Argentine soft commodities producer Vicentin has opened a pre-export finance (PXF) facility worth US$100mn.

The finance will be used to purchase soy beans for a crushing facility. The beans will subsequently be exported.

The Dutch development bank FMO arranged the finance and was joint bookrunner along with Crédit Agricole. FMO structured the finance in an A/B format. FMO funded tranche A and syndicated the rest of the finance to a group of commercial financiers (the B tranche).

These are ABN Amro, Crédit Agricole, Banco Itau, Cordiant (a Canadian fund manager), Fimbank and Natixis. Tranche A has a five-year tenor, with tranche B maturing in three years.

The facility will provide Vicentin with working capital finance, secured by contracts in place for the produce to be exported.

Casper Havinga, investment officer for agribusiness, food and water at FMO, tells GTR that structuring deals such as these has become challenging in Argentina, given the restrictions on foreign currency convertibility and export credits.

He continues: “Commercial banks are reluctant to provide finance. It took us much longer than anticipated to structure this transaction. This was mostly related to the stories about Argentina and its sovereign debt problems. Banks, which are facing Basel III restrictions, find it more difficult to put finance into Argentina. Furthermore, there are no commercial banks that will offer five-year tenors in Argentina.”

Since her re-election in October 2011, Argentine president Cristina Fernández de Kirchner has been rolling out a host of controls on foreign currency, in order to stem the level of capital outflows and to limit the effects of tax evasion.
For instance, foreign banks are no longer permitted to operate in Argentina’s airports or seaports, with large levies being placed on international transactions paid for by credit cards.

The result has been a massive fall in capital outflows (down 84% in 2012). But it has also left very little confidence towards Argentina among the international banking and investor communities.

As such, overseas commercial banks are becoming less and less likely to finance PXFs or any other trade-related transactions without the assistance of development finance institutions.

There are, however, rare exceptions. Last year, Natixis independently funded and arranged a PXF, also with Vicentin.
Argentina is frequently referred to as an “economic basket case”, with inflation levels in the country thought to be running as high as 25% (although the official figure puts it at 10.5%).

In its annual country risk assessments for 2013, the French insurer and export credit agency Coface’s medium-term view of Argentina was that it carried “very high risk”. The report continued to describe it as an “unpredictable business environment”, with controlled imports and capital movements, state interventionism, price controls and insufficient investment in energy and transport.