Invest in Wood: Ecuador Teak

by | Nov 19, 2003 | Archives

Numerous messages here in recent months have warned to get out of the U.S. dollar. Sure enough we have seen a substantial fall. The worst however is likely still to come. Even our top gurus are warnings us. Warren Buffet in a recent article wrote “Through the spring of 2002, I had lived nearly 72 years without purchasing a foreign currency,” Buffett wrote. “Since then Berkshire has made significant investments in — and today holds — several currencies.”

Sir John Templeton came out of seclusion to add to this warning in an interview for Equities magazine, saying that the US economy was in trouble and the US stock market was broken. He anticipates a 40% drop in the value of the US dollar and a precipitous fall in real estate.

Plus value guru Jeremy Grantham, a Boston-based money manager to which institutions and individuals have entrusted $22 billion, says in a Barron’s article entitled “Sucker Punch Coming”, that we are in a Bear market rally and that the stock market is way over-valued. He feels that the government and personal debt which should have cleansed itself during this economic slowdown (but did not) will create an economic black hole. This could cause a serious U.S. dollar crash.

The next several messages will focus on places to invest outside the U.S. dollar.

This first thought comes from Grantham himself which is to invest in timber. This is an asset class that seems to do better than most in downturns. One place to invest in wood is in teak plantations.

Much earlier messages (2001)

introduced this idea and said:

“I have finally found an affordable teak investment opportunity in Ecuador. The simple fundamentals have always appealed. Teak is in growing demand. There is diminishing supply, plus a drastic need to stop logging rain forests where old teaks stand. The answer is teak plantations and Ecuador makes a great place to plant with 365 days a year of direct equatorial sunlight, lots of rain and close to the U.S.!

“Finding good people and a project are the hard parts. I hope I have as I have known Joe Montgomery and Paul Palacios (both previously of Banco del Pacifico) for over five years. They now have a project called Tall Teaks III LLC. I have a copy of the preliminary information memorandum and though I still have questions, want to share the encouraging news.

“The potential is around 20% per annum on a compounded basis for twenty years. That is a lot, about 40 times investment or about $400,000 return on a $10,000 investment! A tax attraction is that the first income does not come in until 2009 when the first thinning begins and though initial capital is expected to be returned within ten years, the big profits are in years 18-through 20 in the first major logging.”

So I checked back in with Paul and Joe to see how this plantation is going. They said:

“We have been planting at Rio Congo since 1997 and this plantation’s care and management is now based on cleaning activities, which consist in keeping stands free of weeds that could grow and damage young plants. Stockholders have visited the plantation, as well as potential investors. In the past weeks we had an important visitor, he was a Teak Expert from CATIE (a firm dedicated to Teak research and assessment, located in Costa Rica). He found Rio Congo plantation in very good condition and considered that our technical projections are very conservative. Our has detailed information about our plantations.

Rio Congo’s public offer process is almost finished, 91% of shares has been sold so we are starting a

new teak plantation called EL TECAL. It will be planted during the coming winter season (February 2004). Land extension is about 150.8 hectares and it is located near the Rio Congo plantation. Teak seeds were brought from CATIE (a firm dedicated to Teak research and assessment, located in Costa Rica) and the nursery is already done. The area is being prepared for planting.

This idea makes extra sense because Paul and Joe’s vision is to offer renewable forest products of high quality, using the best agricultural, environmental and social practices; with the use of profitable and efficient integration of capital.

This fits perfectly into the ethical investing ideas outlines in the how to earn 80% + Profits at

The idea is make money and do some good in the process.

We will look at other ways to invest in timber in upcoming messages. Until then may all your investing be good.