Category: South American Agriculture

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Agricultural Investing asset class Avocado Investing Panama South American Agriculture

Agriculture in Panama – The Investment Landscape and Opportunities

Panama is one of the fastest growing economies in Latin America. Foreign investments in Panama amount to nearly 9 percent of the country’s GDP, which is the largest share in the Americas and speaks to the country’s investor friendliness.(1) Foreign direct investment into Panama is up 6 percent since 2013 and accounted for 11.3 percent of the country’s GDP in 2014.

2014 Foreign Direct Investment - Panama

 

With Panama boasting the second largest Free Trade Zone in the world, it’s easy to see why a thriving expat community (3,000 foreigners from 30 different countries) has stimulated the growth of new businesses owned by foreigners and locals alike. Investing in Panama is straightforward as the currency is in USD, there are no restrictions on foreign ownership, nor any exchange controls. The U.S.-Panama Trade Promotion Agreement from October 2012 granted U.S. exporters immediate duty free treatment accounting for more than half of current trade.(2) The country’s tropical climate is favorable to agricultural practices, and can permit up to two growing cycles per year with the proper farming techniques. Couple that with cool, mountain climate retreats, and Panama emerges as an ideal agricultural investment location with the added benefit of being a sought after retirement destination.

Panama’s particularly fertile soil and favorable growing climate afford the country many unique agricultural opportunities. The avocado, particularly the Panamanian Hass variety, is ideally suited for cultivation in Panama. In 2016, the United States purchased nearly 2.2 billion pounds of avocados, a 16 percent increase from the quantity sold in 2014. The U.S. organic avocado market grew by over 30 percent in volume in 2014 while still leaving plenty of room for growth in the market, both in the U.S. and abroad, as presently many smaller producers are unable to meet the growing demand and required consistency of destination markets. Given these conditions, an investment with a Panamanian organic avocado producer could yield an investor a 16-plus percent IRR over a 30-year period through a fully managed, turnkey investment of US$45,000 for 2.5 acres.

Forestry is also another potentially profitable opportunity in Panama, with over 50 percent of the country’s land being forested. As an example, teak has been valued for more than 2,000 years as a durable construction material and is now a worldwide coveted commodity. With the right management and timing, it’s possible to realize a yield of 10 percent IRR over a 20-plus year timeframe when investing in Panamanian teak. There are also reforestation visas available through the Panamanian government where investors can apply for a temporary Panamanian visa or permanent residency, depending on the type and amount of investment in addition to receiving a tax break on their Panamanian taxes. (3)

Potential Yields at Key Stages of Teak Rotation

 

Mango cultivation in Panama also can be explored as a viable investment opportunity. With an average producing lifespan of 60-80 years depending on the variety, the mango is one of the more lucrative and dependable crops in the world. While the mango tree is native to Southeast Asia, the climate is quite similar in Panama and very conducive to mango production.

The United States is the greatest importer of mangos globally, accounting for a nearly 45 percent consumption rate of the world’s mango exports. Meanwhile, imports to European markets more than doubled between 1999 and 2008. Given Panama’s geographical proximity to both foreign markets and their strong business practices and incentives, exposure to the Panamanian mango export market could be a nice fit for a variety of investor classes. For example, an organic mango producer in Panama is projecting a nearly 17 percent IRR over a 30-year period for an initial investment of US$38,500.

The business and tax incentives in Panama are attractive to foreign investors. Panamanian income taxes (only 7 percent after the first US$9,000 and capped out at 27 percent) apply only to Panamanian-generated income. Capital gains taxes can be as low as 10 percent and all inheritance taxes have been completely abolished. The Foreign Investor Protection law grants foreign investors the same rights and freedoms as Panamanian citizens to own land.(4) There is also a law targeting reforestation investments that provides a 25-year income tax exemption to those who purchase farmland for the purpose of reforestation. Panama also boasts an all-around stable economy, where inflation is maintained at 2 percent with a Value Added Tax (VAT – similar to a U.S. sales tax) of zero. Property taxes are extremely affordable in Panama, with properties having a registered value of less than US$30,000 paying nothing and only 2.1 percent on properties more than US$75,000.(5) Investors in agricultural activities are exempt from paying Panamanian income taxes on their agriculturally-earned income if the annual income is under US$350,000 as well as taxes on income earned from exports. Agricultural investors are also exempt from Panamanian property taxes if their agricultural land is used exclusively for farming and the registered value of the property is less than $150,000. Exporters of non-traditional agricultural products (melons, watermelons, pumpkins, pineapples, etc.) enjoy the benefits of exemption from taxes for income earned from exports, duty-free importation of materials and equipment, and negotiable tax credits for amounts exported.(6) These foreign-friendly business practices, agricultural tax benefits, and extremely affordable tax rates make Panama an attractive agricultural investment opportunity worthy of further exploration.

