• TABLE OF CONTENTS
HIDE
 Title Page
 Frontispiece
 Front Matter
 The mission
 Preface
 Table of Contents
 The objectives
 The nature of the program
 Agriculture
 Industry and fuels
 Transportation
 Public health, welfare and...
 Electric power and community...
 Housing and other building
 Public finance and fiscal...
 Monetary and banking policy
 Foreign trade and exchange
 Government organization and economic...
 The overall program






Title: The basis of a development program for Colombia
CITATION PAGE IMAGE ZOOMABLE
Full Citation
STANDARD VIEW MARC VIEW
Permanent Link: http://ufdc.ufl.edu/UF00074142/00001
 Material Information
Title: The basis of a development program for Colombia
Physical Description: xv, 76 p. : maps. ; 22 cm.
Language: English
Creator: World Bank
Currie, Lauchlin Bernard
Publisher: s.n.
Place of Publication: Washington
Publication Date: 1950
 Subjects
Subject: Economic policy -- Colombia   ( lcsh )
Economic conditions -- Colombia -- 1918-1970   ( lcsh )
Genre: non-fiction   ( marcgt )
 Notes
Statement of Responsibility: report of a mission headed by Lauchlin Currie and sponsored by the International Bank for Reconstruction and Development, in collaboration with the Government of Columbia. <The summary>
General Note: "IBRD special publication. Sales number: IBRD. 1950.1."
 Record Information
Bibliographic ID: UF00074142
Volume ID: VID00001
Source Institution: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: aleph - 000108327
oclc - 29383199
notis - AAM3936

Table of Contents
    Title Page
        Title page
        Page i
    Frontispiece
        Page ii
    Front Matter
        Page iii
        Page iv
        Page v
        Page vi
    The mission
        Page vii
        Page viii
    Preface
        Page ix
        Page x
        Page xi
        Page xii
    Table of Contents
        Page xiii
        Page xiv
        Page xv
    The objectives
        Page 1
        Page 2
        Page 3
    The nature of the program
        Page 4
        Page 5
        Page 6
        Page 7
    Agriculture
        Page 8
        Page 9
        Land use and land tenure
            Page 10
            Page 11
        Technical, educational and credit services
            Page 12
        Administration of agricultural programs
            Page 13
        Capital requirements
            Page 14
            Page 15
    Industry and fuels
        Page 16
        Industrial productivity
            Page 17
        Potential expansion of industry
            Page 18
            Iron and steel
                Page 18
                Page 19
                Page 20
            Petroleum
                Page 21
            Oil refinery
                Page 22
            Coal
                Page 23
            Forest products
                Page 24
            Other industries
                Page 24
            Power for industry
                Page 24
        Capital requirements
            Page 25
    Transportation
        Page 26
        Page 26a
        Regulation of transportation
            Page 27
        Railroad transportation
            Page 28
            Improvement of operations
                Page 28
            Proposed expansion of railroads
                Page 29
                Page 30
                Page 31
        Highway transportation
            Page 32
            Operational improvements
                Page 32
            Major highway extensions
                Page 33
        Water transportation and port facilities
            Page 34
            Improvement of operating efficiency
                Page 35
            River and port projects
                Page 36
            Ocean and coastwise shipping
                Page 36
        Pipelines
            Page 36
        Air transportation
            Page 37
            Page 38
        Capital requirements
            Page 39
    Public health, welfare and education
        Page 40
        Public health
            Page 40
            Priority objectives of the public health program
                Page 41
                Page 42
                Page 43
            Hospitals and health centers
                Page 44
        Welfare
            Page 45
        Education and training
            Page 46
            Page 47
            Page 48
    Electric power and community facilities
        Page 49
        Electric power
            Page 49
            Expansion of power capacity
                Page 50
            Type and location of facilities
                Page 51
            Planning and administration
                Page 51
        Other services
            Page 52
            Water supply and sewerage
                Page 52
            Public markets and slaughterhouses
                Page 53
            Telephones
                Page 54
            Street paving and cleaning and waste collection
                Page 54
        Administration and financing of community facilities
            Page 55
            Utility rates
                Page 55
            Municipal finances and administration
                Page 56
    Housing and other building
        Page 57
    Public finance and fiscal policy
        Page 58
        Taxes
            Page 59
        Budgetary practices
            Page 60
        Departmental and municipal finance
            Page 61
    Monetary and banking policy
        Page 62
        Page 63
        Page 64
    Foreign trade and exchange
        Page 65
        Foreign exchange policies
            Page 66
        Foreign investments
            Page 67
        Trade policy
            Page 68
    Government organization and economic data
        Page 69
        Government organization and administration
            Page 69
            Page 70
        Economic data
            Page 71
    The overall program
        Page 72
        Page 73
        Page 74
        Page 75
        Page 76
Full Text














Report of a Mission
headed by
Lanchlin Currie
and sponsored by the
International Bank for Reconstruction and Development
in collaboration with
The Government of Colombia


International Bank for Reconstruction and Development
Washington, D. C.
1950


The Basis of

A DEVELOPMENT PROGRAM

FOR COLOMBIA













































IBRD SPECIAL PUBLICATION

Sales Number: IBRD. 1950.1


Price, U.S. $0.50







INTERNATIONAL BANK FOR
RECONSTRUCTION AND DEVELOPMENT
WASHINGTON 25, D. C.
OFFICE OF THE PRESIDENT



July 27, 1950


His Excellency
Sefior Mariano Ospina Perez
President of the Republic
of Colombia

My dear Mr. President:
I take pleasure in transmitting to you herewith the Report
of the Mission to Colombia, headed by Dr. Lauchlin Currie,
which was organized last year under the sponsorship of the
International Bank for Reconstruction and Development in
cooperation with the Banco de la Repfiblica. The Summary
highlights the Mission's major conclusions and recommenda-
tions, which are further explained and elaborated in the
Comprehensive Report.
In the opinion of the International Bank, the Report
provides an objective, unbiased analysis of Colombia's de-
velopment potentialities and problems by a competent group
of independent experts. You will, of course, recognize that
the Bank has not had the opportunity to consider fully the
numerous recommendations contained in the Report and
therefore must regard them as matters for study and future
discussion with your Government rather than recommenda-
tions of the Bank to your Government. At the same time, we
believe their analyses and recommendations are deserving
of the most careful and sympathetic consideration by the Gov-
ernment and people of Colombia. This Report can be fully
effective, however, only if it serves as a basis and guide for
the Colombian authorities themselves to work out a sound,
well-balanced development program, and as a means of edu-
cating public opinion.







To this end we believe it is important that the Report be
carefully studied and discussed, from an objective, nonpoliti-
cal standpoint, to assure that its major implications are fully
understood and that it can enlist broad support from the
Colombian people. We are very pleased that your Govern-
ment, recognizing this need, has decided to establish a non-
partisan Commission of outstanding citizens to study the
Report and make recommendations thereon to the Gov-
ernment.
We are gratified also that your Government is already
taking active measures in line with the Mission's recommen-
dations to obtain expert assistance in the vitally important
task of effecting improvements in governmental organization
and administration.
The Bank will be greatly interested in the progress of the
analysis of the Mission's findings by the nonpartisan Com-
mission. It is our plan that the Bank's staff will undertake
simultaneously an intensive study of the Report so that we
may be in a position at the appropriate time to discuss with
your government the program that emerges from your studies
and to consider possible ways in which the Bank can help
in the execution of Colombia's development program, through
technical and financial assistance or by other means.
It is my sincere hope that this Report may be of positive
and lasting benefit to the Republic of Colombia.

Sincerely yours,



ZT /f /VL







INTERNATIONAL BANK FOR
RECONSTRUCTION AND DEVELOPMENT
WASHINGTON 28, D. C.





June 28, 1950


Mr. Eugene R. Black, President
International Bank for
Reconstruction and Development
Washington, D. C.

Dear Mr. Black:

I take pleasure in submitting herewith The Basis of a
Development Program for Colombia, prepared by a special
mission of the International Bank for Reconstruction and
Development.
On behalf of the Mission, I should like to record our
appreciation of the arrangements made to facilitate our work
in Colombia. President Mariano Ospina Pirez evidenced great
interest throughout and gave freely of his time, as did mem-
bers of his Cabinet. Dr. Luis-Angel Arango, General Manager
of the Banco de la Repiblica, our host, left nothing undone
to assist us. The help given us by the technical staff fur-
nished both by the Colombian Government and the Banco
de la Repuiblica under the direction of the Coordinator Gen-
eral, Dr. Juan de Dios Ceballos, was invaluable. Names of
the technical advisers to whom we are indebted are listed
below. I regret that I cannot list by name the hundreds of
officials and private citizens of both political parties, as well
as many foreigners, who gave so freely of their time and
knowledge in answering our thousands of questions.
The physical arrangements provided by the Banco de la
Repfiblica could not have been improved upon and the
hospitality and cordiality we encountered on every hand
were most heartening.








The translation of the Report was carried out under the
supervision of Dr. Jaime C6rdoba, the Assistant Coordinator
General, who also has contributed many helpful suggestions
on editing and drafting. He was ably assisted by Dr. Jose
Camacho-Lorenzana of the staff of the Bank. Main respon-
sibility for the editing devolved upon Miss Ruth Aull.
I am most appreciative of the complete cooperation fur-
nished the Mission by the International Bank in making
available helpful studies, in furnishing technicians from its
staff, and in supplying the needs of the Mission in ways too
numerous to list.
I am most grateful to the individual members of the
Mission for their enthusiasm and complete devotion to their
tasks. I am particularly appreciative of the assistance afforded
by those members of the Mission who were on the staff of
the Bank-Messrs. David L. Gordon, Jacques Torfs and
Gordon Grayson-and who, following the return of the Mis-
sion, carried double burdens in working on the Report as
well as performing their regular duties. Names of Mission
members are appended.
I appreciate that the treatment could be considerably im-
proved by the expenditure of somewhat more time. However,
in view of the fact that action on certain projects is being
delayed pending the receipt of the Report, that considerable
time has already elapsed since our observations were made,
and that the proposed arrangements for study of the Report
in Colombia will facilitate refinements and other improve-
ments, it appears that more would be lost than gained by
delaying further the submission of the Report.

Sincerely yours,









THE MISSION




LAUCHLIN CURRIE
Chief of Mission

GORDON GRAYSON
Assistant to Chief of Mission
(International Bank for Reconstruction and Development)


ROGER ANDERSON ......................
(International Monetary Fund)
HAYWOOD R. FAISON ................
(Board of Engineers for Rivers and
Harbors, U. S. Department of
Defense)
CARL W. FLESHER ......................


FREDERICK C. GILL ..................
DAVID L. GoRDON ....................
(International Bank for Reconstruc-
tion and Development)
WILFRED JOHNS ........................

JUAN ANTONIO MONTOYA ........
(Pan American Sanitary Bureau)
JOSEPH W. MOUNTIN ................
(Assistant Surgeon General, U. S.
Public Health Service)
RICHARD A. MUSGRAVE ..............
(University of Michigan, Depart-
ment of Economics)
RAYMOND C. SMITH ....................
(U. S. Department of Agriculture)
JACQUES TORFS ..........................
(International Bank for Reconstruc-
tion and Development)
JOSEPH WHITE ..........................


Adviser on Foreign Exchange

Adviser on Highways and
Waterways


Adviser on Industry, Fuels and
Power

Adviser on Transportation
Adviser on Community Facilities


Assistant Adviser on Agriculture

Assistant Adviser on Health

Adviser on Health and Welfare


Adviser on Finance and Money and
Banking

Adviser on Agriculture

Economist


Adviser on Railroads








ADDITIONAL CONSULTANTS


V. LEwIS BASSIE ...................... Consultant on National Accounts
(University of Illinois)
THE MARSHALL-MOORMAN
DEVELOPMENT COMPANY ........ Consultants on Petroleum Refineries
SNew York, New York

Editor
RUTH AULL


Secretary
DOROTHY SODERLUND


COLOMBIAN ADVISERS TO THE MISSION

JUAN DE DIos CEBALLOS
Coordinator General
(General Manager, Institute for Industrial Development)

JAIME F. CORDOBA
Assistant Coordinator General
(Banco de la Repfblica)


HECTOR ABAD GOMEZ .................
JORGE BOSHELL MANRIQUE ........
GUILLERMO CAMACHO GAMBA ....

MIGUEL FADUL ...........................
JOAQUIN FRANCO ......................
JORGE FRANCO ............................
AUGUSTO HANNABERGH ............
JORGE INFANTE ...... .....................
JORGE PENA POLO ........................

JOAQUIN PRIETO ..........................

NORBERTO SOLANO LOZANO ........
LEONEL TORRES ............................
CONCHA TRIANA .........................
JORGE ZULUAGA ............................


Ministry of Hygiene
Ministry of Hygiene
Administrative Council of the
National Railroads
Banco de la Rep6blica
Ministry of Commerce and Industry
Banco de la Rep6blica
Banco de la Repiblica
Ministry of Agriculture
National Council of Communica-
tions, Ministry of Public Works
National Steel Corporation of
Paz de Rio
Ministry of Education
Banco de la Repiblica
National Institute of Nutrition
Ministry of Agriculture









Preface


This Report is the outcome of nearly a year's work by an
economic Mission, organized by the International Bank for
Reconstruction and Development, which was assigned the
task of working up the framework for a comprehensive, inte-
grated development program for Colombia.
The Mission grew out of conversations late in 1948 be-
tween Mr. John McCloy, then President of the Bank, and
Dr. Emilio Toro, a member of the Board of Executive Direc-
tors of the Bank. For many reasons, it appeared that Colom-
bia, Dr. Toro's native country, was an admirable place to
apply such a comprehensive approach. The idea received an
enthusiastic reception from President Mariano Ospina P6rez,
and the Bank was invited by Colombia to send the proposed
mission. In May 1949, Dr. Lauchlin Currie was invited to act
as Chief of the Mission and to assist in its organization.
The Mission's terms of reference were very simple and
yet very broad. They were, in essence, to formulate a de-
velopment program designed to raise the standard of living
of the Colombian people. To fulfill this assignment the
services of experts in many diverse fields were required. The
Mission included staff members of the Bank and the Inter-
national Monetary Fund, private consultants, and experts
nominated by the Food and Agriculture Organization and the
Pan American Sanitary Bureau. The first members of the
Mission, accompanied by Mr. Robert L. Garner, the Vice
President of the International Bank, arrived in Bogoti on
July 11, 1949, and the last departed November 5, 1949. Ex-
penses of the Mission were borne partly by the International
Bank and partly by Colombia.
The Banco de la Reptiblica acted as co-sponsor of the
Mission in Colombia, and organized a staff of specialists to
advise and assist the Mission in its work there. It assumes
no responsibility, however, for our findings or recommenda-
tions. Final responsibility for both the overall program and
ix








the specific recommendations rests on the Chief of Mission,
although, of course, all members of the Mission made major
contributions in their special fields and assisted in related
fields.
As this was the first Mission of its kind sent out by the
International Bank, there was little precedent to draw on. We
have interpreted our terms of reference as calling for a com-
prehensive and internally consistent program-so far as is
possible with the time, personnel and data available-rather
than merely a series of disconnected recommendations. This
has added to the difficulty and magnitude of the task in
several respects. The relationships among various sectors of
the Colombian economy are very complex, and intensive
analysis of these relationships has been necessary to develop
a consistent picture. We have tried also to make our con-
clusions and recommendations as specific and quantitative as
possible. We realize that this attempt may, in some cases,
lay us open to criticism, for definite proposals are inevitably
more vulnerable than generalities, and the statistical data with
which we have had to work have sometimes been incom-
plete, unreliable or insufficiently detailed.
Nevertheless, we believe this rather ambitious and hazard-
ous approach has proved its value. Its very difficulty and
complexity have perhaps led us to probe more deeply, to
cross-check our results and their implications more carefully,
than we might otherwise have felt necessary. We have been
able thereby to correct some apparently inaccurate informa-
tion and assumptions and to fill in certain statistical gaps.
Moreover, the principle involved in this approach-that the
attack on the problem of poverty must be coordinated on
many fronts, all closely interdependent-is more important
than any of our particular findings or recommendations. We
have tried to illustrate the dynamics of economic develop-
ment through an analysis of national accounts and of the
processes which determine the volume of capital formation
and the direction of investment. An understanding of these
processes and an approximate estimate of the magnitudes
involved are essential to any satisfactory determination of
development priorities and the policies and measures re-







quired to carry them out. We have undertaken in this Report
to construct this necessary framework as soundly as was
possible with the materials at hand. In the course of further
study and experience over the period of the proposed pro-
gram, it will be possible to refine and fill out the statistical
data, and to make appropriate modifications in the specific
measures discussed.
The organization and presentation of the Report have
posed certain other problems. It is addressed to several
quite different audiences: to Colombians, who know a great
deal about their own country; to foreigners, who know little;
and to the general public as well as technicians. It has been
necessary, therefore, to include enough facts and descriptive
material to make the picture intelligible, yet not so many as
to make the Report unmanageable in size and boring to those
who are already well informed about many of the subjects
discussed. Further difficulties of presentation arose from the
very wide range of topics covered, some of them necessarily
quite technical, and from the number of different contributors.
In an attempt to meet these problems, we have prepared
the Report in two distinct forms. The Summary is designed
for the general reader who wishes to ascertain the high-
lights of the program but has neither the time nor the
interest to concern himself with detail. More extensive
descriptive material, technical analysis and explanation of
the recommendations are included in the Comprehensive Re-
port, which in turn is divided into two parts-first, a descrip-
tion and diagnosis of economic conditions and problems in
the various fields discussed and, second, proposed measures
for improvement and estimates of financial and other require-
ments to carry them out. This arrangement of the Compre-
hensive Report is designed to permit purely descriptive
material and most of the analysis to be kept separate from
our conclusions and recommendations. The reader may then.
if he wishes, consider the validity of the diagnosis quite
apart from the prescription or, alternatively, may rely on the
summary of the diagnosis contained in Chapter II and in the
various chapters in Part II of the Comprehensive Report and
concentrate his attention on the recommendations. Inevit-
xi








ably this results in some overlapping and repetition. Those
who may wish to read together the diagnostic and prescrip-
tive chapters on one subject, such as agriculture, will be most
conscious of this.
Some technical appendices, relating mostly to method-
ology or presenting more detailed data of interest only to
specialists, are not printed but may be obtained on request
from the International Bank for Reconstruction and Develop-
ment. These are listed in the Contents of the Comprehensive
Report for ready reference.
Despite the range of topics covered, the Summary and
the Comprehensive Report do not pretend to contain a
complete economic description of Colombia. An effort was
made to cover only those aspects of the economy that appear
to have direct bearing on the standard of living and about
which some recommendations could be made. One unfortu-
nate consequence, however, has been to discuss mainly the
weaknesses and shortcomings of the Colombian economy,
which may convey a false impression to the reader. It is not
our intention to assign either praise or blame, nor to make
any comparisons with other countries unless they throw some
light on Colombia's problems. All the members of the Mis-
sion, although they found need for improvement in many
specific conditions and practices, became intensely interested
in and most enthusiastic over Colombia's potentialities.
It is hoped that the entire Report will be regarded as a
working paper. It is intended to be provocative, to raise many
problems and to offer some suggestions for corrective action.
It does not purport to offer precise or ultimate solutions for
any problems; such solutions must derive from the experience
and will and intelligence of the Colombian people themselves.
Our analyses and recommendations will have fully served
their purpose if they succeed in stimulating Colombians to
think in terms of the whole economy, to take advantage of
the experience of other countries and adapt that experience
realistically to Colombian conditions, and on that basis to
formulate a sound and internally consistent program of de-
velopment which will enlist the broadest possible support.








