LATIN AMERICA - A MARKET FOR CANADIAN FOREST PRODUCTS
POTENTIAL AND PROSPECTS FOR DEVELOPMENT
by
ALFONSO CASASEMPERE
Ingeniero Forestal, Universidad de Chile, 1967
A THESIS SUBMITTED IN PARTIAL FULFILMENT OF
THE REQUIREMENTS FOR THE DEGREE OF
MASTER OF FORESTRY
in the Faculty
of
Forestry
We accept this thesis as conforming to the
required standard
UNIVERSITY OF BRITISH COLUMBIA
April, 1970 In presenting this thesis in partial fulfilment of the requirements for an advanced degree at the University of
British Columbia, I agree that the Library shall make it freely available for reference and study. I further agree that permission for extensive copying of this thesis for scholarship purposes may be granted by the Head of my De• partment or by his representative. It is understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission.
Faculty of Forestry
The University of British Columbia
Vancouver, Canada
Dates April, 1970. i
ABSTRACT
The Latin American market for forest products is eva• luated with emphasis on the economic, social, and political aspects influencing demand and trade.
Canada's political, cultural and commercial relation• ships with Latin America are investigated and it is concluded that, currently, among the most important factors restricting a possible increase in trade with the area ares Canadian detachment from the Inter-American System and political iso• lation; reduced commerce with all countries south of the
United States? trade patterns imposed by economic growth and by bilateral cooperation? and economic integration among the countries of the region.
Trends indicate that as Latin America increases its financial wealth and income is distributed along more equit• able lines, demand for industrial forest products will rise considerably. Estimates of demand for 1965, 1975 and 1985 are given. Emphasis is placed in distinguishing between six types of forest products? sawnwood? plywood and veneer? particle board? and wood pulp and paper. Identical treatment is given to the presentation of future estimates of production and net regional deficits. Net deficits in forest products 3 are anticipated to be, by 1975? 50 thousand m of plywood 3
and veneer? 150 thousand m of particle board? 400 thousand
m3 of fibre board? 192 thousand tons of pulp? and 1.279
million tons of newsprint. The sawnwood sector is expected
to supply all domestic demand and hopefully export to other
regions of the world.
Future import requirements are evaluated under the
assumption that all regional producers will sell their pro•
duction in Latin America, therefore, the trade deficits
forecast are minimal. If, however, any producing country
sells forest products outside the area, net deficits are
expected to increase.
Because Chile is the only net exporter of industrial
forest products in Latin America, its future capacity for
production is evaluated. Considerable, and in some cases
total, competition to Canadian forest products in Latin
America should be expected from Chilean exports. The Latin
American Free Trade Association agreements are the key to
the marketing success of such exports.
The competitive characteristics of Canadian forest
products are appraised and compared to those of other iii
important suppliers to Latin America. Provided that the present trends in production and transportation costs re• main unchanged, Canada should find no great difficulty in competing with the United States, the Baltic countries, or the Soviet Union in Latin America.
Canada's position relative to Chile is also stressed and special references to the Central American common Market and Latin America Free Trade Association tariff regimes are made.
It is concluded that there are excellent opportunities for Canada to increase its trade in forest products with the
Latin American countries, particularly with respect to news• print and other pulp and paper products. In order to realize this potential, however, it would be necessary for the Canadian forest industries to develop a more aggressive sales strategy in the region. iv
R E S U M E N
El presente estudio evalua el mercado Latinoamericano de productos forestales, con especial referenda a las caracteristicas economicas, sociales y politicas que deter- inan su demanda y capacidad de importacion.
Por su trascendencia economica tambien se analizan las relaciones politicas, culturales y comerciales de Canada con America Latina, y se cohcluye que entre los factores mas importantes que afectarian un posible incremento de las exportaciones Canadienses a esta region se encuentrans el desapego del pais del Sistema Interamericano (organizacion de Estados Americanos), y el aislamiento politico con respecto a las Naciones Latinoamericanas? el reducido nivel de comercio corrientemente llevado a cabo con la regi6n? el sistema de compra y venta impuesto por la ayuda financiers y tecnica entre paises; y la integracion economica de
America Latina.
Proyecciones de la demanda de productos forestales para America Latina indican que a medida que la region incremente su poder economico y el ingreso se distribuya mas equitativamente entre sus habitanlies, el consumo de estos productos crecera considerablemente. Estimaciones de V
deraanda se establecen para los anos 1965, 1975 y 1985,
agrupando los productos forestales en tres categoriass
Madera Aserrada, Tableros de Madera, y Pulpa y Papel. Las
estimaciones futuras de producci6n y deficits regionales
reciben identico tratamiento presentandose las cifras para
los mismos anos y categorias de productos.
Los deficits netos de productos forestales indust-
riales en America Latina se anticipa que seran en 1975s 50
3 3 mil m de madera tercida y chapas? 150 mil m de tableros de
' 3 particulas? 400 mil m de tableros de fibra? 192 mil toneladas
de pulpa; y 1.279 millones de toneladas de papel de diario.
En madera aserrada Latinoamerica se espera que sea auto-
suficiente con un cierto poteneial de exportacion a otras regiones deficitarias del mundo. Estas necesidades futuras
de importacion se han evaluado bajo el supuesto de que todos
los productores de America Latina destinaran su produccion al
abastecimiento de la region. Por esto, las cantidades
aque obtenidas solo corresponden a cifras minimas que
deberan modificarse e incrementarse en la medida que algunos
paises exporten extraregionalmente.
A continuacion, en razon al considerable impacto que
ejerceran las exportaciones de Chile en el mercado regional, vi
se establecen tambien las posibilidades futuras de produc•
cion de este pais. Debibo a la existencia de La Asociacion
Latinoamericana de Libre Comercio se concluye que las
exportaciones forestales Chilenas ofreceran considerable y
en ciertos casos total competencia a los productos
Canadienses en esta region.
Habiendose determinado la existencia de numerosos otros
paises interesados en vender productos forestales en
America Latina fue necesario establecer las caracteristicas
competitivas de la produccion Canadiense. Asumiendo que las presentes condiciones en costos de transporte y produccion no sufran de cambios bruscos en el corto plazo, Canada no tendra mayores problemas en competir favorablemente en America
Latina contra los productos forestales que puedan exportar
Estados Unidos, la Union Sovietica o los paises Escandinavos.
Finalmente, se conluye, que existen excelentes oport- unidades para la exportacion de productos forestales
Canadienses a Latinoamerica, especialmente en el area de papel de diario y otros productos de pulpa y papel. La realiz- aci6n de este potencial se encuentra sujeta en todo caso, a
la condicion de que la industria forestal de Canada emprenda una estrategia y politica comercial mas agresiva en toda la region. vii
ACKNOWLEDGEMENTS
The writer would like to acknowledge the continuous guidance and constructive criticism given to him during his entire stay at the University of British Columbia by his supervisor, Dr. D. Haley. His help, friendliness and en• couragement both within academic circles and outside is greatly appreciated.
Thanks are due to Dr. J. H. G. Smith who suggested the topic for this thesis and later, as did Mr. J. V. Thirgood, offered valuable advice which helped to improve its text.
Financial assistance granted by the Faculty of Forestry,
University of British Columbia is gratefully acknowledged.
Finally, the writer would also like to express his sincere gratitude for the unfailing support of his wife,
Karin, throughout the entire study and for the considerable help received from a number of friends, too numerous to mention individually but equally appreciated. viii
TABLE OF CONTENTS
page
ABSTRACT . . i
RESlSUMElftF 00OOO»0«aoOO0«O»00O*00eO000**«'90*00OOO«*O00Q«O00O* IV
ACKNOWLEDGEMENTS , •. vii
TABLE OF CONTENTS viii
LIST OF TABLES XV
LIST OF MAPS xix
SECTION I DESCRIPTION AND GENERAL OBJECTIVES OF STUDY. 1
SECTION II PHYSICAL AND SOCIO-ECONOMIC CHARACTERISTIC..
OF LATIN AMERICA 10
2.1 Physical Characteristics 13
2.1.1 Geography, Climate and Vegetation.... 13
2.1.2 Position of Latin America 23
2.2 Cultural Characteristics ...... 27
2 o2.1 Early Natives oooooeaoooooo.o«.a....o 28
2.2.2 Racial Composition 29
2.3 Introduction to the Economy of Latin America 31
2.3.1 Roots of the Economy ...... 32
2.3.2 Factors of the Economy ...... 35 c ix page
2.4 Economic Characteristics of Latin America 37
2.4.1 Population Growth 38
2.4.2 Gross Domestic Product .„ 44
2.4.3 National Income 47
2.4.4 Per Capita Income 50
2.4.5 Imports and Exports 53
SECTION III FACTORS AFFECTING THE EXPANSION OF CANADIAN
EXPORTS TO LATIN AMERICA 59
3.1 Canadian Detachment from the Inter-American
3.1.1 Political Isolation ...... 63
3.1.2 Reduced Commerce with Latin America.. 70
3.1.3 Potential for Future Relationships... 72
3.2 Trade Patterns Followed by Less-Developed
3.2.1 Trends Imposed by Economic Growth ... 75
3.2.2 Trends Imposed by Bilateral
3.3 Economic Integration in Latin America 82
3.3.1 Economic Development and Comparative
3.3.2 The Theory of Integration 85
3.3.3 The Latin American Free Trade
Association 89 x page
3.3.4 The Central American Common Market... 96
SECTION IV DEMAND FOR FOREST PRODUCTS IN LATIN AMERICA. 100
4.1 Forest Resources of Latin America 101
4.1.1 Economic Characteristics, Geographic
Distribution and Accessibility of the
Native Forests 104
4.1.2 Man-made forests 110
4.2 Forestry Trends in Latin America 113
4.2.1 An Expanding Role for Forestry 115
4.2.2 The Forest Industry ...... 120
Sawmilling Industry 120
Wood-based Panel Industry 121
Pulp and Paper Industry 123
4.3 Consumption of Wood and Wood-based Products
in Latin America 124
4 o3 » 1 S clVvTlWOOCl o«0ooo«aa«ae*«*eoo<»ao«««o*oo 124
4.3.2 Wood-based Panel Products 127
4.3.3 Pulp and Paper 128
4.4 Prospects for Increasing Production and
Meeting Demand in Latin America 132
4.4.1 Raw Material Requirements 132
R OXlTlClWOOCl aooooe»o»ao90»e»aottooooo*eo X 3 5
I? IcLXltlcl't J.On£> oeao*Doeo»*«»oop»ao»»eoo» 136 xi page
4.4.2 Requirements and Potential Develop•
ment of the Forest Industries to
X 97 5 o«»ottoaooo«««oeo FOJT©StlTy ooo«ooo*eoe *oo»eo*o»o«»*eo*o 140 Forestry Industry „ 141 Forest Services 141 Institutions 141 Investments 141 4.4.3 Requirements for a Continued Develop• ment of the Forest Industries to 1985 143 ScLWirtXllinCj o*ooeo«o«<>o«eoeo*o»aoo«ee9 144 Wood-based Panels 145 PVllp cHlCl PcipGjC oo«oeoooo«o«eaoeoooo«o 145 4 © 5 ScllcinGO Of TITCICIG • ooeoooooeoooooooooovoooooo 146 4.5.1 Exports and Imports of Industrial Forest Products 146 SclWflWOOCl •o«ooo«9ooeooooo«»*o0ooo«eo» 147 Wood-based Panel Products 149 Pulp and Paper Products ...... 151 4.5.2 Value and Direction of Trade in Industrial Forest Products 153 Wood-based Panel Products 155 Pulp and Paper 156 xii page 4.5.3 Summary of Net Imports and Future Prospects 157 SECTION V CHILE - A COMPETITOR FOR CANADIAN FOREST PRODUCTS IN LATIN AMERICA 164 5.1 Physical and Socio-Economic Characteristics of Chile , 167 5.1.1 Geography and Climate 167 5.1.2 Population 174 5.1.3 Principal Features of the Economy ... 176 5.1.4 Forestry and Economic Development ... 180 5.1.5 Outlook for the Economy 186 5.2 Forestry in Chile „ 188 5.2.1 Forest Resources and Forest Land .... 188 5.2.2 The Forest Industries „. 191 5.2.2.1 General 191 5.2.2.2 Complimentary Investments Needed for a Better Use of the Forest Areas 194 5.2.2.3 Land Ownership and Competit• ive Forestry Activity 195 5.2.2.4 Productive Capacity of the xiii page 5.3 Forestry Development 199 5.3.1 Possibilities for Increasing Forest Production „ 199 5.3.1.1 Ecologic Condition..... 199 5.3.1.2 Costs 200 5.3.1.3 Demand for Industrial Forest 5.3.2 Possible Forestry Production and Exports 201 5.3.3 Implications for Canadian Imports in Latin America 207 SECTION VI PROSPECTS FOR A MORE DYNAMIC MARKETING POLICY IN LATli^ AMERICA 9*«*oeoo««o*e*«eaooooeeo»*c> 212. 6.1 Significance of the Latin American Market to CSn&d& oo«oo«o0««QOO«ooee*ooaeooooeeo«oo«eo« 211 6.2 Canada's Share of the Latin American Market for Forest Products 214 6.2.1 Canadian Exports of Industrial Forest Products to Latin America 214 SclWnWOOd oo«ooaoooooe«ooa0o«O000oeoee 214 Wood-based Panel Products 215 Pulp and Paper 217 xiv page 6.2.2 Sources of Supply of Industrial Forest Products to Latin America .... 219 6.3 Competitive Character of the Canadian Forest Industry 226 6.4 Influence of LAFTA and CACOMA Tariff Agree• ments on Canadian Exports to Latin America.. 239 6.4.1 Central American Common Market Tariff Agreements 241 6.4.2 Latin American Free Trade Association Tariff Agreements 244 SECTION VII CONCLUSIONS 253 BIBLIOGRAPHY 264 APPENDIX I 288 XV LIST OF TABLES Table page 1 Latin Americas Total Population 1950-1980 40 2 Latin Americas Total Population and Growth Rates as Compared to the United States and Canada in 1980 ... 41 3 Estimates of Gross Domestic Product in Latin America and other Areas 1963, 1965, 1966 46 4 Estimates of National Income in Latin America and other Areas 1963, 1965, 1966 49 5 Estimates of Per Capita Income in Latin America and other Areas 1963, 1965, 1966 52 6 Latin Americas International Trade 1965-1968 . 56 7 Canadas Exports to the United States and Latin America in 1968 71 8 Latin Americas Forest Land and Useable Forests .... 105 9 Latin Americas Growing Stock of Forests, Total Volume of all Forest Areas (Including Non-Commercial Species) 107 10 Latin Americas Forest Planting by Country Ill 11 Latin Americas Apparent Consumption of Sawnwood and Demand Forecasts 126 12 Latin Americas Apparent Consumption of Wood-based Panel Products and Demand Forecasts 127 13 Latin Americas Apparent consumption of Paper and Paperboard, and Future Prospects 129 14 Latin Americas Demand Projections for Paper and Paperboard by Countries 1975 and 1985 131 15 Regional Production of Sawnwood, Plywood and Veneer, Particle board, and Fibre board in 1975 138 xv i Table page 16 Regional Production of Pulp, Paper, and Paperboard in 1975 139 17 Latin Americas Exports and Imports of Sawnwood by Major Countries in 1965 148 18 Latin Americas Exports and Imports of Wood-based Panel Products by Major Countries in 1965 150 19 Latin America? Exports and Imports of Pulp, Paper and Paperboard in 1965 152 20 Latin America; Total Trade in Sawnwood (millions of Dollars) 154 21 Latin Americas Total Trade in Wood-based Panel Products (millions of Dollars) 154 22 Latin Americas Total Trade in Pulp and Paper (millions of Dollars) 158 23 Latin Americas Summary of Sawnwood Imports 159 24 Latin Americas Summary of Wood-based Panel Products Imports o 160 25 Latin Americas Summary of Pulp and Paper Imports .. 162 26 Chiles Population Estimates for the Period 1952 - 1970 175 27 Chiles Exchange Rates for the Period 1961-1968 (Escudos per U.S. Dollar) 180 28 Chiles Indices of Manufacturing Production by Com• modity Groups 1964-1966 (1963=100) 183 29 Estimated Demand for Raw Material, Production Capa• city and Annual Production of the Chilean Forest Industries for the Year 1964 197 30 Projection of the Demand for Sawnwood in Chile to 1989 202 Table xvii page 31 Chiles Demand and Supply of Radiata pine products for the Period 1965-1969 202 32 Chiles Estimates of Total Volumes and Useable Volumes for the Period 1965-1985, based on a Reforest• ation Program of 50,000 hectares a year ...... 204 33 Chiles Potential Radiata Pine Production for the Period 1964-1989 (Based on a Reforestation Program ot 50,000 Hectares a Year) 206 34 Chiles Exportable Surplus for the Period 1965-1989 (1) (Radiata Pine Production) 206 35 Chiles Value of the Exportable Surplus for the Period 1965-1989 (2) (Radiata Pine Production) 207 36 Canadas Exports of Sawnwood to Latin America and the Rest of the World 1960-1967 215 37 Canadas Exports of Wood-based Panel Products to Latin America and to the Rest of the World 1960-1967 216 38 Canadas Exports of Pulp and Paper to Latin America and to the Rest of the World 1960-1970 218 39 Major Suppliers of Sawnwood to Latin America 1967 .. 220 40 Major Suppliers of Wood-based Panel Products to Latin America 1967 222 41 Major Suppliers of Pulp and Paper Products to Latin America 1967 225 42 Cost of Pulpwood at Mill and Manufacturing Costs of Sulphate pulp in Different Forest Regions of the World in 1966 232 43 Central American Common Market External Tariff for Sawnwood 241 44 Central American Common Market External Tariff for Wood-based Panel Products 242 45 Central American Common Market External Tariff for Pulp, Paper and Paperboard 243 Table xviii page 46 Latin American Free Trade Association Tariff Agreements on Sawnwood 246 47 Latin American Free Trade Association Tariff Agree• ments on Wood-based Panel Products 248 48 Latin American Free Trade Association Tariff Agree• ments on Pulp and Paper 249 xix LIST OF MAPS Map page 1 Physical Map of Latin America 18 2 Latin America Today . 19 3 Rainfall Map of Latin America 21 4 Vegetation Map of Latin America 24 5 The Hemisphere of Latin America „ 25 6 Economic Integration in Latin America 92 7 South America (Chile) 169 8 Chile 171 9 Distribution of the Native Forests and Exotic Plantations in Chile 192 SECTION I. DESCRIPTION AND GENERAL OBJECTIVES OF STUDY George Washington is quoted as saying, on the occasion of his farewell to the American people, The rule of conduct for us in regard to foreign nations is, in extending our commercial relations, to have with them as little political connection as possible. So far as we have already formed engage• ments, let them be fulfilled with perfect good faith. Here let us stop. This was the attitude of the American nation towards foreign trade for almost a century. However, the time of Washington is not our time. Progress has marked all industry and the domestic past must give way to the international future. (Allen, 1927). In many ways Canada is tied economically and culturally to the United States. Variations in American markets greatly affect Canada's industry. Despite the fact that these rela• tions are expected to intensify in the future, even to the point of creating a common market, Canada should seek a great• er diversification of its foreign markets. In common language, diversification in trade, both in the number of commodities and markets, means security against unexpected fluctuations. 2 Price uncertainties and variations in demands are minimized through an increase of the parties involved in trade. Apart from Canada's interest in the United States, Europe, and a recent involvement in Japan, its economic relations existing with other regions of the world are quite small. Of all the major areas, Latin America is where least interest has been demonstrated, despite its proximity, population growth, and potential economic development. Despite the recurrent political and commercial isolation in which Canada has placed itself in relation to the Inter- American System, a certain amount of trade has always existed between the two regions. This trade, however, has not follow• ed the growth trends experienced by total Canadian trade, but relatively has tended to remain stationary between two to three percent of total trade. Given the rise in trade Latin America has experienced in recent years one can only assume that other parties have been increasing their influence in the region. Canada is known to be competing favourably in the United States and European markets, therefore, it should also enjoy favourable trade relationships with Latin America. After all, shipping 3 by boat is not generally a major component of total cost, and besides, a great number of Latin American countries are as near, or perhaps closer to Canada than to Europe. Lack of interest is, perhaps^ a fundamental factor influencing the present state of affairs between Canada and Latin America. Carrying on foreign trade is a more complicated activity than domestic transactions. Fundamentally, however, there is no difference between international, or what is often termed foreign trade, and domestic trade. Under normal conditions both represent a private merchandising activity which is carried on for profit and consists of the purchase and sale of commodities. In international trade, the objects of exchange are sent from one country to another, they usually cover greater distances than commodities moved in domestic trade, and on their way to and from markets they must cross political boundaries of states. The level of commercial activity in general, is a function of a number of variables. The greater the knowledge of these variables, the lesser will be the uncertainties and risks involved in trading with one particular party. Among others, these variables include the habits and tastes of the people concerned; their language and business customs? 4 differences in currency, weights and measures? import duties and customs regulations? fluctuating foreign exchanges and many other details peculiar to export-import financing. Unfortunately, Canadians appear to know very little about Latin America, it has always been easier because of language and culture, for them to look to Europe and to the United States as their principal export markets, and not to Latin America. Their general knowledge of the former regions has traditionally been more advanced than that of the latter Given the influence Latin America is presently experiencing in the economy of the world, and its growing importance in the eyes of France, Germany, Japan, and the United States (all great exporters), only sheer misunderstanding of the region's affairs can easily explain Canadian detachment. In other words, Canadians are not interested in increasing rela• tions with Latin American countries because they do not know they could, and should, be interested in doing so. This thesis, working at both a general and specialized level, represents an effort to introduce Latin America to the interested sectors in the Canadian economy, with parti• cular emphasis on its potential as a market for the products of the Canadian wood-based industries. A number of questions 5 are explored, but probably the most important ones ares Where can Canada sell its extra forestry production south of the border of the United States and Mexico? Should Canada increase its promotion of wood products consumption in Latin America? How large is the Latin American market for imports of forestry related commodities? How important is Chilean competition in Latin America? The importance of these questions is better appreciated if we consider that Canada manufactures wood and wood-based products mainly for export. In 1969 total forest production (Gross Value) is estimated to have amounted to more than C$ 6.5 billion, of which roughly 35% was exported to foreign markets, these being principally, the United States, the United Kingdom, and Japan. The relevance of international trade in forest products (almost entirely in exports) to the Canadian wood using industry is even better established by looking at its most developed sector, pulp, paper, and paper board products. During 1968, gross production of pulp and paper mills amounted to C$ 2.455 billion. Exports of these products were made in the order of C$ 1.729 billion (70.4%). With a gross value of total domestic exports of C$ 13.22 billion, the ratio of pulp and paper exports to total domes• tic exports was 13.08%. 6 Therefore, although Canada should maintain and expand its major overseas markets, it is quite possible, that this might not be enough in the years to come. Efforts should also be made in other regions of the world. Among these and because of its proximity is Latin America, where careful con• sideration should be given to serving the potentially great but presently restricted demand of its vastly increased popu• lation. Canada should not forget that by 1980, Latin America will hold more than 364 million people, this is 100 million people more than the population of the United States and Canada combined. It is for these reasons that I have selected Latin America as the field of my work, and by pointing out some of the specific possibilities for the expansion in sales of for• estry related commodities, I hope I may evoke both in the Canadian manufacturer and others who read these pages, a desire for a greater involvement in the area. Perhaps everything that should have been said has not been mentioned', nevertheless, it is also hoped by the author that these areas which at times have purposely remained un• touched will serve as encouragement for others to work in the field. Among the most important ones should be mentioned the 7 potential for selling Canadian forestry equipment and machinery in Latin America, and the possibility that some wood-based industries might advantageously export both capital and tech• nological skills to the area. This is specially true in the pulp and paper sector where, undoubtedly, there are very good prospects for investments. The creation of mixed Latin American-Canadian corporations could serve the purpose of in• creasing the wealth of the industry and help gain access to markets heavily protected by tariffs and customs duties. Section I acquaints the reader with the methods and goals of the thesis. In Section II a general geographic, cultural, and socio-economic description of Latin America is presented. Some confusion often surrounds the term Latin America, and it is difficult to say exactly what is Latin America today, what is its relative importance, and whether it is a suitable entity for economic analysis. The basic information for the whole area is summarized in four subsections. Because of the relevance of a number of factors to Canadian trade increases with Latin America, Section III is devoted to their appraisal. These factors are grouped under 8 three headings; Canadian detachment from the Inter-American System? trade patterns followed by underdeveloped countries; and economic integration in Latin America. Having analyzed all the conditions and factors relevant to the goals of the thesis, Section IV determines the total demand for forest products in Latin America. Gross and net requirements are established in relation to the forest re• sources of the region, the present and projected industrial capacity to work these resources, and the future consumption of wood and wood-based products. The balance of trade is obtained mainly from the evaluation of the import and export capacities of the individual countries. Based on the fact that Chile is, and will be for a number of years, the only Latin American country in a position to produce net exports of forest products, Section V reviews the potential of this country. Both the economic background and future production possibilities are presented. From these, the prospects for the forest industries are obtained. Then, having established projections for domestic consumption, it is possible to estimate the exportable surplus which could be offered in Latin America. 9 Section VI surveys the potential for a more dynamic trade strategy in Latin America. The recent trade patterns in Canadian forest products exports are presented, and the principal suppliers of these products to the region pointed out. The purpose of this was to determine what countries were the principal competitors of Canada in the region which, added to the knowledge of the competitive character of the Canadian forest industry, permitted the author to evaluate the potential for a sales expansion. Finally, in Section VII conclusions are drawn and the most interesting ideas summarized. 10 SECTION II. PHYSICAL AND SOCIO-ECONOMIC CHARACTERISTICS OF LATIN AMERICA Latin America is widely, though not universally, accepted to be everywhere in the American Continent south of the United States. The term is a general one applied to the twenty independent republics of the New World with a Latin background. Half of these countries are on the mainland of South America. Increasingly, however, within the general expression "Latin America" are included the former colonies of the European States in the hemisphere, that iss Jamaica, Trinidad, British Honduras, British, Dutch (Surinam) and French Guianas, the Lesser Antilles, and so on. Puerto Rico, a Spanish colony for four centuries but now a protectorate of the United States, may also be included under the term Latin America. Since several of the Caribbean islands often referred to as the West Indies have recently become independent and are seeking admission to regional organizations, the problem of delimitation of the area is becoming increasingly complex and can no longer be considered purely academic * 11 The term Latin America does not satisfy everyone. Those who think in terms of Iberian background prefer Ibero- America or Hispanic America. In referring to some countries of high Indian population, such as Paraguay, Bolivia, Peru, Ecuador, the Central American States, and Mexico, foreigners often use the expression Indo-America. Just as some writers designate the United States as Anglo-America, others use the expressions Spanish America and Portuguese America to refer to this region. Nevertheless, for the sake of convenience in referring to this distinct area of the world, the term Latin America is both accurate and simple. Latin America covers an area of 20,541,000 km2 (Cole, 1965), nearly a fifth of the land surface of the world. In 1961 it had approximately 217,000,000 inhabitants, about 7% of the world total, but recently the population has been growing at a faster rate than in any other region, and there• fore, the figures have increased considerably. Although large, and long from end to end, Latin America has certain features that at least give to it cultural unity. Spanish or Portuguese (in Brazil) is the official language of almost 95% of the people. In theory the Roman Catholic religion is virtually universal? in practice it is not adhered 12 to everywhere in a pure form but at least quite frequently is the only religion organized throughout the region. In reality, apparent cultural uniformity has been superimposed upon very different Indian and Negro traditions, preserved particularly in rural areas. When referring to names and places, Latin Americans make a point in that, like the people of the United States, they are also American and that no patent is held on that term. South Americans often refer to United States citizens as North Americans, but this is sometimes resented by Canadians and by Latin Americans on the North American continent. United States citizens are increasingly being referred to, especially by the Spanish Americans, as Estadounidenses (literally translated "United- statesers") . For the purpose of this study unless otherwise stated, it should be understood that Latin America consists of all the countries in the Americas south of the border between the United States and Mexico. 