Consultancy report on debt for development and agribusiness opportunities for Costa Rica

Debt/equity swaps to finance nontraditional agribusiness joint ventures in Costa Rica are currently not available. Debt conversion or repayment efforts of the Government of Costa Rica are directly connected to policies and controls of the International Monetary Fund, which is attempting to restructure the Costa Rican debt load and influence government decisions on economic and monetary policy. However, debt for equity swaps of Costa Rican foreign debt have occurred in the past for several traditional and nontraditional export agribusiness projects (e.g., bananas, tropical plants and flowers). The present nonofficial policy is to consider debt/equity swaps for projects of high social impact such as housing, small business development, and natural resources conservation. Investment in export or tourism related projects continues, and even increases. Exports increased 11% during the first 9 months of 1989 compared to the same period in 1988; nontraditional exports increased 7%. By all indications, 1990 should be another year of growth as previous long-term investments (e.g., tropical tree fruits and nuts, fruit processing, and aquaculture projects) mature. The agribusiness climate continues to be attractive and governmental incentives and promotion programs have become more beneficial, at least more reliable and clearer. Extension of the Certifado Abono Tributario incentive (a tax incentive for certified exporters of nontraditional products) was recently revised and renewed, allaying investors" fears. Promotion of Costa Rican agricultural products as having an excellent quality image has increased trade and investment interest as well. Opportunities exist for joint venture projects in fresh mangos, fresh and processed coconut products, vegetable processing, macadamia nut production and processing, tropical fruit processing, and export of ethnic food products such as yucca, plantains, exotic bananas, and other tropical fresh fruits. The above projects currently or possibly involve numerous small growers which could easily be organized into the agricultural cooperative business system. Recommendations for several of the possible "deals" mentioned above are presented in this report. Agricultural cooperatives in Costa Rica are popular with producers, enjoy special privileges and incentives, and have special access to financing debt. For these reasons, it is highly recommendable to pursue this approach to organizing joint ventures. In addition, the presence of an active ACDI office and staff in Costa Rica is important. This office could play a major role in further identification of possible business ventures and acting as an information and organizational center. In summary, it is the consultant"s opinion that Costa Rica is an excellent and safe location to pursue joint venture agribusiness projects and that access to debt for development programs will once again be available. A highly promising joint venture "deal" involving the production, packing, and marketing of fresh mangos has been identified with promising social and economic benefits to all participants and the country of Costa Rica. Other promising business ventures requiring additional investigation have also been identified. (Author abstract)