San José, Costa Rica, since 1956

Broke Farmers Ask Banks to Give Them a Break

Leaders from the agricultural sector, one of the sectors hit hardest by the financial crisis, are requesting that bankers improve the current credit application process, which they say is aggravating the woes of small farmers across the country.

“The credit conditions that are being offered are not acceptable for agricultural activities,” Agriculture and Livestock Vice Minister Carlos Villalobos told The Tico Times. “The current process is not fast, timely or accessible.”

Last week, President Oscar Arias met with members of the manufacturing, tourism and agricultural sectors, as well as with representatives from three state banks – Bancrédito, Banco de Costa Rica and Banco Nacional – in an effort to address the concerns and complaints of these struggling sectors.

“We wanted to show the banks a little bit of what the agricultural sector, and in particular the farmers, has been going through the last several months,” Villalobos said.

The monthly economic activity index, or the IMAE, for March, recently released by the Central Bank (BCCR), indicated the agriculture sector has contracted for eight months in a row, showing a 5.2 percent negative growth in February 2009 compared with the same month last year.

Since the crisis began, Villalobos explained, banks have made the process of requesting loans more difficult. According to him, existing procedures place too many obstacles in the way of small and mediumsized farmers.

“We need the productive sectors (in the country) to be competitive,” Villalobos said. “In order for that to happen, we need financing.”

According to Villalobos, it is common for farmers to apply for credit to finance their harvest operations, but because of delays in the existing process, they often receive financing too late, and lose the opportunity to harvest. In many cases, farmers end up losing the land that they put up as a guarantee for the loans.

Instead of the banks using the farmers’ harvests as collateral, an insurance policy on the harvests or even farm animals as guarantees, these institutions, Villalobos says, will often only accept farmers’ lands as the only guarantee for a loan.

Presidency Minister Rodrigo Arias said that last week’s meeting had three main objectives: to lower the credit loan rates, reactivate credit and improve the existing conditions for credit already granted.

“For a small or medium-sized business owner, or even a big business owner, the time they have to wait for an answer regarding a credit (request) could be the difference between maintaining their business or losing it,” Arias said in a statement last week.

Guillermo Quesada, general manager for Bancrédito, said via e-mail that his bank has maintained open credit lines for microand small businesses, known as MIPYMES.

Regarding waiting periods for  MIPYMES, Quesada said, Bancrédito usually takes one to two weeks to process a loan, depending on the guarantee business owners offer. Certain guarantees require an appraisal of the value of the guarantee, which might extend the procedure.

Quesada said Bancrédito has reduced interest rates by 2 percentage points for credits for housing and for MIPYMES of less than ¢50 million (about $88,600) in response to a request from the Arias administration.

The request was part of Arias’ economic plan introduced in January.

“(Bancrédito) is currently studying operational costs as a way to reduce interest rates,” Quesada said.

Even though Quesada agreed the participation of state banks is necessary to reactivate the productive sector, he insisted that they cannot do this alone, but work in tandem with institutions such as the Central Bank, the Finance Ministry and National Council for Financial System Supervision (CONASSIF).

José Jenkins, president of the Banco Nacional, told the daily La Nación last week that requests made by farmers at the April 16 meeting have to be analyzed before his institution can make a decision.


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