South American Real Estate News

Brazil is an Agricultural Powerhouse

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Brazil is the world’s largest producer and exporter of sugar, coffee and orange juice, as well as the largest exporter of beef, soybeans and poultry. One in four grains consumed in the world is produced in Brazil. More than 5 of every 10 glasses of orange juice drunk worldwide come from Brazilian oranges.

Brazil’s beef cattle herd is 8 times the size of Australia’s. Brazil’s rise to agricultural superpower status has been underpinned by rapidly increasing efficiency in utilising production factors, particularly land and labour.

The country has emerged as one of the top global performers in agricultural Total Factor Productivity (TFP) growth, partly because of research that has led to better crop and livestock technologies and made the development of the Brazilian cerrado (savanna). These lessons of the transformation of this tropical region are particularly relevant for Australia as it contemplates the agricultural development of northern Australia. And new Brazilian technology in the sector is highly regarded. The country has more than 200 agricultural start-ups, two of which are ranked in Forbes 25 Most Innovative Global Agtech listing.

Brazil is an attractive agricultural investment destination because of its capability and a lot of arable land with reliable rainfall. At the Global Agricultural Investing Conference in New York, Brazil was named, along with Australia and North America (USA and Canada), as one of the most prospective agricultural investment destinations.

But given its agricultural might, it is not surprising that Brazil is not only a destination for agricultural FDI, but it is also increasingly a source of it. The stock of Brazilian agribusiness FDI abroad has grown, from a modest base, by 17 in the past ten years. Brazilian companies usually go first to neighbouring countries including Argentina, Paraguay and Bolivia, then perhaps to Africa, the USA and maybe Europe.

Until recently, with a few notable exceptions, that was usually as far as they have gotten. But Australia is also now in the sights of several companies, particularly those that want to participate in the Asian middle-class consumer boom. The notion that Australia could be a logical entry point to Asia would be seemingly tenuous for Brazil, which already exports almost half of its agricultural produce.

In 2016, Brazil overtook Australia in beef exports to China. But its access to Asian markets is hampered by sanitary and regulatory constraints. Brazil can’t sell its beef into three of Australia’s biggest regional markets – Japan, Korea and Indonesia. And it gets only from 20% (in Thailand) to 80% (in China and the Philippines) of the price Australia gets for a kilo of beef. So the entry point pitch resonates with Brazilian processors who want to sell a premium product to Asia.

You can only get the benefits of Australian access and branding for premium products by producing them in Australia. But selling beef to Asia is only part of the story. The opportunity exists across the protein and cropping production chains, not just for produce. Austrade in São Paulo has identified and is now working with 20 Brazilian companies in various stages of contemplating investment in the agribusiness sector in Australia. These are mostly mid-size companies that produce biopesticides, animal health and nutrition, fertilizers and crop protection products.

What is common about them? They believe they have developed world-leading agricultural technology and expertise that can contribute to increased farm productivity and that Australia is the right place to expand its global presence. They are right on both counts. Three Brazilian companies participated in the Northern Australia Investment Forum (NAIF) held in Cairns earlier this week at the invitation of Austrade.

Source: Part of an article written by Greg Wallis, Austrade Senior Trade Commissioner in Sao Paulo

Contact the Gateway to South America team to learn about the best investment opportunities in the region. The company is a benchmark for foreign investors wishing to invest in Argentina, Brazil, Chile, Paraguay, Peru and Uruguay, providing expert advice on property acquisition and investment tours.

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Post available in: English


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