Rise in U.S. Dollar a Primary Cause of the Problem The village of Darakerd, in Armenia’s southern province of Armavir, has 3,000 inhabitants. They all are involved in agriculture. Village Mayor Ghoukas Simonyan said that while residents work the land, benefits are few and far between. 90% of village residents have taken out loans from the ACBA-Credit Agricole Bank Most, if not all, cannot pay back the loans. Their situation is most serious. We met Grigor Poghosyan in his store. He also took out a loan from the bank and put up his house as collateral. He, like many others, got a loan when the exchange rate for the U.S. dollar was low compared to the Armenian dram. When the dollar started inching up in the past couple of days, they ran into problems. Bank only offers loans in dollars Villagers told us that ACBA Bank only offers agricultural loans in dollars and that they are now paying the price as a result. Mr. Poghosyan used the money to buy seed, new peach saplings and to set up a hothouse operation. “I took out a loan when the exchange rate was $1.00 at 310 AMD. Work it out for yourself. You’ll see the hole I’m now in. I needed potato seed for planting. My house is up as collateral. If I can’t sell the potato crop again like last year and if the roads are closed so that we can’t export our produce, I’ll lose my house. I won’t be able to repay on the loan. It’s that simple,” Mr. Poghosyan explained. When we asked if he hadn’t taken into account the possible rise in the dollar when he got the loan, Mr. Poghosyan answered that he had, but that he needed the cash. Right now, his sole concern is paying off the interest and getting out from under the debt burden. “I needed the money, I had no options” “Even if I had thought about the risks, what could I have done? I had no other option but take the loan. I’ve planted 300 peach saplings but they’ve been hit with the frost. I don’t know what I’ll do. The bank only gives agricultural loans in dollars, not AMD. The bank’s not interested if the dollar rate rises or falls,” Mr. Poghosyan said. He added that the government had much to do regarding this problem and pointed to the regulation of the dollar-dram exchange rate as a priority. He talked about stabilizing the rate or at least lowering the loan interest percentages. His fellow villager, Slavik Arzmanyan, has wound up in the same boat. Mr. Arzmanyan also took out a loan from ACBA Bank for $8,000 to buy potato seed and construct a hothouse for growing tomatoes and cucumbers. Villagers want long-term loans at reasonable rates Annual interest on the 3 year loan was fixed at 17%. Mr. Arzmanyan put up 3,000 square meters of land as collateral. “Villagers would really like to see long-term loans being offered and not the 1-2 loans given today by the banks. And who can pay the 18-20% interest rates they demand? Nothing produced by the villager is being sold. By the time our hothouse tomatoes are ready for picking, they’ll already have imported cheap produce from Turkey and saturate the market in Armenia. Our crop will be dumped in the garbage. The government isn’t safeguarding our interests,” said Slavik Arzmanyan. Mr. Arzmanyan assured us that everyone taking out loans has plowed the money back into agriculture but that no one is seeing any revenues from all the effort. The reason is the rise in the dollar and the fact that business expenses are rising as well. “No one makes money from farming anymore” “Before, you could cultivate one hectare of land for around 10,000 AMD. Now, it’ll cost you between 40,000-50,000 AMD. You could hire a tractor to dig up a potato crop for 20,000. Today, you’d have to pay 80,000. We’d be better off if we just hug ourselves and have done with it. There’s a family in the village that’s buried in debt and go to bed hungry. What’s to become of them? I ain’t the only one in this mess. 90% of the village faces a similar situation,” added Mr. Arzmanyan. He, like many others we met, complained that farming is no longer a profitable enterprise; the risks and costs are daily growing. Mr. Arzmanyan snidely laughed when I asked him what his annual profit was from working the land. “You must be joking. We buy seed at 180 AMD at can’t even sell the damn potatoes for 50.” Mr. Arzmanyan is also worried that he won’t be able to pay off his loan. If that happens, he'll be forced to sell his house since the land is already put up as collateral. The man has nothing else to sell.