New Strategic Colombia-WB Partnership Approved

Contacts:

In Washington: Sergio Jellinek

(202) 458-2841 

sjellinek@worldbank.org

  In Colombia: Maria Clara Ucros

(57-1) 3263600 ext. 259

mucros@worldbank.org

•   US $4 billion over the next four years
• A US 550 million loan approved for business productivity

WASHINGTON, April 9, 2008 – The World Bank Board of Executive Directors endorsed   yesterday a new Country Partnership Strategy (CPS) for Colombia that proposes to maintain a lending program of up to US$ 4 billion (about US$ 1 billion per year) over the next four years, with an increasingly active International Finance Corporation program (IFC is the private sector arm of the World Bank Group)  in the range of US$ 300/400 million per year, complemented  by a variety of analytical,  advisory services and specialized grants.

The CPS embodies the World Bank Group’s evolving strategy for working in middle income countries by providing flexible programming, on-demand advisory services and technical assistance and long-term financing at very competitive rates and maturities. In addition, strong continuity with successful operations will be maintained through several second and third-generation operations.

“The World Bank Group and the Government of Colombia have built a productive and dynamic dialogue on a wide range of development issues and this has led to a strong lending program” said Axel van Trotsenburg, World Bank Director for Colombia and Mexico who continued “and the synergies offered by the combined services of IBRD, IFC and MIGA constitute a solid foundation for strategic, financial, and technical support”.

The Board recognized the significant progress the Colombian Government has made in addressing the economic, political and social challenges it faced during the last five years. However, many challenges still remain and the Government is addressing these through its 2006-2010 National Development Plan which is built around five main pillars—Peace and Security, Equity, High and Sustainable Growth, Environmental Sustainability, Good Governance.  It is these pillars which form the basis for the World Bank Group’s Country Partnership Strategy.

While the World Bank Group’s program will be determined on an annual basis, it is expected that the Bank Group will continue to focus on the following areas of engagement: extreme poverty, infrastructure and public services, competitiveness and private sector development,  public sector management, the environment, education, social protection, housing, transportation services, energy and mining, agriculture, sustainable tourism and peace-building.  The lending program is also expected to take advantage of new Bank lending instruments such as the Deferred Draw Down Option for contingency financing,  the first such operation which was approved today (see below).

“These new product lines position the World Bank Group well to respond to Colombia's major development challenges, such as reducing poverty, improving competitiveness, stimulating regional development, and adapting to global climate change”,   said van Trotsenburg. 

A US 550 million loan was approved to support business productivity

As part of this new strategy, the World Bank Board of Executive Directors also approved today a loan in the amount of US$ 550 million for the Third Programmatic Business Productivity and Efficiency Development Policy Loan to support the Government of Colombia’s competitiveness-enhancement reform process.

This loan will be implemented jointly by the Ministerio de Hacienda y Crédito Público (Ministry of Finance and Public Credit - MHCP) and the Departamento Nacional de Planeación (National Planning Department - DNP). This loan will support reforms in three key areas to address bottlenecks to the country's competitiveness: (i) fiscal management and financial sector development; (ii) quality standards and technological innovation; and (iii) infrastructure and logistics.

“By removing critical bottlenecks, Colombia will be better prepared to compete in the global market place and expand the benefits of globalization to all its citizens”,explainedvan Trotsenburg.

According to  Juan Carlos Mendoza,  World Bank Senior Financial Economist “the Bank has supported the Government of Colombia’s reform efforts through this program which is showing excellent results as shown by the record levels of foreign direct investment and non traditional exports”.

The DPL aims to promote fast and sustainable growth through stimulating private sector activity and investment. It is a commitment-linked fixed spread loan, US dollar denominated, payable in 26 years including a 9.5-year grace period. The Government has requested the Bank to use the Deferred Draw-Down Option (DDO) for disbursement of this loan, which will give the authorities the flexibility of drawing down the loan proceeds only if needed, provided that overall program implementation remains on track.

The new terms for the DDOs were recently approved by the Bank in March 2008 as a way to provide more effective support to IBRD middle-income country members. The instrument aims to address the needs of clients that are accessing capital markets for a large part of their funding needs and do not foresee the need for immediate IBRD disbursements, but would like access to a risk management tool to support structural programs in case an unexpected funding need were to arise.

-