I'm off to Colombia

If you are worried about investing in tropical trees in Colombia, don't be. President Alvaro Uribe, now completing his second term in office, has done an amazing job of stabilizing Colombia. The country is now rated with Brazil and Chile as one of the top Latin American economies. In fact, Business Week magazine has rated Colombia one of the top 3 investment jurisdictions in the world. There are still problems with drug traffickers, thanks to the insatiable demand for drugs in the USA and Canada, but these days those problems have been isolated by the Colombian armed forces along the Ecuadoran border in the country's South. Most tree planting occurs in the interior and out in the eastern plains, or llano of Colombia, well away from the coca growing areas.

I am flying into Bogotá, the capital, an exciting and modern city of 8 million. I am  going to be meeting with the world-renowned Omacha Foundation and their executive director, Fernando Trujillo, Ph.D.. I am also meeting with the local Kubota representative to talk about getting more tree planting equipment on the job. Numerous airlines fly into Bogotá's Eldorado airport, but I usually take Taca, as they seem to offer excellent service with connections throughout Central and South America, the USA and up into Toronto, Canada. On Monday morning I'm catching the local Satena flight to Puerto Carreño in the eastern departamento or province of Vichada, some 55 KM from the plantation. Puerto Carreño is a spectacular town on the banks of the mighty Orinoco River, just across from Venezuela.

More amazing Acacia mangium facts ...

One surprising fact about Acacia mangium is its honey production. Africanized and other bees are attracted to Acacia mangium, because its petioles or leafstalks exude extra floral nectar year round, which allows for ongoing honey production. The bees also enjoy the flowers and are the primary pollinator for the tree. Beehives in Acacia mangium plantations produce up to 110 kg or 242.5 lbs of honey per hive per year, which is important for local economies and employment. The only disadvantage is the aggressive nature of Africanized killer bees, which means plantation workers and others need to take extra care when gathering honey or confronting bees.

It has been suggested that Acacia mangium may offer a partial solution to ecological and human problems in sub-Saharan Africa due to 2 factors. The first is the tree’s long history of doing well in reclamation and erosion control projects with poor soils. The second factor is its food value. The germinating seeds can be cooked and eaten as a vegetable. Studies indicate that the seeds are high in crude protein content. Acacia mangium shoots and phyllode leaves have also proven themselves as a crude protein fodder source for sheep and goats, though with low in vitro dry matter digestibility, so best eaten fresh. Together with honey production this offers opportunities for rural subsistence economies.

The tree’s versatility can be determined from other facts as well. As a fuel Acacia mangium has a calorific value of 4,500 to 4,900 kcal/kg (8,098 to 8,818 Btu/lb). This makes it an excellent source for charcoal briquettes and artificial carbon where ecological fuels are required. Where paper making is concerned, the pulp is easily bleached to high brightness levels. The pulp and paper industry considers Acacia mangium ready to harvest after only 6 years of growth. Acacia mangium has a bright future in a number of other industries as well. It is already proving itself ideal for both high and medium density fibreboard products. Other studies suggest that using Acacia mangium wood wool (excelsior) is an environmentally friendly solution for organic packing materials. The tree's sawdust offers a good quality substrate for the profitable gwowing of shiitake mushrooms. The wood has a high tannin content (18% to 39%), meaning that it may become an important source for organic dyes as well. Yesterday's and today's blog tell the story of why investors with Amazonia Reforestation are enthusiastic about Acacia mangium.

Acacia mangium - an investor's miracle tree!

Acacia mangium is a miracle tree in terms of fast growth. Since investors don't want to tie their money up indefinitely, a 10 year turn around is only sustainable if the tropical hardwood trees being planted produce rapid results. Acacia mangium lives up to that promise. It can go from zero to a 50 cm (20 inch) diameter bole or trunk in just 9 years. Since wood is sold in cubic meters in much of the world, another way of expressing this increase is in cubic meter growth per hectare (2.47 acres). Acacia mangium can add 35 to 50 cubic meters of wood per year per hectare in a good location, such as the plantation managed by Amazonia Reforestation. A 9 year old tree will be 21 meters of 65.5 feet tall. When planted for pulp and paper purposes Acacia mangium is often harvested after just 6 years of growth, a factor popular with that industry.

