OREANDA-NEWS. May 17, 2011. EIB provides Moldovan winemaking industry with EUR 75 mln. Interview with the Moldovan Minister of Agriculture and Food Industry, Vasile Bumacov.

- Mr. Bumacov, what are the main conditions the recipients of funds from the European Investment Bank (EIB) must meet?

- The EIB gives Moldova a loan primarily for the production of quality wines, which are called wines of controlled origin or contain controlled geographic names, as well as for the modernization of wineries. The loan covers the entire vine-wine industry, starting with nurseries, planting vineyards, vineyards cultivation, primary processing, and the modernization of laboratories checking the quality of wines.

The EIB loans the money to the state for a period of 12 years with a grace period of four years, and an interest rate not more than 3%. The wine sector will get 50% of the loan amount, the vine sector - 35%, and adjacent companies - up to 20%. The remaining money will be spent on laboratory equipment and training.

- How will the credit be distributed, through the state, through a special company, ministry, or local banks?

- The EIB will transfer the loan funds to the Finance Ministry, which, in turn, will manage the money in collaboration with commercial banks. In addition, at the end of 2010, the government has established a consolidated unit for the implementation and monitoring of wine sector restructuring, which will be accepting applications, business plans from prospective borrowers of funds. The unit membership will include a supervisory committee consisting of representatives of the Minister of Agriculture and Food Industry, the ministries of finance, economy, National Bank, as well as EU experts. The committee aims at monitoring the proper implementation of this program.

- Will the bank or the state receive partial ownership of the companies, as to guarantee the credit return?

- It is obvious that when the government signs an agreement on such financing, it assumes certain responsibilities. First of all, the unit of program implementation, as well as banks, will consider the resources of borrowers concerning the credit refund. If the running projects fail, and companies cannot meet the credit obligations, the state will transfer ownership of the company’s assets as to repay the EIB money.

- What criteria should winemakers and vine growers meet so they could count on the EIB loan funds?

- Winemakers must present a convincing business plan, which would prove that they, for example, are buying modern equipment to improve the quality of wine, which in turn will increase the enterprise competitiveness.

Vine growers will receive credit only upon the confirmation of their ownership of vineyards. Another prerequisite is the fact that loan recipients must have 50% equity of the amount requested. The remaining 50% of the money will be allocated in the form of loan.

- On what period of time will the credit to winemakers and vine growers be provided?

- The money will be lent for a period of 10 years at an annual rate of 5.5%. Winemakers will be able to borrow from 25 thousand EUR to 5 million EUR, while vine grower - no more than 2 million EUR.

- What is the ideal way to distribute the EIB money?

- Of course, the ministry wants as many credit recipients as possible. It is desirable that those who produce quality wines would able to continue their operations that will contribute to the modernization of this sector. Producers of raw materials, as well as winemakers have invested huge money in this sector. But because of the crisis in 2006 they went bankrupt, and now the state must help them and support through foreign loans.

- Winemakers might want to use these financial resources to repay bank debts.

- No, the possibility of using the loan to cover current debts is excluded. Now, the government discusses with foreign banks the possibility of new loans for vine growers and winemakers, so they could repay the bank debts they have taken yet before 2006. Negotiations with the European Bank for Reconstruction and Development and the Black Sea Trade and Development Bank are being held. We are also discussing with local banks the possibility of restructuring the winemakers’ debts and move the due dates for the payment on interest and principal to a later date.