What is FIRA?
Established in 1954 by Mexico’s federal
government, Trust Funds for Rural Development (FIRA) is a second-tier development
bank that offers credit and guarantees, training, technical assistance and technology-transfer
support to the agriculture, livestock, fishing, forestry and agribusiness sectors
Originally FIRA was established with the creation
of FONDO (Fondo de Garantía y Fomento para la Agricultura, Ganadería
y Avicultura). Subsequently, three other trusts were created and integrated
to fulfill FIRA’s current structure. These trusts and their respective
year of creation are as follow:
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FONDO (1954) (Fondo de Garantía y Fomento para
la Agricultura, Ganadería y Avicultura): Focused on mobilizing resources
to the primary sector through short-term financing, targeted for working
FEFA (1965) (Fondo Especial para Financiamientos Agropecuarios):
Financing, subsidies and other services for production, recollection and
distribution of goods and services through long-term financing for the acquisition
of machinery, equipment, installations, etc.
FEGA (1972) (Fondo Especial de Asistencia Técnica
y Garantía para Créditos Agropecuarios): Identification, evaluation,
guarantees, technical assistance, supervision, training and technology transfer
services targeted to improve sector’s development and credit payback.
FOPESCA (1989) (Fondo de Garantía y Fomento para
las Actividades Pesqueras): Focused on channeling FIRA’s resources
towards the fishing sector
FIRA has an extensive network of 143 offices
throughout Mexico, more than 40% of which are based in communities with fewer
than 50,000 residents. FIRA’s field offices and headquarters include a
staff of more than 1,137 agricultural and finance specialists with a deep knowledge
of Mexico’s farming conditions and producer capabilities.
These specialists conduct a broad range of activities
from economic and sectorial studies, feasibility analyses of the projects, supervision,
implementation and training to farmers, risk management and technology development,
among many others.
In order to meet clients’ needs in a more effective, timely manner, FIRA’s
offices are structured geographically as follows:
- Headquarters in Morelia, Michoacán.
- Office in México City
- 5 Regional Offices
- 31 State Offices
- 100 Local Offices
- 5 Technology Development Centers
FIRA is governed by a board of directors comprised
of representatives from the Federal Government, regulatory bodies, commercial
banks, agricultural industries, and a wide array of agricultural organizations
representing small and big farmers. Throughout its history, FIRA had experienced
much greater management continuity than most public sector entities in Mexico.
It is seen as a highly professional and technical organization with a reputation
for high integrity, and, accordingly, enjoys greater insulation from outside
political manipulation. As of today, General Management activities are being
conducted by Rodrigo Sánchez Mújica appointed General Director
on February 2007.
FIRA’s organizational structure is founded
in six administrative areas and one internal regulatory unit.
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Products & Services
FIRA offers a diverse range of products and
services to support the development of the rural sector. It provides short-term
and long-term credit in pesos and US dollars through financial intermediaries
at competitive interest rates. Credit guarantees are provided to banks as a
way to share the risk with lending institutions and to facilitate access to
bank credit by rural producers. FIRA also uses financial derivatives and structured
financing to manage the risk involved in everyday operations.
Among the broad range of products and services
offered by FIRA, we find:
- FIRA Credit
- Medium term credit (2 years max) for working capital.
- Fixed investments up to 15 years. For forestry and long maturity projects
it can be extended up to 20 years.
- Short term credit for the commercialization of goods and services,
for up to 6 months.
- Rural Financing
- This product’s objective is to foment any other economic activity,
different from the agricultural, forestry or fishing activities, in
rural Mexico. For instance: transportation, distribution, warehouses,
bakeries, general stores, etc.
- FIRA Guarantee
- Offered to the traditional banking Institutions and other financial
intermediaries, in order to facilitate the access to producers and/or
businessmen to the FIRA’s financing programs by complementing
their guarantees for feasible projects in the agricultural and rural
- Structured Financing
- o The objective is to provide specific, tailor-made funding programs
to companies with specific needs. These schemes are developed from identifying
the credit, operative and market risks, so they can be managed accordingly.
- Special programs
- These are specially developed schemes to address particular topics,
from financial support to sugar producers to Credit Unions schemes.
- Technologic subsidies
- Management training and technology transfer
- Integral Technical Assistance Services
- Strengthen Economic Organizations and Enterprises
- Strengthen Financial and Management Competencies of Financial Intermediaries
- Expansion of the Business Promotion Structures with FIRA
FIRA offers several types of subsidies. To encourage
long-term financing in Mexican pesos to small agricultural producers at favorable
rates, the institution provides financial intermediaries with subsidies to cover
the difference between the rate charged to them by FIRA and the lower rate they
eventually charge the end borrower. Also, as an incentive to provide credit
to small borrowers, FIRA provides financial intermediaries with subsidies to
help cover transaction costs incurred by serving those with low credit levels.
Subsidies, in the form of reimbursements and vouchers for training and assistance
related to technology development, are also provided to rural producers.
Finally, FIRA provides financial and technical
research and consulting services, which includes identifying new business opportunities
for rural producers and providing them with market data.
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FIRA through history
FIRA’s success can only be understood
if we analyze the several components of its history. Only then the successful
story of FIRA in Mexico’s financial system will be clear.
