Document ofThe World Bank

FOR OFFICIAL USE ONLY

Report No. 16677

IMPLEMENTATION COMPLETION REPORT

BELIZE

AGRICULTURAL CREDIT AND EXPORT PROMOTION PROJECT(LOAN NO. 2959-BEL)

June 6, 1997

Country Department IIINatural Resources Management and Rural PovertyLatin America and the Caribbean Regional Office

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

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CURRENCY EQUIVALENTS(December, 1996 )

Currency Unit = Belize Dollar (B$)B$ = US$0.50US$1.00 = B$2.00

WEIGHTS AND MEASURES

1 acre = 0.405 hectares (ha)1 mile - 1.609 kilometersI sq. mile = 259 ha1 sq km 247 acres

ABBREVIATIONS AND ACRONYMS

BCB Banana Control BoardBCF Belize Credit FacilityBGA Banana Growers' AssociationCBB Central Bank of BelizeDFC Development Finance CorporationGDP Gross Domestic ProductGOB Government of BelizeICR Implementation Completion ReportIME International Monetary FundLA Loan AgreementMAF Ministry of Agriculture and FisheriesMNR Ministry of Natural ResourcesSAR Staff Appraisal ReportUSAID U.S. Agency for International Development

FISCAL YEAR

January 1 - December 31

Vice President: Shahid Javed BurkiDirector: Paul IsenmanActing Division Chief: Jonathan ParkerTask Team Manager: Daniel Moreau

FOR OFFICIAL USE ONLY

Table of Contents

PagePreface ............................... i

EVALUATION SUMMARY. i

Introduction. i

A. Project Objectives. i

B. lmplementation Experience and Results ............................................. . ii

C. Summary of Findings, Future Operation and Key Lessons Learned. iii

PART l: PROJECT IMPLEMENTATION ASSESSMENT . . I

A. Background and Objectives.

B. Achievement of Objectives and Results .......................................... ; 4

C. Major Factors Affecting the Project. 5

D. Project Sustainability. 6

E. Bank Performance. 6

F. Borrower Performance. 7

G. Assessment of Outcome .. 8

H. Future Operations. 8

L Key Lessons Learned ............................... 8

PART II: STATISTICAL TABLES. 9

TABLE 1: SUMMARY OF ASSESSMENTS . .. .... . 9

TABLE 2: RELATED BANK LOANS/CREDITS .. . ... 10

TABLE 3: PROJECT TiMETABLE .. ...... ... ,.... . 10

TABLE 4: LoAN/CREDrr DISBURSEMENTS: CUMULATIVE ESTIMATED AND ACTUAL . 11

TABLES: KEY INDICATORS FOR PROJECT IMPLEMENTATION.......................................... 12

TABLE 6: KEY INDICATORS FOR PROJECT IMPLEMENTATION ... 13

TABLE 7: STUDIES INCLUDED IN PROJECT ... 1... ........ l3

TABLE SA: PROJECT COSTS .. 14

TABLE SB: PRoJEcr FINANCING ........................ .. ,.. . 14

TABLE 9A: ECONOMIC COSTS AND BENEFITS .... .. . .. . 15

TABLE 9B: AGGREGATE INTERNAL ECONOMIC RATE OF RETURN OF THE CREDIT

PORTFOLIO ......... 1,,5,. . . ........ 15

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

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TABLE10: STATUSOFLEGALCOVENANTS ................................................... 16

TABLE 11: COMPLIANCE WITH OPERATIONAL MANUAL STATEMENTS ................................. 18

TABLE 12: BANK RESOURCES: STAFF INPUTS .................................................... 18

TABLE 13: BANK RESOURCES: MISSIONS ................................................... 19

ANNEXES

ANNEX A - FINAL LETTER TO GOVERNMENT ................ ................................... 21

ANNEX B - ICR MISSION AIDE MEMOIRE .................................................... 25

ANNEX C - BORROWER'S CONTRIBUTION . ................................................... 35

ANNEX D - BORROWER'S COMMENTS ON THE ICR ........................... ........................ 41

IMPLEMENTATION COMPLETION REPORT

BELIZE

AGRICULTURAL CREDIT AND EXPORT DEVELOPMENT PROJECT

Ln 2959-BEL

PREFACE

This is the Implementation Completion Report (ICR) for the Agricultural Creditand Export Promotion Project in Belize, for which Loan 2959-BEL in the amount ofUS$7.8 million equivalent was approved on June 15, 1988 and made effective on April 7,1989.

After two one-year extensions, the loan was closed on December 31, 1996. Finaldisbursement took place on February 27, 1997; the balance of US$1,097,003.37 wascanceled on May 28, 1997.

The ICR was prepared by Mr. Daniel Moreau, Task Manager, Natural ResourcesManagement and Rural Poverty Division, Latin American and the Caribbean Region andMrs. Anne Marie del Castillo, Economist, Consultant. The ICR was reviewed by JonathanParker, Acting Division Chief, Natural Resources Management and Rural PovertyDivision and Robert Crown, Project Adviser, Country Department III. The Borrowerprovided its own contribution to the report (Annex C) and its brief comments on the ICR(Annex D).

Preparation of this ICR began during the Bank's final supervision/completionmission, December 1996. It is based on material in the project file, and discussions withrepresentatives of the Borrower's staff and the beneficiaries as well as with individualsinvolved in the project preparation and implementation in the private and public sectors ofBelize.

IMPLEMENTATION COMPLETION REPORT

BELIZE

AGRICULTURAL CREDIT AND EXPORT DEVELOPMENT PROJECT

LN 2959-BEL

EVALUATION SUMMARY

INTRODUCTION

1. The project was the first direct involvement by the Bank in agriculture in Belize.It responded to a Government request to support its strategy to improve the country'sbalance of payments while reducing the dependence on sugar and to realize the agricultureexport growth potential of the country by promoting private sector initiatives. In 1987 aBank mission reviewed and endorsed the Government's policy towards fostering theexpansion of diversified exports and stimulating private sector investment in agriculture.

A. PROJECT OBJECTIVES

2. The project objectives were to support the Government's strategy to realize thecountry's agricultural export growth potential by: (i) expanding agricultural exportswhich would improve the country's balance of trade while reducing its dependence onsugar; (ii) strengthening the Belize agricultural financial system by stimulating privatesector investment in agriculture; and (iii) improving the policy environment for privateinvestment in agricultural export activities. To achieve these, the project provided a loanof US$7.8 million to finance US$7.2 million in credit, to be channeled through private(US$4.8 million) and public (US$2.4 million) financial institutions for the agriculturalexport promotion and US$0.6 million in technical assistance for institutionalstrengthening.

3. As part of the project GOB agreed to policy reforms which removed the shrimpexport tax and the citrus export licensing requirements. In addition, the GOB createdthe cocoa advisory board and transferred the State's banana marketing and extensionservices to growers' association twelve months ahead of the target date of December1991. However, the credit component was poorly designed and it disbursed veryslowly. The objectives of increasing the sector's non-traditional exports through policyreform was sound. The additional objective of improving financial intermediation tothe sector proved unrealistic under the circumstances.

B. IMPLEMENTATION EXPERIENCE AND RESULTS

4. The project's achievement of its objectives was limited. Because of slowdisbursements, US$4.2 million, 54 percent of the credit component was canceled. While

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the project assumed that two-thirds of the credit component would be channeled throughprivate banks, as a result of high liquidity in the banking system and lending termsinconsistent with normal commercial banking practices, not one private bank participatedin the project. Instead, the DFC handled all project credit finance. The project did little tosignificantly increase the access of small farmers to credit. Project-financed agriculturalloans were extended primarily to medium to large farmers. Ten medium to largeborrowers alone accounted for more than 80 percent of the entire sub-loan portfolio.Substantial capital infusions from the Central Government and better financial andaccounting practices associated with the project, helped DFC improve its financialperformance during the course of the project implementation. Nevertheless, theinstitution's long term sustainability remains in doubt, as loan portfolio arrears continue tobe high.

5. Project Performance and Sustainability. On balance, the project's investmentsare likely to be sustained. The project financed economically sound subprojects whichincreased agricultural exports, especially of citrus, bananas and shrimp. The DFC loanportfolio financed by the project (excluding the component's canceled portion) had asatisfactory weighted internal financial rate of return of 27 percent. However, it is unclearthat the project significantly contributed to moving the DFC towards a financialself-sufficient institution. The second and more important impact, was the project'ssupport for the government's agricultural liberalization program. In this regard, theproject was particularly instrumental in accelerating the transfer of the public sector'sbanana export marketing functions to the private sector - a measure which contributed todynamic growth in the banana industry.

6. Bank Performance. The Bank's performance in project identification andappraisal was deficient. The Bank did not adequately appraise the major factors limitingexports, nor did it to determine the extent to which scarce credit limited export growth.Nor did it properly assess the factors impeding private financial institutions fromparticipating in the credit component. Supervision was rated deficient, being often weakand incomplete. It concentrated more on the DFC than on the reasons for private banknonparticipation and the project's progress in achieving its primary objectives, in particularfor expanding or diversifying agricultural exports.

7. Borrower Performance. The Borrower's performance is judged to be highlysatisfactory in terms of sector policy reform. The GOB removed the shrimp export taxand the citrus export licensing requirements, and it created the cocoa advisory board andtransferred the State's banana marketing and extension services to growers' associationtwelve months ahead of the target date of December 1991. Central Bank acting as apexintermediary was unable to solve the problems which discouraged private banks fromparticipating. DFC was never able to comply with its agreed financial performanceindicators, though it was able to improve the quality of its loan portfolio over the period.Nevertheless, overall project management was sound, maintaining control ofadministrative expenses and effective working relationships with DFC.

