1. October
2010
Forestry industry
Investment opportunities in Uruguay

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 requirements.1
 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, 960,000 hectares of forestry plantations account for 5% of the national
territory. However, only 24% 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 basic forestry complex in Uruguay has had strong growth over the past 15 years in all variables.
Extraction, production, consumption and trade have grown and the productive chain has advanced to
the extent that forests have matured. Likewise, the degree of differentiation of exported products has
increased, as has access to larger and different markets.”
Source: 2009 Yearbook of the Office of Agro-Livestock Programming and Policy (OPYPA) at the Ministry of Livestock, Agriculture
and Fishing.
1
The National Good Practices Code for Forestry was passed in 2004. It was created by a working group consisting of
members from the National Forestry Bureau, the Labor and Social Security Inspector General, the National Environment
Bureau, the National Institute for Agro-Livestock Research, the Forestry Department of the Agronomy College, the
Association of Agronomists of Uruguay, the Association of Forestry Contractors of Uruguay and the Society of Forestry
Producers. It can be found at http://www.mgap.gub.uy/Forestal/cod_fores.pdf.
2

3. 1.2. Attractive features for business
 Suitable natural, geographic, economic, political and business environment
characteristics. Uruguay outstands among other Latin American countries for its
economic freedom and security.
 Attractive cultural and educational conditions, including the use of several languages in
addition to Spanish. Advanced communications and connectivity infrastructure.
 Foreign investment receives the same treatment as domestic investment. Foreign
investors do not require permits or prior authorizations. Local companies may be 100%
foreign owned. Uruguay has agreements for the promotion and protection of
investments with 27 countries, including Spain, United States, Finland, France and the
United Kingdom.
 There are no restrictions on the repatriation of capital, profits, dividends or interest.
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 in Free
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 during the request 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 Zones, Free Ports, Free Airport regimes and
Bonded Warehouses), where no customs duties or taxes are due on imports or
exports.
3

4. 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. Forestry activities, as well as
the extraction and development of wood products, accounted for 3.8% of Uruguayan GDP
in 2009.
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.
Figure 1: Forestry industry activities
Nurseries and reproductive material
Agricultural
Planted and native forests
Sawmills
Carpentry for
construction
ACTIVITY
Mechanical transformation
Boards
Manufacturing Chips and pellets
Panels
Pulp
Cellulose - paper
Paper and cardboard
Energy
Logistics and transportation
Source: Uruguay XXI.
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 that 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.
4

5. 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.
Electricity 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 of
between 10 to 12 MW. There are other examples as well.
“Electricity generation from biomass will have sustainable growth due to its competitiveness and its
alignment with Uruguay’s energy policy in terms of the incorporation of biomass energy to the energy
matrix. By 2015, it is expected that 200 MW of biomass electricity from private investments will be
incorporated.”
Source: Cellulose-Wood Forestry Complex (2008). Value Chains (I), Productive Board.
2.2. Current legislation2
Plantations and other activities linked to forestry activities are regulated under law
15,939 dated 28th of December 1987 and regulatory decrees. This law establishes that
natural and artificial forests in forestry priority areas declared as “protective” and
“yielding”3 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).
Exemption from rural real estate taxes (tax on land).4
To receive the aforementioned benefits, the Forestry Bureau (DGF) of the MGAP must
approve the management and organization plan for the exploitation and regeneration of
forests. Any modification of the management and organization plan must be previously
approved by the DGF.
2
Law 15,939 is available at http://www.mgap.gub.uy/Forestal/15.939.htm. Decree 220/06 dated 10 July 2006 is
available at: http://www.mgap.gub.uy/Forestal/DECRETO%20220_006%20Modificacion%20Decreto%20191_06.pdf.
3
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.
4
Law 18,245 dated 27 December 2007 is available at:
http://www.mgap.gub.uy/Forestal/Ley18245ContribucionInmobiliariaRural.mht.
5

