Forestry Sector - Proexport

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Forestry Sector - Proexport

Forestry Sector - Proexport

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  • Colombia escaló 13 posiciones en el ranking de la facilidad para hacer negocios, y se ubico segundo en América Latina.

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  • 1. Forestry sector in Colombia 2012 1
  • 2. In this document, you will discover the competitive advantages of our forestry sector, the opportunities that benefit your investment and the support that Proexport can provide. The following are clear reasons for investment: Resources i. 17 million hectares (42 million acres) suited for timberland, spread out in a range of altitudes. Today 2% of that potential (370.000 hectares) 1 is in use. ii. More than 10 popular commercial forestry species. The most important are Pine (P. maximinoi, P. tecunumanii)) and Eucalyptus (Eucalyptus grandis) for pulp production; Teak, Oak and Acacia (Acacia magnium) for sawn wood and Melina for wood paneling. iii. Photosynthesis throughout the year as a result of our tropical location, allowing higher bio-mass production and yields with shortest biological cycles. As a result of climate conditions, it is possible to establish Patula Pine timberland in the high Andean area, Caribean Pine (Pinus caribea) in the Orinoquia, Eucalyptus (Eucalyptus grandis) in the middle Andean area and Teak in the low tropical line area. As an example, Eucalyptus has a yield of 30 m3/ha/year with a rotation age of 8 years. iv. Important biotechnology and genetic improvement. The country has consolidated a high quality forestry germplasm base 2 with enough material. Market v. Deficit in the balance of trade, which represents an opportunity for the establishment of commercial forestry projects seeking to satisfy the local demand of 46 millions consumers and international markets taking advantage of the signed Free Trade Agreement FTAs. Incentives vi. Legal Incentives for sector investors including the income tax exemptions for new plantations and the Forestry Certificate Incentive (CIF).1 MADR. Number estimate to 20082 Colombia has developed research on, Pinus Caribea, Eucalyptus grandis, Melina, Ceiba and Teak that allows for betteryields through the genetic improvement of the seeds and clones. This research guarantees the genetic material used. 2
  • 3. The information contained in this document was provided by the Ministry of Agriculture and RuralDevelopment, Fedemaderas, FAO, CONIF and DIANThe forestry sector in Colombia• Colombia has a potential of 17 million hectares (42 million acres) suited for commercial forestsThis extension of land neither invades the native forest nor competes with lands available forother agricultural uses. The National Forestry Investigation Corporation (CONIF) 3 identifies theareas suited for commercial forests (excluding native forests). This study estimates that Colombiahas 17 million hectares (42 million acres) suited for commercial forests (2008) discriminating areaswith no restrictions 4 and those with few restrictions. Areas suited for timberland No restrictions With lower restrictions Department ha ha Antioquia 1.477.221 2.137.309 Atlántico(*) 35.820 40.152 Bolívar(*) 355.475 94.177 Caldas 22.420 146.284 Cauca (Cuenca alta río) 90.227 182.036 Cesar 376.935 392.104 Córdoba 189.753 233.770 Cundinamarca 150.116 150.887 Huila 50.022 163.283 Magdalena(*) 500.166 194.942 Nariño 365.621 295.872 Santander 281.353 451.824 Sucre 136.263 167.934 Tolima 229.705 145.193 Quindío 32.130 17.846 CORPORINOQUIA (jurisdiction) Arauca 930.025 Boyaca (jurisdiction.) 2.892 2.877 Casanare 24.295 1.705.973 Meta 339.403 2.604.763 Vichada 467.834 2.128.105 Total 5.127.650 12.185.356 Total Areas Suited for Timberland 17.313.006(*) Places close to Magdalena RiverSource: CONIF 2OO8 In the Valle del Cauca Department, the potential area is estimated to be 200.000 ha. The Department has experience intimberland and has one of the most important ports of the Country: Buenaventura.3 CONIF is the entity that updates the estimate of land available for timber. In 2004, the estimates were 16 millionhectares. In 2008, the areas suited for timber are 17.313.006 hectares.4 No restrictions: Soil needs no improvement to be planted and developed for forestry projects. 3
