Ruta, Unidad Regional de Asistencia Técnica, Boletín Informativo

AGRIBUSINESS

Agricultural value chains: an effective system for mobilizing funds

Latin America’s first international seminar on “Financing Agricultural Value Chains”

Strengthening the concept of agricultural value chains and channeling funds towards these systems is a challenge, but it is also a trend that is becoming increasingly important in Latin America. This was one of the conclusions reached at the first international seminar on “Financing Agricultural Value Chains” in the region, held on May 16 -18 2006, in San Jose, Costa Rica.

The meeting was coordinated by the United Nations Food and Agriculture Organization (FAO), the Central American Academy, RUTA and SERFIRURAL. During the two-day seminar, participants from 17 countries analyzed the current status of agricultural value chains and international best practices in financing these chains in the agricultural sector. These chains may include micro, small, medium and large enterprises in different stages of the production chain, including the production, processing and marketing of products.

The workshop was attended by around 40 high-level officials from a select group of important firms associated with the agricultural sector (producers, processing firms, distributors, exporters, input suppliers), as well as top level financial institutions that provide financing to the different actors involved in agricultural production chains.

Representatives of companies such as Hortifruti, Dos Pinos, Bounty Fresh and Agromantaro discussed the models for financing agricultural value chains that they have been working with, and the opportunities and challenges encountered. For their part, financial institutions such as the Banco do Brasil, Banorte, Lafise and the Banco National described the services and support initiatives available to agricultural chains and other chains or productive sectors. Non-bank financial institutions such as FDL of Nicaragua and others also presented their programs

Agricultural value chains: a good niche to channel funding

The use of agricultural value chains to channel financial services, especially credit, facilitates the expansion of rural financial markets, particularly for micro, small and medium sized producers, according to the conclusions reached at the international seminar held in Costa Rica. Agricultural value chains make it possible to reduce entry barriers, create and expand access to resources and facilitate financial intermediation.

Through agricultural value chains, different systems of financing may be applied to different actors, such as a leader in a production chain or a supplier of inputs or materials, organized groups of producers, individual producers, or semiformal financial intermediaries that have close links with the farmers. There may even be cases of conglomerates and integrated firms that own financial organizations.

However, financing agricultural value chains also poses a number of challenges for different key actors. For financial organizations, the main challenge is to change their perception of rural financing in general, and of agricultural financing in particular, understanding that it can be profitable to serve farmers through value chains. Agricultural producers, for their part, should adopt a business-oriented vision, working with more information and better technology, and improving the management of agribusiness. Meanwhile, governments should support market information systems, reform regulatory frameworks to create spaces for innovative financial products, and finance and support coordinators of chains and extension services and technical assistance. Finally, international organizations can offer support in designing mechanisms to include small producers in the value chains, disseminating best practices and financing programs that improve opportunities to obtain long-term credit.

AGRIBUSINESS

Belize begins cacao production

Small cacao producers in Belize, organized in the Toledo Cacao Growers Association (TCGA), have begun production of organic cacao. To take advantage of this market, the Ministry of Agriculture and Fisheries (MAF) asked RUTA to prepare a study to assess TCGA’s productive and organizational capacity, and its needs. RUTA has been working on this study with the support of the Tropical Agriculture Research and Higher Education Center (CATIE), and has cooperated with TCGA and MAF in gathering information on farm-level production. The preliminary report is in its final phase. The information contained in the study will be very useful to other cacao producers in the Central American region