13 2.1 Physical Characteristics 2-1.1 Georgraphy, Climate, and Vegetation Latin America extends from the Rio Grande, the Mexican border of the United States, down to Cape Horn, only 1100 km from Antartica (Benham and Holley, 1964). Geographically, Latin America is an exceedingly diverse area. One-fourth is mountainous, and an equal area is covered by tropical rain forests, another 10% is desert or semi-arid. Less than 40% is attractive to human habitation (Schneider and Kingsbury, 1965) . In spite of the existence of four of the world's major river systems—the Amazon, La Plata, Orinoco, and Magdalena— the topography of most of South America is generally a barrier to transportation and commerce within countries, as well as between neighboring states. The political borders among Latin American countries generally correspond to topographical barriers such as the Andes, and other mountain ranges. Only in a few cases do national borders pass through heavily settled or even significantly developed areas, a situation which still induces among the Republics of the region an excessive Nation• alism and very frequently little regard for neighbors' problems. With the implementation of new technology and the advance of 14 progress, better communication and transportation systems have been established, thus reversing this trend and bring• ing the countries closer together. The LAFTA (Latin American Free Trade Association) treaty and the Latin American Common Market towards which most of the countries are eagerly working, proves this point. The surface features and geologic structures that are characteristic of the Western United States proceed southward into Latin America as far as the Isthmus of Tehuantepec in Mexico. The landforms, however, are interrupted just south of Mexico City, at about 20° north latitude where a great chain of active volcanoes runs east and west from the Pacific to the Gulf of Mexico. Southeast of the Isthmus of Tehuantepec there is a zone of east-west geologic structures which goes from the countries of Central America under the Caribbean sea to Cuba, Jamaica, Hispaniola, Puerto Rico, and the Virgin Islands. From Nicaragua a number of curving volcanic axes extend southeastward to join the South American Continent in Panama. South America, with an area of approximately 17,540,000 2 km is the fourth largest continent in the world and almost twice the size of Europe. In northern and western South America for almost 6,500 km, from the shores of the Caribbean in Venezuela to the Southern extreme of Chile in Tierra del Fuego, the Andes stand as a barrier and major characteristic of the region. Compared to the Rocky Mountains they are much narrower but also much higher. Many passes across them are above 3,000 meters, except along the Peruvian and Ecuadorian border and in the south beyond latitude 40°. The highest peak in the Western Hemisphere is to be found in the Andes, this is Mount Aconcagua (7,000m) and there are also many other peaks reaching heights of more than 6,000 m. In eastern South America, from Venezuela to Patagonia, there is a hilly upland area composed of a mixture of rounded hills surmounted here and there by plateaus developed on over• lying sedimentary rocks. Standing above this general upland of hills and plateaus there exists a few massive mountain groups, similar to the Great Smokies in Southeastern United States. The highest of these hills, located just inland from Rio de Janeiro, is under 3,500 m in elevation. These hills, plateaus, and low mountains cover a major portion of the area of Brazil. Finally, one finds in South America the lowland plains which occupy a smaller proportion of the total area of the 16 continent than they do in the case of North America. These plains are drained by three great river systems: the Orinoco, in eastern Colombia and Venezuela; the Amazon and its tribu• taries; and the Paraguay-Parana-Plata. The Orinoco Plain slopes gently from the base of the Andes to the river of the same name. This plain is inundated over vast areas in the rainy season (April to October), and is dry and dusty during the dry season. The Amazon plain is peculiar in that it is widest at the base of the Andes and narrows down to a mere ribbon of floodplain when reaching the Atlantic Ocean. The gradient of the Amazon is very lows at Manaus, Brazil miles from the sea, where the Rio Negro joins the Amazon, the main stream is only about 100 feet above sea level. Ocean steamers can ascend the river to Iquitos, in eastern Peru, Yet the main tribu• taries from the south are all interrupted by falls and rapids as they descend from the Brazilian Plateau. The Amazon is one of the greatest waterways of the world and can be a de• cisive factor in the development of Peru, Ecuador, Columbia, and Brazil. The possibilities for transporting raw materials and manufactured goods at a. low cost are unlimited, and at present the development of the area has been only restricted by the very low-density of population that exists . At a similar level of importance further south, the Paraguay-Parana-Plata water system drains the Chaco region of eastern Bolivia and Paraguay? an almost featureless plain sloping from the Andes it is severely inundated during the rainy season. This vast level surface reaches the sea south east of Buenos Aires in the Humid Temperate Pampa of Argentina, area which is one of the most richly endowed agricultural regions in the world. The importance of the Andes Chain as well as of the Amazon, Paraguay-Parana-Plata and Orinoco plains can be better distinguished in Map 1. If a political reference is desired, Map 2 relates the main systems to the countries of Latin America. Climate Climatically most of Latin America lies within the tropics. Uruguay is the only country that is wholly located within a temperate zone. Argentina, Chile, Mexico, and Paraguay, although they also extend into a temperate area, have considerable areas within tropical and subtropical cli• mates. An important factor affecting the climate is the high altitude of much of the area. Because of this, relatively few Latin Americans live in really hot tropical climates. In the 18 Map 1 Reproduced from the 1967 Encyclopedia Americana by permission of the publishers, Grolier Incorporated. 19 Map 2 LATIN AMERICA TODAY ATI ANT / C OCEAN /•Belize «» PUERTO RICO Guatcmal,, l o '™*5."'ii««.'f''° as^ tSSrwffi ' San Juan iftGUADELOUPE (Fr.) •V MARTINIQUE (ff.) .CUPACAO Neth.) Reproduced from the 1967 Encyclopedia Americana by permission of the publishers, Grolier Incorporated. 20 highlands above 1,700 m, temperatures generally average below 18°C. Quito, the capital of Ecuador situated almost on the equator but at an altitude of over 3,000 m, is un• comfortably cool and it registers an average temperature of 13°C during the warmest month of the year (Schneider and Kingsbury, 1965)„ The wide variation of rainfall that exists in Latin America, makes it difficult to say how much water annually each part of the region gets. Nevertheless, for the purposes of the present study, Map 3 gives an overall approximation of the situation. Because of the variation in precipitation within the same area due to changes in seasons, two maps have been given, relating rainfall both to Summer and Winter. Vegetation The dry lands are covered only with scattered growth of low, drought-resistant plants, which form the climax vegetation in parts of Mexico, Chile, and Argentina, along the north coast of Colombia and Venezuela and in western Central America. Despite the low precipitation in these arid areas, which make them inhospitable for tree growth, recent studies suggest that a forest could be established where sea mists Map 3 Reproduced from the 1967 Encyclopedia Americana by permission of the publishers, Grolier Incorporated. 22 might provide the necessary water. The more interesting area for these experiments can be found in northern Chile where the well-known "Camanchaca" (thick fog which almost year-round covers the foothills of the Coast Range) has pro• vided water through condensation nets for afforestation. After a couple of years, the trees themselves can capture their own water requirements. In the Humid Pampa of Argentina, large parts of southern Brazil, and much of Uruguay tall grasses cover the land. Tropical savannas, or grasslands, are also extensively developed in much of Venezuela and southeastern Colombia (a classic example being in the Llanos, the vast grass plains north of the Orinoco River), as well as in eastern Bolivia, in Paraguay, and in the interior of Brazil ( in parts of the Mato Grosso) . Some of these grasslands may be natural phenomena; others are thought to have been induced by the activities of man within historic times, principally by periodic burning of the existing forests. Therefore, it is not difficult to understand why it is widely thought by Latin American foresters that within these areas there lies, together with cattle, a promising potential for tropical forestry. > Where rainfall is heavy (70 to 100 inches) and well distributed throughout the year and the temperature is always high (21° to 30° C), the tropical rain forest, grows ideally. This vegetation complex, indicated in Map 4, is typical of the Amazon Basin, of the Southern part of the Orinoco Basin, and of the extensive areas of the Parana Basin, as well as of the windward slopes of many low mountainous areas with sufficient precipitation. A forest of mixed conifers and broadleaf species is found in southern Brazil, southern Chile, and in the higher altitudes of certain sectors of Central America and the West Indian islands. 2.1.2 Position of Latin America Map 5 shows those parts of the world which are near• est to Latin America. As can be appreciated from this map, Mexico, Central America, and the Caribbean Islands lie close to the United States, while Brazil is fairly near to Western Africa and Southwest Europe. It is noticeable also that most of Latin America is separated by vast oceans from the rest of the world, a condition which has induced most of the countries to look towards the sea with great interest. The merchant fleets of Latin America have historically been called to play an important role in the development of the 24 Map 4 Reproduced from the 1967 Encyclopedia Americana by permission of the publishers, Grolier Incorporated. Map 5 THE HEMISPHERE OF LATIN AMERICA B Bogota Nor th Polt BA Buenos Aires ' l Source: Cole, 1965 26 region, and there is much evidence that this role will be increased in the future. The remoteness of Latin America compared to other populated areas of the world has been a decisive factor affecting the lack of concern it has often demonstrated to• wards world affairs. This behaviour has changed radically since the Cuban revolution and the communist takeover of that country, events which have suddenly drawn Latin America into direct contact with other parts of the world (Cole, 1965) . From Map 5 it can be also seen that no place in Latin America is less than 3,500 km from Europe, whereas more than half of it lies at less than this distance from the United States. Canada's proximity to Latin America is also of interest, and although this factor has not influenced greatly in the past its relations with the region, it should be kept in mind as an advantage for future trade. The merg• ing trends which can be sensed at present in most countries of Latin America will surely have an important bearing upon the region's development. A Common Market of the size of Latin America, is something neither Canada nor any other country of such proximity can afford to overlook. Mexico, 27 Central America and most of the West Indies are at least three times as far from Europe as from the United States or Canada. Strategically and politically, the U.S. has been much more concerned during the present century about the countries closest to it in Latin America, a characteristic which, ac• cording to Cole (1965), is reflected partially in the amount of trade. Trade has been found to increase with proximity to the United States. In contrast, Cole (1965), also found that investment and aid from the U.S. to Latin America appear to be distributed without being influenced by distance, varying only with local conditions, needs, and priorities. 2 .2 Cultural Characteristics With the exception of the geographical features, no• thing distinguishes Latin America more from the rest of the world than its people? their diverse ethnic backgrounds and characteristic social behaviour, form the essence of the image foreigners have of the region. Therefore, no important analysis of Latin America should be made without serious con• sideration of the character of its inhabitants. Overlooking this factor can frequently lead to important misunderstandings in a given problem, with the natural consequences of error being reflected in trends and prospects made for the area. 23 2.2.1 Early Natives How early man entered the American Continent is yet unknown, and though opinions differ widely, the most widely accepted view is that the first humans came from East Asia some ten thousand years ago. The early American man was pre• dominantly a hunter and gatherer, whose techniques were rather of a modest range. The wheel was unknown to him and he used very few metal tools in his work. With time these people changed, and more sophisticated cultures developed to the date when Christopher Columbus came to America. In what is today Latin America there flourish• ed the Mayas (Mexico and parts of Central America) developing complicated calendars and simple writing; farther south, in the Andes of South America, the Incas formed an advanced civilization with a remarkable architecture and sophisticated urban life. With the coming of the European to America, the whole environment in which these ancient cultures had developed began to change, and the same happened with the social patterns and ethnology of the region. Today, cultural traits of the Indians, European, and North American whites, Asiatics, Negroes, and mixed peoples have been combined in various proportions to give the individual areas of Latin America the varieties of culture which distinguish them from the rest of Western civilization. 2.2.2 Racial Composition Spanish America, of course, was colonized by Spain, and Brazil by Portugal, and apart from Negroes from Africa few but Spaniards and Portuguese entered the colonies during the three centuries of colonial rule (Benham and Holley, 1964) This historical domination is today reflected in the fact that Spanish is the language of the region, except in Brazil where it is Portuguese. During the hundred years before World War II over 12 million immigrants entered Latin America, though a few did not stay, the great majority settled down. Between six and seven million went to Argentina and most of the rest to southern Brazil. Over four million came from Spain, and two million from Portugal. About half of the total, that is, six million were composed by other Europeans including Italians, Germans, French, British, Swiss, Yugoslavs, and a number of Asians from the Near Orient (Benham and Holley, 1965) . 30 The racial composition of Latin America is at present extremely varied. This variety is demonstrated by the follow• ing examples? Argentina, Chile, and Uruguay are predominantly white. Costa Rica, where most of the original native popu• lation succumbed to the diseases of the Old World brqught by the conquerors, is also predominantly white (Cole, 1965) .. Haiti is almost completely Negro, and both in the Dominican Republic and in Cuba there exists an important proportion of Negro blood as well as Indian and White. In other countries of South America such as Brazil, Panama, and Jamaica, there are a considerable number of Negroes and Mullatoes, the des• cendants of Negroes imported to work on the sugar plantations (Benham and Holley, 1965). In most countries there has been a great deal of inter• breeding, especially between the white settlers and the native Indians. The result of this combination is the Mestizo, which in turn has largely combined again with the more recent European immigrants to the point where it is difficult today to say how much Indian blood they carry. An important factor is that little racial prejudice exists in most of the region, and people of different races and mixed blood work together in harmony. Occasionally one finds differences in social and economic behaviour between regions, which apparently have 31 no direct explanation. This can often be related to the existing variations in ethnology and social background, variations which frequently are not noticeable to visitors. 2 .3 Introduction to the Economy of Latin America Latin American economic institutions bear the imprint of three centuries of colonial status under the tutelage of Spain, Portugal or France. This can be especially identified in such matters as the landholding system, surface and sub• soil property rights, crops, livestock, farm practices, fiscal policies, and the scale of social values or occupational prestige. Although each country has its own separate and distinct national characteristics, taken together they have a common colonial background, a common history of related movements for independance, a parallel development of national institu• tions and a similar history of republican forms of government (with a few instances of monarchical governments) . The people react frequently according to a similar pattern and despite some cultural or social differences they are united by a language with a common root, a common psychology and way of life, a predominant common religion, a mutual respect for one another, an inclination to cooperate in international affairs, '32 and a certain solidarity and uniformity in foreign policy, induced at times by a common suspicion of the great neighbor to the north, the United States. 2.3.1 Roots of the Economy Potential gain of quick wealth from precious stones and metals was the initial incentive for the conquerors who settled the land, but, shortly after, ships loaded with laborers and seeds from the Old World made possible intensive agricultural use of the newly discovered territories. By the end of the colonial period, agricultural exports from the area greatly exceeded any other type of production, with the exception of New Spain (today roughly represented by Mexico) which was heavily exploiting its gold deposits. The introduction of domesticated animals, which were practically non-existent in Latin America, did more to ensure the success of European settlement and further development of the region than any other factor. Cattle multiplied rap• idly, providing food, raw materials, and traction? horses gave the necessary superiority to the white men who were orig• inally outnumbered by the Indian tribes at war . It was the policy of European colonial powers and of Spain in particular to discourage manufacturing in the colonies of the New World. Therefore, manufactured commodit• ies made in Spain, or elsewhere in Europe, could be sent through Seville or Cadiz to be sold at very profitable prices in America. Competition from Asian manufactured goods such as silk was prevented and only one galleon a year was allowed between Manila in the Philippines and Acapulco in Mexico (Cole, 1965? Schneider, 1965). Although the colonial system envisaged a monopoly of the colonial markets by Spanish or Portuguese manufacturers, the distance from Europe and the cost of transport early gave rise to manufacturing industries in what is today Latin America. Thus we find that articles produced in Mexico during the colonial period included soap, leather and leather articles, cotton and woolen goods, wooden articles, and silver and gold ware. Tobacco and gunpowder manufacture were royal monopolies, but sugar mills were quickly established by the private sector. A similar thing happened with wine produc• tion in Chile, Peru, and Mexico, despite recurring attempts made by the Iberian producers to discourage Latin American production. 34 Another feature of importance and which can still be traced to the present day was the tendency during the colon• ial period to work an area intensively for a particular pro• duct and then abandon it. This practice of shifting agri• culture is largely to be blamed for destruction of a great part of the forest resources. Quite frequently fire was the only practicable way of cleaning up the land, but unfortunate• ly once started they often devastated a much larger area than originally envisaged. Following this destruction erosion would sometimes ruin the soil permanently. Today, the de• structive effects of this shifting agriculture can still be appreciated in several places of Argentina, Brazil, Chile, and many other countries. During the period 1815 - 182 5 Latin America was com• pletely transformed politically due to the drive for indepen• dence of most of the colonies. Compared to this, economic changes were less dramatic and social ones almost non-existent. After independence other European countries were able to trade directly with the new Republics, namely; Britain, France, Belgium, Germany, and Italy, thus ending the monopoly held by Spain and Portugal. From then onwards the rapid improvements in communications and transportation, facilitated the movement of more.bulky goods to the Old World (Cole, 1965) = During this same period, it became possible for non-Iberian immi• grants to settle in Latin America. As time passed, most of the countries came to depend strongly on a small number of exports, often related to the agricultural and mining sectors. Before World War I, the manufacturing industry was still small in scale and confined to a few areas, but the restrictions imposed by the war upon imports encouraged production. Since this date industry has grown considerably, though the number of large and efficient plants is still small. The mining industry is an important exception in this respect, being today one of the more modern and well equipped in the world. • •. In the early 1930s the vital necessity for industrial• ization was recognized. Since then, production has increased considerably, thus permitting a substantial substitution of manufactured imports. 2.3.2 Factors of the Economy Among Latin American countries there are important common characteristics, such as the predominance of raw materials and foodstuffs in the export trade, the relatively low level of per capita incomes and the derivative character of industrial development. In most of the nations, the busi• ness institutions and commercial law are based on Roman or civil law. However, differences in geography, natural re• sources, racial composition, and social development have created important divergences in economic structures. These divergences have been accentuated by the recent developments of the present century. A high degree of economic specialization has been characteristic throughout the region, but some of the economics have been highly diver• sified—a change that is reflected not only in the composition of exports and imports, but also in the ratio of the value of exports to national income. In some countries such as Venezuela, Cuba, and the Central American Republics, the export coefficient is high, but in Latin America as a whole is very low. Latin America is sometimes referred to as a "new land," presumably because of the low average population density. However, the nations of this region have a longer history of settlement and development than the United States. The Antilles and some of the Central American countries are much more densely populated than Europe. The explanation for the low density of South America is to be found in the large proportion of the total area that is taken up by great mountain ranges, deserts, rain forests, and infertile plains. Calcu• lated on the basis of the number of persons per acre of arable land, the density is fairly high., The Latin American coun• tries are mature societies, with settled economic and social patterns. Although frequently there are undeveloped resources in lands, forests, minerals, and waterfalls—there are also many exhausted mines and vast areas of deforested and eroded lands. Since 1946 approximately, Latin America has exhibited an extraordinary rate of economic growth compared with other regions of the world. Correct utilization of forests, fish• eries, arable land and other renewable resources has increased considerably, reaching levels of output which have allowed for greater consumption in these sectors. These gains on a per capita basis have been, unfortunately, offset by the rapid increase in population, a key factor in the economic problems of the region. 2.4 Economic Characteristics of Latin America In order to indicate the relative size of the Latin 38 America potential as a market, and its importance in relation to other regions of the world, five economic indicators have been chosen for analysis. These ares population growth, gross domestic product, national income, per capita income, and imports and exports of the region. The future size of the Latin American market will de• pend largely on the way the first four indicators move, though population growth can be expected to modify trends indicated by Gross Domestic Product or National Income . Given a reasonable economic growth for Latin America and an increase of its population at similar rates to those already experienced, income distribution is liable to be a major factor influenc• ing future overall consumption. Therefore, much will depend on the policies governments take in relation to this matter, and in the end, on how much access individuals have to the total earnings of the region. 2.4.1 Population Growth According to the United Nations' estimates, the popu• lation of Latin America will have surpassed 270 million by 1970. That is about 40 million more than that of the United States and Canada combined. 39 If the current annual rate of growth of roughly 2.9% is maintained during 1970-1980, the population of Latin America will have increased at the end of this period to about 365 million people. Compared with the 267 million the U.S. and Canada are expected to have in 1980, Latin America will have in this year almost 100 million more people, thus widening the difference in population between the two areas. In Table 1 the annual rates of population growth for the area as a whole and for individual countries have been calculated and compared with those of Canada and the United States. These growth rates together with the relative distri• bution of population are presented in Table 2 for comparison with the Unitad States and Canada in the year 1980. The relative distribution of population, shows that Brazil with 33.9% will be by far the most populated country in the region, followed by Mexico (19.8%), Colombia (7.6%), and Argentina (7.6%). High rates of population growth characterize the Central American countries. Costa Rica with a 4.2% rate, is growing the fastest and it is followed by the Dominican Republic with 3.8%, El Salvador 3.7% and Honduras 3.6%. With the exception of Cuba and Haiti, none of the countries of Central America have growth rates smaller TABLE 1 LATIN AMERICA? TOTAL POPULATION (1950-1980) Country 'Total Population (Mid-year, in thousands) 1950 I960 1965 1970* 1975* 1980* Argentina 17,070 20,569 22,352 24,050 25,796 27,580 Bolivia 3,012 3,453 3, 697 4, 658 5, 277 6,000 Brazil 51,944 69,730 81,301 93,752 107,863 123,566 Colombia 11,334 15,415 18,068 20,514 23,774 27,691 Chile 6,062 7, 589 8,584 9, 969 11,349 12,912 Ecuador 3,231 4,352 5,150 6,093 7,186 8,473 Paraguay 1, 397 1,751 2,030 2, 379 2,744 a) 3, 205 Peru 7,959 10,025 11,650 13,586 15,869 18,527 Uruguay 2,193 2, 536 2, 715 2, 886 3,064 3, 255 Venezuela 4,952 7,349 8,722 10,399 12,434 14,811 Costa Rica 801 1,171 1,433 1, 805 2, 206 2, 710 Cuba 5,516 6,826 7,631 8,341 9,183 10,075 Dominican Republic 2,129 3,.047 3, 624 4, 277 5,124 6,174 El Salvador 1, 859 2,454 2,928 3,422 4,073 4, 882 Guatemala 2, 305 3, 810 4,438 5,275 6,130 7, 191 Haiti 3,353 3,991 4, 396 5,255 6,001 6, 912 Honduras 1,445 1, 940 2, 284 2, 583 3,070 3, 662 Mexico 26,282 36,046 42,689 50,670 60,402 72,392 Nicaragua 1,052 1,411 1, 555 2,024 2, 376 2, 825 Panama 795 1,062 1,246 1,400 1, 646 1,940 Total 155,211 204,728 236,593 273,339 315,567 364.783 Sources United Nations, ECLA (1967). * Estimated by ECLA. a) Projection at 2.90% growth rate, b) Projection at 3.16% growth rate. c) Projection at 3.55% growth rate. 41 TABLE 2 LATIN AMERICAt TOTAL POPULATION AND GROWTH RATES AS COMPARED TO THE UNITED STATES AND CANADA IN 1980 Country Total Population Percentage Annual Rate in thousands of Total of Growth Latin America 364,7 83 100.00 2 .9 Argentina 27,580 7 .56 1.3 Bolivia 6,000 1.54 2 .6 Brazil 123,566 33.87 2.8 Colombia 27,691 7 .59 3.1 Chile 12,912 3 .54 2 .6 Ecuador 8, 473 2 .32 3.3 Paraguay 3,205 0.88 3.2 Peru 18, 527 5.08 3.1 Uruguay 3,255 0.89 1.2 Venezuela 14,811 4.06 3.6 Costa Rica 2, 710 0.74 4.2 Cuba 10,075 2 .76 1.9 Dominican Republic 6, 174 1.69 3.8 El Salvador 4, 882 1.34 3.7 Guatemala 7,191 1.97 3 .2 Haiti 6,912 1.89 2 .9 Honduras 3, 662 1.00 3.6 Mexico 72,392 19.89 3.7 Nicaragua 2, 825 0.77 3.5 Panama 1,940 0.53 3.3 United States 242,311 1.7 Canada 25,110* 1.7 Sources United Nations, ECLA (1967); U. S. Department of Commerce (1967)? and Illing, W. M. (1967). * Figure obtained considering medium fertility and medium immigration to Canada. 42 than 3%, and if we compare them with the overall average for Latin America, which is 2.9%, it follows that this area is growing much faster than any other in the Americas. The United States and Canada with a 1.7% growth rate, as indi• cated by Table 2, fall far behind the average for Latin Amer ica. Despite the high growth rates of Central America, South America will be the area where the bulk of the popu• lation will be located in 1980. With 67% of the total pop• ulation of Latin America, South America will have more than 2/3 of the total. Ranking the countries by their population figures, seven countries of Latin America will have 81.6% of the total population by 1980, these will be in order of prioritys Brazil (33.9%), Mexico (19.8%), Colombia (7.6%), Argentina (7.6%), Peru (5.1%), Venezuela (4.1%), and Chile (3.5%). The market potential of a region with 364 million people living in growing economies should be weighed ac• cordingly, and although some countries of the world might have been able to ignore it in the past, the population explosion in Latin America will force the eyes of many to• wards it. On the other hand, it seems probable also that 43 as time goes on, Latin America will become of growing world importance as a source of supply of certain agricultural products, oil and minerals, and other exports, which together with an increasing market for imports and field of invest• ments, will determine a greater expansion of the economies in this part of the world. Whether or not the expected rapid increase of popu• lation will help to raise standards of living is not so clear, the effect is likely to vary from country to country. For countries which are considered to be overpopulated, poor, and short of usable land such as Haiti and El Salvador, the quick growth of population may prove a burden rather than an advantage. However, most of the countries of Latin America still have a considerable amount of land which could be brought under cultivation, and on much of the land presently used yields can be greatly improved with modern techniques. If land, the key factor in Latin America's development, is wisely worked the region will be able to support a growing population with rising standards of living which, together with an expansion of the manufacturing and other non-agricultural sectors, could well mean sustained economic growth. 44 Under such conditions, population growth might act as a stimulus to economic expansion, as it has done in the past in Western Europe and North America. It may lead to a continuous increase of demand, raising the returns and lessening the risks of investment, thus facilitating the opening of new land, creation of new industries and expansion of the existing ones. Under massive education, the growth of population can increase the mobility of labour and im• prove resource allocation, and finally, economic take-off could well be the result in Latin America. 2=4.2 Gross Domestic Product Because of its regional characteristic, Gross Dom• estic Product gives a better idea of the level of economic activity within Latin America than other indicators such as Gross National Product do. All the earnings obtained by all countries of Latin America are considered in the Gross Domestic Product, including those earnings of foreign capital or people within the region, while in the Gross National Produce such values are omitted. Because of the considerable amount of foreign investments in Latin America, this is an important point to consider if a correct 45 evaluation of production is to foe made„ In Table 3 estimates of Gross Domestic Product in Latin America and other areas are shown. The total pro• duction of goods and services in Latin America in 1955 was U.S. $84,376 million. In 1966 this figure grew U.S. $8 billion putting the total up to U.S. $95,516 million. By analyzing the Index for 1956, it is possible to compare the economies within the region and with other countries of the world. The countries of Latin America distribute their total production in relation to their relative sizes both in people and area. In this way we find that with the highest percentage of total Gross Domestic Product stand Brazil (24.6%), Mexico (2 3.1%), and Argentina (18.8%), followed by Venezuela (8.8%), Colombia (6.3%) and Chile (5.1%). These six countries alone produce 35.7% of the total earn• ings of Latin America, leaving the remaining 13.3% to be distributed among the other 14 States. As a whole, Latin America compares in total earnings with France, Germany, the United Kingdom, and Japan which approximately produce between 35 and 100 billion dollars each. Canada's output is almost 50% that of Latin America, similar to that of Italy (58.4%), and India (43.9%). Other 46 TABLE 3 ESTIMATES OF GROSS DOMESTIC PRODUCT IN LATIN AMERICA AND OTHER AREAS 1953, 1955, 1966 Country Gross Domestic Product (millions of U.S.