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Russia: More expensive import products; rouble devalued 22%

Russian economy affected by sanctions
Russia: More expensive import products; rouble devalued 22%

Although Putin is convinced that the country can become increasingly self-sufficient, Russian economists also point to the impact of potential budget shortfalls. Economists see that it is difficult for companies to attract enough investment. Because of Western sanctions, access to capital has become more difficult. Economists warn of the possibility of recession due to high inflation, disappointing consumption, difficult access to capital and declining exports.

To curb the rising inflation, the Russian Central Bank sold $ 420 million worth of foreign currency on Tuesday. In total, the bank spent $ 2 billion in October on interventions. The Rouble is performing poorly this year. Its value has already fallen by nearly 22% against the dollar and 12% against the Euro. Russia has a huge financial buffer of $ 460 billion in foreign currency. Thus, it has sufficient room for manoeuvre for further interventions.

Additionally, the Russian government has been trying for some time now to switch from dollars to roubles in international trade transactions. Already in 2008, media reports appeared on the subject, discussed in relation to the oil market. Trade between North Korea and Russia is already carried out in roubles; the value of trade is equivalent to $ 500 million. But more important trading partners, such as China and Iran, would also welcome trade in domestic currencies. This, however, also entails risks, as Ukrainian traders already experienced. Because of the fact that Russians purchase on credit, the value of the rouble may have already fallen before payments are made, resulting in exporters receiving relatively less for their products.

Consumer prices continue rising in Russia 

At the moment, exporters dealing mainly in dollars, especially in the energy sector, are the only ones that are significantly profiting from the low rouble. Consumers face rising prices, which are growing by about 0.2% per week. Although this is a low overall percentage, some products have become significantly more expensive. In a week’s time, cucumber prices have grown by 7.6%, tomatoes have become 3.6% more expensive, and potato prices have increased by 2.8%. The Central Bank is now taking into account an inflation rate of 8% for 2014, well above the ceiling set by the bank of 6.5%.

Sverdlovsk swapping potatoes for cattle 

Russia’s Sverdlovsk region produces about twice as many potatoes as it can consume. According to the regional government, two years ago it started a project to expand its storage capacity, which resulted in the opening of eight new warehouses last year, bringing its total number up to fifteen. In order to develop the sector further, the government will invest 12 billion roubles ($ 240 million). Where the region has a deficit is in cattle; therefore, Sverdlovsk launched a plan to cooperate with neighbouring Belarus and Kazakhstan, which will provide livestock in exchange for vegetables and potatoes and knowledge about their cultivation. 

Peru signs contracts 

The Peruvian firm Passionfrut Company has gained access to the Russian market with mandarins and mineolas. The agreement was signed during the fair Expoalimentaria in Lima. Russian companies were interested in the mandarin varieties W Murcott and Malvasia and the Minneola tangelo. The Peruvian company is working with a Russian partner to ship two containers of mandarins to St. Petersburg. 

Passionfrut Company is still seeking access to new markets. Besides Russia, the firm wants to export to the Middle East, North America and Europe.

Publication date: 10/9/2014


FreshPlaza.com

Russia: More expensive import products; rouble devalued 22%

Russian economy affected by sanctions
Russia: More expensive import products; rouble devalued 22%

Although Putin is convinced that the country can become increasingly self-sufficient, Russian economists also point to the impact of potential budget shortfalls. Economists see that it is difficult for companies to attract enough investment. Because of Western sanctions, access to capital has become more difficult. Economists warn of the possibility of recession due to high inflation, disappointing consumption, difficult access to capital and declining exports.

To curb the rising inflation, the Russian Central Bank sold $ 420 million worth of foreign currency on Tuesday. In total, the bank spent $ 2 billion in October on interventions. The Rouble is performing poorly this year. Its value has already fallen by nearly 22% against the dollar and 12% against the Euro. Russia has a huge financial buffer of $ 460 billion in foreign currency. Thus, it has sufficient room for manoeuvre for further interventions.

Additionally, the Russian government has been trying for some time now to switch from dollars to roubles in international trade transactions. Already in 2008, media reports appeared on the subject, discussed in relation to the oil market. Trade between North Korea and Russia is already carried out in roubles; the value of trade is equivalent to $ 500 million. But more important trading partners, such as China and Iran, would also welcome trade in domestic currencies. This, however, also entails risks, as Ukrainian traders already experienced. Because of the fact that Russians purchase on credit, the value of the rouble may have already fallen before payments are made, resulting in exporters receiving relatively less for their products.

Consumer prices continue rising in Russia 

At the moment, exporters dealing mainly in dollars, especially in the energy sector, are the only ones that are significantly profiting from the low rouble. Consumers face rising prices, which are growing by about 0.2% per week. Although this is a low overall percentage, some products have become significantly more expensive. In a week’s time, cucumber prices have grown by 7.6%, tomatoes have become 3.6% more expensive, and potato prices have increased by 2.8%. The Central Bank is now taking into account an inflation rate of 8% for 2014, well above the ceiling set by the bank of 6.5%.

Sverdlovsk swapping potatoes for cattle 

Russia’s Sverdlovsk region produces about twice as many potatoes as it can consume. According to the regional government, two years ago it started a project to expand its storage capacity, which resulted in the opening of eight new warehouses last year, bringing its total number up to fifteen. In order to develop the sector further, the government will invest 12 billion roubles ($ 240 million). Where the region has a deficit is in cattle; therefore, Sverdlovsk launched a plan to cooperate with neighbouring Belarus and Kazakhstan, which will provide livestock in exchange for vegetables and potatoes and knowledge about their cultivation. 

Peru signs contracts 

The Peruvian firm Passionfrut Company has gained access to the Russian market with mandarins and mineolas. The agreement was signed during the fair Expoalimentaria in Lima. Russian companies were interested in the mandarin varieties W Murcott and Malvasia and the Minneola tangelo. The Peruvian company is working with a Russian partner to ship two containers of mandarins to St. Petersburg. 

Passionfrut Company is still seeking access to new markets. Besides Russia, the firm wants to export to the Middle East, North America and Europe.

Publication date: 10/9/2014


FreshPlaza.com