6. 2.3. Forested area
Map 1: Forestry priority soils - 2009
Major highways
Secondary highways
Forestry priority areas
Source: Pike Consultora Forestal.
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 2010.5 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 hectares,6
some 23% of the total agriculture-
livestock area of the country (see Map
1).
The type of soil, the climate and the
distance to production departure points
has an effect on forestry plantation
5
Source: “Monitoring of Forestry Resources, National Forestry Inventory,” 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 studied. Of a
total of 4,769 sample points proposed for all of Uruguay, 1,242 sample sites have been installed and studied, which
represents an inventoried forested area of nearly 450,000 hectares.
6
Decree 191/006, available at http://www.mgap.gub.uy/Forestal/ModificacionDecreto452_988de16_06_06.pdf.
6

7. 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 Region: departments of Salto, Paysandú, Río Negro and Soriano.
The South-East region is closest to the port of Montevideo, favouring 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.7 Major departure points for wood
production from this region depend on product location and type and include Paysandú,
Fray Bentos and Montevideo.
The West 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.8 Ports and bridges used for forest product
transport include Fray Bentos, Nueva Palmira and Paysandú.
Table 1: Total forested area and forestry priority area per region, in thousands of hectares
- 2010
Forested area Forestry priority
Forestry
Region Departments as of August area available for
priority area
2010 planting
Artigas, Rivera, Tacuarembó,
North Central Durazno, Cerro Largo and 436 2,177 1,741
Treinta y Tres
Salto, Paysandú, Río Negro and
West 246 633 387
Soriano
Colonia, Flores, San José, Florida,
South-East Canelones, Montevideo, 287 1,304 1,017
Lavalleja, Maldonado and Rocha.
Total 969 4,114 3,145
Source: Uruguay XI based on data from DGF of MGAP and Pike Consultora Forestal.
7
This basically corresponds to the commercial strategy of the main companies of the region, such as Weyerhaeuser,
GFP, GMO and COFUSA.
8
By UPM.
7

8. 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.
Table 2: Species type according to region
Other
Eucalyptus Eucalyptus
Region Department Pinus Eucalyptus Total
grandis globulus
and Salicacea
Artigas, Rivera, Tacuarembó,
North
Durazno, Cerro Largo and 43% 23% 26% 8% 100%
Central
Treinta y Tres
Salto, Paysandú, Río Negro
West 19% 42% 28% 11% 100%
and Soriano
Colonia, Flores, San José,
Florida, Canelones,
South-East 14% 6% 69% 11% 100%
Montevideo, Lavalleja,
Maldonado and Rocha
Source: Uruguay XXI based on data from the DGF of MGAP.
2.4. 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 2008 international crisis, extraction volumes in the country fell to 8.4 million m 3
in 2009. This decline is tightly linked to the decline in wood extraction for pulp
production.
A decline was also registered in chip production, 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, 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.
Table 3: Round wood extraction volume
3
ROUND WOOD EXTRATION (1,000 m )
Product 2005 2006 2007 2008 2009
1 – WOOD FUEL, INCLUDING WOOD FOR CHARCOAL 1,973 2,111 2,062 2,210 2,210
2 – INDUSTRIAL ROUND WOOD (BULK WOOD) 3,729 4,254 5,111 7,230 6,173
Pieces for sawmills and boards 580 734 1,168 1,150 1,030
Pulp wood (round wood and split wood) 3,128 3,497 3,929 6,080 5,143
Other industrial round wood 21 23 14 0 0
TOTAL WOOD (1+2) 5,702 6,365 7,173 9,440 8,383
Source: Forestry Bureau (MGAP).
8

