Adecoagro SA (AGRO) Risk Analysis

Brazilian Federal Law No. 5,709, effective October 7, 1971 ("Law 5709") established certain restrictions on the acquisition of rural property by foreigners, including that (i) foreign investors may only acquire rural properties in which agricultural, cattle-raising, industrial or colonization projects are going to be developed as approved by the relevant authorities; (ii) the total rural area to be acquired by a foreign investor cannot exceed one quarter of the surface of the municipality where it is located, and foreigners with the same nationality may not own, cumulatively, more than 10% of the surface of the municipality in which it is located; and (iii) the acquisition or possession (or any in rem right) by a foreigner of rural property situated in an area considered important to national security (i.e. land located at or near the Brazilian border) must be previously approved by the General Office of the National Security Council (Secretaria-Geral do Conselho de Segurança Nacional). Pursuant to Article 23 of Law No. 8,629, of February 25, 1993 ("Law 8629"), the restrictions mentioned in items (i) and (ii) above established by Law 5709 are also applicable for rural lease agreements executed by foreigners. "Parcerias Agrícolas" (agriculture partnerships agreements) have not been subject to these restrictions. The Federal General Attorney's Office ("AGU") on October 8, 2012 issued a legal opinion 005/2012, pursuant to which the AGU confirmed the understanding that the "Parcerias Rurais" are not subject to the restrictions or limitations of Law 5709. In addition, pursuant to Law 8629, the acquisition or lease by a foreigner of a rural property exceeding 100 módulos de exploração indefinida – "MEI," a measurement unit defined by the Regional Superintendence of the National Institute of Colonization and Land Reform (Superintendência Regional do Instituto Nacional de Colonização e Reforma Agrária – "INCRA") must be previously approved by the Brazilian National Congress. Law 5709 also establishes that the same restrictions apply to Brazilian companies that are directly or indirectly controlled by foreign investors. Any acquisition or lease of rural property by foreigners in violation of the terms of Law 5709 would be considered null and void under Brazilian law. Since the enactment of the Brazilian Constitution in 1988, the consensus view was that the restrictions imposed by Federal Law 5709 on the acquisition or lease of rural property above-mentioned did not apply to Brazilian companies controlled by foreigners, pursuant to legal opinion No. GQ-22, issued by the AGU in 1994, which was ratified by legal opinion No. GQ-181, also issued by the AGU in 1998. The Brazilian Constitution and its amendments, in particular Constitutional Amendment No. 6, of August 15, 1995, provides that (i) no restrictions on the acquisition of rural land in Brazil should apply to Brazilian companies; and (ii) any company incorporated and headquartered in Brazil and controlled by foreign investors must receive the same treatment as any other company incorporated and headquartered in Brazil and controlled by Brazilian investors. However, the Brazilian Justice National Council issued an Official Letter on July 13, 2010 addressed to all the Brazilian local State Internal Affairs Bureaus in order for them to adopt procedures within sixty (60) days and instruct the local State Notary and Real Estate Registry Offices to observe the restrictions of the Brazilian law on the acquisitions of rural land by Brazilian companies with foreign equity holders. Thereafter, on August 19, 2010, the AGU revised its prior opinion, and published a new legal opinion which: (i) revoked the AGU's legal opinions No. GQ-22 and GQ-181; and (ii) confirmed that Brazilian entities controlled by foreigners should be subject to the restrictions described above, and transactions entered into by foreigners in connection with the acquisition of rural properties would be subject to approval from INCRA, the Ministry of Agrarian Development and the Brazilian National Congress, when applicable. This revised opinion was ratified by the President of Brazil and published in the Official Gazette of the Federal Executive on August 23, 2010, becoming effective as of such date. We believe that the acquisitions of rural properties by Brazilian companies directly or indirectly controlled by foreigners registered in the appropriate real estate registry prior to August 23, 2010 are not affected by the AGU's legal opinion. As a confirmation of such understanding, pursuant to the Joint Normative Ruling N. 1 issued on September 27, 2012 by the Ministries of: (i) Agricultural Development; (ii) Agriculture, Cattle-raising and Supply; (iii) Industry Development and Foreign Commerce; and (iv) Tourism (the "Joint Normative Ruling N. 1"); and the Normative Ruling/IN INCRA No.76, issued on August 23, 2013, a Brazilian company controlled by foreign individuals or companies which acquired or leased rural properties, by means of an act or agreement entered into from June 7, 1994 and August 22, 2010, may register such property before the National System of Rural Registry (Sistema Nacional de Cadastro Rural-SNCR), without any administrative sanction. However, as of said date, the acquisition and leasing of rural land in Brazil, including through corporate transactions, will be subject to the above-mentioned restrictions, and will require several additional layers of review and approvals, which may be discretionary (including the approvals from INCRA, Ministry of Agrarian Development and the Brazilian National Congress, when applicable), burdensome and time consuming. Additionally, the Joint Normative Ruling N. 1 sets forth the administrative procedures applicable to requests for authorization for the acquisition or lease of rural properties by foreign investors pursuant to Law 5709. Under the Joint Normative Ruling, in order to obtain the authorization for the acquisition or lease of rural properties, foreign investors must present a project proposal to the INCRA, containing: (i) the rationale for the relationship between the property to be acquired or leased and the project size; (ii) physical and financial schedule of the investment and implementation of the project; (iii) use of official credit (governmental funds) for the total or partial finance of the project; (iv) logistic viability of the execution of the project and, in case of an industrial project, proof of compatibility between the local industrial sites and the geographic location of the lands; and (v) proof of compatibility with the criteria established by the Brazilian Ecological and Economical Zoning (Zoneamento Ecológico Econômico do Brasil – ZEE), relating to the location of the property. While we conduct our operations in Brazil through local subsidiaries, we would be considered a foreign controlled entity within the meaning of the restrictions described above. Therefore, if we are not able to comply with these restrictions and obtain the required approvals in connection with future acquisitions or lease transactions, our business plan, contemplated expansion in Brazil and results of operations will be adversely affected. Furthermore, there is currently proposed legislation under review in the Brazilian National Congress regarding the acquisition of rural land by Brazilian companies controlled by foreign holders, which if approved may further limit and restrict the investments of companies with foreign equity capital in rural land in Brazil. Such further restrictions, if adopted, may place more strain on our ability to expand our operations in Brazil.

