ACPWP97 THE STATE OF THE INDUSTRY - BRAZIL
April 1997 FO: ACPWP 97/2

ADVISORY COMMITTEE ON PAPER AND WOOD PRODUCTS

THIRTY-EIGHTH SESSION

Rome, 23 - 25 April 1997

THE STATE OF THE INDUSTRY


BRAZIL

Introduction

AIMEX is the Association of the Timber Industries Exporters in the State of Pará, in Brazil, concentrating, mostly, producers of plywood and sawn lumber.

The State of Pará represents about 30 percent of the Brazilian timber products exports, and 70 percent of the exports from the Amazon Region, which comprises nine states.

Due to the complexity of a huge country as Brazil, considering that AIMEX is a regional Association, and also the limitation of the size for the presentation of this paper, we will give an overview of some aspects, and focus a special attention on issues related to the native Brazilian tropical forest. Naturally, none of these issues will be analysed in depth.

In July 1994 a new Economic Plan, named Real, the same as the country's currency, was launched in Brazil. Since then, for the first time in more than 15 years, an acceptable stability in the inflation rate has been achieved, which stayed at a level of 10 percent in 1996.

However, this stability was conquered sacrificing some sectors of the economy, especially the export one, and also generating a concerning level of unemployment.

Special attention has to be given to the main anchor of this Plan, which is the exchange rate of the US Dollar vis-à-vis the Brazilian Real.

The evaluation of the Brazilian Foreign Trade Association (AEB) is that the appreciation of the Real facing the Dollar could have reached around 50 percent.

Estimates from other institutions, including the World Bank and the International Monetary Fund vary from 19 percent to 30 percent.

The fact is that there is indeed an artificial appreciation of our currency, that stimulates imports and makes export products less competitive, which was also responsible for the negative value in our trade balance in 1996 being around US$ 5.5 billions.

Measures taken by the Government to present do not seem to be sufficient. A great amount of time was lost in 1996 trying to change the Constitution in order to allow the inclusion of right for re-election of the President, that was finally approved by the Congress last January in the first voting of four.

The following issues have yet to be implemented by the Government:

  • Reformulation of the social security system;
  • Reformulation of the taxes system to simplify it and reduce duties, as the existence of more than 50 different types of taxation lead to a high level of illegal withholdment and increased the informal economy estimated at 50 percent of the GNP;
  • Privatization of State companies;
  • Reduction of the so-called "Cost Brazil", to diminish the bureaucracy, the insane complexity of many procedures, the recomposition of infrastructure (roads, ports, communications) and so on;
  • Reformulation of the government administration, related to the public employees;
  • Unemployment.

Perspectives as a whole are very good, but the task to overcome the above issues is very difficult.

Performance of the Forest Industry

More than 60 percent of the Brazilian territory is covered by forests, representing around 400 million ha. Natural tropical rain forest in the Amazon is the most important forest formation, but there are also temperate softwood species in the south and large plantations spread all over the country.

In spite of the fact that the participation of Brazil in the international trade of forest is relatively small, the country is the largest producer and exporter of wood products in Latin America. Having a population of almost 150 million inhabitants, Brazil is also the largest market for wood products of the region. In fact, for at least one product Brazil is the largest world consumer: the domestic consumption of tropical sawn lumber is around 16 million m3 per year.

Extensive resources, large and growing domestic market, as well as favourable macro economic conditions, make Brazil an excellent alternative for investments in the forest industry.

Composed by the sectors of sawn lumber, veneer, plywood, fibre boards, particleboards and pulp and paper, the forest industry in Brazil intends to invest around US$ 10 billions till the year 2000.

Up to the end of the 1960s, the sector was not expressive within the Brazilian economy. Regular plantations covered no more than 30 000 ha; wood exports, mainly sawn lumber from the state of Paraná, did not reach US$ 70 million.

In recent years, the picture has been changing. Plantations now cover an area of about 6 million ha. The contribution of the forest industry represents more than 2.5 percent of the GNP; employment, direct and indirect represents 3.5 percent of the economically active population in rural areas, and the activity generates an annual income of US$ 11 billion, being US$ 2.3 billion in exports.

These figures do not include furniture plants, and several other segments which use wood in some form, such as charcoal and chemical products, nor machinery and equipment manufacturers.