$) 1963 1965 1966 Index for 1965 Latin America = 100 Argentina 11,375 17,393 17,359 18.8 Bolivia 453 571 G16 0.7 Brazil 19,857 18, 535 22,720 24.6 Chile 2, 502 4, 229 4, 769 5.1 Colombia 5,053 5,681 5, 816 6.3 Costa Rica 472 533 576 0 .6 __ Cuba — — Dominican Republic 872 839 907 1.0 Ecuador 831 1,030 1,095 1.2 El Salvador 526 729 779 0.8 Guatemala 1,134 1, 229 1, 301 1.4 Haiti 331 337 356 0.4 Honduras 407 477 505 0.6 Mexico 14,928 18, 324 21,375 23 .1 Nicaragua 428 535 563 0.6 Panama 514 596 658 0.7 Paraguay 363 420 439 0.5 Peru 2, 539 2,952 2,997 3 .2 Uruguay 1,270 1, 519 1, 516 1.6 Venezuela 6, 067 7,903 8,158 8.8 Latin America a) 70,022 84,376 92,516 100.0 Canada 35,797 42,242 46,694 50.5 United States 541,100 630,509 690,004 745.8 France 67,949 79,522 85,407 92 .3 Germany (West) 31,800 97,938 103,863 112 .3 Greece 4,054 5,089 5, 604 6.1 Italy 42,578 50,213 54,022 58.4 Portugal 2, 863 3,430 3, 727 4.0 Spain 14,667 19,958 22,778 24.6 Sweden 14,267 17,386 18,628 20.1 United Kingdom 74,866 85,966 89,992 97.3 India 39,207 47,097 40,589 43.9 Indonesia 8,420 10,063 10.9 Japan 50,539 78,657 90,822 98.2 Philippines 7,006 7,972 8,621 9.3 Ghana 1, 521 1,983 2, 298 2.5 Nigeria 3, 384 -- 4,495 4.9 Sudan 1, 200 1, 231 — Sources United Nations (1968 c) and (1969) . a) Excludes Cuba. — Figures not available. 47 countries of the world such as Spain, Sweden, and Indonesia have a Gross Domestic Product smaller than 2 5% of that of Latin America. A remarkable figure is that of the United States which, in 1966 with 690,004 million dollars, produced almost 7.5 times more than Latin America. Despite comparing favourably in total output with other major areas of the world, Latin America has to dis• tribute its production among a greater number of people, thus reducing individual earnings accordingly. Therefore, though in general terms the region has an important market potential, in order to provide a more realistic picture, adjustments must be made because of population growth and unequal distri• bution of wealth. These factors tend to decrease the pur• chasing power of Latin America and limit its prospects for imports. 2.4.3 National Income Theoretically, National Income cannot be considered a precise measure of what Latin Americans produce, because it does not consider indirect taxes, adjustments in valuations or allowances for capital consumption. This can only be given in true terms by Gross National Product (GNP)? nevertheless, 48 it does give a fair idea of what Latin Americans earn, or in other words, how much is their approximate power of purchasing goods and services within their economies. Because of its more national characteristic and not simply geographical as Gross Domestic Product, National Income excludes all earnings of foreign capital and labor in Latin America. This conceptual difference can already be appreciated in the 1965 Index given in Table 4—Estimates of National Income in Latin America and other Areas—where Mexico is ahead of Brazil in its share of the total income of the region, while the opposite was true for GDP. Also, while Argentina, Panama, Uruguay, and Venezuela increased their percentages, other countries such as Brazil, Chile, Dominican Republic, and Mexico decreased them. In 1965, Latin America had a total income of about 81 billion dollars, which, compared with Canada's 3 6 billion dollars, makes it almost 2.3 times larger. Individually, Italy and India had half of the total earnings of Latin America; Spain, and Sweden only about one-fourth. This re• lative advantage held by Latin America in total earnings, is again greatly offset by the population among which it has to be distributed,a characteristic which is finally reflected TABLE 4 ESTIMATES OF NATIONAL INCOME IN LATIN AMERICA AND OTHER AREAS 1963, 1965, 1966 Country National Income (millions of U.S. $) 1963 1965 1966 Index for 1966 Latin America=100 Argentina 10,509 16,093 15,996 19.9 Bolivia 423 533 578 0.7 Brazil 18, 535 17,140 20,969 21.7 Chile 2,161 3, 648 4,150 4.5 Colombia 4, 444 5,073 5,192 6.3 Costa Rica 437 491 524 0.6 Cuba 3,267 4,038 — 5.0 Dominican Republic 801 763 825 0.9 Ecuador 771 945 1,001 1.2 El Salvador 587 683 730 0.8 Guatemala 1,067 1,153 1,211 1.4 Haiti 309 353 344 0.4 Honduras 382 444 470 0.6 Mexico 13,904 17,568 19,696 21.7 Nicaragua 410 501 525 0.6 Panama 455 530 581 0.6 Paraguay 334 384 395 0.5 Peru 2, 315 2, 714 2,739 3.4 Uruguay 1, 212 1,493 1,446 1.8 Venezuela 4, 926 6,418 6, 638 7.9 Latin America 67,249 80,973 — 100.0 Canada 30,317 35,759 39,691 44.2 United States 485,264 566,293 620,968 699.4 France 60,783 70,836 76,156 87.5 Germany (West) 72,260 85,903 90,610 106.1 Greece 3, 889 4, 874 5,349 6.0 Italy 38,658 45,576 49,066 56.3 Portugal 2, 690 3, 256 3,529 4.0 Spain 13,697 18, 617 21,185 23.0 Sweden 15,712 19,228 — 27.7 United Kingdom 69,689 79,835 83,064 98.6 India 35,832 44,234 38,163 54.6 Indonesia 8,164 — 9,770 — Japan 53,575 68,016 78,224 84.0 Philippines 6, 385 7,163 7,703 8.8 Ghana 1, 380 1,801 2,118 2.2 Nigeria 3,187 — 4,057 — Sudan 1,169 1,197 — 1.5 Sources United Nations (1968 c). — Figures not available. 50 in the lower per capita incomes of the region. Often as is demonstrated in Section 2.4.4, Latin America's absolute advantage in income over important areas of the world is lost in terms of per capita income. In the case of India, Latin America has an advantage, however, both in total income and per capita income. Because of their size, Mexico, Brazil, and Argentina generate together about 63% of the total income of Latin America. Individually these countries can be compared in total income with Spain and Sweden which, at roughly 19 billion dollars, generate only between 1.5 and 2 billion dollars more than the former. At a more reduced level, Venezuela (6.4 billion dollars) generates a similar income to that of the Philippines (7.1 billion dollars), and Colombia (5.07 billion dollars) only 0.2 billion dollars more than Greece (4,87 billion dollars). 2.4.4 Per Capita Income Total National Income is distributed very unevenly in Latin America, both by countries and within them, among dif• ferent social strata and among different geographic sectors 51 of the population. As shown in Table 5, the average per capita income in the region in 1966 was 356 dollars, fluc• tuating from a minimum of 77 dollars in Haiti to a maximum of 744 dollars in Venezuela. Of the three countries with the highest National Income (Argentina, Brazil, and Mexico), only Argentina (705 dollars) and Mexico (446 dollars) have a per capita income higher than the average for Latin America. Brazil has only 252 dollars per head. Above the average for the region in 1966, were only seven countries (Argentina, Chile, Cuba, Mexico, Panama, Uruguay, and Venezuela); in Central America and the Caribbean, with the exception of Cuba and Panama, which have more than 356 dollars, and Costa Rica which almost equals the average with 355 dollars, most of the countries fall below this value. Latin America has a per capita income about 8.8 times less than the United States, 5.5 times less than Canada, and about 4 times less than the one enjoyed by northern Europeans. Despite this general situation, individual countries of the region such as Argentina and Venezuela have a per capita income of more than 700 dollars which approximates the level of Japan of 791 dollars, and both Chile with 473 dollars and 52 TABLE 5 ESTIMATES OF PER CAPITA INCOME IN LATIN AMERICA AND OTHER AREAS 1963, 1965, 1966 Country Per Capita Income (millions of U.S.$) 1963 1965 1966 Index for 1966 Latin America=100 Argentina 486 720 705 198.0 Bolivia 118 144 154 43.3 Brazil 243 212 252 70.8 Chile 263 425 473 132.9 Colombia 263 282 279 78.4 Costa Rica 325 343 353 99.2 Cuba 452 429 — 154.7 b) Dominican Republic 237 212 220 61.3 Ecuador 160 133 188 52.8 El Salvador 216 233 240 67 .4 Guatemala 256 260 265 74.4 Haiti 73 80 77 21.6 Honduras 179 194 199 55.9 Mexico 349 412 446 125.3 Nicaragua 266 303 305 85.7 Panama 390 425 452 127 .0 Paraguay 175 139 189 53.1 Peru 211 233 228 64.0 Uruguay 458 550 526 147.7 Venezuela 605 745 744 209.0 Latin America 301 342 356 a) 100.0 Canada 1,602 1,824 1,980 556.2 United States 2, 562 2,910 3,153 885.7 France 1,270 1,448 1, 542 433.1 Germany (West) 1,254 1,455 1,518 426.4 Greece 458 570 621 174.4 Italy 763 884 944 265.2 Portugal 298 353 378 106.2 Spain 441 589 665 186.8 Sweden 2,006 2,486 — 726.9 b) United Kingdom 1,298 1,466 1,517 426.1 India 80 91 77 21.6 Indonesia 82 — 91 25.6 Japan 559 694 791 222.2 Philippines 211 221 230 64.6 Ghana 188 233 267 75.0 Nigeria 58 — 68 19.1 Sudan 91 88 — 25.7 b) Sources United Nations (1968 c). a) Does not include Cuba. b) Calculated for 1965. — Figures not available. 53 Mexico with 446 dollars have higher per capita incomes than Portugal which has 378 dollars. A significant feature in the Latin American econom• ies is the uneven distribution of income. An important reason that might account for these variations is the low productivity of agriculture, which invariably employs a larger share of total population than it provides of gross national product. Therefore, predominantly agricultural areas usually have much lower per capita incomes than non-agricultural areas. Naturally, differences in population/resource bal• ance such as the one that exists between Uruguay and Haiti, and differences due to organizational ability are also pri• mary factors influencing the income level. In general, it can be found that regions with a predominance of Europeans tend to be the most prosperous, but this can be related to their choice of the areas favoured with the best resources as well as to a greater ability, brought from more advanced regions, to organize an economy and introduce technology than non-European groups. 2.4.5 Imports and Exports The foreign trade of Latin America as a whole, has been, and still is, largely characterized by the export of primary products to and the import of manufactured goods from North America and Western Europe (Cole, 1965). The economy and development of almost every country in the region revolves around the export of one or a few limited items. According to Benham and Holley (1964), Latin America provided in the late 1950's about 10% of the total exports of the free world, which related to the export coefficient it had at the time, this is of 16% (Imports/GNP) (Cole, 1965), make foreign trade of the greatest importance to this part of the world. For a correct evaluation it should be recalled that in that same period, Western Europe had an export coefficient of 18.5%, the United States 4-5% and the Soviet Union a mere 2%. The significance of trade in Latin America has tended to de• cline during the last decade, for the value of trade has not risen as fast as Gross National Product, or as fast as total world trade. This in part is a reflection of increasing self-sufficiency in manufactured commodities. Despite progress made in developing home production of manufactured goods and foodstuffs, most countries have not greatly lessened their dependence on the outside world. Industrialization makes necessary larger imports of capital goods, raw materials, and fuels, while rising urban incomes increase the demand for imported consumer goods. Shortage 55 of foreign exchange, caused by failure to expand the volume of exports has permanently been putting a check on imports, and in a way forcing some economies to substitute products by local ones or occasionally reducing consumption„ In Table 6 it is shown that the actual amount of foreign trade carried on by individual Latin American countries varies greatly* While Venezuela due to its oil fields is reaching the three billion dollar mark in exports, Brazil is roughly one billion dollars behind, and with the exception of Mexico, Argentina, Chile, and Peru which are above or around one billion dollars, all the other coun• tries have exports lower than 0,25 billion dollars. As a whole, Latin America excluding Cuba with its 11.6 billion dollars of exports is comparable to Canada which exports 13.1 billion dollars worth of goods annually. The United States exports approximately three times more than Latin America. The level of imports is similar to that of exports, although some countries such as Brazil and Mexico appear to be importing in 1968 much more than they export. This can be partially explained by the flow of foreign capital to these countries, together with policy changes in their foreign exchange reserves. TABLE 6 LATIN AMERICA? INTERNATIONAL TRADE (1965-68) (millions of U.S. Dollars) * • ' ' Country Exports (fob) Imports (Cif) 1965 1966 1967 1968 1965 1966 1957 1968 Latin America a) 10,380 11,040 11,030 11,560 8, 860 9, 740 10,290 11,100 Argentina 1,493 1,593 1,464 1,368 1,199 1,124 1,096 1,169 Bolivia 110 126 145 153 126 133 151 152 Brazil 1, 595 1,741 1,654 1,881 1,096 1,496 1,667 2,132 Chile 685 877 910 933 604 755 868 — Colombia 537 510 510 — 454 674 497 Costa Rica 112 136 144 172 178 178 191 214 Cuba 686 522 — — 865 b) 926 b) — — Dominican Republic 126 137 156 164 100 185 201 226 Ecuador 180 186 200 — 168 164 191 — El Salvador 189 192 207 212 201 220 224 216 Guatemala 187 228 199 222 229 207 247 247 Haiti 37 35 34 36 34 38 36 38 Honduras 127 143 156 186 122 149 164 186 Mexico 1,120 1,199 1,145 1,254 1,560 1,605 1,746 1,960 Nicaragua 144 138 146 157 160 182 202 ; 185 Panama 79 89 93 95 224 253 271 287 Paraguay 57 49 48 48 55 59 71 73 Peru 666 763 774 865 745 817 833 630 Uruguay 191 186 159 179 150 164 170 165 Venezuela 2, 744 2,713 2,886 — 1,454 1, 331 1,464 — Canada 8,494 9,988 11,027 13,134 8, 713 10,170 10,966 ,12,482 United States 27,530 30,430 31,622 34,660 23,186 27,745 28,745 35,546 Sources International Monetary Fund (1969). a) Excluding Cuba. b) Valued cif. — Figures not available. 57 Drastic changes in prices of primary commodities, such as coffee, sugar, petroleum, copper, and other minerals are a constant worry for Latin American economies. Most of their exports are based on these types of goods, so naturally, any fluctuations in their prices greatly affect the patterns of trade. Foreign trade in this part of the world is also affected by the existence of tariffs of varying severity protecting both Latin American countries themselves and partners with which Latin American countries trade. Cole (1965), mentioned that it should not be overlooked that tariffs on imports of foreign goods serve several purposes in Latin America: to protect home industries from outside competition, to discourage the import of luxury items, and as an important source of revenue, particularly since income tax and other forms of tax are generally inefficiently organized and contribute little. The United States manipulates much of its trade with pri• mary producing countries by allowing quotas on its imports from these. European tariffs tend to be low on raw materials such as copper, cotton, and wool, but in recent years Argentina and Uruguay have had difficulty in selling temperate food products to some countries especially in the EEC. '' The same author finished by saying that there is also growing concern among tropical Latin American countries for the export of coffee, cacao, and other tropical products to West Europe. Most of Latin America is a long way from the major markets and exporting centres of the world (see Section 2.1 58 and Map 5). The axis of the region does not run from north to south but from north-west to south-east, so that most of South America (including, for example, Valparaiso, the chief port of Chile) lies further east than New York? and the great bulge of Brazil towards Africa makes the chief ports of this country and Argentina at least as distant from the United States as they are from Europe. Although a number of Latin American countries have expanded their merchant navies in recent years (Benham and Holley, 1964), most of the exports and imports of the region are carried in foreign ships and,therefore, transport and insurance payments are high (OAS, 1962). In 1956 the Latin American payments in respect of maritime freight and insurance amounted to over $800 million (Brazil, $175 million? Argentina, $136 million? Venezuela, $140 million)(Benham and Holley, 1964). 59 SECTION III FACTORS AFFECTING THE EXPANSION OF CANADIAN EXPORTS TO LATIN AMERICA Whenever a country desires to increase its trade with other nations, it generally begins working through the channels which already exist. Many social, political, and economic institutions which are conducive to the ob• jective of expanding trade, are bound to be used, and new, more specialized institutions will probably develop as a reaction to the needs of commerce. Canada has never taken any major interest in the affairs of Latin America or regarded this region as an important trade partner. Many reasons exist for this at• titude, but the current situation makes the improvement of trade relationships difficult. If political isolation were to end by Canada joining the Inter-American System, it would undoubtedly prove beneficial for a trade expan• sion, and even though directly it would not contribute much to the levels of commerce, the political junction could be the platform for the birth of more sophisticated and specialized business relationships. 60 Today, because of Canada's detachment from the Organization of American States (OAS), and generally from the economic affairs of Latin America, it is often unrewarding to take steps towards a greater economic re• lation with this part of the world. This happens princi• pally because of the lack of information Canadians have of the markets in Latin America, and of the uncertainty which therefore, involves potential transactions. Under these conditions, it is much easier for the exporting and import• ing industries to look to more familiar markets which be• side lowering the risk, provide a greater degree of informa• tion with respect to all kinds of commodities. Despite the existence of traditionally important Canadian-European trading patterns, the prospects of an even greater merging with the United States will heavily influence the attitude of Canadians towards Latin America, in the next decades this economic link will force the affairs of the United States in Latin America to be the affairs of Canada. On the other hand, the growing populations and improved standards of living in the region, are continually expanding the potential of the market, making it in global terms as important as the Japanese, German, United Kingdom or Spanish markets (see Section 2.4). 61 Another important factor greatly affecting Canadian trade relationships with Latin America is the trade patterns followed by the less-developed nations, namely the composition of trade and the reduced levels of imports forced by the shortage of foreign exchange. Substitution policies have also seriously restricted imports, although recently the improvements made in exports have brought about a partial reversal in this trend. Finally, the third point which is mentioned in this section, calls for the relevance to Canadian exports of economic integration in Latin America. If, in the past, Canada dealt with individual countries, because of economic merging and trade agreements the emphasis in the future will have to fall increasingly on a more generalized treat• ment. The market conditions such as tariffs, quality re• quirements and other variables will be far more homogeneous, and competition against regional output will be much tougher due to the preferential treatment Latin American production will enjoy. Only after regional production has been sold will the excess demand be met by production from outside Latin America. 62 3.1 Canadian Detachment from the Inter-American System The question of Canada not participating in the Inter-American system is one Which deserves serious consid• eration. Not because of the political isolation in which the country finds itself in respect to the other American nations, but rather because it accentuates the lack of know• ledge Canadians have of Latin American institutions and of the social and economic behaviour which accompany them. The non-participation of Canada in American affairs outside its special relationships with the United States, can be viewed and appreciated in many ways, but because of their relevance to the present study only two deserve a special mention. These are political isolation and reduced commerce with Latin America. Despite the somewhat dis• couraging picture presented by the analysis of these two factors, a quick survey of the potential for future relations indicates that there is plenty of room for improvement. In fact, if all the historical and political influences could be removed and left alone the basic economic concepts which regulate human behaviour, Canada could be found playing one of the more important roles in American affairs. This role has, unfortunately, been postponed principally because of 63 the country's political connections with Great Britain and the Commonwealth and links with other European nations. Today, these links give the impression of being sufficiently elastic to permit a greater involvement of Canada in the Americas. 3.1.1 Political Isolation Canada was originally precluded from the Inter - American system, both by its position within the British Empire and by lack of interest in joining (Ball, 1944). Notwithstanding the fact that a boundary dispute between Venezuela and Great Britain once threatened to draw Canada into a war with the United States, the traditional Canadian attitude up to the early 1940's towards Latin America and Pan-Americanism was one of indifference (Humphrey, 1942). The reasons which are normally given for this be• haviour are diverse, and ranging from the state of internal affairs, to the influence of geographical and external political influences. In the first place, Canada was at the time tied to Great Britain not only spiritually but juridically, and as 64 Humphrey (1942) put it, content to leave the responsibilities for the pro• tection of her foreign interests to the Mother Country in whose judgement and policies she had an almost blind confidence. " Domestic problems up to the beginning of World War I kept Canadians too busy at home, which meant very little interest in Latin America or anywhere else. As a result of the disappearance of the British Empire and creation of the British Commonwealth of Nations in which Canada actively participated, the country took an increasing interest in international affairs, but these were still not great enough to encourage her to join the Pan-American Union. Behind the scene, there were also important differ• ences in the Canadian and Latin American ways of life. Canadians and Latin Americans seemed to be different in al• most every possible way. The segregation of the Indian from Canadian life was radically opposed to the quick interbreed• ing which took place in Latin America (see also Section 2.2), and to the indian motives which predominated in several countries had to be added the Latin dislike for the Anglo- Saxon type of society. Religion created another basis for detachment. While Latin America was almost exclusively Roman Catholic, the majority of Canadians with the exception of some French- Canadians, professed other faiths. In the political order, Canadians have always felt that they have had more in common with the great European democracies than with Latin America where the differences between the Parliamentary and Republican System provided orators with a never-failing emotional instrument which once again separated the two areas. Geographically, the fact that Canada was joined to South America by a continuous mass of land whereas she was divided from Europe by an expanse of water traditionally proved to be more an obstruction to travel and transporta• tion than an aid. Only with the building of the Panama Canal did this influence turn into a positive one. As was indicated in Section 2.1.1, Latin America lies mainly be• tween the tropics of Cancer and Capricorn and though this tropical location is occasionally offset by altitude, it has important effects upon the character of its economy. The Canadian environment is radically different, and the idea of the Latin American economy being complementary to the Canadian follows naturally. In fact, however, the tariff preferences that Canada has traditionally extended to the British colonies of the Caribbean have meant that her imports of tropical produce have largely come from this area. After decades of domestic, political, and economic struggles between the independent States of the Americas, the first Inter-American Conference was held in Washington in 1890. This was about six years before paramountcy in the region passed definitively from Great Britain to the United States. Since 1890, the Inter-American System has passed through three stages of development (Bailey, 1967). Between 1890 and 1945, the system was loose and relatively informal, gaining effectiveness according to the United States' advances in more skillful diplomacy, and the eli• mination of rivalry among Latin American neighbors. Be• tween 1945 and 1954, the System formalized itself and effect• ively maintained on several occasions the Pax Americana in the Hemisphere (Smith, 1966). This was possible mainly because the United States, a power now unchallengeable and invincible, was apparently heading the Organization and naturally backing up the principles for which it stood. 67 The third stage from 1954 to the present has been dominated by the adjustment of the signing countries to the challenge of a new paramount force (Communism) working largely by means of internal subversion within the Republics themselves. In the period 1890-1943, numerous conferences were called and treaties signed, many resolutions and declara• tions were passed by the Inter-American System dealing principally with good offices, mediation, investigation, conciliation, arbitration, and judicial settlement. Be• cause of this procedure, every state in the System was bound by at least one of these treaties and a great percentage had ratified several. In 1947, the Inter-American Conference for the main• tenance of Continental Peace and Security met in Rio de Janeiro. At this conference, the Inter-American treaty of Reciprocal Assistance was signed. Following this reunion, the Ninth Inter-American Conference met in Bogota the next year (1948), where the Inter-American System was finally given a fundamental law with the signing of the Charter of the Organization of American States (OAS). The first Chapter of the Charter, entitled 'Nature and Purposes,' described the organization as being 'within the United 68 Nations ... a regional agency,' and referred to its 'regional obligations under the Charter of the United Nations.' Five essential purposes were proclaimed% to strengthen the peace and security of the continent? to pre• vent possible causes of difficulties and to ensure the pacific settlement of disputes that may arise among member states in the event of aggression? to seek the solution of political, juridical, and economic problems that may arise among them? and to promote, by co-operative action, their economic, social, and cultural development (Smith, 1966). Although the idea of Canada eventually joining the Inter-American System was accepted at a rather early date, the United States for a long time opposed inviting her to do so because of her ties with Great Britain (Anglin, 1961). Between the two World Wars there was some Latin American support for Canadian membership, but the United States did not favour even a Mexican proposal that Canada should send an observer to the Seventh International Conference of American States (1933) . During the period of the Second World War and afterwards there was a growing sentiment in favour of Canada's admission among members of the System. At the Ninth International Conference the name 'Organization of American States' was adopted specifically to facilitate 69 Canada's subsequent membership, now desired by the United States. But, although Canada is included in the region covered by the Inter-American Treaty of Reciprocal Assist• ance, she has not yet joined the OAS. The present state of inter-American relationships (1965) is not such as to indicate Canada's desire to become a member. By being out of the OAS, Canada is then also out of the main stream of political cooperation with Latin America, together with the economic isolation that frequently comes with it. The Charter of the OAS is clear in its statement of objectives that a main issue is . . ."to promote, by co-operative action the economic, social, and cultural development". . „ between the member States. This fact, although it does not restrict Canadian-Latin American busi• ness activity completely, does exclude Canada from a valu• able source of information and co-operation, a source which undoubtedly provides to those countries which support it, many favourable benefits. According to how Canada views its possible member• ship in the OAS, will vary greatly both the quality and quantity of its relations with Latin America. The decision of becoming a member of the System could certainly influence economic co-operation with the member countries, including 70 trade. If this is not the case, however, the normal channels of communication, diplomatic relations (which today are in healthy condition), together with specialized economic in• stitutions and favourable demand on both areas could get the job done, if not as effectively, at least with consider• able success for all parties. 3.1.2 Reduced Commerce with Latin America The political isolation in which Canada finds itself with respect to Inter-American affairs can also be extended to the amount of trade which historically has been carried on with the region. Seldom has Canada sold more than 3% of its total exports in Latin America, and compared to its trade with the United States or Europe, the purchases in Latin America are almost negligible. Despite this low participation in trade, Latin America still bought more than 372 million dollars (U.S.) worth of Canadian goods in 1968 (see Table 7), an amount which is of importance given the total level of Canadian production, and the fact that the country is so heavily dependent on international trade. 71 TABLE 7 CANADAs EXPORTS TO THE UNITED STATES AND LATIN AMERICA IN 1968 Country Exports % of Total 1,000 of U.S. $ World 12,556,279 100.0 United States 8, 527,125 67.9 Argentina 44,920 0.4 Bolivia 3,313 - Brazil 46,144 0.4 Chile 19,386 0.2 Colombia 17,576 0.1 Costa Rica 2, 628 - Cuba 41,977 0.4 Dominican Republic 5, 314 - Ecuador 3,293 - El Salvador 2, 957 - Guatemala 2, 342 - Haiti 1,931 - Honduras 1,252 - Mexico 53,090 0.4 Nicaragua 2,064 - Panama 5,157 - Paraguay 680 - Peru 20,721 0.2 Uruguay 2,210 0.2 Venezuela 95, 280 0.8 Latin America 372,245 3.0 Sources Organization for Economic Co-operation and Development (1968 b). - Less than 0.005%. 72 The advantages of increased Canadian trade with Latin America have been widely discussed (Allen, 1927? Humphrey, 1942; Cole, 1965; Urquidi, 1964), but though some efforts have been made to correct the situation, this trade is still relatively unimportant. It would be necessary to multiply the present figure many times before the area became a really important factor in Canada's export trade. Canadian natural trade lines, apart from her trade with the United States, are mainly longitudinal (Humphrey, 1942). Latin America, it is said, does not want, on the whole, the things Canada has to sell; and Canadian manufacturers are at a disadvant• age in the Latin American market because of economic inte• gration and protective tariffs which are swiftly being raised there. On the other hand, historically, Canada has not had much use for the surplus commodities that Latin America has had to export. But as Humphrey (1942) mentioned one thing is certains any Canadian programme for commercial expansion in Latin America should in• clude joining the Pan American Union (today the OAS) which offers important facilities for develop• ing trade between the member States. 