 

 

[1] Alex, “Panama Farmland – A Guide to Agricultural Investment in Panama”, panama equity REAL ESTATE, September 2013, https://www.panamaequity.com/panama-farmland-a-guide-to-agriculture-investment-in-panama/, May 23, 2016.

[2] United States Department of Agriculture (USDA), “Panama”, USDA – Foreign Agricultural Services, n.d., http://www.fas.usda.gov/regions/panama, May 23, 2016.

[3] Jeff, “Panamanian residency visa investment through sustainable, environmentally friendly reforestation projects”, Panama Forestry, n.d., http://www.panamaforestry.com/, May 23, 2016.

[4] Michelle Martínellí and Rubén Irígoyen, “International tax – Panama Highlights 2015”, Deloitte Touche Tohmatsu Limited, 2015, https://www2.deloitte.com/content/dam/Deloitte/pa/Documents/tax/2015_PA_Tax-panamahighlights.pdf, May 24, 2016.

[5] International Living, “Taxes in Panama”, International Living Magazine, Agora Inc., 2013, https://internationalliving.com/countries/panama/taxes/, May 24, 2016.

[6] Alvaro Aguilar, “Panamanian Tax Exemptions”, International Law Office, January 28, 2005, http://www.internationallawoffice.com/Newsletters/Corporate-Tax/Panama/Fabrega-Molino-y-Mulino/Panamanian-Tax-Exemptions, May 24, 2016.

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Agricultural Investing Articles asset class Investing South American Agriculture

Agriculture as an Asset Class

Agriculture is one of the oldest asset classes in the world, time tested and proven to weather economic uncertainty.  Within agriculture, farmland has historically proven itself as a tangible, stable storage of wealth, appreciating approximately 3.5 percent annually over the last 30 years.

 

A Global Farmland Index recently developed by Savills World Research, an index based on data from 15 key farmland markets across the globe, recorded an annualized growth since 2002 of 14.8 percent. The strong, steady growth highlighted by the index also illustrates a reduced volatility, characteristic of the asset class. A direct comparison between farmland and other global commodities shows farmland values were less volatile than other commodities and were significantly less affected by the credit crunch in 2008.

 

Historical Commodity Price Index

 

When compared to other selected asset classes within the U.S. markets and global commodities, farmland and timberland have upheld their reputation as high-returning, low-risk asset classes.

 

Historical Risk and Return

 

A further assessment between farmland and the S&P 500, the market index that represents roughly 70 percent of all stocks publicly traded, shows that farmland investments dramatically outperformed the S&P 500 Index over a 15-year span. As the graph below also illustrates, the 2008-2009 financial crisis had virtually no impact on the NCREIF Farmland Index’ investment value, further highlighting agriculture as a secure, stable alternative uncorrelated with the equities market.

 

NCREIF Farmland Index

The fundamentals of agriculture are some of the most promising characteristics of this asset class. With the global population expected to reach 9.7 billion people by the year 2050, the development of a robust food system will be crucial to ensuring a sustainable and prosperous future. This increase in global population will require a 60 percent increase in the demand for food production. Where will this growth in food production come from? While U.S. agricultural markets may be an investor’s first solution, they may not be the most lucrative market for an agricultural investment.

Potentially productive U.S. agricultural land is being developed at a rapid rate and as a result of this shrinking supply, prices for remaining farmland are increasing. From 2007 to 2012, nearly 3.5 million acres of rural land in the United States was converted to non-agricultural uses. During that same time period, according to the USDA’s 2016 Land Value Summary, U.S. farm real estate, cropland, and pasture land rose in price per acre an average of 17 percent.

 

Average Farm Real Estate, Cropland and Pasture Land Values

 

The relative ease of agricultural transactions in the U.S. has more investors chasing the same shrinking pool of opportunities, further reducing supply and continuing to drive up prices. Investors bold enough to diversify with an overseas agricultural investment can find plenty of untapped opportunities, strong upside potential, and an industry poised to not only support, but profit from the rise in global population and corresponding demand for increased food production.

Opportunities and Risks in Latin American Agriculture

The multi-faceted investment opportunities in Latin American agriculture provide an assortment of alternatives for a variety of investors – private, institutional, family offices, and High Net Worth Individuals (HNWIs). Ideal climate, quantifiable soil productivity, and an immature agribusiness market creates opportunities that the U.S., as a fully developed market, can hardly present. These conditions present a growth potential offered by Latin American agriculture that is hard to match in other parts of the world.