In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. This pandemic, as well as the reality or fear of any other adverse public health developments, could adversely and materially affect, among other things, our manufacturing and supply chain operations, including due to the reduction or closure of our production units and the interruption of the supply of raw materials (see "- Risks Related to Our Business and Industries-The COVID-19 pandemic may have an adverse effect on our business and operating results"). In this regard, the Brazilian federal, state and municipal governments and other authorities have enacted a number of rules to address the potential impacts of the COVID-19 outbreak. Considering the possible outcomes thereof, we may be exposed to additional risks, which include: (i)    to contain or delay the spread of COVID-19, the Brazilian Ministry of Health, as well as several state and municipal authorities have adopted or recommended social distancing measures, which may ultimately result in severe fines/penalties;(ii)    in March 2020, the Brazilian government created a Crisis Committee to Monitor the Impacts of COVID-19 in Brazil. Since then, it has announced several measures (tax or otherwise) to address the effects of COVID-19 in Brazil. Likewise, the Brazilian Congress is currently discussing several measures to increase the Brazilian government's revenues, such as imposing new taxes, revoking tax benefits and increasing the rates of current taxes; and (iii)    States and municipalities may also revoke tax benefits and/or increase the rates of current taxes to increase its revenues. See "- We receive certain tax benefits from Brazilian Tax Authorities which we cannot assure will be maintained or renewed;". These new rules, if approved, may have a material adverse impact on our results of operations. Further, the ongoing COVID-19 pandemic and any possible future outbreaks of viruses may have a significant adverse effect on us. Firstly, a spread of such diseases amongst our employees, as well as any quarantines affecting them or our facilities could adversely impact the productivity of our personnel and thereby affect our operations, which can impact the quality and continuity of our activities and, ultimately, our reputation. Secondly, the current COVID-19 pandemic and any possible future outbreaks of viruses may have an adverse effect on our suppliers and/or transportation companies used to distribute our products. Thirdly, any quarantines or spread of viruses may adversely affect the demand of our products from end-consumers. It is also possible that our commercial contracts, including power supply agreements, could be affected by adverse impacts derived from the COVID-19 pandemic, since the parties thereto may not comply with their contractual obligations. As the COVID-19 pandemic will most likely be considered as an act of God or force majeure event by Brazilian courts, parties may justify their nonperformance and request (i) termination without penalties; (ii) adjustment and/or release of contractual obligations; (iii) adjustment and/or release of the effects of arrears; and/or (iv) adjustment and/or release of penalties for breach of contract, which, in any case, may cause a negative impact on our results of operations. Additionally, our operations may be adversely affected by the wider macroeconomic effect of the ongoing COVID-19 pandemic. Currently, it is expected there be a recession or diminishing growth in several countries, including Brazil, due to the freeze of the economic activities. Although the economic scenario is still uncertain, the updated forecast for the 2021 Brazilian GDP points out to a growth, following a 4.1% recession in 2020. The final effects of the COVID-19 pandemic could have substantial negative impact on the countries where we operate. Any negative effect on the economy, particularly in the countries that we operate, may decrease incomes and the demand for our products. Lastly, in case of an economic downturn, the price of our common shares may be adversely affected. Moreover, Brazil is experiencing political disagreements among governments and other authorities in connection with the measures that have been adopted and the ones that might be implemented. In March 2021, after a second wave of the pandemic, Brazil has become the country with the current highest daily death toll in the world. The Brazilian government cannot affirm confirm if the vaccination will be concluded in 2021 and when and the pandemic will be under control. Therefore, these institutional conflicts since the beginning of COVID-19 as well as the potential adoption of measures against WHO's recommendations may lead to political turmoil and, ultimately, civil riots and impeachment process, which all may potentially negatively impact our businesses and operations in Brazil . Lastly, there is considerable uncertainty regarding the possible outcomes of the COVID-19 pandemic and we cannot assure that other measures will be implemented to mitigate the impacts of the COVID-19 and whether they will mean tougher restrictions or limitations that could affect our operations. In addition, the deterioration of global economic conditions as a result of the pandemic may ultimately decrease customer demand for our products and have a material adverse effect on our financial condition and results of operations.

As a company organized under the laws of the Grand Duchy of Luxembourg and with its registered office in Luxembourg, we are subject to Luxembourg and European Union insolvency and bankruptcy laws and regulations in the event any insolvency proceedings are initiated against us including, among other things, Council and European Parliament Regulation (EU) 2015/848 of 20 May 2015 on insolvency proceedings (recast). Should courts in another European Union Member State determine that the insolvency and bankruptcy laws of that Member State apply to us (or to certain of our assets) in accordance with and subject to such European Union regulations, the courts in that Member State could have jurisdiction over the insolvency proceedings initiated against us. Insolvency and bankruptcy laws in Luxembourg or the relevant other European Union Member State, if any, may offer our shareholders less protection than they would have under U.S. insolvency and bankruptcy laws and make it more difficult for them to recover the amount they could expect to recover in a liquidation under U.S. insolvency and bankruptcy laws.

In the past, the Brazilian economy has experienced balance of payment deficits and shortages in foreign exchange reserves, and the Brazilian government has responded by restricting the ability of Brazilian or foreign persons or entities to convert reais into foreign currencies. The Brazilian government may institute a restrictive exchange control policy in the future. Any restrictive exchange control policy could prevent or restrict our Brazilian Subsidiaries' access to U.S. dollars, and consequently their ability to meet their U.S. dollar obligations and may adversely affect our financial condition and results of operations.

