Boasting agricultural diversity, a wealth of natural resources, and fast-growing economies, Latin America is a rising star in the global agriculture market.
As the skyrocketing global population drives food prices to record-busting highs, capital is pouring in to boost agricultural productivity. As a primary exporter of agricultural and food products, Latin America is set to profit in the coming years.
The region accounts for nearly 30 percent of the world’s forests and arable land and more than 30 percent of the world’s water resources. Over the last decade, there has been considerable growth in agriculture production within Latin American countries. LATAM agriculture growth is being fueled by a number of factors, including the introduction of new farming techniques and technology, hybrid and disease-resistant seeds, advanced land and soil management, as well as mounting global demand. Today, Latin American countries are major exporters of soybeans, cacao, pork, maize, poultry, animal feed, sugar, coffee, fruits, and vegetables.
Now, three Latin American countries are emerging as pivotal players in the future of food production and exports in the region and throughout the world. This is how Brazil, Chile, and Colombia compare in terms of agricultural potential.
A rising global agriculture powerhouse, Brazil enjoys the status of the globe’s largest exporter of soybeans, coffee, and sugar, as well as the second-largest food producer in the world. Brazil’s strength lies in its wealth of agricultural land, rich with raw materials and fed by the Amazon river.
Since 2006, Brazil has increased agricultural production by 156 percent. And there’s still room to grow: Of the country’s roughly 600 million acres of arable land, only 170 million acres are currently being cultivated.
With its potential for high yields and productivity, Brazil has become a top target country for agriculture investment. However, investing in Brazilian agriculture does carry significant risks. In recent years, Brazil has gained notoriety for corruption that has given way to the indictment of one ex-president, impeachment of another, and the abysmal approval ratings of current President Jair Bolsonaro. Political instability, coupled with recent years of substandard economic performance, has made investors uncertain about the future of Brazil’s economy and agriculture sector.
In addition to concerns about corruption, Brazil is facing escalating global pressure on the Brazilian government to put a stop to the ongoing deforestation of the Amazon. As concern for environmental impact rises around the globe, Brazil’s agriculture industry—which relies heavily on harmful techniques like slash-and-burn deforestation—will likely take a hit.
Finally, Brazil has recently heightened restrictions on foreign land ownership, making the process of acquiring farmland a challenge for international investors. Under Brazilian law, foreign investors can own no more than 25 percent of the land within any municipality. The Brazilian government also restricts foreign investors to 5,000 hectares or 12,000 acres, depending on the circumstances.
As one of the region’s fastest-growing markets, Brazilian farmland can be an appealing opportunity for investors looking to diversify their portfolio geographically. But corruption in Brazil’s government, the country’s agricultural sector’s serious problems with eco-responsibility, and obstacles associated with buying Brazilian farmland should not be overlooked.
One of Latin America’s largest, most prosperous economies, Chile is another darling among agricultural investors. Chile is the world’s fifth-largest exporter of wine and a leading exporter of wood pulp, grapes, and fish.
Chile is one of the few countries in the southern hemisphere that enjoys a Mediterranean climate, which provides an excellent growing environment for fruit. For example, in the last ten years, the Chilean fruit industry has doubled its exports. According to some projections, Chile is set to become one of the world’s top ten food exporters in the coming years.
Although Chile is an appealing market for foreign agricultural investment, challenges remain. Chile’s position near Argentina creates significant geopolitical risks, and the country has endured its fair share of domestic violence and civil unrest in recent years that have continued to this day. Current concerns include turmoil and corruption regarding land disputes with the Indigenous Mapuche people.
One of the first countries in Latin America to open up to foreign investment, Chile was hailed as a top country in Latin America for investing for many years. However, the once-stable nation kicked off the decade with widespread protests over soaring subway prices, spurred by the nation’s wealth gap and climbing cost of living.
The protests paved the way for the restoration of Chile’s Pinochet-era constitution, leaving some investors wary of populist sentiments. In addition, the country’s economy shriveled by 13 percent during Q2 of 2020 in the wake of the global pandemic.
Despite political turmoil and the health crisis, the country’s fundamentals are solid, and Chile remains a reliable economy for farmland investment.
With an incredible array of climates and altitudes, direct access to both the Atlantic and Pacific oceans, diverse soil profiles, and an unparalleled geostrategic location, Colombia is ripe for farmland ownership. For agriculture investors, Colombia holds untapped potential because only 2 percent of the country’s arable farmland is currently cultivated.
Already, Colombia is the world’s second-largest coffee grower and largest producer of the highly prized mild-washed Arabica bean, contributing around 15 percent of the world’s total annual coffee production. Global sales of coffee is expected to increase by 8.5 percent by 2023, putting Colombia in a strategic position to ramp up production to meet growing demand.
But other agricultural sectors are growing too. Already the fifth-largest producer of bananas in the world, Colombia plans to boost its banana exports by 10 percent in 2021. Last year alone, Colombia exported 109 million 20-kilogram boxes of bananas, up nearly 10 percent from 2019.
In addition, Colombia is the world’s fastest-growing exporter of limes. The country has increased its exports by a staggering 449 percent since 2015. And as the world eagerly reopens its bars and restaurants, limes are currently experiencing high prices and some of their strongest demand in history.
Between 2018 and 2019, Colombia saw a GDP growth of 3.3 percent However, COVID-19 has exacerbated long-standing concerns like economic inequality, high unemployment, and security problems, sparking street protests in major cities. As the country struggled to enforce COVID restrictions, Colombia’s GDP dropped by 6.8 percent in 2020.
But despite Colombia’s pandemic problems, the resilient country’s economy has already shown signs of recovery. Financial experts expect the country’s GDP to rise 4.8 percent in the second half of 2021. Over the next few years, Colombia is expected to emerge as one of the region’s agricultural stars. When compared to more established players like Brazil and Chile, Colombia — long considered one of LATAM’s best-kept secrets — has the most room to grow, as well as the tenacity and rapidly developing infrastructure to get there.
The country is on pace to have a bright future in global markets, particularly when it comes to lime exports. With the value of the Colombian peso (COP) firmly linked to oil prices, now is a smart time for investors to take advantage of discounted opportunities in the country’s lime industry. If you are interested in participating in the growth of Colombia’s booming lime industry, learn more about owning part of Colombia’s top-performing farms with Farmfolio.