 

A critical consideration when researching agricultural land as an investment is the availability of arable land and sufficient water resources in that region to support sustained agriculture.  The Latin American region is home to the world’s greatest agricultural land and water availability per capita. Comprising only 15 percent of the world’s land area, Latin America receives nearly 30 percent of the world’s precipitation and is home to almost 35 percent of globally available renewable resources[i]. As you can see from the image below, much of Latin America has a water stress level (ratio between withdrawal and availability) between 0 and 0.3.  Essentially, there is very little competition or stress between the amount of water being consumed by the population and its availability in the environment. The same cannot be said for the United States.

Water Stress Level Map

 

One very compelling point of differentiation between U.S. and Latin American farmland is price. A 2016 Iowa Land Value Survey found the average price of Iowa farmland, some of the most productive and sought-after farmland in the U.S., was approximately $7,183 per acre[ii].  Compare that, for example, to the average price per acre for top quality, fertile farmland in Uruguay at $4,850 per acre or productive cropland in Argentina for $3,600 per acre and these price points become hard to ignore. As the graph below shows, the average price of varying types of agricultural land in several different Latin American countries is extremely competitive against current U.S. agricultural land prices.

 

Approximate Dollars Per Acre of Agricultural Land

 

It’s important to note here that Panamanian land prices are influenced by the country’s excellent foreign investor and business practices, their longstanding and proven track record of excellent agricultural practices, their proximity to the U.S. and ease of export, and their use of the USD as a primary currency. Uruguay, Argentina, and Ecuador, on average, offer more affordable land prices than their North American counterpart.

 

When considering U.S. versus emerging market investments, one of the key differences is the risk profile an investor is willing to assume. An investment in Latin American agriculture, for example, may present a higher risk profile, but these risks are becoming increasingly easier to understand and mitigate. To minimize these risks, as with any investment, investors need to first parse emerging market risk at a country-level first, then isolate specific, often localized risks that may not be readily apparent at the country-level assessment phase. This is particularly true in the resource/agricultural sectors. Some of the greatest risks revolve around politics, macroeconomics, and rule of law. While there is little that can be done to manage political and macroeconomic risks, investors need to fully assess these environments, understand all possible scenarios, and make the right trade-off for themselves between potential risks and reward.

 

Understanding a country’s legal framework is crucial to protecting and insulating the investment as much as possible. This is where sound legal assistance is an absolute must. The right representative can provide you with advice concerning titling issues, cultural differences, and connect you with governmental agencies to apply for special investor programs. Potential investors should seek counsel from someone with international investment experience as local advisors may tend to favor loyalty to their local network more than finding the investment that best suits your needs. Finally, a failure to understand the culture of the country you’re investing in is a recipe for a failed investment. Essentially, an absentee investor is asking the surrounding community to watch over their investment while they are away, something that’s not possible without their support.

 

[i] Wendong Zhang, “2016 Farmland Value Survey Iowa State University”, Iowa State University Extension and Outreach, 2016, https://www.extension.iastate.edu/AGDM/wholefarm/html/c2-70.html, January 2nd, 2017.

[ii] Inda Flachsbarth, Barbara Willaarts, Hua Xie, Gauthier Pitois, Nathaniel D. Mueller, Claudia Ringler, and Alberto Garrido.  “The Role of Latin American’s Land and Water Resources for Global Food Security:  Environment Trade-Offs of Future Food Production Pathways”, PLOS One, U.S. National Library of Medicine National Institutes of Health, January 24, 2015, http://www.ncbi.nlm.nih.gov/pmc/articles/PMC4305321/, May 20, 2016.

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Agricultural Investing Investing South American Agriculture

The Case for Ag Investment in South America

Insight from International Entrepreneurs in Agriculture

The Case for Ag In South America

 

 

 

 

 

 

Written by Michael DeSa, Wilfred Morren, and Monica Ganley

In the context of recent political turmoil and today’s uncertain economic times, many investors and entrepreneurs are seeking alternative investment options outside the U.S. as a way to add diversity and uncorrelated assets to their portfolios. Agriculture is one of the oldest asset classes in the world, time tested and proven to withstand economic uncertainty and volatility.  In particular, multi-faceted and diverse agricultural investment opportunities in South America provide an assortment of alternative opportunities for a variety of investors.

To help shed light on this topic, Jacob Warwick, founder of ThinkWarwick Communications, recently interviewed three investment entrepreneurs and founders that specialize in South American agricultural markets. Michael DeSa, Monica Ganley, and Wilfred Morren, discuss how South American agriculture markets differ from the U.S. and where you should focus your efforts this year.

Agriculture as a Growing Asset Class

These experts believe agriculture in South America is a more stable, tangible alternative compared to low yielding bonds or overvalued, risky, and extremely volatile equity markets within the US.

