microReport #12: Costs and Benefits of Liquidating Peru's Agricultural Bank

The Banco Agrario del Peru (BAP) was a large agricultural development bank working throughout Peru’s rural and agricultural regions. Because of its poor performance, fiscal pressures, and new macroeconomic policies aimed at controlling inflation, BAP was closed in 1992. This microREPORT describes and explains some of the forces that led to the bank’s demise and, more importantly, the implicit as well as explicit costs and benefits of liquidating BAP, many of which became apparent only after its closure. Lessons about the value of rural financial infrastructure, in particular, may be useful when considering the liquidation of other agricultural development banks.