Audit of the trade credit insurance program

Audit covers the period 10/84-9/88. The audit found that the Trade Credit Insurance Program has been a useful means for making foreign exchange credit available in Central America. It has facilitated imports for industrial, agricultural and export purposes and improved relationships between U.S. banks and local banks. In fact, it was the mechanism preferred by Central American importers for financing imports from the U.S. The program has been steadily growing in popularity and through FY88 was overcoming initial problems of slow utilization. Utilization of FY88 credits had reached the $200 million point. This was a 69% increase from the previous year. In the opinion of program manageers and evaluators, the program is beneficial to both the U.S. exporters and local importers. Even though the program is now growing steadily and has been a useful means for making foreign exchange credit available to Central America, some improvements were needed. The audit found that the program agreements are too vague, administrative and management procudures need improvement, and promotion of the program should be a continuous process. It is recommended that A.I.D., in coordination with the Central Banks of Costa Rica, El Salvador, Guatemala, and Honduras, amend the country agreements to clearly specify that Central America imports under the program be for production purposes. Additionally, A.I.D. should inform USAID"s and the Central Banks of A.I.D."s policy so they can do a better job in monitoring program compliance; amend country agreements to include clauses on maintenance of records and ensure that local banks develop and maintain separate accounting for the program"s lines of credit; revise records and reports so transactions can be tracked through the banks; and ensure that brochures are developed and published in Spanish to promote the program. A.I.D. agreed with the recommendations, has taken action to implement most of them, and will take action in the near future to implement the remainder. (Author abstract)