Being a sizeable producer of agricultural goods, Argentina is in a favourable position to reap the benefits of rising global demand for food products. According to figures provided by the Ministry of Agro-industry (MoA), in 2017 food exports amounted to $25bn and accounted for 43% of total Argentine exports. That same year, the food and beverage (F&B) industry represented 26% of manufacturing GDP.
The sector is dominated by small and medium-sized enterprises (SMEs), which represent 97% of the total 14,498 companies operating throughout the industry. Overall performance was relatively stagnant, shrinking by 0.8% between January and November 2017, with segments posting varying levels of growth. Several subsectors experienced reduced production levels, including dairy products (-6.6%), ground cereals and oilseeds (-3.5%), sugar and confectionery (-2.4%) and beverages (-0.5%). Conversely, red meat and white meat processing, and yerba mate manufacturing expanded by 9.2%, 3.6% and 3.3%, respectively. The volume of red meat exports expanded significantly over the period, by 30.1% to 223,000 tonnes, based on increase demand coming from China, Israel and Chile.
Other exported food products that have benefitted from the elimination of export taxes by the current administration of President Mauricio Macri include wheat, maize, wine, soybeans and soy-based derivatives.
One of the strategic objectives of the government is to expand the industry’s capacity to provide food for over 600m people by 2020. To this end, concrete measures have been taken to improve the profitability and productivity of the sector. In the first half of 2018 the Senate proposed a law to update and enhance the legal framework of warrants, a valuable financial tool for the sector. While in December 2017 the MoA created the position of secretary of food and bioeconomy to help companies, in particular SMEs, improve their competitiveness and facilitate integration to the global market. In addition, the Argentine Investment and Trade Promotion Agency (Agencia Argentina de Inversiones y Comercio Internacional, AAICI) and respective sectoral chambers are expected to develop a strategic plan to promote commercial financing. Other government moves include tax breaks, the modernisation of transport and logistics infrastructure, new agreements to facilitate access to international markets and the improvement of financial conditions for all actors on the value chain.
The range of investment opportunities in the sector is broad. In its investor’s guide published in March 2017, the AAICI highlighted that Argentina was preparing to satisfy the growing local and global demand for meat products. Beef production is forecast to increase on the back of an average 3% annual growth in domestic consumption, as well as strong incentives to regain export markets. Other potential investment areas include citrus production. Argentina is the world’s number-one producer and exporter of lemons and lemon-based products, such as juice and essential oils, with yearly production levels amounting to approximately 1.6m tonnes, according to a report issued by investment bank Finanzas & Gestión in April 2017.
Among the challenges facing the F&B industry, the adaptation to climate-related issues is the most crucial. Argentina is the third-largest soy and maize exporter; however, in early 2018 serious droughts throughout food-producing areas led industry analysts to forecast a contraction of 25% in soy production. In other areas flooding on 10m ha of agricultural land led government to declare a state of emergency in seven provinces in the summer of 2017. In an attempt to mitigate these problems, the government is looking to promote agricultural best practices, such as crop rotation and the building of irrigation channels, while addressing issues with public water infrastructure and management practices. Considering the sector’s significance for the manufacturing industry, these efforts will likely be willingly received.
You have reached the limit of premium articles you can view for free.
Choose from the options below to purchase print or digital editions of our Reports. You can also purchase a website subscription giving you unlimited access to all of our Reports online for 12 months.
If you have already purchased this Report or have a website subscription, please login to continue.