Frequently Asked Questions
Answers to some commonly asked
questions about Tropical American Tree Farms and about owning tropical
hardwood trees for later harvest, for profit.
1. What types
of trees are you planting?
2. Are the
hardwood prices of all of your species the same?
3. Will you
plant each of the species every year?
4. When is
the first harvest?
5. How does
planting tropical hardwood trees compare with leaving my money in a
savings account or CD's to accumulate interest?
6. Do I have
to pay income tax on the increase in value of my trees each year?
7. Can I own
trees in my IRA?
8. Will the
harvest schedules be the same for all of the species?
9. What if I
need cash before my trees are harvested?
10. If I travel to
Costa Rica to inspect my trees, is the cost of my trip deductible?
11. How politically
stable is Costa Rica?
12. Are hurricanes a
problem in your area?
13. Are forest fires
a problem?
14. Are there
diseases or pests which will destroy my trees?
15. Are there other
people in Costa Rica planting trees for later harvest?
16. Will too many
plantations result in lower prices for my hardwoods?
17. What reports
will I receive?
18. When are the
trees actually planted in the plantation?
19. When is the
rainy season and when is the dry season?
20. How do you know
what each species requires?
21. Are you cutting
down any existing forest to plant your trees?
22. Are you planting
any trees that will not be harvested?
23. If I have other
questions?
1. What type of trees are you planting?
We are growing more than 40
species of precious tropical hardwood trees, carefully chosen by our
foresters for their beautiful hardwoods, excellent growth potential, and
high value, both on the local and international markets.
2. Are the hardwood prices of all of your
species the same?
All of our selected species of
tropical hardwoods are valuable. Some are already quite scarce and many of
their export/import prices are not published. We can, however, use their
retail prices as a guide.
Teak for example sells for nearly
four times the price of black walnut, considered to be one of the finest
hardwoods grown in North America. And some of our hardwood species sell
for even more than teak.
We expect the prices of all of
our hardwoods to go much higher as the world's remaining tropical
rainforests are either destroyed or placed off limits to logging.
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3. Will you plant each of the species every
year?
No. Which species we plant in any
year will depend upon the availability of quality seeds and seedlings, and
the availability of planting areas within our farms which match each
species' requirements.
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4. When will the first harvest be?
For teak, we project that the
first thinnings will be after the 7th full growing season after
field-planting, followed by additional thinnings approximately
each 3 or 4 years and continuing until the final harvest in about the
15th, 20th or 25th
year, depending upon the species.
You may choose to keep the lumber
from your trees for your own use, sell it yourself, or have us market
your hardwoods for you, using our best efforts to obtain the highest
prices for you, whether on the local or international market.
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5. How does planting tropical hardwood trees
compare with leaving my money in a savings account or CD's to accumulate
interest for 20 years?
It is difficult to predict what
future interest rates on savings accounts and CD's will be. However, as an
example, if you were to put $4,998, the price of 100
20-Year Final Harvest Teak
trees, into
savings or CD's today at 3% compound interest and allowed the interest to
accumulate for 20 years, you would have a total of $9,026 at the end of
the 20 years.
That compares to approximately $66,600
projected cumulative net harvest proceeds over the next
20 years from 100 20-Year Final Harvest Teak trees. See
Teak Projections.
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6. Do I have to pay income tax on the increase
in value of my trees each year?
No. Even though your trees are
growing in size and value, you will not have to report their increase in
value or pay any income tax until you actually receive the proceeds from
the sale of your hardwoods.
This is unlike many other
investments where you have to pay tax on the interest you earn each year,
even if the interest is not paid out to you.
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7. Can I own trees in my IRA?
Yes. Growing tropical hardwood
trees is definitely an investment that qualifies for your IRA. Many of our
tree owners have chosen to have us grow trees for their IRA.
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8. Will the harvest schedules be the same for
all of the species?
The harvest schedules will vary
from species to species, depending upon their growth rates and
silvicultural requirements. Because many of our species are rare and have
not previously been grown in plantations, their growth rates are not as
well documented as teak.
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9. What if I need cash before my trees are
harvested?
You have the right to sell or
transfer your trees at any time to whomever you choose. We will be happy
to assist in preparing appropriate transfer documents. Because we are
frequently in contact
with tree owners and others interested in owning trees, it is possible
that we may be able to help find a buyer for your trees but we cannot
guarantee the sale or value of your trees.
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10. If I travel to Costa Rica to inspect my
trees, is the cost of my trip deductible?
You should consult your tax
advisor to answer this question. Generally, you are allowed to deduct the
transportation and lodging costs of a trip if the principal purpose of
your trip is for business, and your purpose and activities on the trip are
well documented. Even if your trip does qualify for a business deduction,
only a portion of your food and beverage expenses are deductible. Again,
ask your tax advisor for details.
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11. How politically stable is Costa Rica?
Costa Rica has enjoyed more than
a century of democracy and peace. It is the oldest democracy in all of
Latin America.
Like the U.S., the Costa Rican
government consists of three branches, the executive - the presidency and
ministries, the judicial - the supreme court, and district and appellate
courts, and the legislative branch - their assembly or legislature.
