PRIVATE SECTOR PRODUCTIVITY

BANEX will implement the project. Project activities will be in three areas. First, BANEX will re-lend A.I.D funds, at market rates, to small, medium, and large export-oriented enterprises from industrial, agricultural, commercial, and service sectors to promote nontraditional exports destined for non-Central American Common Market areas, as well as to promote production and marketing systems and product diversification. Loans will be long-term (3-7 years) to finance plant equipment and permanent working capital, or short-term to finance capital or export/import credit. BANEX will limit latter-type lending and rollovers to 40% of total A.I.D funds. BANEX will provide borrowers with a variety of banking services, e.g., export collection and bonds, currency management, documentary services required to facilitate payments between buyer and seller, assistance and verification of legal documentation, and development of markets with foreign banks and their customers. Fees from these services will help increase BANEX revenues. BANEX will improve its export management services by establishing a wholly-owned Costa Rican-based subsidiary trading company (TRACO CR) and a wholly-owned US-based subsidiary (TRACO US), as well as at least one partially-owned export company (EXCO) specializing in a given product line. BANEX will also enter into financial arrangements such as equity participation with producers. The services of TRACO US, which will serve as the link between Costa Rican producers and foreign buyers, will include warehousing and financing, procurement, transportation, insurance, and documentation. TRACO CR"s activities will be the same, but will be limited to BANEX project activities. BANEX will use A.I.D. funds to take a $400,000 equity in TRACO US to permit it to become a viable credit risk for U.S. suppliers and banks. TRACO US will contract the World Trade Institute to provide its staff with on-the-job training in exporting and purchasing. Project Paper Amendment No. 1 (1981) extends project to 9/84 and allows: (1) BANEX to use up to $4.5 million in loan funds in support of Costa Rica"s traditional export sector; (2) TRACO to undertake procurement activities for Costa Rica"s productive sector; and (3) BANEX to use an additional $300,000 of the USAID/CR loan to increase TRACO"s capital to $1 million. (PD-AAN-675)