Rice in Uruguay - The death of a way of life
Gustavo Sosa, CEO of Sosa Ingenieria and Chief of Engineering at RONTIL
Rice has been in my family for generations. My great-grandfather came from Germany to the deep south of Brazil (on the border with Uruguay) and became a rice farmer. My late grandfather was once a very rich and powerful farmer, a small millionaire, though he lost everything later.
My father was a rice farmer too, but bad investments and bad luck made him lose everything, so he became a salesman of farming machinery. Remember those times when weather insurance and grain futures were science-fiction? They still are in the Third World.
I am a mechanical engineer but have worked in my family's business almost my whole adult life, and specialised in grain bins, conveyors, dryers, and milling machinery. More than half of our clients are rice farmers or millers. As with my family, Uruguay has a deep relation with rice. Production started in 1919, aiming to local consumption. By 1930, it really became relevant in the national industry. By the 50's, it was one of the main export products.
Uruguay developed a unique system of production. It is grown in rotation with pastures for cattle breeding. There is only one harvest per year, and the cycle is two years of rice and three years of pasture. The manure allows the soil to recover many of its nutrients naturally.
This is a country where 90 percent of the rice production is exported to over 600 other countries. The quality is flawless, and the yields are the best. However, this industry is dying.
It all started with the businesses with Venezuela. Lured by the sweet money of oil, rice millers got into contracts to supply to the Venezuelan government. The Uruguayan government backed the deal because of ideological proximities. It really sounded like easy money, but there were a variety of problems that soon occurred.
Millers soon got into debt just to keep working; farmers weren't paid and got in debt too. All the millers had to close some facilities, just to survive.
Rice is not alone in these problems. The poultry and the milk industry also suffered from similar fates. Even the local giant of the milk industry, CONAPROLE, is looking for a buyer. For the whole company, not the products.
Nobody knows who will survive. This is a massacre. Maybe in five or ten years we will be able to rebuild this industry, thanks to the accumulated know-how and the quality of the soils, but right now the future seems bleak.
The lesson I hope people will learn from this is to be careful and build healthy business relationships. Money has to be made the hard way, gradually, day after day, and there are no shortcuts.