Document of The World Bank FOR OFFICIAL USE ONLY Report No 60620-CO INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND INTERNATIONAL FINANCE CORPORATION COUNTRY PARTNERSHIP STRATEGY FOR THE REPUBLIC OF COLOMBIA FOR THE PERIOD FY2012-2016 June 12, 2011 Colombia and Mexico Country Management Unit Latin America and the Caribbean Region The International Finance Corporation Latin America and the Caribbean Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
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INTERNATIONAL BANK FOR RECONSTRUCTION AND … · Xiomara Morel, Alicia Pérez, Hnin Hnin Pyne, Rekha Reddy, Camila Rodríguez, Mariangeles Sabella, Taimur Samad, David Sislen, Eduardo
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Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No 60620-CO
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
AND
INTERNATIONAL FINANCE CORPORATION
COUNTRY PARTNERSHIP STRATEGY
FOR
THE REPUBLIC OF COLOMBIA
FOR THE PERIOD FY2012-2016
June 12, 2011
Colombia and Mexico Country Management Unit
Latin America and the Caribbean Region
The International Finance Corporation
Latin America and the Caribbean Region
This document has a restricted distribution and may be used by recipients only in the
performance of their official duties. Its contents may not otherwise be disclosed without
World Bank authorization.
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ii
CURRENCY EQUIVALENTS
(Exchange rate effective as of June 12, 2011)
Currency Unit Colombian Pesos
US$1.00 COP 1,773
FISCAL YEAR
January 1 to December 31
WEIGHTS AND MEASURES
Metric System
ABBREVIATIONS AND ACRONYMS
APEC Asia-Pacific Economic Cooperation APL Adaptable program loan CAF Corporación Andina de Fomento CAT DDO Catastrophe deferred drawdown option CCT Conditional cash transfer CPPR Country Portfolio Performance Review CPS Country Partnership Strategy CTF Clean Technology Transfer DAC Development Assistance Committee (OECD) DDO Deferred drawdown option DDR Disarmament, demobilization, and reintegration DNP Department of National Planning DPL Development policy loan ECD Early childhood development GDP Gross Domestic Product GEF Global Environment Facility GFDRR Global Facility of Disaster Reduction and
Recovery GOC Government of Colombia IBRD International Bank for Reconstruction and
Development IDB Inter-American Development Bank IDA International Development Association IDF Institutional Development Fund IFC International Finance Corporation IDP Internally displaced population
IMF International Monetary Fund JSDF Japan Social Development Fund LAC Latin American and the Caribbean Region (World
Bank) NGO Nongovernmental organization NTF Norwegian Trust Fund NUTP National Urban Transport Program OECD Organization for Economic Co-operation and
Development M&E Monitoring and evaluation
MESEP Misión para el Empalme de las Series de Empleo,
Pobreza y Desigualdad
MHCP Ministry of Finance and Public Credit NDP National Development Plan PFM Public financial management PPP Public–private partnership PSIA Poverty and Social Impact Analysis SFLAC Spanish Fund for Latin America and the
Caribbean SME Small and medium-size enterprise SSC South-South Cooperation SSKE South-South knowledge exchange STI Science, technology, and innovation TA Technical assistance WBG World Bank Group WBI World Bank Institute
I. INTRODUCTION .................................................................................................................. 1
II. COUNTRY CONTEXT ............................................................................................................ 1 A. POLITICAL CONTEXT ............................................................................................................................ 1 B. RECENT ECONOMIC DEVELOPMENTS AND PROSPECTS ............................................................................... 2 C. MACROECONOMIC OUTLOOK ............................................................................................................... 4 D. POVERTY LEVEL AND TRENDS ................................................................................................................ 5
III. GOVERNMENT’S VISION AND DEVELOPMENT CHALLENGES ..................................................... 6
IV. WORLD BANK GROUP PARTNERSHIP .....................................................................................10 A. LESSONS LEARNED FROM PREVIOUS CPS AND STAKEHOLDER FEEDBACK .................................................... 10 B. PROPOSED WBG PARTNERSHIP STRATEGY ............................................................................................ 12 C. THE WBG’S INDICATIVE PROGRAM...................................................................................................... 29 D. DEVELOPMENT PARTNER COLLABORATION AND SOUTH-SOUTH KNOWLEDGE EXCHANGE ............................. 30
V. RISKS .....................................................................................................................................31
Mariangeles Sabella, Taimur Samad, David Sislen, Eduardo Somensatto, Claudia
Tabuenca, María Clara Ucros, Joao Pedro Wagner De Azevedo, Eduardo Wallentin, and
Fernanda Zavaleta.
Invaluable inputs and suggestions were received from the broader Colombia Country
Team and the peer reviewers: Sascha Djumena and Peter Siegenthaler, as well as from
other participants of the concept review and regional operations committee meetings.
EXECUTIVE SUMMARY
Colombia is an upper-middle income country with the fourth largest economy in Latin
America. President Juan Manuel Santos assumed office in August 2010 with a strong
political mandate that gave his ―national unity‖ coalition an 80 percent majority in Congress.
The elections demonstrated the maturity of Colombia‘s democratic process and reflected a
strengthening of political institutions. The new President is committed to continue
implementing the core policy framework established by the previous government, while also
promoting new reforms to boost growth and tackle poverty and inequality.
Colombia has a solid and stable economy with a large domestic market and a rich
natural resources endowment. A strong macroeconomic framework helped cushion the
impact of the economic crisis. By 2010, the Colombian economy had fully recovered from
the 2008-09 slowdown; GDP growth reached 4.3 percent in 2010, compared to 1.5 percent in
2009. Private domestic demand, supported by higher consumer and investor confidence and
access to cheap credit, has led the recovery process. On the supply side, the recovery was
spearheaded by the mining and financial sectors.
In December 2010, the Government launched its ambitious National Development Plan,
called Prosperity for All. The overarching goals of this Plan are to increase employment,
reduce poverty, and improve security. The Plan has three strategic areas: (1) Sustainable
Growth and Competitiveness, (2) Equality of Opportunities for Social Prosperity, and (3)
Consolidation of Peace. Moreover, it highlights four cross-cutting themes: (a) Relevance of
International Relations, (b) Environmental and Disaster Risk Management, (c) Good
Governance, and (d) Regional Development and Integration.
This Country Partnership Strategy (CPS) builds on the successful experience of the
prior World Bank Group (WBG) strategy in Colombia. It aims to support the new
National Development Plan. The WBG will step up efforts to enhance development impact
through selectivity and to provide added value to the country. The IFC hopes to increase both
its investment and advisory operations in Colombia, as market conditions permit. The WBG
will carry out activities either through financial, knowledge, or convening services for which
the Government or the private sector has expressed explicit need. These activities are
combined as a results-focused package of support grouped under three strategic themes: (a)
Expanding Opportunities for Social Prosperity; (b) Sustainable Growth with Enhanced
Climate Change Resilience; and (c) Inclusive Growth with Enhanced Productivity.
Despite the slow decline of poverty and inequality over the last decade, Colombia has
continued to strengthen its social policies to expand opportunities to the majority of the
population. Colombia‘s efforts to achieve lasting peace are also commendable. Still, the
country‘s recent history has been marred by violence and armed conflicts that have precluded
it from reaching its full development potential. Violence has displaced a large portion of the
population, and the new Government has adopted policies to further promote peace.
While in recent years progress has been achieved in fostering infrastructure
investments, Colombia lags behind other Latin American countries. Management of
infrastructure assets, including maintenance, and improved information systems remains a
critical challenge within the context of Colombia‘s three-tier system of decentralized public
administration. While urbanization rates have remained high, the quality of urban services
has not kept up with the growth of cities. Environmental management and climate change are
increasingly important areas of policy action in Colombia. Despite Colombia‘s major
improvements in environmental management, environmental degradation affects public
health and welfare in significant ways and compromises the country‘s potential for
sustainable economic growth.
Colombia also needs to focus on achieving faster and more inclusive economic growth. The country requires policy efforts geared toward converting the country‘s natural and
human resources into a development pattern that accelerates growth and shares its benefits
with broad segments of the population. In particular, it requires skillful management of risks
and fiscal policy challenges associated with natural resources wealth and careful monitoring
and evaluation of policies and programs conducive to inclusive growth. Transparent and
effective public sector institutions (at national and subnational levels) and a friendly business
environment will also facilitate this growth. And in support of innovation and
entrepreneurship for higher productivity, the development in the financial sector must deliver
efficient and stable services with access for all people.
The programs under these strategic themes reflect current dialogue with the authorities
and include the ongoing portfolio as well as new activities running until FY13. Within
the framework of the National Development Plan, new activities beyond FY13 will be
identified in agreement with the Government to acknowledge the needed flexibility and
responsiveness to emerging requests. The CPS Progress Report, which is envisaged after the
next Presidential elections in 2014, will provide an update on the WBG engagement.
The IFC will seek investments in areas where it can add the greatest value. The IFC‘s
main objectives are to foster greater entrepreneurship in advanced fields or in developing
innovative business models. Investments will be focused initially on education, infrastructure
development, investment climate, royalty management, and corporate governance. Also, IFC
may engage with selected agribusiness clients to enhance yields and productivity.
1
REPUBLIC OF COLOMBIA
COUNTRY PARTNERSHIP STRATEGY (FY12-16)
I. INTRODUCTION
1. Colombia is an upper middle-income country with substantial potential yet with
relatively high rates of poverty and inequality. It has a solid and stable economy with a
large domestic market and a rich natural resources endowment. At the same time Colombia is
particularly vulnerable to natural hazards and faces an important challenge in consolidating
peace following decades of internal strife and violence.
2. This Country Partnership Strategy (CPS) covers the fiscal years 2012-16. It
proposes a World Bank Group (WBG) integrated program of financial, knowledge, and
convening services and has been designed to selectively support the Government of
Colombia‘s (GOC) new National Development Plan (NDP) 2010-2014. The proposed CPS is
also grounded in the LAC Regional Strategy and the WBG strategic themes. Its five-year
span takes into account the GOC election cycle in order to provide a mid-term opportunity to
address potential government and policy changes that will be reflected in the CPS Progress
Report. The CPS core principles are flexibility, responsiveness, and innovation. Past
experience has shown that WBG support to GOC is most effective by being adaptive and
receptive to emerging needs rather than just a blueprint of the terms and scope of the
partnership with GOC. The focus on innovation corresponds with the needs of a
sophisticated middle-income country and the WBG‘s efforts to add value to the GOC
program. The CPS lays out the guiding principles for shaping this partnership.
3. This CPS provides a summary of (a) the country context, (b) the Government‘s
vision and development challenges, (c) lessons learned from the implementation of the
previous CPS as well as stakeholder feedback, (d) a proposed new strategy for the WBG, and
(e) a description of risks in Colombia.
II. COUNTRY CONTEXT
A. Political Context
4. President Juan Manuel Santos assumed office in August 2010 with a strong
political mandate that gave his “national unity” coalition an 80 percent majority in
Congress. He won the second round of the Presidential poll by more than 70 percent of the
vote against a former mayor of Bogotá. Santos campaigned on a continuation of former
President Alvaro Uribe‘s democratic security and economic policies. The elections
demonstrated the maturity of Colombia‘s democratic process and reflected a strengthening of
political institutions. The country has undergone a transformation since 2002, striving to
move away from internal violence, drug trafficking, and weak institutions that has plagued
the country for many years. Today, Colombia has a resurgent economy with promising
prospects. It is a safer, more stable country that is more popular with foreign investors, and it
aspires to join the OECD group of countries.
