How to invest in Aloe Vera?

Aloe Vera

LatAm Prime is a new Colombian company, specialised in the cultivation of organic Aloe Vera plants. Aloe Vera is a plant which is composed of 99% water; the remaining 1% is very powerful containing of 75 nutrients, 200 active compounds, 20 mineral, 18 amino acids and 12 vitamins. The plants are processed into a 100% organic aloe vera powder. This product is sought by the food, cosmetic and medical industry. LatAm Prime gives you the opportunity to invest directly in Aloe Vera production.

SWOT Review of LatAm Prime.

Strengths

Investor point of view:

  • Diversification. As of Oct 2016 the stock market Shiller P/E stands at  26.6 (+ 0.02%). This could mean that stocks are overpriced and a market correction is not far off. Investing in alternative assets could reduce the impact of such an event on your portfolio.
  • When buying into this aloe vera investment, you are buying the land. This is important because, in other forestry products, the investors have only a contract as a guarantee of return. The return of the majority of the capital depends on this contract. With LatAm Prime, the investor owns the land. Thus you keep the title as part of your invested capital. If LatAm Prime defaults, you will still own the land.
  • Taxes are included in this aloe vera investment. Similar products are tax-free, what this means is that in the likelihood of tax increases the estimated ROI will fall short of what has been promised. In this case, the likelihood is less. At this time, the price also includes the filing of taxes in Columbia. You need to check if your country has a double tax treaty with Columbia. Otherwise, you can get taxed in both countries separately for that income.

Aloe Vera:

  • Dead aloe vera plants are replaced free of charge during the 12-year farm management contract.
  • The LatAm Prime website has several videos and photos of the plantation and production facilities, these add additional credibility.
  • The management firm has skin in the game because it will make most profits during the life of the investment and not upfront. What this means is they have a vested interest in making the project a success.
  • LatAm Prime operates a laboratory/nursery on one site and a second area for the actual production of Aloe Vera. They are continuously testing and developing more efficient methods of Aloe Vera farming.
  • The site on which the Aloe Vera hectares are currently being sold to investors includes three reservoirs. The valley holding the hectares has two streams and one above ground river which supply the reservoirs with water.
  • The management firm will buy the Aloe Vera from the investors; they will process it and sell it on the open market. Prices will be determined by the market and not the management firm.

Management Firm:

  • The company is headed by the energetic, 61-year-old Enrique Gaitan Luque who is a civil engineer by profession. Mr Gaitan Luque was one of the civil engineers behind the largest hydroelectric plant in Colombia. His son  Julian Enrique Gaitan Cuevas is an environmental engineer. Mr O’ Connor the general manager is a seasoned investor. The combination of skills within the management team, give the project momentum and an increased potential for success. In addition LatAm Prime has invested over 1.8 million US dollars of their own money into this project, showing the commitment they have for the project and their belief in its profitability.
  • In such investments, it is crucial that the investment team have local connections. The right local knowledge and connections can make the difference between success and failure. Knowing the local language, culture and customs make significant differences in how the management firm deals with the local authorities on behalf of the Aloe Vera investors.
  • The company was originally started five years ago with the intention to involve local farmers in the production of Aloe. The project has evolved into a larger operation, and this is why they have expanded to the point where they are looking for external farmer investors.

 Example beauty products that can be made from Aloe VeraAloe Vera Products

 

Weaknesses

  • One hectare of Aloe Vera investment costs $38.000 (As of Oct 2016).  This price is roughly broken down as follows:
    • $12,000 land
    • $12,000 infrastructure
    • $14,000 farm management contract for 12 years
  • The company has maintained organic cultivation practices and is in the process of getting USDA organic certification; they do not yet have this certification. They do have Colombian certification already. To obtain USDA organic certification, three years of information are needed in relation to the farming practices. These would include fertilisers used and the state of the soil amongst others. This is the main reason why the investment farm does not yet have officially USDA certification but is in the process of doing so. The land being cultivated is virgin soil; this is an advantage when applying for organic certification.  Give the virgin state of the land; more infrastructure needs to be put into place, and this explains the price tag on this investment.
  • This product is new, and no payments have been made to investors, it will take two years for investors to receive any profits.
  • Currently (Oct 2016), there are no trustees or published third-party accounts of the firm.

Opportunities

  • There are opportunities for intercropping which LatAm Prime is experimenting with. This is an additional source of revenue which is not included in the current estimates.
  • Several important industrial Aloe Vera consumers are in talks with LatAm Prime.
  • Demand for Aloe Vera 100% organic powder is increasing year on year at 11%.
  • Coca-Cola has recently bought  a minority stake in Aloe Gloe. Aloe is gaining attention from the giants in the industry, the market for Aloe Vera is increasing.
  • The lifespan of an Aloe vera plant is 12 years, but because you own the land you can repeat this process again, you do not need to pay for the land again. A second 12 year round of Aloe Vera investment will give you a much higher ROI.
  • LatAm Prime will have an impact on less than 1% of Aloe Vera supply. Thus there is no danger of the prices decreasing because of an over supply.
  • LatAm prime is in the process of being recognized by the Aloe Vera International council.
  • Colombia is currently undergoing reforms which could result in lower taxes and increased earning for Aloe Vera investors.
Aloe Vera Juice
Aloe Vera Juice

Threats

  • Columbia has a bad reputation when you mention Colombia images of drug cartels and FARC rebels come to mind. This situation is improving, and being one of the first investors to ride the wave of change sweeping over Colombia gives you access to cheaper priced assets. For example, Colombia exports 5 billion worth of flowers every year.
  • Interpreting the NO in the FARC referendum: Only 24% of the voted, showing that the results do not necessarily represent what the majority wants. It is highly unlikely that the fighting between the rebels and government forces will resume.
  • The Aloe Vera plantation has always been in government control, and so have the bordering regions.
  • Venezuela dive into further chaos and this could spill over into Columbia.
  • Inflation in Colombia is currently (Oct 2016) in the region of 8%. However, since this investment is export oriented, there should be a small impact on the earnings, as the exported product is denominated in US dollars. However this could impact the price of local expenses.
  • Aloe Vera plant can be attacked by several pests.

See Also : Agricultural investing

Conclusion:

Aloe Vera has potential, investing directly in this plant on a commercial scale is difficult and time-consuming. Latprime, offer an interesting product that allows you to become Aloe Vera investor.