A broad ranging discussion I had with the Ambassador at his office in Buenos Aires last week.
The Latin America Interview with Indian Ambassador R. Viswanathan
December 23rd, 2011 Posted in Brazil, colombia, Commodities, India, Infrastructure, Investing, Latin America, Mexico, Uruguay
Agriculture is one of the great places to be – Jim Rogers on Bloomberg UTV in India
July 1st, 2010 Posted in Agriculture, Argentina, Brazil, India, Investing, Latin America, Uruguay, Videos
Jim speaking at an event – “Investment strategies in an emerging financial lanscape”. Funny to see the Indian interviewer’s (probably an MBA!) WTF reaction to Jim’s comments on agriculture. In trying to sell the attractiveness of the farming business in South America to potential investors, I’ve found the going rough in India. People cannot imagine farming as a lucractive proposition, like it is in South America. No Indian middle class family would want their kids to get into farming. Heck, even Indian farmers – almost half of whom want to quit farming, don’t want their kids to be farmers! Farming and agribusiness gets a bum rap in India, because it is a disastrous business there – afflicted with a nexus of misdirected subsidies, price support, import and export controls, collapse of extension services, absence of an agricultural land market and pervasive corrupt bureaucratic intervention across the entire range of the rural economy, as Dr. Rajiv Kumar of ICRIER so eloquently states.
One of the CEOs of an Indian agrochemical company shared a story with me last month. One of his employees approached him asking for his help in finding a job for the employee’s 25 year old nephew back in the village. When the CEO asked what the son was doing, the employee replied “Nothing” The CEO said “How can he be doing nothing, he is 25 years old?” The employee replied, “He is dabbling in farming, that is like doing nothing!”
YouTube – Jim Rogers on Bloomberg UTV.
Agriculture in my view, is one of the best places to be in the next 30 Years , I mean all these people getting MBAs are making terrible mistakes as far as I’m concerned , they should be getting farming degrees.
Agriculture has been a disaster for 30 years…Agricultural products are gonna be the best investments over the next several years. I think farming…agriculture is gonna be one of the best industries in the world. Like I said, all people who got MBAs made a mistake, they should have been getting agriculture degree.
Related articles
- India’s Interest in South America must go beyond World Cup: Not just football superpowers, agriculture superpowers as well (induslatin.com)
- How to Invest Like Jim Rogers (induslatin.com)
Latin America: India’s next frontier
June 25th, 2010 Posted in Economics - Indicators, Policy and Trends, India, Investing, Latin America, M&A
- Image via Wikipedia
I think the India-Latin America trade corridor is one of the last frontiers in business. India does more trade with Africa – 2-way flows about $40 billlion, which has a fraction of the overall GDP($2,5Tn at PPP) compared to Latin America (almost $6Tn at PPP) – 2-way flows about $16billion. So, the future potential is quite rosy.
“We are very upbeat about Latin America and view it as the next frontier of growth,” says Harshul Asnani, head of Latin America and US West operations for BPO company TechMahindra.
The rapid growth in IT and network spending, increased mobile/broadband penetration and large scale consolidation in the telecoms sector in Latin America offers “vast potential” for a specialized telecom-focused systems integrator like Tech Mahindra, he says.
Omar Momin, vice president of strategy and M&A at Godrej Industries, also sees strong Latin America potential. “There are tremendous opportunities in Latin America that fit in with our strategic objectives,” he says. “These emerging markets have characteristics and consumer demographics similar to India with significant middle of the pyramid populations. They also hold tremendous potential in terms of growth in the coming decade and give the Godrej Group an opportunity to serve the needs of Latin American consumers better.”
One of the reasons why India´s trade with Latin America is below potential is the inadequate attention Indian business have paid to this region in the past,” says R. Viswanathan, India’s ambassador to Argentina, Uruguay and Paraguay and his country’s top Latin America expert. “Now this is changing. [Indians] are impressed by the strength and resilience of Latin American markets which have withstood the U.S. crisis and are marching ahead despite the gloom in Europe.”