A profile of the forest production could be designed as follows:

Products
Production

(m3)
Income

(US$)
Sawn Lumber14 000 000 2 950 000 000
Veneer500 000 150 000 000
Plywood1 900 000 665 000 000
Fibreboards510 000 163 000 000
Particleboard670 000 214 000 000
Pulp and Paper9 500 000 6 000 000 000
Others 1 000 000 000
Total27 080 000 11 142 000 000

Source: ABIMCI.

Brazilian production of wood panels in 1995 achieved approximately 3.1 million m3, representing 2.2 percent of the world production, being plywood 1.6 million m3.

Plywood

In 1996 plywood production reached 1.7 million m3.

Brazilian Plywood Production

(thousand m3)
Year
1990
1991
1992
1993
1994
1995
1996
Installed Capacity 1 8501 900 1 9502 000 2 2002 500 2 700
Production1 050 1 1161 250 1 6001 900 1 6001 700
Unused800 784700 400300 9001 000

Source: ABIMCI.

Evolution of the Brazilian Plywood Exports
1973
US$ 8 971 000
1983
US$ 48 410 000
1993
US$ 274 122 000
1995
US$ 259 992 728
1996
US$ 247 669 877

Source: DECEX-Brazilian Department of Foreign Trade.

Sawn Lumber

Brazilian Sawn Lumber Exports
1995
US$ 379 816 218
1996
US$ 344 745 905

Source: DECEX-Brazilian Company Department of Foreign Trade.

It is interesting to note the efforts being made to increase new species in the international market. In the State of Pará, where precise figures for exports are available, while in 1973 only 10 species were exported, in 1996 around 70 species have been exported, with about 50 percent in volumes above 1 000 m3. However, a higher concentration is observed in about 15 species (see attached table).

Another significant point is that, individually speaking, mahogany (Swietenia macrophylla) that was the most exported species in Pará till 1993, fell to the third place in 1994, being surpassed by Tauari (Couratari spp.) and Jatoba (Hymenaea courbaril) (see attached table).

Consumption

Historic Series of Consumption of Logs from Native Forests in Brazil

(thousand m3)
Year
Sawn Lumber
Plywood and Veneer
Charcoal
Industrial Firewood
Total
198626 663 3 08666 812 32 498129 059
198726 663 2 74363 767 30 677123 850
198827 213 3 04765 694 28 346124 301
198927 463 3 26973 370 24 568128 670
199027 325 3 10956 016 21 223107 672
199130 500 2 85941 114 18 14292 615
199231 025 3 29140 999 17 14492 459
199331 550 4 48041 222 16 62493 876
199432 075 4 18334 914 13 98785 159
199533 075 3 65733 153 13 29483 179

Source: IBAMA, FUNATURA, ITTO.

Investments

In any country, in any language, money is a must, and actual possibilities, many times, a mystery!

Due to the complexity of this matter, especially when related to the native tropical forest, we do not dare deal with this item under such a small space.

However, the figures presented by the Brazilian Government, during the Council Session of the International Tropical Timber Organization, held in Yokohama in November of 1995, just to reach the so called Target 2000: US$ 7 billions.

In addition, it is important to notice that there are absolutely no lines of credit available for plantations or sustainable forest management in Brazil, compatible with the time requirements of the growing of tropical species, which can vary from 10-15 to 50-80 years.

Issues of Particular Interest

Sustainable Forest Management (SFM)

Difficulties to prepare and implement SFM in Brazil:

  • Lack of a forest policy considering the several regional characteristics of the Amazon Forest;
  • Inadequate land policy and high taxation;
  • Non existence of credit lines;
  • Heterogeneity of the forest:

The SFM facing the great amount of species in the Amazon (more than 3 000 types of trees, while, at most, around 80 are presently commercially traded) leads to the huge extensions of land. As an example, a plywood mill that consumes yearly 120 000 m3 of soft logs (low density), and located in an area where the forest produces an average of 20 m3/hectare of suitable species. There will be a need of exploring 6 000 ha per year. The present accepted rotation cycle by IBAMA (Portaria 48/95) is 30 years requiring therefore a total area of 180 000 ha.
To the ones that are not aware, there are social problems generated by the land issue in Brazil, especially with the invasions promoted by the Landless Movement, who simply will not tolerate the possession of such huge areas. So, it is easy to imagine the pressure the timber industry will suffer, and in fact is already suffering, from the society.
On the other hand, SFM areas are difficult to reach (mostly in the Amazon Region) due to lack of roads, or bad conserved ones, and costs will, therefore, skyrocket, making the utilization of the less valuable species not feasible.