2
5. The Santos Administration registered several significant achievements early in
its first term. This includes the restoration of diplomatic and trade relationships with
Venezuela, which had been broken off shortly before the second round of the presidential
elections in July 2010. Relationships were also fully normalized with Ecuador. Moreover, an
agreement reached with the United States increases the likelihood that the bilateral Free
Trade Agreement, which was signed in 2006, will eventually be implemented. Overall, these
positive developments have helped boost the popularity ratings of the President and
strengthened the national unity coalition.
6. The Santos Administration has launched a very ambitious reform program. To
consolidate the fiscal stance and manage windfalls from commodities production, Congress
has approved a new fiscal rule, a reform of the royalties system, and a proposal to make
fiscal sustainability a Constitutional criterion. Tax exemptions have been reduced, loopholes
closed, and import tariffs lowered in an effort to enhance revenues and promote
competitiveness. Legislation has been passed to reduce informality and encourage youth
employment. A new legal framework is being introduced to improve the performance of the
health system, including the enactment of an ordinary Health Law in 2011. And, a Victims
Law (Ley de Victimas) will compensate victims who have been harmed by actions as a result
of conflict.
7. Municipal and regional elections are scheduled for October 2011, and the next
legislative and presidential elections are set for March and May 2014, respectively. The
outcome of the municipal and regional elections will help to gauge the support for the
various coalition members as well as the opposition during 2011–2015.
B. Recent Economic Developments and Prospects
8. Colombia is an upper-middle income country whose economic performance is
typical of the major economies in Latin America. The economy is well endowed with
natural resources, including oil, coal, gas, iron, and gold. The domestic market is sizeable,
making it important for aggregate demand growth. Agribusiness (particularly coffee) and
manufacturing (e.g., the car industry) are also relatively well developed. Improved security
combined with business-friendly investment rules has led to a surge in foreign direct
investment, particularly in the oil and mining sector.
9. Following a longer period of broad-based economic growth, the economy was
not affected too severely by the global economic crisis. Between 2002 and 2007, GDP
growth averaged 5.0 percent per year on account of an improving security situation and a
favorable external environment. The economy slowed down in 2008 to a growth rate of 3.5
percent, as economic policies were tightened to address overheating. The country‘s strong
macroeconomic framework and the resilience of the financial sector helped cushion the
impact of the global economic crisis. Monetary policy responded swiftly as the policy rate
was lowered from 10 to 3 percent. Fiscal policy also contributed to support aggregate
demand. Countercyclical policies were combined with a flexible exchange rate regime,
which acted as a shock absorber to counter the deceleration in external demand. By 2010, the
economy had largely recovered from the slowdown, although a collapse in exports to
Venezuela has held back some economic expansion. The GDP growth increased by 4.3
percent in 2010 compared with 1.5 percent in 2009.
3
Table 1. Key Economic and Fiscal Indicators (percent of GDP)
arrangement under the IMF Flexible Credit Line, approved in May 2011, will mitigate these
risks continuing to provide space for policy flexibility while bolstering Colombia‘s access to
international markets if tail risks were to materialize.
100. Another external economic risk derives from a slower-than-expected global
recovery. Earlier fears of a double-dip recession have not materialized, but there are
important downside risks. Future developments in the United States, in particular, are of
importance to Colombia. Substantially higher oil prices or a further decline in domestic
housing prices could dampen confidence and consumer spending in the United States. This
would reduce demand for Colombian exports. Higher global prices for Colombia‘s
commodity exports will mitigate this impact, but the recovery of non-traditional exports
(e.g., flowers) may be slower than expected. The Bank and the IMF are maintaining an on-
32
going policy dialogue with the Government on macroeconomic policy issues, which may
help detect early potential threats to Colombia‘s growth.
101. Rising food prices. Since end-2010, global food prices have risen substantially and
are now at levels comparable to the 2008 crisis with a risk that they may rise even further
owing to global market conditions. High food prices raise macroeconomic as well as social
concerns. Higher global prices are, to some extent, transmitted to domestic food prices,
which in turn generate inflation. If the Central Bank evaluates that the price effect is
permanent or that it affects expectations for inflation, then it may decide to tighten monetary
policy, which would dampen the economic recovery. Higher food prices directly affect
poverty given that a relatively higher share of household consumption is devoted to food
expenses among the poor. The Government of Colombia can mitigate this impact through
social programs, including an increase in the amount of conditional cash transfer.
102. Policy slippages in implementing fiscal reforms. Given the high level of ambition
for the fiscal reform agenda, there is a risk of slower progress in politically contentious areas.
This unfortunately has been frequently the case in Colombia when dealing with structural
fiscal reforms in the past (e.g., pensions, health care). This would call for frontloaded action
in key policy reform areas that signal commitment to strengthening fiscal institutions and
reducing fiscal risks. Moving forward with the most contentious issues first would signal
strong commitment to reform and mitigate some of these risks. The Government has, to some
extent, followed this strategy, for instance, by bringing forward the royalties reform and
frontloading the fiscal adjustment. The Bank will stay engaged through its programmatic and
comprehensive engagement in the fiscal reform program.
103. Sustainability of reform efforts in disaster risk management. In the aftermath of
the La Niña event, natural disaster risk management moved to the top on the political agenda.
The Government designed an effective post-disaster financing mechanism; included the
theme in the new National Development Plan; and between December 7, 2010 and January 6,
2011, the issued several decrees to improve the country‘s future crises preparedness. While
there are important indications that Colombia is heading toward an improved institutional
framework, there is a risk that reform attention will be diverted as the memory of the recent
disaster fades and other priorities rise up the political agenda. The Government has asked the
Bank to be its strategic partner in moving the reforms forward, and the Bank can try to
mitigate the risk by reminding the Government of importance of the agenda.
104. Working at subnational level. As the Bank intensifies its engagement at the
subnational level, fiduciary and safeguard risks will increase — as will the costs of attendant
mitigation mechanisms. The Bank may also face potential reputational risks as it expands its
support into regions where local governments might be subject to the influence of illegal
groups and other non-state actors. The Central Government‘s commitment to work with the
subnational authorities and the Bank to embed strong fiduciary measures will help offset
these potential risks.
105. Promoting peace, deposing violence. Peace has not been secured throughout the
entire country. Poverty, corruption, and the drug trade remain significant challenges. A rise
in urban crime and violence from illegal groups tied to the drug trade — some of which have
been formed by former paramilitary combatants — represents an increasing security
challenge and will require more attention from the Government during 2011–16.
33
Strengthened drug cartels in Mexico and Central America working closely with Colombian
suppliers also impose a challenge for the authorities in the years to come. Beginning in early
2000, the Bank has been closely involved with the Government in a range of activities
related to community-driven conflict resolution and management as part of the peace pillar in
the previous CPS. These activities are likely to continue in coming years as the new
administration has broadly adopted policies to further promote peace.
34
Annex A: CPS Results Framework
Country Development Goals
(from NDP) Issues and Obstacles CPS Outcomes Milestones
WBG Program (and
Partners)
Expanding Opportunities for Social Prosperity Enhanced Social Promotion and Improved Citizens Security
Social Protection: Families
graduated from the Unidos
Program that meet conditions to
not be in Extreme Poverty
Baseline: 0 (2011) Target: 350.000 (2014)
Reduction in overall and youth unemployment rates:
Baseline (2010): 12.0% (overall) and 21.6% (youth)
Target (2014): 8.9% (overall)
and 16.1% (youth)
1. Weak coordination among
programs for poverty reduction
2. Barriers to create formal
employment, including high labor
costs, relevance of skills, complex regulatory framework to establish
businesses
3. Deficiencies in enforcement of
basic rights of IDP‘s
1. Better coverage of Unidos
program (merger of two key
poverty reduction programs)
Baseline: 0
Target: 1.5 million
2. Increase in the coverage of
municipalities that offer active labor market policies to enhance
labor productivity and reduce
barriers to the employability of the poor
Baseline: 0 Target: 300 new municipalities
3. Increase in number of land
rights protected of internally
displaced people who abandoned
their land due to forced displacement
Baseline: 83.450 households
(2.525.566 hectares) protected (2008)
Target: 219.450 households X
hectares (2014)
1. Merger of CCT (Familias en
Accion) and social promotion
strategy (Juntos) into a single
program (Unidos)
Baseline: Programs operate separately
Target: Programs merged
2. Design and implementation of
the program Trabajemos Unidos,
to provide active labor market policies for the poor.
Baseline: 0
Target: Program created and
implemented at pilot or national
scale
Financial Services:
Lending – Ongoing:
Support for the Second Phase of the Expansion of the Program of Conditional Transfers-Familias en Acción Project – Social Safety Net II(P101211) Peace and Development (AF) (P051306) Lending – Pipeline:
Social Safety Net III (SIL) (FY13) (P104507)
Knowledge Services:
Enhanced Social Promotion (P123158) (Programmatic)
Financed by grants - Ongoing:
Empowering young women affected by violence (JSDF, TF093829/TF093830) Soccer together (JSDF, No-code yet) Peaceful Dispute Resolution Services for the Poor (JSDF, TF091176, Recipient) Gender and IDPs (GENTF, TF095198) Protection of Land and Patrimony of IDPs Phase 3 (SPBF, TF094596) Access to Opportunities for Youth (JSDF, TF093141) Labor Reforming Cajas de Compensación Familiar (CCF) (PSIA, TF097240) Institutional Community Strengthening for Local Governance (JSDF TF091174) Youth Reintegration Project (Colegio del Cuerpo) (IF-P095598-CAH-BB)
35
Country Development Goals
(from NDP) Issues and Obstacles CPS Outcomes Milestones
WBG Program (and
Partners) Study on conflict and education resilience in Antioquia as part of the
global study ―Towards a Tool to
Assess Violent Conflict and Educational Fragility/Resilience in
Conflict-affected and Post-Conflict
Countries‖(Fragile States Program – HDNED) Financed by grants - Pipeline:
Strengthening Human Rights to Basic Social Services in Peace and Development Zones (NTF, TF096627)
Convening Services:
Financed by grants:
Community Practice CCTs South-south transfer - labor Social network on health financing Natl. Tech. Comm. - IDP‘s Assets Protection Program Human Rights-Peace & Dev. Dialogue Support for South-South Dissemination on DDR (WBI initiative IFC Possible direct lending to and/or equity investment in microfinance institutions. Advisory services support for transitioning microfinance lenders to regulated institutions Low-income housing finance.
Improved Opportunities In Education
Human Capital Formation: Education Coverage (Higher)
Baseline: 35.3% (2011)
Target: 50% (2014)
1. Subpar learning outcomes compared to other countries in the
region.
2. Pronounced disparities in
access and quality of secondary
and tertiary education.
1. Increase in enrollment rates (primary and lower secondary;
and secondary education) of
students from poor and rural
households (31 poorest territorial
entities, including 17 departments
and 13 municipalities).
