Final report : evaluation of the Latin American Agribusiness Development Corporation de Centroamerica

Final report covers 1976-84 and is based on an in-depth financial analysis and interviews with LAAD-CA staff, sub-borrowers (SB"s), financiers, and government officials. LAAD-CA is an effective lender with an excellent reputation, and its loans have created considerable benefits in employment, exchange earnings, and small producer purchases. LAAD-CA"s ability to identify and approve loans for competent businesses is outstanding, as shown by the success of its SB"s (11 of 13 SB"s sampled are profitable) and dearth of foreclosures. Despite its small staff (4 professionals and 1 secretary), LAAD-CA"s loan approval, monitoring, collection, and rescheduling procedures are effective. Sixty-two percent of loans were used for expansion or new businesses and 38 percent were used for working capital. The market for LAAD-CA dollar loans, which finance high-risk agribusinesses throughout a high-risk region at market or near-market interest rates, is affected by political and economic stability, availability of credit from commercial and other banks, incentives that attract export industries, local entreprenuerial talent, and companies" need for foreign exchange. A 2-year projection of these factors indicates that market prospects for Costa Rica and El Salvador are excellent, Guatemala average, Honduras very limited, and Panama very poor. LAAD-CA could distribute $16 million in new funds over a 3-year period. Despite its impressive performance, problems such as a gradual decline in portfolio yield and the 25% cofinancing requirement on A.I.D. loans could threaten LAAD-CA"s long-term stability. It is recommended that ROCAP provide LAAD-CA with an additional loan at concessional rates, with no cofinancing requirement. LAAD-CA should: continue to balance the risks in its portfolio; market loans to medium-sized firms that need export marketing assistance; work with a commercial or foreign bank in each country to cofinance nontraditional product exporters; prepare its investment analyses more conservatively; maintain a full set of loan documents at its Guatemala City headquarters; and establish a strict cost monitoring program.