Wilfred Morren, a Dutch native who has lived and worked in Uruguay for ten years, is the director of an investment brokerage firm called, Farmland Uruguay. He points out, “Farmland has historically proven itself as a tangible storage of wealth. In fact, the appreciation of farmland worldwide over the last 30 years is approximately 3.5 percent annually.”

Monica Ganley is the founder of Quarterra, a boutique strategy consultancy dedicated to providing clients insight into the Latin American food and agriculture industries—and the tools needed to unlock business opportunities in the region.

For Ganley, the fundamentals of agriculture as an asset class are the exciting aspect. She authenticates her belief in agriculture with facts. “With the global population expanding rapidly, the U.N. estimates a world population of almost 10 billion by 2050, enabling the development of a robust food system will be crucial to ensuring both a peaceful and prosperous global future.” She further solidifies this point by saying, “If there are any doubts about the relationship between food availability and geopolitical stability, look no further than the role hunger played in the Arab Spring.”

While it’s a near given that population will continue to compound over the foreseeable future, this doesn’t necessarily mean agriculture in the United States is a bad investment option; only that it may not prove the most lucrative investment opportunity.

Ganley adds, “There’s nothing wrong with agriculture in the United States, but I think because of the relative ‘ease’ of these transactions, there are a lot more people chasing the same opportunities.”

Michael DeSa is the founder of AGD Consulting, a US-based, veteran-owned advisory company offering consulting services and customized investment research trips to private and institutional investors. DeSa shares insight into the US market, “Research shows that from 2007 to 2012, nearly 3.5 million acres of rural land in the U.S. was converted to non-agricultural uses. During that same period, the average price per acre of U.S. farmland rose nearly 22 percent.”

It appears that while there are agricultural investment opportunities within the United States, their availability is shrinking and prices are increasing. Investors bold enough to diversify with an overseas investment can find plenty of untapped opportunities.

Opportunities in South American Agriculture

Both DeSa and Morren agree that South American agriculture has grown more attractive over the past several years. “It’s one of the few regions of the world that still has underdeveloped and underutilized farmland. The region is home to nearly 30 percent of the globe’s arable land and one third of its freshwater supply, speaking to its sustainability over time.”

Morren adds that for the past three decades, countries such as Uruguay have concentrated on establishing foreign investor-friendly business practices to draw more outside investment dollars. This means that securing a long-term investment partner is more obtainable for United States citizens that is has been in the past.

Ganley, a resident of Buenos Aires, agrees that investment opportunities are becoming increasingly accessible. “We have seen an important shift in Argentina’s attitude toward foreign investment. Since taking office in December 2015, president Macri has eliminated the parallel exchange rate and taken other measures to facilitate investment flowing into the country.”

With its sustainable water supply and untapped arable land, South American agriculture may be poised to support the world’s growing need for food; however, with the tremendous size and scope of the continent, these three experts believe the most value and upside potential is concentrated in the southern cone, primarily Argentina, Uruguay, and Paraguay.

DeSa acknowledges that while opportunities abound throughout the continent, “The south and central region has the most potential for future upside. In this region, you’ll find a stronger physical and legal infrastructure, a longer track record of strong foreign investor sentiment, and examples of a more stable geopolitical climate.”

DeSa’s sentiment on the region closely aligns with what Ganley has been seeing in Argentina, particularly within governance around the agriculture industry.

“The elimination of effective export taxes on corn and wheat have increased potential returns while the soy industry is benefitting from recent tariff reductions. In the Northern provinces, the government is aiding soy farmers by offering subsidies and transport initiatives.”

Argentina’s beef industry is also poised for growth as a result of the government removing export taxes imposed by the former administration.

Morren is seeing farmers in Uruguay play towards trends in the United States to increase investor interest.

“The climate and physical landscape (in Uruguay) are ideal for extensive cattle breeding and uniquely qualified to meet the increasing demand for grass-fed beef. Premium quality beef production is business as usual in Uruguay, with many of the animals bound for the U.S. having a rating of Never Ever III, which indicates that the animal has never received antibiotics, growth hormones, or proteins of animal origin.”

Morren adds that forestry in Uruguay has also been a strong sector, “Forestry started growing nearly 30 years ago when the government was able to attract large multinational investors such as Shell and UPM from Finland.” These major investments primed the Uruguayan economy with established pulp mills and processes that are designed for large scale operations.

Risks and Opportunities in South America Versus United States

DeSa, while not against investing in the United States, advises his clients about one very compelling differentiation between the two—farmland prices.

“A 2016 Iowa Land Value Survey found the average value of Iowa farmland was approximately $7,183 per acre. Compare that to the average price per acre of top quality, fertile land in Uruguay at $3,500 and these price points become hard to ignore.”

Morren agrees, “The strong growth potential offered by South American agriculture is hard to match in other parts of the world. Ideal climate, quantifiable soil productivity, and an immature agribusiness market creates opportunities that the U.S., as a fully developed market, can hardly present.”

