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Why invest in agriculture andl livestock in South America

 

 

1 -. By the year 2030 there will be nearly 2,500 MM more people in the planet that will need more grains and meat.

World population remained more or less stable until the beginning of the Industrial Revolution. Then population growth began to multiply exponentially. During the last century only, the world population tripled. Population is expected to continue to grow significantly with life expectancy increasing exponentially too.

Los seis ejes de la demanda de productos de la agricultura y ganadería


2 During the past 20 years 200 MM Chinese have entered into the urban capitalist consumer market and it is likely that another 350 MM will join over the next 20 years.

Millions of people are joining the capitalist world in China, India and Southeast Asia. These people consume more and better quality food as they incorporate more protein to their diet, including grains such as corn and soya and beef and meat.

Un verdadero huracán a favor de la agricultura y la ganadería


3 - South America is the region best positioned to supply grains and meat for the world

South America is abundant in fertile land and fresh water reserves. The region has a very suitable environment for agriculture and livestock production with good temperatures and good annual rainfall. Because of its historic role in food production for the world South America has generations of accumulated know-how (human capital) and an adequate infrastructure for exporting agriculture and livestock to the world.

Brazil, Argentina, Paraguay and Uruguay formed in 1990, the Common Market of the South (Mercosur), which accounts for half of world soybean exports, 35% of world beef exports and 25% of world corn exports. This is the world's largest agriculture and livestock economic bloc.

Other primary food-producing regions are facing several problems, such as financial trouble that cause production subsidies to be reduced (European Union), political instability and wars (Eastern Europe and Africa), lack of infrastructure and know-how (Africa, Eastern Europe) or are already developed and, therefore, have a smaller margin and growth potential (USA, Canada and Australia).

Production rates in South America are very good compared to other emerging markets and agriculture and livestock enjoy the legal protection conferred by the institution of private property for agriculture farmland (instead of the system of precarious government concessions over land that is used in other emerging countries).

La crisis mundial, los países emergentes y una oportunidad sin precedentes


4 - The growing interest in biofuels spurs demand and aids farmers instead of diminishing direct subsidies from governments

The growing interest in environmental care and concern for the use of non-renewable resources has promoted policies that encourage the production and consumption of biofuels, especially in the U.S. and the EU.

For decades after World War II, direct assistance to producers through government subsidies brought down international prices of agricultural and livestock products exported by emerging countries. Currently, those governments are helping their farmers via the promotion of biofuels, which raises the price of the final products they sell. "Biofuels changed the way we analyze grain markets", by Juan Francisco Ramos Mejia. Ambito Finaciero, 09/04/2007.


5 - Investments in the "real world" in agriculture and livestock in South America are good business in the current international financial context.


At times where high international inflation melts away the value of the currency, investments in the real world in the agriculture and livestock sectors provide adequate asset protection. Earnings are real and occur in real terms (constant currency) instead of illusory nominal earnings in a currency that loses value every day. Investments in agriculture and livestock, to the extent that production risks have been controlled, allowed investors to maintain and increase the value of their assets in real terms.

South America is also well positioned to take advantage of a change in international monetary policy. A rise in interest rates in the U.S. and the EU would attract capital flows from emerging countries towards those countries. That would cause a depreciation of the currency in emerging countries and currency appreciation in central countries. As a result, emerging production costs would be reduced for agriculture and livestock while in the core countries these costs would increase as a result of currency appreciation, making profit margins more attractive in South America.

Los commodities agrícolas compiten como opción con el petróleo y el oro





 
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