Production of certified wood for export
Production of certified wood for export
Business Model Description
> Invest in the production of certified commercial wood from reforested plantations of exotic species, such as eucalyptus or pine, for the export market
Expected Impact
Increasing the use of sustainably sourced inputs,benefiting the environment due to reduced deforestation and small producers in the production chain
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Amambay
- Itapúa
- Concepción
- Canindeyú
- El Chaco
Sector Classification
Renewable Resources and Alternative Energy
Development need
58% of the electricity supply corresponds to hydroelectricity and 27% to biomass (firewood, charcoal, and vegetable residues). The remaining 15% are imported hydrocarbons because there is no oil or natural gas production in the country.
Policy priority
The Ministry of Public Works and Communications has developed an Energy Policy with a vision of "Meeting the energy needs of the population and all productive sectors, with criteria of quality, socio-environmental responsibility, and efficiency; energy becoming a factor of economic growth, industrial development, and social progress, within the framework of regional integration.
Gender inequalities and marginalization issues
Inequalities in access to energy and electricity services in rural areas
Investment opportunities introduction
opportunities were identified to support the sustainable development of the forestry and biofuels subsector
Key bottlenecks introduction
High investment requirements
Forestry and Paper
Development need
The participation of the forestry sub-sector in GDP with measurements for 2006, according to FAO, shows Paraguay at 3.6%. Additionally, 46% of the primary energy generated in Paraguay is destined for export.
Policy priority
The Ministry of Public Works and Communications has developed an Energy Policy with a vision of "Meeting the energy needs of the population and all productive sectors, with criteria of quality, socio-environmental responsibility, and efficiency; energy becoming a factor of economic growth, industrial development, and social progress, within the framework of regional integration.
Gender inequalities and marginalization issues
Inequalities in access to energy and electricity services in rural areas
Pipeline Opportunity
Production of certified wood for export
> Invest in the production of certified commercial wood from reforested plantations of exotic species, such as eucalyptus or pine, for the export market
Business Case
Market Size and Environment
> USD 1 billion
Annual exports of primary and secondary wood products from tropical forests have exceeded USD 20 billion in recent years, and an increase is expected later as other countries focus their exports on higher value secondary wood products. (9)
Indicative Return
10% - 15%
The IRR of an investment in a Eucalyptus plantation for timber purposes in Paraguay in 2014 is 25.35%. (2)
Cases of Eucalyptus camaldulensis crops with IRR close to 12% have been identified in the lower Chaco and with less return results in the Central Chaco. (29)
Investment Timeframe
Medium Term (5–10 years)
A study of an investment in a Eucalyptus plantation for timber purposes in Paraguay in 2014 concluded that although significant financial income is obtained in the second and fifth years, the investment fully recovers in year 10 (2)
Market Risks & Scale Obstacles
Capital - CapEx Intensive
Impact Case
Sustainable Development Need
During the years 2010 and 2009, the deforestation rate in the region is of 350 to 500 ha per day, depending on the time of year. (1)
The objective imposed by Fepama is to reach one million hectares with forest plantations (today with approximately 170,000) of quality with international certification if possible.
According to the Global Forest system, In 2018, 258,779 hectares of lost tree areas were registered throughout the country, while in 2019, the figures show a significant increase, reaching 314,372 hectares destroyed throughout the Paraguayan territory. (23)
Gender & Marginalisation
Low income and productive opportunities for population in rural areas
Expected Development Outcome
Reduce deforestation in the national territory and increase the production and export of certified wood
Reduce the negative impacts on the environment and ecosystems in Paraguay
Increase the area of forests and increase the protection and levels of programmed deforestation in Paraguay
Gender & Marginalisation
Increase the income of small producers
Primary SDGs addressed
15.1.1 Forest area as a proportion of total land area
15.2.1 Progress towards sustainable forest management
15.3.1 Proportion of land that is degraded over total land area
Secondary SDGs addressed
Directly impacted stakeholders
Gender inequality and/or marginalization
Planet
Indirectly impacted stakeholders
Corporates
People
Outcome Risks
Increased water consumption in eucalyptus plantations gives rise to new chemical reactions in the ecosystem and complex reactions between vegetation, soils, and the water table (14)
Impact Risks
Execution risks: The cost of certification for commercial timber is very high (16)
Stakeholders: Investors' aversion to medium and long-term investments such as wood
External risks:There is insecurity and lack of legal action in the face of indiscriminate felling of trees, which also affects the obtaining of export certifications (14)
Impact Classification
What
The outcome is likely to be positive because this investment could reforest, help preserve biodiversity, and decrease the rate of deforestation
Who
The fauna and flora of the Chaco and other regions that are underserved due to sustained deforestation in recent years
Risk
Although the model is based on a solid evidence base, longer investment horizons or unfair competition from illegal logging or commercialization of uncertified wood may affect the impact
Impact Thesis
Increasing the use of sustainably sourced inputs,benefiting the environment due to reduced deforestation and small producers in the production chain
Enabling Environment
Policy Environment
The National Development Plan 2030 -Its goals include promoting renewable energy, reforestation, and the sustainable management of urban and industrial waste. (10)
MIC and Rediex conference - The first virtual conference organized by MIC through Rediex, Infona and Fepama was held, which had as its central axis “Forest production: business and market opportunities”.