  • 4. From 114 million hectares of the national territory, only 0.4% is under forestry commercialplantations, 60.7 million hectares are protected and unavailable for forestry projects for they arecovered by native forest. Current and potential use of land in Colombia, 2011 (Million hectares) 39,1 14,5 17,3 10,2 4,6 0,4 Agriculture Forestry Livestock Current Use PotentialThe development of the forestry sector is a long term national plan. The National ForestryDevelopment Plan (PNDF) established a goal of 600.000 planted hectares by 2014 and 1.5 millionby 2025.• Colombian potential regions for forestry plantations developmentThe Ministry of Agriculture and Rural Development (MADR) has identified three regions with highpotential for forestry development projects. The identified regions include Eje Cafetero, theCaribbean and Orinoquia. 4
  • 5. Potential zones for forestry development Source: FAO. Calculations MADRThese potential zones have forestry experience, for the reason that the most important Forestlandowners are located in these regions. National forestry area 2008-2011 Department 2008 2009 2010 2011 Antioquia 56.620 61.635 64.156 79.422 Bolivar 9.305 9.319 9.319 12.112 Caldas 17.958 19.728 19.841 20.452 Casanare 5.581 5.651 5.651 5.651 Cauca 21.498 22.040 22.557 23.394 Cordoba 29.047 29.047 29.598 31.442 Magdalena 18.183 18.272 18.272 18.558 Santander 7.648 8.612 10.203 10.526 Tolima 4.574 4.674 3.117 4.910 Valle del Cauca 24.457 24.457 24.461 25.030 Vichada 16.962 22.752 23.632 29.067 Others 41.233 42.833 42.833 108.876 Total 253.066 269.020 273.640 369.440 Source: Ministerio de Agricultura y Desarrollo Rural 5
  • 6. • More than 10 high value added commercial timber speciesMore than 10 commercial timber species are suitable for planting in Colombia, offering anenormous potential for increasing yields by applying biotechnology and genetic improvementprocesses. In Colombia, commercial timber species need less time to grow, increasing productivity.For example, the Eucalyptus has a yield of 30 m3/ha per year in a rotation age of 8 years. Rotations age and yield by species in Colombia Yield Rotation age Scientific Name Common name 3 (m / ha/year) (years) Eucalyptus grandis Eucalyptus 25-40 8 Acacia magnium Acacia 26 – 30 12 Bombacopsis quinata Ceiba Tolua <18 >20 Cordia alliadora Laurel 8-20 20 Eucalyptus globulus Eucalyptus 15 – 35 8 – 12 Gmela arborea Melina 20 – 25 10 -14 Eucalytus pellita Eucalyptus 15- 20 12 Eucalytus tereticornis Eucalyptus 20 8 - 12 Schizolobium parahybum Brazilian Firetree 13 16 Tectona grandis Teak 7 – 10 25 – 28 Cariniana pyriformis Colombian Mahogany 7 20 Source: CONIF/MADR• In Colombia, it is possible to obtain excellent yields in softwood timber similar to important producer countries.As an example, in Pinus tecunumanii it is possible to obtain a Mean Annual Increment (MAI) of 30to 40 m3/ha/year with a rotation age of 16 years.In hardwood timber, Colombia followed Brazil with the second highest yield with 30 m3/ha peryear with a rotation age of 7 years with E. grandis. Turnover and Yield of Various Species in Colombia and Other Countries Turnover Species Country Yield- IMA (M3/ha/year) (years) Softwood P. tecunumanii Colombia 16 30 – 40 P. radiate Chile 20-25 10 – 25 6
