Karl KehrENG

Markets, Challenges & Opportunities in Central America: 

Markets, Challenges & Opportunities in Central America Introduction. The market of the big neighbor, USA. The Caribbean market. Challenges and Opportunities. presented by: Karl H. Kehr Note: The speaker produced this presentation of recent publications and presentations from oficial and semi oficial sources such as: USAID, WWF, Forest Trends, Cadefor, Metafore, etc. and private entities like: Exportimo S.A.C /Perú and Tropical Forest Trust /London

Introduction: 

Introduction

THE FOREST WORLD: 

THE FOREST WORLD Tropical Forests Amazon Basin (500 Million has) Congo River Basin (250 Million has) Archipelago of Indonesia (150 Million has)

Conifer Forests: 

Conifer Forests More than 80% of world trade of wood is in Conifers. The biggest producers are: US, Canda, Chile, México, Central Europe and Russia.

Exportation of wood products of highest added value: 

Exportation of wood products of highest added value

Changes in the structure of exportation in Latin America and the Caribbean: 

Changes in the structure of exportation in Latin America and the Caribbean

Example of global forest production (2002) in millions de cubic meters : 

Example of global forest production (2002) in millions de cubic meters

Latin American countries with certified forests : 

Latin American countries with certified forests WWF/GFTN

Market of the big neighbor, USA: 

Market of the big neighbor, USA

Macro market of the USA: 

Macro market of the USA Represents 23% of the world market In 2000 $53,600 million were spent on furniture 43% of the consumption of furniture is in solid wood 30% of consumption is imported 40% of the consumption is done by people with incomes larger than 70 thousand dollars a year Sourcee: Instituto de Comercio Exterior de España (ICEX)

Profile of the market in USA: 

Profile of the market in USA

Market for sawmill wood and plywood: 

Market for sawmill wood and plywood

Principal uses of tropical wood: 

Principal uses of tropical wood Wood from USA –emphasis on structural ownership Tropical Wood – emphasis on: Resistence to the elements Hardness for floors Aesthetics in appearance Three main uses of tropical wood: Hard sawmill wood Plywood Products with added value (furniture, parquet, etc)

Market for sawmill wood : 

Market for sawmill wood Average cost of sawmill wood: Wood from the USA- $us 400 m3 Tropical wood - $us 670 m3 Competition

Imported Species: 

Imported Species 217 species of tropical wood The most common: Mahogany, etc. – 50% of all imported sawmill wood. Resistence to alternative species. Low cost species that have potential and that replace traditional species. The „CITES “ Factor Andiroba, (Carapa spp.), African Mahogany (Khaya), Asian (Meranti) „new“ species Massaranduba (Manilkara spp.) , Cabreuva (Myrocarpus spp.)

Tendencies and Opportunities for sawmill wood : 

Tendencies and Opportunities for sawmill wood Market growing slowly. Very high costs of major transformation in market countries. More niches for products with added value. Continuation in the preference for traditional species.

Conditions for the sale of sawmill wood in the USA market: 

Conditions for the sale of sawmill wood in the USA market Adapt the production to the classification system of the USA Have certain drying process Uniform Processing (standardization of products) Efficiency in transportation and delivery.

Challenges and Opportunities: 

Challenges and Opportunities Adaptation of market products: Sawmill wood – classification system, consistency between placing the order and delivery, drying, logistics Plywood – Quality and cost Products with added value Furniture and its parts & pieces Floors Decking - platforms

Plywood – Positioned better than sawmill wood: 

Plywood – Positioned better than sawmill wood Tropical 8.39% Softwood 82.20% Non-Tropical Hard woodl 9.41% Indonesia 3.44% Malaysia 1.93% Others (Brazil) 3.02% Similar price to American plywood

Considerations for exporting to the USA: 

Considerations for exporting to the USA Comply with American norms Have complete documentation before entering the USA Understand American sale practices * Many exporters turn to intermediaries to facilitate the process.

Slide24: 

Don‘t try to sell only what you can produce Try to produce what you can sell

Caribbean Market: 

Caribbean Market

Major Characteristics : 

Major Characteristics Large consumption and little production of wood products. Lower quality requirement. Lower shipping costs. More interest in green markets and by European capital is invested mostly in tourism projects. Similar negotiation practices.

