Agriculture in Uruguay - Overview

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Executive Summary

• Contract Farm in Uruguay, a safe and peaceful country in Latin America with tremendous growth opportunites. • Invest in one of the best growth sectors in the next few decades, as world population goes from 6.7 billion to 9 billion. • Diversify your risks away from agricultural areas threatened by water scarcity and climate change. • Work to meet the food needs of India, especially in oilseeds and pulses. • Use Uruguay as a platform to expand into the rest of Latin America.

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Executive Summary

• Grow two crops a year (occasionally three crops can be achieved). • Adopt a a non-speculative farming approach (i.e. secure costs and prices through contracts at the beginning of each planting season and do not speculate with obtaining better prices on the spot market at the end of the season). • Outsource all farm services (no investment in machinery or people on payroll necessary.) • Achieve Returns by: (annually in USD, based on 5 year averages) Leasing Farmland – 20 to 25% IRR Owning Farmland – 10 to 14% IRR
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Executive Summary

• Benefit from a positive investment climate, clear land titles, a strong legal system and open financial markets. • Repatriate 100% of capital, dividends and profits. • Enjoy working in a culture that values family and relationships, and is a pluralistic democracy. • Watch Uruguay agriculture videos by clicking here

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Uruguay Country Info .Location www.com 4 .alliedventure.

alliedventure.com 5 .Area • Sandwiched between Argentina and Brazil • Area: About 10% smaller than the Indian states of Gujarat/Karnataka. 3 times the size of Punjab www.Uruguay Country Info .

Density • Population: 3.5 crores in about the same area.km.Uruguay Country Info – Population. Population: Small compared to Gujarat/Karnataka which have a population of over 5.4 million (34 lakhs).km. Population: About 95% are of European descent 6 • • www.. overall pop. density about 17 per sq.alliedventure.com . outside cities less than 5 per sq.

Uruguay Country Info – Agriculture Suitability • 86% land area is arable only 1/8th of which is utilized • Abundant freshwater reserves fed by 28 rivers.alliedventure. network of streams and lakes. no irrigation pumps required • 4 cows for each citizen • Each cow has 2 football fields of grazing area • Thriving dairy industry Satellite map of Uruguay Watch Uruguay agriculture videos by clicking here www.com 7 . rain-fed agriculture.

Uruguay Country Info – Agriculture Environment • Land titles/ownership clear.com 8 . legislation well-developed • Land transactions among private parties • Politically stable country • Government welcomes foreign investment • No governmental meddling in agribusiness sector www.alliedventure.

Uruguay Country Info – Labour Force • Good standard of basic education – literacy rate 98%. • High standard of university education • TCS has its regional office in the capital Montevideo www.com 9 .alliedventure.

com 10 .Investment Climate • The Uruguayan Constitution and investment law Nº 16. Corporate Tax on profits is 25% for all activities (except for forestry and software which is 0%) and can be lowered on certain types of projects (not agriculture). • • • www. institution or corporation.alliedventure. There is free movement of capital and dividends (in and out of the country) for any individual. All corporations and individuals are free to acquire any agribusiness asset.906 clearly state that there can be no discrimination or unequal treatment between local and foreign investors.

state.” http://uruguay..us-television.receiving such a compelling briefing on Uruguay and the economic strengths of this country and the strengths of the human capital of this country and the educational attainment.shtml http://www. Veronaeau (Deputy Director of USTR): “.usembassy. up to the point that I remarked that if Uruguay were a stock I would go out and buy it “ April 2008 • • “For the U.commerce.cfm http://www.com/Countries/Uruguay http://www.htm http://www.tv/programs/uruguay-south-americas-best-kept-secret http://www.gov/usaweb/2009/09-119EN.gov/r/pa/ei/bgn/2091. it was very impressive.shtml “Uruguay: South America’s Best Kept Secret” http://www.com/2008/12/uruguay-best-kept-secret-in-world.shtml http://uruguay.heritage.gov.org/research/latinamerica/em1003.html?cat= http://whatwouldalpanadrink.gov/usaweb/2008/08-196EN. John K.associatedcontent.html www.S.blogspot.International Comments on Uruguay • Mr.gov/usaweb/2009/09-015EN.usembassy.internationalliving.uk/en/about-the-fco/country-profiles/south-america/uruguay?profile=all Other Comments: http://www.fco. Uruguay is a safe country for investments.usembassy.prlog.gov/NewsRoom/PressReleases_FactSheets/PROD01_004210 http://www..alliedventure.com • 11 .html • From the US & UK Government: http://uruguay.com/article/1465/uraguay_ssssh_south_americas_best_kept_pg2.org/10184987-uruguay-investment-property-one-to-watch.

