PORTUGAL

Sociedade Portuguesa de Papel, SA (SOPORCEL)

General economic situation - 2000

The very high growth rate registered in the past few years in the Portuguese economy was followed by a clear slowdown in 2000, especially during the second semester where the growth was substantially inferior to the first half of the year.

The GDP rose in 2000 between 2.75 percent and 3.25 percent and estimates for 2001 point to a growth rate between 2.5 percent and 3 percent.

National exports are estimated to have increased by about 8.5 percent and imports also by 8.5 percent when compared to 1999 (real figures).

The projections of the Central Bank for 2001 anticipate a variation of 8 percent and 6.75 percent in exports and imports, respectively, when compared to 2000.

In 2000, the inflation rate reached 2.8 percent (0.5 higher than in 1999) showing an upward trend at year end.

The official forecasts of the Bank of Portugal regarding inflation in 2001 point to a 2.9-3.3 percent gap.

The unemployment rate has been kept well below the average in the Euro zone. It is estimated to have stood slightly above 4 percent at the end of 2000.

Due to the great external dependence of the Portuguese economy, it is admitted that a weak growth of the international economy, the failure to bring down the price of oil or a strong appreciation of the Euro may aggravate the forecasts made for 2001.

Performance of the paper and wood industry - 2000

The forest and forest products industries issue - with the exception of forest fires - still keeps a rather low profile in the Portuguese society and politics.

Although the summer of 2000 was not particularly warm and dry, close to 90 000 ha burned in Portugal, of which 36 000 ha were forest stands.

The main raw materials and products produced and traded by the Portuguese forest products sector is summarized in the following table where 1999 (actual figures), 2000 and 2001 (estimates) are shown:

^a Approximately 75 percent is tropical timber
^b 1 000 tonnes
^c 85 percent is medium density fibreboard (MDF)

Imports of pulpwood (especially eucalyptus) suffered a substantial reduction compared to the previous years as a result of a sustainable growth of the internal offer.

Forest industries, particularly the wood panel and paper industries, operated at full capacity through the year, with only a slight decrease in demand at the end of the period.

Anticipated and/or already announced financial results are very interesting in general with the exception of non-integrated paper production (thus reflecting the high level of rating of its raw materials, the cellulose pulps).

Exports of forest products in 2000 are estimated to have risen to EUR 2 700 million while imports may have exceeded EUR 1 700 million.

The structure (per amount) of the foreign trade in Portuguese forest products was approximately as follows in 2000:

Early in the second semester of 2000, Soporcel PM2 came on stream, representing a 400 000 tonnes/year production capacity increase in uncoated printing and writing papers.

The announcement of the acquisition of Soporcel by Portucel (taking control of 80 percent of the company's shares) was made at the end of the year, thus completing the national project for restructuring the pulp and paper sector in Portugal. The new company (the largest in the eucalyptus/paper chain in Europe) will account for over 1.1 million tonnes of bleached eucalyptus kraft pulp and nearly 1 million tonnes of uncoated woodfree fine paper.

The year 2001 is envisaged with moderate optimism in the industry since the foreign market for forest products still appears to be expanding and the internal market will start reflecting the announced surge in public works related to the European soccer championship, Euro 2004, to be held in Portugal.

Issues of particular interest

Environmental aspects such as carbon sequestration and substitution (Kyoto Protocol)

There has been little debate around the consequences of the Kyoto Protocol among the Portuguese and the government has failed to submit any measures or policies to counter climatic changes.

Within the specific context of forest as carbon sinks, there are studies proving unequivocally the role of the Portuguese forests (natural forests and plantations) as carbon net sequestrators.

The forest industry in general and the paper industry in particular have not yet taken any public positions regarding either their carbon cycles or the potential carbon credits to which they may feel entitled. The same is true regarding private forest owners.

However, forest products industries have been quite sceptical as to the utility and potential of the use of forest biomass for energetic purposes considering that it may turn into undesirable competition in the use of forest raw materials (especially pulpwood).

Progress in sustainable forest management and certification

The Portuguese forest product industry considers that public opinion in general (the citizen/consumer) is becoming increasingly aware of environmental issues in general and of the sustainable forest management in particular.

This sensitivity is not yet revealed in consumer attitudes in the market but there is evidence that some big wholesalers and retailers, especially in forest product importing countries, are putting increasing pressure on their suppliers with ever-growing demands for products originating from certified forests.

The wide number of certification initiatives that ensued the attempt of monopolizing the `certificate market' on the part of the Forest Stewardship Council (FSC), namely those that in Europe take the Pan European Forest Certification Scheme (PEFC) for reference, largely justify that all parties should look attentively and open-mindedly at mutual recognition mechanisms among different certification schemes.

It appears equally clear that, at least in Europe, forest certification is a market tool rather than a process to guarantee or induce sustainable forest management.

Taking into account this general outlook, the preliminary works for a new Portuguese standard and a national certification scheme, which will apply for recognition by PEFC, are at an advanced stage.

The structure of private forest ownership in Portugal, characterized by small-size forest areas, will however be an obstacle to the certification of private forest, unless group certification mechanisms are available.

In this regard, Portugal is following closely the work being done within the scope of USSE - União dos Silvicultores do Sul da Europa (Southern Europe Forest Owners Union), currently preparing a certification scheme especially adapted to the characteristics of small-size land ownership.