Audit of agricultural and industrial reactivation project : USAID/Costa Rica

The goal of the Project was to stimulate economic growth by: (1) providing long-term credit to businesses for nontraditional exports and (2) capitalizing a facility in the Central Bank as a permanent source of long-term dollar credit. In 6/89, USAID/CR reduced the loan portion of the Project to $7.66 million due to a weak demand for loans and extended the completion date to 9/90. This audit of the project found that: (1) While $6.27 million of project funding had entered the Costa Rican economy, the project"s goal of stimulating that economy was largely unachieved. Subprojects with potential for development impact had already been started (and in some cases completed) prior to receiving A.I.D. funding. Consequently, A.I.D. cannot claim success in achieving this developmental impact since it merely refinanced such subprojects. (2) A.I.D. procurement policies were not followed on project expenditures of over $3.3 million (93% of the amount audited), including $1 million which was lent to a Japanese-owned company to upgrade two hotels to five- and four-star ratings respectively. Both hotels have gambling casinos, even though it is A.I.D. policy not to be connected under any circumstances with financing gambling facilities. An additional troublesome impact is that A.I.D. is funding individuals or corporations from a country with which the United States has continuing balance of trade deficits rather than supporting local businesses. Another $100,000 was spent on sewing machines which were made in Japan and Germany, neither of which are allowable sources for A.I.D.-funded items. Moreover, the Mission did not start procurement compliance monitoring until the project"s fourth and final year, when $6.03 million of the $7.66 million in loan funds had already been disbursed. (3) All $350,000 in training and TA funds needs to be deobligated. This component could not be implemented due to a Costa Rican legal restriction in effect for the past 15 years. The report recommends that the Mission take certain actions regarding project monitoring and the recovery and deobligation of funds. While the Mission did not totally agree with the findings they did agree with all recommendations. (Author abstract, modified)