9. Table 4: Production volume of wood-derived products
PRODUCTION FOR DOMESTIC CONSUMPTION AND EXPORTS
Product 2005 2006 2007 2008 2009
3
CHIPS (1,000 m ) 1,298 1,383 1,280 2,283 1,143
3
SAWN WOOD (1,000 m ) 268 293 308 284 264
3
WOOD BOARDS (1,000 m ) 3 50 162 175 142
PAPER AND CARDBOARD (1,000 metric tons) 113 113 107 107 101
WOOD PULP (1,000 metric tons) 34 34 50 1,129 882
Source: Forestry Bureau (MGAP) and National Customs Bureau of Uruguay.
2.5. Export sector9
Forestry accounted for 13% of Uruguay’s total exports in 2009 and has significant
prospects for future growth. Despite the fact that the 2008 international crisis caused a
drop in sector exports both in volume and value, exports still exceeded US$ 700 million in
that year. For 2010, 2008 export values should be achieved or exceeded (US$ 1,200
million). The main export product of the industry was wood pulp (68% of the total),
followed by wood chips (11%).
Chart 1: Forestry product exports in 2009 – US$ millions
10%
3% Paper and cardboard
Round wood
11%
Chips
4%
68% Sawn wood
5%
Wood boards
Wood pulp
Source: Uruguay XXI based on data from the Customs Bureau of Uruguay.
9
See Appendix 2 for a table indicating the major export destinations of the sector in 2009.
9

10. Chart 2: Forestry product export performance – US$ millions10
US$ millons
180
160
140
120
100
80
60
40
20
0
2005 2006 2007 2008 2009
Paper and cardboard 54 56 52 66 69
Round wood 57 75 93 36 24
Chips 61 72 67 163 79
Sawn wood 23 28 30 30 26
Wood boards 1 0 34 47 32
Source: Uruguay XXI based on data from the Customs Bureau of Uruguay.
Chart 3: Forestry sector export performance - thousands of metric tons11
Thousands of tons
1800
1600
1400
1200
1000
800
600
400
200
0
2005 2006 2007 2008 2009
Round wood 1194 1492 1440 418 289
Chips 949 1087 984 1676 847
Sawn wood 96 98 90 72 59
Wood boards 1 33 75 88 73
Source: Uruguay XXI based on data from the Customs Bureau of Uruguay.
10
Note: the chart does not include wood pulp as its values are outside the scale used. These values are presented in
Chart 4.
11
Note: idem.
10

11. Chart 4: Wood pulp export performance12
1200
1000
800
1097
600
400 867 852
200 480
13 18
0
2007 2008 2009
US$ Million Thousands of tons
Source: Uruguay XXI based on data from the Customs Bureau of Uruguay.
2.6. Logistics
2.6.1. Strategic geographic location in South America's southern 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 the Paraná, Paraguay and Uruguay rivers facilitates 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.
An extensive highway network joins Montevideo to the region's major cities,
facilitating truck transport. 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.
12
Export volume data was provided by the National Customs Bureau of Uruguay and average prices used were taken
from FAOSTAT. 2007: US$ 703/ton. 2008: US$ 790/ton. 2009: US$ 536/ton.
11

12. 2.6.2. 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 2010, Montevideo will have a modern terminal specializing in bulk cargo.
Obrinel, a company established by the Christophersen and Saceem companies, will
start construction at the end of 2010 and will later have a 20-year concession of a
new terminal for wood chips and agro-industrial products in the port. The terminal
will have a storage capacity for 160,000 metric tons of grain in silos and 80,000
metric tons of wood chips in staging areas.
The government’s objective is to turn Uruguay into a “Regional Logistics Pole” by
2030. The following major projects are planned:
o Development of commercial ports: in the La Paloma ocean port (in the
department of Rocha on the Atlantic coast), piers are to be rebuilt to
enable 300,000 metric tons of cargo movement annually. 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 work to enable wood transport via river.
o Complementary investments to the actual Port of Montevideo (Puntas de
Sayago): a National Port Administration´s Project includes the creation of a
Logistics Port on a 103-hectare site in Puntas de Sayago, a coastal area
near the Port of Montevideo. Work is being done to create a “strategic
logistics center” based on the creation of a Free Port Area, a Free Zone
Area and a third area for manufacturing. The project will entail the
construction of highways, railway lines and a barge line to connect to the
port, and will also serve as a warehouse for merchandise and containers in
transit.
o The government has stated its intention to refurbish railway infrastructure.
1,200 kilometers of railway will be repaired with a required investment of
US$ 300 million. It is expected that with the improvements, railway lines
will be able to transport 3.5 million metric tons of cargo per year.
2.7. Recent investments in the forestry industry13
The forestry industry has seen explosive growth over the last few decades, attracting
more than US$ 2,200 million in investments by world leaders in forestry products and
domestic companies. These companies are linked to wood extraction and the industrial
phase (boards, fibers, solid wood products, wood pulp, energy generation, etc.) The
following are some of the major companies operating in Uruguay:
13
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.
12