Law No. 536 establishes incentives for forest plantations, but defining the certification process must be finalized and in force next year.
Financial Environment
Law 422/73 establishes that people who carry out forestry activities will enjoy all the releases related to fiscal taxes and exchange surcharges (18)
Law 536/95 refers to incentives for afforestation and reforestation
PROFORESTAL can finance forestry projects for fast-growing native or exotic species to develop responsible cultivation of said species.
Regulatory Environment
Law 536 to promote afforestation and reforestation - The State will promote the action of afforestation and reforestation on forest priority soils, based on a forest management plan and with the incentives established in this Law (see the financial environment for details) (18)
Law 2524/04 Prohibition of change of land use or Zero Deforestation for the Eastern Region of Paraguay - This law aims to promote the protection, recovery, and improvement of the native forest in the Eastern Region.
Law 422 Forestry - The exercise of rights over forests, forest lands of public or private property, is subject to the restrictions and limitations established in this law and its regulations. (18)
Law 422 Forestry - The exercise of rights over forests, forest lands of public or private property, is subject to the restrictions and limitations established in this law and its regulations. (18)
Marketplace Participants
Private Sector
Grupo Santa Catalina (Paraguay), Silvipar (Paraguay), Unique Wood Paraguay (Paraguay).
Government
National Development Bank, Ministry of Agriculture and Livestock, Ministry of Industry and Commerce, Development Finance Agency
Multilaterals
Climate Change Fund, USAID, World Bank (WB)
Non-Profit
World Conservation Organization (WWF), Moises Bertoni Foundation, Avina Foundation, To all lungs, Union of Production Guilds, Paraguayan Federation of Loggers.
Target Locations
Amambay
Itapúa
Concepción
Canindeyú
El Chaco
References
- (I) (PY33. Política Energética del Paraguay, 2016) (II) (Jorge Méndez Rheineck et al., 2017) (III) (Ministerio de Agricultura y Ganadería, 2013) (IV) (Christian Belt et al., 2011) (V) (Cambridge University Press, 2020)
- (1) (Christian Belt et al., 2011)
- (2) (Econ. Gustavo Cano & Ing. For. Julio Britos, 2014)
- (3) (ABC Rural, 2014)
- (4) (La Nación, 2020)
- (5) (Subsecretaria de Estado de Tributación, s. f.)
- (6) (Daniel Vittar, 2020)
- (7) (Instituto Forestal Nacional, 2013)
- (8) (Argentina Forestal, 2019)
- (9) (FAO, s. f.)
- (10) (Gobierno Nacional, 2014)
- (11) (REDIEX & Ministerio de Industria y Comercio, 2019)
- (12) (Cambridge University Press, 2020)
- (13) (ipaulownia, 2018)
- (14) (Ing. Ftal. Rolando de Barros Barreto, 2015)
- (14) (Tendencia, 2007)
- (15) (Ministerio de Industria y Comercio, 2019)
- (16) (Reuniones sectoriales, 2020)
- (17) (Clara de Iturbe & Verónica Serafina, 2020)
- (18) (MADES- Leyes, s.f.)
- (19) (MADES- SINASIP, s.f.)
- (20) (Dirección Nacional de Cambio Climático, s.f.)
- (21) (Eduardo Viedma, 2017)
- (22) (ABC Color, 2017)
- (23) (Aldo Benítez, 2020)
- (24) (Óscar Rodas, 2019)
- (25) (Ministerio Público, s. f.)
- (26) (FAO, 2018)
- (27) (Cristina Goraleswki, 2020)
- (28) (Ley N°81 que establece la estructura orgánica y funcional del ministerio de agricultura y ganadería, 1992)
- (29) (Gregory Frey, 2007)
- (30) (Secretaria Técnica de Planificación, 2020)
- (31) (ABC Color, 2020)
- (32) (FAO, 2017)
- (33) (Decreto 13960/1996, 1996)