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Forestry industry-uruguay-xxi-december-2011-english-version-corrected-3

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    Forestry industry-uruguay-xxi-december-2011-english-version-corrected-3 Forestry industry-uruguay-xxi-december-2011-english-version-corrected-3 Document Transcript

    • December 2011 Forestry IndustryInvestment Opportunities in Uruguay
    • 1. Why invest in the Uruguayan forestry industry?1.1. Attractive features of the country’s forestry industry Uruguay is located at the same latitude as other major forestry developments in the southernhemisphere. Uruguay’s climate is similar to that of Australia, New Zealand, South Africa and thecentral regions of Argentina and Chile and features weather and soil characteristics that ensurevery good levels of competitiveness on an international scale. For example, the rapid growth ofEucalyptus plantations enable shorter felling frequencies (starting from nine years) to provideproper quality levels for the final product. Uruguay has a stable legal framework that is beneficial for investments in the industry and hasa national good practices code for forestry to achieve sustainable production and to meetinternational requirements1. The country features a suitable road network that enables connections to major productioncenters and staging areas at major ports. Agriculture, forestry and pasture development are promoted to integrate management anddevelopment of forestry with livestock raising and agriculture activities. This enables a diverserange of products and staggered income: livestock, seed, harvesting and forage reserves in theshort term, and quality wood in the medium and long term. The sector has a 20-year history and qualified labor is available. Exports currently account for13% of the country’s total exports. Currently, 885,000 hectares of forestry plantations account for 5% of the national territory.However, only 21.5% of the area declared as forestry priority has been planted. High quality wood is produced on Uruguayan plantations and is used for cellulose pulpproduction as well as for solid wood products. The currency exchange market is open and there are no limits on foreign currency trading.Investments can be made in any currency. There are no restrictions on hiring foreign staff (except for companies located at Free TradeZones where 75% of employees must be local). Residency permits can be obtained in threemonths and anyone who has entered the country legally can obtain one and start working even1 Approved in 2004 the National Code for Good Forestry Practices was developed by the Forestry Bureau, the InspectorGeneral of Employment and Social Security, the National Environment Bureau, the National Agricultural ResearchInstitute, the Forestry Department of the University of Agronomy, the Uruguayan Association of Agricultural Engineers,the Uruguayan Forestry Contractors Association and the Society of Foresters. Available athttp://www.mgap.gub.uy/Forestal/cod_fores.pdf2
    • during the application process. Citizens from most western nations do not require visas to visit thecountry. A strategic geographic location at the heart of MERCOSUR (free trade area between Argentina,Brazil, Paraguay and Uruguay) and near Chile and Bolivia, with excellent river, sea, highway andair connections. An attractive legal framework for trade that allows the use of individual enclaves or acombination of various modalities (Free Trade Zones, Free Ports and Free Airport regimes andBonded Warehouses), where no customs duties or taxes are due on imports or exports.2. Forestry industry in Uruguay2.1. Major featuresThe forestry industry in Uruguay consists of various activities that range from seed and seedlingproduction to the final shipment of finished products. The sector includes at least four industrialchains: cellulose and paper, finished wood (treated round wood, sawn wood, boards, carpentryfor construction, furniture, moldings, etc.), the chemical industry (resins, essential oils, bioplastics,etc.) and energy production. Forestry activities, as well as the extraction and development ofwood products, accounted for 3.5% of Uruguayan GDP in 2010. Activities in the forestry industryinclude: Agriculture (forestry), which includes the production of reproductive material and seedlings in nurseries, tree planting and intermediate treatment for forests and harvesting. Manufacturing activities Transport and logistics Picture No. 1: Forestry industry activities Nurseries and reproductive material Agricultural Planted and native forests Sawmills Carpentry for construction ACTIVITY Mechanical transformation Boards Chips and pellets Manufacturing Panels Pulp Cellulose - paper Paper and cardboard Energy Logistics and transportSource: Uruguay XXI3
    • The Uruguayan forestry industry is characterized by a strong vertical integration that coversagricultural and industrial activities and all intermediate processes through the final sale ofproducts.Some large export companies supply themselves with a large portion of raw materials incomparison to others which buy raw materials from third parties. The largest sawmills use mainlydomestic raw materials and direct production towards foreign markets, while smaller mills focusmainly on the domestic market.Paper manufacturers produce both for foreign and domestic markets. These companies have theirown pulp production mills for in-house supply for the paper production process.Power generation from forestry residue (biomass) is among the activities related to the industrialphase that became more relevant and have significant future prospects due to the increase in rawmaterial supply and State policies in the area. Currently, some sector companies have electricitygeneration plants that use biomass. For example, UPM generates 110 MW with 32 MW of excessfor the national grid. Bioener (a Urufor company) has a 12 MW capacity, while Weyerhaeuser hasan installed capacity that ranges between 10 and 12 MW. Montes del Plata pulp mill, that willstart operating in 2013, will be self-sufficient in terms of power, generating around 160MW ofclean and renewable energy of which approximately 90 MW willbe used to meet the industry’s energy needs. The surplus(between 55 and 75 MW of power) will be fed back into thenational energy grid, providing an equivalent to an averageconsumption of 200,000 households.2.2. Personnel employedPersonnel employed in the forestry sector in 2010 reaches 13,000 workers in silviculture. Inaddition, the mechanical transformation industries (Sawmill and Panels) employ 3,500 workersand the cellulose industries (Pulp, Paper & Cardboard and Chips) 2,500, comprising a total numberof 19,000 employees.2Taking into account indirect employment (employment of service providers, mostly transport andlogistics), we amount to a sum of 21,400, which is an equivalent to 1.3% of the country’semployed population. It is important to highlight that personnel employed in the forestry sector2 Industrial chains based on Forestry Industry, Planning and Budgeting Office, Ministry of Industry and Energy, IndustryBureau, February 2011.4
