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Only a few weeks ago Oxford Business Group published an article on the opportunities for agri-businesses in Colombia, and here we are again talking about the prospects for one of Latin America’s fastest-growing sectors.

At the local level: The Colombia case study

Output from Colombia’s agricultural sector rose by 7.7% year-on-year (y-o-y) in the first quarter of 2017, quite an impressive performance given the shy 1.1% growth of the overall economy. 

In June the US-based agricultural giant Cargill announced between $300m and $500m worth of investment in Colombia, in addition to the acquisition of local poultry company Pollos El Bucanero. Cargill’s recent moves in Colombia are a sign of momentum in the country’s food sector – and also of further expansion in Latin America.

Indeed, the Colombia case is representative of Latin America’s growth prospects as a whole, and the tremendous potential of the region to evolve from a traditional commodities pantry to a technologically adept and connected food supplier. 

Agriculture value added as a percentage of GDP has represented a considerable piece of the pie for Peru (7.76%), Brazil (5.5%), Mexico (3.8%), Argentina (7.6%) and Colombia (7.1%) in the last few years, and the implementation of new technology has the ability to increase those shares even further.

Agri-tech takes off regionally

This is not just a distant wish: it is happening now. The number of investor meetings and start-up contests focused on agriculture is growing fast: in June the AgTech Latam competition, in Chile, focused on agri-, food- and wine-tech projects, and highlighted some examples of disruptive technologies applied in the agriculture industry. That same month the Redagrícola Ica & Agtech Latam Perú 2017 conference was held. 

Although agri-tech is a rapidly growing segment – some 130 start-ups now show potential in Latin America, according to the NXTP Labs, an early-stage tech funder in the region – the industry cannot rely on regional start-ups and venture capital alone. The activity of local companies, and collaboration with international agro-industrial firms, tech developers, accelerators and investors are essential for the sector to catapult to the next level. 

Argentina home to an increasing number of agro-start-ups

I can’t avoid talking about Argentina, which has started to lead this new technological revolution. 

As part of Argentina’s efforts to take advantage of a more liberal framework, led by the government of President Mauricio Macri, the agricultural sector is being tapped to be one of the most powerful in this new era of technological revolution, with big data, satellite information and drones all being applied to foster a more sustainable, scalable and profitable agriculture sector.

Indeed, Argentina leads the list of agro-start-ups with potential for success. Agropool, for example, allows producers to make joint purchases of inputs with significant discounts and play the economies of scale game. Garage Agro provides data analysis to obtain better results in the agricultural value chain. Laurus creates crop networks, and Trails provides geographic information services applied to agricultural production to allow for more efficient production. And these are just a few examples. 

One of the changes we’ve witnessed in Argentina’s agriculture sector – a consequence of its liberalisation process – is that financing through the capital markets has once again become a possibility. That has been the case for Don Mario, a company that is developing the largest genetic breeding programme in Latin America and secured $20m in funding from the local market.

The big four players in the consultancy world agree on the momentum of Latin American agriculture, and particularly on opportunities in Argentina. In a recent report, KPMG signalled the emergence of new opportunities backed by increases in productivity and competitiveness in the agriculture market. 

The good times coming are supported by the success of the 2016/17 harvest, which showed growth in both corn and wheat production. Corn production climbed nearly 20% from the previous harvest to 47m tonnes, and wheat reached a record 18m tonnes, representing a 63% increase compared to 2015/16 production. Both have benefitted from the elimination of tariffs and taxes, which has translated into higher demand for fertilisers and machinery. 

Legislative hurdles to agricultural growth

While the Latin American agriculture sector is regaining its stride – with Argentina one of the markets leading the charge – reforms of various kinds are still necessary. 

Fundamentally, tax streamlining will help any investors interested in the huge pantry that is Latin America. Strengthening regional integration via Mercosur and the Pacific Alliance is also imperative to develop new value chains. Each market faces major challenges, from combatting illicit crops to promoting economies of scale among small farmers. Investment in agri-tech can be key to solving all of these, provided governments help from the legislative side.