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C. SUMMARY OF FINDINGS, FUTURE OPERATION AND KEY LESSONS LEARNED

8. The most significant lessons learned are as follows:

(a) Government-owned development finance institutions are unlikely tosucceed in achieving both a social objective and financial sustainability atthe same time;

(b) Reform and restructuring of a government-owned development financeinstitution is more likely to succeed, if it is subject to the discipline of themarket;

(c) change in macroeconomic and sector policies can have a more positiveimpact than project financial investments; and

(d) Private financial intermediaries will not actively participate, unless theyare carefully consulted on all the policies and procedures for a credit lineduring its preparation, appraisal and loan negotiations.

9. Future Operation. No specific plan has been prepared yet.

IMPLEMENTATION COMPLETION REPORT

BELIZE

AGRICULTURAL CREDIT AND EXPORT DEVELOPMENT PROJECT

LN 2959-BEL

PART I: PROJECT IMPLEMENTATION ASSESSMENT

A. BACKGROUND AND OBJECTIVES

1. Economy. Belize's economy expanded steadily during the 1960's and most of the1970's, with a GDP annual growth rate of 5 percent. This development resulted from theexpansion of the sugar industry, the revitalization of the banana sector and theestablishment of several import-substitution industries. Economic growth declined sharplyduring the 1980's, mainly because of the deterioration in sugar prices. To stimulategrowth, GOB attached high priority to its policy objectives of diversifying away fromsugar production and especially expanding the production of export crops, such asbananas, and citrus, cocoa and shrimp.

2. Private Financial Sector. The private banking system, which provided60 percent of domestic credit, consisted of five commercial banks with 15 branchesthroughout the country. These banks provided nearly half of all agricultural lending.Because of the volatility of the small national financial market, private banks, adverse tolong-term lending, extended relatively short-term loans (frequently extended orrescheduled) and overdraft mechanisms for covering inventory costs and operating capitalneeds. Commercial banks tended to confine their agricultural lending to one type ofagricultural activity (mainly, citrus or banana). Their agricultural clients were medium tolarge farmers, agroindustries or entrepreneurs with well-established credit histories andgood collateral. Between 1986 and 1988, commercial banks experienced substantialexcess liquidity resulting from the Central Bank's relaxation of credit restrictions', highinterest rates2, and increased foreign exchange inflows. Credit to the private sectorincreased substantially, growing from US$68 million in 1986 to US$120 million by 1989.Similarly, agricultural lending grew steadily, from US$6.4 million in 1986 toUS$17.0 million in 1989. In October 1988, the GOB transferred the CentralGovernment's deposits from the Central Bank to private commercial banks. In 1984, theGOB had established a U.S. Agency for International Development (USAID)-financedUS$5.0 million fund to provide the private banks investment credit for agricultural exportpromotion. Despite the fund's extremely attractive lending terms, in four years, no morethan 58 percent of the fund, or under US$2.9 million, were disbursed. The lack of

part of the 1984 IMF Stand-by Arrangement.2 since 1983 the Central Bank established minimum interest rates for lenders.

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installed capacity in the private banks to evaluate non-traditional agricultural investmentproposals was one of the major reasons cited for the failure to disburse.

3. Public Sector Financial Institution. At the time of project preparation, theBorrower's Development Finance Corporation (DFC) was providing 10 percent ofdomestic credit and half of the agricultural credit. It relied almost entirely uponmultilateral and bi-lateral donors for its funds, with foreign liabilities representing73 percent of the DFC's assets in June 1984. By the end of 1984, DFC's portfolio,consisting of 6,000 loans, had a total value of about US$32 million, of which 59 percentwas allocated to agriculture. Of the agricultural loans, 40 percent was for sugar cane,10 percent for citrus, grains, fishing and livestock, 7 percent for bananas; and 13 percentfor other activities. The average loan size was US$4,200. The DFC was the only publicsector financial institution mandated to lend to small- and medium scale farmers. Despiteits mandate, farmers, especially small farmers, were reportedly displeased with the DFC.Specific complaints referred to excessive bureaucracy, long delays in obtaining loanapproval, burdensome security requirements (especially for small farmers), and politicalfavoritism in obtaining new loans and enforcement of repayment conditions. By the lateeighties, the DFC was on the verge of bankruptcy. The status of the DFC portfolio wasunsatisfactory, with at least a quarter of its value in arrears. At project preparation,expected cash flows from the portfolio would not cover DFC's needs and it wasanticipated that the institution would generate annual cash shortfalls of at leastUS$1 million.

4. Statement of Objectives. The project objectives were to support theGovernment's strategy to realize the country's agricultural export growth potential by:(i) expanding agricultural exports which would improve the country's balance of tradewhile reducing its dependence on sugar; (ii) strengthening the Belize agricultural financialsystem by stimulating private sector investment in agriculture; and (iii) improving thepolicy environment for private investment in agricultural export activities.

5. Macroeconomic and Sectoral objectives: The project's macroeconomic objectivewas to improve the country's balance of trade position by increasing non-traditionalagricultural exports. This was an extremely important goal to Belize as its balance oftrade position had deteriorated rapidly in recent years. The project proposed to expandexports by increasing the supply of investment capital targeted for the production ofnon-traditional agricultural export sector. For Belize, the expansion of agriculture, thesector with the most employment and export earnings, was important. In addition, therewas an urgent need to diversify agricultural production away from sugar to reduce theeconomy's vulnerability to the vicissitudes of the world commodity market. At the time ofproject preparation, agricultural exports represented more than 65 percent of totalexports, of which sugar exports contributed half

6. Financial Sector Objectives. The project's aim with respect to the financialsector, was "to increase the efficiency in the credit services and resolve the liquidityproblems of the DFC as well as increase the participation of the private banks in lendingfor the sector". The financial sector objectives were to increase private sector

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participation in the finance of non-traditional agricultural export ventures and the coverageof financial services throughout the sector. While the private sector participation inagriculture was significant, (about half of the sectoral total), the range of its portfolio wasvery limited to its traditional clients for only a few commodities.

7. Institutional Objectives. The project intended to address the inadequacies in theagricultural support institutions; including providing assistance to the Banana Growers'Association (BGA), the Ministry of Agriculture and Fisheries for cocoa and shrimpdevelopment, as well as to the Ministry of Natural Resource for citrus development.This goal was sound as poor extension and marketing services were key constraints to thedevelopment of the agricultural sector. But, relative to the size of the project's technicalassistance component (less than US$0.6 million for these purposes), the goal appears tohave been ambitious.

8. Evaluation of Objectives. While the project objectives identified werewell-founded and reflected genuine needs of the Borrower, the project's strategy forachieving these objectives reflect a inadequate assessment of the realities in Belize at thetime. As the project was premised on the assumption that the primary constraint to theexpansion of agricultural exports was insufficient credit, the project proposed to injectadditional credit to increase exports. The fact that the SAR stated that "the agriculturalsector generally had good access to credit", should have suggested that non-financialconstraints were inhibiting the growth and diversification of agricultural exports.However, logistical, legal and lending requirements were severely limiting the delivery ofthese services, both from private and public sources, to the small farmer segment. Morethan 60 percent of this segment was not being serviced by the formal financial sector.While the project had no explicitly stated social objective, one of the reasons for providingsupport to the DFC was to increase the access of small farmers and rural entrepreneurs toinvestment credit. As the DFC was the only public financial entity with the mandate forservicing small farmers, the project proposed to support the technically insolvent DFC.To propose a credit project at a time when banks were faced with excess liquidity wouldsuggest a lack of appreciation of the Borrower's circumstances. The dismal experience ofthe USAID agricultural credit line (1984-1987) demonstrated clearly enough that theprivate banks were not looking for more funds to finance agricultural loans. Othermeasures, such as training in agricultural project appraisal, evaluation and supervision mayhave been more appropriate to strengthen the private financial sector in agriculture.

9. General Description. The principal components to be financed under the projectwere:

* Part A of the Loan Agreement (LA) with a credit line for term lending foragricultural exports principally bananas, citrus, cocoa and farmed shrimps,through the Belize Credit Facility (BCF), managed by the Central Bank ofBelize (CBB);

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* Part B which included institutional development plan for the DevelopmentFinance Corporation (DFC) to improve its financial position, especially inregard to liquidity and cash generation; and

* Part C with programs for institutional strengthening of the: (i) BananaControl Board (BCB) (subsequently the Banana Growers' Association(BGA)) for banana development; (ii) the Ministry of Agriculture and Fisheries(MAF) for cocoa and shrimp development, and (iii) the Ministry of NaturalResources (MNR) for citrus development.

B. ACHIEVEMENT OF OBJECTIVES AND RESULTS

10. Macroeconomic and Sectoral Objectives. The project achieved itsmacroeconomic and sectoral objectives. By financing operations which increasedagricultural exports, especially of citrus, bananas and shrimp, the project helped toincrease and diversify agricultural exports. While sugar remained the most importantagricultural export commodity, exports of certain other agricultural commodities,especially, bananas, grew dramatically. Between 1987 and 1994, the value of bananaexports more than doubled (see Annex C). More importantly, agricultural exports notonly grew but also diversified. The value of non-traditional (non-sugar) agriculturalexports increased from US$36 million in 1991 to US$80 million in 1995. As a result,during that same period, the share of sugar in total agricultural exports declined from57 percent to 37 percent. Further, in 1995, the estimated export revenue generated fromproject-financed investments in bananas represented up to 10 percent of the value of totalbanana exports from Belize, and, in shrimp up to 12 percent of the value of total shrimpexports. The project's contribution to the liberalization of the export market andimprovements in banana extension services may have had a greater impact on increasingexports than did the project credit component.