    • has almost doubled in the last five years, hence proving the potential this sector has to generateemployment mainly for people who live inland. Table No.1: Job Positions in the different forest-based industrial activities3 Sub-sectors 2005 2007 2009 2010 Sawmills 1,311 1,650 1,415 1,641 Panels 1,326 1,548 1,356 1,912 Pulp - 390 390 390 Paper and cardboard 1,797 1,635 1,460 1,704 Chips 360 360 345 360 Industry sub-total 4,794 5,583 4,966 6,007 Transport and logistics 1,242 1,718 2,070 2,401 Silviculture 5,000 8,500 13,000 13,000 Total 11,036 15,801 20,036 21,408It is important to mention that the construction of the Montes del Plata pulp mill will generate anaverage of 3,200 direct jobs with a maximum of 6,000 people. Once concluded, 500 employeeswill work on the pulp mill premises. Furthermore, it is expected to generate 5,000 indirect jobs.2.3. Current legislation4Plantation and other activities linked to forestry activities are regulated under law 15,939 datedDecember 28, 1987, regulatory decrees and further amendments thereto. This law establishesthat natural and artificial forests in forestry priority areas declared as “protective” and “yielding”5included in “quality wood projects” determined by the Ministry of Livestock, Agriculture andFishing (MGAP), enjoy the following tax benefits: Income derived from exploitation is not included in the calculation of Corporate Income Tax (IRAE). Value or size of forestry priority areas will not be considered for the determination of the taxable amount of Wealth Tax (IP). Rural real estate tax (tax on land) exemption.63 Industrial chains based on Forestry Industry, Planning and Budgeting Office, Ministry of Industry and Energy, IndustryBureau, February 2011.4 Law No. 15,939 available at http://www.mgap.gub.uy/Forestal/15.939.htm. Decree No. 220/06 dated July 10, 2006available at http://www.mgap.gub.uy/Forestal/DECRETO%20220_006%20Modificacion%20Decreto%20191_06.pdf5 In accordance with law 15,939, protective forests are defined as those that have the basic objective of conserving thesoil, water and other renewable resources. Yielding forests have the basic objective of wood productions and are ofspecial national interest due to their location or type of wood or other forestry products that can be obtained fromthem.6 Law No. 18,245 dated December 27, 2007, available athttp://www.mgap.gub.uy/Forestal/Ley18245ContribucionInmobiliariaRural.mht5
    • To be eligible for the abovementioned tax benefits, the Forestry Bureau (DGF) of the MGAP mustapprove the management and organization plan for the exploitation and regeneration of forests.Any amendment to the management and organization plan must be previously approved by theDGF.2.4. Forested areaForestry activities in the country have grown in a sustained manner over the last 20 years. Despitebeing a relatively young sector, over the years the surface area has risen 30 times toapproximately 950,000 hectares by 2010.7 In addition, some 750,000 hectares of native forestexist in the country, leading to a total forested area of 1.7 million hectares, approximately. Thetotal area deemed of forestry priority covers 4 million hectares8, around 23% of the totalagriculture-livestock area of the country (see Map 1). Picture No. 2: Forest priority areas – Year 2010 Source: Pike Forestry Consultants7 Source: “Monitoreo de los Recursos Forestales Inventario Forestal Nacional”, August 2010. This work is the result ofthe first stage of national forestry inventory. In this stage, 26% of the total area of inventoried forests was assessed.From 4,769 sample points proposed for Uruguay, 1,242 sample plots were installed and assessed. This accounts for anarea of inventoried forests of almost 450,000 hectares.8 Decree No. 191/106 available at http://www.mgap.gub.uy/Forestal/ModificacionDecreto452_988de16_06_06.pdf6
    • The type of soil, the climate and the distance to production departure points have an effect onforestry plantation characteristics. This divides the country into three regions in accordance withcriteria established by the DGF: South-East Region: departments of Colonia, Flores, San José, Florida, Canelones, Montevideo, Lavalleja, Maldonado and Rocha. North Central Region: departments of Artigas, Rivera, Tacuarembó, Durazno, Cerro Largo and Treinta y Tres West Coast Region: departments of Salto, Paysandú, Río Negro and Soriano.The South-East region is closest to the port of Montevideo, favoring the departure of forestryproducts by sea. The area is strongly influenced by the sea, with an absence of extremetemperatures. This has led to a better adaptation of species sensitive to extreme temperatures,such as Eucalyptus globulus. The main purpose of plantations in this area is pulp production.Therefore the production cycle is short and requires little trimming.The North Central region is the largest forested area with 46% of the total artificial forests inUruguay. This area has frosts in winter and higher temperatures in summer and due to its sandysoil, it is appropriate for Eucalyptus grandis and Pinus species. Wood in this region is mainlyproduced for mechanical transformation.9 Major departure points for wood production from thisregion depend on product location and type and include Paysandú, Fray Bentos and Montevideo.The West Coast region also has frosts in winter and sandy loam to sandy soils. In this region,plantations of the Salicaceae, Eucalyptus and Pinus species coexist. These have a slightly loweryield in this area as compared to the northern region. The main destination for production fromthis area is wood pulp.10 Ports and bridges used for forest product transport include Fray Bentos,Nueva Palmira and Paysandú.9 This is mainly due to the business strategy of the main companies of the region, such as Weyerhaeuser Company(USA), GFP, GMO and COFUSA.10 By the company UPM.7
    • Table No. 2: Total forested area and forestry priority area per region, in thousands of hectares - 2010 Forested area Forestry priority Forestry Region Departments as of August area available for priority area 2010 planting Artigas, Rivera, Tacuarembó, North Central Durazno, Cerro Largo and 410 2.177 1.741 Treinta y Tres Salto, Paysandú, Río Negro and West Coast 262 633 387 Soriano Colonia, Flores, San José, Florida, South-East Canelones, Montevideo, 213 1,304 1,017 Lavalleja, Maldonado and Rocha. Total 885 4,114 3,145Source: Uruguay XI based on data from DGF of MGAP and Pike Forestry Consultants. Picture No.3: Map of forested area in Uruguay11 The departments of: Rivera, Tacuarembó, Paysandú, Río Negro and Lavalleja contain the largest number of forested hectares, between 100,000 and 200,000 hectares. Followed by Salto, Soriano, Durazno, Florida, Treinta y Tres, Rocha and Maldonado with 55,000 to 100,000 forested hectares. The other departments have between 10,000 and 55,000 forested hectares. Most of Uruguay’s plantations are of the Eucalyptus and Pinus genera. 70% of the country’s total forested area corresponds to the Eucalyptusgenus (with a majority presence of three subspecies), followed by Pinus with 28% of said area,leaving 1% of the Salicacea family.11 Source: Forestry Bureau, Ministry of Livestock, Agriculture and Fishing - 2007.8
    • Table No.3: Species type according to region - 2010 Other Eucalyptus Eucalyptus Eucalyptus Region Department Pinus Total grandis globulus and Salicacea Artigas, Rivera, North Tacuarembó, Durazno, 43% 23% 26% 8% 100% Central Cerro Largo and Treinta y Tres West Salto, Paysandú, Río Negro 19% 42% 28% 11% 100% Coast and Soriano Colonia, Flores, San José, South- Florida, Canelones, 14% 6% 69% 11% 100% East Montevideo, Lavalleja, Maldonado and RochaSource: Uruguay XXI based on data from the DGF of MGAP.2.5. Extraction and productionWood extraction in Uruguay had a strong growth until 2008, from 5.7 million m 3 in 2005 to 9.4million m3 in 2008. Due to the decline in global demand and a drop in export prices since the 2009international crisis, extraction volumes in the country fell to 8.4 million m3 in 2009. This decline istightly linked to the decline in wood extraction for pulp production. In 2010, wood extractionreported higher values than the preceding years, 11.8 million m3, later registering a recovery ofthe figures observed years before.As for production, a decline was also reported in chip production in 2009 and, to a lesser degree,in sawn wood and boards. Specifically, the decline in wood chip production was due to the factthat the main purchasers of this product in 2008, Japan and Finland, made no purchases in 2009.This may be associated to the temporary closure of some pulp mills due to the international crisis.In 2010, there was an increase in the production of all forest industry products, reporting similarvalues in Chips and Cellulose Paste in 2008 and higher value in Sawn wood, Wood boards andPaper and Cardboard.9
