World Forestry Update: South America

World Forestry Update

Prepared by Greenwood Management ApS.
October 1st 2009

10.905.327/0001-66 Ltda.

Greenwood Agropecuaria
info@greenwood-management.com

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 CONTENTS

TABLE OF CONTENTS .............................................................................................................................................. 1/2/3

1.0 SOUTH AMERICA OVERVIEW ........................................................................................................................ 4/5/6

2.0 BRAZIL COUNTRY OVERVIEW ....................................................................................................................... 7

I OVERVIEW ....................................................................................................................................................... 7
II FOREST PRODUCT INDUSTRY ......................................................................................................................... 8
III BRAZIL POPULATION DATA .............................................................................................................................. 9
IV BRAZIL GEOGRAGHY DATA ............................................................................................................................ .10
V BRAZIL GOVERNMENT AND COUNTRY DATA ................................................................................................ .11
VI BRAZIL ECONOMIC DATA ................................................................................................................................ .12
VII BRAZIL ECONOMIC OVERVIEW ...................................................................................................................... .12
VIII BRAZIL ECONOMIC INDICATORS TABLE ......................................................................................................... .13
IX BRAZIL ECONOMIC INDICATORS TABLE ......................................................................................................... .13/14
X BRAZIL PRIMARY CROPS............................................................................................................................... .15
XI INTRODUCTION/ OVERVIEW ........................................................................................................................ .15
XII ANALYSIS AND INTERPRETATION OF DATA .............................................................................................. .16
XIII BRAZIL EUCALYPTUS PRIMARY SPECIES.................................................................................................. .16.
XIV INTRODUCTION ............................................................................................................................................ .16
XV PRIMARY MARKETS ...................................................................................................................................... 16/17/18
XVI SECONDARY MARKET .................................................................................................................................... .19
XVII OTHER PLANTATION SPECIES ........................................................................................................................ .20
XVIII INTRODUCTION .............................................................................................................................................. .21
XIX PRIMARY INDUSTRIES ................................................................................................................................... .22/23

3.0 CHILE................................................................................................................................................................ .24

I COUNTRY OVERVIEW....................................................................................................................................... .24
II GEOGRAPHY DATA ......................................................................................................................................... .26
III GOVERNMENTAL AND COUNTRY .................................................................................................................. .27
IV POPULATION DATA......................................................................................................................................... .28
V FOREST PRODUCTS INDUSTRY.................................................................................................................... .29
VI ECONOMIC DATA TABLE ............................................................................................................................... .29
VII ECONOMIC INDICATORS. ............................................................................................................................. .29/30/31
VIII PRIMARY AGRO FORESTRY SPECIES ........................................................................................................ .32
IX INTRODUCTION.............................................................................................................................................. .33
X OVERVIEW...................................................................................................................................................... .34
XI PRIMARY MARKETS....................................................................................................................................... .35
XII PRIMARY EXPORT MARKETS ....................................................................................................................... .36
XIII ANALYSIS AND INTERPRETATION OF COLLECTED DATA ......................................................................... .37

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 CONTENTS (continued)
4.0 URUGUAY ...................................................................................................................................................... .38
I COUNTRY OVERVIEW ................................................................................................................................... .38
II FOREST PRODUCT INDUSTRY.................................................................................................................... .38
III GEOGRAPHY DATA ...................................................................................................................................... .39
IV POPULATION DATA....................................................................................................................................... .41
V GOVERNMENT AND COUNTRY DATA.......................................................................................................... .42
VI ECONOMIC DATA ........................................................................................................................................... .43
VII ECONOMIC INDICATORS............................................................................................................................... .44/45/46

5.0 PARAGUAY .................................................................................................................................................... .47

I COUNTRY OVERVIEW .................................................................................................................................. .48
II ECONOMIC DATA.......................................................................................................................................... .48
III ECONOMIC OVERVIEW ................................................................................................................................ .48
IV POPULATION DATA...................................................................................................................................... .49
V GOVERNMENT AND COUNTRY DATA.......................................................................................................... .50
VI ECONOMIC INDICATORS............................................................................................................................. .51/52/53/54
VII DEVELOPMENT OF F0REST PLANTATIONS.............................................................................................. .55
VIII SPECIES........................................................................................................................................................ .56

INDUSTRY NEWS ..................................................................................................................................................... . 56

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 1.0 South America An Overview

South America has an area of 17,840,000 square km representative of almost 3.5% of the surface of the earth. In 2005 its population was estimated to be
th
371,090,000. South America ranks 4 in total area after Asia, Africa, and North America as well as fifth globally in population after Asia, Africa, Europe, and
North America.
South America’s agricultural industry is growing, new techniques have been developed to turn land once viewed as unusable and degraded into some of the
worlds most productive areas. The primary country in South America for much of the agricultural operations is Brazil.