Our Brazilian operations are subject to a variety of national, state, and local laws and regulations, including environmental, agricultural, health and safety and labor laws. We invest financial and managerial resources to comply with these laws and related permit requirements. Our failure to do so could subject us to fines or penalties, enforcement actions, claims for personal injury or property damages, or obligations to investigate and/or remediate damage or injury. Moreover, if applicable laws and regulations, or the interpretation or enforcement thereof, become more stringent in the future, our capital or operating costs could increase beyond what we currently anticipate, and the process of obtaining or renewing licenses for our activities could be hindered or even opposed by the competent authorities. The Brazilian government has been constantly implementing new legal provisions through Provisional Presidential Decrees, which expire and loose effect if not converted into law by the Brazilian National Congress after 120 days. This legislative practice causes uncertainties and may adversely affect our business and operations. We are also subject to laws and regulations imposed in Brazil and its agencies, including (i) the National Agency of Petroleum, Natural Gas and Biofuels (Agência Nacional do Petróleo, Gás Natural e Biocombustível) and by the Brazilian Electricity Regulatory Agency (Agência Nacional de Energia Elétrica) on account of our production of sugarcane, ethanol and electricity (ii) the Ministry of Agriculture, Breeding Cattle and Supply (Ministério da Agricultura, Pecuária e Abastecimento), on account of our agricultural, sugarcane and ethanol production activities. If an adverse final decision is issued in an administrative process, we could be exposed to penalties and sanctions derived from the violation of any of these laws and regulations, including the payment of fines, and, depending on the level of severity applied to the infraction, the closure of facilities and/or stoppage of activities and the cancellation or suspension of the registrations, authorizations and licenses, which may also result in temporary interruption or discontinuity of activities in our plants, and adversely affect our business, financial condition and results of operations.

In Brazil, a relevant percentage of sugarcane is currently harvested by burning the crop, which removes leaves in addition to eliminating insects and other pests. The states of São Paulo, Minas Gerais and Mato Grosso do Sul, among others, have established laws and regulations that limit and/or entirely prohibit the burning of sugarcane and there is a likelihood that increasingly stringent regulations will be imposed by those states and other governmental agencies in the near future. Such limitations arise from a Brazilian Federal Decree that set forth the complete elimination of the harvest by burning the crop until 2018 in areas where it is possible to carry out mechanized harvest. In the state of Minas Gerais, the deadline imposed by the State Government for the elimination of the harvest by burning the crop is 2014, for areas with declivity lower than 12%, and for areas with declivity higher than 12%, they are subject to an additional term at the discretion of the State Environmental Agency, on a case by case basis. Nevertheless, in the state of Mato Grosso do Sul, the current deadline is 2018 for the elimination of harvest by burning the crop for areas where mechanized harvest can be carried out, as per the Brazilian Federal Decree. The strengthening of the laws and regulations or the total prohibition of sugarcane burning would require us to increase our planned investment in harvesting equipment, which, in turn, would limit our ability to fund other investments. In addition, the state of São Paulo has imposed an obligation on growers to dedicate a certain percentage of land used for sugarcane cultivation for native or reclaimed forest area. The cost of setting aside this land is difficult to predict and may increase costs for us or our sugarcane suppliers. As a result, the costs to comply with existing or new laws or regulations are likely to increase, and, in turn, our ability to operate our plants and harvest our sugarcane crops may be adversely affected.

