Thinking about investing in agriculture in Latin America? Here’s what you need to know.

agriculture in Latin America
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Many people who are considering owning farmland are interested in the up-and-coming opportunities available in Latin America. While the amount of agricultural land globally expanded 11 percent between the late 1960s and the turn of the century, land for agricultural development has increased over 50 percent in Latin America during this same period, and continues to increase year over year. With food demand growing around world and property values appreciating rapidly across the board in these markets, it’s easy to focus and see why farmland in Latin America is such an attractive investment. But it’s important to understand which countries and economies have the best potential, and which are likely to be less productive and should be approached with more caution.

Chile

Chile has traditionally been a stable South American nation, but the 2020s began with intense protests and discontent over rising costs of living and wealth inequality. The result of these protests was a change to the country’s constitution aimed at creating a more inclusive, prosperous country, although some see these changes as worrisome populist sentiments that could cause further political turbulence in the nation.

That said, the Chilean economy has rebounded well from the pandemic lows, going from $253 billion USD in 2020 to $260 billion USD in 2021. In addition, agricultural exports increased 332 percent between 2009 and 2019. For investors willing to tolerate potential political unrest, Chile may be a promising location for agricultural investment.

Uruguay

Uruguay is one of the most stable nations in Latin America—and is also one of the wealthiest. When it comes to farmland and agricultural productivity, Uruguay is hard to beat with its flat geography and rolling pastureland. Many foreign investors are attracted to Uruguay for its high-quality ranchlands. The country boasts a thriving agricultural sector that accounts for 12 percent of the nation’s GDP and 70 percent of its total exports.

While Uruguay has made great strides in attracting foreign investment (21 percent of all bank deposits are held by foreign residents), and it benefits from a formalized financial sector, agricultural investors should note that its agriculture exports are not very diversified, with over 25 percent of exports consisting of meat. With worldwide beef consumption declining, Uruguay’s ag sector and will likely be negatively affected.

Peru

Peru was expected to have breakout agricultural growth this decade, but the pandemic has meant that this growth was slower than expected, coming in at under 10 percent. Compared to other sectors of the Peruvian economy, though, agriculture has still fared well, posting significant gains in 2021. Yield-increasing technologies and other advances in cultivation practices have resulted in agriculture’s portion of the GDP increasing by 50 percent, and Peru exports large volumes of asparagus, grapes, avocados, potatoes, and mangos.

Cautious investors though should be wary of the highly concentrated banking sector in Peru, with its top four banks controlling over 80 percent of the country’s financial assets. This makes Peru particularly vulnerable to external credit shocks.

Argentina

Argentina has made a concerted effort to build a robust agricultural sector, with recent years showing gains in wine, cereal, and meat. That said, only investors with a large appetite for risk should brave Argentina’s turbulent financial environment.

In 2020, Argentina defaulted on a $500 million USD interest payment on its $323 billion USD in foreign debt, which is only the most recent default in its checkered past of economic troubles. Financial mismanagement and ongoing macroeconomic tumult have understandably discouraged foreign investment in the nation.

Argentina
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Panama

Panama is a key hub for international shipping, which made it particularly vulnerable to the fallout of the pandemic. 2020 saw the nation’s GDP shrink to under $53 billion USD, although it rebounded to $60 billion USD in 2021.

Despite being hit hard by COVID-19, Panama is uniquely positioned for a resurgence as the pandemic wanes. The country is a well-established diversified exporter of pineapples, coconuts, timber, and cacao, and its financial sector runs on the U.S. dollar. However, the State Department does caution investors that Panama has some significant challenges, including corruption, judicial capacity, and labor issues.

Ecuador

Like Panama, Ecuador was hit hard by COVID-19, shrinking both its GDP and its trade sector. As other countries rebound from pandemic lows, Ecuador’s recovery has been slower, and it has not yet reached its pre-COVID numbers.

Desperate for capital, Ecuador is offering agricultural investors a ground-floor investment opportunity. The government is actively working to incentivize foreign investment, including a program to reimburse investors up to 75 percent of the production cost for reforestation, along with the lowest income tax in the region.

Brazil

Brazil has a great deal of potential but also more than its fair share of adversity. While GDP has been in decline since the early 2010s, experts are expecting post-pandemic growth, and both agricultural production and exports are likely to increase in the coming years.

The nation’s total arable land area has increased over 13 percent since 2010, but unfortunately, some of this has come at the cost of deforestation. Questions of sustainability plague the Brazilian agricultural sector, and President Jair Bolsonaro’s government has withdrawn the country from sustainability agreements and removed important environmental protections.

Investors looking for a nation with environmental, social, and governance (ESG) bona fides are better off looking at other Latin American countries for their farmland investments.

Mexico

Mexico is an agricultural powerhouse given its size and close proximity to the United States. It boasts a rich agricultural base, and although ag makes up only 3.5 percent of the Mexican economy, the nation is the eighth-largest crop producer in the world.

A collapse of the Mexican peso in 2020 was cause for concern, but it has now reached near-pre-pandemic levels, and the country’s strong relationship with the United States continues to bolster its export market. Still, the U.S. State Department points to some economic and political uncertainties as reasons to exercise caution before making investments in Mexico.

Colombia

Colombia is one of the most promising prospects for farmland investment in Latin America. The country’s foreign direct investment (FDI) inflows have been steadily increasing, and although this growth was temporarily slowed by the pandemic, experts expect it to continue its upward momentum thanks to its abundant natural resources and strategic location. Measured by GDP, Colombia is Latin America’s fourth-largest economy. It boasts the world’s fastest-growing IT industry, an expanding electronics and appliance sector, and diverse agricultural exports.

Colombia is rolling out a series of ambitious infrastructure projects to connect the ultra-fertile interior farmland to the country’s coasts, reducing transportation times and costs in the process—something of particular interest to agricultural investors. This significant infrastructure improvement, along with increasing demand for nearshoring options by the United States, means there is significant agricultural potential In addition, Colombia’s peso has fallen sharply in recent years, increasing its value for foreign investors, and the nation has a welcoming, stable legal environment and open economy.

infrastructure improvement

Real estate in Colombia is particularly attractive to buyers, and rural land has appreciated by almost 100 percent in the past eight years. Another advantage of purchasing farmland in Colombia is its ten-year tax exemption for rural development, where policy makers give companies a tax break if they meet certain conditions and provide job opportunities, which helps contribute to sustainable development and an increase in Colombia’s overall gross domestic product . 

The Bottom Line on Purchasing Farmland in Latin America

Many countries in Latin America offer prime opportunities for investors interested in farmland, with Colombia ranking near the top in terms of stability and potential for growth, especially as the world faces food security challenges and climate change that is ravishing traditional agricultural producers. International market demand from individual countries in Central America and South America is poised to grow, with Colombia taking an important share of this opportunity. Still, doing research, reviewing data, and understanding statistics are all crucial aspects of knowing the best country in this region to purchase farmland, but that’s only one piece of the puzzle. That’s where our comprehensive Agricultural Investment Guide 2022 comes in.

Download the guide to explore current trends, risk assessments, and tips on choosing the right crops in the right location. Consider Farmfolio your go-to resource for farmland ownership in Latin America.

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