Baseline:
NER primary and lower secondary: 90.21%
1. Enhanced policy framework for quality of education
Baseline: Current framework
Target: Revised framework
2. Improve national system for student assessments
Baseline: Current system Target: Transformed system
(from NDP) Issues and Obstacles CPS Outcomes Milestones
WBG Program (and
Partners) NER upper secondary: 30.84% Target:
NER primary and lower
secondary: 94% NER upper secondary: 35%
2. Increase in tertiary education enrollment of students from poor
households
Baseline: 75,000
Target: 150,000
Risk Management:
Local currency financing for ICETEX, Antioquia Knowledge Services:
Improved Opportunities in
Education (P123144) (Programmatic)
Benchmarking of basic education system Joint OECD/WB Review of the national tertiary education system Joint OECD/WB Review of the tertiary education system at the regional level (Antioquia)Review student loan and scholarship programs Diversify ICETEX financing portfolio Technical and Vocational Education Policy Note Financed by grants – Pipeline:
SSKE CO- Morocco on Measuring Learning outcomes in Higher Education IFC ongoing and potential new projects in technical and vocational adult education Piloting financial literacy programs.
Improved Performance of Social Services
Early Childhood Attention to
Vulnerable Children Baseline: 566,429 (2011)
Target: 1,200,000 (2014)
Access to Health: Coverage of
Subsidized Regime Baseline: 90.2% (2011)
Target: 100% (2014)
1. Fragmented service delivery
systems
2. Blurred institutional mandates,
fragmented financing and
information systems and weak
accountability arrangements
1. Strengthened information
systems to monitor service delivery and strengthen
accountability in health, education
and ECD
Baseline: Multiple information
systems do not effectively capture productivity and quality of
services in health, education and
ECD
Target: Unified information
1. Develop information system for
ECD
Baseline: Information system to
be developed
Target: Plan for ECD information
system developed
2. Strengthen management and
information system of the health
insurance system for the poor
Baseline: Reform strategy lacking
Knowledge Services:
Improved Performance of Social
Services (P123301) (Programmatic)
Financed by grants - Ongoing: Avian Influenza (TF 098473) Financial Capabilities and Education Measurement Project (FLIT TF097524) Financed by grants - Pipeline:
Implementing the right to health (NTF, TF096788) Strengthening Governance of Early
37
Country Development Goals
(from NDP) Issues and Obstacles CPS Outcomes Milestones
WBG Program (and
Partners) systems capture productivity and quality of services in health,
education and ECD
Target: Reform strategy developed
3. Strengthen information system of education sector
Baseline: Reform strategy lacking
Target: Reform strategy
developed
Childhood Development Programs (SFLAC TF099190) Colombia enhancing governance, transparency and accountability in education (IDF grant) Convening Services:
Financed by grants:
South-south transfer health sector regulation Community of Practice ECD North-South transfer ECD South-South transfer ECD ALAS – Colombia University and WB partnership on ECD
Sustainable Growth with Enhanced Climate Change Resilience Improved Sustainable Urban Development
Cities with urban mobility solutions in place
Baseline: 10 (2011) Target: 30 (2014)
Construction Dynamic-# of houses/apartments initiated in the
2010-2014 period)
Base: 560.300
Target: 1.000.000
1. Infrastructure investments and quality of urban services has not
kept up with the growth of cities
2. Land management and housing
development for low-income
segments of the population remains a critical challenge
1.Increased population benefitting from improved transportation
services in large cities;
Baseline: 460,000 (2011)
Target: 1,800,000 (2014)
2. Increased population benefitting
from improved transportation services in medium-sized cities;
Baseline: 0 (2011) Target: 150,000 (2014)
3. Improved institutional capacity
of the central Government to plan and deliver transportation services
Baseline: n/a (2011)
Target: Improved (2014)
1. Number of low income beneficiaries with access to
housing units under
Macroproyectos subprojects, The target would be 40,000
Baseline: 0 (2011) Target: 40,000 (2014)
Financial Services:
Lending - Ongoing:
La Guajira Water and Sanitation Proj (P096965). Bogota Urban Services AF (P074726) Solid Waste Mgmt Project (P101279). Macroproyectos Project (FY11)-(P110671) Integrated Mass Transit Systems (P082466 / P114325) Rio Bogota Project (FY11)-(P111479) Lending - Pipeline:
National Urban Transport (FY12) (P117947)
Knowledge Services:
Financed by grants - Ongoing:
Strategic Basin Planning for the Rio Bogota (WPP, TF095149) Regulatory Aspects of Transport (SFLAC, TF096162, Recipient) Nordic Fund for Universal Access to BRTs (NF, P114302, Recipient) Pilot Impact Evaluation Pereira BRTs-(NTF, TF096953, Recipient)
38
Country Development Goals
(from NDP) Issues and Obstacles CPS Outcomes Milestones
WBG Program (and
Partners) Metro Study, Integration Public Transit Syst., SNTA (3 cities), and Comm. Campaign BRT Impl.(PPIAFs ,TF074726, Recipient) - Integration of Public Transit Systems (SFLAC, TF071296) - Cartagena Bus Rapid Transit System ( P11517, CF) Analyze the Experience of Specialized Water Operator in Colombia (SFLAC TF098814) Colombia Low Carbon Study (SFLAC TF098916) Cities Alliance-Macroproyectos de Interes Social Nacional (CITIES TF098963) Institutional Strengthening and Capacity Building to Support the Rio Bogota Environmental (SFLAC TF097840) Financed by grants - Pipeline:
Public Transport Regulatory Framework (SFLAC, TF096162, Recipient) Water Resource Model (TF096847)
AAA:
Cities Alliance support for Macroproyectos: Developing a Policy and Program Framework Urbanization Review II ) Urban Renovation TA (2 cities) PPIAF - Urban Renewal Financing Instruments Social Compact Work IFC
Transportation, telecom, and multi-sector projects Low income housing projects PPP structuring vehicle for all types of infrastructure
39
Country Development Goals
(from NDP) Issues and Obstacles CPS Outcomes Milestones
WBG Program (and
Partners)
Enhanced Disaster Risk Management
Technical capacity of territorial
entities and CAR in risk
management (# of formulated plans per municipality)
Base: 226 (2011) Target: 790 (2014)
Municipalities assisted and
recovered from rain season
Base: 0 (2011)
Target: 755 (2014)
1. Need to improve territorial
management;
2. Lack of investment in disaster-
resistant infrastructure
1. Strengthened technical
capacity for disaster risk
management at national and regional levels
Baseline: n/a (2011) Target: Improved (2016)
2. National Policy for Disaster
Risk Management formulated.
Baseline: No (2011)
Target: Yes (2016)
1.At least 50 percent of
Colombian Municipalities with
Municipal DRM plans
Baseline: TBD (2011)
Target: 50% (2014)\
2. At least 250 functioning
geological or hydrometeorological
stations connected with early
warning systems
Baseline: TBD (2011)
Target: 250 (2014)
3. Successful definition and
implementation of vulnerability reduction investments in at least 2
Low Carbon Growth (P123695) National Adaptation Plan (TF056350) Rio Amoya CF (TF053534), Jepirachi CF (TF051156), San Nicolas Carbon Sink CF (TF056577) INAP GEF, Mainstreaming Cattle Ranching GEF (TF096465), Protected Areas GEF(TF094084), Netherlands Conservation Incentives Grant FCPF Readiness (TF097224) GEF Protected Areas AF (TF056351) Water Resources and Air Quality Management (SFLAC, TF097348) + Training (WPP, TF096847) Finance by grants – Pipeline:
Course on hydrological modeling for decision makers (WPP financed) International Glacier network Low Carbon Development Study (P124909)
IFC
Green building codes, energy
efficiency, cleaner production
41
Country Development Goals
(from NDP) Issues and Obstacles CPS Outcomes Milestones
WBG Program (and
Partners)
Inclusive Growth with Enhanced Productivity Improved Fiscal, Financial and Social Risk Management
Economic growth (average for
4yr-period)
Baseline: 4,1% (2011)
Target: 6,2% (2014)
1. Price fluctuations and
exchange rate appreciation related
to increased commodity production have important fiscal
and economic impacts that need to
be well managed at national and subnational levels.
2. Public sector contingent
liabilities related to pensions, health care, litigation, and natural
disasters are sizeable and require
sound management.
3. There is scope for further
improvement in the monitoring of
social impacts of crises.
4. The global crisis has exposed
the need to enhance regulatory
and supervisory standards for the financial system.
1. The Central Government meets
the structural fiscal deficit target
for 2014 (2.3% of GDP or less).
2. Financial instruments to
mitigate natural disaster risks have been implemented by 2013.
1. The Central Government
overall deficit:
Baseline: 3.9% (2010). Target 3.5% of GDP or less by 2012 and
3.2% of GDP or less by 2013.
Financial Services:
Lending – Pipeline:
Fiscal Sustainability and Growth Resilience DPL series (FY12-13)
Knowledge Services:
Financed by grants – Ongoing:
National Level Public Finance Study (P106916)
Knowledge and advisory services
to improve the monitoring of social impact of the crisis
Financed by grants – Pipeline:
Institutional Mineral Rights Cadastre Reform (SFLAC) Banking ROSC and FSAP Update
Analyzing the contribution to shared
IFC
Revenue management advisory services in mining (municipalities)
Convening Services:
Fiscal Risk Management
(SFLAC). This activity supports activities related to the improved
management of health and pension
liabilities.
42
Country Development Goals
(from NDP) Issues and Obstacles CPS Outcomes Milestones
WBG Program (and
Partners)
Improved Public Sector Management and Equity and Efficiency of Economic Policies Reduced income inequality as
measured by the Gini coefficient
Baseline: 0.58 (2009)
Target: 0.54 (2014)
1 There is a need to increase
transparency, improve
management capacity, and strengthen the accountability of
public institutions.
2. Effectiveness and efficiency of
public expenditures are poor due
to lack of adequate and timely information on budget execution
at national and sub-national level.
3. Regulations and systems related
with key public management systems including financial,
investment, procurement and tax
management are not linked, preventing the provision of
reliable information on public
expenditures and revenues, as well preventing to the M&E systems.
4. Public management capacities at sub-national level of
government are weak, preventing
the adequate management of public resources and investments,
as well the adequate provision of
services.
5. There is scope for improvement
in the poverty measurement methodology in Colombia.
6. There is scope to improve the existing M&E system for results
7. There is scope to improve access to information in the
country, in particular timely and
well documented access to surveys and administrative
records.
8. There is scope to improve
economic policies to promote
upward mobility and expand the
1. Enhanced public sector
efficiency and transparency by
strengthening and expanding the individual management
information systems that are the
building blocks of an integrated, performance-informed
management model, including:
Sistema Integrado de Informacion Financiera SIIF-Nación, Sistema
Unificado de Inversiones y Finanzas Públicas
SUIFP and Modelo Único de Ingresos, Servicios y Control Automatizado
MUISCA.
Baseline: 2011 - Public Management Information Systems
do not provide on time reliable
information on expenditures and investments.
Target : 2015 - Public
Management Information Systems provide on time, reliable and
consistent information on budget
and investment execution.
2. Management capacities at sub-
national level of governments are improved and have a positive
impact in the quality of
expenditures and the provision of services.
