Investments in farmland in Uruguay are an attractive option for both institutional and private investors. Who are the people investing in farmland Uruguay? In my work I primarily meet managers from international food industry, managers from the financial sector and landowners in the agricultural sector.
Almost all investors feel to some extent affinity with agriculture. They usually invest on a personal title or use an investment vehicle such as a trust. Each investor initially makes a comparison between different countries and regions. In my experience, the international investor often makes a comparison between Canada, Eastern Europe and South America. One looks of course at prices per hectare, the potential yields and as well to the legal safety that an investment in farmland requires.
In general, investing in farmland in South America is attractive because of the relatively low prices per hectare, the climate that allows for double harvesting and large parcels still widely available and often already in production and thus providing direct returns. In addition, the big advantage is that this can be achieved without public support or in other words Farm Bills or EU subsidies.
Another big advantage is that agriculture in South America is generally being carried out with low operational costs and yields can still increase a lot. That increase may be achieved by more frequent use of fertilizers and modern technology. Increasing yield will obviously also lead to increasing value of the land. And land appreciation is obviously for any investor the main goal, annual return from farming is secondary.
The comparison between South American countries nowadays often leads to a comparison between Uruguay and Paraguay. In Brazil investments in agricultural land by foreigners are seriously restricted and Argentina is not attractive for reasons we don´t need to go in to. Paraguay, however, is attractive to many because the prices per hectare are relatively low, the tax rate of 10% is also relatively low and the yield per hectare is comparable with other South American countries. Disadvantage can be that not all land is in production and one never knows when it will be taken into production.
Uruguayan political stability and legal certainty are principal motives for investors that persuade them to invest in farmland in Uruguay. In Uruguay there is a very well-functioning legal system cadaster and the property rights of the investor are fully secured. It is also considered an important plus for Uruguay that it does not impose problems to carry out financial transfers. My experience is that international investors after a visit to Uruguay are always positively surprised about the land, the tranquility, the scenery, the friendliness and the ´European´ appearance which make the country much less eccentric than previously thought. This often helps in taking major financial decisions.
Apart from the purely financial investments, there are agricultural companies which wish to establish themseles in the country or that want to expand their activities. There are numerous examples such as the goat farm of a French couple. They have a goat farm near Punta del Este, milking the animals and processing goat cheese according to French tradition. These products are in high demand on the exclusive market of restaurants and hotels in Punta del Este. The international clients require good artisan products.
Other examples are the Canadians in Uruguay growing blueberries and exporting to North America and Europe. Big advantage is that the harvest of the blueberries takes place in in December when it´s winter in the northern hemisphere. Or a German company growing homeopathic herbs on a small farm at the Atlantic coast. Such niche activities in Uruguay are very innovative and are being received with open arms.