Evaluation report : CABEI - AID loan 596-L-010: $30 million export industries and tourism

LOAN PURPOSE WAS TO STIMULATE EXPORT & TOURISM, INSURE BANK GROWTH, AND STRENGTHEN CENTRAL AMERICAN (CA) INTEGRATN MOVEMT. EVALUATN BASED ON CONSULTATIONS WITH CABEI EXECUTIVES. CABEI HAS ACTIVELY PROMOTED THE EXPORT INDUSTRY,ESTABLISHED IMPROVED POLICIES & STREAMLINED ITS SUB-LOAN AGREEMENT FORM. INCREASED STAFF & MORE LIBERALIZED PROJECT REVIEW REQUIREMTS HAVE ALSO STREAMLINED LOAN APPROVALS & DISBURSEMT PROCEDURES. IMPROVEMTS HAVE BEEN MADE IN INTERAGENCY COORDINATN,SUCH AS RELOCATING FINANCIAL ADMINISTRATN OFFICE IN OPERATN DEPT. A CHIEF OF THE PROMOTN & ECONOMIC RESEARCH DEPT HAS BEEN APPOINTED. LOANS HAVE SUPPORTED RURAL TOURISM,NICKLE MINING,ETC. FURTHER,THE LOAN DISBURSEMT SECTN HAS INCREASED ITS STAFF (3 LAWYERS),CENTRALIZED ITS OPERATNS,APPOINTED A COMMITTEE TO ELIMINATE DISBURSEMT DELAYS & LOCALIZED ITS LOAN RESPONSIBILITIES. UNFORTUNATELY ONLY ABOUT HALF CABEI LOAN HAS BEEN DISBURSED DUE TO INITIAL ADMINISTRATIVE DELAYS,COMPETIVE AID BILATERAL LOANS,FAILURE TO SERVE PRIVATE SECTOR & LACK OF SUPERVISN. EXPANSN OF TOURISM IS GREATLY REDUCED SINCE FUTURE DEVELOPMT IS DEPENDENT ON CONSTRUCTN OF HOTELS/MOTELS IN MAJOR CITIES (ESPECIALLY IN COSTA RICA & GUATEMALA) NOW FORBIDDEN UNDER LOAN LIMITATNS. LOCAL CURRENCY COSTS (ABOUT 55%) ARE NOT PROVIDED BY MANY CABEI LOANS. FURTHER,FEW LOCAL BANKS HAVE MADE EXTENDED USE OF CABEI SINCE EUROPEAN INTEREST RATES ARE LOWER,EXPORT/TOURISM PROJECTS ARE LIMITED & CABEI LACKS ABILITY TO MEET LOCAL BANK NEEDS. TEAM RECOMMENDS A $30 MILLION LOAN BE APPROVED FOR CABEI FUNDING IF LOAN CONDITIONS REQUIRE THAT: 1)FINANCED GOODS & SERVICES BE OF US OR LATIN AMERICAN ORIGIN (EXCEPT CUBA); 2)LOCAL CURRENCY COSTS UP TO $15 MILLION BE MADE AVAILABLE; 3)CABEI SUBMIT PLANS FOR PERIODIC SUB-LOAN AUDITS AND PROCEDURES; 4)ONLY FINANCIALLY AND TECHNICALLY SOUND SUB-PROJECTS BE APPROVED; 5)NONCOMMERCIAL SOURCES BE USED; 6)FINANCES FOR CA COMMON MARKET EXPORTERS BE IMPLEMENTED WITHIN 6 MONTHS; AND 7)CABEI MATCH AID FUNDING PLUS SEEK OUTSIDE SOURCES OF CREDIT.