13. UPM
The UPM Company of Finland is one of the largest wood pulp manufacturers
in the world. In 2009, UPM acquired the major portion of shares in Botnia
S.A., which began operations in November 2007.
It is located on the shores of the Uruguay River, four kilometers north of the
city of Fray Bentos. Production capacity is one million metric 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 for
shipments 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).
“Botnia has developed a cellulose and forestry project in Uruguay. The reasons why Botnia decided to
set up in Uruguay are the weather conditions, which are good for establishing and developing
Eucalyptus plantations, and good human resources to develop and manage capital intensive projects.
Uruguay has offered very clear and stable rules for investment. Since 1987, when the forestry law was
approved in Uruguay, various administrations have left stable conditions for forestry development,
and this has been very beneficial for the establishment of plantations.” RONALD BEARE, General
Manager for Botnia Uruguay, which has invested approximately US$ 1,400 million. 2009.
WEYERHAEUSER
Weyerhaeuser, a U.S. 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 set up in Uruguay in 1996 by purchasing part of the shares of 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 the
Colonvade S.A. and Los Piques S.A. companies.
Weyerhaeuser performs various activities in the sector, from plantations to tracking of
final products. The company has 143,000 hectares of forested area as follows: 78,500 in
Rivera-Tacuarembó and 64,500 in Cerro Largo-Treinta y Tres.
The company has a plywood factory in the department of Tacuarembó (Weyerhaeuser
Productos S.A.) that is forecasted to produce 140,000 m 3 of product this year and 310,000
m3 by 2011. It also has an electricity 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 are between five and six megawatts. The remainder can
be sold to the government electricity distribution company.
13

14. ARAUCO and STORA ENSO
Arauco (of Chile) and Stora Enso (of Sweden and Finland) companies have decided to
increase their forestry activities in Uruguay by doubling forestry assets through Montes
del Plata, a joint venture. The purchase of most of the assets in Uruguay of the ENCE
Company of Spain has led to total forestry assets of approximately 250,000 hectares of
land, of which 136,000 are forested. The transaction amount totaled US$ 344 million.
Currently, the group is carrying out a feasibility study for a pulp mill in Punta Pereira on
the shores of the La Plata River.
“Uruguay has exceptional conditions for fiber plantations and its forestry sector is developing rapidly.
We are very satisfied for being able to participate in this project together with Stora Enso.” MATÍAS
DOMEYKO, Arauco CEO.
COFUSA (Compañía Forestal Uruguaya S.A.) and URUFOR
These companies produce, process and sell high quality
Eucalyptus grandis wood. Both companies are located in
northern Uruguay and are part of the same business group. At its industrial plant, Urufor
processes sawtimber from COFUSA plantations to produce high quality sawn wood. The
products are used for diverse applications to satisfy domestic and international market
needs. Products are used for furniture, kitchens, moldings, construction materials, doors
and windows. Today, Urufor exports to more than 15 countries in Asia, the Americas and
Europe. Industrial investments have been revealed for an amount of US$ 25.8 million plus
US$ 17 million for electricity generation.
URUPANEL
Urupanel is a Chilean company located in northern Uruguay. It
began operations in 2004 and today has more than 500
employees. 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. The plant
opened in 2009. In that year, exports in this area totaled US$ 30 million and of that total,
58% of products were exported to Mexico.
GLOBAL FOREST PARTNERS LP (GFP)
GFP firm makes and administers forestry investments for institutional investors.
Currently, the fund manages a portfolio totaling more than US$ 2,000 million. GFP
operates in Chile, Brazil, New Zealand, Australia, Singapore and Uruguay. Today, the
company operates in Uruguay with four funds with investments of about US$ 150 million.
14

