Having been heavily battered by a series of both external and domestic shocks throughout 2001, the Brazilian economy showed signs of improvement during the final months of last year.
In 2001, the Brazilian real suffered under severe pressures: the risk of contamination of the long-anticipated collapse of Argentina's convertibility plan; the crisis subsequently generated by the events of 11 September; and the domestic electricity shortage caused by a long period of drought.
On the external front, Brazil's exposure to Argentina's downturn was limited by the diversification of its export markets, mainly the United States and the European Union, which are the two most important trading partners of Brazil.
A weakening of the industrial sector and signs of rising inflationary pressure led the Central Bank to increase interest rates to as much as 19 percent per annum.
From a forecasted GDP rise of 4 percent, it is estimated that the final calculations will reach approximately 2.5 percent, due mostly to the agricultural sector, as the industry was heavily hit by macroeconomic fluctuations.
Alterations in the fiscal order with new rules and legislation conducive to responsible actions at district, state and federal levels, drove the primary surplus up to 3.5 percent of GDP, much higher than the previous IMF level.
A few negative aspects were also observed: the nominal deficit rose during the year to 6.1 percent of GDP and the net debt is expected to reach 55 percent of GDP.
In 2001, government-controlled prices and public tariffs, as well as prices driven by international markets, contributed significantly to the increase in the inflation rate to 7.7 percent.
Brazil recorded a trade surplus of US$2.6 billion for the first time since 1994, with exports reaching US$58.2 billion (an increase of 6 percent) and imports remaining stable at US$55.6 billion.
Contrary to the pessimistic third quarter expectations, the yearly average exchange rate was R$2.35/US$, a devaluation of 28.4 percent compared to the previous year's average
The paper industry performed well in 2001 in spite of the energy crisis which forced a reduction of 25 percent of electrical purchase for the paper production industry and 20 percent for the pulp industry, from June to December 2001.
Pulp production totalled 7.4 million tonnes, a decrease of roughly 1 percent over to the previous year, mainly due to oversupply in the international market of pulp which affected exports.
Paper production grew 2.3 percent, reaching 7.3 million tonnes.
The domestic market, consisting of integrated usage and domestic sales, consisted of 4.3 million tonnes of pulp and 6.2 million tonnes of paper, representing respectively 58.3 percent and 84.1 percent of the national production.
Apparent consumption, influenced by the reduction of paper imports by 19.5 percent, remained at 7.0 million tonnes, the same level as the previous year.
Considering the estimated population growth, per capita consumption fell slightly from 41.0 kg to 40.5 kg.
There was a considerable volume growth of pulp exports during the year, although the total value was lower than in the previous year, due to an average international price reduction of 22 percent, as a reflection of oversupply.
Paper exports were lower in 2001 and prices were also 10 percent lower than the average prices in 2000.
The total export income was US$2.2 billion, representing a 14 percent reduction over the previous year.
Imports, mainly of softwood pulp and newsprint papers, fell by 20 percent, to US$772 million, as a reflex of the weak domestic market and the strong devaluation of the real.
The sector's trade balance was positive (US$1.4 billion), although 10 percent lower than in the previous year.
In spite of the poor international price average level, both for pulp and paper in 2001, the devaluation of the real helped to prevent a collapse in exporting companies' financial results.
In addition to that, the real, which was under severe pressure during 2001, rose sharply during the last quarter.
Brazil's hope to re-invigorate the economy is likely to be favoured by the expected recovery in 2002 of the United States economy.
The pulp and paper industry in Brazil is changing its economic and productive profile through mergers and acquisitions in order to become more internationally competitive.
The investment programme for the period 2000-2005 is under way. Until 2004, additional capacity in market pulp will add 1.3 million tonnes of bleached eucalyptus hardwood pulp.
The growing demand in the North American, European and Asian markets will be the main target for the new pulp to be produced.
The paper industry is also investing in process modernization, cost reduction and new products, looking forward to expanded opportunities in the global market.
International agreements, which are being discussed between Mercosur and the European Union, and the installation of the Free Trade Area of the Americas will certainly consolidate Brazil's industry as a leading global player.
A project named Genolyptus was launched in February 2002 to study the eucalyptus genoma, with a view to increasing the global productivity and competitiveness of that species. This project, which will facilitate genetic improvement research being conducted by the industry, includes a network of 12 companies, 7 universities and Embrapa, the Brazilian Agricultural Research Company.
The agencies of the Brazilian Government that are leading the actions in relation to climate change are the Ministry of Science and Technology, the Ministry of the Environment and the Ministry of International Affairs. The Federal Government, assuming the obligations for the implementation of the Framework Convention on Climate Change, created the Inter-ministerial Commission on Global Climate Change in 1999, and the Brazilian Forum of Climatic Changes in 2000.