Baseline:2011 - Lack of efficient
mechanisms in the National Government to provide effective
and efficient support to sub
national governments for the strengthening of management
capacities.
Target: 2015 - A set of mechanisms have been put in
place and are available to sub
national governments to improve their management capacities.
1. 100% of consolidated budget
information (at the level of
individual entities) is published online on a monthly basis within
the first week of the following
month Baseline: Currently not published
Target :80% by 2014
2. SIIF and SUIFP information on
the allocation and execution of budget items is fully consistent.
Baseline Not consistent today
Target ?Consistency achieved by 2013.
3. A cloud computing scheme to provide financial management and
monitoring services to local
governments is implemented. Baseline: Currently not existing
Target: First version operating by
2013
4. A program to increase
managerial capacity at sub national level is implemented
Baseline: Not existing
Target: The program is launched in 2012 and by 2013 20% of low
performing municipalities are
included in the program.
5. The FUT (Single Territorial
Format) is implemented as the sole source of sub national budget
and final reporting)
Baseline Limited coverage Target Sole source by 2012
6. New poverty methodology is finalized and announced and well
received by the public.
Baseline: May 2011 official poverty methodology (based in
1996 expenditure survey)
Target: May 2012 revised poverty
Financial Services:
Lending - Ongoing:
Consolidation of National Public Management Information Systems Project (P106628) Strengthening Justice Services (P083904) Strengthening Public Information, Monitoring, Evaluation for Results Management SIL(P099139) Lending – Pipeline:
Legal claims mgmt system (IDF, TF058311, Recipient) Expanded subnational rapid assessments of PSM Decentralization Study (P101308) Strengthening Procurement System (TF092702, Recipient) IDF Procurement Law Reform Implementation Advisory work on accounting and financial reporting standards Peaceful Dispute Resolution for the Poor (TF091176) Support for the creation of a central Procurement office Citizen‘s visible audits to improve public investment transparency and accountability (Global Partnership Facility, TF096676) Assessment for e-GP and Road Map Strategy Preparation of National Standard Bidding Documents TA on the review of the current subnational control systems TA in strengthening CGR inst AAA
Poverty, Labor Markets, Inequality
and Monitoring and Evaluation
(Programmatic)
43
Country Development Goals
(from NDP) Issues and Obstacles CPS Outcomes Milestones
WBG Program (and
Partners) middle class.
9. There is scope to improve
economic policies to strengthen the productivity of the informal
sector, and in particular, service
sector.
10. Large percentage of the
population has limited access to basic financial services.
11. Colombia‘s free trade
negotiations with the US and other countries necessitate efficient and
transparent trade transactions that
will serve to enhance Colombia‘s image in world markets as a
trading partner, to generate
savings for the private sector and improve transparency. This will
serve to increase Colombian
exports.
3. Improved quality and accessibility of the evidence base
for decision making and
particularly for policies and programs related to poverty
reduction.
Baseline: 2011 - No micro data produced by DANE is made
available to the public.
Target: 2015 - Public guidelines to grant access to the micro data
produced by DANE.
4. Improvement in the movement of cargo in and out of Colombia
by enhancing automation through
the VUCE system and improved handling of cargo at ports through
risk based policy and procedures.
Baseline: 24 days for imports and 23 days for imports.
Target for 2014: 10 days to import
and 9 days to export.
methodology (based on the 2006 expenditure survey)
Strengthening Public Sector (Programmatic) IFC
Infrastructure advisory, PPP structuring for highways, ports Simplifying municipal construction permits
Streamlining trade logistics policies and procedures; enhance automation; improve risk management policy for trade logistics and border clearance Convening Services:
Financed by grants: Seminar to discuss strategies to improve assessment methodology of subnationals Active participation in expert committee on poverty measurement Support to the Colombian M&E Network Worshop on Social Mobility Workshop on Food crisis and Poverty Workshop on the accelerated data program (ADP) with counterparts in DANE Financial capabilities (P122698)
Improved Productivity and Innovation
Investment in STI (% of GDP)
Baseline: 0.39 (2011) Target: 0.70 (2014)
1. 1 Insufficient investment in
science, technology, and
innovation and weak coordination within the
national innovation system;
2. Inadequate stock of advanced human capital and
low economic relevance and
limited international linkages of existing public
research, including linkages
with the Colombian diaspora;
1. Strengthened capacity of
COLCIENCIAS to promote
human capital for knowledge economy, research and
development, and innovation.
Number of journal articles by
Colombian researchers in SCI
expanded per million population Baseline (2009): 48.0
Target (2014): 58.5
2. Raised awareness of science,
1. At least 3 financing instruments designed and redesigned and approved by Colciencias Board of Directors by 2013. 2. Monitoring and evaluation framework for social dissemination of STI defined by 2013. 3.Number of additional families benefitting from high value agricultural value chains Baseline: 0 (2010) Target: 32,000 (2014)
Financial Services:
Lending – Ongoing:
Agricultural Transition Project (P082167) Rural Productive Partnerships II Project (P104567) Science, Technology, and Innovation (P117590) Lending – Pipeline:
Small-holder Agriculture Competitiveness (FY12) Innovation,Competitiveness, Entrepreneurship SIL (FY13)
44
Country Development Goals
(from NDP) Issues and Obstacles CPS Outcomes Milestones
WBG Program (and
Partners) 3. Limited productivity growth
of SMEs;
4. Regulatory obstacles for
SMEs to start, operate and close businesses and
underdeveloped systems for
secured transactions and collateral registration
technology and innovation in the Colombian society
Total grant applications for
research and development and innovation subprojects received
yearly by COLCIENCIAS
Baseline (2009): 2009 Target (2013): 2674
3. Improved regulations for business and property registration,
and reform the legislation for
secured transactions and the collateral registry.
Efficiency of starting a business Baseline: 9 procedures, 14 days, Target (2014): 4 procedures, 6
days
4. Higher financial inclusion
measured by increased percentage of the population with a deposit
account.
Baseline: 1,295 accounts per
1,000 adults (2010)
Target: 1,400 accounts per 1,000
adults (2014).
4.Design of pilots for enhancing technology transfer and diffusion. 5.Disseminate good practices and regulatory reforms implemented
by local Governments in the areas
measured by the 2012 sub-national Doing Business report in
Colombia
6. Scaling up of financial
education strategy
Knowledge services:
Cooperation agreement on Investment Climate Regional Doing Business Reform Advisory project
Financed by grants – Ongoing:
Innovation, Productivity and Entrepreneurship (TF096995) Financial capabilities and Education Measurement Project (P122698) Financed by grants – Pipeline: Agriculture Risk Management - modeling, advising and training to public and private sector on identifying, quantifying and addressing and financing systemic risks in the agriculture sector. SME factoring (primarily with grants) Analyzing the contribution to shared growth of existing instruments to promote public support for commercial innovation (Diagnostic Facility for Shared Growth, TF096995)
AAA:
Productivity, competitiveness and entrepreneurship (Assessment of drivers of TFP growth, technology transfer diffusion mechanisms) PPIAF Support for the Reorganization of INCO IFC
Gender and microfinance sector support Tier 2 insurance companies and mobile banking Transformation projects (agriculture, beverages, poultry, etc) Support PPP projects through investment.
Opportunity Index), social protection, health system modernization and extractive industries.
Disbursements for the CPS period have been around US$3.9 billion (average of US$975 million
per FY), while overall exposure to Colombia rose to approximately US$7.5 billion. The Bank‘s
response to the crisis has led to an acceleration of disbursements in the last couple years, not only
because of fast-disbursing, policy-based loans but also because a few investment operations had a
front-loaded disbursements profile. As a result, IBRD lending to Colombia increased from
US$940 million in FY08 to US$1,275 in FY09, dropping to US$1,173 million in FY10 and
projected at US$315 million in FY11. During the CPS period, the Bank had also around 27 grants
from different trust funds totaling over US$60 million under implementation.
A. Overview and Principles of Engagement
8. The Bank followed three basic principles of engagement in developing its relationship with
Colombia: flexibility, responsiveness and innovation. The flexibility granted by the CPS proved
to be extremely perceptive. In the initial stages of the CPS, when the currency was strengthening
and foreign capital flows were strong, Colombian authorities were focused on the innovative
instruments available from the Bank and were particularly interested in domestic currency
financing, as well as a mix of investment and development policy lending. More recently, the
authorities have asked for support in dealing with the adverse consequences of the global crisis.
This includes additional financing and technical assistance to help sustain and improve crucial
government programs to attenuate the effects of the crisis.
9. To support the emerging needs of the private sector, the IFC also adapted its Colombia strategy
and diversified its portfolio with new projects in infrastructure logistics, microfinance, higher
education, vocational training, agribusiness, natural resources (oil, gas, and mining), and energy
efficiency. The IFC response also led to an increase in commitments and disbursements. The IFC
committed portfolio almost doubled from US$504 million in FY06 to US$881 million in FY10,
as a result of financing 27 projects during this period (in agribusiness, the financial sector,
manufacturing, infrastructure, extractive industries, and private equity fund) for a total
commitment of US$846 million, including syndications. These results were in great part due t
the IFC decentralization process. Today, the Bogotá regional hub office has 30 staff, a three-fold
increase from 2006.
10. In keeping with the principles of engagement, the World Bank Group has also provided an array
of knowledge and convening services to Colombia, ranging from technical support embedded in
the preparation of projects to analytical work specific for Colombia, along with both regional and
48
global studies, just-in-time technical assistance specifically tailored for particular requests, policy
dialogue, and transfer of global knowledge. One important and innovative aspect of this work was
its multi-year programmatic approach, where IBRD had an on-going engagement in key areas,
and defined its annual work program according to the existing needs at the time. The IFC
advisory program expanded in Colombia, and its services were also based on a programmatic
approach that supported strategic investments, with an emphasis on sustainable business advisory
projects, investment climate work, and access to finance engagements. In August 2010, after
elections, the Bank Group team prepared a set of thematic policy notes and met with the President
Santos and Government officials to discuss potential priority areas and provide early input into
the new National Development Plan.
11. Financial innovation was a hallmark characteristic of the Bank Group‘s program. Colombia has
always made effective use of the new Bank instruments, and in some instances has promoted and
led the innovation. During the CPS period, Colombia was one of the first countries to make use
of the new contingent financing for natural catastrophes under the revised Deferred Drawdown
Option (DDO) guidelines. Over the past few years, the Bank‘s Treasury Department has advised
Colombia on several issues related to risk and debt management, including contingent liabilities.
12. The Bank has advised Colombian authorities on strengthening of the Investor Relations Office,
leveraging the Bank‘s expertise in accessing international markets and developing outreach
materials. Complimentarily, the Bank continued providing local currency financing to sub-
national entities such as Cartagena, Antioquia, and Bogotá by converting outstanding loan
amounts to pesos.
B. Progress by Strategic Engagement Themes (Towards CPS Outcomes)
13. The CPS Outcomes, Status and Evaluation Summary, and IBRD/IFC interventions that
contributed to the CPS outcomes are summarized in the CPS Completion Report Matrix in Annex
A.
B 1. Sustained Equitable Growth
14. Commendable macroeconomic management, improvements on institutions, and strengthening
of the financial markets brought about economic growth and increase in competitiveness.
