Guatemala - Industrial Credit Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 4.'90c-GU STAFF APPRAISAL REPORT GUATEMALA INDUSTRIAL CREDIT PROJECT January 26, 1984 Projects Department Latin America and the Caribbean Regional Office } This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Exchange Equivalents 1 Quetzal = 1 US dollar Abbrevial:ions BANDESA Banco Nacional de Desarro:Llo Agricola (National Agricultural Development Bank) BANVI Banco Nacional de Vivienda (National Housing Bank) BG Banco de Guatemala (Guatemala's Central Bank) CACM Central American Common Market CIIU Clasificacion Industrial ]:nternacional Uniforme (Uniform International Industrial Classification) CABEI Banco Centroamericano de Integracion Economico (Central American Bank for Economic Integration) CORFINA Corporacion Financiera Nacional (National Financial Corporation) FIASA Financiera Industrial y Agropecuaria, S.A. (Industrial and Agricultural Finance Corporation) FIGSA Financiera Industrial de Guatemala, S.A. (Guatemalan Industrial Finance Corporation) FISA Financiera Industrial, S.A. (Industrial Finance Corporation) GUATEXPRO Centro Guatemalteco de Promocion de Exportaciones (Guatemalan Export Promotion Center) ITC International Trade Center of the United Nations SIECA Secretaria Permanente del Tratado General de Integracion Economica (Permanent Secretariat for the General Treaty for Central American Economic Integration) SVIR The World Bank's Standard Variable Interest Rate  FOR OFFICIAL USE ONLY GUATEMALA INDUSTRIAL CREDIT PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. I. THE INDUSTRIAL SECTOR ................................... 1 A. Economic Setting ................................... 1 B. Industrial Policies and the CACM ................... 2 C. The Structure of Industry and Industrial Investment. 3 D. Industrial Exports ........................ . 5 E. Foreign Trade Development Strategy and Outlook ..... 5 II. THE FINANCIAL SYSTEM ...... ............... 8 A. The Banking System ................................. 8 BG ............................................................ 8 The Financieras .................................... 8 The Commercial Banks ............................... 10 CORFINA ............................................ 11 Other Financial Institutions ....................... 11 B. Monetary Policy and Mobilization of Resources ...... 12 C. Financing of Industry and Credit Demand .... ........ 13 III. THE PROPOSED PROJECT .................................... 15 A. Project Objectives and Institutional Structure ..... 15 Background ......................................... 15 Project Objectives and Description .... ............. 15 Institutional Structure ............................ 16 B. Investment Component -.. ................... ........ 16 Potential Intermediaries ........................... 16 Beneficiaries ...................................... 16 Operating Policies, Procedures and Guidelines ...... 17 Subproject Appraisal and Supervision .... ........... 17 Lending Terms and Conditions . ....................... 18 C. Technical Assistance and Training Component ......... 19 This report is based on the findings of an appraisal mission to Guatemala in December 1982 composed of Messrs. N.C. Hughes, M. Alonso, M. Hinds, and J.P. Wogart of the Bank, and Mr. M. Lebwith (Consultant). This report was subsequently revised by Mr. Hughes following a mission to Guatemala in December 1983. This document has a restricted distribution and may be used by recipients only in the performance of | their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Table of Contents (Continued) Page No. IV. THE PROPOSED LOAN ....................................... 21 A. General Description ........ ........................ 21 Project Cost and Financing Plan ..... ............... 21 Amount and Conditions of Loan ..... ................. 22 Procurement ......................................... 22 Commitment and Disbursement ...... .................. 23 Accounting and Auditing ....... ..................... 23 B. Project Benefits and Risks .......................... 23 V. AGREEMENTS AND RECOMMENDATIONS .. 25 LIST OF ANNEXES Annex 1 - BG's Project Unit: Statement of Operating Policies and Procedures Annex 2 - Credit Manual: Criteria for Evaluating Investment Subprojects Annex 3 - Estimated Schedule of Disbursement Annex 4 - Selected Documents Available in the Project: File Annex 5 - Supporting Tables T-1 Summary of Balance of Payments (1977-81) T-2 Tariff Protection and Composition of Production T-3 Generation and Use of Foreign Exchange by the Industrial Sector (1979-81) T-4 Sectoral Composition of Gross Production (1977) T-5 Productivity and Wages in the Manufacturing Sector (1973-81) T-6 Investment in Manufacturing (1982) T-7 Exports to Central American Common Market and Other Countries (1977-81) T-8 The Financieras - Balance Sheets T-9 The Financial System - Lending by Type of Institution and by Activity T-10 The Financieras - Income Statements T-11 The Commercial Banks - Balance Sheets T-12 The Commercial Banks - Income Statements T-13 The Consolidated Banking System Assets T-14 Financing of Industrial Firms MAP  GUATEMALA STAFF APPRAISAL REPORT INDUSTRIAL CREDIT PROJECT I. The Industrial Sector A. Economic Setting 1.01 Guatemala has a small, open economy, traditionally dependent on agricultural production and on commodity exports for its foreign exchange earnings. Agriculture is the country's largest employer, providing jobs to 53% of the labor force, and its contribution to GDP is the most important of the productive sectors (25% as against 16% for industry and 4% for construction). Agricultural exports are 62% of total exports and are the main source of foreign exchange to pay for imports from outside the Central American region, including roughly 40% of the manufacturing sector's current inputs and practically all the machinery and equipment used in the economy. 1.02 The Industrial sector employs 14% of the labor force, and produces mostly for the domestic and regional markets. While its exports now represent 30-35% of total exports, most of them go to the Central American Common Market (CACM - paras. 1.07-1.10). Since exports to the CACM only generate hard currency revenues when there is a trade surplus (and for the amount of such surplus), the Guatemalan manufacturing sector generates only a small fraction of the hard currency needed to pay for the raw materials, intermediate goods and machinery and equipment that it has to import from third countries. 1.03 Historically, commodity exports (mainly coffee, cotton, bananas, sugar, beef and recently cardamom) aided by conservative fiscal and monetary policies have helped maintain a relatively stable balance of payments and a low rate of inflation. During the 1970's, Guatemala enjoyed a significant improvement in its terms of trade, particularly during the years of the coffee boom. This allowed imports to grow at an average compounded annual rate of 18% throughout the decade, while net international reserves increased by 732%. Inflation also went up, although it remained low by Latin American standards, averaging 10.8% p.a. Consequently, Guatemala was able to maintain a strong and stable economy during the period, and achieved an average rate of growth of 5.7% in real terms. 1.04 Since 1980, balance of payments stability has been threatened due to a combination of factors. The terms of trade turned abruptly against Guatemala, caused by a fall in commodity prices and an increase in import prices. The Banco de Guatemala (BG) terms of trade index (the ratio between export and import international price indices in dollar terms) fell 44% in  -2- 1980-82, with respect to its 1979 value. Economic growth slowed in 1980, fell in 1981, and was negative in 1982-83, resuLting in an average real growth of minus 0.7% p.a. for 1980-83. Also, the deepening political crisis in the region caused significant capital flight. Until exchange controls were imposed in April 1980, capital from other countries went through Guatemala on its way to third countries, aggravating the problem posed by domestic capital outflows. In addition, the same concern for the political stability of the region caused foreign banks and suppliers to drastically cut credits to Guatemala. As a result of these devtelopments, the private component of the balance of payments (including imports of public productive enterprises) went from a deficit of US$147 million in 1979 to $623 million in 1981, of which 75% was due to the declining trade balance and 25% to private capital outflows. The government financed 55% of this deficit by reducing the consolidated banking system's net international reserves 97%, and the rest by stepping up net official capital inflows (Annex 5, Table 1). 1.05 The deteriorating situation in Nicaragua and El Salvador initially helped Guatemala to counteract the drain on its balance of payments. Exports to those countries went up steeply, mainly because intra-regional trade does not require immediate use of hard currencies. After a deficit of US$4.6 million in 1978, Guatemala achieved consecutive intraregional trade surpluses of US$31.3 million in 1979, US$222.9 million in 1980, US$185.01 million in 1981 and US$22.2 million in 1982. The scarcity of foreign exchange in other CACM countries, however, made it difficult for ]3G to collect the corresponding payments in hard currency, forcing BG to extend increasing credit to Nicaragua and El Salvador, until in mid-1982, BG decided not to allow any further increases. Guatemalan exports to the CACM have been falling since 1981, and it is estimated that intraregional trade as a whole decreased by about 5% in 1982, and by a similar amount in 1983. 1.06 Exchange controls were established in April 1980, and sales of foreign exchange became subject to prior approval of BG. As balance of payments problems worsened, BG slowed its rate of foreign exchange approvals, resulting in substantial delays to potential importers. Consequently, the lack of foreign exchange to purchase imported raw materials and components has become a critical problem which has been aggravated in recent months due to the introduction of a system of import quotas (para. 1.18). B. Industrial Policies and the CACM 1.07 The basic objective of Guatemalan industrial policies during the last three decades has been the promotion and development of an import substituting manufacturing sector on a regional scale, mainly oriented to the production of consumer goods. The instrument used to achieve this objective has been the CACM, which was created in 1961 by the five Central American countries (Guatemala, El Salvador, Honduras, Nicaragua and Costa Rica), to provide a free trade area for regionally manufactured goods. The main instruments of the CACM are: (a) a common external tariff system for extraregional imports; (b) a free trade convention for regionally manufactured goods; and (c) a common system of incentives for industrial  - 3 - investment, comprising exemptions to the payment of tariff duties on inputs and capital goods imported from outside the CACM and income tax exemptions. 1.08 Being a small market, the CACM was quickly saturated. By the late sixties and early seventies, opportunities for investment in new activities were exhausted, and growth of the manufacturing sector was limited to increases in demand for existing output. Obstacles to free trade became common, as governments tried to improve their trade balances by protecting their weakest industries against regional competition. The 1969 war between El Salvador and Honduras and the subsequent withdrawal of the latter from the CACM heightened the divisions between member countries. It was then that the Guatemalan government became interested in fostering exports outside the region, and the Centro Nacional de Promocion de Exportaciones (GUATEXPRO) was established in 1971 as an official institution to promote non-traditional exports to non-regional markets. In 1983, GUATEXPRO was abolished as part of the Government's cost-cutting program. Its functions have been taken over by the Division of Interior and Exterior Commerce of the Ministry of Economy. 1.09 The current structure of protection for most consumer goods and some intermediate goods is relatively high, unevenly distributed, and introduces a bias against exports to third countries on products with high domestic or regional content. Intermediate goods not produced in the region can be imported free of duty, but intermediate goods produced in the region enjoy substantial protection, and producers using the latter as inputs face higher costs than their competitors in international markets. 1.10 High tariffs for most consumer goods and some intermediate goods result in the achievement of balance of payments equilibrium at a lower rate of exchange than in free trade conditions. This not only discourages exports but also favors imports not subject to prohibitive tariffs. This effect has been aggravated by the cumulative difference (about 11%) between domestic and international rates of inflation during the last decade, and especially during 1973-77. As a result, the Guatemalan manufacturing sector imports 40% of its inputs from outside the CACM and generates only 20%-25% of the hard currency needed to pay for those inputs from CACM exports (Annex 5, Table 3). While the erosion of the specific part of the common external tariff has somewhat diminished effective protection, it is unlikely that the system's anti-export bias has been affected significantly, and an updated study on effective protection is needed (para. 3.13). C. The Structure of Industry and Industrial Investment 1/ 1.11 Food, beverages and tobacco, chemicals and textiles and clothing are the most important subsectors in Guatemala, accounting for 78% of gross 1/ Data in the following paragraphs are based on the 1977 manufacturing census and differ substantially from national account data, because the latter include within the manufacturing sector firms with less than 5 employees, whose output is often better classified as a service.  