Equally important to an investor are the potential markets for a hardwood. The obvious primary use for Acacia mangium is wood. This straight trunk tropical tree is a hardwood with an extensive product range, including sawn or hewn building timbers, heavy construction uses, beams, boat building, containers, crates, boxes, industrial and domestic wood ware, tool handles, brushes, turnery, furniture, cabinets, flooring, decking, veneers, wood based materials like particleboard, fibreboard, medium density fibreboard, wood wool or excelsior, pulp and paper, charcoal and firewood. Acacia mangium’s density and fibre length allows the wood to be sawn, polished, drilled, glued and washed.

Besides its timber value, Acacia mangium's fast growing nature is ideal for carbon sequestration programs like the one offered by CO2 Tropical Trees. As we saw from its significant annual cubic meter growth this means that Acacia mangium can sequester an average of 50 lbs or 22.6 kg of CO2 per tree per year. Since more than 50% of the average tropical tree’s woody biomass is carbon, this is an excellent long term storage solution, as the carbon remains trapped in the wood even after harvest for uses like building material and furniture. Industries like oil and gas requiring carbon offsets, regardless of where they are located, can make use of Acacia mangium’s excellent carbon sequestration properties. Atmospheric carbon is a global problem that can find a significant partial solution with tropical trees like Acacia mangium.

What have others said about investing in timber?

I thought these excerpts would be of interest to new tropical tree investors. Get involved now and buy some tropical trees at Amazonia Reforestation. The sooner you invest, the sooner you collect your gains.

The Economist, February 5, 2007 - “He plants trees to benefit another generation” said Caecilius Statius, a Roman comic poet. The sentiment remains admirable, but modern investors are putting money into trees to reap benefits in the nearer term. A growing number of rich individuals, endowments and pension funds are including timber as a “hard asset” in portfolios. No wonder. Average annual returns on timber—meaning managed preserves that are eventually harvested—have outstripped those from leading global stock indices, property, oil and gold for the past decade. Worldwide, timber has attracted more than $20 billion of investment from institutional investors. Advocates say managed timber reserves are good for the environment too, preserving biodiversity on lands that might otherwise be logged recklessly.

Smart Money - Since the days of Robin Hood and King John, the wealthy and powerful have owned woodland. But about 20 years ago, a few insurance companies and big pension funds started buying forests as a hedge against inflation. For the first time, economists began evaluating timber in terms of total returns and risk/reward ratios. The track record of early investors — and a slew of recent academic research — indicate that timber is a near-perfect asset. Studies show that a diversified timber portfolio would have returned 13.3% annually over the past 40 years, compared with 11.6% for the S&P 500. Impressive, but that's just the beginning. Timberland is also remarkably low-risk, with volatility more like bonds than stocks. And it tends to perform best when stocks and bonds go down, making it a neat counterweight.

Money Week - China is crying out for timber. Until recently, China had far less forest (roughly 18%) covering its land than other countries. Beijing imposed restrictions on harvesting timber and has thrown its weight behind creating man-made plantations. In the meantime, China has relied on imports to make up for shortage of timber. Imports to China increased tenfold from $53bn in 1990 to $561bn in 2004, with the bulk in recent years coming from Russia. But just as the Kremlin is happy to use its energy reserves to hold economies to ransom, it is squeezing its timber customers as well. Russian export taxes on timber rose to €15 per cubic meter on 1 April and are expected to balloon to €50 next year.

What happens when you plant 3.25 million tropical trees?

The reason I ask this question is because I did the calculations for an oil company the other day. It takes about 2,750 hectares or 7,200 acres of land to plant that many trees. That is a lot of land, so what impact would planting that many tropical trees have on global warming and climate change? Assuming the tropical trees in question were fast growing species like Acacia mangium, Caraipa llanorum and Eucalyptus pellita, to name just a few, then there should be a significant carbon offset thanks to the ability of tropical trees to sequester CO2. Since 50% or more of the woody biomass of a tropical tree is carbon, so it seems to me that anyone who is serious about reducing atmospheric carbon needs to take action and start planting.

