Newsletters: April 2010

News this month which has been very briefly touched on in the greenwood management blog, but is worth a mention here for to those that haven't visited the blog.

Greenwood Management has recently trialled "Google earth" to produce a video which provides an aerial view of one of its plantations or "fazendas" in Minas Gerais, Brazil. More will follow if the project is well received.

The technology from Google seems ideal for presentations of this kind as it not only provides visual access to the area but also allow us to overlay some of the stills taken from our video footage onto the virtual tour. We believe that using Google earth this way will help our clients to obtain a much better picture of where the projects are located, not only in a geographic sense but also in relation to other related industries, such as iron and steel production. It also provides information regarding the transportation logistics within the region, such as the new rail links which are planned for the area. These rail links will undoubtedly prove to be beneficial both for ourselves and the steel makers in the area and perhaps open up additional markets further afield. Again, this rail link will be outlined on the video.

As the forestry projects progress, the videos will be updated, enabling our investors to stay better informed throughout the duration of the investment.

The video presentations can be seen on our gwm tv website here.

Turning to financial news for a moment, there has been some bullish news regarding Brazil's economic situation of late. Notably from Goldman Sachs, the originator of the BRIC acronym, who have been updating their clients with a research note on the BRIC so called "emerging" economies.

A number of key quotes from Goldman are highlighted below:

"Brazil will probably overtake Italy by the end of 2010, 15 years earlier than we thought in 2003."

"Brazil may now overtake Germany by 2029, seven years ahead of our previous expectations and, most strikingly, is now forecast to overtake Japan by 2034."

"The Brazilian Real stands out in terms of its persistent strength"

"A first group includes economies that have surpassed our expectations. China is, of course, at the top of this list that, within the BRICs, would also include Brazil."

"In turn, the BRICs could become as big as the G7 by 2032, about seven years earlier than we originally believed possible"

"Within the BRICs, in addition to China, Brazil and India have also performed better than we expected."

More indications of the strength of the Brazilian economy this month was signalled by the Brazilian stock market index, the Bovespa, which just hit a 21 month high at the start of April. Notable gainers within the Bovespa have been within the Iron and Steel sector as global and national demand forecasts drive confidence in the sector. On the subject of industrial metals and commodities in general, Goldman Sachs recently lifted its 12-month outlook for returns from commodities to 17.6 percent and said the biggest gains would be in crude, copper, corn and platinum. Energy will gain 23 per cent, industrial metals 12 per cent and precious metals 20 per cent.

Lastly in other Greenwood related news we are delighted to announce the appointment of a new Belgian Agency Representative, contact details of which can be found below:

Greenwood Belgium
Mr Alexandre de Mahieu
Rue Henri Chromestraat 34
Tel: 0032 495 455 124

In other news

Biomass and Renewable Energy in Brazil

Energy plays a central role in the world economy and changes in energy costs have significant effects on economic growth, especially in oil importing developing countries. The changes in energy costs can be derived from three key concerns: the increasing greenhouse gas emissions from fossil fuels, the perceived risk of fossil fuel dependence and high fossil fuel prices. Bio-energy and biomass mitigates these concerns as it offers the opportunity of reducing carbon dioxide emissions per unit energy production, which reduces dependence on energy imports and together with other alternative fuels, creates a cap on rising oil prices.

In 2008 the planted forest area with eucalyptus and pine in Brazil was estimated at 6,126,000 ha. This is an increase of roughly 282,000 ha over the total estimated in the previous year (5,844,367 ha). During this time the planted area with eucalyptus grew by 7.3% and the planted area with pine dropped by 0.4%, which resulted in an increase of 4.8% in total planned area for both species combined. Sustained roundwood production of eucalyptus and pine in Brazil in 2008 reached an estimated 230.6 million m³/ year. A sustained production of a tree species is the potential growth obtained through the product of the planted area and its Mean Annual Increment (MAI). The annual roundwood production from planted forests for industrial use in Brazil totalled 166.8 million m³, out of which 111.5 million m³ (64.0%) was industrial roundwood, and the remaining fuelwood (22.7%), and charcoal (13.4%) according to IBGE 2007 data. It is estimated that in 2008 the annual log production for industrial use increased, reaching 174.2 million m³. From both planted and natural forests there is a high potential in the country for forest biomass, from those generated in urban areas (afforestation, civil construction and others) and from the utilization of forest and industrial wastes. Producing woodchips for energy from harvesting or from industrial waste, for example residues from solid wood processing industries is just one way companies from the planted forest sector have made an effort to increase their use.