output and 70% of value added (Annex 5, Table 4). Backward linkages with the rest of the economy are specially important in the largest subsector, food, beverages and tobacco, which uses 75% of all domestic inputs purchased by the manufacturing sector. This subsector produces 40% of the sector's value added and 46% of its output, mainly in milling, sugar production, malt beverage production and beef packing. The second largest subsector, chemicals, is much less linked with the rest of the economy, importing 54% of its gross output. It produces 19% of the sector's value added and 21% of gross manufacturing output, mainly medicines, soaps and cosmetics, fertilizers and insecticides, plastic products and petroleum refining. Textiles and clothing, the third largest subsector, imports 50% of its output and produces 11% of the sector's value added and gross output, mainly in spinning, weaving and clothing manufacture. 1.12 Firms with more than 50 employees account for 78% of value added and 72% of employment in manufacturing, but firms with between 5-50 workers account for three-fourths the number of enterprises and one-fifth of the sector's output, employment and wages. Productivity and hourly wages are closely correlated, with both variables increasing with the size of the firm. Firms with more than 50 employees, which have a labor productivity equal to 3.2 times firms with 5 to 9 employees, pay hourly salaries 2.3 times larger (Annex 5, Table 5). Value added per unit of wage also increases with the size of the firm, but reaches its maximum in firms with 20 to 50 employees, reflecting relatively greater union strength (and thus a higher wage structure) in the largest industries. 1.13 Gross investment was very high during the boom of the mid- to late 1970s (over 20% of GDP during 1976-79) and, although it dropped thereafter, it was still high relative to the historical trend of the 1960s and early 1970s. Although data on industrial investment expenditures is not available, it can be approximated by using imports of capital goods as an indication of changes in the level of investment, and on this basis it is estimated that manufacturing gross investment declined by 25% in real terms from 1978 to 1981. Part of the investment decline can be explained by a 'wait and see' attitude adopted by potential investors due to the political uncertainty affecting the whole Central American region, and the world recession. Moreover, scarcity of foreign exchange became more severe after 1980,causing difficulties for firms dependent on imported raw materials and components. In mid-1982, the situation was still difficult; 65% of firms surveyed by BG had not realized investment outlays during the previous 12 months, and only 10% of them had realized higher outlays in comparison with 1981 (Annex 5, Table 6). Capacity utilization was low, with 57% of the firms using from 50% to 74% of their capacity, and only 21% using 75% or more. The drop in capacity utilization, however, seems to be a recent development because the combination of growing output and falling investment during 1978-80 implies that capacity utilization actually increased during that period. 1.14 Manufacturing investment can be expected to recover if foreign exchange is made available, if priority is given to the promotion of exports to third countries, and effective incentive policies are implemented to achieve this objective. Much of the existing industrial capital stock will need to be renovated, if a long-lasting export drive is desired, and the  - 5 - modernization of the industrial sector is to be achieved. The proposed project would represent a first step in dealing with these difficulties (para 4.01). D. Industrial Exports 1.15 Total industrial exports in 1980 (the latest complete data) amounted to US$321.7 million. Among industrial subsectors, the most important exports have been chemicals, which in 1980 amounted to US$111.5 million. Exporting subsectors which are still important producers, but whose shares in manufactured exports have decreased because they are less able to compete internationally, were food, beverages and tobacco (US$50.6 million) non-metallic minerals (US$20.4 million) and textile products (US$24.4 million). According to a 1973 study, the latter three subsectors produce mostly consumer goods characterized by more intensive use of local inputs and higher effective protection. Other subsectors which are becoming important exporters are metal products and machinery (US$41.9 million), rubber goods (US$23.4 million), and paper products (US$21.4 million). Subsectors which have remained relatively stagnant are leather goods (US$6.8 million) and wood products (US$6.7 million) (Annex 5, Table 7). 1.16 Although exports to Central America represent a small fraction of the Guatemalan manufacturing output (10%-15%), they initially played an increasingly important role in strengthening industrial development in Guatemala. Between 1977 and 1981, these exports doubled from US$157 million to US$303 million (Annex 5, Table 7). Although exports to third countries almost tripled (from US$23 million to US$65 million), they still represent only 18% of Guatemalan manufactured exports. Products with high-cost domestic content, such as those produced by the food, beverages and tobacco and textiles and clothing subsectors,2/ have estimated ratios of domestic to international prices (average weighted by gross output) of 1.5 and 1.6 respectively, while the less protected and import intensive chemical sub- sector shows a ratio of 1.1. As a result, chemical exports (i.e. pharma- ceuticals, soaps, perfumes and fertilizers) to third markets are almost four times as much as the other subsectors combined. E. Foreign Trade Development Strategy and Outlook 1.17 Government efforts to promote foreign trade have been limited and were focused on a "drawback" scheme (para. 1.19) and on GUATEXPRO. With assistance from the International Trade Center (ITC), the latter focused on providing (i) marketing data to associated enterprises; (ii) direct assistance to selected product groups; (iii) seminars and workshops on product design, quality control, handling/packaging/labelling; and (iv) trade fairs and trade missions to selected third markets. Overall, these efforts have emphasized the gathering, processing and dissemination of information, 2/ These subsectors consume 84% of all domestic inputs used by the manu- facturing sector.  - 6 - and a stronger effort is needed in working with individual enterprises to develop marketing strategies for specific products. A major portion of the technical assistance proposed under this project would assist in achieving this goal (paras. 3.13-3.14). 1.18 In response to the current balance of payments crisis and reduced foreign exchange reserves, the government established exchange controls (paras. 1.04-1.06). Subsequently, a tolerated parallel exchange market began to develop in which the dollar is currently being traded at a premium of 35% over the official rate. On November 14, 1982, the Government enacted Law No. 406-82 which established a system of import restrictions, based on different categories of "essentiality". According to this law, importers were allowed to buy 100% of their level of imports in 1981, if they fell under the most essential category. Products classified in category 2 could be imported up to 90% of the 1981 level, category 3 up to 70%, category 4 up to 50%, category 5 up to 30% and category 6 up to 20%. Since most industrial inputs fell into categories 3 and 4, industrial production and exports were severely hampered once inventories were drawn down and new inputs had to be imported. At the end of 1983, the regime for industrial inputs was liberalized by including most items in category 3. A further revision is planned in mid-1984, following consultations under the INF stand-by agreement. During negotiations, agreement was reached with the Government, that, as a condition of loan effectiveness, the government would take steps to exempt the beneficiaries of the project from import restrictions. 1.19 For exporters who rely on imported inputs, the import controls and other factors which raise import costs make it difficult to compete in international markets. Measures are needed which would compensate for the anti-export bias of the present system. This was attempted in the past, but multiple and often competing objectives were sought after and results were largely unsatisfactory. For example, a "drawback" mechanism was originally designed to decentralize industry rather than to promote exports. Although recent legislation has shifted the emphasis to export promotion, this measure will need to be complemented with others to provide the incentive required to generate more exports. However, in July 1983, the government introduced a tax certificate (CAT), which would allow exporters to receive a tax rebate from their receipts from sales of non-traditional goods to third countries, equal to 15% of sales for new products or existing products going to new markets, or 10% for existing products being sold in existing markets. The effectiveness of this mechanism will be examined as part of the study of export incentives to be carried out under the project. 1.20 A major issue for a successful export performance is the mainte- nance of a favorable exchange rate. The government has chosen to tolerate an unregulated parallel market while trying to control domestic inflation through strong deflationary policies. The success of this measure is based on the expectation of a recovery in world trade. This penalizes potential exporters who either do not have access to foreign exchange, or must absorb the differential between the dollar value of their exports and the amount of Quetzales they receive.  - 7 - 1.21 Over the longer-term, successful promotion of non-traditional industrial exports will require the rationalization of tariffs, as well as further development of an effective policy framework and export incentive system. Assistance would be provided under the proposed loan to help the government to carry out studies dealing with these matters.  -8- II. THE FINANCIAL SYSTEM A. The Banking Sysi:em 2.01 The banking system in Guatemala is comprised of the central bank, Banco of Guatemala (BG); 14 commercial banks, including 1 official and 1 semi-official bank, 10 Guatemalan private banks, and 2 foreign banks; 4 private financieras, Financiera Guatemalteca S.A. (FIGSA), Finaciera Industrial y Agropecuaria S.A. (FIASA), Financiera Industrial S.A. (FISA), and Financiera de Inversion;and 3 specialized 2redit institutions, the Corporacion Financiera Nacional (CORFINA), Banco Nacional de Desarrollo Agricola (BANDESA), and the Banco Nacional de Vlivienda (BANVI). Of these entities, all except BANDESA and BANVI, are presently involved in financing industry. The remainder of the financial system comprises a variety of non-bank financial intermediaries, mainly insurance companies and savings and loan cooperatives. 2.02 BG was established in 1945 as the government's central bank and fiscal agent, with responsibility for formulating and implementing monetary policy, ensuring the efficient operation of the banking system, and controlling Guatemala's international reserves. BG is administered by the Monetary Board, consisting of the Ministers of Finance, Economy, and Agriculture; representatives of the University of San Carlos (the national university), the state banks, the private banks, and the commercial, industrial and agricultural associations. BG its generally well regarded both within and outside Guatemala as a professional, well-managed and adequately staffed organization. Under the Bank's Livestock Development Project (Loan 722-GU) a special fund was created in BG for the discounting of livestock subprojects presented by qualifying financial intermediaries. BG has also managed other government funds (i.e., for guaranteeing loans to small enterprises, housing, and small farmers) and export credit lines extended by other governments. Since BG would be the executing agency for the project, the experience it has gained will be useful in carrying out its responsibilities. 2.03 The Financieras. The 1962 Decree 20,3 "Ley de Sociedades Financieras" provided the basis for establishing private financieras. FIGSA was established in 1965, FIASA in 1968, and FISA and Financiera de Inversion in 1981. FIGSA and FIASA with total assets of US$65 million and US$60 million, respectively, as of June 30, 1983, are the largest private financieras. FISA's total assets are much less (US$18 million) but FISA's main shareholder is Banco Industrial, the largest private commercial bank in Guatemala. In just two years of operation, Financiera de Inversion has acquired total assets of US$6 million. The basic objective of the financieras is to invest in, promote and/or chmnnel domestic and foreign resources to industrial, agricultural and livestock enterprises. The law allows them to subscribe shares in private firms, issue securities, guarantee issues of other enterprises, and obtain domestic and foreign loans (the latter with authorization of the Junta Monetaria). By law, financieras have  - 9 - to lend for a minimum of 3 years to investment subprojects, but they are allowed certain exemptions which enable them to provide some short-term credit mainly for financing acceptances and letters of credit. They must have a minimum authorized capital of US$ 0.5 million (or more if required by the Junta Monetaria), and they are subject to a maximum earning assets/equity ratio of 20:1.3/ Financieras are prohibited from obtaining deposits, and are subject to reserve requirements on their obligations (35% for obligations with maturities up to 30 days, and 10% for over 30 days). Like commercial banks, they cannot grant loans to a single firm for more than 20% of their equity. Financieras are also limited to financing not more than the equivalent of 25% of the paid-in capital of any single enterprise, except those they promote. In such case, for a period not exceeding two years, their share capital participations can reach up to 50%. 