Improved Management of Productive Credit Guaranty Program Can Minimize U.S. Risk Exposure and Costs

GAO reviewed the Productive Credit Guaranty Program (PCGP) through which the Agency for International Development (AID) provides partial guarantees to private credit institutions in recipient countries to encourage lending to organized groups and individuals in carrying out credit and self-help community development projects.

Since 1981, PCGP has been at a virtual standstill in Paraguay, Bolivia, and Costa Rica due to economic recessions and problems with in-country banks and AID management. PCGP was terminated in Paraguay in 1983 and in Nicaragua in 1982, and the Costa Rica PCGP is being incorporated into a new program. Severe economic recessions contributed to declines in loan activity, high interest rates, greater arrearages, and restrictions on the money supply. Because the primary function of the central banks is currency regulation, they had little time or interest in PCGP's which contributed to poor program monitoring, control, evaluations, recordkeeping, and reporting. Because of poor reports management, AID financial liability is unclear. In 1982, all new program authority shifted from the Bureau of Latin America and the Caribbean (LAC) to the Bureau for Private Enterprise (PRE) and, in 1983, PRE signed its first project agreement with Jamaica. In addition, PRE eliminated participation by central banks and technical assistants and will deal directly with the lender.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Joseph E. Kelley Team: General Accounting Office: National Security and International Affairs Division Phone: (202) 275-5790