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  • Archive for June, 2010

    Why Invest in Brazil?

    2010 - 06.29

    Of the BRIC countries many traders don’t think that an investment in Brazil is the best bet for their stock portfolio when there is also a choice of China and India. After all, among the BRIC funds China has the largest population and is the world’s third-largest economy. India is the world’s largest democracy and has the second most populous nation.

    Compared to this Brazil is roughly two thirds the size of the US in terms of population and the country is half the size of Russia. But don’t sell Brazil short, among BRIC funds, this Latin American country offers fantastic investment opportunities.

    For years the Chinese have been inappropriately allocating capital on a grand scale and the interest rate in China has been far below the economic growth rate, which for 20 years has resulted in a runaway real estate market. There is also a growing concern of China’s protectionist policies and fears of a US trade war. This means that not only are private sector companies from foreign nations at a disadvantage, but also BRIC investments in China are at risk of being in a company run by Beijing instead of businessmen. After all, China is a country that prefers state owned enterprises.

    Compared with China, India offers more of a long term promise due to its democratic government. Despite this, long term profits won’t be forthcoming anytime soon as of all the BRIC nations India is the poorest nation and its infrastructure is a serious problem. India is likely to lag behind other BRIC funds until this improves.

    I can see a lot of potential in Russia, it is a huge country with vast natural resources but the lack of economic diversification and stability means it is a risky short term bet. The emerging market has been volatile due to currency problems and inflation worries in global markets.

    Given these risks it seems that Brazil offers the most advantageous opportunities for investment. Compared to the other BRIC countries Brazil businesses are not controlled by the state, the nation is rich in natural resources, which has diversified the economy and the nation enjoys a lack of dependence on exports of consumer goods. Also, unlike the other countries in this group Brazil has a stable democracy.

    There are other advantages of investing in Brazil than just the obvious. Brazil generates 73% of its energy from hydroelectric power and is home to one of the largest oil reserves in the world. Their middle class is booming so sales inside this BRIC investment zone offset sales of resources abroad. There is a competitive manufactured goods industry in which Brazil does not engage in a mercantilist exchange rate policy to boost exports.

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    Timber Companies and Environmental Groups Agree on Forest Protection Deal

    2010 - 06.03

    An agreement has been unveiled by environment groups and Canadian timber companies aimed at protecting two-thirds of Canada’s forests from unsustainable logging. The Canadian Boreal Forest Agreement (CBFA) brings together nine environmental groups and FPAC’s 21 member companies. These two sides have, in the past, fought a bitter battle against each other with few victories on either side.

    At over 72 million hectares this has become the world’s biggest commercial forest conservation deal. In the hope of sustaining endangered caribou populations logging will be totally banned on some of the land. The total protected area is roughly twice the size of Germany and equals the area of forest loss globally between 1990 and 2005. The timber companies hope the deal with bring commercial gains such as timber buyers seeking a higher ethical standard.

    “The importance of this agreement cannot be overstated,” said Avrim Lazar, president and CEO of the Forest Products Association of Canada (FPAC). “Together we have identified a more intelligent, productive way to manage economic and environmental challenges in the Boreal [Forest] that will reassure global buyers of our products’ sustainability.”

    Calls for boycotts and criticism of the industry have been suspended by the environmental groups as part of their agreement. The Pew Environmental Group, said it was ‘excited’ by the agreement and has been trying for over a decade to ‘green’ Canada’s forestry industry.

    “We’re thrilled that this effort has led to the largest commercial forest conservation plan in history, which could not have happened without both sides looking beyond their differences,” said Steve Kallick, director of Pew’s International Boreal Conservation Campaign.

    The protected lands run right across the country from the Pacific to the Atlantic coasts this is an area that is larger than in some agreements currently feted as global leaders, such as the Brazilian Amazon Region Protected Areas project. Companies and environmental groups have pledged to work together to implement world leading forest management and harvesting practices.

    The timber will be certified as coming from sustainable sources and the effects on forest protection will be monitored, especially the caribou. This agreement could act as template for future forest agreements in other parts of the world, according to Pew, as industry leaders respond to an increasingly environmentally aware public.

    “There is recognition that this is how forestry will be done in the 21st Century, and there’s a great interest in getting ahead of the rest of the industry,” Mr Kallick told BBC News.

