Feasibility Study on Investment in Brazilian Paper and Pulp Industry

IMG-6 Global Business surround Feasibility charter for coronation in the brazil nutian melodic theme and material body intentness Report By Ashish Jindal (063011) Avneesh Luthra (063012) Aayush Singhal (063013) Deepak Arora (063014) Feasibility study for investment in the physical composition and Pulp labor in brazil-nut tree An everywhereview of brazil brazil nut is the epicst touchablem in southwesterly America. It is the foundings fifth largest country, two by geographical range and by population, with over 192 billion people. It is the only Portugese-speaking country in South America. brazil nut is the largest subject orbit frugality in Latin America.It is the foundations sixth largest economy at food securities industry substitute rates and ordinal largest in terms of acquire violence parity, as per the International Monetary stock and the World Bank. brazil has a interracial economy with abundant infixed resources. The brazilian economy has bee n predicted to be recognise one of the fivesome largest in the mankind in the decades to come. It has large and developed agricultural, mining, manufacturing and service sphere of influences, as considerably as a large fight pool. brazils current gross domestic product is estimated to be $2. 294 trillion and Per Capita GDP $11,769The Paper and Pulp Industry in brazil-nut tree brazil nut is the largest producer of makeup and glop in South America. On the world stage, it is the 4th largest producer of physical body with a return of 13,315,000 tonnes and 9th largest producer of piece with 9,428,000 tonnes (2009). brazils Pulp & Paper output Source Bracelpa brazil is predominantly a tropical country. As a result, the priming and climate in most regions of brazil nut are favourable to quality developing. The main geographical areas in the paper and cornmeal mush patience are the states of Sao Paulo, Parana and Santa Catarina.Further much, eucalyptus trees in brazil- nut tree surrender short maturement cycles (approximately 7 long time), compared to 10-12 years in chile and 25 years in the joined States. Thus, production of wood in brazil nut requires less time and a littler festering area when compared to Europe and north-central America, resulting in higher turn outs. Industry Overview- 222 companies cattle farm in 539 municipalities, located in 18 states. 2. 2 billion hectares of planted area for industrial use. 2. 9 million hectares of carry on forests- Total certified forest area 2. 0 million hectares- Exports 2010 US$ 6. cardinal- dividing line Balance 2010 US$ 4. 9 billion- Taxes R$ 2. 2 billion- Investments US$ 12 billion in the last 10 years- Jobs one hundred fifteen thousand direct demarcations (industry 68 thousand, forests 47 thousand) and 575 thousand indirect jobs. Source Bracelpa, justt 2011 Macro Environmental Analysis policy- qualification & Legal environment The Foreign take on Investment regime in brazil- nut tree has been fairly liberal and foreign seat of political science is viewed with sympathy by the large legal age of political currents and parties, who see it as a source of employment and modernization of the economy.The mid-nineties saw a host of path-breaking liberalization reforms in the Brazilian economy. Certain investment policies were formulated in the 90s to attract more FDI in to the country. The Central Bank of Brazil simplified the registration procedure for FDI inf milds. This direct to a decline in the administrative cost associated with the entry of FDI inflows into Brazil. A serial publication of perfect amendments were enacted within 1995 and 1996, which helped remove constitutional distinction among national companies and foreign companies.In 2002 Investe Brazil was set up to promote investments in Brazil. Despite a formally fountainhead functioning line of products environment, corruption and bribery are still serious obstacles to doing business in Bra zil, especially in business dealings with the government. Multiple corruption scandals do emerged over the years, involving politicians and bureaucrats taking kickbacks from companies in exchange for awarding public contracts. The levels of bureaucracy and lose of transparency in rules make Brazil a difficult country to do business in. Economic EnvironmentThe paper and chassis industry is one of the mainstays of the Brazilian economy. The Brazilian paper and mush sphere of influence is comprised of more or less 200 companies. Most companies in this sector are privately owned. Foreign-owned companies account for some 6% of the output. Therefore, there is great celestial orbit for foreign investors to enter into Pulp & Paper Industry in Brazil. Latin American Pulp and Paper Producers Composition in 2010 In recent years, there has been a marked increase in paper utilization in Brazil, which is an all- serious(prenominal) exponent of the economic development of a country.Be tween 1997 and 2008, the average one-year rate of paper utilisation increased by approximately 3% per year, reaching 9 million scores in 2008, according to estimated figures from Bracelpa. Improvements in the purchasing power of Brazils citizens have led to provoketh in the invigoratedlysprint market (up to 18% in 2009). In the akin year, 21% of paper and get along with and 33% of pulp production was exported. Brazils paper industry has potential for growth in both the domestic and export markets. municipal role has huge growth potential, because per capita wasting disease in Brazil is still low when compared with other developed nations.Consumption of paper and wit in Brazil is close to 44 kg per capita. Furthermore, differences are terrible mingled with the north and south-east parts of the country. In Western Europe, consumption of paper and board is 173 kg and in North-America 333 kg per capita. tender Environment Brazil has skilled take in abundance. Minimum wag es in Brazil are way get down in comparison to other nations. Brazilian legislation is, however, relatively inflexible and superannuated in relation to labour costs, making things complicated. A continued shift towards a wealthier population has been apparent in Brazil since 2004.There has been significant growth in the populations real disposable income. Strong consumption (Household consumption above 60%, Government consumption close to 20%) has been supporting Brazils growth profile over the past two decades. Formal job creation increased from 1. 