By: Kimberly Ramkhalawan
July 12, 2022
The IDB in its latest venture is looking to lend support to the region in progressing its agro-processing markets in light of the world’s food shortages happening due to the Ukraine-Russia War.
With much of the global supply of wheat and fertilizer resources coming from that part of the world having been put on a halt, there is discussion on ways in which the western hemisphere, particularly Latin America and the Caribbean.
In launching its manual titled ‘Competing in Corporate Strategies and Public Policies for the Challenges of the 21st Century Agribusiness’, the IDB shared ways in which this could be driven and achieved.
Opening the discussion, IDB President Mauricio Claver-Carone said ‘the study offers a broad array to the public and private sector’, while expressing his hope that the report becomes an important benchmark in the region and a tool to guiding the agricultural agenda’. He noted that the IDB lab had sought to contribute to the funding for projects included in the report which includes transforming co-operatives and small farm businesses into modern agro-processing resilient to climate change.
Economist at the IDB and one of the several authors of the book, Ernesto Stein, shared how vertically integrated companies, a term he used to describe companies that participate in multiple links in the agribusiness value chain practice their own production, by managing packing or processing plants, along with their own commercial channels.
Looking at how the region stands to benefit from becoming part of the supply in global value chains, by providing products considered high value, Stein says these businesses can maximize the benefits during offseason marketing, where supply can be targeted to countries in need of these high value products such as blueberries, avocados and mandarins. He added the importance of reducing wastage in produce, by using the less the attractive produce that may appear unappealing for other products such as juice and composting. Vertically integrated also means that there is little to no downtime in between crops, as there is often a rapid and aggressive crop conversion rate, where one crop is out of season, another is planted to ensure a constant land use. Apart from being a source of food, it promotes employment all year round and sustainability across all channels. The report also shows “how horizontal associativity between small producers enables them to reach economies of scale” assisting them to overcome barriers in accessing markets, through advantages shared collectively, such as the sharing of fixed costs associated with investment in infrastructure and equipment, as well as licenses and certification. Farmer Cooperatives that work together are therefore seen as reducing barriers for entry for small producers, all while reducing cost in adhering to proper practices for their products put forward.
An interesting point the study looks at is the ‘reorientation of the agri-food system toward exports’ through certification and credentials. Citing cases studies for its reference points, the report suggests ‘traceability systems’ which it adds ‘complement certifications by providing buyers with all the necessary information about a product’s journey, including where it was harvested, stored, and packed’. This system is said to provide information on how sustainable its growing process was in use of water, land space use such as not to contribute to deforestation all while providing this critical data to the consumer. While this might also be viewed as a social responsibility issue on the part of the company looking to vertically integrate, dissuading many from not participating, the study encourages for business relationships with surrounding small producers it says can help ‘improve the company’s image and relations with the community, and reduce the risk of potential social conflicts’.
Research and development is also covered in the manual and introduces it as critical to driving improvements of market crops through biotechnology, data science, and other technologies, all while “enabling regional agriculture to converge progressively with international productivity standards, providing access to new international markets”.
Maintaining competitiveness also looks at utilizing research and technological improvements to monitoring crops, utilizing techniques and processes that improve productivity and efficiency in production, processing, and trading.
However, while the book focuses on strategies that work rather than commodities the success of this agro-business plan for Caribbean and Latin America requires its governments working with the process to ensure it works effectively through supporting policies and compliance to regulatory standards such as negotiating sanitary and phytosanitary protocols to facilitating international penetration into markets.
According to the IDB, global value chains is one of the priority action areas under its ‘Vision 2025 roadmap to foster an economic recovery in the region’.