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2

1. Why invest in the Uruguayan forestry industry?

1.1. Attractive features of the country’s forestry industry

Uruguay is located at the same latitude as other major forestry developments in the southern

hemisphere. Uruguay’s climate is similar to that of Australia, New Zealand, South Africa and the

central regions of Argentina and Chile and features weather and soil characteristics that ensure

very good levels of competitiveness on an international scale. For example, the rapid growth of

Eucalyptus plantations enable shorter felling frequencies (starting from nine years) to provide

proper quality levels for the final product.

Uruguay has a stable legal framework that is beneficial for investments in the industry and has

a national good practices code for forestry to achieve sustainable production and to meet

international requirements1.

The country features a suitable road network that enables connections to major production

centers and staging areas at major ports.

Agriculture, forestry and pasture development are promoted to integrate management and

development of forestry with livestock raising and agriculture activities. This enables a diverse

range of products and staggered income: livestock, seed, harvesting and forage reserves in the

short term, and quality wood in the medium and long term.

The sector has a 20-year history and qualified labor is available. Exports currently account for

13% of the country’s total exports.

Currently, 885,000 hectares of forestry plantations account for 5% of the national territory.

However, only 21.5% of the area declared as forestry priority has been planted.

High quality wood is produced on Uruguayan plantations and is used for cellulose pulp

production as well as for solid wood products.

The currency exchange market is open and there are no limits on foreign currency trading.

Investments can be made in any currency.

There are no restrictions on hiring foreign staff (except for companies located at Free Trade

Zones where 75% of employees must be local). Residency permits can be obtained in three

months and anyone who has entered the country legally can obtain one and start working even

1

Approved in 2004 the National Code for Good Forestry Practices was developed by the Forestry Bureau, the Inspector

General of Employment and Social Security, the National Environment Bureau, the National Agricultural Research Institute, the Forestry Department of the University of Agronomy, the Uruguayan Association of Agricultural Engineers, the Uruguayan Forestry Contractors Association and the Society of Foresters. Available at http://www.mgap.gub.uy/Forestal/cod_fores.pdf

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during the application process. Citizens from most western nations do not require visas to visit the

country.

A strategic geographic location at the heart of MERCOSUR (free trade area between Argentina,

Brazil, Paraguay and Uruguay) and near Chile and Bolivia, with excellent river, sea, highway and

air connections.

An attractive legal framework for trade that allows the use of individual enclaves or a

combination of various modalities (Free Trade Zones, Free Ports and Free Airport regimes and

Bonded Warehouses), where no customs duties or taxes are due on imports or exports.

2. Forestry industry in Uruguay

2.1. Major features

The forestry industry in Uruguay consists of various activities that range from seed and seedling

production to the final shipment of finished products. The sector includes at least four industrial

chains: cellulose and paper, finished wood (treated round wood, sawn wood, boards, carpentry

for construction, furniture, moldings, etc.), the chemical industry (resins, essential oils, bioplastics,

etc.) and energy production. Forestry activities, as well as the extraction and development of

wood products, accounted for 3.5% of Uruguayan GDP in 2010. Activities in the forestry industry

include:

Agriculture (forestry), which includes the production of reproductive material and

seedlings in nurseries, tree planting and intermediate treatment for forests and

harvesting.

Manufacturing activities

Transport and logistics

Picture No. 1: Forestry industry activities

AC

TIV

ITY

Agricultural Nurseries and reproductive material

Planted and native forests

Manufacturing

Mechanical transformation

Sawmills

Carpentry for construction

Boards

Chips and pellets

Panels

Cellulose - paper Pulp

Paper and cardboard

Energy

Logistics and transport

Source: Uruguay XXI

4

The Uruguayan forestry industry is characterized by a strong vertical integration that covers

agricultural and industrial activities and all intermediate processes through the final sale of

products.

Some large export companies supply themselves with a large portion of raw materials in

comparison to others which buy raw materials from third parties. The largest sawmills use mainly

domestic raw materials and direct production towards foreign markets, while smaller mills focus

mainly on the domestic market.

Paper manufacturers produce both for foreign and domestic markets. These companies have their

own pulp production mills for in-house supply for the paper production process.

Power generation from forestry residue (biomass) is among the activities related to the industrial

phase that became more relevant and have significant future prospects due to the increase in raw

material supply and State policies in the area. Currently, some sector companies have electricity

generation plants that use biomass. For example, UPM generates 110 MW with 32 MW of excess

for the national grid. Bioener (a Urufor company) has a 12 MW capacity, while Weyerhaeuser has

an installed capacity that ranges between 10 and 12 MW. Montes del Plata pulp mill, that will

start operating in 2013, will be self-sufficient in terms of power, generating around 160MW of

clean and renewable energy of which approximately 90 MW will

be used to meet the industry’s energy needs. The surplus

(between 55 and 75 MW of power) will be fed back into the

national energy grid, providing an equivalent to an average

consumption of 200,000 households.

2.2. Personnel employed

Personnel employed in the forestry sector in 2010 reaches 13,000 workers in silviculture. In

addition, the mechanical transformation industries (Sawmill and Panels) employ 3,500 workers

and the cellulose industries (Pulp, Paper & Cardboard and Chips) 2,500, comprising a total number

of 19,000 employees.2

Taking into account indirect employment (employment of service providers, mostly transport and

logistics), we amount to a sum of 21,400, which is an equivalent to 1.3% of the country’s

employed population. It is important to highlight that personnel employed in the forestry sector

2 Industrial chains based on Forestry Industry, Planning and Budgeting Office, Ministry of Industry and Energy, Industry

Bureau, February 2011.

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has almost doubled in the last five years, hence proving the potential this sector has to generate

employment mainly for people who live inland.

Table No.1: Job Positions in the different forest-based industrial activities3

Sub-sectors 2005 2007 2009 2010

Sawmills 1,311 1,650 1,415 1,641

Panels 1,326 1,548 1,356 1,912

Pulp - 390 390 390

Paper and cardboard 1,797 1,635 1,460 1,704

Chips 360 360 345 360

Industry sub-total 4,794 5,583 4,966 6,007

Transport and logistics 1,242 1,718 2,070 2,401

Silviculture 5,000 8,500 13,000 13,000

Total 11,036 15,801 20,036 21,408

It is important to mention that the construction of the Montes del Plata pulp mill will generate an

average of 3,200 direct jobs with a maximum of 6,000 people. Once concluded, 500 employees

will work on the pulp mill premises. Furthermore, it is expected to generate 5,000 indirect jobs.

2.3. Current legislation4

Plantation and other activities linked to forestry activities are regulated under law 15,939 dated

December 28, 1987, regulatory decrees and further amendments thereto. This law establishes

that natural and artificial forests in forestry priority areas declared as “protective” and “yielding”5

included in “quality wood projects” determined by the Ministry of Livestock, Agriculture and

Fishing (MGAP), enjoy the following tax benefits:

Income derived from exploitation is not included in the calculation of Corporate Income

Tax (IRAE).

Value or size of forestry priority areas will not be considered for the determination of the

taxable amount of Wealth Tax (IP).

