Paraguay a “Pearl” in Latin America Agriculture

Date:10-21-2021

In my childhood, there was a proverb that my grandfather always told me that I take this as an absolute truth in my life. Living is wonderful and enjoying it is a gift to all of us, but time and again, life gives us a lot of lemons. Many people take this lemon and find it sour and difficult to digest, others take this lemon and make a beautiful lemonade.

That's exactly what Paraguay did in 2003 when the then governor of the state of Paraná banned the cultivation, handling, import, industrialization, and sale of transgenics intended for agricultural production, human and animal food in the state. As a result, all production from Paraguay that was exported through the state of Paraná was prohibited from going through there.

It could be the biggest “lemon” for that charming country with thriving agriculture, but what Requião did, helped Paraguay to be today the fourth largest exporter of soy, the sixth largest exporter of corn, and the seventh-largest exporter of meat and in the Allied to this, Paraguay has become in recent years an undisputed leader in river navigation in Latin America, being the third in the world, surpassed only by the United States and China.

Today's Paraguay has 7.2 million people in a land area of 406,000 square km, a little larger than the state of Mato Grosso do Sul, which I consider the most promising state in Brazilian agribusiness for the coming years and the similarity with Paraguay is immense, which makes me believe even more in the potential of that country.

With a planted area of 3.4 million hectares of soybeans, farmers manage to grow two crops in a good part of this area, with corn occupying 800 thousand hectares and wheat covering 400 thousand hectares. Together, these three crops represent 94% of the entire market, with soybeans being 81%, corn with 7%, and wheat with 6%.

Paraguay agriculture developed along the border with Brazil and the similarities with Brazilian agriculture are very common, from the planted varieties, soil fertilization, pests, diseases, and even the farmer, as most of them are Brazilians.

Another group of farmers that stood out in Paraguay was the Mennonites, who have a reputation for being excellent farmers, hardworking and disciplined in their habits. This mixture has made Paraguay agriculture a good mix between the boldness of the Brazilians and the dedication and resilience of the Mennonites.

With a market for crop inputs estimated at US$2 billion, the agrochemical market stands out in the order of US$ 700 million, being the fourth most important in Latin America, surpassed only by Brazil, Argentina, and Mexico.

Unlike Brazil where the 5 major players (Syngenta, Bayer, Corteva, Basf, and UPL) have a concentration greater than 70% of the market, in Paraguay, we have a more dispersed market with the 5 largest representing only 38% of the market and two national players occupying the prominent position. Agrofertil/Tecnomyl and Diagro, occupy the positions of BASF and UPL.

The biggest market is fungicides representing 38% of the total, with soybean foliar diseases being the biggest problem. Insecticides represent 31% of the market, herbicides 21% and seed treatment and others 10% of the market.

Paraguay has the advantage of having a very simple and unbureaucratic chemical registration system that helps bring faster innovations to the market and large companies take advantage of this to bring their innovations and serve as a quick test for Brazilian market entry.

This facility on crop inputs registration, easy and cheaper access to credit, fewer taxes, dollarization bringing more stability in the purchase and sale of crop inputs and commodities, and ease in importing agricultural machinery, permit to Paraguay be the land of innovations.

Seeds, crop protection products, and ultra-modern machines take over the Paraguayan fields, all of which, translate into profitability and productivity for the Paraguayan farmers.

Another point of differentiation that caught my attention was the infrastructure and verticalization of Paraguayan distributors, all of them with a system very similar to our cooperatives:

• Strong knowledge of customers
  

• Grain receiving structure and complete logistics
  

• Sales of tractor parts and fuel
  

• And a strong vision of own brands, with most distributors having their lines of seeds, fertilizers, and agrochemicals, which makes most of them leaders in some categories, leaving large multinationals without much space and therefore having little investments in the country.
  

Among these distributors, what I highlight here is Transagro, a company that belongs to the traditional Hilagro group and which was founded by Mr. Albert Hildebrand in 2000. The Hilagro group has several business areas and a very large synergy between them, as they range from technical assistance to farmers to the commercialization of these raw materials in natura or industrialized products in Paraguay and abroad.

Transagro is the business unit dedicated to crop inputs and currently comprises 7 commercial units with services ranging from technical assistance, sale of crops inputs, sale, and purchase of grain, storage and processing services, sale of fuel to parts for tractors, in addition to providing every raw material for the industries of the Hilagro Group, that is, a complete verticalization and very difficult to be copied, which places it as one of the companies with the greatest growth potential.

It currently has among its providers the main brands of agricultural inputs such as Syngenta, Bayer, FortGreen, and Rizobacter, in addition to having their brands of agrochemicals such as traditional generics Atrazine, Glyphosate, 2,4_D, Acephate among others and some innovations such as their mixtures doubles and triples, including its recent launch for the soybean fungicide market Horus (Picoxystrobin + Prothioconazole + Difenoconazole), and also some differentiated packs for seeds  treatment that include Syngenta’s blockbusters Fortenza, Cruiser, Maxim Gold together with Rizobacter and Fortgreen’s products.

The lesser bureaucracy in agrochemical legislation has meant that after the expiration of product patents, the offer and availability of these as exclusive brands and with direct import of assets or formulated products from China or India become abundant, and the farmer with it, has the costs of these inputs reduced and greatly improves its profitability.

I estimate that the Paraguayan farmer with the same problems of pests and diseases, soil conditions, and other similarities costs almost 50% less than the Brazilian farmer, and the cost of land is also much more attractive.

The consolidation we are experiencing here in Brazil has already taken place in Paraguay, with the 6 large distributors Agrofertil, Agrotec, Glymax, Matrisoja, Somax and Transagro itself having more than 60% market share and operating throughout the territory and all of them expanding into new areas of agriculture and livestock, such as the Chaco region. Also noteworthy is that access to customers is almost entirely made through the distribution system, further strengthening this system.

Paraguay still lacks research institutions like the one we have here, such as Embrapa, a better supply of more abundant and qualified labor, and a system that protects the farmer more, as they do not have any system like the one we have here, such as Funrural , which guarantee better social security and a cushion for retirement.

On the other hand, despite the excellent logistics, they need to seek alternatives for the flow of their agricultural production, since the dependence on flow through the Paraguay and Paraná Rivers can cause some bottlenecks in times of drought like the one, we are experiencing in 2021. The targeted Bioceanic will shorten the distance to Asia, further increasing competitiveness.

I also emphasize the improvement of legal security, since a law was recently passed criminalizing land invasions, something common in previous years. I feel a little envious of Paraguay on this topic.

Many changes are set in the future for Paraguayan agriculture, such as the stronger entry of multinationals, a better adaptation of genetics and biotechnology, especially to new regions, the strong entry of some Brazilian cooperatives, the possibility of mergers and acquisitions, greater professionalization, the succession and diversification of new businesses such as precision agriculture, the redistribution of inputs and other forms of value addition such as the offer of biological products, greater offer of special nutrients for plants and the integration of livestock farming. With the feasibility of agricultural production in the Chaco alone, another 8 million hectares could be added to Paraguayan agriculture, that is, the same amount that is cultivated there today.

This new look at the potential and challenges of Paraguayan agriculture is huge, but this agriculture will certainly consolidate and grow strongerr on our continent.