South America is looking increasingly attractive to North American forestry companies like BC based West Fraser Timber.
By Jim Stirling
It has acquired about 30,000 hectares of land in the department of Rivera in northern Uruguay, near the Brazilian border. By the end of 2000, about 18,000 hectares was in plantations, split equally in area between eucalyptus grandis and elliotti pine. The Australian eucalyptus prospers in the drier, mildly elevated areas and the pine originating in the south-eastern United States is planted in the moister, marginally lower levels, explains Frederick, Uruguay project manager for West Fraser Overseas Ltd.
The company does business in Uruguay as Los Piques SA. West Fraser did its homework before venturing into South America. The company investigated economic and political factors and the cost and availability of land suitable for forestry in Chile, Argentina, Brazil and Uruguay. With the prices and stability here, the decision was made to invest in Uruguay, says Frederick.
It was West Fraser's intention from the outset to concentrate on solid wood production. "In Rivera, with the growth rate of trees and distance from port, the drive is to produce quality wood for sawing, not pulp," says Frederick. That objective dovetails neatly with that of Urufors SA. The company, also based in Rivera, manages plantations to support its sawmill and value added plant (see accompanying story). "We have a common interest with Urufors in growing eucalyptus for solid wood," says Frederick. That has evolved into a non-contractual-but strategic-working relationship that has the companies cooperating, sharing information and experience emanating from their respective strengths.
Frederick estimates West Fraser is four or five years away from building a manufacturing plant to convert the wood from its plantations into high quality products. It could be a sawmill, a veneer plant or perhaps a joint venture with Urufors. The company estimates 700,000 cubic metres of wood a year coming on stream. It's going to have a huge impact on Rivera, population 80,000, whatever processing plant decisions are taken. Frederick reckons West Fraser hires, mainly through contract, five to six people per thousand hectares of land owned.
That will easily be multiplied by four with a manufacturing plant. Weyerhaeuser is the largest North American forest company active in Uruguay. It's there for similar reasons to West Fraser: good tree growth rates and favourable operating climate. And perhaps it could see the writing on the wall in other areas in which it operates. Weyerhaeuser revealed this past November that it had lost $40 million since 1998 on its coastal Crown tenures in British Columbia.
A situation, it says, brought about by escalating logging costs, poor markets and high stumpage rates. Weyerhaeuser has purchased 100,000 hectares of land in Uruguay in the last four years. It has succeeded in planting about 40,000 hectares, mainly in taeda pine, followed by eucalyptus grandis. The company has extensive experience in growing and processing pine in the US and marketing its products worldwide. Weyerhaeuser, known locally as Colonvade SA, has three operating areas in the Uruguayan departments of Rivera, Tacuarembo and Paysandu. It is also managing its stands for clear, solid wood.
"Our thinking is to do the manufacturing in Uruguay and export the products abroad," says Stephen Hee, vice president of Weyerhaeuser Forestlands International based in Seattle, Washington. He predicts Weyerhaeuser will have a minimum of 2.3 to 2.5 million cubic metres of wood a year coming on stream from its plantations. Construction of manufacturing plants to accommodate this wood flow will have to begin by 2006 at the latest. Hee says a plant will be built in each of Weyerhaeuser's three operating areas.
"Growth rates appear to be every bit as good
as we thought they'd be and our operations are going well," Hee says.
"We're very enthusiastic about Uruguay. A lot of North American
companies are interested in Latin America. Everyone is thinking more
globally and it helps deal with the pressures at home."
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