Investing in plantations has the advantage that assets, such as land and the increased growth of trees, are a security for the invested capital.
These assets provide greater security than that obtained in other investment projects, and therefore investments in teak plantation operations are considered to be a low-risk investments. And in general, the future value of the investment in teak plantations depends on the quality of the timber, the professionalism of the operation and maintenance of the plantation and the actual market value when the teak is deforested and ready for sale.

But regardless of whether we at Tectona Production believe that this is unlikely, and regardless of whether we believe we assume a great responsibility for the protection of the individual investor, we must emphasize that everything can be lost in an investment such as the one we offer. The value also depends on a number of risks, some of which are general for any investment, while others are specific to investments in teak.

Due diligence
A long-term investment in teak plantations, and not least good business practice, requires that we focus on managing various risks and thus also on describing the risks that we, to the best of our ability, and for the sake of timely care, should illustrate to the investor and in on the whole relate to us responsibly. Some risks have already been mentioned elsewhere, but for the sake of clarity are included in the following overview.

Fire
In general, fires are rare in Panama’s tropical climate, as the drought period lasts only three months. 4 years after establishment, the plantations are relatively resistant to fire. The biggest risk lies in the first season, where dry grass and scrub can ignite and destroy the small teak trees. Therefore, the first two years will be spent a lot of resources on keeping grass and shrubs down. In the event of major fires, it is especially the teak trees that survive.

Fire is thus almost exclusively a problem in the first year of the plantation, where the consequence is least. Before the dry months, fire belts are established in each plantation and fire preparedness with fire extinguishing equipment is established.

Insect and fungal diseases
Due to the unique properties of teak, there is no knowledge of insects that can do much damage to a mature teak plantation in Panama.
Young plants can be attacked by insect and fungal diseases, To prevent this, the trees are treated during establishment with special pesticides and fungicides.

Hurricanes and natural disasters
In Panama, hurricanes do not occur and natural disasters pose a very small risk. Storms rarely occur in Panama. The great Atlantic weather systems that annually plague the Caribbean Islands, Mexico, the southern United States, and Florida usually take a northern turn in the Caribbean Sea.

The southernmost lanes most often pass over the Yucatán Peninsula, about 1,500 km northwest of Panama. Heavy rainfall with floods, as a result, can be a risk if the area is chosen incorrectly. A risk Tectona Production is very aware of, and it is a factor that is thoroughly evaluated when purchasing land.

Animals
In the first year of the life of the tree, there is a risk that grazing animals such as cattle and horses can damage the plantation.
We are very aware of this and make all necessary reservations to minimize this risk.

Theft
Theft is only a possible problem in the plantation when the trees are felled mature and to date, it is not a known problem in the province.

All plantations are fenced and employees live in the individual plantation, which is responsible for keeping control of animal intrusion and any other unwanted visits. Furthermore, there is a very strict police control of all goods leaving Darien province, all cars leaving the area are being investigated by the national police.

Political and economic stability
According to the FAO, Food and Agriculture Organization of the United Nations, Panama and Costa Rica follow closely behind the United States and Canada in terms of political and economic stability in America as a whole. The currency is USD. Panama’s well-developed financial center and the crucial importance of the Panama Canal for the country’s economy ensure a high level of stability.

Price drop
There is no indication that the demand for teakwood should fall in the long run, and a declining supply combined with increasing demands for wood to be certified will certainly send the price increases for plantation wood further up. Should there still be falling prices, teak plantations have the option of postponing the time of drift.

The number of plantations
Today, plantations supply less than 1% of the total consumption, large quantities of which come from illegal deforestation. It is difficult to imagine that sufficient plantations can be established to meet demand, as consumers demand certified timber.

Currency risk or uncertainty
There is currency risk or rather currency uncertainty associated with the payment of dividends as trading in US dollars, USD, in Panama.
Uncertainty because this relationship can also have a positive effect. It is unique to be able to invest in teak production, where the investment is made in a recognized international currency.

Price development
It is difficult to predict whether the price development for teak from plantations and historical figures is no guarantee of future development.
But with the growing environmental awareness and the consequent demands for certification of wood and protection of the rainforest, we at Tectona Production have a hard time imagining that the price development does not continue its stable positive course.

The global demand for wood and biomass, in general, is amplified by the increased applications. In addition, price fluctuations on wood have less to do with the rest of the global economy. Therefore, investing in wood is a great complement to a well-balanced portfolio.

The risk of choosing areas that are unsuitable for teak production
The risk of floods and soil erosion/soil conditions for teak cultivation and unclear ownership of the land are the most important factors that must be taken into account when purchasing land in an otherwise optimal area for teak production. The production company’s employees are among the best and most experienced in the industry. We have also hired a Danish consultant Poul Elgaard to advise on the purchase of land.

The quality of operation
The production company’s employees are among the best and most experienced in the industry.
We also have Poul Elgaard attached to also advise and perform ongoing quality control on the quality of operations.