http://www.miller-mccune.com/business-economics/whats-in-a-label-6842/ Nationally Acclaimed Politics, Science and Culture Coverage Wed, 28 Dec 2011 18:00:17 +0000 hourly 1 http://wordpress.org/?v=3.3.1 http://www.miller-mccune.com/business-economics/whats-in-a-label-6842/#comment-2315 Anonymous Mon, 22 Feb 2010 20:45:59 +0000 http://blog.miller-mccune.com.s72010.gridserver.com/?p=6842#comment-2315 Microlending is killing economic development in Nicaragua. http://nicaraguensesenusa.blogspot.com/ Microlending is killing economic development in Nicaragua.
http://nicaraguensesenusa.blogspot.com/

]]> http://www.miller-mccune.com/business-economics/whats-in-a-label-6842/#comment-2310 Manny in Franklin Mon, 22 Feb 2010 18:52:25 +0000 http://blog.miller-mccune.com.s72010.gridserver.com/?p=6842#comment-2310 The plight of the Nicaraguan farmer (which is not only coffee farmers, but cattle rangers, cocoa farmers, etc…) is caused by a 2 flank assault from greedy bankers and an orthodox ideological government. On the one hand you have government-connected banks, which in fact are owned by politicians (the Ortega’s). And, on the other hand are loans with interest rates and fees that range between 30 to 60 percent by time the loan is amortized. The banking and cooperative system in Nicaragua is broken. I have observed, first hand, how banks and government have carried out this assault on the small farmers in Nicaragua. And I mean very small farmers. These were people who owned 10 to 50 acres and saw their lands foreclosed by banks. This is carried out with backing from the government. One practice that called my attention was that the monies to the farmers are given in local currency, while the loan amortization is configured in dollars; a one- two punch that cripples farmers, regardless of their productive capacity. The process of securing a loan from a cooperative or bank in Nicaragua is as follows: The application process takes the farmer to the bank, which in turn sends a loan officer to evaluate the farm, once the farm is secured as collateral (the farmer’s land title is held by the bank), the loan is processed. Loan fees alone are a cause to shake anyone with a high school finance education. Take for example a $1000.00 dollar loan. Farmers receive only 80% of loans extended, while the other 20% is charged to the farmer as processing fee, upfront. The other little secrete is banks in Nicaragua charge 2% monthly = 24% APY. Last but least, loans are processed in dollars, while the farmers receive local currency from the banks, and sell their products in local currency. At times the local exchange fluctuates as much as 10 to 15 percent in the course of a loan. Therefore, by the time the farmer sells his product in the market, they recover only part of the total of the loan and are faced with a mounting debt, which accumulates interest on the total amount, not just the balance, until the total is paid in full. The banking and cooperative system in Nicaragua is broken. Greedy bankers and unscrupulous politicians have crippled farmers in Nicaragua, who pay as much as 45% to 60% percent in interest rates and fees. If this trend continuous, more and more farmers will default, and social unrest and financial instability will once again resurface. In January 2008, I visited Rio Blanco, in the North of Nicaragua, where over 300 farmers had lost their land to what amounts to confiscations by banks owned by the Ortegas. I saw the fragile peace and free markets take a turn for the worst. If the oligarchs in the country continue serving only their needs, I am afraid we will see another human catastrophe like we saw in the 80’s and 90’s. The plight of the Nicaraguan farmer (which is not only coffee farmers, but cattle rangers, cocoa farmers, etc…) is caused by a 2 flank assault from greedy bankers and an orthodox ideological government. On the one hand you have government-connected banks, which in fact are owned by politicians (the Ortega’s). And, on the other hand are loans with interest rates and fees that range between 30 to 60 percent by time the loan is amortized. The banking and cooperative system in Nicaragua is broken.
I have observed, first hand, how banks and government have carried out this assault on the small farmers in Nicaragua. And I mean very small farmers. These were people who owned 10 to 50 acres and saw their lands foreclosed by banks. This is carried out with backing from the government. One practice that called my attention was that the monies to the farmers are given in local currency, while the loan amortization is configured in dollars; a one- two punch that cripples farmers, regardless of their productive capacity.
The process of securing a loan from a cooperative or bank in Nicaragua is as follows: The application process takes the farmer to the bank, which in turn sends a loan officer to evaluate the farm, once the farm is secured as collateral (the farmer’s land title is held by the bank), the loan is processed.
Loan fees alone are a cause to shake anyone with a high school finance education. Take for example a $1000.00 dollar loan. Farmers receive only 80% of loans extended, while the other 20% is charged to the farmer as processing fee, upfront.
The other little secrete is banks in Nicaragua charge 2% monthly = 24% APY.
Last but least, loans are processed in dollars, while the farmers receive local currency from the banks, and sell their products in local currency. At times the local exchange fluctuates as much as 10 to 15 percent in the course of a loan. Therefore, by the time the farmer sells his product in the market, they recover only part of the total of the loan and are faced with a mounting debt, which accumulates interest on the total amount, not just the balance, until the total is paid in full.
The banking and cooperative system in Nicaragua is broken. Greedy bankers and unscrupulous politicians have crippled farmers in Nicaragua, who pay as much as 45% to 60% percent in interest rates and fees. If this trend continuous, more and more farmers will default, and social unrest and financial instability will once again resurface.
In January 2008, I visited Rio Blanco, in the North of Nicaragua, where over 300 farmers had lost their land to what amounts to confiscations by banks owned by the Ortegas. I saw the fragile peace and free markets take a turn for the worst. If the oligarchs in the country continue serving only their needs, I am afraid we will see another human catastrophe like we saw in the 80’s and 90’s.

]]> http://www.miller-mccune.com/business-economics/whats-in-a-label-6842/#comment-1778 Rodney Fri, 05 Feb 2010 15:50:34 +0000 http://blog.miller-mccune.com.s72010.gridserver.com/?p=6842#comment-1778 I have done a little research on fair trade and this rounds it all out, Thanks for the read. I believe "direct trade" offers the farmers a better bargaining tool and profitability. I have done a little research on fair trade and this rounds it all out, Thanks for the read. I believe “direct trade” offers the farmers a better bargaining tool and profitability.

]]> http://www.miller-mccune.com/business-economics/whats-in-a-label-6842/#comment-1268 Stephen Best Fri, 29 Jan 2010 20:47:37 +0000 http://blog.miller-mccune.com.s72010.gridserver.com/?p=6842#comment-1268 What an informative article...now I know...thanks for the insight. What an informative article…now I know…thanks for the insight.

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