Human capital growth was improved through enhanced quality of secondary and tertiary
education programs.
15. The work under this theme became crucial for the Bank‘s engagement following the onset of the
economic crisis. The WBG contributed to preserving economic growth and minimizing the
impact of the crisis in Colombia through policy-based and IFC loans, as well as targeted
interventions and provision of knowledge and coordination/convening services.
16. The focus of the work was on the economy‘s competitiveness, the financial system, capital
markets, infrastructure development and human capital. Among several loans, the most important
were some development policy loans that supported important policy reforms in the areas of
business efficiency and competitiveness, along with the reforms in the financial sector. The Bank
supported implementation measures that helped keep the banking system adequacy ratio above 10
percent. These policy-based loans also served to cover the fiscal needs during the crisis and to
preserve macroeconomic stability. This was accompanied by project lending in infrastructure.
17. In the area of competitiveness, lending was buttressed by substantial technical assistance.
Development policy lending on business productivity was the umbrella for the program and was
part of a programmatic series that supported reforms in the areas of innovation and technology,
quality standards, and private sector participation in infrastructure and logistics. The Bank also
49
supported labor market reforms through a multi-year knowledge service program that was the
main input in the design of new policies to reduce informality and make the labor markets more
efficient and flexible. A significant contribution was the assistance provided to the National
Planning Department through studies and seminars in their formulation of policies for
employment and income generation.
18. In the area of financial sector development, the Bank provided development policy lending on
finance and private sector development, which supported the recent legal reforms designed to
strengthen financial sector resiliency and deepen capital markets. This was accompanied by
knowledge services to improve the framework for consolidated supervision and to regulate over-
the-counter markets (i.e., advisory work on accounting and financial reporting standards and
strengthening social accountability). The Bank also helped Colombian authorities to undertake a
financial crisis simulation exercise. Through the FIRST program, Colombia received Bank
support to correct any identified shortcomings.
19. The IFC also made investments in key financial lending institutions in order to develop new
services. Since access to finance is low in Colombia, particularly in the rural areas, the joint
Bank/IFC work in financial sector reforms greatly facilitated the IFC investment program to
reach the underserved. With significant involvement in Colombia‘s microfinance sector, IFC
investments in 6 lenders enabled them to make almost 1 million loans for a total US$1.13 billion
in CY2009, equivalent to about one-quarter of all loans by the IFC‘s Latin American
microfinance lenders that year. Bancamia is a key IFC microfinance partner in Colombia and the
country‘s third microfinance lender. The IFC invested US$10 million for a minority equity stake
in the Bancamia in May 2010. In CY2009, Bancamia made over 300,000 loans for a total
US$238.6 million, or an average of about US$800 per loan. Two-thirds of its clients are low-
income women living across 300 municipalities around Colombia.
20. The IFC has also played a role in strengthening Colombia‘s conventional banking system through
countercyclical investments. In May 2010, for instance, IFC committed US$23.5 million in equity
and subordinated debt to finance acquisition of non-performing loans first originated by
Bancolombia, the country‘s biggest bank. This transaction, signed in the aftermath of the global
financial crisis, allowed a systemically important bank to dispose of its non-performing assets
through a market-based mechanism. In addition to financing, IFC also provided a package of
corporate governance advice and workout guidelines that set an example of distressed asset
resolution. The IFC has been active in the global non-performing loan (NPL) market for over a
decade and was able to use its expertise to benefit Bancolombia and assist in the development of
an active NPL market in Colombia.
21. The IFC and IBRD also closely coordinated their support to concentrate much of the project
financing to improve the infrastructure in the country, particularly in areas of transport and basic
services. This was complemented by investments to improve water and sanitation services, solid
waste management, urban housing development, as well as renewable energy and energy
efficiency. The Bank also supported the development of the urban mass transit program in six
major cities, recognized as one of the most innovative and pioneering projects in LCR. This has
been accompanied by assistance to improve urban services in Bogotá, including preliminary
studies on the viability of a metro system. Through a programmatic approach, IFC invested in
transportation/logistic projects (roads, airlines, and ports) and leveraged its investments with
Advisory Services on trade logistics and competitiveness. This approach is exemplified by IFC‘s
role in one of Latin America‘s most significant road projects. Ruta del Sol, a 1,000-kilometer
highway linking Bogotá to the Caribbean coast. The IFC‘s Infrastructure Advisory Team acted as
transaction adviser to Colombia‘s Transportation Ministry, assisting it in structuring and
implementing a public/private partnership project for the concession of the highway. Colombia
has achieved considerable success in attracting local contractors to other public–private projects,
50
but the Government felt IFC would be crucial in convincing large international groups to bid for
such a large and complex project. The IFC completed the three-year concession process in
August 2010. Contracts worth US$2.7 billion were awarded to companies from Argentina, Brazil,
and Italy, as well as Colombia. In addition to reducing travel time between Colombia‘s biggest
cities and the coast, Ruta del Sol will also improve access for once-isolated rural communities.
22. One of IFC‘s largest exposures in Colombia is to Avianca, the national flagship airline. The IFC
committed US$50 million in loans to the airline in September 2008 as part of a turnaround
program being implemented by the troubled carrier‘s new owners. Avianca is an integral part of
Colombia‘s transport system given the country‘s mountainous terrain and long distances between
cities. The company was later able to merge with El Salvador‘s TACA, improving connections
between Central America and the Andean region.
B.2. Poverty Alleviation and Equity of Opportunity
23. The Bank contributed to expanded coverage and quality of public services and social
protection targeted to poor. Increased equality in the Colombian society and opportunities for
the less fortunate especially during the period of the financial crisis mark a significant
development in the fight against poverty including an expanded coverage and quality of public
services. Support ranged from reforms in the health sector to improving the quality of
education; promoting science, technology and innovation; and strengthening the social
protection system.
24. Significantly triggered by the onset of the crisis, the core of the support was through a loan to
preserve the financing of the country‘s main social welfare program, Familias en Acción, a
conditional cash transfer program. Among the Government initiatives in terms of providing social
assistance and poverty alleviation is the creation of Red Juntos, which aims to reduce extreme
poverty by providing extremely poor families with accompaniment and preferential access to core
social services. The Bank‘s support to these programs includes continued knowledge services to
help improve the protection under the social security system, rationalize the existing complex set
of overlapping programs, and modernize the system of information and evaluation.
25. The work in this area was based on the principle of increasing the equality of opportunities by
expanding the provision of basic services. As such, during the current CPS several loans were
extended to expand services in key areas such as water and sanitation, and agricultural and rural
development. In the area of agriculture and rural development, the program included the support
to small farmer organizations to increase market access for their products, and foster a sense of
entrepreneurship. The program also included support for agricultural research and development as
well as the strengthening of sanitary and phytosanitary systems along with the first public, high-
level bio-safety laboratory in the country. The IFC‘s US$30 million financing for Abocol helped
improve agribusiness competitiveness by supporting the fertilizer sector.
26. The Bank Group‘s support in this area also included substantial analytical and advisory service
(i.e. publications on agricultural sectoral issues.)
27. The program also included several projects in education, mostly in the rural areas, and focused on
secondary school quality and enrollment. A core element was support to the student loan program
geared toward giving access to secondary school education to indigenous people. As for the
IBRD Antioquia Secondary Education project, completion rate in the poorest areas has
dramatically increased. The IFC complemented the education initiatives by investing in
Uniminuto, a higher-education institution that serves mostly students from lower quintiles of the
population. Uniminuto aims to reach a total enrollment of 44,000 students by 2015, half of which
will be women. In CY2009, the school had 26,000 students of whom 60 percent were women.
51
Uniminuto is focused on serving the lower two quintiles of Colombian society. Many of its
students are from secondary cities, peri-urban, or rural areas.
28. A key area of involvement was the support to improve the efficiency and sustainability of the
Colombian health system. The complexity of the financing and delivery systems, with cross
subsidies and different forms of reimbursements, and coupled with a Constitutional Court ruling
that guarantees the fundamental right to health, firmly established the need for regulatory reform
to guarantee equal access to all citizens and a fundamental review and reform of the health sector.
29. The Bank played a key coordination and supportive role in the updating of poverty measures.
This work entailed naming a high-level Presidential Commission to assist the Government in
updating its poverty measurements. The lack of consistent information and the publication of
recent poverty data created significant doubts about the accuracy of the preliminary figures. The
work of the Bank and the Commission helped give credibility to the poverty figures.
30. Several grants focused on gender issues and on strengthening institutions dealing with
discrimination. The Bank, with financing from the Japanese Social Development Fund, helped
improve the skills of mostly young single mothers, who have been displaced by the violence in
the country, to assist them to integrate in the formal economy. Another grant supported the
Presidential Secretary for Gender to institute a system of certification of businesses that promote
gender equality and are apply gender-free policies.
B 3. Environment and Natural Resource Management
31. The considerable increase in design and implementation of knowledge and lending services in
sustainable development dramatically increased awareness on environmental issues. The
World Bank Group was able to provide input to national policy and help the Government to
strengthen institutional capacity for managing environmental services and mainstreaming
principles of environmental sustainability.
32. The environmental sustainability activities ranged from loans to support policy reforms and
implementation, to grants designed for piloting key protection and adaptation programs. This was
complemented by many investment projects in flood protection, water treatment, and disaster risk
management. A significant part of the program dealt with climate change adaptation programs.
33. One of the first actions under the CPS was to provide financing and technical support for the
implementation of important policy reforms. The work in this area involved updating the
environmental health policies of the country, where new emission standards were applied. It also
included updating the institutional structure to deal with the formulation and implementation of
environmental policies.
34. Under the CPS, there were several investment projects that contributed to environmental
sustainability, including lending activities in water and sanitation and solid waste management.
These activities are being complemented by two projects under supervision for disaster risk
management, which are designed to improve the data gathering and analysis framework, along
with reinforcing school and hospital buildings. The Government also entered into a catastrophic
risk deferred drawdown option (CAT DDO), the new financial instrument that provides
contingency financing in case of a major natural disaster.
35. The GEF supported a variety of activities, including conservation of national protected areas, and
multi-country integrated Silvopastoral approaches to ecosystem management, an example of
recent achievements under the National Protected Areas GEF with sustainable natural resource
practices in place. Several other grants supported pilot programs of renewable energy, efficiency,
and greenhouse gas reductions in the transport sector. Colombia has also made effective use of
carbon finance grants.
52
36. The IFC invested selectively in small hydro-generation in remote areas of Colombia and in
thermal efficiency, consistent with its focus on reducing impact on climate change through
renewal energy and cleaner, more efficient electricity generation. The IFC was instrumental in
upgrading and expanding the Termoflores natural gas-fired electricity-generating plant in
Barranquilla through a US$62.5 million loan package that included US$10 million in
syndications. The project used energy efficiency gains and heat recovery to increase output
without a significant increase in gas consumption.
B 4. Peace and Development
37. The Bank played an important role in supporting the country’s efforts to achieve lasting peace
and inclusive development. The Bank’s interventions contributed to improved effectiveness of
Government’s peace initiatives by increasing awareness of global experience and piloting
innovative models of participatory community development in conflict-affected zones. Colombia‘s recent history has been marred by violence and armed conflicts that have precluded
the country from achieving its full development potential. Violence has also displaced a large
portion of the population. The Bank actively supported the joint efforts by the Government and
the international community with both financing and coordination services.