Since the average tropical tree absorbs about 50 lbs or 22.6 kg of CO2 per year, the number would have to  be enormous. Assunming the trees take a full year after planting to start sequestering that much carbon, then 3.25 million tropical trees should sequester 162.5 million lbs or 73.45 million kilograms of CO2 every year. Since tropical trees are most effective at sequestering carbon during their first 10 to 12 years of life, that means that if the trees were cared for and maintained for 10 years after becoming CO2 effective, 3.25 million trees would sequester 1.625 billion lbs or 734.5 million kilograms of CO2 during that 10 year period. That is 734,500 metric tons or 809,648 imperial tons of carbon. Clearly, this makes a lot of sense for industries like oil and gas that need to offset their CO2 emissions.

It would cost approximately $6 million dollars (including land, equipment, materials, labour and more) to plant 3.25 million trees.If one starts to factor in the other benefits, like oxygen for all of us to breathe, the removal of a large number of pollutants other than CO2 from the atmosphere by tropical trees, expanded habitat for endangered wildlife, socio-economic benefits to communities in developing countries, and the conservation of native tree species for better bio-diversity, then the price tag becomes ridiculously low. So why don't you call up your local oil and gas company or petro-chemical industry and ask them why they are not actively funding the planting of tropical trees? Send them to http://www.co2tropicaltrees.com.

An investment in fast growing tropical trees can return between 30% to 40% per cent non-compounded per year over a 10 year period. Can you say the same thing for your portfolio? The problem with many investors is that they think short term is one week and long term is two weeks. It doesn't take a rocket scientist to figure out that is an unlikely formula for success. What investors with that mindset are really doing is gambling with their money in hopes of some sort of a quick return. Let's call it the Vegas syndrome.

On the opposite end of the spectrum are the people who buy government savings bonds and treasury bills, earning between 2% to 4.5% per year, a return on investment which rarely exceeds the inflation rate. Let's call it the Clueless syndrome. In the middle are the people who buy stocks, shares and mutual funds and then get defrauded by Wall Street, Bay Street and Fleet Street, while company CEO's get multi-million dollar compensation cheques for putting their company into the red. Let's call this the Mainstream syndrome.

With all the raped and pillaged IRA's, RRSP's and Pensions out there, one would think that people would be flocking to low risk high return opportunities like tropical trees. I used to be a victim of the Mainstream syndrome. I would deposit $200 a month to my RRSP and get a monthly statement from my mutual fund showing plus $200 for the deposit and minus $300 thanks to their investment savvy. Sound familiar? I first started investing in tropical trees in 1995, and I haven't looked back since then.

Forest Certification

One of the best ways of making sure the wood in your coffee table didn't come from a rainforest tree is by making sure that the lumber used was FSC certified. FSC means the Forest Stewardship Council, a non-profit organization that is dedicated to certifying that lumber was either legally cut or came from a plantation. FSC was Established in 1993 as a response to concerns over global deforestation. In order for Amazonia Reforestation to sell its plantation lumber into the USA and Canada, it needs to have its tropical trees FSC certified. This is a process with which most responsible wood lots and plantations are happy to comply.

FSC has certified some 115 million hectares (1.150,000 square kilometers or 444,020 square miles) of  wood lots and forests to date. Since the organization consists of members from environmental groups, the timber industry, aboriginal groups and other stakeholders, it has broad-based appeal. It works with small forest holders and large forestry management companies alike. Certification doesn't just end at the plantation. FSC provides chain of custody certification as well, so that only certified lumber is shipped to and received by the end user.

An FSC certificate tells the public and the end user that the wood producer complied with the highest environmental and social standards on the market when they produced the trees. This makes FSC certification a very credible approach to complex environmental and social issues affecting our planet. More and more timber resellers, governments and instituions are now demanding FSC certification when they are procuring lumber from sensitive sources around the world.