In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. This pandemic, as well as the reality or fear of any other adverse public health developments, could adversely and materially affect, among other things, our manufacturing and supply chain operations, including due to the reduction or closure of our production units and the interruption of the supply of raw materials. The local, national and international response to the pandemic continues to rapidly evolve. Responses have included voluntary and, in some cases, mandatory quarantines as well as shutdowns and other restrictions on travel and commercial, social and other activities. The Argentine government has taken several measures regarding the COVID-19 pandemic outbreak to date. On March 18, 2020, through Decree No. 287/2020 and Administrative Decision No. 409/2020, the Argentine Executive Branch extended the public health emergency following the increasing spread in Argentina. On March 20, 2020, the Decree No. 297/2020 ("Decree 297") was published in the Official Gazette by which the Argentine Executive Branch implemented a social, preventive and mandatory isolation regime ("Mandatory Isolation Regime"), beginning on March 20, 2020, which was extended until November 8, 2020. As of the date of this report, the activities pursued by our Argentine subsidiaries, related to agricultural production, distribution and commercialization, were exempted from the Mandatory Isolation Regime. The new regulations did require our Argentine subsidiaries to guarantee the hygiene and safety conditions established by the Ministry of Health to preserve the health of their employees. On March 31, 2020, the Argentine Executive Branch prohibited: (i) employment terminations without cause; (ii) employment terminations and/or suspensions for lack of workload; (iii) employment terminations and/or suspensions due to reduced workload; and/or (iv) employment terminations and/or suspensions for force majeure events. Suspensions pursuant to Section 223 bis of the Employment Contract Law, regarding suspensions due to lack of work and/or force majeure, were exempted from this prohibition. In addition, Decree No. 39/2021 further extended the prohibition on terminations without cause, terminations based on the lack or reduction of work, and suspensions for force majeure events until May 31, 2021. It is likely that these restrictions are further extended if the scenario remains the same or substantially similar to the current one. Since November 9, 2020, pursuant to Decree No. 875/2020 the Mandatory Isolation Regime was replaced with a mandatory distance regime ("Mandatory Distance Regime") in many Argentine provinces and areas. During the Mandatory Distance Regime, individuals must maintain a minimum social distance of two meters, use face masks in shared spaces, sanitize their hands, and strictly comply with the protocols for activities, recommendations, and instructions implemented by the provincial and federal health authorities. In case of detecting situations of risk of spread of the COVID-19, the provincial governors are empowered to reinstate the Mandatory Isolation Regime for individuals entering the Province or the City of Buenos Aires from other jurisdictions, with prior intervention of the provincial health authority and for a maximum period of fourteen days. The Mandatory Distance Regime implemented in April 9, 2021 new restrictions to means of transport, circulation of individuals, remote work, and a curfew limiting circulation in high sanitary-epidemiological risk. This Mandatory Distance Regime has been extended until April 30, 2021. The extension of the Mandatory Isolation Regime in several Argentine provinces as well as other actions taken by the government have resulted in hurdles for the commercialization, distribution and administrative aspects of our Argentine subsidiaries' businesses. Under the new regulations, the economic, industrial, commercial, and service activities by business entities, including Adecoagro, may be carried out, provided businesses have an operating protocol approved by the provincial health authority that includes all the recommendations and instructions of the federal health authority and restrict the use of closed surfaces allowing a maximum of 50% of their capacity (subject to certain exceptions). For more information on how the Company complies with these protocols see "Information of the Company-Business Overview-COVID-19-Government measures in Argentina and Brazil". The measures to control the COVID-19 pandemic have negatively impacted global economy, disrupted financial markets and international trade, resulted in increased unemployment levels and significantly impacted global supply chains, all of which has had and may continue to have an adverse impact in Argentina's economy and may negatively impact our industry and our business. Maximum Prices and Supply Obligations In connection with the declaration of the COVID-19 sanitary emergency, in order to guarantee the regular supply of essential products, on March 20, 2020, the Argentine Government issued general regulations (applicable to most producers) particularly, Resolution No. 100/2020 of the Secretary of Domestic Commerce, imposing the obligation to those who participate in the production, distribution and commercialization chain of certain products, to (i) sell products to their maximum prices set as of March 6, 2020; and (ii) increase production up to their facilities' full capacity and provide the proper measures to guarantee their transport and supply. Originally, these obligations were supposed to be effective for a 30-day term. However, the Argentine Government successively extended these obligations, in principle, until May 15, 2021. It is likely that these obligations would be extended again. Since this regime has been in place, only certain and limited price increases had been authorized. Considering the inflationary context in the Argentine economy, since many of the product prices were capped to their prices as of March 20, 2020, with some few limited authorized increments, these measures have negatively impacted our Argentine subsidiaries' businesses. Additionally, the Argentine Government created (i) an informative regime for the purpose of publishing standard maximum prices of a basic listing of consumer products for each province (which will be available on the website www.preciosmaximos.produccion.gob.ar); and (ii) a public and free mechanism that allows the filing of claims and complaints by consumers and those included in the production, distribution and commercialization chain of the products included in the obligation to sell at maximum prices. This regulation impacted our processed rice and fluid milk products. The facilities of the Company have been inspected to control compliance of the abovementioned regulation. As long as this regulation is in place, the Company would face restrictions to freely implement price increases on the processed rice and fluid milk products. Those measures (jointly with other announcements that up to the present have not being turned into regulations) suggest that the Argentine Government would be planning to enforce the Supply Act broadly to avoid potential shortage on the supply or increase in the prices of products deemed essential. Since, the Secretary of Domestic Commerce has notified several companies within the Argentine subsidiaries' industries, urging them to work at full capacity. Some of them have even been formally accused of not complying with the Supply Act. Recently, by means of Resolution No. 330/2021, the Secretary of Domestic Commerce has officially urged all industrial and commercial "big business" to manufacture, distribute and market their goods and services to the maximum of their installed capacity, while the health emergency persists in Argentina. On April 4, 2020 the Argentine Government issued Decree No. 351/2020, which authorized the intervention of local authorities (both at Provincial and Municipal level) to control maximum prices under the recently adopted regulations and adopted rules to coordinate the enforcement of regulations. This has resulted in the need to allocate additional economic and human resources for the Argentine subsidiaries to comply with governmental requirements and filings pursuant to the regulations in place. In accordance with Resolution No. 552/2020 (as amended), published on November 12, 2020, the Secretary of Domestic Commerce suspended the effects of Resolution No. 100/2020 for a list of products included in Annex I (among others, brown rice, prepared rice, condensed milks, soy milks, vegetable milks; and brie, camembert, blue and provolone cheeses) that due to their characteristics and purpose are not relevant for the satisfaction of the basic needs of consumers and users, until May 15, 2021. The Supermarkets' Shelves Law published on March 17, 2020 (as implemented by Decree No. 991/2020 published in the Official Gazette on December 15, 2020), is applicable to the products marketed by the Company. The main objectives of this law are: (i) to ensure that the price of certain products remains clear and competitive for the benefit of consumers, (ii) to maintain harmony and balance between economic operators, (iii) to expand the supply of artisanal, regional and national products produced by micro, small and medium-sized enterprises, and (iv) to promote the offer of products manufactured by small producers. Although the law is focused on supermarkets, it might have an impact on the Company's commercialization strategies. The Supermarkets' Shelves Law resulted in the Argentine government imposing increasing regulations affecting the Argentine subsidiaries' businesses, often generating further marketing and distribution costs for the purposes of complying with these regulations. On March 17, 2021, the Secretary of Domestic Commerce published in the Official Gazette Resolution No. 237/2021 which created a new information regime (Sistema Informativo para la Implementación de Políticas de Reactivación Económica) ("SIPRE"; after its acronym in Spanish), according to which the Company might have to submit extensive monthly reports on prices, production and sales. This regime has also increased compliance costs and forced the Argentine subsidiaries to allocate resources to comply with these information regimes. Pursuant to Resolution No. 283/2021, published in the Official Gazette on March 31, 2021, the Secretary of Domestic Commerce created the Product Labeling Inspection and Compliance Monitoring System to ensure that certain product labels do not contain inaccurate information that deceives consumers (Sistema de Fiscalización de Rótulos y Etiquetas) ("SiFiRE"; after its acronym in Spanish). As provided in this regulation, this information regime is aimed at the defense of fair trade and the protection of consumer rights. The SiFiRE established a new set of rules applicable to the following product labels: (i) foods; (ii) beverages; (iii) drinkable foods; (iv) toiletries; (v) personal hygiene products and; (vi) personal care and household cleaning products suitable for human use and handling. Any misleading labels must be amended. If infringing products have already been launched to the market, suppliers and importers must place a correction sticker on them at their own expense. The sanctions provided in Consumer Protection Law No. 24,240 and Executive Order No. 274/2019 on Fair Trade may apply to corporations, including us. Through Resolution No. 330/2021, published in the Official Gazette on April 9, 2021, the Secretary of Domestic Commerce ordered all companies from the commerce and industry sectors, that during 2019 have recorded total sales in the domestic market in excess of the amounts established by Resolution No. 220/2019 (i.e., companies which are not considered small or medium, pursuant to the parameters included therein), to increase their production up to the maximum of their installed capacity and to arbitrate appropriate measures to guarantee the transportation, distribution and supply of inputs and final goods produced throughout the Argentine Republic, until the sanitary emergency declared by the Social Solidarity and Productive Reactivation Law No. 27,541 remains in force (in principle, until December 21, 2021). This Resolution included a similar provision to the one already provided under Resolution No. 100/2020 referred to above. Since Resolution No. 330/2021 does not include any specific requirements, it is difficult to determine at this time both its scope and how compliance with this regulation is going to be monitored by the Argentine Government. However, the Argentine subsidiaries expect to incur further compliance costs due to these regulations. Any application of these measures could potentially affect costs, expenses and/or margins. Remote Work COVID-19 pandemic pressured most companies which were not excluded from the Argentine Isolation Regime to implement measures to guarantee remote work for their employees. Consequently, several liabilities such as cybersecurity, privacy policies, adequate computing devices and professional use of personal computing devices have to be implemented by such companies. Although as of the date of this report the activities carried out by our Argentines subsidiaries have been excluded from the Argentine Isolation Regime, because it provides as "essential" activities and services related to production, distribution and agricultural commercialization, we cannot assure that this exception will continue to apply to our operations. The foregoing measures taken by the Argentine government in response to the COVID-19 virus and any future actions that may implemented are material intrusions and limits on the ability of the Company to operate its businesses and which will adversely impact the price of our products and our operating results. On August 14th, 2020, the Legal Regime of Teleworking Contract under Law No. 27,555 (the "Teleworking Law") was published in the Official Gazette. This Law regulates dependent work provided from the employee's own home or from a place other than the employer's establishment and introduces modifications to the Labor Contract Law establishing the concept of teleworking. In addition, the Teleworking Law provides the minimum legal requirements for regulating teleworking, it delegates specific aspects to collective bargaining, recognizes rights and duties for those who work under this modality (e.g., right of reversibility, right to digital disconnection, trade union rights, right to privacy) and also provides regulations referring to working hours, provision of work tools and reimbursement of expenses. On January 20, Executive Decree No. 27/2021 approving the regulation of the Teleworking Law was published in the Official Gazette, including provisions regulating certain aspects of the Teleworking Law: the right to digital disconnection; conditions under which caretaking tasks may be performed by teleworking individuals; limits and conditions for reversal; how work tools are to be provided and expenses reimbursed; union representation of teleworking individuals; health and safety conditions; employer oversight systems; and the right to privacy of teleworking individuals. On February 5, Resolution 54/2021 of the Ministry of Labor, Employment and Social Security was published ordering that Teleworking Law will enter into force on April 1, 2021. As long as the restrictions to circulate due to the COVID-19 pandemic, the application of this law is in suspense.

