Molinos II

completed

The 2001 recession and following early 2002 financial, political, and economic crisis in Argentina led to a significant cut in Molinos' credit lines. In order to counteract the local prevailing environment, Molinos changed its sales mix and increased its exports from 25% of sales in FY2001 to 47% in 1H02 and expects to close FY2002 with over 50% exports. To assist Molinos overcome short-term capital constraints and increase exports to the envisaged levels, IFC intends to structure a short-term, pre-export finance, export receivables-backed facility. The facility will be renewable annually for a maximum of three years. Developmental Impact: The project is designed to alleviate the immediate constraints faced by the oilseeds sector in Argentina and to help maintain its competitiveness in the face of a remunerative world market but a very volatile political, social, and economic environment. The following benefits are expected from the project: Financing the marketing of the 2003 crop (soybean, sunflower, and wheat aimed at the export market.) The proposed project will enable Molinos to leverage its export receivables and extend financing to farmers. Preserving the supply chain Molinos’s strategy has been to position itself as one of the primary originators of oilseeds and grains in Argentina to compete with global traders who are able to leverage their considerable network of export destinations worldwide. The venture will enable Molinos to secure its grains and oilseed procurement to satisfy both the internal and export markets. Demonstration impact IFC’s support to the Argentine grain/oilseed supply chain is expected to send a signal to foreign financial institutions to focus their attention on the true nature of the credit risk in these operations. This may lead to an increased appetite by foreign banks to increase their exposure to the better corporates -- something essential for Argentina to move towards an export-led recovery. IFC Role: IFC’s participation in the proposed project will: provide capital not accessible today from the markets and enhance the operational and financial sustainability of a major domestic agro-exporter; ensure the participation of foreign banks through a B-Loan under a challenging country scenario; and protect an existing IFC investment.