CONTENTS



PAGE

I. T he O objectives ................. ................ ....................... ...... 1

II. The Nature of the Program ................................. ........... 4

III. A agriculture ....... .......................................... ............... 8
Land Use and Land Tenure............................................ 10
Technical, Educational and Credit Services.................. 12
Administration of Agricultural Programs............... 13
Capital R equirem ents ...................................... ..... .... 14

IV. Industry and Fuels............................... 16
Industrial Productivity .................................... ... 17
Potential Expansion of Industry............................ 18
Iron and Steel.......... ................................ 18
P etroleum ............................................................... 2 1
O il R efinery ......... .............. ... .... ......... 22
C oal ............... .... .................................... ... 23
Forest Products ................... ....... ...... 24
O their Industries .................................................... 24
Pow er for Industry.................................................. 24
Capital Requirements ........................... .................. 25

V T transportation ............................................. ...................... 26
Regulation of Transportation.......................................... 27
Railroad Transportation ......................................... 28
Improvement of Operations................................... 28
Proposed Expansion of Railroads.......................... 29
H highway Transportation ................................................ 32
Operational Improvements .................................... 32
Major Highway Extensions .................................. 33
xiii







PAGE

Water Transportation and Port Facilities................. 34
Improvement of Operating Efficiency.................... 35
River and Port Projects..................................... 36
Ocean and Coastwise Shipping.............................. 36
P ip elin es .......................................................................... 36
A ir T transportation .......................................................... 37
Capital R equirem ents ...................................................... 39

VI. Public Health, Welfare and Education.............................. 40
Public Health .............................................................. 40
Priority Objectives of the Public Health Program 41
O organization ...................................................... 42
E nvironm ent ...................................................... 42
P personnel ................................ ..... ......... .. 43
Hospitals and Health Centers................................ 44
W welfare ................................................... ...... ........ 45
Education and Training ............................................ 46

VII. Electric Power and Community Facilities.......................... 49
E electric P ow er ................................................................ 49
Expansion of Power Capacity................................ 50
Type and Location of Facilities.............................. 51
Planning and Administration.................................. 51
O their Services ........................................ .... .......... 52
Water Supply and Sewerage................................. 52
Public Markets and Slaughterhouses.................... 53
T elephones .................... ... ...... ................. ...... 54
Street Paving and Cleaning and Waste Collection 54
Administration and Financing of Community Facilities 55
U utility R ates ....................................... .................. 55
Municipal Finances and Administration............. 56

VIII. Housing and Other Building................... ...... ......... 57
xiv








PAGE

IX. Public Finance and Fiscal Policy................................... 58
T ax es ........................................................ ..... ...... 59
Budgetary Practices .................................................. 60
Departmental and Municipal Finance ......................... 61

X. Monetary and Banking Policy....................... ................ 62

XI. Foreign Trade and Exchange........................ .............. 65
Foreign Exchange Policies............................................ 66
Foreign Investments .............................. ... ........ 67
T rade P policy .............................................. ......... 68

XII. Government Organization and Economic Data ............... 69
Government Organization and Administration ........... 69
Econom ic D ata .......................................... .......... 71

X III. The Overall Program ................. ....... .... ........ ........... 72

FIGURES
1. Relief map of Colombia ................ .................................. Frontispiece
2. Present and recommended railroads, highways and
pipelines ............................................ ......... ............facing page 26

TABLE

1. Projected investment program by end use, 1951-55......... 72








L The Objectives


For nearly 400 years after the founding of Bogota in
1538, economic development in Colombia was slow and limited
in scope. In the early years of this century the economy was
almost wholly agricultural and pastoral. Gold and agricul-
tural products were exported in exchange for the country's
limited requirements of manufactured consumers' goods and
capital equipment. Travel over any distance was a major
undertaking, the various regions of the country were almost
wholly isolated from one another, and the people developed
quite different accents and even different physical character-
istics and outlooks. Throughout all this period, however,
cultural and intellectual contacts with the outside world were
zealously maintained by a small upper class.
In the past 40 years, the picture has changed drastically.
Railways, highways and airplanes have opened every part
of the country to travel and trade, and journeys that once
took weeks are now a matter of hours. New areas are being
opened to settlement, and some of the country towns and
villages of a generation ago have grown into thriving cities.
The population has increased from less than 4 million in 1900
to about 11 million today, and Bogota, now a city of 600,000
people, looks forward to a million inhabitants in the not far
distant future.
The spirit and the fact of economic progress are abundantly
apparent. Numerous industries have been established-large
textile and cement mills, food processing factories, oil and
ore refineries, metal fabricating and chemical plants, power
generating stations, etc. Ambitious new projects of many
kinds are being started or are under active discussion. A
modern banking system has been created and a stock exchange
opened. A new class of entrepreneurs has emerged, vigorous
and self-confident, to develop and manage these new industries
and institutions.
Foreign and domestic commerce has expanded greatly.
Colombia's dollar receipts have increased from U.S.$81 million
in 1938 to over $300 million in 1949. Not only did this pro-
vide the means of financing greater imports of manufactured
[1]








products of all kinds, both consumer and producer goods, but
it also has enabled the country to contract and service more
foreign debt and thereby enlarged its ability to secure capital
equipment to expand future production.
With this economic growth have come far-reaching social
and political changes. An extensive system of labor and wel-
fare laws has been enacted and an income tax introduced.
The Government has assumed an expanding role in promoting
and guiding the development of the national economy.
The potentialities for development in the future are great.
Colombia is rich in the basic sources of power-coal, oil, gas
and hydroelectric potential-and in forest resources. Good
land is limited, but there are a number of excellent agricul-
tural areas and others capable of improvement by irrigation
or drainage. The growing season lasts twelve months of the
year, and variations in altitude permit a greater diversity of
agricultural production than prevails in the whole North
American continent.
The economic progress of the past 20 or 30 years, however,
while very real, has been quite uneven. A great deal remains
to be done, and there are many aspects of the situation that
give thoughtful Colombians grave concern.
The darker side of the picture centers about the condition
of the masses of the people. The great majority are inade-
quately fed, clothed and housed. Their health is poor and life
expectancy short. A large proportion is illiterate, and few
have had more than two or three years of primary schooling.
Their condition is better, no doubt, than that of the people in
many underdeveloped countries, particularly in the equatorial
belt. But their standard of life is far below the level that it
could attain if the country's potentialities were more ade-
quately realized. This Report is focused, therefore, on the
problem of how the general standard of living in Colombia
can be raised-what use of the nation's physical and financial
resources and what kinds of governmental and private action
can best contribute to this end.
We have not, of course, tried to define the precise level
and components of a satisfactory standard of living. The con-







cept is necessarily vague and largely subjective, to be summed
up, perhaps, as a general state of material well-being. But its
essential elements clearly include the consumption of enough
food, and food of the right kinds, for good nutrition; the
enjoyment of generally good health; the possession of ade-
quate housing and clothing; education and training enough to
meet the needs of modern life and to permit the development
of the people's intellectual resources; and some opportunities
for leisure and amusement.
The possibility of making these basic elements of a satis-
factory living standard generally available depend upon (1)
the size of the national product in relation to population,
(2) the distribution of income among the population, and (3)
the division of the national product between consumers' goods
that can be enjoyed now and capital goods that will increase
production in the future. Of these, the most important is
clearly the first.
Certainly a wide disparity in levels of income exists be-
tween a small wealthy group and the great mass of the
population, in spite of efforts by successive governments to
bring about greater equality through progressive taxation of
incomes and the extension of social services. So far as we
can estimate, nearly one-third of the national income (over
Ps.$900 million' out of some Ps.$3 billion total in 1947)
accrues to less than 100,000 recipients. But the basic problem
is not so much the distribution of present income as the small-
ness of the income to be distributed. By the same token,
while public and private capital formation is quite satisfactory
in relation to gross national income-14 percent- it is small
in absolute magnitude and in relation to the population.
We believe that a very striking improvement is possible
in the factors that underlie the low levels of per capital pro-
duction in Colombia. There appears to be considerable room
for improvement in the efficiency of her manpower-in the
education and training of workers, in their health and physical
stamina, and to some extent in the proportion of productive

1 To distinguish sums in Colombian pesos from those expressed in U. S.
dollars in this Report, we prefix the $ sign used for both currencies with
"Ps." or "U.S.". respectively. The official value of the peso is about 51#
(U.S.$1=Ps.$1.95).








workers to dependents. The country's abundant natural re-
sources could be utilized more efficiently, and the handicaps
of its mountainous terrain ameliorated. The flow of savings
into investment could in many cases be directed into channels
more productive and socially beneficial. The organization of
the economy for the production and distribution of goods and
services, both by Government and private enterprise, could
be considerably improved.
The major ground for concern over the long term lies in the
rapid rate of population increase (estimated at 2.15 percent
per annum) and the prospect of an even more rapid increase
as improved sanitation, diet and disease control methods
produce a decline in the present high death rate. Really
good level land, as well as capital resources, is already strictly
limited in relation to population and an increase in the rate of
population growth would raise serious economic problems.
The problem, therefore, is to bring about an increase in
production considerably in excess of the increase in popula-
tion. In our view this can be done, given adequate improve-
ment in the present organization of the Colombian economy
and better direction of the flow of savings and foreign funds
available for investment.
In this Summary, and in the more detailed supporting
documents, we cite a number of possibilities for such im-
provements. Some of them, probably rfiost of them, can be
expected to show significant results in increased productivity
within a relatively short time. Others will take effect only
over a longer period, but are no less important to achieve the
progressive, cumulative advance essential for sound economic
development.

II. The Nature of the Program

For the sake of simplicity we have given this Report the
title "A Development Program for Colombia", and we refer
from time to time to the "program". In reality, however-
as we emphasize several times-it is not, and is not intended
to be, a complete blueprint for action. It is a working paper,
designed to assist the Government and people of Colombia








to frame for themselves a sound, balanced, adequately de-
tailed program of economic development.
Nevertheless, we believe it contains the essential elements
of a true development program. In order to make clear both
the potential utility and the limitations of this Report, as we
see them, it may be useful to summarize the broad assump-
tions which underlie our recommendations:
1. Our approach is comprehensive, for the causes and
characteristics of economic underdevelopment-poverty, ill-
health, ignorance, low productivity, and the like-are all inter-
related and mutually reinforcing. The chances for success
will be greatly enhanced if the attack proceeds simultaneously
on several fronts.
2. We base our quantitative recommendations, particu-
larly our estimates of capital requirements, on the assumption
that they will be carried out over a five-year period, 1951-55.
Actually, because of the need for more detailed studies in
certain fields, the time required to set up necessary admin-
istrative mechanisms, and other factors, it will probably not
be possible to make some of the contemplated investments
and other changes by 1955. On some of the longer-range
recommendations-in the field of education, for example-
five years will suffice only to make a start. Nevertheless, the
five-year period should prove useful as a rough yardstick of
what may be accomplished in many fields, and later as a
standard against which to measure actual performance.
3. Our conclusions and recommendations vary greatly in
detail and precision. In part this stems from the unavaila-
bility of certain information, or from limitations of time of
the Mission's personnel. But some variations of this kind are
inherent in the nature of any economic program, which must
be implemented through innumerable decisions by many
thousands of individuals. Many of our recommendations call
for Government action of various kinds-investment, defini-
tion of policy, establishment or alteration of administrative
machinery, and so on. Others involve areas of non-govern-
mental activity, such as the desirability of expanding certain
industries or increasing acreage in certain crops; and in such
cases we are necessarily less explicit about how they are to be
[5]







carried out. We have tried, however, to indicate ways in
which the Government can help to encourage and guide pri-
vate economic decisions along desirable lines, by providing
a favorable atmosphere for productive enterprise, improved
financial regulations and machinery, and certain specific in-
centives. Some of our conclusions also, particularly some of
those relating to the amounts of capital investment in certain
fields set forth in Chapter XXX of the Comprehensive Report,
involve merely expectations of what is likely to happen to
be consistent with postulated growth patterns. We explain
this distinction at some length here, because of a possible
ambiguity in the connotation of the word "program".
4. In spite of these problems of analysis and presentation
we have tried so far as possible to express our recommenda-
tions in quantitative terms. The most difficult decisions in
any development program are the determinations of priorities
in the allocation of limited resources, especially financial
resources. We have tried to indicate, therefore, the general
magnitude both of the overall investment program and of its
main components, while appreciating that it may prove
necessary or desirable to modify these magnitudes after
further study. In our quantitative estimates, both of needs
and of available resources, we have kept within limits we
believe to be realistically and conservatively possible.
5. So far as we can ascertain the facts and anticipate
future trends, we believe our proposals are internally con-
sistent; they do not, for example, call for more foreign
exchange than is expected to be available.
6. The program is designed so that it can be undertaken
without producing inflation. The capital formation proposed,
in other words, is approximately equal to the volume of
expected saving and foreign capital imports under conditions
of a balanced budget and stable prices. If the internal or
external price levels do not remain stable, the size and char-
acter of the program will be considerably, and on the whole
unfavorably, altered.
7. We have assumed that rises in wages will not exceed
increases in worker productivity, and that no greater pecuni-
ary incentives are necessary to secure the required shifts of
[6]







the working force into more productive (industrial and con-
struction) employment.
8. Although the process of economic development in-
evitably entails, and should entail, extensive social changes,
we should expect such changes to be gradual and evolu-
tionary in character. Our present proposals do not call for
any drastic changes in the political, social or economic organ-
ization of Colombia. Rather they involve a shift of emphasis
and a multitude of relatively minor improvements and
reforms.
9. The program we have outlined relies mainly on
Colombia's own resources, although we assume that a satis-
factory volume of foreign investment will be forthcoming
if a favorable atmosphere is established and a satisfactory rate
of progress is achieved in the development program.
10. In general, we have tried to avoid direct Government
control and management, except where they were clearly
necessary. We place reliance so far as possible on financial
incentives and deterrents to influence the flow of capital and
the employment of other production factors.
11. We emphasize the need for a thoroughgoing reor-
ganization of the administrative machinery of Government
at all levels to improve its planning and administration.
Based on these general considerations, the sections that
follow contain conclusions and recommendations for improve-
ments in production and other practices, and in the organiza-
tion and direction of capital investment, in the various sectors
of the economy. These conclusions, together with the reason-
ing on which they are based, are further elaborated in the
Comprehensive Report, to which reference should be made
for explanation of any unclear or controversial points.








III. Agriculture


Colombia is still preponderantly an agricultural economy.
Some two-thirds of the population (including over 60 percent
of the labor force) live in rural areas and are supported by
agriculture, which accounts for about 40 percent of the
national income.
Success in raising the general standard of living will
depend in large part on the possibility of so improving agri-
cultural productivity that a much smaller proportion of the
population can raise the food, fibres and export crops that
the country requires. Such a development would serve two
complementary ends. First, it would release large numbers
of workers for the production of other things, or in some
cases for longer or more intensive education. Second, it
would increase the income and living standard of individual
farm families and make their life less laborious. Our recom-
mendations in the field of agriculture are designed primarily
to bring about this increase in output per worker.
In Chapter XVIII of the Comprehensive Report, we pro-
pose target figures for 1955 production of 20 major agricul-
tural products-goals which we believe are realistically attain-
able and will provide a better balanced and more economic
pattern of output. With regard to most farm commodities
for domestic consumption we propose only a relatively small
production increase-hardly more than the estimated rise
in population-but recommend improvement in their quality
and diversity to correct nutritional deficiencies. Our targets
for certain export crops, and for products of which substan-
tial imports are now required, represent a generally higher
rate of increase.
It is important to emphasize that these targets are very
tentative, since neither the data nor the planning and admin-
istrative organization now in existence is adequate for
setting and achieving precise quantitative goals. Our targets
are designed to illustrate the general objectives of a sound
agricultural production program, which should be developed
more precisely and intensively in the near future, and to call
attention to the need for improving the organization of agri-
[8]








cultural activities so that carefully formulated targets can
actually be attained.
The problem of raising agricultural productivity in Colom-
bia is made more difficult by the complexity of the country's
agricultural pattern. The variations of altitude and climate
make possible a diversity of production probably greater
than that of any other country in the world. There is almost
equal diversity in the techniques of cultivation; they range
from highly efficient, mechanized operations on some of the
large valley farms to semi-primitive methods (digging stick
or hoe culture) used on tiny patches of steep hillside, often
only a short distance away.
The most advanced cultural practices in coffee production
afford a model of the progress that can be achieved through
effort. By improved methods of soil preparation, seed selec-
tion and propagation, care of trees, and processing of beans,
it has been possible almost to double coffee production in
eight years. At the same time, the achievements in coffee
culture point up the lack of progress in most other sectors of
farm production.
Colombian farms average about 2 hectares (5 acres) of
arable land, but the typical farm unit is even smaller, since
the average is affected by inclusion of some very large sugar
cane, rice and cotton haciendas. These small patches are
too frequently farmed with practically no equipment and
with little animal' or machine power; the farmers have gener-
ally had almost no schooling or technical instruction, and
often suffer from inadequate nutrition and debilitating dis-
eases; they have little or no capital or access to credit and
only the most rudimentary facilities for marketing the crops
they grow.
Under these conditions, the surprising thing is not that
productivity in agriculture is low, but rather that it is as
high as it is. It affords Colombia's 11 million population a
diet adequate in calories, if somewhat unbalanced and lack-
ing in protective foods, provides sufficient barley and tobacco
to meet the country's requirements for beer and tobacco
products, and produces some 5/2 million bags of coffee each
19]







year. This augurs well for what could be done under really
satisfactory conditions of efficiency.

LAND USE AND LAND TENURE
The Mission was most forcibly struck by the paradoxical
and uneconomic use of land. Although the amount of level,
fertile land in the populated areas is strictly limited, it is de-
voted for the most part to cattle grazing on an extensive and
inefficient basis, while most of the food crops are grown on
small farms, generally on steep slopes, and in poor soil. The
result is a twofold loss to the national economy-from the
underuse of good land which should be producing much more
efficiently, and from the destruction worked by erosion on
slopes too steep to be cultivated without serious damage.

On the occasion of the Mission's first meeting with the
President of the Republic, he directed our attention specifically
to the importance of getting the farming people off the hill-
sides and onto the level plains and valley floors. We have
given intensive thought to this problem, since it is perhaps
the most important single factor making for low agricultural
productivity. While such uneconomic and wasteful use of
land-the nation's most important natural resource-might
have been of-relatively minor consequence in the last century
when Colombia had only a fraction of its present population,
its continuance today is dangerous to the country's welfare
and progress.

