Forestry Sector - Proexport

1. Forestry sector in Colombia
2012
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2. In this document, you will discover the competitive advantages of our forestry sector, the
opportunities that benefit your investment and the support that Proexport can provide.
The following are clear reasons for investment:
Resources
i. 17 million hectares (42 million acres) suited for timberland, spread out in a range of
altitudes. Today 2% of that potential (370.000 hectares) 1 is in use.
ii. More than 10 popular commercial forestry species. The most important are Pine (P.
maximinoi, P. tecunumanii)) and Eucalyptus (Eucalyptus grandis) for pulp production; Teak,
Oak and Acacia (Acacia magnium) for sawn wood and Melina for wood paneling.
iii. Photosynthesis throughout the year as a result of our tropical location, allowing higher
bio-mass production and yields with shortest biological cycles. As a result of climate
conditions, it is possible to establish Patula Pine timberland in the high Andean area,
Caribean Pine (Pinus caribea) in the Orinoquia, Eucalyptus (Eucalyptus grandis) in the middle
Andean area and Teak in the low tropical line area. As an example, Eucalyptus has a yield of
30 m3/ha/year with a rotation age of 8 years.
iv. Important biotechnology and genetic improvement. The country has consolidated a high
quality forestry germplasm base 2 with enough material.
Market
v. Deficit in the balance of trade, which represents an opportunity for the establishment of
commercial forestry projects seeking to satisfy the local demand of 46 millions consumers
and international markets taking advantage of the signed Free Trade Agreement FTAs.
Incentives
vi. Legal Incentives for sector investors including the income tax exemptions for new
plantations and the Forestry Certificate Incentive (CIF).
1
MADR. Number estimate to 2008
2
Colombia has developed research on, Pinus Caribea, Eucalyptus grandis, Melina, Ceiba and Teak that allows for better
yields through the genetic improvement of the seeds and clones. This research guarantees the genetic material used.
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3. The information contained in this document was provided by the Ministry of Agriculture and Rural
Development, Fedemaderas, FAO, CONIF and DIAN
The forestry sector in Colombia
• Colombia has a potential of 17 million hectares (42 million acres) suited for commercial
forests
This extension of land neither invades the native forest nor competes with lands available for
other agricultural uses. The National Forestry Investigation Corporation (CONIF) 3 identifies the
areas suited for commercial forests (excluding native forests). This study estimates that Colombia
has 17 million hectares (42 million acres) suited for commercial forests (2008) discriminating areas
with no restrictions 4 and those with few restrictions.
Areas suited for timberland
No restrictions With lower restrictions
Department
ha ha
Antioquia 1.477.221 2.137.309
Atlántico(*) 35.820 40.152
Bolívar(*) 355.475 94.177
Caldas 22.420 146.284
Cauca (Cuenca alta río) 90.227 182.036
Cesar 376.935 392.104
Córdoba 189.753 233.770
Cundinamarca 150.116 150.887
Huila 50.022 163.283
Magdalena(*) 500.166 194.942
Nariño 365.621 295.872
Santander 281.353 451.824
Sucre 136.263 167.934
Tolima 229.705 145.193
Quindío 32.130 17.846
CORPORINOQUIA (jurisdiction)
Arauca 930.025
Boyaca (jurisdiction.) 2.892 2.877
Casanare 24.295 1.705.973
Meta 339.403 2.604.763
Vichada 467.834 2.128.105
Total 5.127.650 12.185.356
Total Areas Suited for Timberland 17.313.006
(*) Places close to Magdalena River
Source: CONIF 2OO8
In the Valle del Cauca Department, the potential area is estimated to be 200.000 ha. The Department has experience in
timberland and has one of the most important ports of the Country: Buenaventura.
3
CONIF is the entity that updates the estimate of land available for timber. In 2004, the estimates were 16 million
hectares. In 2008, the areas suited for timber are 17.313.006 hectares.
4
No restrictions: Soil needs no improvement to be planted and developed for forestry projects.
