Chile's venture capitalists opt for agro-innovation

Featured Top Stories Most Read Today's Headline
Chile's venture capitalists opt for agro-innovation

With the help of funds from a variety of institutions a group of Chilean businesses has launched several innovative agricultural projects since 2004. Managed under the entity 'Sembrador Capital de Riesgo' by fruit company Subsole and financial services firm LarraínVial, the funds have planted new seeds in grapes, blueberries, avocadoes, citrus fruits, kiwifruit, truffles, chestnuts and walnuts, among other crops.

Two years ago the Inter-American Development Bank (IDB) chose to issue lines of credit to Sembrador through its Multilateral Investment Fund (FOMIN), adding to the group's capital from Chilean government institution Corfo and around 30 agricultural investors.

With the first agri fund fully subscribed and a second already underway, the Sembrador team has been recognized by FOMIN for its successful business plans during a recent trip to Washington.

"We had a four-year plan but in just 1.5 years we were ready," said Sembrador executive director José Miguel Fernández, who is also the general manager of Subsole.

"We are happy because the model is working and we are supporting agriculture."

Sembrador general manager Jorge Karadima, said the model assisted farmers who previously didn't have the economic capacity to modernize their farms or convert their orchards.

Jorge Karadima receives FOMIN recognition with Jose Miguel Fernandez (center-left)

Sembrador has received more than 200 requests for funding but it does not have the financial capacity to fulfil all of them, with the daunting task of choosing the most profitable projects and the best managers.

"When they (managers) meet they raise good ideas and good agricultural practices are approved. This is a very attractive virtuous circle."

A touch of madness

Both Fernández and Karadima have told their investments were a bit crazy as they were put into production areas where no one had gone before. They cite the examples of walnuts in Chillán, blueberries in Temuco and lemons in Lambert.

Sembrador launched its first agri fund four years ago under the name 'Crecimiento Agricola', meaning 'Agricultural Growth', purchasing 100 hectares of land in the Aconcagua region to grow table grapes. They continued with half the existing crops while the other half was dedicated to the plantation of protected varieties such as Midnight Beauty and Ralli.

The group changed the farm's handling system and incorporated new irrigation and packing technologies, and as a result today the farm earns around US$10,000 per hectare annually with Thompson Seedless as one of the most profitable varieties.

"You have to re-invent yourself - create a new formula, invest in new products, new varieties, new handling systems," said Fernández.

He said Sembrador couldn't solve the crisis facing Chile's agricultural sector but could act as a model for other businesses.

"We're searching, we're taking risks and that's due to this fund, this venture capital - we are looking forward, searching for the agriculture of the next decade," added Karadima.

Fund profiles

Crecimiento Agricola (Agricultural Growth)

The first fund began with the support of Corfo, with a total of US$25 million invested in a diverse range of agricultural projects.

Managers: 7

Regions: IV (Coquimbo), V (Valparaiso), VII (Maule), VIII (Biobio) and  IX (Araucania).

Crops: Wine grapes, table grapes, citrus fruits, avocadoes, walnuts, blueberries and kiwifruit. The majority have reached productive maturity.

AgroDesarollo (AgroDevelopment)

The fund was created last year and will be open for investment until 2014. It has a focus on crops in areas with little development or that have not been utilized previously. It is estimated AgroDesarollo will have a total investment of US$28 million.

Managers: 5

Regions: IV (Coquimbo), VII (Maule) and VIII (Biobio).

Crops: Citrus fruit, pomegranates, table grapes, Jintao kiwifruit, chestnuts, truffles, pome fruit and cherries.

Subscribe to our newsletter