Sanitation Works Companies over which INSFOPAL exertsconsiderable influence and in rural areas, by departmental offices of INAS incoordination with the beneficiary communities. Water, sewerage and solid wastetariffs are controlled by the Central Government through the National Tariff Boardwhich acts on proposals submitted by operating companies.

Sector Performance and Prospects

23. The performance of most sector institutions on both the national andlocal levels in Colombia leaves much room for improvement. Poor financialperformance and weak management are the main problems impeding efficientoperations and service expansion. The combined effect of often low tariff levels,poor commercial practices and fast-rising operating costs (mainly personnel costs)have been the key obstacles to achieving financial viability for many companies.Frequent and often politically motivated changes in top- and middle-managementpositions and poor administrative, budgeting and planning systems are generally atthe heart of ineffective management. These shortcomings, together with a generallack of a sufficiently trained work force, manifest themselves in poor upkeep andinefficient operation of many water supply and sewerage systems and are reflectedin generally high levels of unaccounted-for water.

2/ Communities with less than 2,500 inhabitants.

24. Further, Central Government institutions have often not provided thesupport and incentives needed by utilities at the local level to improve theirperformance. In particular, INSFOPAL has generally not been able to appropriatelyassert its technical and financial leadership role. in the sector. In addition,the ready availability in the past of grant funds from the national treasury, oneof the most important sources of finance particularly for small- and medium-sizedcity companies, has effectively deferred the need for utilities to improve theirfinancial and operational performance.

25. Under its plan for "development with equity", the Government aims toprovide adequate water and sanitation services to all its citizens and to this endit has adopted ambitious targets for service coverage. Maintenance of the levelof investment necessary to meet these targets will be a difficult task, however,given the current weaknesses of sector institutions and prevailing fiscal andborrowing constraints. Consequently, and in light of its recently adoptedmacro-economic reform program, the Government is currently reexamining sectorpolicies and institutions, with particular emphasis on (a) adequate cost recovery,investment and credit policies; (b) tariff policies based on financial andoperating criteria and the beneficiary's capacity to pay; (c) strengthening ofutilities through technical assistance programs, such as the FOREC programdeveloped by INSFOPAL under Loan 1726-CO; and (d) a stronger institutionalframework at the central level through which investment funds can be channelledand sector policies enforced.

Past Bank Experience in the Sector

26. Since 1968, the Bank has made 11 loans, totalling US$380.9 million, forwater supply and sewerage development in Colombia. The Bank funds have accountedfor about 70% of the external loan amounts made available to the sector. Eightloans, US$313.8 million in total, were made to EPM's ir. Bogota, Cali, Palmira andCucuta. By far the largest borrower has been EAAB in Bogota, to which the Bankhas lent US$261 million in four lending operations, which have contributed to atotal investment of about US$800 million and a significant strengthening of theentity. Three Bank loans, for a total amount of US$67.1 million, were made toINSFOPAL for relending to local companies in support of a total of 36 snbprojectsin 30 medium-size and small cities and towns. In addition, INSFOPAL was thechannel used to finance small water supply components of Bank-financed urbandevelopment projects. Several small rural water supply projects were supportedthrough INAS, as part of integrated agricultural development projects andnutrition improvement projects.

27. Most Bank-financed projects have experienced lengthy delays in physicalexecution and shortfalls in financial and institutional development goals.Project completion reports have been prepared for two projects,3/ and two othershave undergone performance audits.4 / The audit reports have been critical of theoverestimates of demand for water; delays in project execution which, in aninflationary environment, resulted in cost overruns for most of the projects; andthe borrowers' failure to raise water rates and to limit the growth of operatingcosts sufficiently to comply with financial performance targets.

3/ Loan 738-CO, Palmira Water Supply Project: Report No. 4589, June 1983; Sec85-029, December 1984, Loan 1523-CO, Second Cali Water Supply and SewerageProject.

4/ Loan 536-CO, Bogota Water Supply Project: Report No. 2003, March 1978;Loan PU-30-CO, Cali Water Supply Project: Report No. 2638, August 1978.

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28. Lessons learned from the implementation of earlier Bank projects inColombia have been taken into account in preparation of subsequent projects.Demand projections are using more conservative estimates of population growth andconsumption as the basis for financial projections. Adequate sub-surface investi-gations are being required for tunnels and major structures to minimize delays andcost overruns after construction is in progress. More realistic implementationschedules are being adopted, and projects are presented to the Board only when asubstantial part of physical works is ready for bidding. More specific plans ofaction for financial and institutional reform and earlier discussion of them withthe borrower have also characterized projects that have been considered recently.

Bank Sector Strategy

29. The Bank's current sector strategy distinguishes between three majorsector segments (large cities, small- and medium-sized towns, rural areas), eachof which covers about one-third of Colombia's population. The strategy calls forcontinued lending on a selective basis to the larger municipal companies whichhave demonstrated the will to improve their standards of performance, andemphasizes lending for rehabilitation of existing facilities to permit improve-ments in operational efficiency and more intensive use of water productioncapacity which is already in place. Direct lending to suitable municipalcompanies in major cities enables the Bank to assist the Government in its effortsto extend water supply and sewerage services to large segments of the population,particularly to the urban poor, at minimum unit cost and to support its efforts toupgrade the financial and operating performance of the public sector.The sound performance of the EAAB in Bogota, which the Bank first began assistingin 1968, and of EPM in Medellin attest to the fact that with persistent effortother such municipal companies have the potential to develop into well-runinstitutions. The proposed loan has been designed to help initiate a similardevelopment process in Barranquilla Municipal Companies (EPMB) so that eventuallyits own performance level will match that of these other municipal utilities.

30. Over the longer run, the Bank's aim is to progressively support thesector's development in urban areas through intermediary arrangements capable ofproviding a full range of development banking services and implementing sectorpolicies. In spite of recent improvements in its performance, INSFOPAL does nothave the capacity to carry out such functions. Current discussions within theGovernment (para. 32) and with the Bank, however, should lead to decisions on aset of institutional and policy reforms which would form the core of betterintermediation for the sector and which the Bank could support through a sectoradjustment loan.

31. A rural water supply component costing US$16 million forms rart of therecently approved Health Project. It provides the Bank with the opportunity tosupport a modest investment program for rural water supply systems and strengthenINAS through a technical assistance program and the preparation of a NationalRural Water Supply Plan. This plan is expected to define more accurately theneeds and priorities in the rural sub-sector and develop an investment strategy.Together with the experience acquired in working with INAS, this could helpprepare the way for increased investments in rural water supply, with Banksupport.

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Water, Sewerage and Solid Waste Services of EPMB in Barranquilla

32. Barranquilla, commercial center of Colombia's Atlantic CoastRegion, is the country's fourth largest city, with an estimated present popu-lation of about 1.1 million and annual growth of about 3.5%. Public servicesIn Barranquilla are the lowest in coverage and quality among Colombia'slarger cities. EPMB, the proposed borrower and project executing agency, isan autonomous municipal agency responsible for the following services:water, sewerage, solid waste collection and disposal, street cleaning, parkmaintenance, public markets and a zoological park. The Mayor of Barranquillaserves as the Chairman of EPMB's Board, which includes representatives of thecity's main political and civic groups. EPMB's General Manager is appointedby the Mayor.

