Overview of Investing in Farmland in South America
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Investment in South America farmland provides the opportunity for significant returns, but an in-depth understanding of the market is essential.
Across the world farmland values continue to grow and farmland remains a top performing asset. The Savills Global Farmland Index shows an average global annualised growth since 2002 of 20% – with the highest growth recorded in the emerging markets.
Many investors are seeking to de-risk portfolios leading to a wholesale re-evaluation of asset classes in an attempt to identify real and sustainable values.
At the same time the rule book of financial ‘norms’ has in part been rewritten with an understanding by investors, governments and not least the media of the fundamentals and value of prime assets such as agriculture. This has been driven, as we all know, by a global acknowledgement of the need for sovereign food and energy security driven by population growth and climate change.
All of this is assisted, of course, hugely by the accessibility of global markets, together with the ability to move management skills and technical knowledge, as well as capital, to what are effectively under-developed areas.
Therefore, extending a portfolio into farmland across the region provides access to land and an opportunity for substantial capital growth. As in any case, the rewards depend on the appetite for risk, but an awareness of historical trends and the right choice of location can go a long way towards ameliorating them.
Local Knowledge is crucial
The global farmland markets are an active and diverse marketplace; we are involved in transactions for farms that grow soya to others with substantial livestock enterprises. ie dairying.
To the buyer looking to acquire agricultural land outside his home country, knowledge and understanding of the restrictions and policy on foreign ownership and investment is crucial.
The regulatory environment for foreign investment of farmland is not only complex but varies by country. It will determine both the entry and exit strategy.
We leave you with this final message. Investment in global agriculture has only been on the agenda since about 2005. The markets of the world are immature with little reliable comparative data from which to draw direct conclusions.
The range of opportunities for investors is enormous from what I would describe as the frontier countries such as Bolivia and Peru, where substantial investment in development and infrastructure is needed, to the mature markets of Chile. Within our region there are great opportunities for delivering large-scale agriculture at globally competitive prices , but with less political risk than other emerging economies as recently seen in Eastern Europe and parts of Africa.
The stability of South America reflects on its history. A common language ( apart from Brazil ), a common religion and a common european heritage.
We believe that there will be continued unrest and concern in Eastern European with Russia likely to invade Finland and other remnants of the Tsarist Russia. Whether it happens or not is irrelevant as Putin has shown he can out bluff the West any time he chooses.
This will make South America a focus for agricultural investments going forward.
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. #adp02
Post available in: English