Rural real estate tax (tax on land) exemption.6

3 Industrial chains based on Forestry Industry, Planning and Budgeting Office, Ministry of Industry and Energy, Industry

Bureau, February 2011. 4 Law No. 15,939 available at http://www.mgap.gub.uy/Forestal/15.939.htm. Decree No. 220/06 dated July 10, 2006

available at http://www.mgap.gub.uy/Forestal/DECRETO%20220_006%20Modificacion%20Decreto%20191_06.pdf 5 In accordance with law 15,939, protective forests are defined as those that have the basic objective of conserving the

soil, water and other renewable resources. Yielding forests have the basic objective of wood productions and are of special national interest due to their location or type of wood or other forestry products that can be obtained from them. 6 Law No. 18,245 dated December 27, 2007, available at http://www.mgap.gub.uy/Forestal/Ley18245ContribucionInmobiliariaRural.mht

6

To be eligible for the abovementioned tax benefits, the Forestry Bureau (DGF) of the MGAP must

approve the management and organization plan for the exploitation and regeneration of forests.

Any amendment to the management and organization plan must be previously approved by the

DGF.

2.4. Forested area Forestry activities in the country have grown in a sustained manner over the last 20 years. Despite

being a relatively young sector, over the years the surface area has risen 30 times to

approximately 950,000 hectares by 2010.7 In addition, some 750,000 hectares of native forest

exist in the country, leading to a total forested area of 1.7 million hectares, approximately. The

total area deemed of forestry priority covers 4 million hectares8, around 23% of the total

agriculture-livestock area of the country (see Map 1).

Picture No. 2: Forest priority areas – Year 2010

Source: Pike Forestry Consultants

7 Source: “Monitoreo de los Recursos Forestales Inventario Forestal Nacional”, August 2010. This work is the result of

the first stage of national forestry inventory. In this stage, 26% of the total area of inventoried forests was assessed. From 4,769 sample points proposed for Uruguay, 1,242 sample plots were installed and assessed. This accounts for an area of inventoried forests of almost 450,000 hectares. 8 Decree No. 191/106 available at http://www.mgap.gub.uy/Forestal/ModificacionDecreto452_988de16_06_06.pdf

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The type of soil, the climate and the distance to production departure points have an effect on

forestry plantation characteristics. This divides the country into three regions in accordance with

criteria established by the DGF:

South-East Region: departments of Colonia, Flores, San José, Florida, Canelones, Montevideo,

Lavalleja, Maldonado and Rocha.

North Central Region: departments of Artigas, Rivera, Tacuarembó, Durazno, Cerro Largo and

Treinta y Tres

West Coast Region: departments of Salto, Paysandú, Río Negro and Soriano.

The South-East region is closest to the port of Montevideo, favoring the departure of forestry

products by sea. The area is strongly influenced by the sea, with an absence of extreme

temperatures. This has led to a better adaptation of species sensitive to extreme temperatures,

such as Eucalyptus globulus. The main purpose of plantations in this area is pulp production.

Therefore the production cycle is short and requires little trimming.

The North Central region is the largest forested area with 46% of the total artificial forests in

Uruguay. This area has frosts in winter and higher temperatures in summer and due to its sandy

soil, it is appropriate for Eucalyptus grandis and Pinus species. Wood in this region is mainly

produced for mechanical transformation.9 Major departure points for wood production from this

region depend on product location and type and include Paysandú, Fray Bentos and Montevideo.

The West Coast region also has frosts in winter and sandy loam to sandy soils. In this region,

plantations of the Salicaceae, Eucalyptus and Pinus species coexist. These have a slightly lower

yield in this area as compared to the northern region. The main destination for production from

this area is wood pulp.10 Ports and bridges used for forest product transport include Fray Bentos,

Nueva Palmira and Paysandú.

9 This is mainly due to the business strategy of the main companies of the region, such as Weyerhaeuser Company

(USA), GFP, GMO and COFUSA. 10 By the company UPM.

8

Table No. 2: Total forested area and forestry priority area per region, in thousands of hectares - 2010

Source: Uruguay XI based on data from DGF of MGAP and Pike Forestry Consultants.

Picture No.3: Map of forested area in Uruguay11

The departments of: Rivera, Tacuarembó,

Paysandú, Río Negro and Lavalleja contain the

largest number of forested hectares, between

100,000 and 200,000 hectares.

Followed by Salto, Soriano, Durazno, Florida,

Treinta y Tres, Rocha and Maldonado with 55,000

to 100,000 forested hectares. The other

departments have between 10,000 and 55,000

forested hectares.

Most of Uruguay’s plantations are of the

Eucalyptus and Pinus genera. 70% of the country’s

total forested area corresponds to the Eucalyptus

genus (with a majority presence of three subspecies), followed by Pinus with 28% of said area,

leaving 1% of the Salicacea family.

11 Source: Forestry Bureau, Ministry of Livestock, Agriculture and Fishing - 2007.

Region Departments Forested area as of August

2010

Forestry priority area

Forestry priority area available for

planting

North Central Artigas, Rivera, Tacuarembó, Durazno, Cerro Largo and Treinta y Tres

410 2.177 1.741

West Coast Salto, Paysandú, Río Negro and Soriano

262 633 387

South-East Colonia, Flores, San José, Florida, Canelones, Montevideo, Lavalleja, Maldonado and Rocha.

213 1,304 1,017

Total 885 4,114 3,145

9

Table No.3: Species type according to region - 2010

Region Department Pinus Eucalyptus

grandis Eucalyptus

globulus

Other Eucalyptus

and Salicacea

Total

North Central

Artigas, Rivera, Tacuarembó, Durazno, Cerro Largo and Treinta y Tres

43% 23% 26% 8% 100%

West Coast

Salto, Paysandú, Río Negro and Soriano

19% 42% 28% 11% 100%

South-East

Colonia, Flores, San José, Florida, Canelones, Montevideo, Lavalleja, Maldonado and Rocha

14% 6% 69% 11% 100%

Source: Uruguay XXI based on data from the DGF of MGAP.

2.5. Extraction and production

Wood extraction in Uruguay had a strong growth until 2008, from 5.7 million m3 in 2005 to 9.4

million m3 in 2008. Due to the decline in global demand and a drop in export prices since the 2009

international crisis, extraction volumes in the country fell to 8.4 million m3 in 2009. This decline is

tightly linked to the decline in wood extraction for pulp production. In 2010, wood extraction

reported higher values than the preceding years, 11.8 million m3, later registering a recovery of

the figures observed years before.

As for production, a decline was also reported in chip production in 2009 and, to a lesser degree,

in sawn wood and boards. Specifically, the decline in wood chip production was due to the fact

that the main purchasers of this product in 2008, Japan and Finland, made no purchases in 2009.

This may be associated to the temporary closure of some pulp mills due to the international crisis.

In 2010, there was an increase in the production of all forest industry products, reporting similar

values in Chips and Cellulose Paste in 2008 and higher value in Sawn wood, Wood boards and

Paper and Cardboard.