The basic cause of this illogical pattern of land use lies
apparently in Colombian social traditions and attitudes. Many
large landowners are less interested in the income they de-
rive from their holdings than in the value of those holdings
as a source of security and as a hedge against inflation. Land
taxes have been low and are more than covered by the peri-
odic sale of a few cattle. Land prices have risen with inflation,
and under the pressure of large funds seeking investment in
the limited areas of good terrain, soil and water. Over the
years it cannot be denied that such holdings have proved ex-
cellent investments from the standpoint of security and
increase of principal.
[10]







The Government has undertaken a limited program of
purchasing land from large holders and reselling it in smaller
tracts to operating farmers. But the market price of good
land is generally much above not only the assessed valua-
tion but also that which would result from a fair capitalization
of current earnings. Consequently, we question whether such
a program can really succeed, on any large scale, in securing
more intensive utilization of the best land. While we believe
an extension of this program is desirable, mainly in areas
where land can be purchased more cheaply, it must be supple-
mented by broader and more effective measures.
We propose specifically that underutilization be penalized.
The good arable land of Colombia is part of the patrimony
of the nation, and the nation has both the right and the
duty to insist that it be used productively. We believe that
an important incentive to better land use may be an adjust-
ment in the patrimony tax as applied to land. One way of
formulating such a tax would be as follows: the farm land
would be assessed at its market value; the present usual tax
rate of Ps.$4 per thousand valuation would apply only to land
yielding the "normal" rate of return for land utilized reason-
ably efficiently in each area; and a progressively higher rate
would apply to land yielding less than the "norm" for the
area.
For example, assuming that land in the savannas of Cun-
dinamarca should yield, if it is properly farmed, 10 percent on
its market value,, a farm worth Ps.$100,000 which yielded an
annual return of Ps.$10,000 or more would be taxed at only
Ps.$4 per thousand, or Ps.$400 in all. But if a comparable farm
of the same value yielded only Ps.$5,000 a year because of
inefficient use, it would be taxed at a substantially higher rate,
say, Ps.$13 per thousand. The result would be to put a pro-
gressively higher penalty on serious underuse of land.
These rates are suggested only as examples. The details
should be worked out with care, and various exceptions should
doubtless be made to avoid hardships and to encourage cer-
tain socially desirable uses of land.
While we do not put this proposal forward as a panacea,
nevertheless, we believe that it can be worked out practicably
[11







and equitably, that the principle is sound, and that it merits
serious study. Besides providing a direct stimulus to more
intensive farming or stock raising, such a scheme would help
to depress over-inflated land values and so bring better land
nearer the reach of ordinary farmers. And by expanding agri-
cultural productivity and incomes it would help to enlarge
the market for manufactured products and thus lay the basis
for a more efficient and diversified industry in Colombia.

TECHNICAL, EDUCATIONAL AND CREDIT SERVICES
The Caja de Cr6dito Agrario, Industrial y Minero is the
principal agricultural credit agency. Its activities have been
very useful and have expanded greatly in recent years. But
the needs for agricultural credit, especially those of small
farmers, are being met only to a very limited extent. We
recommend that additional funds be made available to the
Caja, and that its operations be modified in the following
ways:
1. By instituting a program of long-term credit to
finance the purchase of farms and such improvements as
buildings, storage facilities and irrigation and drainage works.
2. By laying more stress on small loans. The cost of
administering such loans, and providing the technical aid
and supervision required to make them effective, is high
in relation to the amounts lent. While the Caja's rates may
be raised slightly above present levels without causing
hardship, we believe the Government should be prepared to
assume part of these added costs as a subsidy.
3. By giving greater emphasis to assistance to coopera-
tives.
4. By divesting itself, where possible, of various sales
and other activities only remotely connected with its credit
program to give it greater freedom to handle a larger volume
of credit operations.
It is important that expanded credit activities be closely
associated with assistance in better farming methods.
Colombia has an Agricultural Extension Service, but it has
been able to reach the great majority of small farmers only
[12]







to a limited extent. They certainly need advice and instruc-
tion, but their capital is usually so limited that they cannot
take proper advantage of such advice. At the same time their
training is so meager that they cannot reap the full benefits
from any credit they are able to secure. We recommend
a closer linking of technical with financial assistance, along
the lines of the Farm Security Program for low income
farmers in the United States in the 1930's, either by means
of the Caja's employing its own technicians, or through a
close working arrangement between the Caja and the Exten-
sion Service.


ADMINISTRATION OF AGRICULTURAL PROGRAMS

The numerous Government and Government-assisted
programs for improvement of agricultural practices should
be consolidated for greater effectiveness. The focal point of
the coordinated program should be the whole farm and
farm family, supplemented by sufficient attention to special
aspects of farm problems to support a sound farm and home
management plan. Special attention should be given to
gardening and home production of meat, milk and eggs to
improve farm diets. To carry out such a program we recom-
mend an expansion of the Extension work as rapidly as per-
sonnel can be adequately trained, with a budget goal in 1955
of perhaps Ps.$2 million a year, compared with Ps.$334 thou-
sand in 1949.
To facilitate marketing we recommend establishment of
a better system of grades and standards, and of a reporting
service to make information on current crop prices available
to buyers and sellers. We also recommend that the appropri-
ate agricultural agencies assist in the formation of soundly
managed marketing cooperatives with advice and necessary
credit.
The program of the Instituto Nacional de Abastecimientos
for improving storage facilities should be expanded; the re-
quired expenditure is estimated at Ps.$17.5 million. We rec-
ommend special study of possibilities for improving the effi-
ciency of small food-processing plants, particularly the panela
[13]







mills, and provision of limited technical and financial aid for
improvements that appear definitely worthwhile.
No individual or agency in Colombia either has clear re-
sponsibility for developing a comprehensive, integrated farm
program, or has the authority to carry out such a program.
Besides the Ministry of Agriculture, there are about twenty
agencies and institutions whose operations affect agriculture
directly and a number of others that affect it indirectly. There
is definite need for better coordinated governmental machinery
for collecting and organizing agricultural statistics, analyzing
rural problems, and formulating and carrying out a consistent
program of agricultural development. This is an important
subject for study by the proposed Public Administration
Mission.
To achieve widespread improvement in agricultural tech-
niques, and shifts to more desirable patterns of production,
it is necessary to develop a closely-knit and flexible combi-
nation of (1) research, to adapt the best seed strains and pro-
duction practices developed abroad to Colombian conditions,
and to improve on the foreign developments where possible;
(2) programming of production goals, in the light of estimates
of yields and markets and the results of technical research;
(3) education, to diffuse knowledge of technical improvements
and market information; and (4) production and marketing
credits, to provide ordinary farmers with the means and in-
centives to adopt improved agricultural.practices, raise the
most productive crops, and market them more intelligently
and efficiently. All these functions are interrelated, and unless
an effective organizational structure is created to carry them
out, there is little prospect of bringing about general improve-
ment of agricultural productivity in the near future.

CAPITAL REQUIREMENTS
Certain irrigation projects are undoubtedly profitable in-
vestments under present conditions which are, however, some-
what artificial. A sounder gauge of the economic justification
of many proposed projects will be possible after Colombia
makes better use of the good land it already has. Some works
of this kind will certainly be justified, however, and we have
[14]








suggested that about Ps.$80 million be provided in the overall
investment program for irrigation and for catch basins, ponds
and drainage projects. Efforts should be made to make sure
that the benefits of expensive, publicly-financed irrigation
works are not confined to a few large landowners.
It is at least equally important, in our view, that a compar-
able investment of money and effort be made in reforestation
of land unsuitable for agriculture and in improvement of pas-
tures through reseeding.
In view of the large losses of crops, particularly grains,
that occur each year for lack of storage facilities, we recom-
mend that Ps.$17.5 million be made available for construction
of such facilities.
Considering the semi-primitive character of many Colom-
bian agricultural practices, it is apparent that substantial bene-
fits would result also from increased use of farm equipment,
fertilizers, insecticides and fungicides. We recommend in-
creased expenditures for these products-to increase domestic
output, step up imports where necessary, and develop a better
distribution system, with a number of strategically located
depots and a wide network of local sales agencies. It is pos-
sible that a supply of basic nitrogen for fertilizers may be
obtainable as a by-product of gas from the proposed oil
refinery or from the country's natural gas resources.
Our rough summary of capital requirements in the major
sectors of the agricultural economy over the next five years
follows:
Irrigation and drainage projects............................................... Ps.$ 80.0 million
Grain storage and drying facilities ............................... ........... 17.5 "
Implements and equipment, fertilizers, pesticides, etc......... 323.5 "
Development and reforestation of land (including reseed-
ing of pastures) .......................................... ................ ...... 78.5 "
Fisheries develop ent .................................................................. 17.5 "
Total ....................... .................... Ps.$517.0 million

The recommended new capital outlays, averaging slightly
over Ps.$100 million a year, represent a modest rise over the
level of investment in this field in recent years. In addition,
it is expected that a substantial amount of labor will be ex-
pended by individual farmers on improvements to their land,
[15]








on which we have placed no pecuniary value. These estimates
do not include funds for the purchase of land required to
carry out an expanded parcelization program, since such
expenditures constitute no drain on the physical resources of
the nation.
Much of this investment, of course, would be made through
private or cooperative channels, as well as by Government
agencies. Technical and credit assistance by the Govern-
ment may have great value in encouraging and guiding the
beneficial and effective use of private capital. In many fields
considerable capital formation may be obtained without any
corresponding loss of consumption by more effective use of
labor, now employed only part time or in relatively unproduc-
tive occupations, to improve rural roads, land and buildings.
Finally, many of the capital investments and other improve-
ments recommended in other sections of the Report will con-
tribute substantially to raising agricultural productivity.
Obvious examples are improvements in transportation (espe-
cially roads), primary and vocational education, health and
sanitation, rural housing, and electric power.


IV. Industry and Fuels

Industry in Colombia has recently "been undergoing a
rapid expansion, particularly during and since World War
II. We estimate that the value of industrial production, in
plants producing more than Ps.$6,000 worth of products in
the years 1944-1945, increased from Ps.$407 million in 1939
to Ps.$830 million in 1944-1945 and to Ps.$2 billion in 1948.
Although this spectacular growth was due mainly to a 215
percent rise in prices, the actual volume of production in-
creased by 143 percent. The value added to manufactured
goods by labor, management and capital increased from
about Ps.$120 million in 1939 to approximately Ps.$500 million
in. 1947, or from 11.5 percent of the national income to
15.3 percent.
Colombia is now producing domestically almost all of
its current consumption of processed foodstuffs, beverages,
[16]







tobacco, textiles, shoes and fuels. It is fabricating a sub-
stantial part of its building material requirements. It has
the foundation of a chemical industry in plants to make
sulphuric acid and caustic soda, and could shortly be self-
sufficient in the production of glass bottles and rubber tires.
On the whole, the development of industry appears to have
been logically and soundly based. For special reasons, how-
ever, the production of power and fuels has lagged behind
what might reasonably have been expected and the develop-
ment of lumbering and the forest products industry has
been slow.

INDUSTRIAL PRODUCTIVITY
Colombian industry is characterized by great variations
in efficiency. Some lines, including cotton textile and cement
mills, are quite comparable in efficiency with many plants
in more advanced industrial nations. In others, relatively
inefficient workshop and handicraft conditions prevail. Also,
the necessary increase in mechanization of industry has been
hampered by lack of power.
Incentives to increased efficiency on the part of both
management and labor appear necessary. The growth of the
market and in the number of competing units will be im-
portant factors in strengthening the incentives for capital
and management, and in altering the prevalent high price-low
volume psychology. Relaxation of quantitative restrictions on
imports, avoidance of excessive tariff protection, reduction
of internal transport costs, particularly on imported goods,
and maintenance of general price stability would be useful
in fostering healthier competition. A relaxation in exchange
controls or more certainty in their operation would help to
further the same end; such measures would also tend to
reduce the preoccupation of management with non-produc-
tion problems and would permit industries to operate on
lower inventories.
In the case of the workers, the key problems appear
to be low levels of physical stamina and training, inadequate
incentives, and lack of proper supervision. We suggest that
experiments in varying the length of the work day, providing
[17]








better balanced diets, fostering in-shop training and promo-
tion, and using piece-work rate methods of payment may
point the way to effective methods of remedying these
deficiencies. Creation of a much larger group of qualified
plant foremen and supervisors is necessary to support a
further expansion of industry; most persons in this group
now in Colombia are foreigners or foreign-trained.
Colombian industrial development has, on the whole,
benefited substantially from the formation of joint foreign
and Colombian companies. Local entrepreneurs have thereby
been able to take advantage of foreign experience in industries
new to Colombia and of the managerial and technical skills
developed in countries with more extensive and varied
industrial backgrounds.

POTENTIAL EXPANSION OF INDUSTRY

In Chapter XIX of the Comprehensive Report, the expan-
sion requirements of a number of specific industries are
examined in relation to the overall program. It may also
be assumed that under competitive conditions capacity will
be increased in some lines above what is strictly necessary to
meet demand, and there will undoubtedly be opportunities
for expansion in various lines not discussed in this general
survey. The contribution of industry to national income may
well amount to more than 20 percent of the total by 1955, as
against 15 percent in 1947.
The field of industrial development is one in which private
initiative is likely to be most effective and private capital
amply available, given generally favorable economic condi-
tions. We recommend, therefore, that Government policy
stress the promotion of private industrial enterprise rather
than state-owned undertakings.

Iron and Steel
Because of the magnitude of the proposed investment
and the great public interest, the Mission made a special
study of proposals for an iron and steel industry. Production
of steel in Colombia is now quite small, aggregating approxi-
[18]








better balanced diets, fostering in-shop training and promo-
tion, and using piece-work rate methods of payment may
point the way to effective methods of remedying these
deficiencies. Creation of a much larger group of qualified
plant foremen and supervisors is necessary to support a
further expansion of industry; most persons in this group
now in Colombia are foreigners or foreign-trained.
Colombian industrial development has, on the whole,
benefited substantially from the formation of joint foreign
and Colombian companies. Local entrepreneurs have thereby
been able to take advantage of foreign experience in industries
new to Colombia and of the managerial and technical skills
developed in countries with more extensive and varied
industrial backgrounds.

POTENTIAL EXPANSION OF INDUSTRY

In Chapter XIX of the Comprehensive Report, the expan-
sion requirements of a number of specific industries are
examined in relation to the overall program. It may also
be assumed that under competitive conditions capacity will
be increased in some lines above what is strictly necessary to
meet demand, and there will undoubtedly be opportunities
for expansion in various lines not discussed in this general
survey. The contribution of industry to national income may
well amount to more than 20 percent of the total by 1955, as
against 15 percent in 1947.
The field of industrial development is one in which private
initiative is likely to be most effective and private capital
amply available, given generally favorable economic condi-
tions. We recommend, therefore, that Government policy
stress the promotion of private industrial enterprise rather
than state-owned undertakings.

Iron and Steel
Because of the magnitude of the proposed investment
and the great public interest, the Mission made a special
study of proposals for an iron and steel industry. Production
of steel in Colombia is now quite small, aggregating approxi-
[18]







mately 3,400 tons of reinforcing rods a year from scrap in
Medellin and approximately 5,000 tons of pig iron in Pacho.
Most Colombian requirements for steel products-mainly
wire, reinforcing rod, pipe and light structurals-are met
from imports and there is a strong feeling that a substantial
part of these requirements might be produced in the country.
There are two main possibilities for developing the Colom-
bian steel industry. One is the creation of a completely
integrated plant utilizing domestic iron ore, coal, and lime-
stone. The other is the development of additional fabricating
facilities for processing local and imported scrap and im-
ported pig iron, with the prospect of eventually working into
iron ore reduction. After intensive study, a summary of
which is provided in the Comprehensive Report, it was our
conclusion that it would be premature to embark on the
development of an integrated steel industry in Colombia
today, but that it would be a very sound investment to expand
fabricating facilities sufficiently to supply most of Colombia's
requirements for wire, rod, and light structural.
We were influenced in this decision by many considera-
tions. For one thing, the capital requirements for an inte-
grated steel industry are very large. Two proposals were
examined, one calling for expenditures of U.S.$95 million
and the other, U.S.$41 million. Examination of the detailed
estimates and consideration of experience in other similar
projects gave little assurance that the cost could be kept
within these estimates. In addition to the high cost of
capital amortization, operating costs for the proposed plant
would be high as a result of several factors, including the
diversity of products required in Colombia in relation to the
total demand, the geographical remoteness and altitude of the
proposed site, the qualities of the ore and coal available, and
the lack of trained labor and community facilities in the area.
According to our estimates, the costs of producing steel,
including amortization, would in some cases be more than
three times the c.i.f. price of imported products; thus the
proposed plant would require heavy subsidies, either direct
or in the form of high tariff protection, to enable it to compete
with foreign producers. Such subsidies would constitute a
[19]







serious burden on steel-using industries and on the whole
economy, and would handicap further industrial development
for many years to come. Anticipated savings of foreign
exchange would be largely offset by the very large service
charges on new foreign debt that would be necessary, and
the cost of foreign materials and personnel required to
operate the plant.
We appreciate that the Government wishes to provide
new employment opportunities in the depressed area of
Boyaca, but the amount of employment that would be pro-
vided at and around the mill site would be quite limited at
best and would not justify the large expenditures which the
entire country would have to pay. Much more effective aid
and more productive employment could be provided in
Boyaca through much less costly public works and through
development of more efficient agriculture and lighter in-
dustries.
Generally, under free competitive conditions and in the
absence of special governmental measures, the first step in
the development of a steel industry is to establish relatively
simple fabricating plants to process scrap. Japan built up
a large steel industry on the basis of imported scrap. It was
not until World War II that the wealthy and populous West
Coast of the United States, with a steel market many times
the size of the Colombian market, supplemented its scrap-
melting facilities (open hearth furnaces) with ore reduction
facilities (blast furnaces). The same process has been ap-
parent in Chile and to a limited extent in Colombia itself.
The first project we recommend would be the creation
of a steel industry at Barranquilla. This would consist of an
open hearth furnace for the melting of imported scrap, a
blooming, merchant and rod mill and a wire plant, together
with necessary facilities. A power plant would not be re-
quired, as ample electricity is already available at Barran-
quilla, as are also essential community facilities. We estimate
that a plant to melt 65,000 tons of scrap and pig per annum
and process this into 5,000 tons of light structural, 30,000 tons
of reinforcing rod and 25,000 tons of wire products, would
not cost in excess of U.S.$9 million, of which foreign exchange
[20]








requirements would approximate U.S.$5 million. For this rela-
tively modest capital investment the bulk of Colombia's fin-
ished steel requirements would be met for some time to come.
We believe this operation would be economical and fully
competitive with foreign production, and that the annual
dollar savings would almost equal the total original dollar
capital requirement. Moreover, it is probable that this project
could be undertaken by private enterprise.
In addition, we would endorse the provision of additional
smelting facilities for the existing plant at Medellin. This
very successful plant has rolling capacity of 15,000 to 20,000
tons of reinforcing rod a year. The shortage of local scrap,
however, has limited its annual production to 3,500 tons. This
company has constructed a cement plant and a 4,000 kw.
hydroelectric plant nearby and has developed coal mines and
limestone deposits and acquired iron ore deposits. Since,
therefore, the company already has power facilities, developed
mines and rolling facilities, it would be possible to double
its capacity of finished products by the relatively small in-
vestment of U.S.$550,000 for a larger electric furnace and
auxiliary equipment to smelt ore into pig iron for the making
of 4,000 tons of steel ingots a year. It is believed that this
production would be at a price competitive with imports.

Petroleum
Present proven oil reserves in Colombia are very limited
-less than ten years' supply at the present rate of production.
Even if exports are sharply cut, the rising level of internal
consumption, especially of gasoline, will require increasing
amounts of petroleum. Moreover, the Barco reserves, which
because of their quality should form the backbone of the
domestic refining industry, constitute only one-third of the
total.
We believe it is extremely important to encourage inten-
sive further exploration by private oil companies, which have
the experience and resources necessary to undertake this
highly speculative function. It is urgent, therefore, that the
Government clarify its relations with the oil companies with-
out delay along lines that will give every encouragement to
mutually advantageous exploratory work.
S21 ]







We also urge that the possibility of conserving Barco crude
for internal use be studied. It may, for example, be possible
to substitute increased exports of DeMares and Casabe crude
for Barco petroleum in an equitable manner.