It is possible to break down FIRA’s history
into seven stages starting in its creation in 1954. First, it is important to
mention that in 54 years of history, FIRA has had six General Directors as follows:
Salvador Lira López
1955 - 1965
Horacio García Aguilar
1965 - 1982
Antonio Baca Díaz
1982 - 1990
Guillermo Vázquez Rodríguez
1990 - 1998
Francisco Meré Palafox
1998 - 2007
Rodrigo A. Sánchez Mújica
2007 - Today
The first stage, from 1954 and 1962, is considered
FIRA’s experimentation phase and launch. It is considered a creative period,
one full of challenges in terms of gaining the banks´ and producers’
recognition as a solid, reliable credit Institution. It was a time full of questions
and doubts from banks, producers and even the government. As stated by FIRA’s
former General Director Salvador Lira: “…it was about a new,
never- seen operative system in México and the world, so it required
constant improvement and modifications, by observing the reaction of the commercial
banks and our main beneficiaries…”
The second phase of FIRA was from 1963 to 1971.
This period is also referred as “the stabilizing development stage”.
During this stage the Institution consolidated its basic operations and started
an aggressive growth strategy. A fundamental change during this time was the
expansion of resources that FIRA was able to operate, shown through the availability
of International funds, such as the US program ALPRO, created by President John
F. Kennedy in order to promote multilateral programs for poverty eradication
in Latin America. This expansion leaded to the creation of the Fondo Especial
de Financiamientos Agropecuarios (FEFA), in 1965, in order to fulfill the highest
mission of the Institution.
During the third stage, from 1972 to 1982, FIRA
continued to implement its expansion strategy, but also focused on defining
FIRA’s particular operative characteristics. In this period, the creation
of the Fondo Especial de Asistencia Técnica y Garantía para Créditos
Agropecuarios (FEGA) in 1972, allowed to broaden the reach of FIRA’s products,
such as guarantees and technical assistance. During these years, and due to
the creation of FEGA, several programs were created and it allowed for greater
innovation in FIRA’s financial operations.
The fourth stage, from 1982 to 1991, is characterized
as a time when activities orientated toward small producers, driven mainly by
the economic situation of México during that period. FIRA’s operations
during this phase where marked by the transition of the agricultural sector
from a protected to market aperture. In addition, and as a result of the economic
situation, the Fondo de Garantía y Fomento para las Actividades Pesqueras
(FOPESCA) was created.
The fifth stage, between the years of 1991 to
1998, is characterized by the financial “cleansing”, driven by the
economic crisis that was occurring at that time. The commercial aperture and
the deregulation process that the economy was going through did not help the
agricultural sector. In addition, the privatization of the Banking System, as
well as the 1995 economic crisis was also negatively impacting the financing
flow to the primary sector. All these factors lead FIRA to have a big opportunity
of becoming an even more important player in the financial and agricultural
sector in Mexico.
The sixth stage, comprised from 1998 to 2007,
is characterized by FIRA’s redesign toward a sustainable Institution in
a global economy context, where the agricultural sector faced new challenges
Nowadays, FIRA is on its seventh stage, where
new strategies are being drawn to fulfill FIRA’s highest objective of
developing the agricultural sector in Mexico through new, and more efficient
financial tools. During the current administration a strategic plan for the
period 2007 – 2012 was established, based on five strategic approaches.
This plan has shown positive performance as can be seen on the qualitative and
quantitative FIRA´s results. For instance, in 2008 FIRA’s operations
were up 28% from 2007, channeling more than $90 billion pesos, positively impacting
around 1,909,917 small and medium producers and farmers all around Mexico. In
addition, 307 thousand jobs were created as a result of FIRA’s strategy
of granting credit lines to lower level’ producers, helping unions and
producers’ organizations create more effective relationships.
It is important to recognize that this plan
has not only be proven effective so far, but also that it has proved to be a
long-term strategy to transform FIRA into a dynamic, reliable Institution capable
of adapting to a very changing, volatile environment.
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FIRA’s Strategy Today
Nowadays, FIRA’s operations are aligned
with the strategic plan formulated by FIRA´s top management for the 2007-2012
period. This strategic plan draws 5 approaches to fulfill FIRA’s objective
of stimulate the agricultural sector in México, as follows:
Focus on smaller producers with no access to credit
Strengthen projects’ structuring by offering training
and technical assistance to small producers’ projects.
Broaden funding flow through the participation of rural
private financial intermediaries
Promote a gradual private financial intermediaries financial
independence, so they can provide funding with their own resources to producers
with an existent credit history
Preserve Institutional assets
The history of FIRA is still being written.
FIRA is an institution characterized by innovation, trust, and leadership. It
is a success story; however, there is a lot to be done for the agricultural
sector and the rural economy in México. In order to build a more prosperous
country, FIRA faces the challenge of maintaining itself as a leading organization
in the Mexican financial system.
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Austin, Chu, y Reavis. 2004. FIRA: Confronting the
Mexican Agricultural Crisis. Harvard Business School.
Mobarak, Gustavo del Ángel. Cosechando Progreso:
FIRA a cincuenta años de su creación. México,
Plan Estratégico 2007-2012. 2008. Presentación.
¿Qué es FIRA? 2008. Presentación.
Primer curso FIRA en Agronegocios. FIRA.
Torres, E. 2008. Evaluating Fira’s Interest
Rate Subsidies Evaluations, 2001-2006. Harvard Kennedy School.