Close But No Mangoes

An interesting investment came to my attention back in 2015.  A company in Panama was offering to sell investors an interest in a mango orchard. The cost was $36,500 for a hectare (abut 2.5 acres) and you got ownership of the land and the mango trees on that land. Be sure to see the end of this article on how things turned out!

The orchard was just getting started.  They had purchased the land (about 400 hectares), secured water rights, and had already started planting mango trees. The investment was to buy one or more of the hectares of land along with the newly planted mango trees and receive a certain return each year when the fruit was harvested and sold. The owners would manage the orchard and they would market and sell the mangos when harvested every year.  The owners would take out a fee for managing and farming the trees and handling the marketing of the fruit. The investor would get a certain percentage of the proceeds. 

One aspect of this arrangement was that the trees take 5 years to mature. So, there was a waiting period before any money would start coming in.  But, after 5 years, the projected return on the investment was anywhere from 12 to 19 percent annually, depending on yields and market prices.

On paper it sounded good, so I decided to make an on-site visit to the orchard in Panama, which the owners encouraged, and see for myself if this project looked viable. I set up a visit for March with my good friend John. We would visit with a representative from a publication called Live and Invest Overseas, which was helping to promote the investment. We would also meet with the owner and senior farm manager at the mango plantation.

The plantation is near Santiago, Panama, about 150 miles from Panama City. This part of central Panama consists of rolling hills, small towns, and lots of small farms.  This orchard was set up to provide organic mangos, and to me, organic farming was a big plus.

When we arrived we were impressed with how many trees had already been planted. There were many medium size ponds containing extra water if needed, but the main water supply was from a small river running through the plantation.  Both the project developer and farm manager were there to greet us and show us around. They told us about the type of mango they were planting and how the farm manager had experience growing mangos on other orchards in Panama. They also described how they would control pests with Neem trees and how they hoped to grow some small produce while the mango trees matured and that this might offer some return during the 5 year wait for the trees to mature.

After we listened to their sales pitch, we got a chance to ask them some questions. I had studied their material and felt that if the trees produced as expected, that it should be a good investment. But what I wasn’t so sure about was the owner’s incentive to develop the orchard since he was getting most of his money up front by selling the land. This was where I started getting a bad feeling. The owner seemed to resent some of our questions and didn’t really give us complete answers. But we continued our tour and ended at an area where the owner said he hoped to build a lodge which investors could use if they wanted to come and visit the plantation. I didn’t think this was anything I would be interested in, but it seemed to be something they liked to promote.

After the tour, we spent some time in Panama and really enjoyed the trip. The Panamanians are very warm, friendly people, and the country is definitely doing well. This investment seemed to be a good investment. I liked the country as a whole, and I liked the location of the mango orchard as well as the farmers who were running it.  They seemed to know what they were doing, had secured adequate water and were going to produce an organic fruit that is in high demand. 

So, we left Panama thinking we wanted to look into this investment further.  The negatives I saw at this time included the fact that for 5 years there would be little if any return on the investment. I didn’t think owning the land was all that beneficial, because there really was not anything else you could do with the land if there were problems growing the mangos. You couldn’t just build a cabin in there as you would need to negotiate access to your land with all the other property owners that had lots surrounding yours. 

Once I got home and received the actual contract for the purchase of the land and the investment aspects, I got a little more concerned. There was nothing in the contract that allowed for getting my investment back if things didn’t go well. There were provisions though, for the owner to buy back land and you could also try and sell your land if you wanted to exit your investment, but that prospect didn’t seem to hold a lot of promise for getting your initial investment back.  All in all, the contract had many provisions protecting the owners, and very few provisions protecting the investors. I ended up not investing in this orchard as I didn’t feel there were enough protections for investors if all didn’t go according to plan.

Post Script:

Update April 2019: I was curious how things were going and tried to find information from actual investors about their experience. I did find one blog from Stock Gumshoe. They had some entries from people complaining that after two and a half years they still were waiting for their title. So that’s another aspect of investing in other countries that should be taken into account when assessing risk. Click the Stock Gumshoe icon to check it out. There are two pages of threads – be sure to check out both pages.

Update February 2021: An investor posted on Stock Gumshoe that he owns many hectares with this investment and was told that the crop from the 2020 harvest was a total loss and he was paid nothing!

Update December 2021: More Stock Gumshoe updates (using Simply Natural as a search string) on how the investors have done. Short answer? It’s been a disaster and they are looking to sue Simply Natural and the owners. Apparently, fruit has been left to rot on the ground, no one is getting any checks, and I wouldn’t be surprised if the owners just pack up and leave. Why? Because they got their money 6 years ago when they sold the land parcels with their empty promises. As I was concerned about at the time, there was no incentive for them to actually work on the plantation and sell the fruit. Sure enough, that seems to be the situation.

This also raises a red flag to me for anyone who might be relying on investment promotions from ‘Live and Invest Overseas’. They regularly hype these types of investments and appear to do due diligence, but in reality, I think they just probably get some kind of remuneration for marketing these schemes.