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Investing in Colombian Timber Plantations

Colombian timber markets have consistently gone through some rough times over the past couple of years. Despite the growth of the construction industry in the region—the largest consumer of timber—the share of timber in overall GDP has gone down to 1.1%. Experts agree across the board that domestic production of timber cannot compete with the overall demand in the economy—leading to higher timber prices in the region and lost economic potential.

The Colombian government is fully aware of the potential offered by development in the commercial timber industry—with the potential to generate $3.5 billion and 35,000 permanent jobs. With this recognition, the state is going out of its way to attract greater investment in the commercial forestry sector to help generate higher revenues for the economy. These dynamics present some very lucrative opportunities for interested investors.

The purpose of this article is to present investment opportunities in the timber market, with revenue projections. Throughout this piece, I’ll discuss the government’s approach to commercial timber plantations, where the timber can be sold, and how you can get in on the action. 

 

Why Invest In Timber In The First Place?

Anyone with even the slightest bit of investment wisdom will tell you that portfolio diversification is very important if you want to make money off it. Hedging against inflation or losses is a commonly used tactic that people use to cushion and spread their risk. Timber as a commodity is one of the best ways to hedge against risk because of the economic relationship between commodity and securities markets. 

Timber sets itself apart from other commodity investments, especially when you look at reports from the industry. With the rise in demand for real estate and an increase in construction activities around the world, lumber prices have improved by an average rate of 25% over the last year. Research indicates that these trends will persist, and, correspondingly, the prices for lumber will also increase at the same time—making timber investments increasingly attractive.

 

Why Invest In Colombian Timber?

Colombian timber markets are a better investment decision because of the unexplored potentials presented by the domestic timber industry. The country is home to nearly 111 million hectares of forest cover, most of which is prime export quality timber. There are further commitments by countries like Norway, Germany, and Britain to invest a total of $366 million to help combat illegal deforestation activities in the Amazon.  While there is still debate on the total value of timber in Colombia, it’s safe to say that it’s worth billions of dollars in export revenues.  Considering the proximity of the country to Trinidad and Tobago, investors have access to global timber export markets that will readily take up the Colombian product. 

In the presence of this much timber product, the performance of timber prices in the global markets, and the government’s eagerness to invest in timber, Colombia is the best place to invest. This brings me to the question of where and how you can invest in Colombia’s timber markets.

 

Investment Options In Colombian Timber

Of particular interest to timber investors is the Vichada region in Colombia. The area runs side-by-side with the Orinoco River, which leads directly into Port of Spain, Trinidad and Tobago—the hub of timber trade in Latin America. Research indicates that among the fertile land of Colombia, Vichada is the most suitable region for timber plantations—with over 6.3 million hectares of land currently unoccupied. 

The land is pretty cheap in the region, priced at around $350 per hectare, and presents a relatively low-cost investment compared to other plantations in the world. The project I’m speaking of is a crowd-funding venture in Vichada, supervised by the Gutierrez Group in Colombia. The process for investing is as follows:

  1. A Colombian LLC is formed with the investors as shareholders.
  2. This investment will be done on previously purchased land.
  3. The land is then prepared for plantations as seedlings are nurtured at a separate location to be planted when both the land and seedlings are ready.
  4. During the 5th year, it is possible to apply for carbon credits to obtain carbon dioxide bonds, which can be sold for additional income.
  5. In the 7th year, the trees are harvested to produce products that can be sold on the international or domestic markets. The dividends are paid to the investors.
  6. At the last stage, the investors are given the option of liquidating the company and selling the land for more dividends. Alternatively, you can also invest in a new project on the same piece of land.

 

Investment Packages And Estimated ROIs

For 2020, Gutierrez Group has a new project called: Colombian Timber IX. Obviously their ninth project overall and their third crowdfunded project, after CT1 in 2016 and CT2 in 2017 which were sold out last year.

  • Shares available: 10,000
  • Minimum investment: $45,000 USD at today’s exchange rate
  • Expected term: 7 years
  • Projected IRR: 16%+ per year
  • Number of hectares to be planted: 400
  • Approximate total cost of the project: $1,350,000 USD at today’s exchange rate
  • Amount to raise this year: $760,000 USD.

 

In Conclusion

Investing in Colombian timber is one of the best financial decisions anyone can make. The investment plan offers a significantly high rate of return, and it’s incredibly convenient to inject capital into these projects. If you’re interested, you should get in touch with the people at Gutierrez Group and ask about their Colombia Timber IX Forestry Investment—this is one of the many investment projects they have in the pipeline. Considering the existing global economic circumstances, it is imperative that everyone starts looking at alternative investment options to make sure that their portfolios are profitable irrespective of shifts in the global economy. Colombian Timber Investments are definitely one of the best options available.  

I hope you got great value from this article: Investing in Colombian Timber Plantations.  Here are a few articles about Colombia and Gutierrez Group that I know you love:

How To Take Advantage Of The Colombian Consumer Lending Market

Colombian Timber Markets in 2020— Commodity Investment Options

You Can Buy The Government’s Debts In Colombia

 

About The Author

Mikkel Thorup - Headshot - CircleMikkel Thorup is the host of The Expat Money Show podcast and Director of Content at Escape Artist. He is also the author of #1 Best-Selling book Expat Secrets on Amazon. He has spent nearly 20 years in continual travel around the world, visiting more than 100 countries including Colombia, North Korea, Zimbabwe, and Iran. His goal is to help people just like you to generate additional streams of income, eliminate your tax bill, and take advantage of offshore structures so you can travel the world freely and never have to worry about money again. For more information on his legal (but creative) tax strategies for Expats watch this free video.

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