Reforestation Investment In Panama

I enjoyed an up-close-and-personal introduction to Panama’s reforestation visa option a half-dozen years ago when Lief and I visited the plantation of friend Robert Kroesen. It was like a day at a new Disney theme park: Teak Forest Adventureland. We pulled on knee-high boots and hooded slickers, climbed into open-topped “quads,” and took off in the rain to off-road it up and down some of the hills and valleys of Robert’s 3,000 hectares of trees.

By the end of the afternoon, we were covered with mud and grinning like fools. Robert led us to his plantation house for bar-b-qued steaks before the plane ride back to Panama City.

In the years since, we’ve done some research:

Managed timber has beaten the stock market over the past 30 years, returning about 15% a year, while stocks, during the same period, have returned only, on average, about 11% annually.

Furthermore, not only is timber a good way to beat the markets, it’s also a great way to hedge them. Timber operates blissfully ignorant of things like NASDAQ, housing bubbles, and Wars on Terror.

And the demand for this commodity continues to grow, while the supply, especially for certain kinds of timber, like teak, the world’s most valuable hardwood, is limited.

Teak is indigenous to only four countries in the world (Burma, Thailand, Laos, and India) and has a very narrow growing zone. Areas suitable for vigorous growth are confined to a band around the equator.

For centuries, the kings of Burma and Thailand considered teak a royal tree. Today, Burma, home to the last remaining natural teak forests, all of which are the property of the government, is the largest global exporter of premium teak, producing about 80% of world supply.

The remaining natural forests are being logged at a rapid rate. Some predictions are that Burmese forests could be logged completely in the next few years, meaning the growing world demand would have to be fulfilled by teak plantation production. And, right now, there aren’t a lot of teak plantations worldwide.

Meantime, Robert’s 14-year-old plantation in Panama’s Darien region is thriving.

If we hadn’t decided to move to Panama and therefore weren’t shopping residency options this past year, we probably still would have bought some of Robert’s teak.

Our residency requirement was the impetus to act sooner rather than later. With our residency investment package, we’ve bought about a hectare of land planted with saplings and titled in our name.

This last point is important. With some groups, your reforestation investment gains you a Panama resident’s visa…but not a piece of titled land. You may be paid out from the production of the plantation, but you don’t own a piece of it outright. With Robert’s United Nature program, you do.

Projected return from our $40,000 hectare-plus of trees, based on today’s price of the commodity, is $240,000. Of course, this is a long-term play. Teak trees take 20 to 25 years to mature.

On the other hand, you’d reasonably expect the world price of teak to increase throughout those two-plus decades. Given supply-and-demand dynamics at work, it could increase significantly.

Meantime, you thin your forest. That is, Robert’s team thins your forest for you. The first thinning is after three years. By year 10, the product of the thinnings has market value, and you can begin to see some return at that point.

Plus: All return from your reforestation investment is 100% tax-free in Panama.

The reforestation investment and the visa application are separate things. You make the reforestation investment through an organization like Robert’s United Nature…then you engage an attorney to manage the visa application process for you.

In Panama last spring, during our final pre-move visit, I spent a remarkably painless morning at the Department of Immigration, the final step in the application process for my visa. I sat comfortably in a chair, out of the way of the crowds and removed from the general chaos, while my runner, a young Panamanian girl in the employ of my Panama attorney, went from window to window, explaining, cajoling, reviewing paperwork, obtaining signatures and stamps, making payments, and, all the while, smiling prettily. At every window, she moved quickly to the front of the line and received almost immediate attention. No one seemed to mind, and everyone seemed to know her.

On the other hand, the poor souls who’d opted to brave the experience on their own stood in line after line and shuffled back and forth among the clerks, looking more tired, more confused, and more demoralized after each encounter with another representative of Panama City’s immigration and naturalization services.

It’s well worth the $1,500 you pay an attorney to handle the process for you.

My attorney has been obtaining visas for would-be Panama residents for many years. As I said, with her help and the assistance of her staff, an experience that, under different circumstances, could qualify as a new level for Dante’s Inferno, was pain-free.

Note that the reforestation residency option leads to citizenship. After five years holding a forestry visa, you can apply for a Panamanian passport.

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