Panama Farmland - A Guide to Agriculture Investment in Panama

Panama Farmland – A Guide to Agriculture Investment in Panama

Considering an investment in Panama farmland and agriculture? Panama offers a tropical climate very suitable to a variety of agricultural activities, and farms for sale in Panama may be easy entry into this small but very lucrative market. The key to this type of investment in Panama farmland is to find a good management team who can operate quality farmlands with sophisticated farming experience and market channel knowledge.

Why Panama? – An investor friendly country

When considering an agriculture investment in Latin America, a foreign investor needs to take into account the investor framework a country provides. When looking more closely, Latin American countries vary significantly in their investor friendliness.

Brazil – the famous member of the BRIC countries – offers an attractive growing market but when considering a direct investment in a Brazilian business, the foreign investor is faced with a complicated tax system, some restrictions on foreign ownership as well as exchange controls, which makes it cumbersome to invest. Other Latin American countries like Argentina and Venezuela have a history of nationalizations of foreign owned assets, basically putting these destinations on a blacklist for many foreign investors.

Investing in Panama on the contrary is straightforward: The economy is dollar based, there are no restrictions on foreign ownership and no exchange controls. Panama’s economy is one of the strongest growing economies in Latin America, experiencing 11% GDP growth per annum from 2005 to 2010.  Foreign investments in Panama amount up to 9% of GDP, which is the largest share in the Americas and clear proof of the country’s investor friendliness.

 Agriculture in Panama

Panama’s tropical climate is very favorable to agricultural activities, as the humid climate allows crops to grow quickly and even for 2 cycles per year with the right farming techniques.

In the countryside Panama’s economy still strongly depends on the agricultural sector, although many of the countries farmers are facing increased competition.  For this reason, there are often opportunities to buy farms for sale in Panama directly from the cash strapped farmers who need to liquidate holdings they may have had for generations.

The most widely planted farmland crops in Panama are rice, maize and sugar cane according to the data of the Food and Agricultural Organization of the United Nations (FAO).  One third of Panama’s harvested area alone consists of rice farms.

Panama – Harvested area 2010 (000 hectares)
Panama Farms - Harvested area
Source: FAO Stat Feb 2013

Rice is a basic consumer staple which is nearly only produced for the domestic market in Panama. Rice is part of the national diet and is one of the cheaper food alternatives for the poor population in Panama. Maize is another important crop in Panama; produced to be used as a basic staple or also as animal feed. Sugar cane is the third most important crop in Panama, produced to supply sugar to the domestic market and also exported abroad.

Unlike Brazil, Argentina or Colombia, Panama is not on the radar of many large institutional farmland investors, as land prices are a bit higher in Panama and their sponsors like them to focus on the biggest markets in Latin America only. Thus local players mostly dominate the agricultural sector in Panama and they operate the land with less foreign know-how, thus leading to some inefficiency in the local agricultural sector.

Currently local producers are challenged with rising inflation costs and the number of producers for some crops decreased significantly over the years. Data from FAO shows that Panama produces less efficient for basically all of its major crops when comparing harvest yields per hectare to other leading producer nations such as the USA or Australia.

Maize – Metric tons per hectare (2011)
Panama Farms - maize
Source: FAO Stat Feb 2013

Rice, paddy – Metric tons per hectare (2011)
Panama Farms - Rice
Source: FAO Stat Feb 2013

Sugar Cane – Metric tons per hectare (2011)
Panama Farms - Sugar Cane
Source: FAO Stat Feb 2013

Given the inefficiencies in the local agricultural sector, it is understandable that for certain crops Panama’s government still insists on import tariff and quotas to protect its local sector. This leads to a situation where prices for certain crops actually can be quite attractive compared to the world market.

The opportunity in agriculture

Lower harvest yields in the domestic sector in Panama can be an opportunity for the experienced investor. Bringing in sophisticated agricultural know-how and transforming underutilized quality farmlands into higher-yielding assets can be an attractive economic business proposition with the right know-how and management team. The result is steady cash flow generation at less risk to local peers when done right.

Contact us if you want to know more about interesting agricultural investment opportunities in the agriculture sector in Panama. Or check out are listings for Panama farms for sale and land for sale in Panama.

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