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4. From 114 million hectares of the national territory, only 0.4% is under forestry commercial
plantations, 60.7 million hectares are protected and unavailable for forestry projects for they are
covered by native forest.
Current and potential use of land in Colombia, 2011 (Million hectares)
39,1
14,5 17,3
10,2
4,6
0,4
Agriculture Forestry Livestock
Current Use Potential
The development of the forestry sector is a long term national plan. The National Forestry
Development Plan (PNDF) established a goal of 600.000 planted hectares by 2014 and 1.5 million
by 2025.
• Colombian potential regions for forestry plantations development
The Ministry of Agriculture and Rural Development (MADR) has identified three regions with high
potential for forestry development projects. The identified regions include Eje Cafetero, the
Caribbean and Orinoquia.
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5. Potential zones for forestry development
Source: FAO. Calculations MADR
These potential zones have forestry experience, for the reason that the most important Forest
landowners are located in these regions.
National forestry area 2008-2011
Department 2008 2009 2010 2011
Antioquia 56.620 61.635 64.156 79.422
Bolivar 9.305 9.319 9.319 12.112
Caldas 17.958 19.728 19.841 20.452
Casanare 5.581 5.651 5.651 5.651
Cauca 21.498 22.040 22.557 23.394
Cordoba 29.047 29.047 29.598 31.442
Magdalena 18.183 18.272 18.272 18.558
Santander 7.648 8.612 10.203 10.526
Tolima 4.574 4.674 3.117 4.910
Valle del Cauca 24.457 24.457 24.461 25.030
Vichada 16.962 22.752 23.632 29.067
Others 41.233 42.833 42.833 108.876
Total 253.066 269.020 273.640 369.440
Source: Ministerio de Agricultura y Desarrollo Rural
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6. • More than 10 high value added commercial timber species
More than 10 commercial timber species are suitable for planting in Colombia, offering an
enormous potential for increasing yields by applying biotechnology and genetic improvement
processes. In Colombia, commercial timber species need less time to grow, increasing productivity.
For example, the Eucalyptus has a yield of 30 m3/ha per year in a rotation age of 8 years.
Rotations age and yield by species in Colombia
Yield Rotation age
Scientific Name Common name 3
(m / ha/year) (years)
Eucalyptus grandis Eucalyptus 25-40 8
Acacia magnium Acacia 26 – 30 12
Bombacopsis quinata Ceiba Tolua <18 >20
Cordia alliadora Laurel 8-20 20
Eucalyptus globulus Eucalyptus 15 – 35 8 – 12
Gmela arborea Melina 20 – 25 10 -14
Eucalytus pellita Eucalyptus 15- 20 12
Eucalytus tereticornis Eucalyptus 20 8 - 12
Schizolobium parahybum Brazilian Firetree 13 16
Tectona grandis Teak 7 – 10 25 – 28
Cariniana pyriformis Colombian Mahogany 7 20
Source: CONIF/MADR
• In Colombia, it is possible to obtain excellent yields in softwood timber similar to important
producer countries.
As an example, in Pinus tecunumanii it is possible to obtain a Mean Annual Increment (MAI) of 30
to 40 m3/ha/year with a rotation age of 16 years.
In hardwood timber, Colombia followed Brazil with the second highest yield with 30 m3/ha per
year with a rotation age of 7 years with E. grandis.
Turnover and Yield of Various Species in Colombia and Other Countries
Turnover
Species Country Yield- IMA (M3/ha/year)
(years)
Softwood
P. tecunumanii Colombia 16 30 – 40
P. radiate Chile 20-25 10 – 25
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7. P. taeda. Uruguay 20 16 – 23
P. patula Colombia 16 12-22
P. taeda Brazil 15 – 20 16
P. taeda Southeastern US 25 10 – 15
Hardwood
E. grandis-urophylla (hybrids) Brazil 7 45
E. grandis Colombia 7 30 – 40
E. spp. Uruguay 8 – 10 27 – 30
E. globules Chile 10 – 12 20 – 30
E. globules Portugal 8 – 10 12
Source: CONIF 2002, CENPAPEL 2003
• Higher yield in four species compared to competing countries
As a result of climatic conditions, biotechnology and genetic enhancement, several species
produce higher yields in Colombia than in competing countries. For example, Acacia can yield 30
m3/ha/year.
