CHALLENGES AND OPPORTUNITIES IN CHILE´S FORESTRY SECTOR
The Chilean forestry sector has proven to become a cornerstone in local economic development. Chilean forestry companies have been acting internationally selling their products worldwide while also investing in other Latin American countries. Nonetheless, further developments are needed in order to add value to local forest production and to take full advantage of the total forest production potential, including the sustainable use of native forest species.
Geographical references
Forty five percent (35 million hectares) of Chile’s total surface has forest generation capacity, from which 13,7 million hectares belong to native forest species, 2,3 million hectares to planted forest (mainly eucalyptus, pinus radiata) and 19 million hectares to protected areas. Chile’s extremely varied topography and climates have endowed it with a wide diversity of native forests species. Particularly abundant are evergreen and deciduous forests (Nothofagus), which are characteristic of temperate and cold regions.
Economic relevance of the forestry sector
Chile places itself in 6th position after the United States, Russia, Canada, Sweden and Finland, when it comes to forest production including products such as pieces, MDF´s, pulp and paper. In 2008, forestry contributed 3% of Chile’s GDP, with over USD 6 billion in silviculture and primary productions. The forestry industry is the second major contributor to the local economy after mining and ahead of fishing, fruits and wine. In respect of exports, forestry counted for 7,8% of total amounts, valued at USD 4,1 billion during 2009, with the following main destination markets: China (24,4%), USA (12,8%), Japan (8,7%), Mexico (6,5%) and Italy (5,4%).
There are 120.000 forest owners in the country and 40.000 forest related entities, including forest companies, associations, universities, public agencies, trade unions and NGOs. This is estimated to contribute with 1,7 million persons that depend on forest related activities and this represents 10% of the nation´s total population.
Potential growth of forests
Nowadays 95% of the local forest economy is based on planted forests with three main internationally acting Chilean companies with investments in Brazil, Argentina and Uruguay. The plantation forest sector with its 2,3 million hectares generates 39,9 million cubic meters, which is predicted to reach 50 million cubic meters by 2025. In the coming 10 years, forest activity in this sector is expected to growth between 25% and 30%.
Chile places itself among the five world leading countries in terms of forest recovery per capita. In comparison to global trends, the latest developments in Chile have contributed to a more acute decrease in deforestation (FAO 2005) and a positive impact on forests due to public monetary incentives for forestation. Preliminary reports estimate that there are still 2 to 3 million hectares of deteriorated lands, which can be recovered and forested commercially. If these 2 to 3 million hectares are to be planted it will double the current figures for the national forest economy.
Native forest species could play a major role when it comes to the development of the forest industry. Very recently the new Native Forest Law entered into force, which promotes the sustainable management of these ecosystems through subsidies. Considering the environmental restrictions already contemplated in the law, 7,6 million hectares could be managed for timber and non- timber purposes, including preservation (currently only 3% of this type of forests are managed). Bearing in mind that 90% of the resources contained in these forests belong to biomass (according to current statistics) and the increasing electricity prices in Chile, bio-energy projects have gained a high business profile.
In consideration of the forecasted plantation forests growth, the recovery and forestation of deteriorated lands and the sustainable management of native forests, the Chilean Forest Institute (INFOR) estimates that forest production can be increased up to 150 million cubic meters in the long term. Using current export trends this would suggest exports of USD 15 billion annually, a GDP share between 10% and 25% and 5 million persons depending on forest related activities.
Challenges and opportunities
Despite the aforementioned potential on forest production, the challenge of adding value to the Chilean forest production remains to be solved. When measured the exported forest production values per harvested cubic meter during 2007 (FAOSTAT), there is a remarkable gap between Chile and other forest countries. Countries like Finland, Sweden and Canada obtain values such as 331 USD per cubic meter, 272 USD per cubic meter and 163 USD per cubic meter respectively, whereas Chile reaches 112 USD per cubic meter.
This indicates the big opportunity for companies and organizations in forest production in Chile. Despite having the legal framework already in place, including monetary incentives, much more needs to be done in order to add value to the forest production and accomplish a full development of this industry. Alongside with the investment in infrastructure (access roads to native forests) and the diversification of products including bioenergy, Chile needs to invest more on innovation, particularly in research and development.
Aware of this situation, the Chilean Forest Institute is promoting R & D in the following streamlines: climate change; bioenergy; inventory and monitoring; native forest recovery; productivity and diversification of forest plantations; genetic improvement and forest biotechnology; agroforestry; non wood forest products; environment and forest certification; wood technology; forest information and economic analysis.
Opportunities for Sweden
This situation presents an interesting opportunity for joint ventures with other forestry partner countries like Sweden. Conditions in Chile are quite open: Association Agreement with the European Union (including a free trade agreement and full access to the 7th Framework Programme), double taxation agreement with Sweden, non discrimination treatment for foreign investors, high liquidity and strong local financial market, global telecom connectivity, several universities throughout the country, highly skilled human resources and the country´s pledge to reduce 20% of CO2 emissions by 2020 on current climate change negotiations.
Sweden has been a traditional partner of Chile, especially in the forestry sector. Successful collaborations have taken place in the past with Sweden and several companies have already established long term business relations aiming to access other Latin American countries. The Swedish experience in the sustainable management of forests, in bioenergy, diversification of products and association of forest owners are areas where further joint projects could be developed.
Author: Dr. Hans Grosse, Chilean Forest Institute (INFOR) Director
Text adaptation and translation: Francisco Ulloa, Third Secretary, Embassy of Chile in Sweden
Foto: Chilean Forest Institute – INFOR
We are willing to assist you!
Francisco Ulloa
Embassy of Chile in Sweden
Third Secretary
Phone: 08- 679 82 80, Extension 203
Email: francisco.ulloa@embassyofchile.se