Costa Rica - Second Import Credit Project

R E S T R I C T E D R e p o r t N o. TO-157-b This report was prepared for use within the Bank. In making it available to others, the Bank assumes no responsibility to them for the accuracy or completeness of the information contained herein. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT ON THE PROPOSED SECOND LOAN TO CONTINUE THE IMPORT PROGRAM FOR AGRICULTURAL AND INDUSTRIAL DEVELOPMENT OF COSTA RICA February 3, 1959 Department of Technical Operations  CONVERSION FACTORS Official Buying Rate 5.6 Colones a US $1 Free Buying Rate 6.6 Colones a US $1 1 Hectare a 2.4 Acres 1 Quintal a 100 lbs.  TABIE OF COMTENTS Page No. Summary 1 I - Intro&uction 2 II - The Import Program 2 III - Benefits and Justification of the Import Program 3 IV - Demand for Goods Imported under the Program 8 V - The Banking System 9 VI - Agricultural Credit 9 VII - Conclusions and Recommendations 10 APPENDICES I - Operations of the Import Program II - List of Industrial Projects III - Proposed List of Goods for New Loan IV - Balance Sheet of the Central Bank V - Profit & Loss Statement of the Central Bank VI - Consolidated Blalance Sheets of the Commercial Banks Yap - Generalized Agricultural Pegions of Costa Rica  S U M M A R Y In September 1956 the Bank made a loan of 1,3 million (IB lk7-CR) to the Central Bank of Costa Rica to finance an import program for the development of agriculture and industry. The commercial banks of the nationalized banking system having committed the full amount of the loan, the Central Bank in September 1957 requested a second loan of "P3.5 million to continue the import program. Loan 147-CR was fully disbursed by the closing date of September 1,1958. The program financed under Loan 147-CR has v'orked well. The commercial banks are efficiently managed and are in a sound financial posi- tion. There is a firm demand for the goods to be imported. Although it is too soon to fully establish the results of the program, there is every indication that it is improving the efficiency and e;panding production of agriculture and industry and will prcve to be of material benefit to the economr. The allocation of the proceeds of Loan 147-CR and estimated re- quirements for continuation of the program for tvo years as submitted with the request for a second loan, are: (In USIC000 Equivalent) TXoan 147-CR Proposed Second Loan Agriculture Equipment 970 2,000 Fertilizers 10266 5CO Industry Equipment 764 l,OCO 3,COO 3,5co The assessed demand for import goods of these categories is well above the amounts sought. A second loan of .3.5 million to the Central Bank of Costa Rica fr. & t oaAt aibout 7 years, >ith a period of grace of about two years, is recommended.  REPORT ON THE APPLICATION BY THE CENTRk.L BANK OF COSTA RICA FOR A SECfTSD LCAN TO CONTINUE THE FIIBANCING OF THE IMPORT PROGRPM FOR THE AGRICULTURAL AND IZDUSTRTAL DEVELOPMENT OF COSTA RICA I. INiTRODUCTION 1. On september 18, 1956 the Bank made a lean of .;3 million (IB 147-CR) to the Central Bank of Costa Rica to finance an import program for the development of agricultural production and related processing and light industries during the years 1956 and 1957. This loan l/ has a term of seven years, including two years of grace, and is guaranteed by the Republic of Costa Rica. 2. The full amount of the loan having been committed by the com- mercial banks of the nationalized banking system, the Central Bank of Costa Rica, in September 1957, requested a second loan of US$ 3.5 million to continue the program. 3. A Bank mission visited Costa Rica during the second half of September 1957. Since passage of en,bling legislation was delayed until late October 1958, another mission visited the country in November 1958 to review the operations of the first loan and to update information on the proposed loan. 4. This report contains the findings and recommendations of these missions. II. THE II PORT PROGRAM 5. Towards the end of 1952, the Government of Costa Rica initiated a program for the encouragement of the importation of capital goods and materials for the betterment of agriculture and industry by a special program of credits through the nationalized banking system. During 1952/56 818 credits were eranted under this program for a total of ' 31.6 million (USe 5.7 million). Early in 1956 the program was slowed down because of balance of payments difficulties. This position held until legislation ratifying Loan 147-CR was passed in March 1957. 6. Loan 147-CR covered program expenditures in foreign exchanee incurred in 1956 and 1957. Expenditures up to March 1957 when the loan became effective, amounted to $ 6.6 million (US$ 1.2 million). Of this amount