33. EPMB's water supply facilities serve about half of the city's totalpopulation through residential, industrial and commercial connections. EPHBestimates that a further 150,000 persons receive water through illegal con-nections. The remaining population, Barranquilla's poorest who live predomi-nantly in the south-western part of the city, purchase water from privatevendors. The state of maintenance and repair of the water system is verypoor. This was illustrated dramatically in April 1985 when the failure of apump for treated water transmission paralyzed most of Barranquilla's watersystem and left some 400,000 of EPMB's customers without water for almost 4days. A similar water emergency was also experienced in June, 1985. Theproposed project focuses on rehabilitation of the most deteriorated parts ofthe system in order to reduce the risks of future breakdowns and to increasethe system's efficiency.

34. Extensive leakage, a great many illegal connections, and thevirtual absence of consumption metering are responsible for a high level ofunaccounted-for water (about 45% of total production). Lack of meters andthe tropical climate encourage high water use which is estimated at about300-350 l/cap/day. Under these conditions, the capacity of EPMX's facilitiesis not even sufficient to meet the demand of those connected and rationing iswidespread. However, EPHB is constructing a fifth treatment plant (PlantaNo. 5) which, when completed by the end of 1985, should boost total net waterproduction capacity to a level sufficient to satisfy Barranquilla's water de-mand until the early 1990s. The proposed project would finance investmentsin additianal transmission capacity as the current capacity is insufficientto deliver the additional production from the new treatment plant to the lowincome south-western part of the city.

35. EPMB has about 80,000 registered sewer connections (48% servicecoverage level). The present system is severely overloaded, creating over-flow of sewage in some sections of town. EPMB forecasts the addition of ano-ther 40,000 connections by 1990, which would increase the service level toabout 58% of the population. Many of these new connections already exist butneed to be registered. The proposed project would include the expansion ofthe capacity of two interceptors designed to eliminate sewage overflows insome crucial downtown areas. It would also, through technical assistance,support a program to register existing connections.

- 1 1 -

36. EPMB has traditionally provided door-to-door collection of solidwaste to about half of Barranquilla's population. Recently, however, collec-tion efficiency and service quality have dropped dramatically as EPMB'sequipment, because of age and deficient maintenance practices, is becomingobsolete. Solid waste management in public markets is very poor and there isno organizea collection of solid waste in the poor neighborhoods at all.Uncontrolled dumping of waste in vacant lots has become increasingly anuisance and public health problem in many parts of the city. Likewise thecity's waste dump is poorly controlled and a growing health hazard. Toaddress the most urgent needs of EPMB's solid waste operation, the proposedproject would finance the purchase of much needed equipment and vehicles toupgrade and extend collections, and technical assistance to improve equipmentmaintenance and to introduce more sanitary waste disposal practices.

37. EPMB is a weak and inefficient institution. It is heavily over-staffed, with 1,600 employees in total, of which 780 for water and sewerage,or about B per 1,000 water connections. General managers change frequently,staving in post on average about 1.5 years. The quality of staff isgenerally deficient. Strong trade unions oppose improved efficiency and havebeen successful in securing expensive compensation packages. Administrativeand financial systems are weak and do not permit adequate managementcontrol. Lack of equipment, trained staff and procedures hinder thesystematic maintenance and operation of EPMB's facilities. Because of itsinability to provide acceptable services in an efficient manner, EPMB's imagein Barranquilla is poor.

38. In recent years, EPMB experienced substantial consolidatedoperating and cash deficits. These deficits resulted mainly becausemunicipal property taxes, 95% of which are assigned to EPMB to cover servicesother than water supply and sewerage, were frozen between 1979 and 1984 atlevels insufficient to cover the operating deficits incurred by theseservices. Inadequate water and sewerage tariff levels, poor collection ofaccounts and excessive operating costs have also contributed to EPMB's pooroverall financial performance. EPMB's cash deficits have been financedmainly by commercial bank overdrafts and by a large increase in arrears tosuppliers and creditors which currently totals about Col$1,l00 million(US$8.1 million equivalent). During the last four years, EPMB's only majorinvestment was its recent undertaking to construct a new water treatmentplant costing USS12 million.

Previous Bank Lending to EPMB

39. EPMB was among the beneficiaries of Loan 1072-CO made to INSFOPALin 1972. The loan proceeds allocated to EPMB were US$10.5 million. TheBarranquilla sub-project was completed in 1982 after considerable delay. Aproject completion report for Loan 1072-CO is under preparation. EPMB didnot meet the rate of return covenant and other financial, institutional, andoperational targets laid down in the subsidiary agreement with INSFOPALpartly because various governments were not prepared to authorize the tarifflevels needed by EPMB. Other shortcomings in the execution of thesub-project can be attributed to EPMB's institutional weakness (para. 37) andINSFOPAL's inability to provide sufficient supervision and support.

- 12 -

PART IV - THE PROJECT

Project Origin and Rationale for Bank Involvement

40. Feasibility studies completed under the Bank's purview in July 1983by consultants to Empresas Publicas Municipales de Barranquilla (EPMB), theproposed borrower, identified an investment program in water, sewerage, andsolid waste with a total estimated base cost of about US$65 million (1983prices). However, it was evident from EPMB's inefficient operations and poorfinancial performance that the company could not support an operation of thismagnitude. In August 1984, under the direction of new management, EPKBrenewed discussions with the Bank and requested financing for a smallerproject which would emphasize financial rehabilitation and institutionaldevelopment and the execution of only the most urgently needed investments inwater supply, sewerage, and solid waste facilities. As a condition of loanprocessing, EPMB subsequently identified and took initial key steps to imple-ment the institutional and financial recovery program agreed upon with theBank. Particularly after the water emergency in April 1985 (para. 33), localauthorities are prepared to support EPMB's current rehabilitation efforts.They realize that drastic measures are necessary to reverse the deteriorationof public service in Barranquilla.

41. The proposed Bank participation in the project stems from a countrystrategy designed to support Colombia's efforts to promote socio-economicinvestments substantially benefitting lower-income segments of thepopulation, rehabilitate existing facilities and bring about better financialand institutional performance of public sector entities. For Barranquilla inparticular, the Bank would, among other things, help to ensure an effectiveproject design for the vital institutional development program for EPMB andprovide the reinforcing incentives and conditionality needed for EPMB'smanagement to implement the program. At present these are beyond thecapabilities of local institutions to undertake alone.

42. The proposed project was appraised in February 1985 and negotia-tions took place in Washington on October 16-18, 1985 with the Colombiandelegation headed by Dr. Guido Borrero Duran, Mayor of Barranquilla. A StaffAppraisal Report (No. 5631-CO of October 29, 1985) is being distributed tothe Executive Directors separately. Supplementary project data are shown inAnnex III.

Project Objectives

43. The proposed project would address the urgent need to restore andextend acceptable water, sewerage and solid waste services to Barranquilla'spopulation and to bring about the financial strengthening and institutionaldevelopment of EPMB. Its immediate objectives would be:

(a) Service rehabilitation and expansion program: (i) restore themost deteriorated parts of the water system; (ii) expand service to lowincome neighborhoods in the south-west part of the city so as to increasewater supply coverage from a current 50% to about 95% by 1990 (75% throughhouse-connections and 20% by public standpipes); (iii) eliminate sewerageoverflows in some key downtown areas and residential neighborhoods throughthe expansion of collector capacity; and (iv) reestablish regular door-tc-

- 13 -

door solid waste collection services to about 50 percent of the city's areaand establish proper waste management services for public markets, currentlyunserved poor neighborhoods and waste disposal sites;

(b) Financial and institutional program: (i) improve EPMB's finan-cial performance so as to achieve an internal financing capacicy of aboutone-third of its investment needs by 1989; (ii) increase the operatingefficiency of all EPMB services, and for water, reduce unaccounted-for waterfrom the currently estimated 45 percent to about 32 percent by 1991 andstabilize the cost per M3 of water sold at its present level in real termsthrough 1990; and (iii) establish an adequate capacity for the repair andmaintenance of equipment and facilities.

