The document discusses the economic sustainability of industrial plantations in Brazil, highlighting the definitions, history, and current scenario of the forest industry. It notes that institutional investors have increasingly invested in timberland, driven by a need for diversification and the industry's demand for resources. The report also outlines the challenges and opportunities within the market, emphasizing the importance of efficient resource use and the impact of new regulations on investments.

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1
Economic sustainability
of Industrial plantations in Brazil
Silvana Nobre
silvana@atriumforest.com
UPM – Universidad Politécnica de Madrid
February - 2015
Economic sustainability of
industrial plantations in Brazil
Definitions & concepts
History
New Scenario
How is it today?
(1)
(2)
(3)
(4)

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(1) Definitions
Economic Sustainability:
The use of various strategies for employing existing resources
optimally so that a responsible and beneficial balance can be
achieved over the longer term.
Within a business context, economic sustainability involves using the
assorted assets of the company efficiently to allow it to continue
functioning profitability over time.
http://www.businessdictionary.com/definition/economic-sustainability
Forest as raw material to industry
Timberland Investments
Raw Material:
Basic substance in its natural,
modified, or semi-processed
state, used as an input to a
production process for
subsequent modification or
transformation into a finished
good.
www.businessdictionary.com
An investment instrument used primarily by large
institutional investors (such as public and private
pension funds). The two main assets that underlie
timberland investments are tree farms and
managed natural forests. The returns on these
forestland investments come from biological
growth, upward product class movement, timber
price appreciation and land price appreciation.
www.investopedia.com

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Brazilian Forest Industry
Plantations: 7.6 million ha
Sectorial GDP: 28 Bi USD
(1.2% Brazilian GDP)
Investments: 3.3 Bi $Reais
People: 4.4 Bi People
2013 data:
(2) History
Pulp & Paper Companies
Housing Companies
• Invested in N Forest management
• Tech Development
Large Pulp & Paper Companies
Steal (Iron + Carbon) Companies
• Invested in euc. plantations
• Tech Development
2000
Brazil USA
A big change
comes up in 1980

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Fact A: New Law (late 70s):
Institutional Investors (Pension Funds) must diversify investments
(2) History in USA
Fact B: New need (early 80s):
Based Forest Industry need resources to invest in Industry (itself)
Fact A + Fact B =
Large Companies sold their forest assets to institutional investors
(2) History in USA
• In 2000 Institutional Investors had
14,4 billion USD invested in
Timberland
• A new type of Company:
• TIMO: Timberland Investment
Management Organization
USA has a established market of 4 billion USD transactions a year
60 Billion USD Invested until 2013

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High Productivity (m3/ha.year)
Brazil Risk (in points)
(2) History: Meanwhile in Brazil….
Increase in Productivity in SP
m3/ha.year
(2) History:
So… US TIMOs came after 2000
2.3 Billion R$
Forest Industry Area in Brazil
American TIMOs Invested in Brazil until 2010
They showed how to do it
However…. s. happens

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(3) New Scenario
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
landPricesinR$
Land Prices in Brazil
Nominal Prices
Real Prices
Real Land appreciation 7.65% a year
New Land Acquisition Regulations:
Foreign companies can’t buy land
(3) New Scenario

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(3) New Scenario
Panels: MDF
Solid Wood
• Government funds with good Interest
Rates finance investments in forest
• Better Market: more small Industries
• Land Owners Investments in the South
in a new Market for Eucalyptus and
Pine Plantations
Panel Industry and
Solid Wood
(3) New Scenario: different market

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(3) Scenario changes >> our turn
(b) Pension funds must diversify
(c) Industry can not invest in land any more
• Land prices are high
• Social movements
% per year rate
(d) New Industry options
(a) Brazilian basic Interest rate (SELIC) is decreasing
11,15%
(4) How is it today? - who
Industry : they are selling their assets to TIMOs,
they still have 60% of the forest assets they need
Land owners and Families:
Looking for funds or Government funds like ABC fund, climate fund…
Institutional Investors as Brazilian TIMOs:
looking for “good” IRR,
has to be more than our SELIC 8% (basic interest rate)

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(4) How is it today:
How much we intend to invest in
upcoming years?
0
2
4
6
8
10
12
2013 2014 2015 2016 2017 2018 2019 2020
BillionsR$
Forest Investments
53 Billions R$
How ?
BNDES
Investments
Other Government Financing Instruments with interest
rates below inflation rate 5%, 2% …:
FCO, Climate Funds, ABC Funds, SP State Funds
1
2

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(4) How is it today? – How
3
$Pension funds &
other Institutional
Investors
Brazilian TIMOs
Investment Management
Forest
Management
Company 1
Forest
Management
Company 2
$$
Where?
Main variables:
Land price
Productivity
Development status
Market:
Pulp,
Steal,
Panels,
Agribusiness

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-3% -2% -1% 1% 2% 3%
Wood Price
Inicial Land Price
%Land Appreciation
Costs
Forest Productivity
% of Land Rent
When you buy Land
Project with high risk
-2% -1% 0% 1% 2%
Wood Price
Inicial Land Price
%Land Appreciation
Costs
Forest Productivity
% of Land Rent
When you buy Land
Project with low risk
silvana@atriumforest.com
www.atriumforest.com
Gracias