USAID grant to Fundacion del Centavo for pilot commercial land markets program - phase II

The program will provide a mechanism for small farmers to buy arable land and receive production credit and TA. As in the first phase, PF will conduct an agronomic survey to locate arable land which the owners wish to sell, but whose size or price precludes its purchase by small farmers. PF will purchase the land, paying up to 50% cash with the remainder in mortgage guarantees. The land will then be divided into smaller parcels for sale to small farmers who will pay 10% down to PF and the rest in installments (up to 12 years) at interest not higher than prevailing bank rates. When possible, PF will facilitate farmer purchases directly from the seller, in which case PF will hold the mortgage and guarantee that installment payments are made. PF will obtain additional funds for the program by issuing and selling mortgage bonds in the local capital markets (using the small farmer mortgages as collateral). In all, the program will support about $2 million in land purchases, enabling some 575 small farmers to purchase plots averaging 3.5 ha each. Farmers who purchase land under the program will be eligible to receive short- to medium-term production credit of Quetzal 200-250 per manzana. A new administrative division will be created within PF to manage the program, and a guarantee fund will be established in a U.S. bank to cover any unpaid installments owed by either farmers or PF. A small portion of the grant will be used to support PF"s traditional activities in agricultural production, housing development, and small business, principally for the native population in the Andes. Amendment of 7/18/86 provides a second $1 million grant. (Information taken from PD-AAY-322) Amendment (Project Paper) of 7/31/87 increases funding by $8.5 million and extends the PACD to 8/92 in order to expand the land purchase/sale program to 10,000 ha (benefiting a total of 2,700 families), continue TA and credit for farmers, and strengthen PF"s capacity to meet the needs of the expanded program. Funds are also provided for research to identify ways to expedite land titling, identify alternative organizations and financial mechanisms for additional land market activities, and examine land-related policy issues. (PD-AAY-322) Amendment of 8/29/90 extends PACD to 8/94 and increases funding by $4 million, of which $2.5 million will be used to alleviate cash flow problems in the land purchase/sale program; the rest will be used to strengthen PF (e.g., by creating Credit and Planning Units, decentralizing management, and formalizing personnel policies and credit policies) and to expand the research component to assist the General Property Registry in automating its record systems and improving title search procedures. (PD-KAT-490)