  • 7. P. taeda. Uruguay 20 16 – 23 P. patula Colombia 16 12-22 P. taeda Brazil 15 – 20 16 P. taeda Southeastern US 25 10 – 15 Hardwood E. grandis-urophylla (hybrids) Brazil 7 45 E. grandis Colombia 7 30 – 40 E. spp. Uruguay 8 – 10 27 – 30 E. globules Chile 10 – 12 20 – 30 E. globules Portugal 8 – 10 12 Source: CONIF 2002, CENPAPEL 2003• Higher yield in four species compared to competing countriesAs a result of climatic conditions, biotechnology and genetic enhancement, several speciesproduce higher yields in Colombia than in competing countries. For example, Acacia can yield 30m3/ha/year. Yield by species: Colombia compared to other countries Yield Yield of Other Countries Species Colombia 3 Countries 3 (m /ha/year) (m /ha/year) Philippines, Malaysia, Haiti, India, Thailand, Acacia 26 – 30 8 – 19 Indonesia, Panama Philippines, India, Indonesia, Malaysia, Teak 7-13 10 – 12 Myanmar, Nigeria, Thailand.Eucalyptus 15-40 16 – 30 Argentina, Chile, Uruguay Bolivia, Brazil, Costa Rica, Philippines, Melina 20 – 25 12 – 19 Indonesia, Malawi, Malaysia. Source: CONIF FAO3. Photosynthesis throughout the year as a result of our tropical locationGeographical characteristics benefit forestry activities, allowing species to have higher yields andshorter rotations ages. 7
  • 8. 8
  • 9. Colombian raw timber demand has been satisfied by ImportsBetween 2009 and 2010, the Colombian trade balance had a deficit in wood board and pulp;meanwhile consumption has been stable and satisfied by imports. This is an opportunity toexecute forestry projects in Colombia. The country has potential land available (17 millionhectares, or 42 million acres) for timberland and an unsatisfied local demand.• In Colombia, consumption is satisfied by imports 9
  • 10. The balance of trade has a deficit in wood, charcoal and wood products and is in part satisfied byimports. In 2010, the registered deficit was of US$121.9 millions and during the first trimester of2011 the deficit was of US$65.9 millions.This is an opportunity to execute forestry projects in Colombia. Thanks to the increase inconsumption in both national and international markets, Colombia has enough available land (17million hectares, or 42 million acres) for timberland and to substitute for the long termimportation of wood products. Sourse: SISEX, Calculations Proexport• Existence of potential strategic partnersColombia has a group of companies engaged in the production, transformation andcommercialization of lumber products, located in different zones of the country, with a largeknowledge of consumption patterns and the local distribution networks. This places theColombian companies as very interesting potential strategic partners for any foreign companyinterested in the development of business plans in our country. 10
  • 11. Main Companies in the forestry Sector in ColombiaForest landowner Species Planted hectares Location Timber uses Teak 1.269 Magdalena Architectonic line Refocosta Oak 762 Magdalena Agro industrial and Pinus 1.525 Casanare construction line Eucalyptus 1.279 Magdalena Smurfit Kappa, Eucalyptus (17.000 11.000 Pereira Paper and Cartón de Ha) 18.000 Cali packaging Colombia Pinus (27.000 Ha) 15.000 Popayán Barranquilla Construction, Pizano Ceiba Roja 20.000 Urabá plywood, doors, Melina Valle del Cauca furniture Pinus Wood is used to Reforestadora Melina supply different Industrial de Pinus Oocarpa 10.555 Antioquia industries Antioquia Acacia Teak Kanguroid. 3F Acacia Construction,Proyectos Bosques Melina 4.100 Córdoba furniture del Futuro Teak Pinus Maximinoi 98 Antioquia Multiple uses, Reforestadora el Pinus Pátula 4.554 Caldas Roundwood and Guásimo Ciprés 202 Tolima fibre Other species 31 Pinus Patula 7.400 Medellín Yarumal Wood is used toIndustria Forestal Pinus Oocarpa Angustura supply different Doña María Pinus Tecumani Yolombó industries Pinus Maximinoi Wood is used to Cupressus supply different Cipresses Lusitánica 2.000 Caldas industries Pinus Pátula Antioquia Madeflex Eucalyptus 4.000 Magdalena Moulding and mill work products Source: Companies Web Pages• Real pre-tax discount rate of 11.2% y 16.6% .The study “Global Timber investments, wood costs, regulation, and risk” 2010, argues that inColombia forestry commercial plantations can obtain interest rates of return (IRR) of 11.2% in P.patula, 14.7% in P. maximinoi, 15.5% in P. tecunumanii and 16.6% in E. spp.; these rates areconsidered attractive in comparison to competitors such as Chile with an IRR of 13.1% in P. radiatafor pulp and 15.6% in P. radiata for sawmills.The study classifies Colombia as an attractive destiny in regards to IRR. Interest rate of return for Latin America Timberland Investments, 2010 Region IRR Species Brazil 16.3-25.5% P. taeda, P. eliottii, E. grandis, Chile 13.1-16.6% P.radiata Colombia 11.2-16.6% E. spp, P. tecunumanii, P. patula, P. maximinoi 11
