Colombia Second-tier Government Banks and Firm Performance Micro-Evidence

Government-owned development banks play the crucial role of channeling public funds to productive activities that, even if promising, may be rationed from credit access and may not flourish in the absence of such credit. Particularly interesting is the case of second-tier public banks. Rather than lending directly to firms, these banks lend resources to financial intermediaries (first-tier), which eventually lend the resources to firms. In this setting, secondtier banks not only expand credit supply by making more resources available, but may also provide resources at low costs and with flexible conditions that the intermediaries may then pass on to the final recipients of loans. Their activity is, therefore, expected to relax the constraints that prevent some firms from accessing credit, either because it is not available at all or because it is not available at costs that these firms can afford.

Such credit by second-tier development banks has potential advantages when compared with direct public lending and other forms of direct public support to business. First, second-tier credit is aimed at addressing market failures that limit access to credit, particularly for micro, small, and medium-sized enterprises (MSMEs). Second, because commercial banks and other private financial institutions eventually take on default risks, one could expect them to

adequately evaluate the quality of different projects and to separate those that are potentially profitable from those that are not. Resources should thus be more likely assigned to better uses than when governments provide direct support to businesses, sometimes assigning it on the basis of lobbying by potential beneficiaries. In fact, studies have found no effects or even negative

effects on economic performance when government-owned banks lend directly. Previous analyses also show evidence that such effects may relate to allocation of direct government loans according to political criteria.

Despite the potential gains from credit by second-tier development banks, little is known about their actual impact. This study is aimed at partially filling that gap by analyzing the impacts of lending activity of Bancoldex, the Colombian second-tier development bank, on the performance of manufacturing firms over the last decade. A companion paper studies Bancoldex’s impacts on the characteristics of credit used at the firm level (Eslava, Maffioli, and

Meléndez, 2011).

First established in 1992 to promote exports, Bancoldex became the Colombia’s development bank in 2003, taking over general development policy responsibilities that were previously held by the development agency IFI (now nonexistent). Bancoldex’s activities concentrate on second-tier lending: all of its credit resources are channeled through other financial or nonfinancial intermediaries.

To explore the effects of loans funded by Bancoldex on firm performance, we use microlevel data for all manufacturing establishments with 10 or more employees from 1997 through 2007 matched with data on Bancoldex credit recipients from 2000 through 2007. This allows us to study the effects of different types of Bancoldex loans on different aspects of firm performance.

After correcting for selection biases, we find that using Bancoldex loans increases firms’ output, employment, investment, and productivity. Moreover, these effects grow with increases in amounts borrowed. While loans intended for long-term purposes are found to have positive impacts on output, investment, and productivity, short-term loans help improve performance in

other dimensions, particularly with respect to exports.

Our study is, to the extent of our knowledge, the first econometric assessment of the impact of credit from second-tier development banks on firm performance. Our findings contribute to the understanding of how different ways of channeling public resources to the business sector can have different effects. In contrast to the negative or inconclusive findings of previous studies on the impact of direct lending by the government, our results suggest that second-tier banking can foster productive activities, especially if resources are targeted to funding long-term projects that may otherwise be hard to finance in a tight financial market.

The paper is organized as follows. Section 2 describes Bancoldex and its financing activity. Section 3 reviews previous studies on the subject. Section 4 introduces the data used in our evaluation, and Section 5 discusses our empirical approach. Section 6 presents the results of our study, while Section 7 discusses those results in the light of the existing literature and

concludes this paper.

Marcela Eslava. Alessandro Maffioli. Marcela Meléndez. Capital Markets and Financial Institutions Division (IFD/CMF). IDB WORKING PAPER SERIES No. IDB-WP-294. Inter-American Development Bank. January 2012

Colombia Second-tier Government Banks and Firm Performance Micro-Evidence

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Colombia Adaptation to Climate Impacts in Water Regulation and Supply Area of Chingaza

The project will support the implementation of adaptation measures designed to address the consequences of climate change in the water supply and hydrological regulation functions provided by high-mountain wetlands and ecosystems of the Chingaza-Sumapaz-Guerrero corridor. These ecosystems and wetlands are the main drinking water source to the Bogota metropolitan area and its adjoining rural communities. The natural water regulation function of these ecosystems is expected to be seriously affected by changes in the intensification of the water cycle.

