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Tropical Lending: International Prices, Strategic Default and Credit Constraints among Coffee Washing Stations

Arthur Blouin and Rocco Macchiavello ()

CAGE Online Working Paper Series from Competitive Advantage in the Global Economy (CAGE)

Abstract: We use detailed contract level data on a portfolio of 197 co¤ee washing sta- tions in 18 countries to identify the sources and consequences of credit markets imperfections. Due to moral hazard, default rates increase following unanticipated increases in world co¤ee prices just before (but not just after) the maturity date of the contract. Strategic default is deterred by relationships with the lender and foreign buyers: the value of informal enforcement amounts to 50% of the value of the sale contract for repaying borrowers. A RDD shows that rms are credit constrained. Additional loans are used to increase input purchases from farmers rather than substituting other sources of credit. Prices paid to farmers increase implying the existence of contractual externalities along the supply chain.

Keywords: Credit Constraints; Commodity Prices; Relationships; Exports; Account Receivable. (search for similar items in EconPapers)
Date: 2014
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