11. Economic Impact. The sub-loans financed through the project were economicallysound. The farm/ production models developed at appraisal were updated by the ICRmission. The DFC loan portfolio financed by the project (excluding the component'scanceled portion) had a satisfactory weighted internal financial rate of return of27 percent, which was very much consistent with the expected rates of return in theproject appraisal. The project financed loan portfolio consisted of loans for citrus(20 percent of the portfolio), bananas (43 percent of the portfolio), shrimp farming(19 percent of the portfolio) and sea fishing (18 percent of the portfolio. The rates ofreturns for these activities were: 27 percent, 30 percent, 25 percent and 16 percent,respectively (see Part II Table 9).

12. Financial Sector Objectives. The project was unable to achieve its financialsector objectives. As the project did not generate any private bank involvement, theproject played no direct role in increasing private long term lending to the agriculturalsector. Paradoxically, the project, by bolstering the presence of DFC in the sector, mayhave, reduced the incentive of the private banks to expand their long term agriculturalportfolios. Many of the DFC's borrowers, including those who obtained project financed

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credit, were well-established short term borrowers of the private banks. In addition,certain DFC advantages, such as soft donor financing, Central Government capitalinfusions and exemptions from normal banking regulations, may have crowded the privatebanks out of long term lending to the agricultural sector.

13. DFC used most of the project's credit to finance large enterprises rather than itsnormal clientele of small or medium sized farmers. The DFC maintained its standardapplicant requirements, including the provision of a bank credit assessment, as well ascollateral of 130 percent of the loan value. These may have favored larger enterprisesparticipating in the credit component. As a result, ten borrowers accounted for more than80 percent of the sub-loan portfolio3. Loan sizes were large, with an average loan size ofUS$180,000. One borrower received a loan of more than US$1.0 million.

14. Institutional Objectives. The project's attainment of its institutional objectiveswas mixed. The project helped to strengthen the institutional capacities of someagricultural institutions, particularly the Banana Growers' Association (BGA). Theproject was not instrumental in increasing the long term agricultural portfolio of theprivate banks. The bulk of the project's institutional strengthening was directed to theDFC. While there was much progress towards improving its financial situation, theinstitution did not meet the agreed financial performance targets and its long termsustainability remains in doubt. As shown in Table 5, DFC's total arrears as a percentageof loan portfolio declined from 35 percent in 1990 to 10 percent in 1996. Also a moremeaningful measurement, loan portfolio affected by arrears more than 12 months, declinedfrom 50 percent in 1990 to 20 percent in 1996. The impressive decline in the earlynineties seemed due primarily to loan write offs and substantial capital infusions from theCentral Government. Nevertheless, project-supported activities, such as an improvedmonitoring system; a more active collection program; and better project appraisal alsocontributed to preventing contamination from returning to its historically high levels. Butit is doubtful that the project resolved the fundamental weaknesses of the DFC and, as aresult, the institution will continue to require financial support from the CentralGovernment and donors.

C. MAJOR FACTORS AFFECTING THE PROJECT

15. Factors Not Subject to Government Control. A development outside the controlof the Bank or the Borrower which influenced the project's outcome was the withdrawalof Hershey from Belize. As Hershey was the sole cocoa buyer and processor in Belize, itsdeparture radically depressed the local cocoa market. This development, along with aparallel IFAD cocoa development project, were factors which stemmed completely theproject's intended efforts in the cocoa sector.

16. Factors Subject to Government Control. Another important factor affecting theproject's outcome, especially with respect to the response of the private banks, was theGOB's 1989 decision, taken after loan signing, to transfer the Central Government's

3 June 1996, Consolidated Progress Report, Ln No 2959-BEL, Ministry of Economic Development.

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deposits from the Central Bank to the commercial banks. The significant increase in theprivate bank's deposits dramatically reduced commercial banks' need for any additionalliquidity - thus dampening the potential interest of the banks in this project.

D. PROJECT SUSTAINABILITY

17. On balance the project's investments in agricultural production are likely to besustained. The project contributed to the establishment and expansion of banana, citrusand shrimp businesses and the sub-projects financed were all judged to be successful. TheGovernment's policy reforms which liberalized the export markets for these commoditieshave clearly laid the groundwork to support the continued growth of non-traditionalagricultural exports. The project's objectives concerning improvements in financialintermediation for the agricultural sector are judged to be less important, as it was neverclear that credit was a meaningful constraint to growth in exports. It is unlikely that theDFC will achieve financial self-sufficiency. Had the Bank been able to dedicate greatertime to understand better the circumstances and practices of the private banks, perhapsthis group would have participated in the project. By supporting a public financialinstitution, the project may have inadvertently crowded the private banks out of long termlending to the agricultural sector.

E. BANK PERFORMANCE

18. Preparation and Appraisal. The project reflects oversights during identificationand appraisal. The Bank did not adequately identify and appraise the major factorslimiting exports, nor did it to determine the extent to which scarce credit limited exportgrowth. A review of the level of lending available to the sector at the time of projectpreparation does not suggest that the sector suffered from a serious credit shortage. In1988, the sector contributed 17 percent of the GDP and received a proportionate18 percent of total national lending portfolio - 65 percent of which was from commercialbanks. Moreover, the value of the national agricultural portfolio represented nearly half ofthe value of the sector's annual output (see Section B of Annex C).

19. Another weakness was the Appraisal's inadequate assessment of the factorsimpeding the private financial institutions, including commercial banks and otherinstitutions, such as savings and loan associations and credit cooperatives fromparticipating in the project. This in part reflects the Bank Group's own lack of experienceat that time in dealing with private financial intermediaries operating in a marketdetermined environment. Given that two-thirds of project credit were earmarked for theprivate sector, the level of the Bank consultations during project appraisal with banks,credit unions and cooperatives, appeared to be insufficient. Based on ICR Missioninterviews with private bankers in Belize, it would appear that the likelihood of theirparticipation would have been improved had the Bank: (i) held more extensive technicaldiscussions on the rediscount mechanism with the commercial banks; (ii) includedrepresentatives of these private institutions in Mission wrap-up sessions and (iii) allowed

the private sector representatives to act as observers in other project discussions, includingthe loan negotiations.

20. Throughout Appraisal, it was mistakenly assumed that the Bank funds were to be"blended" with the softer funds of the USAID facility, thus increasing the attractiveness ofthe project credit line. However, the USAID agreement with the Central Bank precludedfinancing of citrus through DFC. This assumption contributed to an overly optimisticassessment of the attractiveness of the project credit line.

21. The appraisal accurately diagnosed DFC's financial and management problems andat negotiations agreement was reached on an action plan to correct them duringimplementation. However, the difficulties in reforming a government-owned developmentbank that was not subject to pressures of the market place, were underestimated.

22. Supervision. Supervision was weak and incomplete. Although the DFC wasintended to be only one of several financial intermediaries, supervision concentrated moreon the DFC than on the project's progress in achieving its macroeconomic and sectorobjectives. By April 1991, two years after project effectiveness, there had been nodisbursements of the project's credit component. In May 6, 1991, to compensate fordelays in project start-up, the LA was amended to defer the DFC financial performanceindicator target compliance schedule by two years. Later, the loan was amended to makeavailable to DFC US$1.5 million, which had been previously assigned exclusively to theprivate banks. The original closing date was extended twice to December 31, 1995 andDecember 31, 1996 in order to complete disbursements on subloans committed, inaddition to completing other agreed project components. At the first extension of theclosing date US$3,261,842.54 were canceled; at the final closing date $1,097,003.37 werecanceled. The eleven Bank Supervision Missions were focused almost entirely on thefinancial performance of DFC, and its compliance with the financial indicator targets.Performance in this respect proved difficult to gauge, as DFC was very slow in upgradingits loan portfolio accounting and control capabilities. This situation plus disagreementsover how to calculate some of the indicators made enforcement of the agreementproblematic. Although little supervision was given to the actual loan portfolio and itsimpact on expanding or diversifying agricultural exports, the ICR mission confirmed thatgood results were achieved in this respect.

F. BORROWER PERFORMANCE

23. Project Preparation and Implementation. The Government's participation andcommitment in project preparation and design was generally weak. Nevertheless, projectmanagement was sound, maintaining control of administrative expenses and effectiveworking relationships with DFC. The Central Bank, acting as apex intermediary, wasunable to resolve the problems which discouraged private banks from participating. It alsomade persistent requests to the World Bank for clarifications of the project's scope, andthis held up the sub-loan approval process and contributed to disbursements delays.

24. Compliance with Loan Covenants. The govemment fully complied with the LApolicy conditionality in a timely fashion. The GOB removed the shrimp export tax and thecitrus export licensing requirements. In addition, the GOB created the cocoa advisoryboard and transferred the State's banana marketing and extension services to growers'association twelve months ahead of the target date of December 1991. DFC was neverable to comply with the financial performance indicators in its agreed plan of action,though it was able to improve the quality of its loan porfolio over the period.

G. ASSESSMENT OF OUTCOME

25. Outcome. On balance, the project outcome was rated unsatisfactory. Demand forcredit proved to be very slow, requiring the cancellation of nearly half of the sub-loancomponent of the Loan. Private banks which were expected to channel the bulk of thesub-loan finance, chose not to participate. The long term viability of DFC as a commercialenterprise is doubtful. On the other hand, while it is difficult to discern the extent towhich developments would have proceeded in the project's absence, the projectcontributed to the establishment and expansion of banana, citrus and shrimp as importantsub-sectors of the national economy, particularly as generators of foreign exchange. Theproject's role included not only the provision of long-term credit to finance some of theseoperations, but perhaps more importantly, policy reform to liberalize and stimulate privateinvestment in the export markets for these commodities in Belize.

