IDB Study Advocates for Agribusiness Transformation in Latin America and the Caribbean

• Book analyzes successful business strategies to conquer international markets, including the incorporation of sustainability practices
• Study identifies public sector areas of intervention to facilitate agribusiness success

Agribusiness in Latin America and the Caribbean could benefit from a productive transformation that facilitates its insertion in global value chains, according to a study by the Inter-American Development Bank and IDB Invest.

Competing in Agribusiness: Business Strategies and Public Policies for the Challenges of the 21st Century – part of the IDB's series of microeconomic reports – analyzes the challenges facing agribusiness, such as the need for innovation and modernization and including environmental challenges in its business strategy. The study details public policies that can facilitate investment and expansion of agribusiness.

The book – produced jointly by researchers from the IDB and IDB Invest – looks at more than 30 case studies of international insertion in agri-food markets, from large vertically-integrated companies to cooperatives and so-called “magnet companies,” which enable small producers to integrate into global agri-food chains.

“Traditionally, our agricultural exports have reflected our abundance of natural resources, such as the water in the pampas and the land fertility in the Andean valleys,” said IDB President Mauricio Claver-Carone. "The new trends in modern agri-food markets open up an opportunity for our agribusiness producers to show their entrepreneurial ingenuity, their ability to incorporate technology, and their care for the environment."

"The study shows how agribusiness can be an engine for development and job creation," he added. “I am also pleased to note that several of the cases discussed in the book involving small farmers have been supported IDB Lab or IDB Invest. The IDB Group will be a close partner to foster a sustainable agribusiness transformation.”

To integrate into modern agri-food value chains, producers must meet quality standards and comply with the commercial conditions demanded by international buyers. Consumers, for their part, increasingly want more information about the social and environmental impact of the products they consume. Inserting more Latin American firms, particularly small and midsized enterprises, in global value chains is one of the priority action areas under the IDB’s Vision 2025 roadmap to foster an economic recovery in the region.

The success stories in agribusiness in the book do not focus on commodities, but on strategies to differentiate and add value, ranging from taking advantage of the off season in the northern hemisphere to adopting environmental and social certifications and the search for attributes such as better flavor and size, or longer shelf life. In a context in which certain inputs – such as fuel and fertilizer – have seen significant price increases due to Russia's invasion of Ukraine, these differentiation strategies have become even more important.

Producer companies that have managed to integrate successfully into agribusiness value chains organize themselves in a variety of ways. Some are large, vertically integrated firms that are on the technological cutting edge in their respective sectors. But an important and attractive element of the agribusiness sector is its ability to integrate small producers into modern value chains, many of them from indigenous communities or campesino family farming, the report finds. These producers would have a hard time integrating on their own. Instead, they either group themselves into cooperatives or associations of small producers, or work with larger firms that provide them with technical assistance and financing and help them connect with the opportunities offered by a globalized world. Examples in the book range from organic honey produced under fair trade arrangements by cooperative beekeepers in the Gran Chaco ecoregion of Argentina to small organic mango farmers in Nicaragua.

The book shows the importance of the public and private sectors working together and identifies the type of public goods required to facilitate agribusiness success. This ranges from negotiating sanitary and phytosanitary protocols to facilitating international insertion to investing in infrastructure as an essential public good. For example, the agricultural revolution on the Peruvian coast would not have been possible without the extensive irrigation infrastructure works carried out by the government, which turned a desert into one of big fruit producing regions of the world. Governments should also encourage greater investment in telecommunications connectivity, since only 37 percent of the rural population of Latin America and the Caribbean has these services to a significant extent, making it difficult to establish the tracing systems increasingly demanded by foreign markets.

The book highlights the importance of incorporating small farmers into modern agriculture, adopting productive processes that are resilient to climate change, and unleashing the enormous potential of the sector in Latin America and the Caribbean.