Fertile Ground for Partnership: Asia's Agtech Boom and its Promise for Latin America
Stefan Krautwald
LATAM Venture Building | Investing | Softlanding | Tech Entrepreneurship in Latin America | WHU
From the lush rainforests of the Amazon to the majestic Andean peaks, Latin America’s varied topography and diverse climate allow for a thriving agrifood sector that presents many opportunities to agribusinesses and agtech ventures. However, despite the favorable natural conditions, the industry still suffers from structural weaknesses and underdeveloped technologies. There is thus a gaping hole to be filled by knowledge-intensive agtech businesses that understand the workings of the agrifood sector in emerging economies.
Asia’s agtech boom may just hold the key to the development of Latin America’s agricultural economy. While the two regions may be separated by geography, culture, and language, they both share the realities of emerging economies and developing agricultural spaces. The rapidly rising innovations and solutions in Asia’s agtech space may thus hold much promise for Latin America’s agrifood sector.
Latin America’s thriving agrifood sector
The Latin America and Caribbean region (LAC) is widely known for its diverse climate and topography, which allow it to produce a wide range of agricultural commodities. The region covers more than 2 billion ha, of which 38% is used for agriculture[1]. It accounts for almost a quarter of global agricultural production and 23% of agricultural and fisheries commodities exports[2]. Moreover, it receives 30% of the world′s precipitation and generates 33% of the world's water. This renders the region a great reserve for both arable land and water.
Agriculture is one of the most important sectors of the economy, accounting for an average of 4.7% of the region′s GDP in 2015-2017 and employing an average of 14.1% of the total labour force in 2018[3]. The region is a major exporter of grains, sugar, coffee, fruits and vegetables, poultry and pork. However, the region is still mostly untapped, and it faces challenges related to sustainability, productivity, financial inclusion and value creation in a context of low international prices.
According to the IADB, climate change will affect agriculture in various aspects related to atmospheric and soil temperature, decrease in topsoil moisture, sea-level rise, CO2 fertilization, rainfall patterns, changes in pests and diseases[4]. These, in turn, will make some areas unsuitable for specific crops and will reduce crop yields, increasing production costs. To prevent and mitigate the effects of climate change, innovation is needed in production practices, irrigation systems, soil conservation, water management, genomics, biological and precision technologies.
Asia’s agtech boom
Agriculture plays a pivotal role in Asian economies, accounting for about 19% of total global food and agriculture exports and 31% of total food and agriculture imports.[5] From the world’s largest exporters of agri-commodities such as India and Indonesia to the innovation hubs of research and development in Singapore, the region presents itself as a thriving agricultural center. According to AgFunder, the agrifoodtech startup ecosystem in Southeast Asia is one of the world’s fastest-growing markets.[6] The region reported a total of $423 million invested into agrifoodtech startups in 2019 alone, across 99 deals.[7]
In countries like China, India, and the Philippines, governments have been making headway in setting up access to digital agtech devices such as sensors and drones for managing nutrition and pests in crops like rice, wheat, and maize.[8] The rise of “smart-farming” in these countries have provided farmers with real time data on crops and environment through linked IoT systems, allowing for timely action.[9] Asia has also been embracing biotechnology, having grown 11% of the world’s biotech crops in 2018 (about 19M hectares).[10] A third disruptive technology the region has welcomed is indoor farming. In 2016, there were over 450 plant factories with artificial light, and the numbers continue to grow in countries such as Singapore, Japan, China, South Korea, and Taiwan.[11]
Fertile ground for partnership
As two emerging economies where agriculture plays a key role, Asia and Latin America are prime for partnership in the agtech space. At first glance, the two regions seem to be unlikely partners separated by geography, language, and culture. However, take a closer look and we will find more similarities than meets the eye. As emerging economies, both regions have relatively high growth rates and growth potential compared to developed regions due to the untapped nature of their markets. Both regions are also experiencing rapidly growing ICT and internet penetration rates that reflect an uncanny ability to adopt and adapt for innovative tech solutions.
