LATAM Agribusiness Environment Overview 2019
Latin America is a key provider of agricultural, mineral, and other natural products to the rest of the world. Its diverse geographic landscapes and rich ecosystems, experienced local workforces and government agendas for sustainable development support one of the world’s most competitive regions for agribusiness.
As the region’s political and economic stability increases, major consumer markets reach out to these countries to score preferential trade agreements and closer international cooperation commitments. A welcoming, pro-business climate invites new investment and commercial activity, bringing innovation and technological sophistication to the region’s most fundamental sector.
Find out how increasing investment and development is shaping the Latin American agricultural scene, and what new commercial opportunities are emerging in this space.
Longstanding Agricultural Economies
Agriculture has been, and continues to be, a crucial income generator for Latin American countries. This reliance and the region’s prowess as a global provider shows in their collective export statistics. Latin America is responsible for 16% of the world’s agriculture and food exports.
The region is a major global supplier for the following products:
- Bananas (the region provides 60% of the world’s supply)
- Soybeans and sugar (50% respectively)
- Coffee (45%)
- Corn, beef and poultry (30% respectively).
Though agriculture is the backbone of many regional economies, small-scale producers make up a large proportion of this output. In some countries, such as Colombia, small- and micro-sized are the dominant performers in their market. Supporting their commercial resilience and success has been a cornerstone of political discourse and activity in the region.
With the global population increasing – and therefore demand for food – major consumer markets will be asking for more. Compounding this pressure on agricultural actors is the uncertainty and concerns surrounding the effects of climate change on this crucial sector. The pressure is therefore on suppliers in Latin America to find ways to develop their agriculture sectors, including finding sustainable and technological options to advance their practices.
Sustainable Development Agenda
To meet future food supply requirements and achieve greater food security, governments must target sustainable development measures. The Economic Commission for Latin America and the Caribbean, one of the United Nation’s five regional commissions, is progressing the 2030 Agenda for Sustainable Development.
Though social and economic development goals form part of this agenda, the environmental element discusses the need to innovate the growth, distribution and consumption of food. This region, as a key world supplier, therefore has a significant responsibility to find new ways of producing food.
Despite the fact that Latin America possesses rich, abundant terrains and spans various climates, it is lagging in terms of technological sophistication and uptake. A great opportunity for international investors looking to incorporate a company in the region.
Countries around the world are experimenting with technological innovations in the agricultural context. New technologies are being introduced to improve productivity, reduce waste, and monitor crop and livestock health.
Latin America has been slower to adopt new technologies than other regions. However, the region has the potential to further its sustainable development agenda and improve productivity with the introduction of tech-based capabilities and automated business processes.
One example of this is the focus on digitalization and innovation in Colombia’s coffee production processes. Investors and researchers supporting this industry alongside the National Federation of Coffee Growers (Federación Nacional de Cafeteros de Colombia) are working on introducing practical digital tools and genetic engineering to produce resilient seeds and reliable information on coffee crops.
Hot spots for agritech development or agricultural technology, such as the US, Israel, New Zealand and Australia have much to offer the region. Israel’s thriving startup scene offers world-leading solutions for agricultural entities, including genetic engineering, pest deterrents, and creative irrigation systems.
The US mirrors Brazilian, Argentine, and Paraguayan markets in terms of their grain and soybean-producing power. Monitoring the production and health of these crops through aggregated data and online platforms in the US are techniques that would enable these Latin American agricultural powerhouses to up their development and outputs.
Australia and New Zealand, key dairy and meat producers, also house world-renowned centres for agritech research and development. Novel robotic, genetic, and crop-tracking developments emerging from their startup ecosystems are valuable tools Latin America could adopt through closer cooperation with these South Pacific Islands.
Though Latin America has historically been slower on the uptake of new technologies than other parts of the world, its leaders understand the importance of innovation to their economic staples. Tech hubs are emerging across the region, and governments are positioning their markets as attractive investment destinations through law reforms and incentivized tax regimes.
The opportunity here is vast; businesses who are already applying agritech solutions to other parts of the world have myriad value-add opportunities in Latin America. Preliminary market research can identify which agricultural performers in the region may best respond to innovative agricultural practices, but realistically, the regional market for agritech remains largely untapped. Chances of success for agribusiness ventures are therefore high, and the region is reportedly highly responsive to new agritech models and techniques.
In particular, agritech offerings that can provide support and boost resiliency of the region’s micro, small and medium-scale farming businesses stand to excel. Additionally, technologies or innovations considered ‘climate-smart’ that can enable the region to secure future food security are in high demand.
International Connectivity Boosts Opportunity
Latin America is on everyone’s radar, as it’s now reportedly the fastest-growing region in the world. World governments, including major traders and regional powers, are scrambling to connect with the region at the bilateral and multilateral levels.
Events such as the Expo Agrofuturo (Colombia) and Agtech Week (Argentina) are surfacing in major agricultural hubs. These events are a helpful way for businesses to get their foot in the door and start making connections with industry actors in the region.
New and reinforced trade channels (such as those set to emerge from the CPTPP or TPP-11 agreement, once fully ratified) offer increased opportunity for overseas businesses and investors to find their niche in Latin American markets.
Source: Biz Latin Hub
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.