Brazil still offers ‘significant’ opportunities for foreign investment to help meet fertiliser demand

Violeta Libergott, counsel at law firm DLA Piper Brazil in São Paulo, told AgTechNavigator​ there is a ‘crucial’ need for foreign investment to ensure progress of Brazil’s National Fertiliser Plan and the economic gains the country stands to retain through local production.

The National Fertiliser Plan (2022-2050) is a comprehensive strategy by the Brazilian government to bolster domestic fertiliser production and reduce the country’s susceptibility to the ebbs and flows of the international fertiliser market, Libergott explained. “Currently, Brazil is the fourth largest agricultural producer in the world and imports about 87% of the fertiliser it needs,” she said. 

“In this context, the plan sets out a range of directives, goals and action items with a view to increasing national production of fertilisers to 50% of domestic demand by 2050. The plan looks at the industry holistically, recognising that in order to meet its goal it is necessary to focus not only on production capacity, but also in R&D, the general business environment, logistics and infrastructure.”

Environmental concerns

Some critics worry about the effect of direct foreign investment​ in the Brazilian agricultural sector, mainly due to the impact it has on small farmers, land use, the environment, and food security.

But Brazil isn’t going to change course and Congress is expected to pass a series of laws throughout the lifespan of the plan in order to advance its goals, according to Libergott. That means continued opportunities for DFI.

According to some estimates, the significant reduction in the country's dependence on imported fertilisers required to meet the goal by 2050 would require investments of up BRL 150 billion. Libergott adds that much work remains to be done to make Brazil an attractive option for foreign investment and to maximise the National Fertilizer Plan’s effectiveness.

“Brazil does not restrict foreign direct investment in fertilisers. One of the directives of the plan is the improvement of the business environment in Brazil in order to attract investments, including stimulus for attracting foreign direct investment, noted Libergott. 

“There should be ample opportunities for foreign investors and global players to enter the multiple facets of the Brazilian fertiliser market and related areas as the government rolls out its programmes.

“For example, other than in the production of fertiliser itself, there should be investment opportunities related infrastructure, such as ports, transportation and storage, for example, all of which will see in an increase in demand as domestic production grows.”

Simultaneously, Brazil is undergoing a sweeping tax reform that is likely reduce the complexities of doing business in the country and increase the attractiveness to foreign investors generally, she said.

Recent investments by foreign companies already demonstrate the potential in this sector. For example, Switzerland-based EuroChem recently established a new phosphate fertiliser production facility in Serra do Salitre, Brazil. This plant alone will generate 15% of the nation's phosphate fertiliser production.

Continued opportunities for biologicals

The government’s strategy encompasses both biological and chemical fertilisers. “The short-term action items in the plan mostly focus on nitrogen and phosphate fertilisers as they look to reactivate, complete, or expand existing fertiliser plants in Brazil,” explained Libergott.

“However, while the current market is mostly dominated by traditional fertilisers, focus – and investments – should be split between large scale production and technological innovation.

“Brazil is in fact a leader in biologicals, and creating new innovative products that are compatible with increasingly sustainable agricultural trends carries huge growth potential in both the Brazilian and international markets,” explained Libergott. “Those new technologies are likely to play a substantial role in the country’s future agricultural production.”

Libergott added that critical steps are needed to bridge the gap between the priorities of foreign investors and the current state of Brazil’s agribusiness, including infrastructure needs.

“Growing national productivity from 13% to 50% of domestic demand in 25 years will require improvement of the current infrastructure – the country would benefit from more efficient means to transport and distribute product domestically, and will need to develop the infrastructure to support the expected increases in production. 

“Environmental licensing has been a challenge for certain projects. Creating less onerous licensing processes without compromising the effectiveness of environmental protections would boost the capacity not only of attracting investments, but also of meeting the goals to increase fertiliser production nationally.”