Forestation Risks
Below are some of the risks regarding forest plantations that are considered to be significant, along with the impact and how these risks are minimized.
Financial Risks
Low wood prices: the risk is considered negligible with the trend toward higher prices for timber due to this natural resource’s importance in the world, and in a country like Slovakia where the demand for this commodity is quite great.
High costs: considered a moderate risk, given the availability of skilled agricultural workers in the country. Costs can be optimized to such an extent that a producer and staff gain experience in plantation care.
Theft/intrusion: the risk is considered to be very low as criminal liability is the generally used criteria for theft. In addition, theft of small amounts is unprofitable and of larger amounts not possible. Areas are fenced and largely separated by ditches. In general, there is only one access road leading to afforested areas that is always patrolled, minimizing the risk of theft.
Physical Risk
Fire: considered a moderate risk as it can be mitigated by building and maintaining firebreaks to prevent the spread of possible plantation fires and by keeping plantations free of dry bottom growth.
Drought: considered a moderate risk only in the first three months and this risk can be mitigated at the least with irrigation. After three months, it becomes unrealistic due to high ground water.
Frost:: considered to be very low because planting usually takes place in hot weather and regular rain can be expected, while frost-resistant varieties are available on the market and can be sown.
Biological Risks
Pest infestation: Ethereal eucalyptus and its cloned varieties provide themselves with sufficient protection against pests. Pest and ant control is done before planting and thereafter at regular occasions. There is a need mainly by plantations located in mountainous areas to use different chemical agents such as sprays and granular pesticides for ants.
Financial Risks
Market Risk
It is unlikely that the timber market will collapse at harvest time in the face of global population development and resource consumption. Market fluctuations are common only in commodities traded on centralized speculative markets, while raw wood has not encountered any market or marketing pressures. Harvests can be postponed for several years and the sale of wood is not tied only to the local market.
Currency Risk
The exchange rate between the local currency and the US dollar or euro could be unfavorable at harvest time. Lumber sales are not necessarily linked to the local currency and the transactions can be made in either another country or another currency.
Inflation
Forests and their mineral resources are tangible assets not influenced to a large degree by inflationary effects. Only at the time of harvest is the material value exchanged for cash at an equivalent value.
General Risks
Failure of Major Customers
There is no dependence on individual companies so alternatives do exist. It is unlikely that many long-term customers from the industrial and agricultural sectors will suddenly cease to participate in the market.
Loss of Key People
The success of any project depends to a great degree on management entrepreneurial skills. The loss of such entrepreneurial talent could have a negative impact on economic developments. However, there are always several people ready to step into management roles and new people can be trained.
Political Risk
After more than 12 years of experience in Latin America, our belief is that Paraguay is economically one of the stablest countries on the continent. As a trend indicator, there has been a treaty in force since 1998 to protect investments from Germany and other EU and North American countries.
