Markets, Governments Challenge Agribusiness

With demand pushing farmland prices higher, and in some cases spooking politicians, LatAm agribusiness operators are broadening their geographies. Though fundraising hasn’t been easy, some – including Brazil’s LDC Bioenergia, which made initial IPO filings Thursday – are planning to give the markets a try. Farmland plays have pushed land prices in Brazil and Argentina to new heights, and large operations such as Adecoagro, BrasilAgro, and SLC Agricola have been challenged by governments worried about purchases by large international players and sovereign wealth funds. “The Chinese and Arab interests would have to hire locals to work the land and pay export taxes for the products they send overseas just like everyone else,” Julio Piza, CEO of BrasilAgro, tells LatinFinance. BrasilAgro is controlled by Argentina’s Cresud, and has been forced to suspend all land purchases in Brazil. However, the company still has plenty of land for future transformation that can continue to generate returns over the next 2 years without having to increase its land stock, he says. “That’s not to say we wouldn’t like to buy more, but 2 years gives us time to adapt to new legislation,” Piza adds. Argentina passed a law late last year banning foreign-controlled companies or individuals from holding more than 1,000 hectares in the country’s agriculture-rich areas, and Brazil also limits foreign-owned land holdings to no more than 15% of the national territory. “Adecoagro can’t buy any more land in Argentina. In Brazil, when rules are finally clarified, even a new restriction will be better than what we have today,” Alessandro Baldoni, analyst at Deutsche Bank, tells LatinFinance. The legal obstacles have piled on top of the European financial struggles, fears of slower economic growth in Asia, and a drought in Argentina and Brazil, as one more issue giving equity investors second thoughts about the sector. Future growth will have to come from other countries in South America. The company ha