While Ganley, a proponent of investing in South America, understands these opportunities, she also empathizes with North American investors. “When thinking about U.S. versus foreign farmland investments, the key difference is the risk profile an investor is willing to assume” she comments.

“An investment in South American agriculture could come with more risk, but in my opinion, these risks are becoming increasingly easy to understand and mitigate. Many investors are watching the region, especially in Argentina, and its shifting political climate with piqued interest. Investment opportunities here offer compelling fundamentals, but they won’t last forever.”

To minimize this risks, as with other investments, you need to be extremely thorough when researching opportunities in South America. DeSa, who has personally invested in the region twice, argues for due diligence and boots-on-the-ground experience.

“A picture is not worth a thousand words. In my experience, online photos or reports can over or undersell an asset’s potential. Find a company or expert to help you walk the ground, experience the local financial and agricultural culture, and build trustworthy relationships with managers and communities before investing.”

Ganley adds that the greatest risks revolve around politics, macroeconomics, and rule of law. “While there is little that can be done to manage political and macroeconomic risks, the wise investor fully assesses these environments, understands all possible scenarios, and makes the right tradeoff for themselves between potential risks and reward. It’s critical to understand a country’s legal framework in order to protect and insulate the investment as much as possible.”

Sound legal assistance is an absolute must.

“The right representative can provide you with advice concerning titling issues, cultural differences, and connect you with governmental agencies to apply for special investment regimes,” comments Morren.

“Possible investors should seek counsel from someone with international investment experience as local advisors may tend to favor loyalty to their local network more than finding the investment that best suits your needs.”

A failure to embrace the culture of the country you’re investing in is a recipe for a failed investment— potential investors must spend time developing quality relationships.

“You’re asking the surrounding community to watch over your investment while you’re away, something that’s not possible without their trust and support.” adds DeSa.

Conclusion

The vast array of affordable and diverse investment opportunities in South American agriculture are largely unparalleled. As U.S. markets continue to struggle and become increasingly uncertain, many investors will depart traditional asset classes in search of better investment alternatives.

South American agriculture is backed by undeniably strong fundamentals, a high degree of investor freedom to act and create new businesses with local workers, and welcomes the incorporation of experience and technology from developed markets to create high value opportunities with strong growth potential.

Investors should seek to partner with reliable and professional advisors in order to achieve the upside potential of this market.

The future belongs to those who can become comfortable enough with the risks to operate successfully in this high-opportunity environment and while current opportunities exist which are competitive compared to those in more seasoned geographies, fortune will continue to favor the bold, first movers.

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Argentina Cattle Investing Latin America relations South American Agriculture Uncategorized

Argentina Wants to Recapture Global Beef Market Share

An opinion piece about Argentina’s efforts to return to their former beef market glory days.  My emphasis is in bold with my comments in italics.  

Argentina Wants to Recapture Global Beef Market Share

November 30th, 2016

The current wave of agricultural reforms in Argentina could help the country recapture the global beef market share it has lost in recent years, says Valoral consultant Roberto Viton in an interview with Agrimoney.

Viton sees a brighter future for Argentine beef since the election of Mauricio Macri in 2015. Still, the process will take significant time and effort (I recently talked about the need for patience in Argentina in a recent blog post.  Bottom Line: it will take time to change many years of poor economic management, so patience is in order) among producers who are looking to first improve their margins before expanding their production. In the first half of the year, there was much greater retention of cattle by Argentine producers with the goal of building back their herds over time (This is an indication that the local farmer sees future value in cattle and therefore is willing to forgo the immediate revenue in order to build equity in their farms through larger herds.  This is a good sign).

Recovering market share lost to neighboring countries like Brazil, Uruguay and Paraguay will take time in terms of volume, price and quality. At the same time, Argentina will have to regain the confidence of foreign investors and prove to them that “the reforms are truly hear to stay.”

In summary, “I would say that the history of cattle is a history of patience,” says Viton. (I couldn’t agree more).

 

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Agricultural Investing Argentina Articles South American Agriculture Uncategorized

Ask the Expert: Michael DeSa on Latin American Farmland Investments

Below, you’ll find a recent interview piece with Monica Ganley from Quarterra.

DeSa Family Farm in Argentina
DeSa Family Farm in Argentina

http://www.quarterra.com/blog/2016/10/27/ask-the-expert-michael-desa-on-latin-american-farmland-investments

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Agricultural Investing Argentina Articles Cattle Investing South American Agriculture Uncategorized Uruguay

Farmland as an Asset Class & Personal Advice from Successful International Investors

Below is a great excerpt from a recent Q&A session with international, multi-millionaire investor Doug Casey and author/analyst for Casey Research’s Crisis Investing publication Nick Giambruno.  Doug and Nick answer questions about their personal asset allocations and give their thoughts on farmland as an asset class.  Find my areas of interest in bold and comments in []

[QUESTION] WHAT IS YOUR PERSONAL ASSET ALLOCATION?