15. GMO RENEWABLE RESOURCES
GMO Renewable Resources is a U.S. company in Uruguay since
2001. GMO administers investment funds that have a branch
(Renewable Resources) dedicated exclusively 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, of which 25,000 are planted.
A total of US$ 90 million has been invested.
“In our judgment, all the conditions we expected to be able to invest were met. First, institutional
security, with a clear forestry policy that is independent of administrations. Second, the country’s
human resources. And third, the long-term vision for the sector in Uruguay.” ALBERTO VOULMINOT,
Forestry Investment Director at GFP. 2009.
RMK TIMBERLAND GROUP
RMK Timberland group, established in 1981 in Georgia, U.S.A., is an investment fund
focused exclusively on the forestry business. It operates as the commercial unit of
Regions Morgan Keegan Trust and Morgan Asset Management. Its objective is the
development of investment funds and general management of forestry resources in
various regions in 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,
of which about 62% corresponds to forestry plantations located mainly of 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. A total of US$ 30 million has been invested up to the
present date. Caldrey S.A., located in southern Uruguay, focuses on services to increase
forestry productive capacity. A total of US$ 5 million has been invested. 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 sawmill in the
department of Tacuarembó. Investments total US$ 35 million.
NEVOPARK: Nevopark Company invested US$ 7 million in 2007 for the installation and
operation of a splitting mill to supply domestic and foreign demand for wood chips.
15

16. CHIPPER: Chipper Company was born from the association of Foresur and Grupo Forestal
companies in 2004. The Chipper Company has 40,000 hectares of Eucalyptus globulus
plantations and a chipping mill capable of processing 470,000 BDMT (sales measurement
unit equivalent to one ton of dry fiber). Investments made in the chip production mill in
Montevideo totalize US$ 2.6 million. Production is exported to Japan, Sweden and
Finland.
IPUSA: IPUSA is a domestic paper company that was acquired in 1994 by CMPC Holding
Company of Chile. IPUSA Company 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 institutional consumption product conversion.
AGRIFOX S.A.: Agrifox is a Uruguayan forestry company that has 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 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,
expanded drying chambers, mobile machinery and improvements in the area of influence.
The company has a sawn wood capacity of 100,000 m 3 of round wood per year and a
drying capacity of 20,000 m3 per year.
Industry-related service companies include:
PIKE CONSULTORA FORESTAL: Founded in 2002, Pike offers complete consulting services
for forestry projects. Activities include: industrial opportunity evaluation studies,
plantation valuations, wood availability reports, environmental impact evaluations, 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 in 2002, Geosylva Company works in forestry consulting,
sales and services that include executive investment projects, business plans, forestry
project evaluation, quality control, auditing, training for forestry management and chain
of custody.
HARVEST: A joint venture between Phaunos Timber Fund Limited (PTFL) and Union Capital
Group (UCG), Harvest Company 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
16

17. environmental problem. The company specializes in greenhouse gases 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 Spanish company specializing in climate change), Maradei Pike (Argentina) and two
Guatemalan organizations (Energía y Medio Ambiente and Fundación Naturaleza para la
Vida). It is also a member of Markit, one of the main registries for the creation and sale of
carbon certificates.
MUNDIAL FORESTACION: Mundial Forestación is a Uruguayan company focused on
producing Eucalyptus globulus genetic material. The company has a 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 yields 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 ones to disease and the consequences of climate change.”
“Financing of carbon bonds is a valuable instrument for promoting forestry plantations and for the
incorporation of changes in forestry system management. One of the most well-known mechanisms is
the Clean Development Mechanism (CDM) that obliges developed countries to reduce their
2
greenhouse gas emissions. As such, a company that reduces CO emissions can benefit by selling these
bonds to companies in developed countries, which are obligated to lower their greenhouse gas
emissions. In Uruguay, UPM and Posco Uruguay S.A. are examples of companies that have already
used the CDM in their investments. Nevertheless, there are other carbon financing systems, some of
which are particularly advantageous for forestry projects. The most well known is the Voluntary
Carbon Standard (VCS)*, which at a global level has had a strong impact over the past two years.”
Source: Daniel Martino, Director of the Carbosur company.
*
The Voluntary Carbon Standard (VCS) was developed by The Climate Group, the International Emission Trading Association
(IETA) and the World Business Council for Sustainable development (WBCSD), among other organizations, to establish
standards and offer credibility to the voluntary emission reduction market.
2.8. Industry perspectives
2.8.1. Global industry perspectives
Increase in world demand for wood products. Global demand for industrial round
wood is forecasted to reach 2,164 million m3 per year by 2020.14 In 2005, demand
was 1,683 million m3.
14
Source: State of the World’s Forests, 2009 – FAO.
17

