On my last story on China Daily, published on Feb 11th, I was telling about the opportunity of investments done by Chinese and other food industries in land for free designated for food/bio-energy production in Brazil. I want to come back to this topic, telling about the importance of receiving international investments for all nations, but mostly for developing nations and try to contribute with a gap on the analysis. Which gap?

Local or Federal Governments and other institutions sometimes have difficulties to evaluate the capacity of an international investment to promote economic development. This difficulty to evaluate the capacity can even make difficult for Governments to define a specific benefit or support to this international investor company, and even to convince the local community of these benefits on developing the region, moving forward the economy, generating jobs, exports and other benefits

Related readings:  Land for Free… Is This Possible for Chinese Food Companies?

When a transnational company (TNC) comes to a country, normally it comes with several types of resources, not only financial. These resources are our basic list to be analyzed. I want to categorize these resources on a list of 6 points, to share with China Daily community, in order to facilitate Governments on evaluation of international investments in the country. The better these investments are if the investor can perform well on this list of resources. This is based on several discussions I had in 2009 at Geneva, on a UNCTAD/ONU project. This list is different, since it looks also to the local supply chain of this company. If a company can build a nice and integrated supply chain, better the possibility of more economic development. Let’s move to the 6 topics, with its own sub-topics. It will help you to understand if you imagine an international food industry investing on a new country.

1 - Financial Investments and Expertise – Here we may consider the amount of money that will be invested and linked to this point, if this company can provide capital, can open credit lines giving the needed guarantees for suppliers (for instance, local farmers), can have access to government official credit, has knowledge of credit operations and burocracy, has access to international credit and generates a good reputation for the region and the country. We should also look at the capacity of generating the benefits of foreign currency through the increase of exports and finally, the amount of employment generation.

2 – Capacity to Provide Technical Assistance. Normally, a TNC has a "how to do package" for its suppliers, helping on farm support, support on sustainability policies and sustainable practices, participate on activities of research and development, support to achieve standards (ISO, etc.) and transferring of skills that will promote economic development.

3 – Sourcing of Input Supplies to Farmers. This TNC food company can help providing them with up to date seeds, machinery, genetics, fertilizers and chemicals, helping them to produce with the most recent technology.

4 - Management Assistance and Service Provisions. Here we should evaluate the capacity of assistance on economical/financial controls for farmers and suppliers, training and farming management, transportation and storage, communication skills and certification. To help local communities on support to demands on public investments in logistics and infrastructure for that country or region should also be a point.

5 – Capacity to Provide Market Access: This is one of the most important points. A TNC can arrange international sales contracts, providing access to marketing channels, access to niche markets - organic/fair trade/others, providing information on market trends, helping farmers decide what to grow, and enabling reduction on price volatility through long term contracts.

6 – Farmers and Suppliers Organization – this is the last point, not usually done or evaluated. I think a TNC should also be evaluated by its capacity of helping farmers or suppliers in building what is called "countervailing power", to reduce power imbalances in modern food production chains, although it may appear as non-sense. This can be done by stimulating the establishment of local organizations, stimulating the arrangement of cooperatives, building network of local producers and incentives to cooperation. It is not easy, but the China Daily reader knows that I consider inclusion one of the most important words for the next 10 years!

Finally, the relevance of studies in TNC involvement in food, agribusiness and agriculture is of fundamental importance. Food production needs to be enhanced and in order to accomplish these needs. In a moment where countries are establishing policies towards food security, with Governmental and private funds being allocated to buy land abroad and secure food supply, the role of TNC increases in importance. There are several lessons to be learned for developing nations trying to attract international investments, either in agriculture, industry and other. Here we brought a 6 point list to evaluate investments. I will come back on another important list for Government: in which areas and what are the policies/regulations needed to face this international investments?