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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 real estate.
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.
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