Should the countryside be managed as just another financial asset for investment funds?

Should the countryside be managed as just another financial asset for investment funds?

In times of economic uncertainty, land and the agricultural sector in general is becoming a safe haven for many investors.

(Manuel Cohen/AFP)

“Buy land, they’re not making it anymore”. This phrase, attributed to Mark Twain, is the slogan chosen by Cocampo, a company that defines itself as a “rural economy start-up”, to encourage investment in rural land. “The agri-food sector has become the object of desire of venture capital funds and high net worth individuals, both for its profitability and as a refuge from the volatility of the financial markets,” says Cocampo on its website.

The trend is not new, but the enthusiasm with which investment funds are entering the agricultural sector in countries such as Spain (especially in the regions of Extremadura and Andalusia) and Portugal (in the Algarve and Alentejo) is. According to data from CBRE, the consultancy firm specialising in real estate services, in the first quarter of 2022 alone, more than 200 investment funds entered this market on the Iberian peninsula.

They are not only looking to buy land, but also to acquire companies that can be integrated into the agricultural value chain vertically and horizontally, such as manufacturers of inputs, like fertilisers, and food processing companies.

This is what the Coordinating Body of Farmers’ and Breeders’ Organisations (Coordinadora de Organizaciones de Agricultores y Ganaderos, or COAG) has called the “uberisation of the countryside”. “This model has expanded widely in pig and poultry farming in Spain: the farm owner provides the infrastructure and the jobs, but the animals and all the inputs are provided by the farm workers; the free farmer is disappearing and becoming a self-employed worker dependent on the company, although she/he is not recognised as such,” explains Andoni García, head of organising in the COAG Executive.

“It is a silent process, for which we have hardly any data, but we see how investment funds are taking over not only land but also production. This is furthering the industrialisation of agriculture and livestock farming,” he concludes.

In times of economic uncertainty, land and the agricultural sector in general is becoming a safe haven for many investors; even more so when, in a context where climate change is affecting the land available for agricultural use, food security is part of the equation.

“The population is increasing, but the amount of land available isn’t. We have gone from having 0.4 hectares of arable land per person to only 0.2. The population is expected to continue to rise, and so the need of the production of food – that will have to increase by up to 60 per cent,” says Thomas Teixeira da Mota, director of agribusiness for southern Europe at CBRE. This is one of the main reasons why investment funds are increasingly interested in the agricultural sector, but there are others: “It is an asset with interesting returns; for example, it has higher returns and less volatility than gold. And it is a refuge from inflation,” says Teixeira.

Business versus food security?

In this context, the Iberian Peninsula looks like an attractive investment location for investment funds such as the American Nuveen, the Canadian PSP and the British bank HSBC. For several reasons: “First of all, there are many types of crops that can be grown on the Iberian peninsula. In Spain, for example, the diversification rate is very high compared to France, Germany or the UK. It has the right climate to produce and export olives, citrus fruits, nuts (especially almonds), grapes and wine, stone fruit, avocado and red fruits. Secondly, there is the price of land: although it has risen, it is still lower than in other regions. Thirdly, Spain and Portugal have the necessary infrastructure to export to European countries. And finally, there has been public investment in hydraulic systems (in Spain, more than 13,000 million from 2000 to 2022; and in Portugal, more than 3,200 million), which guarantees land with a secure water supply,” Teixeira explains.

What some see as a business opportunity, others see as a risk to food security. “When we talk about investment funds, we are talking about speculation and the promotion of an industrial model of agriculture and livestock farming. And it is the small and medium-sized farmer who feeds people, not the big companies,” says García.

The truth is that when investment funds buy land and agricultural ventures, it has consequences not only for the ownership of the land, but also for what and how it is produced.

Although there are differences between these investors – vulture and private equity funds have a more speculative component, while pension funds are looking for more stable investments – both are looking for large tracts of land, of more than 200 hectares or even of 500 hectares and more, with a water supply for irrigation and soil suitable for highly profitable crops such as nuts, olives, almonds, citrus fruits and, more recently, tropical fruits such as avocados and mangoes. In other cases, land is acquired for investment in solar farms and other renewable energy projects.

“They are large operators looking for highly profitable crops in areas where water is an issue: irrigated crops that are very water-intensive, such as pistachio, and also irrigated winter cereals to increase productivity,” explains Javier Guzmán, director of the Global Food Justice Alliance (GFJA), and adds: “These operators need large areas of land because they introduce a highly capital-intensive model: lots of machinery, few workers and a technological package (genetically modified seeds, fertilisers and pesticides)”. In other words: the same agro-industrial model whose impacts on water, soil fertility and the health of our bodies and land have already been scientifically and empirically proven.

“The dystopia of a countryside without workers”

“What they want is the dystopia of a productive countryside without workers, capital intensive and with very few workers; and it is a model that, if there is no commitment from the state in the opposite direction, is going to advance very quickly, because many farmers in the Iberian peninsula are close to retirement,” reasons Guzmán.

Or, as COAG puts it, “farming without farmers”. Faced with this situation, in which young people are finding it increasingly difficult to access land in the face of competition from big business, “public administrations must defend a social and professional agricultural model, made up of small producers, based on health, sustainability and animal welfare,” argues García.

He believes that the European Union should get involved in order to limit the investment of speculative capital in agriculture: “Although it is the member states who have competence in this area, we believe that the EU should get involved when it comes to land, in order to put limits on speculation. That is why, through European Coordination Via Campesina (ECVC), we are calling on the European Commission to go further with a directive to protect agricultural land and, with it, food production.” In the opinion of COAG’s organisational head, guaranteeing food security in Europe would mean limiting the entry of this type of investor.

In some countries there have been initiatives to curb the foreign ownership of land, which is related to the arrival of investment funds and other types of financial actors. In 2011, during the government of Cristina Fernández de Kirchner, Argentina passed Law 26.737, popularly known as the ’Land Law’, which set a cap on foreign ownership of land: 15 per cent (at national, provincial and departmental level). Lawyer Florencia Gómez, a member of the Mesa Nacional de Tierras (National Land Board), was part of the process by which, within the framework of this law, a pioneering public registry of land ownership was set up:

“One of the main findings of that study was to confirm that foreign ownership is possible where there is land concentration,” explains Gómez.

For the lawyer: “any action by the state to limit the foreign ownership of land will have to involve strategies similar to those used to prevent money laundering; it is what we lawyers call ‘lifting the corporate veil’, that is, unmasking who is behind the capital: because the problem with investment funds is precisely that we don’t know who is behind them”. In Spain, COAG tried to investigate the project to set up a 23,000-cow dairy farm in the province of Soria, and found that “there was no transparency at all, and it was very difficult to know who is behind these funds that acquire land and production,” says García.

“Are we ready to manage the countryside as a financial asset?”, asks Cocampo on its website. However, a more crucial question (if possible) is whether the countryside should be managed as just another financial asset. Because we cannot produce arable land, and, at the same time, we depend on it for the most basic of our needs: food.

This article has been translated from Spanish by Sara Hammerton