Project assistance completion report : regional economic recovery (no. 596-0114)

CABEI"s administrative and financial viability have been greatly improved as a result of the financial and technical assistance provided by project; continual policy dialogue with the U.S. government, the International Development Bank, the World Bank, and other creditors and donors; and, most importantly, the strong direction provided by CABEI"s recently installed new administration in instituting internal reforms. The project"s agribusiness component was successful in that all planned training and TA were completed, and all of the loan funds, including CABEI"s counterpart contribution, have been disbursed to end borrowers. Various institutional strengthening measures have also been completed: CABEI has a permanent agribusiness lending unit; intermediate credit institutions have received the scheduled training; a mechanism to liquidate private sector debt in arrears has been approved by CABEI; CABEI"s personnel administration has been improved; and personnel have been reduced by 70 and the operating budget by 34%. During the project, USAID had become increasingly concerned with CABEI"s financial viability, particularly the growing country member debt and the overall liquidity of the Bank, and the implications of this for CABEI"s ability to service $270 million in A.I.D. and A.I.D.-guaranteed debt. CABEI"s new administration has demonstrated a serious intent to restructure the Bank and deal with its financial problems, and has made progress in doing so. Extraregional members (Mexico, Venezuela, and Taiwan) have been officially incorporated into CABEI"s Board of Directors, contributing to an increase in the Bank"s liquidity. Under the Bangkok agreement (3/91), member countries agreed to negotiate payment plans to improve country contributions and to reduce debt service arrears. Costa Rica has resumed payment of its capital contribution to the Bank. Lessons learned include the following. (1) Projects with CABEI should condition disbursements on accomplishments rather than intentions. (2) Extraregional membership on the Board of Directors remains the key to CABEI"s success, as it reduces the impact of regional politics and increases the transparency of the Board"s decisions. (3) Because the President and Central American members of the Board of Directors are politically appointed in each country, it is essential that donors and extraregional members press the countries to appoint highly qualified Directors. The quality of the Presidents and Directors has been uneven throughout CABEI"s history. (4) Third tier lending mechanisms such as the agribusiness lending component should be avoided, as they add an unnecessary layer of supervision and regulation. (5) CABEI should be considered for inclusion in future debt rescheduling agreements between the individual countries and the multilateral and bilateral donor community. (6) Given the volume of donor assistance which CABEI has a role in administering (up to $270 million in loans and housing guarantees through the U.S. government alone), it is essential ROCAP continue to monitor CABEI, whether there is a current project or not.