Getting A Residency Visa by Investing in Reforestation...
Thursday, October 14 2004 @ 05:35 PM EDT
Contributed by: Don Winner
If you live in Panama, sooner or later you're going to learn about teak and other tropical hardwood plantations because there are several operations actively growing teak and looking for investors. Over the years I've spent some time looking into teak and reforestation in general in Panama, and have learned a few things.
First of all, the primary intent of Law 24 was to allow Panamanian businesses an means to invest in reforestation and enjoy a tax deferrment on that investment until the teak is harvested. There are many large companies here in Panama that are pouring millions of dollars into reforestation to avoid paying income taxes (now) and will pay those taxes in 20 to 25 years or so when the lumber is harvested. Adding the incentive for foreign investment was almost an afterthought, and the vast majority of money invested in reforestation in Panama is local, not from foreigners.
Secondly, there are many plots of plantation teak that have been and are being mismanaged. Growing plantation hardwoods correctly and getting the best results is a scientific process than requires constant maintenance and control. When this law was passed (now 12 years ago) many people just tossed money at reforestation to aviod paying taxes, and then basically left it alone. The lots have to be thinned to allow the best trees enough space and sunlight to reach their full potential. One of the easiest things to find around here are mismanaged lots of planted teak (with a really large price tag) and owners misrepresenting the projected value. They just want to dump a bad deal on to someone else and get out of their investment. So, heads up for that...
Teak and other tropical hardwood reforestation projects can be good for the environment as well, especially when you consider that most of the land that's being planted was abandonded cattle land that had the virgin jungle cut over a hundred years ago. Teak literally sucks up carbon dioxide from the air by the metric ton, and teak plantations are beneficial to reduce and eliminate greenhouse gasses.
That having been said, it's best to look at teak as a crop that gets harvested every 25 years or so, not much different than corn, for example, except that while the trees are growing they are pulling greenhoue gasses out of the air at amazing rates. And as soon as a lot is cut, it will be replanted and the trees will grow for another 25 years.
In addition, there is a looming shortage of "natural" teak, and many places where teak is still harvested from virgin forests are starting to limit the cuts, or have already completely banned logging altogether.
It's still a tricky proposition to accurately portray what a fully grown hectare of teak will be worth upon reaching maturity. I've spent countless hours scrounging through the Internet looking at all of the projections, and the hardest sells always have the most optomistic numbers. In reality there are so many factors that are impossible to know that making a completely accurate 25-year projection into the future is almost impossible. Suffice it to say that the teak lumber product will have a greatly increased value when mature.
And, if you're looking into investing in teak in a reforestation project in Panama as a means of obtaining a visa, then the future value of the lumber is almost an afterthought. Look at it this way -- if you dropped $40,000 on a single stock on the NYSE and left it completely alone for 25 years, at the end of that time chances are it would be worth considerably more. It's an investment, and no investment is ever completely risk-free.
I would suggest that you contact several of the teak plantation operators and visit their sites and operations. They will explain all of the legal considerations and will "pitch" you their product and explain why you should invest with them. The nice part is that there are several operations up and running right now, and you can compare and shop one against the other. My advice to anyone would be to learn as much as you can, see as much as you can, and as always, Caveat Emptor is certainly in effect...
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