Leaders Q&A: Elizabeth de Carvalhaes, President and CEO, IBÁ

Created: 27 September 2017

The Brazilian Tree Industry (Ibá) is the association responsible for institutionally representing the planted tree production chain, from the field to the industry with its main stakeholders. Our conversation with the President and CEO of IBÁ, Elizabeth de Carvalhaes, resulted in an enlightening debate. Topics such as main economic challenges, markets, as well as sustainability practices were some of the issues that guided this interview.

The association was established in April/2014 and represents 55 companies and nine state entities that provide products obtained from planted trees, with special mention to wood panels and laminate flooring, pulp, paper, energy forests and biomass.

Q: The Brazilian Tree Industry (Ibá) is the association responsible for the institutional representation of the productive chain of planted trees. As an association they are only 3 years old. What balance do they make from the moment they have appeared so far?

A: Three years ago, we challenged the market to create an economic/industrial sector that would have a new vision and involve planted forests in its environmental, economic, and social development. Previously there had been four associations planting the same species, with similar certifications for different products and similar public policies. Unification of these associations resulted in a better relationship with the Brazilian government, greater bargaining power, and more agile responses to the demands of the sector.

With greater synergy among the companies and entities for these segments through a single voice, we expanded the competitiveness of products originating from trees planted for industrial purposes. Today, the Brazilian forest sector has the highest productivity in the world and leads in environmental conservation. The industries have developed in terms of research and new technologies, advancing in areas such as transgenics, biotechnology, and nanotechnology, where work is already underway on products that the population will consume 30 years from now. Consequently, we serve as an international model for several other associations, and have significant participation in the global agenda. Within this activity, today Ibá is the most complete association in the world, bringing together the entire forest process up to the final retail consumer.

Q: IBÁ won the international communication award. What were the factors that contributed to achieving this distinction?

A: With the unique challenge of mapping and quantifying the potential of the planted tree industry, including investments in technology and innovation, the infographic "Planted Trees and Their Multiple Uses" was recognized among the main communication projects produced in Spanish and Portuguese around the world. Through this material we were able to depict the trajectories of the forest sector within our own country; this was the result of one area of activities Ibá has undertaken in recent years to bring the work of the forest industry closer to the general public.

We are currently working with dozens of communication channels targeting distinct profiles, including social media activity and institutional videos, focused on demonstrating the importance of forest products to the Brazilian economy and environment and reinforcing their sustainable contributions. The award showed that our strategy is on the right track, rewarding the association’s day-to-day communications work to disseminate the industry’s good practices.

Q: The Brazilian sector of planted trees registered an increase in the volume of exports. What is the evaluation of this performance?

A: Much of this change is the result of continuous investments in technology, forestry, and management of tree plantations in recent years, which have contributed to the best forest yields in the world. Today, Brazil is a leader in productivity, with 35.7 m³/ha.yr for eucalyptus plantations, and also has the shortest rotation (the period between planting and harvesting trees), about 6 years.

The poor performance of the Brazilian economy and the drop in supply on the domestic market also forced companies to strengthen their successful activities in foreign markets; they are especially motivated by the excellence of their product, better genetic engineering for trees, higher productivity, and modern factory installations.

The global movement related to the climate has also contributed to this positive scenario. With the ratification of the Paris Accord, the countries that emit the most greenhouse gases are being pressured to improve their industrial processes, and consequently are looking to import products that have less of an impact on the environment. This provides additional value for Brazilian products from planted forests that are 100% sustainable, renewable, and recyclable, favoring the growth of exports.

Q: How can the planted tree industry achieve sustainability?

A: Sustainability is already the essence of the Brazilian planted tree industry. The hundreds of products from this sector are 100% renewable, since they are derived from wood and its inputs which have a harvest cycle and yearly planting in a sustainable process. It is the agriculture of the tree: plant, harvest, use its benefits, and replant.

This characteristic of the industry makes a number of contributions to the environment. For example, in 2016 this sector was responsible for stocking approximately 1.7 billion tons of carbon dioxide equivalent (CO2eq) - the equivalent of one year of emissions in Brazil. It also retained another 2.48 billion tons of CO2eq in 5.6 million hectares of natural areas protected by the sector through Permanent Preservation Areas (PPA), Legal Reserves (LR), and Private Natural Heritage Reserves (PNHR). Our industry protects the most natural areas in the world: for each hectare planted for industrial purposes, another 0.7 hectare is maintained in reserve areas.

The industries in the tree-producing sector also use landscape management techniques that contribute to biodiversity conservation and restoration of natural forests, and are references for other countries. This is the case with mosaic plantations, which take into account landscape management and intersperse productive forests with natural forests, forming “ecological corridors,” which preserve natural ecosystems and biodiversity, maintaining the quality of soil and water resources and promoting the movement of different species, guaranteeing them food and shelter.

