Opportunities and challenges of expansion in South America

Blog by: IN10T 

Nicolas Reinoso, VP of South America, IN10T

Agriculture is growing at an exponential rate in Brazil and Argentina, where adoption of new technology is thriving. These countries are global leaders in several crops. Brazil has gone from a net importer of food to a major agricultural exporter, with Argentine exports not far behind. However, expanding into these growing South American markets can be challenging for start-ups and multi-national companies alike.

Brazil a Big Market with Growth Potential 

Driven by rising global demand and productivity, Brazil has become the second largest agriculture exporter in the world, with crops such as soybeans, corn, wheat, sugar, meat, coffee, and ethanol leading the charge. Ranking number one in soybean production, and third in the world for corn production, there is ample opportunity for growth in the country.  

With mass application of crop nutrients and microbials that reduce soil acidity and fix nitrogen, as well as improved plant breeding, Brazil’s semi-arid farmland has been transformed from marginally unfarmable, to the world’s new breadbasket. According to the University of Illinois, Brazil is the fifth largest country in the world and has the largest area capable of expansion of any country that is already producing ag products. Out of 868 million acres, only 7.5% of this area is currently being used in crop production. Significant advancements are being made thanks to ag technology, government policies, and the introduction of crop biologicals are playing a pivotal role in bringing Brazil to the forefront. 

Brazil has also been quick to adopt and grow GMO seeds, moving the productivity and yield ahead of conventional crops. In 2021, 95% of the 65 million hectares planted to soybeans, corn, and cotton were biotech varieties. Biotech varieties occupied 97% of the 38 million soybean hectares in Brazil. “Sustainability, technology, and digital farming are growing faster here than any other country… Biologicals, favorable politics, lower export taxes, and infrastructure investments in the countryside are making Brazil the pioneer of the South American innovation and future agriculture,” said Nicolas Reinoso, VP of South America at IN10T. 

Argentina an Agriculture Leader 

Argentina’s vast farmland and favorable natural conditions have placed the country among the world’s leading agri-food producers and exporters. Large-scale farms, averaging about 1,500 hectares, occupy 78% of total agricultural land. Soybeans, corn, and wheat production are the top three produced and exported crops for Argentina. Due to the favorable farming conditions, Argentina is the perfect testing ground for companies specialized in farming innovations like biotechnology, crop protection, fertilizers, biologicals, seeds, and microbial ag inputs. These solutions allow businesses to expand using innovative new technologies to grow food more efficiently, profitably, and sustainably. 

Another significant benefit of doing business in Argentina is its membership with Mercosur, a trading block made up of Argentina, Brazil, Paraguay, Uruguay, and other South American countries. If you are a member of Mercosur, the connections provided make expanding your business into the other member countries more achievable. “Argentina is well known for having proportionally more innovators than other countries in the region. The growers’ enthusiasm for testing new technologies is amazing and could give innovative companies a very fast concept test for a new technology in a short period of time, states Nicolas. 

IN10T out in the field checking emergence of the crop in a South American field.

Global Leaders in the Adoption of AgTech  

Along with adopting biotech, Latin America is also the world’s most rapidly growing region when it comes to the funding of startup companies. According to Crunchbase, a leading business information company, venture capital investors poured a record $19.5 billion into startups based in Latin America last year. That was more than triple the amount invested in the region’s startups in 2020, turning Latin America into “the fastest growing region in the world for venture funding in 2021,” the firm said. Crunchbase is optimistic that the number of investments will be strong again for 2022 and beyond.   

 Access to broadband internet has aided the quick growth in agriculture innovation. As of 2018, 71% of Argentines were using the internet, with mobile subscriptions being common as well. Because of investment in digital infrastructure, Brazil and Argentina are becoming regional leaders in agriculture startups and innovation. Many digital agriculture startups are in operation and gaining traction throughout the region’s agricultural ecosystem. These startups cover a wide range of technology from farm management and data analytics to marketplace platforms, agri-finance and water management, just to name a few. Both countries demonstrate the importance of an enabling ecosystem for digital agricultural innovation to scale and support the growth of small-scale entrepreneurs. Nicolas comments, “The innovation in digital platforms and technologies in the area are blooming daily and giving us the chance to speed up the race to the future way of farming. We have access to the most advanced and innovative tools and products, giving us the ability to continuously grow. We are no longer waiting for new technology to reach our country; we are developing the most advanced ag innovations right here.”  

 Expansion Challenging for International Companies 

For international companies, entering the South American markets can be challenging. Oftentimes, companies want to expand, but have limited knowledge of the market in South America, hectares of land, farmers, culture, and which crops are grown during what season. The language barrier is also a relevant issue for companies wanting to infiltrate the market. Finding bilingual speakers that understand the culture and how business is done in both countries requires an intimate knowledge of the local environment. Understanding the distribution, government procedures, employee benefits, environmental laws, and complex tax structure is a must to be effective in this region. Many companies have found success by working with local businesses, who are receptive to US companies partnering with them. Nicolas states, “Knowing the local way of doing business is key. Not everything is formal and perfect in our region, so having flexibility, being agile, networking, and gaining local knowledge to reach the final goal is the big challenge in our region,” says Nicolas. 

Understanding and prioritizing the customer (farmer) is important and a key to success. Agriculture is different in Brazil then Argentina. Cultural differences between countries can influence the way management decisions are made from one country to the next. Having direct access to farmers and their different segments, and understanding the way they make decisions, is a strength for our team.  Our team in South America is the ideal partner to guide you in a Go to Market strategy.   

Navigating the pitfalls of entering the South American market can be less dramatic with a partner in your corner, like IN10T. How can we help when you don’t know where to start? At IN10T, we connect innovators to farmers. We enable innovators to collect, standardize, and analyze farm-level insights, accelerating adoption of your technology. Collaborating with our team can provide a clear path to accelerating ag product adoption in South America, where the opportunities are abundant.