We are subject to anti-corruption, anti-bribery, anti-money laundering and other international trade laws and regulations. We are required to comply with the laws and regulations of Brazil and other jurisdictions where we conduct operations. In particular, we are subject to the Brazilian Anti-corruption Law No 12,846, to the U.S. Foreign Corrupt Practices Act of 1977, or the "FCPA," to the United Kingdom Bribery Act of 2010, as well as economic sanction programs, including those administered by the United Nations, the European Union and the United States, including the U.S. Treasury Department's Office of Foreign Assets Control, or "OFAC." The FCPA prohibits providing anything of value to foreign officials for the purposes of obtaining or retaining business or securing any improper business advantage. As part of our business, we may deal with entities and employees which are considered foreign officials for purposes of the FCPA. In addition, economic sanctions programs restrict our dealings with certain sanctioned countries, individuals and entities. When issues arise, we attempt to act promptly to learn relevant facts, conduct appropriate due diligence, and take any appropriate remedial action to address the risk. There can be no assurance that our internal policies and procedures will be sufficient to prevent or detect all inappropriate practices, fraud or violations of law by our employees, directors, officers, partners, agents and service providers or that such persons will not take actions in violation of our policies and procedures (or otherwise in violation of the relevant anticorruption laws and sanctions regulations) for which we or they may be ultimately held responsible. Violations of anti-bribery and anticorruption laws and sanctions regulations could have a material adverse effect on our business, reputation, results of operations and financial condition. In addition, we may be subject to one or more enforcement actions, investigations and proceedings by authorities for alleged infringements of these laws. These proceedings may result in penalties, fines, sanctions or other forms of liability and could have a material adverse effect on our reputation, business, financial condition and results of operations.

Our manufacturing facilities and products are subject to regular local, as well as foreign, governmental inspections and extensive regulation in the food safety area, including governmental food processing controls. We incur significant costs in connection with the compliance of food and safety requirements and changes in government regulations relating to food safety could require us to make additional investments or incur additional costs to meet the necessary specifications for our products. Our products are often inspected by foreign food safety officials, and any failure to pass those inspections can result in our being required to return all or part of a shipment, destroy all or part of a shipment or incur costs because of delays in delivering products to our customers. Any tightening of food safety regulations could result in increased costs and could have an adverse effect on our business and results of operations.

The Brazilian government frequently implements changes to the Brazilian tax regime that may affect us and our clients. These changes include changes in prevailing tax rates and, occasionally, imposition of temporary taxes, the proceeds of which are earmarked for designated Brazilian government purposes. Some of these changes may result in increases in our tax payments, which could adversely affect industry profitability and increase the prices of our products, restrict our ability to do business in our existing and target markets and cause our financial results to suffer. Over the past years Brazil has faced an economic recession and the Government is adopting fiscal adjustment measures. Any fiscal adjustment is complex and involves radical and unpopular measures. The Minister of Finance has also been raising the possibility of increasing or creating new taxes. For example, the Brazilian government may reduce or increase at any time through a presidential decree the rates of the tax levied on financial operations, such as credit transactions ("IOF/Credit"), foreign exchange transactions ("IOF/Exchange"), derivative securities transactions ("IOF/Securities"), among other taxable events. On March, 30, 2017, a presidential decree was published in order to introduce a 0.38% rate of the IOF/Credit on some loan transactions, such as credits provided by cooperatives, which were previously subject to a zero percent rate. It is also common for taxpayers to file suits for the declaration that a certain tax is illegal or unconstitutional. Such cases where the final decision is favorable to taxpayers, a situation that occurs very frequently. Accordingly, the Brazilian Government may propose changes in the tax legislation in order to increase rates, tax basis and/or to create new taxes. The effects of these changes and any other change that could result from the enactment of additional legislation cannot be quantified. We cannot assure you that we will be able to maintain our projected cash flow and profitability following any increases in Brazilian taxes applicable to us and our operations.

