Lack of stability in the Russian agriculture

| Foreign Markets |

If you compare the business climates in which Russian and Canadian tractor factories operate, the main difference which puts the Russian industry at a disadvantage is the high cost of the provision of loans and credits in banks that finance manufacturing.

A year ago, the total cost of a loan taken in Russia was already huge in comparison with the main competitors on the global market. Still, the Central Bank of the Russian Federation has raised the reference interest rate by 70% since then! The cost of credits for farmers, the industry and individuals is so high that it acts as a damper on the industrial production. Were it not for the weak ruble, such attitude of the Russian economists would lead to the breakdown of commodity manufacturing in the country.

Rising exchange rates have an impact

The weak ruble is also affecting agriculture. In Russia, this sector is largely dependent on imported machinery and fertilizers. The manufacturers need to take into account the rising cost of the acquisition of imported machinery and mineral fertilizers. The only solution is to include this cost in the suggested price of the goods produced.

The original idea of the Russian authorities was to punish European and American farmers with an embargo, and at the same time encourage domestic farmers to work more efficiently, and limit the competition on the market. All the measures appear to have been counter-productive.