March 26, 2023

#7: Agri-finance and the State – Changing Corporate Strategies and the Financialization of Agriculture: Revisiting the Case of Argentina

Sociologists Carla Gras and Andrea P. Sosa Varrotti are the first ones to contribute to our theme on “Agri-investments and the State”, revisiting their work on agri-investments in Argentina and some of its neighbouring countries. They make a case for placing changing corporate strategies shaping agri-investments in the larger context of pressing market and environmental changes, as well as economic crisis and restructuring shaped by the Argentinian state and multilateral institutions.

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When analysing agribusiness expansion in Argentina one decade ago, it became clear that “finance” constituted a fundamental pillar of this agrarian model[1]. Originally, two aspects appeared as significant. On the one hand, the differential gains made by commodity producers (particularly soybeans during the 2000s and until approx. 2012) operating with hedges and financial derivatives as part of their commercial strategies (mainly large-scale firms). The second aspect was the organisation of the so-called “sowing pools”[2] and their specific financial instruments (agricultural trusts, investment funds), which enabled agri-investments not only from finance capitals but also from non-agrarian capitals (including urban middle classes’ savings). Until the beginning of this century, both mainly manifested themselves in short-term productive projects rather than farmland acquisitions; in fact, land was mostly accessed and controlled through leasing schemes.

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Later, as part of our research on trans-Latin agricultural mega-companies[3] — many of which had their origins in the sowing pool structures — we found a transformation of their strategies. In the second half of the decade, we saw a shift from the asset-light business models — the so-called “network models”[4] — that predominated until mid-2000s, towards a combination with farmland acquisitions on the hands of international institutional investors (private equity, hedge, and pension funds) that started associating with these large companies (mainly through buying their shares). In trying to understand these connections, we found that the search for financial gains became more relevant in these companies’ strategies as financial groups invested in them. These investments were to a great extent oriented towards land transformation and real estate business, a shift in the relation to land which also surged in the case of Brazil[5].

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But to what extent did this shift mean the primacy of rentier mechanisms in capital accumulation processes? Our findings were not conclusive in this regard: our fieldwork in Argentina, Brazil, and Uruguay during the 2010s, showed that these investments allowed the same companies to appropriate both the productive and real estate gains derived from the commodity frontier expansion. Productive and financial gains are not necessarily contradictory but largely intertwined in the association of large agricultural companies and big finance capital. In other words, we found different ways in which productive and financial practices impinge upon each other, giving place to accumulation dynamics we need to further research. This was an important insight on some intersections between the financialization of farmland, land grabs, and renewed social relations and patterns of agricultural organization.

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The winding trajectory of large-scale agricultural companies and big finance capitals’ association in Argentina has been highly influenced by the role of the state. Taxes, currency exchange rates, and international balance of payments are of the utmost importance to the governance of agricultural production[6]. This governance not only results from the dynamics of global commodity value chains, but also from other dynamics of the country’s model of accumulation. In this light, the persistent devaluation of the national currency as well as the existence of — changing — rates of taxes on soybean exports are important drivers of both financial and productive changes. Amidst transformations in these variables between 2011 and 2015, and regardless of some academics’ and mega-companies’ discourses on the longstanding character of their corporate strategies, mega-companies…

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• …reorganised production (what, how and where to produce) both within and across frontiers, including moving companies’ headquarters to Brazil. In some cases, this was followed by a significant reduction of their activity in Argentina (i.e., El Tejar, which came to be controlled by international investment funds in 2012[7], as well as Los Grobo, in 2016);
• …moved — or had recently moved — their tax residences to places like Uruguay or Delaware, where taxation on gains is very low or inexistent;
• …and/or developed a web of controlled subsidiaries and partnerships in other neighbouring countries, through which these companies sell and buy soybeans to themselves, managing tax conditions and exchange rates (local currency/dollars) to their favour, until they reach their final buyer. This has also enabled them to “export” profits to fiscal paradises or international banks.

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These financial maneuvers are, in essence, not new. However, the “traditional” and speculative expressions of financialisation seem to be coming to the forefront, as also suggested by Argentine producers’ strategy of delaying the commercialisation of commodities — currently present in media debates — to take advantage of (or be less disadvantaged by) the volatility in global commodity markets. This renewed strategy has allowed agricultural firms to counterbalance lower production volumes resulting from productive backdrops related to climatic extreme events (droughts) and environmental issues (soil depletion, resistant weeds, etc.).

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The hypothesis in this sense is that the most common and apparent practices of financialisation (speculation), in the context of pressing market and environmental changes, should be analysed closely — and, if possible, across time — insofar as they may become key to understanding how financialised actors are managing these constraints. The case of Argentina can be considered as a somewhat “boundary case” that sheds light on future questions and possible connections between financialisation and the material conditions of production. It is not only about how land and production are converted into financial assets but also how accumulation is sustained and expanded. It is also about connecting the financialisation of agriculture to the larger context of structural economic crises aggravated by the action of multilateral financial organisations, such as the IMF. Finally, this last issue can illuminate other Global South countries’ situations regarding the deepening of agribusiness models and extractivism to pay their external debts.

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[1] Gras C and Hernández V (2013) Los pilares del Modelo Agribusiness y sus estilos empresariales. In: Gras C and Hernández V (eds) El agro como negocio: Producción, sociedad y territorios en la globalización: Buenos Aires: Biblos, pp. 49-66.

[2] Basically, sowing pools channeled investments to production, combining different types of land contracts, outsourcing all productive tasks, and hiring agricultural engineers to manage and organize production. Generally used for soy and maize production, sowing pools mostly managed short-term projects, seeking rapid benefits from high commodity prices, and investors could exit after one crop season (...) Sowing pools could also bring together landowners, machinery and labor contractors, investors, and financial and agricultural experts.” (Sosa Varrotti and Gras, 2021, p. 4).

[3] Gras C and Sosa Varrotti AP (2013) El modelo de agronegocios de las principales megaempresas agropecuarias. In: Gras C and Hernández V (eds) El agro como negocio: Producción, sociedad y territorios en la globalización: Buenos Aires: Biblos, pp. 215-236.
Sosa Varrotti AP (2017) El papel de las megaempresas agropecuarias en la financiarización del régimen alimentario global. Los casos del Grupo Los Grobo y El Tejar en Argentina y en Brasil          (1996-2015) [Tesis de Doctorado, Universidad de Buenos Aires / Université de Toulouse 2 - Jean Jaurès]. Available at: https://tel.archives-ouvertes.fr/tel-02528820/document.

[4] Sosa Varrotti AP and Gras C (2021) Network companies, land grabbing, and financialization in South America. Globalizations 18(3): 482–497. https://doi.org/10.1080/14747731.2020.1794208.

[5] Wilkinson J, Reydon B and Di Sabbato A (2012) Concentration and foreign ownership of land in Brazil in the context of global land grabbing. Canadian Journal of Development Studies / Revue Canadienne d’études Du Développement 33(4): 417–438. https://doi.org/10.1080/02255189.2012.746651.

[6] Oliveira G de LT (2016) The geopolitics of Brazilian soybeans. The Journal of Peasant Studies 43(2): 348-372.

[7] Sosa Varrotti A P and Frederico S (2018) Las estrategias empresariales del agronegocio en la era de la financiarización. El caso de El Tejar. Mundo Agrario 19(41). https://doi.org/10.24215/15155994e086.