H. FUTURE OPERATIONS

26. No specific plan has been prepared yet.

1. KEY LESSONS LEARNED

27. The most significant lessons learned are as follows:

(a) Government-owned development finance institutions are unlikely tosucceed in achieving both a social objective and financial sustainability atthe same time;

(b) Reform and restructuring of a government-owned development financeinstitution is more likely to succeed, if it is subject to the discipline of themarket;

(c) change in macroeconomic and sector policies can have a more positiveimpact than project financial investments;

(d) Private financial intermediaries will not actively participate, unless theyare carefully consulted on all the policies and procedures for a credit lineduring its preparation, appraisal and loan negotiations.

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PART II: STATISTICAL TABLES

TABLE 1: SUMMARY OF ASSESSMENTS

A. Achievement of Obiectives Substantial Partial Neglieible Not aoplicable

Macro Policies V)Sector Policies

Financial Objectives ())

Institutional Development (/)

Physical Objectives (/)

Poverty Reduction (v')

Gender Issues (/)

Other Social Objectives (/)

Environmental Objectives (1)

Public Sector Management ( )

Private Sector Development (1)

Unlikely Thg,taiu

(1)

C. Bi PeformancigYsatisfactorv Satisfactory Deficient

Identification (/)

Preparation Assistance (v')

Appraisal (i)

Supervision (/)

D. Bortower Performance satisfactory Satisfactory Deficient

Preparation (v)

Implementation (/)

Covenant Compliance (it)

Operation (if applicable) (i)

E. Assessment of Outcome satisfh StisfacLqy Uns_atisfac_o_ u _safi,2tv

L S Uns...sfac.or.

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TABLE 2: RELATED BANK LOANS/CREDITS

0Loa/red it title Purpose Year of approval Status

Preceding operations none IFollowing operations none

TABLE 3: PROJECT TIMETABLE

Steps in Project Cycle I Date Planned I Date A li_______________________________X ELatest Estimate

Preparation August 1986

Identification (Executive Project Summary) January 7, 1987

Letter of Development Policy (if applicable) May 1987

Pre-Appraisal July 1, 1987

Appraisal August, 1987 September 8-13, 1987

First Yellow Cover November 16, 1987

Second Yellow Cover April 5, 1988

Pre-Negotiations Mission April 11-12, 1988

Negotiations November, 1987 May 18, 1988

January 25, 1988

Feb. 1-5, 1988

Board Presentation December 10, 1987 June 15, 1988

Signing July 19, 1988

Effectiveness deadlines October 20, 1988 April 7, 1989

November 21, 1988

January 20, 1989

February 1989

March 14, 1989

Midterm review (if applicable) n/a n/a

Project Completion December 31, 1993 December 31, 1996

Loan Closing June 30, 1994 1st. extension Dec. 31, 1995

_________________________________________ ________________ 2nd. extension Dec. 31, 1996

-11-

TABLE 4: LOAN/CREDr1 DISBURSEMENTS: CUMULATIVE EsrMATED AND ACTuAL

(US$ thousands)

Year FY89 FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97

Appraisal Estimate 1,400 3,000 4,600 5,900 6,900 7,700 7,800

Actual - 400 429 1,417 1,611 2,495 2,495 2,800 3,441

Actual as percent 13 10.7 24 23 32 32 36 44of Estimate

Date of Final February 27, 1997Disbursement

Note: October 17, 1995, USS3,261,842.54 were canceled

-12-

TABLE 5: KEY INDICATORS FOR PROJECT IMPLEMENTATION

I Xey Imptemwtatio; Inicators ; Estimated Actual.... S A R .... dent'S R. port _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Yearly ratio of arrears of over 12months to total outstanding debtowed to DFC:Year 1988 14%Year 1989 10%Year 1990 6% 35%Year 1991 3% 30%Year 1992 0% 7%Ratio of total collections on debtowed to DFCYear 1988 115%Year 1989 110%Year 1990 100% 140%Year 1991 95% 158%

II.70; 440AModifiedFIndicatorsstimated Actual§ jMay 6 1991 _______________________ _______________________

Yearly ratio of arrears of over 12months to total outstanding debtowed to DFC:Year 1990 14% 35%Year 1991 10% 30%Year 1992 6% 7%Year 1993 3% 12%Year 1994 0% 14%Year 1995 0% 11%Year 1996 (September) 0% 10%Ratio of total collections on debtowed to DFCYear 1990 115% 140%Year 1991 110% 158%Year 1992 100% 167%Year 1993 95% 83%Year 1994 95% 80%Year 1995 95% 108%Year 1996 (September) 95% 88%

-13-

TABLE 6: KEY INDICATORS FOR PROJECT IPLEMENTATION

N/A

TABLE 7: STUDIES INCLUDED IN PROJECT

Study Purpose Status Findings and Impact of Study

N/A

-14-

TABLE 8A: PROJECT COSTS

Actual/LatestAppraisal Estimate (US$M): S :: S S ::;:: : ::: ~~~~Estimate(US$M)

ForeignLocal Foreign T Local Costs

;0;;;; 0t;0: ;cItem Costs Costs Costs (Bank_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __: D i s b )

1. Agricultural Export 4.4 5.6 10.0 2.6 3.3 5.9Development

2. InstitutionalDevelopment

- Consultants 0.6 0.6 - - -

- Training - 0.2 0.2 0.95 0.95

- Vehicles & Equipment 0.1 0.3 0.4 0.08 0.23 0.31

- Staff, Administ. O&M 0.6 0.2 0.8 N/A - N/ACost

Physical Contingencies - 0.1 0.1 N/A N/A N/A

Price Contingencies 0.1 0.1 0.2 N/A N/A N/A

TOTAL 5.2 7.1 12.3 N/A 3.44 N/A

TABLE 8B: PROJECT FINANCING

Appraisal Estimate(US$M) Actual/Latest Estimate(US$*M

Source Local Foreign Total Local Foreign Total_ _ _ __:::: :0::X::: :t::: : t Costs Costs Costs Costs

IBRD 1.4 6.4 7.8 | 3.44 3.44

Japan Grant facility - 0.5 0.5 | 0.45 0.45

ODA 0.1 0.1 N/A N/A N/A

FAO - 0.1 0.1 N/A N/A N/A

Government 0.8 - 0.8 N/A - N/A

Beneficiaries 2.3 2.3 N/A - N/A

TOTAL N/A N/A N/A

-15-

TABLE 9A: ECONOMIC CosTs AND BENEFITS

Internal Economic Rate of Return for Project Credit Portfolio(US$)

Net Revenue Streams Aggregated Net Revenue

Citrus Banana [ Shrimp Farm Fishing4

Loan Credit 1,184,907 2,715,147 1,215,000 l

Year 1 (1,279,700) - (675,625) (1,955,325)Year 2 (959,775) 24,500 149,250 (786,025)Year 3 (479,887) (697,900) 169,150 (1,008,637)Year 4 (109,087) (312,300) 174,125 (247,262)Year 5 508,913 400,400 174,125 _ 1,083,438Year 6 1,003,313 400,400 199,000 1,602,713Year 7 1,497,713 400,400 199,000 2,097,113Year 2,486,513 400,400 248,750 3,135,663

Year 9 2,486,513 400,400 248,750 3,135,663Year 10 2,486,513 400,400 248,750 3,135,663Year 11 2,486,513 400,400 248,750 3,135,663Year 12 2,486,513 400,400 248,750 3,135,663

._____________ _______________ ___________ _ _________________A ggregateIRR 27% 30% 25% 16% 27%

NPV at 13% 2,828,582 522,415 389,578 3,740,554

TABLE 9B: AGGREGATE INTERNAL ECONOMIC RATE OF RETURN OF THE CREDIT

PORTFOLIO

Citrus Bananas Shrimp Fishing Total. ~~~~~~~~~~~Farming_l

Loan Credit (US$'000) 1,185 2,715 1,215| 1,140 6,255Share of Portfolio Analyzed 19% 43% 19%{ 18% 100%HIRR 27% 30% 25%1 16%1 26%1l

due to insufficient data to recalculate the internal rate of return to the purchase of fishing boats,the internal rate of return provided in the subloan application was applied.

-16-

TABLE 10: STATUS OF LEGAL COVENANTS

ORIGINAL REVISEDCOQNAN FULFILLMENT FULFILLMENT

AGREEMENT SECTION T TYPE STATUS DATE DATE DESCRIPrION OF COVENANT COMMENTS

Loan 2 02(b) 1 C The Borrower shall maintain in dollars aspecial account with authorized allocation ofUS$0 4 million.

Loan 3.01(b) 5 C The Borrower shall sign a subsidiaryagreement with the Central Bank of Belizefor Part A of the project.

Loan 3.01 (b) 9 C The Central Bank of Belize shall furnish theLoan 301(b) 9 C Bank not later than 3/31 of each year.

commencing 3130/90. an evaluation report onPart A of the projectl

Loan 3.01(c) . . The Borrower shall enter into an agreementwith the Development Finance Corporationfor Part B of the project

Loan 3.01(d) 5 C The Borrower shall sign a subsidiary Subsequently the Bananaagreement with the Banana Control Board for Growers Association replacedParl C 1 of the Project, the Banana Control Board A

subsidiary agreement wassigned between the Borrowerand the Banana GrowersAssociation in 03/92.

Loan 3.03 5 C The Borrower shall open and operate aBebize Credit Facility with the Central Bank ofBelize for Part A of the Project

Loan 3.08 2 _ The Central Bank of Beiize shall review withthe Bank, not later than 12/31 of each year,the interest rate to ultimate beneficiaries, andagree on such rate by 311 of each year.

Loan 3.09 2 C The Borrower shalt maintain a ProjectAccount for Parts A and C, with an initialdeposit of B$ 0.1 million.