Doug Casey: I’m heavily in gold, to preserve capital. I own a lot of speculative resource stocks, because they’re very cheap now; I’ll sell them when they, too, become a bubble. I’m moving into commodities—grains and cattle are both quite cheap. [Argentina hosts of wide variety of agricultural opportunities at competitive prices, including cattle pasture land.  Pasture land is available in the $400 – $1,200/acre range, depending on the quality of the soil and availability of water.  In April 2016, Argentina’s beef exports were up 25% from April 2015, likely due in part to the USDA’s lifting of a 14-year hold on the importation of Argentine beef products.  High quality, fattening pasture land is available for approximately $2,000/acre.  Not counting the initial land investment and feed costs, it’s possible to yield a 40-45% annual ROI per head of cattle. Uruguay also offers an extremely developed and quality cattle operation.  Uruguay’s beef products are 100% traceable (the only place in the world this occurs), export to over 150 world markets, and nearly all of their 12 million cows are raised on natural pastures and among superior quality and sanitation practices where hormones and antibiotics are forbidden.]  And a lot of rural real estate, especially outside the US, because political risks are at least as great as market risks today.

Nick Giambruno: I own a lot of precious metals–related assets, some dividend aristocrats, some cash and some foreign real estate.

I am particularly fond of foreign real estate. I think of it like a diversification grand slam. [AG DTours believes in taking this one step further: owning agricultural land in a foreign country.  It offers diversification, a tangle storage of wealth, income generation, and a level of protection from volatile US markets.]

Like a grand slam in baseball, owning foreign real estate is the most potent move possible in a single play. It accomplishes four goals at once…

  1. Move Savings Abroad

Though it’s illiquid and has carrying costs, foreign real estate can function as a hard asset with diplomatic immunity. It’s an asset outside the immediate reach of your home government. It’s highly unlikely they can seize it.

  2. Create Other Diversification Options

In most cases, owning foreign real estate in a country provides a valid justification for you to open a financial account in that foreign country (whereas you may not have been able to before). [Many of these same opportunities are available with the ownership of agricultural land as well].  Obtaining real estate in a foreign country usually gives you some sort of residency, sometimes a shortened path to citizenship, and, in the case of certain countries, like Dominica and St. Kitts and Nevis, immediate citizenship and a second passport. Owning foreign real estate provides you with a second home, potentially a place to retire and an emergency bolt-hole that you could, in an instant, always escape to in case of trouble in your home country.

  3. Portfolio Diversification

Foreign real estate is a tangible hard asset that has diversification benefits for a traditional portfolio of stocks, bonds, precious metals, etc. It has the potential for capital appreciation as well as the ability to generate rental income in a currency other than the US dollar. [While an ag-based investment won’t generate rental income unless your investment also has a residence on it, it can generate income from the sale of the commodities it produces].

  4. Privacy and Tax Benefits

Owning foreign real estate is one of the very few ways that Americans can legally keep some of their wealth abroad while retaining their financial privacy. If the foreign real estate is held directly in your name (i.e., not in a trust, LLC, real estate fund, partnership, etc.), it is not reportable (although any rental income must be reported). [There are just as many tax and business incentives with a Latin American-based agricultural investment.  For more details, check out our white paper on the homepage of our website.]

I’ve personally invested in Colombian real estate. I also think Argentina is very attractive right now. With the election of a pro-market president, Mauricio Macri, there’s a good chance Argentina is also turning the corner to a brighter economic future. That, along with the incredible lifestyle, is why I’m now happily an owner at Doug’s La Estancia de Cafayate. I consider both Colombia and Argentina to be good examples of crisis investing in action.

[QUESTION] IS FARMLAND THE NEXT ASSET CLASS TO SHOOT UP, ALONG WITH GOLD, AND WHAT IS THE BEST WAY TO PLAY IT?

Doug Casey: Well, let me reemphasize that basically all the agricultural commodities are very cheap, and cattle are again very cheap. I think agricultural commodities are going much higher. Like the metals, they’ve been in a five-year bear market. Farmland I think will go up, too. [These are the precisely the types of opportunities AG DTours wants to provide you first-hand experience with in Latin America.  The availability of US farmland is decreasing, prices are rising, and annual returns are falling.  Latin American agriculture can by the alternative investment solution in which many US investors are seeking.]  

Nick Giambruno: I think farmland is the ultimate hard asset. Like gold, its value can’t be diluted by central bankers. Unlike gold, it produces food, the most basic of human needs.