3.1.3 Potential for Future Relationships The Latin American Republics have very good reasons 73 for desiring the closest possible collaboration with Canada; for like Canada they are seeking new markets for their pro• duction surpluses and exporting industries. The geographi• cal proximity of Canada to Latin America is an important incentive for increased trade (see Section 2.1.2) as is the general economic environment in which Latin America is pre• sently growing (see Sections 2.3 and 2.4). Population growth in Latin America cannot be easily forgotten; the 365 million people the region is expected to have in 1980, to• gether with a rising per capita income, could lead to a for• midable market for all sorts of commodities, regional and imported. Canada should not neglect this potential. Room for imports expansion in specialized categories such as the semi-manufactured products of the forest; manufactured pro• ducts; heavy machinery; and foodstuffs exist abundantly, with or without Latin American integration, simply because the region needs these goods as a basis on which to support its growing industries. The particular case of forest products will be speci• fically analyzed further on; however, it is of interest here to mention the importance pulp and paper consumption is bound to have in the massive education programs which soon will be implemented. Newsprint demand is already increasing 74 far more than production within the area, and so is the con• struction sector with the hundreds of thousands of dwellings being required annually. The rising standards of living with their related consumption of pulp products will prove to be another factor affecting the demand for forest products. Surely, Canada being a net exporter of wood and wood-based products to its neighbor the United States can be in a com• petitive position to supply these products to Latin America, at least somewhat better than the Scandinavian countries which are presently doing so. Section 7.3.2 analyzes this question which should be considered a key factor if Canada desires to increase its forest products sales in Latin America. An excess demand in the region, though basically necessary for trade does not mean much by itself if others are in a better position to supply it. Excess demand plus a competitive position will determine the real potential of the market. 3.2 Trade Patterns Followed by Less-Developed Countries Both quantity and quality of trade are affected by programs of economic development. While deficits in the balance of payments force countries to restrict imports, industrial growth increases the necessity to buy a number 75 of capital goods such as tools, machinery, and industrial plants. Because limited progress can be made towards in• creasing foreign exchange funds through exports, less- developed nations often restrict imports of consumer goods not vital to the economy, thus creating a difficult situation for those parties interested in the markets under control. Section 3.2.1 presents the main factors affecting this be• haviour, together with the most common solution which cur• rently minimizes most of their negative influences on trade. Bilateral co-operation and assistance between develop• ed and less-developed nations has also a very important bearing on trade. This happens principally because of the nature of the aid provided, which, when it takes the form of loans, often forces the borrowing party to make it effective on the granting country. This creates an artificial situ• ation through which trade is considerably directed along inflexible and practically non-competitive lines. These factors and their relevance to the trade patterns of Latin America are reviewed in Section 3.2.2. 3.2.1 Trends Imposed by Economic Growth A factor which should not be overlooked in any 76 economic study of Latin America, is the pressure for econom• ic growth in the area. Latin America has to strive constant• ly to maintain and hopefully increase its capacity to import; but this capacity is highly sensitive to changes in the reserves of foreign currency which traditionally have been running at too low levels. Therefore, a chronic shortage of foreisp exchange continues to be a major factor limiting economic develop• ment in less-developed regions such as Latin America. If the development plans now being made are to have much chance of success, it is evident that Latin America will either have to reduce its import dependence greatly or it will have to increase its foreign exchange receipts sub• stantially. Strenuous efforts have been made to reduce import dependence to the point where further reductions would seri• ously threaten to reduce the already low standards of living, and undermine the development programs themselves. Thus, it is very doubtful if any extra relief within this idea, can or should be looked for. Nevertheless, considerable relief can be obtained through measures that stimulate trade amongst the Latin American countries at the expense 77 of trade between developed and less-developed countries. Past experience has indicated that it is difficult to increase foreign exchange receipts to Latin America through aid and investments. The reason for this is found mainly in the uncertainty of capital sources and in the high number of political, social, and administrative problems which they raise. This is not to say that Latin American countries will not seek this type of solution, because it is clear that every little bit of foreign exchange helps, but that altering other policies in trade with developed countries would be much more rewarding. If there is to be much hope for the Latin American countries to increase their foreign exchange receipts by exporting to developed countries it is evident that, as a first step, developed countries must agree not to impose additional restrictions in the face of rising imports from them. A second step, with far-reaching consequences, would be for the developed countries to remove or reduce the extensive quantitative restrictions that they already impose on imports from Latin America. Significant progress along these lines would undoubtedly contribute much more to the export earning cap• acity of Latin America than any other commercial policy measure that developed countries could adopt. 78 The all important point to be emphasized is that no scheme to improve the export capacity of Latin America by improving their competitive price position in the markets of developed countries can be very helpful so long as dev• eloped countries are unprepared to open up their markets by removing their quantitative restrictions. Any measure, such as preferential tariff reductions, devaluation and export subsidies, which do improve the competitive price position of Latin America will be easily frustrated if developed countries maintain existing quantitative restric• tions and raise them in the face of increased import com• petition from Latin American producers. In the light of this situation it can, therefore, be concluded that it will be difficult to expect any increase in imports in Latin American countries through the normal demand supply mechanism. Countries interested in selling in Latin America will be asked to increase their purchases in a nearly proportional way. It then follows that, on the whole, there can be no significant increase in Canadian ex• ports to Latin America unless more is bought in the region. Such reciprocal trade agreements would not only facilitate greatly export transaction, but would also be helpful to the development programs of the region. 79 3.2.2 Trends Imposed by Bilateral Cooperation Over the past twenty years the world has been divided in terms of economics and trade, into two great sectors. On one side there are the so-called industrialized nations, such as the United States, Germany, the Soviet Union, etc., which have enjoyed unprecedented development? on the other side, 77 countries in Asia, Africa, and Latin America grouped under the name of under-developed nations which have found it difficult to achieve a rate of growth sufficient to keep pace with their population explosion. A major reason for this development gap is the charact• eristics of world trade, which really amounts to the trade transactions and capital movements between the development nations (Gustavo Romero-Kobeck in Shapiro, 1968). The less- developed countries are desperately attempting to find the means by which they can acquire the capital goods essential for their development. Recently, the gap between the industrialized and less- developed nations has grown wider because of current price trends. Goods which are being imported by the developing countries are costing more. At the same time, prices of commodities exported by them have in general tended to decline. 80 This deterioration in the terms of trade has resulted in a lower purchasing power for the countries in the early stages of development. These factors establish that somehow Latin America will have to achieve its own development, since there is nothing on the horizon which would indicate addition• al assistance in meeting this goal from the industrialized nations of the world. Unfortunately, at present there really does not exist any such thing as meaningful inter• national co-operation. In recent years the concept has become so elastic in its application that it covers such matters as technical assistance and manufacturing licenses to the developing nations, as well as international credits and the flow of direct foreign investment. As a result, there is at present no real definition of the term nor is there a workable theory of it. Such programs as direct foreign investment, foreign loans, technical assistance, and manufacturing licenses are really nothing more than bilateral business agreements be• tween a developed and a less-developed nation, and this has nothing whatsoever to do with a true spirit of international economic co-operation. What may be passed off as co-opera• tion is really nothing more than international paternalism which the industrialized nations apply toward underdeveloped countries. 81 Often, when a developed country offers credit to a developing one, the agreement loses its true character of aid because the borrowing nation is asked to use the loan for buying commodities only within the granting country. In this manner, trade is suddenly boosted between the con• tracting parties, and an artificial non-competitive price level is occasionally established. This situation, al• though common in the trade of industrial equipment, does not apply fully to the consumer goods trade which depends more on the principle of comparative advantages. This would apply to wood and wood-based products which are largely traded on free competitive markets. Nevertheless, there have been situations where even trade of consumer goods has been affected by direct intervention of the economies through paternalism. More than once this has been applied by poli• tical pressure, economic dependency, and monopolistic characters in the transport facilities. The present state of affairs has permitted most of today's economic powers to get a foothold in Latin America. Looking at it from this point of view, because of its de• tachment (political and economic), Canada can be considered as being in a position of disadvantage towards trading with Latin America. It cannot compete with absolute freedom with 82 other foreign nations, neither can it pull the strings which could equalize the bargaining platform. Though initially unfavourable for Canadian interests in Latin America, these factors do at least leave plenty of room for improved relationships which, once established, should prove much more profitable in all ways than the present state of affairs. 3.3 Economic Integration in Latin America The process of Latin America's economic integration presents a number of problems to all countries interested in trading with the region. The changes which normally result from the formation of this type of organization include modified tariffs, quotas, and many new customs re• gulations which are bound to influence trade considerably. Because of Canada's trade with Latin America, these factors will not greatly affect this country's international com• merce. Nevertheless, if any expansion of sales in the region is to be expected, careful consideration of its trade institutions should be made. In order to have a clear understanding of the con• sequences of economic integration in general, and of the 83 Latin American Free Trade Association in particular, the theoretical basis of these processes should be reviewed, if not extensively, in sufficient detail to provide a critical viewpoint of all influences on trade. 3.3.1 Economic Development and Comparative Advantage Classical economics has long cherished the doctrine of free trade. It is based on Ricardo's law of comparative advantage, the essence of which is that nations will maxi• mize their real incomes by specializing in the production of those goods and services they can produce at least cost, in relation to their other production possibilities, and for which there is demand either at home or abroad (Powelson, 1964). The phrase "relative to their other pro• duction possibilities" is important. For example, Paraguay's comparative advantage in timber may not lie so much in her natural endowments as in the scarcity of alternative occupations. When classical economists first introduced their idea of comparative advantage they did it primarily in terms of natural endowments. Differences in climate, resourse avail• ability, and geographic location, were the factors which determined what the countries were best fitted to produce. 84 They did not deny, but neither did they stress, that the source of comparative advantage might also be in technical competence, skills, and capital accumulation. To them, England was a shipping nation because of its island posi• tion, France produced wines because it had good soils for growing grapes and Spain grew fruits because the climate was propitious (Wionczek, 1966) . Today, because of technological changes, the relative role of natural resources has declined, and man-made factors are increasingly recognized as comparative advan• tage determinants. In spite of knowing the better condi• tion of more capitalized nations, Latin American countries have undertaken the task of making better use of their respective natural comparative advantages. According to the theory of economic integration, not only the market for output expands, but also the productivity level of the factors of production, thus with the same effort a greater benefit is finally obtained. Full use of the comparative advantages currently translates itself into specialization, and this in turn, into full use of the economies of scale which lower unitary costs. In an environment of broad markets, these conditions by themselves have the effect of stimulating economic growth. 85 3.3.2 The Theory of Integration The integration doctrine elevates to the multina• tional plane the thesis that economic development is impos• sible without industrialization. According to this thesis, the sustained growth of an underdeveloped economy depends on the degree to which an active process of substitution of imports by domestic production can be promoted, so as to extend the country's capacity to import to cover the acqui• sition of an optimum volume of capital goods and technology (Wionczek, 1966). At present, Latin American countries can be consider• ed committed to protection, if not individually, on the whole from extra-regional nations. The very existence of two regional groupings—the Latin American Free Trade Area and the Central American Common Market—implies a differ• entiation between commercial policy within the respective areas and that to be accorded to outsiders. As Powelson (1964) mentioneds most Latin Americans relate their protectionism to economic growth. They are convinced that it is possi• ble to develop, within their regions, comparative advantages in long lists of manufactured goods. To do so, it is necessary, at least initially, to pro• tect the growing industries from outside competition of more developed nations. 86 This premise is also, in many ways, backed by the idea that Latin American countries are economically too small to provide the markets which the huge industrial complexes of today need. Without full use of the economies of scale little can be done against competition from Europe or the United States. After all, the United States is a common market of fifty states, and Europe has swiftly been inte• grating into a Common Market and a Free Trade Area. Whether integration will reduce or raise real cost (thus raising or reducing real national income respectively) depends, according to economic theory, on whether it is trade-creating or trade-diverting. If economic integration causes (say) Chileans to buy in Argentina rather than in Chile, there is trade creation, and the cost to Chile is reduced. If, on the other hand, it causes them to buy in Argentina rather than in the United States or Canada, there is trade diversion, and the cost to Chile should be considered as increased. Both the Latin American Free Trade Area and the Central American Common Market contemplate, at least initially, more trade diversion than trade crea• tion, simply because the former is less painful than the latter. The trends, however, are expected soon to reverse drastically. 87 During the first stage of industrial development, restrictions in the economy imposed by trade protection do not necessarily impede growth to a major extent. Most of the Latin American countries have been able to establish substantial consumer goods industries without looking for markets beyond their own frontiers; and in many of these countries nearly all domestic requirements for manufactured consumer goods are now satisfied from home production. Despite this growth, these countries have now reached, or are closely approaching, the limit of import saving that is possible in the light industries. The rate of investment and the growth of income generated in these industries should, therefore, begin to slow down, which has already happened in some cases. New impetus to industrial invest• ment and expansion, and new opportunities for closing the external gap by import saving will have to come from the development of industries manufacturing intermediate pro• ducts such as steel and chemicals, as well as durable pro• duce and consumer goods. It has been argued that the possibilities for spec• ialization in an integrated area are indicated by the degree of economic intercourse among the prospective member coun• tries. According to this proposition, the higher the 88 proportion of trade conducted among the member countries prior to the formation of the union, the greater will be the expansion of intra-area trade and thus the increase in welfare (Wionczek, 1966). This premise would indicate the desirability of the European Common Market, where there existed a pre-union trade among the member countries of roughly 36%. It would also show the prospects for inte• gration in less-developed regions in an unfavourable light, given that intra-area trade in Latin America and Africa does not reach 10% of total trade, and in Asia is less than 15%. In fact, it has been argued that the small amount of intra-regional trade in Latin America provides evidence of inherent limitations of the reallocation of productive activity in a Latin American union. Yet, according to Wionczek (1966), The low degree of economic intercourse in less- developed areas can hardly be used as an argument against their integration. Rather, the differences observed in regard to intra-area trade in Western Europe and in underdeveloped regions reflect dif• ferences in the level of their economic develop• ment. While far-reaching specialization has evolved among the highly industrialized economies of Western Europe, the scope of exchange is limited in low-income countries that specialize in primary commodities. These countries often produce and ex• port the same commodities and the bulk of their imports consists of manufactured goods purchased from industrial economies. 89 The establishment of a more rational pattern of trade and production is, therefore, the most important justification for regional economic integration. There seems to exist little doubt that a pattern of production based on greater specialization within the region will be more economical than one directed toward maximum self-sufficiency on the basis of narrow national markets. If such a pattern of production and investment maximizes the supply of capital goods without disrupting production for domestic demand, as is the case with a typical underdeveloped country, it is at the same time most condusive to economic growth from a dynamic point of view. From the standpoint of static theory, it is true that regional economic integration will not establish the all-around optimum relations between prices of domestic and internationally traded goods, but the situation can be legitimately called the second best solution insofar as the relative price and production patterns, even in a limited sphere, are shifted toward optimum conditions through intra-regional specialization. 3.3.3 The Latin American Free Trade Association The final act of the United Nations Conference on Trade and Development of 1964 established the importance of 90 international economic relations? Regional economic groupings, integration or other forms of economic co-operation should be promoted among developing countries as a means of expanding their intra-regional and extra-regional trade, and encouraging their economic growth and their indust• rial and agricultural diversification, with due re• gard to the special features of development of the various countries concerned as well as their economic and social systems. In other words, as Wionczek (1966) put it, world opinion finally arrived at a consensus to the effect that economic integration programs, such as the Latin American Free Trade Association (LAFTA) and the Central American Common Market (CACOM), constitute an important instrument for economic development, provided they ensure an equitable dis• tribution of the benefits of integration and do not entail elements of discrimination against other areas in process of development. Because the general principle recognized by the 120 countries that met in Geneva tacitly admits that these economic integration programs are essentially aimed at granting reciprocal preferences not intended for extension to the already developed sector of the world economy, Canadian interest in Latin America cannot be expected to benefit directly, at least in the short run by any tariff or customs measure agreed upon. 91 The Latin American Free Trade Area is a brainchild of the Economic Commission for Latin America. In 1948, an ECLA resolution referred to a "Latin American Customs Union," but nothing was really produced until the formation of a Trade Committee in 1956. The objective of the Committee was to study Latin American payments problems but somehow plans for a free trade area were promoted (Powelson, 1964). The proposals thus presented were shaped in a series of meetings in the late fifties, culminating with the sign• ing of the Treaty of Montevideo in 1960. In that year, the Latin American Free Trade Association (LAFTA) was born, (see Map 6), with Argentina, Brazil, Chile, Mexico, Uruguay, and Peru as members. Shortly after, Paraguay, Bolivia, Ecuador, Venezuela, and Colombia also joined, thus widening the area of free trade (Gustavo Romero-Kilbeck in Shapiro, 1968) . Trade liberalization is the basis of the Montevideo Treaty. The contracting parties have committed themselves to the elimination, within twelve years, of all duties on goods currently traded among them. Summarizing the three fundamental agreements of the Treaty. The first called for an elimination, no later than 1973, of all tariffs on 92 Map 6 Economic Integration in Latin America 93 regional products. The second dealt with the establish• ment of industrial complementation agreements for zonal industries. And the third called for preferential develop• ment and trade treatment for the less-developed nations of the region, which include Paraguay, Bolivia, and Ecuador. Up to 1967, two major problems have consistently slowed LAFTA's development. First of all, there has been little progress in the negotiations which would eliminate zonal import duties on select products which already are being produced in one or more of the Latin American nations. The basic reason for this stagnation can be found in the implications of economic integration, which suggest accelerated development in the area involved with a logi^- cal reduction in zonal protectionism. Because industrial development in Latin America is to date of a modest charact• er, wide-spread tariff cuts are difficult to obtain if they endanger the very life of those industries already in existence. The second problem is related to the differences in the degree of development existent among Latin American countries. This makes complementation agreements very difficult, especially since there is little capital available for the development of new industries on a more regional scale. 94 Despite these problems, in 1967 the Latin American Presidents met with the President of the United States to try and reach agreement on the character and conditions of Latin America's economic integration. This time the basis for integration was a Latin American Common Market going far beyond LAFTA's proposal. The LAFTA idea of free zonal trade by 1973 has now become just one part of a larger process. At present, LAFTA clearly needs a good push to est• ablish itself as the base for the forthcoming Latin American Common Market, a push which includes the creation of a common external tariff program. Another important point, is the integration of the Central American Common Market (CACOM), which is already establishing its formula for a common outer tariff. This formula, if completely approved, would require the Latin American nations to freeze their tariff barriers at present levels as far as regional trade is concerned. To complete the integration process on which it has embarked, LAFTA must overcome enormous difficulties. One of these is clearly the evident shortage of the technical and practical tools available to the Latin American countries; 95 which, added to the existence of deep-rooted patterns of behaviour, make it very hard to incorporate in the industry the most recent scientific developments. Traditionally, Latin America has depended on economic relations with the rest of the world and has not found an effective channel for strengthening its inter-regional links. Since the expansion of each individual economy has traditionally depended on the development of the external sector, interest has gener• ally been centered on marketing basic products towards the world. Consequently, commercial and financial networks, as well as marketing research studies, have mainly followed a peripherial circuit. In the customs-tariff field of present LAFTA agree• ments, disparities between the duties charged by the countries that presently constitute the association are quite important, and extend to almost every aspect. In the first place, there are structural differences deriving from the fact that the respective tariffs have no common background and conform to no precise pattern. According to Gustavo Magarinos (Wionczek, 1966), because of lacking systematic classifications dictated by an appropriate methodological approach, the tariffs in force are a source of confusion with regard to the nature of the merchandise, as well as to the tariff schedule applicable in each case . . . 96 3.3.4 The Central American Common Market The Central American economic integration program is essentially an international cooperative effort aimed at surmounting the obstacles that stand in the way of the rapid development of five small countries whose growth is largely dependent on the world market for a handful of commodities (coffee, bananas, cotton, etc.). Unlike LAFTA, the countries composing the Central American Common Market (Guatemala, El Salvador, Honduras, Nicaragua, and Costa Rica) (see Map 6), have committed themselves to complete free trade in the area at a much faster rate. Free trade had to be accomplished within five years of the ratification of the agreement (1960). Beneath this action, which appears on its surface more purposeful and positive than LAFTA, the same fears were voiced con• cerning equal development in all countries, and a set of reservations (not fully resolved) were presented concerning integrated industries. The Central American Common Market was not something that just evolved? on the contrary, it was first proposed at the ECLA session of July, 1950, and was gradually molded in a ten year period replete with studies, suggestions, and tentative agreements (Powelson, 1964). Powelson also mentioned 97 as important the abundant number of studies which preceded the creation of the Union, In fact, he wrote, In proportion to the size of the market, far greater amount of research and thinking has gone into the Central American Union than into LAFTA. Studies have covered such items as industrial integration, training in public administration, research in in• dustrial technology, finance, and development banking, the integration of transportation and electric power, uniform tariffs, and resources. In the agreement of 1960, the signing countries de• cided to eliminate immediately all tariffs on goods orig• inating within the region except those appearing on a specific list. But even those on the special list were committed to an elimination of tariffs within the initial five year period. Two important features of the Central American Com• mon Market deserve a special mention. These are, the stress put on integrated industries and the establishment of a Central American Bank for Economic Integration. Though provisions for integrated industries were substanti• ally cut down in the final version from what had been earlier planned, nevertheless, the objective of the agree• ment is to promote new enterprises that will serve the region as a whole and not individual countries. 98 As regards the adoption of a common tariff for ap• plication to trade with third countries, the General Treaty served to accelerate the negotiations begun in 1959 with the signing of the Agreement on the Equalization of Import Duties and Charges. By means of protocols to that agree• ment, during the three years immediately following, uniform duties were established on 1,213 tariff items, or 95% of the total (Joseph Moscarella in Wionczek, 1966). Starting from national tariffs designed to serve mainly fiscal purposes, the member countries have managed to build a uniform Central American tariff that fulfills the requirements of a selective policy aimed at stimulating the import-substitution process together with an expansion of foreign trade. Based on Joseph Moscarella's findings (Wiomczek, 1966), the average level of the new tariff is equivalent to 48%, or 6% higher than the average of the five national tariffs previously in effect. On the other hand, the composition of the new tariff incorporates import• ant changes by groups of products. In general, low duties have been fixed for capital goods and raw materials not currently produced in Central America, or not susceptible of production in the short-run. Duties were set at relative• ly high rates on consumer goods, except for a few essential 99 items not produced in the region. This was largely done with the idea of increasing fiscal revenue and encouraging regional industry. 100 SECTION IV DEMAND FOR FOREST PRODUCTS IN LATIN AMERICA The demand for wood products in Latin America, as in any other region of the world, depends largely on a few major factors? namely, availability of productive forests, capacity to develop a sound industry based on these forests and perhaps, most important of all, the tastes, standards of living and willingness of the consumers to use wood products in their daily life. In Latin America, the situ• ation is somewhat depressing, because, although the area encloses about 25% of the forested area of the world, forest products consumption has traditionally been low (FAO, 1968). This situation occurs principally because a large proportion of the forests consist of tropical hardwoods or softwoods for which no commercial use has been clearly established. The cost of operations is increased by climatic and topographical conditions, which, added to capital and technological deficiencies, make it difficult to operate efficiently. Latin America's reserves of long fiber softwoods are quite limited. In fact, they are limited to some areas in southern Brazil (Parana pine), southern Chile (Radiata 101 pine)> Mexico (Sp), and Central America (Sp). Because raw material is limited, the pulp and paper industry has had great difficulty in developing, being today the sector which contributes more than any other to the overall imports of forest products to the region. The rising standard of living Latin America is experiencing, together with its population explosion, will help increase demand in the future. Though the bulk of this demand is expected to be met mainly from within the region, considerable amounts will have to be imported from other areas of the world. This section is dedicated to the analysis of these problems and other related questions. Because of insuf• ficient information, individual analyses by countries were not made, except in a few specific cases. Instead, pro• duction, consumption, and demand are presented considering Latin America as a whole. 