Agricultural and industrial reactivation

BCCR will implement the project. Project loan funds ($19.65 million) will be used by the BCCR to establish the AIR. About 10 private banks are expected to participate in sublending AIR dollars at market rates to private firms for fixed asset investment to increase nontraditional exports to markets outside of the Central American Common Market. Subborrowers will be able to draw loan funds in dollars or colones and to make payments in colones at the prevailing rate of exchange on date of repayment. Principal recuperations from subloan repayments will be available for relending, as will two-thirds of interest reflows; the remaining third will be used to create a loan guarantee/risk minimization fund against default by participating banks. Cumulative reflows are expected to reach $6.3 million by year 10. Both new and existing labor- and capital-intensive enterprises will be eligible for subloans, set at a maximum of $350,000 to encourage broad participation. Considerations in subloan approval will include subproject potential for generating employment and foreign exchange and for utilizing the agricultural resource base. Project funds will cover up to 70% of the total cost of each proposed investment; the subborrower will provide the balance. BCCR involvement will be limited to verifying subproject eligibility and participating bank soundness; the banks will be responsible for promoting, analyzing, and approving subloans. Project grant funds will be used to train some 100 participating bank personnel in development lending and to provide the banks with TA in technical subproject evaluation. The grant component will probably be implemented by a Costa Rican contractor. The Costa Rican Banking Association will help with course development and trainee identification; banks will pick up one-third of training and TA costs.