Investing in farmland in Paraguay, Uruguay, and Brazil

South American farmland can be a good investment if you know where to look. We investigated Paraguay, Uruguay, and Brazil

Dateline: Atlantida, Uruguay

Andrew has long outlined the benefits of farmland investment, not only in Asia but especially in South America.

Although land prices have increased in the past few years, the current strength of the US dollar makes a strong case for investing in farmland Latin American’s Mercosur region. The countries in the Mercosur include Uruguay, Argentina, Venezuela, Paraguay and Brazil.

These counties share an asset that some say is more valuable than gold: The Guarani Aquifier.

The Guarani Aquifer sits beneath the surface of Argentina, Brazil, Paraguay, and Uruguay. As one of the world’s largest aquifer systems, this extensive reservoir encompasses 1.2 million square kilometers, and contains an unprecedented amount of water.

Experts believe that this water body can supply enough drinking water to last 200 years. Given the importance of water for agriculture, this makes the Mercosur an attractive region for farmland investment.

The largest segment of the Guarani Aquifier lies beneath Brazil. Let’s start there…

Farmland Investment in Brazil

Brazil boasts the second largest cattle herd in the world, making it the second biggest exporter of beef. In addition to its beef and dairy products, Brazil is a key producer of coffee, sugar, orange juice, and other agricultural products.

Unfortunately, the investment process is anything but easy. Brian Bruha notes some of the obstacles associated with buying Brazilian farmland include Brazilian laws that require rural landowners to invest in complicated GPS technology to georeference their land.

It’s a way to prevent future land disputes, but it’s expensive.

On top of that, foreign-owned farmland in Brazil can not exceed 25 percent of the municipality in which it sits. The government limits you to 5,000 hectares or 12,000 acres depending on the circumstances, and there are zoning restrictions as well.

Farmland Investment in Uruguay

Restrictions are less stringent here in Uruguay, where the Uruguayan government does not limit land ownership by foreign buyers so long as those buyers aren’t foreign governments.

In other words, as long as Uncle Sam or any other country, is not one of your shareholders, you’ll be OK. I would guess that regular Nomad Capitalist readers do not have the government on their shareholder list, so no problem there.

Investors in Uruguay can manage their own land, hire local managers or lease out the land. Uruguay has some excellent soil for certain crops and, while the cost of living can be expensive, is a very free market economy and a hub of offshore banking for those lucky enough to escape Argentina.

However, Uruguay is not perfect either. Thanks to total government control of the water supply, companies have been found to have introduced chemicals that led to the water in some cities – particularly in the Maldinado region – being undrinkable.

One government official actually argued this was reason enough to privatize the water supply. Can you believe it; a government official saying the government’s failure should be the lead cause for privatization.

Although Uruguay is more libertarian than other Latin American countries, you are still dealing with a socialist government and that kind of view is quite rare.

I have asked friends from the Maldonado region how this water crisis has affected farming. Thus far, I have not received any definitive answers. However, this incident indicates the importance of staying up-to-date on issues that might affect life in Latin America.

Farmland Investment in Paraguay

Now to Paraguay…

Paraguay might attract investors interested in the Mercosur’s “roads less traveled”, as it offers a low-tax policy for foreign investors. Additionally, Paraguay’s labor costs are is lower than most of the other Mercosur countries.

Paraguay and Brazil own a bi-national hydroelectric dam, which is the world’s largest generator of renewable clean energy. Consequently, energy costs are low. Even better, Paraguay is strategically located with easy access to neighboring countries and has a stable currency as far as South American currencies go.

In fact, it has been reported that Paraguay has the second highest return-on-investment for the private sector in Latin America. That is why so many people are not only flocking to Paraguay as a second residency haven, but as a cheap investment opportunity.

With over eight million hectares available for agriculture, Paraguay’s agriculture can potentially triple its food production output, and Paraguay is the second largest exporter of stevia, the natural sweetener that is rapidly gaining s greater share of the global market.

Numerous South American countries offer excellent opportunities for agriculture investment. If you have minimal funds and want to get started with fewer hassles, you’ll find Paraguay to be your best bet. Sadly, too many countries in this part of the world can’t get past their socialist, big government past.

Lisa Mercer

Lisa Mercer

Lisa Mercer is Nomad Capitalist's contributor on living in South America. As a long-time expat, Lisa has lived in Ecuador and Uruguay and spent substantial time in almost all parts of South America as a perpetual traveler.
Lisa Mercer
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