Oil Refinery
To meet Colombia's requirements for petroleum products,
which are estimated to be increasing at a rate of 10 percent
per annum, it is necessary to supplement the present topping
units, which yield some 6 to 10 percent gasoline, and to add
modern cracking facilities giving a yield of approximately
40 percent. The present capacity of the unit at Barrancaber-
meja is 21,000 barrels per day, and there appears to be justi-
fication for additional capacity to treat approximately 17,000
barrels of crude a day.
We recommend that the additional required capacity be
established at Barrancabermeja to take advantage of its exist-
ing facilities, its central location and its system of connecting
pipelines. Construction of a combination crude distillation
and 2-coil thermal cracking unit could be started immediately
there. The combination cracking unit would be economical to
operate and should not cost over U.S.$10 million. This ex-
pansion would enable products to be kept in balance over the
next ten years. Our recommendation assumes that the pro-
posed unit will be operated by experienced private manage-
ment.
One loop of the Andean pipeline could be modified to per-
mit transportation to Barranca of Barco crude oil, which is
the only crude entirely suitable for refining to the proper
breakdown of products without going to extraordinary ex-
pense in refining equipment. Crude for export and cracked
fuel oil could be alternated in the other loop of the Andean
pipeline for transport to Cartagena. If the country should
some time have to import crude it could be brought up one
loop of the Andean line.
This recommendation differs from those put forth in the
joint Foster-Wheeler-Consejo Nacional de Petr6leos report,
which calls for a new refinery at Mamonal as well as addi-
tional cracking facilities at Barranca, with further provisions
[22]







for expansion of the Mamonal refinery by 1955. We feel that
in view of the shortage of proven oil reserves in Colombia such
a program, involving expenditures of about U.S.$35 million,
cannot be justified. Moreover, looking ahead, all cracking
facilities should be at one location until a complete refinery
of 40,000 to 50,000 barrels per day has been developed to secure
full operating economies. Finally, the operation of the pro-
posed distillation unit at Mamonal up to 1955 would be waste-
ful of Barco crude oil. Even thereafter, the refinery at
Mamonal would be uneconomic and could not show a reason-
able return on the investment involved without being allowed
an additional spread between refined products and crude oil
prices, an unjustifiable subsidy.

In conjunction with new oil refinery facilities the feasibility
of producing anhydrous ammonia to supply Colombia's re-
quirements for nitrogen fertilizer should be studied. This
product has a very high nitrogen content (82 percent) and
can be made quite cheaply either from the gas by-product of
the refineries or from the natural gas that exists in Colombia.
Methods have been worked out whereby it is now possible to
apply anhydrous ammonia directly to the soil and, if these
methods prove adaptable to Colombia, tremendous savings in
comparison with imported nitrates will be obtained. Alter-
natively, it appears feasible to manufacture ammonium nitrate
(33 percent nitrogen) or ammonium sulphate (20 percent
nitrogen) for fertilizer use.

Coal
Colombia possesses great coal reserves which should prove
of enormous value in the future. At the present time they are
being mined most inefficiently so that the price is high and
the consumption low. It is urged that study be given to the
possibility of introducing efficient coal mining methods. In
addition to supplying domestic fuel requirements it is possible
that coal might become a significant export. There are sub-
stantial proven reserves of apparently excellent quality coal
at Cerrejon near the Caribbean coast. The Mission arranged
for analysis of this coal by the United States Bureau of Mines,
and that agency's preliminary report indicates that the coal
[23]







has excellent fuel qualities. Further work to prove reserves
appears to be amply justified.

Forest Products
Another industry of potentially great significance is lum-
ber and forestry products. It appears that the technique of
forestry has now been developed to the point where tropical
forests may be economically exploited and for the first time
industrialists are becoming interested in starting a modern
lumbering and timber processing industry in Colombia. What
is required is a multi-purpose operation that permits the use
of a wide variety of wood for different purposes, such as
fiberboard, construction timber, furniture, plywood, Kraft and
other paper products. In the development of forest resources
every effort should be made to enforce the conservation laws
now on the statute books and to check the wasteful practice of
burning forests to clear land.

Other Industries
The potentialities of other industries-including textiles,
beverages, tobacco products, processed foods, leather and
shoes, glass products, chemicals, building materials and rub-
ber tires-are considered in more detail in the Comprehensive
Report. It is apparent that Colombia has a substantial indus-
trial potential and that in the next few years considerable ex-
pansion will be economically justified, both to replace certain
current imports and to provide additional exports.

Power for Industry
Perhaps the most fundamental requisite for industrial de-
velopment is cheap and adequate power, principally electric-
ity. The exceptional rise in worker productivity and total
industrial output in Colombia over the last few years may be
ascribed in large part to the growth in power consumption as
the principal motive force for machinery, for industrial heat-
ing and chemical processes. The use of electric power has
expanded since the war at a rate considerably faster than
the increase in generating capacity. Serious shortages have
occurred and undoubtedly hampered industrial development
in some areas.


[24]







has excellent fuel qualities. Further work to prove reserves
appears to be amply justified.

Forest Products
Another industry of potentially great significance is lum-
ber and forestry products. It appears that the technique of
forestry has now been developed to the point where tropical
forests may be economically exploited and for the first time
industrialists are becoming interested in starting a modern
lumbering and timber processing industry in Colombia. What
is required is a multi-purpose operation that permits the use
of a wide variety of wood for different purposes, such as
fiberboard, construction timber, furniture, plywood, Kraft and
other paper products. In the development of forest resources
every effort should be made to enforce the conservation laws
now on the statute books and to check the wasteful practice of
burning forests to clear land.

Other Industries
The potentialities of other industries-including textiles,
beverages, tobacco products, processed foods, leather and
shoes, glass products, chemicals, building materials and rub-
ber tires-are considered in more detail in the Comprehensive
Report. It is apparent that Colombia has a substantial indus-
trial potential and that in the next few years considerable ex-
pansion will be economically justified, both to replace certain
current imports and to provide additional exports.

Power for Industry
Perhaps the most fundamental requisite for industrial de-
velopment is cheap and adequate power, principally electric-
ity. The exceptional rise in worker productivity and total
industrial output in Colombia over the last few years may be
ascribed in large part to the growth in power consumption as
the principal motive force for machinery, for industrial heat-
ing and chemical processes. The use of electric power has
expanded since the war at a rate considerably faster than
the increase in generating capacity. Serious shortages have
occurred and undoubtedly hampered industrial development
in some areas.


[24]







has excellent fuel qualities. Further work to prove reserves
appears to be amply justified.

Forest Products
Another industry of potentially great significance is lum-
ber and forestry products. It appears that the technique of
forestry has now been developed to the point where tropical
forests may be economically exploited and for the first time
industrialists are becoming interested in starting a modern
lumbering and timber processing industry in Colombia. What
is required is a multi-purpose operation that permits the use
of a wide variety of wood for different purposes, such as
fiberboard, construction timber, furniture, plywood, Kraft and
other paper products. In the development of forest resources
every effort should be made to enforce the conservation laws
now on the statute books and to check the wasteful practice of
burning forests to clear land.

Other Industries
The potentialities of other industries-including textiles,
beverages, tobacco products, processed foods, leather and
shoes, glass products, chemicals, building materials and rub-
ber tires-are considered in more detail in the Comprehensive
Report. It is apparent that Colombia has a substantial indus-
trial potential and that in the next few years considerable ex-
pansion will be economically justified, both to replace certain
current imports and to provide additional exports.

Power for Industry
Perhaps the most fundamental requisite for industrial de-
velopment is cheap and adequate power, principally electric-
ity. The exceptional rise in worker productivity and total
industrial output in Colombia over the last few years may be
ascribed in large part to the growth in power consumption as
the principal motive force for machinery, for industrial heat-
ing and chemical processes. The use of electric power has
expanded since the war at a rate considerably faster than
the increase in generating capacity. Serious shortages have
occurred and undoubtedly hampered industrial development
in some areas.


[24]







As one result of the unsatisfactory power supply a num-
ber of industrial plants have established their own generating
facilities. These are uneconomic, since both the initial in-
vestment and the operating costs per unit of output are
normally higher for such plants than for larger public service
facilities; they involve a large increase in the capital re-
quirements for establishing new enterprises; and they increase
the difficulty of obtaining a satisfactory balance in the power
load between residential requirements (which are heavily
concentrated in a few hours of the day) and non-residential
uses. In some localities the building of these factory-owned
power facilities has apparently resulted in part from the
establishment of utility rates that give insufficient encourage-
ment to off-peak industrial uses.
Because of the desirability of a balanced demand for effi-
cient and economical power operations-in which residential,
commercial and industrial consumption complement each
other-it is impossible to deal realistically with industrial
power requirements apart from other uses. Hence, capital
requirements for power facilities to serve all these purposes
are shown in Section VII on Electric Power and Community
Facilities.

CAPITAL REQUIREMENTS
Aside from the investment of about Ps.$53 million indi-
cated for petroleum refineries and iron and steel development,
Ps.$93 million could be invested in priority projects which
are of major interest to the country and are currently under
study. We estimate that other related capital requirements
for the next five years, if the high rate of economic activity
and expansion prevailing in 1946-1950 is to be maintained,
will be Ps.$500 million for other equipment and material and
Ps.$100 million for industrial buildings. On this basis, invest-
ment in industries in the five years to come would total about
Ps.$740 million, including foreign exchange requirements of
U.S.$190 million.


[25]








V. Transportation


Transportation is an especially difficult problem in Colom-
bia because of the very rugged topography. Most of the
main centers of population are located on the slopes or the
high plateaus, or in the valleys of the three Cordillera ranges
which stretch the length of the country from south to north.
These mountains divide Colombia into four principal zones;
and interzonal traffic is largely confined to goods of high
value in relation to their bulk and weight, which excludes
any large-scale interchange of most domestic products. Trans-
port difficulties also inhibit the flow and increase the cost of
export-import shipments between interior cities and the major
ports of Barranquilla and Cartagena on the Caribbean and
Buenaventura on the Pacific Coast. Despite considerable im-
provement in recent years, high transportation costs, delays
in delivery, and excessive breakage and pilferage still im-
pose a heavy burden on almost every sector of the national
economy.
The surface transportation system is fragmentary with
no independent, integrated system of railways, highways or
inland waterways. Almost all traffic must make use of a
combination of at least two of these means, with consequent
operational inefficiencies and relatively higher costs. The
principal artery of commerce has traditionally been the
Magdalena River, which provides the only surface con-
nection between the Caribbean ports and-the important centers
of population around Bogota, Medellin and Bucaramanga.
Railways have been built to connect these cities with the
river and to link the rich Cauca Valley with the major
Pacific seaport, Buenaventura. In recent years a consider-
able highway mileage has been built to tap areas whose
terrain is too difficult or whose traffic is too small to justify
railway construction. Figure 2 shows all the present media
of surface transportation, as well as the changes recom-
mended for their expansion and integration.
Air transportation has developed rapidly and is now one
of the principal means of transporting both passengers and
freight. Because of the slowness and high cost of surface
[26]























COLOMBIA


PRESENT AND RECOMMENDED

RAILROADS, HIGHWAYS

AND PIPELINES


HONDO


RICA


NGA


SAN


LOPEZ


PRESENT

i4M*WI. RAILWAYS
mm HIGHWAYS

-- -M PIPELINES



RECOMMENDED

-n+++++ RAILWAYS

m HIGHWAYS

l-4 -- PIPELINES


Figure 2


ARAUCA
**-- -


~


~


r
~"i e
~ -
'-
i
:'
r-:


L-







transport, commercial aviation is able to compete on favor-
able terms; the airlines carry nearly half the passenger
traffic and a much smaller but steadily rising share of the
freight volume. It is estimated that in 1947 the railways
accounted for about 32 percent of total freight ton-kilometers
(excluding oil shipments by pipeline), the highways for
about 36 percent, inland and coastal shipping for 29 percent
and aviation for about 3 percent.
The Mission recommends certain changes in management
and operating practices to increase the efficiency of exist-
ing transportation facilities, and also some extensions and
improvements of these facilities. In addition we propose
the establishment of more effective regulatory machinery to
bring about better coordination of the various forms of
transportation and better protection of the public interest.


REGULATION OF TRANSPORTATION
We believe it is most important to establish adequate
machinery for regulation of all media of transportation, in
the interest of shippers, passengers and the public generally.
The National Council of Transportation, established in 1948,
is not a wholly satisfactory agency to perform this function.
Its powers are not sufficiently broad or clearly defined. It
is composed of top officials of the various Government bodies
concerned with transportation, who have other extensive and
pressing responsibilities. It meets only informally and has
no adequate staff. Finally, its members generally represent
special economic and bureaucratic interests, some of them
as operators of particular transportation media. Such a setup
is not conducive to careful, disinterested analysis of the com-
plexities of the transportation picture, or to the development
of a comprehensive, consistent, and objective policy with
regard to the various overlapping and competing systems of
transportation.
We recommend, therefore, that the proposed Public
Administration Mission give special attention to the prob-
lem of securing a proper organization of regulatory functions,
as distinct from operations, in the whole field of transportation.
[27]







RAILROAD TRANSPORTATION


Improvement of Operations
For administration and operation of the National Rail-
ways we recommend establishment of a Public Railways
Corporation independent of the regular ministries, with an
outstanding part-time Board of Directors and a General
Manager with broad executive power and responsibility for
day-to-day operations. We believe this administrative change
would better insulate railroad operations from political influ-
ence, permit both greater continuity of policy direction and
more managerial flexibility, and help to fix responsibility for
direction and management. This appears to be a necessary
prerequisite to increased operational efficiency, and a good
starting point for other improvements.
There has been a failure to put into practice the many
specific recommendations for improvement of operations
which have been made in the past, particularly those by the
United States Railway Mission of 1946. We strongly reiterate
the recommendations of that Mission. We would emphasize
our view that substantial improvements in efficiency can be
obtained by those means at relatively small cost, and that
there is little justification for large new capital investments
unless operational improvements are made. In the Pacifico
shops, for example, which -are the best in Colombia, the
average time required to make general repairs actually in-
creased from 118 days per locomotive in 1945 to 145 days
in 1949.
In addition to more efficient operating and maintenance
practices for present equipment, we recommend the pur-
chase of several diesel-electric units to replace steam loco-
motives on certain runs, and of lighter weight freight cars,
as part of the re-equipment program projected by the National
Railways. Through the use of double unit, yard-gauge diesel-
electrics and lighter weight equipment, we believe that it
is possible to increase train payloads on steep grades from
the present average of 100 tons to 700 tons. Centralization
of maintenance shops and purchase of improved types of
machine tools, as recommended by the 1946 Railway Mission,
are also very desirable.
[281







RAILROAD TRANSPORTATION


Improvement of Operations
For administration and operation of the National Rail-
ways we recommend establishment of a Public Railways
Corporation independent of the regular ministries, with an
outstanding part-time Board of Directors and a General
Manager with broad executive power and responsibility for
day-to-day operations. We believe this administrative change
would better insulate railroad operations from political influ-
ence, permit both greater continuity of policy direction and
more managerial flexibility, and help to fix responsibility for
direction and management. This appears to be a necessary
prerequisite to increased operational efficiency, and a good
starting point for other improvements.
There has been a failure to put into practice the many
specific recommendations for improvement of operations
which have been made in the past, particularly those by the
United States Railway Mission of 1946. We strongly reiterate
the recommendations of that Mission. We would emphasize
our view that substantial improvements in efficiency can be
obtained by those means at relatively small cost, and that
there is little justification for large new capital investments
unless operational improvements are made. In the Pacifico
shops, for example, which -are the best in Colombia, the
average time required to make general repairs actually in-
creased from 118 days per locomotive in 1945 to 145 days
in 1949.
In addition to more efficient operating and maintenance
practices for present equipment, we recommend the pur-
chase of several diesel-electric units to replace steam loco-
motives on certain runs, and of lighter weight freight cars,
as part of the re-equipment program projected by the National
Railways. Through the use of double unit, yard-gauge diesel-
electrics and lighter weight equipment, we believe that it
is possible to increase train payloads on steep grades from
the present average of 100 tons to 700 tons. Centralization
of maintenance shops and purchase of improved types of
machine tools, as recommended by the 1946 Railway Mission,
are also very desirable.
[281







We suggest certain changes in operating and management
practices to raise the productivity of railway labor. We
recommend also that the railway pension system be revised
so that experienced, still productive workers can be usefully
employed for a longer time, and wages and social security
benefits can be raised to a more adequate level.

Proposed Expansion of Railroads
The present program of the Government for railroad
expansion appears to be open to two main criticisms: (1) it
involves the building of several lines to compete for the
same traffic and an increase in the traffic handling capacity
of the railroads in excess of any reasonable estimate of future
demand; and (2) so many projects are being carried on at
once that none of them can be completed for many years.
Our recommendations for new construction are designed to
focus on the most urgent projects, to get them completed
as soon as possible and avoid further expenditures on under-
takings of low economic value.
In our view the most important construction project is
the building of a new railway along the Magdalena River
from the head of year-round navigation at Puerto Wilches
to La Dorada and Puerto Salgar. It would connect with the
existing lines running west to Antioquia, Caldas and the
Cauca Valley, south into Tolima and Huila, and east to
Bogota and into Boyaci. This new line would supplement
the Magdalena River in its upper reaches where dependable
navigation is impossible in the dry season, and thus would
provide faster and cheaper year-round transportation for bulk
commodities between the most important interior districts and
the Caribbean coast; this would help also to relieve traffic
congestion over the route from Buenaventura. Moreover, it
would provide a connection between the Eastern and Western
railway networks, and probably also tie the isolated Puerto
Wilches-Bucaramanga line into the rest of the railway sys-
tem. Thus it would help to avoid costly and time-consuming
transfers of freight between the railways and other means
of transportation and would permit much more efficient use
of equipment and maintenance facilities.
[29]







The construction of the new Magdalena River railroad
would greatly reduce the need for the following railway
projects now under slow construction.

(1) The connection between the two sections of the
Norte Railway, similarly designed to provide transportation
for bulk traffic from Puerto Wilches south to the Bogota
area. The Magdalena River line would probably cost no
more to build and its operating costs would be much lower;
it would have greater traffic potential; and it would have the
additional advantage of linking the major railway lines in
Colombia and providing through railroad connections be-
tween the major centers of Bogoti, Medellin and Bucara-
manga.
(2) The Bolivar section of the proposed Western Trunk
Railroad from Cartagena south and eventually intended to
connect with the Western railway system at Anza in
Antioquia. After completion of some 486 kilometers of new
line this would provide an alternative route to the Caribbean.
The prospective volume of traffic is not great enough, how-
ever, to justify such an additional route, and the local traffic
in Bolivar could be adequately handled by highway transport.
(3) The Ibagu6-Armenia railroad, designed to connect
the Eastern and Western systems over the extremely difficult
Quindio Pass. The objectives of this project are certainly
desirable, but its cost is too high and consequently other
means of achieving its objectives are preferable. The Mag-
dalena River railroad would connect the Eastern and West-
ern systems more cheaply and efficiently and would handle
much of the traffic for which the Quindio route is proposed.
The rest of that traffic could be handled more cheaply by
efficient trucking methods than by the projected railway.
(4) The Buga-Buenaventura cutoff on the Pacifico rail-
road, to provide a shorter and easier route from the Cauca
Valley to Buenaventura. This project is designed mainly
to ease the traffic bottleneck between Buenaventura and Cali.
However, construction of the Magdalena River railway and
the Western trunk highway will tend to reduce the volume
of this traffic; and the new Buenaventura-Buga highway and
[301







improvement of operations on the existing railroad through
Cali would take care adequately of the remainder.
Consequently, we recommend that work on these lines
cease and that the Government concentrate its major rail-
road construction effort on the Magdalena River route. In
addition, the two meter-gauge lines serving Bogota should
be changed to the more generally used yard-gauge. The inter-
change of freight between the meter-gauge and the two yard-
gauge railroads entering Bogota is relatively small, but it
is likely to increase. More important, standardization of these
railroads would permit substantial operating advantages,
notably centralization of shop facilities and more efficient use
of equipment. The advisability of also changing the meter-
gauge line running from Puerto Wilches to Bucaramanga
depends on whether the new Magdalena River railroad is
built on the east or on the west side of the river. Decision
on a shift to yard-gauge should, therefore, be postponed until
surveys for the new line are completed and its route
determined.
Our preliminary estimate of the capital requirements for
the Magdalena River railroad is Ps.$36 million, plus U.S.$12
million. A more detailed survey is necessary to define the
best route and estimate the cost more accurately. The
several other projects we recommend involve much smaller
expenditures and can be initiated at once:
Central shop facilities, Bogot.................. Ps.$6,000,000 plus U.S.$2,000,000
Diesel locomotives .............................. U.S.$1,000,000
Standardization of gauge (2 lines)....... Ps.$2,200,000 plus U.S.$ 100,000
Relocation of facilities, Bogot................ Ps.$1,000,000plus U.S.$ 200,000
Total ..................................... Ps.$9,200,000 plus U.S.$3,300,000 2

We recommend that two existing lines, isolated from
the main systems of the National Railroads, be abandoned
because of their low traffic volumes and high operating
losses. These are the Narifio and the Cartagena-Calamar

2 In addition to the foreign exchange expenditures, 33 percent of the c.i.f.
cost of imported equipment should be added to cover transport and trade
markups for such equipment. A similar addition of 33 percent should be made
in all cases where internal distribution costs on imported material are not
specifically included.
[31]







railroads. Other means of transportation-a highway in the
former case and an improved waterway in the latter-would
serve the areas involved more efficiently.
The savings from abandoning these lines are estimated at
Ps.$1,300,000 annually. In addition, we believe that savings
of Ps.$6 million per year can be achieved through improved
operating practices, and perhaps Ps.$12,500,000 a year for
construction projects now in the National Railroad Fund
that we recommend be abandoned or postponed. These sav-
ings would cover capital requirements in less than four years.

