Saturday, September 5, 2009
There are several reasons for doing a mixed species tropical tree plantation. From a technical point of view the reason is to produce more robust, stronger and faster growing trees. The idea is that if one only has one species of tree in a plantation, then those trees are reluctant to compete with their brothers and sisters for space, resulting in slower growth. However, if the roots around them belong to different species, then tropical trees will maximize their efforts to be the biggest and tallest in the competition for space in the rainforest canopy. This is of course desirable from a wood investment point of view.
Mixed species planting also means that when it is time to harvest, selective logging makes more sense. Since different species grow at different rates, only some trees are ready to harvest, meaning that clear cutting is neither responsible nor sensible. This way, as trees are selectively cut, others are planted within an existing forest, making for a healthier forest and a healthier environment. In my opinion clear cutting is a crime, because forests and woodlots have their own social networks. Many seedlings prefer to grow within existing forest, and struggle when planted on their own or out in the open.
A reason for mixed species cultivation is wildlife habitat. Amazonia Reforestation plants fruit trees and native species with plantation species. This permits endangered wildlife to make use of the plantation as additional habitat. Because of the native species and the fruit trees, wildlife can find food in this expanded habitat. One of the things I hate about teak plantations in Central America is that when one enters them they are dead. There are no insects, no birds and no animals. The reason is simple. Teak is a southeast Asian tree that is not native to the Americas. Since most insects and wildlife are niche dependent, mono-species teak cultivation offers nothing in return to its adopted home. The same goes for oil palms, which are a disaster for the environment and for endangered flora and fauna.
Friday, September 4, 2009
The first thing you need to do is get away from the kind of short term thinking that causes so much trouble for investors. Many people enter the stock market thinking that short term is one week and long term is two weeks. If you stop and think about it, what they are really doing is throwing the dice in hopes of a magical quick return on investment. As any business owner will tell you, it takes years of careful management and strategy to build a profitable business with consistent returns. Too many public companies and mutual funds try to short term please investors, leading to poor performance in IRA’s, RRSP’s and pensions.
Once you accept that it is going to take 10 years to see a return, the next question is how big a return? Bank savings pay from .75% to 2% a year. Savings bonds, CD’s, GIC’s and Treasury Bills pay between 2.5% to 5% a year. People with stock portfolios are ecstatic if they can average a 10% a year return, rarely consistent and always risky. Contrast that with people who invest in low risk tropical trees and hardwoods. It is not unusual to have annual growth of from 30% to 40% non-compounded. For example, Amazonia Reforestation pays its investors a return of about 33% per year non-compounded. An investment of $4,000 USD will produce a return on investment of $17,000 USD in 10 years time. In contrast the same $4,000 USD making 10% compound interest over 10 years produces only slightly over $10,000 USD, assuming no recessions or other risks.
So what are the risk factors? The obvious risks are drought, fire, flood, disease and pests. All of these risk factors are greatly reduced using modern forestry practices. Tropical trees are planted in places where there are consistent and predictable weather patterns, making drought and flood problems minimal. Fire breaks and controlled burns of surrounding areas, together with strict underbrush controls make fire risk negligible. In fact, some species of tropical trees, like the Saladillo and Congrio are actually natural fire barriers. Disease and pests are limited by multi-species cultivation, meaning a good tree plantation does not have all of its eggs in one basket. This greatly reduces the incidence of pests and diseases, which may be further controlled with spraying and frequent harvests in 10 to 12 year cycles.
Best of all, the investor does not need to buy stock or shares in the forestry company. Rather, the investor has the option of buying the tropical trees directly. For example, Amazonia Reforestation issues Tree Ownership Certificates to its investors for the exact number of trees they own in the plantation. This joint venture approach has the added due diligence benefit of allowing the investor to come and see, touch and hug their trees any time they want. The plantation or forestry company provides the land, the tree nurseries, the planting, the know-how, the management, the harvesting and the ultimate sale of the timber, and shares those proceeds with the investor on a low risk, high return basis. See http://www.myreforestation.com/.
