The profitability of forestry investments in Brazil vs. France

Palma de Mallorca, November 8, 2013

As a large proportion of our investment portfolio is in Brazil, we are well aware of the benefits this emerging market offers to investors. Even though we are more than confident in our own projects ability to deliver, it is always reassuring when an internationally recognised organisation confirms our choices. In recent months, the European Forest Institute has carried out a study comparing the profitability of forestry investments in Brazil to forestry investments in France.

Using the annual average exchange rate of the European Central Bank as a marker they compared:

•    Land costs
•    Running costs
•    Cost of timber production
•    Benefit cost ratio
•    Rate of return

After compiling and anylising the data they found that the Brazilian forests are much more productive.  Brazilian projects produce a larger volume of timber in a shorter period of time.

The cash flow aspect
The cash flow aspect of any project is obviously important.  This report looked at the long term prospects and France took 45 years to achieve the same cash flow that Brazil achieved in 21 years.  Even after 10 years the differences were significant.

The investment return
Two separate terms were used to try to achieve somewhere near the same investment return.  Brazil managed a return of 21% over 15 years where   France managed 19.90% over 35 years.  Figures for longer terms showed Brazil produced a better ROI every time.

The study’s conclusion
The question at the start of the study was, “Are forestry investments more profitable in Brazil than France”, and the answer was a resounding yes. In the figures they used a discount rate of 6% to ensure sustainability.  In all of the scenarios they used Brazilian investments remained profitable, unlike the ones in France.

The other benefits
This study was to weigh up the financial benefits of forestry investments.  There are others benefits that impact the communities and infrastructure of Brazil as a whole. Ethical companies like Greenwood Management work closely with the local community providing jobs at a more than fair rate of pay and making sure that their culture is not adversely affected. We work closely with local regulatory bodies to ensure sustainability guidelines are always met.

The damage illegal logging causes
Everyone has heard about the damage being caused by the deforestation of huge amounts of land.  Most of us are aware of the role that trees play in taking the carbon dioxide out of the air and replacing it with oxygen. Continuation of illegal logging will slowly rob the human race of oxygen, making the need for investment in sustainable and ethical projects more crucial than ever.

The more sustainable projects there are the brighter the future looks for generations to come. This is why logging is strictly controlled, why whole forests are replanted and why the illegal loggers are treated so harshly when convicted.

The Greenwood Team

Sally-Ann Webster
GW-Marketing Coordinator
0034 971 221 156 x206