2.04 By mid-1983, financieras held 5.8% of the banking system's assets 4/ of US$2.6 billion and accounted for 5.7% of total industrial credit at June 30, 1983, in comparision with 2.7% and 2.0%, respectively, at the end of 1975 (Annex 5, Table 8). Financieras' assets increased in nominal terms 23% on average p.a. during 1975-1983. Growth was faster during 1977-1980, as a result of increasing credit demand fueled by the post-earthquake reconstruction program and the coffee boom; but it decreased considerably during 1981 and stagnated in 1982-83, reflecting the sharp decline in credit needs and availability resulting from the country's current problems (paras 1.04-1.06). The financieras' portfolio is mainly medium and long-term, with about 60% of their term portfolio having maturities of up to three years, and the other 40% of five years or more, with one-half of these loans going to industry (Annex 5, Table 9). 2.05 During the period 1975-1983, the financieras experienced a considerable change in their liabilities' structure, substituting domestic for foreign resources as the main source of funds. During the period, foreign resources decreased from US$9.7 million to US$7.8 million, and local resources increased from US$5.7 million to US$125.3 million. Bonds have been increasingly the most important source of local resources, 5/ representing about 83% of financieras' total liabilities by mid-1983. Factors which help to explain these trends are the increasing availability - particularly during the coffee boom - of generally lower cost local resources, and the increasing difficulties in obtaining foreign loans. Financieras' portfolio in arrears (as percentage of total portfolio) was 3.7% at the beginning and of the period; it varied considerably in 1976-1977 (part of the coffee boom years) was 3.9% at the end of 1981, and rose to 8.0% by mid-1983. The government is presently taking steps to deal with this problem (para. 2.12). In addition, 3/ As of mid-1983, the financieras maximum earning assets were 8.2 times their equity. 4/ Defined as including all financial institutions listed in para 2.01 except BG, BANDESA and BANVI. 5/ Bonds are issued with maturities between 3 and 10 years, some of them with a repurchase agreement, and yielding on average about 10% (ranging from 8%-12%) but effective yields are higher as the interest on the bonds is tax free.  - 10 - like commercial banks (para. 2.06), financieras' liquidity has increased sharply during 1981-82, and clients who accumulatetd cash surpluses were able to repay some of their arrears. The financieras' average return on assets (before taxes) varied between 2.1% and 3.9% p.a., averaging 3.0% p.a. during 1975-82. However, the average has been declining in the last five years, to 2.1% in 1983,6/ mainly as a result of a decreasing financial spread (onlending interest rates have not kept up with the increased cost of borrowings), increased competition (i.e., two new financieras were established in 1981) and the reduced credit demand of the last two years (Annex 5, Table 10). However, as the financieras have substantially increased their leverage in recent years, average return on equity has actually increased sharply, rising from 8% in 1975 to 34% in 1982, before dropping to 24% in 1983.6/ 2.06 The Commercial Banks. Fourteen commercial banks form the core of the financial system and account for about 85% of the banking system's assets (Annex 5, Table 11). The largest and most important is Banco Industrial, with total assets of US$394.7 million (as of June 1983). Banco Granai & Townson is the next largest bank, followed by Banco de Occidente, Banco Inmobiliario and Banco Agricola-Mercantil, with total assets ranging from US$202 to US$231 million. The remaining banks are somewhat specialized, relatively new, or are branches of foreign banks. After growing from US$385 million in 1975 to US$1.0 billion in 1980, commercial banks' loan portfolios grew much more slowly, reaching US$1.2 billion in 1982. About 90% and 97% of commercial banks' total and industrial portfolio, respectively, is in short-term loans of up to one year. Lending rates are fixed and there is a maximum permitted rate. Since there is also a prohibition against adjusting the rates on existing loans when the maximum rate is increased, banks find it more profitable to lend at the shortest term possible, as this increases their effective yield. 7/ Commercial banks loans made since 1975 are concentrated in industry (34%), commerce (21%), and agriculture (16%) (Annex 5 Table 9). Portfolio in arrears of commercial banks has increased considerably since 1975, particularly during 1979-81 (from 8% to 19% of total portfolio), but they declined somewhat in 1982 to 16%. Arrears were actually understated because renewals of overdue loans amounted to 27% in 1979 and 30% in 1981. 2.07 Since 1975, commercial banks, like the financieras (para 2.05), have been receiving a steadily increasing flow of local private funds, which amounted to US$1.7 bilion by mid-1983. The struct:ure of such deposits has changed slightly during the period, with the share of savings and time deposits increasing from 70% in 1975 to 79% in 1983. Commercial banks' equity also increased from US$56 million in 1975 t:o US$147 million in 1983, primarily because commercial banks are subject to a maximum earning assets/ equity ratio of 10:1. In order to keep pace with expanding operations, additional capital had to be raised. Commercial banks' return on assets (before taxes) of about 1% during 1975-1983,6/ was low (Annex 5, Table 12), 6/ Annual rate based on 10 months' earnings. 7/ Although Banks are allowed to apply adjustab].e onlending rates for loans with foreign funds, such loans have comprised only a small share of their portfolio.  - 11 - because of increasing administrative costs, (i.e., presently around 4% of assets), and additionally, during the last 2-3 years, reduced earnings due to portfolio arrears and idle assets. Because borrowing is limited to 10 times equity, return on equity has beea less than for the financieras (para. 2.05) but has averaged between 9%-14% since 1975. 2.08 CORFINA was created in 1972 as an autonomous government entity with responsibility for promoting the diversified development of the industrial, mining and tourism sectors, by sponsoring new enterprises, granting long-term loans and providing technical assistance. CORFINA had, as of June 30, 1983, paid-in capital of US$7.5 million. CORFINA started operations in 1974, lending to and promoting mainly medium and large scale enterprises. Following the 1976 earthquake, the government through CORFINA and with assistance from USAID, established an emergency assistance program to rehabilitate small- scale enterprises in the capital and handicraft industries in the highlands. By mid-1983, CORFINA's assets amounted to US$323 million (12.6% of banking system assets) of which US$166 million was invested (including equity of US$17 million and loans of US$149 million) in 16 projects promoted by this institution. Of these projects, 9 are already operating, but over half are operating with losses. The other 7 require additional investments of about US$45.0 million before they can commence operations. Although portfolio in arrears represents about 14% of CORFINA's total loan portfolio, these arrears are spread among a large number of borrowers, and portfolio affected by arrears is therefore about 90% of the total number of operations. As CORFINA's largest borrowers have only recently entered the repayment period for their loans, arrears could increase rapidly in the near future. Most of CORFINA's operations have been financed with foreign borrowings which account for about US$175 million or 58% of total borrowings. The balance is provided by BG (14%), depositors (5%) and other sources (23%). At present, however, CORFINA has no funds available for further lending, and is experiencing a considerable cash-flow deficit. Thus, CORFINA is in a very difficult financial situation, its viability as a development lending institution is in doubt, and it is not anticipated that it could meet the criteria for participation under the proposed project (para. 4.04). A high level committee, headed by the Superintendent of Banks, is presently carrying out a detailed analysis of CORFINA's financial situation and quality of its portfolio. The findings of this committee will provide a basis for the government to decide what ought to be done with the institution. 2.09 Other Financial Insitutions. The Central American Bank for Economic Integration (CABEI), although not part of the Guatemalan banking system, has been active in financing Guatemalan industry since its inception in 1961. During 1975-1982, CABEI made 57 loans totaling about US$67.0 mil- lion to Guatemalan industry (equal to about 4% of total industrial lending by the banking system). More recently, declining credit demand as well as scarcity of resources has limited CABEI's industrial activities. In 1982 only 3 industrial loans (about US$5.0 million) were made to financieras for relending to agroindustry. Data for 1983 is not yet available; however, CABEI's contribution to industrial financing in Guatemala is expected to be small.  - 12 - B. Monetary Policy and Mobilization of Resources 2.10 Guatemalan monetary policy has traditionally been based on conser- vative management of the money supply, supported by an equally conservative fiscal policy, a fixed parity with the dollar (not changed for more than 50 years) and interest rate ceilings. The slow expansion of the money supply and fixed parity helped to maintain inflation rates in the order of 1% p.a. for decades. However, during 1971-81 the money supply increased at 17% p.a. and the inflation rate went up to an average of 11% p.a., resulting in a perceptible decline in the real exchange rate with respect to the dollar. During that period, fixed parity was maintained because favorable expecta- tions regarding the long term prospects of the Guatemalan economy brought about substantial capital inflows. 2.11 In the presence of the contractionary effects of the current balance of payments crisis, net foreign assets of the consolidated banking system declined, and the banking system rapidly increased its net domestic assets, from 16.1% of GDP in 1979 to 26.3% in 1981. Most of this increase went to the central government, which had stepped up its investment expendi- tures (from 4.5% to 7.2% of GDP) in an effort to maintain the economy's rate of growth (Annex 5, Table 13). However, the large increase in internal credit was not enough to compensate for the sharp contraction of the banking system's net foreign assets, and the annual rate of growth of the money supply declined from 19% during 1971-79 to 11% in 1980-81 (approximately equal to the rate of inflation). 2.12 In 1982, the government's deficit dropped to about 4.5% of GDP as a result of cuts in investment expenditures, but two new problems have devel- oped. The combination of an increase in the supply of reserve money in a declining economy with exchange and import controls, has caused a substantial rise in the banking system liquidity in local currency. As Banks are not willing or able to increase their lending because of the depressed state of the economy, funds earmarked to purchase foreign exchange (with delays up to 7 months) are accumulating as liquid assets, causing a drop in the banks' profitability from the relatively high level of previous years. In addition, reduced sales led to erosion of profits of enterprises. As a result, arrears grew rapidly until 1981 and although they increased only slightly in 1982 and 1983, they are high, and BG is planning to provide temporary refinancing of credit in arrears at interest rates substantially lower than the original credits. To achieve this objective, BG intends to sell public bonds with repurchasing agreements at compensatory rates to financial intermediaries. The coupon rate would be about 12%, and the proceeds of such sales would be used to rediscount loans in arrears. The rediscount rate would be about 8% and BG would absorb the cost differential. An estimated Q200 million (2.3% of GDP) of credits in arrears are expected to bet refinanced in this way, thus effectively using up the excess liquidity in the banking system. 2.13 Since October 1981, commercial banks maximum interest rates have been 13% for depositors and 15% for borrowers. However, while lending rates for new operations have been charged at their maximum, deposit rates have remained well below the maximum (at 7.8% on average) as the banks' excess  - 13 - liquidity has not encouraged any increase in passive rates. Consequently, real interest rates have tended to be negative for depositors and positive for lenders. Unlike commercial banks, financieras are not subject to interest rate ceilings, and lending rates are 15% while borrowing (i.e., bond) rates are 10-11%. C. Financing of Industry and Credit Demand 2.14 Internally generated resources have traditionally been the major source of funds for the financing of industrial enterprises. A 1977 industrial survey shows that enterprises' equity and reserves provided 45% of total resources, while bank loans only provided about 23% and other sources 32% (Annex 5, Table 14). The survey also shows that only about one-third of borrowing is long term. Since 1977, however, industrial firms have been able to rely increasingly on borrowing to finance their needs, especially larger firms which were also able to borrow abroad, mainly as a result of the sizeable expansion of the eurodollar market in the mid-to-late 1970's. This situation changed during 1981-1982, however, when external credit dropped sharply (para 2.11). Larger Guatemalan firms--overall--have had greater access to long-term credit than smaller firms, since lending to small-scale enterprises involves a higher relative cost and such enterprises often cannot provide the collateral the banks require. 