CO-G1002: Adaptation to Climate Impacts in Water Regulation and Supply area of Chingaza

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Colombia.Adaptation to Climate Impacts in Water Regulation and Supply area of Chingaza

The project will support the implementation of adaptation measures designed to address the consequences of climate change in the water supply and  hydrological regulation functions provided by high-mountain wetlands and ecosystems of the Chingaza-Sumapaz-Guerrero corridor. These ecosystems and wetlands  are the main drinking water source to the Bogota metropolitan area and its adjoining rural communities. The natural water regulation function of these ecosystems is expected to be seriously affected by changes in the intensification of the water cycle.

IDB.CO-G1002:Adaptation to Climate Impacts in Water Regulation and Supply area of Chingaza

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Colombia. Support to the Energy Efficient National Freight Transport Initiative

Road freight transportation is the main transport mode related to domestic commerce, thus becoming a major factor regarding high logistics costs that overwhelm the Colombian economy. The present TC will help assess and review sectoral public policies in cooperation with carriers and shippers. In addition will deepen the general knowledge regarding road freight transport and its impact on GHG emissions

IDB. CO-T1237 : Support to the Energy Efficient National Freight Transport Initiativex

Colombia.La Guajira Water and Sanitation Infrastructure and Service Management Project

The PDO has been slightly modified to include rural areas in its geographic scope as follows: "to improve the quality of water supply and sanitation services in urban, periurban, and rural areas of the Borrower's territory by: (a) supporting utility institutional performance through the use of #specialized operators; and (b) delivering the necessary water and sanitation infrastructure."

Document Date: 2011/11/22.Document Type: Integrated Safeguards Data Sheet.Report Number: AC6402. Volume No: 1

Colombia-La Guajira Water and Sanitation Infrastructure and Service Management Project

Bribery.OECD invites Colombia to join Anti-Bribery Convention

OECD.Newsroom. 29/11/2011. The OECD today invited Colombia to join its Working Group on Bribery and to accede to the Anti-Bribery Convention. OECD Deputy Secretary-General Richard Boucher signed an exchange of letters with Colombian President Juan Manuel Santos at a ceremony in Bogotá, making Colombia the 40th member of the Working Group on Bribery.

Mr Boucher also conveyed the OECD’s invitation to Colombia to become an observer of the OECD’s Competition Committee, as well as to adhere to the Declaration on International Investment and Multinational Enterprises and so become a full participant in the OECD’s Investment Committee.

““As it steps up its investment abroad, it’s important that Colombia has clearly made anti-corruption a top priority,” Mr Boucher said at the signing ceremony. “We are confident that Colombia’s accession to the Anti-Bribery Convention will not only strengthen its ability to fight corruption but it will also strengthen OECD efforts to stamp out bribery and create a level-playing field.”

Colombia will now embark on the domestic legislative processes for ratification of and accession to the OECD Convention. Like all members of the Working Group on Bribery, and in accordance with its procedures, Colombia will undergo detailed reviews of its anti-bribery laws to confirm that they meet the Convention’s standards, and that they are effectively implemented.

The OECD Anti-Bribery Convention, which entered into force in 1999, outlaws the bribery of foreign public officials in international business transactions. Through country monitoring and extensive peer-led follow-up, the OECD Convention seeks to ensure that the fight against bribery is effective, thus creating a level playing field for fair competition. Since the Convention came into force, 199 individuals and 91 companies have been sanctioned for foreign bribery offenses.

The 34 OECD member countries plus Argentina, Brazil, Bulgaria and South Africa are Parties to the Convention. Russia is also a Member of the Working Group on Bribery.

More information about the OECD work on Columbia is available here.

h

Colombia.Support to the Energy Efficient National Freight Transport Initiative

Road freight transportation is the main transport mode related to domestic commerce, thus becoming a major factor regarding high logistics costs that overwhelm the Colombian economy. The present TC will help assess and review sectoral public policies in cooperation with carriers and shippers. In addition will deepen the general knowledge regarding road freight transport and its impact on GHG emissions

CO-T1237:Support to the Energy Efficient National Freight Transport Initiativea

Colombia.CT-INTRA Sharing experience for the National Investment System

The objetive of the TC intra is to allow the visit of Colombian officials to their peers of the National Investment Systems of Chile to learn about the evolution of their investment systems

CO-T1276:CT-INTRA Sharing experience for the National Investment Systema

Colombia. Strengthening Financial and Capital Supervisory Agency

Supporting to the Financial Superintendency of Colombia in the design and implementation of an adequate data processing platform to supply the needs of an supervision integrated and then de able to adopt the Supervision Based on Risks.