Loan 3. 10(a) 9 C 3/31/91 The Development Finance Corporation shallconduct a mid-term review jointly with theCentral Bank of Belize and the Bank, notlater than 3/31/91, to evaluate progress withimplementation of action plan set forth inSchedule 7 to Loan Agreement.

Loan 3.10(d) 1 CD The Development Finance Corporation shallfumish to the Bank, not later than 9/30 ofeach year, its audited financial statements.

Loan 3.10(f) 2 5 The Development Finance Corporation shall Superseded by agreed two-yearC carry out the agreed actions to achieve: Action Plan. Appropnate loan

yearly ratio of arrears to outstanding portfolio modification madeof 14%, 10% 6%, 3% and 0% in 1988, 1989,1990, 1991, and 1992, respectively; yearlyratio of total collections on debt owed to theDevelopment Finance Corporation of 115%,110%, 100% and 95% in 1988, 1989, 1990,1991 and thereafter, respectively; andrecovery, in accordance with yearly schedulefurnished to the Bank not later than 2/15189and every 2115 thereafter, of all debt owed tothe Development Finance Corporation inamounts exceeding US$25,000 equivalent

should have been rated CP

-17-

per loan in arrears as of Septenber 30,1987

The Minisiry of Economic Development shalLoan 3.11 9 CD submit, not laber than 331 of each year,

commencing 3J31/89, a consolodatedprogress report of all parts or the Project.

The Borrfower shall furnish to the Bank notLoan 3.12 9 CD later than 3131 of each year, commencing

3J31/89, the annual training program for thefollowing year in respect of Parts B and C ofthe Project, and inform the Bank of theresults thereof promptly upon completion.

Loan 3.13 12 C 12131418 The Borrower shall, not later than 12/31/88,remove the export license requvrements forcitnrs and citrus products and exempt land-based shnmp from 5% export tax.

Loan 3.14 5 C 12131/91 The Banana Control Board shall maintain a Transferred to the BananaGeneral Manager, and appoint not later than Growers Association.12/31/91

Loan 3.15 10 CD 1231/88 The Banana Control Board shall not later Loan agreement amended inthan 12/3tl30, enter into an agreement with 1291 to reflet the transfer of

12131/91 the Banana Growers Association for he t the service activito thetransfer of responsblities for extensionservices by 1 V3t91 Banana Growers Association.

The Borrower shall, for purposes of PartLoan 3.16 1 1 C 120388 C.2(a) of the Project, not later than 12131/88,

establish a cocoa advisory board.

Audted project accounts of the Belize CrecitLoan 4.01 1 CD Facility, statements of expendtures, and the

Project and Special Accounts in the CentralBank of Belize shal, not later Ihan 9/30 ofeach year, be fumished to the Bank.

Covenant types:

I. - Accour/audits S. -Indigenous people2. -Fuiacial performance/revenue gneration from 9. Monitoring, review, and reporting

beneficiaries 10. - Project implementation not covered by categories 1-93. -Flow nd utilization ofproject funds 11. - Sectoral or cross-aectoral budgetary or other resource4. - Countprat funding allocationo. - Maagement aspects of the project or executing 12. - Sectoral or cross-sectoral policy/

agency regulatory/institutional action6. - Environmental covenants 13. = Other7. - Involurnry resettlement

Presnd Status:

C - covenant complied withCD - conplied with after delayCP = conplied with pariallyNC - not complied with

- 18-

TABLE 11: COMPLIANCE W1TH OPERATIONAL MANUAL STATEMENTS

N/A

TABLE 12: BANK RESOURCES: STAFF INPUTS

Stagebof Pl anned Revised Actual7:: '

Project Cycle Week US$ Weeks US$ Weeks US$

Preparation to n/a n/a n/a 131.5Appraisal 6

Appraisal - Board ' n/a n/a n/a 43.1

Negotiations through n/a n/a n/a 25.9Board Approval 8

Supervision 14.0 47.6 12.0 40.8 75.4 236.7

Completion 4. 10.6 5. 11.3 2.4

TOTAL 10.0 58.2 17.0 52.1 77.8

6 Due to changes in MIS no historical information is available prior to FY94.same as above.

8 same as above.

-19-

TABLE 13: BANK RESOURCES: MISSIONS

perotmanic. Ratig.

Ste of Monrh Number Days in Specialized ISUGemen- Develop- Types ofPrO*et Cycle Year Of Fed staff Skills tattion nient Pelm

Persons Represnted Status Objectives_~ -

Through Appraisal 10186 1 9 A

2/87 3 18 A, F

Appraisal through 3/87 1 5 FBoard Approval __ _ __ _ __ _____

9/87 5 18 E,F, A - -

Supervision 11/88 1 5 F 2 2 _ n-

9/89 2 5 F, A 2 2 In

1L90 1 5 F 2 2 In, Ma

11/90 1 8 F 2 2 In, Ma

6/91 2 5 F, A 2 2 Ma, Fi

1/92 1 5 E 2 3 Ma, Fi

6/92 1 5 F 2 2 Ma, Fi

12/92 2 5 F, E 2 2 Ma, Fi

7/93 1 5 F 2 2 Ma, Fi

1/94 1 5 F 2 2 Ma, Fi

6/94 1 5 F 2 2 Ma, Fi

4/95 1 5 A S S Ma, Fi

Completion 12/96 2 8 A, E . .

Skills Represented: Types of Problems:F = Financial Analyst In = InstitutionalA = Agriculturalist Ma= ManagerialE = Economist Fi Financial

Rating:S = Satisfactory

DMoreau:afdMay 13, 1997m\belize\icr\icr-all.doc

1818 H SU" N.W. 477-tZANNWinhington, D.C. 2C43 CaQA.ddr INTAFRAID NEX A

_ ~~~ ~ ~ ~~~U.SAk CaW*Adr= INOIEVASThe World BankIITTfON,AL 1A14 MOR "IECC#N4tUC=CN AMc CEV=OP%EN

NWrNTDL D CPMT AS3OCA71CN

December 27, 1996

Mrs. Yvonne HydePermanent SecretaryIvfiistry of Economic DevelopmentBeIrnopanBelize

Dear M.rs. Iyde:

BE=LZE - Agric-altural Credit and Export Development Project (Ln. 2959-BF-L)

`Mlrs. Anne del Castillo, Consultant, andS Mr. Dariel Mforeau, SeniorAgriculturalist from the World BanLk who visited Beiize from December 9 toDeceember 17, 1996 on a supervision rmission of the above-referenced project, havereturned to Washington and reported their findings. We wish to thank theGovernment and DFC for the cooperation extended to the miss.on.

The Development Finance Corporation's operations during projectimplementation has indeed shown some improvements especially in the financialresults. MNfost of the investment projects financed under the Loan went to the bananaand citrus industries, as we!l as for fisheries and shrimp farms. However, to dininishthe risks of lending to small farmers without credit history and sufficient collateral,azicultural lending through DFC was increasingly limited to medium to large wellestablished borrowers.

At the time of project preparation and appraisal, DFC was essentially the onlyfinancial intermediary that provided terrn credit for smaLL and medium farmers inBelize. DFC has also been in the forefront of the efforts to diversifyr agriculturalproduction and exports in the country away from sugar by providing term credit fornew export crops, which the commercial banks have been initially reluctant to finance.Because DFC does not have centralized credit poLicies, but uses instead the directivesissued by individual donors, DFC's loan application and approval process is lengthyrelative to that of commercial banks, and it involves high transaction costs. During therecent past years, the private agricultural sector demonstrated to be very dynamic todiversify toward new export crops and in parallel, there was an increased participatioaof private banks in lending for the agriculture sector.

RCA 24U21:3. WUI 64145 Q FAX (2= 477-4U9

-22 - . .................. ~ ANNEX A

Now, the fimdamol quesdon for DFC is its role and as a publicfinancn insdon sizeDFC in one hand had obvious caziesforproviding loanto small imnds d in anothe hand is in direct competition wit pivate com=dalbanks for providing loans to medium and large farmers.

The firn closing date for the Aspicultural Credit and Export DevelopmetProject (LoanNo. 2959-BEL) is December 31, 1996. As mentioned in the Aide-Memoire (attached), theBank is preparing an Implemenation Completioa Report(ICR). This ICP needs to be done during the six months foUowing the closing date ofthe project and it would have to include a draft of the Borrowers Evaluation Report.We are pleased to learn that a consultant has already been identi£ed to undertake thiswork and that the draft report would be completed and sent to the World Barnk by theend of March 1997.

I would lLke to ta-ke the opportunity to wish you ard your farnily an happy newyear 1997.

SLr:cerely,

Daniel MoreauActing Division Chief

Natural Resources Management and RLral PovertyCountry Department ImI

Latin America & the Canbbean Re^goa

Attachment

-23- ANNEX A

ce: MrI. Jaime Alpuche Mr. Kieth ArnoldFmandal Secretary Gavenor,MInIstrY of Fnance Central Bank ofBezeBe!mopan, Be1z . P.O. Box 852

Beze City, Bclize

Mr. Frank Garbutt Mfr. Rodney NealGeneral Manager, BCF Permanent SecretaryCentral Bank ofBeiize Minstry of AgricultureP.O. Box 852 Belmopan, BelizeBelize City, Belize

Mr. Douglas SinghGeneral ManagerDevelopment Finance CorporationP.O. Box 40Belmopan, Belize

ANNEX B

BELIZE

AGRICULTURRAL CREDIT AND EXPORT DEVELOPMENT PROJECT(Loan 2959-BEL)

World Bank Final Supervision Mssion December 9 - 17, 1996

AIDE-MEMOIRE

1. Tnis Aide-MemoLre summarizes the findings of a World Bank F-mal SupervisionMission comprising Mrs. Anne del Castilo (Consultant) and Daniel More-au (MissionLeader) which visited BeTize between December 9 and December 17, 1996. Themnission underwook field visits to the Banana Growers Association, the Citrus GrowersAssociation, some banana and citrus farms, Nova Shrimp Farms, and the NorthernFishermen Cooperative. Tne mission warts to tha-n al individuals, agencies andofficials corn.ct5d for the excellent cooperation and the frank discussiors held.