It‘s working like thisJoint Ventures in Nícaragua between indigenous Communities and private producers : 

It‘s working like this Joint Ventures in Nícaragua between indigenous Communities and private producers Layasiksa – Prada S.A (plywood and sawmill wood) Harvest 1.600 m3 (r) of lesser used species (EMU) in 200 hectares to sell to Prada. Negotiation price of US$ 51 m3 delivered to the sawmill vs. standrad price US$6/m3 for the price of wood in feet. Now there is a market in the Caribbean for species that didn‘t have a market before. Las Crucetas – Hermanos Ubeda (sawmill wood) Harvest 8.000 m3 of Caribea Pine in 163 hectares US$ 0,23/pt carried on cargo pontoons in a very remote area, from a very economically disadvantaged community. Pines have very little value in Nicaragua but sell very well in the Caribbean and in Tennessee. Sangnilaya – Amerinica (sawmill wood) Harvest 1.300 m3 of EMU in 150 hectares Negotiated at US$ 12,50 per m3 vs. US$ 11 per m3 for wood by foot The Caribbean market prefers red wood (Mahogany) but it can‘t pay current prices due to economic problems and high prices, thus lesser used species are welcomed.

Challenges and Opportunities: 

Challenges and Opportunities

Central America:Pioneers in FSC Tropical Forest Certification (WWF): 

Central America: Pioneers in FSC Tropical Forest Certification (WWF) 700,000 hectares of certified natural forests and plantations First industrial certification of operations in the tropics: Portico in Costa Rica (now called: Masonite of Costa Rica); doors made with Carapa guianensis (Andiroba) First region to provide certified products for „Home Depot“: (doors from Guatemala and Costa Rica) Certification of the management of industrial forests for companies and communities, with proven conservation strategies (Guatemala: Maya Biosphere Reserve, Hondúras: Plátano River Biosphere Reserve, Belize: Bravo River, etc.) Principal (only one for many years) source of certified mahogany (Guatemala, Belize, Hondúras...México) WWF/GFTN

WWF strategies to promote LKS/EMU to reduce the dependence on Mahogany and to provide more benefits for all certified operations in Central America. : 

WWF strategies to promote LKS/EMU to reduce the dependence on Mahogany and to provide more benefits for all certified operations in Central America. Make it as easy as possible for the buyer! Solid Supply Sale and demand Simplicity of the Linkage Better products Good supply + Increase of demand + Quality of products + Linkage = Sales (and conservation) WWF/GFTN

Supplies of LKS/EMU:Solid Information from trustworthy sources: 

Supplies of LKS/EMU: Solid Information from trustworthy sources WWF recommends: Establish a solid supply, based on good inventory and management plans (nobody wants to invest in new species if the supply isn‘t interesting in terms of ensured volume and availability) Define the base value of real costs of production (nobody wants to invest in species if their costs are higher than the usual) Promote information about the types (Bucida, Lonchocarpus, Calophyllum, etc.) presented to potential buyers at fairs and buyers round-tables in Guatemala, Atlanta, California, Portland, Maderalia, Costa Rica, etc. WWF/GFTN

Build demands for LKS/EMU in Central America: High profile projects : 

Build demands for LKS/EMU in Central America: High profile projects WWF worked with 8 companies to comply with the formal commitments of a responsible purchases policy (Holiday Inn: furniture, construction, other hotels) WWF worked proactively the Tortuga Hotel (Costa Rica) with potential suppliers to determine the best supply with the best LKS/EMU and products utilized for beds, doors and window frames. WWF focused mostly on: which lesser used specie could serve the buyer best, and what is a unique characteristic of the wood, for example: the Exchange Model in Nicaragua. WWF/GFTN

Building demands for LKS/EMU in Central America:Big wood consumers: 

Building demands for LKS/EMU in Central America: Big wood consumers Public works in Costa Rica and Transportation Department (MOPT) Initially stipulated the minimum price of EMUs ( without reference to legality, sustainable management of forests, etc.) WWF trained buying officials in characteristics of LKS/EMU, processed by manufacturers of Costa Rica Focused on the attention and the necessity of construction vs traditional species (as in: „Which wood do I need to make a product, and which specie should I use?“ instead of „Let‘s use the same wood we always use“) We have mostly improved/modified the sales language. Increase in sales of certified manufacturers of Costa Rica in relation to the Gmelina sp Specie in industrial applications in which the species haven‘t been used before. WWF/GFTN

Don’t Forget:Know your Buyer: 

Don’t Forget: Know your Buyer This is the global market The buyer is always right How does the buyer operate? Quality On-time delivery Other requirements like social and corporate responsibility Good corporate role Economically interesting Design Price Rapid change of stock Ecologically „good“