Thursday, September 3, 2009
There are 3 principle ways of offsetting carbon. The first, and my favorite, is to be pro-active and to do something that will actively sequester CO2 from the atmosphere. Planting tropical trees qualifies in spades, because as each tree grows it absorbs carbon at an average rate of about 50 lbs or 22.6 kg a year. The second way, and my least favorite, is what I call the status quo or do nothing approach. This is where you agree to not chop down the forest or to not fly someplace. In other words, if one doesn't do something then no CO2 will be generated. The third approach, almost as important as the first one, is to actively reduce the CO2 one is producing, so for instance insulating one's house, turning the thermostat down, changing to energy efficient light bulbs, installing and using alternative energy sources like solar, wind or hydro power. Well, I'm sure you get the idea.
I actively promote CO2 Tropical Trees, which is a program dedicated to helping consumers like yourself make your car carbon neutral. The program relies on the US Environmental Protection Agency's finding that the average North American car emits 12,100 lbs of CO2 every year. That means that it takes an average of 242 tropical trees, each absorbing 50 lbs of CO2 a year, to offset the emissions of your car. The CO2 Tropical Trees program plants 250 tropical trees and cares and maintains them for you for a 10 year period, meaning that your car can be carbon neutral for those same 10 years. The cost of doing this is only $750 for all 10 years, or by annual subscription of $85 a year. To make it simple, you could offset your car's annual CO2 emissions for the price of just a single fill-up at the pumps, or about $0.20 a day.
Besides knowing that you did the right thing, your funding of the tropical trees they plant gets you an annual bumper sticker and windshield decal that lets you brag to your neighbours, friends and associates about the fact that you are doing something "real" in the fight against global warming and climate change. Equally important, the tropical trees being planted provide invaluable habitat and food for endangered wildlife. Part of the CO2 Tropical Trees program is dedicated to setting up a Natural Reserve on plantation land in cooperation with the world renowned Omacha Foundation. Simply put, this is a socially responsible and "green" activity you need to do right away.
Wednesday, September 2, 2009
I am starting this blog to tell people about the low risk - high return opportunities offered by tropical trees. Despite the name, this blog is about more than financial investing. The way I see it, any time you fund the planting of tropical trees you are having a positive impact on the planet. Besides making money, tropical trees sequester carbon dioxide (CO2), provide employment to people in developing countries, feed and provide habitat to endangered wildlife, absorb pollutants, produce oxygen, are the source of numerous natural medicines and remedies, fix nitrogen in the soil, stop erosion, hold ground water and lift the spirits of humans on a planet with more and more people living on it all the time. The list continues, and it is my hope that I will be able to address all of these issues in the coming months.
First I guess in would be in order to introduce myself. My name is Dexter Dombro. I am a lawyer who had an epiphany one day and decided to do something useful with his life. I quit the law and started to work on affordable low cost housing for low income working families in Central America. This led to a fortuitous meeting with some folks in Colombia who wanted me to see some areas in the eastern plains of Colombia (the llano oriental or Orinoquía) that were ideal for afforestation and reforestation projects. I agreed and the next thing I new my wife and I became the owner operators of a tropical tree farm in the Departamento of Vichada, in Colombia. The tree farm is located along the banks of the Rio el Bita, which flows into the mighty Orinoco River, not far from the river port city of Puerto Carreño.
So everything I am going to talk about in this blog is based on first hand experience, a little bit of knowledge and a lot of passion. Perhaps the most exciting aspect, for some people, is the fact that tropical trees as an investment have consistently outperformed the world's stock markets since before the 1940's. This shouldn't really surprise anyone, because there are less and less forests available to logging companies and more and more people on the planet wanting wood products, for construction, furniture, pulp and paper, cooking fuel, natural remedies, arts and crafts, toothpicks and satay sticks and a zillion other uses. The bottom line is that demand exceeds supply, and is likely to continue to do so. I hope you will therefore enjoy my musings about investing, the science of tropical trees, life in Colombia, and the importance of creating habitat for endangered wildlife.