Agroforestry / May 31, 2016

Why Agribusiness in Latin America?

Latin America tropical countries such as Colombia and Costa Rica are amongst the most biologically diverse countries in the world. With over 55,000 plant species, the respective countries feature a variety of ecosystems and natural forests that cover great amounts of the national territory. Taking advantage of the rich soil, local farmers value sustainable development in diversified plantations featuring fruit commodities, valuable tree crops, and livestock. In the case of Colombia, most of the country’s agricultural production takes place in the vast Atlantic plains, which is the ideal environment for such large ventures. As agricultural products become a coveted and highly valued commodity worldwide, such farmlands will continue to rise in value not only for their yields but also for the rich soils that they occupy. Most importantly, Colombia and Costa Rica are countries with direct access to both the Atlantic and Pacific oceans, which allows for easier shipping to markets worldwide.

Agribusiness participation provides a unique opportunity for investors to benefit from a tangible asset that appreciates in property value while at the same time benefiting from the yields of increased global food demand. The demand for food crops will increase dramatically over the coming decades, particularly in the tropics, for two mains reasons. The first is the projection of demographic growth worldwide, which will require an ever-larger food supply. The second is a movement towards biofuel energy sources to meet the world’s increasing energy demand.

In Brazil’s case, for example, ethanol produced from sugarcane has revitalized this agricultural sector and driven up profits for sugarcane farmers who now have a more stable demand for their product. Another benefit of tropical farming is security brought about by yearlong growth and the possibility of alternative products that are highly valued. In addition to fruit and livestock farming, tree crops remain in high demand throughout these regions for uses in furniture production and construction. Likewise, farmlands in Costa Rica and Colombia are ideal for non-edible crops that have energy production potential. Examples of these crops are palm and jatropha, both of which produce oil and biodiesel fuels.

All of these favourable qualities can yield high profits through hybrid land utilisation and agroforestry. With agroforestry and mixed farming, the workers of the land manage to boost agricultural production and add property value to their farmland. Agroforestry consists of the utilization of a unique set of trees grown within the farmland to increase and sustain biodiversity, which in turn mitigates the effects of soil degradation. At the same time, agroforestry provides shade for livestock and maintains favourable humidity levels within the property, thus preventing severe drought.

How to participate in Latin America

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The depreciation of the local currencies against the dollar helps boost exports in the manufacturing and agricultural sectors. It is advisable to design a plan for the next 6-18 months to profit early in time from the next investment wave.

The scenario presented above has unparalleled potential when converted into an asset class, and there is a variety of ways for investors to share in the benefits of agribusiness yields. Several financial instruments offer the possibility of high return on investment by pooling resources into a commonly held company, fund or trust that actively administers agricultural lands. These instruments include Real Estate Investment Trusts (REIT), Equity, and Limited Liability Corporations (LLC). Equity shares through Farmfolio Holdings (FFH) provide a safe investment because of the intrinsic diversity of the asset, in this case farmland, whose value is safeguarded in a variety of ways and whose yield relies on several independent elements. Finally, assets purchased through Farmfolio Holdings (FFH) are secured by a Delaware based LLC which provides the most secure environment in the United States for asset protection and security.

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