    • Chart No.1: Round wood extraction volume (1000m3)12 Wood fuel, including wood for Industrial round wood charcoal (bulk wood)2.500 100002.400 8000 2.4302.300 60002.200 7841 2.210 2.210 4000 60802.100 5143 2.111 39292.000 2.062 3497 20001.900 1168 1150 1547 734 1030 01.800 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Wood pulp Sawlogs Table No. 4: Production volume of wood-derived products PRODUCTION FOR DOMESTIC CONSUMPTION AND EXPORTS Product 2006 2007 2008 2009 2010 3 CHIPS (1,000 m ) 383 280 2,283 1,143 2,274 3 SAWN WOOD (1,000 m ) 293 308 284 264 346 3 WOODBOARDS (1,000 m ) 50 162 175 142 199 PAPER Y CARDBOARD (1,000 metric tons) 113 107 107 101 117 WOOD PULP (1,000 metric tons) 34 50 1,129 882 1,100Source: Forestry Bureau, MGAP and National Customs Bureau of Uruguay2.6. Export sector13Forestry accounted for 12.5% of Uruguay’s total exports in 2010 and has significant prospects forfuture growth. Despite the fact that the 2009 international crisis caused a drop in sector exportsboth in volume and value, exports still exceeded US$ 700 million in that year. In 2010 exportvalues achieved US$ 1 billion, a similar figure to 2008 (record breaking year). From 2008 onwards,the main export product of the industry was wood pulp, which in 2010 accounted for 64.5% oftotal industry exports, in second place were wood chips accounting for 13% of the total, followedby paper and cardboard with 9.3% in 2010.12 Source: Forestry Bureau, MGAP13 Appendix No. 2 shows a chart with the main industry exports destinations for 200910
    • Chart No. 2: Uruguayan forestry product exports in 2010 – US$ millions14The following charts show the forestry sector product performance between 2006 and 2010 indollars and in tons. It is important to clarify that Cellulose pulp has not been included since itsvalues are outside the scale used, therefore they are displayed in chart No.5. Chart No. 3: Forestry product export performance – US$ millions 400 350 Millon of US$ 300 250 200 150 100 50 0 2006 2007 2008 2009 2010 Paper and cardboard 56 52 66 69 93 Round wood 75 93 36 24 38 Chips 72 67 163 79 131 Sawn wood 28 30 30 26 40 Wood boards 0 34 47 32 54 Source: Uruguay XXI based on data from the Customs Bureau of Uruguay.14 Source: Uruguay XXI based on data from the Customs Bureau of Uruguay.11
    • Chart No. 4: Forestry sector export performance15 - thousands of tons 3.000 2.500 Thousands of tons 2.000 1.500 1.000 500 0 2006 2007 2008 2009 2010 Round wood 1492 1440 418 289 392 Chips 1087 984 1676 852 1478 Sawn wood 98 90 72 58 81 Wood boards 33 75 88 72 107 Source: Uruguay XXI based on data from the Customs Bureau of Uruguay.Cellulose pulp exports have grown year after year, showing its peak performance in 2008 as UPM(ex Botnia SA) established in Uruguay, at which time figures reached US$ 1.025 million anequivalent to 1,297 thousand tons. In 2009 and 2010, the values in dollars and tons decreased.Nonetheless they continue to represent a high level of export. It is important to mention thatCellulose pulp exports exit the country via Nueva Palmira Free Zone once sent from the pulp milllocated at Fray Bentos Free Zone. Chart No. 5: Wood pulp export performance16 1.600 1297 1.200 1025 921 764 800 647 519 400 13 18 0 2007 2008 2009 2010 US$ Million Thousands of tons15 Note: idem16 Data regarding exported volumes were provided by the Customs Bureau of Uruguay and average prices used weretaken from FAOSTAT. 2007: US$ 703/ton. 2008: US$ 790/ton. 2009: US$·536/ton. 2010: US$ 847/ton.12
    • Source: Uruguay XXI based on data from the Customs Bureau of Uruguay.The following table displays the main product destinations for the forestry sector for 2010. As itcan be seen destinations are varied, with outstanding sales of chips to Spain and Portugalachieving US$ 50 million and US$ 44 million and sales of cellulose pulp to the Netherlands andChina for US$ 394 million and US$ 227 million, respectively. Table No. 5: Main export destinations of the Uruguayan forestry sector - 2010 Product Country FOB US$ million %/total Vietnam 12 32.1% Round wood Portugal 12 30.6% China 5 11.9% Subtotal 28 74.5% Total 38 100% Spain 49,9 38.2% Chips Portugal 43,6 33.4% Norway 27,9 21.4% Subtotal 121 93.0% Total 131 100% U.S.A. 10 24.4% Sawn wood Indonesia 5 12.6% China 5 11.5% Subtotal 19 48.4% Total 40 100% México 16 29.6% Wood boards United Kingdom 8 14.2% Argentina 6 10.9% Subtotal 30 54.8% Total 54 100% Argentina 52 56.0% Paper and cardboard Brazil 21 21.9% Paraguay 7 8.0% Subtotal 80 85.9% Total 93 100% Netherlands 394 60.9% Cellulose China 227 35.1% Uruguay 26 4.0% Subtotal 647 100% Total 647 100% Source: Uruguay XXI based on data from the Customs Bureau of Uruguay.13
    • 2.6.1. Exporting companies17It is estimated that there are around 800 companies in the forestry sector at an industrial level -700 of which are part of the product manufacturing chain and the remainder from the celluloseproduction chain. It has been noticed that 50% of the companies are small businesses, althoughsome are large sized corporations.It is important to highlight that the first two companies account for almost 50% of Uruguays totalexports, Compañía Forestal Oriental S.A. and Forestal Atlántico Sur S.A. The main exportingcompanies are listed in the following table showing their participation in the whole forestrysector. Table No.6: Exporting companies (annual % share -2010) Exporting companies % of total COMPAÑIA FORESTAL ORIENTAL S.A. 33.2% FORESTAL ATLANTICO SUR S.A. 10.3% FABRICA NACIONAL DE PAPEL S.A. 7.1% SIERRAS CALMAS S.A. 6.3% INDUSTRIA PAPELERA URUGUAYA S.A. 5.7% LOS PIQUES S.A. 4.9% URUPANEL S.A. 4.7% COMPAÑIA FORESTAL URUGUAYA S.A. 4.1% EUFORES S.A. 3.6% URUFOR S.A. 3.5% COMERCIALIZADORA GRUPO FORESTAL 3.3% FORESUR G.I.E. 3.2% DANK S.A. 2.0% CAS.A.BO S.A. 1.1% CAJA DE JUBILACIONES BANCARIAS 0.9% PAMER S.A. 0.8% MADERAS ASERRADAS DEL LITORAL 0.6% SAGRIN S.A. 0.4% RIO TUMBES S.A. 0.3% IMNSUR LTDA. 0.3% ASOC AGRAG DE RESP LTDA. DE PRO 0.3% PIKE Y CIA COMERCIAL LTDA. 0.3% Other 3.2% Total 100.0% Source: Based on data from the Customs Bureau of Uruguay17 Industrial chains based on Forestry Industry, Planning and Budgeting Office, Ministry of Industry and Energy, IndustryBureau, February 2011.14
    • 2.7. Forestry sector prices18Cellulose pulp exports constitute 65% of the forestry sector, consequently international prices ofthis product will be analyzed first. BHKP cellulose international price rose between 2000 – 2007(an average of US$641 per ton). In 2008 there was a considerable drop as a result of theinternational crisis, recovering by the end of 2009 achieving higher values in 2010 than thosereported in the previous years. By mid 2011, after achieving very high levels, celluloseinternational price underwent severe downward adjustments in the last months. Despite thesedrops, prices remained high from a historical perspective.BHKP cellulose international price was US$858 per ton in July 2011, setting the highest value inthe course of this year and hardly 6.5% lower than the achieved record in July 2010. Nevertheless,in the last months and in a highly volatile financial market environment (which was also reflectedin agricultural commodity prices) a considerable slump in cellulose international market valuecould be observed. Chart No. 6: Cellulose pulp international price US$/ton 1000 800 750 600 400 200 0 Celullose BHKPWith regard to Uruguays wood chip export price, it maintained a stable performance until 2008,it then showed a remarkable growth during the second quarter of 2008 reaching US$ 105.7 perton. In the course of 2011, in line with the cellulose market trend, Uruguay’s wood chip exportprice decreased in the following quarters, after showing a significant increase in the first quarterby 17.3% in comparison to 2010s final quarter.18 Source: Prepared by Uruguay XXI based on data from Deloitte. October 2011.15