44. The successful execution of the service rehabilitation and thefinancial and institutional strengthening programs would put EPMB in a betterposition to undertake the larger investments which will be needed in the1990s to maintain in Barranquilla water, sewerage, and solid waste disposalservices at levels comparable to those in other large Colombian cities. Thusthe project would also include engineering services to prepare studies forthis next phase.

Project Description

45. The proposed project would include the following components:

(a) Water supply and sewerage: Construction of transmissionmains, a storage tank, reequiping of pumping stations, repair and improvementof treatment plants and transmission and distribution facilities (leakdetection and repair), rehabilitation and expansion of the water deliverysystem in the south-western zone including the construction of about 50public standpipes, the purchase of about 40,000 and installation of 70,000water meters and of 20,000 house connections, and capacity expansion of 3sewerage collectors; (b) Solid waste: Purchase of about 25 collectiontrucks, 3 street sweepers, 2 front loaders, 2 bulldozers, 3 lifting trucksand various containers and tools and spare parts for the repair shop; (c)Institutional development: Technical assistance, training of EPMB's staff,and the purchase of vehicles and equipment, to improve existing or implementnew systems and procedures in management, financial and operational areas ofEPMB's business; (d) Engineering services: Supervision of construction,survey of existing network conditions and preparation of a rehabilitation andservice expansion plan in south-western zone, an update of existingfeasibility studies and the preparation of designs and bidding documents forthe next stage of water and sewerage investments, and a solid waste study todefine a cost-effective and environmentally acceptable long term solution tothe final disposal of wastes; and (e) Incremental permanent working capital:A contribution of US$2.5 million to be disbursed against chemicals and spareparts purchases between March 1, 1985 and December 31, 1987 to cover EPMB'sneeds for increased permanent working capital resulting from the project.This would also indirectly help to restructure EPMB's effectively negativeworking capital position and reestablish its credit standing with localbanks.

- 14 -

Project Cost and Financing

46. The total cost of the proposed project (including US$4.4 million ininterest during construction and US$6.2 million for incremental workingcapital) is estimated at US$41.6 million equivalent, of which 58% or $24.0million is foreign exchange. The local cost component of $17.6 millionequivalent includes sbout US$2.0 million equivalent of tanes charged againstthe purchase of equipment and materials and foreign consultants' fees whichthe Bank would not finance. The base cost, expressed in June 1985 prices, isUS$31.9 million. Physical contingencies are calculated to be about 10%.Price and ColS devaluation contingencies, equivalent to about 81 of the sumof base cost and physical contingencies, were included assuming that localinflation varies from 22% in 1985 to 18% in 1990 and international Inflationof 5% in 1985, 7.5% in 1986 and of 8% through 1991.

47. The Bank would provide US$24 million or 58% of total financingrequired. The loan would cover the foreign exchange cost of the project'sinvestments totalling US$17.1 million, interest during construction up to amaximum of US$4.4 million, and the US$2.5 million foreign exchange componentof EPMB's incremental permanent working capital needs. The financing planalso includes a loan of US$3.4 million from FFDU, which has already beencontracted, to support initial project costs during 1985 and 1986 andincludes a grant from the Department of Atlantico totalling US$4.3 millionequivalent. Assurances were obtained from EPMB that no later thanJanuary 31, 1986, EPME would enter into an agreement with the Department tothis effect. EPMB would contribute a total of US$9.9 million. Of thisamount, about US$3.7 million would be used to meet incremental workingcapital needs and about US$6.2 million would finance project investmentsbeginning in 1987, when EPMB's financial position is expected to haveimproved. To ensure that these funds for project investments would be madeavailable, FFDU has provided EPMB and the Bank with a letter indicating itsintent to cover any shortfall with an additional loan.

Project Imnlementation

48. Project implementation would take place over six years with comple-tion expected by mid-1991. It in fact began in February 1985 with EPMB'spurchase with FFDU funds of pipes for the transmission main and 20,000 watermeters. Contracts for the installation of transmission mains and the storagetank have already been awarded and bids for other important items (pumps,water meters and vehicles) are scheduled to be issued in early 1986.

49. Continuity of management staff and EPMB's policies is vital to therehabilitation process and to the success of the project. To this end,assurances were obtained from EPMB and the Government that EPMB wouldmaintain continuity and a minimum of turnover in the management of thecompany, and assure an adequate level of competence of its management staff.

50. Draft terms of reference for technical assistance associated withthe project's institutional development component have already been preparedand agreed upon by EPMB and the Bank. Responsibility for the administrationof this component would rest with EPMB's Planning Department under the direct

- 15 -

supervision of the General Manager. Assurances were obtained from EPMB thatit would maintain a unit, with staff and functions acceptable to the Bank, inthe Planning nepartment to coordinate this component of the project.The technical assistance would be likely to be provided mainly by localconsultants who would employ foreign expertise in special areas. In view oflengthy local procurement proctedures, signature of contracts with theconsultants selected for this component would be a condition of loandisbursement of all project components except for working capital.EPMB would give the Bank ample opportunity to comment on the consultant'srecommendations and their implementation. All construction would besupervised by engineering consultants under the direction of EPMB'sConstruction Supervision Department. The signing of a contract forconstruction supervision with consultants satisfactory to the Bank would alsobe a condition of loan disbursement.

51. The public standpipe network in the south-western part of the citywould be constructed in close coordination with neighborhood leadershiporganizations known as Juntas de Accion Comunal (JAC). Many of the JAC'shave already indicated their desire to work with EPKB in selecting standpipelocations, maintaining and operating them, and collecting payments for waterconsumed. Each standpipe would be metered. Assurances were obtained duringnegotiations that, as a condition for providing water through standpipes,EPMB would enter into arrangements with JAC's assigning them responsibilityfor selection of locations for and proper maintenance of standpipes andestablishing a mechanism for collection of payment on EPMB's behalf for waterconsumed.

Procurement

52. Contracts awarded under the proposed project through internationalcompetitive bidding procedures (ICB) would account for about 50% of totalproject costs. Contracts for most equipment are expected to be won byforeign manufacturers while those for pipes, accessories and civil works arelikely to be awarded to local firms. Qualifying domestic suppliers would begiven a preference in bid evaluation of 15% of the c.i.f. bid price or theapplicable import duty, whichever is lower. About 90% of the professionalservices required for the project are expected to be provided by localconsultants.

53. Civil works contracts larger than US$1 million equivalent and good3contracts larger than USS50,000 equivalent would be procured through(ICB). Local procedures acceptable to the Bank would be used to awardcontracts with estimated costs below these limits. Open bidding would beused for contracts between US$10,000 and US$50,000 and local shopping basedon price quotations from at least three qualified local bidders for contractsof less than $10,000. The installation of water meters and house connectionswould be contracted directly by work orders to pre-qualified contractors atunit prices established by EPMB. Individual work orders would be limited toa ceiling of IJSS20,000 equivalent. Spare parts and chemicals, financed underthe working capital component, would be procured through local shoppingprocedures or by directly negotiated purchase from one supplier (for chlorine

- 16 -

products). The limits for prior review of bidding documents by the Bank(US$50,000 equivalent for equipment/material contracts and US$500,000equivalent for civil works contracts) would result in a coverage of about 90Zof the total estimated value of goods contracts and about 50% of civil workscontracts. The Government provided assurances at negotiations that importlicenses for goods purchased under the project would be issued promptly bythe Instituto de Comercio Exterior (INCOMEX).

