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 in Mexico.
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:
- 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 capital.
- 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.
FIRA's organizational structure is founded in six administrative areas and one internal regulatory unit.
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 sectors.
- Structured Financing
- 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.
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 - 2013|
|Rafael Gamboa González||2013 - 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 and opportunities.
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.
FIRA's Strategy Today
Nowadays, FIRA's operations are aligned with the strategic plan formulated by FIRA's top management. This strategic plan draws 5 approaches to fulfill FIRA's objective to stimulate the agricultural sector in México, as follows:
- Focus on smaller producers with no access to credit lines.
- 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.
- 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, 2004.
- Plan Estratégico 2007-2012. 2008. Presentación. FIRA.
- ¿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.
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