4.1 Forest Resources of Latin America Despite the fact that more than half of Latin America is classed as forest land, forestry has not progressed as expected. Many countries, in fact, are actually importing a considerable proportion of their requirements in wood 102 products. This state of affairs can be explained to some extent, by three facts. Most of the forests are at present inaccessible; they consist overwhelmingly of tropical hard• woods? and these hardwood forests usually contain only scattered trees of economic species, hemmed in by others of no commercial value. Broadly speaking, the forests of Latin America may be divided initially into a large area of tropical forest, mainly lowland but reaching to about 2,000 m in places, and a smaller area of temperate forest, found both outside the tropics and at high altitudes within the tropics. Much of the land classed as forest is in areas such as northeast Brazil, where conditions are too dry for the growth of commercially useful stands. In addition, the tropical rain forest is characterized by the occurence of a very large number of species in any given small area, with useful species scattered among more useless ones and, therefore, costly to exploit. Many useful species do in fact occur in areas such as the Amazon, but the limited quantity that can be assembled in any one place and the cost of moving products to markets have so far limited exploi• tation of timber there. 103 The Caribbean coastlands of Central America have been more exploited. Most of the timber produced commercial• ly, rather than for local consumption, comes from the coni• fer forests of the South Brazilian uplands, from southern Chile and from the high ranges of Mexico. The high Andes from Colombia to northern Argentina do not have a continu• ous forest cover and the region was notoriously deficient of forests until planting of Eucalyptus species began at the end of the nineteenth century (Cole, 1975). Many other parts of Latin America, especially southern Brazil, Uruguay, and parts of Argentina and Chile have also greatly benefited from the introduction of these remarkable Australian trees. Chile has managed to build with these species, together with Radiata pine, a reserve of more than 300,000 hectares of plantations. These man-made forests represent today the most valuable portion of the country's wood resources. The area under forest bears little relationship to the actual state of the industry in Latin America, but clear• ly the potential is great since, of the larger countries, only Mexico and Chile are less or equal to one-third covered with forests, while Brazil and Colombia are nearly two-thirds covered. 104 Statistics on forest areas, total and in use are given in Table 8. The growing stock of these forests separated into hardwood and coniferous volumes can be found in Table 9. By looking at Map 4, which shows the distribution of the main forest types in Latin America, it can be readily seen that about half of the total forest resource of the region lies in the large area of tropical hardwood forest in the Amazon basin. These forests, however, have hardly been exploited and the majority of the forests now in use are to be found in the more developed and populated areas, such as Central America and Eastern and Central South America. 4.1.1 Economic Characteristics, Geographic Distribution, and Accessibility of the Native Forests Latin America contains today forests in excess of 1,000 million hectares in area, almost one-quarter of the world's forested land (United Nations and FAO, 1963). South America which has more than 54% of the forests of Latin America represents the highest proportion of forest to total land area in the world and with its 950 million hectares of TABLE 8 LATIN AMERICAs FOREST LAND AND USEABLE FORESTS Forest Land Forest in Use Sub-regions Total Forests, Accessible Conifers Hardwood Forests in (thousands per cent as per cent (thousands and mixed use as per of ha.) of total of total of ha.) woods cent of land area forest area (thousands total for• of ha.) est area Mexico 38,840 20 100 10,000 13,300 60 Central Americas 29,640 2,495 5,800 British Honduras(Belize) 1,810 80 76 180 1,020 74 Costa Rica 3,620 72 47 1, 500 41 El Salvador 280 14 100 25 240 100 Guatemala 5,350 51 83 840 1,810 50 Honduras 6,860 54 23 700 300 16 Nicaragua 6,450 47 23 750 750 23 Panama 5,270 71 22 1,180 22 Caribbean islandss 5,000 480 1,630 Cuba 1,300 11 100 110 980 84 Dominican Republic 2,230 47 40 125 75 9 Haiti 200 7 86 75 125 86 Other Islands 1,270 28 58 170 450 49 Northern South Americas 166,100 7,620 British Guiana 18,130 84 20 260 1-4 French Guiana 7,000 80 21 50 0.7 Colombia 69,400 64 30 5,900 10 Ecuador 14,850 33 30 300 2 Surinam 11,720 84 8 10 Venezuela 45,000 49 17 1,100 2.4 Brazil 561,660 66 25 6,000 34,000 7.1 M en Continued TABLE 8 (Continued) Forest land Forest in Use Sub-regions Total Forests, Accessible Conifers Hardwood Forests in (thousands per cent as per cent (thousands and mixed use as per of ha.) of total of total of ha.) woods cent of land area forest area (thousands total for• of ha.) est area South-west South America 137,400 540 21,120 Bolivia 47,000 43 13 6,000 13 Chile 20,440 28 48 490 4,120 23 Peru 70,000 56 21 50 11,000 16 South-east South America 91,460 260 12,550 Argentina 70,000 25 85 250 7,000 15 Uruguay 550 3 100 10 530 97 Paraguay 20,910 51 30 5,020 24 TOTAL 1,030,140 19,775 97,020 Source. United Nations and FA0 (1963a). o 107 TABLE 9 LATIN AMERICA: GROWING STOCK OF FORESTS. TOTAL VOLUME OF ALL FOREST AREAS (Including Non-Commercial Species) (Million m^ without bark) Sub-regions Total Conifers Hardwoods Mexico 4,900 500.0 4,400 Central Americas British Honduras (Belize) 205 5.0 200 Costa Rica 600 660 El Salvador 36 1.5 35 Guatemala 820 40.0 780 Honduras 1,035 35.0 1,000 Nicaragua 1,020 20.0 1,000 Panama 1,000 1,000 Sub-total 4,776 101.5 4,675 Caribbean islands: Cuba 243 3.3 240 Dominican Republic 289 3.8 285 Haiti 118 3.0 115 Other islands 190 5.0 185 Sub-total 840 15.1 825 Northern South Americas British Guiana 3, 620 3, 620 French Guiana 1,130 1,130 Colombia 11,800 11,800 Ecuador 2,460 2,460 Surinam 2,210 2,210 Venezuela 5,630 5,630 Sub-total 26, 850 26,850 Brazil 79,150 150.0 79,000 South-west South Americas Bolivia 6,960 6,960 Chile 3, 820 100.0 3, 720 Peru 11,100 0.2 11,100 Sub-total 21,880 100.0 21,780 South-east South Americas Argentina 3,195 15.0 3,180 Uruguay 98 2.7 95 Paraguay 1,940 1.940 Sub-total 5,233 17.7 5,215 Total 143,629 884 142,745 Sources United Nations and FAO (1963a). 108 forest it has the largest timber reserve in the Western Hemisphere. In Central America the proportion of land area under forests falls to 24%, but these are more accessible than in South America because of a smoother topography and higher density of population (United Nations and FAO, 1963). Of all the forests of Latin America, less than one- third are considered to be accessible (300 million hectares), of which, in turn, another third (110 million hectares), is presently being utilized (FAO, 1967 a). The tropical rain type forest predominates in the areas classed as inaccessible. Because of the lower proportion of the forests used, there are large areas of accessible but not exploited woods? these will eventually be put to use as other reserves around the world become exhausted. According to the joint publication of the United Nations and FAO, "Latin America Timber Trends and Prospects" (1963), the forests of the region vary considerably in their location with respect to population. The forests in Chile, for example, are located reason• ably close to the population centres and the forest industries are we11-developed. By contrast in the Amazon basin the population is thinly spread and the forests are not subject to the same uses as in other parts of Latin America. 109 Many of the factors which interfere with forestry exploitation are common throughout the region and have been classified in decreasing order of importance as follows: a low concentration of presently commercially valuable tree species (often only 5% of the total volume in hardwood types)? poor communications? difficult terrain? and poor seasonal weather conditions (United Nations and FAO, 1963a). The first obstacle is presently being taken care of, but progress is rather slow because of difficulties in obtaining new commercial outlets for the secondary species. Communications are being improved in most of the countries in the region and this has brought into production an in• creasing number of forests which used to be considered of no commercial value. With the introduction of better and cheaper extraction equipment this trend is expected to persist thus considerably increasing the industrial use of the total forest in the region; and as part of this develop• ment, great hopes have been put into the use of more sophi• sticated logging equipment such as wide-track caterpillars and low pressure four wheel drive tractors in swampy places. Because of the capital costs related to highly mech• anized activities, it is expected that primitive human and 110 animal labour will still play an important role in timber harvesting and, therefore, output will be somewhat limited both in quantity and in quality. This problem, added to the existence of seasonal working can mean a serious draw-back on future production in Latin America, mainly because timber extraction will have to be concentrated in the drier months and the wood-processing plants be forced to stockpile timber for the rainy season. 4.1.2 Man-made Forests Plantations of forest trees in Latin America are to be found mainly in South America. These now cover more than one and a half million hectares, and are being added to at a rate of over 150 thousand hectares a year (United Nations and FAO, 1963 b). According to the figures given in Table 10, artifi• cial forests are most extensive in Brazil (700 thousand hectares, created principally out of Eucalyptus species). In second place is Chile which accounts for half of Brazil's figure (350 thousand hectares, mainly of Radiata pine). Chile is currently planting in excess of 35,000 hectares annually, with a possible 50,000 hectares by 1970, Argentina Ill TABLE 10 iATIN AMERICA? FOREST PLANTING BY COUNTRY (thousand of hectares) Region Area Planted Planting Plans Principal to 1963 1963 to 1967 Species Planted Latin America 1,650 592 Eucalyptus spp Pinus spp. Brazil 700 o o Populus spp. Chile 350 100 Salix spp. Argentina 260 50 Araucaria angustifolia Uruguay 140 20 Cuba 106 182 Mexico 50 Guatemala 22 94 Other countries 22 146 Sources FAO, (1967 d). has plantations mainly of Poplars and Willows, and in 1963 had almost 260,000 hectares of these species„ Uruguay has planted principally Eucalyptus and Pines, managing to build a reserve of 100,000 hectares. While Cuba, Chile, and Guatemala have the greatest planting rates of Latin America, 182,100, and 94 thousand hectares respectively for the period 1963-1967, Brazil and Mexico have practically stopped planting and, therefore, their forest plantations have recently remained rather static and perhaps even decreased in area due to harvesting. Planting plans to 1967 for other American countries include 112 British Honduras 4,000 hectares, Honduras 10,000 hectares, Ecuador 32,000 hectares, Surinam 5,000 hectares, Bolivia 70,000 hectares, and Peru 25,000 hectares (FAO, 1967). During the last few years, planting rates have in• creased considerably and emphasis has been placed on plant• ing conifers rather than hardwoods. This reflects the region's deficit of long fibre raw materials. Most of the plantations in Latin America are managed on short rotations (10 to 25 years). They carry a growing 4 stock of 200-300 m3 per hectare and more, and usually grow at a rate of 10-15 m3 per hectare annually. Rates as high as 30 m3 and over are not uncommon, especially with Radiata Pine in Southern Chile, where averages of 25 m3 per hectare are normal (United Nations and FAO, 1963; and casasempere, 1967) . The most important reason for the widespread crea• tion of plantations in Latin America is related to wood needs which the local indigenous forests cannot fully meet, such as railway sleepers, posts, poles, mine timbers, wood packaging, and pulp and paper (Casasempere, 1970) . Based on FAO's findings (1963), production from plantations in the region is estimated at 12 to 15 million m3 per year, an 113 amount which represents about 6% of the total regional re• movals of roundwood. Nevertheless, in terms of plantation area this figure represents only a fraction of one percent of the total area, thus giving a good idea of how important this type of forestry has become in Latin America during the last few decades. 4.2 Forestry Trends in Latin America In the early 1960's, Latin America was the richest region of the world in terms of forest area per capita (5.3 hectares against 1.1 hectares in the rest of the world), and at present it still is. For many years this apparent wealth was known to most Latin Americans, nevertheless, little has been done to exploit it. This state of affairs could have continued for many more years had not certain facts struck heavily on the local economies. In the first place, the region was found to be ex• porting annually only 50 million dollars (U.S.) worth of wood and wood-based products while importing 300 million dollars. In the second place, it had become clear that economic development and rising standards of living brought considerably increased needs for wood, a commodity essential for housing, railways, mines, and factories, books, newspapers, 114 commerce and marketing. The countries of the region then realized that unless more forest products were made within the area, imports would increase disproportionately or, alternatively, there would be a shortage of items vital for material and cultural progress (United Nations and FAO, 1963). In this way, under pressure for development, forestry projects were given priority all over Latin America. Response in production came to a greater or lesser degree, depending on each individual country and on its needs to substitute imports. The problems of the agriculture sector also have had an important bearing on forestry development. Governments have often permitted increasing alienation of areas pre• sently forested to agriculture thus considerably depleting the forests of the region. Not only has physical timber output been affected but many other values of the forest resource have suffered. The consequences of uncontrolled alienation can be presently viewed in many ways. Rivers in Southern Chile, navigable to ocean-going boats only a few decades ago are now silted up. Shifting agriculture has radically transformed the landscape, and vast green areas have given way to desert mainly through devastating erosion and changes in the microclimate. In parts of Brazil 115 deforestation of the uplands has meant that a number of rivers on which towns depended for hydroelectricity have dried up. As mentioned in a United Nations and FAO report (1963 a) It is these, and the countless similar facts that could be recited if space allowed, that provide a warning for those who would seek solace in the crude statistics which depict the region as singu• larly rich in forest. The abundance of forest and forest land in Latin America can, therefore, only be regarded as wealth within import• ant limits and their usefulness is restricted. Unless adequate safeguards are provided, no real progress in out• put can be attained without liberating catastrophic con• sequences in other sectors of the economy or endangering the potential for future generations. 4.2.1 An Expanding Role for Forestry Great efforts to industrialize Latin America have recently been made and everything indicates this process will continue to grow. The forest industries have been receiving careful attention and have grown particularly fast in certain areas. It has lately been recognized that social betterment cannot be promoted without vastly in• creased quantities of processed wood. 116 According to United Nations and FAO (1963 b), Latin America's need for industrial wood around 1985, is expected to be nearly three times greater than it was in the early 1960's. Taking the forecast one step forward, this same study foresees that by 1985 the region will require two-and-a-half times as much sawnwood, eight times the volume of wood-based sheet materials, and six times as much pulp and paper as it consumed in 1963. Another factor which justifies the present attention which the forest industries are given is their role in check• ing the drift of rural population to the big towns and urban areas. To many it is clear that, because the wood-based industries require to be located close to the source of raw material, they are generally built away from urban centres. These industries do not normally gravitate to the big cities as others do in search of external economies, and, therefore, producing congestion, over-crowding and overtaxed utilities. Furthermore, their development often can be related to colon• ization and settlement schemes where their activity provides for new employment opportunities and raises the incomes of the community. All these implications are now widely understood in 117 Latin America, resulting in a substantial growth of all forestry activity. In many countries ample encouragement has been given to new forest industries largely for the reasons just mentioned, but also because of their effect• ive import-saving capacity. The growth of the forest industries, however, though satisfactory in many ways has not been good enough as to prevent the adverse trade balance on the wood products account. In 1962 it was estimated that for pulp products alone, extra needs by 1975, if met completely through imports, would add around one billion dollars to the import bill of Latin America, if the extra demand was to be met fully from within the region, average yearly investments of up to 190 million dollars would be required for the period 1963-1975, in order to create the necessary facilities (United Nations and FAO, 1963). A negative influence in the past has been the limited size of the domestic markets for forestry related commodit• ies . This condition has been acute for those products which depend heavily upon economies of scale for lower costs. For• tunately, the regional markets are now expanding and a high income elasticity of demand has been noticed for most of the wood and wood-based products. 118 Latin America has always been praised for its abundant forest resources. Today it is known that not all of them are of value, and that of those that are, many lie where they cannot be economically reached. others, due to their heter- ogenity pose serious exploration problems. However, the region also has many areas which, owing to their particular soils and climate, are ideal for the creation of new forests. In these places where trees grow incredibly fast and pressure for land is almost non-existent, forest production can be increased at comparatively low cost and with little risk. These pronounced natural advantages point to a potential role for Latin America as a supplier of certain forest products to other regions of the world. Plantation forestry has largely made a notable contribution towards satisfying forest products demand in several Latin American countries, and some export oriented industries have already been developed (United Nations and FAO, 1963b). For almost 300 years, Latin America has been called "the region with a future." However, this potential has yet to be fully realized. Today, everything indicates that Latin America is not willing to wait for that future. From all around the region come demands for more and improved edu• cation, better housing facilities and higher nutritional 119 levels. In order to meet these greater demands, Latin America will have to find newer and superior ways of com• bining its human, cultural, and natural resources, ways which will finally promote sustained economic development. The region has had difficulties in meeting all forest products demands from within. Traditionally imports have been required to meet these deficits and always a much greater proportion of pulp and paper has been required than any other wood products. There are indications that Latin America has succeeded in developing comparative ad• vantages in sawnwood while failing to do so in the wood- fiber related products. A quick review of the data avail• able shows that this trend will continue in the years to come, and while Latin America is expected to have a more fav orable balanced trade by 1975 in such, products as sawnwood, plywood, veneer, fibreboard, and particle board, pulp and paper imports will continue at a high level, especially in the area of high grade pulps and newsprint (FAO, 1967 d). Because of this, major efforts are currently being made to increase output in pulp and paper, but also outputs are being increased of those products with comparative ad• vantage . It is realized that increased output of these other products will enable the region to carry on profitable 120 international trade thus generating enough foreign exchange to import other wood products. Intensive management and exploitation of a number of valuable hardwood species, for lumber, veneer, and plywood is being promoted as they are currently very well accepted in North American, European, and Asian markets. Despite the fact that by 1975 Latin America will still require to import about 1.24 million tons of paper and paper board, and 192 thousand tons of pulp, the development of newer exports in a number of other items is expected to help mitigate substantially the trade deficit in these products. (FAO, 1967 a). 4.2.2 The Forest Industry About the forest industry in Latin America it needs to be said that it covers a wide range in sizes, quality, efficiency and type of product. Sawmilling Industry There are about 15-20,000 sawmills in the region, their exact number is yet unknown. In the same year, Sweden produced a slightly smaller amount, but with 4,000 mills, which gives a good idea of the small average size of the region's sawmills (FAO, 1967c) . 121 The industry is generally underpowered, poorly equipped and managed, and seldom works to capacity. If its faults were corrected, it would produce better quality sawnwood and probably in enough quantity to meet the inter• nal demand over the next 10 years (FAO, 1967c) . Most sawmills have circular saws which are comparatively easy to use and cheaper than other types of saws. The fact that these saws cause wastage and a rather low quality product, has in no way restricted their widespread use. (FAO, 1968) An important reason for this happening is the abundance of low value logs and the existence of an un• demanding market which is more interested in price than in quality. There can be found some well-equipped and well- organized sawmills, with modern machinery, power plants, mechanical handling and highly sophisticated technology. Regretably, these are few in number. Several factors are responsible for poor standards of most mills, but the one which has the greatest bearing probably is the lack of capital. Wood-based Panel Industry There are about 300 to 400 plywood and veneer mills in Latin America which produce approximately 480,000 m3. An important feature of the industry is that about 50% of 122 all the mills are located in one country—Brazil. The average mill size, as in sawmilling, is generally small and most of the plants are equipped with very old machin• ery. The finished product is in most cases of a low quality and ungraded. Only a few mills are able to produce a product with the necessary characteristics to be accept• able in the export market. The condition of the panel board industry differs radically from that of plywood and veneer, as its produc• tion standards are more accordance with those existing in other countries. There are thirty board plants in Latin America with a production reaching 130,000 m3 in 1968. Most of these mills started by using sawmill and/or plywood mill residues for raw material, but today they have shifted towards direct use of roundwood. The finished product is of a superior quality, though somewhat expensive because of the high cost of glues which are normally imported. The twelve existing fibreboard plants, concentrated in only eight countries, produced 2 50,000 m3 in 1965. A few of these mills manufacture insulating and hard boards as well as the so-called "formica"(Plastic covered) type. Most of the industry is dependent upon wood for raw material 123 although a few plants operate on sugar cane bagasse, mainly in Cuba and Venezuela. Pulp and Paper Industry In the ninth FAO regional conference for Latin America held in December 1966 in Punta del Este, Uruguay, the pulp and paper industry of the region was outlined by the conference secretariat (FAO) as follows; The pulp industry (1965) had a capacity of some two million tons a year—550,000 tons of mechanical pulp from 165 plants, and 1,400,000 tons of semi-chemical and chemi• cal pulp from 70 plants. Five large chemical-pulp plants accounted for 30% of all pulp produced. The paper and paperboard industry had a capacity of 3,120,000 tons per annum—there were 13 newsprint plants with a capacity of 380,000 tons per annum and 282 paper and cardboard plants with a capacity of 2,750,000 tons per annum. These pulp and paper plants are often below the minimum economic size and the conditions under which they operate do not permit them to supply the market with good products at competitive prices. Although conditions are improving and there is a definite trend towards meeting 124 requirements from national production, there are obstacles to an expansion of the industry. These ares the limited size of many national markets? the difficulties of small or old low-quality plants in financing their own expansion and improvement? the high cost of obtaining pulp of national origin and the scarcity of long-fibre raw materials for pulp production? and, finally, the lack of economic infra• structure . The growing demand will probably favour the establishment of large units for the production of common types of pulp and paper which until recently were imported. Prospects for 1975 are that with the exception of certain types of pulp and paper such as newsprint, for which long- fibre woods are required^the expansion of the industry will make it possible to meet some 80% of the total demand. 4.3 Consumption of Wood and Wood-based Products in Latin America 4.3.1 Sawnwood As has already been mentioned in the introduction to Section IV, Latin America has about 25% of the world's forests. Despite this wealth and extraordinary number of sawmills (see Section 4.2.2), sawnwood consumption has 125 developed quite slowly, in fact the region only consumes 3 at present 13 million m , which represents just 4% of the world's sawnwood consumption. Most of the sawnwood consumed in Latin America is produced within the region. Only Peru and a few Caribbean nations still import wood from countries outside Latin America. Apparent consumption varies very much among countries. Brazil, the main producer and consumer, accounts for about 44% of total consumption, while Argentina, Mexico, Colombia, and Chile together consume only 35%. Of all sawnwood consumed in the region, 60% goes to the construc• tion industries and, therefore, small changes in building projects greatly influence the overall level of demand ^ (FAO, 1968g) . In Table 11 is shown the situation in 1956-59, and 1965, as well as estimates of the situation in 1975 and 1985, regarding consumption of sawnwood. By looking at Table 11 it can be deduced that during the 1965-1975 period consumption of sawnwood is expected to grow at an average rate of 12.2%, while during 1975-1985 it is estimated to grow at a somewhat slower rate of 10.6%. Nevertheless, it is estimated that by 1985 126 TABLE 11 LATIN AMERICA; APPARENT CONSUMPTION OP SAWNWOOD AND DEMAND FORECASTS (THOUSANDS OF m3 (s)) Year Coniferous Broadleaved Total % Of % of total total 1956/59 5,200 43 6, 900 57 12,100 1965 6,300 48 6,700 52 13,000 1975 9,400 45 11,500 55 20,900 1985 14,400 45 17,600 55 32,000 Source; FAO* 1968 g. consumption will be 32 million m3, 2.46 times greater than in 1965. Also, requirements are expected to remain more or less constant as regards the species utilized. Coniferous wood consumption will remain at about 45%, while broadleaved will be at 55%. Total demand especially that of broadleaved species is expected to be met mainly from within the region. As for coniferous species, however, regional production might be much lower than consumption. This is largely due to the fact that 97% of all Latin American forests are made up of broadleaved species and only 3% of coniferous species. (FAO, 1968g). 127 4.3.2 Wood-based Panel Products Consumption of panel products has been growing con• stantly during the last decade. From 1956/59 to 1965 it rose about 40%, mainly because of the growth experienced in particle and fibre board consumption of 600% and 270% respectively. The figures shown in Table 12 indicate that a rapid growth in consumption of panel products is to be expected right through to 1985. An exception will be the case of plywood 1/ where the growth rate is expected to decline over the 10 years following 1975. TABLE 12 LATIN AMERICAs APPARENT CONSUMPTION OF WOOD- BASED PANEL PRODUCTS AND DEMAND FORECASTS. (THOUSAND OF m3) Year Plywood and Particle- Fibre- Total Veneer Board Board 1956/59 540 20 SO 640 1965 550 123 215 888 1975 950 650 850 2,450 1985 1,400 1,700 1,900 5,000 Sources FAO, 1968 g. 1/For the purpose of this section of the study, "plywood" includes veneer. 128 By 1985 total consumption of panel products will rise to 5 million m3, more than double the expected demand in 1975. This will largely be due to the greater acceptability particle boards and fibreboards are expected to acquire. The pattern of consumption will, therefore, change greatly and dominancy will move from the plywood and veneer group to the fibre-board group. At present Brazil absorbs slightly more than half of the regional demand for panel products. Argentina, despite the fact of being the largest panel producing country in Latin America, has a total consumption lower than Brazil. 4.3.3 Pulp and Paper Practically all wood pulp in Latin America is employ• ed to make paper and paperboard, only a very small quantity is employed for making dissolving pulp (FAO, 1968). Of all the pulp and paper plants in the region, only one is designed to produce dissolving pulp from wood, therefore, past con• sumption and future demands will be analyzed from the point of view of the end products. In Table 13 is shown the development in the apparent consumption of paper and paperboard and demand forecasts. 129 TABLE 13 LATIN AMERICAs APPARENT CONSUMPTION OF PAPER AND PAPERBOARD, AND FUTURE PROSPECTS (THOUSANDS OF METRIC TONS) Year Newsprint Other Printing and Other Papers Total Writing Papers and Boards % 1955 483 27 373 21 912 52 1,768 1965 767 22 576 17 2,071 61 3,415 1975 1,514 22 1,125 16 4,490 62 6,929 1985 2,944 21 2,055 15 8,876 64 13,875 Sources FAO, 1968g. In 1935, Latin America consumed only 625,000 tons of paper and paperboard. Its per capita consumption in that same year was 5.5 Kg. Thirty years later, in 1965, apparent con• sumption had risen to 3,400 million tons. Despite popula• tion growth, per capita consumption had also grown rapidly, rising more than 2h times and reaching a new level of 14.3 Kg (FAO, 1968d). Latin America, however, is still far behind the con• sumption levels of more industrialized nations. Demand should, therefore, be expected to increase as economic develop• ment and new income levels are attained in the region. 