Chilean Timber Firms Eyeing Argentina

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WORLDWIDE FOREST/BIODIVERSITY CAMPAIGN NEWS

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Forest Networking a Project of Ecological Enterprises

http://forests.org/

1/31/97

OVERVIEW, SOURCE & COMMENTARY by EE

Twenty-five years after the Chilean timber boom began, virgin forests

suitable for industrial exploitation are becoming scarce. The Los

Angeles Times reports in the attached photocopy that Chilean timber

firms are "looking to the lush soil and virgin forests of northern

Argentina to maintain their rapid growth." Fully intact forest

ecosystems are finite, and rapidly diminishing in terms of quantity

and quality. Say No to industrial forestry in remaining forest

wildernesses. And Yes to management of old second growth and mixed

species plantations, as well as to general forest restoration and

sustainable management.

g.b.

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RELAYED TEXT STARTS HERE:

Chilean Timber Firms Eyeing Argentina

Wednesday, January 29, 1997

From Bloomberg Business News

Forestry: With land in short supply in their own country, companies

seek greener hectares.

SANTIAGO, Chile--Strapped for land at home, Chilean timber companies

are looking to the lush soil and virgin forests of northern Argentina

to maintain their rapid growth.

Twenty-five years after a forestry boom began in Chile, land is

getting hard to find. The country has 2 million hectares (5 million

acres) of plantations, slightly more than all of Brazil.

"Without a doubt, it is easier to expand in Argentina," said Fernando

Raga, head of forestry development at Cia. Manufacturera de

Papeles y Cartones SA, or CMPC.

Still, the $2.5-billion-a-year forestry industry will remain a motor

behind Chile's economic growth for at least 15 more years as existing

plantations mature and companies shift gears to produce more value-

added products. For example, companies are producing increasing

amounts of clearwood pine (knotless), which fetches far higher prices.

Moreover, local companies continue to extend plantations, with 99,857

hectares planted last year.

While pine production alone is expected to rise to 36.9 million cubic

meters in 2017, from the current 17.7 million cubic meters as

plantations mature, the number of new plantations is down from a high

of 130,429 in 1992.

"It is getting harder to find suitable land in Chile," Raga said. "We

are buying land at 40 hectares a time, compared with 1,000 hectares in

Argentina." That makes a big difference when you need over 50,000

hectares for a pulp mill.

* * *

Most of the land available in Chile is good pasture land, which is

more expensive and requires a high return on investment to make it

profitable. That makes it suitable for high-yielding eucalyptus

plantations, but not the pine Chile's forestry industry has been

based on to date.

Chile could double the 300,000 hectares of eucalyptus it currently

has, Raga said. However, the returns from eucalyptus have proved

disappointing, especially for smaller farmers. "It's more complicated

than pine," Raga said. "It dies with frost."

That has helped encourage expansion in Argentina. Still, many

obstacles remain, including a dearth of knowledge of the forestry

industry in Argentina and high labor costs.

CMPC has planted 35,000 hectares of pine plantation in Argentina over

the last few years, compared with the 258,000 hectares it has in

Chile.

Chile's Maderas y Sinteticos SA, or Masisa, has planted 10,000

hectares in Argentina and plans to increase that to 65,000 in the next

10 years. Masisa, which produces particleboard and medium-density

fiberboard for the furniture and construction industries, recently

started production in Argentina.

* * *

Chile's largest forestry company, Cia. de Petroleos de Chile SA, or

Copec, which has almost 500,000 hectares of land in Chile, also

expanded into Argentina.

Last month, Copec's forestry unit, Celulosa Arauco y Constitucion,

agreed to pay $287 million for 95% of the Argentine wood pulp

producer Alto Parana SA. Parana owns about 30,000 hectares of land in

Misiones, the region of Argentina that stretches between Brazil and

Paraguay.

"We are not just buying a pulp plant, we are buying potential growth,"

with Argentina offering access to the giant Mercosur market, embracing

Brazil, Paraguay and Uruguay, said Alejandro Perez, Arauco's general

manager.

"Argentina has some incredible fast-growth rates" for trees, said

Andres Katz, a forestry engineer at New Zealand's Carter Holt Harvey

in Chile. "The average in Misiones is higher than almost anywhere else

in the world."

The semi-tropical climate is perfect for pine trees, with rich, red

soil washed down from Brazil.

Yet, Misiones won't be the center of Argentina's forestry industry.

Small land holdings and vast tracks of native forest will hamper

development.

"You could only buy 50 or 100 hectares at a time," Katz said. There is

no market for land there with small, poor farmers unwilling to give

up their only source of income.

Forestry companies are unlikely to slash down the centuries-old native

forests either.

Corrientes to the south offers better opportunities, with land more

readily available. Still, the terrain is flat with the water table

only 1.5 meters below the surface, making part of the land unsuitable

for forestry, Katz said.

For the moment, "forestry is small-scale and inefficient in

Corrientes, but the area has great potential," Katz said.

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