Uruguay, a safe haven in times of crisis

by Esc. John S. Leaman - Investment Advisor Engel & Völkers

We live in troubling times. The invasion of the Ukraine by Russia has thrown the planet off balance, and risks of a more generalized conflict and the extreme volatility of the markets triggered in recent months, has caused a sharp decline in the prices of risk-on assets like equities and cryptocurrencies.

The stocks of many so-called blue-chip technology companies, including Meta Platforms Inc, Netflix, PayPal, and Shopify have registered brutal declines of 52.7%, 69.8%, 63.3%, and 77% on a year-to-date basis.  A similar story can be seen in general in the stocks and bonds market.  We are experiencing a crypto market crash where the market cap has experienced a decline from 3 trillion Dollars to $991 million. The Euro, hit by the energy crisis, has experienced for the first time in its history a parity with the US Dollar. The United States’ inflation has reached 9,1%.

In short, we are faced with a crisis of unparalleled magnitude and with an extension we cannot predict. Many are now faced with a dilemma of where to invest their capital in assets which do not run the risk of seeping through their fingers from one day to the next, and the safest bet, for sure is to invest in agricultural land.

Global trends in the food market indicate that the demand for food shall consistently keep growing in the coming decades. The world's population is increasing whilst the amount of arable land per capita is, regretfully, decreasing. According to UN forecasts, the number of people in the world will increase to 9.55 billion by 2050.

If today, on average, there are 0.218 hectares of arable land per person in the world, by 2050 this value will decrease to 0.18 hectares. Therefore, to supply the world population with food and meet the demand, food production capacity must increase by 60%.

Agricultural land is an ancient asset class that has been proven to allow investors to diversify their investments abroad in the long term and thus expand their financial capabilities. Without a doubt, Uruguay is considered not only the best option to invest in South America, but also one of the very best in the world. 

Thanks to its political stability and the security of its rule of law, Uruguay has set up a strong productive and agricultural structure. With the potential capacity to produce food for up to 50 million people, with 95% of its territory (16.4 million hectares) suitable for agriculture, and the main fluvial highway into South America, it is an ideal destination for investors in search of haven for their investments. Additionally, prices for its fertile land still compare very favourably to those of other countries in the world.

Beef, soybeans, wheat, rice, barley, citrus, dairy products, and forestry products derived from pines and eucalyptus are its main agricultural exports. The country's commitment to produce reliable food has led it to the forefront of development in the world of advanced geo-referencing and traceability systems, being the only country with 100% traceability in its meat products, thus guaranteeing the safety of its food products from the beginning of the production cycle up to the consumer's table.

The prestige enjoyed by Uruguayan products has opened the doors of the most demanding markets in the world, such as Europe and the United States. Currently its products are on the tables of more than 150 countries, from the United States, the United Kingdom, Canada, Italy, Spain, Germany and Hong Kong or Seoul.

The prestigious German publication Spiegel Ausland assures that "everyone wants to benefit from the boom in Uruguayan agricultural products boosted by the war in Ukraine" and reports that Uruguayan exports increased 30% between 2020 and 2022, with a 36% growth in the last three months alone. Egypt has imported 200% more products from Uruguay and Algeria 150%, these are countries that previously were supplied with grains from Russia and Ukraine.

At Engel & Völkers Agro we aim to be at the forefront of intermediation and advice on agricultural properties in the country, to assist its extensive network of clients in the selection of agricultural properties of all sizes and to help them choose the best professional advisors for their investment, with the comprehensive and first-class professional service which is typical of Engel & Völkers.