Everything you need to know about Agro Grain Pools in South America
This post is also available in: Spanish
The following are a series of frequent questions and answers we have received from our customers regarding the main aspects of investing in Latin American agribusiness pools.
How do these vehicles work?
Investors pool the money via a trust, and a team of professionals manage the operations in exchange for a management fee. After their first year, investors can choose to reinvest their capital or liquidate their assets.
In what currency is the investment?
Global investors usually choose US Dollars as their preferred currency, and there is no inconvenience with that. Latin American citizens need to comply with the regulations of each country in terms of currency transactions. In any case, the return of the investment will ultimately depend on global commodity prices measured in US dollars.
What kind of returns can be expected from agribusiness pools?
It varies depending on the year and industry conditions, but long term averages have been comfortably above 10% in US dollars. A severely negative environment like that of 2009 produced losses around 25% for many pools, but years like 2005, 2007 and 2010 delivered gains in the 20% zone for each year, demonstrating the long term resiliency of the business.
What are the expectations for the next year?
Perspectives are looking good, as weather conditions in the US have produced record high prices for many agro commodities on a global scale.
How do these pools control for risks?
By geographically diversifying production, and also buying insurance against different kind of climatic factors.
What advantages do agribusiness pools have versus other forms of farming?
Capital requirements are obviously much lower, and so are transaction costs, this ultimately means much higher liquidity. Also, profitability is enhanced due to economies of scale, which at the same time means higher diversification due to the size of the operations.
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 and investment tours.
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