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Brazil's 'corrupt' government hurting business, says Agco boss

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Brazil's "corrupt" government is hurting the country's business sector, including in agriculture, the head of one of the world's biggest tractor-makers said, warning over the "very, very difficult" Venezuelan market too.

Martin Richenhagen, chairman and chief executive of Agco, said that the maker of Fendt, Massey Ferguson and Valtra machinery had tried, and failed, to persuade Brazil's government to speed up the payment of ag support programmes used by farmers for funding equipment purchases.

"We tried to lobby. Politicians right now don't listen," Mr Richenhagen told investors.

Agco was "not satisfied… at all" with the payment performance of the government, which in June unveiled a $60bn harvest plan for 2015-16 offering a cocktail of support packages, including low interest loans.

He added that "the government in Brazil is in very bad shape. They don't know what they are doing. They don't have a strategy.

"They are corrupt, and this is damaging not only our business, but business in general."


Political instability, economic weakness'

The comments by Mr Richenhagen – a multilinguist, who is a graduate of Paris's Sorbonne as well as the University of Bon, and chef d'equipe of the German dressage team which won a gold medal at the 2008 Beijing Olympics – followed Agco's release of results which sent its shares tumbling.

While a fall in profits for the October-to-December quarter was in line with market expectations, it disappointed investors with guidance of earnings per share of $2.30 for this year, and a forecast that "difficult global industry conditions [will] persist through 2016".

The profits tumble in the latest quarter was led by a sharp deterioration in the South American market, where industry tractor sales volumes in Brazil tumbled by 40%.

"Industry retail sales in South America were extremely weak, resulting from political uncertainty, or you could call it catastrophe, and a depressed general economy in Brazil," Mr Richenhagen said, also flagging "disruption" in processing loans to farmers.

The group forecast a decline of 10-15% in South America's agricultural machinery market this year.

"Political instability, economic weakness, and uncertainty on the funding levels of the government-subsidised financing programs in Brazil are expected to contribute to the weaker South American industry demand forecast in 2016," Andy Beck, the Agco chief financial officer, said.

'Very, very difficult market'

Mr Richenhagen was also downbeat on the, relatively small, equipment market in Venezuela, a country he said appeared "close to complete bankruptcy.

"The political system doesn't work at all. You can't travel there without being killed.

"So, that's really, really a very, very difficult market."

However, he was sanguine on prospects for Argentina, where Mauricio Macri became president in December, with an agenda deemed pro-agriculture.

"We're very hopeful that the new president, with whom we will meet soon, comes in with a much more business-oriented strategy," Mr Richenhagen said.

By Mike Verdin

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