HIGHWAY TRANSPORTATION
Highway transportation has grown rapidly in importance
since its inception in Colombia 25 years ago. Highways have
several advantages over other media of surface transporta-
tion: they can be used efficiently by many types of vehicles
for both local and long-haul traffic; they can traverse ter-
rain too difficult for railway construction; and the investment
in their construction can be adjusted in considerable mea-
sure to the economic utility of the route involved. However,
a very high minimum investment is always required for a
railroad. Despite these advantages, highway transportation
has not yet assumed its proper place in the transport system
of Colombia because of excessively high construction costs,
poor road maintenance, and the incompleteness of the high-
way network.

Operational Improvements
The present unsatisfactory standards of highway mainte-
nance are less the result of inadequate appropriations than
of uneconomic administration of the funds available. The
average National Government allowance of Ps.$1,000 per
kilometer per year for maintenance and paving, which was
approximately provided in the 1950 budget, should be suffi-
cient if properly used, especially since it is supplemented by
substantial departmental expenditures.
For many through highways with a high traffic volume,
however, Ps.$1,000 per kilometer is far too low, while for
[321







railroads. Other means of transportation-a highway in the
former case and an improved waterway in the latter-would
serve the areas involved more efficiently.
The savings from abandoning these lines are estimated at
Ps.$1,300,000 annually. In addition, we believe that savings
of Ps.$6 million per year can be achieved through improved
operating practices, and perhaps Ps.$12,500,000 a year for
construction projects now in the National Railroad Fund
that we recommend be abandoned or postponed. These sav-
ings would cover capital requirements in less than four years.

HIGHWAY TRANSPORTATION
Highway transportation has grown rapidly in importance
since its inception in Colombia 25 years ago. Highways have
several advantages over other media of surface transporta-
tion: they can be used efficiently by many types of vehicles
for both local and long-haul traffic; they can traverse ter-
rain too difficult for railway construction; and the investment
in their construction can be adjusted in considerable mea-
sure to the economic utility of the route involved. However,
a very high minimum investment is always required for a
railroad. Despite these advantages, highway transportation
has not yet assumed its proper place in the transport system
of Colombia because of excessively high construction costs,
poor road maintenance, and the incompleteness of the high-
way network.

Operational Improvements
The present unsatisfactory standards of highway mainte-
nance are less the result of inadequate appropriations than
of uneconomic administration of the funds available. The
average National Government allowance of Ps.$1,000 per
kilometer per year for maintenance and paving, which was
approximately provided in the 1950 budget, should be suffi-
cient if properly used, especially since it is supplemented by
substantial departmental expenditures.
For many through highways with a high traffic volume,
however, Ps.$1,000 per kilometer is far too low, while for
[321







less important roads it is too high. It is important, there-
fore, that the allocation of maintenance funds be based on
sound economic criteria and accurate and up-to-date surveys
of present and prospective traffic. In view of the importance
of good highway maintenance we suggest that it may be useful
to make the experiment of turning over to private interests
the reconditioning and maintenance of one or two bad
stretches, or the construction of a new highway section to
be financed by tolls. Alternatively, the Government might
consider entering into a contract with competent and specially
experienced private firms to maintain some important stretches
of highway.
Greater use of mechanical road equipment is recom-
mended. The equipment now in use should be concentrated
in fewer larger pools to permit better supervision and main-
tenance and more flexible use. Budget allocations for pur-
chase of highway machinery and parts should be larger than
in past years; the 1950 figure is more adequate, however, and
we recommend that this level be maintained for some years
to come.
Unsatisfactory highway conditions have contributed
greatly to the excessively high cost of truck operations.
Maintenance and accident costs are heavy and the life of
equipment is short; a large part of every truck fleet is always
laid up. As a result of these hazards, light equipment and
low speeds are generally used and reduce the efficiency of
operations. The wide diversity of truck types in use and
the foreign exchange restrictions of the past few years have
made it difficult to maintain adequate inventories of spare
parts, and have increased maintenance costs and delays. We
believe it should be possible, by improving the quality of
the major highways and using more uniform fleets of higher
capacity trucks, to reduce truck operating costs by at least
50 percent.

Major Highway Extensions
We recommend that highway construction efforts, instead
of being spread out over more than a hundred projects, as
in 1949, be concentrated on a few projects of outstanding
[33]







economic importance. Most of these are relatively short
segments required to complete important through routes. As
we see them, the top priority construction projects are:
the Taraza-Planeta Rica segment of the Cartagena-
Medellin highway;
the la Dorada-Sons6n segment between Bogota and
Medellin;
the CAchira-Abrego gap and the cutoff from Rinc6n Hondo
to Caracoli on the route from Bucaramanga to Santa
Marta and Barranquilla;
the Buga-Buenaventura cutoff;
the Tumaco-El Diviso highway to replace the present
railway;
various parts of the Medellin-Turbo road.

We estimate the capital requirements for these undertakings
at Ps.$33.5 million plus U.S.$1.5 million. An additional U.S.$3
million for road machinery would serve both for these con-
struction projects and for maintenance work.
In addition, we believe consideration should be given to
closing the gaps in the Bogoti-Neiva-Popayan route and to
building the direct highway link between Barranquilla and
Santa Marta.


WATER TRANSPORTATION AND PORT FACILITIES
Magdalena River transport, historically the most impor-
tant medium for import-export traffic, has become increasingly
unsatisfactory in recent years, partly because of the difficulties
of navigation above Puerto Wilches at the low water season,
and partly because of the inefficiency and high cost of cargo
carriage and handling. The recommended new railway south
from Puerto Wilches should remedy the first deficiency in
large part, and certain river improvements which we have
outlined are desirable below Puerto Wilches. The most im-
mediate need, however, is to increase the operating efficiency
of water transport, for otherwise investments in better facili-
ties would be largely ineffective.
134]








Improvement of Operating Efficiency
We recommend that:
(1) The present high uniform transfer charges be reduced
and differentiated for commodities of different types and
values, to attract a greater traffic volume;
(2) Greater use be made of mechanized loading and un-
loading equipment, and the resulting labor savings passed
on in lower transfer charges;
(3) Shipping rates on the Magdalena River be differen-
tiated for different cargoes and types of service;
(4) The "turn" system of assigning cargoes be changed
to enable shippers to choose the vessels best suited to their
requirements and to foster more effective competition among
ship operators; and
(5) Crew labor practices be revised to permit efficient use
of modern equipment.
Our recommendations with respect to terminal handling
at ocean and river ports are similar. Emphasis should be
placed on speeding up the loading and unloading process,
especially at Buenaventura, by 24-hour work while ships are
in port, greater use of mechanized equipment, payment of
wages on an incentive basis, and use of lighters. Part of
the difficulties of port operation apparently stems from divi-
sion and confusion of administrative responsibility. We there-
fore recommend the establishment of a National Port
Authority to administer and operate all ocean and river port
facilities. Such a coordinated port administration would be
in a better position than the various agencies now concerned,
or private stevedoring companies, to install modern mechan-
ical facilities, to adjust handling charges to fit economic and
competitive conditions, and to negotiate fair agreements with
the stevedores' organizations.
Several of the changes proposed involve substantial modi-
fication of present labor practices, which may be strongly
resisted unless the workers understand how dangerous to
their long-run interests is the decline of water transport. It
is important, if serious labor difficulties are to be avoided,
[35]







that the higher productivity resulting from these changes
be adequately reflected in higher wages or other benefits.

River and Port Projects
Three major projects for improvement of waterways ap-
pear to merit high priority. They are:
(1) Stabilization of the shifting Magdalena River channel
for 20 miles opposite and below Puerto Wilches. We believe
the Government should be prepared to spend at least Ps.$3
million, plus U.S.$1.5 million for dredges, and to undertake
annual maintenance expenditures of Ps.$250,000.
(2) Dredging of the Bocas de Ceniza at the entrance to
Barranquilla harbor. An initial outlay of Ps.$10 million and
a continuing cost of perhaps Ps.$2 million annually are
estimated.
(3) Improvement of the Canal del Dique to permit fuller
use of the excellent natural port of Cartagena and abandon-
ment of the inefficient Cartagena railway. This is estimated
to require Ps.$4 million and annual expenditures of about
Ps.$285,000.

Ocean and Coastwise Shipping
We believe it is doubtful that further expenditures by the
Gran Colombiana line for the purchase of more ships and
the opening of new routes would yield returns as large as
equivalent investments in Colombia itself, especially since the
maritime shipping industry is becoming increasingly competi-
tive. However, the acquisition of a 1,000-ton seagoing freight
vessel, as planned by the government, would aid in main-
taining adequate coastwise shipping and is probably justified
for social and political reasons, although it is not likely to be
directly profitable.

PIPELINES
Pipelines now handle perhaps half of the total ton-kilome-
ters of freight traffic in Colombia, consisting mainly of crude
petroleum for export. However, as the domestic demand for
petroleum products increases and supplies of crude diminish,
[36]







that the higher productivity resulting from these changes
be adequately reflected in higher wages or other benefits.

River and Port Projects
Three major projects for improvement of waterways ap-
pear to merit high priority. They are:
(1) Stabilization of the shifting Magdalena River channel
for 20 miles opposite and below Puerto Wilches. We believe
the Government should be prepared to spend at least Ps.$3
million, plus U.S.$1.5 million for dredges, and to undertake
annual maintenance expenditures of Ps.$250,000.
(2) Dredging of the Bocas de Ceniza at the entrance to
Barranquilla harbor. An initial outlay of Ps.$10 million and
a continuing cost of perhaps Ps.$2 million annually are
estimated.
(3) Improvement of the Canal del Dique to permit fuller
use of the excellent natural port of Cartagena and abandon-
ment of the inefficient Cartagena railway. This is estimated
to require Ps.$4 million and annual expenditures of about
Ps.$285,000.

Ocean and Coastwise Shipping
We believe it is doubtful that further expenditures by the
Gran Colombiana line for the purchase of more ships and
the opening of new routes would yield returns as large as
equivalent investments in Colombia itself, especially since the
maritime shipping industry is becoming increasingly competi-
tive. However, the acquisition of a 1,000-ton seagoing freight
vessel, as planned by the government, would aid in main-
taining adequate coastwise shipping and is probably justified
for social and political reasons, although it is not likely to be
directly profitable.

PIPELINES
Pipelines now handle perhaps half of the total ton-kilome-
ters of freight traffic in Colombia, consisting mainly of crude
petroleum for export. However, as the domestic demand for
petroleum products increases and supplies of crude diminish,
[36]







that the higher productivity resulting from these changes
be adequately reflected in higher wages or other benefits.

River and Port Projects
Three major projects for improvement of waterways ap-
pear to merit high priority. They are:
(1) Stabilization of the shifting Magdalena River channel
for 20 miles opposite and below Puerto Wilches. We believe
the Government should be prepared to spend at least Ps.$3
million, plus U.S.$1.5 million for dredges, and to undertake
annual maintenance expenditures of Ps.$250,000.
(2) Dredging of the Bocas de Ceniza at the entrance to
Barranquilla harbor. An initial outlay of Ps.$10 million and
a continuing cost of perhaps Ps.$2 million annually are
estimated.
(3) Improvement of the Canal del Dique to permit fuller
use of the excellent natural port of Cartagena and abandon-
ment of the inefficient Cartagena railway. This is estimated
to require Ps.$4 million and annual expenditures of about
Ps.$285,000.

Ocean and Coastwise Shipping
We believe it is doubtful that further expenditures by the
Gran Colombiana line for the purchase of more ships and
the opening of new routes would yield returns as large as
equivalent investments in Colombia itself, especially since the
maritime shipping industry is becoming increasingly competi-
tive. However, the acquisition of a 1,000-ton seagoing freight
vessel, as planned by the government, would aid in main-
taining adequate coastwise shipping and is probably justified
for social and political reasons, although it is not likely to be
directly profitable.

PIPELINES
Pipelines now handle perhaps half of the total ton-kilome-
ters of freight traffic in Colombia, consisting mainly of crude
petroleum for export. However, as the domestic demand for
petroleum products increases and supplies of crude diminish,
[36]







as is anticipated, the pattern of pipeline transportation should
increasingly stress internal distribution from the refinery at
Barrancabermeja to the major consuming centers.
Two extensions of the existing pipeline that runs south
from Barranca to Puerto Olaya appear fully justified on eco-
nomic grounds: (1) from Puerto Olaya to Puerto Salgar, and
(2) from Puerto Berrio to Medellin. The present pipeline
should also be replaced, since it was built during the war
with inferior materials. Distribution of petroleum products
from Puerto Salgar to the Bogota area and beyond, and
from Medellin to Antioquia, Caldas and the Cauca Valley,
can be adequately handled over the next few years by rail
and truck. Consequently, we recommend against construction
of a pipeline from Buenaventura to Cali or, for the present,
from Puerto Salgar to Bogota pending experience with the
cost reduction measures we have recommended for railroads.
We estimate tentatively that Ps.$12 million, including per-
haps U.S.$2.5 million, should be sufficient for these recom-
mended projects.


Am TRANSPORTATION

The development of commercial aviation in Colombia, al-
most wholly through private initiative and with little Govern-
ment aid, has many favorable aspects. At the present stage,
however, a greater measure of public assistance and the
elimination of some uneconomic competitive practices are
clearly necessary to enable the industry to maintain itself
on a sound basis, to expand and improve its facilities to meet
rapidly growing demands, and to serve the interests of the
public and the needs of the national economy to its full
capacity. A continuation of unrestricted competition, with
all the cutthroat practices entailed, would be likely to under-
mine the solvency of the remaining lines and eventually to
eliminate competition. Moreover, certain aspects of the com-
petitive picture are clearly uneconomic (as, for example, the
construction of duplicate airports) or prejudicial to safety
(such as the inadequate system of air traffic control now in
use).
[37]







We recommend, therefore, that:
(1) An appropriate regulatory agency be assigned respon-
sibility for establishing and administering a system of route
franchises, for reviewing and regulating air transport rates,
safety regulations and standards of service.
(2) Communications, air traffic control and navigation
equipment satisfactory to handle present and foreseeable needs
be purchased and installed; we estimate the cost of such
equipment at U.S.$1,750,000.
(3) Night flying be initiated on the major routes as soon
as facilities permit, especially for cargo traffic, in order to
improve the utilization of equipment and bring down unit
costs.
(4) Top priority be given to the construction of an air-
port at Buenaventura and to the improvement of the fields
at Bogota (Techo), Medellin, Cartagena (L6pez), Cali
(AVIANCA), and Bucaramanga to permit their being used
by heavier equipment; capital requirements are estimated at
Ps.$6 million plus U.S.$2 million.
(5) Duplicate air fields at numerous localities be aban-
doned to ease the financial drain of maintaining and im-
proving the extra facilities and. to reduce safety hazards.
(6) The Government Air Force abandon its operation of
commercial flights on certain marginal routes, and to the
extent that service to these areas is deemed necessary in the
national interest, that the Government provide subsidies to
the private airlines to the extent necessary until sufficient
traffic is generated to permit self-sustaining operations.
(7) The carriage of airmail, until recently a heavily
subsidized monopoly of AVIANCA, be opened to all fran-
chised air carriers on a contract basis at compensatory rates.
As a means of carrying out recommendations numbered
(2), (4) and (5) above, and generally of putting air transpor-
tation on a sounder, more efficient basis, we recommend the
establishment of an Airport and Communications Corpora-
tion, with the Government and the airlines as principal
owners. This Corporation would take over (by purchase or
lease) and operate a nationwide system of air fields-using
[38]







the best field in each locality where more than one exists
at present-and air navigation facilities, for use on a fee basis
by all licensed carriers and other flyers. This Corporation
could be financed from communications and landing fees and
other charges, the gasoline tax, and the subsidy now con-
cealed in the airmail contract; probably an additional subsidy
of about Ps.$1 million annually would be required, at least
initially. However, such an arrangement would permit much
safer and more efficient airline operations and would release
large amounts of the companies' capital funds, now tied up in
fixed installations, for other necessary investments.


CAPITAL REQUIREMENTS
The specific projects mentioned above amount to approxi-
mately Ps.$180 million, which include exchange requirements
of U.S.$32 million. In addition, markups and internal trans-
port charges for imported equipment bring the total to nearly
Ps.$200 million.
The building and maintenance of highways, ports and
airfields, other than those discussed above, to maintain past
rates of growth would absorb another sum of approximately
Ps.$400 million. Motor cars, trucks, buses, planes and other
operating equipment will have to be bought and maintained
and existing railways will have to be maintained to provide
for the projected rates of growth of the entire economy. Re-
S quired expenditures for this purpose we estimate at Ps.$920
million.
The grand total of capital expenditures for all forms of
transport in the period 1951-1955, therefore, comes to about
Ps.$1.5 billion, or 30 percent of the requirements of the entire
program, of which U.S.$322 million represent foreign ex-
change requirements.


[ 39]







VI. Public Health, Welfare and Education

A natural tendency in formulating objectives and plans for
economic development is to lay primary stress on expansion
of facilities and improvement of efficiency in those sectors of
the economy-notably agriculture, industry and transporta-
tion-which contribute most directly to the production of
goods. The importance of increasing physical output is
obvious, and the effect of such an increase on the standard
of living is relatively easy to measure. But in the long run
the raising of standards of health, welfare and education is
likely to be even more fundamental in promoting sound
economic development. For these services not only are major
components of a higher standard of living in themselves, but
also are vital means of improving the human resources of the
nation and thereby laying the groundwork for further economic
and social progress.
In recent years less rapid advances have been made in
health and educational standards in Colombia than in pro-
duction and national income. The Mission has, therefore,
devoted considerable attention to these problems and to
possible means of effecting improvements.