Disbursements

54. The Bank loan would be disbursed against:

(a) 100% of foreign expenditures for all direct imports; 40% of localexpenditures for imported equipment and materials procured locallyand 40% of ex-factory cost of locally manufactured goods;

(b) 40% of total cost for expenditures for the purchase of spare partsand chemicals purchased after March 1, 1985 and before December 31,1987 up to a maximum of USS2.5 million equivalent;

(c) 40% of total expenditures for civil works;(d) 100% of total expenditures for consulting services and training

under the institutional development component; (para. 45(c));(e) 40% of total expenditures for consultants for engineering services

(para 45(d)); and(f) amounts due for interest on the Bank's loan up to a maximum of

US$4.4 million.

55. For contracts whose value is less than USS20,000 equivalent,dis-bursement would be against statement of expenditures certified by EPMB. Aprovision for retroactive financing up to a total of $2.0 million fromMarch 1, 1985 would be made to facilitate project start-up in view of EPMB'scurrently poor financial condition. In order to expedite project execution,a special account would be opened in Colombia's central bank with an initialdeposit of up to USS2.0 million. The closing date of the loan would beDecember 31, 1991.

EPMB's Financial Prospects

56. Measures taken by EPMB since late 1984 under its recovery program(para. 40) in five main problem areas have markedly improved its financialprospects. Operating costs are being stabilized with the dismissal so far ofsome 150 staff performing redundant tasks, and the strict control ofovertime. An aggressive campaign has been mounted to connect and billunregistered customers and to collect past due accounts, which has to dateresulted in a 20% increase in monthly collections for water supply andsewerage services. Financial deficits of the public markets have beeneliminated by cutting expenditures and collecting payment arrears.Rescheduling of past due debt owed to major domestic creditors of EPMB isbeing negotiated. And finally, EPMB obtained from the National Tariff Boardin May 1985 an effective aggregate increase of about 10 percent in itstariffs above the 1.8 percent increase per month already in effect, and isthe main beneficiary of a nearly 250% increase in municipal property taxeseffected earlier in the year by the Municipal Council of Barranquilla.

- 17 -

57. While these measures will help EPMB to attain a balanced cash flowfor 1985, the Company will have to continue to take financial adjustmentmeasures over the project implementation period to develop a capacity togenerate funds internally to cover a reasonable share of its futureinvestment needs. The most important measures would include: substantialincrease in solid waste tariffs; continued tariff and municipal property taxincreases approximately in line with average domestic inflation rates;maintain tight control over operating costs, particularly for personnel; andlimit strictly capital expenditures and long-term debt. To help ensure thatthese measures are achieved, assurances were obtained from EPMB that, for itswater supply and sewerage operations as well as for the Company as a whole,it would take all actions necessary to generate sufficient revenues to coveroperating and maintenance expenses, working capital needs, debt servicerequirements, including rescheduled payments to major creditors, andcontributions of not less than 10% of capital expenditures starting in 1987,increasing to 30% by 1989. Assurances were also obtained from EPMB that itwould not incur any additional long-term debt or undertake any capitalexpenditures in excess of US$200,000 equivalent per year without the Bank'sagreement and would reschedule and then pay off its overdue debt with majorcreditors and suppliers in accordance with agreement subject to the Bank'sapproval, which would be a condition of loan effectiveness.

58. These financial policies need to be complemented by adjustments inEPMB's operations in order to achieve the financial performance sought. Tohelp meet projected revenues, the project would include provisions forperformance targets to increase the number of new water connections fromabout 97,000 in 1985 to about 160,000 in 1990, improve the proportion ofbillit:gs and property taxes collected from about 70% in 1985 to 90% in 1990,reduce personnel per 1000 connections from 10 in 1984 to 7 by 1986, andreduce the level of unaccounted-for-water from the present 44% to 34% by1990. Assurances were obtained from EPMB that it would take all actionsnecessary to achieve these targets which would be jointly revised from timeto time as required. Assurances were also obtained that EPMB would providethe Bank regularly with sufficient information to enable it to monitor EPMB'sinvestment program, financial position and success in meeting performancetargets.

59. In the past few years, EPMB's weak financial position has forced itto pledge a portion of its collections to commercial banks to securelong-term loans. The level of pledged collections is modest, about 20Z ofEPMB's total collections, and is expected to be phased out gradually duringproject execution as these loans are repaid. In addition, as interest on theBank loan is to be capitalized during this period, the Bank would effectivelybe in an inferior position vis a vis other creditors only from 1990 by whichtime improvements in EPMB's financial condition should have been realized.Given this, the Bank would not seek pari passu treatment with respect to suchsecurity as a condition of extending the loan. However, during negotiationsEPMB agreed that loans secured by pledges would be repaid as they become dueand that no further pledges conflicting with the Bank's negative pledgeclause would be made following loan signing. Some short-term debt is alsosecured by pledged collections, though this does not conflict with the Bank'snegative pledge clause and is a frequent practice in the sector. Theproceeds from the working capital component or the Bank loan and additionalrevenues to be generated during project implementation are expected to permit

- 18 -

EPMB to meet its future working capital requirements with a minimum of suchpledging. EPMB thus agreed during negotiations that the proportion of totalcollections pledged to repay short-term debt would not exceed more than 5%from 1986.

Project Justification, Benefits and Affordability

60. Host of the proposed investments would be used to repair, rehabili-tate and replace existing facilities and equipment and to assist EPMB in itsefforts for institutional and financial reform. The benefits to be derivedfrom the project are difficult to quantify realistically and therefore aspecific financial and economic rates of return have not been calculated.They become apparent from the consequences of not doing the project, namelythe continued (a) deterioration of EPMB's water facilities leading to moreserious service interruptions like those experienced in April 1985 and againin June 1985; (b) poor management performance of EPMB making it impossible tomount the large medium- and long-term investments needed to provideacceptable water, sewerage and solid waste services to Barranquilla'spopulation in the 1990s; (c) rationing and irregular water supply to most ofBarranquilla's population; (d) increasing public health hazards as solidwaste collection and disposal service progressively deteriorate; and (e)dependence of about 400,000 people, most of them belonging to Barranquilla'spoorest, on often unsafe water purchased from vendors at high prices. Thebenefits from the project's alleviation of these circumstances are believedto be high and, on these grounds, the project would be financially andeconomically justified.

61. By 1991, about 600,000 additional people would have access topotable water from the project. About 400,000 of them would live in thecity's southwestern zone belonging to the lowest income group. Of theseabout 100,000 would receive service through house-connections and 300,000through public standpipes. Investments in solid waste would allow EPMB toreinstitute regular door-to-door service to some 50% of Barranquilla'spopulation, put in place a regular clean-up system around public markets,initiate solid waste removal in some of the city's poor neighborhoods andmake final disposal practices more sanitary. These investments would removethe public health hazard now created by the indiscriminate dumping of wastein empty lots and bring about more sanitary disposal of waste.