    • Meanwhile, round wood for pulp export price remained steady throughout the whole period, inaverage a value of US$ 45.5 per ton (2005 - 2011) could be observed. Maximum value wasreached in the third quarter of this year, US$ 58.7 per ton. Chart No. 7: Wood for pulp US$/m3and wood chips US$/ton export prices 120 100 80 60 40 20 0 round wood for pulp US$/m3 Chips US$/tonOn the other hand, sawn wood international prices showed an unstable course. Non-conifer sawnwood price sustained an upward trend from 2009, reaching its maximum in August 2011 with US$974/m3. However, conifer sawn wood reported a downward trend, showing the lowest value inAugust 2007 at US$ 249.Sawn wood export prices had different performances. They did not report major fluctuations,however non conifer international price experienced significant variations, showing a steadydecline during the second quarters of each year. During the third quarter of 2011, the price stoodat US$350.3 per ton. Chart No. 8: Sawn wood international price US$/m3 Sawn Wood non conifer Sawn Wood - conifer US$/m3 Conífera US$/m3 1200 400 350 1000 300 800 250 600 200 150 400 100 200 50 0 0 Sawn wood - Non conifer (Malasya) Sawn wood - conifer (E.U.A.) US$ / m3 US$ / m316
    • Chart No. 9: Sawn wood export prices US$/ton. 500 450 400 350 300 250 200 150 100 50 0 Sawn wood - conifer Sawn wood - Non conifer US$ / m3 US$ / m32.8. Investments in forestry industry19Investment projects in the forestry industry submitted to the Investment Act ApplicationCommission (COMAP) for tax exemptions, showed irregular development between 2005 -2011.Forestry industry investments are linked to wood extraction and the industrial phase (boards,fibers, solid wood products, wood pulp, energy generation, etc.).It is important to highlight that from 2007 onwards with the approval of the decree 455 thatregulates chapter III of the Promotion and Protection of Investment Act (16,906), a very favorableand attractive investment environment for the country was created. Due to this reason, in theforestry industry projects presented reached in 2007 US$ 107.3 million, and in 2008 it increasedto US$173.1 million.The main project presented in 2007 was by Los Piques S.A., for an amount of US$70 million (60%of total investments), to expand production capacity. In 2008, the outstanding project to buildPunta Pereira Free Zone with US$ 92 million was presented, accounting for 65% of the total.During the January to August 2011 period, projects submitted to COMAP reached US$225.3million. The main project was also related to Punta Pereira Free Zone, accounting for 80% of thetotal, equivalent to US$178 million.19 Source: Wood pulp – wood forestry complex (2008). Value Chains (I), Productive Board. Forestry Agenda 2009.Rosario Pou & Asociados. Websites: www.upmuruguay.com.uy; www.weyerhaeuser.com;www.montesdelplata.com.uy; www.cofusa.com.uy; www.urupanel.com; www.af.com.uy; www.geosylva.com;www.harvest.com.uy; www.agrifox.com.uy17
    • Chart No.10: Projects submitted by COMAP. 20 Data in Millions of US$ 250 225 200 173 150 107 100 50 17 14 5 3 0 2005 2006 2007 2008 2009 2010 Ene-Ago 2011 Projects approves for COMAPBelow are some of the main companies with a share in the forestry industry:UPMThe Finnish company, UPM, is one of the largest wood pulp manufacturersworldwide. In 2009, UPM acquired the major stake in Botnia S.A., which beganoperations in Uruguay in November 2007.It is located at the shore of Uruguay River, four kilometers north of the city of Fray Bentos.Production capacity is one million tons per year of bleached pulp from Eucalyptus short fiber. Pulpexports are shipped by barge from the mill to the deep water port at Nueva Palmira andtransferred to transoceanic ships bound to Europe and Asia. The company has a subsidiarycompany, Compañía Forestal Oriental S.A., that provides most of the wood for the cellulose pulpproduction process (nearly 70% of raw materials comes from company-owned forests).Investment carried out by UPM was approximately US$ 1,200 million.“UPM’s cellulose mill in Fray Bentos is competitive on a worldwide basis, along with the leadingcountries, Brazil, Chile and some Asian countries”, claimed engineer Ronald Beare, UPM generalmanager. “At the same time, it is also a modern plant and this is important because clients like toacquire companies that have state-of-the-art production facilities, which means that it will lastthrough time. Key elements to keep clients are: permanence in the market which is obtained byhaving good industrial facilities, a good product and reliability. This is what UPM has.”20 Source: Prepared by Uruguay XXI based on data from COMAP.18
    • WEYERHAEUSERWeyerhaeuser, a US-based company, is one of the largest forestry andwood companies in the world. It has operations in 13 countries andemploys over 18,000 people worldwide.Weyerhaeuser established itself in Uruguay in 1996 by acquiring part of the shares in ColonvadeS.A. In 2001, the company expanded its assets with the purchase of Los Piques S.A. from the WestFraser Timber Company of Canada and Associates. In 2006, Weyerhaeuser Uruguay wasestablished and in 2007, the company obtained 100% of assets of Colonvade S.A. and Los PiquesS.A. companies.Currently the company operates in various areas such as forest plantation management, planningand inventory, harvest, logistics and transport, and timber yielding product trade.The company’s total land base is 139,000 hectares, 75,000 of which are planted in thedepartments of Rivera, Tacuarembó, Cerro Largo, and Treinta y Tres. In 2010 the companyproduced approximately 350,000 m3 of pieces suitable for peeling and another 350,000m3 ofpieces suitable for sawing and pulping. Plywood production reached 110,000m3.It also has a power co-generation plant that is fed by sub-products of its own production process.The plant’s generation capacity is 12 megawatts and the company’s consumption needs rangebetween five and six megawatts. The remainder can be sold to the state power distributioncompany.MONTES DEL PLATAA forestry company founded in 2009 in Uruguay for the purposes ofproducing cellulose pulp. The company came about from theassociation of two of the most notable forestry companies in theworld: Arauco and Stora Enso. The companies, made up of Swedishand Chilean capital, respectively, are equal partners in Montes del Plata.Montes del Plata is currently developing a sustainable forestry base to supply the required rawmaterials for a cellulose pulp mill to be built in Punta Pereira in the department of Colonia (190km from Montevideo).The company has a total of 250,000 hectares - 135,000 of which are planted, while the remainingare either not planted or are biology conservation areas, native forests or native species such as19
