Agriculture as an Investment

Because of incredibly rich soil and year-round growing seasons, Costa Rica is an agricultural paradise. The country is checker boarded with crops of all descriptions. Just about anything grows here, with bumper crops the rule rather than the exception. Rich volcanic soil and a rainy season that coincides with the peak growing season make farming a dream in Costa Rica. Therefore, agriculture would seem to be one of Costa Rica’s best bets for investment. It is, actually, but it can also be Costa Rica’s biggest investment disaster for novice farmers and for those who do not understand the ground rules. Just because crops grow well doesn’t guarantee you are going to make money.
Ray Nelson warned against going overboard on farm and agricultural investments, particularly for those new to this field. “Farming is a great way to go broke even if you are an experienced agriculturist. There are too many unknowns and too many marketing problems. If I had invested the same amount in real estate as I spent trying to get an orange grove started, I would be a rich man by now,” he said wryly.
Newcomers are bombarded with brochures, advertisements and lecturers, all promising huge profits from oranges, macadamia nuts, black pepper and other such crops. Seminars on teak, mahogany and other exotic woods tempt investors with promises of 30 percent return on the dollar. Most of these promotions feature absentee management; you put up the dough, the company handles the rest. Other investors plan on living on the property and actually doing the growing, harvesting and marketing all by themselves.
Of course, growing and harvesting are the nitty-gritty of agribusiness, but a third factor, marketing, is truly the key. Without a marketing strategy, all your efforts in growing oranges or bananas are in vain and your crops a waste, except for whatever you and your family can eat. One farmer said, “If you don’t have a contract, you are banging your head against the wall. What are you going to do with a field full of pineapples without buyers? Local marketing is the only way to move them, but there is only so much local demand. Bananas are the country’s top crop, but a little guy can’t compete with the huge multinational corporations. Coffee growing is a small-scale operation, that’s true, but today’s world price is so low that you can’t make money.”
One ex-farmer narrated some problems he encountered trying to farm profitably in Costa Rica. “We had some great orchards, with good production, but we couldn’t get marketing contracts. Local markets can absorb only so much citrus fruit, and high export costs kept our products out of range for foreign markets. The only money appeared to be in marketing juice. So a few of us citrus farmers decided to invest in a juice extraction plant. But, before it could be completed, a government plant went into operation, causing our project to go bankrupt.”
Next he tried growing star fruit. “We did great at first, because we were the first to put it on the market. But the problem was, a star fruit vine bears a thousand fruit, and each fruit has enough seeds to grow a thousand plants. Before long, star fruit flooded the market and we couldn’t give it away. Then we looked toward Europe as a market for star fruit juice. That worked out great for a time, but competition reared its head again. European buyers began demanding concentrate rather than juice, and we couldn’t afford to build a concentrate plant.”
A long-time Costa Rica resident who dabbles in agriculture for fun, advised, “It’s a mistake to blindly take the word of promoters and developers who daim huge returns from agricultural projects. If you don’t know Spanish and don’t understand Costa Rican labor laws or the legal system, you are going to have a tough time under the best of circumstances. If you don’t understand the problems of production and marketing, then you have no business trying to be a tropical agriculturist.” He added that even if an investor is an expert in these fields, he shouldn’t buy a farm unless he is prepared for continuous, personal, hands-on management. “Absentee ownership seldom works,” he emphasized. But what about all of these advertisements for plantations of high-profit crops? Listed here are some problems and questions related to me by farmers:
Black pepper at one time was indeed a profitable crop, but East Indian overproduction has dropped the price. Buyers are insisting on low prices because they use black pepper as a loss leader in their marketing strategies.
Jojoba bean production was once popular, but like many other crops, jojoba wasn’t native to this area and a glitch in the climate killed off most of the trees in one season.
Macadamia trees take a long time to produce and then are susceptible to pests; the wrong spray can kill them.
Hawaiian papaya is becoming popular for shipment to Japan. But this market is very selective, with buyers hand-picking and accepting only about 30 percent of the crop. Another problem with papaya and other crops is that Japan and other countries usually insist on certification of med fly-free crops. “This is the roughest part, getting med fly-free certification. It’s difficult enough in places like California or Florida, and extremely difficult in Costa Rica,” said Ray Nelson.
What about teak plantations? This is the biggest push in Costa Rica at the moment. According to promoters, this is a sure- fire venture that will pay huge dividends. One company advertises that a $6,500 investment “will earn almost $300,000 over a ten year cutting period.” I asked an American agriculturist about this. This was his opinion: “First of all, teak isn’t native here, and nobody knows what the production will do or what kind of wood it will produce. It takes about 15 to 25 years for the trees to be big enough for harvesting, and we won’t know for sure until then. That is a long time to wait for profits. Then, what happens 15 years from now, after the government has given big tax breaks and incentives for teak as a reforestation project? Suppose they decide to put restrictions on how much wood can be harvested and when?”
In 1993, the Tico Times ran a series of investigative feature articles on teak an investment. The controversy is on-going, with pro and anti forces arguing the subject of teak. Before you invest, do some investigation on your own.

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