10

Chart No.1: Round wood extraction volume (1000m3)12

Table No. 4: Production volume of wood-derived products

PRODUCTION FOR DOMESTIC CONSUMPTION AND EXPORTS

Product 2006 2007 2008 2009 2010

CHIPS (1,000 m3) 383 280 2,283 1,143 2,274

SAWN WOOD (1,000 m3) 293 308 284 264 346

WOODBOARDS (1,000 m3) 50 162 175 142 199

PAPER Y CARDBOARD (1,000 metric tons) 113 107 107 101 117

WOOD PULP (1,000 metric tons) 34 50 1,129 882 1,100

Source: Forestry Bureau, MGAP and National Customs Bureau of Uruguay

2.6. Export sector13

Forestry accounted for 12.5% of Uruguay’s total exports in 2010 and has significant prospects for

future growth. Despite the fact that the 2009 international crisis caused a drop in sector exports

both in volume and value, exports still exceeded US$ 700 million in that year. In 2010 export

values achieved US$ 1 billion, a similar figure to 2008 (record breaking year). From 2008 onwards,

the main export product of the industry was wood pulp, which in 2010 accounted for 64.5% of

total industry exports, in second place were wood chips accounting for 13% of the total, followed

by paper and cardboard with 9.3% in 2010.

12

Source: Forestry Bureau, MGAP 13

Appendix No. 2 shows a chart with the main industry exports destinations for 2009

Wood fuel, including wood for charcoal

Industrial round wood (bulk wood)

2.1112.062

2.210 2.210

2.430

1.800

1.900

2.000

2.100

2.200

2.300

2.400

2.500

2006 2007 2008 2009 2010

734 1168 1150 1030 1547

34973929

60805143

7841

0

2000

4000

6000

8000

10000

2006 2007 2008 2009 2010Wood pulp Sawlogs

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Chart No. 2: Uruguayan forestry product exports in 2010 – US$ millions14

The following charts show the forestry sector product performance between 2006 and 2010 in

dollars and in tons. It is important to clarify that Cellulose pulp has not been included since its

values are outside the scale used, therefore they are displayed in chart No.5.

Chart No. 3: Forestry product export performance – US$ millions

2006 2007 2008 2009 2010

Paper and cardboard 56 52 66 69 93

Round wood 75 93 36 24 38

Chips 72 67 163 79 131

Sawn wood 28 30 30 26 40

Wood boards 0 34 47 32 54

0

50

100

150

200

250

300

350

400

Mill

on

of

US$

Source: Uruguay XXI based on data from the Customs Bureau of Uruguay.

14 Source: Uruguay XXI based on data from the Customs Bureau of Uruguay.

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Chart No. 4: Forestry sector export performance15 - thousands of tons

2006 2007 2008 2009 2010

Round wood 1492 1440 418 289 392

Chips 1087 984 1676 852 1478

Sawn wood 98 90 72 58 81

Wood boards 33 75 88 72 107

0

500

1.000

1.500

2.000

2.500

3.000

Tho

usa

nd

s o

f to

ns

Source: Uruguay XXI based on data from the Customs Bureau of Uruguay.

Cellulose pulp exports have grown year after year, showing its peak performance in 2008 as UPM

(ex Botnia SA) established in Uruguay, at which time figures reached US$ 1.025 million an

equivalent to 1,297 thousand tons. In 2009 and 2010, the values in dollars and tons decreased.

Nonetheless they continue to represent a high level of export. It is important to mention that

Cellulose pulp exports exit the country via Nueva Palmira Free Zone once sent from the pulp mill

located at Fray Bentos Free Zone.

Chart No. 5: Wood pulp export performance16

13

1025

519647

18

1297

921764

0

400

800

1.200

1.600

2007 2008 2009 2010

US$ Million Thousands of tons

15 Note: idem 16 Data regarding exported volumes were provided by the Customs Bureau of Uruguay and average prices used were

taken from FAOSTAT. 2007: US$ 703/ton. 2008: US$ 790/ton. 2009: US$·536/ton. 2010: US$ 847/ton.

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Source: Uruguay XXI based on data from the Customs Bureau of Uruguay.

The following table displays the main product destinations for the forestry sector for 2010. As it

can be seen destinations are varied, with outstanding sales of chips to Spain and Portugal

achieving US$ 50 million and US$ 44 million and sales of cellulose pulp to the Netherlands and

China for US$ 394 million and US$ 227 million, respectively.

Table No. 5: Main export destinations of the Uruguayan forestry sector -

2010

Product Country FOB US$ million %/total

Round wood

Vietnam 12 32.1%

Portugal 12 30.6%

China 5 11.9%

Subtotal 28 74.5%

Total 38 100%

Chips

Spain 49,9 38.2%

Portugal 43,6 33.4%

Norway 27,9 21.4%

Subtotal 121 93.0%

Total 131 100%

Sawn wood

U.S.A. 10 24.4%

Indonesia 5 12.6%

China 5 11.5%

Subtotal 19 48.4%

Total 40 100%

Wood boards

México 16 29.6%

United Kingdom 8 14.2%

Argentina 6 10.9%

Subtotal 30 54.8%

Total 54 100%

Paper and cardboard

Argentina 52 56.0%

Brazil 21 21.9%

Paraguay 7 8.0%

Subtotal 80 85.9%

Total 93 100%

Cellulose

Netherlands 394 60.9%

China 227 35.1%

Uruguay 26 4.0%

Subtotal 647 100%

Total 647 100%

Source: Uruguay XXI based on data from the Customs Bureau of Uruguay.

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2.6.1. Exporting companies17

It is estimated that there are around 800 companies in the forestry sector at an industrial level -

700 of which are part of the product manufacturing chain and the remainder from the cellulose

production chain. It has been noticed that 50% of the companies are small businesses, although

some are large sized corporations.

It is important to highlight that the first two companies account for almost 50% of Uruguay's total

exports, Compañía Forestal Oriental S.A. and Forestal Atlántico Sur S.A. The main exporting

companies are listed in the following table showing their participation in the whole forestry

sector.

Table No.6: Exporting companies (annual % share -2010)

Exporting companies % of total

COMPAÑIA FORESTAL ORIENTAL S.A. 33.2%

FORESTAL ATLANTICO SUR S.A. 10.3%

FABRICA NACIONAL DE PAPEL S.A. 7.1%

SIERRAS CALMAS S.A. 6.3%

INDUSTRIA PAPELERA URUGUAYA S.A. 5.7%

LOS PIQUES S.A. 4.9%

URUPANEL S.A. 4.7%

COMPAÑIA FORESTAL URUGUAYA S.A. 4.1%

EUFORES S.A. 3.6%

URUFOR S.A. 3.5%

COMERCIALIZADORA GRUPO FORESTAL 3.3%

FORESUR G.I.E. 3.2%

DANK S.A. 2.0%

CAS.A.BO S.A. 1.1%

CAJA DE JUBILACIONES BANCARIAS 0.9%

PAMER S.A. 0.8%

MADERAS ASERRADAS DEL LITORAL 0.6%

SAGRIN S.A. 0.4%

RIO TUMBES S.A. 0.3%

IMNSUR LTDA. 0.3%

ASOC AGRAG DE RESP LTDA. DE PRO 0.3%

PIKE Y CIA COMERCIAL LTDA. 0.3%

Other 3.2%

Total 100.0% Source: Based on data from the Customs Bureau of Uruguay

17 Industrial chains based on Forestry Industry, Planning and Budgeting Office, Ministry of Industry and Energy, Industry

Bureau, February 2011.