2.15 During 1975-83, over one-third of total credit from the banking system was channeled to industry, with an unusually high 44% (US$390 million) share of loans to industry in 1981 (reflecting CORFINA's loan for US$220 million to a pulp and paper project). The share of loans to agricul- ture remained at about 16% during the period, and the share of commerce increased from 16% to 21%. These three sectors received almost three-fourths of total lending of the Guatemalan banking system during the period. Overall, industrial credit grew by about 14% p.a. average in nominal terms (slightly over the inflation rate) during 1975-81 but slowed down in 1982 and 1983. While commercial banks have been the main source of financing to industry, the financieras and CORFINA have been practically the only sources of medium- and long-term credit. For the next several years, CORFINA's lending, if any, is expected to be very limited, because of its current problems (para. 2.08). While commercial banks are in the process of initiating investment lending the private financieras are expected to continue to be the main source of this type of financing. 2.16 It appears that overall investment credit demand is beginning to increase and prospects appear more favorable for the establishment of policies conducive to export-led investment. However, lack of foreign exchange is constraining the growth of this demand. If this constraint is eased, credit demand for rationalization of existing production (modernization of production capacity and some equipment replacement) by firms with established markets is likely to revive. Demand for investment financing, as projected by the financieras and commercial banks could amount to between US$30-40 million over the next two years, if adequate financing is made available. In addition, because of the decline of the CACM market, exporting to third markets has become urgent for many industrial enterprises,  - 14 - and an export diversification effort by the private sector with strong support from the government is vital. This, in turn, would require financing to restructure production facilities, adapt products to new markets, and satisfy the corresponding working capital requirements. If these overall trends are taken into account and a conservative: approach is adopted to investment demand projections as well as to the trend in capital goods imports to industry (para. 1.13), a demand of about US$125.0 million p.a. for imported capital goods for new investment projects as well as modernizing existing production, may be expected over the next 2-3 years. About one-third of this amount or US$40 million p.a. is expected to be financed through the financial system, of which about one-half would be financed under the proposed loan. The remainder of firms' credLit requirements would be met by commercial banks, suppliers credit, private sources, bilateral export lines of credit administered by BG, and in a few cases by direct foreign loans.  - 15 - III. THE PROPOSED PROJECT A. Project Objectives and Institutional Structure Background 3.01 The proposed project would represent the Bank's first direct support for the development of the industrial sector in Guatemala. For a number of years the Bank carried out preparatory work with a view to channeling resources for industrial financing in the Central American countries through CABEI; however, promising solutions to legal problems in connection with the provision of guarantees have only recently been found. During the 1970s CACM countries became increasingly concerned with providing direct financial support to small and medium-sized industry, while CABEI concentrated primarily on large, regionally-oriented projects. Most countries either established or strengthened existing national institutions capable of providing industrial finance, and the Bank began working with individual governments to prepare projects designed to strengthen these institutions and to deal with the needs of each industrial sector. The possibility of Bank participation in the financing of industry in Guatemala was first discussed in 1978; however, it was not until 1982 that the government was able to reach a clear consensus of how the Bank might help meet the needs of the sector. The proposed project was prepared by BG with the assistance of Bank preparation missions in June and September 1982. It was appraised in December 1982, and updated in December 1983. Project Objectives and Description 3.02 The proposed project, which would be the first Bank IDF project in Guatemala, is intended to assist Guatemalan industry, during a time of severe foreign exchange constraint. It would support the Government's strategy of promoting non-traditional industrial exports outside the CACM. It would make a start in (i) modernizing or renovating existing plant and equipment, and to a lesser degree, expanding capacity of establishing new enterprises: (ii) helping firms with export potential to diversify into third markets; (iii) encouraging improvements in the export policy framework; and (iv) helping to develop more effective mechanisms for financing exporters and smaller enterprises. To this end, the proposed project would finance the fixed asset and related permanent working capital needs of investment subprojects, and provide project-related technical assistance to the Government for evaluating its existing export promotion system, to exporters (or potential exporters) and to BG and financial intermediaries. Manufacturing, agroindustrial, and mining enterprises would be eligible to participate. At present, it appears that firms producing wooden furniture, wood products, chemicals and pharmaceuticals are in the best competitive position for expanding existing market shares or developing new non-regional markets. It is expected that firms in these subsectors would be the major beneficiaries of the project, as well as selected firms in such subsectors as clothing, food products, leather goods and rubber products.  - 16 - Institutional Structure 3.03 The Project Unit, which would carry out the proposed project, would be the Seccion de Credito Bancario of BG's Departamento de Credito. The Project Unit would help train staff from financial intermediaries to assist in project implementation, and would use its own full-time staff, which would include a sub-director (sub-Jefe), who would be responsible for implementation of the project. As it may be difficult to obtain the full-time services of a qualified engineer, BG would undertake to utilize consulting services as necessary to obtain the required expertise. The appointment of a sub-director for the Project Unit would be a condition of loan effectiveness. The sub-director would be responsible for managing the operations of the unit, and would report to the director of the Seccion de Credito Bancario in BG's Credit Department. The Project Unit's financing operations would be governed by a Statement of Operating Policies and Procedures (Annex 1) and investment subproject appraisal and supervision criteria would be established in a Credit Manual (Annex 2). Project funds would be channeled through a separate account established in BG. Financial accounting would be handled by the appropriate departments of BG. B. Investment Component Potential Intermediaries 3.04 The financieras are the only financial institutions in Guatemala that presently make long-term loans to industry. The financieras have the orientation and staff necessary to help prepare and evaluate investment subprojects and would account for most of this type of lending. Two finan- cieras, FIASA and FIGSA, which have been in operation for over a decade, are expected to be the most important intermediaries using Bank funds. Together with FISA and Financiera de Inversion, they are expected to account for about US$14 million, or over three-fourths of the utilization of the US$17.9 mil- lion allocated to the investment component. While it is difficult to tell at this time exactly which commercial banks would participate under the proposed loan, several of the more dynamic banks are expected to be active in seeking new lending opportunities and would utilize a relatively small portion of the loan. To encourage as many financial institutions as possible to participate, no more than US$5 million could be cDmmitted by any single intermediary. The adequacy of this requirement would be reviewed not later than September 30, 1985. Both financieras and banks would need to take steps to train existing staff, to hire new professional staff or to contract outsiders, as needed, to carry out project evaluation and supervision tasks in conformity with the Project Unit's requirements. With appropriate training, commercial bank loan officers can be expected to become proficient in project evaluation and supervision procedures. Beneficiaries 3.05 The investment component would assist industrial firms which are planning investments to establish new plants or to expand, modernize or  - 17 - restructure existing production capacity, provided that the firms are or will become internationally competitive. The project would also help enterprises with total assets--excluding land--of less than US$250,000 equivalent, as of December 31, 1983, which have been defined as small-scale enterprises (SSE). The proposed project would support lending to such enterprises, which account for over two-thirds of the number of firms, by providing additional inducements for banks to lend to such firms. To avoid concentrating investment financing in a few larger firms or groups of firms, Bank financing for investments by any single enterprise or its subsidiary would be limited to US$1.5 million. On an exceptional basis, this requirement could be waived provided that: (i) the firm would produce non-traditional exports and would export at least 50% of its output to non-CACM markets; and (ii) financing required over this limit would be essential if the firm were to meet its export goals. A lower limit of US$10,000 would also be established. Operating Policies, Procedures and Guidelines 3.06 The policies and procedures that would govern the Project Unit's investment financing operations are set forth in a Statement of Operating Policies and Procedures (Annex 1). It specifies, among other things: (i) financing objectives; (ii) the type of subprojects that would be financed; (iii) the terms and limits of financing; (iv) the criteria for subproject approval; and (v) the responsibility of financial intermediaries. Guidelines for subproject appraisal and supervision would be established in the Credit Manual (Annex 2), which would be used by the Project Unit and all participating intermediaries. The Statement of Operating Policies and Procedures and the Credit Manual as presently drafted would form a satisfactory basis for BG channeling of Bank funds for investment subprojects under the proposed project. Agreement on the content of both documents was reached during negotiations, and approval by BG's Board would be a condition of loan effectiveness. Any subsequent modification of these documents would require prior Bank authorization. Subproject Appraisal and Supervision 3.07 Commercial banks and to a lesser degree the financieras, need addi- tional trained staff to identify, prepare and appraise subprojects. During the initial phase of project implementation the Project Unit would work directly with financial intermediaries as well as potential beneficiaries in this task. In addition, consulting expertise would be made available to coordinate and supervise this effort, and formal training would begin as soon as possible, but not later than September 30, 1984. In line with the requirements of the Credit Manual, the depth and sophistication of subproject appraisal would be varied to fit the size and nature of subprojects. Invest- ment subloans to medium-sized enterprises would be subject to a detailed review of their technical, financial, market and economic aspects, of both the enterprise and the subproject. For investment subloans above US$200,000, the economic rate of return (ERR) would be calculated by the Project Unit, using standard Bank DFC guidelines. Subloans to SSEs would be subject to simpler appraisals, focussing on the key market and technical variables, repayment capacity and on the financial rate of return (FRR). All appraisals  - 18 - would include an analysis of the procurement prDcedures applied (para 4.05), as well as of certain key economic indicators, (e.g., output, employment, value added, foreign exchange earnings/savings) to assist in monitoring of the impact of subprojects. 3.08 The first five investment subprojects submitted by the Project Unit would require the Bank's approval regardless of subloan size. This would enable the Bank to assess in detail the initial appraisal efforts of the Project Unit, and to provide feed-back and assistance where necessary. Thereafter, Bank approval would be necessary only for investment subloans above US$200,000. This procedure is expected tD result in a review by the Bank of 25-30 subprojects covering about one-half of the investment compo- nent. 3.09 Initially, subproject supervision would focus on follow-up by financial intermediaries of subloans during their disbursement periods to ensure proper utilization of funds. Financial intermediaries would be expected to assume primary responsibility for supervision of subprojects and BG's own direct supervision would be planned to support and monitor their efforts. Although intermediaries would work closely with industrialists in the preparation of appraisals and supervision of subprojects, and would bear the credit risk, BG would have the ultimate responsibility for ensuring the quality of appraisals and effectiveness of supervision. Lending Terms and Conditions 3.10 Bank funds would be relent in Ouetzales. The interest rate to the sub-borrower would be variable and equal to the Bank's standard variable interest rate (SVIR) plus up to 5%. This would include maximum fixed spreads to financial intermediaries of 4% for small-scale subprojects and 3% for medium-scale subprojects, with a spread to BG of 1% and 2%, respectively. The maximum terms for investment subloans would be 12 years, with up to 3 years of grace. Appropriate maturities for each subloan would be established on the basis of cash flow projections for each subproject. 