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PRESS RELEASE April 22, 2006

Colombia First to Expand Use of World Bank Hedging Products

The Government of Colombia and the World Bank signed on Thursday April 20, 2006 an ISDA Master Agreement that will allow the Government of Colombia to use a range of hedging products to assist in managing the currency and interest rate risks of its sovereign debt portfolio.

Commenting on this agreement, Kenneth Lay, The World Bank Deputy Treasurer said, “Colombia will have access to valuable tools for sovereign debt management. Prudent use of hedging products can strengthen government risk management and help reduce vulnerability to financial shocks.”

This is the first time the World Bank has entered a Master Derivatives Agreement with one of its member countries that would allow the use of hedging products for the entire public debt portfolio, rather than just for the country’s outstanding World Bank debt. The newly signed agreement would enable the Government of Colombia to access a range of hedging products offered by the World Bank, including currency swaps, interest rate swaps, caps and collars and, on a case by case basis, commodity swaps.

In working toward an agreement, the Colombian government was able to rely on support from the World Bank’s Treasury staff in considering the legal and technical aspects associated with the World Bank’s hedging products, within the government’s broader asset-liability management framework.

The hedging products offered by the World Bank allow borrowers to use standard market techniques to transform the risk characteristics of their outstanding debt portfolio. In providing these financial products, the World Bank intermediates between market institutions and its borrowers, entering separate financial contracts with each of them. Borrowers therefore benefit from financial terms that reflect the Bank’s own AAA credit rating. The World Bank uses one of the standard derivatives agreements developed by the International Swaps and Derivatives Association, Inc. (ISDA) (the ISDA Master Agreement – Multicurrency - Cross Border), as documentation for clients’ hedging transactions.