Spotlight on Latin America – Diverse by Country but Concentrated by Sector

Below is an excerpt on Latin America from the International Finance Corporation’s (IFC) May 2015 Report titled “Private Equity and Emerging Markets Agribusiness:  Building Value Through Sustainability”.  The report highlights trends in private equity investment in emerging markets agribusiness, including Latin America.

I’ve italicized parts I think are particularly interesting.

Spotlight on Latin America – Diverse by Country but Concentrated by Sector

As in Sub-Saharan Africa, Latin American agribusiness investments exhibit diversity by country but are slightly more concentrated with respect to sector (figure 11).

Figure 11: Latin America Agribusiness PE Deals by Country and Sub-Sector, 2008-2014

Of the three regions discussed, Latin America exhibits the greatest concentration of investments in forestry deals, which could be due to the climatic and soil conditions in South American countries. Based upon his experience with tree crops in Southeast Asia and South America, Pacific Agri Capital’s Randall observes, “The tropical belt yields on both a per-hectare and food-caloric basis that can be produced in Latin America are far greater than anywhere else in the world.” These growing conditions have created deal flow both in primary production of tree crops and in lumber processing companies.

Similar to other emerging market regions, a key constraint on agribusiness companies in Latin America is ensuring that their operations are fully capitalized. One distinctive feature of the region’s agribusiness environment, however, is that unlike India, parts of Southeast Asia and Sub-Saharan Africa, investors in many Latin America countries can obtain freehold titled land. This makes it easier to pursue primary production opportunities and can facilitate an agribusiness firm’s ability to achieve scale and vertical integration.

Read the full report here