In terms of sectors, he predicts that Indian investment will grow in IT, agribusiness, mining and petroleum in the coming years.
Meanwhile, lighting products manufacturer Havells Sylvania is also looking at expanding. “We are open to new proposals and are looking at both organic and inorganic growth in Latin America [along the] lines …Havells in India has aggressively grown from year to year,” says Kapil Gulati, the Costa Rica-based general manager and director of the Americas for Havells Sylvania. “We plan to initiate assembly operations in a few countries.”
Note: an abbreviated version of this article titled “India’s Interest in Latin America must go beyond World Cup” was syndicated by Indo-Asian News Wire Service. A few portals that ran the article include: SIFY, TradeIndia, IndiaNewsPost, ThaIndian, SouthAsiaMail, ProKerala, Gulf Times, Qatar and the Ministry of Overseas Indian Affairs.
Over the next few weeks, millions of Indians, like their compatriots around the world, will be glued to the television, cheering for their favorite World Cup teams. Among the South American teams are traditional favorites, Brazil and Argentina. But other teams from the region include Uruguay, Paraguay and Chile. All these countries are football superpowers, with a long history of producing players who dazzle with their stylish play: eyes-in-the-back-of-the-head passing, bicycle kicks, dancing and dribbling past three or more defenders before scoring. The names of Messi, Kaká, Tévez and Forlán will echo off fans’ lips well after the finals.
In India, meanwhile, fever for those South American fútbol stars tends to fade once the games are over. Yet there is an important reason why enthusiasm for South America should persist beyond the World Cup: The Mercosur trade bloc of countries – Brazil, Argentina, Uruguay and Paraguay are the world’s emerging agriculture superpowers. They are already shipping their tremendous surpluses worldwide and, as agriculture outsourcing hubs, have the potential to meet India’s food needs in the coming decades.
South American surpluses, especially in oilseeds, pulses and sugar, will feed the growing food deficits in much of Asia, with shrinking arable land and expanding populations.
First some geographical context, since South America – unlike Canada and the United States – generally doesn’t appear on the Indian radar. Brazil is three times the size of India. It is even larger than the continental United States. Yet its population is about that of Uttar Pradesh and Uttarakhand. Argentina is nearly the size of India, with a population equivalent to New Delhi, Mumbai and Kolkata. Uruguay, sandwiched between Brazil and Argentina, is about the size of either Karnataka or Gujarat, three and a half times the size of Punjab, yet it holds less than half the population of Bangalore or Ahmedabad.
Flying from India to cities like Buenos Aires, Montevideo or Sao Paulo, located in the South Atlantic seaboard, is quicker than getting to California. All these Mercosur countries lie in the tropical and temperate latitudes where a wide range of crops can be grown, outside the zones of hurricanes, earthquakes or volcanoes.
What makes the agribusiness fundamentals so great in these countries?
- Farmland is abundant, and scale farming on parcel sizes of more than 1000 hectares the norm. Many farms are 4000 hectares and larger. The soil quality is extremely good. Soybean yields, for example, are 3 to 4 tons per hectare; corn yields range from 5 to 12 tons per hectare; and rice yields total more than 7 tons per hectare.
- While crop yields are at least two to three times greater than those in India, the cost of farmland is only a fraction of Indian prices. Most farmland comes with clean property titles.
- Agribusiness is well developed, analogous to the IT sector in India. A large pool of qualified agronomists – experts in soil science and management – conducts ongoing research in the most effective and efficient farm practices. Argentina introduced the technology of direct-seeding, which improves soil and moisture conservation, and which other nations now use. Harvard has selected leading South American agribusiness models as case studies in its own research.
- The Mercosur countries use the same or similar cutting-edge farm machinery and technology – the “no-till drill,” for example – found in the United States, Europe and Australia. A network of service providers assists with planting, harvesting and other aspects of the farming process. Logistics and supporting transport infrastructure are well developed.
