WASHINGTON, D.C., July 23, 1998 --- The International
Finance Corporation today took a step towards improving Russian agricultural
trade by financing a pilot project that will serve as a model for bringing
farmers together with trading companies, equipment suppliers and financial
institutions in order to break the vicious circle of unproductive farms,
lack of financing in the countryside and deteriorating terms of trade.
IFC signed an agreement to invest up to 30% of the share capital of the
Russian company DReVo for the equivalent of up to US$900,000.
DReVo will operate a shared-cropping scheme in the Voronezh region for
the production of cash crops (winter wheat, sugar beet, sunflower seeds).
With 100% equity financing, DReVo will leverage on its capital base to
provide working capital, seeds, fertilizers, agricultural equipment, as
well as technical assistance to the contracted farms in exchange for a
share of the production.
DReVo will use its initial US$3 million equity to mobilize US$5 million
working capital the first year and US$15 million after the third year,
with similar levels for the leasing of machinery. The total cultivated
area of the project would be 20,000 hectares in the first year increasing
to 100,000 ha after the third year.
The main sponsor, Louis Dreyfus Négoce S.A., is a privately held major
grain and oilseed trading company that is part of the Louis Dreyfus Group,
a French agribusiness conglomerate with international investments and operations
in oilseed crushing, storage facilities, and orange juice. The Louis Dreyfus
Group also has activities in shipping, the energy sector, finance and commercial
An important priority for IFC in Russia is to accelerate reforms in agricultural
and rural development by addressing the lack of rural credit, equipment
and access to markets. IFC’s participation in the capital of the company
made shareholders, input suppliers and trade partners more willing to become
involved in one of the first schemes in Russia to integrate suppliers of
seeds and fertilizers, trading companies, suppliers of agricultural machinery
and expertise in modern agriculture practice. IFC’s expertise in the agribusiness
sector and the leasing industry worldwide, and its knowledge of the country
and hands-on involvement in the Land Privatization and Farm Reorganization
are well recognized.
IFC, part of the World Bank Group, fosters economic growth in the developing
world by financing private sector investments, mobilizing capital in the
international financial markets, and providing technical assistance and
advice to governments and businesses.