The president, two vice
presidents, and the legislators are all elected to four-year terms in
free, direct popular elections. Each president can serve only one
four-year term. Candidates run for office in a multi-party political
system and no single party dominates.
Costa Rica is a government of
laws, and like the U.S., the Costa Rican constitution guarantees human
rights, private property, and equality before the law - for Costa Ricans
and non-Costa Ricans alike.
Costa Rica has enjoyed this
long-standing stability for several reasons. No part of the Costa Rican
population has ever been subjugated, so there is no class division, no
resentment. There is a large, strong, active middle class, and prosperous
individuals, including foreigners, are respected for their hard work and
success.
Also, Costa Rica has dedicated
its resources to education. There is no army here, and there are more
teachers than policemen. Free and obligatory public education has been
mandated by Costa Rica's constitution since 1869.
Costa Ricans understand and
treasure the benefits of their democracy.
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12. Are hurricanes a problem in your area?
Although hurricanes have
occasionally struck the Caribbean side of Costa Rica, an 11,000 foot
mountain range runs north and south through the center of the country,
sheltering the Pacific side where our tree farms are located. From all we
can determine, no hurricane has ever struck in the area of our tree farms.
However, localized flooding from hurricane-related heavy rains has
occurred.
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13. Are forest fires a problem?
Forest fires are not normally a
problem in the humid tropics. In these humid tropical areas, where trees
and forest are growing the natural moisture and humidity are retained. For
example, when farmers clear their land of forest, they first cut the trees
and let them dry in the hot sun for weeks or months before they can burn
the area being cleared. Even so, our workers keep the areas around our
trees clear of brush and debris.
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14. Are there diseases or pests which will
destroy my trees?
We have chosen only those species
which thrive in the area of our plantations and for which there are no
known problems of pests or disease. Even so, our foresters and workers
will continue to monitor all of the trees, and can respond quickly at the
sign of any problem.
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15. Are there other people in Costa Rica
planting trees for later harvest?
Yes. There are several other
commercial growers enjoying the political stability and lush growing
conditions in Costa Rica. For example, U.S.-based Stone Container Corp.
planted several large gmelina plantations in Costa Rica, some only a few miles from
our farms. Gmelina is a fast growing tree whose
wood initially was used in the manufacture of paper and cardboard and is
now recognized as an excellent hardwood for beautiful furniture and
architectural details.
There are also several other
teak plantations ranging from newly-planted, to more than 20 years old.
Trees planted in plantations in
Costa Rica have shown some of the highest growth rates in the world.
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16. Will too many plantations result in lower
prices for my hardwoods?
Plantations today produce less
than 1% of the tropical hardwoods consumed in the world. Meanwhile, nearly
50 million acres of rainforest are being destroyed every year. It is
unlikely that enough plantations can ever be established to keep tropical
hardwood prices from spiraling out of sight.
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17. What reports will I receive?
After your trees are planted and
marked in the field, we will send you a copy of their entry into the Tree
Registry, showing the exact quantity, species and planting year of your
trees, and the farm, field and rows where they are planted..
Thereafter, we will send you
copies of the Tree Owners News to keep you informed about the farms and
tropical hardwoods.
At least 30 days before we
thin or harvest any of your trees, we will send you a report of our foresters'
recommendations of the number of your trees to be harvested, and when the
harvest is planned.
After each thinning and harvest, we will send
you a precise accounting of the number of your trees harvested, the costs
incurred in the harvest of your trees and the processing of your logs into
lumber, the amount of our care and management fee, and if you
choose to have us sell your hardwoods for you, the exact amount of your
net proceeds from the harvest.
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18. When are the trees actually planted in the
plantation?
Our trees are moved from the
nurseries to the field during the main part of the rainy season, usually
beginning in early June, after the rains have become more regular.
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19. When is the rainy season and when is the
dry season?
Our area of Costa Rica receives
more than 100 inches of rainfall annually, with the majority of the rain
falling during the approximately 9 month rainy season. The rains begin in
April, gradually increasing until late October, and then begin to taper
off. The dry season generally begins about mid-December and continues
through March, with February and March normally the driest months. In our
area, we average an inch of rain per month even during the dry season.
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20. How do you know what each species
requires?
The requirements for teak are
known because teak has been grown in plantations for more than a century.
Information about our other species and their growth requirements has been
accumulated from forestry research and observations in the natural
forests.
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21. Are you cutting down any existing forest
to plant your trees?
No. We are planting our trees
only in areas which have been previously deforested - primarily former
pasture. We are carefully preserving nearly 7,000 acres of existing
natural rainforest on our plantations.
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22. Are you planting any trees that will not
be harvested?
Yes. In addition to the trees we
are planting for harvest, we are planting thousands of trees that will
never be harvested - flowering, fruiting and shelter trees to attract and
feed the birds and animals, trees along the river and stream banks to
protect the waterways, and permanent corridors of natural habitat
connecting the areas of existing forest.
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23. If I have other questions?
We invite you to
call or
e-mail us if you would like more
information, or if you have any questions at all.
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