pasp?pageid=55 Weyerhaeuser (US) http://www.html http://news.nz/page.html?nclick_check=1 Adeco Agro (Main shareholder: George Soros (UK)) with three farms in Uruguay.com/cms/s/0/6428e204-338d-11de-8f1b-00144feabdc0.ENCE (Spain) .13260.co.bbc.stm Some Examples: • • • • • • El Tejar (paragraphs 9 & 10) : http://www.co. http://www.com/Businesses/International/Uruguay D’Aremberg Group (Germany).farminguk.adecoagro. ADP (Grobocopatel ARG).com Metsa-Botnia (Finland) .weyerhaeuser.PGG Wrightson (Stake acquired by NRI company OLAM) http://www.Stora Enso (Sweden) .alliedventure.Portucel (Portugal) http://www. www. several others.com/publications/publication1778.thompsonhine.uk/1/hi/world/americas/7469731.ft.asp New Zealand Farming .com/news/Uruguay-Timber-plantations-attract-European-investors.nzfsu.com 12 .Corporations in Agriculture • Corporations and individuals (local and foreigners) can acquire and operate agricultural projects in Uruguay http://www.

Uruguay offers these advantages in Latin America – Businesstransparency – Company Formation – Sound Legal framework – Qualified workforce – Preferential market access • Switzerland – Social and Political Stability – Banking Secrecy – Agriculture – Dairy – Forestry • Mauritius Uruguay www.alliedventure.com • New Zealand 13 .

8 tons/ha for rice Highly mechanized and technology based operations Continuous appreciation of land prices.3 million hectares High yields compared to international standards – approaching 3 tons/ha for soya. Strong inflow of foreign investors for 7 years in a row (30% of agricultural land in Uruguay is owned by foreign companies).Agriculture in Uruguay • High growth of planted area in the last 9 years – from 300. neighbour across a river).com • • • • .alliedventure. 14 www. but still significantly lower that other agricultural areas in the world (even than Argentina.000 to over 1.

alliedventure.Growth in planted area – 2001 to 2009 www.com 15 Source: Uruguayan Ministry Of Agriculture .

Million Ha 1 3 2.5 17.5 2. 1 to 1.Farmland available in abundance.4 8.com .3 % 6% 17% 14% 13% 49% 100% Acc % 6% 23% 38% 51% 100% Very high Aptitude High Moderate Marginal Not proper for agriculture Total Total of at least 3 more million hectares very suitable for agriculture.5 million hectares to be planted in the next 10 years 16 www.alliedventure.

alliedventure.com 17 .Agricultural Areas www.

www.com 18 . Excellent Agricultural Land and abundance of fresh water Soybean plantation in a typical uruguayan landscape with no irrigation systems.Fundamentals of Profitability 1.alliedventure.

uy www. Average Temperature (ºC) by Country Region 30 25 20 15 T-East T-North T-West T-South 10 5 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Source: www.meteorologia. Excellent weather conditions and water availability through rain.Fundamentals of Profitability 2.com.alliedventure.com 19 .

Excellent weather conditions and water availability through rain. Average Monthly Rain (mm) by Region 180 160 140 120 100 80 60 40 20 0 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC R-East R-North R-West R-South Annual Average = 1400 mm www.com 20 .alliedventure.Fundamentals of Profitability 2.

silos. • • • www. Bunge. • • • Large Areas + Technology + Logistics All agricultural land is satellite-mapped and soil types and conditions detailed for every hectare of the country. Monsanto. Highly developed logistics infrastructure for agriculture (trucks.Fundamentals of Profitability 3. Dreyfus. homogeneous spread of fertilizers and herbicides with no overlapping. fertilizers. Precision systems in planters. specialized ports) results in additional lower costs. lower costs and higher yields. dampness and yield maps when harvesting. etc). etc. herbicides. ADP. Planters. Distances to ports are low (< 300 km) All big international players are established: Cargill. resulting in less use of materials (seeds. etc.com 21 .alliedventure. sprayers and harvesters allows for seed by seed planting at exact distances. Sprayers and Harvesters are satellite linked with high precision GPS systems (<10 cm error) and can work on automatic pilot even at night. optimization and so consequently. diesel.

alliedventure. Argentina. • • • • • Research and Knowledge This region has a numerous group of internationally recognized agriculture research centres. 80% of world’s international trade of grain will be provided by this region (Brazil.com 22 . Paraguay and Uruguay). Agricultural Technology is being produced locally (Argentina and Brazil) and exported to Europe and the US. Qualified professionals are available to manage agricultural operations.Fundamentals of Profitability 4. The region is considered to be the most efficient grain cluster in the world. www. USDA projects that in ten years.