The position of the Brazilian Government regarding the clean development mechanism (CDM) projects in the country is extremely positive, mainly focusing on the following subjects:
• renewable energy sources;
• energy conservation;
• carbon sinks; and
• other projects aiming at the reduction of emissions.
The imminence of ratification of the Kyoto Protocol underlines the need for the forest sector to be prepared to take advantage of the chances that will be proportioned by CDM, since this is the only mechanism available for non-Annex I countries, to participate in the Kyoto Protocol. For Brazil, the potential value of CDM, would be in terms of reforestation and afforestation.
The CDM, therefore, can also be an important additional instrument for the attainment of financial resources as compensation for the CO2 emissions that have exceeded the limits established by the Kyoto Protocol.
Brazil, through CoP 7 resolutions, will be one of the ten members of the Executive Committee of CDM for Latin America and the Caribbean region.
Other potential benefits for Brazil as a result of CoP 7 are:
• possibility of immediate beginning of the CDM projects;
• agreement obtained in CoP 7 was an important first step for the effective implementation of the carbon market and the effective participation of non-Annex I countries; and
• participation in this market will stimulate new investments in the forest-based sector.
The possibility in the abatement of greenhouse gases through sinks (reforestation and afforestation) give to the country comparative advantages, i.e. its continental dimensions and appropriate climate and ground. Other side attributes are the technological domain in forestry and availability of qualified labour.
These comparative advantages contribute to make forest plantations with a higher productivity level and, and with a short period of rotation, characterizing a dynamic carbon supply with the forests functioning as temporary sinks.
Focusing on the point of view of industrial forestry, CDM will be also able to offer:
• reduction of pressure on native forests;
• multiple uses of wood;
• resetting of the riparian zones; and
• recovery of degraded areas.
So that the Brazilian forest sector takes advantage of the chances of the worldwide carbon market, government, private initiatives, universities and research institutions are defining the national criteria of eligibility that will be adopted and the operational procedures that will be followed by the proponents of the projects. Baselines of the sector will be established, determining reference levels to characterize the forest sector and reference projects to characterize the country.
The country and the forest-based sector recognize the potentiality of CDM to attract external investments that will be focused on the objectives of mitigation of the greenhouse effect but also lend to the economic, social and environmental development of the country,.
According to Ministry of Science and Technology, the national inventory of emissions will be available in the first semester of 2002.
Brazil will have to ratify the Kyoto Protocol by next September, before the Worldwide Summit on Sustainable Development.
Forest certification is of vital importance for the Brazilian forest-based industry and adds value to Brazilian forest products. Demand for certified products principally comes from the United States and Europe.
In the national scope, the Brazilian Federal Government launched the National Programme of Forests (PNF), coordinated by the Ministry of the Environment, to promote and implement sustainable forest development, to protect the biological diversity associated with forest ecosystems and to maintain compatibility with the development of sustainable forestry and extra-sectoral politics. The PNF is proposing aims to ensure that raw material production will satisfy the internal demand of forest products as well as the excess to be exported; the forest base is extended; degraded areas are recuperated; the handling of forest replacement is improved and controlled; monitoring systems are modernized; and public forests are extended.
The CERFLOR scheme, the National Programme of Certification of Forest Origin, was initially developed in the framework of the Brazilian System of Certification, as a voluntary, non-governmental instrument that had the participation of research institutes, universities, entities, associations, and governmental and non-governmental institutions. Inserted in this system, the norms of forest handling, chain of safekeeping and forest auditing had already been developed in the scope of the ABNT - Brazilian Association of Technical Norms, i.e. the Brazilian Technical Forum norms. The regulations throughout the process are being developed by the INMETRO - National Institute of Metrology Normalization and Industrial Quality, in order to confer credibility and transparency.
The CERFLOR scheme follows the globally accepted requirements of normalization and of accreditation; it takes into consideration the rules of the World Trade Organization (WTO) and therefore will be able to be inserted in a chain of international recognition certification systems. The Brazilian forest products sector has been working to gain recognition of the programme in order to increase the concern of import markets with regards to the environmental and partner-economic aspects of the production and sustainable handling of forests.
The principles, criteria and indicators of the CERFLOR were developed in accordance with the characteristics of the Brazilian conditions. The norms that constitute the CERFLOR programme are:
• handling of planted forests;
• safekeeping chain;
• forest auditing (that includes three rules); and
• handling of native forests (in the final phase of elaboration).
The norms have already been published by the ABNT and will be operational from this year. Currently, in Brazil 18 units are already certified and handling forests in accordance with Forest Stewardship Council (FSC) scheme totalling about 1 million hectares (12 areas with plantations of eucalyptus, pynus and teak amounting to 763 000 hectares and 6 areas with native forest amounting to 286 000 hectares). Brazil possesses 95 products certified by the safekeeping chain, whose forest raw material is deriving from certified forests. In terms of ISO 14001, Brazil currently has 13 certified companies in terms of planted forests, totalling 1 million hectares.