A couple of federal agencies are trying to get Mexican cattle producers to think of Canada as they rebuild herds after devastating droughts.
Last week Canada’s Export Development Corp. established lines of credit with two Mexican banks that can be used to finance up to 85 percent of the value of Canadian breeding cattle, semen and embryos sold to Mexican buyers.
Two weeks ago, Mexican bankers were in Regina meeting with the Farm Credit Corp. to learn how that lender deals with risk when providing loans to the cattle industry.
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They toured nearby dairy and beef farms and met livestock producers, officials of Canadian Western Agribition and provincial government officials.
“Mexico had a very bad drought several years ago and has a real deficit in livestock,” said Ron Witherspoon, FCC vice-president of business development.
“This was an opportunity to tell them about the quality of Canadian genetics. Certainly the Americans are trying to market their products to them and it’s beneficial for financial institutions to understand how well Canadian genetics compare on a worldwide basis.”
The federal crown corporation EDC has set up credit of about $225 million with Banco National de Mexico (Banamex) and Bancomer. The money will be made available to Mexican farmers buying cattle genetics from Canada.
Canadian cattle exporters can also offer their Mexican buyers credit through Banco National de Comercio Exterior (Bancomext) and National Financiera (Nafin), where EDC has long-standing relationships.
“FCC’s role in this initiative is to help explain to the Mexican banking partners that EDC is using, exactly how FCC finances the industry and why we have so much confidence in the industry,” Witherspoon said.
FCC has data on all the loans it has made since 1975.
“We have 55,000 loans that we have analyzed and looked at the probability that loans will succeed or have problems.”
Such information helps guide FCC in establishing how much money it will lend an operation, repayment schedules, interest rate charges and collateral levels.
Witherspoon said the Mexicans did not come without experience.
“We all deal with information gaps and by sharing experiences, information and techniques, we can all do a better job of managing our risk. Otherwise, the only practice that is safe is to be ultra conservative.”
Financing can also be provided on a case-by-case basis through EDC’s medium-term bulk agriculture guarantee program. Under this program, a letter of credit is opened by a Mexican bank and negotiated by a Canadian financial institution.
With an EDC guarantee, these institutions can act as the lender and agree to finance the credit taken with a repayment term of up to three years.
For more information, Canadian cattle exporters should contact EDC at 613-598-2500 or the trade finance group of any Canadian financial institution.
