The world´s population is continuously growing, while the amount of arable land usable for the production of food is declining. A growing demand and likely shortage in supply means food prices are bound to rise significantly in the long term.
Farmland offers diversification of a portfolio with risks comparable to bonds and returns close to stocks. Unlike many traditional paper assets, farmland cannot be downgraded to zero.
Investing in farmland not only serves as a hedge against inflation, but also yields lucrative returns in terms of both production and asset appreciation.
This is commonly broken down into 2 major sections:
The very fertile soils of the Chaco area, combined with an excellent genetic quality of livestock and abundance of rainfall provide for above average returns on production in especially Paraguay. Depending on the individual demands of each investor this varies significantly.
Land value appreciation is the most significant aspect of an investment in especially Paraguayan farmland. While arable land generally increases in value relative to the increase in food prices, Paraguay is currently going through an historic growth in land value appreciation.
Throughout the last 4 years Paraguayan farmland appreciated approximately 25% annually as the land price is adjusting itself to the international standard.
While fully developed farmland in the Chaco area sells for approximately USD 1,200.00 per hectare, a comparable piece of land in terms of production capacity in neighbouring Brazil sells for approximately USD 9- 12,000.00. This clearly indicates a further potential for growth.
Virgin farmland in the Chaco area of Paraguay has to be developed in order to be ready for production. Land prices in the Chaco area are around USD 1,100.00 per hectare for developed land ready for production, and USD 600.00 for undeveloped virgin land. Developing virgin land carries a cost of approximately USD 600.00 to be completely ready for production.
Farmland in Uruguay ranges between USD 3000.00 per hectare for forestation (lower quality soil) and USD 8000.00 for grain and other demanding crops (high quality soil).
Our recommended minimum investment varies by investment approach. Due to the extensive farming methods in South America, economy of scale is an important factor, meaning that returns increase significantly with project size.
Years of experience have lead us to recommend the following property sizes as minimums for sustainable and successful investment in Paraguay:
Uruguayan farmland is usually immediately ready for production as there is no need to prepare the virgin land. The prize of land in Uruguay has levelled off and we do not expect to see a significant appreciation in the near future, therefore landbanking is not as recommended as in Paraguay unless if used as a tool for wealth preservation. Depending on location and soil quality we recommend the following property sizes in Uruguay:
The Southern Connections Agro Consulting & Management team consists of individuals who grew up on farms and have generations of experience in the meat production industry.
A family run business, the international farming experience of the Stahr family provides the investor with personnel and innovative expertise. Combined with teams of highly competitive local staff guarantees our investors the most profitable, optimised, and transparent farmland investment opportunities in South America.
We work on a highly individual basis, adjusting each investment project to the exact demands of the investor.
After acquisition of the land we take full responsibility for the complete management of the food production facilities/farms. Services include everything from notary, legal and accounting all the way to practical management of the farms, including staff.
The countries of Paraguay and Uruguay provide the most positive environments for foreign investment in agricultural real estate of all countries in South America.
Paraguay offers excellent conditions in order to attract and retain investors from all over the world. A stable democratic government, private property rights duly respected by the constitution, along with a positive investment climate and undiscovered resources provide a country of great opportunities. By law, any foreign investor enjoys the exact same rights and responsibilities as a local and tax incentives are given to foreign investors in the agricultural sector. Good sanitary standards, significantly undervalued land prices and outstanding production capacity make Paraguay a highly lucrative agricultural real estate investment opportunity without equal.
Uruguay is a country like not other: Beautiful natural landscapes, endless fertile soil and an abundance of fresh water make it an agricultural paradise. With a very high degree of literacy, the workforce is skilled and its people are peaceful and agreeable. Uruguay presents a stable and secure business environment, very suitable for safe, long-term capital investments.
Paraguay offers one of the world’s most comprehensive legal systems regarding foreign investments, as unless an application is filed for incentives granted under Law 60/90 or the Maquila or Free Trade Zone Laws, investors need no governmental approval to invest. Except for a certain border protection area, there are no restricted areas, no discrimination and no limitations.
Paraguay actively promotes foreign investment in the industrial and service sector. The country´s Foreign Investment Law 117/91 grants foreigners the same guarantees, rights and obligations enjoyed by any local investor.
A series of features make Uruguay an interesting place for foreign investors, like its political, legal and financial stability, its well educated population, its location, and infrastructure. Uruguay also incorporated a so called ¨Investment Law¨ (Ley N° 16906 de Promoción de Inversiones, 1998 ). At a high level, these pieces of legislation start by giving the prospective investor with no discrimination between local and foreign investors, a framework of security and transparency that is fundamental in the investment decision-making process.
We work on a highly individual basis based on the demands of each client.
In most cases the entire project is fully owned by the investor(s). Southern Connections Agro Consulting & Management takes responsibility of the complete management of the project, including everything from notary, legal and accounting all the way to practical management of the farms, including staff.
While managing the agro project for the investor, complete transparency is maintained at all times through monthly progress- and accounting reports. All decisions are taken by the investor with assistance of our consultancy team.
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