15

2.7. Forestry sector prices18

Cellulose pulp exports constitute 65% of the forestry sector, consequently international prices of

this product will be analyzed first. BHKP cellulose international price rose between 2000 – 2007

(an average of US$641 per ton). In 2008 there was a considerable drop as a result of the

international crisis, recovering by the end of 2009 achieving higher values in 2010 than those

reported in the previous years. By mid 2011, after achieving very high levels, cellulose

international price underwent severe downward adjustments in the last months. Despite these

drops, prices remained high from a historical perspective.

BHKP cellulose international price was US$858 per ton in July 2011, setting the highest value in

the course of this year and hardly 6.5% lower than the achieved record in July 2010. Nevertheless,

in the last months and in a highly volatile financial market environment (which was also reflected

in agricultural commodity prices) a considerable slump in cellulose international market value

could be observed.

Chart No. 6: Cellulose pulp international price US$/ton

750

0

200

400

600

800

1000

Celullose BHKP

With regard to Uruguay's wood chip export price, it maintained a stable performance until 2008,

it then showed a remarkable growth during the second quarter of 2008 reaching US$ 105.7 per

ton. In the course of 2011, in line with the cellulose market trend, Uruguay’s wood chip export

price decreased in the following quarters, after showing a significant increase in the first quarter

by 17.3% in comparison to 2010's final quarter.

18 Source: Prepared by Uruguay XXI based on data from Deloitte. October 2011.

16

Meanwhile, round wood for pulp export price remained steady throughout the whole period, in

average a value of US$ 45.5 per ton (2005 - 2011) could be observed. Maximum value was

reached in the third quarter of this year, US$ 58.7 per ton.

Chart No. 7: Wood for pulp US$/m3and wood chips US$/ton export prices

0

20

40

60

80

100

120

round wood for pulp US$/m3 Chips US$/ton

On the other hand, sawn wood international prices showed an unstable course. Non-conifer sawn

wood price sustained an upward trend from 2009, reaching its maximum in August 2011 with US$

974/m3. However, conifer sawn wood reported a downward trend, showing the lowest value in

August 2007 at US$ 249.

Sawn wood export prices had different performances. They did not report major fluctuations,

however non conifer international price experienced significant variations, showing a steady

decline during the second quarters of each year. During the third quarter of 2011, the price stood

at US$350.3 per ton.

Chart No. 8: Sawn wood international price US$/m3

0

50

100

150

200

250

300

350

400

0

200

400

600

800

1000

1200

Sawn wood - Non conifer (Malasya)US$ / m3

Sawn wood - conifer (E.U.A.)US$ / m3

Sawn Wood non conifer US$/m3

Sawn Wood - conifer Conífera US$/m3

17

Chart No. 9: Sawn wood export prices US$/ton.

0

50

100

150

200

250

300

350

400

450

500

Sawn wood - coniferUS$ / m3

Sawn wood - Non coniferUS$ / m3

2.8. Investments in forestry industry19

Investment projects in the forestry industry submitted to the Investment Act Application

Commission (COMAP) for tax exemptions, showed irregular development between 2005 -2011.

Forestry industry investments are linked to wood extraction and the industrial phase (boards,

fibers, solid wood products, wood pulp, energy generation, etc.).

It is important to highlight that from 2007 onwards with the approval of the decree 455 that

regulates chapter III of the Promotion and Protection of Investment Act (16,906), a very favorable

and attractive investment environment for the country was created. Due to this reason, in the

forestry industry projects presented reached in 2007 US$ 107.3 million, and in 2008 it increased

to US$173.1 million.

The main project presented in 2007 was by Los Piques S.A., for an amount of US$70 million (60%

of total investments), to expand production capacity. In 2008, the outstanding project to build

Punta Pereira Free Zone with US$ 92 million was presented, accounting for 65% of the total.

During the January to August 2011 period, projects submitted to COMAP reached US$225.3

million. The main project was also related to Punta Pereira Free Zone, accounting for 80% of the

total, equivalent to US$178 million.

19 Source: Wood pulp – wood forestry complex (2008). Value Chains (I), Productive Board. Forestry Agenda 2009.

Rosario Pou & Asociados. Websites: www.upmuruguay.com.uy; www.weyerhaeuser.com; www.montesdelplata.com.uy; www.cofusa.com.uy; www.urupanel.com; www.af.com.uy; www.geosylva.com; www.harvest.com.uy; www.agrifox.com.uy

18

Chart No.10: Projects submitted by COMAP. 20 Data in Millions of US$

5 3

107

173

17 14

225

0

50

100

150

200

250

2005 2006 2007 2008 2009 2010 Ene-Ago 2011

Projects approves for COMAP

Below are some of the main companies with a share in the forestry industry:

UPM

The Finnish company, UPM, is one of the largest wood pulp manufacturers

worldwide. In 2009, UPM acquired the major stake in Botnia S.A., which began

operations in Uruguay in November 2007.

It is located at the shore of Uruguay River, four kilometers north of the city of Fray Bentos.

Production capacity is one million tons per year of bleached pulp from Eucalyptus short fiber. Pulp

exports are shipped by barge from the mill to the deep water port at Nueva Palmira and

transferred to transoceanic ships bound to Europe and Asia. The company has a subsidiary

company, Compañía Forestal Oriental S.A., that provides most of the wood for the cellulose pulp

production process (nearly 70% of raw materials comes from company-owned forests).

Investment carried out by UPM was approximately US$ 1,200 million.

“UPM’s cellulose mill in Fray Bentos is competitive on a worldwide basis, along with the leading

countries, Brazil, Chile and some Asian countries”, claimed engineer Ronald Beare, UPM general

manager. “At the same time, it is also a modern plant and this is important because clients like to

acquire companies that have state-of-the-art production facilities, which means that it will last

through time. Key elements to keep clients are: permanence in the market which is obtained by

having good industrial facilities, a good product and reliability. This is what UPM has.”

20 Source: Prepared by Uruguay XXI based on data from COMAP.

19

WEYERHAEUSER

Weyerhaeuser, a US-based company, is one of the largest forestry and

wood companies in the world. It has operations in 13 countries and

employs over 18,000 people worldwide.

Weyerhaeuser established itself in Uruguay in 1996 by acquiring part of the shares in Colonvade

S.A. In 2001, the company expanded its assets with the purchase of Los Piques S.A. from the West

Fraser Timber Company of Canada and Associates. In 2006, Weyerhaeuser Uruguay was

established and in 2007, the company obtained 100% of assets of Colonvade S.A. and Los Piques

S.A. companies.

Currently the company operates in various areas such as forest plantation management, planning

and inventory, harvest, logistics and transport, and timber yielding product trade.

The company’s total land base is 139,000 hectares, 75,000 of which are planted in the

departments of Rivera, Tacuarembó, Cerro Largo, and Treinta y Tres. In 2010 the company

produced approximately 350,000 m3 of pieces suitable for peeling and another 350,000m3 of

pieces suitable for sawing and pulping. Plywood production reached 110,000m3.

It also has a power co-generation plant that is fed by sub-products of its own production process.

The plant’s generation capacity is 12 megawatts and the company’s consumption needs range

between five and six megawatts. The remainder can be sold to the state power distribution

company.

MONTES DEL PLATA

A forestry company founded in 2009 in Uruguay for the purposes of

producing cellulose pulp. The company came about from the

association of two of the most notable forestry companies in the

world: Arauco and Stora Enso. The companies, made up of Swedish

and Chilean capital, respectively, are equal partners in Montes del Plata.

