RURAL COOPERATIVE UPGRADING

Evaluation covers the period 5/77-4/78; no methodology is stated. Before U.S. assistance to the Government of Chile (GOC) ceased in 6/77, 87% of loan funds, including 25% of the technical support (TS) funds, and $26,715 in grant funds had been disbursed. Only 59 of a targeted 85 co-ops received subloans, but the average loan size of $127,103 was as expected and 50% of loaned funds have gone to targeted low-income members of reform sector, campesino, and fishing co-ops. Loans to remote areas such as Putre and those for honey production, rose hip gathering, and dairies have especially benefitted the poor, while others (e.g., for fruit storage, juice processing) have had only an indirect impact. IFICOOP over-extended itself by replacing the GOC as lender of concessional agricultural production credit and by committing itself to helping worker co-ops purchase previously nationalized enterprises sold by the GOC. IFICOOP thus became lender to, guarantor of, or temporary owner of many financially unsound firms. This situation, compounded by soaring real interest rates, tight credit, poor management and financial monitoring, and a 25% default rate, culminated in IFICOOP"s bankruptcy on 7/15/77. Under provisional administration by the Superintendent of Banks, IFICOOP has renegotiated its bank debts, obtained Central Bank financial support, liquidated unprofitable ventures, adopted stricter collection practices, been reimbursed $1.1 million which USAID had not previously disbursed to IFICOOP, instituted a financial management control system, reduced staff 50%, and upgraded its Rural Development Department to an Operations Department. It is recommended that: (1) IFICOOP develop plans to use remaining TS funds and expedite field work under the grant portion of the project; (2) the GOC monitor IFICOOP"s recovery closely; (3) the target number of co-ops be reduced to reflect lower funding availability; and (4) USAID explore the possibility of follow-up assistance to IFICOOP.