38. As an innovative approach to the gender, minority populations, and youth issues, the Bank
integrated grant activities to the Peace and Development pillar. The Internally Displaced
Women‘s Project was designed to increase the economic empowerment of women in
communities of internally displaced populations by assisting them in joining the formal labor
force, building their assets (including greater food security), and helping them to understand the
causes of political and/or domestic violence against women and develop tools to mitigate them.
The Bank closely engaged in supporting the Secretary for Women‘s Issues in the Presidency with
an initiative to certify those businesses and enterprises that adopted gender-neutral employment
policies. The Human Rights Project‘s was designed to identify effective links between the nature
and work of the Regional Peace and Development Programs, Government, other partners and the
Bank, regarding human rights and to promote the introduction of human rights best practices in
peace and development interventions. The new operations, Afropaz, designed to strengthen Afro-
Colombian organizations, build social networks and empower communities to promote local
development, and Access to Opportunities for Youth, designed to enhance the access of young
men and women to opportunities for education, work and political participation, were recently
declared effective.
39. As part of the activities under this pillar, the Bank was a key player in the coordination of
activities of the international community. The Bank led organizing and preparing the
International Disarmament, Demobilization and Reparation Congress in Cartagena in May of
2009. This Congress and the Education for Peace Partnership are examples of the catalytic role
the Bank plays in promoting dialogue and disseminating experiences.
40. Joint efforts with the International Organization for Migration, the Bank contributed to
diminishing the risk of impoverishment of the displaced population and to the peace-building
process, by promoting the application of measures for protection of patrimonial assets, providing
land titles for those internally displaced populations whose rights have not been protected, and
proposing public policy initiatives for restitution of properties of internally displaced populations.
Under the two initial phases, more than 3 million hectares have been protected, equivalent to
100,000 farms and 127,000 land rights, benefiting overall more than 95,000 individuals. A third
phase was declared effective in August 2010, and project outcomes have been acknowledged and
recognized by the new Government to the extent that the project will constitute the foundation of
the land restitution and regularization flagship program of the Ministry of Agriculture and Rural
Development that will benefit 480,000 displaced and violence-affected families.
53
41. The Bank raised the awareness of the human challenges confronted by Colombians affected by
violence through a unique publication, ―Voices.‖ The book, published in June 2009, contains
stories of the experiences of individuals directly touched by the violence. A special exhibit, which
included a collection of photographs and testimonials, was mounted in several Colombian cities
and in Washington D.C.
B 5. A State at the Service of its Citizens: Efficient and Effective Government
42. Excellent public financial management paired with an increase in the number of social
programs contributes to Central Government efforts to improve public sector management and
citizen services. The Bank’s supported programs improved public sector management and
citizen services in support of Central Government efforts.
43. The World Bank Group‘s expanded its support for institutional reforms and improvement in
governance. Initiatives ranged from strengthening the public management information systems to
integrating the tax and customs administration processes, implementing a system of monitoring
and evaluation of government programs, expanding the assistance to sub-national governments,
and assisting with the modernization of the judicial sector. One of the major achievements was
the introduction of a new system for budget management throughout the Central Government. It
is a web-based system, with open architecture, which will greatly improve the efficiency of public
financial management, expand access to information, and establish greater transparency. The
new system is being complemented with new norms and procedures for budgetary management,
as well as the introduction of a single account for cash management.
44. The support for improving the managerial systems was designed for the full application of
country systems. The Bank accepted the use of Colombia‘s financial management system for its
projects and programs. This was achieved with considerable support by several project loans that
helped modernize the systems, and the progress achieved in streamlining implementation
arrangements and the reliance on the Colombian Supreme Audit Institution (SAI) and sub-
national SAIs for external audits for Bank-financed projects. The Bank provided extensive
training and technical assistance to the SAI toward strengthening its staff capacity; and from
2008, all projects with the exception of grants implemented by NGOs are audited by the SAI.
45. A Public Financial Management (PFM) and Procurement Performance Assessment Report, which
was authorized by the Government, concluded that PFM systems, institutions, and processes at
the central level show advanced levels of performance, which are close to or follow good
international practice. There remain a few gaps where challenges and opportunities to further
enhance PFM in the country could be pursued in the near future toward strengthening fiscal
discipline and increasing operational efficiency and transparency.
46. The program under this theme included targeted financing and a broad program of knowledge
services. During the last two years, several smaller loans were approved to improve the services
of the state. They included a loan to support building the Management and Planning System for
the Government (SIGOB), a fairly advanced system of monitoring and evaluation of government
programs, which is considered a leading program in Latin America. This technical assistance
loan is assisting with all of the evaluations of government programs being carried out by the
National Planning Department. The Board has approved a follow-up loan for the Modernization
of the Public Sector Management Systems. This operation is part of a series of loans that, over the
years, helped modernize the budget and financial systems, along with the tax and customs
agencies. The other important operation will be assisting with the process of judicial sector
reforms, which remain a major development challenge for the country.
47. Among the most promising work was the development of new relationships and support for sub-
national governments. The public sector group has developed a new product called the Rapid
Assessment and Action Plan (RAAP) for sub-national governments. Public sector experts on
54
fiscal, budget, tax, financial management and information systems worked with local authorities
to develop an action plan for key public sector reforms. The first two studies were presented in
cities where there has been tremendous improvement in the financial, fiscal, and managerial
capacities. The IFC complemented this work with cities and regions on issues of regional
competitiveness, local business climate, and management of royalties from mining development.
The IFC‘s Advisory Services expects to expand its royalty management activities in Colombia,
assisting companies and local communities in managing revenues from mining and oil producing
projects. The IFC currently advises Ecopetrol, the state-owned oil company and is in advanced
talks with other clients on future engagements.
III. WORLD BANK GROUP PERFORMANCE
48. The World Bank Group performance is rated satisfactory. The CPS was relevant, aligned with
the Government’s National Development Plan and its design and implementation of the
program contributed to the achievement of CPS outcomes with a focus on results, and a timely
adaptation to changing circumstances and priorities. It delivered a package of services beyond
those initially anticipated in the CPS, in response to both the emerging needs of the country and
the impact of the international financial crisis.
49. The success of the strategy and program was due in part to the continued Bank presence over the
years, the close engagement with the client, WBG‘s responsiveness and an active supervision and
follow-up to the projects and scheduled activities.
A. CPS Design
50. The foresight to preserve the flexibility and to ensure full compatibility with the Government‘s
program proved critical. In addition, the design of the strategy was constructed on the basis of
extensive experience and understanding of the conditions and the development challenges of
Colombia. The initial CPS results framework entailed a mixture of outcomes and outputs and
was therefore strengthened and updated in the CPSPR.
51. The success of the Bank‘s program in Colombia owes much to the fact that the CPS was well
aligned with the priorities of the Government, and thus equipped with strong local ownership.
The strategic engagement areas of the CPS were fully consistent with the main building blocks of
the National Development Plan.
52. The Bank‘s ability to respond successfully to the changing circumstances in Colombia was rooted
in the flexibility of the CPS design. The Bank was able to adjust its program or reallocate staff
and budgetary resources in response to the country‘s emerging financial and development needs,
especially at a time when international markets were severely constrained. Colombia continues to
promote innovation by taking full advantage of the new instruments and policies offered by the
World Bank.
B. Implementing the Strategy
53. The overall implementation of the strategy was satisfactory. The Bank followed essentially the
overall thrust of the CPS, while having to make adjustments in response to the international
financial crisis. The initial program had to be altered slightly to include accelerated
disbursements through policy-based loans and projects supporting budget programs. Most of the
potential investment projects initially identified in the CPS were carried out, and some new
priorities were introduced as a result of continued dialogue with the authorities.
54. As shown in the Results Matrix (Annex A), most of the activities of the WBG involved transfer
of knowledge and provision of advisory and convening services. Making effective use of the
wealth of knowledge available in the Bank, Colombia also relied on the Bank‘s support to
55
evaluate different policy alternatives and proposals. While often associated with lending
activities, much of the knowledge work was specifically designed to address direct requests or
particular issues. An important characteristic of the Colombia program was the inclusion of
programmatic multisectoral knowledge services, designed to be an open multi-year engagement
in a particular area. The annual activities were determined after a review of previous
accomplishments and the evolving needs of the country. Finally, during the political transition to
a new administration in mid 2010, the Bank prepared policy notes in areas of special interest to
the incoming authorities. These were discussed with the newly elected President Santos and
Government members, and offered an excellent entry point for engagement with the new
authorities.
55. The implementation of the program entailed close supervision and periodic reviews of the
portfolio. The Bank‘s supervision occurred though continuous monitoring and evaluation of the
activities, both at the project and country level. The high-quality of Bank lending during the CPS
period was evidenced by a generally satisfactory progress in portfolio implementation and by the
achievement of the project‘s development objectives (see Table 3.1). Policy-based lending played
an important role in producing results.
56. The current Administration has underlined the need to strengthen the institutional capacity of key
government entities to optimize the implementation of investment projects, in particular civil
works financed with public funds at the national level. The government, led by the Ministry of
Transport, is exploring an appropriate strategy, including a review of the legal framework,
enhancing procurement processes and external controls, in addition to strengthen the technical
capacity of the executing agencies.
57. To that end the Bank has maintained close scrutiny of the portfolio in Colombia and timely
addressed procurement issues that have been uncovered during Bank supervisions. In addition, in
close coordination with the borrower, the Bank has incorporated a broad set of measures into both
project implementation and supervision to strengthen the overall fiduciary control framework and
to safeguard individual operations.
58. The 2008 Country Performance Portfolio Review (CPPR) focused on assessing the quality of the
portfolio with respect to necessary adjustments in relation to the CPS. As a consequence of the
CPPR, three projects were restructured that showed problems on implementation and slow
disbursements. The 2010 CPPR focused on establishing a new coordination mechanism between
the Ministry of Finance, the National Planning Department, the Social Action Department, and
the Bank for the implementation and discussion of the grants pipeline.
Table 3.1 Portfolio overview (data as of May 16, 2011)
Variable FY2007 FY2008 FY2009 FY2010 FY2011
Number of projects 17 20 15 18 22
Net commitment (US$ million) 1,900 2,866 1,857 2,489 2,044
Number of problem projects 0 2 1 2 2
% at risk 0.0 10.0 13.3 11.1 9.1
% proactivity -- -- 50 -- --
% Realism Index -- 47.5 31.1 40.7 44.4
Overage projects by FY 0 2 1 0 0
Total undisbursed balance (US$
million) 1,117 1,488 1,451 885 734
Disbursement ratio by FY 39 48 25 60 42.5
56
59. Much of work of the Bank Group was carried out in partnership with other development partners.
The Bank continued to build excellent relations with groups involved in the development agenda
of Colombia. The work with agencies extending bilateral support included joint activities in the
area of environment, climate change, and the peace and development agenda. While the
Government coordinated much of this work, the financing from bilateral partners was critical for
the success of some Bank-supported programs. The Bank has worked closely with the European
Union and the UN System on peace and community development in areas affected by violence.