    At present the agreement covers the timber companies and environmental groups and they are now looking for reinforcement and backing from the government. In the Canadian system that means the national and provincial authorities and ‘First Nation’ governments of indigenous groups, some of whom have already given their support.

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    Chinese Look to Invest in Canadian Forestry Industry

    2010 - 06.02

    Canadian Forests Minister Pat Bell has gone on record as saying that there is a huge potential for the northwest to tap into the increased growth of the Chinese market.

    A Chinese company, which already has a high level of interest in the region, is currently planning to send some of its senior executives to visit the northwest. According to Bell they are interested in the region’s forest resources as a whole and not just for the export of raw logs.

    “The interest we’ve had expressed by companies like China Forestry Exchange is specific to manufacturing in the northwest,” said Bell.   He adds “there’s always been some interest in log exports but our goal and objective is to rebuild a manufacturing sector in the northwest.”

    In addition the mothballed Eurocan Paper mill in Kitimat is being eyed up by some Swedish business people, according to Bell.

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here

    Deforestation in the Balkans

    2010 - 06.01

    The home of more than half of Europe’s bears and wolf populations is being threatened by illegal logging and unregulated real estate projects.

    This weekend marks the International Day for Biological Diversity and to alert public opinion to the looming dangers, national parks in the region will rally together for this event.

    One of the countries worst hit by deforestation is Albania. According to several environmental non-governmental organisations contacted by AFP woodlands that once covered 51% prior to 1990 have now been reduced to 25%.

    A prime example is the Vlora region on Albania’s southern Adriatic coast, where according to the Albanian National Forest Association 102 hectares (252 acres) of forests were cleared to make room for illegal construction.

    Illegal loggers haven’t even spared Albania’s national parks such as the Lura, considered a gem of the Balkans with its vast expanse of pine, fir and beech trees. According to the national statistics institute no one has been tried and convicted for illegal logging although ten times more trees are felled illegally than legally.

    Meanwhile Romania boasts the second largest woodland expanse in Europe after Russia with 300,000 hectares of intact forest. Even so its national parks are also under threat. Between 2004 and 2007 in Piatra Craiului Park in the Meridional Carpathians, nearly 300 hectares of forests were cut down illegally. In protest an environmental group called Agent Green used huge logs to write the word ‘crime’ on one of the now bald mountainsides.

    “This is a disaster; I’ve never seen anything like this. If logging continues, the area will turn into a desert,” Alex, an environmental activist told AFP.

    If that wasn’t bad enough offical figures in Romania show a worrying trend, more than 170,000 cubic meters of illegally cut timber are seized every year and out of the 25,000 fines issued over the last three years only two have ended up in actual convictions. Cristian Apostol a Romanian junior minister for forestry blamed legal loopholes for the situation. He cited various reports where more than 180,000 hectares of forest had been illegally cleared since the fall of the late communist dictator Nicolae Ceausescu in December 1989.

    Since that time some of Romania’s deforestation has been blamed on the shifts in ownership after the collapse of communism.

    “The law was there but the necessary structures to enforce it were missing,” said Apostol.

    Today there are more than 800,000 private owners of forest land and for obvious reasons it is not easy to control them all.

    “Things have improved, however, thanks to regional enforcement bodies and private firms and foundations,” he said, adding more than one-quarter of Romania’s forests were now privately managed.

    During the 1992-1995 war forests suffered massive destruction in Bosnia with some 100,000 hectares of forests infested with land mines and expected to remain off limits for many years to come.

    The Balkans have also been badly affected by forest fires. Macedonia saw 35,000 hectares turn to ash in 2007 resulting in floods, landslides and a depletion of wildlife. Authorities and NGOs in the Balkans have now, after years of neglect to take action to reverse the decline of forest land.

    Croatia has slapped severe restrictions on construction in forest areas and Romania has pledged tougher sanctions against illegal lumbering. Romania has also joined Macedonia and Serbia in launching ambitious reforestation programmes.

    Despite this Grabriel Paun, the head of Agent Green, warns against expecting miracles.

    “The trees we are planting now will only turn into a mature forest in 80 years’ time,” he said. “We won’t be there to enjoy it, but we are doing this for the next generations and hoping to see the wildlife return.”

    The Timber Investment Blog is sponsored by Greenwood Management. For more information on investing in Forestry please click here