Tropical South American forestry

The tropical South American regions comprising of Brazil, Paraguay, Bolivia, Peru, Columbia, French Guiana, Suriname, Guyana, Venezuela, and
Ecuador consists of the largest concentration of tropical rainforest globally.

It is understood that there is approximately 970 million hectares of rainforest located in the area on a total land mass of 1387 million hectares,
the forest types in the region vary dramatically from arid and semi-arid comprising around 36% of the total area, tropical moist deciduous
forest representing 24%, tropical mountain forest representing 10% and tropical dry forest at 9.5%. There is now an international Amazon
forestry fund initiated by Brazil to protect the area, and management programs have been allowed in some areas in order to stamp out illegal
logging.

South American agro-forestry

Agro-forestry is the practice of growing trees as a crop and has been utilized by farmers for centuries. South America not only produces much
of the worlds fruit and a large amount of global soft commodities but also produces a large amount of timber. In South America the agro-
forestry plantations are dominated by fast growing Pines, and Eucalypts, however other species such as Poplar, Acacia, and willow are also
planted

New data from the World Agroforestry Centre suggests that nearly half of the worlds farmlands have at least 10% tree cover the study also
found that in South America there is approximately 3.2 million squared kilometers

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 Tropical South American Forestry
Country / Agro- Forest Forestry
Area Land Natural Forestry Cover Above Ground Currently
Plantations Biomass Volume m3 Under
ha Forest ha ha Total ha /ha Management

Bolivia 108 438 000 53 022 000 46 000 53 068 000 114 6 900 000
538 924 543 905
Brazil 845 651 000 000 4 982 000 000 131 4 000 000
Colombia 103 871 000 49 460 000 141 000 49 601 000 108 85 000
Ecuador 27 684 000 10 390 000 167 000 10 557 000 121 14 000
French
Guiana 8 815 000 7 925 000 1 000 7 926 000 145 400 000
Guyana 21 498 000 16 867 000 12 000 16 879 000 145 4 200 000
Paraguay 39 730 000 23 345 000 27 000 23 372 000 34 3 000 000
Peru 128 000 000 64 575 000 640 000 65 215 000 158 1 573 000
Suriname 15 600 000 14 100 000 13 000 14 113 000 145 1 568 000
Venezuela 88 206 000 48 643 000 863 000 49 506 000 134 3 970 000

Total 1 387 493 827 252 834 142

Tropical 000 000 6 890 000 000 129
South
America

Total 1 754 741 875 163 885 618

South 000 000 10 455 000 000 125
America

13 063 900 3 682 722 3 869 455

Total 000 000 186 733 000 000 100
Global
Table 1: Shows the areas currently afforested and managed in the tropical areas of South America

Although there are a number of countries located in South America this report focuses primarily on the top 3 countries for
investment Brazil, Chile and Uruguay.

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 2.0 BRAZIL –Country Overview

Overview
Brazil gained independence from the Portuguese in 1822 and maintained a monarchical system of government until slavery was abolished in
188. This was followed by a military republic system in 1889. The Brazilian coffee exporters held political control over the country until the
populist leader Getulio Vargas rose to power in 1930. Brazil is the largest and most populous country in South America and has endured more
than 50 years of populist and military government until 1985 when the then military rule peacefully relinquished power to civilian rulers. Brazil
as a nation is in physical terms, the size of a continent.

2.2 The Forest Products Industry

In the Mercosur countries, forest plantations have won international attention from investors due to high forest productivity (MAI). This,
coupled with competitive production costs, provides strong advantages to produce unrivalled returns in comparison to some other countries.
Brazil is the world’s fifth-largest industrial wood producer, the largest producer of tropical wood and produces 280 million cubic meters of
wood per year. Brazil produces significant quantities of both hardwoods and softwoods with almost a third of Brazil’s planted wood
production being used to produce sawn timber, and a large quantity of the remainder being used to produce pulp and paper. Brazil’s wood
panels sector is also significant on a global scale. Brazil consumes a relatively high proportion of its wood production but is still one of the
world’s ten largest forest products exporters and is one of the three largest producers and consumers of wood for fuel. A recent study by the
IDB (Inter-American Development Bank) ranked Brazil as the most attractive of the Latin American countries for foreign investment.

