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Executive Summary
• Invest in one of the best growth sectors in the next few decades, as world
population goes from 6.7 billion to 9 billion.
• Work to meet the food needs of India, especially in oilseeds and pulses.
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Executive Summary
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Executive Summary
• Benefit from a positive investment climate, clear land titles, a strong legal
system and open financial markets.
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Uruguay Country Info - Location
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Uruguay Country Info - Area
• Sandwiched between
Argentina and Brazil
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Uruguay Country Info – Population, Density
• Population: Small
compared to
Gujarat/Karnataka which
have a population of over
5.5 crores in about the
same area.
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Uruguay Country Info – Labour Force
• Good standard of
basic education –
literacy rate 98%.
• High standard of
university education
• TCS has its regional
office in the capital
Montevideo
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Investment Climate
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International Comments on Uruguay
• Mr. John K. Veronaeau (Deputy Director of USTR): “..receiving such a compelling briefing on Uruguay and the
economic strengths of this country and the strengths of the human capital of this country and the educational
attainment; it was very impressive, up to the point that I remarked that if Uruguay were a stock I
would go out and buy it “ April 2008
• Other Comments:
http://www.heritage.org/research/latinamerica/em1003.cfm
http://www.internationalliving.com/Countries/Uruguay
http://www.prlog.org/10184987-uruguay-investment-property-one-to-watch.html
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Corporations in Agriculture
• Corporations and individuals (local and foreigners) can acquire and operate
agricultural projects in Uruguay
http://www.thompsonhine.com/publications/publication1778.html
http://news.bbc.co.uk/1/hi/world/americas/7469731.stm
Some Examples:
• El Tejar (paragraphs 9 & 10) :
http://www.ft.com/cms/s/0/6428e204-338d-11de-8f1b-00144feabdc0.html?nclick_check=1
• Adeco Agro (Main shareholder: George Soros (UK)) with three farms in Uruguay.
http://www.adecoagro.com
• Metsa-Botnia (Finland) - Stora Enso (Sweden) - ENCE (Spain) - Portucel (Portugal)
http://www.farminguk.com/news/Uruguay-Timber-plantations-attract-European-investors.13260.asp
• New Zealand Farming - PGG Wrightson (Stake acquired by NRI company OLAM)
http://www.nzfsu.co.nz/page.pasp?pageid=55
• Weyerhaeuser (US)
http://www.weyerhaeuser.com/Businesses/International/Uruguay
• D’Aremberg Group (Germany), ADP (Grobocopatel ARG), several others.
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Uruguay offers these advantages in Latin America
– Social and
Political Stability
– Business- • Switzerland – Banking
transparency Secrecy
– Company
Formation
– Sound Legal
framework
– Qualified
workforce – Agriculture
– Preferential – Dairy
market access – Forestry
Million % Acc %
Ha
Very high 1 6% 6%
Aptitude
High 3 17% 23%
Moderate 2.5 14% 38%
Marginal 2.4 13% 51%
Not proper for 8.5 49% 100%
agriculture
Total 17.3 100%
Total of at least 3 more million hectares very suitable for agriculture;
1 to 1.5 million hectares to be planted in the next 10 years 16
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Agricultural Areas
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Fundamentals of Profitability
1. Excellent Agricultural Land and abundance of fresh water
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T-East
T-North
T-West
T-South
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10
5
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Source: www.meteorologia.com.uy
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Fundamentals of Profitability
180
160
140
120
100 R-East
R-North
R-West
80 R-South
60
40
20
0
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
• All agricultural land is satellite-mapped and soil types and conditions detailed
for every hectare of the country.
• Planters, Sprayers and Harvesters are satellite linked with high precision GPS
systems (<10 cm error) and can work on automatic pilot even at night.
• Precision systems in planters, sprayers and harvesters allows for seed by seed
planting at exact distances, homogeneous spread of fertilizers and herbicides
with no overlapping, dampness and yield maps when harvesting, etc. resulting
in less use of materials (seeds, fertilizers, herbicides, diesel, etc), optimization
and so consequently, lower costs and higher yields.
• Highly developed logistics infrastructure for agriculture (trucks, silos,
specialized ports) results in additional lower costs.
• Distances to ports are low (< 300 km)
• All big international players are established: Cargill, Monsanto, Dreyfus, ADP,
Bunge, etc.
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Fundamentals of Profitability
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Economics of the Business
• All operations are outsourced. There are a large number of service providers
who provide the planting, spraying, harvesting, transport and warehousing
services.
