April 7, 2011

Restriction on Foreign Investments put Forestry Projects on Hold

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The new regulations put in place last August by the Brazilian Attorney General limiting the amount of land that foreigners may purchase in Brazil could have a huge impact on the forestry sector in Brazil. Foreign investments in the forestry sector in Brazil have increased steadily over the last decade and these investments have been aimed at the production of lumber, paper, cellulose, and charcoal. Foreign investors are now uncertain if they will be allowed to continue investing in the forestry sector or if their past investments are secure.

The director of the Brazilian Association of Planted Forest (Abraf), Cesar Augustodos Reis, indicated that Brazil has 6.3 million hectares of planted forest including eucalypts and pine and that one million of those hectares are owned by foreigners. Of the 27 companies that make up the Abraf association, 14 are Brazilian companies that are controlled by foreign capital. In the state of Parana there are 870,000 hectares of plantation forests for the production of lumber, paper, and cellulose and 20% of the forest are owned by multinationals.

Companies involved with forestry projects have complained that the new regulations have put any new foreign investments on indefinite hold as well as planting a seed of doubt if existing investments are secure. The Attorney General for his part said the new regulations were needed to insure domestic food security, for the protection of the environment, and for a more uniform farm policy.

Since the new regulations were announced last fall, foreign investments worth R$ 37 billion in the purchasing of land and the construction of industrial enterprises have been paralyzed.