3.11 The Bank would finance the direct and indirect foreign exchange costs involved in the purchase of (i) fixed assets, including machinery, equipment, and their installation costs, repair or replacement parts, build- ings, and infrastructure costs related to the construction of the new facili- ties; (ii) current assets, including incremental permanent working capital needs related to investment subprojects. The foreign exchange component would be calculated as follows: (a) imported machinery, equipment, spare parts, inputs and consulting and training services; 100% (b) locally purchased machinery, equipment, parts, and inputs; 60% (c) buildings, related infrastructure, and installation costs of machinery and equipment. 40%  - 19 - 3.12 Bank financing of foreign exchange costs of investment subprojects would be subject to an overall limitation of 65% of the total project cost of new enterprises and 80% for existing enterprises; excluding land but includ- ing fixed assets to be financed under the proposed subproject. On average, the Bank would finance about 63% of the total investment cost involved. Beneficiaries would need to provide from their own resources, a minimum of 10% of the total cost of restructuring, modernization or expansion of exist- ing enterprises and 25% of the cost of new enterprises. Financial inter- mediaries would provide sufficient funds to complete the financing required (i.e., averaging about 20% of subproject costs). C. Technical Assistance and Training Component 3.13 The project's technical assistance and training component would focus on aiding the Government in evaluating how to strengthen its export promotion system, assisting exporters of non-traditional products to develop new markets outside of the Central American region and on training staff of the Project Unit and participating financial intermediaries in the preparation, appraisal, and supervision of subprojects. The Government would be assisted in developing an export promotion strategy through a review of the existing system of export incentives, institutional framework and financial mechanisms. Expertise would be provided to study (i) levels of effective protection of individual industrial products; (ii) alternatives for providing incentives to exporters; and (iii) the need for additional financial mechanisms for exporters. Under the direction of the Project Unit, technical assistance in market development would be provided to potential exporters to enable them to determine the export potential of specific products, to identify product quality and design standards required in third markets, and to develop test marketing and promotional strategies for entering specific markets. Individual and group training of Project Unit and financial intermediary staff in project evaluation and supervision is expected to take place both prior to and following loan effectiveness. More formal training based on course curriculum would be used to train staff of financial intermediaries and new Project Unit staff during the first two years of project implementation. The Government would also receive assistance in carrying out a study of possible ways of stimulating and supporting the growth of SSE. The study would focus on identifying policy and other constraints to the growth of such enterprises as well as the best means of eliminating such constraints. 3.14 Technical assistance and training to be provided under the proposed project would amount to about 165 man-months of consulting services at an average cost of US$12,121 per man-month (including administrative overhead, salaries, international travel and subsistence). Bank funds would be on-lent by BG in Quetzales and through financial intermediaries at a rate up to the Bank's SVIR plus a 1% spread to the financial intermediary, which represents an appropriate cost for the beneficiary. In the case of direct technical assistance to BG or other Government entities, BG would receive the funds as a grant. The maximum term for technical assistance subloans would be 5 years with up to 2 years of grace. The total cost for this component would be US$2,000,000 in accordance with Table 3.1 below:  - 20 - Table 3.1: Technical Assistance Beneficiary Assistance Man-Months US$ Cost Project Evaluation BG/Financial (1) Advisor on project Intermediaries preparation, appraisal and supervision 12 120,000 (2) Training seminars on project preparation, appraisal and supervision 7 150,000 19 270,000 Export Marketing BG/Individual firms (1) Market analysis, exploration and selection 30 350,000 (2) Market preparation (adapta- tion or development of product concept, design, quality, packaging, labelling) 35 400,000 (3) Market promotion, test marketing, market penetration 52 625,000 117 1,375,000 Export Policy Development BG/Ministry of (1) Study levels of effective Economy protection in industry 12 150,000 (2) Compare alternative incentive systems for industrial exporters 6 75,000 (3) Review adequacy of export financing mechanisms 3 35,000 21 260,000 Small-Scale Enterprise Development BG/Ministry of (1) Study the most appropriate means Economy for promoting the development of small-scale enterprises 8 95,000 TOTAL 165 2,000,000 3.15 BG would prepare the terms of reference and subproject document (indicating work program, expertise required and implementation schedule) for each sub-component and submit them to the Bank for its approval. The selection of consultants would be carried out in accordance with the Bank's guidelines for the use of consultants.  - 21 - IV. THE PROPOSED LOAN A. General Description Project Cost and Financing Plan 4.01 The total cost of the project is expected to amount to US$32 million of which the Bank would finance US$20 million, or 63%, amounting to the expected foreign exchange cost involved. Participating financial institutions would provide US$6.5 million equivalent (20% of the total), project sponsors would contribute US$4.5 million (14%) and BG would finance US$1.0 million equivalent (3%). The financing plan for the project is contained in Table 4.1 below: Table 4.1: Project Financing Plan (in US$ millions) Percent Foreign Local Total of Total Investment Component IBRD 17.9 - 17.9 56 Intermediaries - 6.5 6.5 20 Sponsors - 4.5 4.5 14 Subtotal 17.9 11.0 28.9 90 Technical Assistance Component IBRD 2.0 - 2.0 6 BG - 1.0 1.0 3 Subtotal 2.0 1.0 3.0 9 Front-end Fee on Bank Loan 0.1 - 0.1 1 Total 20.0 12.0 32.0 7/ 100 7/ Including price contingencies.  - 22 - Amount and Conditions of Loan 4.02 The proposed loan of US$20 million including a front-end fee of one-fourth percent of the loan amount, would be made to the Republic of Guatemala at the Bank's SVIR (presently 10.08%) and standard commitment fee. The government would assume the cross-currency risk, and would on-lend the proceeds of the loan in US dollars to BG on the same terms and conditions as the Bank loan to the government, except for US$625,000 which would be given to BG as a grant to finance technical assistance to public entities. The signing of a subsidiary loan agreement between the government and BG would be a condition of loan effectiveness. The proceeds would be allocated as follows: US$17.9 million for the financing of investment subprojects and US$2.0 million for technical assistance. BG would channel the proceeds of the loan to industrial borrowers, through financial intermediaries that meet BG conditions for participation (para. 4.04). Repayments to the Bank would be made over a fixed 17-year term, including 4 years of grace. The surplus of repayments to BG over repayments due to the Banlk would be relent for purposes consistent with those of the project. 4.03 Based upon the Bank's SVIR, final rates to beneficiaries, after including a spread for BG and financial intermediaries, would range from about 11% for technical assistance to about 15% for investment financing in Quetzales. Inflation has declined from 11.0% in 1981 to 6.5% in 1982-83 and is expected to continue at relatively low levels thereafter. Consequently, the proposed rates would be positive in real terms. However, agreement was reached at negotiations for a review of the above interest rate structure no later than August 31, 1985, and annually thereafter. 4.04 Intermediaries would be required to sign participation agreements with BG, which would detail the intermediaries' responsibility to: (i) maintain a sound financial condition; (ii) appraise projects in accordance with BG guidelines; (iii) supervise projects to ensure that resources had been used for the purpose intended and that projects were progressing on schedule; (iv) adhere to terms of lending and repayment of loans; (v) ensure that procurement and disbursement provisions are met; (vi) maintain adequate records on Bank-financed projects; and (vii) provide the Project Unit and the Bank with periodic reports on subprojects financed and under study. As a condition for loan effectiveness, the Bank would need to receive signed satisfactory agreements between BG and at least three intermediaries. Procurement 4.05 The proceeds of the loan would finance the foreign exchange costs of imported and locally procured equipment, materials, civil works and services. Consulting services for subprojects or technical assistance for the project would be open to international recruitment, and will be selected in accordance with "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency", published by the Bank in August 1981. For investment subloans, participating intermediaries would satisfy themselves that procurement items are suitable for the respective subprojects and reasonably priced, and that the beneficiaries are purchasing from the most advantageous source. In cases where it may be difficult or too  - 23 - costly to obtain three quotations because of the smallness of the order, this requirement could be waived if adequate justification is provided. All subproject appraisals would include a discussion of procurement procedures used, responses received, prices quoted and criteria for selection of suppliers. It is not expected that any single contract would exceed US$750,000. Commitment and Disbursement 4.06 Full documentation would be required based on an approved list of goods and services for all investment subprojects. Since the two-tier system involving BG and the financial intermediaries requires a longer time for processing of subprojects than is usual for single-tier loans, disbursements for investment subloans would be made for expenditures incurred up to 180 days prior to the receipt by the Bank of the particular subloan request. 4.07 Disbursements under the proposed loan are expected to be consistent with regional and bankwide disbursement profiles of IDF lending. The final date for submission of subproject proposals would be June 30, 1986 and the closing date for disbursements would be December 31, 1987. Accounting and Auditing 4.08 BG would maintain separate project accounts in accordance with accounting principles consistently applied and in a form satisfactory to the Bank. The project accounts would be audited annually by the Superintendencia de Bancos or by independent auditors acceptable to the Bank. The annual audit would include a balance sheet, statement of income and expenses, and a statement of sources and application of funds. Supplementary data on project objectives, operations, quality of portfolio, and scope and quality of work carried out by BG and the financial intermediaries would also be provided. The annual audit report in a scope and format satisfactory to the Bank, would be submitted to the Bank not later than four months after the end of each BG fiscal year. In addition, BG would forward to the Bank quarterly reports on the project's financial situation and operations. B. Project Benefits and Risks 4.09 The proposed project would represent a significant step in helping the Guatemalan Government to address the problems faced by non-traditional exporters of industrial goods in dealing with unfavorable terms of trade; and by producers with obsolete plant and equipment who need to modernize or renovate their facilities. Such enterprises would be assisted in re-orienting these productive facilities to become more efficient producers, and to obtain scarce foreign exchange resources. The project also would assist small-scale enterprises to play a greater role in the growth of the sector. In addition, the project would provide technical assistance to existing and potential non-traditional exporters in diversifying their markets, and would strengthen the capability of the financial system to appraise and supervise subprojects. The proposed project is expected to  - 24 - finance some 60-80 industrial subprojects involving total project costs of about US$32 million, focussing on a wide range of small and medium-sized enterprises. The project is expected to have a substantial employment impact, generating a total of about 1,500-1,600 new jobs, at an average total fixed investment cost per job of around US$20,00 in 1983 prices. 4.10 In addition to meeting the immediate need for a stronger export performance, technical assistance contemplated under the proposed project would assist the government in resolving longer-term problems by studying the most appropriate means of developing a policy framework for export development, and for measuring the efficiency of industrial enterprises. Based on the financieras subproject pipeline, the bulk of the financing is expected to go to the chemicals, wood products, food, beverage and tobacco, clothing, and metal-mechanics subsectors. 4.11 The project is expected to contribute to the institutional develop- ment of the financial system. It would focus on widening financial inter- mediation and supporting BG's efforts to build-up subproject appraisal and supervision capabilities of participating intermediaries. The capability of financial intermediaries to lend to SSEs is expected to be strengthened con- siderably. 