62. EPMB's new tariff structure recently approved by the NationalTariff Board as a condition of loan processing will substantially increaseboth EPMB's revenues and the progressivity of its tariffs. The averagetariff is now about Col$18/m3 (US$.13 equivalent), which is close to theestimated long-term average marginal cost for water in Barranquilla. Afamily in Barranquill-'s lowest income group would pay about Col$100 permonth (US$74 equivalent) for a supply of 1Dm3, well within this group'scapacity to pay, considering that the average monthly income of even a poorfamily exceeds Col$10,000. A family belonging to the highest income categorywould have to pay Col$670 for the same 10m . The new structure also providesimportant incentives for water conservation as the tariff becomes quiteprogressive for consumption above 30m3/month, independent of the socio-econo-mic status of the user. The public standpipe service to be provided in thecity's southwestern part would significantly reduce the amount of familyincome spent on water; today water purchased through vendors can cost up to

- 19 -

Col$1200/family/month and in extreme cases reach up to 10% of family income.Under the project, charges to be paid by public standpipe users would beabout Col$50 and more consistent with a poor family's financial capacity topay.

Project Risks

63. Physical implementation of the proposed project carries little riskas the works themselves are simple and straightforward. Considerable riskexists, however, that the management continuity and political support neededto sustain the financial and institutional program cannot be maintained. Asensitivity analysis on the project demonstrates that a shortfall of morethan about 20% in reaching any of the performance targets for tariff and taxincreases, collection efficiency, operating costs, and the number of newwater connections would prevent EPMB from generating sufficient internalfunds to finance its investment program. However, the substantial measuresalready taken toward financial recovery (para. 56) as a condition of loanprocessing reflect considerable willingness of the authorities so far to takethe difficult steps required to achieve EPMB's rehabilitation. Assumptionsunderlying the rate of rehabilitation of EPMB in coming years are also on thecautious side. The technical assistance in support of EPMB's rehabilitation,the regular joint reviews of agreed upon performance targets, and back-uparrangements to ensure availability of EPMB's project contribution (para. 47)should also help to yield an acceptable project risk level given the dangersof further deterioration in services in Barranquilla if the project were notundertaken.

PART V: RECOMMENDATION

64. I am satisfied that the proposed loan would comply with theArticles of Agreement of the Bank and recommend that the Executive Directorsapprove the proposed loan.

A. W. ClausenPresident

Attachments

Washington, D.C.November 8, 1985

- 20ANNEX I

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1WLAZD ZN Illa me0 (NELL) 37.06TAT1ON*RT IOHLATZOU (NKM. 10.0UUSLAI -SU 1.6

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- 21 - ANNEX I

T A I L E 1A Page 2 of 6

COLOMIA - SOCIAL INDICAT0RS DATA SHEETCOLOMBIA ERPERDICE GROuPS WElCITD AVERAGES) /a

MOST (OT RECENT ESTIMTE) /bRECENT MIDDLE ZICOHE MIDDLE INTy-

1960Lt 197D/b unESTItA LAT. AMERICA CAR EUROPE

ADJUSTED ECRIOLUIN RATIOSPRIMARY: TOAL 77.0 108.0 130.0 106.7 101.9

LALE 77.0 107.0 129.0 108.5 106.2FEMu 77.0 110.0 132.0 104.6 97.5

SECONDARn: UOL' 12.0 25.0 46.0 64.2 57.5HLEA 13.0 25.0 45.0 42.7 , 64.9FEULE 11.0 24.0 51.0 44.9 50.0

VOCATMOAL (Z OF SECONDRYr) 30.8 /L 20.2 21.6 Id 13.3 21.0

PUPIL-TEACHER RATIOPRIM 38.0 38.0 31.0 29.9 25.1SEODMDARY 11.0 17.0 20.0 16.7 19.1

PASSEGE CARSITUSANIID POP 5.7 11.2 16.6 /d 46.0 54.2RADIO RECEIJERS/l1OUSD POP 125.1 104.3 131.7 328.3 170.7TY REGC11ERS(TNDUSAUD POP 9.5 38.1 86.9 /c 112.4 149.3NESPAPMRCK "A33T GENERAL

INTEREST) CIALETIOPER THIUSAND POPULATIO 50.0 10.17 t1.0 51.1 97.0

CI111A ANEAL AXTA CAPTA .. .. 2.6 2.4 2.7

TOTO L R FORCE (TICUS) 4727.0 6353.0 9084.0nUIL CPzRWT) 19.2 24.8 24.6 23.6 36.3AICILZURE (PERWY) 51.6 37.9 25.8 /c 31.4 60.8INDsR (PERWT) 19.2 21.0 21.2 7c 24.3 23.3

PARTXCIPATI0U RATE (PERCT)TOAL 30.0 Z9.9 33.0 33.5 43.1MALE 48.8 45.1 49.4 51.3 55.1FEMALE 11.5 14.8 16.1 15.9 31.4

ECONOMIC DEPCY RATIO 1.7 1.6 1.3 1.3 0.9

o DISPCRCCNT OF RVATE ICMRECKEIVD BT

RICHEST 52 or D 5uLI 61.2 /j 31.9 iHSSIIS 20S 07 RONSUECLUS 67.7 t 60.1 . .LODIWSr ZCS or HOUU EIS S 2.1 3 3.5 .LOUIS? 4020O UIUSEDS 6.8 1 0.1

-, TA SESTIMATED ABSOLI P09RT INCONKLEVL (CUSS PE CAPIT)

11W .. .. 214.0 /d 288.3RURAL .. .. 197.0 /d 165.3

ESTIMATED RELATIVE POVZE ITlLEEL USS PER CAPITA)

URA .. .. 267.0 Id 519.8Im7RL .. .. 122.0 7 359.7

ESTIMATZD POP. BELOW ABSOLUrgPOVERTY INCE LVL (S)

URUII .. .. 34.0 IdRURAL .. ..

NOT AVALLAJZ.~~~~~~~~~~ . WT V NOT ALICAeE

1* The groop avrag for each indicator are populatio-wel5htd. arithetic mom. Coverae of cotntriemog the indcatore depea on aD ailebility of data and is no uniform.

/b Unlaes othbelae noted. Datca for 196 refer to an year bt_en 1959 en 1961; 'Data for 1970" between1969 and 1971; ad data for "Not Recat Estlirt" botirnn 1981 and 1983.

/c 1980; Id 1977; /a 1978; /f 1962; i 1973; lh 1964; /I Includiq teacher tcranxg at the certicryleve; a Econor _ ly acte popolation.

JUNE. 1985

- 22 - ANNEX IPaRe 3 of 6

DEFINITIOS OF SOCIAL INDICATORSNoten Although the data aredwn frsaun som grnmly jdd she mast authortative nd reilable. it shoul also b noted thai they my not be intmtinallycompsrtble becuse of the lack of standardiud deitons and conceps use by diffrent cumnri in collecing thge da The data are. nonmthues usful todecrnbe orders of mnanatude indicste trend. and charctenre cemtn major dilffeen betw en countri.Te ref eence groups re (II the sae country group of the subjct county nd (2 country group with somewhat higher avera income than the countrygroup o thestUbjict cuntry tcefpt er -Higb Incorm Ol Exporters" grup ere -Middk Income North Africr and Middl Ea chosen beamuse of strongrsocio-cultura alniites In the refee group dtu dti averaes ar population weightd arithmec means for each indintor and shown only when naorityof the countnes n g roup has data for that indicator. Since te covarg ofcountrie among the indicators depends on the availabiUty ofdat nd aisnai unironn.caution must be excised in relaing avesps of one indicator to anoeher Thee avenzge are only usful In comparing the value otone mndicasor a a time amongthe country and reference groupL

AREA (thousand sq.km.) Crudr Ak Rate (per thesuad- Number of livc births in the year

