On the Outside Looking In: A Foreigner’s Perspective on the Latin American Dairy Industry

Last week, dairy sector stakeholders from across the world gathered in Curitiba, Brazil to attend the 2nd annual Latin America Dairy Congress put on by Zenith and Agripoint. I was fortunate enough, not only to attend, but to have been given the opportunity to present my observations as a foreigner who lives and works within the dairy sector in the region.

 

My intent on this occasion was to share my perspective both about how an ‘outsider’ such as myself sees the region, as well as to offer some thoughts on steps the industry can take to improve cross border relationships. I thought these points might prove useful to those of you who were not at the conference so for today’s post I would like to share a condensed and adapted version of my presentation.

 

Latin America’s Dairy Sector is Full of Opportunity…

 

One of the things that I find most exciting about Latin America’s dairy sector is that it has so much to offer to both sides of the production and consumption continuum. The industry is underpinned by strong fundamentals that make a clear case for future expansion throughout the entire supply chain.

 

On the consumer side, Latin America is an exciting place to be! The population is growing and becoming wealthier. According to the World Bank, GDP and GDP per capita have been rising steadily over the past few decades. Of course there have been a few hiccups along the way, with 2016 being a particularly poignant exception. Low commodity prices and political turmoil have made this year one to forget. But most scholars agree that the region will return to growth next year and that the outlook for the region is quite strong. Another trend underlying consumption in the region is urbanization. As the population expands, more people will move to megacities like Sao Paolo, Mexico City, Rio de Janiero, and Buenos Aires. We know from experience that as populations urbanize, they demand more proteins of animal origin, which is good news for dairy. Taken together, these trends paint a promising picture for strong dairy consumption in Latin America.

 

Switching gears to the producer side, I truly believe there are few places as well equipped to meet the needs of global dairy consumers as Latin America. While there is, of course, incredible diversity in terms of production systems, many countries can produce milk under a modest cost structure and many have the unique luxury of being able to flex somewhat between intensive and extensive production systems. In addition, I think you would be hard pressed to find another location in the world that is blessed with such a wealth of natural resources, such as land and water. Farmers in the region have repeatedly demonstrated resilience and a dedication to their craft that is enviable no matter where you are in the world.

 

…But the Risk Profile is Hard for Foreigners to Stomach

 

When we talk about Latin America, we always end up talking about risk – political, macroeconomic, and risk related to rule of law. Coming from the US, we aren’t used to having to factor meaningful amounts of these types of risk into our business models. Furthermore, if you have regularly lived through boom and bust economic cycles these extremes don’t seem so frightening. But when you are coming from a relatively protected experience, the thought of riding out one of these storms can seem overwhelming.

 

To share a story from my own experience, I moved to Argentina in August of 2012. Inflation that year was about 25%, though of course there was no official source to verify that number. A thriving black market paid 150% of the official rate for dollars. To me, I was sure that the economy was on the brink of collapse and that any moment the world around me would melt down into complete and total chaos. Of course that didn’t happen. Well, not completely. And although I am not trying to pretend that Argentina’s economy was or is in good shape, the point is that if you are not used to enduring such extreme variations, it is extraordinarily difficult to speculate about what the outcomes might be. My perspective – drawn both from my own experiences as well as conversations with clients – is that it isn’t the risk itself, but an inability to accurately assess potential outcomes which causes discomfort.

 

What Can the Sector Do?

 

I believe there are two key things that the Latin America dairy sector can do to improve how they interact with foreigners and facilitate constructive working relationships across borders. These are:

 

  1. Adopt an Attitude of Education
  2. Tirelessly Build a Foundation of Trust on the Principles of Transparency, Credibility, and Consistency

 

One of my favorite lessons from my time living abroad is that ‘we don’t know what we don’t know.’ (If you’d like to hear how I came to this realization, let me know and I’ll share a story involving cars, a water jug, and a sassy remisero.) When we think about dairy in the region, we see the opportunities through the perspective that we have built from our own experiences, travels, and conversations. Of course it is impossible to remove these lenses – nor do I think we should – but I do think it is important to be aware of our innate biases when analyzing opportunities in this part of the world.

 

The most powerful way to overcome this knowledge gap is if the local industry adopts an attitude of education that is incorporated into every interaction with foreigners. The problem with ‘not knowing what we don’t know’ is that we don’t even know what to ask questions about! So I would encourage people to take the time to explain the intricacies of your country and your business. When possible, take tours and visit facilities. These can be invaluable experiences for highlighting difference and can help to achieve a common understanding as well as a more solid business foundation. This can certainly be a two-way street. I would encourage the regional industry as well to embrace intellectual curiosity and strive to constantly be learning about how things are done in other parts of the world.

 

In order to help foreigners, become more comfortable in what can sometimes be an uncomfortable environment, trust must form the foundation of any working relationship. This trust must be tirelessly built and maintained. One can do this by focusing on having transparency, consistency, and credibility govern every interaction. This openness is particularly important given the complications caused by language and cultural differences.

 

Trust is critical for both the private and public sector. Perhaps it is nowhere more important than with respect to data and statistics. There is a marked difference between the quality and quantity of statistics available in the United States, for example, and any Latin American country. People come to rely on this data when it is available. Not having access to such data makes an already uncomfortable situation even more difficult to negotiate. In this respect, my appeal is to governments and trade organizations to make a strong effort to procure and publish data in a consistent, credible, and transparent way. Some recent, important strides have been made in this area but there is still work to be done.

 

Summary

 

To wrap up I want to focus on a concept that has been referred to liberally throughout this piece: Opportunity. Opportunity is what we are all seeking for our businesses and for ourselves. Opportunity is greater when we can learn how to effectively and efficiently work with people from other places. Opportunity is all around us in the Latin American dairy industry. We just need to figure out how to unlock it.