Doing things the Latin way

Tips on doing business in South America crop up at the Guild of Agricultural Journalists and Communicators' 50th jubilee conference in Wellington

JEFF McKEWAN

OPPORTUNITY KNOCKS: Lincoln University professor Keith Woodford sess many opportunities for New Zealand farmers in Latin America.

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The Latin way sounds as if it should be one of those long straight roads the ancient Romans were famous for. And it is a kind of road, explains Lincoln University agribusiness professor Keith Woodford, but a tortuously winding one.

It is a way of doing business in Latin America that is littered with potholes and blind turns for the unwary. And it has brought down many New Zealanders.

Professor Woodford, who has travelled widely through South America and studied its farming systems, sees many opportunities for New Zealand farmers in Uruguay, Chile and Brazil, but less in Argentina.

However, he sounds a note of caution. "The jury's still out on whether going there will be worthwhile."

One of the traps for the unwary was the Latin way. Asked to explain this, he found it difficult to put into words. "It is not code for corruption, that's definite. It is subtle and is only recognised when things go wrong."

There was the social aspect. "South Americans like to spend more time than we would building a social relationship alongside their business transactions."

Latin people tended to be less direct. They would sometimes, out of politeness, not express disagreement, but just not follow through on the action that Kiwis expected.

New Zealanders also had to negotiate a legal system that relied more on European traditions than English-based law, and different financial and institutional systems. Mortgages, for example, might be secured over land, but mortgagee sales to recover bad debts were extremely difficult to complete.

His advice was to use the many Lincoln graduates among the locals as guides through the system.

And he warned New Zealanders considering farming in Latin America against overestimating their capabilities. "It is very easy for some farmers to think their achievements here are the result of their own expertise and not realise just how blessed we are in New Zealand with our reliable environment."

Around the world, the standard of the top farmers in each country was the same. "The one thing different about Kiwi farmers is that we've lost the poor ones off the bottom. The average in terms of expertise is higher."

His assessment of each country:

Uruguay: The farmland is flat and rolling and greater than the pastoral area of New Zealand. The climate is slightly warmer and land is cheap by New Zealand standards. Dairy land sells for about $4000 a hectare and returns are around 6 per cent.

"They've been studying our agriculture for 40 years and hundreds and hundreds of Uruguay farmers have visited New Zealand. So this idea that we can go across there with our technology – our own secrets – that we can make work . . . well, they've been here, looked at what we can do and they know a fair bit about us."

Their technical knowledge of agriculture is good, and their graduates leave university knowing more than their Kiwi counterparts. But they are specialists, and New Zealanders have the edge when it comes to overall farm management. Kiwis who do not understand the Latin way and who think their farming system can be applied there without modification will come adrift.

Chile: The pastoral farming region has 10 per cent of the New Zealand farming area. It has free- draining volcanic soil and high rainfall. "Not a bad place to do business. It has a democratic, open market economy, it welcomes foreign investment and has free trade with New Zealand."

Kiwis have been going there for six years, buying land and converting it to modern dairy farms, from which they are now getting almost as much production as they would in New Zealand. A Waikato consortium has bought 19,000ha and intends to convert it to 45 dairy farms to supply a local company part-owned by Fonterra.

Argentina: It has potentially good farmland but it is a "nightmare country" for entrepreneurs. "Essentially a populist government, they do what is popular or expedient. Sometimes agriculture suffers. When prices get high they just put a ban on exports – they've done that for beef to lower domestic prices."

Brazil: The future lies in 90 million hectares of central and southern grassland. The potential is huge and Brazil's capability has been demonstrated over the past six years with its swift progression from beef importer to the world's biggest exporter.

Brazil has been largely untapped by New Zealanders, though PGG Wrightson's New Zealand Farming Systems, which is developing 36,000ha to dairying in Uruguay, is keen but is holding off in these financial times.

- © Fairfax NZ News