Emerging Markets / March 20, 2017

Top Five Reasons to Walk the Ground Yourself

Top Five Reasons to Walk the Ground Yourself

In an age of market volatility, diversification is increasingly recommended. Investors bold enough to expand into international agriculture can find stores of untapped opportunities, strong upside potential, and an industry poised to profit from the coming rise in global population. As the Founder & CEO of AGD Consulting, a US-based, veteran-owned firm offering advisory services and due diligence trips for investors seeking experience in international agricultural investing, we believe overseas agriculture is an excellent way to achieve these goals. It’s imperative that investors walk the ground, experience the local financial and agricultural culture, and build trustworthy relationships with managers and communities before investing.

Below are the top five reasons investors need to walk the ground themselves.

A picture is not worth a thousand words

In my experience, online photos or reports can over or undersell an asset’s potential. Investment managers and syndicates tend to only present the best possible front for the project they’re promoting, therefore, it’s imperative for investors to see what they’re not showing you. Often times, these site visits and experiences do not negatively impact the project; rather they add context and breadth for investors to more fully understand what they are involved with. Find a company or expert to help you organize a research trip and perform your own due diligence before investing. As an example, AG DTours, a division of AGD Consulting, is providing customized expeditions to Colombia in partnership with Farmfolio as way to provide investors with a richer understanding of their investment opportunity.

Meet the management

An experienced, well-balanced management team that believes in what it is doing is one of the most important indicators to investors of whether or not a project will succeed. If the project manager and the team do not truly believe in the opportunity, it will be evident when you talk with them face-to-face. If you’re traveling to a country where you don’t speak the language, have your research trip provider arrange for interpreters to meet you at the project site. Talk with the local workers, ask what they think of the project, and watch how the investment manager interacts with his team. Listen and observe how the workers respond to your questions and watch how they perform their work; it will speak volumes as to how much they believe in what they’re doing.

Experience the geopolitical and economic climate

Potential investors need to experience the current geopolitical and economic climate of the country they are investing in and what it could become during the investment’s lifetime. Talk with the locals about the current political administration, ask them what they think of foreign investors, and get a sense of how important agriculture is to their local economy. Talk to local street vendors selling agricultural products and ask them where they get their supply from, how business is going, and what would make their lives easier and more profitable. Learn how to convert money back and forth between currencies in order to get a sense for how easy or difficult it is. Go to a local bank and see if foreigners can open bank accounts. While you may never need to do this as an absentee agricultural investor, it will provide you with contextual and fundamental understanding of the geographic and economic climate you’re investing in.

The right legal assistance

Understanding a country’s legal framework is crucial to protecting and insulating your investment as much as possible. This is where sound legal advice is an absolute must. If the investment opportunity you’re pursuing already has an imbedded legal team with experience in the country they’re operating in, great, if not, then you need to find one. The right representative can provide you with advice concerning titling issues, cultural differences, and connect you with governmental agencies to apply for special investor programs. Investors should seek counsel from someone with international investment experience as local advisors may tend to favor loyalty to their local network over providing you with the best advice that suits your needs.

Understand the culture

One of the most common misconceptions foreign investors have regarding international investments, especially in the agricultural sector, is the assumption the processes move at the same speed as the Western world. The Latin American way of life is generally slower-paced than many in the United States are used to. Foreign investors need to experience this culture for themselves and determine if it suits their personality and investment needs. If you try to force your cultural expectations onto the local management team and the surrounding community, you will struggle. As an absentee investor, you are asking the community and team on the ground to watch over your investment while you are away. This is simply not possible without an understanding and appreciation for the local people and their culture.

(Read more about Agricultural and Cereal Markets in Ireland)