Toral-Total surface ara compnsing land area and inland waters; per thousand or mid-year populauon 1960. 1970. and 1983 data.1960. 1970 and 1983 dat. Crsdr Death Rut (per rthousnvd)-Number of deaths in the yearAgrksul-Fstimate of agriculturd area used temporarily or per thousand or mid-year population; 1960. 1970. and 1983 data.permanently for crops. pastures. market and kitchen gardens or to Gres Rep_daia Rate-Average number of daughters a womanlie rallow. 1960. 1970 and 1982 dan. will bear in her normal reproductive period if she experiences

present age-specific rertility rates: usually five-year avenges endingGN- PER CAPITA (USS)-GNP per capita estimates at current in 1960. 1970. and 1983.market pnces. calculated bv same conversmon method As World i P AwAeJrs. Annual fuhouzandsr-Anw"al num-Bank Atlas [ 1981-83 basis 1; 1983 data. ber ofacceptors ofbirth-control devices under auspices ofnational

ENERGY CONSUMPTION PER CAPITA-Annual apparent family planning pro- rm.consumpaon of commercial pnmary energy (coal and lignite. Fanuai(p, Plamay-Uws (perent tePfswrd-ww.)--Thse prcen-petroleum. natural gas and hydro-. nuclear and geothermal cekc- tage of married women of child-bearing age who am practicing ortricity) in kilograms of oil equivalent per capita: 1960. 1970. and whose husbands are practicing any form of contaception. Wbmen1982 data. of child-bearing age are generally women aged 15-49. although for

sone countries contraceptsve usage is measured for other agePOPULATION AND VITAL STATISTCS groups.Total P bpatim. M.Uid- Year (thzssn-As of July 1: 1960. 1970. FOOD AND NUTRITIONand 1983 data.

UranPpr ooof urban to total Index ofFood Poddo Per Capi (16971= 1I)-Index of perprJa Popn tiereon (perfent of rrald) Lnrc ma anet cotal capita annual production of all food commodities. Productionpopulation: different definstiona of urban areas mpdudes animal feed and seed ror agriculture. Food commoditiesability or data among countnes: 1960. 1970. ard 19- 3 data. include primarv commodities (e.g. sugarcane instead of sugar)Poplatin P-je'iou which are edible and contain nutrients (e.g. coffee and tea arePopulation in year 2000-The projection of population for 2000. excluded); they comprise cereals. root crops. pulss. oil seeds.made for each economy separatelv. Starting with information on vegetabls, fruits. nuts. sugarcane ane sugar beets livestock, andtotal population by age and sex. fietlity rates, mortality rates, and livestock products. Aggregate production of each country is basedinternational migration in the base year 1980. these parametr on natw;nal average producer price weights 1961-65. 1970. andwere projected at five-year intervals on the basis of generalized 1982 data.assumptions until the population became stationary. Pr Coputa &5p ofCaris (prcent ofreqalroesn-C omput-Stationary popdartion-ls one in which age- and sex-spec'. mor- ed from calorie equivalent of net food supplies available in countrytality rates have not changed over a long period. while age-specific per capita per day. Available supplies comprise domestic produc-fiertility rates have simultaneously remained at replacement level tion. imports less exports. and changes in stock. Net supplies(net reproduction rate = I). In such a population. the birth rate is exclude animal feed. seeds for use in agriculture, quantities used inconstant and equal to the death rate. the age structure is also food processing. and losses in distribution. Requirements werconstant. and the growth rate is zero. The stationary population estimated by FAO based on physiological needs for normal activitysize was estimated on the basis of the projected characteristics of and health considering environmnental temperature. body weights.the population in the year 2000. and the rate of decline of fertility age and sex distribution of population. and allowing 10 percent forrate to replacement level. waste at household level: 1961. 1970 and 1982 data.Population Momentrw-Is the tendency for poputation growth to Per Caeta Supply ofP1wein (grams per dqj-Protein content ofcontinue beyond the time that replacement-levd fertility has been percapita net supply of food per day. Net supply of food is definedachieved: that is. even after the net reproduction rate has reached as above. Requirements for all countries established by USDAunity. The momentum of a population in the year t is measured as provide for minimum al;owances of 60 grams of total protein pera ratio of the ultimate stationary population to the population in day and 20 grams of animal and pulse protein, of which 10 gramsthe year t. given the assumption that fertility remaias at replac- should be animal protein. These standards are lower than those ofment lewel from year t onward. 1985 data. 75 grams of wtal protein and 23 grams of animal protein as anpopuation Densit average ror the world, proposed by FAO in the Third World FoodPer sqkm.-Mid-year population per square kilometer ( 100 t Supply: 1961. 1970 and 1982 data.tares) of total area 1960. 1970. and 1983 data. Per Capia Proein Supply frm Animl and Puke-Protein supplyPer sqkm. agriultural kind-Computed as above for agricultural of food derived from animals and pulses in grams per day: 1961-65.land only. 1960. 1970. and 1982 data. 1970 and 1977 data.Aopulation AgeSirrncru (percetn-Children (0-14 yearsl. work- Cfid (ages 1-4) DeashRare(perrtousand)-Numberofdeathsofing age(I 5-64 years). and retired (65 years and over) as percentage childrcn aged 1- years per thousand children in the samne ageof mid-ycar population: 1960. 1970. and 1983 data. group in a given year. For most developing countries data derivedPopuaton Growth Rate (peArcen-total- Annual growth rates of from life tables: 1960. 1970 and 1983 data.total mid-year population for 1950460. 19t60-70. and 197O-13. HEALTH

Popution Growth Rate (percenrt-,rban--Annual growth rates Lie Epctancy t Birth (yearsn-Number of vcars a newbomof urban population for 1950-60. 1960-70. and 1970-83 data. infant would live if prevailing pattems of mortality for all people

ANNEX I- 23- Page 4 of 6

at the time of of its birth were to stay the same throughout its life; PApd-teader Rotio - primary. and secondary-Total students en.1960, 1970 and 1983 data. rolled in primary and secondary levels divided by numbm ofWoefsat Mat sA e (p. thuaaa)-Number Or infants who die tetcies in the corresponding klvelsbefore reaching one year of ae per thousand live births in a givenyear 1960, 1970 and 19h3 data. CONSUMPTIONAces ea Safe Wtr (pfr- t pun)t _ d fsjq Cars (per tb._ad pop. J -Passenger cars con-r_al-Number of people tt-u. urban and rural) with reasonable prise motor car seating less than eight persons; excludes ambul-access to safe water supply (includes treated surface waal or atces hearses and military vehides.untrnated but unwcontmited water such as that from protectd Rieb Rect (pfr ea Jdp-pd I)-A types of receiversborhoks. springs and sanitary wells) as pcentags of their mqec- for radio broadcasts to general public per tholaund of population;tive populations. In an urban ar a public fountain or sandpost excludes ic-lnsed receivers in countries and in years whenlocated not more than 200 meters from a house may be considered registration of radio sets was in effect; data for recent years mayas being within reasonable aces of that house. In rural ares not be comparble since most countries abolished licensing.reasonable ac' would imply that the housewife or member of thehouselhold do not have to spend a disproportionate part of the day TVRtv (pr h p.-TV vers for brostin fetching the family's water ncets. to gencral pubbc per thousand populaion; exckudes uncesetd TV

