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What’s Behind the Growing Investment Interest in South American Fruit Companies?

Renewable Resources Group (RRG), an agricultural asset management company headquartered in Los Angeles, has been rapidly expanding its business group over recent years. Through its subsidiary, Frutura, RRG already had a diverse portfolio that included U.S. firms Dayka & Hackett LLC and TerraFresh, Peru’s Agrícola Don Ricardo SAC, Uruguay’s Citrícola Salteña – Caputto, and Exportadora Subsole S.A. from Chile. On Oct. 16, the company announced that its operations had been further bolstered by the acquisitions of Sun Belle from the United States and Giddings Fruit, based in Chile.

The expansion of RRG into South America reflects a broader industry trend. In 2021, Hancock Natural Resource Group (HNRG) of the Manulife Group, an investment firm based in the U.S., acquired Chilean exporter David Del Curto (DDC). This was followed in 2022 by the sale of nearly 400 hectares (1,000 acres) of blueberries by HFE Berries Peru to PSP Investments, a leading Canadian pension fund manager. That same year, Continental Grain Company, a U.S.-based fund, acquired a stake in Agroberries Chile. Earlier, in 2018, Westfalia Fruit from South Africa merged with Chile’s top avocado exporter at the time, Agricom.

Even earlier, in the 2000s and 2010s, Harvard Management Company (HMC) acquired and developed forestry and Hass avocado farms in northern Peru and central Chile (which are now managed by HMC spin-out Solum Partners). These are just some examples in a wider pattern of investment firms in farmland and permanent crops, focusing increasingly on the west coast of South America.

What is it that draws these international organizations to agricultural land and fruit companies in these countries? In a world frequently grappling with economic crises from various causes, agricultural land and the agri-food sector have emerged as a new asset class, safeguarding investors’ wealth against inflation. Farmlands exhibit low volatility and low correlation with other economic sectors. Most importantly, they have shown positive financial returns over extended periods. They also promise a horizon of greater growth potential, thanks to new technologies and the robust food fundamentals in today’s world.

Chile and Peru, both facing the Asia-Pacific region, have significant comparative and competitive advantages in the higher value-added, fresh agro-export sector, with tangible and visible achievements. Each year, more investors of all types seek opportunities in these countries, which both have numerous large agricultural companies with vast development potential. Concurrently, there are hundreds of investment funds, each with its unique policies, scales, and specific focuses, prompting questions about the impact of their increasing involvement in iconic local companies and farmland within each country. This trend raises concerns about whether the economic opening of Chile and Peru to the world might threaten the traditional way of life in rural areas.

These questions generate different and sometimes conflicting views, especially when they involve agricultural land, estates and communities. Taking a positive and optimistic stance, I believe these developments present an outstanding opportunity for these two countries to attract more investment, adopt improved best practices, achieve greater efficiencies, and, most importantly, maintain the long-term operational status of many estates and local companies. This approach can also benefit fieldworkers by providing better conditions and ensuring the continuity of local production chains. Moreover, the introduction of new controllers can be a viable option for aging agricultural entrepreneurs who lack a clear succession plan and can no longer manage or finance increasingly costly and complex campaigns independently.

Considerably, a business model involving an external specialized controller in partnership with a local farmer or family, rather than outright acquisitions of local companies or estates, emerges as a particularly and potentially new alternative in the local agri-investment scene. This model has the potential to better guarantee the long-term continuity and sustainability of local agricultural production.

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