Ecuador industrial development finance

seed capital, the public sector Corporacion Financiera Compania Nacional (CFN) and the private sector Financiera Ecuatoriana de Desarrollo, S.A. (COFIEC) were established in the mid-1960"s to provide long-term financing for industrial development in Ecuador. This study examines the relative success of these two institutions, as well as some of their shortfalls. The study: (1) analyzes the macroeconomic context in which the banks were created and in which they have operated, especially the industrial and financial sectors and the institutional and legal factors affecting them; (2) reviews the banks" development, management and lending procedures, portfolios, and financial performance; and (3) and analyzes a representative sample of A.I.D. subloan projects. Together, CFN and COFIEC mobilized about 25% of all the capital invested in medium- and large-scale industry between 1966 and 1982 and contributed to the creation of 45% of the new jobs in the sector during that period. Both have also provided a training ground for financiera administrators. CFN has been more demanding in loan evaluation and administration (only about a third of its clients seek repeat loans), but currently maintains a higher-quality loan portfolio. The more growth-oriented COFIEC has maintained higher profitability through higher risk. CFN has focused more heavily in larger and longer term loans, i.e., manufacturing, and has been relatively more active outside of Quito and Guayaquil, the foci of both institutions" efforts; lending by COFIEC outside these cities has been mainly for agriculture in Guaya Province. Among lessons learned are that: both public and private development finance institutions can effectively allocate resources for industrial development, each likely to be more effective in the presence of the other; the availability of resources constrains the term structure of sublending, reflecting the influence of macroeconomic policies on financing supply as well as demand; both institutions are overly dependent on external resources, and as a result have been severely affected by recent devaluations and foreign currency exposure. Subloan and CFN/COFIEC financial data are provided in appendices.