18. Major factors affecting long-term global demand for wood products:
 Demographic changes: the world population is expected to increase from 6,400 million in
2005 to 7,500 million by 2020 and 8,200 million by 2030.
 Continuing economic growth: global GDP rose from US$ 16 trillion in 1970 to US$ 47
trillion in 2005 (at 2005 prices and exchange rates), and is forecasted to increase to US$
100 trillion by 2030.
 Regional changes: from 1970 to 2005, most of GDP corresponded to developing
economies. However, the rapid growth of developing economies, especially Asian
economies, will lead to notable changes over the next 25 years.
 Environmental policies and regulations: more forests will be excluded from wood
production.
 Energy policies: the use of biomass, including wood, is rising rapidly.
Other important factors for the future of wood products include: the decline of natural forest
harvesting, conversion of planted forests, technological advances, increase in plantation
productivity through improved genetics, decline in wood required due to increases in
recycling, the wider use of compound products and production of cellulose biofuels.
Source: State of the World’s Forests, 2009 – FAO.
Table 5: Real and forecasted consumption of forestry industry products by region - millions
of m3
Industrial round Paper and
Sawn wood Wood panels
wood cardboard
2005 2020 2005 2020 2005 2020 2005 2020
actual forecast actual forecast actual forecast actual forecast
Africa 12 26 68 88 3 4 7 14
Asia and the Pacific 84 113 316 498 79 161 128 234
Europe 121 171 494 647 70 99 101 147
Latin America and
32 50 166 181 9 12 16 24
the Caribbean
North America 158 211 620 728 70 96 106 138
Western and Central
13 23 19 22 9 18 8 14
Asia
World total 420 594 1,683 2,164 240 390 366 571
Source: State of the World’s Forests, 2009 – FAO.
18

19. Chart 5: Real and forecasted total consumption of forestry industry products by region -
millions of m3
2500
2000
1500
1000
500
0
Sawn wood Industrial round Wood-based Paper and
wood panels cardboard
Real 2005 Forecast 2020
Source: State of the World’s Forests, 2009 – FAO.
Increase in global demand for environmental products and services. Policies
related to energy and climate change are leading to an increase in wood used as a
source for energy. Greater attention to “green development” and commercial
cellulose biofuel production will have an unprecedented impact on the forestry
industry. 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.”15
2.8.2. At the national level:
Future availability of forestry assets, due to the fact that 80% of the soils
declared as forestry priority still have no plantations.
Forestry assets in the country are rising, measured in plantations that have not
reached yet harvest time. In the short term, wood production will double to 12
million m3 per year. This implies a great potential for investments in the industrial
sector, such as mechanical transformation for processing and exports of wood
products and sub-products.
15
FAO report: State of the World’s Forests, 2009 – Rome.
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20. 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 7th of January 1998) declares that the promotion and protection of
domestic and foreign investment is of national interest. Decree 455/007 updated the
regulations of this law.
Investment projects in any industry that are submitted and promoted by the Executive
Branch may use between 50% and 100% the amount invested as partial payment of
corporate income tax, according to project classification. The 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 plus 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 the bloc.
Venezuela is currently in the process of joining Mercosur.
Within the framework of ALADI, Mercosur has signed trade agreements with other
countries: Chile (1996), Bolivia (1996), Colombia, Ecuador, Venezuela (2004), India (2004),
Peru (2005) and 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.
2. Investment protection agreements
Uruguay has signed investment security, 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
20

21. 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)
Technical working groups, e.g., Wood Board.
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
Enterprises. 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.
21

