If we look back at 2022 it’s likely to be seen as the year of food shortages and financial market upheavals. All across the western world we have seen food production slow-downs, shipping difficulties within the supply chain, and shortages hitting items at the local supermarkets. However, the potential shortages are also proving to be a strategic opportunity with Paraguayan Farmland Investment now attracting interest from around the world.
Article Updated on the 1st of November 2022
- Why Agriculture is Going to Be Important in 2023
- Why You Should Consider a Paraguay Farmland Investment
- What Does a Foreign Investment Cost in Paraguay?
- Be Wary of Cheap Land!
- Active Investment – Finding a Management Company
- Passive Investment – Holding the Land
- Tax Incentives
- Key Takeaways
Why Agriculture is Going to Be Important in 2023
The coming years are likely to be strongly about the security of food supplies and many South American nations are well positioned to benefit from rising demand within the United States. Unfortunately, the implementation of climate change policies have seen a move away from domestic farmland being used for cattle and other forms of agricultural production. This means demand is largely not being met from solely domestic production.
Subsequently, if the U.S continues down the road of reducing their climate change emissions, this will likely induce a need for the importation of food to satisfy demand. Agricultural countries, such as Paraguay, are well positioned to benefit from this change in the market.
Why You Should Consider a Paraguay Farmland Investment
Paraguay is a unique nation in that it sits above a huge aquifer of water known as the Guarani Aquifer. It is, probably, one of the largest natural water systems in the world. It’s an unusual geological feature but, for agriculture, it provides a huge competitive advantage given the need for water.
Subsequently, farmland within the nation is lush and highly productive and, coupled with the low cost of labor, means that the MERCOSUR nation is highly placed to meet U.S. demands in the coming years. The nation is also relatively close to a variety of borders with access to international gateways making exporting relatively easy.
Probably one of the best reasons to consider agricultural investments is the fact that they are an excellent hedge against inflation. I won’t bore you with another rant on why inflationary pressures are artificially created, but, suffice to say that inflation causes food prices to rise and the net beneficiaries are the farm operators and land holders.
The final point, which ties in with inflation, is that the farm business is totally uncorrelated to financial markets. Food is an inelastic good and the reality is that you are not going to see the same crushing drop in the agricultural sector as what you will soon witness within the financial markets.
The lack of correlation means that farmland is an excellent diversification strategy for a global investment portfolio.
What Does a Foreign Investment Cost in Paraguay?
The answer to this question very much depends on where in Paraguay you choose to buy agricultural land. The best value land is likely to fall within the Southern Cone region of the nation but there are still deals to be had in the Chaco.
If you are seeking to actually farm the land, in contrast to simply holding it/renting it out, than the highest yielding ground is likely to cost between US$5,000 to US$10,000 a hectare. This would put you close to local processing plants and provide you the best yield for an active investment.
However, at the lower end of the cost scale, you can pick up perfectly acceptable cattle farming land for around the US$500 – US$2,500 a hectare price point. This would allow you to commence a cattle farm within the region and profit from the increase in meat imports that the U.S. is likely to demand in the coming years.
Some Actual Examples of Virgin Land for Sale
|Encarnacion, Itapua||6,071 sq ft||$31,185|
|Limpio, Central Paraguay||10,537 sq ft||$52,668|
|Aregua, Central Paraguay||34,316 sq ft||$108,108|
|Carayao, Caaguazu||38.63 ha||$110,880|
You can probably source some additional information on prices by visiting
Be Wary of Cheap Land!
Recently, I have seen online promoters marketing cheap agricultural land in Paraguay and highlighting the fact you can purchase farmland for as little as US$50 a hectare. Obviously, this sounds incredibly attractive to investors looking to dip their toes into the sector. However, be wary of anyone promoting such an investment.
The reality is that you CAN buy land that cheaply in Paraguay. However, it is unlikely to be anywhere near any sort of road of infrastructure, it will have little access to water, is likely covered in jungle and vegetation, and may not be suitable for farming.
Do yourself a favor and avoid anyone offering you cheap agricultural land anywhere in South America!
Active Investment – Finding a Management Company
You might left wondering how you can actually capitalize on the land your now own and start actively farming it for a profit. Thankfully, there are a range of management companies that offer active farming solutions for investment land.
You are always welcome to contact us for some recommendations on trustworthy management companies in Paraguay. Unfortunately, there are plenty of rogues that will simply rip you off and selecting your management company is a critical decision. Subsequently, do some research and speak with the names we can provide you and make your own mind up on who you trust.
Passive Investment – Holding the Land
Many also choose to passively hold the land as an investment effectively land-banking for the decades to come. Given the changing food security conditions, Paraguayan agricultural land is likely to continue increasing over the coming decade and you can expect to make a healthy capital return with limited holding costs.
It’s also worth noting that any land you purchase can also be leased out to other prospective farming tenants. Typically, the returns are only around the 3-4% annually mark, but they are enough to offset any holding costs that you might have.
Paraguay is a nation actively looking for foreign direct investment and, therefore, offer plenty of tax incentives. Subsequently, they offer a foreign investor pretty much the same rights and privileges, including direct land ownership, as that of a citizen.
In particular, when you are a foreign investor, you can expect to receive the following benefits:
- The waiving of any company formation government fees
- A 10-year exemption on all company profits derived from any investments exceeding US$5 million
- No withholding taxes to be applied per the above investment level
- No customs or excise duties will be levied
Subsequently, an agricultural investment can be highly tax-effective and could also potentially be used as a tax shelter for offshore investors.
Paraguay is one of the few nations that actively encourages direct foreign land ownership of agricultural land. Subsequently, they are an excellent option for those looking to receive, not only the future capital gains, but also access a solid income stream that has little correlation to financial assets.
Ultimately, the nation could be an excellent bolt hole for your capital as things continue to deteriorate over the next few years in the west. However, you need to do plenty of homework and find the right management company and advisors to affect a successful transaction.
Wishing you the best of luck with your future alternative investments.