On December 29, 2017, the Argentine Government enacted Law No. 27,430 (the "Tax Reform Law"), a comprehensive tax reform which became effective on January 1, 2018. Specifically, Law No. 27,430 introduced amendments to income tax (both at corporate and individual levels), value added tax, tax procedural law, criminal tax law, social security contributions, excise tax, tax on fuels and tax on the transfer of real estate. In addition, the Solidarity Law, introduced important tax modifications -among other provisions- which modified the Tax Reform Law, provided measures regarding employer contributions, applicable rates for foreign goods and created, in regards to the Tax for an Inclusive and Solidary Argentina, an 8% rate for the acquisition of digital services and a 30% rate for the acquisition services abroad and passenger transport services destined outside the country (see "-The impact of the Argentine congressional and presidential elections on the future economic and political environment of Argentina remains uncertain"). The Tax Reform Law introduced several amendments in connection with federal income tax, such as the progressive reduction of the tax rate on corporate level from 35% to a 30% applicable to the fiscal periods starting on January 1, 2018 until December 31, 2019; and to 25% applicable to the fiscal periods starting on January 1, 2020, and established that dividends or other profits distributed to Argentine resident individuals and foreign beneficiaries would be subject to taxation. Therefore, as of January 1, 2018, income tax on Argentine resident companies and branches of non-Argentine entities applies in two stages: (i) a first stage is charged at the corporate level (at a tax rate of 30% or 25%, depending on the fiscal period involved, as explained above); and (ii) a second stage is charged at the shareholder or owner level - in respect of an Argentine resident individual or a foreign beneficiary- (at a tax rate of 7% or 13%, according to the fiscal period from which the distributed profit derived). Such tax treatment was amended by the Solidarity Law, which established: (i) the suspension up to fiscal years to be initiated as of January 1, 2021 inclusive, of the 25% corporate income tax rate and of the 13% tax rate applicable on dividends; and that (ii) on such periods of suspension, the applicable rate on corporate income tax will be of 30% and the applicable rate on dividends will be of 7%. The Argentine Congress is currently discussing a draft bill to modify the following aspects: (i) amend the corporate tax rate for Argentine entities, by applying a sliding scale from 25% to 35%, depending on the accumulated net income obtained during the given year; and (ii) regardless of the applicable corporate tax rate, in all cases, dividends or profits will be levied at a 7% tax rate. If the bill is approved by the Argentine Congress, such tax treatment would be applicable for fiscal years starting as of January 1, 2021. The Tax Reform Law eliminated the equalization tax, which levied distributions made out of previously untaxed income, was eliminated. The sale, exchange or disposition of shares and other securities not trading in, or listed on, capital markets and securities exchanges by resident individuals and foreign beneficiaries in general is subject to tax at a rate of 15%. Non-residents can opt to be taxed at a rate of 15% on the net gain or 13.5% on the gross amount of the transaction, at the option of the seller. These and other changes in the Argentine tax laws could adversely affect our operations, financial condition and cash flows.

Whether the Company will be a PFIC for the current or future tax year will depend on the Company's assets and income over the course of each such tax year and, as a result, cannot be predicted with certainty as of the date of this Form 20-F. Under circumstances where the cash is not deployed for active purposes, our risk of becoming a PFIC may increase. If we were treated as a PFIC for any taxable year during which a U.S. investor held common shares, certain adverse tax consequences could apply to such U.S. investor. A U.S. taxpayer who holds stock in a foreign corporation during any year in which such corporation qualifies as a PFIC may mitigate such negative tax consequences by making certain U.S. federal income tax elections, which are subject to numerous restrictions and limitations. Holders of the Company's common shares are urged to consult their own tax advisors regarding the acquisition, ownership, and disposition of the Company's common shares. See "Material U.S. Federal Income Tax Considerations for U.S. Holders-Passive Foreign Investment Company ("PFIC") Rules".

Our corporate affairs are governed by our articles of incorporation and by the laws governing joint stock companies organized under the laws of the Grand Duchy of Luxembourg as well as such other applicable local law, rules and regulations. The rights of our shareholders and the responsibilities of our directors and officers under Luxembourg law are different from those applicable to a corporation incorporated in the United States. As a foreign private issuer, we are exempt from certain rules under the Exchange Act, and consequently, there may be less publicly available information about us than is regularly published by or about U.S. issuers. Also, Luxembourg regulations governing the securities of Luxembourg companies may not be as extensive as those in effect in the United States, and Luxembourg law and regulations in respect of corporate governance matters may not be as protective of minority shareholders as state corporation laws in the United States. Therefore, you may have more difficulty protecting your interests in connection with actions taken by our directors and officers or our principal shareholders than you would as a shareholder of a corporation incorporated in the United States.