A a. & Dupesai e .juiata.ajaesa~ mien receivers in countries and in years when regstratio of TV sets wasAce"s toxe &on Dipmfi (pertem of e hm o)-J s arb a efect.and rural-Number of people (total. urban. and rural) served by mexcreta disposal as percentages of their respective populations. A"'Fa.g Cicd.tigw (per thnasu.dpepdti..i-Shows the aver-Excreta disposal may indude the collection and disposaL with or age circulation of -daily general interst newspaper.' defined as awithout treatment, of human exereta and waste-water by water- periodkal publication devoted prinarily to recording geeral news.borne systems or the use of pit privies and similar installations It is considered to be 'daily' if it appamm at kast four times a week.Popak°i- per Physicion-ltipulation divided by number of prac- C uens Amwal AneAauer per Capx per Y_-Based on thetising physcians qualified from a medical school at university level. number of tickets sold duning -c year. including admissions toP qpaiwiam per Nxrjirg Arrson-Population divided by number of drive-in cinemas and mobile units.practicing male and female graduate nurses, assistant nurses,pracical nurses and nursing auxiliares. LO FORCEP1pallu per HospaW .Bed-tol, urBn, a_l aral-ltpulation Total Labor Fame (thma_dJ)-Economially active persons, in-(totaL urban, and rural) divided by their respective number of cluding armed forces and unemployed but exlduding housewives.students. etc.. covering popuLation of alf ages. Definitions inhospital beds available in public and private, general and sahzd v c ahospitals and rehabilitation centers. Hospitals are cstablishments wanous countres am not compable; 1960. 1970 and 19S3 data.permanently staffed by at least one physician. Establishments prov- Femake (ercearn-Fernalc labor force as petcenage of total laboriding principaly custodial care are not included. Rural hospitals. force.howcver. include health and medica renters not permanently staffed Ap.fchue (percenti-Labor force in farming, forestry. huntingby w physician (but by a medical assistant, nurse, midwife. etc.) and fishing as percentage of total labor fnc; 1960. 1970 and 1980which offcr in-patient acconunodation and provide a iumited range data.of medial facilities. hidostry (perceat)-Labor force in mining. constnrution. manu-Adrsios per Hospital Bed-Total number of admissions to or facturing and electricity. water and ps as percentage of total labordischarges from hospitals divided by the number of beds. force; 1960. 1970 and 1980 data.

P -rk,ati Raoe (percea)-a tl,a _I, afelie-ParticipationHOUSING or activity rates are computed as totaL male, and female labor forceAeme -lr Hehd fpers p er ho_sdol)-tataL m, as Per entages of totaL male and femae population of aU agesadrina,-A household consists of a group of individuals who share respectively; 1960. 1970. and 1983 data. These are based on ILO'sliving quarters and tbeir nain mek A boarder or kedgr may or participation rates reflecting age- sexstructure of the population. andmay not be induded in the household for statistical purposes. long time trend. A few estimates are from national sources..4erage lV/uber of Persons per Roe -ioral, rhm, sad rEral- Ecouac DepeAdey Rati-Ratio of population under 15. andAverage number of pemons per room in al urban, and rural 65 and over. to the working age population (those aged 15-64).occupied conventional dwellings. respectively. Dwellings excludenon-permanent structures and unoccupied parts. INCOME IDLSRIBUTLONPercrtage of Dwelags with Electry-total, urba,and rur- Percentage of Totra Dipabk Iowe (bath i cah aed kad)-Conventional dwellings with electricity in living quarters as percen- Accruing to pentile grmups of households ranked by total house-tage of total. urban. and rural dwellings respectively, hold income.

EDUCATION POVERTY TARGET GROUPSAdjusted Ea uta Ratios The following estimates are very approximate measures of povertyPhsary school - total nuale awd feme-Gross totale m and lees, and should be interpreted with considerable caution.female enrollment of all agcs at dte primary klvd as percentages of Esriaured Abso&e Ibrery Iame Leve (USS per caprJ)-,_rbaarespective primary school-age populations. While mrany countries and rnral-Absolute pnverty income levd is that income levdconsicer primary school age to be 6-l1 years, others do not. The below which a minimal nutritionally adequate diet plus esse ntialdiffernces in country practices in the ages and duration of school non-food requirements is not affordable.are rcfl cted in the ratios given. For some countries with universal Esimated Reliv Fbverry Incomw Level (USS per capita)-arbieducation, gross cnrollment may exceed 100 percent since some ad rxral-Rural relative poverty income level is one-third ofpupils are below or above the country's standard primary-sdool average per capita personal income of the country. Urban level isagc. derived from the rural level with adjustment for higher cost ofSecondar, school - total. ale and femae-Computed as above; living in urban areas.secondary education requires at least four years of approved pri- Ewserda Pboplton Beow Absewe Povry Incomw Levd (per-mary instruction: provides generaL vocationaL or teacher training cent)-whan and uwal- Percent of population (urban and ruralinstructions for pupils usuaBy of 12 to 17 years of age; correspond- who are -absolute poor.'cnce courses are generally exduded.Vocational Enrolbnenr (percent of secondarvi-Vocational institu- Comparative Analysis and Data Divisiontions include technical. industriaL or other programs which operate Economic Anablsis and Projections Departmentindependendy or as departments of secondary institutions. June 1935

A. q18 **A6b&n.J - 24

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- 26 -

Annex IIPage 1 of 4

STATUS OF BANK OPERATIONS

A. STATEMENT OF BANK LCANS AND IDA CREDITS IN COLOMBIA (as of September 30, 1985)

(US$million)Loan Amount (less Cancellation)Number Year Borrower Purpose Bauk IDA Undisbursed

72 fully disbursed loans and one IDA credit 1,743.8 23.5 1/ -

1450 1977 Empresa Nacional deTelecomunicaciones Comunications 57.6 14.7

1471 1977 Colombia Highways 90.0 2.61487 1978 Colombia Nutrition 25.0 0.51558 1978 Colombia Urban Develop-

ment 24.8 3.41582 1978 Interconexion Electrica, S.A. Power 126.0 4.11583 1978 Colombia Power 50.0 10.41593 1978 Zona Franca Industrial y Industrial

Comercial de Cartagena Export 15.0 1.91694 1979 Colombia Urban Develop-

ment 13.5 6.21697 1979 Empresa de Acueducto y

Alcantarillado de Bogota Water Supply 27.9 0.11725 1979 Interconexion Electrica, S.A. Power 72.0 10.21726 1979 Instituto Nacional de Fomento

Municipal Water Supply 30.5 7.31737 1979 Instituto Colombiano de la

Reforma Agraria Agriculture Cr. 20.0 4.71807 1980 Empresa de Energia Electrica

de Bogota Power 84.6 32.61825 1980 Empresas Publicas de Nedellin Communications 44.0 3.21857 1980 Banco de la Republica Industrial Cr. 150.0 32.41868 1980 Empresas Publicas de Medellin Power 124.9 48.51953 1981 Empresas Publicas de Medellin Power 85.0 64.91966 1981 Colombia Rural Roads 33.0 10.01996 1981 Instituto Colombiano de

Hidrologia Irrigation 37.0 13.9

1/ Includes exchange adjustment of USS4.0 million.

The status of the projects listed in Part A is described in a separate report on allBank/IDA financed projects in execution, which is updated twice yearly and circulatedto the Executive Directors on April 30 and October 31.

