October 4, 2022

The Usa Herald

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Forest industry. Millionaire investments and a 2030 plan

4 min read

The Argentine industrial forestry sector is already beginning to be called “the green cow”. It happens that it has the potential to attract US$7 billion in investment in the coming years, create 186,000 jobs and increase current exports fivefold to US$2.6 billion annually. It could become the protagonist of the 2030 plan for productive development.

This industry brings together a heritage of 1.3 million hectares of forest plantations in the country; 53 million hectares of native forests; exports for US$550 million; 100,000 direct jobs, and 6,000 SMEs at different levels of wood processing.

In the country there is a heritage of 1.3 million hectares of forest plantations.

As commented in the Argentine Forestry Association (AFoA), the estimated investments include two paper plants, a pulp mill, ten international-level sawmills and the development of companies for the manufacture of wooden houses, panels and thermal energy. In addition, only in plantations, it aims to go from the current area of ​​1.3 million hectares to one of 2 million), which will require US$1,000 million.

“There is an ideal of a new Forest Argentina, which generates sustainable raw material to feed industries and strategic sectors such as renewable energies, housing construction; paper (the country imports some US$1 billion a year in paper) and biorefineries that contribute to multiple sustainable products, such as textiles and nanocellulose, among other items”, says Osvaldo Vassallo, president of AFoA, an entity that on the 15th of this month will celebrate its 75th anniversary.

On March 21, the Minister of Productive Development, Matías Kulfas, received the representatives of the Argentine Forest Industrial Council (Confiar), which includes all the actors in the sector: the Association of Pulp and Paper Manufacturers (AFCP); AFoA; the Association of Manufacturers and Representatives of Machinery, Equipment and Tools of the Wood Industry (Asora), and the Argentine Federation of the Wood and Allied Industry (Faima). In that meeting, the productive and investment projects of IRAIC were presented to him.

Claudio Terrés, president of AFCP, says that the pulp and paper sector has a high growth potential in the country due to the comparative advantage that forest availability represents in the Mesopotamian region. “In terms of investment, pulp mills (or biorefineries) are capital intensive, in the order of 2,000 to 3,000 million dollars for each production unit. Taking into account the current availability of 1.3 million hectares of forest plantations [intensive labor], between two or three factories could be installed,” estimates the manager.

Terrés stresses that Argentina has a pending matter in the development of the industrial forestry chain. The countries of the region have received more than US$30 billion in investments in the last 10 to 15 years. “Today we have the Ysyry Cuatiá project, which would involve a first investment from IRAIC. Recently, Paraguay announced the Paracel project, from the Zapag group, with an investment of more than 3,000 million dollars, but which would be supplied with Argentine wood. We must not let any other opportunity pass by”, he suggests.

Currently the sector’s trade balance is negative (with a red of US$500 million), but, in Terrés’s opinion, with a single plant that exports pulp, the situation is quickly reversed. The growth potential of exports with IRAIC is also very important, as well as the substitution of imports of products.

Fernando Correa, principal of AFRY Management Consulting and a specialist in the forestry market, says that the strategic plan with IRAIC is designed based on the demand for different types of products, framed in the potential of the wood that exists in the country, where it predominates the pine, which is highly required for the supplies with which packaging is made, and the eucalyptus, which is used to make toilet paper. “Argentina has the characteristic that it is almost the only one in the world that has a lot of raw materials and little industry, since the last big investment in that sense was made 40 years ago,” he says.

Correa clarifies, however, that Argentina has external difficulties in the industrial forestry sector, which makes it less attractive than Uruguay or Paraguay, which offer greater legal certainty and better fiscal regimes. “The strategic plan with IRAIC covers all the industrial sectors of the industrial forestry chain, which means that it is not just cellulose. The estimated investments will be made in a traditional way, which implies 30% equity and 70% financing”, explains the specialist.

The countries of the region have received more than US$30 billion in investments in the last 10 to 15 years.

The idea, according to Correa, is that these investments are made by large Argentine industrial groups and international companies such as IRAIC for their global exponentialization. “There are groups that are not in this industry today, but that can enter with large outlays if the conditions are met. For example, when Misionero Paper was put up for sale and bought by the Arcor Group, it was the case of a company that was not in the business, but became part of it,” he says.

With regard to the markets in which forestry-industrial exports would be placed, the strategy is to target the most mature first, such as Japan, the United States and Europe, which have an interesting demand, but which is not growing, and also China, which It is the one that moves the balance.

But for the investments to bear fruit, it will also be necessary to advance in the technological aspect. According to Osvaldo Kovalchuk, vice president of the Association of Manufacturers and Representatives of Machinery, Equipment and Tools of the Wood Industry (Asora), in addition to promoting afforestation by setting goals, it is necessary to intensify technological innovation in all processes. “In our country there are companies that have the same technology that is used in Europe, but, unfortunately, these companies are not the majority. To ensure that these changes reach more and more companies, we need strategies or plans for comprehensive, industrial and technological development, as IRAIC has done, where industrial forestry companies managed to significantly increase their productivity,” he says.

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