Yield by species: Colombia compared to other countries
Yield
Yield of Other Countries
Species Colombia 3 Countries
3 (m /ha/year)
(m /ha/year)
Philippines, Malaysia, Haiti, India, Thailand,
Acacia 26 – 30 8 – 19
Indonesia, Panama
Philippines, India, Indonesia, Malaysia,
Teak 7-13 10 – 12
Myanmar, Nigeria, Thailand.
Eucalyptus 15-40 16 – 30 Argentina, Chile, Uruguay
Bolivia, Brazil, Costa Rica, Philippines,
Melina 20 – 25 12 – 19
Indonesia, Malawi, Malaysia.
Source: CONIF FAO
3. Photosynthesis throughout the year as a result of our tropical location
Geographical characteristics benefit forestry activities, allowing species to have higher yields and
shorter rotations ages.
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8. 8

9. Colombian raw timber demand has been satisfied by Imports
Between 2009 and 2010, the Colombian trade balance had a deficit in wood board and pulp;
meanwhile consumption has been stable and satisfied by imports. This is an opportunity to
execute forestry projects in Colombia. The country has potential land available (17 million
hectares, or 42 million acres) for timberland and an unsatisfied local demand.
• In Colombia, consumption is satisfied by imports
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10. The balance of trade has a deficit in wood, charcoal and wood products and is in part satisfied by
imports. In 2010, the registered deficit was of US$121.9 millions and during the first trimester of
2011 the deficit was of US$65.9 millions.
This is an opportunity to execute forestry projects in Colombia. Thanks to the increase in
consumption in both national and international markets, Colombia has enough available land (17
million hectares, or 42 million acres) for timberland and to substitute for the long term
importation of wood products.
Sourse: SISEX, Calculations Proexport
• Existence of potential strategic partners
Colombia has a group of companies engaged in the production, transformation and
commercialization of lumber products, located in different zones of the country, with a large
knowledge of consumption patterns and the local distribution networks. This places the
Colombian companies as very interesting potential strategic partners for any foreign company
interested in the development of business plans in our country.
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11. Main Companies in the forestry Sector in Colombia
Forest landowner Species Planted hectares Location Timber uses
Teak 1.269 Magdalena Architectonic line
Refocosta Oak 762 Magdalena Agro industrial and
Pinus 1.525 Casanare construction line
Eucalyptus 1.279 Magdalena
Smurfit Kappa, Eucalyptus (17.000 11.000 Pereira Paper and
Cartón de Ha) 18.000 Cali packaging
Colombia Pinus (27.000 Ha) 15.000 Popayán
Barranquilla Construction,
Pizano Ceiba Roja 20.000 Urabá plywood, doors,
Melina Valle del Cauca furniture
Pinus Wood is used to
Reforestadora Melina supply different
Industrial de Pinus Oocarpa 10.555 Antioquia industries
Antioquia Acacia
Teak
Kanguroid. 3F Acacia Construction,
Proyectos Bosques Melina 4.100 Córdoba furniture
del Futuro Teak
Pinus Maximinoi 98 Antioquia Multiple uses,
Reforestadora el Pinus Pátula 4.554 Caldas Roundwood and
Guásimo Ciprés 202 Tolima fibre
Other species 31
Pinus Patula 7.400 Medellín Yarumal Wood is used to
Industria Forestal Pinus Oocarpa Angustura supply different
Doña María Pinus Tecumani Yolombó industries
Pinus Maximinoi
Wood is used to
Cupressus supply different
Cipresses Lusitánica 2.000 Caldas industries
Pinus Pátula Antioquia
Madeflex Eucalyptus 4.000 Magdalena Moulding and mill
work products
Source: Companies Web Pages
• Real pre-tax discount rate of 11.2% y 16.6% .
