Private sector support program

Audit report covers the period 12/80-9/81 and is based on document review, end-use check of project-funded commodities, and discussions with project personnel. As agreed, the GOES used the $20 million grant to insure PS access to essential imports -- all from the United States and all but $315,000 used by the PS. Also as agreed, the GOES established two 50 million Colon funds. One fund, generated from grant monies and designed to make credit available for the Agrarian Reform (AR) Program, remained unused at the end of the 1981 planting season. Plans have been made to use the money to refinance delinquent farm loans from an earlier program. Interest from the fund is being used as planned. A second fund, created out of GOES monies and aimed at providing short-term loans to the PS, has been used only marginally (1.9 million Colones), mainly due to more attractive commercial loan terms. Because A.I.D. required that the GOES use as much of the $24.9 million loan as possible to open lines of credit with U.S. banks, only a small amount of the money was available to meet immediate import needs. The GOES has made little progress in implementing a price-checking system aimed at identifying violators of GOES capital flight regulations. A 52.25 million Colon fund created in accordance with the loan agreement offered medium-term low rate loans to the PS. Demand for these loans has exceeded supply and proposals have been made to tie their use to the underutilized short-term loans. No action has been taken yet on plans made to disburse an additional 10 million Colones to vital public and private institutions. Because the management of the local currency funds presented USAID/ES with serious review and accountability problems, it is recommended that USAID/ES establish guidelines for management of these funds. It is also recommended that: the GOES be allowed more flexibility in managing its foreign exchange and provide concrete plans for implementing the price-checking system; the AR Credit Fund be used only for new loans; and that the short-term loan program be re-evaluated.