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Forestry Projects & Teak Plantation Investments

 

Forestry Projects And Our First Teak Plantation INvestment

The start of our Costa Rica story began with forestry projects and our first teak plantation investment, which accompany us to this day.  

How did we arrive at this idea?

Many experts agree that you should invest part of your savings or net worth in forest. This is something nobility has already done in the past.

The problem is that it is almost impossible to do, since it’s very rare that you can buy forest in industrialized countries. And if you can, then you pay high amounts, which makes it impossible for a large majority. 

Additionally, a tree in Europe or North America takes between 80 to 120 years to grow, in order to sell it. This makes it only an investment for future generations.  

The advantage in the tropics is that we have a much faster growth, which makes it possible to invest for yourself or your children.

The above are original pictures without any “doctoring” done!

why precious woods and especially teak?

Teak is a worldwide commodity like oil or natural gas. Price have increased independently from crisis for decades. Additionally, due to different regulations and laws in industrialized countries, it is only permitted to sell plantation wood and prohibited to sell rainforest teak wood.  

According to reports from the International Tropical Timber Organization (https://www.itto.int/), prices from a plantation in Myamar (1st and 2nd grade quality) doubled since the year 2013. Currently prices are at $3,000 US per cubic meter (*1).  

The next large advantage of teak is, that it needs only 20 to 25 years until the trees are valuable and ready to sell. After the harvest, plantations can be reforested again.

why teak plantations in costa rica

Costa Rica is a country with extremely strict forestry legislation, which are hard to imagine in Europe or North America. About 27 percent of the national territory are protected (in Germany, it’s 3.6 percent and in the USA, it’s 14 percent).  

The presently existing forests, except plantations, must not be used commercially anymore. Trees must not be felled and violations are prosecuted with very long prison sentences.  

After 80 percent of the rainforests were cleared not only in Costa Rica but also in other parts of Central America for cattle ranches, banana and pineapple plantations during the 80s, intensive protection laws were established.

Because of these laws and reforestation projects, about 50 percent of Costa Rica is forested again. (Source: Food and Agriculture Organization of the United Nations, FAO-Report 2010).  

The Costa Rican government also gives investors a grant for reforestion projects. These funds have been generated by a gasoline tax for decades. 

 

Below you can watch how our team built a road in a very steep area of a teak plantation:

and what about climate change? 

According to a study from the University of Munich (April 2009), one hectare of a teak plantation can reduce the emission of CO2 by 28.1 tonnes per year.  

One average, American produces 15.8 metric tonnes per year. So one teak plantation neutralizes the CO2 emission of almost two average Americans. Because of the current discussion about climate change, further financial incentives can be considered and are likely in the near future. 

 

why there are failed teak plantation Investment projects? 

When you surf through the web, you will easily stumble upon this topic. We know many of these projects and companies personally and can therefore shed some light on it.

The reasons are: 

  • The originators didn’t have a successful investment product for investors in mind. The only aim was to line their own pockets.
  • The wrong properties were purchased. It had to be cheap, and this was the only criteria. But if the climate and the soil weren’t suitable, it couldn’t become a success. The failure was already certain at the moment the property was purchased. You get what you pay for. This is something that won’t change in the future. 
  • The wrong or insufficient forest management. 
  • Not enough capital to hold out until the final harvest.

In the end, these are all things that can be avoided easily. The same mistakes that were and are made in the real estate industry were repeated here.

 

 

 

 

A Poorly Managed Teak Plantation

A Well Managed Teak Plantation

 How does an Investment like that pay off?

Let’s make it easy and short. The calculation is based on a one hectare (2.47 acres) teak plantation:

  • Investment in the property and forest management until the final harvest: $45,000 US
  • Return because of the wood sales: $200,000 US (*1)

We can explain these parameters easily to our investors. Additionally, we can show you our model plantation in San Isidro and further explain that the above assumptions are conservatively calculated because we will make much higher returns.

Since we are offered already existing teak plantations on a regular basis (such was the case of the plantation in San Isidro),  it is possible to make investments that don’t take 20 to 25 years until the final harvest, but only 5 to 10 years.

We buy the plantation today, improve it with our own forest management methods and carry out the final harvest and the sale of the wood. 

Our investors become always the owners of the properties they invest in, even if it’s a small investment (e.g. one acre). This is what distinguishs us significantly from other providers in the industry.

What about our forest management services? 

Very easy: We take care of everything.  We are looking for the right location and farm, do the forest management until the final harvest and sell the harvested wood. 

We know, this requires trust on both sides. Therefore, we can only do business with each other if we know each other and can see if we are a fit.

 

 

(*1) Calculation of the timber earnings:

We only calculated with 200 tress per hectare (2.47 acres). Each tree has an average of 1 cubic meter. So we get a total of 200 cubic meters. 

Assuming a price of $1,000 USD per cubic meter, we get $200,000 USD. But again, this is calculated very conservatively and cautiously.  

To get the right prices on the market, it only makes sense to produce very high quality teak wood. This is possible in Costa Rica by only using the right forest management techniques on a high quality level, such as what we are offering.   

The supply for this kind of quality teak wood has been too low and the demand very high for several years now. We researched prices in this context, which you can review in the following monthly report from June 2019 by the ITTO  https://www.itto.int/files/user/mis/MIS_16-30_June2019.pdf.  

There you can extract the following prices:  

Plantation wood from Myanmar, first and second grade quality has a price of 5,000-7,000 Indian Rupee per cubic foot (that’s not cubic meters). This document shows, that the prices have doubled since 2013!!  

35 cubic feet are 1 cubic meter. We take the average of 6000 Indian Rupee, which equals US$ 87.09 (exchange rate from July, 27th, 2019) multiplied by 35 to get $3,048 USD per cubic meter.  Now you might see that we calculated quite conservatively above with $1,000 per cubic meter.

 

Get In Touch

(+506) 7144-2840

contact@bluezone-tropical.com

100 Metros Sur De La Iglesia Catolica de Hojancha Hojancha, Guanacaste

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