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Indian firms entering the South American agriculture sector in a big way!

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Beaches…Parties…Brazilian Carnivals..

These are some of the words and thoughts which come into one’s mind when thinking of South America. Tourism and parties are one of the biggest money spinners in South America. So one cannot find fault with the Indians for having such a picture of the continent. But off late Indian firms are completely changing the way at which we look at South America.

First lets take a look at some of the facts and statistics:

Shree Renuka Sugars has made it to the club of the top 5 sugar producers in Brazil, the world’s largest sugarcane producer. It first bought sugar and ethanol producer Vale Do Ivai S.A. Acucar E Alcool in November 2009 for $240 million. In February 2010, it consolidated its position at the top by investing another $329 million for a 51-percent stake in Equipav SA Acucar e Alcool which is also a very large sugar producer

The consortium led by state – run Bharat Petroleum Corporation and also private companies like Rajashree and Godavari are scouting for opportunities in the country in the field of sugar production and investments. Bajaj Hindustan also has a subsidiary in Brazil to scout for investment opportunities

Sterling Group with olive production, Olam owned by NRI with peanut production and the Solvent Extractors Association of India (group of 16 companies) with production of oilseeds are leading a revolution in the agricultural sector in this continent

So what’s so special about South America that Indian firms are moving into their agriculture sector when the Indian agriculture sector is itself so challenging and has vast opportunities?

This led me to analyze and find out the reasons for the same –

Cost of Land

– The cost of the land in South America is generally around half of that in Punjab at around $ 12,000 a hectare while fallow land is even cheaper

Synergy between India and South America

– Being at a premium, finding cultivable land in India is a big problem. Therefore growing crops overseas and sending them back to India is a win – win situation for both

Land acquisition

– Since the population is low, the problems faced in India for acquisition of land aren’t seen here and it thus becomes a much easier process

Rules of the land

– Since there are no restrictions on foreigners acquiring land, this makes it a great proposition for countries to invest in South America

Research and Development

– Presence of a large number of technologies for agriculture and farming have also made it a really inviting place for companies in this sector

All these factors have opened new avenues for Indian companies in the field of agriculture.

Do you think this will be good for India in the long run? Should companies use this strategy?

  1. balaji yadhav says

    Thanks Aseem for the info. infact Indian companies are going in a big way in other developing countries like in the case of TVS Motors already in the Top 4 automobile producers in Indonesia. We should encourage our Indian companies to invest in other developing countries as it can help us to sustain our energy needs like in ethanol and other agri products considering the Projected demand of India in the future.
    But we should also remember the fact that all these investments are not creating Jobs in India nor is it going to help sustain the huge population in India dependent on agriculture.

    1. Aseem Rastogi says

      Balaji, as I pointed out in the agriculture sector, these companies have moved into South America because of better tax benefits, easier land acquisitions and other such benefits there. The reason them leaving is poor availability of such facilities in India. Till the point such a situation would be there, firms would move out. Its sad but true :(

  2. Yaamini says

    Interesting article . Surely gets u thinking

  3. cuteaditi111 says

    Google translation from Portuges to Eng of above comment.

    “I am resident in Brazil (south america) and would like to clarify that all
    involves purchase of land, the values are many varied regions where there
    1 ha. could be worth $ 2,000. but in respect of investments in agribusiness
    is not very easy.”

    1. Aseem Rastogi says

      Hey thanks for giving an idea of how the situation is there in South America…

  4. Sergio says

    Sou morador no Brasil (america do sul) e gostaria de esclarecer que, tudo que
    envolve compra de terras, os valores são muitos variados, existe regiões onde
    1 hec. pode valer 2.000 dolares., mas em relação a investimentos a agroindustria
    não é muito facil. sergioclaro@bol.com.br

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