And these are just a few of the key attributes that position the country as a potential protagonist in this new economy that will control the planet, and which fits all the criteria to be green.

Q: At present, where do the biggest increases in the sector come from?

A: The industry is currently in a time of expanding trade with countries where it already worked. The export volume registered (+14.1%) and the drop in imports helped the trade balance in the sector reach unprecedented numbers, closing 2016 with a surplus of US$ 7.8 billion (+3.2%). Pulp exports reached 12.9 million tons (+11.9%) and wooden panels surpassed 1.1 million cubic meters sold to other countries (+64%), historical records for these segments.

With this conquest of the external market, domestic production was also strengthened. The sector’s share of the industrial gross domestic product (GDP) increased from 6% in 2015 to 6.2% in 2016, with gross revenues totaling R$ 71.1 billion. Brazilian pulp set a record in 2016 with 18.8 million tons produced (+8.1%), placing the country in second place among the world's largest pulp producers, surpassing the Canada and China. This has further increased Brazil’s visibility in the global market, adding value and reputation while also catalyzing trade and investments. We also rose one slot in the global rankings of paper production, reaching eighth place with production of 10.3 million tons. And the share of Brazilian charcoal produced from planted forests in 2016 rose to 84%, a record for the segment.

Q: Are the Brazilian economy's business worries in the pulp and paper sector?

A: The planted tree sector, like the entire market, felt the impact of the Brazilian economy's weak performance, which reduced purchasing power in the domestic market. The good news is that the first positive signs have begun to appear and show a reaction in the Brazilian economy, even if modest. Brazilian GDP grew 0.2% in the second quarter of 2017 over the first three months of the year, inflation is below the target, and the basic interest rate is declining steadily.

But to invigorate the internal market sustainably in 2017, it is essential that the Brazilian government carry out reforms like simplification of tax issues and logistics, which will have a positive impact on exports by increasing national competitiveness in production and consequently job generation. In order to rebuild, the Brazilian economy needs to rely on sectors in which it is a worldwide reference and has strength and competitive advantages, which is the case with the planted forest sector.

While the domestic market is beginning to recover, companies continue to pursue opportunities in foreign markets. One sign of this is that planted trees should continue to grow in the coming years, since the projected investment between 2016 and 2020 is roughly R$ 20 billion.

Q: What are the biggest challenges in eucalyptus cultivation?

A: One of the greatest challenges facing the planted tree sector in 2017, which includes eucalyptus plantations, is approval of the bill for foreign capital companies to acquire land; this is an important step to attract investment and generate jobs and income. Various large multinational companies are associated with Ibá, and their investments in new units and expansions of current ones are frozen at this time. Additionally, in order to increase national competitiveness, it is essential that the Brazilian government work on actions to simplify taxation and improve the logistics of export sectors. This year will also require great efforts from industries within the planted tree sector to recover from the drop in export prices and ensure real growth in revenues.

On the other hand, the productivity of planted forests in Brazil (compared with the country’s main competitors) is an important competitive edge, mainly because in many countries productivity rates are lower and no land is available for new plantations. This makes eucalyptus plantations in Brazil an attractive investment. And to further encourage rural producers, many of the companies in this sector use partnerships involving outgrower programs that transfer technology, guarantee wood purchases from these producers, and encourage participants to undertake other profitable agricultural activities associated with forest plantations. In 2016, 19,900 people benefited from the outgrower programs adopted by Ibá member companies, planting trees for their own consumption and/or industrial purposes on 545,000 hectares of areas owned by third parties.

Q: How do you characterize the paper and pulp industry in South America, particularly in Brazil?

A: When analyzing the South American market, we see Brazil as the main producer of pulp, paper, and wood paneling. To illustrate this difference, the pulp sector alone is four times greater than the country in second place, Chile.

But the Latin American market is important for its imports of Brazilian products originating from planted trees, especially the paper and wood paneling segments. In 2016, Latin America accounted for 18.3% of export values, especially the paper and wood panels segment, which accounted for 60.6% (US$ 1.1 million) and 54.4% (US$ 136 million) of export values, respectively.

Q: What are the prospects for the forestry sector for 2017?

A: The question would be easy, if not for the crisis that does not give definite answers about the direction of the domestic market. However, some factors may be considered important for defining perspectives in the pulp and paper sector, especially when we look at the external market.

The ability of national companies to produce more in less time with fewer resources has transformed Brazil into a reference for supplying the market quickly at more competitive prices, which also generates positive impacts for the products derived from this chain. Today, Brazil is seen as one of the few countries with the potential to efficiently supply growing global demand. On the other hand, industries within the planted tree sector will need to work hard in the external market to recover from the drop in export prices and guarantee real revenue growth. Copyright CW Group.

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