Indian firms foray into Latin America’s agri business

NEW DELHI - Indian companies are increasingly getting a foothold into South America, acquiring assets and land not just to get entry into its lucrative agricultural market but also to export commodities such as sugar, pulses and edible oils back to India.

According to Latin American diplomats serving here, Indian company Shree Renuka Sugars recently made it to the club of top five sugar producers in Brazil, South America’s largest country and world’s biggest sugarcane producer.

India’s largest sugar refiner, Shree Renuka Sugars had first bought a sugar and ethanol producer Vale Do Ivai S.A. Acucar E Alcool in November 2009 for $240 million, including its 18,000 hectares of land and cane crushing capacity of 3.1 million tonnes annually.

A few months later, in February, it invested another $329 million for a 51-percent stake in Equipav SA Acucar e Alcool, that owns two sugar mills with 10.5 million tonnes annual capacity, as well as, 115,000 hectares of cane growing land in south-eastern Brazil.

The diplomats said other Indian companies are also vying to get into the lucrative sugar industry, such as the consortium led by state-run Bharat Petroleum Corp, as also private sugar companies like Rajashree and Godavari, looking at cane estates and ethanol plants.

Mumbai-based Bajaj Hindusthan already has a subsidiary in Brazil, Bajaj Internacional Participators Ltd, to scout for investment opportunities in the country. But, it’s not just sugar and Brazil, which are attracting Indian corporate groups.

“It is a natural synergy for Indian companies to look at South America for agriculture. Cultivable land is at a premium in India and growing food overseas to import it back to the country is win-win for both sides,” said a senior diplomat, requesting anonymity.

“Frankly, there is also not much sensitivity about the issue of land in South America due to the low population, unlike, say, in Africa where it is often a political hot potato,” the diplomat added.

Interests in sugar and ethanol aside, Sterling Group has a 2,000 hectare olive farm in Argentina, while Solvent Extractors Associations of India — made up of 16 member companies — plans to invest $50 million to grow oilseeds in Uruguay.

Olam, a company owned by a non-resident Indian with headquarters in Brazil, cultivates 30,000 hectares of peanut production in Argentina.

In a similar development, Indian companies are also increasingly looking for farm assets abroad in Latin America for import of pulses, edible oils and sugar in recent years. In 2009, India imported over $1 billion worth of edible oils from Brazil.

South America, of course, has the advantage of large surplus of land and no restrictions on foreigners acquiring this asset. It has 25 percent of world’s freshwater reserves and there is little need to bring farm technology, thanks to a sophisticated research system.

Further, the cost of land in South America is also often much less than its equivalent in India, said the diplomat.

“The cost of land generally in South America is half the cost of land, say in Punjab. The most fertile land is costing around $12000 a hectare , while fallow land can be bought for as little as a few hundred dollars a hectare.”

(Devirupa Mitra can be contacted at devirupa.m@ians.in)