IDB. Colombia.CO-T1268:Strengthening Financial and Capital Supervisory Agency

Colombia. FINDETER- Lending Program for Public Service Providers III

This operation is the third individual loan financed with resources from the Conditional Credit Line for Investment Projects (CCLIP) for the Lending Program for Public Service Providers, approved on 26th March 2008. IDB

CO-L1116 : FINDETER - Lending Program for Public Service Providers III

Colombia. CO-National Macroproyectos Social Interest Program Project

The Project development objective is to enable access to affordable housing solutions for low-income beneficiaries.

World Bank.Author:Samad,Taimur.Document Date:2011/11/18.Document Type:  Implementation Status and Results Report.Report Number: ISR4247.

 

Colombia - CO-National Macroproyectos Social Interest Program Project : P110671 - Implementation Status Results Report : Sequence 02

Latin America.Anchor SMEs promoting production development in the BOP

El objetivo de este proyecto es fomentar la competitividad de los pequeños productores de la base de la pirámide a través del fortalecimiento de las cadenas productivas de pequeñas y medianas empresas (PYME) anclas en los sectores agrícolas, agroindustrial, manufactura y turismo de Bolivia, Nicaragua, Guatemala, Honduras, República Dominicana, Perú, Paraguay, El Salvador y Colombia.

 

A través de este proyecto se espera generar un efecto de demostración positivo en el acceso al financiamiento a largo plazo, el cual potencia el rol del sector de las PYME en las economías regionales como motor de generación de empleo formal, ingreso y aumento en la productividad de pequeños productores que pertenecen a la base de la pirámide y que hacen parte de sus cadenas de suministro y de producción.

 

Latin America.RG-L1040 : Anchor SMEs promoting production development in the BOP

 

Anchor SMEs promoting production development in the BOP

Colombia, First Country in the Americas to Eliminate River Blindness

Bogotá, Colombia, 17 November 2011 (PAHO/WHO) — Colombia has become the first country in the Western Hemisphere to eliminate onchocerciasis (also known as river blindness) within its national borders, according to an announcement made by Colombian health authorities at the 21st Inter-American Conference on Onchocerciasis in Bogotá last week.  The announcement was based on the results of three years of intensive surveillance and testing, following the planned halting of treatment for the disease in 2007. Colombia’s Ministry of Health and Social Protection has asked the World Health Organization (WHO) to certify the elimination and has submitted data to substantiate the achievement. Efforts to eliminate onchocerciasis from Colombia spanned 16 years and were led by its National Health Institute with support from the Ministry of Health and Social Protection, the Onchocerciasis Elimination Program of the Americas (OEPA), and the Pan American Health Organization/World Health Organization (PAHO/WHO). The country’s single focal area of transmission was a remote community of 1,366 people in the Department of Cauca, along the southwestern coast. The elimination strategy included twice-yearly treatment over 13 years of area residents with the antiparasitic drug ivermectin, donated by the manufacturer, Merck & Co. Onchocerciasis is the second-leading infectious cause of blindness worldwide and disproportionately affects people and communities living in poverty. It is caused by the parasitic worm Onchocerca volvulus and is transmitted to humans through the bites of Simulium flies. The disease was introduced into the Americas through slave trafficking in the early 18th century. Thanks to internationally supported efforts, no new cases of blindness due onchocerciasis have been seen in the Americas since 1995. The disease is in various stages of elimination in seven remaining focal areas in Brazil, Ecuador, Guatemala, Mexico and Venezuela, where an estimated 393,740 people are still considered at risk. Partners in onchocerciasis elimination efforts include OEPA, the ministries of health and affected communities in the six endemic countries, the Carter Center, the Mectizan Donation Program, the Bill & Melinda Gates Foundation, the Lions Clubs International Foundation, the Centers for Disease Control and Prevention, PAHO/WHO, and the Pan American Health and Education Foundation. The countries of the Americas pledged to eliminate illness resulting from onchocerciasis and to interrupt transmission of the parasite in the hemisphere by 2012 in a resolution passed by PAHO’s Directing Council in 2008. Contact: Donna Eberwine-Villagran, eberwind@paho.org This e-mail address is being protected from spam bots, you need JavaScript enabled to view it , Tel. +1 202 974 3122, Mobile +1 202 316 5469, Knowledge Management and Communication, OPS/OMS – www.paho.org

Last Updated ( 17 November 2011 )

Addressing the Implementation of Prefential Trade Agreements.The Law and Pratice of the European Union-MJS

Like most industrialized countries, the European Union (EU) has concluded trade agreements with selected countries with a view to liberalize trade among those countries. In most cases, the objectives of these agreements are rather ambitious. Objectives may be the establishment of an all-inclusive custom union, such as the one with Turkey, or a full association that facilitates accession to the European Union, such as the one with the Balkan countries.