60. The Nordic countries were also closely engaged, especially in the areas of environmental
protection. In several programs, the Bank co-financed and worked in close coordination with the
IDB, such as in conditional cash transfers, water and sanitation, and science and technology. The
Bank and IDB also closely coordinated in furthering the development of country systems and
prepared a program to pursue shared documentation. The alliances also involved NGOs,
particularly those involved with efforts to consolidate the peace process and create the conditions
for more inclusive communities. A well-publicized alliance took place with Shakira, a famous
Colombian artist, who is leading an international effort to promote greater attention to early
childhood development programs.
C. Management of Risks
61. The risks originally identified in the CPS were well managed. The CPS anticipated potential
difficulties emanating from external shocks. The subprime financial crisis and reductions in trade
with neighboring countries actually materialized and led to the need for additional financing.
Naturally, the overall magnitude of the crisis was beyond any initial estimate, and the rapid
exposure to Colombia was not fully anticipated. The domestic risks to the strategy, which
included both overheating of the economy and political factors, did play a significant role. In
fact, the political transition was much smoother than foreseen with a continuity of programs and
an excellent relationship with the new authorities.
IV. LESSONS LEARNED AND RECOMMENDATIONS
62. The CPS was designed to be flexible and innovative in responding to Colombia’s financial and
development needs. The IFC also adapted its Colombia strategy and diversified its portfolio
with new projects. This flexibility allowed the Bank to explore new avenues of resources, mainly
through trust funds, that financed unanticipated Government requests for knowledge and advisory
services. Just-in-time technical assistance tailored for particular requests, policy dialogue, global
knowledge transfer and a fully integrated trust fund portfolio resulted in an important and
innovative aspect of the program. Colombia was one of the first Bank clients to take advantage of
the flexible DPL with Catastrophe Drawdown Option (CAT-DDO) as part of its integrated
approach to disaster risk management. Combined with the other ongoing activities by the Bank --
which span the range of financial and knowledge services -- Colombia has one of the most
integrated programs in risk management of any Bank client. Its multi-year, knowledge and
advisory programmatic approach, where IBRD had an on-going engagement with the
Government in key areas, defined the annual work program (for knowledge and convening
services) according to the existing needs at the time. The IFC advisory program also expanded in
Colombia, and its services were also based on strategic aims. This flexibility and just-in-time,
multi-sectoral programmatic advisory approach proved to be effective and should be maintained.
63. Good Governance and increased transparency in Colombia’s economy remains challenging
and the performance of public financial management (PFM) systems including public
procurement is a critical factor for fiscal discipline, strategic allocation, operational efficiency
and transparency in use of public funds. The Bank will therefore continue to pay special
attention to PFM issues to support the Government in enhancing its operational efficiency,
57
ensuring sustainability of the procurement reform, including improving country intuitional
capacity, creating of a public procurement bureau, enhancing transparency, promoting
participation of the private sector, and the creation of a more efficient compliant mechanism.
64. With the Government of Colombia wanting to borrow more than currently possible under Bank
exposure limits — it is advisable to agree with the Government on an integrated package of
financial, knowledge, and convening services with a focus on providing customized results-
focused development solutions in areas where the Bank Group can add value. In this context, it
will be important for the WBG to increase its efforts to leverage resources from other
development partners and to maximize it development impact by created better synergies among
different sectors in support of the Government‘s program.
Figure D4. Growth incidence curves from 2005 to 2009
83
Annex E: Fiscal Risk Management in the Colombian Public Sector
I. INTRODUCTION
Fiscal risks can be broadly defined as deviations of fiscal outcomes from what was expected as the
time of the budget or other forecast7 and can arise from both revenues and expenditures, principally
as a consequence of exogenous shocks such as volatility of currency and interest rates, closure of
international financial markets, natural disasters, volatility of commodity prices, etc., combined with
the Government‘s exposure to these shocks. The time horizon should be defined for quantification
and management of fiscal risk; in Colombia‘s case, it could include reference8 to the Government‘s
Medium-Term Fiscal Framework (MTFF) in the next five to ten years, as well as next year‘s budget
and possibly other fiscal forecasts.
The Colombian authorities are well along the curve of identifying, quantifying, and managing various
types of fiscal risks. The authorities acknowledge the obligation to address many of the potential risks
— direct and indirect, explicit and implicit — by including them in the MTFF and in setting fiscal
targets. However, it would be prudent for the authorities to decide on an explicit strategy for dealing
with remaining sources of medium-term budgetary risk arising from factors such as natural disasters.
II. SOURCES OF FISCAL RISK
Initially the analysis has been limited to the central government balance sheet,9 although the MTFF
also applies to the consolidated public sector. The analysis includes the accounting balance sheet, an
expanded ―fiscal‖ balance sheet, and contingent assets and liabilities, both explicit and implicit.
Figure E1 Figure E2
The government asset and liabilities with potential fiscal risk can correspond both to an accounting
and a fiscal simplified balance sheet (Figure E1). The Colombian Government has an accounting
balance sheet so the main items could be analyzed in terms of fiscal risk, namely, identifying and
ideally quantifying how much the value of the asset or liability change, given a movement in the
7 Cebotari and others, Fiscal Risks: Sources, Disclosure and Management, (IMF, FAD, 2009).
8 Country Insurance: Reducing Systemic Vulnerabilities in LAC (World Bank, Nov.2007), which concludes that countries
should cover themselves against insurable external shocks, providing insurance is offered at reasonable costs, and having
considered main fiscal risks arising from exogenous shocks. 9 Ideally it would be extended to the public sector as a whole, due to the decentralized nature of the Colombian Government.
84
source of risk (e.g., interest rates, currencies). The bottom items refer to a ―fiscal balance sheet‖,
which is necessary to understand the risks to the Government‘s budget. The most important source of
risk is usually the rate of economic growth, but it is possible to identify other vulnerabilities of the
revenue and expenditure streams to factors that can decrease revenues and/or increase expenditures,
in comparison to the original budget and other forecasts.
It is also necessary to analyze sources of fiscal risk that are contingent on events/variables, namely,
contingent liabilities and assets (Figure E2). In turn these can be classified as explicit or implicit: the
former refers to Government‘s legal obligations to make a payment (liability) or receive revenues
(asset) only if a particular event occurs. The latter refers to liabilities that arise but on which the
Government is not legally obliged to act, and which are typically excluded from the Government
balance sheet.
A. Criteria for identifying sources of fiscal risk
The criteria for identifying sources of fiscal risk are as follows:
(a) Government assets and liabilities that --
(i) have a potential exposure to shocks (e.g., currency, interest rate, volatility in the price
of commodities, credit defaults), which could impact the MTFF or other medium-term
fiscal forecasts; and
(ii) lack a reasonable or successful10
risk management strategy and/or have difficulties with
its implementation, such that shocks may have a significant impact on fiscal forecasts
such as the MTFF.
For example, these could include a government loan portfolio whose value could be
diminished by credit risk factors (e.g., default by the borrowers), or investments in state-
owned enterprises that go bankrupt.
(b) Contingent liabilities with potential exposure to shocks (e.g., natural disaster that can have an
effect on higher expenditure related to government insurance for agricultural produce,
disaster mitigation expenditure for affected population, etc) with estimated expenditures not
included in the medium-term fiscal forecasts, including MTFF.
The contingent liabilities already included in the fiscal forecasts would not be considered
fiscal risks as they are already taken into account (e.g., government guarantees for
infrastructure) unless, as in the case of legal demands against the Government, there are flaws
in the system for managing its risk (i.e., lack of an adequate information system on legal
demands).
The accounting balance sheet allows an identification of the government direct assets and
liabilities, as well as explicit contingent liabilities; an economic balance sheet includes the
Government‘s tax revenues and expenditures, as well as implicit contingent liabilities of
various types.11
10 The success of the strategy has to be analyzed in terms of whether it is indeed limiting/preventing a fiscal impact arising
from the risks being dealt with and whether it is ―reasonable‖ from a technical point of view — for example, a debt
management strategy that is highly speculative (i.e., based on market views) and that does take into account reducing
medium-term cost within prudent risk limits would not be considered ―reasonable‖. 11
In addition, the Colombian authorities have already estimated expected cost and maximum cost with 95% probability of a
number of contingent liabilities.
85
B. Current sources of fiscal risk for government finances
Legal claims against the state (risk quantification identifies as 18 to 82 percent of GDP
in 2010, according to MTFF);
Oil price shocks (revenues are 13 percent of fiscal revenues annually and rising; requires
updated risk quantification);
Natural disasters (total value exposed is equivalent to US$173 billion, including publicly
owned assets and the private assets of low-income groups). The fiscal risk is calculated
by adjusting the value exposed with the probability of a disaster event. Estimated fiscal
risk equivalent to US$316 million a year; PV is 18 percent of GDP in 2011-50 period.12
Agricultural subsidies (currently being estimated).
There are other implicit contingent liabilities such as financial sector risk, which can be
analyzed and quantified.
III. WORLD BANK ADVISORY SERVICES/PRODUCTS FOR FISCAL RISK
MANAGEMENT
The World Bank is assisting the Colombian Government13
in its design of medium-term fiscal risk
management strategies for the specific sources of fiscal risk mentioned above and for a
comprehensive strategy for the central government, taking into account total fiscal exposure. Working
closely with the Colombian authorities, it will do so by providing the following services and financial
products:
(a) Definition of fiscal risk management objectives;
(b) Identification, together with the Colombian authorities, of potential fiscal risks and mapping
of those same risks, taking into account the accounting and fiscal balance sheet, as well as
Colombia‘s explicit and implicit contingent liabilities;
(c) Identification of methodologies/models for quantifying risk;
(d) Quantification of fiscal risk;
(e) Analysis of the Government‘s capacity to absorb some or all of the risk, that is whether it has
a high degree of fiscal flexibility (e.g., provided by fiscal surpluses, fiscal buffers and
stabilization funds, a low-debt level, a low-risk debt structure, diversified funding sources,
lack of budgetary rigidities, etc.);
(f) Assistance to the Government in its design of risk management strategies, including:
(i) Definition of objectives and time horizon for dealing with potential shocks, followed
by evaluation of different risk-management alternatives, taking into account the
following aspects:
risk avoidance/reduction using policy dimensions;
risk retention/self-insurance, related to the Government‘s macroeconomic
credits, instruments to leverage funding from international financial
institutions, leveraging concessional financing for climate change, etc.);
risk transfer, whereby fiscal risk is transferred to third parties market — using
interest rate swaps, currency swaps into desired currencies, including local
12
Study by ENS, quoted in Fiscal Risk DPL Concept Note. 13 Fiscal risk can be analyzed and managed at the level of the public sector, the central government, sub-national
government and/or different state-owned entities.
86
currency, natural disaster insurance, weather hedges as, for example, rainfall
indexes, financing of low-carbon investments in the market, swaps, options
and/or forwards for oil price risk, loans tied to oil price indexes, etc.
cost-risk trade-off of alternative strategies and instruments;
coordination of proposed alternatives with macroeconomic policy;
constraints of the financial markets, which may limit the strategy choices;
institutional capacity for risk management strategy design and implementation,
including coordination among different government units (e.g., governance,
Personal computers (per 100 people) 0.9 1.7 3.8 11.2
Note: Figures in italics are for years other than those specified. .. indicates data are not available. 5/13/11
Development Economics, Development Data Group (DECDG).