4.12 As conceived, the proposed project does not involve any unusual risks. However, because the institutional arrangements established under the project would be new and intermediaries would need to develop their capabili- ties in project appraisal and supervision, some initial delays in subloan processing may occur. This risk would be considerably reduced by rapid implementation of the technical assistance and training component. A continuation of the unsettled political situation in Central America and the failure of world trade to revive may also cause some firms to postpone investment decisions; however, this risk has been taken into account in the definition of the loan amount. In addition, the Bank would closely supervise the initial phase of project implementation.  - 25 - V. Agreements and Recommendations 5.01 During negotiations agreement was reached with the government and BG on: (i) the amount, allocation and terms and conditions of the proposed loan (paras. 3.10-3.12, 3.14, 4.02, and 4.03); (ii) the scope and arrangements for implementing the technical assistance component (paras. 3.13-3.15); (iii) the staffing of the Project Unit and the appointment of a sub-director responsible for carrying out the project (para. 3.03); (iv) the content of the Statement of Operating Policies and Procedures, and the Credit Manual (para. 3.06); (v) a procedure for reviewing the adequacy of onlending rates to subborrowers (para. 4.03); and 5.02 Prior to loan effectiveness: (i) a subsidiary loan agreement between the government and BG, satisfactory to the Bank, would be signed (para. 4.02); (ii) BG's Board of Directors would (a) adopt a Statement of Operating Policies and Procedures and a Credit Manual (para. 3.06) and (b) appoint a sub-director for the Project Unit (para. 3.03). (iii) at least 3 financial intermediaries would have signed satisfactory participation agreements with BG (para. 4.04); and (iv) the Government would take steps satisfactory to the Bank to exempt beneficiaries under the loan from import restrictions (para. 1.18). 5.03 The proposed loan constitutes a suitable basis for a Bank loan of US$20 million to the Banco de Guatemala on the terms and conditions outlined in Chapter IV.  -26 - ANNEX 1 Page 1 of 6 GUATEMALA: INDUSTRIAL CREDIT PROJECT BG's PROJECT UNIT: STATEMENT OF OPERATING POLICIES AND PROCEDURES A. Policies 1. The objectives of the BG's Project Unit shall be to promote industrial development especially in sectors that generate foreign exchange, create new jobs, and increase the use made of Guatemalan natural resources. Such sectors would be: (a) manufacturing; (b) agro-industry; (c) forestry and lumber; (d) fishing industry; (e) mining; and (f) services directly associated with these sectors. 2. In order to accomplish those objectives, the Project Unit shall: (a) operate through financial intermediary institutions to finance (i) well-designed projects for the creation, expansion, or restructuring of production capacity, especially that of small- and medium-scale enterprises; and (ii) production inputs required by non-traditional exporters; (b) ensure that non-traditional exporters and small-scale enterprises (SSE) are given the access to credit and technical assistance they require for proper project preparation and implementation; (c) encourage financial intermediary institutions to assist borrowers in improving the techn:ical and financial aspects of their project preparation and to develop their capabilities for project appraisal and superviision. 3. The Project Unit shall make use of its resources for the following purposes: (a) to grant loans through financial intermediary institutions for the purchase of (i) fixed assets such as machinery and equipment (installation costs included), buildings, handling and storage facilities, and related civil engineering works; (ii) permanent (i.e. incremental) working capital needs for related investment subprojects; (b) to meet payment of all costs and commissions arising out of its own activities; and (c) to effect any other financial transactions connected with its objectives.  -27 - ANNEX 1 Page of 6 4. The Project Unit shall establish a maximum limit on the financing of each investment subproject. This limit shall be cumulative, taking into account the outstanding balance of previous Project Unit's loans to the enterprise, or to any subsidiary enterprise. 5. Investment subloans shall be expressed in Quetzales and BG shall cover the foreign exchange risk associated with such operations. 6. Projects for which credit financing is sought shall be judged on the following criteria: (i) economic and financial viability; (ii) genera- tion of foreign exchange; (iii) generation of value added; (iv) use of domestic raw materials, goods and services; (v) employment generation; and (vi) other financial and technical factors, depending on the nature of the particular project. For projects which shall require financing by BG (from whatever source) in excess of US$200,000 equivalent, their evaluation shall include a calculation of the economic rate of return for the project. 7. The Project Unit shall operate for an indefinite period and shall employ sufficient staff to attend to the activities of project preparation, promotion, appraisal and supervision, including the necessary administrative functions. Its principal resources shall consist of funds allocated to it by BG from the proceeds of loan agreements entered into with national and inter- national financial institutions, its own earnings and funds coming to it from any other source. 8. The Project Unit shall encourage participation by as many inter- mediary institutions as possible, avoiding a concentration of financing through any single one of them. To this end, the Project Unit shall set a limit of US$5 million on the participation by any financial intermediary. 9. In order to be accepted as a participating financial intermediary, a financial institution must be properly equipped to appraise and supervise long-term loans, sign a contract establishing the conditions of participation and corresponding obligations, and meet any other requirements prescribed by the Project Unit. 10. In financing subprojects, the Project Unit shall, if required, provide financing in conjunction with financial intermediaries and sub- borrowers, and to that end it shall establish the appropriate structure for participation. 11. The interest rates payable by borrowers and the spreads to finan- cial intermediary institutions shall be as set by BG in conformity with those agreed upon with the corresponding source of funds. 12. Maturity periods on loans granted by the Project Unit shall be established on the basis of cash flow projections of each subproject and enterprise, and on the type of asset to be financed. 13. Financial intermediary institutions shall make financing available to sub-borrowers on the terms and conditions established under the project, except for the interest rate on its own counterpart funds, which shall be as established by BG.  - 28 - ANNEX 1 Page 3 of 6 14. Loans made available to intermediary institutions for the financing of subprojects shall be subject to the following conditions: (a) they may be granted only to financial intermediaries operating in accordance with the laws of Guatemala; (b) the financial intermediary must ensure that the borrower will have access to sufficient funds to complete its financial plan, including the financing of its working capital needs; (c) the financial intermediary shall, as much as possible, help applicants to prepare their studies of technical, financial, and market aspects of their subprojects in an acceptable form that will facilitate appraisal; as well as conduct the subproject appraisal and supervision as established by the Project Unit; (d) the financial intermediaries shall repay their loans from BG punctually, even if they have not been reimbursed by their sub-borrowers; they shall also pass on to BG any repayments received in advance from sub-borrowers; (e) financial intermediaries and beneficiaries shall comply with all such terms, conditions, and requirements as may be established by the Project Unit. 15. The Project Unit shall only finance projects for which alternative financing on reasonable terms is not available i-rom other sources. 16. The Project Unit shall maintain separate accounts and keep proper records of its operations, which shall be duly audited; it shall also set up a well-designed system for the retrieval of information on its activities. 17. The Project Unit shall conduct periodic reviews of the results of its operations, the participation by financial itntermediary institutions and the results given by subprojects financed, then making recommendations for, or itself carrying out, whatever adjustments it deems necessary for the accomplishment of its appointed objectives. B. Procedures BENEFICIARIES ARTICLE 1: Individuals or corporate bodies meeting the following requirements may be beneficiaries:  - 29 - ANNEX 1 Page 4 of 6 (a) those establishing a new enterprise or expanding or restructuring existing production capacity, provided the amount of the BG loan applied for does not exceed US$1.5 million and is not less than US$10,000, or the equivalent in Quetzales. The upper limit shall be cumulative, including any other outstanding debt balance from other BG subloans under the project to the subborrower, or any of its subsidiaries. (b) those with the managerial, technical, and financial capacity to implement their projects efficiently. TERMS AND CONDITIONS AFFECTING OPERATIONS ARTICLE 2: Within the limits enunciated, the following provisions shall apply: (a) the Project Unit may finance up to 65% of the value of fixed assets (excluding land and including the assets to be financed) and permanent working capital of a new investment enterprise, or up to 80% when an existing enterprise is being expanded; intermediary financial institutions shall contribute not less than 10% from their resources, while the sub-borrower shall meet the remainder of project costs, but not less than 10% of the total cost of the expansion or modernization of an existing enterprise, or 25% of the total cost of a new enterprise; (b) the Project Unit shall not provide financing: (i) to cover existing debts or debts to third parties; (ii) for the rental or purchase of land or commercial buildings; (iii) for the purchase of securities; (iv) for the payment of dividends or recovery of investment capital; (v) for used goods, except when appraised or guaranteed by a firm of recognized capability or solvency; and (vi) to pay taxes or other fiscal liabilities of beneficiaries; (c) small scale enterprises (SSE) are those firms having total assets, excluding land, of less than the equivalent in Quetzales of US$250,000, as of December 31, 1983; and (d) for technical assistance subprojects, the Project Unit shall follow the following procedures: (i) prepare terms of reference and subproject document satisfactory to the Bank indicating the objectives of the assistance proposed,  -30 - ANNEX 1 Page of 6 including a detailed work plan and implementation schedule for carrying out these objectives and indicating the functions to be carried out by consultants to be financed under the subproject; (ii) select consultants in accordance with procedures satisfactory to the Bank, indicating the number of proposals received, the proposal selected and reasons for its selection. INTEREST RATES, SPREADS AND COMMISSIONS ARTICLE 3: The interest rate payable by loan beneficiaries on funds provided by the Project Unit shall be up to the Bank's SVIR plus 1% for technical assistance subloans, and up to the Bank's SVIR plus 5% for investment subloans. Participating banks themselves shall set the rate payable on funds lent directly from their own resources, within the limits laid down by BG. ARTICLE 4: Spreads for financial intermediaries would be 4%, 3% and 1% for subloans to SSE's, medium-sized enterprises and for technical assistance, respectively. ARTICLE 5: Financial intermediaries shall pay a commitment charge at the rate of 0.75% per annum on the principal amount of the Project Unit's loan not withdrawn from time to time. Such commitment charge shall accrue from the date of the loan agreement between the Project Unit and the financial intermediary. The commitment charge is transferable to the subborrowers. MATURITY PERIODS ARTICLE 6: The maximum loan repayment period shall be determined in each case by the participating intermediaries and the Project Unit, within the following limits: (a) for investment subprojects; up to 12 years, including 3 years of grace and (b) for technical assistanc:e subprojects; up to 5 years including 2 years of grace. Repayment installments may be scheduled on a monthly, quarterly or semi-annual basis by the financial intermediary, in accordance with the nature of the particular subproject. PROCESSING OF LOAN APPLICATIONS ARTICLE 7: A proposed subproject shall be appraised by the participating intermediary in accordance with the Credit Manual issued by the Project Unit. Both the feasibility study and the appraisal report shall be forwarded to the Project Unit, which shall analyze them and recommend appropriate action to BG's Credit Committee, which will have the responsibility for approving or disapproving all subprojects. If the funding to be made  -31 - ANNEX 1 Page 6 of 6 available by the Project Unit with resources from abroad is over US$200,000 or its equivalent in Ouetzales, BG's decision must be ratified by the World Bank. ARTICLE 8: Once a loan application has been approved, notification shall be sent to the participating intermediary, accompanied by a statement as to the amount of the subloan that will be granted. ARTICLE 9: After receipt of notification of approval, the participating intermediary shall provide the Project Unit with a copy of the loan contract entered into with the beneficiary. ARTICLE 10: Requests for disbursement from the Project Unit shall be accompanied by the documentation specified in the Credit Manual as required as evidence of purchase or intent to purchase the goods and services in question. ARTICLE 11: These Regulations shall come into effect on  - 32- ANNEX 2 Page 1 of 9 GUATEMALA: INDUSTRIAL CREDIT PROJECT CREDIT MANUAL: CRITERIA FOR EVALUATING INVESTMENT SUBPROJECTS (Spanish version) I. El PROYECTO: RESUMEN, CONCLUSIONES Y RECOMENDACIONES A. Resumen y Conclusiones 1. a) Breve descripcion y proposito; b) patrocinadores del proyecto (la empresa y sus accionistas); c) factibilidad tecnica y comercial; d) plan financiero, indicando (i) el costo detallado de las inversiones necesarias en moneda extranjera y moneda local; y (ii) cada fuente de financiacion para cada bien o servicio que sea financiado; e) evaluacion financiera; f) evaluacion economica. B. Recomendaciones 1. Condiciones a ser incluidas en los documentos legales; 2. recomendaciones y justificaciones para cualquier arreglo especial antes: - de la firma del contrato - del inicio de los desombolsos. II. LA EMPRESA: ANTECEDENTES Y ACCIONISTAS 1. Descripcion de la empresa y del proraotor a) Nombre, naturaleza y evolucion, fecha y lugar de la constitucion de la empresa; una resena historica de la misma; y lineas de produccion actuales; b) informacion sobre los propietarios, accionistas y promotores; capitalizacion y control de la erapresa; principales accio- nistas y participacion de invers:Lonistas extranjeros;  - 33 - ANNEX 2 Page 2 of 9 c) experiencia previa de la empresa y los accionistas con el BG, incluyendo los diferentes creditos otorgados, historia de recuperaciones, prestamos en mora, y el saldo; b) informacion sobre otras empresas afiliadas a la solicitante del credito, incluyendo la participacion de cada empresa afiliada en la capitalizacion de la solicitante. III. LA EMPRESA: ADMINISTRACION Y ORGANIZACION 1. Miembros del Directorio de la Empresa a) Nombres y calificaciones pertinentes, experiencias y representacion: b) descripcion de responsabilidades. 