In the agricultural space, a vast majority of farmers in both Asia and Latin America are smallholder farmers. Obstacles such as limited access to irrigation, the effects of climate change, occupying marginal lands, limited access to machinery and technical inputs, and lack of financial and insurance support plague farmers in both regions. However, while Asia moves full steam ahead with agtech innovations and the adopting of technologies to try and address some of these issues, Latin America continues to trail behind. While agtech in just Southeast Asia alone has received much attention and funds of up to $423 million, agtech in Latin America continues to represent barely 1% of overall VC investment in the region and remains one of the most undercapitalized sectors[12].
As technologies continue to develop in Asia and more innovative startups enter the space, there is great potential for increased cooperation with Latin America. The shared similarities underscore the adaptability of digital solutions across both regions, and the rapid pace of agtech developments in Asia holds much promise for the industry in Latin America. Overall, there is much to be gained on both sides from increased cooperation. Asia possesses the resources and technological know-how that can advance Latin American society, while Latin America presents itself as a widely untapped market for expanding Asian businesses with a wealth of raw materials and human capital. These conditions lay the fertile ground for a partnership between the two regions that may not seem so unlikely after all.
About Latin Leap
Latin Leap is a unique Venture Capital Studio that aims to soft-land purpose-driven tech scale-ups in Latin America. With a focus on tech scale-ups from Southeast Asia, Latin Leap provides a full suite of soft-landing services to facilitate expansion in the Latin American region. Latin Leap’s viable soft-landing model connects expanding businesses to the relevant corporate, public sector, media, and talent networks in Latin America while helping them navigate regulatory procedures and promoting a topicalization of strategies.
Latin Leap is an official in-market consultant for Colombia of Enterprise Singapore and a proud member of the Singapore Venture Capital Association. With strong roots in the Singaporean start-up ecosystem, Latin Leap is in a prime position to serve as a gateway to Latin America for Southeast Asian tech companies looking to set foot in the region.
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Latin Leap is looking to partner with promising tech scale-ups that are ready to embrace the vibrant Latin American market, as well as fellow investors and venture capital studios that want to play a part in growing the economies of Asia and Latin America.
Whether you are a tech company seeking to internationalize in the Latin American region, or a venture capital firm looking to expand your network and portfolio of companies, we would love to hear from you! Reach out to us at [email protected] or let us know more about your firm by filling in this contact form.
For more information on Latin Leap, visit our website at https://latinleap.vc/.
[1] https://www.fao.org/americas/noticias/ver/en/c/1200912/
[2] https://www.fao.org/3/ca4076en/CA4076EN.pdf
[3] https://www.fao.org/3/ca4076en/CA4076EN.pdf
[4] https://publications.iadb.org/publications/english/document/Agriculture-and-Future-Climate-in-Latin-America-and-the-Caribbean-Systemic-Impacts-and-Potential-Responses.pdf
[5] https://economics.rabobank.com/publications/2016/february/asia-pacific-agricultural-perspectives/
[6] https://research.agfunder.com/2020/2020-asean-report-final.pdf
[7] Ibid.
[8] https://www.scidev.net/asia-pacific/opinions/disruptive-technologies-transform-asian-agriculture/
[9] Ibid.
[10] Ibid.
[11] Ibid.
[12] https://lavca.org/2017/05/03/record-year-agtech-latin-america/
[13]https://deloitte.wsj.com/riskandcompliance/2014/03/26/when-entering-emerging-markets-understand-the-potential-risks/
[14] https://hbr.org/2015/03/few-companies-actually-succeed-at-going-global
[15]https://www.worldbank.org/en/news/press-release/2019/10/24/doing-business-2020-reforms-to-improve-business-climate-made-in-21-out-of-32-economies-in-latin-america-and-caribbean
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