    • Yatay palm tree lands or Santo Domingo wetlands, conservation areas in which the companycarries out environmental monitoring activities and projects. In the pulp mill construction process3,200 direct jobs will be created throughout 24 months with a peak of around 6,000. Once the millis operating, there will be 500 employees at the site. Furthermore, it is estimated that around5,000 indirect jobs will be created. The mill is expected to produce 1.3 million tons of cellulose peryear and it will start operating in 2013.Montes del Plata investment is estimated to be approximately US$ 1.9 billion in the mill and US$700 million in land. The plant will begin operations in the first quarter of 2013. This investmentwill be attributed to FDI corresponding to 2011, 2012 and 2013.COFUSA (Compañía Forestal Uruguaya S.A.), URUFOR and BIOENERThese companies produce, process and sell high quality Eucalyptus grandis wood. They arelocated at northern Uruguay and are part of the same Uruguayan business group. Cofusa specializes in genetic improvement, seedling, nursery, planting and silviculture management of the forest (pruning, thinning and harvesting). Urufor processes saw timber from COFUSA plantations. Its forestry activities comprise sawing, drying and manufacturing of half-finished product from Eucalyptus grandis. Bioener is a cogeneration power plant that produces energy from forest biomass of 12 MW and sells power to UTE and supplies URUFOR with stream needed in the board drying process. Uruguay’s average power consumption is of approximately 1,200 MW/hour. Bioeners capacity accounts for approximately 1% of the country’s average power usage.URUPANELUrupanel is owned by a Swiss investment fund, located at northern Uruguay.It began operations in 2004 and today it is one of the top exporters ofplywood in the country. Urupanel invested US$ 56 million in 2004 and US$ 20 million in 2007 forthe installation of a new industrial plant to manufacture MDF plywood boards. This plant beganoperations in 2009. In 2010 this company’s exports reached 4.7% of total forestry industryexports.20
    • GLOBAL FOREST PARTNERS LP (GFP)GFP structures, executes and administers forestry investments on behalf of institutional investors.The fund manages a portfolio of more than US$ 2.5 billion. GFP operates in Chile, Brazil, NewZealand, Australia, Singapore and Uruguay. The company is present in our country with fourfunds, with an investment of approximately US$ 150 million.GMO RENEWABLE RESOURCESGMO Renewable Resources is a US-based company with offices in Uruguay since 2001 GMOadministers investment funds with a branch (Renewable Resources) exclusively dedicated toforestry investments. Currently, the company administers three investment funds. The assets(plantations) are in northern Uruguay (departments of Rivera, Tacuarembó and Cerro Largo) with37,000 hectares - 25,000 of which are planted. Investment made amounts to US$ 90 million.RMK TIMBERLAND GROUPRMK Timberland Group, established in 1981 in Georgia, United States of America, is aninvestment fund exclusively focused on the forestry business. It operates as the commercial unitof Regions Morgan Keegan Trust and Morgan Asset Management. It is engaged with thedevelopment of investment portfolios and general management of forestry resources in differentparts of the world. The group began activities in Uruguay in 2005 with the creation of theSouthern Cone Timber LLC fund and the establishment of Taurion S.A. Later, the group addedplantation management with the Criollo Madera company (Monte Fresnos S.A.) and Bosques delSur (Ponte Tresa S.A.). Wood production by these companies is used for cellulose pulp, sawnwood, energy and other uses for the domestic market and exports. Total assets of RMK inUruguay are approximately 40,000 hectares - about 62% of which corresponds to forestryplantations mainly located at forestry priority lands.Other companies:PHAUNOS TIMBER FUND LIMITED: Phaunos is a British fund operating in Uruguay throughPradera Roja S.A., Caldrey S.A. and Aurora Forestal Limited companies. Pradera Roja S.A. owns 12,000 hectares of Eucalyptus plantations for the supply of cellulose pulp mills and sawn wood markets. Caldrey S.A., located in southern Uruguay, focuses on services to increase forestry productive capacity. Investment made amounts to US$ 5 million.21
    • Aurora Forestal Limited focuses on planting mixed-age pine trees in Uruguay. The company has 19,500 forested hectares in the department of Rivera and performs operations in a saw mill in the department of Tacuarembó. Investment made amounts to US$ 35 million.NEVOPARK: Nevopark Company invested US$ 7 million in 2007 for the installation and operationof a splitting mill to meet domestic and foreign demand for wood chips.CHIPPER: Chipper Company was born from the association of Foresur and Grupo Forestalcompanies in 2004. Chipper has 40,000 hectares of Eucalyptus globulus plantations and a chippingmill capable of processing 470,000 BDMT per year (sales measurement unit equivalent to one tonof dry fiber). Investment made in the chip production mill in Montevideo amounts to US$ 2.6million. Production is bound to Japan and the Scandinavian Peninsula (Sweden and Finland).IPUSA: IPUSA is a domestic paper company that was acquired in 1994 by the Chilean CMPCHolding Company. IPUSA invested US$ 1.4 million in 2006 and US$ 939,000 in 2007 for theconstruction of two paper manufacturing machines, round wood conversion lines, napkinconversion and product conversion for institutional consumption. In 2008, IPUSA invested US$ 7million and in 2010 US$ 2 million.AGRIFOX S.A.: Agrifox is a Uruguayan forestry company with plantations in central and northernUruguay. It began activities in Uruguay in 2005 and focuses on harvesting and exporting roundwood. Major export destinations are Vietnam, China, India and the Philippines.FORESTAL CAJA BANCARIA: Forestal Caja Bancaria began forestry activities in 1964, when itacquired the first 6,000 hectares in Paysandú for pine and eucalyptus plantations. Currently, thecompany carries out forestry, industrial and livestock activities on 18,000 hectares. In 2008, thecompany invested US$ 2.7 million in the construction of a new sawmill, expansion of dryingchambers, acquisition of mobile machinery and enhancement of the areas of influence. Thecompany has a sawn wood capacity of 100,000 m3 of round wood per year and a drying capacity of20,000 m3 per year.22
    • Industry-related service companies include:PIKE CONSULTORA FORESTAL: Founded in 2002, Pike offers complete consulting services forforestry projects. Services include, but are not limited to, industrial opportunity assessmentstudies, plantation valuation, wood availability reports, environmental impact studies, FSCcertification and forest fire prevention plans.AGROEMPRESA FORESTAL: A domestic company located in northern Uruguay, AgroempresaForestal offers consulting services, plantation administration, planting services, brush control, antcontrol, pruning, etc. "We work with FSC certification in every fund. This guarantees that the company operates under responsible environmental and social practices showing respect for the most demanding communities. It is common for the certification to be a market requirement, in our case it is requested by our investors, who want their capital to be invested in a responsible manner.” ALBERTO VOULMINOT, Director of GFP Forestry Investments . Forestry Agenda 2011.GEOSYLVA: Starting activities at the beginning of 2002, Geosylva is a service company focused onthe forestry industry. It is mainly focused on forestry consultancy, sales and services including, butnot limited to, development of executive investment projects and business plans, assessment offorestry projects, quality control and audits, advisory and training for forestry management andcustody chain.HARVEST: A joint venture between Phaunos Timber Fund Limited (PTFL) and Union Capital Group(UCG), Harvest offers services to the domestic forestry industry, mainly mechanized harvestingthrough a clear cutting system with processors, self-loading tractors and loaders.CARBOSUR: Carbosur is a Uruguayan company founded in 2000. It offers specialized services inthe area of climate change, with an emphasis on mitigating this global environmental problem.The company specializes in greenhouse gas inventories and offers emission inventory services andcarbon footprint estimates for companies and their products. Carbosur has strategic alliances withPike Consultora Forestal (Uruguay), Factor CO2 (a company from the Basque Country specialized inclimate change), Maradei Pike (Argentina) and two Guatemalan organizations (Energía y MedioAmbiente and Fundación Naturaleza para la Vida). It is also member of Markit, one of the mainregisters for creation and sale of carbon certificates.23
