Foreign companies invest in African mahogany plantation in Brazil

African mahogany has entered the business radar of foreign companies that want to invest in the forestry sector in Brazil. Two outside groups are in talks to start commercial planting with the tree, which has been nicknamed “white gold” thanks to the promise of long-term income.

In very advanced negotiations, Greenwood Resources, controlled by the American fund TIAA-CREF, is in the process of securing its leadership in African mahogany production in Brazil. Focused on investments in forest assets, the company plans to sow 10,000 hectares of African mahogany in the Unaí region of Minas Gerais. Greenwood has partnered with a 15,000-hectare local producer and will work on the development model – that is, the company finances production without ownership. The law prohibits the acquisition of land by foreigners in the country.

Greenwood has set as a schedule the planting of one thousand trees per year, with an average investment of R $ 35 thousand per hectare in the total 20-year cycle of the plant. Sought by Valor, the company declined to comment on the matter.

Another multiple studying a joint venture with a Brazilian native and exotic commercial tree planting company is African Mahogany Australia – currently the world’s largest 14,000-hectare African mahogany producer in northern Australia. Conversations, however, are still at an early stage, as a person familiar with the business.

On its website, TIAA-CREF states that investments in forest assets are a way of diversifying the portfolio, as well as providing strong protection against inflation compared to other equities or fixed income investments. The US fund has about $ 1.8 billion invested in forests, with an area of ​​340,000 hectares in North, Central and Latin America and also Asia.

In Brazil, Greenwood positioned itself in the forestry market with the acquisition of BrasilWoods Reflorestadora, owner of 11 eucalyptus farms in Mato Grosso do Sul and supplier of wood to Fibria.

Small by planted forest standards – the estimate, far from being accurate, is 28,000 hectares planted against almost 8 million hectares of eucalyptus area – Greenwood’s mahogany input is the most striking of a number of projects with the wood that pop up in the country. In general, low-risk, low-risk, liberal-professional initiatives to wait for the long 20-year cycle until the first cut. The wait, they say, may be worth it: African mahogany’s sawn and dry cubic meter for export traded at € 1,000 (FOB) in Ghana’s port on April 15, according to the ITTO report.

“It’s a business that has been getting attention,” says Patrícia Alves Fonseca, executive director of the Brazilian Association of African Mahogany Producers (ABPMA) in Belo Horizonte. Like the psychiatrist and best-selling writer Augusto Cury, who has 600 hectares planted in Prata (MG) and Ricardo Tavares, former partner of 3Corações, with farms in northern Minas Gerais.

Recently planted in the country – the first seeds came from Africa in the 1970s – African mahogany is characterized by its high strength and reddish color. It is widely appreciated for the production of furniture abroad, especially in the US, the largest consumer market for this type of wood. And unlike native mahogany, the target of predatory exploitation in the past, logging of African species is permitted by law.

The bets of Brazilian producers come down to two varieties: senegalensis and ivorensis. Plantations, until then more concentrated in Minas, are rising to the Midwest and northern areas of the country. This migratory movement made ABPMA soon decide to open a new regional office in Goiás to map investments and organize the sector.

Mahogany Roraima is one of those companies that saw potential in the Brazilian state for the rapid scalability of this mahogany. In Amazonia, the competitive advantage is to do without irrigation, says Urano de Carvalho, a researcher at Embrapa Eastern Amazon.

Founded by Marcello Guimarães, an IT entrepreneur, the company operates in the Boa Vista region and will complete 1,200 hectares sown this year. He is looking for investors to make him the sole African mahogany producer in the country, with 24,000 hectares in ten years. The trees would be intercropped with other species, such as cocoa, acai and banana. “The rain regime is ideal and the land is the cheapest in Brazil,” says the executive about why he chose Roraima. This done, its average annual revenue expectation reaches R $ 326 million.

Another reason investors are thrilled is that African mahogany is being grown in strange habitat. This freed him from his largest natural predator, the robust Hypsipyla moth, facilitating forest management and reducing the cost of production.

Rodrigo Ciriello, a partner at Futuro Florestal, a reforestation and sale company for native and exotic tree seedlings in São Paulo, says that caution is still needed. The few trees that have ever been cut down (those still from the 1970s) remained in the domestic market. “We don’t have harvest data to know the actual yield or how much it will generate on export. It’s still a start.”

“The first large wave of African mahogany cuts in Brazil will be from 2030,” says Mauri Abud, who began planting in Tocantins. It will be 1,200 hectares. “It will be for the daughters-in-law to fight”, jokes (Press Officer, 4/23/18)

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