Does
Money Grow on Trees?
Growing
Teak Wood In Bocas Del Toro, Panama
By: Cindy Ellis Cody
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| Some may think investing
in trees is the stuff of fantasy. But the hard facts about hardwoods
are a far cry from fairy tale—especially in Panama.
The Law 24 incentives—a program to
encourage investment in the tree-growing sector—are just some of the reasons
investors choose to get growing in Panama. With 100% exoneration on taxes
(both for imported equipment and future profits); a reforestation visa
for a minimum $40,000 investment; combined with an outstanding opportunity
to earn profits offshore—all of these are reason enough. Combined
with the numbers on future lumber yields (projections of 1460%+ return
over the life of a 20 year teak plantation, are the norm), the activity
presents itself as a highly profitable medium to long-term investment with
low risk.
Panama’s advantages have been enumerated
often: its dollar-based economy; attractive Miami-like capital; its balmy
climate and friendly people; a democratically-elected, stable government;
cultural and natural beauty and diversity; home to one of the most important
famous waterways in the world: the Panama Canal. Panama’s status
as an independent offshore center—at a time when many other such havens
are feeling pressure from US and UK tax authorities—is also noteworthy. |
| Paul and Cindy Cody have lived
in Isla Bocas del Toro for the past six and a half years and have planted
over 150,000 trees and sold more than 72 square kilometers of farmland
in the province, mostly for government-approved tree farms. |
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The Tweak of Teak
Teak is prized throughout the world
for its use in boat building, fine furniture making, flooring, veneers,
cabinetry and joinery. Because of it natural oils, it is resistant
to moisture and the drying effects of weather. In short, teak is
a well-known wood with established markets and a proven reputation.
A non-indigenous species with great
resiliency which grows best in pastureland, Tectona grandis is easy to
establish, fast-growing (especially in areas where there is no dormant
season such as Bocas del Toro) and relatively problem free, with maintenance
expenses being most intensive in the first three years. The first
thinning in year 4 may yield small dimension lumber; but the first major
harvest of trees takes place in year 12 with subsequent harvesting cycles
in years 16 and 20. Current wholesale price in the US? Approximately
$2.50 per board foot wholesale FOB for teak of this grade.
The Jones Forestry and Development
Corp. formed by a diverse coalition of some of Panama’s most successful
business people sights “economic solvency, security in investments and
high economic returns” as the reason they chose to establish a 2,000 hectare*
(4,940 acre) project of teak in the Darien in 1996.
(*One hectare = 2.47 acres)
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On the other end of the spectrum,
Fred Rulison, an American investor, has planted 22,000 teak trees in an
ANAM (National Authority of the Environment) approved project on Isla
San Cristobal, Bocas del Toro, as
a legacy for his children and grand children. At three years old,
his teak trees are averaging 10.5M (34.44 feet) in height with diameters
of approximately 12.2 cm (4.8 inches)—a measurement taken at a one meter
(3.28 feet) height from the ground. For the first major harvest in
year 12 it is estimated that each tree will yield 233 board feet of commercial
lumber, or 111m3 per hectare; in year 16, 112.5 m3 is expected. For
the final harvest in year 20, the forecast is for a conservative 223m3
per hectare on the remaining trees.
At today’s prices on these projected
yields ($1.00 domestic per board foot; $2.50/bf international), an alluring
$419,200 per hectare in the domestic market, or $1,136,914 per hectare
in the international market are not unreasonable values. Bottom line? Teak
is the hands-down favorite for investors in this sector owing to its high
end-market value. |
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Many other options
But is teak the only way to go?
Not by a long shot. According to Ing.Bolivar Jaen of ANAM, there
are 1,101 individual Law 24-approved projects in Panama today covering
a total of 38,217 hectares (94,396 acres). Of these, 21,748 has.
(53,717 acres) are of teak, the remainder are of pine, cedar, acacia, mahogany
and other mixed hardwood species.
When asked what recommendations ANAM
makes for the successful tree projects, Ing. Jaen states that “although
there are no official recommendations, ANAM encourages the utilization
of the mixed native species of a given area.” Native tree seeds are
generally easier to collect, and once planted are less maintenance intensive.
Also, local knowledge of indigenous trees serves to co-opt Panamanian farm
workers into the process, making the whole process more sustainable.
Laurel (Cordia alliodora) is one
of Panama’s most common softwoods whose two-tone gold-colored heartwood
is used for common construction, as well as for furniture; it is mature
in 8 to 10 years with yields of up to 600 board feet of marketable lumber
when fully grown. Though less precious than teak at $.50 per board
foot (current wholesale domestic price, unmilled), laurel grows easily
in many terrains, needs little maintenance and does not require pruning.
Laurel is noted for its straight, tall trunks.