    • INFOREST SERVICIOS FORESTALES. The main purpose of the company is to offer comprehensiveprofessional service focusing mostly on the forestry and agricultural field, to cater for customerand market needs and to provide consulting support at all times always considering differentalternatives to improve business, through the sustainable use of natural resources.MUNDIAL FORESTACION: Mundial Forestación is a Uruguayan company focused on producingEucalyptus globulus genetic material. The company has capacity for 30 million plants (seeds andclones) and is one of the largest nurseries supplying the national market. According to companydirector Rogerio Aguiar, “traditional plantations of Eucalyptus globulus in Uruguay yield around 12to 17 m3 per hectare per year. Using clones enables the possibility of doubling this production,adapting each clone to local conditions, while improving wood quality and allowing theidentification of the most resistant to disease and the consequences of climate change.”JOHN O´RYAN SURVEYORS. Uruguayan company committed to developing control systems thatenable their clients to improve their productive and logistic services as well as to facilitate atransparent and sustainable relationship between these and their buyers. Among the differentintegral quantity control systems available there are: humidity content, material compressionand material physical condition, traceability required to reach sustainability and efficiencyobjectives, sustainable forest management certification (PEFC, FSC, among others) as well ascarbon footprint measurement and emission reduction plans.2.9. Logistics2.9.1. Strategic geographic location at the expanded region (Argentina, Bolivia, Brazil,Chile, Paraguay and Uruguay) There are seven ports in Uruguay, two of which have ocean access: Montevideo and Nueva Palmira. Nueva Palmira specializes in bulk cargo, while Montevideo works mainly with containers. The seaway consisting of Paraná, Paraguay and Uruguay rivers enables river access for products to and from Asunción (Paraguay), Rosario and Santa Fe (Argentina) and eastern Bolivia (department of Santa Cruz). Both Nueva Palmira and Montevideo offer ocean- going access for this seaway.24
    • An extensive highway network joins Montevideo to the regions major cities, facilitating truck transportation. Three bridges on the Uruguay River connect the country to Argentina at the cities of Salto, Paysandú and Fray Bentos. Connections to Brazil are available at land border crossings at the cities of Bella Unión, Rivera, Río Branco and Chuy. Approximately 57% of national highways are in very good condition and the Ministry of Transport and Public Works (MTOP) intends to raise this figure to 80% over the next five years. Likewise, MTOP plans to implement a monitoring and follow-up system for cargo transport through GPS technology.2.9.2. Upcoming investments in the industry The departmental highway network is vital for forestry industry transport. As such, MTOP will invest US$ 7.3 million in the coming years for forestry roadway maintenance (construction, reconstruction and maintenance of departmental forestry corridors). In 2013, Montevideo will have a modern terminal specializing in bulk cargo. Obrinel, a company established by the Christophersen and Saceem companies, will construct a terminal for bulk cargo in the port of Montevideo. The project will be destined for wood chips and bulk cargo in general. The building will be ready to start operating by the beginning of 2013 with an investment of over US$ 60 million. Shareholders will provide a 30% of the funding and banking entities will be resorted to for the remaining 70% needed. The terminal will have a storage capacity for 120,000 tons but can take up to 200,000 tons. The terminal will have a shipping cargo capacity of 2,400 tons/hour. The government’s objective is to turn Uruguay into a “Regional Logistics Pole” by 2030. The following major projects will be carried out: o Development of commercial ports: In La Paloma ocean port (in the department of Rocha on the Atlantic coast), piers are to be rebuilt to enable 300,000 tons of cargo movement per year. This will be of vital importance for wood exports from the eastern region of the country. In accordance with this objective, the port of Paysandú is already undergoing pier and dredging works to enable wood transport via river. o Complementary investments to the Port of Montevideo (Puntas de Sayago): The Institutional Project includes the creation of a Logistics Port in a 103-hectare site at Puntas de Sayago, a costal area near the Port of Montevideo. From April 2012 the first 10 hectares corresponding to “Puerto Logístico de Puntas de Sayago” will25
    • be tendered. These lands located West of Montevideo will serve as warehouse for goods and containers in transit from and to Montevideo. o The government has stated its intention to refurbish railway infrastructure. 1,200 kilometers of railway will be repaired. It is expected that with the improvements, railway lines will be able to transport 3.5 million tons of cargo per year. Some of the railway lines will be: - West coast, Central region and Montevideo metropolitan area with La Paloma port for the purposes of meeting the needs of forestry product transport as well as containers, grains and other cargo. Estimated investment - which includes the construction of a new siding and classification yard in the port, sums up to US$ 49 million. - New international bridge with Argentina, towards the South of the existing ones. It would connect Punta Chaparro, North of Nueva Palmira to Brazo Largo in Argentina with a length of 12 km for highway and rail traffic, with an overall investment of US$ 300 million. - In the railway network integration framework with Argentina and Brazil, the connection with the Brazilian rail network will be developed in Rivera- Livramento. - Overhaul of Pintado-Rivera section. The estimated investment for these works total US$60 million which include US$37 million consisting of 21,200 Russian rails of the type R50 with a length of 25 m supplied by AFE.26
