Agribusiness, News

Agribusiness: Land Resources that Feed the World

World population is expected to grow from 6.8 billion in 2009 to 8.2 billion by 2025. The agribusiness sector must adapt to satisfy the nutritional requirements of a growing global population.

Argentina is recognized as one of the world’s leading food producers and exporters. Competitive advantages regarding soil properties, rainfall and climate contribute to place Argentina as one of the lowest cost producers of agricultural commodities worldwide. Also, as an off-season producer, this country reaches the Northern hemisphere with fresh products when they are not produced in such lands.

Since 1994, Argentina has experienced an expansion of agricultural production as a result of changes in production systems, the implementation of “no-till” technology, biotechnology, and the increased use of agrochemicals, fertilizers and irrigation.

It was the first Latin American country to implement an organized system to assess the biosafety of genetically modified crops, through the creation of a regulatory framework for the implementation of activities with Genetically Modified Organisms (GMOs).

Currently Argentina has more than 30 events (that is, unique DNA recombination events that took place in one plant cell, which was then used to generate entire transgenic plants) approved in soybean, cotton and corn, which mainly introduce insect resistance and herbicide tolerance. In recent seasons, corn with accumulated events has also been adopted.

Long-awaited changes

Agribusiness is the main source of dollar earnings for the country. Agro-industrial exports contribute with 1.2 out of every 2 dollars as foreign currency from exports, reflecting the role that agricultural food chains play in the generation of foreign currency.

As a consequence, as soon as the new government took power in December 2015, several beneficial changes were introduced in this economic sector. Said changes facilitated a visible expansion of this industry and a growing interest of foreign investors.

One of the first decisions was to remove export taxes on agricultural products (grains, fish and meat), with the exception of soybean. Retentions on this commodity were decreased from 35% to 30%, and a gradual rate reduction program was introduced for the coming years.

The most welcomed change was the elimination of the Registry of Export Operations (ROE – Registro de Operaciones de Exportación). Originally created as a statistical tool, the registry ended up being a barrier to agricultural exports. It was replaced by the Affidavit of Foreign Sales (DJVE – Declaración Jurada de Ventas al Exterior), an instrument created solely for statistical purposes.

Argentina’s new government also modified the official dollar exchange rate from AR$ 9 to nearly AR$ 15 per dollar. This represents a significant incentive for agribusiness, a sector affected by export control regulations and the international fall in commodity prices.

Restrictions on land purchase by foreign investors, imposed by the previous government, were also modified. This decision relaxed the conditions for foreign firms to buy real estate in Argentina.

Argentina has considerable potential to increase its production and grain and animal protein exports. Agricultural production here enjoys significant natural competitive advantages, and the country’s products are well known for their quality in international markets.

Some of the key aspects to be addressed are the improvement of capacity utilization (grains, dairy), and restructuring (pork, dairy) and better tailoring of products to market needs (beef, poultry). Meanwhile, investments in infrastructure —particularly new national routes and increased port capacity— are crucial for the country to fully realize its agricultural potential in the coming years.

Last but not least, Argentina is home to the largest number of biotechnology companies per capita in Latin America: more than 200 firms are dedicated to this activity. This biotechnological activity is strongly linked to the agribusiness and has important investment incentives. Argentina has more than 35 research institutes in bioscience operating in universities and private companies.

Marval has the largest agribusiness practice in Argentina, and most probably in the whole Latin America, in terms of size and volume of transactions. Our experience of handling cross-border agribusiness transactions is unmatched in Argentina.

Pablo Viñals Blake

Partner

C.V.

Juan M. Diehl Moreno

Partner

C.V.

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