December 22, 2011

Brazil Struggles to Increase Cellulose Exports

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

The total production of paper and cellulose products in Brazil in 2011 is expected to remain unchanged compared to 2010. According to the Brazilian Association of Paper and Cellulose (Bracetpa), Brazil is expected to produce 14.2 million tons of cellulose and 9.8 million tons of paper in 2011. The two biggest concerns for the sector is the financial crisis engulfing Europe and the lack of clear rules on how foreigners can invest in Brazilian reforestation projects.

The financial problems in Europe are of prime concern for Brazilian paper producers because Europe is responsible for 46% of Brazil'BCEs cellulose exports, followed by China at 25%, and North America at 19%.

According to the president of Bracetpa, Elizabeth de Carvalhaes, the amount of hectares devoted to reforestation in Brazil should double to 14 million hectares in the next few years if the Brazilian Congress can agree on new rules on how foreigners can invest in Brazilian reforestation projects. In August of 2010, then President Lula decreed that foreign investment in Brazilian land purchases be suspended until new regulations could be developed by the Brazilian Congress. Those new regulations have yet to be agreed upon in Congress and in the meantime, there is an estimated US$ 10 billion to US$ 12 billion in investments waiting on the sideline for the new regulations.

Bracetpa officials feel the future of the reforestation is bright in Brazil due to new uses of the wood products such as energy and biofuels. The reforested areas of Brazil could also be used for carbon credits due to the sequestration of carbon by the trees. Bracetpa estimates that the reforested areas of Brazil store the equivalent of 1.3 billion tons of carbon dioxide.