BRAZIL: ATTRACTS LARGE INVESTMENTS IN AGRIBUSINESS

[Music] do [Music] do [Music] [Applause] um [Music] what is a gvi what does the acronym stand for and how long the company have been in force agpi is a asset management company we were brazilian based sao paulo based originally we were agri business investments but uh since 2015 we have dabbled in some real estate investments as well uh it was founded by luciano lewandowski which is my father he's an asset manager here in brazil had the one of the largest real estate funds or rather the largest real estate fund in brazil during the early 2000s and in 2012 together with a new team we set a new strategy focused on rural and agricultural real estate essentially agbi real assets as the name implies focuses on real assets especially farms uh we buy degradated pasture lands in brazil and we convert them into cropland uh as as uh in most parts of latin america especially the ones that are ag heavy agriculturally heavy uh as as its uh common knowledge uh pastoral land is uh less valuable than agricultural land so through the transformation process we capture a lot of uh capital gains we're heading into our third fund right now uh the the manager was we were established in 2012 so we're about to to complete 10 years of age experience and thankfully a lot of success okay well you already told something about the which area but we would like to know more about that uh where do you operate today it's only in brazil do you practice on somewhere else and especially in which area do you prefer to work well we're very much we're exclusively focused in brazil at the moment because we understand that brazil is uh an up-and-coming well that's actually an established and up-and-coming agricultural star uh if you if you have a look at the brazilian economy you will see that about in 2020 about uh 26 of all the gdp growth was from the ag sector brazil is uh the largest sugar exporter in the world the largest citrus exporter in the world the second largest soybean export um exporter in the world uh it's a very ag heavy country and uh it has a lot of technology and a lot of infrastructure for agricultural exports so we understand that we have our hands full with uh with good opportunities over here and it's also a very complicated market to work with so it's a big differential to have brazilian people that understand the financial markets dabbling into agriculture uh we're very much focused in brazil as a whole specifically in the cejado region the sahaba region is uh is the region that is below the amazon and um further north from the atlantic uh the atlantic region of brazil uh especially the state of mato grosso mato grosso and goyal uh which are places that are particularly good for agriculture uh the quality of the soil is is relatively decent especially with all of the technology that uh brazilian agriculture has developed to um uh to better the quality of the soil and the rainfall which is a very important part of agriculture as a whole and therefore an important part of land value the rainfall is very steady it's uh it's possibly the most steady rainfall pattern in all of the world which makes this region in particular probably the best region in the world for agriculture great you mentioned there is another companies like yours but what are their agbi's strengths actually there's very few uh asset managing companies focused on agriculture uh we've been in this market since 2012. starting in 2015 some other asset managers started looking into agriculture mainly the the companies that work with ag are the ones that are focused on purdue on production so we're talking about tradings we're talking about uh companies like for example amazi which are companies that are focused on the production itself and not on the financial aspect and the land acquisition that is something that agbi started with back in 2012 and uh our largest differential is most likely our experience because although there's a lot of agricultural producers and rural producers in brazil there's very few producers with a very um with a profound knowledge of finance and uh although there's plenty of asset managers in brazil with know-how in real estate there's very few um real estate asset managers that understand how the field works for example a very interesting thing about this um this crossroads between agriculture and finance is that most of the land acquisition and sales in brazil and i believe uh throughout all of the world um they're not pegged in hais or pegged in dollars they're pegged in bags of soybean or in uh or in bushels of of corn the currency for uh for the agricultural business and the currency for land trade in the agricultural business is usually pegged to the production itself because that's how the farmer uh has a better uh a better insight of how much his land is going to be worth or it's going to cost and so on and so forth and some of those little quirks are the things that um that only experience brings okay great tell us a little bit about your your company i mean uh your work team who what part of your team how many people do they work how is the how they charge huh organization we're very we're a very focused team right now our team is uh seven members uh luciano lewandowski which is my father and the founder is our uh is our head fundraiser um he helped develop the strategy with gustavo fonseca the other partner uh other than that we're composed of analysts uh all of our analysts are usually their background usually as an engineer or economics but everybody has some sort of connection to the um to the re so the rural area into the field uh we like to we like to joke around that uh although we're used to doing all of the valuation calculations of the financial calculations everybody in agbi at some moment has to step on the dirt in the sense that you have to understand how the countryside works how the farmers think because that's our market uh we're a very small company in the sense that uh we do a lot of valuations and we do a lot of uh research on agricultural land we've researched over 555 uh farms all over brazil that's probably the largest portfolio you'll find in uh in land valuation in brazil uh with the exception maybe some banks that finance rural production but we can do that with a very small team because we're very focused okay okay thinking about the south american market what would be the appeal of trading with you and why it's there's a very