The Belize Agricultural Credit and Export Promotion Project, supported by a loan for US$7.8 million, was approved in FY88. The loan closed in FY97 two and a half years late. Altogether, US$4.3 million of the loan was canceled. Japan, the United Kingdom and FAO provided cofinancing totaling US$0.7 million. The Latin America and the Caribbean Regional Office prepared the Implementation Completion Report (ICR). The Borrower provided a contribution to the report and comments on the ICR, both of which are included as annexes.
The project was designed to support the Government’s plan to realize the country’s agricultural export growth potential. Specific objectives were i) to expand agricultural exports to improve the balance of payments while reducing dependence on sugar, ii) to strengthen Belize’s agricultural financial system so as to stimulate private sector investment in agriculture, and iii) to further improve the policy environment for private investment in agricultural export activities. The project sought to achieve these objectives through three components: a credit line for term lending for agricultural exports through public and private financial institutions; institutional development of the state Development Finance Corporation (DFC) to improve its financial position; and programs for institutional strengthening of the Banana Growers’ Association (BGA), the Ministry of Agriculture and Fisheries (MAF) and the Ministry of Natural Resources (MNR).
The project only partially achieved its objectives. The macroeconomic and sectoral objectives were realized, although it is not clear what the contribution of the project was to the growth of exports overall. The project did finance some operations that helped increase agricultural exports, especially of citrus, bananas and shrimp. However, its impact was limited in the number and scale of operations it supported. The project was unable to achieve its financial sector objectives. There was a lack of interest on the part of private banks in participating in the project, largely because of poor project design, resulting in the cancellation of over half of the credit component. The loans were extended only through the DFC, and contrary to the intent, the beneficiaries were mainly medium and large farmers. Attainment of the project’s institutional objectives was mixed. The programs for the MAF and the MNR were not successful. The BGA benefited, but the main focus of the technical assistance was the DFC. Although the DFC’s financial situation was improved, it failed to meet agreed financial performance targets. Its portfolio continues to suffer from high arrears and it’s long term sustainability remains in doubt. However, the sub-loans financed through the project were economically sound, yielding a weighted internal financial rate of return of 27 percent.
The ICR rates project outcome as unsatisfactory, institutional development as modest, sustainability as likely, and Bank performance as unsatisfactory. The Operations Evaluation Department agrees with these ratings. OED notes that the investments financed by the project are sound, and judges the policy and institutional development it helped foster to be sustainable. Hence, the positive sustainability rating.
The key lesson emerging from the project is the critical role that the participation of private financial intermediaries can play in project design. Consultations on key policies and implementation modalities at the time of project preparation, appraisal and during negotiations can significantly help remove potential obstacles to fuller private sector participation in project implementation. This is particularly important where the private sector is expected to play a dominant role.
The ICR is satisfactory. It raises important questions about the soundness of the problem analysis on which the project design was based. However, direct, indirect or even anecdotal evidence on the developments that took place in the agricultural and export sector, particularly the role of non-project related investments, would have helped put the contribution of the project into a clearer perspective and provided better support for the conclusions reached in the ICR.
No audit is planned.