Crisis reverberates deep into Mongolian steppe

By Jason Subler

BAYANCHANDMAN, Mongolia (Reuters) - Layoffs in financial hubs such as London and New York are rippling deep into the grasslands of Mongolia, where herders are suffering as the price of cashmere, a wool used in luxury suits, has plunged.

A drop in demand for cashmere clothing as investment bankers, lawyers and other high-flyers have either lost their jobs or faced salary cuts has led to a 50 percent fall in cashmere prices, sapping the income of goat herders on the Mongolian steppes.

That is just the tip of the iceberg of the impact the global financial crisis is having on the people of this vast, landlocked country, wedged between Russia and China.

Aside from plunging wool prices, the economic slowdown in countries such as South Korea means that the tens of thousands of Mongolians working there are sending less money back home to their families, or even returning home after losing jobs.

And with prices for the country's main export, copper, and other metals down relative to last year, construction and other spending have slowed, taking a toll on the government's coffers and its ability to help the poor.

Sereeter Damba, who like much of the population is a nomadic herder, is looking for new ways to support his wife and 11 children now that his 200 sheep and goats are no longer worth what they used to be.

"I'm trying to find a way to plant crops, some vegetables, because I'm not making enough from my herd. But it's hard to get land to do so," Damba, 52, said at a settlement at Bayanchandman, 70 km (40 miles) northwest of the capital, Ulan Bator.

In the meantime, a loan of 500,000 tugrugs ($355) is helping his family to get by at a time when inflation in Mongolia is still over 12 percent after peaking at 34 percent last summer.

He is determined to hold onto his herd, which serves as collateral on the loan.

"Of course I'll pay it back," he said.

Many others have not been so lucky. Pinched between double-digit interest rates and low meat and cashmere prices, more and more herders have been driven into default on their loans, forcing them to give up some or all of their flocks.

NO CASH

That downward spiral in turn affects people like Sambuugiin Saruul, a 43-year-old carpenter in Bayanchandman who has seen demand shrivel for his wood fences and other building materials.

"Last year, by this time, I had lots of orders and people even paid in advance," Saruul said. "This year, it's nothing like that. I've had one or two orders but no money, they want it on credit."

Saruul and his family have had to cut back on food as a result, reduced to just one full meal a day. Like many others before him, he is considering moving to the city to find work.