interesting point to that question juan uh right now i'm not in sao paulo right now i am in uruguay in montevideo and we're talking to some investors over here because we're about to launch our fund number three and uh the interesting thing about when you talk specifically to people from uruguay or from argentina because of the agricultural background of some of these countries uh they understand what the market is and how the market works uh the whole land market uh in agriculture there's uh an interesting fact about this and this applies to to maybe midwestern usa as well which is when people make money in our countries usually they buy land and they'll have a farm where they're going to have some crops uh they'll also use it for leisure at some point so in in the natural people and in family offices and so on and so forth usually they understand a little bit more about farms and latin america as a whole as a large agricultural uh producer and as uh as economies that have a lot of ag uh a lot of weight on ag uh it's easier for you to talk about agriculture as opposed to other countries that have uh financial markets that maybe are a little bit more developed and they're trading in uh advanced and complex securities they'll be talking about bonds and sometimes they'll lose track of the underlying assets whereas when we when we talk here in latin america in particular we're the assets are still very much connected to the real assets so for example here in montevideo we're talking to some of our investors a lot of them they have farms of their own and they produce in their own what we bring as uh as agbi as a professional fund is we bring the capacity to scale and when you're talking about ag scaling is absolutely essential okay understood you mentioned something about the how big is brazil and the opportunity but thinking about south american investors why invest in brazil well what we do here is very much focused on the on the part of of the land itself which is connected to the valuation it's important to mention for example that uh when we talk about productivity the land productivity in brazil is particularly astonishing it's it's it's amazing actually if you consider uh if you consider that in 1995 so about 30 years ago we were planting about 81 tons uh 81 000 tons of soybeans right now 30 years after we're producing 266 000 tons whereas the land the planted area has basically not increased it's went from 40 to 60. so we're talking about a four to five time increase in production as opposed to a less than two times increase in planted land so we're talking about a lot of technology and that's very that's very interesting that's something that's been uh for for people who are in the ag sector that's very obvious we see the technology that's being put into the ag sector right now here in brazil they talk a lot about uh what they call ag techs which are startups and technology companies focused on agriculture and that has made um the ag sector a very a very hot spot for investments in technology but if you consider that brazil was not traditionally a very productive agricultural economy before the the 1980s the land in brazil wasn't very suitable to planting some of the cash crops that we're used to right now for example soybeans in particular uh soybeans weren't uh a good fit for the brazilian midwest for the brazilian sejada region but through a lot of the technology input input through imbrapa which is the brazilian uh agricultural research agency it's a governmental agency focused on researching technology and agriculture imbrapa helped develop together with some of the large tradings we developed better seeds we developed better procedures better fertilizers and all of this technology has come into the agricultural sector so when you ask about good types of investments definitely agriculture in brazil is something that is off the charts not only because of the scale of the country but also because of the technology that's put in sometimes we use um sometimes we think that technology is something that's only related to industrial goods or to services but uh when you look at the brazilian case study and this isn't only valid for brazil this is very valid for uruguay very valid for argentina as well when you look at the agricultural sectors of some of the latin american countries you realize that there is a lot of technology in the rural and in the rural areas of our countries and uh it kind of breaks a little of the stigma that that suggests that agriculture is something backwards or there is something simple uh if if you try to if you try to buy a farm and plant right now one i mean i mean no disrespect but it's going to take you a while to be able to understand all of the details complexities and technologies that some of our farmers are used to doing from from as soon as they start walking the fields okay you're going to the next question and with that which are the main problems uh or challenge that exists in brazil for foreign investors and how can you support them okay uh i think there's three three big points to mention the first main point and we've been facing this a lot for the last couple of years there's a currency risk uh i mean a lot of investors in brazil managed to get a lot of good returns in the country but they lost loss of these returns to currency risk that's something that's a macroeconomic question uh we have elections coming up in 2022. that should be a that should be a good uh indicator of of the economic policy as a whole the second large risk is an infrastructure question but then again infrastructure is a large problem not only in brazil but in most in most developing countries which is we're already the second largest producer in most every agricultural good but we still have a hard time taking to the port so that on one side that's an investment challenge on the other side that's an opportunity because as soon as those problems are solved you're definitely going to have an appreciation and the third the third question is the legislation itself specifically the legislation for land and agricultural investments in brazil uh they require uh somebody with boots on the ground a lot of the investors that are that don't have a partnership with somebody inside of brazil they have a hard time understanding all of the legislations and all of the um all of the red tape that you have to work um that you have to work with when when investing in brazil uh we're actually