130 According to Table 13; apparent consumption of pulp products will be about 7 million tons in 1975, a figure which is estimated to double by 1985 to slightly less than 14 million tons. Although demand for all three groups is forecast to increase, newsprint and other printing papers will become relatively less important. These trends are probably a reflection of the greater need that will exist for industrial papers compared to that of cultural papers. Consumption of paper and paperboard in Latin Ameriea has traditionally been concentrated in three countries. These are Argentina, Brazil, and Mexico which in 1965 ac• counted for 65% of total consumption. Based on the pro• jections by countries for 1975 and 1985 shown in Table 14, this pattern of consumption should be expected to suffer very little change in the future. Consumption of paper and paperboards will, therefore, continue to be concen• trated in a few countries and Brazil, Mexico, and Argentina will continue to absorb 65% of total consumption, while another 30% will be concentrated in Venezuela, Colombia, Cuba, Peru, Chile, and Ecuador. TABLE 14 LATIN AMERICA, DEMAND PROJECTIONS FOR PAPER AND PAPERBOARD BY COUNTRIES, 1975 and 1985 (thousand of metric tons) 19 7 5 19 8 5 Newsprint Printing Other paper Total Newsprint Printing Other paper Tot< & Writing and paper- & Writing and paper- Paper board Paper board Argentina 290 160 480 930 440 260 750 1,450 Bolivia 5 4 6 15 9 8 15 32 Brazil 359 293 1,246 1,898 800 400 2,800 4,000 Colombia 104 47 275 426 206 100 551 857 Costa Rica 10 3 29 42 18 6 54 78 Cuba a/ 98 61 293 452 169 111 536 816 Chile 81 68 117 266 145 122 225 492 Ecuador 23 7 110 140 47 17 155 219 BI Salvador 16 4 23 43 29 7 42 78 Guatemala 9 3 14 26 17 5 25 47 Haiti a/ 1 1 3 5 3 3 18 24 Honduras 3 2 13 18 5 3 24 32 The Guianas a/ 4 1 9 14 10 3 19 32 Mexico b/ 308 347 1,007 1, 662 678 781 2,326 3,785 Nicaragua 6 4 25 35 12 8 49 69 Panama a/ 6 4 30 40 11 8 70 89 Paraguay 2 1 4 7 4 1 7 12 Peru 71 42 151 264 139 83 306 528 Dominical Republic a/ 6 4 30 40 12 9 69 90 Uruguay 37 14 25 76 50 20 35 105 Venezuela 75 55 400 530 140 100 800 1,040 Other Caribbean Islands TOTAL 1,514 1,125 4,290 6,929 2,944 2,055 8,876 13,875 Sources Indicative World Plan. a/ Latin American Timber Trends and Prospects. b/ El Papel y la Celulosa en America Latinas Situaci6n Actual y Tendencias Futuras de su _o Demanda, Produccion e Intercambio; E/CN.12/570/Rev3? for 1975, and estimation of Pulp M and Paper Advisory Group for 1985. 132 4.4 Prospects fox Increasing Production and Meeting Demand in Latin America Having established the future expected levels of consumption for wood and wood-based products in Latin America, the possibility of meeting demand from within the region needs to be analyzed. If production grows as fast as consumption is expected to develop, imports will con• tinue to be made so long as any Latin American country decides to sell overseas instead of regionally. If this happens, Latin America as a whole will only be exporting through a given port what it eventually will have to import through another. If production does not keep pace with consumption, increased imports will be required. This being the case, net deficits will force consumers to look for supplies outside Latin America, if domestic consumption is not to be restricted and economic growth retarded. 4.4.1 Raw Material Requirements Production forecasts have been made for Latin America but the development of the forest industry is anything but clear, especially in regard to investments and inovation 133 of the newer plants. Very important shortcomings presently exist in the industry. Their solution does not depend on solving a few direct problems but is linked to more basic economic, social, and political deficiencies of the region. It is, therefore, difficult to say how much and where output will increase. Rising demand is an incentive but, tradi• tionally, the forest industry has encountered tremendous difficulties in keeping pace with it, and more than often it has fallen far behind as in the case of the pulp and paper sector. There are, however, good reasons to believe that certain sectors such as sawnwood and wood panel products will enjoy more rapid development. Latin America has al• ready developed some comparative advantages in these pro• ducts and their growth is somewhat assured by the existence of abundant raw material. This last factor is one of the main shortcomings of the pulp and paper industry where the shortage of long fibre sources has more than once restrict• ed its development (see Sections 4.1 and 4.2.2). To be in a position to supply its rising demand for long fibred wood, Latin America will have to increase its rate of afforestation with coniferous species. The suc• cess of past experiences has clearly indicated the potential of developing such a resource. While in the short-run most of the pulp and paper produced will be intended for regional consumption, wide spread plantations could in the long-run transform self sufficiency into a valuable export business. Considerable growth in forestry is currently being promoted, if not to fully meet demand in all sectors, at least in enough quantity to assure minimum consumption. The governments, and also the people, of Latin America now understand the consequences of a poor forestry develop• ment to their economies. If regional production is unable to keep pace with demand, the region will be forced to satisfy demand by means of imports, thus aggravating its present deficit of 200 million dollars per annum in forest products (not including manufacturers)(FAO, 1963a, 1967b, and 1968g). Given the present problems in the balance of payments additional imports are unlikely to be raised easily. But if this is not done and production is not increased, Latin America will be unable to implement fully its social and economic programs, especially as regards education and housing development. 135 Roundwood Despite the predictable increase in the utilization of wood residues and other sources of fibre such as sugar cane bagasse? future demand will make it necessary to have larger amounts of disposable wood to supply the industry^ $A0 (1968), estimated that by 1935 Latin America will have to produce 54 million m^ of coniferous wood and 58 million m3 of broadleaved wood (all roundwood), if it is to supply its own demand for industrial forest products. Generally speaking because of the poor present conditions of the in• dustry this objective will be difficult to fulfil, especi• ally when referring to the pulp and paper sector. In re• lation to sawnwood and wood panel products the present posi• tive balance of trade should be expected to continue and Latin America should not encounter much trouble in keeping pace with demand. It is believed that no large invest• ments would be required in order to increase production simply by 50%, simply by taking production up to capacity, This could be done by improving the management and utili• zation of existing plants and equipment (FAO, 1963a, 1968g) (also see Section 4.2.2). The total amount of roundwood required by Latin America in 1985 will be of the order of 112 million m3. 136 Of this amount, 58% will be used by the sawmilling industry, this is 64„8 million m3; the pulp and paper sector is to use 34% (38.5 million m3)? and only about 8% shall be re- quired by the wood panels sector (9 million m ). Plantations Reforestation now covers about 1.5 million hectares in Latin America, including one million hectares of broad• leaved species and one-half million hectares of conifers (see Section 4.1.2). Given the underdeveloped condition of the region, these plantations constitute a very significant achievement, but they by no means have exhausted the enormous possibilities offered by extensive areas all over Central and South America. On the other hand it has also been recognized that the present reforestation programs are not related to consumption trends in the region. Therefore, there exists an urgent need for an updating of the plantation rates so as to avoid, wherever possible, future deficits in regional wood production. At the Tenth Session of the Latin American Forestry Commission of the FAO (1967), it was estimated that to reach the already mentioned production targets for 1985, an 137 annual plantation program of 300,000 hectares had to be implemented. This annual rate was then considered the minimum advisable figure, given the rising pressure of demand for wood products. The Commission noted the difficulties involved in obtaining the funds required for a program of this magni• tude (U.S. $58-60 million per year) on favourable terms, but it also emphasized the importance to Latin America of supplying its own needs for raw material. Satisfaction was expressed regarding the existence of certain favour• able prospects for international finance institutions to supply credit, not only for the establishment of forest plantations, but also for their subsequent utilization. These prospects, however, were not unlimited and, there• fore, quantitative evaluations of the production and in• direct benefits of the reforestation programs had to be made. This was necessary in order to assess the results which could be expected from the investments and to decide priorities between different projects. 4.4.2 Requirements and Potential Development of the Forest Industries to 1975. In 1966, the Regional Office for Latin America of 138 the FAO evaluated the forest industries of the region and their development. At the Ninth FAO Regional Conference for Latin America held in Punta del Este, Uruguay in December 1966 the following evaluation was presented. In the opinion of the Conference Secretariat, the capacity of the forest industries was insufficient to meet demand and the region as a whole was a net importer of wood products. Provided that the current trend in regional production continued, it was believed that by 1975 a sub• stantial proportion of the demand for these products could be met from within the area itself. Table 15 shows an estimate of the expected situation in 1975 regarding sawnwood, plywood, and veneer, particle board, and fibre board. TABLE 15 REGIONAL PRODUCTION OF SAWNWOOD, PLYWOOD AND VENEER, PARTICLE BOARD, AND FIBRE BOARD IN 1975 Product Possible Production thousands of m3 Sawnwood 2 5,000 Plywood and Veneer 900 Particle board 500 Fibre board 450 Sources FAO, 1967 a. 139 For pulp, paper, and paperboard, considerable growth was also expected, however, not as much as in the sawnwood and wood panel sectors. Provided that an extra• ordinary effort was made, Latin America, it was believed, could develop its pulp and paper industry by 1975, to the point where most of the demand for printing papers and pulp could be met. Nevertheless, there would still be a short• age in the newsprint sector as well as in total pulp pro• duction. Table 16 shows the expected situation of the pulp and paper industry in 1975. TABLE 16 REGIONAL PRODUCTION OF PULP, PAPER, AND PAPER- BOARD IN 1975 Product Possible Production thousands of tons Pulp 4,230 Paper and Paperboard 5,650 Sources FAO, 1967 a. To be able to reach the level of production shown in Tables 15 and 16, Latin America must follow a minimum de• velopment plan which would stimulate output. This plan, among other things, includes the need to incorporate forestry 140 in regional economic projects and to establish more dynamic forest policies. FAO's (1967a) recommendations for the proposed program may be summarized as follows; Forestry a) Carry out pre-investment studies on 50 million hectares of unworked forest over the next 10 years. b) Bring 20 million hectares of accessible unworked forest into well-managed production. c) Increase afforestation to 300,000 hectares per annum, particularly with quick-growing, long-fibred species, as rapidly as possible. d) Protect 20 million hectares of accessible forest areas threatened with destruction, over the next 10 years. e) Introduce proper management over the next 10 years to 50 million hectares of the forest now being utilized, ex• tending this to cover all utilized forests by 1985. f) Extend watershed management, protective afforesta• tion and torrent control over 5,000,000 hectares during the next 10 years. 141 Forest Industry a) Sawmilling: increase annual production by 12 3 million m of sawnwood by 1975. b) Panel industrys increase veneer and plywood 3 production by 450,000 m by 1975. c) Pulp and paper industrys increase annual pro• duction by 1,720,000 tons p.a. and paper and cardboard production in 2,120,000 tons p.a. by 1975. Forest Services a) Strengthen the forest services to enable them to implement more dynamic forest policies. Institutions a) The educational and training effort needed over the next 10 years should be gauged from additional manpower requirements of approximately 2,500-3,000 forest engineers, 5,000-6,000 technicians, 20,000-30,000 forest rangers, 1,000-1,500 forest industry specialists, 1,000-3,000 forest industry technicials, and 6,000-7,000 forest industry foremen. Investments a) All these actions and goals to accelerate for• estry development involve, at the regional level, a minimum 142 investment during the next 10 years of not less than U.S. $1,500 million, bringing total investment requirements in the forest industries sector to some U.S. $2,000 million. Implementing such a complex and ambitious program is anything but simple. At the time this program was elaborated it was commonly believed that an extraordinary effort had to be made both by the private industry and govern• ment if anything was to be achieved. Success depended upon intimately relating work among all interested institutions and on serious commitments to important long-range projects. An evaluation made by FAO of the state of forestry at the end of 1967, indicated that though several of the basic objectives had possibilities of being reached by 1975, a few would tend to fall far behind what was originally in• tended. Among the latter were the development of the forest services, and the number of pre-investment and industrial feasibility studies. Given this somewhat unstable and ir• regular development of forestry, serious doubts have now risen as to whether the region will be able to reach its proposed production targets by 1975. 143 4.4.3. Requirements for a Continued Development of the Forest Industries to 1985. In Section 4.4.2 the intended development of the for• est industries to 1975 was analyzed. To be able to prolong these growth trends to 1985, Latin America would be required to implement a much larger program. Based on the extent of the forest resources of Latin America the region ought to be self sufficient in wood pro• ducts and in the very long-run even a net exporter. Un• fortunately, as it has been indicated in previous sections, the condition of the forest industries is not good. Whenever large scale expansion has been intended serious trouble has arisen, and because of this, the movement towards overall self sufficiency has been retarded. One of the impediments to a better utilization of resources is unquestionably the lack of suitable infra• structure and sources of capital. An important example of this shown by FAO (1968g), is the delay in utilizing certain coniferous stands in spite of the shortage of this type of wood in the region? specifically, the forests in Durango and Chihuahua districts in Mexico and in Olancho in Honduras, as well as the plantations of Radiata pine in the Constitucion area in Chile. 144 It is very difficult to base the entire burden of infrastruct- ural works (roads, ports, power, etc.) upon an individual project. Not even in the case of large pulp and paper plants can this be done without a considerable rise in costs. As has often been pointed out, governments should help solve these problems. Because the solution could easily be found by building large vertically, as well as horizontally, in• tegrated industrial complexes where the heavy expenses of infrastructural work could be distributed among all projects (United Nations and FAO, 1963). To satisfy the additional demand for industrial wood and wood-based products from regional production, U.S.$4,390 million would be required by 1985 (FAO, 1968). This amount covers only the need for installation investments and does not include infrastructure. Subdividing the total figure into different sectors FAO (1968c) presented the following distr ibution j Sawmilling Approximately 400 million dollars. The amount includes a small investment of about 20 million dollars to increase the present production by 6 million m3 within the existing enter• prises and 380 million dollars for the construction of new sawmills. 145 Wood-based panels About 390 million dollars may be required, of which 45 million would go to the plywood and veneer industry (it is estimated that production could be raised to 200,000 m3 without making any new investments), 170 million to the fibre- board industry and 175 million to the particle board industry. Pulp and paper Assuming that in the future the existing capacity is fully used, and without taking into account the replacement of a large amount of equipment which will undoubtedly be obsolete by 1985, it is estimated that approximately 3,6000 million dollars will be required for the establishment of new plants. The investment of 4.39 billion dollars in the forest industries of Latin America is a very difficult thing to achieve, even for the region as a whole. This is especially true when other economic activities are in need of an equal or greater amount of money. Under conditions of high capital costs, entrepreneurs will be forced to examine carefully every investment possibility. If high operating costs persist in the wood products industry there is a strong possibility that forestry might well be left outside the flow of capital. 146 Failure to invest according to the requirements indicated above does not only mean that the present deficit in pro• duction will persist, but that once again imports might have to be raised. 4.5 Balance of Trade 4.5.1 Exports and Imports of Industrial Forest Products Up to the beginning of the 1960's, international trade was a minor factor in the timber economy of Latin America. In 1958, the region exported less than 2% of the volume removed from its forests and imported only about 3% of the volume it consumed (United Nations and FAO, 1963). This picture has improved somewhat during the last decade and forest products trade has risen considerably. However, because of the expansion in trade experienced by other industries, wood and wood-based products have not improved their relative position a great deal in total Latin American trade. Traditionally, there has existed little trade in fuel- wood despite the fact that it makes up for a large proportion of total wood consumption. But there has been, and still is, 147 a large amount of trade in products such as sawnwood and pulp and paper products. Some countries are practically self- sufficient in wood products, but others like Argentina, Cuba, and other Caribbean Islands depend heavily on imports. An anomalous situation arises in Latin America in that this region which is so wealthy in forest resources, is a net importer of forest products. While a positive trade balance exists in sawnwood and wood-based panel products, a negative balance occurs in pulp and paper products. Sawnwood In Table 17 the export and import situation for sawn• wood in 1965 is shown. During this year, Latin American countries exported 1,869 million m3 of sawnwood while they imported 1,518 million m3, a positive balance of 351,000 m3. Brazil dominates the trade in sawnwood, exporting 69% of the total volume of Latin America. Other important exporters are Honduras and Chile which export 13% and 5% of the total volume respectively. In the import area, Argentina accounts for the bulk of the purchases with 53% of all regional imports. Cuba follows in order of importance by importing 14% and then come El Salvador, Peru, and Uruguay with 5% each. Coniferous TABLE 17 LATIN AMERICAs EXPORTS AND IMPORTS OF SAWNWOOD BY MAJOR COUNTRIES IN 1965 SAWNWOOD (1,000 m3) Country EXPORTS IMPORTS Balance Conifers Broad- Sub % Conifers Broad- Sub % leaved Total leaved Total Argentina 1 1 725 74 799 53 - 798 Bolivia Brazil 1,225 65 1,290 69 +1,290 Chile 78 24 102 5 + 102 Colombia 44 44 2 + 44 Cuba 218 218 14 - 218 Ecuador 13 13 1 + 13 El Salvador 78 78 5 - 78 Honduras 241 4 245 13 + 245 Mexico 15 4 19 1 11 11 1 + 8 Nicaragua 21 18 39 2 + 39 Paraguay 45 45 2 + 45 Peru 7 7 81 81 5 - 74 Uruguay 76 5 81 5 - 81 Others 14 50 64 5 195 55 250 17 — 186 Latin America 1, 594 275 1,869 100 1,384 134 1,518 100 + 351 Sources FAO (1968 a) 149 savmwood contributes heavily in Latin America's commerce. During 1965 this type of wood accounted for 88% of all ex• ports and imports. The major producing countries in order of importance are, Brazil, Honduras, Chile, Nicaragua, and Mexico. Wood-based Panel Products In 1965, Latin America's exports of Plywood and Veneer, Particle board and Fibre board amounted to 94 thousand mJ while imports were only 59.7 thousand m3. The surplus in trade for the region was, therefore, of the order of 34.3 3 thousand m . Brazil appears again as the largest exporter of wood-based panel products. It exports 41% of all the volume, followed by Surinam which sells 34% and Costa Rica 11%. Imports are made principally by Cuba (26%), Peru (10%), and El Salvador (6%). More than 60% of all trade in wood-based panel products in Latin America consists of plywood and veneer. Fibre board accounts for 23% and particle board for only 16%. According to the figures shown in Table 18, though Cuba is the major importer of panel products, it does not import particle or fibre boards. El Salvador, another important buyer of panels, presents a similar pattern, and Peru,while TABLE 18 LATIN AMERICA; EXPORTS AND IMPORTS OF WOOD-BASED PANEL PRODUCTS BY MAJOR COUNTRIES IN 1965 WOOD-BASED PANEL PRO DUCTS (1000 m3) EXPoRTS Country IMPORTS Ra1^T Plywood Particle Fibre Sub % Plywood Particle Fibre Sub % & Veneer Board Board Total & Veneer Board Board Total Brazil 16.6 0.1 22.0 38.7 41 + 38.7 Chile 0.4 1.5 1.1 3.0 3 0.4 0.4 1 + 2.6 Colombia 0.3 0.3 + 0.3 Costa Rica 10.4 10.4 11 0.4 0.1 0.5 1 + 9.9 Cuba 15.6 15.6 26 - 15.6 Ecuador 1.9 1.9 2 0.3 0.3 1 + 1.6 El Salvador 0.7 3.8 3.8 6 - 3.8 Guatemala 0.7 1 0.6 0.6 1 + 0.1 Honduras 0.4 0.1 0.5 1 0.7 0.3 1.0 2 - 0.5 Mexico 3.4 1.6 5.0 5 0.7 0.5 1,3 2.5 4 + 2.5 Nicaragua 1.4 1.4 1 0.2 0.1 0.3 1 + 1.1 Peru 3.4 2.8 6.2 10 - 6.2 Panama 1.4 1.4 2 1.4 Surniam 13.3 18.3 31.6 34 0.3 0.3 1 +- 31.3 Uruguay 2.6 2 .6 4 - 2.6 Venezuela 0.7 0.7 1 - 0.7 Others 0.5 0.5 1 16.2 3.7 3.6 23.5 39 - 23.0 Latin America 49.3 19.9 24.8 94.0 100 44.9 4.5 10.3 59.7 100 + 34.3 Sources FAO (1968a) UI o 151 while importing plywood, veneer and fibre board, does not im• port any particle board. Pulp and Paper Products Despite the enormous efforts to increase pulp and paper production, Latin America has not been able to de• crease its net imports of these products. However, recent years have witnessed considerable progress in the export field. In Table 19 is shown the trade situation as regards pulp and paper products in 1965. In this year 130,600 tons of pulp, paper and paper board were exported by Latin American countries while imports amounted to 1,568,700 tons. The net deficit in the region was in consequence 1,438,100 tons. The main exporter of pulp and paper products in Latin America is Chile which sells about 61% of the total. Exports from Brazil are also quite important, amounting to 35% of all regional exports. Apart from these two countries, only Colombia and Mexico contribute significantly to the exports of the region. Imports, although concentrated in Argentina (27%), Mexico (13%) and Venezuela (12%) show a much more even TABLE 19 LATIN AMERICAs EXPORTS AND IMPORTS OF PULP, PAPER AND PAPER-BOARDS IN 1965 PULP, PAPER AND PAPE R - BOARDS (1,000 m.t.) Country Balance EXPORTS IMPORTS Pulp Paper & Sub % Pulp Paper & Sub Paper Bds. Total Paper Bds. Total Argentina 0.2 0.2 184.0 236.4 420.4 27 - 420.2 Brazil 46.0 0.2 46.2 35 17.7 59.7 77.4 5 - 31.2 Chile 18.2 61.0 79.2 61 5.2 9.5 14.7 1 + 64.5 Colombia 3.1 3.1 2 49.6 53.7 103.3 6 - 100.2 Costa Rica 0.1 0.1 48.2 48.2 3 - 48.1 Cuba 63.9 45.3 109.1 7 - 109.2 Ecuador 32.3 32 .3 2 - 32.3 El Salvador 0.1 0.1 0.1 25.0 25.1 2 - 25.0 Honduras 40.7 40.7 2 - 40.7 Jamaica 29.3 29.3 2 - 29.3 Mexico 1,1 1.1 1 71.1 129.0 200.1 13 - 199.0 Panama 0.1 0.1 0.6 61.8 62 .4 4 - 62.3 Peru 18.4 41.3 59.7 4 - 59.7 Uruguay 18.5 26.1 44.6 3 - 44.6 Venezuela 104.8 91.0 195.8 12 - 195.8 Others 0.5 0.5 6.2 99.3 105.5 7 - 105.0 Latin America 64.2 66.4 130.6 100 540.1 L028.6 1, 568.7 100 -L438.1 Sources FAO (1968a). 153 distribution than exports. All countries of Latin America do import varying quantities of pulp and/or paper products. Chile the only net exporter sold in the region a net pro• duction of 64,500 tons in 1965. Brazil, though it exports 46,200 tons, is presently a net importer of pulp and paper. 4.5.2. Value and Direction of Trade in Industrial Forest Products The value of Latin America's trade in forest products is very small compared with the region's total trade. In 1965, exports 1/ of all forest products amounted to 130 million dollars, and imports to 342 million dollars, i.e. 1.2% and 3.5%, respectively, of total trade (FAO, 1968). Sawnwood Table 20 indicates that the total value of Latin American exports of sawnwood is 82.9 million dollars if we include in this figure the value of intraregional trade. The total imports of sawnwood reach 74.3 million dollars. Of this amount 20.1 million dollars worth of sawnwood are imported from outside the regions 60% comes from North 1/ In this section, exports are given in f.o.b. values and imports in c.i.f. values, unless otherwise stated. TABLE 20 LATIN AMERICA? TOTAL TRADE IN SAWNWOOD (MILLIONS OF DOLLARS) 1965 EXPORTS I M PORTS BALANCE Conifers Broad- Total Conifers Broad Total leaved leaved Intraregional 37.8 6.6 44.4 47.4 6.8 54.2 - 9.8 North America 1.6 7.2 8.8 11.3 0.8 12 .1 - 3.3 Rest of the World 25.5 4.2 29.7 7.8 0.2 8.0 + 21.7 Total 64.9 18.0 82.9 66.5 7.8 74.3 + 8.6 Sources FAO (1968) TABLE 21 LATIN AMERICAs TOTAL GRADE \IN WOOD--BASED PANEL PRODUCTS (MILLIONS OF DOLLARS) 1965 EXPO R T S I M P 0 R T S BALANCE Plywood Particle Fibre Total Plywood Particle Fibre Total Board Board Board Board Intraregional 3 .1 0.4 0.3 3.8 3 .2 0.4 0.3 3.9 - 0 .1 North America 3 .0 1.2 4.2 1 .0 0.1 0.6 1.7 + 2 .5 Rest of the World 2 .1 0.8 0.6 3.5 3 .4 0.4 0.4 4.2 - 0 .7 Total 8 .2 1.2 2.1 11.5 7 .6 0.9 1.3 9.8 + 1 .7 Sources FAO (1968g) 155 America and 40% from the rest of the world but mainly from Europe. These imports are made principally by Peru, Mexico, Cuba, and other Caribbean Islands. Of the 74.3 million dollars of extraregional imports, 66.5 million dollars (90%) correspond to coniferous sawnwood. This type of wood is imported, despite the fact the region exports 27.1 million dollars worth of the same. Wood-based Panel Products In Table 21 is shown the value of total exports of panel products made by Latin American countries. This value reached to 11.5 million dollars 2/ in 1965 and compares favourable with the 9.8 million dollars imported during the same year (the figure includes intraregional trade) . Of all panel exports, roughly 33% are in intraregional trade, 36% goes to North America and 30% to the rest of the world. Plywood 3/ sales reaching over 70% of all panel pro• ducts dominate the market? fibre board sales come second and particle board third. A similar trend occurs in panel imports where plywood purchases are the most common. Panel products, as opposed to sawnwood, are not primarily imported 2/ Dollars should be understood as being U.S. currency, unless otherwise stated. 3/ In this section unless otherwise stated plywood is to be understood as being plywood and veneer. 156 from North America but from Europe and other countries of the world. Of all extraregional imports, only 29% come from the United States and Canada. Extraregionally, the major trade flows are established by Brazil's sales of plywood and fibre board to the United States and Europe (4 million dollars) and Surinam's consign• ments of particle board to Europe (1.4 million dollars). All other exports are almost all made up of plywood sold by Costa Rica, Peru, and Mexico to the United States. Principal imports of panel products come from Europe and consist largely of plywood for the Caribbean countries and Peru. Mexico imports these same products from its neigh• bor, the United States (FAO, 1968). Intraregional trade in plywood, mainly consists of consignments from Surinam to the islands of the Caribbean and Central American countries. Pulp and Paper In 1965, pulp imports amounted to 65.4 million dol• lars. Scandinavia is still the region's main supplier, al• though it has lost a certain amount of ground to North America and to increased intrexegional exports from Chile and Brazil. Imports are mainly of long-fibre chemical pulp 157 and principal importers in order of importance ares Argentina, Venezuela, Cuba, Mexico, and Colombia (FAO, 1968). Imports of paper and paperboard rose to 191 million dollars in 1965. North America continues to be the region's main supplier, and is closely followed by Scandinavia. During the recent years, imports from the latter have de• clined partly due to increased intraregional trade and partly to the type of paper the region is importing. Most paper imports in Latin America are of newsprint and of kraft liner and corrugated board used to make banana boxes. Main importers ares Argentina, Mexico, Venezuela, Ecuador and Brazil. Of the 256.5 million dollars worth of pulp and paper products Latin American countries imported in 1965 (see Table 22), only 8% (21.3 million dollars) was provided by regional producers. North America provided 52% (133.8 million dollars), and Scandinavia 40% (101.4 million dollars) * Exports of paper and paperboard are made up almost entirely of newsprint exported from Chile to the rest of the Latin American countries. 4.5.3 Summary of Net Imports and Future Prospects In 1965, with a consumption level of 13 million m3 of TABLE 22 LATIN AMERICA* TOTAL TRADE IN PULP AND PAPER (MILLIONS OF DOLLARS) 1965 EXPORTS IMPORTS BALANCE Pulp Paper Total Pulp Paper Total Intraregional 8.9 9.8 18.7 10.5 10.8 21.3 2 .6 North America - 0.2 0.2 25.3 108.5 133.8 - 133 .6 Rest of the World 0.1 — 0.1 29.6 71.8 101.4 - 101 .3 Total 9.0 10.0 19.0 65.4 191.1 256.5 - 237 .5 Sources FAO (1968g) 159 sawnwood, Latin America was able to export only 351,000 m3 net. This happened largely because considerable imports 3 were made during the same year (1.5 million m ). TABLE 23 LATIN AMERICA s SUMMARY OF SAWNWOOD IMPORTS (thousands of mJ) Year Production Consumption, Net Imports 1965 13,351 13,000 351 1975 25,000 20,900 - 5,000 1985 32,000 Sources Tables 11, 15, and 17. In 1975, provided the development program mentioned in Section 4.4.2 is carried out, the region will be able to produce 25 million m3 of sawnwood. Comparing this output to the expected level of consumption for the same year, gives a possible net export for Latin America of 5 million m of sawnwood. In 1985, consumption is expected to rise to 32 million m3, this means an approximate growth of 53% from the level it had in 1975. Production figures are not available for 1985, however, the countries of Latin America are currently trying to implement programs which will at least permit them 160 to expand at a similar rate of growth. Net imports for 1985 will, therefore, vary according to how effective these pro• grams are (see Section 4.4.3) . TABLE 24 LATIN AMERICA. SUMMARY OF WOOD-BASED PANEL PRODUCTS IMPORTS. (THOUSANDS OF m3) Year Production Consumption Net Imports Plywood and Veneer 1965 554 550 - 4 1975 900 950 50 1985 1,400 Particle Board 1965 138 123 - 15 1975 500 650 150 1985 1,700 Fibre Board 1965 230 215 - 15 1975 450 850 400 1985 1,900 Sources Tables 12, 15, and 18. Up to 1965, the three types of panel products had a positive balance of trade in Latin America. In 1975, 161 this positive balance could turn into a negative one if pro• duction is not able to keep pace with rising demand. The accuracy of this forecast for 1975 will depend solely on how expansion in the industry is carried on. A similar situation should be expected to occur with production in 1985 (for more information on production prospects see Sections 4.4.2 and 4.4.3). Between 1975 and 1985, consumption is expected to rise extremely fast in particle board and fibre board, 161% and 123% respectively. In plywood and veneer, growth will only be about 47%. In 1975 plywood and veneer will still remain as the leading panel products, but in 1985, fibre board will be the product most in demand. In Table 25 is shown the situation in 1965 together with estimates to 1975 and 1985 as regards production, con• sumption and net imports of pulp and paper in Latin America. Consumption of pulp in 1965 reached to 1,718 thousand tons, while paper and paperboards was 3,415 thousand tons. In 1965 imports of the order of 28% were required for both pulp and paper products. In 1975, although demand is expected to rise to 4,422 thousand tons in pulp and to 6,929 thousand tons in paper and paperboards, external dependence 162 TABLE 25 LATIN AMERICAS SUMMARY OF PULP AND PAPER IMPORTS (THOUSANDS OF TONS) Year Production Consumption Net Imports Pulp 1965 1,242 1,718 476 1975 4,230 4,422 192 1985 Paper and Paperboard 1965 2,453 3,415 962 1975 5,650 6,929 1,279 1985 13,875 Sources Tables 13, 16, and 19. In 1965 imports of the order of 28% were required for both pulp and paper products. In 1975, although demand is expected to rise to 4,422 thousand tons in pulp and to 6,929 thousand tons in paper and paperboards, external dependence will diminish in both products to 4% and 18% respectively. By 1985, demand in Latin America has been put at almost 13.9 million tons. Whether the region will continue to depend heavily on imports is still uncertain. In order to be self- sufficient Latin America would not only require a boost in production but it would also need to increase by a similar 163 order of magnitude its sources of long-fibre raw material. For Latin America this can only mean increased coniferous afforestation. Given the present difficulties for implementing such a program (outlined in Sections 4.4.2 and 4.4.3) many consider self-sufficiency as improbable , at least in the short run. It should be noted, however, that in spite of the probability that the region could produce at the level of its requirements, because of potential overseas exports principally from Chile and Brazil, other Latin American nations could in turn be forced to continue and even raise their purchases outside the region. Among all these trends and possibilities, regional economic integration adds one more variable to the uncertainty surrounding future imports. 