Loan Restrictions In Russia Causing Problems For U.S. Manufacturers

Deere & Co., Moline, IL, said sales in Russia have plunged more than 50% this year after the country imposed tariffs and loan limits on foreign farm equipment, Bloomberg news reports.

Loan restrictions have more than doubled borrowing costs for farmers willing to buy foreign machinery, said Samuel Allen, who will succeed Robert W. Lane as Deere’s chief executive officer on Aug. 1. “While the U.S. and Europe will remain good markets, the growth opportunities of the world are in the emerging markets,”
Allen said. “Russia and other former Soviet states, Brazil and Argentina present significant opportunities and the rate of growth will be much more accelerated there in comparison to that of the western world.”

A U.S. Chamber of Commerce survey, earlier this year, of the top 50 American businesses in Russia, found that Deere and Peoria, IL-based Caterpillar Inc., were most affected by the loan restrictions and tariffs of as much as 25% imposed by Prime Minister Vladimir Putin. But Putin has said that Russia has no plans to extend farm machinery tariffs beyond the “severe” phase of the economic crisis.

International producers expect the Russian government to eliminate import tariffs and provide support for companies who set up assembly lines in Russia, similarly to the way it supports carmakers. Deere has said it will invest about $500 million in Russia during the next five to seven years. Deere has a production unit in Orenburg and is developing an $80 million project in
Kaluga, where it may also build a production plant. The company and its dealers employ about 2,000 people in Russia.