PRODUCTIVE CREDIT GUARANTY PROJECT

PES, attached to a special evaluation (PD-AAH-215-B1), covers the period 10/1/78-12/31/79 and was based upon a review of files and interviews. The project guaranty fund grew from $6,300 in 1978 to over $1 million as of 9/31/80 and 634 subprojects and 3,906 jobs were generated. The most significant positive impact was the development of a portfolio of guaranteed loans that justified lowering A.I.D. support from 50% to 20% of each participating lender portfolio. These indicators show that the end of the project status has been achieved. However, without explanation the Central Bank of Paraguay (CBP) decided to discontinue the project. This complicates the continued phase-out of A.I.D."s assistance. Negotiation of this phase out could be attempted, but may be difficult in view of CBP"s withdrawal. The project unexpectedly demonstrated that considerable amounts of in-country financial resources could be generated without the need to borrow hard currencies to increase reserves and be able to monetize (sic). While the program should continue to be used in other LDC"s, it should eventually be administered by the the technicians, but only after they have become organized and more effective. In addition, the mechanism should be implemented on a regional basis to improve its reliablity and impact. If the Government of Paraguay desires to continue the project, it should do so without the CBP as administrator and should support the system in Panama in order to gain access to the Panamanian Banks" liquidity. It is advised that participating technicians use their operating handbooks to a greater extent to improve the general quality of subprojects. Finally, the project model must be improved to eliminate the constrant arising from the CBP"s to honor its obligations. Alternatives for the transfer of functions to other system participants must be studied to prevent deterioration of program operations.