Montes del Plata is currently developing a sustainable forestry base to supply the required raw

materials for a cellulose pulp mill to be built in Punta Pereira in the department of Colonia (190

km from Montevideo).

The company has a total of 250,000 hectares - 135,000 of which are planted, while the remaining

are either not planted or are biology conservation areas, native forests or native species such as

20

Yatay palm tree lands or Santo Domingo wetlands, conservation areas in which the company

carries out environmental monitoring activities and projects. In the pulp mill construction process

3,200 direct jobs will be created throughout 24 months with a peak of around 6,000. Once the mill

is operating, there will be 500 employees at the site. Furthermore, it is estimated that around

5,000 indirect jobs will be created. The mill is expected to produce 1.3 million tons of cellulose per

year and it will start operating in 2013.

Montes del Plata investment is estimated to be approximately US$ 1.9 billion in the mill and US$

700 million in land. The plant will begin operations in the first quarter of 2013. This investment

will be attributed to FDI corresponding to 2011, 2012 and 2013.

COFUSA (Compañía Forestal Uruguaya S.A.), URUFOR and BIOENER

These companies produce, process and sell high quality Eucalyptus grandis wood. They are

located at northern Uruguay and are part of the same Uruguayan business group.

Cofusa specializes in genetic improvement, seedling, nursery, planting and silviculture

management of the forest (pruning, thinning and harvesting).

Urufor processes saw timber from COFUSA plantations. Its forestry activities comprise

sawing, drying and manufacturing of half-finished product from Eucalyptus grandis.

Bioener is a cogeneration power plant that produces energy from forest biomass of 12

MW and sells power to UTE and supplies URUFOR with stream needed in the board drying

process. Uruguay’s average power consumption is of approximately 1,200 MW/hour.

Bioener's capacity accounts for approximately 1% of the country’s average power usage.

URUPANEL

Urupanel is owned by a Swiss investment fund, located at northern Uruguay.

It began operations in 2004 and today it is one of the top exporters of

plywood in the country. Urupanel invested US$ 56 million in 2004 and US$ 20 million in 2007 for

the installation of a new industrial plant to manufacture MDF plywood boards. This plant began

operations in 2009. In 2010 this company’s exports reached 4.7% of total forestry industry

exports.

21

GLOBAL FOREST PARTNERS LP (GFP)

GFP structures, executes and administers forestry investments on behalf of institutional investors.

The fund manages a portfolio of more than US$ 2.5 billion. GFP operates in Chile, Brazil, New

Zealand, Australia, Singapore and Uruguay. The company is present in our country with four

funds, with an investment of approximately US$ 150 million.

GMO RENEWABLE RESOURCES

GMO Renewable Resources is a US-based company with offices in Uruguay since 2001 GMO

administers investment funds with a branch (Renewable Resources) exclusively dedicated to

forestry investments. Currently, the company administers three investment funds. The assets

(plantations) are in northern Uruguay (departments of Rivera, Tacuarembó and Cerro Largo) with

37,000 hectares - 25,000 of which are planted. Investment made amounts to US$ 90 million.

RMK TIMBERLAND GROUP

RMK Timberland Group, established in 1981 in Georgia, United States of America, is an

investment fund exclusively focused on the forestry business. It operates as the commercial unit

of Regions Morgan Keegan Trust and Morgan Asset Management. It is engaged with the

development of investment portfolios and general management of forestry resources in different

parts of the world. The group began activities in Uruguay in 2005 with the creation of the

Southern Cone Timber LLC fund and the establishment of Taurion S.A. Later, the group added

plantation management with the Criollo Madera company (Monte Fresnos S.A.) and Bosques del

Sur (Ponte Tresa S.A.). Wood production by these companies is used for cellulose pulp, sawn

wood, energy and other uses for the domestic market and exports. Total assets of RMK in

Uruguay are approximately 40,000 hectares - about 62% of which corresponds to forestry

plantations mainly located at forestry priority lands.

Other companies:

PHAUNOS TIMBER FUND LIMITED: Phaunos is a British fund operating in Uruguay through

Pradera Roja S.A., Caldrey S.A. and Aurora Forestal Limited companies.

Pradera Roja S.A. owns 12,000 hectares of Eucalyptus plantations for the supply of

cellulose pulp mills and sawn wood markets.

Caldrey S.A., located in southern Uruguay, focuses on services to increase forestry

productive capacity. Investment made amounts to US$ 5 million.

22

Aurora Forestal Limited focuses on planting mixed-age pine trees in Uruguay. The

company has 19,500 forested hectares in the department of Rivera and performs

operations in a saw mill in the department of Tacuarembó. Investment made amounts to

US$ 35 million.

NEVOPARK: Nevopark Company invested US$ 7 million in 2007 for the installation and operation

of a splitting mill to meet domestic and foreign demand for wood chips.

CHIPPER: Chipper Company was born from the association of Foresur and Grupo Forestal

companies in 2004. Chipper has 40,000 hectares of Eucalyptus globulus plantations and a chipping

mill capable of processing 470,000 BDMT per year (sales measurement unit equivalent to one ton

of dry fiber). Investment made in the chip production mill in Montevideo amounts to US$ 2.6

million. Production is bound to Japan and the Scandinavian Peninsula (Sweden and Finland).

IPUSA: IPUSA is a domestic paper company that was acquired in 1994 by the Chilean CMPC

Holding Company. IPUSA invested US$ 1.4 million in 2006 and US$ 939,000 in 2007 for the

construction of two paper manufacturing machines, round wood conversion lines, napkin

conversion and product conversion for institutional consumption. In 2008, IPUSA invested US$ 7

million and in 2010 US$ 2 million.

AGRIFOX S.A.: Agrifox is a Uruguayan forestry company with plantations in central and northern

Uruguay. It began activities in Uruguay in 2005 and focuses on harvesting and exporting round

wood. Major export destinations are Vietnam, China, India and the Philippines.

FORESTAL CAJA BANCARIA: Forestal Caja Bancaria began forestry activities in 1964, when it

acquired the first 6,000 hectares in Paysandú for pine and eucalyptus plantations. Currently, the

company carries out forestry, industrial and livestock activities on 18,000 hectares. In 2008, the

company invested US$ 2.7 million in the construction of a new sawmill, expansion of drying

chambers, acquisition of mobile machinery and enhancement of the areas of influence. The

company has a sawn wood capacity of 100,000 m3 of round wood per year and a drying capacity of

20,000 m3 per year.

23

Industry-related service companies include:

PIKE CONSULTORA FORESTAL: Founded in 2002, Pike offers complete consulting services for

forestry projects. Services include, but are not limited to, industrial opportunity assessment

studies, plantation valuation, wood availability reports, environmental impact studies, FSC

certification and forest fire prevention plans.

AGROEMPRESA FORESTAL: A domestic company located in northern Uruguay, Agroempresa

Forestal offers consulting services, plantation administration, planting services, brush control, ant

control, pruning, etc.

GEOSYLVA: Starting activities at the beginning of 2002, Geosylva is a service company focused on

the forestry industry. It is mainly focused on forestry consultancy, sales and services including, but

not limited to, development of executive investment projects and business plans, assessment of

forestry projects, quality control and audits, advisory and training for forestry management and

custody chain.

