Trading ideas
initiatives
Creative reception
It's just over three years since we first reported the launch of a so-
called trading company by our Chile operation. Since then, the idea
has been picked up by Rl offices in other markets, especially emerging
economies, such as Russia. We look at how a good idea in
one location can be exported successfully, adapted to local
conditions and bring in considerable returns.
Added value
Ad hoe solutions
Tailored approach
What sNewS Issue 8'December 2000
One of the main reasons behind the
Santiago de Chile team's decision to
set up a trading company was the fact our
business there was growing too fast. Back
in 1997, we had rep office status in Chile.
There was no plan to apply for a full
banking license, at
least at the time. But
the rep status, which
essentially means
you're a forward
sales office for a par-
ent organization else-
where, limited what
the team could and
could not do in the
rnarket. At the time,
Ronald Blok and
Jorge Cristoffanini
had a team of 17
people at the 'rep' of
fice and understood
they had to come up
with an alternative solution. The answer
would prove to be the adaptation of a
Citibank initiative. However,
said Cristoffanini in 1997,
'we adjusted the idea and
made it accessible for
Chilean food and agrihusi-
ness clients.'
'we never buy anything without a firm
sales contract with the
customer, who also
pays for things like
storage. The advantage
is that the commodity
is not on his balance
sheet. Companies are
willing to pay a pre
mium for a higher
added value product
like this.'
Chile's Jorge Cristoffanini
A special purpose
company was set
up to offer what
Blok calls 'a banking product
which is essentially asset-based
financing taken one step fur-
ther'. The trading company
buys agricultural commodities
on behalf of a customer, either
in the local rnarket or as an im
port. It is rather like giving the
cliënt a loan, but RI actuallv
owns the collateral. The whole
structure is underpinned by all
manner of safeguards. Mitigating risk is a
top priority. 'First,' explains Cristoffanini,
Poland's Ronald Blok, armed
with his Chilean experience
Rabo Invest has been making head
lines in the international press.
With the European Bank for Recon-
struction and Development (EBRD),
our team in Moscow has come up with
a neat scheme to provide seasonal fi
nancing for Russian agribusiness. The
scheme is in response to a USD 150
million Regional Warehouse Receipts
program initiated by the EBRD. This
program aims to help Russia's strug-
gling agricultural sector overcome a
structural lack of investment.
According to Hans Christian Jacobsen,
director of the EBRD's agribusiness
team, 'this sector has significant poten-
tial, but it will only be realized if it can
attract substantial commercial financ
ing. The use of warehouse receipts
could help achieve that goal.' The
Russian government is currently work-
ing on legislation which would enable a
warehousing receipts systern and the
EBRD/Rabo Invest initiative is seen as
a stopgap measure while new laws are
in the pipeline.
When this structure
was first introduced,
both Blok and Cristof
fanini were convinced
it was exportable and could prove very
useful for other RI offices, especially in
emerging or difficult markets. In fact, that
prediction proved correct, although highly
developed markets like Germany were
among the first to piek up on the idea. Of-
ten it is used as an ad hoe solution in these
markets. Australia actually developed its
own form of 'trading' option. But the con
cept has truly come into its own in Russia.
'This is a very difficult rnarket,' confirms
Maarten Pronk who heads up our activi-
ties there. 'It is very hard to do business
here. The environment is uncertain. If you
are to do anything at all, each commercial
transaction has to be highiy structured
and equipped with comprehensive risk
mitigation mechanisms. This means only a
very limited number of counterparties
would be able to comply with the tough
requirements we lay down for customers.'
Yet, RI is still very active in Russia and is
even making rnoney there on monthly ba
sis. The solution that Pronk and his team
have come up with is Rabo Invest, the
Russian equivalent of Blok and Cristof-
fanini's Rabotrading Chili. But Rabo In
vest takes the concept further. 'Our ap
proach is tailored to the present Russian
environment,' Pronk continues. 'So we're
offering asset-backed lending to selected