PUBLIC HEALTH
Health is probably the most important single component
of a people's standard of living, and at the same time one of
the most important determinants of that standard. Poor health
lowers productivity and constitutes a continuing drain on
national wealth and resources, resulting from loss of working
time, from the need for large capital outlay to build hospitals
and similar facilities, and from increased costs of welfare,
insurance, and sickness and accident benefits.
Colombia's health status compares favorably with the
standard of most of her South American neighbors, but this
standard is not very high. Although available statistics are
not wholly reliable, it appears that life expectancy at birth is
below 40 years, as against 70 in some of the most advanced
countries. This short average life expectancy, and the destruc-
tion or grave impairment of the productive capacity of many
[40]







VI. Public Health, Welfare and Education

A natural tendency in formulating objectives and plans for
economic development is to lay primary stress on expansion
of facilities and improvement of efficiency in those sectors of
the economy-notably agriculture, industry and transporta-
tion-which contribute most directly to the production of
goods. The importance of increasing physical output is
obvious, and the effect of such an increase on the standard
of living is relatively easy to measure. But in the long run
the raising of standards of health, welfare and education is
likely to be even more fundamental in promoting sound
economic development. For these services not only are major
components of a higher standard of living in themselves, but
also are vital means of improving the human resources of the
nation and thereby laying the groundwork for further economic
and social progress.
In recent years less rapid advances have been made in
health and educational standards in Colombia than in pro-
duction and national income. The Mission has, therefore,
devoted considerable attention to these problems and to
possible means of effecting improvements.


PUBLIC HEALTH
Health is probably the most important single component
of a people's standard of living, and at the same time one of
the most important determinants of that standard. Poor health
lowers productivity and constitutes a continuing drain on
national wealth and resources, resulting from loss of working
time, from the need for large capital outlay to build hospitals
and similar facilities, and from increased costs of welfare,
insurance, and sickness and accident benefits.
Colombia's health status compares favorably with the
standard of most of her South American neighbors, but this
standard is not very high. Although available statistics are
not wholly reliable, it appears that life expectancy at birth is
below 40 years, as against 70 in some of the most advanced
countries. This short average life expectancy, and the destruc-
tion or grave impairment of the productive capacity of many
[40]








people as a result of ill health, results in a very high ratio
of dependents to workers, apparently over four to one.
The people of Colombia suffer from a high incidence of
disease, including those common to temperate zones as well
as all the maladies found in tropical climates. Malaria, intes-
tinal infections, tuberculosis and venereal diseases take a
heavy toll of lives and account for much of the nation's dis-
ability. Nutritional disorders are widespread. Ordinary sani-
tary precautions are at a bare minimum, and adequate systems
of water purification, milk pasteurization and sewage and
waste disposal are practically non-existent.
A significant beginning has been made in attacking these
problems. Anti-malaria measures and campaigns to eliminate
or control some of the other major diseases have been started,
numerous hospitals and asylums have been built, and an ex-
tensive program of water supply and sewer construction is
under way. But much still remains to be done before satis-
factory minimum health standards can be attained. And the
financial and personnel resources presently available to under-
take this task are seriously inadequate. Health workers are
few, generally poorly trained, and inadequately paid. Medical
practitioners and specialists of all kinds are in acute shortage.
Hospital facilities are generally inadequate in quantity and
quality.

Priority Objectives of the Public Health Program
Present public health activities are predominantly medical,
with the first emphasis on treatment. This emphasis is perhaps
natural in view of prevailing health conditions. But, while
medical treatment is a vital aspect of any satisfactory program,
the greatest need is for better preventive measures. In our
view, major emphasis should be given to (1) strengthening
the public health structure and reshaping its functions so that
it concentrates more directly on the promotion of positive
good health and the prevention of disease; (2) safeguarding
environmental health, primarily through the provision and
maintenance of sanitation facilities, such as water purification
and sewage and waste disposal systems; and (3) training and
recruiting more professional personnel of all kinds-especially
[41]







physicians, dentists, public health nurses and sanitarians-for
public health service. Hospitals and related institutions also
need improvement and expansion, but they cannot fulfill their
purpose adequately in the absence of proper attention to the
more fundamental requisites for good health.

Organization. Health problems are of most immediate
concern to local authorities, and health services can normally
be provided most efficiently and economically at the municipal
and departmental levels. Because of the weakness of the great
majority of municipal health administrations, however, (and
to a somewhat lesser extent of departmental agencies) many
functions that should properly be the responsibility of local
bodies are performed by the National Ministry of Hygiene,
because it has superior organization, funds and personnel
resources.

We recommend that the relationship between the Ministry
of Hygiene and the health agencies at lower levels be clarified,
in general seeking to achieve the largest possible measure of
local administrative and financial responsibility. National
Government grants will continue to be necessary to assist local
agencies to maintain satisfactory standards, and the Ministry
clearly must supervise the allocation and use of such grants.
Beyond this, we believe the Ministry should limit itself, in
general, to broad areas of responsibility-issuance of regula-
tions, setting of standards, provision of consultant services,
research and statistical work, and the operation of certain
institutions which serve the entire country or broad regions.
Similarly, the departmental health agencies should provide
certain department-wide services, such as diagnostic clinics
and the distribution of drugs and biologicals, while most of
the day-to-day treatment and preventive activities should be
carried on through local agencies.

Environment. The major requisites for improving environ-
mental conditions are the provision of more adequate housing
and community facilities, particularly safe water supplies and
sewage disposal systems in urban areas and satisfactory in-
dividual installations-wells or streams protected against
pollution and sanitary privies or septic tanks-for rural
S421








dwellings.3 It is essential that these facilities, once provided,
be properly maintained. Protective measures for food and
milk, through Government regulations and inspection and
better refrigeration and other food preservation methods, are
also very important. Present milk pasteurization plants and
practices in Colombia are unsatisfactory in many cases; but
until refrigeration facilities are more widely available, we
believe the development of evaporating plants is preferable
to large-scale investment in new pasteurization facilities.

Personnel. The possibility of accomplishing the necessary
improvements in public health organization, disease control
methods and hospital and medical care facilities depends, in
the last analysis, upon the availability of sufficient numbers
of properly trained professional and specialized personnel.
In Chapter XXII of the Comprehensive Report we esti-
mate the number of professional personnel that will be re-
quired in 1955 to operate an expanded public health program
and staff the proposed hospital and health center facilities.
Indicated are 2,750 physicians (2,500 on a part-time basis),
870 dentists and dental assistants (250 part-time dentists),
and 6,250 nurses. This represents a very considerable in-
crease over the present numbers in these categories, and will
involve the public employment, mainly on a part-time basis,
of the great majority of the country's medical and allied
personnel, especially physicians. This would not greatly
alter present practices, since most doctors already devote
part of their time to public medical care, but it emphasizes
the importance of increasing the number of trained personnel
not only in the public health service but also in private
practice.
Several noteworthy steps have been taken recently to
develop reservoirs of competent personnel in the public health
professions, in particular the establishment of the National
School of Hygiene. Training programs in this field need to
be enlarged and systematized, with greater emphasis on
up-to-date disease prevention and health protection techniques.

3 Requirements in these fields are analyzed in some detail in Chapter
XXIII of the Comprehensive Report.
[43]







Equally important is the need to increase the attractive-
ness of public health service. We recommend that serious
consideration be given to a substantial increase in salaries
to bring them more closely into line with the incomes of
private practitioners and the cost of living. Better job stand-
ards, adequate security of tenure and opportunities for advance-
ment through a genuine merit system will also be important
factors in attracting qualified, public-spirited, professional
personnel into the public health service.
In Chapter XXII of the Comprehensive Report we out-
line some of the elements of a disease prevention program
for Colombia, emphasizing campaigns against the infectious
and parasitic diseases. Advances in recent years in dealing
with such diseases as malaria, smallpox, diphtheria, whooping
cough, syphilis and gonorrhea have been such that soundly
conceived, adequately organized and persistently conducted
campaigns for their suppression should have excellent possi-
bilities of success. Reduction in the prevalence of these
diseases should help to mitigate both the incidence and the
severity of tuberculosis, which is presently a serious problem;
use of mass chest X-rays to find active or incipient cases,
and a program of immunization with BCG vaccine, also offer
considerable promise. We recommend modification of the
present leprosy program, which now takes nearly one-fourth
of the national health budget-far out of proportion to the
importance of the disease in Colombia.
Effective health education on a wider scale is necessary
to gain public acceptance and support for programs of pre-
ventive medicine, to promote good habits of personal hygiene,
and to encourage the people to seek proper diagnosis and
treatment of diseases in their early stages. In addition,
education about dietary requirements will be an important
means of improving nutrition.

Hospitals and Health Centers
The Ministry of Hygiene has estimated hospital require-
ments on the basis of a proposed ratio of 5.3 beds per thou-
sand population. (The present ratio is about 2/1000.) We
believe this is too ambitious an expansion to be realized in
[44]







five years, and suggest instead that the present objective be
set at 3 beds per thousand for the nation as a whole, with
no Department to have less than 2 per thousand. A tentative
program of construction, by major regions and Departments,
is outlined in Chapter XXII of the Comprehensive Report.
It would call for over 17,000 new general hospital beds, at
an estimated cost of Ps.$86 million. More than 4,500 addi-
tional are recommended for tuberculosis care, at an estimated
cost of Ps.$13.6 million. For other custodial institutions we
estimate capital requirements of something over Ps.$11 million
for expansion and replacements.
We endorse the plans of the Ministry of Hygiene to estab-
lish a comprehensive system of health centers to serve as a
framework for the entire public health program. The Minis-
try proposes to build some 146 primary centers for the larger
cities and 648 secondary centers for the smaller municipalities,
at an aggregate cost of Ps.$22 million.
In this connection also, it is important to bear in mind
the basic problem of personnel: There would be little point
in carrying out the proposed expansion of facilities for medi-
cal care unless sufficient doctors, nurses and technicians can
be found to administer and staff them. Thus we would re-
emphasize the necessity for giving top priority to building
up an adequate corps of physicians and other trained per-
sonnel for public health work.

WELFARE
Public welfare in Colombia, like the public health system,
is only partially effective. Trained social workers and other
professional personnel are lacking, funds are inadequate, and
the organization is characterized by duplication in some places
and important gaps in others. The most important welfare
agencies are the departmental Beneficencias, controlled by
autonomous "juntas" and supported mainly from lottery
profits and earmarked taxes. The National Government exer-
cises some general supervision over, and provides limited
funds for, these departmental organizations.
Beneficencia activities are limited almost exclusively to the
support and operation of hospitals and other institutions-
[45]








orphan asylums, homes for the aged and infirm, and the like.
These institutions vary widely in the quality of their facilities
and the care provided, although most of them need improve-
ment or expansion. But in our view the trend should be
away from this strictly institutional approach, and should
emphasize more field work and, for children especially, place-
ment in a suitable family environment rather than an insti-
tution. A much larger number of social workers will be
needed to carry out such a program, and a program of recruit-
ment and training for such workers should be initiated.
Colombia has an ambitious social security system on the
statute books, which involves serious problems of costs and
of coordination with other public welfare agencies and activi-
ties. It is estimated that when the social security program
is in full operation, it may entail an outlay equal to 24 per-
cent of payrolls-8 percent for health and maternity, 4 percent
for old age, 4 percent for invalidism, 4 percent for survival,
and 4 percent for work accident insurance. Financing is by
joint contributions of employer, employee and Government.
The problem of the proper relationship of the social security
system to other health and welfare programs is complex and
difficult, and the Mission has not attempted to draw specific
conclusions. However, in view of the importance we attach
to preventive medical programs and certain Beneficencia
activities, which do not lend themselves to the insurance
approach, we feel it would be unfortunate if the development
of the new social security program, however desirable in
itself, were permitted to obscure the need for expansion and
improvement of these older social services.

EDUCATION AND TRAINING
Education, like health, is both a determinant and a com-
ponent of the standard of living. It has a direct relation to
productivity and, at the same time, contributes to a fuller
appreciation and enjoyment of life. The raising of educational
standards, therefore, should receive high priority in any de-
velopment program.
The Colombian Government is making earnest efforts,
and is currently spending some Ps.$57 million a year, to edu-
[46]








cate its people, but educational standards-measured by
school attendance, literacy and other criteria-are still unsat-
isfactory. Information supplied to the Mission by the
Ministry of Education indicates that about 44 percent of the
population is illiterate and that there were more illiterates
among both adults and children of school age in 1947 than
there were ten years previously. In 1948, only about half the
children in the 7 to 11 age group attended primary schools.
The small number of students in the higher grades and
in vocational schools is even more disquieting, for it is these
sources that must be counted on to supply the majority of
the trained people so sorely needed in Colombia's economic
development. Although there were nearly 674,000 pupils en-
rolled in public primary schools in 1948, only about 17,000
graduate from such schools each year. The number finishing
secondary schools is about 3,000 annually. In 1946 there were
slightly over 4,000 pupils enrolled in industrial and arts and
trades schools, and about 800 students in agricultural voca-
tional schools. Total enrollment in the two general agricul-
tural colleges is only 300.
The Mission did not attempt any intensive study of educa-
tional problems, but in view of the influence they have on
almost all aspects of Colombia's economic development, we
believe the following general observations are appropriate:
(1) It is clearly of primary importance to increase the
numbers and improve the training of teachers. Out of some
16,650 primary school teachers in 1946, nearly two-thirds
must be considered untrained, since they did not have any
degrees or any certificates from either elementary or superior
normal schools. The public and private normal schools pro-
duce perhaps 800 graduates per year but only 30 percent of
recent graduating classes have gone into teaching. This is
less than the number required for normal replacement of
teachers now in the school system, and as facilities are ex-
panded the average quality of teaching personnel will fall
even more unless vigorous efforts are made to increase the
number of qualified teachers. The normal schools should be
capable of turning out many more graduates; short, intensive
courses might well be instituted to raise the qualifications of
[471







inadequately trained teachers now employed. Most important,
salary levels should be increased to provide an inducement
for properly trained persons to enter and stay in the teaching
profession.
(2) Construction of schools at a faster rate is necessary
to provide facilities for the many places which now lack them
and to relieve widespread overcrowding. However, lack of
school buildings does not seem to be the chief reason for the
small proportion of the child population enrolled in school
in many areas, and there would be little advantage in greatly
expanding facilities unless teachers are available. Thus, ex-
pansion and improvement of the teaching staff remain the
first priority. Appropriations at the present rate for primary
school construction would probably be adequate over the
next five years if building costs were brought down through
use of cheaper materials and more efficient production
methods.
(3) Special effort should be devoted to providing practical
education for a much larger proportion of rural children.
(4) An expanded program of vocational training, in both
industry and agriculture, appears to be very necessary as a
means of raising individual productivity and extending the
use of improved production techniques.
(5) Additional financial aid to promising students from
lower income families would be of value in increasing the
number of secondary school and university students.
In Chapter XXV of the Comprehensive Report we outline
a modest program of capital investment in educational facili-
ties, amounting to about Ps.$50 million over five years. Cur-
rent expenditures for education might well increase over this
period by 60 to 80 percent. At best, however, these figures
are only very rough estimates. In view of the central import-
ance of progress in this field, we urge that there be further
intensive study, taking full advantage of foreign experience,
to design a well-rounded educational program as an integral
part of Colombia's over-all development program.


[48]








VIL Electric Power and Community Facilities

The difference in living standards between the most and
the least developed countries can be expressed largely in
terms of differences in the facilities available for modern com-
munity living-electric power, sanitary facilities, and similar
public services. Their adequacy has a major bearing not only
on the comfort and convenience of life, but also on the possi-
bilities for industrial development, the efficiency of labor, and
the general rate of scientific, technical and social advance.
In Colombia great strides have been made in recent years
in the provision of community facilities. But the need for
such facilities is almost everywhere far in excess of their
availability, partly because of the rapid increase of urban popu-
lation and partly because the advances of the past two or
three decades started from a very low level in comparison
with standards in most of North America or Western Europe.
Most of these facilities and services are provided and
administered at the local ("municipio") level. There are more
than eight hundred "municipios" in Colombia, ranging from
large cities to tiny hamlets and sparsely settled rural areas,
so that generalizations as to the adequacy of community serv-
ices and requirements for investment in these fields are difficult
and hazardous. It was impossible, of course, for the Mission
to make a first-hand examination of facilities in more than a
very few localities, and statistical data on the subject are frag-
mentary and unreliable. We have tried, nevertheless, to reach
some general conclusions as to the nature and magnitude
of the needs, distinguishing wherever possible between dif-
ferent classes of towns and different regions.
ELECrmC PowmE
Development of electric power is the essential foundation
and stimulus for development in a wide variety of fields. It
turns industrial machinery, heats electric furnaces, and is
essential in many chemical processes; it provides lighting for
homes and factories, energy for cooking and refrigeration, for
irrigation pumps and urban water systems; and it makes
possible new forms of mass education and recreation, such as
the radio and motion pictures.
[49]








VIL Electric Power and Community Facilities

The difference in living standards between the most and
the least developed countries can be expressed largely in
terms of differences in the facilities available for modern com-
munity living-electric power, sanitary facilities, and similar
public services. Their adequacy has a major bearing not only
on the comfort and convenience of life, but also on the possi-
bilities for industrial development, the efficiency of labor, and
the general rate of scientific, technical and social advance.
In Colombia great strides have been made in recent years
in the provision of community facilities. But the need for
such facilities is almost everywhere far in excess of their
availability, partly because of the rapid increase of urban popu-
lation and partly because the advances of the past two or
three decades started from a very low level in comparison
with standards in most of North America or Western Europe.
Most of these facilities and services are provided and
administered at the local ("municipio") level. There are more
than eight hundred "municipios" in Colombia, ranging from
large cities to tiny hamlets and sparsely settled rural areas,
so that generalizations as to the adequacy of community serv-
ices and requirements for investment in these fields are difficult
and hazardous. It was impossible, of course, for the Mission
to make a first-hand examination of facilities in more than a
very few localities, and statistical data on the subject are frag-
mentary and unreliable. We have tried, nevertheless, to reach
some general conclusions as to the nature and magnitude
of the needs, distinguishing wherever possible between dif-
ferent classes of towns and different regions.
ELECrmC PowmE
Development of electric power is the essential foundation
and stimulus for development in a wide variety of fields. It
turns industrial machinery, heats electric furnaces, and is
essential in many chemical processes; it provides lighting for
homes and factories, energy for cooking and refrigeration, for
irrigation pumps and urban water systems; and it makes
possible new forms of mass education and recreation, such as
the radio and motion pictures.
[49]







Present power capacity in Colombia is quite low. The
Mission's estimate of total generating facilities is 241,000 kw.,
or 24 watts per capital. This compares with 359 watts in the
United States at the end of 1947, 72 watts in Uruguay and
about 63 watts per capital in Chile.
The pattern of power development prevailing in the past
is proving inadequate in several respects:
(1) The rapid rise in current and prospective demand
makes it necessary to build relatively huge generating stations
to supplement and replace the existing small local plants.
These new facilities involve capital outlays too large to be
undertaken by most private or municipal enterprises.
(2) As power networks increase in size and scope, the
traditional local administrative and regulatory mechanisms
become less and less adequate.
(3) The rate structures in many places, designed to fit a
residential and commercial consumption pattern and particu-
larly to ease the cost of power to small consumers, provide
insufficient incentive to industrial and other off-peak users.
This has several disadvantages. It does not aid industrial
growth, particularly in fields requiring large quantities of
power; it tends to encourage the building of inefficient, fac-
tory-owned power plants; and it reduces the overall efficiency
of the utility systems involved by holding down off-peak
consumption.