164 SECTION V CHILE - A COMPETITOR FOR CANADIAN FOREST PRODUCTS IN LATIN AMERICA Chile should be considered as a sizeable competitor to any country interested in selling forest products in Latin America. During the last decade this nation, although not one of the biggest in South America, has swiftly been increas• ing its output of these products, and exports to neighboring countries have, therefore, grown accordingly. In 1960, exports of sawnwood reached 13.5 million board feet. Five years later, in 1965, this had risen by 220% to 43.2 million board feet (102 thousand m3) and by 1970 is expected to reach 50 million board feet (118 thousand mJ). Pulp and paper exports have also grown at a fast rate. From 42.6 thousand tons in 1960 they rose to 79.6 thousand tons in 1965, an increase of more than 86%. By 1970 growth trends indicate that pulp and paper exports will reach 562 thousand tons. These figures are even more meaningful if it is taken into account that in 1959, the country was still a net importer of these products with total purchases in the order of 37 thousand tons. The principal characteristic which makes Chilean exports so important in Latin America's trade is their relevance to 165 total regional deficits„ Most Latin American countries do carry out a certain amount of trade in forest products but only Chile has a favourable balance of trade with respect to these products. Moreover, it is also the sole country which is a net exporter of pulp and paper, commodities which at present are in great demand and contribute most to the pro• blems of Latin America's balance of payments. Pulp and paper imports yearly absorb a major portion of Latin America's foreign exchange. In value they repre• sent the largest purchases of forest products imported from within and outside the area. The only Latin American nation in a position to alter these imports significantly is Chile, its softwood plantations produce a first-class pulping fibre in quantities large enough to provide for the raw materials of an expanding industry. The recent upward trend in Chilean reforestation plus the determination of its people to execute long term industrial development in forestry, indicate that this nation will play an expanding role in Latin America's trade of wood-based products. What Chile does or does not sell in the region will seriously alter the total net deficit of these products. For example, the net 192 thousand tons of pulp and 1,279 thousand tons of paper per annum that Latin America will demand in 1975 have naturally been calculated 166 assuming that every producing country in the region exports its surplus to other Latin American countries. Therefore, if in practice some of this volume is sold instead in other regions of the world, like Europe and/or Asia, it should be added to the net deficits of Latin America. However, regional economic integration, mainly through LAFTA 1/ and CACOMA 2/ should counteract this last possibility as it will facilitate trade within the area by giving prefer• ential tariff treatment to associated countries. Because of the reasons explained above, it was decided that it would be most important to study the Chilean poten• tial for producing. Canada's trade possibilities, and for practical purposes that of any major country interested in exporting wood-based products to Latin America, are heavily dependent on what this southern republic does. In order to determine as precisely as possible Chile's future exports of forest products, the socio-economic condi• tions of the country were analyzed. Special reference was made to its forest resources and current programs of 1/ Latin American Free Trade Association. 2/ Central American Common Market. 167 reforestation, as most of the development of the industry is to be based on the long fibre obtained from these plantations. Estimates of future production were then obtained and after adjusting for internal demand the exportable surplus was de• termined. Within the period 1985-1989, Chile should be export• ing about 836 thousand tons of chemical pulp, 280 thousand tons of newsprint, and 130 million board feet (307 thousand m3) of sawnwood, all this radiata pine. Because of a number of uncertainties and deficiencies in the information, the export• able surplus for native related species was not established. 5.1 Physical and Socio-Economic Characteristics of Chile 5.1.1 Geography and Climate Located on the extreme southwest side of South America, Chile stretches some 2,680 miles (4.288 Km) along the Pacific coast, with the towering Andes providing the country's eastern frontier. The total area of the country is 786,396 sq. mi. (2.04 million Km2), of which 286,396 sq. mi. (0.73 million Km2) are situated in continental South America and 500,000 sq. mi. (1.28 million Km2) in the Chilean Antartic. At no point wider than 250 miles (400 Km) and with an average width of barely more than 100 miles, the area of Chile 168 still exceeds that of Texas. There is a tremendous range of geography and climate in this long strip of land. Some of the world's highest mountain peaks and greatest ocean depths lie near Chile's borders, which illustrates the great geo• logic instability of this area, proved by a historical sequ• ence of severe and tragic earthquakes. Twenty-seven per cent of continental Chile (81,327 sq. mi.) is said to be forest land, because of its existing forests or because it has forest potential due to soil, topo• graphic or climatic conditions (Haig, 1946). Some of the islands in the Pacific also belong to Chiles the Juan Fernandez Islands, scene of the shipwreck of Alexander Selkirk, the model for Defoe's Robinson Crusoe? and Easter Island, the site of a mysterious ancient Polynesian culture. From a geographic and economic point of view Chile may be divided into three main zones,—these are the northern, middle, and southern zones. The point of transition between northern and middle Chile is usually set at 30° S. (La Serena), but some geographers move this boundary to the Copiapo River. The 400 mile (640 Km) stretch which lies between the Copiapo River and Loa River embraces the great Atacama Desert, one of the driest regions on the globe. Although cloud banks 169 MAP 7 SOUTH AMERICA (CHILE ) SOUTH AMERICA AftCHIPIEUGO DE COLON JU _ :ui«ris«i If, 170 form almost every day along the coast, and there are occasion• al summer showers in the Andes Mountains, rain is virtually unknown in the pampa, where the coefficient of evaporation is by far greater than in the Sahara desert. This is the region of the nitrate fields and copper mines. In the ex• treme north and from Copiapo south there are several oasis and river valleys which sustain some tropical agriculture. Middle Chile extends about 900 miles (1.440 Km), from latitudes 30° to 40° S., including the great island of Chiloe in the South. This is the area where most of the pop• ulation is concentrated (85% of the total inhabitants). About two-thirds of this region has a Mediterranean climate, with mild wet winters and long dry summers. This is the zone where most of the exotic forest plantations have been developed. Rainfall, which is less than 10 inches (254m.m.)annually at La Serena, gradually increases toward the south. It is 13.8 inches (350 m.m.) at Santiago and varies between 23.6 inches and 31.5 inches (600 m.m.-800 m.m.) from the Basin of Rancagua to the Maule River, south of the City of Concepcion rainfall ranges between 50 and 80 inches (1,270-2,032 m.m.) . From the Maule River down to the Bio-Bio there exists a transitional zone in which the longitudinal MAP 8 CHILE 'Arica BOLIVIA 20 z < UJ u o CJ Ll (J < CL Antofagasta 25' Uj o —' o u D •G6piapq ARGENTINE ARGENT iN; Monti • >La Serer 173 valley has the semiarid characteristics of the central valley, but the western flanks of the Coastal Mountains and the Andes receive substantial rainfall. South middle Chile, from Bio-Bio to Puerto Montt, has a short but well-marked dry season favourable to wheat, potatoes, oats, fruits, and pastures. Forests originally covered this region and still occupy close to half of the area. The stormy winters and cool summers resemble the Pacific Northwest of the United States. South of the Tolten River are a number of lakes dominated by snow-capped volcanoes and the scenic beauty of this region has always attracted many tourists. The Southern zone of the country is a territory of mountains, fiords, high winds, and heavy snow and rain. Along the coast there are hundreds of islands and waterways. On the Atlantic side, near the eastern end of the Strait of Magellan, there is a distinct climatic zone which is com• paratively more cold, dry, and windy. This region is notable for its sheep farming. Petroleum has been discovered in this area, principally on the island of Tierra del Fuego where at present there is production of crude oil. In physiography and climate, Chile resembles the west 174 coast of North America from Alaska right down to Southern California. 5.1.2 Population Chile was first settled by Spaniards and most of its people are of Spanish descent. Few, if any, South American countries have a more homogeneous population, perhaps due to the geographical and cultural isolation which Chile enjoyed in its early history. However, a small but influen• tial number of Irish and English immigrants came to Chile in colonial times and played important roles in Chilean history. An important stream of German immigration started about 1850, and for 90 years these people came to Chile. Today there is a surprisingly strong German influence in the Valdivia-Llanquihue-Chiloe area in the south. Other signi• ficant immigrant groups are the French, Italian, Swiss, Yugoslav, and Arab. There are probably fewer than 130,000 pure blooded Indians, mostly the legendarily fierce Araucanians now living quietly around the Temuco area in the south. The nation ranks sixth among Latin American countries in population and fifth among the South American countries. The population was estimated at 9,318,000 in mid-1967 and its 175 average annual rate of growth of 2.4% approximates that of Latin America as a whole, which, at 2.9%, is one of the highest in the world. A surprisingly high degree of urbanization (about two- thirds) exists in the country, and more than one-third of this urban population is concentrated in a single province which includes the capital. Greater Santiago, with a population estimated almost at 3,000,000, accounts for a disproportion• ately large share of the nation's total purchasing power. TABLE 26 CHILE; POPULATION ESTIMATES FOR THE PERIOD 1952-70 Year Estimated Figures in Thousands (mid-year estimations) 1952 6,295 1953 6,437 1954 6, 597 1955 6,761 1956 6,944 1957 7,121 1958 7,298 1959 7,465 1960 7,689 1961 7,827 1962 8,001 1963 8,217 1964 8,391 1965 8,584 1966 8, 780 1967 8,935 1968 1969 1970 10,260* * Corporacibn de Fomento de la Producci6n, 1965. Source: United Nations, 1963 and 1968. Demographic Yearbooks for the years 1962 and 1967. 176 As in most Latin American countries Chile has a young population? more than two-thirds of the Chileans are under 40 and one-half under 21. Despite its recent rate of growth the population is considered one of the most educated in Latin America, with 80% of those above 14 years old being literate. Population project ons point to a population of 10,260,000 by 1970 of which 3,891,000 are expected to be living in the Province of Santiago. 5.1.3 Principal Features of the Economy Historically, Chile's internal as well as external economy has been heavily dependent on minerals (nitrates and copper). Since the late 1930's, Chile has made attempts to diversify its economy and expand its infrastructure, but it continues to be faced with two basic and recurring pro• blems—the stagnation of agriculture and a history of in• flation spanning almost 100 years. Despite domestic economic development, the nation still is heavily dependent on the mining sector for the bulk of its foreign exchange? with minerals and mineral products accounting for about 90% of foreign exchange receipts from exports. With copper being the principal export the balance 177 of payments is highly sensitive to changes in its price. After many years of trade deficits extremely favourable prices in 1965-66 areated a considerable surplus in the balance of payments. Today, the mining sector1s share of GNP has fortun• ately declined to a figure between 4 and 7%. Considering that in the 1930's the participation of this same sector was 25% it can be said that industrial diversification has been achieved with reasonable success. In 1964 the Government began to put into effect a wide-ranging program of social and economic reform, aimed at promoting rapid economic growth with income redistribu• tion. Some of the objectives of the last administration have been: a) the reduction and halting of inflation; b) agrarian reform; c) greater participation by the Government in the copper mining industry through joint ventures with U.S. copper companies; d) the redistribution of income along more equitable lines; e) fiscal reform; 178 f) substantial improvements in the balance of payments? g) expansion of reforestation and of the forest industry ? h) accelerated economic integration with other member countries of the Latin American Free Trade Associ• ation—LAFTA?1 i) the organization of rural workers in agricultural unions and cooperatives? j) expanded credit to the small farmers as well as loans and financing of low-cost housing. An important objective of the development program has been the expansion and "Chileanization" of certain critical sectors of the economy such as petroleum, power, communications and especially copper. In 1967 the government entered into a joint venture agreement with the three U.S. owned companies which account for the bulk of Chile's copper production. Be• sides increasing Chilean participation in this production, the agreements provide for increased investment leading to a doubling of output by the early 1970's and for a stable tax and exchange rate regime. ^Argentina, Bolivia, Brazil, Colombia, Chile, Ecuador, Mexico, Paraguay, Peru, Uruguay, Venezuela. 179 Another important goal has..been comprehensive agri• cultural reform including land redistribution, restructur• ing of prices for agricultural products to encourage produ• ction, and modernization of techniques. Although parts of this progranv have run into difficulties, agrarian reform and farm unionization laws were passed in 1967 and have been responsible for significant improvements in the living stan• dards of rural people. The most difficult problem which Chile continues to face, however, is inflation, which averaged 40% per annum in the early 1960's. The last administration established price and exchange rate stabilization as the foundation of its economic policies and although inflation was significantly reduced to about 15% in 1965 and 1966, there has been a partial reversal of this trend in 1957 and early 1968. The root cause for inflation can be found in an excess of demand by consumers, investors, and the public sector over the productive capacity of the country. This demand has been fueled by frequent large expansions of the money supply and it is known today that the only way of stopping this in• flationary spiral is by calling for greater wage restraints while attempting to generate greater savings for developing projects which will increase output. 180 Inflation has also been an important factor in caus• ing balance of payment deficits which have in turn resulted in periodic currency devaluations. Table 27 shows the periodic devaluation the Escudo (E—) has suffered in rela• tion to the U.S. dollar (U.S.$) since 1961. TABLE 27 CHILEs EXCHANGE RATES FOR THE PERIOD 1961-68. (ESCUDOS PER U.S. DOLLAR) 1968 1961 1962 1963 1964 1965 1966 1967 I II III IV a) 1.053 1-64 2 .15 2.70 3.47 4.37 5.79 6.37 6.81 7.25 b) 2.42 3.04 3.26 4.22 5.00 6.71 7.41 7.86 8.29 a) Trade. b) Non trade. Sources International Monetary Fund, 1968. 5.1.4 Forestry and Economic Development There is no development plan for the country as a whole at present, although many if not all of the economic sectors do have specific and definite development goals. The more important sectors are perhaps agriculture and forestry, industrial manufacturing, power, transportation and communi• cations, and ports. 181 Since World War II, new industries have been est• ablished in many fields such as iron and steel, automotive, petroleum, petrochemicals, fisheries, and recently pulp and paper and a variety of consumer goods. The bulk of this effort has been carried by the government which established its role principally through loans, investments, and techni• cal assistance. In addition great strides have been made lately to produce a well developed economic infrastructure mainly with the assistance of loans from international financial agencies. Foreign capital also, principally of private and public U.S. origin has been flowing into the country in the past decades. The manufacturing sector has undergone steady diversi• fication and expansion in recent years with the assistance of government protection against competing imports. Manu• facturing output grew by 7.5% in the period 1960-64, and by 6.5% in the period 1964-66, well exceeding overall economic growth. In 1963 manufacturing industries (excluding artisan activities) produced goods worth $1.1 billion, of which $500 million represented value added. The most important indust• ries include iron and steel, automotive vehicle assembly, paper and wood pulp, rubber, petroleum products, and the traditional and long established textile, food-beverage, 182 tobacco, and leather goods industries (U.S. Department of Commerce, 1968) . One of the principal characteristics of the manu• facturing industries in Chile is their concentration into relatively large firms, which account for the bulk of output and employment. Thus, only 12 firms having 25% of the capital accounted for 20% of the total production in 1963. Further still, only 3% of all manufacturing firms employed in that same year 44% of the total labor force in this sector. On the other hand, small industry accounted for 67% of all manufacturing units but employed only 16% of all w orkers in manufacturing (Corporacion de Fomento de la Produccion, 1965). The country's industries are also concentrated geographically (at least the ones belonging to the manufact• uring type). The provinces of Valparaiso, Santiago, and Concepcion account for 69.7% of all manufacturing enter• prises and employ 81% of all workers in this sector (Cor• poracion de Fomento de la Produccion, 1965). Indices of manufacturing production, by commodity groups , for 1964-66 are shown in Table 28. 183 TABLE 28 CHILE: INDICES OF MANUFACTURING PRODUCTION BY COMMODITY GROUPS, 1964-66. (1963 = 100) 1964 1965 1966 Food 132 135 150 Beverages 145 181 201 Tobacco 128 138 160 Textiles 132 137 140 Clothing and foot wear 155 166 172 Furniture 109 119 132 Paper and paper products 236 261 232 Printing and publishing 115 128 130 Leather and leather products 099 108 111 Rubber products 203 210 233 Chemical products 134 132 128 Petroleum and coal products 223 221 268 Non-metallic mineral products 147 147 155 Basic metals 216 219 231 Metal products, except machinery and transport equipment 290 307 327 Electrical machinery, apparatus and articles 175 189 249 Miscellaneous 202 260 232 General index 156 164 175 Source: U. S. Department of Commerce, 1968 The paper and wood pulp industries have developed very rapidly in recent years. During the 1957-64 period the annual average growth rate in output was 10.4% and everything indicates that this growth is continuing at an increasing rate. j The woodpulp industry is almost entirely based on Chile * s exotic plantations of radiata pine and, although a 184 considerable output has been obtained, the potential of this resource has been hardly touched. Production of pulp in 1965 was estimated at 200,000 metric tons, and paper and paper board at 171,000 metric tons (Chile, Instituto Forestal, 1966a). The five modern pulp and paper mills had an estimated capacity of 400,000 metric tons in the year 1966 and ex• pansion plans are underway to increase production to about 570,000 metric tons of pulp alone by 1970. At present, the government is also constructing two new pulp and paper mills at Arauco and Constitucion which when completed will increase production to about 720,000 metric tons of pulp in 1975 (Corporacion Chilena de la Madera, 1966) . Two major pulp and paper companies account for almost all the output. These are Cia. Manufacturera de Papeles y Cartones S.A. and Industrias Forestales ,S .A. The former produces approximately 80% of the total, while the latter produces newsprint exclusively for export. Apart from the plants owned by these two companies there are other small plants producing wrapping paper with a combined estimated production of 2,000 metric tons, and 8 factories producing cardboard and boxes (U.S. Department of Commerce, 1968). 185 Chile has been particularly successful in exporting woodpulp to LAFTA* countries, exports increased from 23,928 metric tons in 1962 to 59,411 metric tons in 1966 (Chile, Instituto Forestal, 1966). In general, Chile's economic development has received considerable foreign economic assistance in recent years, especially from the U.S. Government. During the fiscal period 1961-66, the U.S. extended loans and grants to Chile amounting to $805 million, making Chile the largest per capita recipient of U.S. assistance in Latin America. Only U.S. assistance to Brazil in the region exceeds that for Chile in absolute terms. U.S. AID Program loans which are tied to the purchase of imports and services from the U.S. amounted to 35, 55, 80, and 80 million dollars in the years 1963-66 respectively (U.S. Department of Commerce, 1968). In December 1966, the Chilean government announced it would forego program loans in 1967 in view of its streng• thened balance of payments and budget positions. However, substantial loans were received for specific projects from the Export-Import Bank and other international lending *LAFTA = Latin America Free Trade Association. 186 agencies. Examples of significant loans extended to Chile in 1967 which at the same time give an indication of how the country is developing ares from the World Bank, $60 million for electricity power expansion; from the Inter- American Development Bank, $6 million for low cost housing? $7.52 million for telecommunications, $20 million for in• dustrial development, $6.5 million for an ethylene plant? from the Eximbank $204 million for copper production ex• pansion, $17,4454 million for jet aircraft? $5,3625 million for construction of an earth satellite station? $12 million for modernization and expansion of copper processing faci• lities? $2.5 million for the manufacture of pressure pipe and $25 million for expansion of steel making facilities. In addition, a $10 million loan was extended by AID to improve educational facilities in the country. 5.1.5 Outlook for the Economy In the next few years, the outlook for the Chilean economy is for overall moderate growth. However, an im• portant and decisive factor in this growth will be the in• ternational price and demand for the country's main export, copper. Also the magnitude of economic growth will depend on the success or failure of current efforts to stimulate 187 the agricultural sector to increase output. In addition to expanding output of food products, a strong agricultural sector would permit the country to decrease its food imports thus liberating foreign exchange for industrial development. A recovery in agriculture would, in turn, also help to bring inflation under control by stimulating savings and investments necessary to build the productive facilities and push forward social develop• ment . The expansion of output presently underway in copper, iron, and steel, pulp and paper, and petrochemicals should contribute importantly to expanding economic growth. The future expansion of these industries will not depend only on the growth of internal markets but also on the development of foreign ones. Recent trends in Latin America indicate that there is a gradually accelerating movement towards economic in• tegration implying a reduction in trade and tariff barriers among the countries of this region, and the formation of a Common Market. Chile's industries should be in a good position to take advantage of the opportunities offered by this trade organization and benefit from economics of scale not pre• viously available due to the limitations of the national markets. 188 5.2 Forestry in Chile 5.2.1 Forest Resources and Forest Land Chile owes the essential characteristics of its flora to the long period of complete isolation before the Argen• tine "pampas" (prairies) were lifted from the waters that covered them. Even now, the country is shut in by the Andes on the eastern side, and to the north it is cut off from the rest of the continent by deserts. Formerly Chile's isolation was like that of a Pacific island and, naturally, it is distinguished botanically by a large number of unique indigenous species. There are sev• eral species of cactus and the hard "espino," a species of acacia from which excellent charcoal is made, is found throughout the Central Valley. An interesting tree species is the Chilean pine (Araucaria Araucana (Molina) Vc. Koch), the nuts of which as well as the wood are highly valued. South of the Bio-Bio River, where the true forests begin, are found the native commercial woods, such as laurels, magnolias, various species of conifers and, most important, a variety of beeches (Nothofagus) producing a high quality lumber. 189 Since 1930, artificial forests of radiata pine, poplars and e-i-alypts have become very significant from a soil conservation point of view, and as a source of in• dustrial raw material. The bulk of these plantations is found in the Central-South portion of Chile as indicated in Map 9. This region is principally characterized by a long valley which runs north and south flanked on one side by the Andes with a maximum average height of some 15,000 feet and on the other side by the old worn-down hills of the Coastal Range, which only in a few places rise above 3,000 feet. It is on the latter which used to be covered by native forests that reforestation has mainly progressed. Other important plantations are also found in some allu• vial terraces of the Central Valley extending in some cases to the first foothills of the Andes (United Nations Technical Assistance Administration, Economic Commission for Latin America, and PAO, 1957) . The total area of Chile, excluding the Antartic portion, is about 74 million hectares, of which 28.8% is classed as "forest lands" (i.e. woods, open woods, scrubby growths, and lands without vegetation but which have re• forestation potential). However, of the 21.4 million hectares of forest land, less than half consist of millable 190 stands, most of which are found between 46° and 37° south. Only about 16 million hectares (76.6%) bear forest cover, the rest is clear of vegetation or occupied by grass fields or bush of little value (Corporacion de Fomento de la Produccion, 1962). Given the present economic development of the coun• try and market for forest products, only 4.64 million hectares are considered merchantable and capable of being logged, of these, 4.27 million hectares correspond to native species naturally grown and 0.38 million hectares to exotic plantations, mainly composed of radiata pine (0.3 million hectares), eucalypts and poplars (80,000 hectares) (Chile, Ministerio de Agricultura, 1967) . The native forests of Chile consist of about 60 different species of which only 15 or 20 are considered lumber producers (Corporacion de Fomento de la Produccion, 1965). It is currently estimated that 55% of all forest lands belong to private owners, these being the most valuable areas left. The State owns 45%, consisting principally of land considered inaccessible or of difficult access which is maintained in National parks and Forest Reserves. In the area dedicated to plantations the relative 191 importance of State ownership decreases even more as 84% of the area planted is privately owned, 15% belongs to social security institutions and only 1% belongs to the State (Corporacion de Fomento de la Produccion, 1965). A rough indication of the distribution of Chile's indigenous forests and principal areas of plantations can be found in Map 9. It can be readily appreciated that most of the man-made forests are located in the Central- South region of the country, plus a small area in the North. The potential here for increasing the area under fast growing plantations it is currently estimated to be more than 2.5 million hectares, whether radiata pine or other exotic species are used. The total area, however, with good potential for reforestation in Chile easily exceeds 10 million hectares. This area includes soils which have suffered moderate to intensive erosion and land with a semi-arid climate but still with excellent possibilities for tree growth (Chile, Instituto Forestal, 1966 b). 5.2.2 The Forest Industries 5.2.2.1 General It has already been mentioned in preceding chapters 192 i 6V MAP. 9 c •ri a> \ •P I c o r o o •ri «M •H O cu c a> o o •H U AO MAINLY PLANTATIONS OF RADIATA PINE NATIVE SOFTWOODS AND HARDWOODS 193 that Chile is a country which has a definite forest potential. The geographic, topographic, and climatic conditions found in its territory form an excellent envir• onment for tree growth. Approximately one-third of its area is composed of soils adequate only for a forest use. To this it should be added, that several millions of hectares in the Central South region are presently cap• able of producing forests of a high productivity at a low cost, on rotations which axe considered among the shortest in the world. In the year 1965, the forest inventory indicated that Chile's plantations were composed of 278,000 hectares of radiata pine and more than 30,000 hectares of other species, principally eucalyptus and poplars, today the total area planted is well over 400,000 hectares. During the last ten years, plantation trials with other exotic species have proved highly successful thus widening the number of potential species for plantation development. The most interesting results have been ob• tained with Douglas fir, Scotch pine, Larix spp., and Caaegieaeia piae. The actual value of Chile's economic forests has been estimated at 3,582 million dollars, of 194 which 152 million dollars correspond to plantations and 3,430 million dollars to the native forests (Chile, Ministerio de Agricultura, 1967). Considering the figures given for 1965, that is of approximately 300,000 hectares of plantations, it was possible to know that these forests were generating each year 4 million cubic meters of wood. This amount suggests that the opportunity cost of the forest land not used is far greater than originally thought, making reforestation not only economically feasible but also mandatory. (CORMA, 1966). 