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Report: Agrobanco could be closed as Peru creates a fund to help farmers

The Peruvian government could shut down troubled development bank Banco Agropecuario, or Agrobanco, after all and create a new emergency fund to disburse credit to farmers, despite previous comments about restructuring the bank, Gestión reported citing financial sector sources.

According to the sources, who were not identified by the newspaper, the government may stop the bank from lending due to its severely deteriorated loan portfolio, a situation which Finance Minister Claudia Cooper has acknowledged "failed farmers." But before such steps are taken, the government reportedly would put 100.0 million Peruvian soles into an emergency agricultural fund that would continue to extend loans to small and medium-sized farming enterprises.

Meanwhile, the government would use capital injections to manage the weak debt situation at Agrobanco and prevent it from collapsing, Gestión said.

Earlier in February, Cooper told a congressional agricultural committee that the national government would recapitalize the development bank with 450.0 million Peruvian soles in 2018.

Agrobanco is battling a deteriorated portfolio after years of what politicians and regulators have described as weak risk management control. They said a period of aggressive loan-taking from foreign creditors in turn led to an overabundance in credit flow to agricultural companies.

A preliminary investigation found evidence of around 400 fraudulent credit operations carried out between 2013 and 2016 at Agrobanco.

As of Feb. 16, US$1 was equivalent to 3.24 Peruvian soles.