Rio Grande do Sul: a new lumber production center

Dagoberto Lima Godoy *

Sweden and Finland are near the top of the list of developed countries, with a Human Development Index (HDI) ranking of 0.946 (2nd place) and 0.935 (13th place), respectively (UNDP, 2000). Rio Grande do Sul (RS), while one of the most developed states in Brazil, by contrast had an HDI of just 0.814 in 2000. A major source of wealth of the two Nordic countries, like RS in the past, has been the lumber industry. Nevertheless, while today, for example, in Finland forest products continue to be an important component of GDP (8%) and of exports (30%), in RS the lumber industry has been losing importance as native forests are being extinguished without adequate replacement. The state's flourishing furniture industry depends upon imports to sustain its success: today, the forestry chain of production represents only 3.5% of GDP of the state and was responsible for only 4.9% of RS's exports, including furniture and pulp. Nevertheless, RS is in a good position to recover its lumber tradition - now in a new form - combining economic interests, social inclusion and environmental preservation.

In the first instance, this is possible because there is a domestic and international market for the product. In 1997, Brazilian industry consumed 204 million cubic meters of lumber, of which 67 million was extracted from native forests, which thus need to be replaced. While the world market involves some US$290 billion annually and is tending to grow, Brazil's share of this is only about 1.5 %.

Secondly, RS, especially in the southern part of the state, has an enviable set of competitive advantages, including: i) availability of vast tracts of land at reasonable prices (when compared with other forested regions such as Paraná and São Paulo), in part inappropriate for other crops but with soil and topography that are proper for forests; ii) exceptional logistical conditions, led by the facilities of the Port of Rio Grande, whose depth and geographical location make it the most privileged along the Atlantic Coast of South America, with a view to servicing the Asian market; iii) pre-eminence in nursery, planting, management and forestry extraction technologies and with a solid research base involving several universities in the state; iv) longstanding entrepreneurial tradition in this industry in the State, plus specialized manpower for forestry and lumbering operations; v) an installed manufacturing base with pulp, furniture, chipboard, panel and plywood, MDF, paper, firewood, charcoal and wood chip export companies already set up; vi) a strong rural extension and associated structure in place, provided by the state government and civil entities; and finally, and much more important: vii) excellent weather conditions, even when compared with regions where most forest plantations are being established in Brazil, such as the south of Bahia, given the greater regularity of rainfall in the south of Rio Grande do Sul. This makes it possible for a tree to grow here up to eight times as fast as in the timber-growing nations of the northern hemisphere.

Thirdly, the forestry chain of production has enormous potential for generating income and jobs, so much so that it already has sales of R$3.5 billion/year (about US$1.2 billion) in RS - which is about six per cent of the Brazilian total. It is estimated that each R$1 million invested in forestry activities generates 160 jobs (compared with 149 in commerce, 111 in civil construction and 85 in the automobile industry).

As if all of these advantages were not enough, for its part, the Caixa RS (the state government's main agent for economic promotion) is launching PROFLORA, a program for financing forest plantations using funds from the Brazilian National Economic and Social Development Bank (BNDES), with amortization maturities of up to 12 years, grace periods of up to eight years and fixed interest rates (without monetary correction) of 8.75% per year!

The Program seeks to give a boost to the economy in the south of RS, with a restructuring effect. Furthermore, it envisages reduced wood imports into the state, the apparent consumption of which is about 30,000 ha/year whereas annual planting has not reached even half his demand. The CaixaRS was not being modest in proposing a target of 120,000 hectares of industrial forest plantation by 2006, which will mean an increase of one-third in the current state inventory. The good news is that the result of the first half year of the program has been surprising, with project decisions already exceeding half the ambitious goal set: 52,000 hectares announced by large integrated companies, with Aracruz a notable example, and more than 17,000 hectares undertaken by 190 individual investors. Total investments are estimated at some R$290 million (about US$100 million) including land costs, which promise to generate about 46,000 jobs.

Following these adjustments, there is every prospect that RS will become a lumber center of world importance and that wood will once again become a major source of wealth for the people of the state.

* Dagoberto Lima Godoy, who has a degree in Civil Engineering, is the president of the Caixa RS

Aracruz news. N°30 Year 9. December 2004