Investing in Latin America's Green Energy Growth Market

By the Costa Rica News

Biofuels is on the rise… again. The first time some painful lessons were learned for fast-in investors. This time the focus is on second generation biofuels and Central America.

First generation:

Why so bad? Some of it´s obvious and has been covered before: using petroleum-based fertilizer to grow corn, which is sprayed with petroleum-based pesticides and then shipped using fossil-fuel based transport (before and after it´s turned into ethanol), doesn´t make a lot of sense. This is also a problem with sugarcane ethanol exported from Brazil and soybean biodiesel produced in the US. Add to these standard issues like displacement of agriculture onto previously unused land, which contributes to carbon dioxide emissions when the land is cleared, and things start to get messy.

For second generation biofuels, the first investment wave that started in 2005 was short lived, and was already seeing problems before the 2008/9 global economic decline. Fast-in investors pushed their money into any available project based on talk of political capital, market capital, the Green Marketing Movement, and talk of cap & trade carbon markets.

Unfortunately the only investors that really benefited were initiators of large commercial projects. The small to mid level investors, suffered as a whole.

One example is D1, rushed into planting Jatropha on large scale, with very little agronomic research. First billed as a wonder crop, Jatropha, as a non-food crop that grows on marginal was hailed as the cure to Global biofuel shortages. And while Jatropha does grow on marginal lands, any farmer will tell you that marginal inputs mean marginal outputs.

But biofuels, like Jatropha have been quietly developing knowledge, experience, and success stories over the past 3 years.

Where most of the first investment/development projects were developed overseas in Africa, and South Asia, savvy developers have now turned their eye to Central America; where biofuel/oil feedstock are indigenous, vast amounts of available land, rich and fertile soil, cheap labor, time zone benefits, and CAFTA (Central America Free Trade Agreement) have illuminated barriers.

In the mean time the demand continues to growth. Mandates on production or blend continue to put pressure on refineries, and other companies in oil production, both upstream and down-stream, to meet demand. Companies in USA are complaining that they are being fined for not using biofuels that don’t yet exist!

Beaker or Barrel:

Now the second and more sustainable wave has begun. The main factors driving biofuel develop:

The continuing rise of fossil fuel prices; Russia needs $110/barrel just balance their books, Average Middle Eastern per barrel requirement is between $75 and $85 per barrel, just to balance the books.

29% of the global vegetable oil production’s increase and 68% of the global sugar cane production’s increase are expected to go to biofuels. Food for fuel simply doesn’t work; it’s not a sustainable strategy.

China and India are quietly capturing more oil supplies, both fossil and bio fuels, and their demand is outpacing the #1 consumer, USA.

The aviation industry is starting to see blend mandates, and many European airlines (USA soon to follow) will start receiving fines for not using blends, but like the US refineries they will being fined for not using bio-fuels that don’t yet exist in the market. Here is a perfect example, Lufthansa airlines, just completed over 1800 test flights between European cities using a 50% blend with bio-synthetic Jatropha fuel (the #1 drop in replacement choice for airlines). The results: a huge success, emissions using bio-fuel cut by up to 80%, costs dramatically reduced… the problem? Lufthansa said the jatropha and bio-fuel supply was not yet sustainable at the levels only one airline would require let alone all of them.

So here we have a mandated product in a mandated market, countries and industries have to by law purchase your bio-fuel product at fair market value. Mandated markets and products make investors feel secure.

These are just a few of the reasons bio-fuel investors are on the rise.

It’s a more intelligent market, the demand as expected by analysts has continued grow exponentially and now there are investment options for the small and mid level investor to play as well, it’s an opportunity for everyone now, not just for the big boys.

Click here to read the full story by the Costa Rica News

The Future of Costa Rica: Leading Biofuel Production

By Jaz Chopra for the Costa Rica News

Over the years, terms like construction, development and real estate have failed to take into consideration the words sustainability and environmental well-being. In fact, so much so that infrastructural development tends to take place at the cost of natural resource depletion. Fast forward to 2012 and sustainable, eco-friendly development is at the forefront of modern day progression. Blame it on increased awareness of climate change or on the fact that humans have found this new appreciation for nature but biofuel production is the newest craze to hit Costa Rica!