22. Appendix 2
Table 6: Land sales for agriculture-livestock use. Number of sales, area sold and value (per
year)
Area sold Value
Number of Total
Year Average Total Average
sales (thousands of
(hectare) (US$ millions) (US$/hectare)
hectares)
2005 2,872 846 295 613 725
2006 3,245 859 265 972 1,132
2007 3,277 676 206 968 1,432
2008 2,959 684 231 1,260 1,844
2009 1,847 323 175 753 2,329
Source: Ministry of Livestock, Agriculture and Fishing – Agriculture-Livestock Statistics Bureau based on information
from the General Registry Bureau.
Table 7: Land leasing for forestry use Number of contracts, leased area and value - 2009
Leased area Value
Number of Average
Use Total Average Total (US$
contracts (US$/hectare/
(hectares) (hectares) thousands)
year)
Forestry 23 15,527 675 1,441 93
Source: Ministry of Livestock, Agriculture and Fishing – Agriculture-Livestock Statistics Bureau based on information
from the General Registry Bureau.
Table 8: Costs of activities linked to the forestry sector – October 2009 – in US$
1 - Transport
1.1 – By truck
Round wood: 251 to 450 km US$/ton 32
Round wood: 51 to 250 km US$/ton 19
Round wood: up to 50 km US$/ton 7
Round wood: more than 450 km US$/ton 43
1.2 – By rail
Wood US$/ton/100km 7
2 - Labor
2.2 – Minimal nominal wage with food and housing for forestry tasks
Foreman US$ 415
Daily allowance for food and housing US$ 3
Monthly allowance for food and housing US$ 74
Machine operator (daily) US$ 14
Specialized machine operator (daily) US$ 16
Common laborer (daily) US$ 10
Specialized laborer (daily) US$ 12
Source: Price Bulletin, October 2009. DIEA-MGAP.
22

23. Table 9: Major destinations of Uruguayan forestry sector exports 2009
Product Country FOB US$ millions % of total
Vietnam 10 43.7%
Round wood Spain 3 14.2%
Portugal 3 12.9%
Subtotal 17 70.7%
Total 24 100.0%
Spain 32 40.7%
Chips Norway 26 32.8%
Sweden 11 13.6%
Subtotal 68 87.0%
Total 79 100.0%
USA 8 30.8%
Sawn wood Indonesia 2 9.3%
China 2 9.1%
Subtotal 13 49.2%
Total 26 100.0%
Mexico 12 38.3%
Wood boards USA 8 25.5%
UK 6 17.1%
Subtotal 26 80.9%
Total 32 100.0%
Argentina 33 47.2%
Paper and cardboard Brazil 19 26.8%
Paraguay 6 8.1%
Subtotal 57 82.1%
Total 69 100.0%
16
Netherlands 237 49.4%
Wood pulp
China 209 43.5%
Subtotal 446 93.0%
Total 480 100.0%
Source: Uruguay XXI based on data from the Customs Bureau of Uruguay.
16
Merchandise exported to the country includes all that has Rotterdam as the main destination. Merchandise is
normally reshipped to other countries, as the Netherlands is not necessarily the final destination for Uruguayan wood
pulp.
23

24. Appendix 3
Forestry product certification
Forestry certification is an independent evaluation of 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). 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 evaluate compliance with the requirements.
The following are two of the main companies involved in certifying forestry plantations in
accordance with the 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 custody17 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 not-for-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 2: FSC certified areas by region
Source: Forest Stewardship Council - “Global FSC certificates: Type and distribution”
17
The entire process of wood from manufacture to transformation and distribution.
24

25. Appendix 4
Quality wood in Uruguay
a) 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. According to several national
studies, for pulp bleached with a standardized ECF process, the Eucalyptus globulus,
grandis, dunnii and maidenni species have gross pulp yields of between 51% and 53%. The
following is the gross yield and basic apparent density for the various species of the
Eucalyptus genus.
Table 10: Gross yield and basic apparent density for Eucalyptus spp
Gross yield at kappa 20 Basic apparent density
Species 3 18
(%)* (g/cm )
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, 2009.
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 11: Average values of elastic modulus, rupture modulus and apparent current
density
Elastic modulus Rupture modulus Apparent current density
Species 19 20 3
(Mpa) (Mpa) (g/cm )
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, 2009.
18
Relationship of weight to volume of the wood sample, without accounting for hollow interior spaces.
19
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.
20
Measure of maximum force per surface unit that a sample can withstand without breaking.
25

