Paraguay has signaled that it is preparing to welcome new mega-sized industrial projects into the country’s forestry sector after President Santiago Peña met last week in Asunción with Peter Kaindl, CEO of Kronospan Group SA, the largest global producer of wood-based panels. The meeting comes amid renewed speculation that a major industrial project could be coming to Paraguay soon. Such projects have remained elusive for several years, even as the country’s area stocked with forest plantations has grown rapidly, and macroeconomic conditions have remained positive and stable. The meeting at Paraguay’s Government Palace was part of a wider-ranging government effort to promote manufacturing investments tied to the forestry sector instead of simply raw material exports. Mr. Kaindl is visiting Paraguay for undisclosed reasons, while government officials are reaching out to other potential investors in Brazil and elsewhere. Wood panel industry analysts have viewed those moves as a strong indication that a multi-billion-dollar project related to panel manufacturing or pulp production could materialize soon.
Meeting with Forestry Industry Titan
Mr. Kaindl is an Austrian businessman who has served as head of the Kronospan Group for many years. Kronospan is based in Austria but has facilities in Europe, Asia, and the Americas. The company manufactures particleboard, MDF panels (medium-density fiberboard), laminate flooring, and other wood-based materials used in furniture making and construction. It is currently the world’s largest producer of panels made from engineered wood. Kronospan operates in countries around the world, so interest in expanding its production further is closely watched by the forestry sector and construction industries in many countries. Mr. Kaindl traveled to Paraguay during a critical window during which government officials were meeting with investors to discuss potential opportunities related to forest plantations. Forestry investment in Paraguay is likely to continue picking up if multinational corporations like Kronospan believe that they can competitively produce goods for export to regional and international markets from Paraguay.
Background on Paraguay’s Forestry Sector Ambitions
Paraguay has grown its forest plantation area by about 10% each year on average over the past two decades. Forest plantation investments have been incentivized by Paraguay’s public sector, benefited from the country’s suitable climate, and experienced tremendous growth from private sector investment. Peña and previous administrations have encouraged landowners to plant trees through various public programs. They have also required long-term land use planning and other steps designed to ensure forestry projects would last for many years and supply raw materials that could eventually feed industrial projects capable of processing logs, wood chips, and other outputs into higher-value products. Forestry industrialization has been a particular focus of the Peña administration. While wood chip exports and log exports bring in millions of dollars of annual revenues for Paraguay, government officials have said that the country needs to attract companies that will operate sawmills, panel plants, pulp mills, and other industrial projects that further add value to exported goods. Forestry investment in Paraguay may be treated as synonymous with industrial policy under the Peña administration. Plans by Kronospan or another global leader in forestry manufacturing would create a flagship investment that Paraguay could promote to investors from other countries around the world.
Could Kronospan Bring Mega-Projects to Paraguay?
Forestry industry analysts believe that Kronospan is coming to Paraguay to explore opportunities related to either wood panels (MDF, particleboard) or pulp. Both forest products segments would be major investments for the company, though pulp is believed by some to be a primary target for investment. Analysts pointed to remarks by Paraguayan businessman Blas Zapag promoting a pulp plant referred to as Paracel that has failed to secure financing in recent months. Global pulp markets have been challenged by inflation and higher borrowing costs, making it difficult for the Paracel project to close on financing even though trees have already been planted in preparation for its development. Countries like Brazil are also experiencing challenges. The Arauco Group recently announced that it is studying alternative financing for a pulp plant under development near Brasilia due to higher capital costs. That pulp project, Sucuriú, may have to be partially sold off by Arauco in terms of its forest estate in order to advance. Forestry investment in Paraguay could become more likely if Kronospan views the country as a low-risk destination, given financing challenges elsewhere. Paraguay boasts low levels of debt compared to other countries in the region, stable macroeconomic indicators, and pro-business policies that are likely to appeal to global investors. Analysts say low operating costs in Paraguay are another potential draw for foreign investors looking at mega-sized projects that can take advantage of economies of scale.
Is MDF on Kronospan’s Radar?
It’s also possible that Kronospan is vetting an MDF manufacturing project during its trip to Paraguay. Last February, Paraguayan officials traveled abroad to tour an MDF facility as part of an investment promotion mission. During that mission, President Peña and senior officials met with Peter Kaindl, according to a source familiar with the meeting. An MDF manufacturing project would require consistent supplies of plantation-grown trees as well as reliable access to affordable energy and the ports needed to export products around the world. As noted above, forestry investment in Paraguay’s MDF sector could create demand for countless complementary products and services that would create jobs and boost value chains related to furniture making, construction, and other similar industries. SMEs in particular stand to benefit if larger projects are able to connect with local companies serving Paraguay’s plantation sector. Adding wood-based panel capacity in Paraguay would make sense from Kronospan’s perspective, too. Demand for MDF in South America has grown in recent years as countries look to promote wood-based construction.
Government Says Little about Plans but Shares Photos of Meeting
There have been few official announcements from the Paraguayan government about the potential implications of President Peña’s meeting with Peter Kaindl of Kronospan. Photos of the meeting were posted on X, formerly Twitter, by both the Presidency and President Peña. In the photos, Mr. Kaindl can be seen flanked by both President Peña and Graciano Pereira, a Paraguayan businessman with interests in rice farming and agroindustry. The newspaper Última Hora also reported that Peter Kaindl said that Paraguay has good forestry policies and seems interested in industrial projects instead of simply raw material exports. There has been no indication of a timetable should talks continue between the Paraguayan government and Kronospan. Such negotiations can often drag on for years as both parties conduct feasibility studies, track borrowing costs, solicit input from lenders, and negotiate key terms of any resulting agreements. Meetings like the one last week can take on increased importance when officials say little beyond showing that they met with potential investors from countries all around the world. Forest investment in Paraguay relies on these types of meetings to gain momentum.
Paraguay Poised to Become Forestry Hub
Plans related to MDF, pulp, or panels could help turn Paraguay into a regional hub for forestry-related industries. Global markets for wood products, sustainable packaging materials, and other bio-based sources of energy are expanding every year. Countries with strong capabilities in plantation forestry stand to benefit. Kronospan choosing to expand production in Paraguay would also create opportunities for suppliers of equipment, feedstocks, transportation services, and more. Forestry investment in Paraguay would have positive effects that reach far beyond the size of the initial investment. Rural communities that are home to plantation forestry investments would likely experience periods of accelerated development. Exports of higher-value wood products would diversify Paraguay’s trade portfolio and help the country connect with markets in North America, Europe, and Asia that demand sustainably sourced and traceable raw materials.
Forestry investment in Paraguay will continue to be watched closely by industry analysts and investors around the world as the results of Kronospan’s visit continue to unfold.