FINANCIADORA DE ESTUDOS DE PROJETOS, S.A. (FINEP) - LOAN 512-L-054

THIS EVALUATION INCLUDED TESTS OF FINANCIAL RECORDS, INSPECTIONS, AND DISCUSSIONS WITH FINEP, BANCO NACIONAL DO DESENVOLVIMENTO ECONOMIC (BNDE), AND USAID PERSONNEL. FINEP WAS ESTABLISHED WITHIN THE MINISTRY OF PLANNING PRIOR TO RECEIVING ANY FUNDING. IN 8/65,THE MISSION EXTENDED FINEP A NCR$1 MILLION PL480 GRANT TO GET ITS PROGRAM UNDERWAY. IN 10/65,THE INTER-AMERICAN DEVELOPMENT BANK PROVIDED A $5 MIL LOAN; AND IN 6/66 USAID PROVIDED $11 MIL IN LOAN FUNDS. ($6 MIL WERE INCLUDED FOR NATURAL RESOURCE SURVEYS.) ONLY 60% OF THE TOTAL FUNDS AVAILABLE HAVE BEEN COMMITTED DURING THE PAST FOUR YRS. OF THE $10 MIL PROGRAMMED EXCLUSIVELY FOR FEASIBILITY STUDIES,LESS THAN 45% WAS OBLIGATED. BNDE HAS BEEN THE ONLY DEVELOPMENT BANK TO PARTICIPATE IN THE PROGRAM. HOWEVER,EVEN BNDE OFFICIALS HAD READILY STATED THAT THERE WAS NO NEED FOR ANOTHER FINANCIAL INSTITUTION SUCH AS FINEP. IN 1967,FINEP WAS SUPPOSEDLY TRANSFORMED FROM A FUND TO A PUBLIC CORPORATION. HOWEVER,FINEP MANAGEMENT WAS NOT IN A POSITION TO EFFECT REAL CHANGES: BOTH THE PRESIDENT & THE SECRETARY GENERAL HAD ACCUMULATED A MULTITUDE OF OTHER GOVT DUTIES;AND THE US CONSULTANT HAD DEPARTED EARLIER THAN SCHEDULED. AS A RESULT,FINEP"S LEVEL OF ACTIVITY WAS NOT SIGNIFICANTLY ALTERED. IN ADDITION,FINEP"S CORE STAFF OF 26 COULD HARDLY SERVE A WIDE & SCATTERED MARKET. AUDITORS CONCLUDE THAT FINEP WOULD BE MORE EFFECTIVE AS A FUND,WITH THE GOB & OTHERS DRAWING ON ITS RESOURCES FOR IMMEDIATE DOLLAR NEEDS. THE AUDITORS NOTE THAT PRACTICALLY ALL LOANS TO THE PRIVATE SECTOR ARE LESS THAN NCR$100,000 AND DO NOT REQUIRE DOLLARS. THE MISSION SHOULD DETERMINE IF THERE ARE ANY PROJS REQUIRING AID DOLLARS,AND DECIDE WHETHER TO RE-EXTEND THE ELAPSED TERMINAL DATE OR DE-OBLIGATE THE $2 MIL UNCOMMITTED BALANCE.