IFC Agribusiness Department Strategic Response to Rising Global Food Prices

1. IFC Agribusiness DepartmentStrategic Response to Rising Global Food Prices November 12, 2008

2. IFC and Agribusiness

3. IFC Investment in the Agribusiness Value Chain Exceeded US$1.3 Billion in FY 2008 IFC’s Goal: Deliver development impact along the global agri-supply chain, through investments and advisory services with the private sector, to create opportunities and improve peoples’ lives Fertilizers and other Chemicals Project/CorporateFinance CIT – Access to Markets Land Inputs Farm Production Agri. Marketing Processing Marketing Distribution Retail Market Infrastructure Infrastructure/Logistics Financial Institutions Pre-HarvestFinance TradeFinance Risk Sharing Facilities Note: The aggregated amounts listed next to categories above denote potential IFC investment size, subject to approvals

4. Agribusiness Committed Portfolio $2.2 Billion Committed Portfolio As Of June 30, 2008 By Region By Sector 4

5. Agribusiness Investment Approach Corporate & Project Finance • Provide long term financing – equity and loans – that is not otherwise available • Create long term partnerships with emerging industry leaders • Promote IFC’s brand through best practice for corporate governance, sustainability, Environment & Social standards, etc. • Implement “further reach” programs to support individual farmers, distribution companies, etc. • Provide Technical Assistance as “added value” in IFC’s financing package Wholesaling through Traders and Financial Institutions (FIs) • Majority of farms/SMEs are too small for IFC reach but are essential to the sector • Field advantage of local intermediaries (regulations, business customs, client/ supplier reputations) • Channel financial and technical assistance to end users via intermediary • Develop and promote sustainability best practices through the intermediary • Instruments: Long Term finance, partial credit guarantees, risk sharing, etc. Technical Assistance (TA) and Advisory Services • Project specific for farmers, SME development, supply chain linkages, infrastructure • Market development of local supply to meet quality and quantity requirements • Corporate governance and business transparency advisory services 5

6. Strategic Response to Rising Food Prices

7. Agribusiness Action Plan for Rising Food Prices Food prices have risen substantially over past year Main drivers of food price inflation Fundamentals • Supply and Demand Financial Markets Supply and Demand • INCREASING DEMAND (food demand from emerging markets; diet changes; biofuel mandates) • LOWER SUPPLY (low stock to use ratio due to shortfalls in grain production; disappearance of reserve stocks; rising production costs – fuel, fertilizer, seeds, chemicals; competition for land from biofuels) • DECLINING DOLLAR • SPECULATION AND INFLATION HEDGE Source: FAO, April 2008 7

8. IFC’s Multi-Channel Response Direct Investments • Investment in productive assets • Linkages: Supply Chain value • Capacity building for farmers • Land Funds Indirect Investments • Wholesaling via Financial Intermediaries (Debt/Equity) • Portfolio risk sharing • T.A. for the FI and borrowers Partnering with World Bank • Improving Investment Climate (FIAS) • Legal / regulatory environment • TA projects in land titling reforms • FIAS/PEP-Africa warehouse receipts Working Capital Facilities • Traders • Producers • Processors 8

9. IFC is Well Positioned to Provide Interventions in the Short Term Short Term Response • Strengthen Supply Chain Coordination and Increase Liquidity via Working Capital Facilities • Prevent disruption of prefinancing • Ensure continued provision of essential inputs (seeds, fertilizers, chemicals, fuels). • Processors and traders in good standing eligible • Wings (Indonesia), Ecom (Africa/Asia), Noble (Argentina) • Increase rural credit through Wholesaling Facilities with Financial Institutions • Reach a new class of smaller clients (farmers, MSMEs) • Channel technical assistance to financial institutions (agribusiness credit analysis) and clients (environment and social, linkages, etc) • Agrofinanzas (Mexico), TSB (Tajikistan), Aval Bank (Ukraine) 9

10. IFC is Well Positioned to Provide Interventions that Address Long-Term Imbalances Fundamentals Of Supply • Productive land strategy • Bring land into sustainable production (CIS, Africa, Brazil) • Introduce better agronomic practices • Improve productivity (seeds, fertilizer, chemicals access) • Regional focus on countries with upside potential: Argentina, Brazil, Russia, Ukraine • Investment Funds (Atera, Bulgaria), Input distribution (Rise, Ukraine), Farming (Rise, Ukraine; BGK, Russia; Salala, Liberia; GOPDC, Ghana) • Vertically integrated Agri Supply Chain Infrastructure • Strengthen and support the development of • Bulk ports and Terminals (Timbues, Aguirre) • Land, Rail and Sea Trasport (UABL, TransAmerica) • Logistics and Warehousing (Merec, Trio, Pronaca) • Modern retail (Rubliovskiy, ErroTech, Agrokor) • Water Efficiency and Irrigation Infrastructure (especially through PPPs and Municipalities) • Wholesaling Facilities with Financial Institutions, Processors and Traders toincrease rural credit to farmers and MSMEs. • Explore the systematic development of Financial Instruments related to Agiculture that deepen the markets and allow for efficient intermediation of financing and risk management in the sector (e.g. warehouse receipts, weather-index insurance) Financial Markets 10

11. Response to 2008 Global Food Prices Crisis: IFC Agribusiness Development Plan Short Term Response Medium Term Response Long Term Response • Immediate budget increase for most impacted industry departments and advisory services business lines • Provide liquidity throughout the value chain • Trade finance • Working capital • Wholesaling finance • Supply side responses through global agricommodity players • Trade finance • Productive land • Improve supply chain infrastructure • Agribusiness development in Africa • Technical programs on the ground: productivity, access to finance • Standard setting • Improve logistics, product-to-market efficiencies • Reform agenda: regulatory / land / trade policy • Drive integration of small farmers to global agrisupply chain • Rural finance • IFC has already scaled up its activities and will continue to do so, to effectively provide financial and advisory services to its private sector clients and partners • Early results indicate that supply side, market driven responses to rising food prices will deliver results on the ground

12. Chris RichardsAdviserIFC Agribusiness Departmente: crichards@ifc.orgp: 202-473-6230