2. Organizacion a) Organigrama de la empresa, especificando la estructura de la organizacion, numero de empleados por cada unidad de la organizacion y las distintas categorias de empleados; b) canales de comunicacion dentro y entre unidades organizacionales; delegacion de responsibilidades; c) sistemas de control interno (personal, productividad, inventario, contabilidad de costos, etc.); d) sistema de tomar decisiones en cada nivel de responsibilidad; e) sistema de planeamiento, programacion y presupuesto. 3. Relaciones de trabajo a) Aplicacion y efectos de las legislaciones laborales, practicas gremiales; b) escalas de salarios, seguridad social, sistema de incentivos, otros beneficios. IV. LA EMPRESA: OPERACIONES 1. Sistema de Produccion a) descripcion del sistema de produccion actual: b) ampliaciones recientes, diversificaciones, adquisiciones y consolidaciones de produccion: c) volumen anual de produccion por principales lineas de productos - de ser posible los cinco anos;  - 34 - ANNEX 2 Page 3 of 9 d) utilizacion de la capacidad de produccion; 2. Sistema de Ventas a) Volumen anual de ventas por principales lineas de productos - de ser posible los ultimos cinco anos; b) el porcentaje de mercado cubierto pcr la empresa para cada pro- ducto y las principales empresas comLpetidoras; en el caso de exportaciones especificar todos los otros factores (i.e. calidad, presentacion, transporte, tarifas, distribuciones, etc.) que afectan la capacidad de la empresa de competir en cada mercado extranj'ero; c) sistema de mercadeo. V. LA EMPRESA: SITUACION FINANCIERA 1. Analisis financiero de ser posible de los ultimos cinco anos a) balances; b) perdidas y ganancias; c) fuentes y usos de fondos; d) indices financieros y tendencias; e) analisis de la solidez financiera y rentabilidad de la empresa. 2. Auditoria externa a) nombre y experiencia del auditor externo; b) conclusiones, recomendaciones, comentarios y opiniones del auditor. VI. LA EMPRESA: CONCLUSIONES SOBRE FORTALEZAS Y DEBILIDADES VII. EL PROYECTO: PROPOSITO E INVERSIONES PROPUESTAS 1. Proposito del proyecto y diseno a) descripcion del proyecto y su proposito; b) existencia de procesos de produccion alternativos y su eficiencia relativa; c) justificacion de procesos selecciona,los.  -35 - ANNEX 2 Page 4 of 9 2. La Inversion Propuesta a) Lista de las principales maquinarias requeridas y sus especificaciones, capacidad instalada, numero de turnos, dias de operaciones por mes y por ano; b) disponsibilidad de maquinaria (locales, importaciones), tiempo de envio del fabricante, servicio y suministro de repuestos; c) base para seleccion entre por lo menos tres proveedores (excepto en casos cuando sea relativamente dificil o costoso de obtenerlo), incluyendo precios, calidad, escala de la planta, compatibilidad de nuevos equipos con los medios existentes y futuras ampliaciones, etc.; d) justificacion de la ubicacion elegida (adquirida o rentada), disponsilidad de terreno para ampliaciones futuras, acceso al mercado y medios de transporte; e) equipo para el control de la contaminacion y otros efectos nocivos; f) servicios necesarios de combustible, agua, alcantarillado, energia electrica, telefono; g) obras civiles, incluyendo edificaciones, pequenas construciones, vias de acceso, etc. h) necesidades de capital de trabajo y su justificacion. VIII. EL PROYECTO: ASPECTOS TECNICOS A. Materias Primas y Productos 1. Principales Materias Primas a) Fuentes, suministros, disponibilidad (presente, futuros) y variacion en las estaciones; necesidades de transporte y de almacenamiento. b) calidad indicando si son perecederas, tendencias de los precios, dependencia de las importaciones, impuestos sobre importaciones, requerimientos de cambios de moneda extranjera y disponibilidad; c) concesiones; contratos actuales, creditos comerciales. 2. Productos a) Especificaciones (calidad, tamano, peso, volumen, empaque, etc.); conveniencia o aplicabilidad a las condiciones del mercado;  - 36 - ANNEX 2 Page 5 of 9 b) por cada linea de producto, volumen des produccion y valor, factores de temporada que afectan la produccion, y produccion diaria, mensual y anual. c) utilizacion de capacidad instalada. d) medios de control de calidad y standards de pruebas (factor de desperdicios). 3. Mano de Obra a) Disponibilidad y calidad de mano de obra, numero de obreros requeridos en cada etapa de produccion; b) requerimentos de entranamiento, programas y medios (locales, exteriores); c) supervision de trabajo; necesidad de asistencia tecnica o instruccion (temporal o permanente); d) impacto del proyecto sobre el nivel de ocupacion nacional escala de sueldos; 4. Plan de Implementacion a) Responsabilidades de la ejecucion del proyecto: nombres, definiciones y division de responsabilidades; b) construccion y fecha de inicio, demoras; c) calendarizacion de las inversionesz desarrollo de produccion (volumen, calidad, lineas): d) programa de mantenimiento y disponibilidad de repuestos. 5. Asistencia Tecnica a) Arreglos con los consultores (nombres, experiencia, descripcion de servicios, duracion del contrato, previsiones de penalidades y garantias, etc.); b) acceso a la tecnologia e investigacion, innovaciones tecnicas, patentes, licencias, registros; 6. Compras de Bienes y Servicios a) Discussion de los procedimientos de ccmpra que van a ser utilizados; b) justificacion de cada compra en terminos de compatibilidad, calidad y precios;  - 37 - ANNEX 2 Page 6 of 9 c) analisis de las cotizaciones de proveedores potenciales, incluyendo la propuesta de cada proveedor, los precios indicados y los criterios de seleccion utilizados. IX. EL PROYECTO: EL MERCADO 1. Entorno Empresarial a) Importancia estrategica del proyecto para el pais; relacion al plan de desarrollo del gobierno; b) licencias para operar, permisos de importacion para negociar en moneda extranjera, para hacer contratos con el exterior, para establecer operaciones exteriores o recibir participacion inter- nacional, garantia de franquicia, privilegios; c) participacion directa o indirecta en el proyecto; papel como cliente, suministrador, competidor o proprietario; participacion en la junta directiva de la empresa; d) distribucion de ganancias y repatriacion de capital; e) control de precio y ganancias; f) incentivos o subsidios fiscales aplicables al proyecto (libera- ciones de impuestos, tarifas protectoras, cuotas o subsidios de importacion o exportacion, reintegracion de impuestos, deprecia- cion acelerada, impuestos sobre revaluacion del activo, etc.); 2. Precios a) Precio de fabrica por linea de produccion y el precio del mismo producto importado (c.i.f.), indicando variaciones temporales y regionales; tendencia, fabricas afectadas y estimaciones de precios futuros. 3. Demanda a) Desarrollo historico de la demanda interna y/o externa durante los ultimos cinco anos; b) bases y estimaciones de demanda interna y/o externa durante los proximos cinco anos. 4. Oferta a) Produccion local o importada por linea de produccion durante los ultimos cinco anos; b) nombres de competidores, su capacidad y su utilizacion de capacidad por fabricas existentes;  -38 - ANNEX 2 Page 7 of 9 c) naturaleza y grado de competencia (estructura de costo, precio, calidad, productos o servicios); posibilidades de fusiones; d) bases y estimaciones de oferta interna y/o externa durante los proximos cinco anos. 5. Plan de Mercadeo a) Contratos para ventas (internas y/o exportaciones); b) promocion, propaganda (agencia, de publicidad), presupuesto; c) politica crediticia hacia el cliente; d) experiencia de mercadeo del vendedor por producto. e) sector de mercado. X. EL PROYECTO: PLAN DE INVERSION Y SU FINANCIAMIENTO 1. Costo Total del Proyecto en Moneda Local y Extranjera a) Inversiones fijas (terreno, lugar de desarrollo, caminos, edificios, construccion de la planta, maquinaria y equipo, gastos anticipados, imprevistos); fechas de adquicisiones, vida util de las maquinarias, precio CIF, recargos de descarga, obligaciones y tasas de cambio, costos de instalacion; b) requerimientos de capital operativo, variaciones de temporada o ciclo; c) gastos de formalizacion de prestamos; d) programa de inversion (cronograma de ejecucion de obras); e) costos incurridos hasta la fecha de presentacion de la solicitad; f) bases de las estimaciones del costo incluyendo imprevistos. 2. Fuente Finaciacion del Proyecto a) Proposito, moneda y forma de utilizacion, linea de credito afectada; b) terminos y condiciones de financiamiento; programa de compromisos, desembolsos y repagos; garantias of recidas; c) condiciones y convenios de financiamiLento (restricciones para contratar nuevas deudas o avales, distribucion de dividendos, etc.);  -39 - ANNEX 2 Page 8 of 9 d) participacion de fondos generados internamente; contribucion de los accionistas; creditos comerciales; proveedores. XI. EL PROYECTO: EVALUACION FINANCIERA PARA EL PERIODO DE VIDA UTIL DEL PROYECTO 1. Costos de Operacion y Ganancias a) Costos fijos y variables; b) costo unitario por productos; c) punto de equilibrio como porcentaje de utilizacion de capacidad; d) ganancia de operacion y ganancia por linea de produccion. 2. Estados Financieros para Cada Ano Fiscal a) Estados de ingresos; b) estados del flujo de caja; c) balances. 3. Indices Financieros (analizando tendencias) a) Relacion de liquidez - relacion corriente - relacion acida - cobertura del servicio de la deuda b) relacion de ganancias - margen de ganancias (ganancia bruta/ventas); - ganancia neta/activos totales; - relacion de habilidad de ganancia (ganancia neta/capital proprio); c) relacion de solvencia - capital pagado/deuda a largo plazo - capital pagado/deuda total 4. Rendimiento Financiero a) Tasa interna de retorno (financiera); b) analisis de sensibilidad, riesgos e incertidumbres, influencia de factores variables sobre el rendimiento de inversiones;  -40- ANNEX 2 Page 9 of 9 c) rendimiento para los inversionistas, estimando distribuciones de los dividendos; y ganancias por accion. XII. EL PROYECTO: EVALUACION ECONOMICA Y SOCIAL 1. Analisis Costo-Beneficio a) Divisas ganadas y/o ahorradas como resultado del proyecto; b) tasa economica de retorno; c) riesgos e impacto de cambios en los precios sobre el rendimiento economico. 2. Otros Efectos a) Efectos sobre el crecimiento y programa de desarrollo del pais (balanza de pagos, substitucion de importaciones, etc.); b) utilizacion de capacidad productiva ociosa, apertura de nuevos mercados, transferencia de la tecnologia, estimulo para nuevas industrias, etc.; c) entrenamiento de trabajadores y mejoramiento de la administracion; aumento del nivel educativo de la poblacion local; mejoramiento de salud, condiciones de nutricion y viv:ienda; d) generacion de empleos directos e indirectos. 3. Efectos Ecologicos a) Regulaciones para prevencion de incendio, explosion, ruido, radiacion, etc.; b) medidas contra efluentes y basuras; solidos, liquidos, o vapores y gases toxicos, disposicion de subproductos, problemas e investigaciones recomendadas, regulaciLones, locales.  - 41 - ANNEX 3 GUATEMALA: INDUSTRIAL CREDIT PROJECT ESTDIATED SCHEDULE OF DISBURSEMENTS 1/ Disbursement (USS millions) IBRD Fiscal Year/Quarter By Quarter Cumulative FY 1985 September 30 0.5 0.5 December 31 1.5 2.0 March 31 1.0 3.0 June 30 1.5 4.5 FY 1986 September 30 2.0 6.5 December 31 2.0 8.5 March 31 1.5 10.0 June 30 2/ 1.5 11.5 FY 1987 September 30 2.0 13.5 December 31 2.5 16.0 March 31 1.5 17.5 June 30 1.0 18.5 FY 1988 September 30 1.0 19.5 December 31 3/ 0.5 20.0 1/ Estimated disbursements would conform to both regional and bankwide profiles for the IDF sector. 2/ Terminal date for submission of subprojects. 3/ Closing date for disbursements. LCPI2 January 1984  - 42 - ANNEX 4 GUATEMALA: INDUSTRIAL CREI)IT PROJECT SELECTED DOCUMENTS AVAILABLE IN THE PROJECT FILE 1. Assessment of the Needs of Industrial Exporters in Guatemala. International Marketing Group, New York, New York. 2. Protection of Manufactured Goods in Guatemala. Prepared by M. Hinds. 3. Legislacion Vigente Para el Desarrollo del Sector Industrial. GUATEXPRO. 4. Guia de Procedimientos y Documentos de Exportacion. GUATEXPRO. 5. Guatemala, Promocion de Exportaciones, UNDP. 6. El Sector Industrial de Guatemala, 1976-1980. Secretaria General de CONAPLAN. 7. Boletin Estadistico, April-June 1977; October-December 1979; July- September 1980; July-September 1981; January-June 1982; April-June 1983; Banco de Guatemala. 