A promised land: the core area of the Pampa Húmeda in Argentina is, along with the corn belt of the United States and the damaged plain of Ukraine, the three most productive areas in the world. However, what in other parts could have been a blessing, for the companies that inhabit the Argentine agricultural production ecosystem is the signal to have been converted into a moving target of national, provincial and municipal taxation.
Taking accounts. Knowing the ability to resist and continue bearing fruit, the sector’s production has been subjected to triple imposition: tax (especially due to withholdings that extract up to a third of the product), exchange rate (due to the gap that reached be 50%) and tariffs, leading to paying more expensive inputs than the international value. An account that successive economic authorities know and never fail to give a remainder but that the lion’s share remains in other coffers. For the producer Santiago del Solarthinking about a profitability of 3% per year for an agricultural field follows a historical pattern in which the price of real estate value arbitrates. “Now, with the devaluation, the profitability for the owner of the land has increased and with that a small revaluation of the asset, but no one buys the value of an asset for a short period but rather for 20 years,” Explain.
Such is the case of Juan Pablo Rossimember of a family agricultural company with production in the north of Buenos Aires that a few years ago opted for the area of the Uruguayan department of Colonia. “The difference with the Argentine sector is that the one who finally captures the eventual income that you may have for a good year is the producer, but also the one who has to face a bad campaign, like the last one”, synthesizes. So much so that local producers are astonished at the restrictions that their River Plate peers must defy. Among these notable differences are:
There is no differential prices or withholdings
Up to US$250 thousand billing Profits are not paidwhile in Argentina advances are paid or the balances in favor are devoured by inflation.
Although it is charged in dollars, the price of inputs is also dollarized (fertilizers, labor, inputs, fuel -more expensive-). The margin is greater because the entire system is more competitive.
The rural property tax is lower and there is also the possibility of buying cheaper imported used agricultural machinery and facilitates the capitalization of eastern agriculture.
For contractors work is more relaxed because there are no exchange differences, The services and the entire scheme are dollarized or in product price.
open gate. If there is something characteristic about the agricultural business, it is precisely being rooted in the territory… but that is in the short term. In the medium and long term, the capital and talent involved choose to migrate to other neighboring markets where, although productivity is lower, so are official restrictions. “H.“Today, Argentine producers carry in their DNA more than 100 years of history of agricultural production, so their presence in foreign fields contributes to constant improvement in the agroindustry of other nations,” Explain Federico NordheimerCEO of Nordheimer Fields and Ranches, rural real estate company active in Uruguay, Paraguay, Bolivia and the United States. In his opinion, diversification can stabilize returns in times of crisis and as a risk mitigation strategy. “Just as producers diversify crops in their own fields to mitigate climate and commodity price risks, Argentine investors seek geographic variety to optimize their portfolios and ensure sustainable returns,” he concludes. He also emphasizes that the most notable difference is that Uruguay is more stable and in Argentina the exchange rate factor that ends up shaping income weighs more, that in these fluctuations profitability can reach a floor of 2% per year in dollars or rise to 5% in dollars. matter of days. “In general, the investor who is active in lands abroad already has a certain culture of investing in other countries in different areas”close.
For Juan José Maderodirector of the Campos Division of LJ RamosUruguay has always remained competitive with Argentina because its market has always functioned regularly (access to dollars, credits under logical conditions, prices aligned with the Chicago market), but costs are very high (especially fuel) and productivity It is more limited in its potential. “The operating result obtained there is very similar to the Entre Ríos area, but without the difficulties of expensive credit, production restrictions, withholdings, exchange gap, etc. which motivated some investors to diversify their portfolio by betting on Uruguay”.
Ignacio Gonzalez He is a partner in the Campos division of the traditional real estate firm Terramar and has been dealing for some time with foreign investors (individuals, family groups, investment funds or companies) who are looking for tangible alternatives to what they can develop in their countries of origin. “There are Europeans and Americans who seek to diversify risks in a market with more development potential in a long-term decision since immediately after the purchase, they want to rent it with the necessary guarantees,” he clarifies. The expected profitability is between 2% and 5% annual for the case of the agricultural fields of the eastern core zone (that of the departments of the Río Uruguay, with values of up to US$10.00/ha) but it can be higher in the case of a livestock field – US$2,500 to US$3,500/ha. depending on the cycle – or also with a longer time horizon, in those destined for forestation.
Regulations apply in each market, but Finally, the flow of investments ends up finding alternatives where those who direct their capital are better treated.