- Agribusiness remains in private-sector hands; governments provide no farm subsidies. In some instances, the government taxes agriculture revenue; yet farming remains a profitable activity. So there is an ongoing imperative for innovation and efficiency to sustain the profitability.
- All the Mercosur countries have abundant fresh water, with networks of streams, lakes and perennial rivers. Rainfall occurs predictably throughout the year, which means there is little, if any, necessity for groundwater pumps.
- South America has 26 percent of the world’s freshwater and just 5 percent of the world’s population. Population growth rates are below replacement rates, so over the next 40 years, there will be little demographic pressure on water resources.
With these advantages, the Mercosur countries enjoy large agriculture export surpluses and ship 60 to 90 percent of their annual production to such countries as China, Vietnam, Korea and Japan. India imports their grains, edible oils and sugar.
On the socioeconomic front, Mercosur countries are democracies, with relatively little ethnic, religious or racial conflict. Cultural values, such as emphasis on family and relationships, resemble those in India. Indians will find a good business fit while operating in these countries. The Mercosur governments are dedicated to attracting responsible foreign investment and industry.
In South America, various combinations of buy/lease farming options are available, and annual financial returns can exceed 20 percent or more. In addition, farm portfolio managers in South America (akin to financial portfolio managers) can manage an agriculture operation for a fixed fee per hectare, plus a share of the profits. This would suit those Indian investors who know nothing about farming but do care about output and returns, and don’t want to deal with purchasing equipment or hiring personnel. Indian agrochemical companies like United Phosphorus and Excel Crop Care, and farm equipment players like Mahindra are reaping rewards from the South American agriculture market.
It is a fact that India’s domestic production cannot keep pace with the growing demands for more and better-quality food. It is time that Indian companies and investors look at South America for “backward integration” into farming operations. To use a World Cup analogy, it’s time to score goals for India’s food needs.
Related articles
- Agribusiness Opportunities in South America (induslatin.com)
- Hardeep Singh’s, ex-CEO Cargill India and South Asia, visit to farms in Uruguay
- Videos on South American farming
A few months back IndusLatin spotlighted the expansive use of skin whitening creams in India and Latin America. Recently the issue has been back in the news in India. Vogue magazine’s India edition dedicated its May cover story to the issue, and declared that it is time “to say we love, and always have loved, the gorgeous color of Indian skin”. It may prove difficult, however, to change societal perceptions of beauty. From The Christian Science Monitor:
Skin color matters in India, a fact made clear by the adjectives used in personal ads seeking spouses. Suitors use keywords such as “dusky,” a euphemism denoting dark skin, or “wheatish,” meaning one is light-skinned, to indicate their complexions… Being darker-complected has traditionally been considered an impediment to finding a good partner…
Sales in skin-lightening creams are up by 17 percent from the previous year, reported marketing firm Nielsen Company late in 2009. One Indian advertising executive, who worked on a skin-whitening campaign and wished to remain anonymous, explained the growth by saying that “being fair is seen as a passport to getting the ideal partner.” These attitudes are also reflected in India’s thriving film industry.
“In Bollywood, there is a premium on being fair. Dusky actresses … aren’t considered glamorous,” says filmmaker Jag Mundhra.
Mr. Mundhra, is more hopeful about the future. “The economic changes have meant that India no longer sees itself as a third-world country. This newfound pride will help us accept our own skin color.”
I was invited to speak at the CII Partnership Summit held in Chennai at the session on New Trade Routes. I spoke on how Latin/South America is well-positioned as the world’s agriculture outsourcing hub, and can meet India’s needs for food security. See video below:
The recent price rise in food items which has caused heartache and wallet-ache for many Indian households is a phenemenon that will worsen in the years ahead. The near quadrupling in the price of toor dal (split pigeon pea) over the last 3 years is only a trailer in the coming horror movie of spiraling food inflation. With Indian incomes forecast to rise over the next decades, food consumption will skyrocket. On the edible oil front, the annual additional deficit of 350,000 to 450,000 tons projected by the Solvent Extractors Association of India is the equivalent of every Indian eating an additional samosa or bhajji every year; this is an exponential increase in demand. The same is the case with pulses and other commodities.
