Overseas real estate is one great way to hedge against a falling U.S. dollar. Investing in timber is another. Now you can invest in timber in Argentina where prices are low and values are high. See why in this November 4, 2004 Gary Scott
Argentina from our eClub advisor Steve Rosberg in Buenos Aires.
“Forestry is a investment that can be profitable and incredibly good for the world. Today’s trends are disturbing. The global population grows. Natural resources decline. U.S. government debt is at all time highs and rapidly rising. Politicians are bolder in their lies.
All of these factors argue in favor of forestry investments.
One way to diversify against currency loss and inflation is real estate and commodities. Timberland has an exceptionally good record on this count because it combines both assets.
Now let’s look at why forestry investments in Argentina makes special sense.
One huge problem that faces the world is water pollution and the surging costs of dealing with nature's risks. Argentina has one of the world's largest fresh water reserves: not only are the great Patagonian lakes, glaciers and continental ice-shelf nearby, but the Guaraní aquifer, the Paraná and Uruguay rivers are part of the territory.
Yet prices in Argentina are a fraction of the cost of properties in Brazil and Paraguay, not to speak of the northern hemisphere.
Forestry can be a profitable investment in a tangible non-speculative asset that provides growing wealth that takes excess carbon dioxide out of the atmosphere. This can help reduce global warming as it expands your bank account!
Growing trees takes carbon out of the atmosphere and frees the oxygen. Our eucalyptus plantations in Entre Ríos and pine plantations in Misiones withdraw approximately 35 metric tons of carbon dioxide per hectare per annum.
Our plantations are in some of the highest forestry productivity regions on earth. We plant eucalyptus and pine, which start generating income after eight or nine years, when the forests are thinned. The whole cycle takes between eleven and eighteen years, and provides recreation opportunities in the meantime!
The forecast returns, even with the most prudent and conservative hypotheses, are very good. If you own your property, you should expect to make over 11 % compounded annually. And this is under the assumption that future prices do not rise beyond today's, which are 30% to 50% lower than those prevailing in neighboring Brazil or Chile, both of which are experiencing timber shortages which are getting more and more severe.
In summary, we sequester carbon dioxide from the atmosphere at a prodigious rate, take the pressure off the natural forests, and make good profits.
How can you invest?
There are several ways in which you can invest. You can buy the land and grow a forest. Or you can buy participations in a forestry investment trust for a single forest cycle.
Buy the land
This is the most lucrative and best option, as you can run your property as you prefer. And, if you wish, you can build a house, have horses, and even obtain full residency rights in Argentina.
Properties are all different, so pricing and potential vary. Some are apt for forestry only, some will have a portion you can assign to nature preservation, others may have a portion suitable for cattle grazing, or citrus or fruit production.
All land shares year-round snow-free weather and have substantial real-estate appreciation potential because of their location and natural beauty.
Starting investment is approximately USD 66,000 for a 35 hectare lot (86.5 acres). We are buying and subdividing a property for this purpose, close to the city of Concordia.
This investment includes the costs of planting and caring for the plantation.
At today's prices, for an eleven year forest cycle we anticipate that it will generate income in excess of USD 1.3 million plus some cattle grazing revenue and, of course, the appreciation of the land value. The IRR, the compounded annual yield will be well in excess of 10%.
We have other properties for larger investors in the region, ranging in size from 500 hectares to 1200 hectares, and valued in the USD 800,000 to USD 1,500,000 price range.
We have also identified opportunities which we are working on in the Misiones Province, farther north. The climate is subtropical.
Buy a trust
For those of you wanting to invest smaller amounts, you can buy units in a forestry trust.
In this case, you buy part of a newly planted forest trust (or, in the future, growing forest trust) that gives you rights to income generated by the forest as it is cut.
The land is held in a trust which bears the carrying cost of the land.
Entry investment levels are either USD 10,000, representing the forest on approximately 10.3 acres or USD 2,500 representing 2.34 acres.
At the end of the forest cycle, we expect that you will receive at least USD 25,700 for the USD 10.000 investment and USD 5,800 for the USD 2,500 investment.
This is a conservative projection, based on today's prices and not taking into account the subsidy for forest plantations in the Argentine law. Our expectations, in view of trends in the forest market and of inflation are significantly higher.
All trust investments can be sold or transferred at any time, and there is no tax due in Argentina for profits.
We expect to be able to sell carbon credits originated in the plantations that we manage once the Kyoto Protocol Clean Development Mechanism comes into operation.
If and when this happens, 80% of the net proceeds will be for investors' benefit.
Argentine taxation benfits
The Argentine forestry legislation exempts our activities of most taxes and allows a method of accounting for forest growth that eliminates most of the income tax.
No guaranty can be given that this will continue to be the case for the duration of the investment. However, as soon as the whole project is underwritten we will apply for the special tax stability guaranty foreseen in the legislation.
Visiting the properties
Investors are always welcome to come and visit the properties and meet our team. This is one of the very enjoyable aspects of our activity, both for our investors and for us.
As there are many reasons to visit Argentina, let us help you to plan your visit with a focus on your interests.
Many of the questions regarding ownership and title are addressed at www.ushay.com/realestate.htm.
Please email your questions and requests for further information to firstname.lastname@example.org.
All the best, abrazos to you and Merri,
Albarellos 2184 – 1 -1
B1640 BIR Martinez
Tel: (5411) 4793 8988
Cel: (54911) 4986 8798 – [from Buenos Aires, dial 15 4986 8798]
Fax: (USA) (603) 907 8530