HARVEST: A joint venture between Phaunos Timber Fund Limited (PTFL) and Union Capital Group

(UCG), Harvest offers services to the domestic forestry industry, mainly mechanized harvesting

through a clear cutting system with processors, self-loading tractors and loaders.

CARBOSUR: Carbosur is a Uruguayan company founded in 2000. It offers specialized services in

the area of climate change, with an emphasis on mitigating this global environmental problem.

The company specializes in greenhouse gas inventories and offers emission inventory services and

carbon footprint estimates for companies and their products. Carbosur has strategic alliances with

Pike Consultora Forestal (Uruguay), Factor CO2 (a company from the Basque Country specialized in

climate change), Maradei Pike (Argentina) and two Guatemalan organizations (Energía y Medio

Ambiente and Fundación Naturaleza para la Vida). It is also member of Markit, one of the main

registers for creation and sale of carbon certificates.

"We work with FSC certification in every fund. This guarantees that the company operates under responsible environmental and social practices showing respect for the most demanding communities. It is common for the certification to be a market requirement, in our case it is requested by our investors, who want their capital to be invested in a responsible manner.” ALBERTO VOULMINOT, Director of GFP Forestry Investments . Forestry Agenda 2011.

24

INFOREST SERVICIOS FORESTALES. The main purpose of the company is to offer comprehensive

professional service focusing mostly on the forestry and agricultural field, to cater for customer

and market needs and to provide consulting support at all times always considering different

alternatives to improve business, through the sustainable use of natural resources.

MUNDIAL FORESTACION: Mundial Forestación is a Uruguayan company focused on producing

Eucalyptus globulus genetic material. The company has capacity for 30 million plants (seeds and

clones) and is one of the largest nurseries supplying the national market. According to company

director Rogerio Aguiar, “traditional plantations of Eucalyptus globulus in Uruguay yield around 12

to 17 m3 per hectare per year. Using clones enables the possibility of doubling this production,

adapting each clone to local conditions, while improving wood quality and allowing the

identification of the most resistant to disease and the consequences of climate change.”

JOHN O´RYAN SURVEYORS. Uruguayan company committed to developing control systems that

enable their clients to improve their productive and logistic services as well as to facilitate a

transparent and sustainable relationship between these and their buyers. Among the different

integral quantity control systems available there are: humidity content, material compression

and material physical condition, traceability required to reach sustainability and efficiency

objectives, sustainable forest management certification (PEFC, FSC, among others) as well as

carbon footprint measurement and emission reduction plans.

2.9. Logistics

2.9.1. Strategic geographic location at the expanded region (Argentina, Bolivia, Brazil,

Chile, Paraguay and Uruguay)

There are seven ports in Uruguay, two of which have ocean access: Montevideo and

Nueva Palmira. Nueva Palmira specializes in bulk cargo, while Montevideo works mainly

with containers.

The seaway consisting of Paraná, Paraguay and Uruguay rivers enables river access for

products to and from Asunción (Paraguay), Rosario and Santa Fe (Argentina) and eastern

Bolivia (department of Santa Cruz). Both Nueva Palmira and Montevideo offer ocean-

going access for this seaway.

25

An extensive highway network joins Montevideo to the region's major cities, facilitating

truck transportation. Three bridges on the Uruguay River connect the country to

Argentina at the cities of Salto, Paysandú and Fray Bentos. Connections to Brazil are

available at land border crossings at the cities of Bella Unión, Rivera, Río Branco and Chuy.

Approximately 57% of national highways are in very good condition and the Ministry of

Transport and Public Works (MTOP) intends to raise this figure to 80% over the next five

years. Likewise, MTOP plans to implement a monitoring and follow-up system for cargo

transport through GPS technology.

2.9.2. Upcoming investments in the industry

The departmental highway network is vital for forestry industry transport. As such, MTOP

will invest US$ 7.3 million in the coming years for forestry roadway maintenance

(construction, reconstruction and maintenance of departmental forestry corridors).

In 2013, Montevideo will have a modern terminal specializing in bulk cargo. Obrinel, a

company established by the Christophersen and Saceem companies, will construct a

terminal for bulk cargo in the port of Montevideo. The project will be destined for wood

chips and bulk cargo in general. The building will be ready to start operating by the

beginning of 2013 with an investment of over US$ 60 million. Shareholders will provide a

30% of the funding and banking entities will be resorted to for the remaining 70% needed.

The terminal will have a storage capacity for 120,000 tons but can take up to 200,000

tons. The terminal will have a shipping cargo capacity of 2,400 tons/hour.

The government’s objective is to turn Uruguay into a “Regional Logistics Pole” by 2030.

The following major projects will be carried out:

o Development of commercial ports: In La Paloma ocean port (in the department of

Rocha on the Atlantic coast), piers are to be rebuilt to enable 300,000 tons of

cargo movement per year. This will be of vital importance for wood exports from

the eastern region of the country. In accordance with this objective, the port of

Paysandú is already undergoing pier and dredging works to enable wood

transport via river.

o Complementary investments to the Port of Montevideo (Puntas de Sayago): The

Institutional Project includes the creation of a Logistics Port in a 103-hectare site

at Puntas de Sayago, a costal area near the Port of Montevideo. From April 2012

the first 10 hectares corresponding to “Puerto Logístico de Puntas de Sayago” will

26

be tendered. These lands located West of Montevideo will serve as warehouse for

goods and containers in transit from and to Montevideo.

o The government has stated its intention to refurbish railway infrastructure. 1,200

kilometers of railway will be repaired. It is expected that with the improvements,

railway lines will be able to transport 3.5 million tons of cargo per year. Some of

the railway lines will be:

- West coast, Central region and Montevideo metropolitan area with La Paloma

port for the purposes of meeting the needs of forestry product transport as well

as containers, grains and other cargo. Estimated investment - which includes the

construction of a new siding and classification yard in the port, sums up to US$

49 million.

- New international bridge with Argentina, towards the South of the existing

ones. It would connect Punta Chaparro, North of Nueva Palmira to Brazo Largo

in Argentina with a length of 12 km for highway and rail traffic, with an overall

investment of US$ 300 million.

- In the railway network integration framework with Argentina and Brazil, the

connection with the Brazilian rail network will be developed in Rivera-

Livramento.

- Overhaul of Pintado-Rivera section. The estimated investment for these works

total US$60 million which include US$37 million consisting of 21,200 Russian

rails of the type R50 with a length of 25 m supplied by AFE.

27

3. Industry perspectives

3.1. Global industry perspectives:

Main factors affecting long-term global demand for wood products:

o Demographic changes: The world's population is expected to increase from 6,400 million

in 2005 to 7,500 million by 2020 and 8,200 million by 2030.

o Regional changes: from 1970 to 2005, most of GDP corresponded to developed

economies. However, the rapid growth of developing economies, especially Asian

economies, will lead to notable changes over the next 25 years.

o Environmental policies and regulations: more forests will be excluded from wood

production.

o Power policies: the use of biomass, including wood, is rising rapidly.

Other important factors for the future of wood products include: o The decline of natural forest harvesting, conversion of planted forests,

o Technological advances, increase in plantation productivity through improved genetics,

o Decline in wood required due to increases in recycling,

o The wider use of new compound products and production of cellulose biofuels.