As of December 31, 2020, approximately $717.6 million of our total debt on a consolidated basis was subject to fixed interest rates and $253.4 million was subject to variable interest rates. As of December 31, 2020, borrowings incurred by the Company's subsidiaries in Brazil were repayable at various dates between January 2021 and November 2027 and bear either fixed interest rates ranging from 2.5% to 7.95% per annum or variable rates based on Taxa de Juros de Longo Prazo (TJLP), Índice de Preços ao Consumidor Amplo (IPCA) and CDI plus spreads ranging from 1.62% to 4.24% per annum. Borrowings incurred by the Company´s subsidiaries in Argentina are repayable at various dates between January 2021 and June 2028 and bear either fixed interest rates ranging from 2.8% to 7.0% per annum. Significant interest rate increases can have an adverse effect on our profitability, liquidity and financial position. Currently, our variable interest rate exposure is mainly linked to the London Interbank Offer Rate ("LIBOR") rate plus specified spreads. If interest rates increase, whether because of an increase in market interest rates or an increase in our own cost of borrowing, our debt service obligations for our variable rate indebtedness would increase, and our net income could be adversely affected. At December 31, 2020, LIBOR (six months) was 0.26%. Volatility in LIBOR or other reference rates could increase our periodic interest payments and have an adverse effect on our total financing costs. We may be unable to adequately adjust our prices to offset any increased financing costs, which would have an adverse effect on our results of operations. On July 27, 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. Further, on November 30, 2020, ICE Benchmark Administration ("IBA") announced that it planned to consult on its intention to cease the publication of one-week and two-month LIBOR on December 31, 2021, and the overnight, one-month, three-month, six-month and 12-month LIBOR tenors on June 30, 2023. That same day, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency jointly responded to IBA's announcement by encouraging banks to stop writing contracts referencing LIBOR as soon as possible (and in any event by the end of 2021, subject to certain limited exceptions), stating that entering into new contracts that use LIBOR as a reference rate after December 31, 2021, and failing to prepare for disruptions to LIBOR (including operating without robust fallback language that includes a clearly defined alternative reference rate), could cause significant issues if not addressed. These announcements indicate that the continuation of LIBOR on the current basis cannot and will likely not be guaranteed after June 2023 and may be subject to significant disruption after December 2021.It is not possible to predict the effect of these changes, other reforms or the establishment of alternative reference rates in the United Kingdom, the United States or elsewhere. See also the discussion of interest rate risk in "Item 11. Quantitative and Qualitative Disclosures About Market Risk-"Risk of Fluctuations in Interest Rates." The transition process may involve, among other things, increased volatility or illiquidity in markets for instruments that currently rely on LIBOR. The transition may also result in reductions in the value of certain instruments or the effectiveness of related transactions such as hedges, increased borrowing costs, uncertainty under applicable documentation, or difficult and costly consent processes. Any such effects of the transition away from LIBOR, as well as other unforeseen effects, may result in losses or increases in financing costs with respect to our indebtedness, expenses, difficulties, complications, or delays in connection with future financing efforts, all of which could have a material adverse impact on our business, financial condition and results of operations. Also, changes in the fair value of the derivative instruments can result in a non-cash charge or gain being recognized in our financial results for a period preceding the period or periods in which settlement occurs under the derivative instruments and interest payments are made. Changes or shifts in interest rates can significantly impact the valuation of our derivatives and therefore could expose us to substantial mark-to-market losses or gains if interest rates fluctuate materially from the time when the derivatives were entered into. Accordingly, fluctuations in interest rates may impact our financial position, results of operations, and cash flows. See "Note 2 to our Consolidated Financial Statements".

The terms of our Senior Notes due 2027 and the debt instruments of some of our subsidiaries contain customary covenants including limitations on our ability to, among other things, incur or guarantee additional indebtedness; make restricted payments, including dividends and prepaying indebtedness; create or permit liens; enter into business combinations and asset sale transactions; make investments, including capital expenditures; and enter into new businesses. Some of these debt instruments are also secured by various collateral including mortgages on farms, pledges of subsidiary stock and liens on certain facilities, equipment and accounts. Some of these debt instruments also contain cross-default provisions, where a default on one loan by one subsidiary could result in lenders of otherwise performing loans declaring a default. These restrictions could limit our ability to obtain future financing, withstand a future downturn in business or the economy in general, conduct operations or otherwise take advantage of business opportunities that may arise. Moreover, by reducing the level of dividends we may receive, the terms of our subsidiaries' indebtedness places limits on our ability to make acquisitions or needed capital expenditures or to pay dividends to our shareholders. The financial ratio covenants we are currently required to meet, some of which are measured on a combined basis aggregating results of the borrowing subsidiaries and others which are measured on an individual debtor basis, include, among others, debt service coverage, minimum liquidity and leverage ratios. The failure to maintain applicable financial ratios, in certain circumstances, would prevent us from borrowing additional amounts and could result in a default under such indebtedness. If we or our subsidiaries are unable to repay those amounts, the affected lenders could initiate bankruptcy-related proceedings or enforce their rights to the collateral securing such indebtedness, which would have a material and adverse effect on our business, results of operations and financial condition.

As of December 31, 2020, we had $634.8 million of net debt outstanding on a consolidated basis, including $500 million of Notes 2027, incurred by Adecoagro S.A. Certain of our subsidiaries in Argentina and Brazil have a substantial amount of debt, which requires significant principal and interest payments. Such indebtedness could affect our subsidiaries' future operations, for example, by requiring a substantial portion of their cash flows from operations to be dedicated to the payment of principal and interest on indebtedness instead of funding working capital and capital improvements and other investments. The substantial amount of debt incurred by us and our subsidiaries also imposes significant debt obligations, increasing our cost of borrowing to satisfy business needs and limiting our ability to obtain additional financing. The substantial level of indebtedness borne by certain of our subsidiaries also affects the amount of cash available to them to pay as dividends, increasing our vulnerability to economic downturns or other adverse developments relative to competitors with less leverage, and limiting our ability to obtain additional financing for working capital, capital expenditures, acquisitions or other corporate purposes in the future. Moreover, our indebtedness places limits on our ability to make acquisitions or needed capital expenditures or to pay dividends to our shareholders.

A vast majority of ethanol in Brazil is produced at sugarcane mills that produce both ethanol and sugar. Because sugarcane millers are able to alter their product mix in response to the relative prices of ethanol and sugar, the prices of both products are directly correlated, and the correlation between ethanol and sugar may increase over time. Sugar prices in Brazil are determined by prices in the world market, resulting in a correlation between Brazilian ethanol prices and world sugar prices. Accordingly, a decline in sugar prices would have an adverse effect on the financial performance of our ethanol and sugar businesses. In addition, gasoline prices in Brazil are set by the Brazilian government through Petrobras. Because flex-fuel vehicles, which have become popular in Brazil, allow consumers to choose between gasoline and ethanol at the pump rather than in the showroom, ethanol prices are correlated to gasoline prices and, consequently, oil prices. The COVID-19 pandemic had an impact at the inception . See "We may be exposed to risks related to health epidemics, and the COVID-19 in particular, that could adversely impact our ability to operate our business and results of operations." While we are not now able to fully determine the impact of fluctuation. A decline in oil prices to our operations, we believe that a decline in oil prices or a decision by Petrobras to lower fuel prices and its attendant effects on the price of ethanol and sugar will have an adverse effect on the financial performance of our ethanol and sugar business.

