Peru: Planned expansion for agriculture
A recent increase in agricultural exports, buoyed by growing healthy eating trends in major export markets such as the US, is anticipated to continue despite a host of geographic and logistical challenges to increasing production.
Between January and July 2012, fresh avocado exports went up by 21.5% over the same period in 2011, while grapes and tangerines were up by 23.7% and 12.5%, respectively. Ricardo Polis, CEO of Agricola Hoja Redonda, a local agricultural producer, told OBG, “In the coming years, Peru will see growth in grape and soft citrus production. There has been an almost worldwide change in consumer behaviour towards eating healthier food products. The demand for fruits and vegetables is on the rise and Peru can take advantage of this opportunity.”
In addition to increasing avocado and grape exports, cacao exports increased by 9% in the first quarter of 2012. According to Adolfo Valle, the CEO of Expofrut, a major producer and exporter of agricultural products, “Avocadoes, grapes and particularly cacao will be leading growth figures in the agricultural sector for years to come.”
The increase in demand for Peruvian fruits and vegetables can also be attributed to a series of promotional campaigns and agricultural trade fairs. For example, the fourth annual Expoalimentaria agricultural fair, held September 19-21 and organised by the Peruvian Association of Exporters,, attracted more than 2000 foreign visitors to Lima.
To take advantage of increasing demand, a number of producers are looking to expand production and have begun searching for suitable land for agricultural development. However, this has become a major challenge for prospective producers, as the vast majority of developed agricultural land is concentrated along the country’s coastline where land prices are currently on the rise, due to limited supply and excessive demand. According to the local press, high-quality agricultural land located near the southern cities of Ica and Arequipa is now valued at $80,000 per hectare.
While many producers would like to expand inland to both the sierra and jungle regions of the country, a lack of transportation infrastructure often prevents them from exploring this option. According to Polis, “There is agricultural potential in other regions. However, the lack of access routes and long, difficult distances from the ports make any initiative inefficient.”
A lack of infrastructure presents a problem for the agricultural sector more generally as well. “The growth of agricultural exports from Peru is currently limited by the lack of appropriate export infrastructure,” Valle told OBG. “If the country hopes to grow in this regard, there is a need for increased capacity at existing ports or the construction of new ports.”
According to the World Economic Forum’s 2012 Competitiveness Report, Peru ranks 88th out of 142 countries in terms of infrastructure. The report further identifies inadequate supply of infrastructure as one of the most “problematic factors for doing business” in Peru.
Projects such as the dredging of the Port of Paita in the north of the country should help to address some of these concerns. However, building infrastructure is a long process and it will take some years for agricultural exporters to realise the benefits of any projects started in the near term.
While land availability and infrastructure are both important issues, one of the biggest concerns among producers at the moment appears to be water scarcity and the overall impact this may have on the sector. Just 2% of the country’s freshwater supply is available along the country’s arid coastline, where approximately 70% of the country’s population resides and adequate infrastructure for exports is present.
In Peru’s interior Amazon region, the supply of fresh water is more abundant. However, in addition to the logistical challenges of accessing supply, the effects of climate change on the country’s tropical glaciers have also given cause for concern. Investment in infrastructure, as well as the introduction of more efficient agricultural practices would serve to make better use of the water supply.
Though there is no doubt as to the potential to expand Peru’s agriculture sector, there is also no clear path forward for producers at the moment. Only by addressing the three key issues of land availability, infrastructure and water supply will producers be able to move forward.