Renewable Energy Farms are by no means a new concept, what is new however, is their rapid growth in some of the world’s most naturally abundant locations. Based upon the ideals of the above concept, Multi-purpose Real Estate is the latest project to incorporate environmental productivity with economical benefit. The company offers a potential buyer a chance to not only be owners of a self-sufficient piece of property but also offers them an opportunity in making their contribution to reducing green-house gas emissions. With added bonuses of providing local farmers with further work and helping promote a healthier lifestyle choice, property owners would own a share in a global movement. Ultimately, the question that needs answering is, what has given rise to this sudden demand for this industry? Based on EU regulations of ensuring 10% of all fuel at European pumps being biodiesel by 2020, governments in other countries are becoming increasingly open to the idea!

Central America is the ideal location for projects of this nature as there is a demand for emerging markets particularly in connection to the environment. Costa Rica, perhaps agriculturally the most prosperous of Central and South American countries has become the focal point of the bio fuel market. Combining the factors of real estate, low cost labour, biofuel markets and high yielding crop production gives way to the perfect formula for a successful business venture. UBA, formally known as United Biofuels of America have seized the opportunity and are based in Costa Rica permanently. Having joined forces with real estate developers, we have seen the birth of Multi-Purpose Real Estate.

Michael Klein, Chief Development Officer for UBA was quoted stating that “Multi Purpose Real Estate is one of the newest and most promising programs that we have launched in this initiative. Essentially we offer investors that are already in or will be entering land banking market in Central America, the ability to turn land that would be otherwise sitting unused into a Bio-oil Field that generates income while their land continues appreciating.” Summarizing the project to a tee, the concept has a USP (unique selling point) that would capture the imagination of many prospective buyers.

For the estimated price of $35,000, property owners would see returns of 30% or more each year! During the span of a 5 year contract, a prospective buyer could potentially make over $100,000 yielding almost three times their investment. The properties being located in ‘hot zones’ around Costa Rica have also meant that when it comes to re-sale, the land value would be much higher than the original purchase price.

One could potentially argue the ‘what’s the catch’ aspect of the project but the reality of it is that there isn’t one! Buyers are entitled to opting out at any time by selling their land on and following a 5 year agreement will be permitted to build on the property.

Now is the time to invest in the biofuel market for analysts predict a doubling of biofuel prices in as little as 5 years time! From an investment point of view, the current attraction is the substantial amount of return the buyer receives in the long term. With fuel resources estimated to run out during our lifetime, biofuel is the biggest investment out there. With fossil fuels fast depleting, biofuel production takes the lead. Costa Rica provides the biggest asset of the all, the crops themselves. Jatropha Curcas is a native crop originating in a town called Tempate. Exported in the 1700s, this plant has many extra uses pertaining to medicine, cosmetic surgery, latex and glycerin based products. Additionally, Costa Rica’s close proximity to major U.S cities, a stable government and currency and less stringent bureaucracy laws have made Costa Rica the perfect host to the perfect concept.

Foreign buyers’ share the same rights as local citizens, making the actual process of buying fairly hassle free. That aside, having outlined all the successes of this project, it would only seem fair to consider the potential risks involved. Though few and improbable, it is important to understand that almost every element of life carries risk. With regards to failures of the project, the two biggest issues MPRE (Multi-Purpose Real Estate) is faced with are that of natural disasters and the incompletion/ suspension of the new international airport construction. If the new international airport creation was to be deferred or cancelled then land value around the area would not appreciate as much. Similarly, if for reasons of natural disaster, a hurricane was to destroy the crops, then land will be damaged and productivity would come to a standstill leading to property value loss.

The purpose of this article is to make the public aware of such projects by highlighting their benefits and discussing their potential risks. If this article has provoked an urge to know more about such initiatives then logging on to www.costaricainvest.ie and reviewing some of the information about Renewable Energy farms will provide you with more of the answers you are looking for.

Photos from JatrophaWorld.org

By Jaz Chopra for the Costa Rica News