  • Lack of sufficient research

A positive point is the implementation of the AIMEX Laboratory of Seeds and Seedlings, being built in Belém in an area of 21 ha, the first private initiative in the region, which will be ready by July 1997. It is expected to produce high quality seeds and seedlings, to allow good Reforestation programs.

AIMEX believes that the solution comprises two basic points:

  • The SFM rules should be simplified, accepting for instance just low impact logging techniques as enough to fulfil its requirements, and the ones under implementation by the Tropical Forest Foundation in the state of Pará seem very encouraging, and
  • Plantations should be given the same level of importance to reach sustainability, basically for low-density species, and naturally, not destroying the natural forest, but recuperating in particular the already degraded areas.

Certification

Certification is an extremely polemic issue as regards trade. It is rather seen as a non-tariff barrier to be imposed on tropical forest products, and also a new industry to be created, generating jobs to hundreds of people, rather than an actual and sincere concern for the environment.

It is obvious that if the market wishes any kind of certification, it will have to pay for it, and costs will have to be added to the price. When consulted, importing countries generally inform they are willing to pay an extra price to receive certified products. However, there is a big distance between willing to pay and actually paying, and also paying the full cost of such certification.

Even so, CERFLOR, a joint system conducted by the SBS, Brazilian Silviculture Society, and ABNT, Brazilian Association of Technical Rules, is having its Technical Committee established on 17 March. This system is almost ready to certify timber from plantations, but nothing yet has been discussed, in terms of principles and criteria, for the native Brazilian tropical forest.

Public Forest Concessions

The Brazilian Government, through the Ministry of Environment and IBAMA, is intensifying the studies to simplify and extend the access to the public forest concessions, which could be an interesting alternative to the private forests, presently the only feasible possibility.

IBAMA´s Absurd Increases on Taxes

We would like to give some special attention to this issue, due to its important impact on the costs of trade.

IBAMA is the Brazilian Department of Environment and Renewable Natural Resources, responsible for the legislation of several activities, including the timber industry, as regards the conservation and (management) operation of forests.

In September 1996, the President of IBAMA, Dr. Eduardo Martins, requested, through a direct phone call to the President of AIMEX, Mr. Danilo Remor, to start conversations and jointly search for mechanisms to overcome the existing problems resulting in proposing a policy on the tropical forest, as well as evaluating the present level of taxes being charged by IBAMA.

Four meetings were held, two in Belém, one in Brasilia and one in Manaus. During the last meeting, we were surprised by the publication of Portaria Nr. 89/96, on 25 October, which increased all taxes of IBAMA, some of them up to 2 841 percent (two thousand, eight hundred and forty one percent) and the creation of others which did not exist before, such as the imposition of a tax of R$ 100.00 (roughly US$ 100) per each cubic metre of mahogany, virola, Paraná pine and imbuia exported.

Considering a market price of US$ 200/m3 for virola the tax in this case would represent about 50 percent of the sale. Simply a nonsense!

Due to the political pressure from all timber associations in Brazil, among them AIMEX, IBAMA issued a new Portaria Nr. 118/96 on 27 December, reducing some taxes, but not yet to reasonable levels, and reducing the R$ 100/m3 tax to R$ 6/m3, but now including all species of wood in Brazil, and also from plantations!!

The pressure was then made by the pulp and paper industry, and on 8 January Portaria No. 118/96 was issued again, excluding plantations, but maintaining all species if thickness was above 4 inches.

To better understand these acts of pure madness, it is important to observe that the accumulated inflation since July 1994 is of the order of 50 percent and that Government is creating mechanisms to stimulate exports and is pressing any economy sector that increases prices beyond 10­20 percent, and not accepting even automatic transfer of inflation, as it was common in the past. So, how can IBAMA allow itself to make such tax increases going against a national Government policy?

In fact, IBAMA does not consider sufficient its budget and therefore is trying to impose higher taxes to compensate for that, acting against the legislation, which requires a law to permit a tax increase or duties on export products, and not only an internal Portaria.

Not accepting this procedure, 30 (thirty) timber associations from all over Brazil have taken out a court injunction against Portaria Nos. 89 and 118/96, for which a decision is awaited.