Forgetting the recent blame game for rapid food price in India – accusing politicians, traders, speculators, hoarders for this recent food increase, the main reason has been prolonged underinvestment on the supply side of food production, because Indian farming has been a sector with terrible incentives. Not surprisingly, 45% of Indian farmers want to quit farming. Add to that rapidly falling water tables in North India – India’s bread basket, and erratic monsoons from climate change you have the recipe for domestic food output falling short of demand, repeatedly in the future.
Latin America can meet India’s food needs, a place where agriculture commands the status of IT in India, with the best brains and fortunes in that sector. Indian companies should join US, European companies who have realized this, and participate in the agri value chain there – investing in contract farming to agroinputs to food processing to logistics.
Length Comparison in an old Victorian map between the rivers in South America – the Amazon, River Plate (La Plata), and Orinoco (made famous in song by Enya) with the rivers Ganges and Indus.
- Image by leetucker via Flickr
India was the leading economy of the world for much of the last 2000 years from wealth generated from agricultural surplus. As Jim Rogers says, India should be the greatest agricultural country in the world, not America, with great weather, soils, climate. But, government policies militate against farming as a lucrative profession with antiquated laws on farm holding limits and buying policies for output.
Indian farmers are political cannon fodder; once they are economically empowered politicians are redundant. So, farmers will continue to be kept in economic intensive care by the political class. It can be a long wait for any meaningful changes in farm policies.
Traveling through the farm areas of Latin America in Uruguay, Brazil and Argentina with great soils and weather help me imagine what a paradise, agricultural and otherwise, historic India with 50 million people over its current land area must have been. And farming in these Latin American regions is entirely in private sector hands and they are all export powerhouses. It is in these regions that Indian entrepreneurs should deploy capital for augmenting existing local agribusiness ventures or starting new ones. Priority areas include production of pulses and edible oils.
via The Economic Times.
MS Swaminathan, top farm scientist and one of the architects of India’s green revolution, has warned that the country would face a food crisis if agriculture and farmers were ignored.
“We are on the verge of a disaster. We will be in serious difficulty if food productivity is not increased and farming is neglected,” Mr Swaminathan said on the sidelines of the 97th Indian Science Congress being held here. “The future belongs to nations with grains and not guns. The current food inflation is frightening. If pulses, potatoes and onions are beyond the purchasing capacity of the majority, malnourishment will be a painful result,” he said.
“I want the government to act upon three major recommendations,” the Rajya Sabha member said. “It should change compensation laws as farmers do not have pay commissions like the sixth pay panel; attract youth to farming; and amend the Women Farmers’ Entitlement Act to allow women avail bank loans without their land as a collateral security .”
Mango Tango: Top 10 Similarities between India and Argentina
December 23rd, 2009 Posted in Uncategorized
These are generalizations I think that would help to give some business context. As they say, for everything you say about India the opposite is also true.
1. Resiliency / Resistencia. Both India and Argentina have enough citizens who are resilient, having collective memory of crises from – wars, foreign occupation, inflation, going from riches to rags, social unrest, political mismanagement of the economy – and have the experience and strength to manage ambiguous situations.
2. Family. Both cultures place an emphasis on family bonds. Immediate family and extended family are usually geographically close. In Argentina, the asado (or barbeque) is sacrosanct; every Sunday the extended family comes together to enjoy a long, leisurely meal and time with family. In both India and Argentina, sons and daughters typically live with parents till before marriage. The number of family controlled businesses are high in both countries, especially in small and mid-size businesses.
