The pulp industry and the global crisis. Unsaddling until clear

The pulp industry and the global crisis. Unsaddling until clear

By Víctor L. Bacchetta

Today, the pulp industry is experiencing the phase of cannibalism typical of the crises of capitalism: unemployment and hunger for workers, bankruptcy or flourishing for investors, while recovery arrives. For now, the determining actors in this process do not question the model or its influence on the global economic and environmental crisis.

In the framework of the international financial and economic crisis, unleashed definitively at the end of 2008, the world pulp industry suffered a sharp drop in prices and sales in the market. This caused the almost immediate reduction or interruption of production when the closure of several plants, since their owners began to consider them unprofitable or declared bankruptcy because they could not meet the obligations contracted.

Like other sectors of the global financial system, speculating on the assumption of an unlimited economic boom, large pulp industrial groups were in a rampant race to invest in lands, plantations and pulp mills on an ever-increasing scale. and in the most profitable areas. The abrupt reduction in sales and the credit freeze left some of these groups unsustainable.

As if it were just another cyclical crisis of capitalism, even despite the depth and breadth of the current world recession, the main actors in the system -whether governments, multilateral organizations, banks, investors and economic groups- are dedicated only to to the rescue of the strongest and to lessen some edges of the social crisis, assuming that the economy will return to its previous growth rate sooner rather than later.

Company closures and mergers, asset purchases and sales occur, where some die or are swallowed up by others who take advantage of the situation to become even more powerful. The pulp industry is going through that phase of cannibalism typical of capitalism without questioning the production and consumption model prior to the crisis, ignoring that this is the cause of the crisis itself and its greatest environmental impact, climate change.

- In March 2009, the Brazilian company Celulose Sul Mato-Grossense of the Votorantim Group (VCP) started the operation of the largest pulp mill with a single production line in the world, located in Três Lagoas. The installed production capacity is 1.3 million tons of cellulose per year. Baptized as the Horizonte Project, the VCP expansion plan has a manufacturing park and a forest base of 200 thousand hectares, with 140 thousand hectares planted with eucalyptus and 60 thousand hectares of preservation. According to VCP, the Horizonte Project is currently the only expansion plan in the pulp sector worldwide.

- In the same month, VCP bought the Brazilian company Aracruz, giving rise to Grupo Fibria, the largest pulp manufacturer in the world, but with a debt of US $ 7,000 million. Aracruz denied that the sale was linked to the crisis, but the company had large losses due to speculative investments and closed 2008 with a liquid deficit of R $ 4,194 million. Fibria shares belonged 35.8% to VCP, 34.9% to the state National Bank for Economic and Social Development (BNDES) and the rest to the stock market. With 1.3 million forested hectares in the states of Bahia, Espíritu Santo, Mato Grosso do Sul, Minas Gerais, São Paulo and Rio Grande do Sul, Fibria expects to produce some 8 million tons of pulp in 2012.

- In April 2009, the Swedish-Finnish transnational Stora Enso decided to reduce activities in its eucalyptus plantations in the Brazilian state of Rio Grande do Sul and laid off 150 of the 400 workers employed. Florestadora Nativa, a contractor for the transnational, calculated that it would have to do without 50% of its 206 workers, in addition to the 547 who had been laid off since October of the previous year. Stora Enso admitted that the measures were motivated by the global crisis and, while that same month it acquired the Ence Group companies in Uruguay, in August it took much more drastic measures with its operations in Finland.

- At the end of April, Stora Enso and the Chilean company Arauco acquired in equal parts the assets of the Spanish group Ence in Uruguay -130,000 hectares of forest land and an industrial and port free zone on the Río de la Plata, among other operations. Both companies had 74,000 and 39,000 hectares of land, respectively; society now totals 255,000 hectares, the largest large estate in Uruguay. A Stora Enso manager said that this ensures the supply to build a world-class pulp mill "when economic and financial conditions can justify an investment of this nature" (sic).

- In August, Stora Enso decided on new plant closures in Finland, which had already suffered large cuts in 2007. The company's plans will affect 450 to 1,100 employees, while estimating to raise profits by more or less 150 million euros from 2011, depending on the evolution of the crisis. "Finland is the country with the highest relative dependency per capita on the forestry industry", stated the president of Stora Enso, although he justified the measures based on profit margins. Trying to mitigate the social impact, the Finnish government approved 80 million euros of subsidies for the forest industry in 2010-

- The change in ownership of Botnia shares in Uruguay, whereby the Finnish transnational UPM now owns 91% of the Fray Bentos pulp mill and its entire forestry sector, also responded to the problems of the pulp industry in the Nordic country. The multinational Metsaliitto, a cooperative of plantation owners in Finland, sold its shares in Botnia-Uruguay to pay off part of its indebtedness and have state financial support. The Finnish government could not justify this support for an investment outside the country when its citizens are going through one of the most serious unemployment crises.

- At the end of September, the Chilean group CMPC bought the Guaiba pulp mill, owned by Aracruz in the state of Río Grande del Sur, for US $ 1,430 million. The operation meant for CMPC the largest acquisition in its history and one of the largest Chilean investments in the area abroad. The purchase included some 212 thousand forest hectares, 60% planted or to be planted with eucalyptus trees, and a nursery capable of producing 30 million plants per year. Guaiba produced 450 thousand tons per year and has approved an expansion project for an additional 1.3 million tons. CMPC could thus become the third largest pulp producer in Brazil, handling about 20% of Latin American production.

In summary, beyond the strong impacts on the workers' living conditions, the international economic crisis unleashed in the pulp industry only changes in the ownership of companies, without altering one iota of the agro-industrial model, which continues to be guided by the interest of moving operations to more profitable areas and facilities.

The Latin American Southern Cone continues to be a pole of attraction for these companies and the governments of these countries not only do not question this option, but also encourage it and come to dispute the possibility of hosting them and expanding the scale of their activities in the region.

In Brazil, the reactivation of the pulp industry has the active support of BNDES, the country's main development bank. In Rio Grande do Sul, a state that was a pioneer of environmental policy and management in the country, the government of Yeda Crusius and several local governments are dedicated to offering incentives to afforestation, to facilitating credits, to modifying the zoning of the forestry and to dismantle the agencies in charge of environmental control.

In Uruguay, the government of Tabaré Vázquez continues to be concerned about attracting new pulp production projects and even sent a presidential mission to Portugal to dispute with Brazil the location of a plant of the Portucel company in the country. In Argentina, outside the Gualeguaychú resistance, the XIII World Forestry Congress was inaugurated with a symbolic planting of trees by Minister Nilda Garré and the Chief of the Army General Staff.

The possibility of changes in this process does not seem easy or quick, if the interests at stake and the degree of penetration achieved by the plan of the pulp industry in the region are taken into account. However, there is a growing resistance where, to the affected communities, sectors of the population are joined with awareness of the immediate and long-term unsustainability of the forestry model, as well as the concept of development that underpins it.

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