Eric Balsley Russ Dunlap Dave Jaggard Brad Patt Jordana Weiss Agrium Corporation Fertilizer...
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Transcript of Eric Balsley Russ Dunlap Dave Jaggard Brad Patt Jordana Weiss Agrium Corporation Fertilizer...
Eric Balsley
Russ Dunlap
Dave Jaggard
Brad Patt
Jordana Weiss
Agrium CorporationFertilizer Production
in Brazil
Agrium Potash• 5% of global potash supply• Concerns Moving Forward
•Overreliance on Canpotex for intl. dsn.
•Distance from growing markets•N.A market growth slowing•Growing organic sector
Price of Potash
Brazilian Market• Currently imports 90% of potash (1st)
• Largest in world
• World’s 3rd largest potash reserves• Self sufficient in 10 years•$1.8B/year potential market• 4.1% growth rate (3rd)
Competition in Brazil• Distribution Conglomerates
• Canpotex (70% of dsn)
• Large Mining Companies• Vale – Own potash mines, Brazilian• BHP Billiton - capacity
• Existing Potash Companies• Cargill (Mosaic) and Bunge
Political Considerations Federal Republic, robust checks & balances (1988- ) Respected world citizen, WTO & IMF member Socialist/populist leanings
RISK DESCRIPTION ASSESSMENT
Expropriation Risk
Agrarian land expropriation in 1960’s-70’s
Stability of current government mitigates risk adequately
Property Rights Protection
Contracts considered secure
Legal system unreliable
Include arbitration/mediation provisions in contracts
Labor Market Risk
2/3 Rule
Terminations costly & difficult
Payroll tax relatively high
Hire carefully
Support ops from global HQ when possibleRegulatory Risk Possible market interference:
-Price controls
-Special treatment
Work cooperatively & transparently with government
Market Entry Recommendation Produce fertilizer in Brazil via JV Focus on large-scale wholesale market
Joint Venture Characteristics Leverage Agrium’s capabilities in manufacturing & logistics Partner with other multinational (BHP, Cargill/Mosaic) 30% share in $0.9-$1.1B investment in mining & production
Risk assessment Financial & political risks moderate & manageable Domestic entry aligns with government Preserves Agrium presence in Brazil JV model spreads risk & overcomes holdup problems