    • 3. Industry perspectives3.1. Global industry perspectives:Main factors affecting long-term global demand for wood products: o Demographic changes: The worlds population is expected to increase from 6,400 million in 2005 to 7,500 million by 2020 and 8,200 million by 2030. o Regional changes: from 1970 to 2005, most of GDP corresponded to developed economies. However, the rapid growth of developing economies, especially Asian economies, will lead to notable changes over the next 25 years. o Environmental policies and regulations: more forests will be excluded from wood production. o Power policies: the use of biomass, including wood, is rising rapidly. Other important factors for the future of wood products include: o The decline of natural forest harvesting, conversion of planted forests, o Technological advances, increase in plantation productivity through improved genetics, o Decline in wood required due to increases in recycling, o The wider use of new compound products and production of cellulose biofuels.Increase in global demand for environmental products and services. o Policies related to energy and climate change are leading to an increase in wood used as energy source. Greater attention to “green development” and commercial cellulose biofuel production will have an unprecedented impact on the forestry industry. o Greater attention to green development implies a new orientation for the development of the forestry sector. “Planting trees, increasing investments in sustainable forestry management, active promotion of wood in construction with environmental criteria and renewable energy will be integral parts of green development.” 21Increase in global demand for wood products: o The world demand for round wood is expected to reach 2,164 million m3 per year22 by 2020. In 2005 it was 1,683 million m3.21 FAO Publication “2009 State of the Worlds Forests - Rome, 2010”22 Source: “2009 State of the Worlds Forests” - FAO.27
    • Chart No. 11: Actual and forecasted consumption of forestry industry products by region - millions of m3 Source: “2009 State of the Worlds Forests” - FAO.3.1.1. At national level: Montes del Plata pulp mill which is expected to be operating in 2013 -2014 will consume more than 4 million tons of pulpable wood per year, it will export 1.3 million tons/year (between 600 and 800 million dollars/year). Likewise, between 2014 and 2020 production plantations for sawmill, plywood and engineered wood will have reached harvest time. There will be a significant increasing supply in quality wood which will be produced and supplied in a sustainable way in volumes that range between 4 million m3/year for 2011-2016 period to over 10 million m3/year for 2017-2021 period. This entails an opportunity for industrial investment, as well as wood export with a higher added value and various sub-products. It does not seem risky to foresee Uruguay exports over 3,000 million by 2014. Future availability of greater forestry assets due to the fact that 80% of the soils declared forestry priority still has no plantations.28
    • APPENDICESAppendix 1Domestic and foreign investment promotionForeign investors in Uruguay enjoy the same benefits as domestic investors and do not need priorauthorization to set up in the country.Law 16,906 (dated January 7, 1998) declares the promotion and protection of domestic andforeign investment is of national interest. Decree 455/007 and its modification on January 9th of2012 updated the regulations of this law.By virtue thereof and for investment projects in any sector of activity submitted and promoted bythe Executive Branch, 50% to 100% of the amount invested may be computed as partial paymentof Corporate Income Tax (IRAE), depending on the type of project. Corporate income tax rate is25%.In addition, moveable fixed assets and civil works are exempt from wealth tax and VAT (ValueAdded Tax) can be recovered for purchases of materials and services for the latter.Trade agreements and investment protection1. General trade agreementsUruguay has been part of the World Trade Organization (WTO) since its creation in 1995 and ispart of the Latin American Integration Association (ALADI, 1980) along with nine other SouthAmerican countries, Cuba and Mexico.In the framework of ALADI, the Southern Common Market (Mercosur) was formed in 1991 withArgentina, Brazil and Paraguay. Mercosur became a customs union in 1995 with the freemovement of goods, the elimination of customs duties and non-tariff barriers between countries,and a Common External Tariff for countries outside Mercosur. Venezuela is currently in theprocess of joining Mercosur.Moreover, in the framework of ALADI, Mercosur has signed trade agreements with other SouthAmerican countries: Chile (1996), Bolivia (1996), Colombia, Ecuador and Venezuela (2004), India(2004) and Peru (2005), Israel (2007), all of which form respective Free Trade Areas with tariffreduction schedules that should be completed no later than 2014/2019, according to the country.Uruguay also signed a bilateral free trade agreement with Mexico (2003), which has enabled thefree movement of goods and services between both countries since June 2004, with certainexceptions that end in 2014.29
    • 2. Investment protection agreementsUruguay has signed investment protection and promotion agreements with 27 countries,including Spain, the U.S., Finland, France and the U.K.InstitutionsA significant number of institutions bring together diverse players in the productive chain. Thesehave participated in varying degrees in the discussion and practice of tools and policies for theindustry, both in production as well as in environmental and social spheres. These institutionsinclude: Forestry Bureau (DGF): www.mgap.gub.uy/Forestal/DGF.htm Forestry Producers Society (Sociedad de Productores Forestales): www.spf.com.uy Wood and Related Areas Industrial Association (Asociación de Industriales de la Madera y Afines): www.adimau.com.uy Forestry Producers of the East (Productores Forestales del Este - PROFODES): www.profodes.com Research entities (INIA www.inia.org.uy, LATU www.latu.org.uy, University of the Republic, private universities, among others) Environmental and social non-governmental organizations (NGOs) Wood and Furniture Competitiveness Forum (Foro de Competitividad de Madera y Muebles), which operates in the domestic and MERCOSUR spheres. It operates within the scope of the Industry Bureau and the Ministries of Industry of other MERCOSUR members. Program to support competitiveness and export promotion for Small and Medium-sized Enterprises (PACPYMES). It has a competitiveness promotion and business development program for second and third degree transformation of wood (Promadera: www.promadera.com.uy) National Environment Bureau (DINAMA): www.dinama.gub.uy Forestry Tripartite Sector Board - Wood (Productive Cabinet): http://gp.gub.uy/es/node/188/630
    • Appendix 1Table No. 7: Land sales for agriculture-livestock use. Number of sales, area sold and value(per year). Area sold Value Number of Total Year Average Total Average sales (thousands of (hectare) (US$ millions) (US$/hectare) hectares) 2005 2,872 846 295 613 725 2006 3,245 859 265 972 1,132 2007 3,277 676 206 968 1,432 2008 2,959 684 231 1,260 1,844 2009 1,847 323 175 753 2,329 2010 2,093 336 160 885 2,633Source: Ministry of Livestock, Agriculture and Fishing - Agriculture-Livestock Statistics Bureau based on informationfrom the General Registry Bureau.Table No. 8: Land lease for forestry use. Number of contracts, leased area and value -2010. Leased area Value Number of Average Use Total Average Total (US$ contracts (US$/hectare/ (hectares) (hectares) thousands) year) Forestry 23 15,527 675 1,441 93Source: Ministry of Livestock, Agriculture and Fishing – Agriculture-Livestock Statistics Bureau based on informationfrom the General Registry BureauTable No. 9: Costs of activities linked to the forestry sector – October 2010 – in US$ 1 - Transport 1.1 – By truck Round wood: 251 to 450 km US$/ton 21 Round wood: 51 to 250 km US$/ton 20 Round wood: up to 50 km US$/ton 9 Round wood: more than 450 km US$/ton 46 1.2 – By rail Wood US$/ton/100km 7 2 - Labor 2.2 – Minimal nominal wage with food and housing for forestry tasks Foreman US$ 598 Daily allowance for food and housing US$ 4 Monthly allowance for food and housing US$ 95 Machine operator (daily) US$ 20 Specialized machine operator (daily) US$ 23 Common laborer (daily) US$ 15 Specialized laborer (daily) US$ 17 Source: Pricing List. June 2011 - DIEA-MGAP.31
