Mr. Eduardo Elsztain, Chairman of Banco Hipotecario S.A., a financial institution that has more than 120 years of reputation as one of Argentina's largest commercial banks, is very pleased to participate at the G20 Business Summit on the "Trade & FDI" agenda dealing with "Nurturing SMEs". In this occasion he commented on Banco Hipotecario's current SMEs Program which could be a valuable experience for other emerging countries.
Mr. Elsztain also expressed that "in Latin America SMEs face difficulties in getting access to credit at an affordable interest rate, especially in times of crisis, when the risk of default makes money even more expensive. One solution to address this issue, and meanwhile benefit the economy as a whole, is to have financial institutions lend money to SMEs with the option to -eventually- convert their credit into equity. In exchange for lending money at a lower rate, financial institutions are able to convert their loan into shares, in case the SMEs become successful. In this way, SMEs can also increase their shareholders equity and therefore enhance their capital structure".
Banco Hipotecario is currently implementing this strategy with an increasing demand to take loans, where SMEs are reducing their financing cost by approximately 1,000 bp. To select successful businesses, Banco Hipotecario has reached an agreement with Endeavor Foundation (www.endeavor.org), a SMEs community that identifies entrepreneurs running high-growth innovative companies in emerging markets. This foundation, which model has been described by New York Times columnist Thomas Friedman as "the best anti-poverty program of all", provides the entrepreneurs with a quality seal that works as a positive signal and makes financial institutions become interested in financing them.
Mr. Elsztain also serves as Chairman of Cresud, a leading agricultural company in Latin America which directly and indirectly controls aprox. 1 million hectares of rural land (aprox. 2.5 million acres), producer of Soybean, Corn, Wheat, Sunflower, Cattle and Milk, and devoted to the operation and conformation of a valuable portfolio of farmland in South America, mainly in Argentina and Brazil. The latter through BrasilAgro, Cresud's agricultural arm in Brazil.
In relation to a worldwide increasing concern on Food Security, Mr. Elsztain said that: "Global population will grow from 6 to 9 billion people by 2050. In addition to this, people are migrating from rural to urban areas at impressive rates (almost 40 million annually only in China), and increasing income in emerging countries are changing consumer habits. All these will result in a larger protein-per-capita consumption. In this scenario, worsened by water scarcity and high commodities' prices, the World will demand what Latin America produces for the next Century. For this reason, our region is positioned to have a leading role in solving this challenge, where investments in agribusiness and its "value chain" (infrastructure and services), will promote growth and development to the region while addressing the World's food security concerns.