Source:  Doug and Nick Answer Your Crisis Investing Questions

 

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Agricultural Investing Argentina Articles South American Agriculture Uncategorized

Argentina’s Improving Agricultural Investment Climate

Below is an excerpt from our white paper about the improving agricultural investment climate in Argentina.  Don’t hesitate to reach out to us at contact@agdtours.com for more information about how to experience these opportunities for yourself.

Taxes on agricultural commodities are shrinking by the day.  Shortly after his election in December 2015, President Maurico Macri ushered in a new more market-friendly administration which immediately began implementing a series of agriculturally beneficial tax reforms.  He reduced the export tax on soybeans and its byproducts by 5% and eliminated all export taxes on all other remaining commodities.  These commodities with a new zero percent export tax include meat products, grains, fruits, and vegetables.  He also eliminated export permit requirements for grains and oilseeds and removed the country’s foreign exchange restrictions, which devalued the Argentine peso by approximately 45%[i].  This action allowed the peso to float freely in relation to the USD, nearly eliminating the “black market” for the USD almost overnight.  Many of these changes are expected to significantly improve farmer returns and encourage greater wheat and corn planting for the 2016-17 season and beyond.  In March of 2016, the Argentine government suspended the collection of the $160 USD reciprocity fee from US passport holders who visit Argentina for less than 90 days for tourist or business purposes[ii].

Argentina is a home to a thriving agricultural industry, modest land prices, pro-foreigner land ownership practices, and emerging tax reforms for farmers.  It’s no wonder why an agricultural investment in Argentina is a viable investment alternative, one the founder of AG DTours and his family have already capitalized on.

[i] World Grain Staff, “Argentina reduces export tax on grains, oilseeds”, WORLD-GRAIN.com – The Grain and Grain Processing Information Site, February 8, 2016, http://www.world-grain.com/articles/news_home/World_Grain_News/2016/02/Argentina_reduces_export_tax_o.aspx?ID=%7B62B60C81-C80C-4D43-BAA9-81B0B3EDE01E%7D&cck=1, May 22, 2016.
[ii] Embassy of Argentina in the United States, “Reciprocity fee for US citizens”, Embassy of Argentina in the United States, March 24, 2016, http://www.embassyofargentina.us/en/consular-section/reciprocity-fee-for-us-citizens.html, May 22, 2016.
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Agricultural Investing Articles Latin America Private Equity South American Agriculture Uncategorized

Spotlight on Latin America – Diverse by Country but Concentrated by Sector

Below is an excerpt on Latin America from the International Finance Corporation’s (IFC) May 2015 Report titled “Private Equity and Emerging Markets Agribusiness:  Building Value Through Sustainability”.  The report highlights trends in private equity investment in emerging markets agribusiness, including Latin America.

I’ve italicized parts I think are particularly interesting.

Spotlight on Latin America – Diverse by Country but Concentrated by Sector

As in Sub-Saharan Africa, Latin American agribusiness investments exhibit diversity by country but are slightly more concentrated with respect to sector (figure 11).

Figure 11: Latin America Agribusiness PE Deals by Country and Sub-Sector, 2008-2014

Latin America Agribusiness PE Deals by Country and Sub-Sector, 2008 - 2014

Of the three regions discussed, Latin America exhibits the greatest concentration of investments in forestry deals, which could be due to the climatic and soil conditions in South American countries. Based upon his experience with tree crops in Southeast Asia and South America, Pacific Agri Capital’s Randall observes, “The tropical belt yields on both a per-hectare and food-caloric basis that can be produced in Latin America are far greater than anywhere else in the world.” These growing conditions have created deal flow both in primary production of tree crops and in lumber processing companies.

Similar to other emerging market regions, a key constraint on agribusiness companies in Latin America is ensuring that their operations are fully capitalized. One distinctive feature of the region’s agribusiness environment, however, is that unlike India, parts of Southeast Asia and Sub-Saharan Africa, investors in many Latin America countries can obtain freehold titled land. This makes it easier to pursue primary production opportunities and can facilitate an agribusiness firm’s ability to achieve scale and vertical integration.

Read the full report here

 

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Agricultural Investing Argentina Articles South American Agriculture Uncategorized Uruguay

Global Farmland Index/Prices – Savills World Research

A great report just released by Savills World Research last month describing the state of global farmland from 2012 to the present.  The report is based on data from 15 different world agricultural markets and is designed to provide comparative data on global farmland prices and market summaries.  Here a few highlights from the report

  •  The Global Farmland Index recorded an average annualised growth of 14.8% since 2002 and 6.6% over the past five years.

  • Farmland values are less volatile than other commodities and were significantly less affected by the credit crunch in 2008.