8. Boletin de Estadisticas Bancarios, I Trimestre 1982, II Trimestre 1983. SuDerintenrdencia de Bancos. 9. Censo de la Industria Manufacturera Fabril 1977. Ministerio de Economica.  GUATEMALA: INDUSTRIAL CREDIT PROJECT Table 1: SUMMARY BALANCE OF PAYMENTS (1977-81) (in Us$000) Total 1977 1978 1979 1980 1981 1979-81 1) Current Account -35.2 -262.2 -196.4 -176.4 -564.7 -937.5 74.9% a) Trade Balance 73.3 -191.4 -173.3 47.2 -240.9 b) Net Services -204.3 -i86.4 -149.8 -333.4 -414.7 c) Transfers 95.8 115.6 126.7 109.8 90.9 2) Private Capital Flows 122.9 . 236.5 41.9 -323.0 -58.3 -339.4 27.1 3) Errors and Omissions -2.8 -.8 7.4 18.4 -.3 25.5 -2.0 4) Sub-Total 1/ 84.9 -26.5 -147.1 -481.0 -623.3 -1,251.4 100.0 5) Official Capital Flows 71.1 102.5 120.1 162.0 274.3 556.4 44.5 6) Change Int'l. Reserves (Increase -) -156.0 -76.0 27.0 319.0 349.0 695.0 55.5 Memo Items: Terms of Trade (1970=100) 164.4 173.6 16'.3 146.0 116.2 - - Exports GNFS 1,160.2 1,092.4 1,221.4 1,519.8 1,299.1 Imports GNFS 1,086.9 1,283.8 1,394.7 1,472.6 1,540.1 1/ Private Accounts = Official Capital Flows plus changes in reserves. Note: Terms of Trade for January - May 1982-85.6 SOURCE: Banco de Guatemala - LCPI2 L January 1984  - 44 - GUATEMALA: INDUSTRIAL CREDIT PROJECT ANNEX 5 Table 2 Table 2: TARIFF PROTECTION AND COMPOSITION OF PRODUCTION (1) (2) (3) (4) (5) Theoretical Tariff Theoretical Implicit % of Value % of Gross Effective Protection Tariff Tariff Added Output (A) Consumer Goods 31 Food, Beverages, Tobacco 187.1 88.5 47.1 41.5 47.0 322 Clothing 1,822.8 101.2 44.9 2.7 2.0 324 Footwear Negative Value Added 123.1 38.6 1.2 1.0 332 Wooden Furniture 281.6 79.6 71.4 .6 .4 342 Printing 2.9 - .9 3.8 2.0 3522 Medicines 8.2 91.6 15.2 5.7 3.0 3523 Soaps, Cosmetics 242.6 104.0 16.4 2.7 2.9 3551 Tires 40.4 98.1 40.1 1.3 1.4 356 Plastic Products 99.6 201.4 18.1 2.5 2.4 3832 Radio, T.V. 62.0 160.2 6.4 1.0 .9 3843 Automobiles 45.3 91.4 8.1 .4 .4 3844 Motorcycles, Bicycle3 160.0 71.2 -8.2 .6 .7 Total and Weighted Average 222.8 92.6 40.1 64.1 64.1 (B) Intermediate Goods 321 Textiles 36.7 90.4 51.3 7.3 7.5 3233 Leather, except shoes, clothes 74.2 121.6 54.8 .1 .1 331 Wood and Cork 98.3 138.6 11.5 1.5 1.4 341 Paper 34.7 66.4 24.7 1.8 2.4 351 Ind. and Agr. Chemicals -2.2 54.0 -2.3 3.8 4.4 3521 Paints 54.1 84.0 11.4 .6 .6 353 Petroleum 29.0 49.6 3.0 2.3 5.9 3559 Rubber, n.e.c. 24.7 196.1 26.1 .3 .3 36 Non-Metallic Minerals 33.7 57.9 21.7 9.0 6.3 37 basic Metals 17.7 39.6 4.6 1.7 2.5 Total and ',eighted Averages 3?.4 7r.5 2n.2 27 31.3 (C) Capital Goods 30, except 3832, 3843, 3844 IQ 7 7/, A A 1 7 7 A (TD) Total 157.2 84.8 32.2 100.0 100.0 Definitions: Theoretical Tariff Effective Protection - It is the proteet.ion to the activity as distinct from the product, estimated from the theoretical structure of tariffs. It does not take into account exemptions. The averages were weighted by value added. Data refers to 1.973. Theoretical Tariff: It is the tariff estimated from the legal specific and ad-valorem tariffs. Averages weighted by gross output. Data refers to 1973. Implicit Tariff: It is the percentage in which local prices of products exceed international prices. Averages weighted by Gross Output. Data refers to 1973. Note: Value added and gross output shares correspond to 1977. Given the stability that these compositions normally show, the use of 1973 data for tariffs and 1977 data for the composition of production does not introduce substantial error. SOURCE: Column 1: Alan I. Rapoport "Effective Protection Rates in Central America", in W.Cline and E.Delgado, Editors Economic Integration in Central America. The Brookings Institution, Washington, D.C. 1978. 2 & 3: Jorge Rorstcheff "Estudio de los efectos de la Nueva Tarifa Arancelaria and nivel general de precios al consumidor" SIECA/BID. Columns 4&5: 1977 Census of the manufacturing sector. LCPI2 January 1984  -45 - ANNEX 5 GUATEMALA: INDUSTRIAL CREDIT PROJECT Table 3 Table 3: GENERATION AND USE OF FOREIGN EXCHANGE BY THE INDUSTRIAL SECTOR (1979-81) (in US$000) 1979 1980 1981 (A) Hard Currency Generated By 1979 1980 the Manufacturing Sector: 1. Exports to countries outside the CACM 29.6 48.5 63.7 2. Trade Surplus in the CACM 1/ 5.3 165.7 192.9 3. Total 34.9 214.2 256.6 (B) Imported Inputs from Outside the CACM 1. Intermediate Goods (a) Fuels and Lubricants 123.1 181.5 164.8 (b) Inputs for Agricultural Intermediate Foods Production 72.0 72.8 78.6 (c) Inputs for Agricultural Capital Goods Production 28.3 21.3 25.8 (d) Construction Materials 98.1 92.5 98.7 (e) Other Intermediate Products 401.6 455.1 466.3 Sub-Total Intermediate Goods Imports 723.1 823.2 834.2 Less, Inputs imported from the MCCA 2/ 20.2 23.0 23.4 Total Intermediate Goods Imported from Outside the CACM 702.9 800.2 810.8 2. Capital Goods (a) Machinery and Equipment 217.4 180.8 193.5 (b) Transport Equipment 90.5 76.4 66.3 Total Imports of Capital Goods 307.9 257.2 259.8 3. Miscellaneous 8.5 7.8 13.7 4. Total Inputs Imported from Outside the CACM 1,019.3 1,065.2 1,084.3 (C) (A * B) % 3.4% 20.1% 23.7% Memo Item: Inputs Imported from Outside the CACM as % of Total Imports 67.8% 66.7% 64.8% 1/ Total Guatemalan Trade surplus in the CACM less non-manufactured exports to the CACM. 2/ Estimated. SOURCE: Items under (A): Economic Memorandum on Guatemala, November 1982, Report No. 4195-GU Items under (B): Estadisticas de Cambio Exterior (Mimeo), 1979, 1980, 1981. Banco de Guatemala. LCPI2 January 1984  GUATEMALA: INDUSTRIAL CREDIT PROJECT Table 4: SECTORAL COMPOSITION OF GROSS PRODUCTION (1977) Composition of Production (Figures in Percentages of Value of Production) Gross Production Inputs by Sub-sector Third Total Gross X of X of Total Coun- Total Wage Value Produ- Total Mfg. Manufacturing X of Total X of Total Domestic CACM tries Inputs Bill Profits Added ction in Qm Production Value Added Euploymeit Fixed Aaseta 31 Food, Beverages, Tobacco 55.8 1.9 7.6 65.4 6.6 22.4 29.0 100.0 691.2 46.4 40.2 32.9 43.4 311 Food 63.5 1.6 5.5 70.6 5.8 18.8 24.5 100.0 536.0 313 Beverages 22.8 2.1 10.3 35.1 10.7 45.6 56.3 100.0 83.5 314 Tobacco 28.5 5.3 8.6 42.4 12.1 32.6 44.6 100.0 22.4 32 Leather, Textiles, Clothing 30.2 5.3 22.6 58.2 14.1 20.8 34.9 100.0 160.8 10.8 11.2 22.0 15.3 321 Textiles 30.4 4.6 26.3 61.3 11.3 20.5 31.8 100.0 109.5 322 Clothing 25.5 6.8 15.8 48.1 19.9 24.6 44.4 100.0 29.7 323 Leather, except shoes 43.9 2.8 21.3 68.0 13.3 14.7 28.0 100.0 7.5 324 Footwear 31.8 8.0 10.6 50.4 24.1 17.7 41.8 100.0 14.1 33 Wood and Furniture 48.6 0.4 3.3 52.3 19.1 24.4 43.5 100.0 26.2 1.8 2.3 6.1 2.4 331 Wood 53.9 - 2.7 56.6 17.1 22.4 39.5 100.0 332 Wooden Furniture 32.4 - 4.4 36.8 26.3 29.8 56.1 100.0 _ 34 Paper 11.0 1.3 38.3 50.6 16.7 26.8 43.4 100.0 65.4 4.4 5.7 7.0 5.6 341 Paper 8.0 2.1 61.0 71.1 8.2 11.9 23.2 100.0 342 Printing 10.2 .5 15.8 26.6 24.9 42.2 67.1 100.0 35 Chemicals 8.7 4.7 49.6 63.0 8.7 21.1 29.8 100.0 311.9 21.0 18.6 12.1 14.2 351 Industrial and Agricultural 4.5 6.4 55.5 66.3 6.9 20.6 27.5 100.0 352 Chemical Products 13.2 6.0 26.1 45.4 13.4 29.0 42.5 100.0 355 Rubber 20.S 2.7 38.5 6i.9 i5.9 11.1 32.9 100.0 356 Plastic 12.8 11.0 35.6 59.4 11.6 23.3 34.9 100.0 36 Non-Metallic Minerals 27.9 13 14. 43.3 1 T 38 .5 52.3 100.0 92.0 6.2 9.6 7.9 10.6 37 Basic Metals 4.1 .6 68.7 13.4 6.8 14.4 21.2 100.0 6.8 2.5 1.6 1.5 2.9 38 Metal Products 8.7. 2.7 32.0 43.5 12.9 36.5 49.4 100.0 96.4 6.5 9.5 9.7 5.0 381 Cutlery, furniture, structures 9.7 2.0 26.1 37.8 15.3 41.9 57. 100.0 7.4 .5 1.2 .9 .5 383 Electrical Machinery 7.1 5.9 34.7 47.6 10.0 33.9 43.9 100.0 384 Transportation 7.2 - 56.2 63.4 9.8 18.9 28.7 100.0 39 Other 2.3 .6 5.2 8.1 13.5 70.3 83.8 100.0 3 34.2 2.8 23.3 60.3 9.5 24.1 33.5 100.0 1,488.2 100.00 100.0 100.0 100.0 SOURCE: Direccion General Estadistica: V Censo de la Industria Manufactuera, Fabril, 1977, Guatemala Note: The difference between the sum of value added plus industrial inputs and gross output is due to other inputs (general expenditures). LCPI2 January 1984  GUATEMALA: INDUSTRIAL CREDIT PROJECT Table 5: PRODUCTIVITY AND WAGES IN MANUFACTURING SECTOR (1973-81) 1/ 1473 1974 1975 1976 1977 1978 1979 1980 1981 I. Wage Trends (Firms affiliated to the Social Security System) (A) Manufacturing Sector 1. Wages Bill (Qm ) 58,4 64.9 94.6 102.8 95.5 118.9 134.5 151.8 189.3 2. Affiliated persons (thousands) 47.7 50.3 66.7 69.9 70.8 70.6 69.5 78.9 78.4 3. Annual Wage/person (Q thousands) 1,17 1.29 1.42 1.47 1.35 1.68 1.93 1.92 2.41 4. Index of Real Manuf. annual wage/person 2/ 100.0 94.8 89.7 84.0 68.5 78.9 81.2 72.8 82.2 5- Ratio of manufacturing wages to average wages 1.58 1.48 1.51 1.50 1.44 1.58 1.61 1.59 1.69 in the economy. (B) All Sectors 1. Wage Bill (Qm) 344.9 434.7 515.4 574.1 579.2 714.4 836.7 ,924.7 1,081.7 2. Affiliated Persons (thousands) 468.9 499.4 550.2 586.6 6L7.5 673.3 694.8 766.9 757.0 3. Annual Wage/Person (Q thousand) .74 .87 .94 .98 .94 1.06 1.20 1.21 1.43 4. Index of Real Average Annual wave/persoa 2_/ 100.0 100.7 94.1 88.1 75.6 78.5 80.0 72.6 77.0 5. Unemployment rate 4/ 3.4 3.1 5.2 4.3 3.3 3.7 4.3 5.8 8.0 II. Prodctivity and Wages by Sub-Sector (Census Data for 1977) a, Value Added Per Man-hour (Q in 1977) Hourly Wages (Q in 1977) Total Assets ] or gnrx- More Than More Than per Worker ing Force Average 5 to 9 10 to 19 20 to 50 50 age 5 to 9 10 to 19 20 to 50 50 31 Food. Beverages, Tobacco 18.5 32.9 5.20 1.48 2.95 1.85 5.14 .98 .42 .59 .93 1.04 32 Textiles and Clothing 10.2 22.a 2.nn 1.06 1.31 1.71 7.15 .h7 .37 .50 .57 .72 33 Wood and Furniture 4.3 5.9 1.44 1.12 1.30 1.45 1.59 .57 .42 .42 .58 .68 34 Paper and Printing 9.1 7.0 3.49 1.58 1.81 4.58 3.67 1.18 .54 .69 1.22 1.32 35 Chemicals 27.7 12.1 7.45 2.54 4.55 6.84 7.98 1.74 .72 1.04 1.25 1.96 36 Non-Metallic Minerals 14.0 7.9 4.38 1.23 1.67 1.51 5.75 1.07 .42 .46 .65 1.31 37 Basic Metals 28.2 1.5 4.01 1.21 1.87 3.21 4.21 1.05 .5b .82 .64 1.09 38 Metal Products 10.6 9.7 3.88 .95 39 Other 7.6 .9 5.31 .83 3 15.2 100.0 4.13 1.38 2.18 4.28 4.48 .99 .46 .62 .85 1.08 Value Added per Unit of Wage - 4.17 3.00 3.52 5.04 4.15 - - - - _ SOURCE AND NOTES: 1/ Time trends refer to affiliates to the Social Security System, which in 1977 covered only a third of manufacturing workers (Source: Banco de Guatemala). Productivity and wages by subsector refer to firms included in the 1977 Census, which covered also about a third of manufacturing workers. The two groups coincided to a large extent. The rate of growth of the Social Security affiliates, however, far exceeds the rate of growth of employment, and these figures should not be used as indicators of the latter. 2/ Deflated by Urban CPI (Banco de Guatemala). 3/ The Social Security System now covers 32% of the total labor force, 4/ Estimated for the whole economy. Source - Economic Memorandum on Guatemala, November, 1982,Report No. . LCPI2 January 1984  GUATEMALA: INDUSTRIAL CREDIT PROJECT Table 6: INVESTMENT IN MANUFACTURING (1982) Planned Investment Actual Inve.tmeut At C8pacity Utilization Sectors 1982 1/ % of Firms With . -l- % of Firms With ILgher % of Firms Ut,ilizing Higher No Outlays Not 50-74% 75 or more Outlays Outlays Outlays Food Processing 21.0 54.0 9.5 60.8 50 18 Beverage and tobacco 3.7 74.1 10.3 62.1 52 22 Textiles 30.4 34.8 18.2 59.1 67 20 Clothing and Leather 8.0 76.1 12.4 80.9 59 13 Wood and Furniture 21.7 53.3 - 91.4 53 12 Paper and Printing 28.3 52.1 21.7 63.1 36 33 1 | Rubber and Plastics 26.5 44.1 5.1 56.4 68 29 Chemicals 37.5 47.2 9.5 60.8 69 20 X Non-Metallic Minerals 14.3 50.0 9.3 60.5 71 5 Basic Metals 12.6 58.8 - 70.6 47 35 Metal Products 11.7 58.3 5.0 81.7 36 37 Other Industries 23.1 30.7 - 1u0.0 62 39 TOTAL 20.5 54.9 10.0 64.8 57 21 1/ Plans made in early 1982 by surveyed firms. 2/ First semester 1982 in comparison to 1981 reported by surveyed firm in September of 1982. SOURCE: Table (A): Direccion General de Estad'stica and Banco de Guatemala. Table (B): Banco de Guatemala, "Encuesta de Actividad Industrial", 1982. a LACPI2 January 1984  GUATEMALA: INDUSTRIAL CREDIT PROJECT Table 7: EXPORTS TO CENTRAL AMERICAN COMMON MARKET AND OTHER COUNTRIES (1977-81) (US$000) 1977 1978 1979 1980 19812/ Other Other Other Other Other Products C.A.C.M.1/ Countries C.A.C.M.1/ Countries C.A.C.M.1/ Countries C.A.C.M.1/ Countries C.A.C.M.I/ Countries TOTAL 222.5 937.7 264.7 815.1 304.1 904.1 440.8 1,030.3 419.3 906.3 I. BASIC PRODUCTS 16.1 905.7 20.9 768.0 26.1 843.2 57.4 900.2 46.9 756.3 1. Non Processed Food 10.5 694.1 13.6 558.6 18.9 561.2 46.4 633.8 606.3 2. Agricultural Raw Material 5.6 208.8 6.1 203.2 6.1 279.1 9.2 264.9 150.0 3. Minerals - 3.1 0.1 6.2 0.4 2.9 0.4 1.5 - 4. Fuels 0.03 0.05 1.0 0.05 0.6 - 1.5 0.1 II. SEMI-MANUFACTURED GOODS 49.9 8.9 55.7 17.3 75.9 31.3 110.2 81.6 69.5 85.0 1. Agro 35.4 5.1 38.8 8.1 51.0 9.8 77.4 10.2 2. Chemicals 7.8 3.5 8.8 2.4 12.6 2.2 16.7 8.9 3. Minerals 6.7 0.3 8.1 6.8 12.3 19.2 16.2 62.5 III. MANUFACTURED GOODS 156.5 22.7 188.1 29.7 202.2 29.6 273.2 48.5 302.9 65.0 1. Foood/Beverages/Tobacco 29.8 3.3 33.0 2.7 28.7 2.5 45.7 4.9 7.6 2. Textile Products 16.7 1.9 17.8 1.2 19.0 0.7 23.7 0.7 6.3 3. Leather Gooods 3.6 0.6 3.7 0.6 4.5 0.8 5.3 1.5 - 4. Wood Products 4.2 0.4 3.6 0.7 4.4 0.5 5.7 1.0 1.1 5. Chemicals 46.7 11.4 58.4 13.2 61.6 14.9 89.8 21.7 27.6 6. Rubber Goods 9.4 0.7 10.1 1.8 10.1 2.4 18.4 - 4.7 - 7. Petroleum Derivates 0.2 - 1.0 - 1.6 - 1.4 0.1 - 8. Non Metallic Minerals 16.5 2.0 21.0 2.1 17.6 2.3 17.4. 3.0 3.0 9. Metals 4.6 0.7 5.3 1.3 5.4 0.8 9.9 1.6 2.4 10. Machinery and Tranport Equipment 12.9 0.4 19.5 4.1 18.0 3.0 24.0 6.4 11. Other 12.2 1.3 13.7 1.9 21.1 1.8 32.1 2.9 1/ Central American Common Market. 2/ Estimates. SOURCE: Banco de Guatemala, GUATEXPRO LCPI2 January 1984  GUATEMALA: INDUSTRIAL CREDIT PROJECT Table 8: THE FINANCIERAS - BALANCE SHEETS (In US$000) 1975 1976 1977 1978 1979 1980 1981 1982 1983 a/ ASSETS Current 3 347.4 1 030.8 1 017.0 3 889.0 5 828.6 15 753.0 45 777.0 36 083.5 9 964.5 Foretgn 2.1 9.9 10.0 18.0 2.7 2.5 4.5 27.1 10.9 Domestic 3 345.3 1 020.9 1 007.0 3 871.0 5 825.9 15 750.5 45 772.5 36 056.4 9 953.6 Investments 462.9 2 906.1 1 488.0 3 840.5 2 089.2 2 509.6 3 405.5 3 427.3 3 224.4 Loans and Discounts 15 244.7 16 086.1 18 925.0 28 154.8 36 700.1 56 364.1 75 002.6 83 993.6 96 383.7 Other Investments