Other objectives include the establishment of a comprehensive economic partnership with developing countries in order to foster their sustainable economic development, such as the case of the African, Caribbean, and Pacific (ACP) Group of States. In Latin America association and partnership agreements have been concluded with Mexico and Chile.

A Free Trade Agreement was recently concluded with Colombia and Peru. Negotiations for an Association Agreement were concluded with Central American countries4 and were revived with the Mercosur countries during the last EU-Latin America Summit in Madrid in May 2010.Trade agreements imply preferential trade treatment among the parties. As such, they must in principle meet the conditions of Articles XXIV of GATT and V of GATS. This means that an agreement must provide for reciprocal trade benefits for substantially all trade in goods between the parties, and it must have substantial sectoral coverage in relation to services. It can apply to selected countries as opposed to others. Trade preferences are also possible under the Enabling Clause. While in this case reciprocal trade benefits are not required, the preferences must be granted to developing countries only, and no discretionary selection of them is possible otherwise than through objective criteria.

It is the policy of the EU to only negotiate reciprocal trade agreements that match the requirements of Articles XXIV of GATT and V of GATS. Under the Enabling Clause, the EU only maintains a unilateral scheme of generalized tariff preferences.8 The time when the EU would conclude trade agreements with chosen countries, thereby granting them unilateral trade preferences, is over since this would clearly violate the GATT, the GATS, and the Enabling Clause.

For instance, the trade chapter of the Cotonou Agreement, which reserved important unilateral preferences to the ACP states, was authorized until it was covered by a special WTO waiver.However, the latter expired on 1 January 2008. Therefore the Cotonou trade preferences had to be reciprocated to the EU for ―substantially all trade‖ in order to be maintained. The expected expiration of the waiver entailed the 2002 launch of a new round of negotiations with the ACP states in order to determine the pace of their own trade liberalization towards the EU. The process is laborious and is still ongoing. The only comprehensive Economic Partnership Agreement (EPA) that has been concluded is that with the CARICOM countries and the Dominican Republic (the EU-CARIFORUM EPA).11 For the rest, the EU has concluded interim economic partnership agreements (Interim EPAs) with certain individual ACP states, while pursuing negotiations for comprehensive EPAs at sub-regional levels.

The EU’s reciprocal trade agreements generally encompass two aspects, in addition to a commitment to institutionalize and intensify political dialogue. The first aspect concerns the trade arrangements between the parties and tends to be very mercantilist in nature. The purpose of the agreement is to maintain the negotiated balance of tariff rights and concessions between the parties and the services commitments, when they exist. The second aspect concerns the provisions that are meant to proactively contribute to the economic development of the EU’s partners and in certain cases, facilitate their accession to the EU. These provisions relate to the EU’s neighborhood or development policy towards non-EU countries. In this context, the trade preferences constitute merely one part of a larger political objective, and care must be taken to ensure that the agreements themselves do not undermine that objective.

For instance, the stated objective of the Stabilisation and Association Agreements with the Balkan countries are to (1)―ensure peace and stability in the region by providing support for the strengthening of democracy and the rule of law and the development of a market economy;(2) to encourage reforms with a view to accession to the EU; and (3) to foster trade relations atregional level in the Balkans and with the EU. This type of Agreement entails a progressive alignment of the legislation of the countries concerned with that of the Community

David Luff. Addressing the Implementation of Prefential Trade Agreements.The Law and Pratice of the European Union-MJS.September 2011.Inter-American Development Bank.

The Inter-American Development Bank Policy Briefs present a particular policy issue and outline courses of action, including specific policy recommendations. The information and opinions presented in these publications are entirely those of the author(s), and no endorsement by the Inter-American Developme Bank, its Board of Executive Directors, or the countries they represent is expressed or implied. This paper may be freely reproduced provided credit is given to the Inter-American Development Bank.

Addressing the Implementation of Prefential Trade Agreements.The Law and Pratice of the European Union-MJS

Housing Tenure and Housing Demand in Colombia

Using the 2003 and 2008 Quality of Life Surveys, this paper identifies the factors that affect housing tenure decisions in Colombia. Households with higher incomes are more likely to purchase than to rent, and the choice of formal housing is positively associated with wealth.

Households eligible for social housing subsidies are more likely to purchase than to rent, and those working in the informal sector are more likely to purchase informal dwellings. Subsidies and access to mortgage credit have a large positive impact on demand. Finally, savings have a positive effect on demand in 2008, but not in 2003. The positive effect on demand of both subsidies and credit is explained by demand for low- income housing.