Expansion of Power Capacity
We estimate that Colombia's electric generating capacity
should be increased over the next five years to 475,000 kw.,
about 205,000 more than exist at present. This represents a
rate of expansion (12 percent per year) about equal to the last
five years' extraordinary growth in demand. The total cost
of this program-for all necessary generating, transmission
and distribution facilities-we estimate at Ps.$255 million,
of which U.S.$51 million would be foreign exchange.
The proposed capacity would be sufficient to produce 3.4
times the amount of power generated in 1944-45, and nearly
twice the estimated present production. It would support
without difficulty the expansion of industrial production pro-
[50]








jected elsewhere in this Report, and would permit a very
considerable increase in commercial and residential use of
electricity.
In view of the time required for planning and construc-
tion work on such an ambitious scale, particularly in relation
to hydroelectric projects, it is important that this work get
under way at once.

Type and Location of Facilities
Most important Colombian power installations in recent
years have been hydroelectric. For future expansion in cer-
tain areas, e.g., Bogota, Cali and the Atlantic Coast region,
it may be desirable, however, to lay greater stress on thermal
plants. In many cases a combination of hydraulic and ther-
mal units would make for the most flexible arrangement and
the lowest cost per KVA.
The principal urban areas-around Medellin, Barranquilla,
Bogoti, Cali and Manizales-offer an established and rapidly
growing market for power and will be the chief centers of
industrial and commercial expansion; they should clearly be
assigned a high priority in the development of new power
projects. Similar considerations apply to other potential in-
dustrial centers with a very limited power supply at present
-e.g., Cartagena, Bucaramanga, Cticuta and Popayan. From
these centers the distribution of electricity should branch out
progressively into rural districts. Special emphasis should be
given to rural electrification in certain areas that offer par-
ticular promise for rapid agricultural development, such as
the upper Magdalena Valley between Girardot and La Dorada,
the Cauca Valley north of Cali, and the Sindi Valley.

Planning and Administration
The Institute of Water Utilization and Electrical Devel-
opment is assigned the major task of planning and admin-
istering a national program of power development. The
hydroelectric "centrales" of mixed ownership (usually na-
tional, departmental and local governments), in which the
Institute plays the major role, will doubtless form the back-
bone of the proposed power expansion. They constitute a
[51]








jected elsewhere in this Report, and would permit a very
considerable increase in commercial and residential use of
electricity.
In view of the time required for planning and construc-
tion work on such an ambitious scale, particularly in relation
to hydroelectric projects, it is important that this work get
under way at once.

Type and Location of Facilities
Most important Colombian power installations in recent
years have been hydroelectric. For future expansion in cer-
tain areas, e.g., Bogota, Cali and the Atlantic Coast region,
it may be desirable, however, to lay greater stress on thermal
plants. In many cases a combination of hydraulic and ther-
mal units would make for the most flexible arrangement and
the lowest cost per KVA.
The principal urban areas-around Medellin, Barranquilla,
Bogoti, Cali and Manizales-offer an established and rapidly
growing market for power and will be the chief centers of
industrial and commercial expansion; they should clearly be
assigned a high priority in the development of new power
projects. Similar considerations apply to other potential in-
dustrial centers with a very limited power supply at present
-e.g., Cartagena, Bucaramanga, Cticuta and Popayan. From
these centers the distribution of electricity should branch out
progressively into rural districts. Special emphasis should be
given to rural electrification in certain areas that offer par-
ticular promise for rapid agricultural development, such as
the upper Magdalena Valley between Girardot and La Dorada,
the Cauca Valley north of Cali, and the Sindi Valley.

Planning and Administration
The Institute of Water Utilization and Electrical Devel-
opment is assigned the major task of planning and admin-
istering a national program of power development. The
hydroelectric "centrales" of mixed ownership (usually na-
tional, departmental and local governments), in which the
Institute plays the major role, will doubtless form the back-
bone of the proposed power expansion. They constitute a
[51]







practical administrative device, combining the advantages of
national planning and supervision with decentralized manage-
ment and flexible financing. However, the Institute is still
relatively new and its plans are quite general. We recommend
that it be provided with funds and staff adequate to (1)
obtain accurate flow data on potential hydroelectric power
sources; (2) survey comprehensively the present and prospec-
tive demands for power in Colombia; (3) develop a national
program and priorities for providing generating facilities to
meet these demands; (4) develop plans for interconnecting
regionally, and eventually nationally, the major sources and
markets for power as rapidly as is economically feasible; (5)
plan efficient combinations of hydraulic and thermal power
to meet varying conditions in the major power markets; (6)
work out sound arrangements for financing power projects,
including the difficult problem of the subscription of neces-
sary funds from local sources; (7) review project designs and
construction plans; and (8) exercise general supervision over
the construction and operation of projects aided financially
by the National Government.

OrHER SERVICES
Water Supply and Sewerage
A good supply of pure water and satisfactory means for
disposing of human waste are essential to the health and
welfare of every community. Most of Colombia's large cities
have some central water supply system (although a number
in the 10,000 to 20,000 population range do not) but the vol-
ume or purity of the water is often unsatisfactory. Most small
communities have to rely on wells and rivers, frequently pol-
luted and difficult of access. Sewer facilities are even less
adequate with sanitary sewers almost non-existent. No city
has a sewer system covering the entire urban area, many
have none whatever, and there are no sewage treatment
plants.
In our recommendations regarding this field we give first
priority to providing every community which now lacks a
pure and adequate supply of water and sanitary means of
waste disposal with at least minimum facilities, which will
[52]







practical administrative device, combining the advantages of
national planning and supervision with decentralized manage-
ment and flexible financing. However, the Institute is still
relatively new and its plans are quite general. We recommend
that it be provided with funds and staff adequate to (1)
obtain accurate flow data on potential hydroelectric power
sources; (2) survey comprehensively the present and prospec-
tive demands for power in Colombia; (3) develop a national
program and priorities for providing generating facilities to
meet these demands; (4) develop plans for interconnecting
regionally, and eventually nationally, the major sources and
markets for power as rapidly as is economically feasible; (5)
plan efficient combinations of hydraulic and thermal power
to meet varying conditions in the major power markets; (6)
work out sound arrangements for financing power projects,
including the difficult problem of the subscription of neces-
sary funds from local sources; (7) review project designs and
construction plans; and (8) exercise general supervision over
the construction and operation of projects aided financially
by the National Government.

OrHER SERVICES
Water Supply and Sewerage
A good supply of pure water and satisfactory means for
disposing of human waste are essential to the health and
welfare of every community. Most of Colombia's large cities
have some central water supply system (although a number
in the 10,000 to 20,000 population range do not) but the vol-
ume or purity of the water is often unsatisfactory. Most small
communities have to rely on wells and rivers, frequently pol-
luted and difficult of access. Sewer facilities are even less
adequate with sanitary sewers almost non-existent. No city
has a sewer system covering the entire urban area, many
have none whatever, and there are no sewage treatment
plants.
In our recommendations regarding this field we give first
priority to providing every community which now lacks a
pure and adequate supply of water and sanitary means of
waste disposal with at least minimum facilities, which will
[52]








(1) eliminate any substantial health hazard, (2) be at least
as convenient as those presently available, and (3) not be
unduly difficult to maintain. The second priority, we believe,
is to improve the existing systems in those cities whose
growth has far outrun their present facilities.
We therefore question the soundness for most Colombian
municipalities of plans calling for quite elaborate and costly
water supply and sewer facilities, suitable for communities
in which a large proportion of the houses have interior
plumbing. As a water supply system for the smaller towns
and villages we envisage a number of outside taps at con-
venient intervals throughout the town, with community pump-
ing and purification facilities kept as simple as possible.
Waste disposal requirements for these communities can prob-
ably best be taken care of by sanitary privies, which are less
expensive and easier to maintain than sewer systems. For
the larger towns and cities, of course, more elaborate facili-
ties will be required.
We estimate that capital requirements in these fields over
the next five years will be as follows: for water supply, Ps.$71
million, of which U.S.$20 million would be foreign exchange;
and for sewers and privies, Ps.$70 million, including U.S.$1.5
million.

Public Markets and Slaughterhouses
Many of the urban public markets in Colombia are un-
sanitary, decrepit and seriously overcrowded, and constitute
a definite health hazard. It appears undesirable, however,
to make very large new investments in facilities of the present
character, in view of the inherent inefficiency and wasteful-
ness of the present system of food retailing, often directly
by the producer, in central public markets. We recommend,
therefore, that expenditures for public markets and slaughter-
houses be limited in the main to (1) improvement of sanitary
conditions in existing markets and slaughterhouses through
paving, screening, water supply, etc.; (2) improvement of
refrigeration and storage facilities for meat and other perish-
ables; (3) construction of new public wholesale markets where
necessary; (4) such expansion of existing markets and
[ 53]








slaughterhouses as may be required for short-term needs.
We estimate roughly that about Ps.$40 million, including
U.S.$4 million, will be required for these purposes.
Meanwhile we believe that the possibilities of instituting
a more efficient food marketing system should be thoroughly
explored. The increasing shortage and rising cost of space
in the existing public markets may actually encourage such
a change, by strengthening the position of more efficient
retailers and forcing the decentralization of other retail meat
and produce shops.

Telephones
In 1948 the number of telephones connected in Colombia
was something less than 70,0JO-about 7 per thousand of
population compared with 14 per thousand in Latin America
generally. Substantially all telephone facilities are in cities
over 20,000 population; rural service is not provided. There
has been a rapid expansion of telephone service in the last
few years but there is a continued strong demand. On the
basis of this demand and the plans of the operating com-
panies, so far as they have been defined, we estimate that
an additional 70,000 telephones may well be installed over
the next five years; the cost of such -an expansion would
be about Ps.$48 million, of which the foreign exchange com-
ponent would be approximately U.S.$21 million.

Street Paving and Cleaning and Waste Collection
The indicated capital requirement for expansion and im-
provement of street paving and cleaning and waste collection
services is about Ps.$53 million, including U.S.$1.5 million of
foreign exchange. We recommend that the possibilities of
greater use of concrete for street paving and of a large-scale
sanitary fill for garbage and waste disposal, as used in Bar-
ranquilla, be explored by other cities.
The estimated capital requirements indicated in this sec-
tion, including electric power, total Ps.$537 million, including
U.S.$98.5 million of foreign exchange. These figures, of course,
are only a rough estimate. Further analysis will be necessary
[54 1








slaughterhouses as may be required for short-term needs.
We estimate roughly that about Ps.$40 million, including
U.S.$4 million, will be required for these purposes.
Meanwhile we believe that the possibilities of instituting
a more efficient food marketing system should be thoroughly
explored. The increasing shortage and rising cost of space
in the existing public markets may actually encourage such
a change, by strengthening the position of more efficient
retailers and forcing the decentralization of other retail meat
and produce shops.

Telephones
In 1948 the number of telephones connected in Colombia
was something less than 70,0JO-about 7 per thousand of
population compared with 14 per thousand in Latin America
generally. Substantially all telephone facilities are in cities
over 20,000 population; rural service is not provided. There
has been a rapid expansion of telephone service in the last
few years but there is a continued strong demand. On the
basis of this demand and the plans of the operating com-
panies, so far as they have been defined, we estimate that
an additional 70,000 telephones may well be installed over
the next five years; the cost of such -an expansion would
be about Ps.$48 million, of which the foreign exchange com-
ponent would be approximately U.S.$21 million.

Street Paving and Cleaning and Waste Collection
The indicated capital requirement for expansion and im-
provement of street paving and cleaning and waste collection
services is about Ps.$53 million, including U.S.$1.5 million of
foreign exchange. We recommend that the possibilities of
greater use of concrete for street paving and of a large-scale
sanitary fill for garbage and waste disposal, as used in Bar-
ranquilla, be explored by other cities.
The estimated capital requirements indicated in this sec-
tion, including electric power, total Ps.$537 million, including
U.S.$98.5 million of foreign exchange. These figures, of course,
are only a rough estimate. Further analysis will be necessary
[54 1







to fill out the data that were available to us and to provide
a firm basis for definite plans.

ADMINISTRATION AND FINANCING OF COMMUNITY FACILITIES
Public utility enterprises in Colombia were established
initially by private capital. Many have been taken over by
the Government, and the prospect is that most future under-
takings of this kind will be publicly administered and financed.
The major responsibility for such administration and financ-
ing devolves on local authorities, which are presently the
weakest part of Colombia's governmental structure. Some of
the problems involved are discussed in the following para-
graphs.

Utility Rates
About 70 percent of the capital requirements indicated
above are for power, water and telephone facilities, which
are largely self-liquidating and which may be either privately
or publicly owned, although public ownership is more com-
mon. In either case, however, a sound rate structure to pro-
vide adequate and stable revenues for the enterprises involved,
and at the same time protect the public interest, is of crucial
importance to the healthy development of these services.
Utility rates in Colombia are established by the respective
municipalities, subject to review by the National Ministry of
Industry and Commerce. Despite this review, both the level
and the pattern of rates vary widely from one locality to
another. With the prospective expansion of power systems
from local to regional scope, these disparities are likely to
create substantial problems. Moreover, the rate structure in
numerous cities appears to be ill-suited to promoting efficient
use of electric power, and a superficial analysis of water rates
reveals similar problems.
We recommend, therefore, that consistent general princi-
ples for setting utility rates be established as soon as possible
for the country as a whole, and that effective administrative
machinery be set up to apply and enforce these principles.
We suggest that it may be advisable to establish an autono-
mous, quasi-judicial regulatory commission to conduct studies
[ 55]







to fill out the data that were available to us and to provide
a firm basis for definite plans.

ADMINISTRATION AND FINANCING OF COMMUNITY FACILITIES
Public utility enterprises in Colombia were established
initially by private capital. Many have been taken over by
the Government, and the prospect is that most future under-
takings of this kind will be publicly administered and financed.
The major responsibility for such administration and financ-
ing devolves on local authorities, which are presently the
weakest part of Colombia's governmental structure. Some of
the problems involved are discussed in the following para-
graphs.

Utility Rates
About 70 percent of the capital requirements indicated
above are for power, water and telephone facilities, which
are largely self-liquidating and which may be either privately
or publicly owned, although public ownership is more com-
mon. In either case, however, a sound rate structure to pro-
vide adequate and stable revenues for the enterprises involved,
and at the same time protect the public interest, is of crucial
importance to the healthy development of these services.
Utility rates in Colombia are established by the respective
municipalities, subject to review by the National Ministry of
Industry and Commerce. Despite this review, both the level
and the pattern of rates vary widely from one locality to
another. With the prospective expansion of power systems
from local to regional scope, these disparities are likely to
create substantial problems. Moreover, the rate structure in
numerous cities appears to be ill-suited to promoting efficient
use of electric power, and a superficial analysis of water rates
reveals similar problems.
We recommend, therefore, that consistent general princi-
ples for setting utility rates be established as soon as possible
for the country as a whole, and that effective administrative
machinery be set up to apply and enforce these principles.
We suggest that it may be advisable to establish an autono-
mous, quasi-judicial regulatory commission to conduct studies
[ 55]







of utility finances and rate structures, to develop sound
standards of rate-making, and to approve or modify specific
rates for all the power, water and telephone systems in
Colombia, whether publicly or privately owned. In addition,
we believe consumption of power and water should be metered
insofar as possible in order to discourage waste.

Municipal Finances and Administration
Although the national and departmental governments pro-
vide considerable help in the financing of power and other
community facilities, a major share of this financing must
come from local sources, principally municipal governments.
At present, however, the smallest municipalities, which con-
stitute by far the largest number, are incapable of financing
more than a bare minimum of community services. Moreover,
the allocation of aid from the National Government is too
often arbitrary and determined by considerations of politics
rather than need or equity. The poorest communities, in fact,
receive the smallest amount of national assistance in propor-
tion to their population.
The principal channel for National Government financial
aid to the municipalities is the Municipal Development Fund,
which also exercises some supervision over the construction
of municipal facilities-primarily power, water and sewer
systems, schools and hospitals-it helps to finance. We sug-
gest that the Municipal Development Fund be strengthened
and reorganized to enable it to aid municipal governments
more extensively and effectively, specifically by: (1) serving
as a center for studies on municipal development problems
and as a clearing house for technical and financial advice
to municipalities; (2) administering the National Govern-
ment's grants-in-aid on the basis of clearly established and
equitable criteria; (3) guaranteeing loans to municipalities
from private sources, in appropriate cases, to finance desirable
projects; (4) setting and enforcing standards for the planning,
design, construction, management and maintenance of com-
munity facilities built with National Goverment aid; and (5)
having a staff of qualified technicians, and supplies of repair
parts and equipment, at convenient field stations for the
maintenance of local installations.
[56]







VIII. Housing and Other Building
Population in Colombia appears to have been increasing
more rapidly than housing units have been provided, so that
the average occupancy per dwelling unit has risen from 6
persons in 1938 to nearly 6Y2 in 1948. Since the typical dwell-
ing unit measures about 10 by 20 feet, this indicates serious
overcrowding. In addition, most houses have no running
water, lights or sanitary facilities.
The great majority of houses are built privately. The
Institute de Cridito Territorial has built, or has financed
the building of, less than 10,000 units. Funds for this organi-
zation have always been inadequate, and the average cost
per house has been excessive, ranging from Ps.$5,000 for
rural dwellings to Ps.$18,000-30,000 for housing for salaried
employees. The Federaci6n Nacional de Cafeteros has assisted
its members in building truly low-cost homes, but because
of inadequate funds it financed the construction of only 388
houses in 1948.
On the basis of the standards set forth in Chapter XXIV
of the Comprehensive Report, we estimate that 350,000 new
housing units should be built in the period 1951-55. Con-
struction at this rate would not reduce the occupancy per
house, but it would make available somewhat more living
space and better facilities. Of the total number, 190,000 units
are needed to take care of the increase in population and
160,000 to replace dilapidated dwellings. Requirements for
new urban houses are estimated at 106,000 and for rural houses
at 244,000, but because of higher costs for construction, the
urban portion of the program will be the more expensive.
In view of the low income of most of the people and the
large proportion spent on food, it is doubtful that they can be
expected to spend more than 10 to 15 percent of their income
for housing. On this basis-and assuming that interest rates
will be kept relatively low, if necessary through Government
assistance or guarantee-we estimate that the average cost of
rural housing should be kept down to Ps.$2,250 and of urban
housing, to Ps.$5,550 per unit, to enable farmers and workers
either to acquire new houses or to pay rent in line with their
income. In the poorer areas of the country, the cost should
[57]







not exceed Ps.$1,000-1,200. We are satisfied that dwellings
superior to those now available can be built at this cost.
Government action will be necessary to promote large-
scale, low-cost building of houses to assure the observance
of minimum construction and hygiene standards, and to keep
interest rates within reach of those who need housing. In
general, we believe actual construction should be performed
by private enterprise, with the Government providing incen-
tives and setting standards. We suggest that the agency
responsible for administering the national housing program
should be granted power to guarantee mortgage loans made
on specified terms by commercial banks and savings institu-
tions, for dwellings that meet established standards. We
recommend a close study of the guarantee provisions of the
U. S. Federal Housing Administration in this respect. In
order to keep down monthly rental or amortization and in-
terest payments for the lowest income group, some public
subsidy in the form of financing charges below the market
rate will undoubtedly be required.
We believe that through the use of new building mate-
rials, reduced transportation charges and improved building
practices, the cost of construction can be substantially reduced.
To meet the postulated housing needs would require
capital expenditures of Ps.$230 million a year, or Ps.$1.15
billion for the five-year period. In addition, we estimate
five-year capital needs for commercial buildings, factories and
public buildings, exclusive of hospitals and health centers, at
about Ps.$450 million. Approximately half of this total ex-
penditure of Ps.$1.6 billion would be for domestic labor, and
17 to 20 percent would represent foreign exchange require-
ments.


