Buying farmland in Paraguay, Uruguay and Brazil: an investment with upside growth potential
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Land prices have declined in the past few years in these countries, along with the current strength of the US dollar, it makes a strong case for investing now in farmlands Latin American’s Mercosur region. The countries in the Mercosur include Uruguay, Argentina, Venezuela (suspended), Paraguay, and Brazil.
Farmland has a history of preserving capital in times of economic downturns.
The durability and negative correlation of farmland returns to economic cycles are driven by the consistent requirement of a growing population to eat from a limited land resource base
These counties share an asset that some say is more valuable than gold: The Guarani Aquifer.
The Guarani Aquifer sits beneath the surface of Argentina, Brazil, Paraguay, and Uruguay. As one of the world’s largest aquifer systems, this extensive reservoir encompasses 1.2 million square kilometers and contains an unprecedented amount of water.
Experts believe that this water body can supply enough drinking water to last 200 years. Given the importance of water for agriculture, this makes the Mercosur an attractive region for farmland investment.
The largest segment of the Guarani Aquifer lies beneath Brazil. Let’s start there…
FARMLAND INVESTMENT IN BRAZIL
Brazil boasts the second-largest cattle herd in the world, making it the second-biggest exporter of beef. In addition to its beef and dairy products, Brazil is a key producer of coffee, sugar, orange juice, and other agricultural products.
Unfortunately, the investment process is anything but easy. Some of the obstacles associated with buying Brazilian farmland include Brazilian laws that require rural landowners to invest in GPS technology to georeference their farm boundaries. This is to avoid future boundary disputes between neighbours.
On top of that, foreign-owned farmland in Brazil can not exceed 25 per cent of the municipality in which it sits. The government limits you to 5,000 hectares or 12,000 acres depending on the circumstances, and there are zoning restrictions as well.
FARMLAND INVESTMENT IN URUGUAY
Restrictions are less stringent in Uruguay, where the Uruguayan government does not limit land ownership by foreign buyers so long as those buyers aren’t foreign governments. ie sovereign funds.
Investors in Uruguay can manage their own land, hire local managers or lease out the land or working farmers. Uruguay has some excellent soil for certain crops and, while the cost of living can be expensive, is a very free-market economy and a hub of offshore banking for its neighbours.
Uruguay is more libertarian than other Latin American countries, so are dealing with a progressive growth-focused government.
FARMLAND INVESTMENT IN PARAGUAY
Paraguay might attract investors interested in the Mercosur’s “roads less traveled”, as it offers a low-tax policy for foreign investors. Additionally, Paraguay’s labor costs are is lower than most of the other Mercosur countries.
Paraguay and Brazil own a bi-national hydroelectric dam, which is the world’s largest generator of renewable clean energy. Consequently, energy costs are low. Even better, Paraguay is strategically located with easy access to neighboring countries and has a stable currency as far as South American currencies go.
In fact, it has been reported that Paraguay has the second-highest return-on-investment for the private sector in Latin America. That is why so many people are not only flocking to Paraguay as a second residency haven, but it’s stand out as a lower-cost investment opportunity.
With over eight million hectares available for agriculture, Paraguay’s agriculture can potentially triple its food production output, and Paraguay is the second-largest exporter of stevia, the natural sweetener that is rapidly gaining a greater share of the global market.
Numerous South American countries offer excellent opportunities for agriculture investment. If you have minimal funds ( under 1 million ) and want to get started with fewer hassles, you might find Paraguay could be your best bet.
South American farmland continues to provide strong and consistent risk-weighted returns relative to other asset classes. Farmland’s performance is unique relative to other financial products due to its relatively low volatility, negative correlation with equities, and consistent performance throughout economic cycles.
Contact the Gateway to South America team to learn about the best investment opportunities in the region. The company is a benchmark for foreign investors wishing to invest in Argentina, Brazil, Chile, Paraguay, Peru, and Uruguay, providing expert advice on property acquisition.
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