We require substantial amounts of fuel oil and other resources for our harvest activities and transport of our agricultural products. During the 2019/20 harvest year, fuel represented 3.2% of the cost of production (including manufacturing and administrative expenses) of our Farming business. In our Sugar, Ethanol and Energy business, fuel represented 9.3% of our cost of production (including manufacturing and administrative expenses) for the 2020/21 harvest year and 10.2% for the 2019/2020 harvest year. We rely upon third parties for our supply of energy resources used in our operations. The prices for and availability of energy resources may be subject to change or curtailment, respectively, due to, among other things, new laws or regulations, imposition of new taxes or tariffs, interruptions in production by suppliers, imposition of restrictions on energy supply by government, worldwide price levels and market conditions. Over the last few years, the Argentine government has taken certain measures in order to reduce the use of energy during peak months of the year by frequently cutting energy supply to industrial facilities and large consumers to ensure adequate supply for residential buildings. For example, certain of our industrial facilities have been subject to a quota system whereby electricity cuts occur on a work shift basis, resulting in our facilities being shut down during certain work shifts. We cannot assure you that we will be able to procure the required energy inputs at acceptable prices. If energy supply is cut for an extended period of time and we are unable to find replacement sources at comparable prices, or at all, our business and results of operations could be adversely affected.

Our production process requires various raw materials, including primarily fertilizer, pesticides and seeds, which we acquire from local and international suppliers. We do not have long-term supply contracts for most of these raw materials. A significant increase in the cost of these raw materials, especially fertilizer and agrochemicals, a shortage of raw materials or the unavailability of these raw materials entirely could reduce our profit margin, reduce our production and/or interrupt the production of some of our products, in all cases adversely affecting the results of our operations and our financial condition. For example, we rely on fertilizers and agrochemicals, many of which are petrochemical based. In our Farming business, fertilizers and agrochemicals represented approximately 17% of our total cost of production (including manufacturing and administrative expenses) for the 2019/2020 harvest year. In our Sugar, Ethanol and Energy business, fertilizers and agrochemicals represented 16.7% of our cost of production (including manufacturing and administrative expenses) for 2019 and 17.1% for 2020. Worldwide production of agricultural products has increased significantly in recent years, increasing the demand for agrochemicals and fertilizers. This has resulted, among other things, in increased prices for agrochemicals and fertilizers.

Ownership of a significant portion of the land we operate is a key part of our business model. However, agricultural real estate is generally an illiquid asset. Moreover, the adoption of laws and regulations that impose limitations on ownership of rural land by foreigners in the jurisdictions in which we operate may also limit the liquidity of our farmland holdings. See "-Risks Related to Argentina-Argentine law concerning foreign ownership of rural properties may adversely affect our results of operations and future investments in rural properties in Argentina" and "-Risks Related to Brazil-Changes in Brazilian rules concerning foreign investment in rural properties may adversely affect our investments." As a result, it is unlikely that we will be able to adjust our owned agricultural real estate portfolio promptly in response to changes in economic, business or regulatory conditions. Illiquidity in local market conditions may adversely affect our ability to complete dispositions, to receive proceeds generated from any such sales or to repatriate any such proceeds.

Government authorities of several countries, including Brazil and certain states of the United States, currently require the use of ethanol as an additive to gasoline. Approximately 31% of all fuel ethanol in Brazil is consumed in the form of anhydrous ethanol blended with gasoline; the remaining 69% of fuel ethanol is consumed in the form of hydrous ethanol, which is mostly used to power flex-fuel vehicles. Flex-fuel vehicles have the flexibility to run either on gasoline (blended with anhydrous ethanol) or hydrous ethanol. In The United States, which currently requires the addition of 10% of ethanol into gasoline, is considering increasing this requirement to 15% in 2021 The European Union aims for 10% of the energy used in the transport sector to derive from renewable energy sources by 2020, without specific targets for certain renewable energy sources and without intermediate targets, to be determined by each Member State. Other countries such as Colombia and Canada have a 10% and 5% biofuel blending mandate, respectively, while Argentina currently has a 12% ethanol blending. In March 2021, the British government announced that that next September it will require an increase from 5% to 10% in biofuel additives to petroleum products. Also, India has established a target of achieving 20% ethanol-blending with petroleum by 2025. In addition, flex-fuel and ethanol powered vehicles in Brazil are entitled to a tax benefit in the form of a lower tax rate on manufactured products (Imposto sobre Produtos Industrializados) and therefore are currently taxed at lower levels than gasoline-only vehicles, which has contributed to the increase in production and sale of flex-fuel vehicles. Many of these policies and incentives aim to mitigate the effects of climate change. If climate change policies were to change, the legal framework and incentive structure promoting the use of ethanol may also change, leading to a reduction in the demand for ethanol. In addition, any reduction in the percentage of ethanol required in fuel blended with gasoline or increase in the rates at which flex-fuel vehicles are taxed in Brazil, or any growth in the demand for natural gas and other fuels as an alternative to ethanol, lower gasoline prices or an increase in gasoline consumption (versus ethanol), may cause demand for ethanol to decline and affect our business. Additionally, the COVID-19 outbreak and other market factors have resulted in a reduction in the demand for oil and related fuels, causing significant volatility in the price of, and a reduction in the demand for, ethanol. Due to the uncertainty surrounding the COVID-19 pandemic and its impact on global markets, we cannot fully determine the extent of the reduction in the demand for ethanol, which, if sustained, may have a material adverse impact on our operations and financial condition. See "- Ethanol prices are correlated to the price of sugar and are also closely correlated to the price of oil, so that a decline in the price of sugar or a decline in the price of oil will adversely affect our sugar and ethanol businesses and (See "- We may be exposed to risks related to health epidemics, and the COVID-19 in particular, that could adversely impact our ability to operate our business and operating results."

As with any agricultural business enterprise, our business operations are predominantly seasonal in nature. The harvest of corn, soybean and rice generally occurs from January to May. Wheat is harvested from December to January. Cotton is harvested from June to August, but requires processing which takes approximately two to three months. Our operations and sales are affected by the growing cycle of our crops process and the timing of our harvest sales. In addition, our sugar and ethanol business is subject to seasonal trends based on the sugarcane growing cycle in the center-south region of Brazil. The annual sugarcane harvesting period in the center-south region of Brazil begins in March/April and ends in November/December. This creates price fluctuations which result in fluctuations in our sugar and ethanol inventories, usually peaking in December to take advantage of higher prices during the traditional off-season (i.e., January through April), and a degree of seasonality in our gross profit. Seasonality could have a material adverse effect on our business and financial performance. In addition, our quarterly results may vary as a result of the effects of fluctuations in commodities prices, production yields and costs. Therefore, our results of operations have varied significantly from period to period and are likely to continue to vary, due to seasonal factors.