  • 12. Uruguay 12.8-22.9% E. globules, E. grandis, P. taeda United States 6.5-8.5% P. taeda, Ps. menzeii Source: Global Timber Investments, Wood costs, regulation, and risk Biomass and bioenergy 34 (2010) 1667-1678• Legal Incentives for sector investorsThere are two significant incentives in the forestry sector: (i) The exemption on the income tax fornew forestry plantations and sawmills. (ii) The Certificate of Forestry Incentive (CIF in Spanish).These benefits cannot be accumulated, it means, that the plantation simultaneously cannot accessto both incentives.Exemption on income tax:New forestry plantations and sawmills, have an exemption on the income tax. This benefit is forplantation established from the 1st of January of 2003 and it does not have temporal restrictions.5In order to access to this exemption the plantation needs to be registered with the Ministry ofAgriculture6.• Requirements for New Fields:– Register the project with the Autonomous Regional Corporation.– Owner’s certificate or lease contract where the company can prove that they have the right to exploit the field.– Certificate of the Autonomous Regional Corporation stating that this is a new field.– Accounting certificate stating both the income generated by the new field and other income the company may have.• Requirements for New Sawmills– Proof of purchase for sawmill and accompanying machinery, written after 2003.– Contract purchasing the wood production from a new forest.– Accounting certificate stating both the income generated by the new forest and other income that the company may have.Certificate of Forestry IncentiveThe CIF is the monetary subsidy that recognizes 50% of the investment for introduced andautochthonous species to finance the establishment and maintenance (from the second to thefifth year) of new forest plantations. The CIF is neither compatible with the tax benefits nor withother subsidies from the government. For 2012, the government has $100.000 million COP(around 50 million dollars) to subsidize reforestation in Colombia.The Ministry of Agriculture has established the national average value of the total net costs for theestablishment and maintenance of a hectare of a planted forest as well as the maximum quantitythat will be recognized by the CIF in 2012. These figures appear below. CIF resources are limited.The Ministry of Agriculture defines a date each year in order to file CIF applications.Regarding the specific amounts that are covered by the CIF, each year the Ministry of Agriculturedefines the average plantation and maintenance costs per hectare for introduced and native5 Article 207-2, Tax Statute.6 Article 2, Decree 2755 of 2005. 12
  • 13. species. This average is the maximum amount to be covered by the CIF. This maximum applies forplantations with a density over 1000 trees per hectare. 7For 2012, the average plantation costs are the following 8: Specie Average national net costs Incentive Percent Value Payable value for each CIF per hectare (aprox.) per hectare (aprox.) Native USD$869,954 50% USD$434,97 Introduced USD$869,954 50% USD$434,97The average maintenance costs for 2012 are the following 9: Specie Average national net costs Incentive Percent Value Payable value for each CIF per hectare (aprox.) per hectare (aprox.) Year 2 USD$233,188 50% USD$116,59 Year 3 USD$164,837 50% USD$82,42 Year 4 USD$104,94 50% USD$52,47 Year 5 USD$197,88 50% USD$98,94In order to obtain the Certificate of Forestry Incentive the investor has to fulfill the followingrequirements 10: The plan of establishment and forest management has to be submitted and approved by the Ministry of Agriculture. Proof of the plantation´s execution will make on lands with forest quality, according to its characteristics. The