Chile seeks investment to double cultivation
A reluctance from Chile's banks to provide long-term loans to the agricultural sector has pushed local growers to seek further investment from abroad. Fruit union president Antonio Walker tells Freshfruitportal.com about plans to double cultivation land in a country currently 'sleeping in a boom' of high copper prices and exchange rates.
From his office in central Santiago the Fedefruta president is not far from the headquarters of the nation's leading banks, yet his requests for long-term loans to boost agricultural growth have so far been ignored.
A list of foreign companies that have found prosperous plantations in the South American nation would be too long, but in its ranks it includes the likes of Italy's Unifrutti, Oppenheimer from Canada and New Zealand's Enza.
Yet, despite the clear opportunities outsiders have taken in agriculture, Walker says the nation's banks seem to be more interested in the property sector than a business that is by far Chile's leading source of employment.
"There is no other sector of the economy that employs so many people (800,000). For every million dollars Chile exports, the agro-export sector generates 157 jobs and mining generates five jobs," he says.
"If you want to buy an apartment, which is not a productive activity, they (banks) give you credit of 20 years with good rates. How come for agriculture, which is a productive sector that generates employment and exports, 20-year credit does not exist?
"The agricultural world, contrary to what is thought, is a good business for banks with a low rate of default, and this is recognized by the state bank because farmers have a guarantee of the land, and the land always appreciates."
But while he waits for Chile's lending institutions to take action, he says the industry needs more international players to form joint ventures with local entrepreneurs who are ready to grow more and sell more as new markets open up.
"Now we are looking to double the cultivation of land. There are one million hectares under irrigation, but with a better water deal we could reach two million hectares. I think Chile 50 years ago would have never imagined it would export 250 million cartons of fresh fruit - I say that if you open up Asia, why not think that Chile can export 450 million cartons of fruit," he says.
"In Chile there is still major investment space. Unifrutti has been a successful (joint) venture in that direction - an exporter that has incorporated foreign capital well."
Walker predicts with the right investment the fruit industry could grow between 10% and 15% annually, with the right climate and billions of potential consumers in Asia to export to.
"As the world is increasing its purchasing power three times more food will be consumed. The question before us is whether we can produce three times more and I think at this rate we can.
"I call on investors to make inroads in the food industry, especially fresh food - today the business is not having a good time, which is the time to invest.
On the topic of land grab discussions that have heated up in other Southern Hemisphere countries such as Brazil, Argentina and Australia, Walker says Chile should opt to sell land to foreign investors rather than lease it.
"The two are alternatives but I think it's a better business to buy because the profitability of the business also has the surplus value of the land - land is a scarce resource and foreign investors value this more than before the financial crisis."
Walker recently told Economiaynegocios.cl that 66% of farmers were 'in the red', while the challenges of water and high exchange rates are always on the agenda. Like many he calls on the central bank to take further action to devalue Chile's currency, while high labor costs are also a concern.
However, exchange rates always fluctuate, land is scarce and Walker's main message is that with enough capital investment Chile has the potential to be a far bigger producer yet in the global food market.
"If changes are made it's possible to return to a second boom, like in the 70's. That's what I think."