Strategies and hybrid dynamics of soy transnational companies in the Southern Cone

Abstract

Economical liberalization, market globalization and soy expansion stimulated the advance of big transnational companies in the Southern Cone countries (Brazil, Argentina, Paraguay and Uruguay). Currently, the main corporations acting on the last links of the productive chain are ADM (Archer Daniels Midland), Bunge, Cargill and Dreyfus (the ABCD firms), global leaders in the soy trade. The objective of this contribution is to analyze the different strategies these companies articulate in the Southern Cone, and their dynamics in local space through market relations with local producers. The results show the rapid and intense process of denationalization of the firms in the soy productive chain as well as the high level of market internationalization and company concentration. In spite of this, this study shows that all transnational power of ABCD firms, which seems so abstract and intimidating when seen in the global scale, depends on its basis of the formation, maintenance and exploration of relations of proximity, trust and reciprocity with local actors (especially rural producers), including family friendship linkages.

Keywords:

• soy market
• agribusiness
• transnational companies
• ABCD firms
• Southern Cone Region
• hybrid organizations

Acknowledgements

This contribution presents some of the results of my doctoral dissertation (Wesz Jr. 2014). I would like to thank the National Counsel of Technological and Scientific Development (CNPq) and the Foundation for Research Support of the State of Rio de Janeiro (Faperj) for a scholarship and Sergio Pereira Leite by orientation for the supervision. I would also like to thank Susanna Hecht, Gustavo Oliveira and the reviewers who commented on this paper. Finally, I thank Ana Isabel Márquez Pérez and Bruno Azevedo Prado for translating the paper.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

¹This contribution presents some of the results of the author's doctoral dissertation (Wesz Jr. 2014).

²In this paper, the Southern Cone includes the following countries: Brazil, Argentina, Paraguay and Uruguay.

³In Bolivia there is a strong process of soy expansion, especially in the department of Santa Cruz, which is similar to the prevailing situation of the Southern Cone. However, Bolivia was not considered in this paper because the ABCD firms do not appear as strong there as they do in the other countries (even with ADM and Cargill acting there). In this country, Bolivian, Peruvian and Venezuelan agroindustries have a major presence (even because the main destination of soy is the Andean countries themselves) (Colque 2013). Besides, there is limited access to data and information on the companies.

⁴In relation to Figure 2, two comments must be made. First, concerning the spatial unity, where some equivalence between the four countries was sought. This is particularly important to keep proportionality where absolute values are used, instead of average values. For this, the unit ‘micro-region’ was used in Brazil, and the ‘department’ in Argentina, Paraguay and Uruguay. The second comment refers to the data, which were built based on different sources: Brazil – agricultural research by municipalities of the Brazilian Institute of Statistics and Economy (IBGE 2013); Argentina – Ministry of Agriculture, Livestock and Fishing (MAGyP 2013); Paraguay – Ministry of Agriculture and Livestock (MAG 2013) and Paraguayan Assembly of Cereal and Oilseeds Exporters and Traders (Capeco 2013); Uruguay – Ministry of Livestock, Agriculture and Fishing (MGAP 2013). In spite of the different statistical sources, the variable ‘soy production’ did not present comparability problems. As the analysis was made for a 30-year period, in some countries there were no data allowable by department (only national), as in the case of Paraguay (harvest 1980/1981) and Uruguay (harvest 1980/1981 and 1990/1991). In these two countries, the data were estimated from studies and news that portray the soy trajectory in these areas. This way, they are approximations that were made to allow a comparative spatial and historical analysis.

⁵It is important to highlight that at the same time that the movements of globalization favoured the entrance of transnational firms in the Southern Cone, these corporations were one of the key elements in the transformation of the production of food to a financialized, globalized and complex business (McMichael 2009; Giménez and Shattuck 2011; Ahmed, Hamrick, and Gereffi 2014).

⁶It is worth highlighting that Ceval, Santista, Sadia, Incobrasa and Gessy Lever were among the six major food agroindustries in Brazil (Cargill was added to this group) that met 34 percent of the crush capacity in 1995. Therefore, mergers and acquisitions conducted by the ABCD firms happened over the market leaders that were, in most parts, national capital ones.

⁷Stimulating these different sectors on a global scale demands large resources. In addition to directing an important share of profitability in these activities, companies mobilize resources from the financial market for such aims. This process, which has been called ‘financialization’, happens when private investment funds, companies of asset management, commercial banks and other financial institutions invest in futures markets of commodities, farmlands and agricultural production. ABCD firms buy and sell in the futures market and make use of financial instruments to mobilize resources, manage risks and increase their profits. For a deep analysis of this process, see Murphy, Burch, and Clapp (2012) and Salerno (2014).

⁸The Amaggi Group is a Brazilian company that started its activities in Paraná in 1977. Today it is the main firm with national capital in the soy market. The group is involved in different stages of the productive chain: agriculture (it planted 225,000 hectares for the 2012/2013 harvest), seed production, fertilizer distribution, crushing, trade, water transport and energy production. In addition to Brazil, it acts in Argentina, Paraguay, Switzerland, the Netherlands and Norway (Amaggi 2014). Blairo Maggi, the group's founder's son, was the governor of Mato Grosso state between 2013 and 2010, and was later elected senator.

⁹Aceitera General Deheza (AGD), created in Argentina in 1948, has industries for the production of oil, soybean meal and biodiesel, and also warehouses and port terminals aimed at exporting (AGD 2014).

¹⁰Cereoil was started in Uruguay by the 2000s, and its main business activities are the purchase of cereal and its exportation (Menéndez and Gulla 2013).

¹¹Obviously when the negotiation is specific as with prompt payment, the criteria do not gain relevance. However, most transactions do not occur this way currently.

¹²This relation of interdependency between economic actions and other dimensions of society is close to discussions brought by classic authors in sociology (Weber 1978 [1922]; Durkheim 2014 [1893]), and by those from the new economic sociology (Granovetter 1985; Zelizer 1997; Fligstein 2001, among others).

¹³In the agrarian theme, the debate around hybrid livelihoods has gained attention focused especially on the relation of producers and rural families with the urban space, labour market, and global capital logics (Fairbairn et al. 2014; Hecht 2014; Toit and Neves 2014).

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Valdemar João Wesz Jr

Valdemar João Wesz Jr is a professor at the Federal University of Latin American Integration (UNILA) and a researcher at the Observatory on Public Policies for Agriculture (OPPA/CPDA/UFRRJ). He has master's and PhD degrees in social science in development, agriculture and society from the Federal Rural University of Rio de Janeiro (CPDA/UFRRJ), with undergraduate studies in rural development and agribusiness management at the State University of Rio Grande do Sul (UERGS). Email: [email protected]