How Do You Spell Debt Relief? C-A-R-E

CARE, the relief group renowned for parachuting food to the starving, now is packaging a more complex type of Third World aid: venture capital, debt-for-equity securities swaps and investment banking advice.

The New York-based nonprofit organization has formed a subsidiary aimed at assisting debt-ridden developing countries to devise innovative ways to reduce dependence on foreign loans while helping creditors recover some of the money they thought they would never see again.

CARE’s Small Business Assistance Corp. invests in small and medium-size businesses, from fruit canners in Honduras to shrimp farmers in the Philippines, when invited to do so by the host country. It is also exploring business ventures in other countries undergoing profound political change, including Poland and Nicaragua.

Philanthropy experts said the CARE subsidiary is the first investment banking venture formed by an international relief group to help developing countries, which owe a total of $1.2 trillion, become more self-reliant.

The subsidiary will hold a minority stake in all the companies it invests in and will concentrate on businesses worth $250,000 to $2.5 million. Foreign banks and other creditors that contribute to the subsidiary’s investment fund will receive dividends if the businesses are profitable.

“We offer a useful investment option to American companies that want to make money in the developing world, particularly those looking to sell idle equipment or exchange foreign currency or recover bad debt there,” said Donald R. Nicholson, president of the CARE subsidiary.

“We’re not going to solve the problems of heavily indebted Third World countries,” Nicholson said. “But we bring a unique approach to the Third World crisis because we’re not for profit.”

Nicholson said he has talked with Citibank, Chase Manhattan Bank and Bankers Trust about restructuring part of their Third World debt through the CARE subsidiary.

He said it was too early to predict the subsidiary’s success but said CARE’s clean reputation and cultural sensitivity in foreign countries give it entree that larger for-profit companies might never obtain.