PRIVATE SECTOR DEVELOPMENT AND EL NINO PROJECT

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The Private Sector Development project aims to strengthen the private sector so that is can play an enhanced role in fostering economic growth in Paraguay. This will be achieved by strengthening Paraguay's banking sector and by providing medium- and long-term credit to overcome the immediate constraints on investment financing, which is limiting the response of the export sector to the liberalized macroeconomic environment and the expanded Mercado Comun del Sur (MERCOSUR) market. Reform of the financial sector will increase the efficiency of resource mobilization, intermediation, and allocation. An investment component in the form of two global credit lines will be passed onto commercial banks and finance companies for on-lending to private sector enterprises. The credit lines will support financially, technically and environmentally sound investment subprojects of viable enterprises in all sectors of the economy except housing. The project will also have policy conditionality directed at strengthening the banking sector regulatory framework and the supervisory capability of the Superintendency of Banks within the Central Bank of Paraguay (BCP), as well as the maintenance of market determined interest rates and the curtailment of subsidized lending by the BCP.