Argentina expanding agribusiness regionally

 

 

Argentina's agricultural companies are investing in soy production in neighbouring countries while hedging their exposure to their homeland's high export taxes.

 

Argentina's firms are looking to continue their expansion into Brazil, Paraguay and Uruguay. Expanding abroad helps the companies to diversify climate risk, and also helps them to get away from grain export taxes and a long-running dispute between Argentine farmers and the government.

 

The companies are expanding in neighbouring countries because of Argentina's lack of market predictability, and to also take advantage of more convenient costs, said Miguel Campos, a consultant and former agriculture secretary.

 

Argentine companies including Los Grobo, MSU and El Tejar have nearly doubled their grains planting area, mostly soy, in Brazil during the 2009-10 season. They have also expanded into other neighbouring countries.

 

Los Grobo produces 2.5 million tonnes of grains on 250,000 hectares of rented fields in the region, with Brazil accounting for about 35 percent of the total. Los Grobo president Gustavo Grobocopatel said they plan to triple that amount in three years, with most of the growth taking place in Brazil.

 

The MSU group farms 250,000 hectares in Argentina, Uruguay, Paraguay and Brazil, following a 90-percent expansion in its Brazilian area in the 2009-10 season. MSU general manager Guillermo Marseillan said the company is seeking geographical diversification, and that other countries allow longer renting periods while contracts in Argentina are short.

 

There is room for further growth in Paraguay and Brazil in the long term, although fields require more investment and soil improvements because they are not as suitable for agriculture as Argentina's Pampas grasslands, Marseillan said.

 

In Uruguay, soils require more fertilisers than in Argentina, but the company can plant near ports and cut transportation costs, Marseillan added.

 

Sporadic strikes and protests by Argentine farmers against the government over the past 18 months over export and market policies have deterred investments, diverting the companies' attention elsewhere.

 

Grobocopatel said conditions are more favourable in Brazil than in Argentina, as Brazil has more acreage growth opportunities, more credit, and better farm policies.

 

Analysts said lower taxes in neighbouring countries also make them more attractive than Argentina for grains exporters.

 

As such, overseas expansion will continue for the long term, Campos concluded.