The Swiss trader Trafigura, through its financial director Christophe Salmon, claims that “prepaying for raw materials is a centuries-old practice”, evoking its use by Venetian merchants during the 17th century. However, the deals that the Swiss group and three other trading giants – its compatriots Glencore, Gunvor and Vitol – have concluded in recent years on the continent are considered controversial.
The principle of these deals is simple: a loan is granted by a trader, which is repaid – for both principal and interest – “in kind” by shipments of oil or minerals from the future production of the contractor, usually a state or the national extractive company.
It is the trader – not the borrower – who structures the credit for the operation, taking advantage of their good relations with bankers in Geneva, London, Paris or New York, where their reputation is well established.
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