26. 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 6: Comparative of Eucalyptus grandis wood from Uruguay, Australia, Argentina and
Brazil – Elastic and rupture modulus
Elastic modulus of Eucalyptus grandis (Mpa) Rupture modulus of Eucalyptus grandis
20000 (Mpa)
16500 150
120
15000
11904 100
10800 10300 86 82
10000 76
5000 50
0
0
E.grandis E.grandis E.grandis E.grandis
(Australia) (Uruguay) (Brazil) (Argentina) E.grandis E.grandis E.grandis E.grandis
(Australia) (Uruguay) (Argentina) (Brazil)
Source: Technology Laboratory of Uruguay (LATU). Research performed by Project Department, 2009.
26

27. Uruguay at a glance (2009)
Official name República Oriental del Uruguay (Oriental Republic of Uruguay)
Location South America, bordering Argentina and Brazil
Capital Montevideo
2
176,215 km . 95% of the territory has soil suitable for agriculture and
Surface area
livestock activities.
Population 3.3 million
Population growth 0.3% (annual)
Per capita GDP US$ 9,458
Per capita GDP (PPP) US$ 13,019
Currency Uruguayan peso ($)
Literacy 98%
Life expectancy at birth 76 years
Form of government Democratic republic with presidential system
Political divisions 19 departments
Time zone GMT - 03:00
Official language: Spanish
Main economic indicators 2005-200921
2005 2006 2007 2008 2009
Annual GDP growth rate 7.5% 4.3% 7.5% 8.5% 2.9%
GDP (PPP), US$ millions 32,048 34,602 38,235 42,543 43,551
GDP, US$ millions (current) 17,367 20,035 24,262 32,207 31,606
22
Exports (US$ millions), goods and services 5,085 5,787 6,936 9,291 8,551
Imports (US$ millions), goods and services 4,693 5,877 6,775 10,217 7,775
Trade surplus (US$ millions) 393 -90 166 -926 796
Trade surplus (% of GDP) 2.3% -0.5% 0.7% -2.8% 2.5%
Current account surplus (US$ millions) 42 -392 -212 -1,502 258
Current account surplus (% of GDP) 0.2% -2.0% -0.9% -4.7% -0.8%
Overall fiscal balance (% of GDP) -0.4% -0.5% 0.0% -1.4% -2.2%
Gross capital formation (% of GDP at current prices) 16.5% 18.6% 18.6% 20.2% 19.1%
Gross national savings (% of GDP) 17.6% 16.9% 19.0% 17.9% 17.1%
Foreign direct investment (US$ millions) 847 1,493 1,329 1,840 1,139
Foreign direct investment (% of GDP) 4.8% 7.5% 5.4% 5.7% 3.6%
Exchange rate peso / US$ 24.5 24.1 23.5 20.9 22.5
Reserve assets (US$ millions) 3,071 3,097 4,121 6,329 8,373
Unemployment rate (% of EAP) 12.2% 11.4% 9.7% 7.9% 7.7%
21
Source: GDP data is taken from IMF. Foreign trade, FDI, exchange rate, international reserves and foreign debt data is
taken from the Central Bank of Uruguay. Population growth, literacy, unemployment and inflation data is taken the
National Statistics Institute (INE).
22
2008 and 2009 data includes a partial estimate of productive activity in free zones and information from the CUTI-
coordinated survey for software related activities.
27

28. Investor Services
About Us
Uruguay XXI is the country’s investment and export promotion agency. Among other functions,
Uruguay XXI provides no cost support to foreign investors, both those who are evaluating where
to make investments as well as those currently operating in Uruguay.
Our Investor Services
Uruguay XXI is the first point of contact for foreign investors. Services we provide 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, incentive
programs for investments, location 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 public entities and private companies.
www.uruguayxxi.gub.uy/investinuruguay
invest@uruguayxxi.gub.uy
28