- 27-

Annex IIPage 2 of 4

A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of September 30, 1985)

Number Year Borrower Purpose Bank IDA Undisbursed

1999 1981 Corp acion Electrica de laCosta Atlantica Pover 36.0 15.0

2008 1981 E-presa de Energia Electricade Bogota Power 359.0 171.7

2069 1981 Iustltuto Nacional de losRecursos NaturalesRenovables y del Medio WatershedAmbiente Management 9.0 7.2

2090 1982 Ferrocarriles Nacionales deColombia Railways 73.8 63.7

2121 1982 Fondo Vial Nacional Highways 149.6 86.22174 1982 Colombia Rural Develop-

ment 53.0 44.82192 1982 Fonda del Ministerio de

Educacion Rural Education 15.0 12.02303 1983 Instituto Colombiano Agricultural

Agropecuario Research 63.4 57.62349 1983 Carbones de Colombia. S.A. Coal

Exploration 9.5 8.72379 1984 Colombia Earthquake Re-

construction 40.0 24.62401 1984 Financiera Electrica Nacional Power Develop-

ment Finance 170.0 54.32449 1984 Empresas Publicas de Medellin Multipurpose

power & watersupply 164.5 150.2

2453 1984 Federacion Nacional de AgriculturalCafeteros de Colombiano diversifi- 50.0 46.3

cation2464 1984 Banco de la Republica Industrial Cr. 40.0 30.4

2470 1984 Empresas Municipales Water Supply 18.5 17.3de Cucuta

2476- 1984 Empresa Colombiana de Petrol Petroleum 130.0 106.22477 1984 Banco de la Republica Development

Banking 90.0 82.7

2512 1985 Empresa Acueducto Water Supply 129.0 120.9Alcantarillo de Bogota

2551 1985 Republic of Colombia Trade Policy 300.0 185.5Export Diver-sification

26111/ 1985 Republic of Colombia Health ServicesIntegration 36.5 36.5

TOTAL 4,791.4 23.5Of which has been repaid 1,033.1 5.1

Total now outstanding 3,758.3 18.4

Amount sold 51.0 -Of which has been repaid 51.0

Total now held by Bank and IDA 3,758.3 18.4_

Total undisbursed 1,593.4

- _

1/ Not yet effective.

- 28 -

Annex IIPage 3 of 4

B. STATENENT OF IFC INVESTMENTS (as of September 30, 1985

Fiscal Type of Amount in US$ MillionYear Obligor Business Loan Equity Total

1959 Lamlaas del Caribe, S.A. Fiber-board .50 .501960-1965 Industrias Allmentlclas

Noel, S.A. Food products 1.98 .08 2.061961 Envases Colombianos, S.A. Metal cans .70 - .701961-1968 Morfeo-Productos para el

Hogar, S.A. Home furniture .08 .09 .171961 Electromanufacturas, S.A. Electrical equlpment .50 - .501962-85 Corporacion Financiera Development

Colombiana financing 6.00 2.02 8.021962-1963-85 Corporacion Financiera Development

Nacional financing 6.00 2.04 8.041963-1967 Compar.4a Colombiana de Textiles 1.98 .15 2.131968-1969 Tejidos, S.A.1964-1970 Corporacion Financiera de Development

Caldas financing - .81 .811964-1968 Forjas de Colombia, S.A. Steel forging - 1.27 1.271966 Almacenes Generales de Warehousing 1.00 - 1.00

Deposito Santa Fe, S.A.1966 Industria Ganadera Livestock 1.00 .58 1.58

Colombiana, S.A.1967-70-74-85 ENKA de Colombia, S.A. Textiles 11.75 2.61 14.361969 Compania de Desarrollo de Tourism - .01 .01

Hoteles y Turismo, Ltda.(HOTURISMO)

1969-1973 Corporacion Financiera del DevelopmentNorte financing - .45 .45

1969-85 Corporacion Financiera del DevelopmentValle financing 6.00 .43 6.43

1970 Promotora de Hoteles de Tourism .23 .11 .34Turismo Hedellin, S.A.

1970-1977 Pro-Hoteles, S.A. lourism .80 .24 1.041973-1975 Corporacion Colombiana de Housing - .46 .46

Ahorro y Vivienda1974 Cementos Boyaca, S.A. Cement 1.50 - 1.501975 Cementos del Caribe, S.A. Cement 3.60 - 3.601976 Las Brisas Mining 6.00 - 6.001977 Promotora de la Interconexion

de los Gasoductos de laCosta Atlantica S.A. Utilities 13.00 2.00 15.00

1977 Compania Colombiana de Clinker, Cement andS.A. Construction

Material 0.49 2.24 2.73

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Annex IIPage 4 of 4

B. STATEMENT OF IFC INVESTMENTS (as of September 30, 1985) (Continued)

Fiscal Type of Amount in USS Millione Year Obligor Business Loan Equity Total

1981-1985 Leasing Bolivar Leasing 9.00 .20 9.20* 1981-1982 Petroleos Colombianos Ltd. Chemicals and

Petrochemicals 12.15 3.86 16.011983 Frigorificos Colombianos, S.A. Food Processing 1.00 0.54 1.541984 Cementos Rioclaro S.A. Cement and

Constructiondaterial 21.86 5.00 26.86

1984 Carbones del Caribe S.A. Mining 10.24 1.64 11.88

Total Gross Commitments 117.36 26.83 144.19Less cancellations, termina-

tions, repayments and sales 67.34 9.59 76.93

Total couitments now held by IFC 50.02 17.24 67.26

Total undisbursed (including 45.39 6.36 51.75participants) -

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Annex IIIPage 1 of 2

COLOMBIA

BARRANQUILLA WATER SUPPLY PROJECT

Supplementary Project Data Sheet

Section I : Timetable of Key Events

a) Time taken to prepare project: 7 months

b) Project prepared by: EPMB assisted by consultantsand the Bank

c) First presentation to Bank: August 1984

d) Departure of Appraisal Mission: February 1985

e) Completion of negotiations: October 1985

f) Planned date of effectiveness: March 1985

Section II : Special Bank Implementation Actions

None

Section III : Special Conditions

EPMB to:

- Enter into an agreement with the Department of Atlantico, no later thanJanuary 31, 1986, to obtain a grant of US$4.3 million equivalent from theDepartment for the project (para. 47).

- Maintain management continuity and ensure a high level of competence inits management staff (para. 49).

- Employ consultants for the technical assistance associated with theproject's institutional development component (condition of disbursement,para. 50).

- Employ consultants satisfactory to the Bank for constructionsupervision (condition of disbursement, para. 50).

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Annex IIIPage 2 of 2

- Maintain a unit in its Planning Department, with staff and functionsacceptable to the Bank, to coordinate the project's institutional developmentcomponent (para. 50).

- As a condition for provision of water by EPMB, enter into arrangementswith JAC's (a) assigning them responsibility for selection of locations forand proper maintenance of standpipes, and (b) establishing a mechanism forcollection of payment for water consumed (para. 51).

- Take all actions necessary to maintain revenues at a level sufficientto cover, both for EPMB's water and sewerage operations and for its consolid-ated operations, operating and mainLonance expenses, working capital needs,debt serv4 charges, including rescheduled payments to major creditors, andat least 10% of capital expenditures starting in 1987 and increasing to 30%by 1989 and thereafter (para. 57).

- Not incur any additional long-term debt or undertake any capitalexpenditures in excess of US$200,000 equivalent per year without the Bank'sagreement (para. 57).

- Pay off its overdue debt with major creditors and suppliers in accord-ance with an agreed schedule (condition of effectiveness, para. 57).

- Take actions necessary to achieve agreed financial and operationalperformance targets (paras. 5B and 59).

- Regularly provide the Bank with sufficient information to enable it tomonitor EPMB's investment program, financial position and success in meetingperformance targets (para. 58).

Government to:

- Ensure that import licenses for goods purchased under the project wouldbe issued promply by the Instituto de Comercio Exterior (INCOMEX) (para. 53).

- Take actions to enable EPMB to maintain management continuity andensure a high level of competence in its management staff (para. 49).