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Production (m ) Leading State (% of market segment)

Natural Forests
Charcoal (1) 38,734,000 Pará(35%), Maranhão(21%) All Northern
Firewood 47,232,000 Bahia(26.6%), Ceará(9.3%) States
Logs 20,663,000 Pará(52%)

Planted Forests
Charcoal (1) 39,468,000 Minas Gerais(74.5%)
Firewood 33,903,000 Rio Grande do Sul(32.5%) All Southern
Paper & Cellulose 49,531,000 Sao Paulo(26.6%) States
Lumber 50,166,000 Sao Paulo(26.6%)

Total 279,697,000

Table 1: Brazilian Annual Wood Production, Segmented

Source: IBGE, Diretoria de Pesquisas, Coordenação de Agropecuária, Produção da Extração Vegetal e da Silvicultura 2002 e 2003 (2003 figures
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shown) figures are Estimated equivalent m of wood.
Figure 1: Above shows how the Brazilian wood products market is divided

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 2.0 BRAZIL - Country Overview (continued)
2.2 The Forest Products Industry (continued)

The Brazilian Amazon occupies almost 60% of the country as a whole. Approximately 85% of timber production from natural forests comes
from the Amazon. In 2005 it was estimated that over 3,000 logging companies were in operation. Exports from the area are just under US$1
billion with around 30% of the total exports going to EU member states. The legal timber extracted from the area is produced from either
managed forestry areas or authorized land clearance, although illegal timber extraction is of still a concern and the total consumed by the
forestry and forest products industry could have as much as 80% volume unauthorized.

There have been a number of re-forms in the industry and in 2008 the Brazilian President Luiz Inacio Lula da Silva signed a decree creating the
Amazon Fund. The fund, an international forestry fund, has been designed to receive up to 21 billion dollars in contributions over the next
thirteen years.

The donations to the fund are administered by the National Economic and Social Development Banks (BNDES) and the fund will also be
monitored by the BNDES. The funds primary motive will be to finance conservation and sustainable development programs in the Amazon
area.

The fund represents Brazil’s stance and its intention to conserve the natural resources of the Amazon, despite the criticism from some
environment groups that not enough is being done to support the area. Additionally up to 20% of funds can go to preserving Brazilian
ecosystems outside the area and is also directed to other tropical areas of environmental importance.

Other legislative reform such as the law on Public Forest Management in 2006, has opened legal timber production on public forest land under
a concessionary system. This is important as this is also the first time that this has been allowed. It is noted that as much as 45% of the Amazon
could be held under this tenure and there is now an opportunity to regularise a substantial quantity for timber that would previously have
been illegal. The creation of a federal forest service and forestry fund for development of managed initiatives will also allow more control. This
leaves the Amazon less dependant on the political priorities that have been previously attached to environmental management, which has
been the primary reason for unmanaged, unsustainable illegal logging in the area.
Other structural designs introduced under this law require 3 yearly audits on concessions given on public forests.

National efforts to address the problems of illegality in forestry are being co-ordinated by intra-governmental departments such as the Ministry for Justice,
and Defence and Strategy. Directed via the National Forest Programme, these combined efforts will be vital in reforming the industry. Advances in technology
via bar-coding, on-line data bases and better tracking systems will also bring new opportunities to address these problems. Despite these advances in
illegality, there still remain the ongoing difficulties of land tenure reform. Under-resourcing in government administration departments for land title/tenure
allocation is still a significant problem for Brazils forestry industry.

The chain of responsibility regarding regulation from the upper levels of the Federal Government also presents a significant challenge to evolve workable
solutions. Considerable over-lapping exists within the decision making chain and the regulatory areas of responsibility often become quite indistinct. Poor
forestry management in some states also provides obstacles to proper forestry practices, particularly with respect to the chain of custody and systematic
control procedures. The existing procedure within the legal profession is restricted by under-resourcing and a programme of targeted funding for expansion
of the judicial sector would alleviate the situation considerably. Extra funding via re-forestation credits is offered to wood producers as an incentive to
maintain supplies to Brazil’s end users of timber products.

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We hope that you have enjoyed this 7 page sample of the “World
Forestry Update”
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