Background and Setting.

2. Loan Amount - Original: USS7.8 million- Revised: USS4.7 milLion

Disbursed Amount (10125196): USS3.0 MillionDate of Effectiveness: 04/06/89Original Closing Date: 12/3 1/91CuZ.ent Closing Date: 12/3 1196

3. The objectves of the project are: (i) to assist the Borrower in financing suchproductive facilities and resources in Belize as will contribute to the development ofagricultural exports; and (ii) to strengthen selected financial institutions providingagricultural services or credit. The project provides a line of credit to financeinvestment projects for export crop development as well as strengthening of institutionsproviding support- services for export crop production: Development FinanceCorporation (DFC), Growers Association and the Minist.ies of Agriculture andNatural Resources.

Overall Project Performance

4. Most of the investmnents projects financed under the Loan went to the bananaand citrus industies, as well as for fisheries and shrimp farns. However, to diminishthe risks of lending to small farmers without credit history and sufficient collateraLagricultural lending through DFC was increasingly limited to medium to large wellestablished borrowers (see Table I and Table n). As of October 25, 1996, out of the

-26 - ANNEX B

revised Loan amount of US$4.7 million, the total amount disbursed from the Loaa wasabout USS3.0 million.

DFC Financial Performance

5. An imrorant measure of the financial peTeorm.ance of the DFC is portfoliocontarnina ion, or the share of loans affected by total arrears as well as the distrbutionof the total loans affecttd by arrears of more than and less than 12 months. Graph Aillustates tlh-e sicnificant declines in the level of loans affec-ed by arrears. This is dueto: (i) capital infusions from the Central Government in the early 1990s to reconcile itsaccounts wihi the DFC and provide the DFC with fresh capital; (ii) improvements inthe DFC r cia moni:oring system; (ii) the DFC's mocre active co11ecdon program;and (iv) bete-r project appraisal acdeities w.iLir. the DFC. Nevertheless, it can beobserved tha-, af-er the initial drop in contailna4on due to the direct intervention ofthe Central Covernment, subsequent reductons ir. contarrination have been reladvelyminor in recent years and still approaches 20 percent.

Graph A

Loan Por1.ciio Cantarrination

a aX0 _. j .-i--

| | ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. ,.. . . . . . ...: ,'':'.' '".''',.' L - ~~~~~~~~~~~~~~~~~~~~~~~~~~~~.:. . :. .:*. ... .:.-- -

510 .- _ = |__ ___[sMnR o

4a

300] l l es ~~~~~~~~~~~~~~~~~~~~~mcr than 7m |

2QO 0

iao

i~~~~~ 1 | 4

1 9i: 1 iS1 1 S2 1993 1ig4 199j Sep-96

6. Tnere was also an improvement of the DFC financial performance, asmeasured against the indicators in the Action Plans:

* Annual rates of total arrears as a percentase of outstanding debt fell from 11percent in 1995 to 9.6 percent in 1996 - well above the 1996 target rate of 5.0 percent;

-27- ANNEX B

* Annual rates of collecdon of nrfncipal and interest as a gercentag of debt owed tthe DFC fell from 107.7 percent in 1995 to 87.9 percent in 1996 - approximatng thetarget minimurm of 90 percent for 1996;

* Annual administrative costs as a Dercentgge of total costs has declined steadily -falling from more than 8 percent in 1990 to 5.7 percent in 1995 and to 4.9 percent in1996. Thus the 1996 targe: level of 5.5 percent was satisfied.

7. However, to fully appreciate any efficiencies which may have been realized inadmirniistative cost, this raho needs to be assessed against the number of loans in thepor-tolio. A least a part of the "efficiency gaains" realized by the DFC has been dueto its reducion in the number of loan in its portfolio obtained through its gradualprocess of increasing the loan size. Small loans (under BZS10,000) as a share of totalnumber of Ioans in the DFC por-folio declined from 79.8 percent in 1991 to 60.9percent in 1995. Tne small loan share in the total poorUfo value declined from 16.6percent in 1991 to 12.7 percernt in 1995. As a result, dur-ng that pericd, the averageloan increased 30%7o. When total costs (operatiopal plus salary) are compar-d againstthe nurmber of loLns in the portfolio, the cost per loan irc:eased by 17 percentbetween 1991 and 1995.

* Annual debt to ecuitv rt;cs were si:JfcantIy reduced f-oro thei- 1992 level of17:: 1. In 1993, the -atio fell to 11::1 and, in 1995 and 1996, the ra24o has stabilizedat 3::1. outperformng te target level of 4: 1; and

- Annual returs to ep=uitv Tatio, while declining from 12.85 percent in 1995 to 9.85percent in 1996 - still satisfied the target level set for 1996 of 3.5 percent. Tneapiarent decline is a reflection of the ext-aordinary gaLns recorded in 1995, when theDEC introduced the policy of recognizing annrual unr e^l ed incorm.e (losses),particularly from foreign exchange gains (losses).

8. Indicators specifying desirable levels for involvement in the agricultural sectoror a particular target beneiciay group have never been set. Nevertheless, it is clearthat the DFC's agricultural and small loan portfolios have declined dramatically inrecent years. These developments are a reflection of the DFC's: (i) desire to improveits financial performance; and (ii) increasing participation in the housing sector. Forthe DFC, agricultural and small loans have traditionally been the poorest performing,in ter=s of supervision costs and risk. By limiting its agricultural portfolio torelatively large Icans and borrowers with established credit histories and goodcollateral, the DFC can reduce its risks and administrative costs.

9. Preparation of Borrowers Contibution to the Irnplementation CompletionReport (ICR). N= has confirmed that in collaboration with DFC, it will prepare adraft of the Borrowers Evaluation Report to be included in the ICR for finalization andsubmission to the World Banlk. It u,as agreed that the document should be available bythe end of March 1997. The Mission has provided advice as requested regarding thedocument which should provide the Borrower's evaluation of:

- 28 - . - :ANNEX B

(a) the Projects emc=on and inital opemton including an assessment of the Pojectobjecdves, deign, implemention.and opeaton eperence;

(b) the Projeces cos and benefts, and the Ztent to which the purposes of the Loanwere achieved;

(c) the Borrower's own perfornance during the evoludon and implemntention of theProject including the Bormwees obligations under the Loan Agreement specialemphasis should be given to lessons learned that may be relevant in the future; and

(d) the perform-mace of the Bark during the evolut4on and implement-ton of theProject including the Ban-Vs obligations under the Loan Agreemnent and theeffectiveness of the rela"onshaip between the Borrower and the Bank; sceci! emphasisshould be given to lessons lea-ned that may be relevant in the future.

10. Tne Borrower's Evaluadon Report will be atrched unedited to the ICR unIless itis over ten pages long, in which case a summary should be prepared which will insteadbe included in the ICR. To assist in the prepration of the document., Mv:D has beenprov,ded with a copy of World Ban-k Operaornai PoEc.es OP 13.55 and BankProcedures BP 13.55. The content of the Borrowers Report is outlired inOperational Policies OP 13.55 page 1, para. 3.

