In 2017, your Company reported another year with excellent results, despite the extreme weather events, political issues, and new regulatory practices and economic environments that threatened the relative stability of the agribusiness industry.
Multiple factors affected the agribusiness industry on a worldwide level in 2017, and Latin America was not the exception. Extreme weather events, including devastating floods in the Dominican Republic and Peru, powerful hurricanes Irma and Maria in the Caribbean, and the catastrophic earthquake in Mexico, forced farmers and lenders to cope with extraordinary circumstances. Political issues, such as the effect of the US elections in Mexico and the Odebrecht corruption case in the Western Hemisphere, further complicated the already challenging business landscape. High global liquidity levels drove the influx of capital into the region, forcing financial institutions in certain markets to reinvent their strategies. For LAAD in particular, this meant lowering our rates to remain competitive.
By all indications, the agribusiness industry will continue to evolve beyond 2017. On the production side, the farming community is in the midst of major shifts, including the effects of climate change on the usual dynamics of the farming cycle, forcing farmers to take more measures against external variables beyond their control, which leads to higher productions costs and, for the less fortunate, going out of business. Another consequential development is the consolidation of the entire agribusiness value chain into bigger and fewer players (including producers as well as suppliers of agricultural inputs), which will change the balance of power, redefining winners and losers. Urbanization is yet another factor significantly affecting rural communities, as farmers and agribusiness companies in Latin America struggle to find laborers to work at the field level and maintain the farming tradition and legacy within families for future generations.
On the consumer side, new players are entering into the food system. Innovative methods to purchase food are being introduced (such as multiple e-commerce platforms) and novel ways to consume food (in terms of quality, type, packaging and delivery) are becoming available to cater to the preferences and demands of educated and discerning millennial consumers.
Without a doubt, our clients and farmers are facing exceptional challenges in addition to the usual problems they experience on a daily basis. Despite the increasing demand for food in the world to feed the growing population and the additional purchase power of the majority of the consumers at the low end of the pyramid, especially in emerging markets, there are and will be hurdles to overcome. LAAD will continue to support farmers as they embrace the use of technology to adapt to and remain competitive and sustainable in this unpredictable environment.
Once again, geographical and industry diversification proved to be the best insurance against natural disasters, as even under these circumstances your Company achieved a record disbursement of US$239.5 million to 305 projects in 15 different countries and created over 10,000 new jobs. Additionally, it will generate over US$170 million per year in foreign currency for the region. The Company took over US$182 million in term loans and lines of credit from local and international financial institutions to finance portfolio growth. It surpassed last year’s net income by 4% and achieved 11% growth, and – most significantly – attained an average return on equity of 12%. This year, we will also embark on a new entrepreneurial endeavor, as we plan to enter into Argentina for the first time.
On October 27, 2017, AgriTellus Investments LLC, a company owned by Benjamin Fernandez III and LAAD’s Senior Management, bought JPMorgan’s ownership in LAAD, thus becoming one of the twelve LAAD shareholders. We believe that this purchase not only reinforces Management’s commitment, but also further aligns the goals of Management and Shareholders.
We are optimistic about what tomorrow holds, as our history of tenacity and resilience will support our present decisions and inspire our future success. We will face each new challenge with confidence and ingenuity, armed with the knowledge acquired through almost half a century of experience and encouraged by the gratification of being part of a Company that drives progress and promotes innovation while maintaining the mission, values and culture that define us.