Uruguay Agricultural Real Estate Review
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Update of Uruguay agricultural real estate review: Prices of agricultural fields sold in 2016 are significantly lower than in previous years. However, the fields – three of them – are very extensive and are exclusively dedicated to cattle pasture. In addition, among the hectares included and paid for, there are significant tracts of mountains and bush. Average prices are therefore seen to be lower, without this being the reality.
An important factor to consider, and that has influenced the low average price, is the selling, in haste, by investment funds – vagabond capital – of agricultural properties located in northern Uruguay.
A great advantage of Uruguay is that there are no restrictions or barriers to entry and exit of capital. This substantial fall in average prices is an example of the negative externalities of open policies.
We know that these funds are for the most part volatile capital. Having options to buy low and sell more expensively – with a better margin – anywhere else on the planet, liquidated to below average to mobilize capital quickly, and there goes that capital.
We can only speculate what might be the interest of gaining liquidity so quickly. It could be that the political destabilization of Brazil could eventually drive away the more conservative investors, which, in turn, would attract investment funds to buy bargains in that market.
Uruguay agricultural real estate review prices 2016
On the other hand, we see in this chart that the price paid in Colonia for premium crop land – USD11,917 – has been preserved, and has slightly increased the average amount paid in previous years in that area.
Transactions subsequently registered with the Government of Uruguay – only 13 – are all properties of over 500 hectares, which, according to regulations, must be registered with the government.
Also, keep in mind that the tax reforms which the government has implemented have been rejected by speculators. These same changes, seen from the outside, are not seen to be as important as to cause significant impairment to the value of agricultural land in Uruguay.
In short, most of the farms sold so far this year are suitable for livestock and forestry.
So what has pushed down the average price – and is of concern to some investors – unaccustomed to the fact that land values are affected not by owners but by market externalities, as is the case of investment funds, has no relation to the actual performance of agriculture in Uruguay or the values of the products or the related exports.
Conditions for agricultural development in Uruguay
The special and very favorable conditions that Uruguay provides for investment in this market area are explained by an exceptional climate; abundant water and moderate temperatures, which together promote sustainable agriculture and growth.
The natural conditions are complemented by a government policy which regulates soil conservation. As regards traceability, in Uruguay all cattle have a chip in their ear, and the animals are followed from birth, through transportation, marketing and to the table: either within the same country – Uruguay consumes more than 50 kilos of beef per person per year – or at the table of, say, a Chinese citizen. The quality of premium Uruguayan meats is among the best in the world.
Fields of moderate size in Uruguay, which allow for logistics focused on exports, have fair value. The distance from field to port is, on average, just 200 kilometers.
It is important to emphasize that Uruguay has a transparent agricultural land market. All purchases exceeding 500 hectares are incorporated into public records, and, most importantly, are available for consultation and study.
The record prices of purchases and sales, and the objective classification of soils and records of each agricultural property are public and can be consulted on the websites.
Serious and mature market
Without exaggeration, the transparency and information available is the most advanced in South America. That same transparency, very advantageous under normal circumstances, this time has caused some concern.
Due to the above-mentioned externalities, an unnecessary warning has been placed on the market. Uruguay has the best conditions of transparency in the region and the soils for crops and livestock are of the highest quality.
Uruguay is a mature market, in the sense of transparency and quality. However, it still has great potential for further development in the agricultural area. All this gives Uruguay great advantages as regards agricultural fields and within the market as a whole.
Legal security, political stability, free movement of capital and transparency are four factors that facilitate investment in Uruguay and that provide comparative advantages to other markets in the region, in the sense that Uruguay has a consistent policy and complete control of transparency and competitiveness of the agricultural market.
Uruguay has no restrictions on the purchase by foreigners of agricultural land.
China increased imports of red meat during the first months of this year. We will have to follow closely the trend, which clearly appears very auspicious, not only for Uruguayan exporters but also for the world. If the giant arises from its recent lethargy, the world economy as a whole accelerates.
Want to know more about Uruguay? Then read some of our other Uruguayan Posts.
Want to know what Real Estate costs in the area?
English Editor: Audrey van Ryn
Writer & Translator: Mª Verónica Brain
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.