Belamopan, Belize, December 17, 1996

Signed: i

~~~~~~~~~~~~~......... ..... .....)(Daniel MoNreau) (Yvone

World Bank Permanent Secr-etary

Ministry of Economic Development

- 29 - ~ Attachment

FTrancial Performance IndicatorTargets and Actual Performance

Table A

Yearly R:ates of Total Arrears as a Fercentage of Outstandina Debt

Targ=s Pedcr;an

Ye= L. fl tLan Amend:d Azoon | DEC Acton P?anAg==:en Pla of

19921988 ! 14.0 I _I I1989 1 10.0 I I1990 I 6.0 14.0 ! _ fi _1 35.01991 3.0 10.0 _ 1 29.51992 J 0.0 I 6.0 1 _ t _ _ _ _

1993 _3.0 2.5 _ | 11-71994 -- __-_- _ 0.0 i 2.5 I | 1-.31995f _ I I 5.0 11.0

Sept-96 1 5.0 9.6

* si -iE:r re:.i:cn 6e in '-ge p2rt to cnpijl :z.ons om the C _- C- -: t 2r 191/92.

Table B

Yeariy Rates of Collection ofFrincipal and Interest as a Percentage of Debt Owed toDFC

Tar-. js P-.forc

Year Loan Amended Acon DFC Az-on ?InPlan of

1992

1988O I -115.0 I1989 110.0 _ I . I _1990 100.0 1 115.0 1 _ 140.01991 95.0 110.0 1S8.01992 95.0 100.0 _ _ 167231993 T 95.0 80.0 65.0 1 82.51994 95.0 85.0 70.0 79.61995 T _ 80.0 107.7

Set-96 - 90.0 87.9

-30 - Attachment

Table C

YearHy Rates of Portfolio Conta2ination: Total Principal Affected by Arrers

Year Mor= tan 12 months Tota

1990 t 27.0 1 51.01991 1 17.2 4-4.21992 8.0 t 18.01993 t 6.0 t 31.01994 T 15.8 t 30.41995 1 11.2 21.8

Sept-96[ 7.9 I 19.9 I

Table D

Administrative Costs as a Percentage of Total Assets

Il~~~- _ _ _ Taraes _ _ __ _ _ I F f.o rz... c-

Ycar Loan kzended Ac-icn DFC Abdc: ?lanAg-:eenr 1 Plan of

_____ __ _ _____ __1992 I1992 | NA ; NA | 6.0 11993 NA i NA 5.0 5.0 6.01994 tNA t NA | | 5.0 | 5. 11995 | NA NA | | 5.0 I 5.7

Scvr-961 NA NA I_____I 5.5 4.9

Table E

Administrative Costs Relative to the Number of Loans in the Portfolio

No-ofLcans Expnscs |Expese perT oan___________O('00OBZS) 1

Y:as ateion:,1 Stff I Total 1990 1 3573_ t 946 1959 2905 j 0.811991 | 2884 1039 1725 2764 0.951992 2884 774 | 1857 2631 I 0.911993 3073 797 11990 21787 0.851994 3239 993 I 2090 3083 0.951995 3345

���������S a U - S

-31 - Attachment

Table FDebt to Equity Ratio

Targets

Year Loan Anended Ac-on DFC Acdox P!anAgr=:a t Plan of

_________ _________ _________ 1992

1992 I NA | N.A | _ 4::1 17::11993 | NA i NA I I 4::1 11::11994 | NA i NA | | 4::1 4::11995 NA | NA 4::1 4.:1 3::1

Se?t-96 I hA | NA I 4::1 | 3::1

Table G,Minimum Debt Service Coverage

Targets Pe'.-^r-= -

Ye=. Lcan Amended Arc-c DFC A=zcIAp. mezr ?!m of P!=~Agr-______ ________ _____1992 Pl

1992 NA NA | J 1::5 | 2::11993 N NA I NA. I | 1::5 | 1I

1994 | NA N NA _ 1::5 I 1::11995 ! NA T NA 1::5 ! I 1 1::1

Sen-i96I NA A N I I 1::1 1::1

Table H

Return on Equity

Targets P| :fca.a==

Year Loan Amended P in of DFCAgW_::t Acxcn of

J 1992 __ _ _ _ _ _ _ _ __ _ _ _ _ _ _

1993 I NA I NA _ 5.1 I 7.3;1994 | NA | NA | 4.S 3.581995 NA I NA 5-10% 1.2 | 12.85

Sevt-96 | NA | NA | _ _i.5 3 9.8"

- 32 - Attachment

Table IDFC Loan Portfolio

Number of Loans by Size(Share of Total Number of Loans in the Portfolio)

Size 1991 j 1992 1993 1994 I 19955,000 and under i 70.4 I 65.31 64.1 j 59.9 5H.05.001-10.000 9.4 10.1 J 10.o I 12.1 J 12.910,001-20.000 8.7 12. I7 12.3 12.5 12.520,001-50,000 8.8 9.0 1 9.9 I 11.08 1 11.4730001 and over 2.5 2.7 3.6 4.3 .0Total 2.884 | 2.84 j 3,073 |3.239 i 3.3-SAveg-cLcan Size 10,396 12,095 j 14,376 1 14,118 13,793

Table IDFC Loan Portfolio

Share of Value of Loans by Size to the Value of Total Por-folio_____________(%)

Size 1991 1992 1993 I 1994 1 9 95,000 and under J 9.6 6.8 5.3 1 5.4 6.25,001-10.000 I 6.6 I 5.8 1 6.0 I 6.2 I 6.510,001-20.000 1 12.3 I 15.2 I 12.3 12.3 I 12.520,001-50,000 I 26 I 23 24 25 25.950.001 and over I 45 48.5 1 51.3 50.9 I 48.9Total Value 29,933 34,S83 45,714 45,730 |456,139(BZSOOO) I .I ! .I

Table K

DFC Agricultural PortfolioValue of Agricultural Loans Approved as Share of Total Value of Loans Approved

Year Azr.cJ1tu.1 ITotl I Sh-ae(BZS '000) I(%/0)

1990 I 2,996 6,400 46.81991 5,568 1 10.582 1 52.61992 8.637 I 15,386 56.11993 4,823 12,347 3 39.11994 2.298 10.558 I 21.7

199_

-33 - Attachment

Table L

Analysi of Worid Bank Agricultural Export Promotion Credit Line

Coimmdity Number of Avege A= Tol Tota Share of ValrT_ Size (aC.CS) Appd Di and Number of

(UW t~~~~~USS (US0 ToaWr viff} . (acres) Problems

Shrimp 4 588,716 40 direcdy 2,354,864 2,154,863 nonc:. __ 360 indirecdy

Bananas 6 453,732 1,308 of which 2,722,393 2,715,147 none594 for I

. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ inigatlon ..__ _ _ _ _ _ _ _ _ _ _ _ __ir_ _Ratio

Citrus 28 55,252 1X6 approved 1,54?,2061 1,184,907 24% (value)2 955 actual .. 25% (nuv ber)

covrs shrimp firming and fshing (purhasc of trawlers)

ANNEX C

GOVERNMENT OF BELIZEMinistry of Economic Development

P.O. Box 42Fax: (501)08-23673 New AdministrativeTel: (501)08-22526/08-2252 BuildingRef: IA/ID/1/297(37) BelmopanBelize, Central America

April 9, 1997

Ms. Carmen NielsenProcurement AnalystLAC - Natural ResourcesThe World Bank1818 H Street N. WWashington DC 20433USA

Dear Ms. Nielsen

RE: BORROWER'S CONTRIBUTION TO IMPLEMENTATION COMPLETION REPORT

I have pleasure in providing a copy of the Borrower's Contribution to Implementation Completion

Report in regard to the Agriculture Credit and Export Development Project, Loan 2959 - BEL..

With best wishes.

Yours sincerely

G,ENNIS D ZELA YAfor Permanent SecretaryMinistry of Economic Development

ATTA CHMENT

-36 - ANNEX C

DEVELOPMIENT IANCE CORP ORATION

Anriculture Credit and Export Development Proiect

Borrower's Contribution to hmplementation Completion Report

I. The main proiect obiectives were:-

1. Expand and promote diversification of Belize's Agricultrl Exports and improve itsbalance of payments.

2. Improve Banking Services for farmers and strengthen the financial condition of DFC in itsrole as a financial intermediary.

In order to achieve its objectives, the project design included the following components:-

1. Establishment of a rediscount facility at the Central Bank of Belize, namely, the BelizeCredit Facility (BCF) to provide loans for financing export-oriented agricultural projectsthrotugh public and private sector financial intermediaries.

2. Development of Agricultural exports (bananas, cocoa, citus and cultured shrimp) through:

a) Provision of a Line of Credit;

b) Strengthening institutions providing support services for export crop production.These included the Development Finance Corporation, the Banana ControlBoard/Banana Growers Association, the Ministry of Agriculture and Fisheries andthe Ministry ofNahtual Resources

IlL Assessment of Institutional Stren2thening and Development of Aericulthual Exports

(Cocoa and Bananas) provided by the Proiect.

The Development Flnance Corporation (DFC)

The World Bank project contributed significantly to the financial recovery of the DFC. TheRecovery Action Plan prepared by World Bank was closely monitored and evaluated by WorldBank staff To date, DFC has made satisfactory progress in meeting the financial performance

9

-37 - ANNEX C

t Ltreeta and on s-quently otinue t ccess fimds from international finding agencies ouch as theEuropean Investment Bank and the Caribbean Development Bank Teclhnical assistance receivedunder the project assisted in achieving among others the following:-

1. Development of a Loan Administration and Collateral Administration Manual;

2. Decentralization of branches;

3. Establishnent of a Quality Control Department;

4. Improvement of the Management Infornation Systems, particularly Accounting Information

Systems, and computerization of branches.

The objective of strengthening the DFC in terms of operational efficiency and credit deliverycapacity was therefore achieved.

Cacao Development

The project provided funds for a Cocoa Agronomist with support staff and vehicles to promote thedevelopment of cocoa production in the Cayo and Stann Creek Districts. It was difficult toconvince farmers to plant cocoa instead of citrus due to depressed market conditions for cocoa andthe attractiveness of citrus. Nevertheless interest was expressed by several small fiamers tocultivate a combination of citrus and cocoa. Most of the farmers, however, could not satisfylending requirements in terms of contribution, experience in the crop, and collateral. As a matterof fact, a nurnber of these farmers had no land tenureship and those with land had poor farmaccessibilit.

Lending, as a result, was focused on existing citus farmers who required assistance forrehabilitation and/or expansion. This was due to change in lending policies as a direct result offluctuating prices of citrus concentrates in the World Market and the fact that the industy requiredto improve efficiency and consolidation rather than expansion. A total of 30 citrus loansamounting to $1,500,000 to rehabilitate/expand 955 acres were granted. The project targeted1,000 new acres by small to medium size farmers.

Banana Development.

World Bank finds were used to assist the Banana Control Board and subsequently the BananaGirowers Association (BOA) with institutional strengthening to continue the development of thebanana industry. The assistance was received at an appropriate time, when marketing andoperational finctions were being transferred to the BGA. A Project Manager, paid from WorldBank funds assisted in this transition. Funds were also utilized to assist in the surveying andsubdivision of a parcel of land in the Bladen area for expansion. Assistance was also given toequip the laboratory to conduct soil analysis and pest control research.

-38 - ANNEX C

Due to BGA's policy to consolidate acreage tuder production (to keep production within the ECCquotas) rathier than expand, acreage surveyed for expansion was not filly utilized, except for amere 100 acres. DFC loans were consequently limited to banana rehabilitation and financing ofinfiastructure to improve efficiency and competitiveness.

Authorities in the industry felt that much more could have been accomplished if BGA/ProjectManager was given more authority to make decisions. The situation was further aggravated bychanges of officers responsible for monitoring this project component and the consequent transferof responsibilities from Ministry of Economic Development to Ministrv of Agriculture.