After sending five faxes to the President of IBAMA, without any response, AIMEX sent a letter to the Governor of Pará, signed also by seven Unions of Timber Workers, protesting and requesting the Governor's help, who immediately phoned the President of IBAMA, who finally decided to come to Belém, on 20 February to talk with us.

As a result of this meeting, IBAMA decided to:

  • Immediately suspend the taxation of R$ 6/m3 on exports;
  • Immediately reduce the cost of each ATPF (authorization to transport logs) to R$ 5.00/each, what previously was R$ 0.34/each, and was increased to R$ 10.00/each (2 841 percent) (please, note that some companies use up to 1 000 ATPFs per month);
  • Proposed a creation of a Working Group with eight members, four from IBAMA, and four from the trade, of which, one from AIMEX, to re-evaluate all taxes.

Though this seems a progress, and in fact it is, we are still concerned with the lack of criteria that IBAMA used to create and modify all these Portarias.

III International Congress on Plywood and Tropical Timber

II Machinery and Wood Products Fair

The above issues will be discussed during the III International Congress on Plywood and Tropical Timber, which will be held in Belém, State of Pará, Brazil, from 4 to 9 November 1997, in a joint venture of AIMEX and ABIMCI (Brazilian Plywood Association).

We would be pleased to count on your participation!

Bibliography

- AIMEX statistics and documents

- The Socio-Economic Importance of the Forest Industry-ABIMCI

- Wood-Based Panels in Brazil-STCP/Dr. Ivan Tomaselli

- Partnership Program Forest Industry x Ministry of Environment-SBS-Brazilian Silviculture Society

Tables Attached

- Brazilian Wood Exports 1996 - Amazon Region Comparison

- Evolution of Total Timber Products Exports from Pará 1992-96

- Comparison of Mahogany Quota System 1990-96

- Evolution of Wood Exports from Pará 1990-96 by Products/Species

Evolution of Total Timber Products Exports from the State of Pará

(1992-1996)
44.07
44.08
44.09
44.12
Others
Total
1992109 656 695 11 054 726 3 293 28141 923 754 168 451166 096 907
1993152 659 455 16 775 625 4 623 04578 098 490 176 256252 332 871
1994208 809 798 17 590 747 2 710 98885 396 443 10 030 179 324 538 155
1995225 663 848 24 599 204 5 047 29477 576 029 15 215 880 348 102 255
1996174 930 678 26 145 227 6 683 45876 233 053 16 867 721 300 860 137
Total  871720474   96165529  22358066   359227769  42458487    1391930325
Harmonized System Reference (NBM/SH)

Position 44.00 = Timber
44.07

44.08

44.09

44.12

Others
Sawn lumber

Veneer

Wood flooring/panel

Plywood

44.01; 44.02; 44.03; 44.04; 44.05; 44.06; 44.10; 44.11; 44.13; 44.14; 44.15; 44.16; 44.17; 44.18; 44.19; 44.20 E 44.21

Source:DECEX - Department of Foreign Trade Operations
Prepared by: AIMEX / SINDIMAD
Forester: GUILHERME DOS SANTOS CARVALHO

Comparison of Mahogany Actually Exported with the Quota Allowances,

from 1990 (year when Quota System began) to 1996
Volumes (m3)
Quota Allowance
Actually Exported
Balance
1990150 000 110 488(+) 39 512
1991150 000 116 527(+) 33 473
1992130 000 113 144 (+) 16 856
1993 * / **100 000 112 025( - ) 12 025
1994 * / **106 000 127 439 ( - ) 21 439
1995100 000 93 051 (+) 6 949
1996 **70 000 71 166( - ) 1 166
Total 806000  743840 (+) 62 160

Source: Department of Foreign Trade Operations - DECEX

Prepared by: AIMEX

Forester: GUILHERME DOS SANTOS CARVALHO

NOTE:

* Higher exported volumes in 1993 and 1994 are due to the old system of exports control of SISCOMEX permitting valid date of the issuance of authorization for 60 days from the date of its liberation. Thus, autorizations issued for exports by SISCOMEX in December were valid until February of the next year. If exports authorized in December for any reason were not placed on board, they were transferred for shipping the next year.

** It is important to also note additional liberation of the volume of permitted technical reserve in the quota system decree.


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