Frontal Trust expands into agribusiness with the help of the former wine advisor of Luksic

A US$ 100 million private fund is expected to be launched in 2023.

Described as a new step in the growth strategy in alternative assets, Frontal Trust launched a new line of business: FT Agro, focused on investments in the agricultural sector in Chile, Peru and Colombia.

As reported by the company, the new line of business will be led by  the agronomist Gustavo Llona, who was previously instrumental in the formation and management of Viña Santa Ema and Viña Santa Rita, as well as others linked to the Luksic group such as Tabalí and Leyda.

He also led several agricultural projects in the Belén Group, linked to businessman Luis Enrique Yarur.

Agriculture is growing at a very significant rate and Chile is a net exporter: the country is export-oriented given the size of the domestic market.. “We see a lot of interest from foreign entities and, on the other hand, a significant lack of financing for agricultural projects”, explained Llona.

We are focused on the Andean zone of Latin America, that is, Chile, Peru and Colombia. We have had  advanced talks with agricultural operators of very good standing. “The idea is to select crops for export  which have a competitive advantage in the long term”, added Llona, indicating that in Chile FT Agro’s target will be walnuts, citrus fruit and avocados.

For his part, Frontal Trust’s advisor, Benjamín Viel, specified that the most typical way of channeling the opportunity will be through a private investment fund aimed at qualified investors, to be launched in early 2023, with a size of at least US$ 100 million.

Its main focus will be on buying and developing agricultural land from scratch.

“When we look at the industry there are all kinds of opportunities, and we are looking at some that could be one-off individual investments, as well as some opportunities suitable for the main objective which is launching  a fund,” said Viel.

Based on this, the company does not rule out the possibility of including other countries in the region with agricultural potential, such as Mexico, Brazil and Uruguay, in the future.

The attractiveness of the sector

The arrival of FT Agro takes place in a context of strong food demand due to global factors such as the pandemic, inflation, droughts and geopolitical conflicts which have altered supply chains, increasing the prices of most commodities.

This year alone, prices of major agricultural commodities such as corn and wheat have increased nearly 20%, according to Bloomberg.

“With the pandemic and the war in Ukraine, the concept of food security has become a very important and relevant issue. And that makes certain sectors or institutions seek to boost the agricultural sector”, said Viel.

In addition, Llona indicated that there is a decrease in arable land worldwide, which generates greater production challenges and also an opportunity for exporting countries such as Chile.

“Latin America has an important role in this situation, not only because of its geographic location in the southern hemisphere, which has  the ability to satisfy the demand of the northern hemisphere at different times of the year but also because it is where we see that there is a greater extension of land available,” said Llona.

“Historically the agricultural sector has been quite fragmented in the world in general, which makes it difficult to connect it with the financial world. Banks play a role more at the micro level, but, with investment funds, it has been more challenging because  they are long-term investments with a different perspective, investors need to take the long view but on the other hand there is a lot of appetite, both local and international, he said.