Nicaragua private sector support project : assessment of private sector initiatives

Interim evaluation covers the period 4/92-3/93. Despite important contributions towards the project purpose -- notably regarding the divestiture of state-owned enterprises (SOEs) and the establishment of viable financial institutions -- private sector initiatives generally are not supported by macroeconomic conditions and cannot be sustained in the long run. For example, a concerted effort must be made to incorporate linkages between the project components and Government of Nicaragua macroeconomic policies to ensure that real exchange rate policies, as well as monetary and fiscal policies are conducive to expansion of trade and investment. The Center for Exports and Investment (CEI), which is responsible for export and investment promotion, lacks a clear mandate, and as a result, support for investors and exports remains unfocused. Its effectiveness would be enhanced by gradually establishing its independence from the Consejo Superior de la Empresa Privada (COSEP) and by expanding public and private representation on its Board. In the privatization component, Price Waterhouse is well on its way to meeting contract obligations and has received favorable reviews by the Corporaciones Nacionales del Sector Publico (CORNAP) and other involved parties; more funding is needed, however. Additional assistance is sorely needed to transfer skills to new owners of privatized properties, primarily in agriculture. There is also considerable concern that the numerous failures of enterprises owned by workers and ex-combatants could derail privatization and unbalance the present delicate political stability. For its part, CORNAP, which has focused on privatizing the easiest SOEs in order to generate transactions and reach the most beneficiaries quickly, requires additional personnel to maintain the pace of the program; it also needs a source of cash to pay worker indemnities. In the financial services component, private banks, the Superintendency of Banks, and the Bankers" Association are all new entities and are variously in need of training, TA, and other support. In addition, Nicaragua needs enabling legislation and investors to form private insurance companies and private pension plans before they can play an active part in capital markets. Only two of six planned studies are underway, and much effort will be needed for their timely completion. More funding of studies in all three project components -- trade and investment, privatization, and financial services -- is needed. Given the conflict of opinions regarding the status of women in the private sector, USAID urgently needs statistical information on which it can base its assistance, particularly regarding mechanisms to encourage women to seek higher levels of education, flexible work schedules which permit women to attend to family obligations, and the extent to which sexual harassment exists.