Why Chile’s Agricultural Sector is Distinctive and Ripe for Investment
Where in the world would you find a country so rich in natural resources, geographically shielded from disease and pests, growing in population and purchasing power, with a stable political system and economy, easy access to cheap local labour, and the most free trade agreements and treaties than any other nation on the planet?
This inimitable combination of factors positions Chile as a territory ripe for investment, especially where agriculture is concerned.
The agricultural industry is one of the "staples of the Chilean economy", says Guillermo Garcia Gonzalez, a Chilean farmer and general manager of the nation's third-largest pork producer, Coexca S.A.
"Chile is a stable country with a long-term vision," Gonzalez says.
"I can say that Chile is a reliable place to invest. The country is one of the most developed in Latin America and is noted for its economic, political and institutional stability. These characteristics have transformed Chile into an attractive investment opportunity and a platform for foreign investors wishing to invest in Latin America.
Gonzalez is based in the Maule Region of Chile where he oversees the management of Coexca S.A, a vertically-integrated pork producer with an annual turnover of more than US $85 million, exporting to 33 countries globally. He has seen first-hand the increasing appetite of international investors seeking exposure to Chile and attributes several key reasons to this heightened interest.
"Several distinct aspects of Chile's economic and geographic make-up position the country - and its agricultural sector in particular - as a highly appealing investment opportunity," he says.
Chile's macro-economic stability, growth perspective and low level of risk are among the most promising points of the economy. It ranks fifth among the countries that are the most open to imports and foreign investment in the world. The country is also the top Latin-American importer per capita, enjoys excellent solvency, with the highest purchasing power in South America.
Foreign investment is not new to Chile. Multinational manufacturers have a long history of investing in Chile with companies such as Nestlé; and PepsiCo who now have manufacturing plants in the country. More. recently, Gonzalez has witnessed other international companies seeking a toe-hold in the food and agricultural industries, realising the stable and positive growth that is taking place across the nation.
"The fruit, wine and pork industries each offer tremendous export potential as a result of global trade liberalisation, particularly between Chile and Asia. These sectors also benefit from the government's efforts to diversify its export sector away from copper to high value-added agricultural exports," he says.
Chile's geography makes it similar to an island. As one long, thin strip of land, it is surrounded by desert to the north, the Andes mountain range to the east, the Pacific Ocean to the west and south, which collectively protect Chile from most pests and diseases and allow easy access to ports for exportation.
Chile also benefits from a relatively 'Mediterranean climate' - one of the few countries with such a climate in the southern hemisphere - providing optimal growing conditions for fruit.
One distinctive characteristic is the thermal oscillation between day and night during the Chilean harvest season which allows for the build-up of natural sugar in the fruits, endowing them with unique flavours, aromas and colours wide-renown among consumers.
Gonzalez says, "Chile's southern hemisphere location also means that we produce crops during the opposite seasons to the world's major consumer markets in the northern hemisphere".
"Our elongated north-south orientation means that harvests can be staggered throughout the growing season," he says.
"Investors are finding many real opportunities here in Chile - we saw this with our recent capital raising process facilitated by TerraProtein Equity Partners, where we collaborated with the Danish Agricultural Fund who have invested in our business allowing us to expand our production and export capacity.
Gonzalez' perspectives are echoed by Recaredo Ossa, a founding partner of Terra Value, the Chilean-based investment advisory firm with special interests in agriculture.
Ossa says the "Chilean fruit industry has experienced rapid growth, doubling its exports in the past 10 years. The projections for the upcoming years place Chile in the select group of the top 10 food exporters (previously ranked 17), with an expected annual growth of US $1 billion5.
"For example, the Chilean fruit industry has grown due to its comparative advantages such as its climate, soil, geography, and trade agreements which have made it one of the most outstanding industries at the international level," Ossa says.
"Almost all of the agricultural sectors are getting investors' attention, more aggressively in fresh fruit and nuts, but also the meat industry too with pork, given the huge potential to export to Asia."
"As a result, we are seeing several Chilean agricultural producers seeking capital to expand and grow their businesses as they are learning that this offers a faster way to grow, rather than relying on organic growth."
Collaborating with TerraProtein Equity Partners, Ossa believes there is an important role to play in helping local agricultural producers connect with the international investment community, in order to facilitate growth through establishing long-lasting equity partnerships.
"TerraProtein Equity Partners has a lot of experience with investors, and also agriculture is part of their background, so they easily and quickly understand the needs of both sides, facilitating communication and understanding," he says.
Founded in 2013, Terra Value is an investment advisory firm based in Chile specialising in the agriculture sector in Latin America. Ossa is an agricultural technician and a citizen of Chile. His extensive production and commercial experience in Chile, USA, Mexico, Turkey, Cyprus, Canada, and Saudi Arabia has given him a very broad agriculture sector outlook and allows him to manage and lead a wide range of agribusiness investments in companies such as Frupac, Sofruco, Viña La Rosa, Ventisquero, and Veramonte.
Ossa says Chile is open for investment and the opportunity has to be seen to be believed.
His message is clear: "Come down to see us and realise why Chile has been defined as an 'agricultural paradise'."
Free Trade Agreements: Australia, Canada, Central America, China, Colombia, EFTA (Norway, Switzerland, Iceland and Liechtenstein), Malaysia, Mexico, Panama, Peru, South Korea, Vietnam, Hong Kong, Thailand, Turkey and the United States.
Economic Association Agreements: European Union (EU), Japan and P4 (New Zealand, Singapore and Brunei Darussalam as well as Chile).
Economic Complementation Agreements: Bolivia, Ecuador, MERCOSUR (Argentina, Brazil, Paraguay, and Uruguay) and Venezuela.
Partial Scope Agreements: India and Cuba.