Agribusiness employment/investment promotion

PES covers the period 9/81-10/83 and is based on site visits and interviews with personnel from the Latin American Agribusiness Development Corporation - Central America (LAAD-CA), borrowers, and AID/ROCAP. External problems and constraints - worsened business conditions, foreign exchange shortages, and nationalization of LAAD-CA"s Nicaraguan portfolio - have affected implementation, requiring LAAD-CA to invest time meant for developing new subloans to managing its investments and assisting existing clients. Nonetheless, LAAD-CA has developed a strategy to deal with foreign exchange and economic constraints, and the project has made adequate progress despite the generally poor investment environment. Estimated impacts of agribusiness subloans, assuming full disbursement of the A.I.D. loan, are: a $17.5 million increase in exports (vs. a target of $15 million); an increase of only $3.5 million in imports (less than half the projected figure); and - the strongest impact - some $12.9 million in foreign exchange earnings, vs. an expected $7.2 million. Least impact is expected in new direct in-plant employment and income, with some 126 jobs created, but the project will indirectly benefit some 5,000 small farmers supplying raw materials to agribusiness borrowers. Procedures used in assessing potential borrowers have been a strong point, enabling LAAD-CA to maintain a high-quality portfolio while keeping its staff small. Also, borrowers are happy with LAAD-CA"s rapid loan processing and disbursement. However, several borrowers report that they have been unable to satisfy the TA and training needs of their raw material suppliers (small farmers and fishermen) and would welcome LAAD-CA"s help in finding TA sources; LAAD-CA has tended to act strictly as a lender, providing only limited assistance to its borrowers. The project demonstrates that LAAD-CA is a useful channel through which A.I.D. can direct funds to benefit the private sector in Central America. Action decision is to continue to work with Central Banks in order to resolve the problems caused by the lack of foreign exchange.