Increase in global demand for environmental products and services.

o Policies related to energy and climate change are leading to an increase in wood used as

energy source. Greater attention to “green development” and commercial cellulose

biofuel production will have an unprecedented impact on the forestry industry.

o Greater attention to green development implies a new orientation for the development of

the forestry sector. “Planting trees, increasing investments in sustainable forestry

management, active promotion of wood in construction with environmental criteria and

renewable energy will be integral parts of green development.” 21

Increase in global demand for wood products:

o The world demand for round wood is expected to reach 2,164 million m3 per year22 by

2020. In 2005 it was 1,683 million m3.

21 FAO Publication “2009 State of the World's Forests - Rome, 2010” 22 Source: “2009 State of the World's Forests” - FAO.

28

Chart No. 11: Actual and forecasted consumption of forestry industry products by region - millions of m3

Source: “2009 State of the World's Forests” - FAO.

3.1.1. At national level:

Montes del Plata pulp mill which is expected to be operating in 2013 -2014 will consume

more than 4 million tons of pulpable wood per year, it will export 1.3 million tons/year

(between 600 and 800 million dollars/year).

Likewise, between 2014 and 2020 production plantations for sawmill, plywood and

engineered wood will have reached harvest time. There will be a significant increasing

supply in quality wood which will be produced and supplied in a sustainable way in

volumes that range between 4 million m3/year for 2011-2016 period to over 10 million

m3/year for 2017-2021 period. This entails an opportunity for industrial investment, as

well as wood export with a higher added value and various sub-products. It does not

seem risky to foresee Uruguay exports over 3,000 million by 2014.

Future availability of greater forestry assets due to the fact that 80% of the soils

declared forestry priority still has no plantations.

29

APPENDICES

Appendix 1

Domestic and foreign investment promotion

Foreign investors in Uruguay enjoy the same benefits as domestic investors and do not need prior

authorization to set up in the country.

Law 16,906 (dated January 7, 1998) declares the promotion and protection of domestic and

foreign investment is of national interest. Decree 455/007 and its modification on January 9th of

2012 updated the regulations of this law.

By virtue thereof and for investment projects in any sector of activity submitted and promoted by

the Executive Branch, 50% to 100% of the amount invested may be computed as partial payment

of Corporate Income Tax (IRAE), depending on the type of project. Corporate income tax rate is

25%.

In addition, moveable fixed assets and civil works are exempt from wealth tax and VAT (Value

Added Tax) can be recovered for purchases of materials and services for the latter.

Trade agreements and investment protection

1. General trade agreements

Uruguay has been part of the World Trade Organization (WTO) since its creation in 1995 and is

part of the Latin American Integration Association (ALADI, 1980) along with nine other South

American countries, Cuba and Mexico.

In the framework of ALADI, the Southern Common Market (Mercosur) was formed in 1991 with

Argentina, Brazil and Paraguay. Mercosur became a customs union in 1995 with the free

movement of goods, the elimination of customs duties and non-tariff barriers between countries,

and a Common External Tariff for countries outside Mercosur. Venezuela is currently in the

process of joining Mercosur.

Moreover, in the framework of ALADI, Mercosur has signed trade agreements with other South

American countries: Chile (1996), Bolivia (1996), Colombia, Ecuador and Venezuela (2004), India

(2004) and Peru (2005), Israel (2007), all of which form respective Free Trade Areas with tariff

reduction schedules that should be completed no later than 2014/2019, according to the country.

Uruguay also signed a bilateral free trade agreement with Mexico (2003), which has enabled the

free movement of goods and services between both countries since June 2004, with certain

exceptions that end in 2014.

30

2. Investment protection agreements

Uruguay has signed investment protection and promotion agreements with 27 countries,

including Spain, the U.S., Finland, France and the U.K.

Institutions

A significant number of institutions bring together diverse players in the productive chain. These

have participated in varying degrees in the discussion and practice of tools and policies for the

industry, both in production as well as in environmental and social spheres. These institutions

include:

Forestry Bureau (DGF): www.mgap.gub.uy/Forestal/DGF.htm

Forestry Producers Society (Sociedad de Productores Forestales): www.spf.com.uy

Wood and Related Areas Industrial Association (Asociación de Industriales de la Madera y

Afines): www.adimau.com.uy

Forestry Producers of the East (Productores Forestales del Este - PROFODES):

www.profodes.com

Research entities (INIA www.inia.org.uy, LATU www.latu.org.uy, University of the

Republic, private universities, among others)

Environmental and social non-governmental organizations (NGOs)

Wood and Furniture Competitiveness Forum (Foro de Competitividad de Madera y

Muebles), which operates in the domestic and MERCOSUR spheres. It operates within the

scope of the Industry Bureau and the Ministries of Industry of other MERCOSUR

members.

Program to support competitiveness and export promotion for Small and Medium-sized

Enterprises (PACPYMES). It has a competitiveness promotion and business development

program for second and third degree transformation of wood (Promadera:

www.promadera.com.uy)

National Environment Bureau (DINAMA): www.dinama.gub.uy

Forestry Tripartite Sector Board - Wood (Productive Cabinet):

http://gp.gub.uy/es/node/188/6

31

Appendix 1

Table No. 7: Land sales for agriculture-livestock use. Number of sales, area sold and value (per year).

Year Number of

sales

Area sold Value

Total (thousands of

hectares)

Average (hectare)

Total (US$ millions)

Average (US$/hectare)

2005 2,872 846 295 613 725

2006 3,245 859 265 972 1,132

2007 3,277 676 206 968 1,432

2008 2,959 684 231 1,260 1,844

2009 1,847 323 175 753 2,329

2010 2,093 336 160 885 2,633

Source: Ministry of Livestock, Agriculture and Fishing - Agriculture-Livestock Statistics Bureau based on information from the General Registry Bureau.

Table No. 8: Land lease for forestry use. Number of contracts, leased area and value - 2010.

Use Number of contracts

Leased area Value

Total (hectares)

Average (hectares)

Total (US$ thousands)

Average (US$/hectare/

year)

Forestry 23 15,527 675 1,441 93

Source: Ministry of Livestock, Agriculture and Fishing – Agriculture-Livestock Statistics Bureau based on information from the General Registry Bureau

Table No. 9: Costs of activities linked to the forestry sector – October 2010 – in US$

Source: Pricing List. June 2011 - DIEA-MGAP.

