With demand outpacing supply in markets the world over, Peruvian produce multinational Camposol has planted avocados aggressively in recent years and would have been set for a considerable production spike in 2016. However, El Niño reared its ugly head and now that prospect looks unlikely. As part of a two-part series on the company, Jose Antonio Gomez discusses his two-pronged approach to the weather phenomenon, and his thoughts on the global economic outlook.

When asked about El Niño, Gomez pauses, taking his time to capture its relevance while taking a clinical approach to its significance for his business.

"El Niño is a very huge name and it could be very dangerous," he starts. "When we talk about El Niño I try to break up the subject in two pieces."

One aspect is temperatures and how they affect fruits and vegetables, while the other is more serious; the type of havoc these weather events can wreak on infrastructure, the events that grab global headlines.

"El Niño means high temperatures that normally translate into fewer cold hours – sometimes some crops require more chill hours to produce enough yields, and if you get 2-3°C higher than normal temperature on average, that means that you’re going to lose some of your minimum temperatures during the year...that definitely impacts yields.

"Some crops are subject to more impact than others – some are impacted as much as 40-50% and some others get 10-20%; so far we have been impacted in a way by the temperature in most of the crops.

"Asparagus this year has been a tough year – volumes went down significantly at the end of 2015, and the avocado season in general was affected by El Niño."

He emphasizes the lack of cold temperatures in 2015 will impact the 2016 avocado crop as well.

"I don't think the Peruvian volume in avocados is going to be much higher than what it was in 2016 even though there are significantly more hectares coming into production," he says.

"We anticipate that at a certain point avocados in Peru could be 30-40% higher than 2015, but at this moment I would say that the Peruvian volume may not even be 10% higher than last year - probably about the same."

He says all these factors are already factored into Camposol's business strategy for 2016, but there are other variables that are less predictable.

"The impact we have not seen yet is on infrastructure. When you have a very strong El Niño and strong rains, you can get impacted in infrastructure, especially roads, bridges, and sometimes in the crops themselves.

"Normally that happens around January and February with strong rains. So far, we got a little bit of extra rain than normal but we have not seen anything that’s strong enough to damage infrastructure."

In his address to the nation in mid-2015, Peruvian President Ollanta Humala highlighted the extensive work his government has made in recent years to improve infrastructure, and not a week goes by without Peruvian authorities announcements disaster planning exercises in different regions.

As a result of these efforts and those of previous governments and the private sector, Gomez is also more confident about Peru's ability to handle El Niño this time around.

"To be quite frank also, the El Niños in the past happened in a country that was lacking infrastructure, and I would say in the last 10 years there have been significant amounts of investment in reinforcing the river walls and bridges, and working in a way to prevent some of the potential impacts that could happen with a strong El Niño.

"If we reach March and there is no major infrastructural impact, that’s it for El Niño; at least that kind of El Niño, and we’ll just have to wait and see the volume reduction in 2016 which is most likely in avocados."

Economic outlook

This week Gomez is on heading to Paris to participate in the Coface Country Risk Conference, where he plans to talk about recent changes in China and other slowing economies.

"It is incredible to see the amount of capital that is flowing out of emerging markets, back into more stable markets like the U.S. and Europe," he says.

"That for sure is going to create a lot of different changes in our countries; there is not just less capital available, there are higher interest rates, the appreciation of the dollar, in all countries, not just in Peru.

"What I see coming is a more difficult situation for a lot of countries that are based on commodity exports, especially mining, oil."

But in Gomez's mind, agriculture behaves a little bit differently to other commodity sectors.

"We have seen now in Peru that agriculture has become the second most important activity and the second most important export after mining, while years ago it was not even mentioned.

"More and more I think Peru, Chile and Argentina are going to rely on agriculture rather than mineral commodities, and definitely that will be a challenge because you know labor is more expensive, the dollar is helping a little bit but the general situation of labor, water and land availability is going to be challenging.

"Therefore companies like Camposol are going to need to focus on being more efficient, invest a lot in technology and try to produce more with less in order to keep up with increasing world consumption; that is not going to change.

"Besides the downturn on economic factors in China and other countries, people still need to eat, and that’s a role that South America in particular is important for in filling those needs."

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