IFC, Rabobank and Natixis lend $295m to Argentine agribusiness

IFC executives tells Agri Investor that the deal continues a years-long effort to stoke investor sentiment about the Latin American ag powerhouse that is starting to bear fruit.

The International Finance Corporation, the World Bank’s private sector arm, has teamed with Rabobank, Natixis and a group of financial partners to arrange a $295 million pre-export financing package for Vicentin, a diversified Argentine agribusiness.

The package is structured as a $35 million loan from the IFC’s account and an additional $260 million in financing provided by a range of institutions including Credit Agricole, FMO and Cordiant Capital. The credit is to be offered in two tranches on terms of up to six or seven years, the IFC said.

With roots that stretch back into the 1920s, Vicentin’s central business involves the processing of soybeans and the export of meal and oil. The Santa Fe, Argentina-headquartered company also maintains units devoted to cotton, biodiesel, agrochemicals, honey and wine, among others.

“Vicentin is an essential player in the agribusiness and export sectors in Argentina,” David Tinel, IFC regional manager for Argentina, Peru, Paraguay and Uruguay, said.

‘Pushing the envelope’

Facundo Sanchez, the IFC’s senior investment officer in Argentina, told Agri Investor that the loan package announced last week continues a relationship between IFC and Vicentin that started more than 20 years ago. In addition to previous support packages for the company in 1996, 2003 and 2005, Sanchez said the IFC provided credit to support the creation of Renova, a joint venture between Vicentin and Glencore Agri subsidiary Oleaginosa Moreno Hermanos.

Juan Jose Garcia, the IFC’s head for syndications in Latin America, the Caribbean and sub-Saharan Africa, told Agri Investor that the IFC has played a “significant role” in helping encourage an improvement in investor sentiment in Argentina over the past two-and-a-half years. That support, Garcia said, started before the election of President Mauricio Macri in 2015 and has evolved from a focus on export-orientated businesses capable of producing dollar-denominated revenue to supporting businesses that deal more on local markets.

“There is a lot of excitement, because some of the initial measures taken by the current administration are starting to bear fruit”
Juan Jose Garcia, IFC

“The IFC has been accompanying this process, little by little, pushing the envelope and has created a little bit of a demonstration effect for the market to catch up with what we’ve been doing,” Garcia said. “There is a lot of excitement, because some of the initial measures taken by the current administration are starting to bear fruit.”

Garcia declined to disclose specifics interest rates but did say that the improving sentiment about Argentina more broadly is starting to translate into improved access to credit, on longer terms, for local agriculture businesses.

“You can tell just by observing how spreads have been compressing at the sovereign debt level that that same degree of spread compression has also been observed in the commercial lending space,” said Garcia.

Changing regulations

In its 2018 outlook published this month, Valoral Advisors wrote that agriculture-related mergers and acquisition activity in Argentina has continued to improve since 2015, when political risk and low commodity prices slowed activity considerably.  The report said Argentina has also emerged, alongside Brazil, as a leading regional hub for agtech, with 60 relevant startups present in the country surpassing the 43 present in Brazil.

Overall, the food and agriculture-focused advisory firm wrote that Argentina’s local agriculture sector has responded rapidly to the improvement in business conditions and benefitted from slow change to existing regulations on foreign investment in farmland.

“The central area of the country offers opportunities for row crops and for mixed operations, including grass-fed beef production,” Valoral noted. “There are niche opportunities linked to specialty crops produced under irrigation in more marginal lands which have access to water, including citrus and the nuts family, as well as organic farming systems.”