• Management and Administration is also outsourced to specialized firms (such
as Allied Venture).
• The company owned by the investor can have no more than 1 employee (the lot
watchman).
• Planting, spraying and harvesting services are provided on an USD amount per
hectare price. Transport and logistics on a USD per ton price.
• Legal issues for human resource claims, etc. are thus diminished or inexistent.
• Investment in expensive machinery is un-necessary (85% of agricultural
operations work this way; only producers with more than 40.000 hectares
acquire machinery).
• Contracts with operational parties are done on a single operation at a time
(planting for this season), with no long-term commitment, so one can easily
switch operating service providers based on price and quality of services. It is
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Economics of the Business
AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL
PLANTING 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft
Soy (1st)
Soy(2nd)
Wheat
Barley
Maize
Sorgum
Sunflower
Oats
HARVESTING 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft 1ft 2ft
Soy (1st)
Soy(2nd)
Wheat
Barley
Maize
Sorgum
Sunflower
Oats
ft: fortnight
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Economics of the Business
Production Schemes:
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Economics of the Business
• Weather: Undoubtedly the most important risk for agriculture. Can be hedged by
insurance policies, location diversification, crop diversification and crop planning.
• Commodity Prices: Usually volatile. Control actions include, contract farming (prices
and costs set at the start of operations), crop selection and diversification. Margins
tend to have a much more stable behaviour given the high correlation between price
of grains and production costs. Prices are international prices with no tax distortions.
• Country Risk: All operations, prices and costs are US Dollar based, so there is no
significant exchange rate risk. Uruguay, along with Chile, is the ‘safest’ business
environment in the region with a long standing tradition of respect for law, contracts
and the most stable.
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The Business Case
• Projections at last years average prices, yields, and costs show returns
between 10 and 14% for owned land, between 20 and 25% for leased land.
• Planted area grows year after year, so does production and yields with record
productions being achieved in Uruguay each passing season.
• Investors (new and old) keep investing in agriculture in Uruguay.
• Big groups moved to Uruguay and haven’t stopped for expanding for more
than 5 consecutive years.
• They say the are very satisfied and are planning for more.
• Official numbers prove sustainability of margins and profits for the last 6
consecutive years and in an upward trend.
• Argentina, known for being an agricultural powerhouse, is the main source of
investors and farmers pouring into Uruguay.
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The Business Case
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Why Allied Venture?
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Executive Team
Marcos Marin (38) - EC., MBA, Dave Ramaswamy (38) - B.S., MBA
MFIN Marketing and Sales, Mgmt. Consulting,
Corporate Finance, Private Equity, Business Strategy, International Business
Business Strategy, Agribusiness,
Food, Retail, Energy, IT University of Illinois (Urbana-Champaign),
Kellogg School of Management -
Univ. de la República, Universidad Northwestern University
Torcuato di Tella, Harvard
Business School
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We are at your service!
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Comparisons across Key Indices
URU: 27 23 47 97.8 3
Source:
DI: Democracy Index - The Economist
CPI: Corruption Perception Index - Transparency
International
HDI: Human Development Index - United Nations 33
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LR: Literacy Rate - United Nations
ESI: Environmental Sustainability Index - Yale University
Agricultural land
Per capita (Sq. km per 1000 people)
Uruguay 43,787
India 1,646
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* Year 2005 www.alliedventure.com
Source: NationMaster.com
Total Actual Renewable Water Resources (TARWR)
Per capita m3/year
Uruguay 40,420
India 1,750
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* Year 2005 www.alliedventure.com
Source: UN Aquastat
Macroeconomic data
10,00%
8,00%
6,00%
4,00%
Note: 2009 GDP growth estimated at 1%
2,00%
0,00%
2005 2006 2007 2008
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Agricultural sector’s share of GDP
14%
12%
% of Total GDP
10%
8% Agriculture
6% Livestock
4%
2%
0%
98
99
00
01
02
03
04
05
06
07
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20
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Total and agricultural GDP evolution
(1990 = 100)
2007 2008
7,000 1,700
1,500
5,000
Thousand tons
Million US$
1,400
4,000
1,300
3,000
1,200
2,000
1,100
1,000 1,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
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Uruguay export markets (in %)
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2000
40
2008
35
30
25
20
15
10
5
0
Mercosur UE Nafta Asia Africa Others
E.U.
Source: BCU, Uruguay XXI, INE
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