Emerging Markets / November 26, 2019

Institutional Investors Showing Strong Interest in Latin American Agriculture

The Carlyle Group, an American multinational private equity and asset management firm, has provided a €140-million loan to fruit producer Unifrutti, following a notable trend of American institutional investors filling the space left by large European banks in the Latin American agricultural sector. Unifrutti, whose operations are primarily based in Chile, was targeted due to its potential for export-led growth amid growing middle-class consumption in developing markets.

Institutional investors are showing increased interest in the Latin American agricultural sector, especially as governments in the region continue to incentivize exports and develop infrastructure. New free trade agreements between Latin American countries and Asia, especially China, promise to provide food and agriculture (F&A) products with increased access to markets.

The Carlyle Group cited these and other factors as the foundation of their decision. Carlyle managing director Taj Sidhu praised the straightforwardness of the Unifrutti model, saying “Very simply, they produce their products in the southern hemisphere and sell them in the northern hemisphere.”

The loan constitutes the full amount of the debt financing package sought by Unifrutti, indicating the confidence that Carlyle has in the company and the industry as a whole. Unifrutti was seeking a partner to refinance its existing debt and provide capital for future growth, said Sidhu. The decision was in-line with Carlyle’s policy of targeting companies that are family-owned or owned by the entrepreneur.

Indicative of wider trends within the F&A sector, both parties feel that market expansion and continued growth will result in a mutually beneficial relationship. Marco Venturelli, Group CEO of Unifrutti, said, “There is a positive outlook in the fresh fruit market and we will continue consolidating our leadership position with the objective of creating value for our shareholders.”

In the face of widespread economic uncertainty and growing global trade tensions, institutional capital is looking to the F&A sector for diversification and as a source of uncorrelated assets. One of the most time-tested and reliable industries in the world, the F&A sector is generally more resilient to economic volatility. Experts see the F&A sector as a more stable alternative to overpriced, risky equity markets in the developed world.

The Latin American region, specifically, has attracted significant attention from institutional investors in recent years, as many countries have adopted more investor-friendly business practices in an effort to bolster long-term growth. With huge swaths of arable land and considerable water resources, F&A investors are looking to Latin America to meet rising global demand.

Many investors also see an opportunity to fill the gap left by US agricultural products amid the intense US-China trade war. As China pursues free trade agreements with Latin American countries, producers will have the chance to expand into new and lucrative markets.

The Carlyle Group’s loan to Unifrutti is welcome news for agricultural producers in Latin America, as it indicates growing interest from institutional investors in the F&A sector in the region. With investment-friendly governments, widening access to markets, growing infrastructure, and ample farmland, the F&A sector in Latin America has proven appealing to the Carlyle Group and many other savvy investors worldwide.