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While the Argentinean pulp and paper industry has worked quickly to adapt to changing market demands during the pandemic, major investments are needed to capitalize on the country’s potential in this sector, sources told Fastmarkets.
Despite a concerning macroeconomic environment and difficulties with foreign trade, industry executives and leaders agreed that the country still has a lot of unexplored potential in the pulp market.
In an exclusive interview with Fastmarkets, Leandro Mora Alfonsín, the economist responsible for a broad study about the forestry sector sponsored by the Argentinean Finance Ministry, noted that Argentina currently has 1.3 million hectares of planted forests and 54 million hectares of native forests.
“The country still has the potential to increase its cultivated forest areas to 3.7 million hectares without affecting any protected areas or competing with food production,” the economist said.
Argentina also has 20 million cubic meters (m³) of wood available for industrial use, but only 15 million m³ are consumed, according to Alfonsín.
“We need to revert this lack of usage [by] attracting intensive capital and technological investments. Argentina can be very competitive, and I believe that with a few signs of economic stability, it can start to attract investments,” he said.
Speaking during the bi-annual conference promoted by the Argentinean Pulp and Paper Manufacturer’s Association (AFCP) in May, delegates noted that neighboring countries Uruguay and Paraguay have received large investments for the construction of new mills.
“The [Argentinean pulp and paper] sector had a great opportunity of growth and did not take the opportunity,” AFCP president Claudio Terres said during the conference.
In 2006, Argentinean authorities contested the construction of a pulp mill in Uruguay by Finish company Botnia (now owned by UPM) in the International Court of Justice, alleging environmental risk to waterways.
That case — along with problems of maxi inflation and difficulties with foreign trade inflow, which complicates multi-billion-dollar investments in the country — has kept investors away from the country in the years since.
“More than 15 years ago, Botnia installed its pulp mill in Uruguay. [After that], we saw other two projects there, several more in Brazil, Chile and now in Paraguay,” Terres said. “These projects have shown that no environmental damage was caused, but instead it improved GDP in those nations, increased inflow of foreign exchange, created jobs and improved social aspects.”
According to Alfonsín, it is not hard to imagine that a new project could be announced in the country by 2025 if major problems with foreign trade and the macroeconomy begin to be resolved. At this point, he noted, the country presents an inexpensive opportunity for foreign investors.
“There are a lot of investments at our doors just waiting to enter. There are challenges such as logistics that Uruguay has solved already, but the sector here has a lot of tradition with companies with decades of experience, good climate and availability of water,” Alfonsín said.
Indeed, Terres said that the AFCP is working hard to make the development of large pulp projects in the country possible in the future.
“The country is already pursuing opportunities with lithium extraction and shale gas; the forestry industry has the same capacity. This is a sector that must be considered a priority by the government, included in policies of development, with stable conditions so we can attract large investments,” Terres said.
This article was first published in PPI Latin America, the industry’s most trusted pulp and paper market news and prices for Latin America. Speak to our team to find out more about subscribing to our products and services.