Growing Rural Prosperity through Agro-Processing in Peru
AgroMantaro is a Peruvian agro-processor of artichokes and jalapeños that sources from small-scale farmers throughout Peru and has located its processing plant in the central Peruvian Andes. By maintaining long-term relationships with customers like General Mills and McCain, AgroMantaro provides a steady income to hundreds of small-scale farmers as well as job security for more than 600 employees at its processing plant – 90 percent of whom are women employed in their first formal job. AgroMantaro’s growth is critical in these rural regions where most farmers earn little income and unemployment is at 30 percent. Since becoming a Root Capital client in 2010, AgroMantaro has been able to increase sales and production by 50 percent.
Client Profile: AgroMantaro
Augusto Fernandini founded AgroMantaro six years ago, after working for large agricultural processors that served global clients. He saw an opportunity to operate as a specialty exporter in the Mantaro Valley, a fertile but remote region of central Peru. Since most agricultural investment in Peru was near the coast, Augusto’s seemed like a risky strategy.
“I have been in this business 25 years,” Augusto says. “I know that when I began AgroMantaro, some of my old friends and colleagues thought, ‘What's with Augusto? He's crazy, he's going to lose his money...poor Augusto.’ But now, after six years, they see our achievement, and they are now saying, ‘Hey, maybe he was not so crazy, he just had a different vision.’”
Before working with Root Capital, it was difficult for Augusto to get financing to realize his vision. Timely credit is essential to any business that depends on the harvest to fulfill its orders. Without ready cash to pay suppliers and employees, AgroMantaro had struggled to grow. “In the past, suppliers were waiting 60 to 90 days to be paid on 30-day invoices. Growers weren’t receiving financial support [for seed and other inputs] on time, so they would plant 15-20 days later than the optimal time for planting,” Augusto says.
He reflects, “With Root Capital it was different. We have felt since the beginning that we were talking with people who understood what we needed. And for me personally it was a big surprise , because I spent four years explaining my business model to commercial banks, and really it was kind of frustrating.”
AgroMantaro’s business model is built on multi-year deals to supply its core clients: General Mills for artichokes and McCain for jalapeños. Augusto explains, “Everything that we produce and everything that we invite the growers to produce is already sold. The challenge here is not selling; the challenge here is complying with our customers’ high standards.”
To maintain production quality and quantity requirements, AgroMantaro invests in its farmers as well as its plant employees. While most of AgroMantaro’s suppliers historically grew low-value subsistence crops such as maize and potatoes, producing jalapeños and artichokes for AgroMantaro has increased their incomes.
Farmer Guillermo Apang Rodríguez says, “I have been working with AgroMantaro for four years. I have planted more artichokes because the product is very profitable for me and I want to expand this coming year.”
Agromantaro also makes a difference in the lives of women at its processing plant in Concepción, a town of 5,000 in the Mantaro Valley that gives the company its name. Agromantaro offers good wages, health insurance, paid vacation, and retirement benefits – all rare benefits for Peruvian workers, especially for women in rural areas.
Plant employee Margarita Chaca Ramo says, “I’d been working about half a year, and I got pregnant. My pregnancy was risky because I had pre-eclampsia and had to be hospitalized. The company paid all of the expenses. I have AgroMantaro to thank for my son’s life.”
“If AgroMantaro didn’t exist, my income would be half what I’m making now,” she adds. “My salary is helping build my house, and I am paying for my children’s education. I am also able to buy better food with the salary. We’d like to have more businesses like AgroMantaro in Concepción, so that we can export our products and have better incomes and more stable livelihoods in the valley, and in the whole country.”
Augusto Fernardini, who received a long-term Root Capital loan in 2011 to make capital investments in AgroMantaro, shares this vision of growth, “I would love to see what we have done become an example for others.”