There are a large number of service providers who provide the planting. The company owned by the investor can have no more than 1 employee (the lot watchman). Legal issues for human resource claims. Transport and logistics on a USD per ton price. so one can easily switch operating service providers based on price and quality of services. spraying and harvesting services are provided on an USD amount per hectare price. spraying. are thus diminished or inexistent. transport and warehousing services. Contracts with operational parties are done on a single operation at a time (planting for this season).000 hectares acquire machinery).Economics of the Business Operations and Management • All operations are outsourced. Planting.com • • • • • • . etc.alliedventure. It is 23 a highly competitive market. only producers with more than 40. with no long-term commitment. harvesting. www. Investment in expensive machinery is un-necessary (85% of agricultural operations work this way. Management and Administration is also outsourced to specialized firms (such as Allied Venture).

com 24 .Economics of the Business Planting and Harvesting windows by Crop SPRING AUG 1ft 2ft SEP 1ft 2ft OCT 1ft 2ft NOV 1ft 2ft DEC 1ft 2ft SUMMER JAN 1ft 2ft FEB 1ft 2ft MAR 1ft 2ft AUTUMN APR 1ft 2ft MAY 1ft 2ft WINTER JUN 1ft 2ft JUL 1ft 2ft PLANTING Soy (1st) Soy(2nd) Wheat Barley Maize Sorgum Sunflower Oats HARVESTING Soy (1st) Soy(2nd) Wheat Barley Maize Sorgum Sunflower Oats 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft ft: fortnight www.alliedventure.

• Rotation is also a good practice to avoid land degradation produced by single crop plantation. • Typical productive schemes are based on selecting (or combining planted areas) of soy.Economics of the Business Production Schemes: • Almost all agricultural operations are based on crop rotations. sunflower and/or sorghum in the summer with wheat or barley in winter. www. • Diversification is adopted also to control weather risks and commodity price risks.alliedventure.com 25 . Land and climate allows for crop switching or combination from season to season. maize.

Uruguay.com 26 . contracts and the most stable. • Commodity Prices: Usually volatile. close supervision of operations and good planning considerably diminishes this risk. contract farming (prices and costs set at the start of operations). location diversification.alliedventure. Margins tend to have a much more stable behaviour given the high correlation between price of grains and production costs. crop diversification and crop planning. so there is no significant exchange rate risk. www. • Operations Risk: Medium impact on financials. Control actions include. Prices are international prices with no tax distortions. Nevertheless. crop selection and diversification. Can be hedged by insurance policies.Economics of the Business Risks and Risk Management: • Weather: Undoubtedly the most important risk for agriculture. along with Chile. selecting appropriate service providers. is the ‘safest’ business environment in the region with a long standing tradition of respect for law. prices and costs are US Dollar based. • Country Risk: All operations.

and costs show returns between 10 and 14% for owned land. yields. is the main source of investors and farmers pouring into Uruguay.alliedventure. www. Official numbers prove sustainability of margins and profits for the last 6 consecutive years and in an upward trend.The Business Case Is farming a profitable and attractive venture? • • • • • • • Projections at last years average prices. Investors (new and old) keep investing in agriculture in Uruguay. known for being an agricultural powerhouse. Argentina. between 20 and 25% for leased land. They say the are very satisfied and are planning for more. Planted area grows year after year. so does production and yields with record productions being achieved in Uruguay each passing season.com 27 . Big groups moved to Uruguay and haven’t stopped for expanding for more than 5 consecutive years.

www. as land prices lagged when commodities went down. 2009/early 2010 is an excellent year to enter the business. so we know about the soundness of this business opportunity. • Operating returns are high (above 35%) and so it is a stable cash business despite commodity price fluctuations and weather events.alliedventure.The Business Case Is farming a profitable and attractive venture? • • We have been involved in agriculture for decades.com 28 .

alliedventure.Why Allied Venture? Knowledge of Latin America Knowledge of Agribusiness Knowledge of Uruguay Investment Advisors www.com 29 .