IIL Establishment of the Belize Credit Facility (BCE) at Central Bank of Belize (CBB).

The BCF was set up at the CBB and became fimctional after some delays. Ihe constant movementof staff caused some delays in the execution of loan agreements, approval of projects andreimbursement of claims. Nevertheless, overall performance improved as the BCF Managerimproved its knowledge of World Bank policies and disbursement procedures and overalladministration of the project It can therefore be concluded that the BCF is now capable ofdelivering credit to Financial Intermediaries. The project objective was therefore achieved-

IV. The Participaion of Financial Intermediaries in Credit Delivery.

DFC is the only financial institution that signed the participatory agreement and delivered creditunder the World Bank fimds. Scotia Bank signed the participatory agreement but subsequentlywithdrew from the programme.

The Commercial Bank's reluctance to participate was due to:

a) High liquidity during project implementation;

b) Uunwillingness to take risk by providing long-term development loans to small tomedium size farmers with no tack record

Notwithstanding the above, the DFC was able to deliver-credit for export oriented projects,namely, citrus, bananas, shrimp trawlers and shrimp farms.

9

-39. ANNEX C

V.7. Credit De+>r by DFC.

Despite no demand for cocoa loans and low demand for banana expansion, opportuities forlending for banana rehabilitation and consolidation, citr improvement and expasion, andshrimp farning arose at a later stage. Consequently, DFC allocalion ofUSS2.4 million wasincreased by World Bank to USS3.9 million. At December 31st, 1996, the following wasachieved by DFC only:-

Acreaee No. of Beneficiaries Loan Amount(USS)

Projected Citrus 1,000 125 1.7 M

Actual 955 28 1.SM

Projected Banas 1,080 18 10.2M

Actual 1,308 2.7M

Projected Cocoa 1,000 125 l.OM

Actual

Projected Shrimp 200. 10 1.2M

Actual " 400 4 2.2M'

Includes 2 shrimp trawlers for .9M

(USS)

DFC allocation by World Bank - 3.9MNet Approval - 3.1M

Disbursement - 3.04M

VI World Bank's Performance

The Supervision Mission spent many hours providing guidnce to omure DFC's compliance withthe Action Plan. It also exercised some flexibility to enable approval and drawdown of loanfimds. Its assistance in implementing the Technical Assistace component (Training, Consultancyetc.) was very fruitful.

-40- ANNEX C

n tems of eligible sectors for lending, the borrower felt that more inestment projects could havebeen financed if provision had been made for fimding rice production (Import substitultion) andforestry products. Generally, World Bank's interest in the financial recovery of DFC and thedevelopment of agricultural exports was great. World Bank's performance was thereforesaisactory.

VII. Lessons Learnt

The long term future market outlook and viability of cocoa should have been studied prior to thepromotion of such crop. Identification of suitable land with accessibility, and identification ofbona fide farmers eligible for citrus loans under the programme should have been addressed priorto implementation of programme.

Detailed studies would have showm that Belize's Banana Industrv camot compete on the WorldMarket due to its high production costs. The Project should have been designed to improve andconsolidate instead of expansionL BCB'sJBGA'a policy later emphasized consolidation.Consequently fimds were lent for irrigation and rehabilitatiom Alternative possibilities that couldhave been financed e.g. rice and forestry by-products were not considered by World Bank despitethe fact that earlier AIDE Memoire allowed such

With regards to non participation by the Commercial banks, flexibility in addressing banks'concerns would have probably led to their participation.

-41- ANNEX D

Ministry ofAgrculture and FisheriesPhone Numbers:- SO1-8-22241 Fax Number: 5018-&22409

501-8-2224250J-8-22672

Ref: A12004/1/97(19) VOLV RECEIVED JUN 0 3 1997

June 3, 1997

Jonathan ParkerActing Division ChiefNawral Rosource Management & Rural Poverty Country Deparnent II1Latin America & Caribbean RegionWorld Bank1818H. Scet N.W.Washington D.C. 20433U .S.AFax: (202)-477-6391

Dear Sir:

In reference to the ImplQmentation Completion Report (ICR) on the "Belize - Agriauu}re Creditand Export Development Project (Ln 2959 - BEL)," the report reflects properly on:

(I) Project Objectives,(XI) Implementation ExpcrienccfOutput,(M) Project Peaformanco/Sustainability,(IV) World Bank's Performance,(V) and on Government of Belize Performance.

In summary, the Agiculture Credit & Export Development Project did contribute tD a morevibrant agricllture sector as reflected in increased export growth.

With High Regards

CFE ~Croccio SO"Penmne Se"tr

-43 - ANNEX DAttachment

86/06/1997 16:38 08-23673 ECONOMIC DEVELOPMENT - PkFA 01

GOVERNMENT OF BELIZEMinitry of Economic Development

P. O Box 42Fax: (501)08-23673 Ne AdministrativeTel: (501)08-22526/08-2252 Bul ing.Ref: IAYID/1/2/97(53).. Belr 8opan

Bek e, CentralAmeitcaJune 6, 1997

Mr. Jonatlhan ParkerDivision Chief (XAg.)Natural Reszuwro Management and RuralPovertyCountry Department I/.Latin America and The Caiibbean RegionThe Wordd Bank

8 118 H Street N. W.Washington, D.C. 20433..USA . .U: , A

Dear Mr Par*er

E:. BEJZE . AGRICULTURAL CREDIT AND EXPORT DEVELOPM+HT PROJECT -IMPLEMAENTATION COMPLETION REPORT

Please refer to your letter of May 13, 1997 concerning the completion of the CR for he aboveproject.

You should have received a lhtter from the Min;itry of Agriculture and Fisheries ting tha in theopinion of that Ministry, the project did contribuw postively to the developmen of the agriculturalsector in Belize. We havs received the following additional comments froms Central aik ofBelize and the. Development Finance Corporation In conne'ction with their rol .s in the project'simplementation.-

(1) Paragraph 3 of the Evaluation Summary makes ,fte,shce to the fac tha the acilons of theCentral Bank 'impeded implementation of the (credit) componenr. The omment is rathervague and we are concerned that the document does not provide a cla, d/caton of what isbeing. refened to In the statement

(2) Paragraph 4 -fnal sentence - the Development Finance Corporaion h commented thatthe report does not substantiate the observation. Since its fstablshmen the DevelopmentFinance Corporatfon has improved In operational efficiency and Is ach vng yeatty pofitsand growth. The institution's Fiv 'Year Plan projects lnding of app cimaulyBSI2tQmyear/y and growth from $54.Om to $75.Om by the end of year 2001. It also prets a

.. minimum net prorit margin of J% of total assets. The Development Fin ceCorporatfon'sLoan Portfolio'consists of a mix of agtfcutumr, indusfry, tourism, housing nd student loansThe Board and management are satisfied that self sustainability Is achi vable.

- 44 - ANNEX DAttachment

06/06/1997 16:38 08-23673 ECONOMIC DEVELOPMENT PAGE 02

-2 .

(3) Paragraph 5 - lines 5-6 - we would like to make the point that, in fact, th project did help to* ' . move the Development Finance Corporaton to a level of rinancial s f sufficiency. The

technical assistance which was received contributed significantly towa greater efficiency* in loan de/ivery loan portfolio quality, accounting practices and man menent information

sysfems. The credit component supplemented other available line of credit from theCaribbean Development Bank and the EiE. Such strengthening ss assisted in theimprovement in the performance of the Development Finance Corpon tion.

(4) The statement in paragraph 7 that the 'Central Bank acting as apex intermediarydemonstrated little interest in solving the problems which discourage private banks from

* . participating' is again cause for concerm. The Central Bank has p v/ded the followingcomments.

During 1992, much effort was expended in an effort to g t commercial bankparticipation. With the exception of Barclays Bank that indic ted from the outsettheir complete lack of interest in the project the Central Ba k along with IBRDrepresentatives held extensive discussions with commercia bank managers toaddress their concerns on several occasions. All the issues arising ftm thesediscussions were subsequently addressed in letters to these m nagers. As a nesult,the 8ank of Nova Scotia executed the Participating Agree nt in March 1993

.. . although they were not subsequently able to identify projects uitable for fnancing. - : Junder the IBRD.loan. The Belize Bank informed the Central ank in Decemrber of* .. zthat year that while the Central Bank had adequately ccv red the issues and

* . . concams it had raised, the Belize Bank did not then have any an applications thatcould be financed under the scheme. The Atiantic f3ank's lack of response toseveral letters and reminders leaves open the question as to th real reason for theirsubsequent decision not to participate in the project.

A more extensive discussion of the issues affecting the irpier, ntabon of this projectwould. no doubt become very involved. Commercial ba s' excess liquidity,satisfaction with traditional modus operandi, and inexperiene prc] t preparationand appraisal were all important issues which should have propriately factoredinto the I8RD's overall design of the project. For its part, th Centrl Bank's ownresponsibility was more than adequately camried out. In paragr h 6 of a letter to youdated July 21, 1993, the IBRD's Vicente Ferrer acknowledg d the Central Banks

* . efforts to encourage thea commercial banks to use the credit li e but also.noted that* .. ' there was a general lack of interest on the part of the banks. 7 a statements alluded

to in the IMR.D's project completion report are therefore myst, ing.

: hope that the comments and observations which have been made can be ti ken account of in thefinal draft of the Implementation Completion Report There is not the dou t that the project didcontribute to the development of the agricultural sector in Belize. I feel, howe ver, that we al wouldhave to agree that there were other extenuating circumstances which detr- :ted from the level of* success which was foreseen at the time of project design.

.. .WIMth best wishes!

Yours sincerely

YVONNE W 4 ffE:Perrnonont Sec'otary

MmnistryOf Economic Development

IMAGING

R/epoNt N.. 1-677Type.. ICR