IX. Public Finance and Fiscal Policy
Financial policies and mechanisms are vitally important
as means of using the country's natural resources and man-
power efficiently for economic development. Thus the proper
formulation and execution of financial measures are essential
to a comprehensive development program.
[581








In 1947, total public expenditures on goods and services
in Colombia, including national, departmental and municipal
governments, amounted to about 12 percent of the gross na-
tional product. Adoption of the recommendations in this
Report would involve a rise to about 16 percent.
In view of the size of this figure, it is most important that
the Government obtain its revenues in a way conducive to
economic stability and which will contribute to a broad
distribution of purchasing power as well as encourage private
business to develop in such directions as will contribute most
to the country's welfare. Thus the overall magnitude and
structure of taxation, as well as the volume and pattern of
public expenditures, are important elements in economic
progress. Improper fiscal policy may not only result in an
improper use of scarce capital resources but may produce in-
flation with its attendant evils.


TAXES
Like all Western countries, the National Government has
relied increasingly on direct taxation; nearly half of the
national revenue is derived from such sources, including both
personal and business income taxes. On the whole, the tax
structure is rather well designed and balanced. In Chapter
XXVI of the Comprehensive Report, however, we recommend
that:
(1) The present income tax structure with three sets of
rates should be consolidated into one;
(2) Individual rather than corporate income tax rates
should apply to the entire salary income of corporation execu-
tives instead of only partially, as at present;
(3) The capital gains tax should be broadened and applied
more generally to capital gains, possibly being graduated
according to the type of gain;
(4) Additional required revenue should be raised, first, by
better tax collection; second, by raising rates and lowering
exemptions on income tax; third, by selectively increased ex-
cise taxes and customs duties, particularly on luxury articles.
[59]







The National Government undoubtedly loses a consider-
able amount of revenues from undercollection. We believe
that a substantial expansion in the number of employees in
the fiscal service, and an increase in their salaries to attract
higher caliber personnel would yield manifold returns in the
form of increased tax revenues. Because of the shortage of
qualified personnel in these fields, an extensive training pro-
gram is essential; we believe that consideration should also
be given to sending a number of key members of the revenue
staff abroad for advanced training.

BUDrETARY PRACTICES
The Mission has given some study to the problems of
budget reform and to the proposals now under consideration
in Colombia for their solution. The present procedures, based
on a series of amendments to the original legislation of 1923,
are quite unsatisfactory. The changes recently enacted by
Decree4 would improve the situation in many respects, but
they still appear to have certain weaknesses.
The previous requirement that the budget must always
be balanced by taxes and other non-loan revenue, which has
proved unsatisfactory and ineffective, is modified to require
a balance only in the "ordinary" budget. While it may well
be desirable to impose some restraint on legislative action
to increase expenditures without providing corresponding
revenue, this kind of distinction between "ordinary" and other
expenditures seems of dubious validity and doubtful wisdom.
It is suggested that as a substitute for this and other pro-
visions of the plan, a two-thirds majority of Congress might
be required for incurring debt beyond that needed to finance
expenditures recommended by the Government.
The adoption of a less rigid formula for estimating revenues
is a desirable step, and the new formula has the advantage
of favoring a compensatory fiscal policy. On the other hand,
the practice of limiting drawings by the Administration against
authorized appropriations to the rate of actual receipts inter-
feres with sound administration. Finally, the new provisions
do not alter the trend toward earmarking certain revenues for
4Decree No. 164, January 24, 1950.
[601







specific purposes, which makes the budget structure unduly
rigid and hampers adaptation of the fiscal program to changing
conditions.
In our opinion there is need for a review and recasting
of the entire system of budget accounting and presentation,
so that the Government's revenue and expenditure accounts,
their impact on economic activity, and the level of the public
debt can be adequately appraised. This task is a difficult one
and may well require special technical help.

DEPARTMENTAL AND MUNICIPAL FINANCE
The decline in the financial importance and strength of
the Departments and municipalities in relation to the National
Government, and particularly the great disparity in resources
among the various Departments and municipalities, have
hampered the development of health, welfare, sanitation,
educational and other services for which these latter levels
of government are responsible. The financial difficulties of
the Departments are aggravated by the narrowness of their
tax base and their heavy dependence on revenues from the
production and sale of liquor by departmental monopolies.
Most of the municipalities have very limited revenues, derived
mainly from real property taxes, which are inadequate to
support any satisfactory standard of public services without
extensive outside aid.
Arrangements for sharing of revenue sources among
various levels of Government, or for matching National
Government grants, have only limited application in meeting
these problems since there is often little revenue to share,
or with which to match national contributions. On the other
hand, the transfer of responsibilities for various functions to
national agencies, with a view to relieving the burden on
local governments, tends to produce overcentralization. In
general, the allocation of responsibilities among the various
levels of Government has not been based on any consistent
principles, but is the outgrowth of a series of ad hoc expedients,
and has led to considerable overlapping and confusion of
authority. Finally, the present methods of apportioning and
administering direct grants from the National Treasury are
quite unsatisfactory; their effect is often to aggravate rather
[61]







than to mitigate the disparity in the resources of various local
governments.
We recommend, therefore, that the division of functions
and of sources of revenues among the three levels of Govern-
ment be reviewed comprehensively to reduce inequities and
undue complexities of the present structure. Departmental
and municipal taxes which interfere with the free flow of
trade within the country should be eliminated. The proposals
for reforms made by the Committee of Financial Experts in
the Ministry of Finance appear to deserve careful and sympa-
thetic study. The establishment of a more effective Municipal
Development Agency should help considerably to improve the
financial organization and administration of the weaker muni-
cipalities and to strengthen their ability to borrow for develop-
ment purposes.
Municipal revenues could be substantially increased by
improving local tax collections. The reassessment of property
valuations now in progress should help to increase receipts
from the real property tax, which is the basic source of muni-
cipal revenues. Collections of other taxes should be improved,
and inequities reduced by simplifications in the tax structure.
Some upward adjustment in the average rate of real prop-
erty taxes from the present "emergency" level of Ps.$4 per
thousand (the "normal" level is only Ps.$2 per thousand)
seems desirable; a higher average rate may, in fact, have
positive value in promoting sound development, especially
if the principle (proposed in Section III of this Summary) of
progressive rates of tax on underused land is adopted.

X. Monetary and Banking Policy
Inflation has been an almost universal economic problem in
the past decade, and it has profoundly influenced the economy
of Colombia. The adverse effects of inflation are many: it
intensifies inequalities of income distribution; gives excessive
windfall profits to investors in many fields and fosters ex-
travagance on the part of those who reap such profits; en-
courages speculative rather than productive investments; and
often necessitates resort to drastic controls over prices and
exchange in an attempt to avoid, or lessen the seriousness
[62]







of, its consequences. Inflationary pressures will almost cer-
tainly be a major problem in Colombia for years to come; it
is important, therefore, to recognize their causes and devise
measures to control them more effectively in the future.
The index of consumer goods prices rose from an average
of 100 in 1940 to 182 in 1946 and 272 in December 1949, or an
increase of 172 percent; and still further increases have since
occurred. In the same period, the total money supply (cur-
rency in circulation plus demand deposits) increased from
Ps.$212 million in 1940 to Ps.$740 million at the end of
1946, and to Ps.$940 million in June 1949, an overall increase
of 343 percent. In the period up to 1945, when many goods
were unobtainable, the money supply increased more rapidly
than prices rose, but this relationship was reversed in the
period 1946-49.
In part the rise in prices was an almost unavoidable reflec-
tion of world developments. The rise in prices abroad, and
the inability of Colombia to import many articles, led to an
increased flow of exchange proceeds, an increase in bank
reserves and a multiple expansion of deposits. To prevent
any rise in the price level during such a period would have
caused severe hardships. The actual price rise, however,
exceeded that necessary to adjust to inflation abroad, and the
monetary expansion resulting from exchange inflow was sup-
plemented by expansion of commercial bank credit and
Government borrowing from the Central Bank. An attempt
is made in Chapter XIV of the Comprehensive Report to
trace the increase in money supply to these three sources.
In very general terms, the increase up to 1945 can be attrib-
uted primarily to acquisition of foreign exchange, and that
from 1946 to 1949 primarily to expansion of commercial bank
and Central Bank credit, which far more than offset the
loss of foreign exchange. That chapter also includes a table
which provides for the first time an accurate accounting for
changes in the reserve funds of commercial banks due to
such factors as changes in foreign exchange, Central Bank
credit, Treasury deposits at the Central Bank and currency
outside banks.s
s See Table 108, Chapter XIV of the Comprehensive Report.
[63]







The Colombian banking system is based in part upon the
commercial loan theory of banking-that is, the theory that
if bank credit is restricted to short-term commercial loans,
its volume and the resultant volume of deposits will so adjust
themselves as to obviate any danger of inflation. In general,
this theory has not proved valid. Rather, it appears that con-
tinuous and deliberate measures are required to adjust the
supply of money to the needs of the economic situation. To
do this the Central Bank must be in a position to exert
effective control over commercial bank reserves on which
deposits are based. In the absence of an open market in
public debt, this control must operate primarily through the
rediscount operation. But such control has been handicapped
by statutory requirements under which commercial banks are
entitled to ample rediscount. We recommend, therefore, that
the Banco de la Reptiblica be given power to ration its credit
advances. This might be done by giving it power to vary
periodically the upper limits of rediscounts as a percentage
of a commercial bank's capital and reserves.
We have noted that one cause of the expansion in the
money supply was the borrowing by the Government from
the Central Bank. For example, in the years 1947 and 1948,
the extension of Banco de la Repiiblica credit to the National
Government and the Stabilization Fund reached the relatively
large figure of Ps.$73 million which, of course, tended to
increase commercial bank reserves. We urge that under con-
ditions of full employment the Government should make every
effort to avoid borrowing from the Central Bank either to
cover deficits or to finance long-term development projects.
In either case, the borrowings result in an addition to com-
mercial bank reserves and make possible a multiple expansion
of bank deposits.
While the commercial banks have made available an
ample, and at times excessive, volume of commercial credit,
their contribution to longer term investment has been slight.
We recommend that commercial banks be permitted to invest,
under proper safeguards, an increased proportion of their
assets in longer term loans in sectors of the economy where
credit is very short. This will help to improve the direction
[64]







of capital flow and, if held within proper limits, may be done
without endangering the liquidity or solvency of the banking
system which, in the last analysis, can only be assured by
a healthy and expanding national economy.
From this brief discussion, it is apparent that the formu-
lation of correct central banking policy is a matter of great
difficulty, requiring a knowledge of some of the most technical
aspects of economic theory, an ability to assess the future
impact on the economy of developments in the exchange,
fiscal and monetary fields, and the courage and disinterested-
ness to pursue unpopular restrictive policies at certain times.
The Mission of experts from the Board of Governors of the
Federal Reserve System of the United States affords an
opportunity to study the basic organization of the Banco
de la Repfiblica and its relation to the Government on the
one hand, and the Exchange Control Board on the other, with
a view to improving its effectiveness.


XL Foreign Trade and Exchange

The foreign trade position of Colombia is relatively favor-
able, particularly in relation to hard currency markets. The
country's dollar earnings derive principally from the export
of coffee, and rising demand and prices for this commodity
have largely accounted for the increase in the value of Colom-
bia's exports from U.S.$81 million in 1938 to U.S.$284 million
in 1948. Should coffee hold at anywhere near its price in early
1950, foreign exchange receipts might very well approach
U.S.$400 million annually. Over the longer term, however,
this dependence on the fortunes of a single crop may be a
source of weakness. In past years coffee has been subject to
serious fluctuations in supply and demand and consequent
wide variations in price, and less favorable conditions might
well recur in the future.
For the next few years, however, Colombia's satisfactory
trade position should greatly ease the problems of develop-
ment, if wise financial policies are followed. The foreign
exchange resources prospectively available should be suffi-
cient to finance both the necessary purchases of capital equip-
[65]







ment from abroad and an adequate volume of consumer goods
imports as well. At the same time, domestic production of
goods and services may be expected to increase at an accelerat-
ing rate, replacing some of the products formerly imported.
Another relatively favorable aspect of Colombia's interna-
tional position is that the service on its external debt of
approximately U.S.$130 million amounts to less than 4
percent of current exchange receipts.
Colombia has been able in the past to produce enough
oil to meet its own requirements, has received a steady dol-
lar revenue from royalties on exported oil, and has attracted
a very substantial amount of foreign capital for oil exploration
purposes. The country's petroleum situation, however, has
recently become less favorable. No major new fields have
been discovered, domestic consumption has grown steadily,
and exploratory work has been sharply curtailed.

FOREIGN EXCHANGE POLICIES
In spite of Colombia's generally favorable international
economic position, the country's foreign exchange reserves
were subjected to a severe drain in 1946-48, which was curbed
only by resort to detailed, complex controls over imports and
exchange transactions.
These controls have succeeded in their primary purpose
of restricting the loss of exchange, but as they have been
administered they have entailed serious adverse consequences
as well. They have increased the cost and complexity of for-
eign trade, have weakened competition, have caused certain
distortions in business policies, and have encouraged high
markups and permitted excessive profits on both legitimate
and illegitimate imports. They have frequently been used to
promote economic self-sufficiency without much regard for
the relative costs of domestic and foreign production. Their
complexity and discretionary character have tended to dis-
courage foreign investment and to distort the pattern of
domestic investment.
The heavy demand for imports which so endangered Co-
lombia's exchange reserves was caused essentially by the
[661








relatively greater rise in prices and incomes at home than
abroad-a rise that was not sufficiently compensated by a
fall in the exchange rate, so that prices of foreign goods were
low relative to domestic products.
It is clear that the system of multiple rates and compli-
cated, discretionary controls over foreign trade and exchange
transactions constitutes a substantial hindrance to orderly
economic development along the lines outlined in this Report.
It is clear also, however, that these controls can safely be
relaxed only as part of a complex of measures that will reach
to the inflationary pressures underlying the exchange dis-
equilibrium. The whole problem is a highly technical one, tied
in with almost every aspect of the development program.
We recommend, therefore, that an intensive study of pos-
sible changes in monetary and exchange policy be undertaken
as an integral part of the study of the overall development
program outlined herein; and that this aspect of the study be
carried on in close consultation with the International Mone-
tary Fund, which has special responsibility and competence
in this field.
FOREGN INVESTMENTS
The great bulk of direct foreign investments in Colombia
have been in oil and gold mining. Only a relatively small
amount of foreign capital has gone into manufacturing, al-
though the experience of firms that have established plants
in Colombia, either on their own account or in partnership
with Colombian capital, has generally been very favorable.
The Colombian economy could derive considerable benefit
from larger and more diversified equity investments from
abroad. Such investments usually are accompanied by tech-
nical skills and managerial experience from the more highly
industrialized countries, which in many cases would be of
value not only to the particular enterprises in which the in-
vestment is made but also as a stimulant to the industrial
growth in the whole economy. Our estimates in Chapter
XXX of the Comprehensive Report indicate that the overall
program can be realized within the period specified only if
there is a net inflow of foreign capital of approximately
Ps.$60 million a year. The gross inflow must be much larger.
[67]








Unfortunately, however, an atmosphere and economic en-
vironment unfavorable to extensive foreign private invest-
ment appear to have developed. The actual treatment of
foreign capital in the middle of 1949 seemed to be reasonably
fair, but a feeling of uncertainty was prevalent about the ex-
change rate, the operation of exchange controls and about
the way in which the many other laws and regulations
affecting foreign investment might be applied in the future.
Private capital can adjust itself to many conditions, but not
to extreme uncertainty. Whatever rules may be established
relating to the export of earnings and the re-export of capital,
it is of primary importance that they be fixed, known and
changed as seldom as possible.

TRADE POLICY

Advantage should be taken of the present favorable con-
ditions to encourage the diversification of Colombian exports
and thereby reduce the importance of coffee in the country's
foreign trade. Sugar, bananas, forestry products and coal
appear to offer possibilities worthy of further investigation.
It seems desirable also to encourage exports of both manu-
factured and agricultural goods to Venezuela, as a means of
earning dollars. The present relatively high external value
of the peso tends to discourage exports of many commodities
by imposing unduly high prices in terms of foreign currencies;
it may also handicap the development of domestic manufac-
tures to replace imported goods.

In recent years, a beginning has been made in inaugurating
a system of bilateral trades with a number of other countries.
Although such trades offer a possibility of stimulating world
consumption of coffee and thus strengthening its price, the
disadvantages attendant upon bilateral trading in general
raise serious question as to the wisdom of extending this
policy.


[68]








XIL Government Organization and Economic Data

A development program cannot be soundly formulated
and successfully carried out unless a well-organized and
efficient administrative structure exists and unless adequate
economic and statistical data are available.


GOVERNMENT ORGANIZATION AND ADMINISTRATION

The Mission has had neither the time nor the personnel
to undertake an intensive study of the administrative struc-
ture and problems of the Government. We recommend that
this task be undertaken by a special public administration
advisory mission. But our substantive recommendations in
every field inevitably have important administrative implica-
tions, and at numerous points in the Summary and the Com-
prehensive Report we have had occasion to call attention to
the need for certain administrative improvements and to make
suggestions as to their general character.

Among the most important of these needs, in our view,
is to strengthen the Office of the President to enable him
to exercise more effectively his constitutional function as
Chief Executive and his responsibility for coordinating the
programs and operations of the Executive Branch of the Gov-
ernment as a whole. Specifically, we propose the establish-
ment, directly under the President, of a Resources Planning
Agency to undertake continuing analyses of the economic
potentialities and needs of the nation; to review, from the
standpoint of overall economic policy, the programs and pro-
posals of the various Government agencies; and to advise
the President on these matters. We also recommend that
the Budget Bureau be located in the Office of the President,
to serve as his agent and technical adviser on the interrelation-
ships and requirements of the various governmental agencies,
in order to help secure more efficient administrative coordina-
tion and a well-conceived budgetary program. Such changes
should be of value not only to improve efficiency and coordina-
tion in the Executive arm of the Government, but also to
make it easier for the Congress to review the policies, opera-
[69]








XIL Government Organization and Economic Data

A development program cannot be soundly formulated
and successfully carried out unless a well-organized and
efficient administrative structure exists and unless adequate
economic and statistical data are available.


GOVERNMENT ORGANIZATION AND ADMINISTRATION

The Mission has had neither the time nor the personnel
to undertake an intensive study of the administrative struc-
ture and problems of the Government. We recommend that
this task be undertaken by a special public administration
advisory mission. But our substantive recommendations in
every field inevitably have important administrative implica-
tions, and at numerous points in the Summary and the Com-
prehensive Report we have had occasion to call attention to
the need for certain administrative improvements and to make
suggestions as to their general character.

Among the most important of these needs, in our view,
is to strengthen the Office of the President to enable him
to exercise more effectively his constitutional function as
Chief Executive and his responsibility for coordinating the
programs and operations of the Executive Branch of the Gov-
ernment as a whole. Specifically, we propose the establish-
ment, directly under the President, of a Resources Planning
Agency to undertake continuing analyses of the economic
potentialities and needs of the nation; to review, from the
standpoint of overall economic policy, the programs and pro-
posals of the various Government agencies; and to advise
the President on these matters. We also recommend that
the Budget Bureau be located in the Office of the President,
to serve as his agent and technical adviser on the interrelation-
ships and requirements of the various governmental agencies,
in order to help secure more efficient administrative coordina-
tion and a well-conceived budgetary program. Such changes
should be of value not only to improve efficiency and coordina-
tion in the Executive arm of the Government, but also to
make it easier for the Congress to review the policies, opera-
[69]




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