    • Appendix 2Forestry product certificationForestry certification is an independent evaluation of the activities of an organization inaccordance with previously established external standards. The Forest Stewardship Council (FSC)has developed an international standard for forestry management called Principles and Criteria(P&C). FSC P&C requirements include environmental, social and economic impacts of forestrymanagement. Forestry certification generally acts as an incentive to improve forestrymanagement practices. There are certifying organizations that assess compliance with therequirements. The following are two of the main companies involved in certifying forestryplantations in accordance with FSC: a) SGS (Societé Générale de Surveillance) is headquartered in Geneva, Switzerland, and has offices around the world, including Uruguay (SGS URUGUAY Ltda.). The forestry certification program is entitled “SGS QUALIFOR”. “SGS QUALIFOR is a program with more than 1,000 chains of custody and more than 190 forestry stewardship certifications worldwide. The program is currently active in more than 60 countries worldwide.” b) SmartWood is a program from the Rainforest Alliance conservation organization, which is headquartered in New York and has activities in several countries, including Uruguay. With regard to plantation certification, SmartWood is defined as the “main non-profit certifying body” that “certifies all types of forestry operations, including natural forests, plantations, large scale commercial operations and small scale family and community woodlands." Map No. 2: FSC certified areas by region Source: Forest Stewardship Council- “Global FSC certificates: Type and distribution”32
    • Appendix 3Uruguay wood qualitya) Destination of cellulose pulp65% of all industrial wood extraction is used to produce cellulose pulp. Eucalyptus is the mostoften used variety in the generation of short fiber. The following is the gross yield and basicapparent density for the various species of the Eucalyptus genus.Table No. 10: Gross yield and basic apparent density for Eucalyptus spp 3 23 Species Gross yield at kappa 20 (%)* Basic apparent density (g/cm )Eucalyptus globulus 54.5% 0.423Eucalyptus grandis 51.7% 0.499Eucalyptus dunnii 51.1% 0.520Eucalyptus maidenii 51.4% 0.559Note (*): Laboratory Kraft process, variation parameter.Source: Technology Laboratory of Uruguay (LATU). Research performed by Project Department.b) Solid wood and derivative productsThe species Pinus taeda, Pinus elliottii and Eucalyptus grandis are the most widely used in solidsawn wood and derivative products. The following are average values of some of the mechanicalproperties and density of each of the aforementioned species.Table No. 11: Average values of elastic modulus, rupture modulus and apparent current density. Elastic modulus Rupture modulus Apparent current density Species 24 25 3 (Mpa) (Mpa) (g/cm )Pinus taeda 8,120 64.2 0.403Pinus elliotti 8,034 77.7 0.403Eucalyptus grandis 11,900 86.1 0.463Source: Technology Laboratory of Uruguay (LATU). Research performed by Project Department.23 Weight to volume ratio of wood sample, without accounting for hollow interior spaces.24 Measure of resistance to a change in shape or size under the action of various forces. Defined as the coefficientbetween the per unit force of the surface and the deformation per unit of length.25 Measure of maximum force per surface unit that a sample can withstand without breaking.33
    • Levels of quality wood in Uruguay measured through the mechanical properties of elasticmodulus (stiffness) and rupture modulus are higher than regional levels. In particular, Eucalyptusgrandis has higher values than the same species in Brazil and Argentina.Chart No. 12: Comparative of Eucalyptus grandis wood from Uruguay, Australia, Argentina andBrazil – Elastic and rupture modulus. Source: Technology Laboratory of Uruguay (LATU). Research performed by Project Department.34
    • Investor ServicesAbout usUruguay XXI is the Uruguayan investment and export promotion agency. Among other functions,Uruguay XXI provides free support to foreign investors, both to those who are in the process ofassessing where to make their investments and those who have been operating in Uruguay for along time.Our Investor ServicesUruguay XXI is the first point of contact for foreign investors. Our services include: Macroeconomic and industry information. Uruguay XXI regularly prepares reports on Uruguay and the various sectors of the economy. Tailored information. We prepare customized information to answer specific questions, such as macroeconomic data, labor market information, tax and legal aspects, investment-promotion programs, localization and costs. Contact with key players. We provide contacts with government agencies, industry players, financial institutions, R&D centers and potential partners, among others. Promotion. We promote investment opportunities at strategic events, business missions and round tables. Facilitation of foreign investor visits, including organization of meetings with public authorities, suppliers, potential partners and business chambers. Publication of investment opportunities. On our website, we periodically publish information on investment projects by state entities and private companies. www.uruguayxxi.gub.uy invest@uruguayxxi.gub.uy35
    • Uruguay at a glance (2010)26 Official name Oriental Republic of Uruguay (República Oriental del Uruguay) Location South America, bordering Argentina and Brazil. Capital city Montevideo 2 176,215 km . 95% of its territory is productive land fit for farming Surface area exploitation Population (2010) 3.3 million Population growth (2010) 0.35% (annual) Per capita GDP (2010) US$ 11,996. Currency Uruguayan peso ($) Literacy index 98% Life expectancy at birth 77 years Form of government Democratic republic with presidential system Political division 19 departments Time zone GMT - 03:00 Official language Spanish Main economic indicators 2005-2010 Indicators 2005 2006 2007 2008 2009 2010GDP (Var % per year) 7.5% 4.3% 7.3% 8.6% 2.6% 8.5%GDP (in millions of USD) 17,398 19,823 23,902 31,177 31,322 40,265Population (in millions of people) 3.31 3.31 3.32 3.33 3.34 3.36GDP per capita (USD) 5,263 5,981 7,191 9,351 9,364 11,996Unemployment rate – Annual Average (% labor 12.20% 10.90% 9.20% 7.70% 7.30% 6.80%force)Exchange Rate (UYU/USD, Annual Average) 24.4 24.0 23.4 20.9 22.6 20.06Exchange Rate (Annual Average Variation) -1.56% -2.50% -10.65% 7.73% -11,12%Consumer Prices (Var % annually accumulated) 4.90% 6.38% 8.50% 9.19% 5.90% 6.93%Exports (in millions of USD), goods and services (1) 5,085 5,787 6,933 9,372 8,647 10,666Imports (in millions of USD), goods and services 4,693 5,877 6,775 10,333 7,957 9,875Commercial Surplus/Deficit (in millions of USD) 393 -90 158 -961 690 791Commercial Surplus/Deficit (% of GDP) 2.3% -0.5% 0.7% -3.1% 2.2% 2.0%Global Fiscal Result (% of GDP) -0.4% -0.5% 0.0% -1.5% -1.7% -1.1%Capital gross formation (% of GDP) 17.7% 19.4% 19.6% 22.3% 17.2% 17.9%Gross Debt (% of GDP) 80.2% 69.2% 68.3% 53.0% 69.9% 57.2%Direct Foreign Investment (in millions of USD) 847.4 1,494 1,330 2,106 1,593 2,358Direct Foreign Investment (% of GDP) 4.9% 7.5% 5.6% 6.8% 5.1% 5.9%26 Sources: Data regarding GDP were taken from IMF; data regarding foreign trade, FDI, exchange rates, InternationalReserves, External Debt were taken from BCU; population growth, literacy, unemployment and inflation rates weretaken from National Statistics Institute.36