• Submitted by: manso
• Business and Economy
• 09 / 21 / 2011

---

Marcella Scarlett, Business Reporter. Wednesday, September 21, 2011.Newport Fersan Jamaica Limited, the island's sole manufacturer of ferlilizers, has secured a deal to supply 98,000 bags or 4,600 metric tonnes of the product to Cuba.

Financing for the fertilizers, valued at Can$3 million, will be undertaken through the Export-Import (ExIm) bank's Cuban line of credit.

The product will be sent in two shipments, the first of which will be loaded during the first week of October and the second 15 days later, Fersan's managing director Dennis Valdez told Wednesday Business.

"We are very excited," said Valdez, adding that "the customer is excited about this operation and I believe that we can foresee many more shipments happening soon."

Fersan was in negotiations to ship additional supplies to Cuba, he said.

With the line of credit, payments are made to the exporter - in this case Fersan - immediately upon delivery of the goods. Once the importer, Cuba, is satisfied with the product, it submits the relevant documents to Banco Nacional de Cuba, which will make a formal request to the ExIm bank for financing.

Banco Nacional de Cuba will repay the ExIm bank in equal installments over six months because the transaction is being undertaken under an institution-to-institution arrangement.

Additional workers

Production of the fertilizer has not yet started, but Valdez said the plant would require additional workers to assist in the process. With a production capacity of about 10,000 bags per day, the product is expected to be produced over nine days.

"We don't change the raw material. We just mix them, we blend them and we bag them. That is the whole production process and everything is done mechanically," Valdez said.

Valerie Crawford, manager for trade financing at the ExIm Bank was unable to definitively say what would be the interest rate on loans accessed under this facility. However, she said the interest rate is variable and is priced using the Canadian Libor rate.

Newport Fersan has an annual production capacity of 83,000 metric tonnes but is currently producing only 35,000 metric tonnes to fill local demand.

Newport Fersan has been producing fertilizers for the local farming community since 2004 when it started operating in Jamaica.

Valdez said the brand originated in the Dominican Republic but the company expanded to Jamaica to take advantage of the export market within CARICOM and Cuba due to the comparative advantage of financing available in Jamaica.

Possible demand increase

He said Fersan was anticipating increased demand for fertilizer used in domestic production of sugarcane on the heels of the recent divestment of the Frome, Bernard and Monymusk sugar estates to Chinese-owned COMPLANT International Sugar Industry Company.

The Cuban line of credit was established in 1997. There was zero take up in the first year and marginal take up in the two years following. However, except for the 2008-2009 period when Cuba was badly affected by hurricanes that had negatively affected their repayment abilities, since 2000, local manufacturers have been accessing the line of credit.

The ExIm bank's Crawford said that following the natural disasters in Cuba, "there was some repayment issues and we had to be sensitive to what was going on in their economy. For about a year we had to give them some time to catch up."

She told Wednesday Business that the deal with Newport Fersan could have busted the CDN$10 million credit limit of the facility if it was successfully negotiated. This means the ExIm Bank would not take on any new transactions until the fund was replenished.

Asked if the limit could be increased, Crawford said: "We would want to, we would love to because it is a part of expanding our export sales. Remember, Cuba has a population of over 12 million and they would not mind the take up."

Source: http://jamaica-gleaner.com/gleaner/20110921/business/business4.html