Emerging from a few years of hostile conditions, Uruguayan rice producers are now tilling the field of high finance. As part of a US$35 million securitization of future flows into a government-administered rice fund, debt-addled farmers will receive funding expressly to pay back loans to the Bank of the Oriental Republic of Uruguay and to manufacturers and exporters. "A part of the funds will go to cancel these debts," said Eduardo D'Orazio, director of Fitch Ratings Argentina. "The object is to help mend the banking and rice sectors."

Keeping true to the namesake of its French parent company Credit Agricole, Banco ACAC is leading the transaction. The deal is split into two tranches, both rated A+(uy)' on the national scale by Fitch. A US$28 million chunk was sold exclusively to pension funds in the last days of December, while a wider net was cast for the remaining US$7 million. Other than the investor audience, the series are identical. The expected maturity of the paper is five years and the yield 9.5%. Ferrere Lamaison provided legal counsel.

The collateral is made up of future flows from a 5% tax on the FOB (Free on Board) value of rice exports. That tariff goes to a fund run by the Livestock, Agriculture and Fishing Ministry and the Economy and Finance Ministry. The deal is reminiscent of a milk-related transaction that closed almost exactly one year earlier, also led by Banco ACAC.

Exports account for 90% of rice output in Uruguay. Over the last few years, a slump in international prices and a devaluation of currency by the sector's single biggest customer, Brazil, shriveled up the traditionally fat margins enjoyed by Uruguayan producers. Better days resumed just last year, thanks to a drop in their country's currency and healthier prices. Rice exports hit roughly US$170 million during the 2002-2003 crop cycle.

A new trust law in Uruguay is expected to kindle the securitization sector in the country. Due to the small size of the economy, deals are unlikely to have much heft. A good candidate for future deals is consumer debt, which has sparked a revival of domestic structured deals in neighboring Argentina


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