The study “Global Timber investments, wood costs, regulation, and risk” 2010, argues that in
Colombia forestry commercial plantations can obtain interest rates of return (IRR) of 11.2% in P.
patula, 14.7% in P. maximinoi, 15.5% in P. tecunumanii and 16.6% in E. spp.; these rates are
considered attractive in comparison to competitors such as Chile with an IRR of 13.1% in P. radiata
for pulp and 15.6% in P. radiata for sawmills.
The study classifies Colombia as an attractive destiny in regards to IRR.
Interest rate of return for Latin America Timberland Investments, 2010
Region IRR Species
Brazil 16.3-25.5% P. taeda, P. eliottii, E. grandis,
Chile 13.1-16.6% P.radiata
Colombia 11.2-16.6% E. spp, P. tecunumanii, P. patula, P. maximinoi
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12. Uruguay 12.8-22.9% E. globules, E. grandis, P. taeda
United States 6.5-8.5% P. taeda, Ps. menzeii
Source: Global Timber Investments, Wood costs, regulation, and risk
Biomass and bioenergy 34 (2010) 1667-1678
• Legal Incentives for sector investors
There are two significant incentives in the forestry sector: (i) The exemption on the income tax for
new forestry plantations and sawmills. (ii) The Certificate of Forestry Incentive (CIF in Spanish).
These benefits cannot be accumulated, it means, that the plantation simultaneously cannot access
to both incentives.
Exemption on income tax:
New forestry plantations and sawmills, have an exemption on the income tax. This benefit is for
plantation established from the 1st of January of 2003 and it does not have temporal restrictions.5
In order to access to this exemption the plantation needs to be registered with the Ministry of
Agriculture6.
• Requirements for New Fields:
– Register the project with the Autonomous Regional Corporation.
– Owner’s certificate or lease contract where the company can prove that they have the right to
exploit the field.
– Certificate of the Autonomous Regional Corporation stating that this is a new field.
– Accounting certificate stating both the income generated by the new field and other income
the company may have.
• Requirements for New Sawmills
– Proof of purchase for sawmill and accompanying machinery, written after 2003.
– Contract purchasing the wood production from a new forest.
– Accounting certificate stating both the income generated by the new forest and other income
that the company may have.
Certificate of Forestry Incentive
The CIF is the monetary subsidy that recognizes 50% of the investment for introduced and
autochthonous species to finance the establishment and maintenance (from the second to the
fifth year) of new forest plantations. The CIF is neither compatible with the tax benefits nor with
other subsidies from the government. For 2012, the government has $100.000 million COP
(around 50 million dollars) to subsidize reforestation in Colombia.
The Ministry of Agriculture has established the national average value of the total net costs for the
establishment and maintenance of a hectare of a planted forest as well as the maximum quantity
that will be recognized by the CIF in 2012. These figures appear below. CIF resources are limited.
The Ministry of Agriculture defines a date each year in order to file CIF applications.
Regarding the specific amounts that are covered by the CIF, each year the Ministry of Agriculture
defines the average plantation and maintenance costs per hectare for introduced and native
5
Article 207-2, Tax Statute.
6
Article 2, Decree 2755 of 2005.
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13. species. This average is the maximum amount to be covered by the CIF. This maximum applies for
plantations with a density over 1000 trees per hectare. 7
For 2012, the average plantation costs are the following 8:
Specie Average national net costs Incentive Percent Value Payable value for each CIF
per hectare (aprox.) per hectare (aprox.)
Native USD$869,954 50% USD$434,97
Introduced USD$869,954 50% USD$434,97
The average maintenance costs for 2012 are the following 9:
Specie Average national net costs Incentive Percent Value Payable value for each CIF
per hectare (aprox.) per hectare (aprox.)
