November 22, 2006
ACDI/VOCA Organizes Tour for Russian Farm Credit Officials
Having played a key role in the development of the Russian rural credit system, ACDI/VOCA was the natural choice to organize a recent U.S. fact-finding mission for some of the system’s top officials. Nine Russians, among them three republic ministers of agriculture, looked intensively at the American farm credit system Nov. 12-22.
ACDI/VOCA’s president Carl Leonard welcomed the group to ACDI/VOCA’s headquarters in Washington, and VP Fred Smith spoke of the company’s formidable work in Russia. The Russians got an overview of the U.S. farm credit system from John O’Day, former vice president of AgriBank, and a briefing on the federal government’s role in fostering cooperatives from USDA economist Jim Baarda. The first day ended with a reception, where Asif Chaudhry, deputy administrator of the Foreign Agricultural Service, formally welcomed the group on behalf of the government. After dinner, participants took a nighttime tour of the Lincoln Memorial.
The next day the group was off to the heartland. Mr. O’Day had arranged meetings at AgriBank, in St. Paul, Minn., the largest farm credit bank in the nation with $40 billion outstanding. After hearing in Russian from a bank employee who had emigrated from Russia at sixteen, former bank president, and former senior deputy governor of the Farm Credit Administration, C.T. Fredrickson had a rapt audience when he spoke about the dire U.S. farm credit crisis of the 1980s and the lessons it held today.
While the turmoil and dislocation suffered by many farm families and farm credit professionals could not be ignored, he said, a legislative remedy proved highly successful. He added, however, that there were dangers in operating in an environment in which government plays too prominent a role. He said, “Those engaged in businesses in which government policy is a large factor in determining prices, profits and asset values should always remember that the market forces cannot by suppressed by the government indefinitely.”
The group then heard from Lee Egerstrom, noted business reporter for the St. Paul Pioneer Press, who presented the Russians with signed copies of two of his influential books on cooperatives. He pointed out that a co-op has two objectives: to succeed as a business and to help its member-owners succeed in their own businesses.
Then John Schmitz and Tom Larson, CFO and executive VP, respectively, of Cenex Harvest States, the country’s largest farmer co-op, addressed the group. Schmitz said that he saw great potential for Russian agriculture, but that Soviet style co-ops, while able to perform certain governmental functions, are poorly structured to succeed as businesses in the global marketplace.
Bob Doane, regional manager of CoBank, led off the next day’s agenda. He said CoBank‘s mission is to provide financial services to co-ops and other businesses serving rural America. A representative of FC Leasing Co. explained how the company works with CoBank customers and others to determine if it is advantageous to lease or buy equipment. Perry Aasness and Jim Boervoom, deputy commissioner and assistant commissioner of the Minnesota Department of Agriculture, discussed how farmers are financed at the state level and what the role of the states is in the federal system.
Upon return to the Washington area, the group visited the Farm Credit Administration in McLean, Va., where they learned about the FCA’s role as an independent regulatory agency in governing the farm credit system, and the nuts and bolts of rulemaking and the examination process. Several FCA officials have a keen interest in global rural finance, including Roland Smith, secretary to the FCA board, who has facilitated the service of FCA staff as ACDI/VOCA volunteers. Smith introduced one of them, Ron Boehr, who has served on six assignments in Russia over 11 years.
The final speaker of the day was Gene Swackhamer, former president of the Farm Credit Bank of Baltimore, who sketched a history in which farm credit authority migrated from the U.S. Treasury Department to USDA, and then from the FCA to the banks themselves and, more recently, to associations.
The Russians’ heavy exposure to bureaucracy ended on Sat., November 18, with a trip to the Eastern Shore of Maryland to visit the 65-head operation of St. Brigid’s Dairy Farm in Kennedyville, and, later in the day, local grain and chicken farms. On the way back they learned first-hand that a trip to the Eastern Shore is not complete without a stop at a local outlet mall.
On the next day, a Sunday, the Russians toured another mall—the National Mall in Washington—and visited the museums of the Smithsonian Institution.
It was back to a learning agenda on Monday with a briefing from the Farm Credit Council, the U.S. farm credit system’s advocate in Washington, which was assisted by CoBank vice president for public affairs Candace Roper. Export financing is an important part of CoBank’s portfolio. The bank has $2.3 billion in lines of credit, of which $158 million is in Russia. Participants in the mission expressed interest in working with CoBank in importing new and used farm equipment, fertilizer and Jersey cows. Then National Council of Farmer Cooperatives economist Terry Barr discussed the economics of world agricultural trade and the issues of the Doha rounds of trade talks.
The last working day of the tour was spent on Capitol Hill, meeting with officials of the 5.7 million-member American Farm Bureau and staff of the Senate Agriculture Committee who explained the mechanics of the farm bill. The Russians were interested to hear that the House Agriculture Committee alone employs 48 full-time professional staff members. A tour of the Capitol was graciously provided by Senator Norm Coleman (R-MN).
During lunch at the Monocle Restaurant, a Hill institution, the group met with Senator Richard Lugar (R-IN) who chairs the Senate Committee on Foreign Relations and who formerly chaired the Senate Agriculture Committee. Senator Lugar, who visits Russia at least once a year, was very interested to hear about the objectives of the mission and of the progress being made in Russian agriculture.
Credit for planning the tour goes to consultant Jane Shey, Mr. O’Day and various ACDI/VOCA staff. Upon the Russians’ return, J. Michael Harvey, ACDI/VOCA’s country representative in Russia, reported that, “…the trip was very well organized and the meetings and visits to various institutions in the farm credit system were thoroughly worthwhile and productive. As a result of this trip, we now have strong relationships with ministers from key areas of the North Caucasus and they have new contacts within the credit cooperative system.”
Rural credit is important in Russia. The Russian Rural Credit Cooperation Development Foundation (RCCDF), together with ACDI/VOCA, managed the groundbreaking Russian-American Loan Program that has helped to make rural credit a viable concept in Russia. An ACDI/VOCA idea, it was initially funded with loan capital from USDA and technical assistance funds from USAID, first through the Mobilizing Agricultural Credit Project and now the Cooperative Development Program.
From a start of $6 million in USDA capitalization, the RAL Program now has $10 million of equity and has successfully loaned over $38 million to rural credit cooperatives. Over 91,000 people belong to Russian rural credit co-ops, and it is the best—or only—access to financing available to many of them.
According to Harvey, “While credit cooperatives improve access to credit for farmers and rural entrepreneurs and are thus an important economic development tool, they also facilitate grassroots improvements to local civil society.”
Credit cooperatives also have a national impact. Credit cooperative leaders have become political leaders in their respective regions, and at least one, a woman, has been elected to the State Duma, Russia’s parliament. In addition, staff of the RCCDF and Union of Rural Credit Cooperatives have served as expert advisers in both the Duma and the Federation Council.
For 43 years and in 145 countries, ACDI/VOCA has empowered people in developing and transitional nations to succeed in the global economy. ACDI/VOCA delivers technical and management assistance in agribusiness systems, financial services, enterprise development and community development in order to promote broad-based economic growth and vibrant civil society. ACDI/VOCA currently has approximately 90 projects in 40 countries and revenues of approximately $85 million.