Code: IDB-WP-259.Author (s):Arbelaez, Maria Angelica,Becerra, Alejandro Steiner,Roberto Wills, Daniel.Published: October 2011

Housing Tenure and Housing Demand in Colombia

Colombia.CO-T1258: Intermediate Cities Planning-Pereira

This TC seeks to provide technical assistance to the municipality of Pereira in Colombia in the preparation of their new Urban Development Plan (POT), with an emphasis in the promotion of strategies and instruments that generate compact urban development and the incorporation of the climate change thematic

Inter American Development Bank

CO-T1258: Intermediate Cities Planning - Pereira

Colombia to reduce its vulnerability to natural disasters with IDB support

Colombia will reduce its vulnerability to natural hazards and climate change with the help of a $120 million loan approvedby the Inter-American Development Bank (IDB).

Colombia is one of themost vulnerable countries to natural disasters in Latin America, with more than eight out of ten Colombians located in disaster-prone areas and 87 percent of the country’s GDP at risk from such events. More than 150 natural disasters have struck Colombia over the past 40 years, claiming more than 32,000 lives and affecting more than 12 million people.

This is the first operation in a policy-based loan program. Under these loans, which provide governments with flexibility to fund priority programs, disbursements are made after achieving certain goals agreed upon between the IDB and the borrowing country.

"The program will help the Colombian government protect the country's most vulnerable populations," said Sergio Lacambra, IDB project team leader. “Incorporating risk management and adaptation to climate change in the national development plan will be an important contribution to sustainable development in Colombia."

The program will advance reforms in the areas of risk identification, risk reduction, and disaster management. The reform process will also improve coordination among key government institutions during the emergency, rehabilitation, and reconstruction phases.

The program also includes a series of pilot projects in Pereira and other vulnerable municipalities to strengthen their ability to assess natural disaster risks. Furthermore, it will ensure the physical integrity of buildings such as hospitals, schools, and government offices by changing Colombia’s regulations for earthquake-resistant construction.

The loan is for a period of 20 years with a grace period of five years at a variable interest rate based on LIBOR.

Should cash transfers be confined to the poor ? implications for poverty and inequality in Latin America

This paper compares for 13 Latin American countries the poverty and inequality impacts of cash transfer programs that are given to all children and the elderly (that is, "categorical" transfers), to programs of equal budget that are confined to the poor within each population group (that is, "poverty targeted" transfers).

The analysis finds that both the incidence of poverty and the depth of the poverty gap are important factors affecting the relative effectiveness of categorical versus poverty targeted transfers. The comparison of transfers to children and the elderly also supports the view that choosing carefully categories of beneficiaries is almost as important as targeting the poor for achieving a high poverty and inequality impact.

Overall, the findings suggest that although in the Latin American context poverty targeting tends to deliver higher poverty impacts, there are circumstances under which categorical targeting confined to geographical regions (sometimes called "geographic targeting") may be a valid option to consider. This is particularly the case in low-income countries with widespread pockets of poverty.

Argentina,Bolivia,Brazil,Chile,Colombia,Dominican Republic,Ecuador,El Salvador

Author:Acosta,Pablo;Leite,Phillipe;Rigolini,Jamele.Document. Date: 2011/11/01.Document Type:  Policy Research Working Paper.Report Number: WPS5875.Volume No: 1 of 1

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Is there such thing as middle class values? Class differences, values and political orientations in Latin America

Middle class values have long been perceived as drivers of social cohesion and growth. This paper investigates the relation between class (measured by position in the income distribution), values, and political orientations using comparable values surveys for six Latin American countries.

The analysis finds that both a continuous measure of income and categorical measures of income-based class are robustly associated with values. Both income and class tend to display a similar association to values and political orientations as education, although differences persist in some important dimensions.

Overall, there is no strong evidence of any "middle class particularism": values appear to gradually shift with income, and middle class values are between the ones of poorer and richer classes. If any, the only peculiarity of middle class values is moderation.

The analysis also finds changes in values across countries to be of much larger magnitude than the ones dictated by income, education, and individual characteristics, suggesting that individual values vary primarily within bounds dictated by each society.

Latin American countries–Argentina, Brazil, Chile, Colombia, Guatemala, Mexico and Peru.

The World Bank. Author:Lopez-Calva,Luis F.;Rigolini,Jamele;Torche, Florencia.Document Date: 2011/11/01.Document Type: Policy Research Working Paper.Report Number:  WPS5874. Volume No:  1 of 1

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