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Chile: Sugal will invest USD 1 billion to fight drought
After ten years in Chile, the Sugal group's financial involvement is impressive: USD 120 million invested in industrial capacity and another USD 700 million in financing for farmers.
For the tomato paste producer based in Portugal – and which also operates in Spain – the country of Chile has become a major operational asset, as it currently accounts for 40% of the company’s total production and gives it the advantage of being active in both hemispheres and having two different harvests each year.
In one of his frequent visits, Joao Ortigào Costa, CEO of Sugal, explained that this gives them "a very advantageous position" in terms of business interests and what they can offer their customers.
The Portuguese processor believes that Chile still has the potential to continue to grow and increase its productivity, which is why the company plans to invest USD 1 billion over the next ten years in the country, both in developing industrial capacity and in further financing and advice for growers.
However, Ortigào has pointed out that in Europe there is a degree of concern about the economic and social scenario that Chile is currently experiencing, but he has stated he is convinced that "it will follow a good path".
"There are new political actors, very smart and well prepared, and l'm sure their focus will be on continuing to create wealth, spreading it to all the Chilean people," he says.
However, Ortigào has pointed out that in Europe there is a degree of concern about the economic and social scenario that Chile is currently experiencing, but he has stated he is convinced that "it will follow a good path".
"There are new political actors, very smart and well prepared, and l'm sure their focus will be on continuing to create wealth, spreading it to all the Chilean people," he says.
Waste of water
Sugal's CEO warns that Chile needs to work on an infrastructure improvement plan to remain competitive in the business, above all, he says, in a sector like tomato processing, which has surplus installed capacity around the world. The data being used by the company indicates a global consumption of 38 million tonnes of fresh tomato equivalent, with a possibility of 50 million tonnes.
Ortigào Costa says the country must compete with producers from powerful operators such as Italy, China and the US, which is impossible without the support of local government. "We are here to invest and create wealth, but we need the support of the state," he says.
For example, he comments that more than 60% of the water in Chile’s irrigation channels is lost, as this infrastructure is out of date and, in some cases, was built as long as 100 years ago.
"We have droughts, but it's not something exclusive to Chile. There are countries that are preparing much better to go through these times of water scarcity (…), countries like Israel, with many deserts and where it rains four or five times less than in Chile. They are powerful in terms of agricultural. They have the technology to return water to the aquifers, but it is impossible for everything to depend on investment by a single company; it has to be a joint national project,” he argues.
Sugal currently has two factories in Chile, at Quinta de Tilcoco and Talca, in the regions of O'Higgins and Maule, respectively. According to Ortigào Costa, during the years the company has been in Chile, a large proportion of investments have been aimed at improving the irrigation technology of the fields. With the growers in the tomato cultivation sector, they have managed to reduce the consumption of water by a quarter.
However, this has not been enough. He revealed that last year, as a company, they produced 20% less than they could, due to lack of water. "These are currencies that are prevented from entering the country; it's not just for us," he says.
Export potential and TPP-11
In 2021, Sugal achieved sales of USD 160 million in Chile. The company's CEO points out that the war in Ukraine has not only put pressure on agribusiness, but the rises in prices of fuels, inputs and fertilizers, among others, have hit the entire economy in a transversal manner.
However, the executive has stated that this scenario once more reminded the world of the importance of food-producing countries: "Once again, this can be of important value for Chile, because countries cannot depend on one or two geographic zones [of agriculture]. It is necessary to have greater diversity.”
Consequentially, the CEO of Sugal has highlighted that, no matter how hard they work as a company, they must also be able to count on the support of local authorities and commercial agreements. Ratification of TPP-1 1, he maintains, is vital for the company.
"Today, competitors who signed the agreement can sell to certain countries without tariffs – or with less than us – and that takes away our direct competitive edge", he argues. As an example, he mentioned the case of Japan, which is a key destination for Sugal.
Regarding the company's global strategy, Ortigào Costa says that the focus of its investments until 2026 will be to continue to grow and invest in the diversification of the type of products it develops, some of which are not yet manufactured in the Chilean market and have greater added-value.
Sources: df.cl, simfruit.cl
