By Renata Mercante, Editor, PPI Latin America, RISI
SAO PAULO,
March 13, 2008 (RISI) -
Over 100 people looking forward to entering the Latin America timberland market attended the “Timberland Investing Latin America Summit” from March 3-5 in São Paulo, Brazil. The event was organized by IQPC – International Quality & Productivity Center – and brought forth many opportunities of investments in the region.
According to a survey of US pension funds and university endowments, mentioned during the event, there are currently $8 billion available in investors’ hands waiting to be put in the worldwide timberland sector over the next five years. And Latin America’s timberlands are likely to attract $2 billion in foreign investments through 2012, as countries in the region still have large areas available for plantations and offer some of the lowest timber production costs in the world.
North American timberland investment management organizations (TIMO) and other investors currently have $40 billion in forest assets around the globe. Of this total, 91% is concentrated in North America, 5% in Australia, 2% in South America and 2% in other regions of the world. “The investors are looking to reduce their participation in the USA and increase it in Latin America,” John Forgach, president of the Timber Group, said.
Brazil and Argentina are ranked as the best countries for timberland investments in Latin America. “Chile and Uruguay have a good experience in timber activities, but they don’t have many areas available for plantations,” Forgach stated.
Ramón del Pino, director of the International Forest Businesses Program for Fundación Chile, admitted that Chilean domestic demand for wood is lower than the supply. According to him, Chile has 15.6 million ha of forests – 13.5 million ha of native forests and 2.1 million ha of plantations owned by CMPC, Arauco and Masisa, among other smaller groups.
But Pino stressed that, despite not having available land, Chilean forest companies have a very efficient business model. “Arauco, for example, sells $2 billion and has profits of $600 million while IP [International Paper] sells nine times more and has profits that reach only the double of Arauco’s,” Pino said.
Regarding Brazil, there are larger areas available for plantations, but it’s important to notice the presence of “hidden costs”. In Amazon, for example, the price of land is much cheaper than in the south of the country, but you have to spend a lot of money to take the wood out of there as there isn’t an efficient logistics infrastructure. “However, if you learn how to manage these hidden costs, you’ll earn a lot of money,” Forgach said.
Currently, the country has 1.7 million ha of eucalyptus and pine plantations for industrial use as well as 2.8 million ha of preserved forests.
But besides wood fiber, there are many other markets that a timberland investor can work with, such as carbon credits, wood products, electricity, fuels, and ecotourism operations. Only the carbon market, for example, was worth $12 billion in 2005 and $29 billion in 2006, which shows its great potential for growth, according to Forgach.
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