investor must prove that previously the lands have not been occupied by natural forests during the last 5 years or currently. The beneficiary of the incentive has to prove its quality as owner or tenant of the land. Making the contract between the investor and the Ministry Agriculture.After all the steps before mentioned, the Ministry of Agriculture will evaluate and verify the statusof the plantation, in order to authorize Finagro to make the payment, the payment will takeapproximately 1 month, but it can take longer.Single-Enterprise Free Trade Zone for goods.These zones are designed so that one enterprise may set up in any place in the country with thebenefits of a Free Trade Zone.Agro-Industry projects may install processing plants in a Single-Enterprise Free Trade Zonewhenever the company fulfills the following requirements:Requirements:1. Investment of USD $ 40.62 million 11.2. Creation of 150 direct jobs. For every extra 23.000 “Minimum Monthly Legal Wage”s ($5.19 million USD) the job requirements decreases by 15 jobs, but never less than 50 jobs total.7 Resolution 319 of 2011 of the Ministry of Agriculture.8 The costs are originally fixed in COP. 1 COP=2000 USD.9 The costs are originally fixed in COP. 1 COP=2000 USD.10 Law 139 of 1994 and Decree 1824 of 1994.11 The market exchange rate used is USB 1 = COP 2,000. The requirements for calculating Monthly Legal MinimumWages of 2009 is of $ 515.000 COP. The Monthly Legal Minimum Wages as well as market exchange rate are subject tochange. 13
  • 14. Benefits:• A single 15% income tax rate.• Goods introduced from the rest of the world into a FTZ (i.e. capital goods) are not considered imports; therefore, they do not pay import tariffs or VAT.Raw materials, parts and inputs sold from a national customs territory to FTZ users will be VATexempt.Tariff and VAT free capital goods imports: Import-Export System “Plan Vallejo”Plan Vallejo for Capital Goods is a special import-export system in which a company may request aprogram for the importation of capital goods free from tariffs and VAT.• Requirements: – The good must be on the list of the Resolution 1148 de 2002 12. – Export 1.5 the FOB price of the imported capital goods. – Submit an application for the program to DIAN.Tariff and VAT free inputs and raw material imports: Plan Vallejo for inputs and raw materialsImports of raw materials and inputs for the production of goods, which may be partially exported,provided that they are used to produce goods whose importation, are tariff exempt. Exports mustrepresent consumption of at least sixty per cent (60%) of the imported inputs.• Related Entities Company Description Web Page Ministry of Agriculture and Area for Forestry Policy for www.minagricultura.gov.co. Rural Development Timberland Fedemaderas National Federation for the www.fedemaderas.org.co Lumber Industry CONIF National Forestry Investigation www.conif.org.co Center Corpoica Colombian Corporation of www.corpoica.gov.co Agricultural Investigation• Proexport Services The Colombian Government places special emphasis on generating favorable conditions and providing the best support possible to investors. Proexport, the Governmental Agency for the Development of Investments, provides services to foreign investors that include the following:  Information requests (economic, legal, procedural or sector-specific information).  Contacts with the public and private sectors.  Agenda organization for investors who decide to visit Colombia.  Support services for investors already established in the country.  Evaluation and improvement of the business environment.12 http://www.mincomercio.gov.co/eContent/NewsDetail.asp?ID=567&IDCompany=1 14
  • 15. All services are free of charge. The main objective is to develop new businesses throughefficient and friendly processes. All information provided during the process is maintainedconfidential.Proexport has support teams in 18 cities around the world. It would be our pleasure to helpyou. Access our contact information at: www.inviertaencolombia.com 15