Brazil trade hope: wood pulp, paper

With domestic consumption of wood pulp and paper growing by 20 percent a year , Brazil is not only trying to keep up, it is also planning to produce enough to increase exports drastically.

According to official industry figures, annual wood-pulp production should reached 4.3 million tons by the end of 1980 and paper production 3.6 million tons, nearly double the 1978 figures. Of these totals, Brazil expects to export around 1.5 million tons of wood pulp and 250,000 tons of paper in 1980, mainly to Japan and neighboring Latin American countries, now heavily dependent on US suppliers.

This will bring in as much as $1 billion in much-needed foreign currency and savings in imports of slightly over $250 million. It is felt that once Brazil acquires a tradition as supplier of wood pulp, it will be able to switch more to paper exports, with their higher aggregate values.

Brazil's decision to double its production, particularly of wood pulp, from which paper is manufactured, in the face of excess capacity in several countries more established as producers and of the low prices that past few years, is based on the conviction that long-term prospects are good in view of the constantly increasing demand for paper and newsprint.

Although Brazilians do not see themselves coming close to catching up to the United States, Canada, and the Scandinavian nations, for many years the principal producers, they feel that Brazil possess excellent "natural" advantages like favorable climatic and soil conditions and an abundance of fairly cheap labor. Eucalyptus, pine, and fig trees, the soft-wood species generally used for wood pulp, for instance, grow up to 10 times faster in Brazil than in the Northern Hemisphere or in the Orient.

Since 1967, the government has had good results encouraging forestation and reforestation by private enterprises by allowing them to invest up to 25 percent of payable income taxes in such projects.

An estimated 7.5 million acres with more than 7 billion trees have been planted in the past 11 years. Also, Brazil's tropical Amazon region contains more than 20 percent of the world's reserves of hardwoods used as lumber for construction, furniture, tools, utensils, and increasingly for energy.

The increases in production are coming both from expansion of existing facilities and the recent opening of new factories, with an investment calculated in excess of $2 billion.

At the last count, Brazil had 50 plants producing wood pulp of various types of fiber (predominantly unbleached and bleached sulfate) and 152 paper mills, with the numbers still growing. Many are small, of course, judged by American standards. The great majority are concentrated in south-central part of the country, near the softwood-forest-growing areas with access to transportation. The two largest integrated operations belong to Brazilian groups of Klabin and Leon Feffer, followed by US-controlled Champion and Olinkraft. Daniel K. Ludwig's Jari Florestal, the only large wood-pulp project in the northeast, was begun just recently, with 1979 production estimated at 80,000 tons, to be increased to 275,000 in a year or so, all of it destined for exports.

There is also the Braskraft project, which has received much unfavorable publicity in Brazil. Continental Forest Industries, a division of the Continental Group, has one-third participation and provides all technical know-how, with the remaining two-thirds equally divided between a private Brazilian group and the government's National Bank for Economic Development. The original investment was to be $350 million to produce 210,000 tons of paper and kraft board annually, valued at $60 million, with 60 percent for export.

The original site in the State of Sao Paulo was on the only remaining unpolluted river. Land was bought and construction started without securing all the necessary approvals and authorizations. The project generated such widespread protests over possible pollution that Braskraft was obliged to relocate to another state, and to take losses estimated at $50 million and more than a year's production delays.