Vicentin II

completed

The 2001 recession and following early 2002 financial, political, and economic crisis in Argentina led to a significant cut in Vicentin'' credit lines. To assist the company overcome its short-term capital constraints, 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. More specifically the project is expected to:- Support Argentine farmers: Following the economic and financial crisis, farmers have expanded their production of oilseeds at the expense of other crops such as grains, as the former generally use fewer inputs, their trade is more oriented toward export, and crushing margins on the world market are currently favorable and support higher prices for oilseeds. Official forecasts are that areas sown with soybeans and sunflower will expand by 8% and 15% respectively in 2002/03, which could result in the largest oilseed harvest in history with the 2003 crop of soybeans currently forecast at 32.5m metric tons. This is likely to put significant stress on the physical and financial infrastructure required for an orderly marketing of the crop. The proposed project would alleviate some of the anticipated constraints in the financing of this record crop - Preserve the supply chain Vicentin is one of the primary originators of oilseeds in Argentina. Unlike global traders who can leverage their considerable network of export destinations worldwide and retain an access to external financing resources, domestic companies have been severely constrained in their ability to raise external financing because of the perceived country risk. The proposed project intends to increase liquidity in the established supply chain, preserve its integrity and the associated social fabric, which includes numerous participants in the countryside -- farmers, input suppliers, independent storage operators, transporters, brokers and traders -- as well as their dependents.Demonstration impactSupport to the Argentine grain/oilseed supply chain by IFC and some of the most respected foreign banks in commodity finance is expected to send a strong signal to foreign financial institutions, focusing their attention on the true nature of the credit risk in these operations by disaggregating the business risk from the sovereign risk. It is expected to result in an increased appetite to raise exposure to the better risks in export-oriented Argentine companies.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.