1 - Transport

1.1 – By truck Round wood: 251 to 450 km US$/ton 21

Round wood: 51 to 250 km US$/ton 20

Round wood: up to 50 km US$/ton 9

Round wood: more than 450 km US$/ton 46

1.2 – By rail Wood US$/ton/100km 7

2 - Labor

2.2 – Minimal nominal wage with food and housing for forestry tasks

Foreman US$ 598

Daily allowance for food and housing US$ 4

Monthly allowance for food and housing US$ 95

Machine operator (daily) US$ 20

Specialized machine operator (daily) US$ 23

Common laborer (daily) US$ 15

Specialized laborer (daily) US$ 17

32

Appendix 2

Forestry product certification

Forestry certification is an independent evaluation of the activities of an organization in

accordance with previously established external standards. The Forest Stewardship Council (FSC)

has developed an international standard for forestry management called Principles and Criteria

(P&C). FSC P&C requirements include environmental, social and economic impacts of forestry

management. Forestry certification generally acts as an incentive to improve forestry

management practices. There are certifying organizations that assess compliance with the

requirements. The following are two of the main companies involved in certifying forestry

plantations in accordance with FSC:

a) SGS (Societé Générale de Surveillance) is headquartered in Geneva, Switzerland, and has

offices around the world, including Uruguay (SGS URUGUAY Ltda.). The forestry

certification program is entitled “SGS QUALIFOR”. “SGS QUALIFOR is a program with more

than 1,000 chains of custody and more than 190 forestry stewardship certifications

worldwide. The program is currently active in more than 60 countries worldwide.”

b) SmartWood is a program from the Rainforest Alliance conservation organization, which is

headquartered in New York and has activities in several countries, including Uruguay.

With regard to plantation certification, SmartWood is defined as the “main non-profit

certifying body” that “certifies all types of forestry operations, including natural forests,

plantations, large scale commercial operations and small scale family and community

woodlands."

Map No. 2: FSC certified areas by region

Source: Forest Stewardship Council- “Global FSC certificates: Type and distribution”

33

Appendix 3

Uruguay wood quality

a) Destination of cellulose pulp

65% of all industrial wood extraction is used to produce cellulose pulp. Eucalyptus is the most

often used variety in the generation of short fiber. The following is the gross yield and basic

apparent density for the various species of the Eucalyptus genus.

Table No. 10: Gross yield and basic apparent density for Eucalyptus spp

Species Gross yield at kappa 20 (%)* Basic apparent density (g/cm3)

23

Eucalyptus globulus 54.5% 0.423

Eucalyptus grandis 51.7% 0.499

Eucalyptus dunnii 51.1% 0.520

Eucalyptus maidenii 51.4% 0.559

Note (*): Laboratory Kraft process, variation parameter.

Source: Technology Laboratory of Uruguay (LATU). Research performed by Project Department.

b) Solid wood and derivative products

The species Pinus taeda, Pinus elliottii and Eucalyptus grandis are the most widely used in solid

sawn wood and derivative products. The following are average values of some of the mechanical

properties and density of each of the aforementioned species.

Table No. 11: Average values of elastic modulus, rupture modulus and apparent current

density.

Species Elastic modulus

(Mpa)24

Rupture modulus

(Mpa)25

Apparent current density

(g/cm3)

Pinus taeda 8,120 64.2 0.403

Pinus elliotti 8,034 77.7 0.403

Eucalyptus grandis 11,900 86.1 0.463

Source: Technology Laboratory of Uruguay (LATU). Research performed by Project Department.

23 Weight to volume ratio of wood sample, without accounting for hollow interior spaces. 24 Measure of resistance to a change in shape or size under the action of various forces. Defined as the coefficient

between the per unit force of the surface and the deformation per unit of length. 25 Measure of maximum force per surface unit that a sample can withstand without breaking.

34

Levels of quality wood in Uruguay measured through the mechanical properties of elastic

modulus (stiffness) and rupture modulus are higher than regional levels. In particular, Eucalyptus

grandis has higher values than the same species in Brazil and Argentina.

Chart No. 12: Comparative of Eucalyptus grandis wood from Uruguay, Australia, Argentina and

Brazil – Elastic and rupture modulus.

Source: Technology Laboratory of Uruguay (LATU). Research performed by Project Department.

35

Investor Services

About us

Uruguay XXI is the Uruguayan investment and export promotion agency. Among other functions,

Uruguay XXI provides free support to foreign investors, both to those who are in the process of

assessing where to make their investments and those who have been operating in Uruguay for a

long time.

Our Investor Services

Uruguay XXI is the first point of contact for foreign investors. Our services include:

Macroeconomic and industry information. Uruguay XXI regularly prepares reports on

Uruguay and the various sectors of the economy.

Tailored information. We prepare customized information to answer specific questions,

such as macroeconomic data, labor market information, tax and legal aspects,

investment-promotion programs, localization and costs.

Contact with key players. We provide contacts with government agencies, industry

players, financial institutions, R&D centers and potential partners, among others.

Promotion. We promote investment opportunities at strategic events, business missions

and round tables.

Facilitation of foreign investor visits, including organization of meetings with public

authorities, suppliers, potential partners and business chambers.

Publication of investment opportunities. On our website, we periodically publish

information on investment projects by state entities and private companies.

www.uruguayxxi.gub.uy

invest@uruguayxxi.gub.uy

36

Uruguay at a glance (2010)26

Official name Oriental Republic of Uruguay (República Oriental del Uruguay) Location South America, bordering Argentina and Brazil. Capital city Montevideo

Surface area 176,215 km

2. 95% of its territory is productive land fit for farming

exploitation Population (2010) 3.3 million Population growth (2010) 0.35% (annual) Per capita GDP (2010) US$ 11,996. Currency Uruguayan peso ($) Literacy index 98%

Life expectancy at birth 77 years Form of government Democratic republic with presidential system Political division 19 departments Time zone GMT - 03:00 Official language Spanish

Main economic indicators 2005-2010

Indicators 2005 2006 2007 2008 2009 2010

GDP (Var % per year) 7.5% 4.3% 7.3% 8.6% 2.6% 8.5%

GDP (in millions of USD) 17,398 19,823 23,902 31,177 31,322 40,265

Population (in millions of people) 3.31 3.31 3.32 3.33 3.34 3.36

GDP per capita (USD) 5,263 5,981 7,191 9,351 9,364 11,996

Unemployment rate – Annual Average (% labor force)

12.20% 10.90% 9.20% 7.70% 7.30% 6.80%

Exchange Rate (UYU/USD, Annual Average) 24.4 24.0 23.4 20.9 22.6 20.06

Exchange Rate (Annual Average Variation) -1.56% -2.50% -10.65% 7.73% -11,12%

Consumer Prices (Var % annually accumulated) 4.90% 6.38% 8.50% 9.19% 5.90% 6.93%

Exports (in millions of USD), goods and services (1) 5,085 5,787 6,933 9,372 8,647 10,666

Imports (in millions of USD), goods and services 4,693 5,877 6,775 10,333 7,957 9,875

Commercial Surplus/Deficit (in millions of USD) 393 -90 158 -961 690 791

Commercial Surplus/Deficit (% of GDP) 2.3% -0.5% 0.7% -3.1% 2.2% 2.0%

Global Fiscal Result (% of GDP) -0.4% -0.5% 0.0% -1.5% -1.7% -1.1%

Capital gross formation (% of GDP) 17.7% 19.4% 19.6% 22.3% 17.2% 17.9%

Gross Debt (% of GDP) 80.2% 69.2% 68.3% 53.0% 69.9% 57.2%

Direct Foreign Investment (in millions of USD) 847.4 1,494 1,330 2,106 1,593 2,358

Direct Foreign Investment (% of GDP) 4.9% 7.5% 5.6% 6.8% 5.1% 5.9%

26 Sources: Data regarding GDP were taken from IMF; data regarding foreign trade, FDI, exchange rates, International

Reserves, External Debt were taken from BCU; population growth, literacy, unemployment and inflation rates were taken from National Statistics Institute.