Brazil is a
popular country for alternative investments. It has a politically stable
environment and a fairly strong and growing economy. It is one of the top ten
largest economies in the world, and one of the famous BRIC-countries with a
relatively high GDP-growth.
This investment
(which I made in year 2012) is in a teak plantation in Brazil. The investment
broker I used was Emerald Knight Consultants, a British company specializing in
providing sustainable and ethical investments with high returns. The company is
only marketing investment products and the contract is signed directly with the
product provider. In this case, the product provider is Global Forestry
Investments (GFI), a timberland investment company focusing on sustainable forestry
investments. GFI also has a long term goal to help the local community in
Brazil by working together with the local government and plans to build a
school for the locals. GFI has offices in Brazil, UK and Dubai.
The teak plantation
is located in Belem, in the region Para north east of Brazil, and the
investment project is named Belem Sky plantation. I have purchased 0.1 hectares
where around 100 trees are grown, managed by GFI with partners during the
investment period. The trees are already eight years old and the plan is to do
the final harvest in 15-18 years. There is an option to resell the trees after
three years to GFI with a capital uplift of five percent. During the investment
period there will be thinning of trees (selective removing trees to improve
growth rate of remaining trees) around four times, which will provide extra
dividends the year after the thinning since the removed trees can be sold. The
expected average return is 10% per year over the investment period.
A few years ago
I invested in another teak project, in Panama. So why do another one? Well,
there are two main reasons. Firstly, if I invested in this teak project through
Emerald Knights, I would get access to another more lucrative investment (more
about this investment in a later blog posting). Secondly, timber has
historically been a very safe investment class with good returns. The teak
price has increased steadily over the past 20 years and has a broad usage
within both industry and private consumer industry. Also, teak is resistant against
fungus, insects, fire and challenging weather conditions, making it a sturdy timber
class.
The photo above illustrates how timber has shown attractive returns over the years in comparison to other investment classes (figure from Emerald Knight Belem Sky investment prospect)
It all sounds pretty good but how has this investment
performed this far?
I was initially
excited about this investment - pretty good returns and investing in something
that brings something good to the locals in Brazil. The returns from the
thinning process 2012 (around 10% of initial investment) were going to be paid
out in January this year. Unfortunately this didn't happen and there was no
communication about it from GFI until March when I emailed them and asked for
the returns... The reason was apparently that it had been severe weather in the
Belem region with heavy rainfalls that had delayed the thinning process. It
seemed to be a fair explanation and I would have been ok with this little hiccup
in the investment process but the payment delay continued. And continued... I
still haven't received the promised payment and now it is eight month delayed!
GFI has come up with more reasons for the delay but all is perceived as quite
unprofessional to me. Emerald Knight has recently established a specific
email-address for questions related to this issue so there seems to be quite a
few investors experiencing the same problem... Maybe it is the first time GFI
has this kind of project and I and the others investors waiting for money are “guinea
pigs”? I hope not, but it sure seems that way. GFI has promised a compensation
for the delay but I will believe it the day I see the money. My wife is quite
pissed at me since I invested our common money and she is nagging me about it
every other day – so I really hope I will see that money soon, especially since
she doesn’t want to discuss new investments until I retrieve the funds!
I will update if and when I receive my funds, so stay tuned and subscribe to my blog (at the top right on my blog) - don’t miss out on more interesting stories!