Evaluation of the agribusiness employment/investment promotion project implemented by the Latin American Agribusiness Development Corporation De Centro America, S.A.

Special evaluation covers the period 1981-10/83 and is based on document review, a site visit, and interviews with concerned officials and project subborrowers. Reasonably good progress has been made, given the poor business environment in Central America. Some 60% of loan funds have been committed by the Latin American Agribusiness Development Corporation of Central America (LAAD-CA), the implementing agency; four subloans have been disbursed, with four others scheduled for disbursement by 12/83. The average loan size is $462,500. LAAD-CA"s ability to make new subloans has been affected by its need to devote staff time to a variety of external problems - lack of foreign exchange, a sharp reduction in foreign and local investment in the region, and Nicaragua"s nationalization of subborrowers" assets. LAAD-CA has managed to keep its staffing small while maintaining the high quality of its operation. Its procedures for evaluating potential subborrowers, which promote repayment by forging a direct personal link between lender and borrower, continue to be one of LAAD-CA"s strong points. In addition to its careful assessment, LAAD-CA has loaned only to those capable of providing strong collateral or guarantees, usually 150% of the loan"s value. Subborrowers" management capabilities, marketing skills, and technology are generally good and none of the subloans are in default, although one may have to rescheduled. Subborrowers have been well satisified with their relationship to LAAD-CA and with the speed with which it processes and disburses loans. Interest rates on the subloans (12-13.5%) are very attractive in most countries. Although it is impossible to predict subloan effects with precision, it appears that the impacts on foreign exchange earnings and gross domestic products will be greatest, impacts on farmer income good, and impacts on in-plant employment and income least. Key recommendations are that LAAD-CA should, without compromising its present standards of safety, identify new borrowers; and that subborrowers should examine the feasbility of providing TA to their suppliers (small farmers and fishermen).