Buenos Aires, Argentina
May 18,2 017
Verdant Partners periodically develops market overviews of specific regions, crops, technologies and various other factors that impact the global crop agribusiness industry. Accordingly, this newsletter provides an overview of the political and financial realities facing Argentinian agribusinesses today and highlights opportunities that exist in the market.
Argentina has been seriously side-tracked in recent years with a weak peso, suffocating taxes & inflation, and what some consider being overall mismanagement of the economy. However, recent political changes may be shedding light on a renewed optimism for one of largest economies in Latin America, including opportunities to invest in the agriculture sector and reassert Argentina’s position as a major food supplier to the Americas and the world. Agriculture (agribusiness value chain) currently makes up approximately 8%-9% of annual Gross Domestic Product (GDP) and two-thirds of all exports for the country.
But is Argentina ready for this change? Is there consensus on the opportunities? Where might such investments come from? Are there attractive risk-adjusted projects?
One thing is for certain: Argentina has some of the most fertile, productive agricultural lands in the world. US Corn Belt. Eastern Europe. Humid Pampas. From a broad-based perspective, Verdant Partners sees Argentina as one of the most important crop production areas of the world. Unlike most places, the country holds a unique combination of fertile soils, temperate climate, farming know-how, and a readiness to adapt modern farming technologies, that allows Argentina growers to produce an abundance of food and export much of those crops into markets around the globe.
Investment in agriculture today is at an all-time high, and there are good reasons for that optimism. The United Nations projects global populations to increase from the current 7.5 billion people in 2017 to 8.5 billion in 2030 and more than 9.7 billion by 2050. Because agriculture will need to feed these people by producing as much as 50% more food on the same amount of land (or less) than we have today, while being mindful to be good stewards of that environment, most experts agree that technology (“AgTech”) must be a big part of the answer. Investments in research and development (“R&D”) are therefore intimately related with agricultural productivity and sustainability. The results of the R&D pipelines take years to see the light so no short-term strategy is suitable and a clear understanding of intellectual property is needed. Huge multinational companies are involved in mergers & acquisitions (“M&A”) today, and private investors and even countries (i.e. China) are making long-term investments in this important industry, all because of the opportunities envisioned possible through AgTech.
There is no doubt that Argentina agriculture is poised to participate in an important share of that growth. But for Argentina agriculture to achieve its growth potential will require a combination of its great natural resources & farming capabilities, with a political and regulatory environment welcoming of the challenge, and long-term R&D investment in AgTech, agribusiness infrastructure and grower education. These investments will come from both inside, and outside, of Argentina. Clearly Argentina will not cure all its financial challenges overnight, and a 2016 inflation rate greater than 35% remains one of the primary reasons for cautious investment. But the “big storm” of protectionist economic policies appears to be in retreat, so many believe this could be a good time to invest in anticipation of the next boom. Is this the right time for your company to make a move?
Verdant Partners has always viewed Argentina as a market with tremendous agricultural resources and capabilities and now, with hopes of a rebounding economy and a more stable political foundation, sees enthusiasm for investment in Argentina agriculture increasing once again. In some cases, these investments may be realized through in-house research and development (R&D) and organic growth. However, in other cases the answer could include the possibility of strategic mergers, acquisitions, collaborations, or joint ventures. So, while paying close attention to the operating fundamentals of your business today, we encourage all companies, small & large, to examine their business model and strategies for realizing competitive and financial success in the future – which may mean changing the way you do business today. Companies that develop clear strategies and implement those plans in their daily operations will be a step forward from the competition.
Verdant Partners is recognized as the leading business brokerage and consulting group for agribusiness. Founded in 1998, Verdant's focus covers the span of crop production agriculture, with transaction experience extending beyond seeds and traits to all facets of crop-based agribusiness. Since 1998, Verdant has initiated and managed successful transactions and alliances valued at more than U.S. $2.3 billion.
Verdant's Argentina Advisors
Luis Casanova
Felipe Lanusse
Buenos Aires Office
Cerviño Av. 3636 #3
CABA 1425, Argentina
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