Growing global demand for products generated in planted forests ensure real profitability with lower volatility from market oscilations
Diversification is one of the most recommended actions for those aiming at investing. Having a varied investment portfolio ensures greater and safer profits. Therefore, it is important for those considering to invest to learn about forest assets, one of the investment modalities with the lowest volatility of hte market, with real revenue.
Forest assets are areas with commercially planted forests to meet the demands of several industry purposes, such as paper, pulp, firewood, energy, furniture, civil works, ingredients for pharmaceutical, chemical and food products, among others. The growth in the consumption of forest products is increasing, and more cultivated forests – mainly pine and eucalyptus – are required to meet this demand. This ensures that the area will always be profitable. In order to invest, the idea is simple: you purchase bonds, with amounts to be applied in the planting of forests. When the planted trees reach the cutting point, the wood is sold and the investors receive their share in the profits.
According to Eudes Moreira, general manager at CF Wood Brasil, with over 25-year’s experience in the forestry segment, the paper and pulp industries are currently the major owners of forest assets in Brazil, since they must have safety in the supply of their plants, due to the cycle of each species, which ranges from seven (eucalyptus) to 15 to 20 years (pine). “In Brazil, the first investments in forest assets started at the end of the 1990’s, with the expansion of the industries and greater demand for raw materials to supply the factories. In order to meet the volume of wood, some of them developed funding models, partnerships with local producers, but the profitability obtained was not sufficient to attract partners to meet the expansions of the industrial plants. With that, investors from other countries were attracted, due to the lower financial costs and greater scale of investments, he explains.
According to Moreira, with the current expanding demand for wood from planted forests and the reduction of the forest bases of the industries in order to reduce debt and also expand the investments on their plants, they have been choosing to sell part of their own forest assets to domestic and foreign investment funds. “The profitability of those forest assets has ranged from 7% (seven) to 10% (ten) percent per year”, he says.
The expert explains that investments in forest assets are directly connected to the real economy and are not related to Exchange Market, fixed income, or exchange rate, which generates less instability. “The profitability happens due to the growth in the volume of commercial wood. The growth of the global population and the increase in the consumption of wood or its derivates will contribute to further improve the profitability of forest assets”, he states. Additionally, he also believes it is an investment that has flexibility in cases of global crises that may reduce consumption. “It is possible to extend the cycle without generating loss of invested capital, even with the reduction of the forest increase. This will not cause any impact that may greatly reduce profitability. Forest assets also do not oscillate according to the shares listed in the stock exchange markets, and therefore, the risk of devaluing the invested capital is nonexistent”, he guarantees.
Moreira explains that the profitability of forest assets in Brazil is currently above the SELIC interest rate, CDI funds, and bonds from the Brazilian government. “In the United States, where such investments have been made since the 1980s, forest assets provide historical profitability, with returns greater than those for the bonds from the American government”, he notes.
The sustainability cultivated forests provide is also a great attraction in this type of investment. “Investors seek options with greater opportunities of scale, profitability and safety, and therefore, sustainability is extremely important. Additionally, investors and industries have opted for forest assets with forestry certifications issued by competent entities, which have international credibility”, Eudes Moreira adds.
But the investment depends on the profile of the investor, since minimum values established for raising funds are attractive to large investors diversifying their business in the medium- to long-term. “However, with the increasing trust of investors on this sector, due to the profitability and safety, the trend is for new fund projects to open with lower values, considering the period for the return on the investment, which is of approximately 10 years”, he says. Nowadays, for the most highly regarded funds, with greater portfolio value, the investment starts at BRL 1 million. “There are others, with minimum investment of BRL 10 million, but there are smaller funds with minimum investments starting at BRL 100 000. They vary according to the assumptions and deadlines established by each fund”, he clarifies.In his point of view, for anyone interested in further learning about the possibilities, he recommends contacting the financial agents of the investment funds, checking if they are raising funds for new projects, evaluate the minimum investment, the investment period, the time for the return on the investment, and the profitability, and check if they meet the expectations and the profile of the investor. “Domestic and foreign funds that manage greater volumes of forest assets usually have investments in pension funds, and therefore, they must be regulated at the Securities and Exchange Commission of Brazil (Comissão de Valores Mobiliários – CVM)”, he points out.