Expectations growing over arrival of foreigners (principally Argentines) to invest in Uruguay’s agribusiness

RIO DE JANEIRO, BRAZIL – Expectations are growing among real estate operators offering investment opportunities in Uruguayan agribusiness because of the potential influx of foreigners interested in the livestock and agricultural markets.

The main factors behind this are the government’s flexibility in reopening borders due to the drop in Covid-19 infections, the results of the Primary, Open, Simultaneous and Compulsory (PASO) elections in Argentina, and its agricultural situation  due to a new extension of restrictions on beef exports.

Inquiries from investors from the region’s countries did not increase excessively after the Uruguayan government announced the reopening of its borders, but the land market is “dynamic,” and the demand for land to work is higher than supply.

Moreover, the situation of the Argentine agricultural producers – most of them unhappy with the country’s government due to restrictions on beef exports – is encouraging expectations among rural agents.

The land market in Uruguay “is dynamic, but very cautious at the same time,” explained Pablo Albano, head of the Rural Real Estate Department of Zambrano & Cía. Demand for land has increased, “the lost interest in cattle farms has returned,” primarily in the north of Uruguay, where there was little activity and today there are purchase orders for that area. On the other hand, the price of agricultural land has risen as a result of the increase in the price of grains and today demand is higher than supply, he explained.

After borders reopen, foreign investment is expected to increase, mainly medium and small scale, from 200 to 1,000 hectares, he said and mentioned that these are “investors with the intention of using their savings.”

On the other hand, the entrepreneur speculates that larger scale investments will increase, albeit more gradually as there is less land available and because for these investments to enter Uruguay “the new reality of international commodity prices will need to mature.”

MAINTAINING ATTRACTIVENESS

With respect to business development, Albano said that an increase in the prices of land offered could represent a slowdown in foreign investment and in this sense he stressed that businesses must always be profitable to be attractive to investors.

“The reopening of borders could boost interest in the purchase of land and, therefore, keep the market dynamic, but this should not be confused with hikes in the price of land, because profitability is still part of the equation and irrational price increases would slow down the market,” he said.

INQUIRIES CONTINUE

At Valdez y Cía rural office, inquiries from foreigners interested in investing in the cattle market have increased over the last year and a half. According to the company’s commercial manager Ricardo Pigurina, no major changes have been seen in the past few days since borders were reopened. Inquiries continue to be received, mainly from Argentines who already have businesses in Uruguay and wish to expand them, he said.

This year most investments have been local and there are expectations that new players will come in. For Pigurina, in Uruguayan agriculture “there are more people who already know the business and are here than new ones.”

Nevertheless, the coming months are key to define what may happen with foreign investments and one of the determining factors may be the result of the PASO elections – to be held on September 12 – after which he believes that “there could be a change, an acceleration or otherwise of the migration process to Uruguay.”

The case of Brazilian entrepreneurs, a public with which this company usually works, is different from Argentines, as they “are more confident in Brazil,” he said.

Although there has not been an avalanche of callers for business, inquiries come mainly from clients who had called before and are now looking to arrange their arrival. “Probably many who inquired will make the move and try to come, but I don’t know if that has increased due to the reopening of borders,” Pigurina said.

Investments in the cattle market are mainly aimed at expanding existing businesses. There is currently a limited supply of land to lease for cattle raising, the entrepreneur said, in a business that “is more attractive for foreign investors,” who, by leasing, can make a real estate investment with shorter terms without using as much capital. The limiting factor today is the low availability of land to this end, he added.

EXPECTATIONS AND UNCERTAINTIES

In the agricultural market the situation is not very different, expectations for the arrival of interested parties in agriculture are there, as well as uncertainty. There are several foreigners working in the National Agrarian Cooperative (COPAGRAN), some partners who sell through the cooperative and other customers who buy inputs and to whom financing and advice are provided.

COPAGRAN’s vice-president Juan Manuel García reported that due to the reopening of borders, there have been some contacts, although no new business deals have been completed.

“We expect that in the next few months they may start coming to invest in the purchase of land and in production. Once the borders reopen, we expect that mostly Argentines will come to invest, and we think that most of them will invest in real estate,” he said. And he added: “I don’t think it will be like before, that many will come to produce, but there is still much uncertainty,” he conceded.