having a lot of success with our conversations with other latin american investors because we're understanding that a lot of the red tape and a lot of the bureaucracy that we have in brazil it's a regional cultural thing uh when we talk about some of our problems with investors from uruguay uh with investors from from colombia from venezuela obviously in different levels but um we deal with some of the same problems regarding legislation regarding taxes and so on and so forth okay on your website you report that the price of farms in brazil has not stopped rising in recent years it seems that it's a great business to base in this area tell us what is happening and how you can invest in agribusiness and carbon credits in brazil and how do you support the potential investors in brazil that's a very good question specifically because as i mentioned a lot of what we do we're not reinventing the wheel my grandfather came to brazil 70 years ago and uh he he bought a little piece of land a farm uh what happened is as as the country grows and develops infrastructure eventually arrives so land has a tendency to appreciate even when it doesn't appreciate it has a tendency to not lose value especially if it's cultivated if you find a good land in a place that there's a good rain uh rainwater pattern in a place where you have all the infrastructure and the technology to make the betterments necessary your land will improve uh we have a couple of studies and this is basically our bread and butter and agbi um we have a couple of studies that suggest that there's an arbitration opportunity between pasture land and cropland as soon as you convert a pasture land to a crop land so as soon as you buy a a pasture land that's used for cattle and you transform it to a cropland that will will produce soybeans and corn you have automatically about a hundred percent appreciation in the land value because of the transformation i like to trace a parallel with the real estate market because this is where luciano came with the inspiration for all of our strategy when you buy um a site and you raise on top of that site uh a warehouse automatically that site is more valuable because now it can be used uh industrially in the same sense when you buy a pasture land and you make the investment necessary to transform it into a into a cropland automatically you raise its value so it's something that doesn't depend on the market itself it depends more on the investment capabilities of whoever is buying the land and making the transformation the second point that's very interesting and it touched the carbon market that you mentioned the pressure for the reduction of deforestation is something that is very strong in the world and it isn't something that is new although it's been receiving more and more attention every year uh the market in brazil has a very strong commitment uh especially the the serious agricultural players in brazil a strong commitment to reduce deforestation because that actually hinders uh our sales abroad especially in europe and some other and some other countries because there are things like the soy moratorium which uh companies won't buy soybeans from places that have deforestation there are things like the cejado manifest which is an international pact to not buy um any products from places where there's been some sort of degradation in the cejado lands so what is this what is this made this actually forced the um the larger brazilian agriculture to better their techniques in order to increase production and productivity without the increase of land for example agbi has been in the market for almost 10 years now and we have not taken down any hectare of forests anywhere and we still have growing and growing returns how come because of the technology we put in we we better our procedures we're always looking for other forms of increasing our returns uh and one of those examples is carbon credits our fund number three is gonna increase the strategy that we've already started to adopt in our fund number two which is uh some technologies have started to be able to measure how much carbon has been sequestered inside the land because when you transform a pasture land to a crop land you're growing products be it a soybean be it uh be it the grass that covers the soybean be it the corn and all of this production and all these plants that are being planted they inject carbon into the soil and we've just partnered up with a with a company with an ag tech that has managed to use a technology to measure how much carbon is captured this is obviously verified by the gold standard by vera the international certifiers and with that we're actually being able to bring another option of return into our investments which is not only do we sell the crops not only do we have a land appreciation because of the transformation but now we can also generate carbon credits that can be sold out whether on a voluntary or a regulated market uh so that companies that produce more uh or that um emit more uh carbon equivalent gases can buy our credits to neutralize their emissions oh great great i didn't know that well do you do you support either purchase an operation on the farm or just a purchase uh right now because our focus is on the purchase we are partnered up with middle to large uh producers operators and they do the transformation for us they do the operation for us why do why did we choose this model in agbi for two reasons first of all the medium-sized producers in brazil have a very hard time finding credit finding credit to finance finance the expansion of their production and these guys they would rather have their money invested in production then to immobilize their capital and land so we buy the land we we rent the land offer to the producer he manages to pay for all of the transformation that means agbi does not pay for the transformation we charge a rent over somebody who's producing on the land that gives us a fixed income and that gives the producer an opportunity to expand his business and get more money off of the operation right right right now after 10 years of taking that um taking that strategy on to market we're starting to consider operating some of our farms ourselves but right now we have a very positive relationship with the operators because if they're not looking for hgbi they're probably gonna have to take um take credit on a bank or take credit on a on a money lending fund or firm and the