Year 2 USD$233,188 50% USD$116,59
Year 3 USD$164,837 50% USD$82,42
Year 4 USD$104,94 50% USD$52,47
Year 5 USD$197,88 50% USD$98,94
In order to obtain the Certificate of Forestry Incentive the investor has to fulfill the following
requirements 10:
 The plan of establishment and forest management has to be submitted and approved by the
Ministry of Agriculture.
 Proof of the plantation´s execution will make on lands with forest quality, according to its
characteristics.
 The investor must prove that previously the lands have not been occupied by natural forests
during the last 5 years or currently.
 The beneficiary of the incentive has to prove its quality as owner or tenant of the land.
 Making the contract between the investor and the Ministry Agriculture.
After all the steps before mentioned, the Ministry of Agriculture will evaluate and verify the status
of the plantation, in order to authorize Finagro to make the payment, the payment will take
approximately 1 month, but it can take longer.
Single-Enterprise Free Trade Zone for goods.
These zones are designed so that one enterprise may set up in any place in the country with the
benefits of a Free Trade Zone.
Agro-Industry projects may install processing plants in a Single-Enterprise Free Trade Zone
whenever the company fulfills the following requirements:
Requirements:
1. Investment of USD $ 40.62 million 11.
2. Creation of 150 direct jobs. For every extra 23.000 “Minimum Monthly Legal Wage”s ($5.19
million USD) the job requirements decreases by 15 jobs, but never less than 50 jobs total.
7 Resolution 319 of 2011 of the Ministry of Agriculture.
8 The costs are originally fixed in COP. 1 COP=2000 USD.
9 The costs are originally fixed in COP. 1 COP=2000 USD.
10
Law 139 of 1994 and Decree 1824 of 1994.
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The market exchange rate used is USB 1 = COP 2,000. The requirements for calculating Monthly Legal Minimum
Wages of 2009 is of $ 515.000 COP. The Monthly Legal Minimum Wages as well as market exchange rate are subject to
change.
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14. Benefits:
• A single 15% income tax rate.
• Goods introduced from the rest of the world into a FTZ (i.e. capital goods) are not considered
imports; therefore, they do not pay import tariffs or VAT.
Raw materials, parts and inputs sold from a national customs territory to FTZ users will be VAT
exempt.
Tariff and VAT free capital goods imports: Import-Export System “Plan Vallejo”
Plan Vallejo for Capital Goods is a special import-export system in which a company may request a
program for the importation of capital goods free from tariffs and VAT.
• Requirements:
– The good must be on the list of the Resolution 1148 de 2002 12.
– Export 1.5 the FOB price of the imported capital goods.
– Submit an application for the program to DIAN.
Tariff and VAT free inputs and raw material imports: Plan Vallejo for inputs and raw materials
Imports of raw materials and inputs for the production of goods, which may be partially exported,
provided that they are used to produce goods whose importation, are tariff exempt. Exports must
represent consumption of at least sixty per cent (60%) of the imported inputs.
• Related Entities
Company Description Web Page
Ministry of Agriculture and Area for Forestry Policy for www.minagricultura.gov.co.
Rural Development Timberland
Fedemaderas National Federation for the www.fedemaderas.org.co
Lumber Industry
CONIF National Forestry Investigation www.conif.org.co
Center
Corpoica Colombian Corporation of www.corpoica.gov.co
Agricultural Investigation
• Proexport Services
The Colombian Government places special emphasis on generating favorable conditions and
providing the best support possible to investors. Proexport, the Governmental Agency for the
Development of Investments, provides services to foreign investors that include the following:
 Information requests (economic, legal, procedural or sector-specific information).
 Contacts with the public and private sectors.
 Agenda organization for investors who decide to visit Colombia.
 Support services for investors already established in the country.
 Evaluation and improvement of the business environment.
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http://www.mincomercio.gov.co/eContent/NewsDetail.asp?ID=567&IDCompany=1
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15. All services are free of charge. The main objective is to develop new businesses through
efficient and friendly processes. All information provided during the process is maintained
confidential.
Proexport has support teams in 18 cities around the world. It would be our pleasure to help
you. Access our contact information at:
www.inviertaencolombia.com
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