Other indigenous species worth considering
include Roble de Sabana (Spanish oak); Cedro Espino (spiny cedar); Nispero
(chicle tree); Caoba (mahogany), Cocobolo (rosewood), Criollo (ironwood)—the
list goes on and on. Though most tropical hardwoods (with longer
maturities than laurel) flourish best in areas of regrowing pastureland
or secondary growth forests requiring a non-linear approach to planting,
it may be worth the effort to establish a true reforestation project of
mixed species in these areas. Increasingly, the demand for fine hardwoods
such as Nazareno (purple heart), Ron Ron (goncalo alves), Coco Mono (monkey
coconut) and the like, is increasing as fewer and fewer of these mature
trees are to be found in the wild.
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| Supply and Demand
The Forestry and Agriculture Organization
(FAO) of the U.N. report, State of the World’s Forests 2001, states that:
“The estimated net annual change in forest area worldwide during 1990-2000
was –9.4 million hectares representing the estimated annual rate of deforestation
of 14.6 million has. and the annual rate of forest area increase of 5.2
million has.”
The International Tropical Timber
Organization (ITTO), the clearing house for information and prices on tropical
hardwoods worldwide, states that “tropical hardwood log imports rose by
25% between 1998 and 1999 with a 3.6 million m3 gap between imports and
exports in 2000.” Latin American countries processed virtually all
tropical logs harvested in 1998-2000, according to ITTO’s annual report
published in January 2002.
The hard numbers on hardwoods speak
for themselves. With the supply of wild hardwoods rapidly running
out, more restrictions being placed on log exports, and increasing demand
worldwide, there is little doubt that the hardwood plantation of the future
will have substantial value.
Panama has many advantages for the
investor who chooses trees. Land and labor costs are reasonable.
There are few, if any, property taxes to pay. Under Law 24, future
profits on logs and lumber are exonerated, as is any sales tax.
Money, perhaps, does not really grow
on trees, but in Panama many investors are already proving, it comes remarkably
close. |
| Fred Rulison, an American investor,
has planted 22,000 teak trees in an ANAM (National Authority of the Environment)
approved project on Isla San Cristobal, Bocas del Toro, as a legacy for
his children and grand children. |
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Paul and Cindy Cody have
lived in Isla Bocas del Toro for the past six and a half years and have
planted over 150,000 trees and sold more than 72 square kilometers of farmland
in the province, mostly for government-approved tree farms. Contact them
on: E-Mail: trees@cwp.net.pa
tel. (507) 757 9751
Send a check for $50 made payable
to Gloria Ellis to: Gloria Ellis, 665 Moraine Street, Marshfield, MA 02050.
When she has this, a copy of the business plan will be downloaded to you.
Don't forget to include your email address!
Links: http://realestate.escapeartist.com/P-22443
http://realestate.escapeartist.com/P-22394
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What
makes Bocas Del Toro so inviting?
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Addendum:
The Bocas Del Toro Archipelago
- The most popular place in Panama is Bocas Del Toro - and with good
reason. There is more to do in Bocas Del Toro than anywhere in Central
America and the Caribbean combined. It is the Caribbean, the lowest
priced real estate in the Caribbean, it is Panama, and Bocas
is just an hour from the high-tech international banking center of Panama
City, and minutes from the European ambiance of San Jose, Costa Rica. (In
fact it's only minutes by water ferry to Costa Rica,) and it's sailing,
diving and surfing is world renown.
What makes
Bocas Del Toro so inviting? - It's the wide range of activities
and the international flavor. Boquete will never be an international
community, merely a retirement location of sorts where people go to listen
to their hair fall out. Bocas Del Toro on the other hand has already
reached 'critical mass' as an international expat haven. Unlike Belize,
to make another comparison, Bocas has no hurricanes, no 'Rasta'
crime, no miles of tropical swamp, and no mosquitoes. Belize has no surf,
no decent cities in proximity where one can enjoy the city life. |
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Surfs Up! Yes,
Bocas Del Toro has great surf. The Archipelago has everything.
European restaurants, a modern airport, internet connection, telecommunications,
a peaceful and friendly population, low crime, and a very interesting cultural
scene of expatriates from around the world. There is bargain real estate.
There is San Cristobal with $5,000 per acre waterfront lots, and Isla Solarte,
an entire island, minutes from Bocas Town has a well planned expat development.
We have an entire section on Bocas Del Toro Real Estate - See
The Bocas Del Toro Real Estate Section - Find out about Bocas Del Toro
and you'll find out why you'll want to live there. It's already the
best expat haven in the world. Come see. |
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| Boating,
Sailing, Zodiac Jamming - Everyone in the Bocas Del Toro Archipelago
seems to own a boat. In fact you can live in Bocas without a car,
but everyone wants a boat. Water taxis abound, but it's more fun
to jump in the family zodiac and go shopping, diving, surfing, fishing,
or just island hopping. The extraordinary calm and protected waters
of the Archipelago mean that one can go on the water 365 days a year. No
hurricanes or inclement weather, and an endless archipelago that is an
ecological paradise. |
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