Global Farmland Index Graph

  • South America showed a 17.5% annualised growth since 2002.  The above graph shows South America was only outperformed in index growth by Central Europe; now facing extremely unstable times due to the Brexit.

  • The report describes an innovative way of benchmarking farmland prices to account for regional variables or more specifically investment spend relative to output by determining the cost of acquiring land in order to grow a tonne of wheat. Our ‘land cost for wheat production’ league (Figure 3 below) takes the average value of farmland in 2015 and divides it by the average harvest wheat yield over seven years (2008 to 2014). By taking a seven year period it allows for any weather fluctuations to be accounted for.

Cost of Land Graph

  • Note that Uruguay and Argentina have some of the lowest costs of land per tonne of wheat values.

  • Investor interest and demand to diversify investment portfolio’s will remain strong. Farmland performance tends to be counter-cyclical to other assets

Bottom Line to Investors

  • Agriculture is a long term investment to iron out volatility.

  • Diversify your portfolio to spread risk across different regions

  • Due diligence, especially with a range of cultures, political administrations, ownership structures, tax regimes, foreign investment regulations, is essential to understand global markets.

  • The right asset in the right market will yield positive returns for the investor in the long term.

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Argentina Articles South American Agriculture Uncategorized

A Glimpse into Argentina’s Economic Future

Traditional Asado
Traditional Asado

Below is an except from Doug Casey’s May 2016 Casey Report.  Doug is an American investment advisor, author, and owner of a wine and residential sporting estate project called Estancia de Cafayate in Salta Province, Argentina.  As a ranch owner myself in Argentina and after having spent a considerable amount of time there over the past year, both before and after Macri’s election, I think his assessment of Argentina’s economic future is spot on.  We, at AG DTours, think the time to invest Argentine agriculture is now.  Enjoy…especially his description of an asado; a truly unique experience.

“So, word got out here in Argentina that I was turning 70. And that meant a fiesta was in order. I hate celebrating my birthday, but it would be churlish to wave off people who like that sort of thing.

I was invited to a party put on by some of my neighbors. Vintners, horse breeders, ranchers, farmers, and the like. An interesting group. Rich, sophisticated, the local upper crust; I’d only met perhaps a third of them before that evening. It turns out that most of them get together weekly, at one estancia or another, and have an exotic asado party. I served as this week’s center of attention and entertainment.

It was different from similar parties I’ve been to in Buenos Aires (BA) in that everyone here was speaking Spanish, with a smattering of English. In BA, the conversation at a dinner table is typically multilingual—Spanish, English, French, German, and Italian can all be used.

People were patient with me, understanding that Americans generally lack linguistic sophistication. My French (now rusty and affreux) is still better than my Spanish, mainly because I went to school for a year in Switzerland. My German is even worse, even though the 500 basic English words are all German cognates.

Argentina, of all the countries in the world, most resembles ancient Rome.  The whole country revolves around BA, the way the early Roman Empire revolved around Rome.  Successful people all have a place in the capital, one in the country, and another on the ocean for when it’s hot in the summer.  And they socialize like the Romans, with dinner parties that last well into the wee hours, as a matter of course.  First, you’re served hors d’oeuvres and champagne. Then various sausages and warm meats. Then the main course and vegetables. Then pasta. Then fruit and a desert. You’re now halfway through. Next come the after-dinner drinks and cigars. Finally, coca leaves, which most everyone chews for the rest of the evening. And conversation for the whole six hours.

What did we talk about? Many things, of course, including the economy, the world situation, politics, and the recent Argentine and upcoming US elections.  Everyone had heard it said that Hillary was going to be the next president.  Nobody liked the idea, if only because Argentina has had uniformly disastrous experiences with populist female politicians.  Peron’s first wife, the famous Evita, acted as a shadow president and, some would say, set the tone for the country’s long decline. Then came Peron’s second wife, Isabel, an Evita look-alike/act-alike, who was first his vice president then succeeded him as president after he died. Then came Cristina Kirchner, the wife of another president who died in office.  Everyone (including myself ) was shocked, but extremely thankful, that Cristina’s surrogate was beaten by Mauricio Macri.  Macri is hardly John Galt, but my guess is that the country will experience a boom in the next few years. Why? Agricultural products are at rock bottom after a long, deep bear market; tens of billions of additional money will flow into Argentina with higher agricultural prices. The new government has discarded agricultural export taxes ranging to 40% (before income and other taxes); as a result, production will likely go up 50%, bringing in many more billions. Some of the estimated $200 billion that Argentines have abroad is now likely to come back. And with the settlement with the holdouts from the government’s $100 billion default of 15 years ago, lots more money will flow into the country. A general deregulation of the economy, now in progress, will further increase prosperity. So, I told them, things were likely to get better in Argentina…”