3. Colonial Legacy. Spanish empire in the case of Argentina and the British empire in the case of India. Remnants include institutions that are extractive/exploitative in nature and give ordinary citizens the run around for doing simple things. Powerful bureaucracy. Restrictive economic freedom. Transaction-slowing paperwork.
4. Corruption, cronyism. Licenses and permits are required for starting, operating businesses. Rent-seeking behavior by businesses to compete for the market instead of in the market.
5. Sporting Heroes. Crickets stars in India and football stars in Argentina are divinity. Tendulkar and Maradona head up the pantheon.
6. Socialism. Over the last 60 years, government has run many businesses that would be better left to the private sector like telecom, airlines. Politicians talk of helping the poor, but implement policies that wallop them instead. For politicians, business is a dirty word, except when they or their cronies are involved in it. Idea that State is supreme, and knows best. Manufactured scarcity – ‘waiting in long lines/queues’ is considered normal.
7. Agriculture sector’s importance. Occupies a strong place in national imagination. Agriculture as a source of previous national wealth and economic success/could be again. Government interference distorts incentives and gives farmers a hard time and has resulted in a sub-par peformance for the sector.
8. Hierarchy. Both societies are class-conscious, respecting high status and privilege. In business, knowing the right people, especially at senior levels is important. Also, decisions are made at the top and trickle down.
9. A lot of talk accompanied by little action. High GDT (Gross Domestic Talkativeness) per capita. Truly, there is a love of talk, discussing philosophy, sharing opinions, badmouthing politicians and engaging in lively debate. Follow-up and execution is often lacking.
10. Patriarchal. India and Argentina are patriarchal cultures. Pater familias typically wielded considerable influence, though weakening in recent times. At the same time, especially in political and business settings, women are in key positions of power.
The agricultural output of India over the next 3 decades could be severely curtailed if water shortages are not addressed. The populist measure of giving Indian farmers free power has resulted in rapid depletion of groundwater supplies for agriculture. I saved Andy Mukherjee’s Bloomberg columns from 2 years go where he wrote about problems created from lack of wastewater treatment/underpricing of piped water and from a switch to biofuels.
The recent monsoon which has been below normal in India (June precipitation was the lowest in 80 years), have not only caused heartburn in agricultural circles, but also have led to fights breaking out in urban areas over access to reduced water supplies.
Going forward, India faces 2 serious challenges with water supplies for agriculture, both beyond its control:
1) Climate change is causing rapid melt in the Himalayan glaciers “suggesting that the Ganga, Indus, Brahmaputra and other rivers that criss-cross the northern Indian plain may become seasonal rivers in the near future as a consequence of climate change with important ramifications for poverty and the economies in the region.” At least 400 million farmer livelihoods are at risk.
2) Plans to divert water from the Brahmaputa by the Chinese government to feed its parched western/northwestern regions. Even though this is denied in official circles, there is little doubt that this will not be carried out knowing the CCP’s penchant for grandiose-projects like Three Gorges and preventing rain from falling during the Olympic opening ceremony. Moreover, Tibet – China’s Water Tower
is also the source for the Ganges river’s 2 major tributaries – the Kosi and the Gandaki. Attempts to “bottle those rivers” by official apparatchiks cannot be ruled out. The consequences for Indian agriculture are too staggering to contemplate.
Bottomline: Lower riparian states like India, and Iraq as mentioned in a recent NYTimes article, besides various countries in the Middle East and Africa, are almost guaranteed losers in the coming wars over water.
And the, Winners: Fresh Water paradises like Brazil, Argentina, Uruguay – perfect candidates for being India’s Agricultural Outsourcing providers. South american rivers like Amazon, Orinoco, Sao Francisco, Parana, Paraguay and Magdalena rivers contain more than 30 percent of the earth’s surface water. Add to that the Guarani Aquifer – the world’s single biggest groundwater source.
It is worthwhile for executives in India’s food and agriculture sector to keep these considerations in mind as they make plans for future growth and business contingencies.