Universidad Torcuato di Tella. MFIN Corporate Finance. Food Univ. Business Strategy Farming. Sales.AGR. Kansas State University. Agribusiness.. International Business University of Illinois (Urbana-Champaign). Kellogg School of Management Northwestern University Lautaro Perez (36) . Food Processing and Distribution. Private Equity. MAB. Retail.EC. PHD(c) Agriculture. Management. Business Strategy. Energy. Consulting. ESADE www. MBA Marketing and Sales.com 30 .alliedventure.Executive Team Marcos Marin (38) . Harvard Business School Dave Ramaswamy (38) . de la República.S.B. de la República. Food... Mgmt. IT Univ. Business Strategy. MBA. Agribusiness.

com Marcos Marin .2600 Through USA: +1 (305) 722 1275 Through UK: +44 (20) 3026 0037 www.lperez@alliedventure.We are at your service! Treinta y Tres 1334. 401 Montevideo 11000 .com Lautaro Perez .com Dave Ramaswamy .mmarin@alliedventure.com www.alliedventure.com 31 .: +598 (2) 916.Uruguay Tel.alliedventure. Of.dramaswamy@alliedventure.

alliedventure.Appendix www.com 32 .

Yale University www.6 97.2 89.6 93.alliedventure.Comparisons across Key Indices Index Democracy Corruption Human Devl Literacy Rate Envt.United Nations LR: Literacy Rate .6 97.United Nations ESI: Environmental Sustainability Index .com .8 101 11 9 17 3 33 Source: DI: Democracy Index .Transparency International HDI: Human Development Index .The Economist CPI: Corruption Perception Index . Sustainability IND: BRA: ARG: PAR: URU: 35 42 54 71 27 85 80 109 138 23 132 70 46 95 47 65.

646 * Year 2005 Source: NationMaster.alliedventure.com 34 .Agricultural land Per capita (Sq.787 India 1. km per 1000 people) Uruguay 43.com www.

420 India 1.com 35 .Total Actual Renewable Water Resources (TARWR) Per capita m3/year Uruguay 40.750 * Year 2005 Source: UN Aquastat www.alliedventure.

00% 2005 2006 2007 2008 www.00% 0.7% 2008 3062 4999 497 2040 4557 2818 14234 32207 9660 7.alliedventure.Macroeconomic data GNP per sector and per capita In million US$ Agribusiness Manufacturing Electricity. gas.00% 4.00% 8.4% 2007 2102 3523 784 1453 3277 1977 11146 24262 7299 9.2% 2006 1774 3018 404 1180 2593 1668 9397 20032 6040 11.00% 6. Water Construction Commerce Transport and Communications Other TOTAL GNP per capita (US$) UNEMPLOYMENT RATE (%) 2005 1562 2579 544 962 2210 1437 8073 17367 5254 12.00% 10.00% Note: 2009 GDP growth estimated at 1% 2.6% Uruguay GNP Growth (%) 12.com 36 .

alliedventure.com 37 .Agricultural sector’s share of GDP 14% 12% % of Total GDP 10% 8% 6% 4% 2% 0% Agriculture Livestock 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 www.

8 7.7 -3.5% • Annual cumulative growth: 7.9 3.2 16.alliedventure.Total and agricultural GDP evolution (1990 = 100) 2007 Total AGRO Agriculture Livestock 2.2 2008 11.com 38 .6% www.8 • Growth 2002-2008: 66.

com 39 .Other macroeconomic variables Exchange rate S/US$ Inflation Note: the majority of agricultural commodities in Uruguay are traded in US dollars www.alliedventure.

000 1.000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1.com 40 .200 2.000 1. 2008.Evolution of Uruguay's total products export 7. 36% increase compared to 2007 www.alliedventure.500 5.000 Thousand tons Million US$ 1.400 4.000 Source: Uruguay Central Bank.000 1.600 1.100 1.700 6.300 3.000 1.000 Million US$ Thousand Tons 1.

1% Oilseeds: 4.com .alliedventure.7% Wool: 5.9% 41 Agricultural exports represent almost 60% of total exports !! www.7% Wood: 5.3% Dairy products: 8% Cattle furs 6.Uruguay Exports breakdown Beef products: 20% Cereals: 8.

Source: BCU.U. Uruguay XXI.Uruguay export markets (in %) 45 40 35 30 25 20 15 10 5 0 Mercosur UE Nafta 2000 2008 Asia Africa Others E. INE www.alliedventure.com 42 .

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