Livestock Investment Opportunities in Paraguay

November 4th, 2014

This editorial is featured on Global AgInvesting. See it here !

The country of Paraguay offers optimal conditions for efficient, cost effective, and secure food production. There are abundant investment opportunities in beef production and processing facilities in the country, but due to the region’s difficult history these available opportunities have not gotten the attention they deserve, remaining mostly unrealized and therefore completely undervalued. The following is a primer on the conditions of livestock production as a foreign investment opportunity in this South American country.

The Republic of Paraguay

Paraguay is a relatively small country in central South America, bordered to the east and northeast by Brazil, by Argentina to the south, and by Bolivia to the northwest. The country is landlocked, however, a system of barges on the Paraguayan river has been developed to transport goods to the open sea.

Geographically, Paraguay is divided into two distinct regions by the Paraguay River. To the southeast is the Oriental, and to the northwest the Occidental, also known as the Chaco.

Paraguay´s market economy is characterized by a very large informal sector. The currency in use is both the local Guarani, as well as the U.S. Dollar and at the time of this writing one U.S. Dollar equals approximately 4,250.00 Guarani.

The current president, Mr. Horacio Cartes, is a successful Paraguayan businessman. Since taking office in 2013, his administration has implemented various socio-economic incentives in support of foreign investment in Paraguay. The country extends the same rights and responsibilities to its foreign investors as it does to its own citizens; Paraguay does not carry out any foreign exchange control, has a low value-added tax of 10%, and does not subject foreign investment to capital gains taxes.

The Chaco Area

Most foreign investment in Paraguay is currently taking place in the Chaco region. Despite being home to only 2% of the country’s population, over 65% of the country’s milk and meat is produced here due to it´s high fertility and the development and use of advanced technologies.

The Chaco is an extremely fertile region of the country with cattle operations ranging from 5,000 – 30,000 hectares holding approximately 1-1.5 large stock units per hectare. Simply put, this means that on average 1 to 1.5 animals with a mass of 450 kg can be maintained and grown on a hectare of farmland in this region. Beef is produced organically from grass-fed and free-range cattle and without the use of hormones. No additional chemical or synthetic fertilizers are used, as they are simply not necessary.

Land prices in this area can range from USD 600 for undeveloped land to USD 1,100 per hectare for fully developed land, however, as more foreign investors are investing here, the price of land is starting to appreciate. Prices per hectare have grown approximately 25% per year over the past 3 years, as prices adjust to the international standard. In neighboring Brazil for example, a comparable hectare of land, in terms of fertility and production capacity, sells for USD 8,000 to 12,000 per hectare. A well-managed beef production project in Paraguay, in addition to land value appreciation, returns 6% 8% of total investment on production alone.

Considering the positive investment climate, low taxes, and undervalued, highly productive land in the country, the investment opportunities in Paraguayan agricultural real estate are hard to be matched and without equal around the world.

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