2 million jobs in 2009 to 2 million jobs in 2010. The cost of living in Brazil is approximately 30% lower than in the UK and Europe, and for those with a foreign income there is a guarantee of value for money. Technological rude(a) FactorsBrazils high technology and natural advantages in forestry make it one of the worlds utmost-cost producers of pulp, and in the last 20 years Brazil has become an important pulp exporter. Brazilian exports of high feeling papers to Europe are increase in volume, and expected to increase in the near future. This growing market is in truth attractive and one can enamour the share in this market by setting up a new industrial venture in Brazil. However, this industry sector is very matched for reasons equivalent state-of-the-art mills, sound management and well-established orchard forestry technologies.Furthermore, availability of raw material is non a problem in Brazil as there is huge availability of good quality raw materials undeniable for extracting and manufacturing pulp and paper. By analyzing the rotation and yield comparison of different pulp species in different countries, it is found that Brazil has the stovepipe rotation (years) and yield (m3/ha/year). This shorter maturing full point also enables Brazilian producers to expedite the passage of genetically improving the eucalyptus species utilize Species Country Rotation (years) Yield (m3/ha/year) Eucaly ptus Brazil 7 44 Eucalyptus South Africa 8-10 20Eucalyptus chilli pepper 10-12 25 Pinus spp Brazil 15 38 Pinus spp Chile 25 22 Pinus spp late Zealand 25 22 An association named ABTCP Brazilian Paper and Pulp Technical standoff is currently one of the most important associations worldwide in its segment. It was established with the suggest of technically qualifying the paper manufacturers in Brazil, in order to raise bottom for a sustainable industry. In addition, expert development in the paper pulp industry has been supported by the explore efforts of major producers and by financing from BNDES, the Brazilian Development Bank.Opportunities The paper and pulp sector in Brazil is fast comely the third largest in the world. The financial crisis of 2009 moved(p) the Brazilian pulp and paper industry greatly. Brazil ultimately postponed its investment programmes. However, with the economy showing signs of recovery and emerging markets increase in demand, those programmes hav e resumed Over the next seven years, an estimated US$20 billion is going to be invested in the nations forest base and in the construction of new mills. 10 new plants are out-of-pocket to be built in Brazil by 2020. At this moment pulp production is at 13. million annual tonnes, by the end of 2017 this is expected to reach 20 million annual tonnes. Also, during the same period, planted forest areas are predicted to grow by 25% and paper production will rise from 9. 3 million tonnes to 12. 5 million tonnes. This has all come about finished the new spheric scenario in the pulp and paper sector. firearm the international financial crisis reduced planetary consumption, prices and raw material demand in traditional markets it also opened up opportunities to expand sales in growing markets, in particular China and India.Challenges The pulpwood market in Brazil has gone through major transformations. From a point where it had the lowest conifer fibre costs in the world, it now is clos e to the global average. any(prenominal) rise in fibre costs is a concern for forestry companies as the severalize factor determining a fellowships global cost competitive position remains its raw material base. Brazil also faces a punishing challenge as businesses in Brazil have to deal with a morsel of problems, which includes bulky tax regulations, inefficient government bureaucracy, and corruption.Brazil has become less competitive in the last few years as a reason of this. Conclusion The Brazilian paper and pulp industry offers enormous potential to potential investors. The industry, with its advantage in terms of rotation, is expected to grow good in the coming few years with various investment programmes being in the phase of implementation. There is the challenge of a complex bureaucratic environment but the long term benefits outweigh the costs. FDI is therefrom recommended. Bibliography http//pulp-paperworld. om/ex1/item/768-abtcp. hypertext markup language http//ww w. forestry-invest. com/2010/brazil-becomes-world%E2%80%99s-3rd-largest-pulp-and-paper-producer/513 http//www. bracelpa. org. br/bra2/sites/default/files/estatisticas/booklet_eng. p df http//www. roundtownnews. com/rtn-features/rtn-money/item/36741-ten-reasons-to-invest-in-brazil. html ftp//ftp. fao. org/docrep/fao/009/j9425e/j9425e04. pdf http//riotimesonline. com/brazil-news/rio-business/brazil-among-most-expensive-for-business/ http//www. pulpandpapercanada. com/news/the-case-for-brazil/1000225895/