Russian agri-food sector: 16 months after the breakdown of the monetary system

In August 1998 the Russian foreign exchange market and financial system collapsed. As a consequence the rouble devaluated in real terms against the currencies of the main trade partners, generating an output push in the agri-food sector. This improved the financial health of most producer, thus opening a window of opportunity enhancing the long run growth prospects. But, it is not apparent whether the agri-food sector make use of the enhanced circumstances. Insufficient incentive systems due to non-enforcement of legal rules within firms and farms and lack of credibility of Russian government promote a rent-seeking behaviour of employer and employees. Thus, it could be expected, that the non-price competitiveness of Russian products will rather worsen than getting better.