Sugar, grain, fish and fruits: with its major
corporations and many family-owned farms,
South America offers great opportunities
for Rabobank. That's why Rabobank South
America is now a separate unit within
the bank. But opportunities come with
challenges. How important is rural and
retail banking versus corporate banking?
And is local funding feasible?
Twin-model: corporate
and rural banking
Salmon was not on the menu in Chile
during Christmas 2008. The reason for
this was that previously a deadly virus
in the country's waters, and a lack of
funds to come up with a solution,
forced many of Chile's salmon
exporters to harvest and sell most of
the surviving fish to get an income.
As a result, the output of the world's
second largest salmon producing
country dropped by more than thirty
percent in 2009. That production gap
will not be closed until 2011, and fish
farms are struggling to finance their
way out of the crisis.
"It's a disaster for one of Chile's main
export products," confirms Roberto
Simpson, head of corporate banking
at Rabobank in Santiago de Chile.
'The price of salmon has reached
record heights, but production
volumes are dramatically low and
liquidity is limited in the fish farming
industry. At Rabobank Chile we
have to devote a lot of time to the
companies involved." The salmon
scenario is a so-called 'perfect storm'.
A crisis in production or market
pricing coincides with an economie
downturn, which makes most banks
hesitatent to finance struggling
companies. It takes a strong bank to
recognise these dynamics, choose
potential survivors, and support the
companies while they are navigating
their way out of rough waters.
Rabobank is ideally positioned
within such a sector, with its expert
understanding of the market
dynamics of the F&A sector, access
to funds that local banks lack, and
international presence that enables
itto look beyond local limitations for
solutions.
"Because of our expertise in F&A,
we can analyse business cycles
in agricultural commodities and
show confidence in our support for
companies that have to deal with
downturns," explains Guillermo
Bilbao, Regional Head of Rabobank
in South America. 'That expertise is
what Rabobank brings to the table,
especially when other financial
institutions are getting a bit nervous.
They don't have the same view on
what these cycles are all about. But
they do know Rabobank is usually
involved for a long period. So when
we support a specific company, other
banks understand that we see this
company as a long-term survivor. In
effect Rabobank is a market-maker."
What happened to salmon in Chile
is a scenario that Rabobank is
familiar with. Although two years
of production might have been
destroyed, liquidity will return and
prices will bounce back. Weaker
companies in the food chain will
be wiped out, but the survivors will
return stronger than ever. "F&A in
South America is a mature sector with
advanced companies, many of which
are really cutting edge,"
ISSUE 22 JANUARI THE WORD 25
