AUDIT REPORT USAID/B LOAN TO FINANCIADORA DE ESTUDOS DE PROJETOS, BRAZIL (FINEP)

LOAN WAS INTENDED TO PROVIDE SEED CAPITAL AND FOR FUNDING BY FINEP OF NATURAL RESOURCE FEASIBILITY STUDIES ON GRANT BASIS. AUDIT WAS CONDUCTED ACCORDING TO ACCEPTED STANDARDS. SLOW FINEP ACTIVITY, NOTED IN 12/69 AUDIT, CONTINUED UNTIL SHARPLY INCREASED IN 1972 DUE TO FINEP FINANCING OF ENGINEERING PLANS STUDIES PREVIOUSLY PROHIBITED BY LOAN TERMS, DEVELOPMENT OF FINANCIAL AGENTS, AND BOOMING ECONOMY. BULK OF 1970-72 ACTIVITY WAS TO 2 PRIOR COMMITMENTS: METEREOLOGICAL SERVICE (DMET) AND SAO FRANCISO VALLEY AUTHORITY (SUVALE). ALTHOUGH $2 MI LLION REMAINED TO BE USED, ONLY $178,000 WAS NEWLY COMMITTEDIN 1970. AS A RESULT, USAID/B DEOBLIGATED LOAN BY $2,055,802IN 1971. AS OF 11/30/72, $7,531,767 OF $8,936,998 COMMITTED FUNDS HAD BEEN DISBURSED, WITH $7,200 UNCOMMITTED. USAID/B MONITORING/COORDINATING/PROCURING HAS BEEN GOOD, THOUGH IT HAS BEEN UNABLE TO INTERVENE DIRECTLY. FINEP HAS SEVERELY NEGLECTED ITS PRIMARY MONITORING RESPONSIBILITY. FINANCIAL INPUT BY GOVT OF BRAZIL (GOB) AND INTER-AMERICAN DEVELOPMENT BANK (IDB) HAS BEEN ADEQUATE. DMET PROJECT IS FORESEEN AS SATISFACTORILY COMPLETED BY MID-1973 WITH REDUCED GOALS. MAJOR CONSTRAINT IS INADEQUACY OF QUANTITY/QUALITY OF PERSONNEL DUETO GOB FREEZE ON GOVT PERSONNEL/SALARIES. AS OF 11/30/72, $1,858,215 OF $2,220,501 COMMITTED FUNDS HAD BEEN DISBURSED. RE SUVALE: PRINCIPAL ROLE OF MISSION, IN COOPERATION WITH SUPERINTENDENCY FOR DEVELOPMENT OF NORTHEAST (SUDENE), HAS BEEN TO OBTAIN/COORDINATE TECHNICAL ASSISTANCE TEAM (TAT). SUVALE IS VERY WEAK, WITH ACUTE PERSONNEL SHORTAGE DUE TO GOB FREEZE. TAT HAS BEEN EXPECTED TO PROVIDE FINISHED PRODUCTS. THUS THERE HAS BEEN NO INSTITUTIONAL STRENGTHENING OF SUVALE. OF $3,040,221 COMMITTED FUNDS, $2,014,012 HAS BEEN DISBURSED. IT IS RECOMMENDED THAT SUVALE CONTINUANCE REQUEST FOR TATASSISTANCE BE BASED ON USAID/B"S EVALUATION OF GOB PRIORITY DECLARATION.