conditions are much more of a credit condition than a partnership as it is with with agbi so at this moment we're not operating but uh we're starting to look into it because at some point you're owning so much land you it makes sense for you to take uh take a little a little piece of the operation great mario maybe i'm wrong but according to what i read in your website it seems that the real estate investment is part of your business i think it's 80 percent there is something wrong with that how is it support that you provide in that area first of all it's important to mention that real estate we consider real estate obviously the traditional industrial real estate we we do work with bts's and so on and so forth but what we do in our farms essentially is a real estate play okay we talk about ag because it is inherently agricultural but it is a real estate play because we buy land we incorporate value into that land not through a building but through the transformation and then we sell the asset our our first investment we just we just moved out of it it was eight years long investment and we had 4.5 times uh the return of the capital so we're talking about some absurdly large numbers as long as you have the discipline to stick firm to the strategy throughout the eight to ten year okay period you have a minimum in investor amount in order to work with as a foreign investors our funds usually work with uh 1 million ai's investment minimum they're usually closed funds or club deals uh agbi does not work with publicly listed funds so um and we're talking about guys our fund number three which is about to be launched this month will be a 500 million guys fund uh our last fund was liquidated for 180 million guys um so we talk about a one million how minimum investment usually we're talking to family offices we're talking to institutional investors because they're close funds and they can't even be offered uh publicly i'm mentioning about these funds here because they are they haven't been launched yet but as soon as they're launched they're going to be very focused uh we we talk a lot about our strategy because we understand that it's a good strategy that has to be replicated and this is a market that deserves more liquidity okay great uh thinking about a south american investor what guarantees do you give to the investors and what is the process like if someone decides to invest in brazil okay um with regards to guarantees we work in our funds in agbi we work with a hurdle we talk usually about inflate about five to seven percent over inflation and this is an interesting point because inflation in brazil depending on where your investments made it it plays a big part so we're talking about a hurdle of five to seven over inflation uh in regards to guarantees we do not work with guarantees but as i mentioned we have ample studies and ample research that talks about um the lack of depreciation in the land so what we bought the land for we're pretty sure we're going to be able to sell for more uh if we get our track record and we're one of the few companies that has a track record because we've been in this for so long our track record suggests usually over 100 capital uh capital gains in the investments as to the process for the investment uh we usually ask for the investors to um some investors in particularly come looking for us recently we started talking some asian companies that are interested in secondary uh in secondary uh positions so we are our fund is already closed we're already dealing with it somebody wants to buy off one of our older investors in order to um to make a play or take a stake in the game uh we usually ask for the investors to look for us directly and whenever our funds are launched since they're closed funds uh they will usually be distributed by um by a bank in particular right well mario we are ending an interview but before ending we would like to have a message for you to the south american potential investor which is your personal view about this and what would you suggest okay um first of all thank you for thank you for the conversation is very good and thank you for this opportunity i i have two things that i have to say the first thing i think which is the most important is a lot of people have been talking about esg sustainability and uh some people think that sustainability is something that has a direct conflict with agriculture this is not right that is a false statement uh responsible agriculture is sustainable in its s in its essence because whenever you buy land to produce on it if you degradate the land you're gonna decrease your yield your future yields so uh this is a very important point if you're looking for agricultural investments check to see who are the people that are working the land check to see how responsible the companies are because you can't have one thing without the other the second thing we're taking a very strong and uh an excited position on carbon credits fund number three not only will have the capital play but it will also have a carbon capture strategy through agriculture and we're very excited because we feel that not only are we going to be bringing very good returns to our investors but we really feel like we're part of something bigger we feel that we might be able and this is valid for brazil but this is valid for most of latin america we have the opportunity to capture credits to capture carbon credits and sell them to the rest of the world we can bring some of the um some of the sustainable environmental benefits that the whole world needs and actually make a profit out of it as long as we have enough people understanding the importance of this and uh and investing on it because like any other like any other development sustainable development needs investments great mario thank you thank you very much for your time i hope you're going to have a lot of new clients from south america um [Music] well let's see we can do another interview from here for another time thank you very much juan uh whenever you need anything uh if you want to talk about um the brazil brazil as a whole we're at your disposition and specifically to talk about sustainability of carbon credits and agriculture we love this we do this we do this because we like it not only because of the good returns well thank you very much thank you [Music] do [Music] do [Music] so [Music] [Applause]

2022-01-14 22:05

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