Energy related challenges such as global warming and the dwindling energy supply can be easily tackled by renewable energy sources. In Brazil the generation of energy with pellets and briquette sugarcane bagasse has the potential to supply a substantial amount of energy in the US and Europe. It should be noted though that this potential has not been developed to date.

Brazil Introduces Changes to the Forestry Code

During a meeting with journalists at the Brazilian capital, Brasilia, Reinhold Stephanes, Brazil's minister of Agriculture, spoke in favour of Brazil adopting environmental requirements for imports of food.

Due to a series of environmental criteria that Brazilian agriculture must meet Stephanes wants to raise debate on the matter in case the New Brazilian Forestry Code is passed. Currently this forestry code is under discussion at the National Congress. A result of the requirements imposed by the new law would mean that Brazil farmers would have to refrain from producing food in certain areas. In broad terms Stephanes found this illogical as Brazil would then have to import from countries that are deforesters.

"I want to provide the environmental debate with rationality," said Stephanes.

Were Brazil to adopt a 'reciprocity law' as Stephanes refers to the restriction on foreign sales then there would be an impact on imports, such as wheat and milk from Uruguay and Argentina for instance. Stephanes has said that if his proposal to the commission in charge of the law at Congress is not included in the new Forestry Code then he will submit a project of law. However, the minister's intention is to stir up a debate on the subject and to put pressure for the new law to not be quite so strict.

"Grain crops only take up 10% of the national territory, and cannot be blamed for the environmental problem in Brazil and worldwide," he claimed.

A requirement of the new law prohibits farming on land surrounding river banks for up to twenty metres. The minister proposes that the distance should be proportional to the size of the river at hand and in the case of creeks it should be smaller.

"The Egyptian civilization would not have existed if they were not allowed to plant near rivers," said Stephanes.

Stephanes has also called for Permanent Preservation Areas (APP) to be legally considered as nature reserves in plots up to 150 hectares and that commercial trees may be planted in the other half of the reserve.

Typically forests are located along rivers, riversides, hillsides, hilltops and springs. The legal reserve, in turn, is the legally defined percentage of the forest that should remain intact in rural plots. Each biome - the Amazon, the Savannah - has a different rate. According to Stephanes, President Luiz Inácio Lula da Silva agreed with his suggestions.

Brazil Prepares for its First Forest Fair

It has been confirmed that the Expoforest - Fair Forest Brazilian will take place from 13th to 15th April 2011. This is the first fair forest dynamics in Latin America and the entire productive sector of Brazilian planted forests is preparing for it. The event is due to be held at a 118 hectare eucalyptus plantation owned by International Paper.

The event will bring together new technologies and will be focusing on timber production especially. Hopefully this will help contribute towards devising ways to improve the competitiveness in the sector. The goal of the fair is to provide visitors with the best technology options available for timber production, according to the organisers.

"We are planning an event that may be compared to more traditional place in countries of the northern hemisphere, but with the advantage that Brazil is known worldwide in the production of forests planted mainly eucalyptus. The Expoforest want to be a global benchmark in this sector", said the general coordinator of the event, Jorge Malinovsky.

Already engaged in the design and planning of the event are large companies in the productive sector, such as manufactures and users of machinery, equipment and technology.

"We understand that Brazil has great potential to organize a fair forest of this magnitude," Malinovsky said.

Best regards,

Joe Randall
Greenwood Management

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