Cooperative agreement with Federacion Nacional de Cooperativas de Ahorra y Credito y Servicios Varios with (FENACOAC) for a project to strengthen Guatemalan cooperatives

The Federacion Nacional de Cooperativas de Ahorro y Credito y Servicios Varios (FENACOAC) will implement activities in institution building, financial stabilization, and credit management. FENACOAC"s Technical Development Unit (TDU), to be staffed by 4 long-term expatriate advisors and 8 Guatemalan technicians, will provide TA to federations and, through them, will help co-ops to analyze their financial and operational status and to implement development plans that focus on institutional development and financial strengthening. Specific actions will include: policy reviews and adjustments; provision to co-op managers of salary and training incentives and of training in management and financial management; and provision of short-term external TA, as needed. In addition, the National Cooperative Institute (INACOP) will be helped to improve its auditing and examination capabilities and the Cooperative Federation (CONFECOOP) to improve its training and representation activities. To address the co-op movement"s need for capital, the project will establish a Stabilization Fund through which participating co-ops and federations will receive grants of cash or securities; these grants will enable the co-ops and federations to expand their operations and will restore confidence in the creditworthiness of the co-op system. A Savings Protection Program which is expected to evolve in the credit union subsector from the operations of the Stabilization Fund will guarantee depositors" savings accounts in credit unions. Third, a credit fund will be established to help restore economic activity in rural areas by providing federations and co-ops with funds for production and investment lending. Standardized credit policies and procedures will be developed, and considerable training will be provided at all levels in loan analysis and approval, collections, etc. FENACOAC"s Fund Management Unit will administer both the stabilization and credit funds. Amendment of 8/28/90 authorizes Phase II, extending the PACD to 6/94, eliminating the restriction against working directly with primary agribusiness co-ops, and adding policy dialogue and legal reform activities. At least 14 independent agribusiness co-ops that had been receiving assistance under project 5200276 will be helped to increase members" crop production and marketing capacities. Activities to be supported will include: use of high-cost inputs such as pesticides and fertilizers; crop diversification and seed variety trials; field research and soil sampling; extension programs; marketing agreements with processing firms and brokers; and networking with market information services. The policy dialogue component will attempt to change Government policies that treat co-ops as social entities and discourage their growth as businesses, targeting especially INACOP and INGECOP (the Inspector General of Cooperatives); various training exercises will be funded. CONFECOOP will continue to receive assistance in its lobbying efforts. The project will continue to assist the recapitalization and financial stabilization of federated co-ops, including those associated with FENACOAC (credit unions), ARTEXCO (artisan co- ops), and FECOAR, FEDECOAG, and FEDECOVERA (three agricultural federations). The amendment also increases access to capital for short-term production and medium- and long-term investment credit. (PD-KAT-488) Amendment of 7/15/92 reduces project assistance as a result of a 4/92 Mission review, which concluded that the existing project is too large to implement efficiently. The project will terminate assistance to 2 federations (ARTEXCO and FEDECOCAGUA), both of which are considered to have met EOP conditions, and to 15 primary co-ops and by 12/92 will be assisting only 2 agricultural co-op federations (FEDECOAG and FEDECOVERA), 16 primary agricultural co-ops, FENACOAC, and 24 credit unions. (PD-ABE- 623)