RIO DE JANEIRO - Demand from China, rising domestic purchasing power, cheap land and labor have helped Brazilian giants earn themselves a healthy slice of the international food sector, as shown by the Heinz-Kraft merger.
Brazilian group JBS, the world's market leader in meat, has become the world's number two global food producer by revenue after Nestle
HJ Heinz's owner 3G Capital, billionaire Jorge Paulo Lemann's investment fund, will have a 51 percent stake of the new group under an agreement with Warren Buffett's Berkshire Hathaway to create North America's third-largest food and beverage conglomerate.
The move comes after Brazilian group JBS, the world's market leader in meat, became the world's number two global food producer by revenue after Nestle.
Brazil has another big-hitter in the shape of BRF, already the world's number one exporter of poultry, which in November inaugurated a 130 million euros ($140 million) production facility in Abu Dhabi.
The companies have different profiles but local analysts argue that they have one thing in common: They came up the hard way, learning to be efficient while US and European agribusiness got fat on state subsidy.
"The low cost of land and labor give Brazilian foodstuffs producers key comparative advantages," explains Maria de Albuquerque David, professor of economics at Rio University.
- 'Barriers lifted' -
"A few decades ago we had little freedom in Brazil owing to the military dictatorship. We suffered from the 'Tupiniquim complex’ -- the Amerindian who doesn't venture far from his beach," adds another economist, Gilberto Braga.
"But with democratization and the end of the East-West standoff these barriers have lifted," says Braga.
Jorge Paulo Lemann, Brazil's richest man, built his empire on beverages.
His AB InBev, the fruit of a series of mergers, today brews some 20 percent of beer worldwide with a stable of global brands such as Stella Artois, Corona and Budweiser.
His 3G Capital fund then wolfed down fast-food chain Burger King, the Heinz group and then Canadian coffee chain Tim Horton's and now the trio of fund members controls investments worth $260 billion.
Buoyed by Chinese demand for meat and soy, of which Brazil is the world's second-largest producer, and with Brazilians' purchasing power on the rise the sector has racked up large surpluses.
"If agribusiness is so dynamic it is because it is present on two fronts -- Brazil and exports, leaving the less attractive aside depending on the period," says David.
BRF exports poultry to 110 countries and has ten industrial sites spread across Argentina, the Netherlands and the United Kingdom.
JBS, which started off as a butcher's chain in central Brazil and in which a public investment bank has a quarter stake, today sees foreign operations account for 80 percent of sales, from Australia to the United States.
- 'Critical moment' -
Braga says he sees no risk these mega-firms will go the same way as that of fallen icon Eike Batista, the one-time multi-billionaire and oil magnate whose empire crumbled in just a few months in 2013.
"There is no risk. Batista was a seller of dreams with immature projects. In agribusiness we are talking about long-established firms with experience and profound knowledge of their market," Braga insists.
There are, however, latent threats to their well-being, including high debt, a slump in prices of raw materials, prohibitive transport costs and the high cost of investment owing to high interest rates.
"This is a critical time, when we are going to see if they really are good managers," says David.
"3G Capital has made draconian spending cuts and cut back on production. Maybe the meat giants will do likewise."
JBS announced in early March that it did not envisage making any acquisitions this year.