C o lo mbia
0
25
50
75
100
125
2000 2002 2004 2006 2008
Primary net enrollment ratio
Ratio of girls to boys in primary & secondary education
Education indicators (%)
0
20
40
60
80
100
120
2000 2002 2004 2006 2008
Fixed + mobile subscribers
Internet users
ICT indicators (per 100 people)
0
25
50
75
100
1990 1995 2000 2008
Colombia Latin America & the Caribbean
Measles immunization (% of 1-year olds)
94
Annex I: Selected Indicators of Bank Portfolio Performance and Management
As As of 5/12/2011
Indicators * 2008 2009 2010 2011
Portfolio Assessment
Number of Projects Under Implementation a 22 17 21 22
Average Implementation Period (years) b 3.6 3.2 3.2 3.7
Percent of Problem Projects by Number a, c
9.1 5.9 9.5 9.1
Percent of Problem Projects by Amount a, c
5.9 4.8 4.8 5.4
Percent of Projects at Risk by Number a, d
9.1 11.8 9.5 9.1
Percent of Projects at Risk by Amount a, d
5.9 6.9 4.8 5.4
Disbursement Ratio (%) e 47.6 25.2 59.9 42.5
Portfolio Management
CPPR during the year (yes/no) y y y n
Memorandum Item Since FY 80 Last 5 FYs
Proj Eval by IEG by Number 133 13
Proj Eval by IEG by Amt (US$ millions) 10,513 1,087.5
% of IEG Projects Rated U or HU by Number 23.7 16.7
% of IEG Projects Rated U or HU by Amt 18.2 0.2
* All indicators are for projects active in the Portfolio, with the exception of Disbursement Ratio, which includes
all active projects as well as projects which exited during the fiscal year. a. As shown in the Annual Report on Portfolio Performance (except for current FY). b. Average age of projects in the Bank's country portfolio. c. Percent of projects rated U or HU on development objective (DO) and/or implementation progress (IP). d. As defined under the Portfolio Improvement Program. e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of the year:
Investment projects only.
95
Annex J: Colombia Social Indicators
Latest single year Same region/income group
Latin Lower-
America middle-
1980-85 1990-95 2002-08 & Carib. income
POPULATION
Total population, mid-year (millions) 30.1 36.5 44.5 560.6 3,434.5
Grow th rate (% annual average for period) 2.0 1.9 1.3 1.3 1.1
Urban population (% of population) 65.6 70.5 74.2 78.3 41.6
Total fertility rate (births per woman) 3.4 2.8 2.5 2.4 2.3
POVERTY
(% of population)
National headcount index .. 60.0 46.0 .. ..
Urban headcount index .. 48.0 30.7 .. ..
Rural headcount index .. 79.0 65.2 .. ..
INCOME
GNI per capita (US$) 1,210 2,100 4,670 5,801 1,905
Consumer price index (2000=100) 6 50 158 158 142
Food price index (2000=100) .. .. .. .. ..
INCOME/CONSUMPTION DISTRIBUTION
Gini index .. 57.2 58.9 .. ..
Low est quintile (% of income or consumption) 2.4 3.2 2.9 .. ..
Highest quintile (% of income or consumption) .. 61.2 61.6 .. ..
SOCIAL INDICATORS
Public expenditure
Health (% of GDP) .. .. 6.2 3.4 2.0
Education (% of GNI) .. .. .. 3.5 3.2
Net primary school enrollment rate
(% of age group)
Total .. 68 87 94 90
Male .. 64 87 94 91
Female .. 73 88 94 90
Access to an improved water source
(% of population)
Total .. 90 93 91 88
Urban .. 98 99 97 96
Rural .. 71 77 73 83
Immunization rate
(% of children ages 12-23 months)
Measles 51 95 95 93 82
DPT 61 86 86 92 79
Child malnutrition (% under 5 years) .. 6 5 4 25
Life expectancy at birth
(years)
Total 68 70 73 73 69
Male 64 66 69 70 67
Female 71 74 76 76 71
Mortality
Infant (per 1,000 live births) 32 25 17 22 38
Under 5 (per 1,000) 43 31 20 26 50
Adult (15-59)
Male (per 1,000 population) 237 222 202 196 197
Female (per 1,000 population) 162 127 97 107 125
Maternal (per 100,000 live births) .. .. 130 130 300
Births attended by skilled health staff (%) .. 86 96 89 69
CAS Annex B5. This table w as produced from the CMU LDB system. 04/14/11
Note: 0 or 0.0 means zero or less than half the unit show n. Net enrollment rate: break in series betw een 1997 and 1998 due to
change from ISCED76 to ISCED97. Immunization: refers to children ages 12-23 months w ho received vaccinations before one
CF TF054033 Rio Frio Waste Management 100 12/31/2016
CF TF090526 San Nicolas Carbon Sink and Arboreal Species Recovery 486 12/31/2018
68,171
101
Annex O: IFC Committed and Disbursed Outstanding Investment Portfolio
Cor
di l ler
a Orie
nta l
Cor
dil le
ra C
entr
al
Cord
i l lera O
ccident a
l
PicoPicoCristóbal ColónCristóbal Colón(5,775 m)(5,775 m)
C A Q U E T ÁC A Q U E T Á VA U P É SVA U P É S
G U AV I A R EG U AV I A R E
M E T AM E T A
H U L AH U L AC A U C AC A U C A
C H O C ÓC H O C Ó
A N T I O Q U I AA N T I O Q U I A
VALLE DELVALLE DELCAUCACAUCA
RISARALDÁRISARALDÁ
QUINDIOQUINDIO
C U N D I N A -C U N D I N A -M A R C AM A R C A
DISTRITODISTRITOCAPITALCAPITAL
G U A I N Í AG U A I N Í A
V I C H A D AV I C H A D A
C A S A N A R EC A S A N A R E
C E S A RC E S A R
NORTE DENORTE DESANTANDERSANTANDER
A R A U C AA R A U C A
A M A Z O N A SA M A Z O N A S
N A R I Ñ ON A R I Ñ O
P U T U MAYO
CALD A S
CÓRDOBA
BOL Í
VA
R
BO
YAC
Á
SUC
RE
S A N TA N D E R
TOL IMA
La PedreraLa Pedrera
PuertoPuertoSantanderSantander
PuertoPuertoPizarroPizarro
PuertoPuertoLeguízamoLeguízamo
PuertoPuertoHuitotoHuitoto
MacujerMacujer
CalamarCalamar
MapiripanaMapiripana
Santa RitaSanta Rita
PuertoPuertoNuevaNueva
ChavivaChaviva
San JuanSan Juande Aramade Arama
GarzonGarzonGuapíGuapí
IpialesIpiales
GaviotasGaviotasSan PedroSan Pedro
MirafloresMiraflores
San VicenteSan Vicentedel Caguándel Caguán
GiradotGiradot
PalmiraPalmira
BugaBuga
CartagoCartago
ChiquinquiráChiquinquirá
SocorroSocorro
TurboTurbo
YarumalYarumal
QuibdoQuibdo
PuertoPuertoAsisAsis
El EncantoEl Encanto
Locas deLocas deCahuinariCahuinari
LéridaLérida
YavarateYavarate
TabaquénTabaquén
BrujasBrujas
San RafaelSan Rafael
El BaneoEl Baneo
OcañaOcaña
MaganquéMaganqué
LeticiaLeticia
MituMitu
PuertoPuertoInirídaInirída
PuertoPuertoCarreñoCarreño
FlorenciaFlorencia
NeivaNeiva
PopayanPopayan
CaliCali
PastoPasto
San JoséSan Josédel Guaviaredel Guaviare
VillavincencioVillavincencio
MocoaMocoa
ArmeniaArmeniaPereiraPereira
TunjaTunjaYopalYopalManizalesManizales
BucaramangaBucaramanga
MonteriaMonteria
SincelejoSincelejo
ValleduparValledupar
CúcutaCúcuta
MedellinMedellin
IbaqueIbaque
BOGOTÁBOGOTÁ
MA
GD
ALE
NA
LA G
UAJ I RA
AraucaArauca
La Pedrera
PuertoSantander
PuertoPizarro
PuertoLeguízamo
PuertoHuitoto
Macujer
Calamar
Mapiripana
Santa Rita
PuertoNueva
Chaviva
San Juande Arama
GarzonGuapí
Tumaco
Ipiales
GaviotasSan Pedro
Miraflores
San Vicentedel Caguán
Giradot
Palmira
BugaBuenaventura
Cartago
Chiquinquirá
Socorro
Turbo
Acandí
Yarumal
Quibdo
PuertoAsis
El Encanto
Locas deCahuinari
Lérida
Yavarate
Tabaquén
Brujas
San Rafael
El Baneo
Ocaña
Maganqué
Puerto Bolívar
Leticia
Mitu
PuertoInirída
PuertoCarreño
Arauca
Florencia
Neiva
Popayan
Cali
Pasto
San Josédel Guaviare
Villavincencio
Mocoa
ArmeniaPereira
TunjaYopalManizales
Bucaramanga
Monteria
Sincelejo
Cartegena
BarranquillaSanta Marta
Valledupar
Cúcuta
Ríohacha
Medellin
Ibaque
BOGOTÁ
C A Q U E T Á VA U P É S
G U AV I A R E
M E T A
H U L AC A U C A
C H O C Ó
A N T I O Q U I A
VALLE DELCAUCA
RISARALDÁ
QUINDIO
C U N D I N A -M A R C A
DISTRITOCAPITAL
G U A I N Í A
V I C H A D A
C A S A N A R E
C E S A R
NORTE DESANTANDER
AT L Á N T I C O
A R A U C A
A M A Z O N A S
N A R I Ñ O
P U T U MAYO
CALD A S
CÓRDOBA
BOL Í
VA
R
BO
YAC
Á
SUC
RE
MA
GD
ALE
NA
LA G
UAJ I RA
S A N TA N D E R
TOL IMA
R.B. DEVENEZUELA
BRAZIL
PERU
ECUADOR
PANAM
A
Guaviare
Negro
Cauc
a
Atrato
Vichada
Patía
Ptumayo
Casanare
Atacavi
Meta
Vaupés
Caquetá
Caguán
Magdalena
Caribbean Sea
Lago deMaracaibo
PACIFICOCEAN
To Maracaibo
To Mérida
To Guasdualito
To Ibarra
Cor
di l ler
a Orie
nta l
Cor
dil le
ra C
entr
al
Cord
i l lera O
ccident a
l
PicoCristóbal Colón(5,775 m)
75°W 70°W
75°W 70°W
5°N
10°N
0°N
5°N
0°N
COLOMBIA
0 80 160 240
0 1208040 160 200 Miles
320 Kilometers
IBRD 33388R
FEBRUARY 2009
COLOMBIASELECTED CITIES AND TOWNS
DEPARTMENT CAPITALS
NATIONAL CAPITAL
RIVERS
MAIN ROADS
RAILROADS
DEPARTMENT BOUNDARIES
INTERNATIONAL BOUNDARIES
This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, o r any endo r s emen t o r a c c e p t a n c e o f s u c h boundaries.