This Fair Lady In Panama Could Earn You As Much As 27% Per Year
It’s been two years since I first recommended what was at the time an innovative new agricultural investment opportunity in Panama—specifically, a mango plantation.
The project was launched in February 2014. After a couple of months of preparation on the ground with the help of topography maps and drones, the developers began clearing the land. This was followed a few months later by the first plantings.
Starting an agricultural undertaking such as this one from scratch isn’t a quick or an easy task. Preparing the land for planting is more than removing the brush. You’ve got to clear the land, yes, but, more than that, you’ve got to strategize irrigation and drainage to ensure best possible growth and production from the trees.
That’s where the drone came in. At least once a week, a drone was sent up to photograph the entire property. Those photos were then downloaded to a computer program that tracked changes in the topography as the bulldozers cleared the land, allowing real-time adjustments, again, to optimize irrigation and drainage.
Once that process was completed, trees could start going into the ground. This was done with a soil and fertilizer mix to foster quick establishment of the roots.
Meantime, land clearing continued and plantation infrastructure was established. Internal roads were designed to minimize the impact of vehicle traffic on the organic plantation. Fencing was installed to delineate the plantation and also to keep out stray livestock from neighboring farms. Reservoirs were built as part of the irrigation management system. Redundancy of water supplies was a priority. As the developer put it, “I bought the water. Now I’m developing around it, making sure I’ve got an abundance of reserves.”
The initial mango plantation offering, which featured a variety called Lady Victoria, sold out in June 2015.
Planting for the Lady Victoria parcels was completed in 2015, meaning all of the original production projections are on track.
Meanwhile, the developer continues to work to expand and evolve his plans for selling the harvests. He is in continual conversations with organic fruit wholesalers in the United States, who are advising him on the best ways to maximize revenues. Selling the organic fruit to U.S. distributors will generate higher revenues per pound than if it were sold to local Panamanian juice producers. In addition, processing the fruit by either drying it or pureeing it adds more value and even more revenues per pound. All options are being studied in advance of the first harvest.
Additionally, the wholesalers the developer is working with are asking for more production. The 650 hectares of mangos the developer planned for this plantation aren’t enough according to his U.S. buyers. Demand in the United States for organic anything is expanding… exploding… and the demand for organic mangos and organic mango products, specifically, warrants more production.
That has led the developer to plan a second mango plantation, this one using a different varietal of the fruit.
The My Fair Lady mango, as it’s been named, is a cross between the Lady Victoria and the Fairchild mango. I’ve joked with the developer that it sounds as though he’s naming horses rather than mangos. However, the crossbreeding helps to create different mango flavors and textures.
The main reason the developer has chosen to use a different mango type for this next mango plantation is to maintain market positioning for each type of mango. In other words, he wants to keep the mango varietals as specialty products in the marketplace to help keep prices at a premium.
Currently, you can invest in a hectare of this new My Fair Lady plantation for US$38,500.
At that price, the projected IRR (the IRR is the annualized return over the lifetime of the investment, taking into account the first years when no return will be generated) works out to 17%. The projected annual net yield on the initial investment once the trees have reached full production is 27%. That works out to US$9,989 in net cash flow for each hectare of mangos.
The projected net yield goes up each year after year six on the assumption that the price of mangos will increase each year. This increase is figured at a rate of 3% a year, which barely covers inflation projections.
The return has been projected over the initial 25 years of harvest but keep in mind that mango tress will produce for 60-80 years.
Whether it’s a pre-construction condo or a new agricultural project, one of the biggest risks of any early-in property investment is implementation. In the case of the Lady Victoria Mango plantation, the first investors are seeing their project risk diminish daily, thanks to the timely planting of their trees. This developer is doing everything he said he would do according to the timeline he promised.
The other risks in the case of an agricultural project such as this one, of course, are Mother Nature (that is, weather and pests) and ultimately the market risks associated with finding buyers for the produce.
Weather-related concerns in Panama boil down to the potential for drought. The developer is protecting against this risk with careful and redundant planning for water supply. With a river bordering the plantation and reservoirs in place to store water, drought concerns have been addressed. Also note that drought ceases to be as much of a concern once the trees reach maturity.
Pests aren’t a great concern for the Lady Victoria (or the My Fair Lady), as both of these varietals have been bred to be pest-resistant. They have thicker skins than other mango varietals, making it harder for insects to break through. In addition, the developer has developed an organic pest management plan that includes the use of neem products, among others.
That leaves market risk, which won’t come into play until the trees start producing. However, the sales price per pound of mango used in the projections is today’s sales price for mangos sold locally to a Panamanian juice company. As I’ve explained, the developer intends not to sell his harvests locally but to export them to U.S. wholesale buyers who will pay significantly more for organic mangos and even more for processed organic mango products.
Right now, the U.S. wholesale buyers are assuring the developer that they will buy all the organic mango products he can produce. Should something happen to interfere with that strong and open-ended demand between now and the time of harvest, the developer could fall back to selling to the local Panamanian juice companies. And, again, he’s made his return projections based on this fallback contingency.
If you took my advice and invested in the Lady Victoria Plantation (as I did), your trees are on schedule to be producing as projected. I’m feeling very good about having gotten in so early, and I think you should, too.
If you weren’t able to buy into the Lady Victoria Plantation, the My Fair Lady plantation is your second chance.
I see Panama generally and this agricultural opportunity specifically as one of the best buys you could make right now.
“My question is: If I purchase my Medellín, Colombia property next year in U.S. dollars, what will happen to my mortgage and property when the IMF announces in Oct. 2016 that the Chinese yuan is the new World’s Reserve Currency, replacing the U.S. dollar?
“Should I purchase my Medellín property in the Chinese Yuan, instead of the U.S. dollar?”
Well, you can’t purchase a property in Colombia with Chinese yuan (renminbi)… but then again you can’t purchase a property with dollars, either. Properties only trade in Colombian pesos.
But, otherwise, the yuan is not taking over as the world reserve currency in 2016. It’s only being added to the IMF’s basket of currencies used for SDRs… at a relatively low percentage relative to the dollar.
And the IMF doesn’t decide the world reserve currency anyway. Commerce does.
If someone is holding yuan, then they can convert it to pesos. However, if they are holding U.S. dollars then they would simply convert that to pesos. Taking an exchange loss by converting U.S. dollars to yuan and then the yuan to pesos would be silly.
“Lief, we are currently checking out a couple of retirement spots overseas until mid-March when we return to the United States. Our business and home are currently up for sale and that process will be completed upon our return. We plan to attend your August conference in Las Vegas but would like to contact an adviser (likely an attorney) before then.
“We plan to travel for a year or more before settling into a particular country and would like someone experienced in the various issues to lay out our options and guide us through the pluses and minuses. I checked the Rolodex we received when we subscribed to your paid service, but you have no one in the U.S. listed. The person doesn’t necessarily need to live in the U.S. but would need to be familiar with the laws.
“Thank you for your help.”
I’d say that what you need to help you plan and prepare for your move overseas, more than a U.S. attorney, is a U.S. tax advisor. You can reach the one I recommend here.