Agribusiness, News

Agribusiness: A Climate of Opportunities

In the last twenty years, the agri-food industry in Argentina underwent a profound technological and organizational transformation. New production systems, along with the implementation of biotechnology, the use of agrochemicals and fertilizers, and privileged natural conditions make our country a more than attractive destination for the potential investor.

Generally speaking, agribusiness is the economy with the highest level of productivity at local level. In fact, much of 2017 global growth is due to the increase of the agri-food production, expanding at an annual rate of 8 %.

Nevertheless, the true motor of this increase is exports, which are a constant and sustained income to support the rest of the economy. More than two thirds of national exports belong to the agri-food production: mainly soy oil and flour. To a lesser extent, Argentina’s exports include sunflower flour and oil, corn, wheat, barley, sorghum, beef and poultry.


Incentives for new players

As well as the industry “heavyweights” that already have an established place in the market, in Marval, we observe an increased interest of local and regional firms in learning about the new scenario of agribusiness in Argentina.

Mostly, the inquiries are related to the new government policies, which, since last year, have been modifying the rules of the game in a favorable way.

Though not as dramatic as the measures taken during 2016 (elimination of retention taxes on agricultural products, with the exception of soy, elimination of the Registry of Export Operations, etc.), in the last months, the government has implemented new measures. Their goal is to reactivate regional economies and promote the growth of manufactured products that add value to primary production.

The “Plan Belgrano” ―to give incentives for agriculture― for instance, establishes a compensation regime for soy producers from the provinces of Salta, Jujuy, Formosa, Santiago del Estero, Tucumán, Corrientes, Misiones, Catamarca, La Rioja and Chaco. This system compensates soy producers with 5 % of the price per ton sown during the 2016/2017 campaign.

Regarding small and medium-sized enterprises dedicated to pork, cattle and poultry, and the postharvest of fruits and vegetables (reconditioning and packaging), the government has made access to financing used for building or buying sheds for industrial activities easier  (“Mi Galpón” Program).

These new tools contribute to increase competitiveness along the agri-food chain, and they promote the introduction and improvement of facilities and technologies.


The challenge

Even though the benefits are obvious, there is a lot of room for improvement.

First, the public and private sectors agree on the need for infrastructure investments to improve logistics, mainly roads, but also truck access to ports and railroads. In this sense, the new public private partnership regime might be an efficient tool to channel private investments in public infrastructure within a reasonable period of time.

Reducing cost structure is also a necessary condition to increase investment: tax reforms and cheaper energy are among the main demands of the firms of the sector.

Finally, by definition, the agricultural sector cannot disregard nature, a variable that is both its best ally and its highest risk. On this point, the government is also giving some concrete answers: recently, there have been announcements of public investments in infrastructure to prevent floods in the provinces of Buenos Aires, Córdoba, La Pampa and Santa Fe.

Juan M. Diehl Moreno

Partner

C.V.

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