5.2.2.2 Complimentary Investments needed for a Better Use of the Forest Areas Great deficiencies exist today in the Chilean road system. There are too few roads and often those existing are of a low quality. Road building has been carried out with the purpose of transporting only current production, and no provision has been made for future volumes. This has left Chile with very little margin for expansion in transportation. The private sector has most of the time constructed and maintained th« forest roads. Because this sector lacks 195 the necessary capital for such work, forest roads seldom serve properly the purpose for which they were created. Integrated planning has not been applied to them and during winter large sectors cannot be used due to muddy conditions. This situation, undoubtedly puts serious limitations on future expansion in forestry (CORMA, 1966) and not only discourages investments in afforestation, but also creates relatively high operating costs in the existing industries. Complimentary investments in roads are, therefore, unavoid• able and should be considered as part of any development project which is undertaken in the future. 5.2.2.3 Land Ownership and Competitive Forestry Activity A number of other difficulties also appear to be restricting forest production in Chile. Among the most im• portant are the problems of excessive land subdivision on marginal soils and improper use of the land. Many people own too small properties. Use of this land for agricultural purposes leads to increased erosion and units are too small for the establishment of economical forest plantations. Fortunately, a recent Land Reform program presently being applied by the government is tackling this problem in sev• eral ways. In order to promote the establishment of forest 196 plantations on these lands some form of co-operative associ• ations of land owners should be considered. 5.2.2.4 Productive Capacity of the Industry In Table 29 can be found a summary of some forest industry statistics for the year 1964. Naturally, important changes have taken place since that year, and several ex• pansion programs especially of the pulp and paper sector have been developed, but as a way of giving a broad idea the figures presented can be useful. The production figures for lumber, show as its most distinct characteristic the overwhelming importance of radiata pine. The decreasing importance of the native broadleaf forests in lumber production, has been marked in the last few years and it is considered that in a short period, radiata pine lumber will represent more than 80 per cent of the total annual production of sawnwood. It is also important to mention that since 1964 eleven mechanized sawmills of a high efficiency have been built in the plantations region. These sawmills due to their modern design and high productivity, are able to pro• duce lumber of good quality, thus making it possible for Chile to compete favourably in international markets. 197 TABLE 29 ESTIMATED DEMAND FOR RAW MATERIAL, PRODUCTION CAPACITY AND ANNUAL PRODUCTION OF THE CHILEAN FOREST INDUSTRIES FOR THE YEAR 1964 Type of Industry Wood Demand Production Cap• Annual Pro• in round wood acity expressed duction ex• m3 (s) in m3 (s) pressed in m3 (s) Lumber 990,000 680,000 500,000 Radiata Pine 1,480,000 800,000 744,000 Total 2,470,000 1,480,000 1,244,000 metric tons metric tons Particle Board 9,000 13,100 4,500 metric tons metric tons Fiber Board 43,200 12,000 12,000 3 3J m m Plywood 24,000 13,000 8,000 Pulp and Paper metric tons metric tons Mechanical Pulp 420,000 140,000 140,000 Chemical Pulp 530,000 100,000 100,000 (Paper) 220,000 220,000 Sources CORMA, 1966. 198 In relation to the particle board industry it is interesting to note that there are only three plants. The oldest uses as raw material timber coming from the native forest. The other two, of more recent creation, use radiata pine. In 1964 there was only one fibre board plant located in the plantation region and that uses radiata pine as raw raw material. This industry has lately expanded production to about 22,000 metric tons per annum. The plywood industry is presently composed of two plants and their output is considerably lower than their maximum capacity. Although at present this industry is based on native timbers alone, it is expected to be expanded in the future and will use radiata pine. Pulp and paper production has changed considerably since 1964. In that year a new pulp mill was established and in the last three years this mill, as well as the others, have been expanded bringing production to a total of 450,000 metric tons per annum. In the year 1965 the total value of forest produc• tion was 14.4 million dollars and in 1966, 41,569 new 199 hectares were reforested with fast growing species. In this year also, the country's forest resources supplied the basic materials for 300 lumber mills; 60 plants manufactur• ing doors and windows; 200 furniture manufacturing plants; 80 plants manufacturing various wood products; 10 plants producing particle board, veneers, plywood and other pro• cessed woods; 5 pulp and paper mills; and 25 industrial plants for prefabricated houses. 5.3. Forestry Development 5.3.1 Possibilities for Increasing Forest Production 5.3.1.1 Ecologic Conditions Although the intensive cutting of indigenous forests has given way to a highly destructive process of erosion, the ecologic conditions in much of Chile still favour forest cover. Recent studies have concluded that in the Central South and Southern regions of Chile, where the climate is most favourable for intensive silviculture, there are 20,000,000 hectares which have no alternative use. To re• forest this land in a way which will offer protection to the soil, improve forest production and improve the human 200 environment is a task which is not only important from the point of view of economic development but has important wider implications for the total welfare of the nation. 5.3.1.2 Costs Several countries of the world, and, undoubtedly, almost all of the Latin American ones, find themselves in a similar situation regarding forestry expansion. In fact, many have already begun forestry programs that will enable them to increase output not only to meet domestic demands but also to supply international markets. The important thing which puts Chile ahead in this competitive situation is the fact that a substantial reforestation program already exists and that there is considerable expertise in this area. The silviculture of species such as eucalyptus, poplars, acacias, Douglas fir, and radiata pine is widely known. Their yields are higher than in many other parts of the world with very low costs of planting and managing. The industrial processing of their wood is also well established and expanding at a fast rate. To compensate for the higher costs of transportation to foreign markets, the greater cost of industrial machinery that must be imported, and the higher price of energy, the 201 country can put forward its comparatively lower costs of standing timber. 5.3.1.3 Demand for Industrial Forest Products In Chile, high future demands are anticipated for lumber and pulp and paper products. The national market for sawnwood will be influenced by the housing construction programs of the near future. For the quinquennium 1980-1984 these programs alone will be consuming 1,285 thousand board feet per year, increasing to 1,635 thousand board feet for the period 1985-1989 (see Table 30) . In relation to the export situation, the country is already selling pulp and newsprint to Latin American countries and lumber to Europe. It is currently thought that if the conditions of low cost for wood production are maintained and the cost of manufacturing the raw materials is kept between reasonable limits by increasing product• ivity, the country should have no problem in selling its forestry output. 5.3.2. Possible Forestry Production and Exports It is possible to deduce from the information already given that a limit in the expansion of forestry output in 202 TABLE 30 PROJECTION OF THE DEMAND FOR SAWNWOOD IN CHILE TO 1989 Period Radiata Pine Total millions of board feet per year 1965 - 1969 290 620 1970 - 1974 480 790 1975 - 1979 730 1,015 1980 - 1984 1,050 1,285 1985 - 1989 1,415 1,635 Sources CORMA, 1966 TABLE 31 CHILEs DEMAND AND SUPPLY OF RADIATA PINE PRODUCTS FOR THE PERIOD 1965 - 1969. Type of Industry Production Wood Demand (round wood) m3 (s) Chemical pulp 310,000 tons/year 1,640,000 Mechanical pulp * 15,000 tons/year 45,000 Newsprint 160,000 tons/year 480,000 Sawnwood 290,000,000 board feet 1,380,000 Plywood 50,000 Particle Board 30,000 Fibre board 50,000 3,675,000 Total Amount Available 4,400,000 m3 (s) Source: CORMA, 1966. * It does not include the wood used for newsprint. 203 Chile is the availability of raw materials for such a pro• gram. Table 32 dhows the considerable impact n annual reforestation programme of 50,000 hectares of fast growing species would have on the availability of roundwood for industrial purposes. The amount of 50,000 hectares a year of new plan• tations is considered both by the government and private sector, as the minimum possible to be made in order to have the required economic impact. A projection of these minimum f igures indicate that for the year 1985 such a program would be providing annually more than 13 million cubic meters (solid), a quantity which is extremely significant at the national level. Apart from the 50,000 hectares, mainly of radiata pine, an additional 20,000 hectares of plantations of slower growing species are also being considered. These species would provide for the better quality wood, not possible to produce with fast growing stands. During the next two decades, therefore, the country should be planting, annually, a minimum of 70,000 hectares. Government and private owners have already begun to move according to these objectives and encouraging progress has TABLE 32 CHILEs ESTIMATES OF TOTAL VOLUMES AND USABLE VOLUMES FOR THE PERIOD 1965-1985, BASED ON A REFORESTATION PROGRAM OF 50,000 HECTARES A YEAR. Total Exist• Total Exist• Annual Vol• Annual Vol Annual Total Annual Vol- ing Area ing Volume ume available ume avail• Volume avail- ume avail• P e r i o d for Pulp wood able for able able for Sawnwood Sawnwood hot. m^ m3 m^ m^ board ft. Total 1965-69 364,000 68,081,000 1,965,000 3,842,000 5,807,000 784,995,000 Total available 75% 51,061,000 1,474,000 2,881,000 4,354,000 561,746,000 Total 1970-74 564,000 83,964,000 2,287,000 5,123,000 7,410,000 998,985,000 Total usable 80% 67,091,000 1, 830,000 4,098,000 5,928,000 799,188,000 Total 1975-79 749,000 113,539,000 4,013,000 5,976,000 9,989,000 1,165,320,000 Total usable 89% 90,831,000 3,210,000 4,781,000 7,991,000 932,256,000 Total 1980-84 918,000 154,792,000 5,562,000 8,111,000 13,673,000 1,581,645,000 Total usable 80% 123,834,000 4,450,000 6,489,000 10,938,000 1,265,316,000 Total 1985 181,037,000 6,501,000 10,145,000 16,746,000 1,997,775,000 Total usable 80% 144,830,000 5,201,000 8,196,000 13,397,000 1,598,.220,000 Source: CORMA, 1966. O 205 been made. In 1965, 18,000 hectares were planted, a vast improvement over the 4,392 hectares which were planted in 1964. And in 1966 the area of newly created stands went up to 41,000 hectares (Chile, Ministerio de Agricultura, 1967). On several occasions it has been indicated that 70,000 hec• tares is too modest an objective and that the area reforested should be at least 80,000 hectares by 1970, increasing to 100,000 hectares before 1985. These figures undoubtedly in• crease the challenge to the country, but hopefully they will eventually be met. Tables 33 and 34 show the potential production and exportation of forest products provided by a reforestation program of 50,000 hectares a year. To this production should be added the volume coming from the native forests and from the additional 20,000 hectares of slower growing species. This output, although comparatively smaller in quantity, will still be sufficiently important as to in• crease the total value of forestry production by at least 30%. In Table 35 can be found the potential value of the exportable surplus for the period 1965-1989 if a rate of 50,000 hectares a year is maintained throughout these years. 206 TABLE 33 CHILE; POTENTIAL RADIATA PINE PRODUCTION POR THE PERIOD 1964-1989 (BASED ON A REFORESTATION PROGRAM OF 50,000 HA/YEAR). Type of 1964 1965 1970 1975 1980 1985 Industry 1969 1974 1979 1984 (thousands of tons/year) Cellulose 95 310 520 730 920 1,100 Newsprint 110 160 220 260 380 410 Fiber board 12 13 18 23 29 33 Particle board 5 16 26 29 36 42 (millions of board feet/year) Sawnwood 210 290 480 730 1,050 1,280 (thousands of m3/ year) Plywood 13 20 30 38 49 56 Source: CORMA (1966) TABLE 34 CHILE: EXPORTABLE SURPLUS FOR THE PERIOD 1965- 1989 (1) (RADIATA PINE PRODUCTION) UNITS 1965 1970 1975 1980 1985 1969 1974 1979 1984 1989 (thousands of units/year) Cellulose ton. 316 402 572 708 836 Newsprint ton. 154 160 183 280 280 Sawnwood board feet 30,000 50,000 70,000 100,000 130,000 Source: CORMA (1966) (1) Net mean quantities for each period: In the case of Cel• lulose the amount needed for newsprint production has been substracted. For the period 1965-1974 it has been estimated a possible exportation of forest products other than Radiata Pine, of 40,000,000 board feet per year. This value is not included in the Table. 207 TABLE 35 CHILE; VALUE OF THE EXPORTABLE SURPLUS FOR THE PERIOD 1965-1989 (2) (RADIATA PINE PRODUCTION) 1965 1970 1975 1980 1985 UNITS 1969 1974 1979 1984 1989 (millions of US$/year) i Cellulose 40 52 73 92 109 Newsprint 20 21 24 36 36 Sawnwood 2 3 4 6 8 TOTAL 62 76 101 134 153 Source: CORMA (1966) (2) F.O.B. value: Cellulose 130 U.S. $/ton Newsprint 130 U.S. $/ton Sawnwood 60 U.S. $/l,000 board feet. 5.3.3 Implications for Canadian Imports, in Latin America In the foreseeable future, the Chilean forest industries will considerably increase production. Large surpluses will exist in two major groups of wood products, these are sawnwood and pulp and paper. Despite the expansion of the plants pro• ducing particle board, fibre board and plywood, production will be absorbed primarily by domestic consumption, and little will be left for exportation. Based principally on its softwood plantations the country will increase sawnwood production to 480 million board 208 feet per annum (1,133 thousand m3) by 1970-74 and to slightly over one billion board feet (2,360 thousand m3) by 1980-84. Due to internal demand, exports in these two periods will be limited to only 50 million board feet (118 thousand m3) and 100 million board feet (236 thousand m ) per year respectively. Traditionally, Chilean sawnwood has found the best markets in Argentina and Peru, though large quantities have also been ex• ported to Uruguay and other Latin American countries. In recent years exports have been increased to Europe and the Near-East, with the United Kingdom, Belgium, Prance, Germany, and Israel as the larger buyers. In the next decade these trends in lumber exports are expected to continue, though much will depend on how domestic demand grows. During the period 1970-74, Chile is expected to produce on the average 740 thousand tons of cellulose and newsprint per annum. Exports will be approximately 562 thousand tons per annum. In 1980-84 industrial expansion will permit an in• crease in exports to 988 thousand tons per annum, making the country one of the leading suppliers of these products to Latin America. There is, however, some indication that if Chile manages to lower unitary costs by a better utilization of economies of 209 scale, it might begin to sell its surplus overseas, possibly in the Asia-Pacific or European markets. If this is the case, the total deficits for Latin America will increase ac• cordingly thus raising the possibilities for Canadian imports in the region. If Chile continues to sell most of its pro• ducts in Latin America as it does today, because of prefer- e ntial treatment granted by LAFTA (Latin American Free Trade Association) to its trade partners, Chilean pulp and paper should, at least in the LAFTA area, provide strong competi• tion for Canadian imports. Under this assumption, the most probable size of the market available to Canada will be the net imports required by Latin American countries (see Section 4.5.3) which by 1975 will total 1,471 thousand tons of news• print and cellulose, 50 thousand m3 of plywood and veneer, 150 thousand m3 of particle board, and 400 thousand m3 of fibre board. Depending on how much the leading Latin American producers sell extra-regionally these figures will rise and consequently increase the size of the market. In sawnwood, the region will export, nevertheless, there will exist a limited market for overseas imports in countries such as Argentina, Uruguay, Mexico, and Peru. This will happen be• cause a number of regional producers are planning on selling to the U.S. and Europe instead of selling to Latin America. 210 Because of their proximity to Eastern Canadian ports and relatively longer distances to the South Pacific coast of Latin America (geographic location of Chile) countries such as Brazil, Venezuela, the Central American ones, the Caribbean, and Mexico could perhaps develop into better trading prospects for Canada than other nations in the region. In those products of fine quality such as special printing papers and dissolv• ing pulp with a high content of alfa cellulose not produced by Chile or Brazil, production from Canada should be able to compete favourably against other major producers of the world. 211 SECTION VI PROSPECTS FOR A MORE DYNAMIC MARKETING POLICY IN LATIN AMERICA 6.1 Significance of the Latin American Market to Canada Canada, at present, has great need for newer markets in which to sell its rising forestry production. It is well known, that the Canadian industry is largely dependent on export markets and, therefore, its control over prices and other market variables is somewhat limited. Under these conditions, any policy that can provide an extra measure of security in trade should be eagerly persued, and one of them certainly is trade diversification, both in product sold and number of purchasers. It is, however, currently thought that in deciding where to make capital investments, the Canadian forest in• dustry tends to favour projects designed to improve the avail• ability of raw material. This does not mean that all market• ing promotion is ignored, but that assurance of raw material for increased production has priority. This would seem, perhaps, out of place given the vast forest resources of Canada. Nevertheless, it should be borne in mind that not all of these forests are economically exploit- 212 able. The necessary infrastructure such as roads, power, railways, etc., for competitive costs has not yet been developed in many areas, and the rising need of recreation and other non-timber using activities is placing increasing demands on forest lands. There is a body of opinion that believes that the traditional export markets for Canadian wood-based products, specifically the United States, the United Kingdom, and Japan show very good prospects for great• er sales. It is known that these countries are continually increasing consumption of forest products and that domestic supplies are limited. Why then spend time and money pro• moting new markets? A good deal of uncertainty, however, surrounds many of the existing markets for Canadian forest products. Japan will, no doubt, continue to increase imports of forest products, but there is a question of whether or not the Soviet Union will expand into this market. Proximity to Japan should help Russian shipments at least from a freight standpoint. In Britain's case the prospects of it entering the European Economic Community and, therefore, of a newer tariff regime which will not favour Canadian imports is a real possibility. It is time then that all these factors were given some thought if the forest industry in Canada is not to be caught by surprise 213 by a drastic change in world trade patterns. Because of all these uncertainties, the possibility of carrying on a larger amount of trade with other major areas of the world should not be overlooked by Canadian producers. Despite its numerous imperfections and diffi• culties as a market, Latin America has quite a potential for Canada. Though the long run prospects for the region indicate it should develop into a net exporter of forest products, tremendous problems in industrial development and of adequate raw material supply have so far prevented such a development, and will probably continue to do so in the next decades. This is specially true in the pulp and paper sector where the limited amount of long fiber avail• able will restrict production for many years to come. Softwood plantations can help solve these difficulties but they still have to be established and that takes time. In the meantime, while Latin America is still a net importer of wood-based products, someone will have to supply its deficits. Canada could well be this supplier. The productive characteristics of the country? its advanced technology? the fact of it being the larger producer of newsprint in the world, a commodity of which Latin America is in great need? and its geographic location, should work 214 to its advantage. Intraregionally', with the exception of Chile's, and perhaps to a certain extent Brazil's, produc• tion which are protected by LAFTA tariff agreements, the general situation should also be favourable to Canada. However, in order to verify this supposition the competitive character of the Canadian forest industries must be reviewed with respect to other major producing regions of the world. This is quite important because the United States and Scandin avian countries are hardly expected to give away whatever share of the Latin American market they already have. 6.2 Canada's Share of the Latin American Market for Forest Products 6.2.1 Canadian Exports of Industrial Forest Products to Latin America Sawnwood In 1960 Canada exported 2.6 million m3 of sawnwood of which 1.7%, that is 44.6 thousand m , were sold to Latin American countries. Though by 1967 total exports to this part of the world increased to 186 thousand m3, the relative proportion of sales decreased compared to exports to other major areas (see Table 36). 215 TABLE 36 • CANADA: EXPORTS OF SAWNWOOD TO LATIN AMERICA AND TO THE REST OF THE WORLD. 1960-1967 SAWNWOOD (1,000 m3) YEAR TOTAL Latin America Rest of the World % 1960 44.6 1.7 2,620.4 2.665 1961 42.4 1.5 2,783.6 2,826 1962 189.3 1.4 13,215.7 13,405 1963 199.1 1.3 15,100.9 15,300 1964 200.7 1.3 15,666.3 15,867 1965 186.9 1.2 15,717.1 15,904 1966 229.9 1.5 14,786.1 15,016 1967 185.9 1.2 15,658.1 15,844 Sources FAO, 1962, 1964a, 1966a, 1968a. In 1960, the percentage of sales to Latin America was 1.7, in 1967 it decreased to 1.2%. Despite these figures, consumption of Canadian sawnwood in Latin America more than quadrupled in the period 1960-67. Wood-based Panel Products Canadian exports of plywood to the world totalled 114 3 thousand m in 1960. Seven years later these exports have increased four-fold, now totalling 401 thousand m3 (see Table 37). In 1960, exports to Latin America were 1.1 thousand m (1.0% of the total), but by 1967 they had increased to 4.3 216 TABLE 37 CANADA? EXPORTS OF WOOD-BASED PANEL PRODUCTS TO LATIN AMERICA AND TO THE REST OF THE WORLD. 1960-1967. PLYWOOD (1,000 m3) YEAR TOTAL Latin America Rest of the World % 1960 1.1 1.0 112.9 114 1961 1.0 0.8 121.0 122 1962 1.5 0.8 180.5 182 . 1963 1.5 0.8 192.5 194 1964 2.6 0.9 294.4 297 1965 3.6 1.2 288.4 292 1966 3.2 1.0 326.8 330 1967 4.3 1.1 396.7 401 FIBRE BOARD (1,000 m.t.) 1960 0.7 0.3 22 .0 22 .7 1961 0.8 0.4 20.9 21.7 1962 1.5 0.7 19.9 21.4 1963 1.7 0.6 28.4 30.1 1964 2 .4 0.6 35.8 38.2 1965 2.3 0.4 50.3 52.6 1966 2.4 0.7 32.6 35.0 1967 1.6 0.4 34.4 36.0 Sources FAO, 1962, 1964a, 1966a, 1968a. thousand m3 (1.1% of the total) . In this way, Latin America *s share of Canadian plywood exports has remained relatively constant, a characteristic which. with the exception of news- print, is common to all other industrial forest products. 217 Fibre board exports to Latin America were 0.7 thousand metric tons in 1960 (0.3% of all exports), but in 1967 they rose to 1.5 thousand metric tons (0.4% of the total). Fibre board exports have experienced similar trends to those of plywood. Though they have risen by more than 2.3 times in the seven year period, exports to Latin America have merely increased their relative share by 0.1%. Pulp and Paper During 1960-1968, exports of pulp to Latin America rose from 76 thousand tons to 101 thousand tons. However, because of the rapid expansion in sales to other regions, Latin America's share of Canadian pulp decreased during the same period. In 1960 total exports were 2,601 thousand tons, of which 2.9% were sold to Latin America. In 1968, total exports grew to almost 5 thousand tons, but only 2% was sold to Latin America. As indicated in Table 38, newsprint sales to Latin America show the most encouraging picture of all forest pro• ducts. From a 3.7% relative figure in 1960, they grew to 5.3% by 1968, and are expected to reach 7.2% in 1970. During this decade, consumption of Canadian newsprint in Latin America will have grown more than 2.5 times while demand 213 TABLE 38 CANADA; EXPORTS OF PULP AND PAPER TO LATIN AMERICA AND TO THE REST OF THE WORLD. 1960-1970 PULP (1,000 of nut.) YEAR TOTAL Latin America Rest of the World % 1960 76 2 .9 2,525 2,601 1961 152 5.3 2,717 2,869 1962 91 3.0 2,953 3,044 1963 81 2.4 3,258 3,339 1964 82 2 .3 3,554 3, 636 1965 85 2.2 3,768 3,853 1966 81 2 .0 4,015 4,096 1967 91 2.1 4,178 4,269 1968 101 2.0 4,870 4,971 NEWSPRINT (1,000 Of m.t.) 1960 235 3.7 6,030 6,265 1961 272 4.4 5,944 6,216 1962 233 3.8 5,936 6,169 1963 245 4.0 5,855 6,100 1964 261 3.9 6,498 6,759 1965 324 4.5 6, 833 7,157 1966 389 5.0 7,375 7,764 1967 348 4.7 6,982 7,330 1968 394 5.3 7,028 7,422 1969 540p 6.8 7,360 7,900 1970 590p 7.2 7,585 8,175 Source? Canadian Pulp and Paper Association (1969b), Newsprint Association of Canada (1969). p Figures are preliminary estimates. 219 from other sources will have increased by only 1.3 times. In 1970, total exports to the world are expected to be 8.2 million tons, Latin America will roughly import 600 thousand tons of these exports. 6.2.2 Sources of Supply of Industrial Forest Products to Latin America As shown in Table 39, during 1967 the major suppliers of sawnwood to Latin America provided the region with more than 1.72 million m . Of this figure, 1.7 million mJ corres- pond to coniferous species and only 21 thousand mJ to broad• leaved species. This is a reflection of the region's less abundant reserves of softwood. Twelve countries appeared listed under FAO statistics as exporting sawnwood to Latin America, of these five only account for almost 98% of the total volume. During 1967, Brazil sold 36%, the U.S.S.R. 18%, the United States 17%, Honduras 16%, and Canada 11%. The participation of the Soviet Union in these imports would not be so important if it were not for the considerable 220 TABLE 39 MAJOR SUPPLIERS OP SAWNWOOD TO LATIN AMERICA 1967 SAWNWOOD (1,000 m-5) COUNTRY Coniferous Broadleaved Total % of Total Canada 185.5 0.4 185.9 11 Brazil 607.2 7.8 615.0 36 Chile 28.0 28.0 2 Colombia 0.7 0.7 - France 0.4 0.1 1/ 0.5 - Germany (Fed.Rep.) 0.2 0.2 - Honduras 281.0 1/ 281.0 16 Philippines 0.1 0.1 - Romania 0.5 0.5 - United States 287.0 11.5 298.5 17 U.S.S.R. 310.1 1/ 310.0 18 Yugoslavia 0.4 0.4 - Total 1,699.6 21.2 1,720.8 100 Sources FAO, 1968a. 1/ Figure for 1966. - Less than 0.5%. amounts of sawnwood periodically required by Cuba. The link between the governments of these two countries provides the principal reason for the carrying on of this trade. However, this should not be overlooked or be considered as an isolated case in Latin America. At present, several countries are al• ready increasing their economic and cultural ties with the U.S.S.R. and this in time could mean a substantial rise in trade at all levels. Industrial commodities, heavy machinery, and equipment have up to now been the products sold to Latin 221 America, this could be easily extended to sawnwood and other wood-based products. Because of economic integration in Latin America, Brazil, Chile, and Honduras should be expected to continue to sell their products within the region. Nevertheless, there still exists 35% of the market in the hands of the United States, and the Soviet Union. Some of this 35% could be won by Canadian producers by means of a more aggressive marketing strategy. The Latin American market for imported sawnwood should be expected to decrease over the long run as the region increases its domestic production. Therefore, wood-based panel products, and pulp and paper should be considered as well as sawnwood in any new marketing strategy. These later products which have a much greater potential in Latin America would help to diversify the line of products and in this way lessen the burden of decreasing prospects for sawnwood. The supply of plywood and fibreboard to Latin America is somewhat less concentrated in the hands of a few producers than that of sawnwood. Table 40 shows the major exporters of wood-based panel products to Latin America. In 1967, out of a total of 61.6 thousand m , of plywood and fibreboard sold to Latin America, 25% was provided by 222 TABLE 40 MAJOR SUPPLIERS OF WOOD-BASED PANEL PRODUCTS TO LATIN AMERICA 1967 WOOD-BASED PANEL PRODUCTS (1,000 m3) COUNTRY ~t Plywood Particle Fibre Total 3/ %-of Board 2/ Board Major Total Countries Canada 4.3 1.7 6.0 10 Australia 2.3 2.3 4 Brazil 2.3 2.3 4 Finland 0.6 3.6 4.2 7 France 3.8 0.7 4.5 7 Gabon 1.9 1.9 3 Germany (Fed.Rep.) 0.2 0.1 0.3 - Israel 1.9 1.9 3 Italy 0.2 0.2 - Japan 1.2 1.2 2 Norway 1.0 1.0 2 Poland 0.5 0.5 1 Sweden 8.7 8.7 14 United States 13.0 2.5 15.6 25 U.S.S.R. 11.0 1/ 11.0 18 Total 38.1 23.5 61.6 100 Sources FAO, 1968 1/ Figure for 1966. 2/ Final Figures were not available. 3/ Does not include Particle Board. Less than 0.5%. the United States (15.6 thousand m ). This country, princi• pally because of its exports of plywood, is the greatest source of panel products for the region. It is followed in order of importance by the U.S.S.R. which holds 18% of the 223 3 market (11.0 thousand m of plywood, and then by Sweden 14%, which sells only fibreboard (8.7 thousand m3). Canada holds fourth place with 10% of the market (4.3 thousand m3 of ply• wood and 1.7 thousand m3 of fibreboard), which is a modest share given the considerable installed capacity of its wood- based panel industry. The rest of the Latin American market for plywood and fibreboard is held by a number of other countries each sel• ling between 2% and 7% of the total exports to the region. These countries are in order of importances Findland, France, Brazil, Australia, Gabon, Israel, Japan, and Norway. Poland also sells to Latin America but barely reached to 1%. In this sector of the industry, Canada could also ex• pand its sales to Latin America. Here, though an effort should be made to win sales from the United States, the U.S.S.R. and Sweden, work should be concentrated in obtaining a greater share of the market from the other competitors. Because of their smaller size their hold of the market is less secure than the major exporters, and also their geographic location should work to their disadvantage compared to Canada. This is specially true in the case of Australia and Japan whose products must travel far greater distances than 224 those of Canada to reach any major point in Latin America. The pulp and paper sector is where the greatest pot• ential for increased sales to Latin America exists. Canada already holds more than one-third of the market for wood pulp and newsprint. In 1967 out of a total of almost 1.2 million tons of these products bought by Latin America, Canada supplied 413 thousand tons, an amount well ahead of its nearest competitor, the United States, which supplied 225 thousand tons (19%). other important suppliers of pulp and paper products to the region ares Finland (17%), Chile (11%), and Sweden (11%). Table 41 gives the absolute and relative figures for pulp and paper sales to Latin America in 1967. Canada's importance in the Latin American market for wood pulp products is even greater in the newsprint sector, here it accounts for 46% of the imports. This figure re• flects the fact that Canada is the largest producer of news• print in the world with total shipments well over 7.4 million tons per annum. Of all the forest products Canada could export to Latin America this is definitely the best suited. Theoretically, and in practice, Canada is at the top of the list of the producing countries of the world. Economies of 225 TABLE 41 MAJOR SUPPLIERS OF PULP AND PAPER PRODUCTS TO LATIN AMERICA 1967 PRINCIPAL PULP AND PAPER PRODUCTS (l,000m.t) COUNTRY ~ Woodpulp Newsprint Total Major % of Countries Total Canada 93.0 32.0 413.0 35 .Austria 0.2 0.2 — Brazil 11.0 11.0 1 Chile 65.0 63.0 128.0 11 Czechoslovakia 0.4 0.6 1.0 Finland 63.0 143.0 206.0 17- France 4.1 4.1 Italy 9.9 9.9 1- Netherlands 0.1 0.1 Norway 0.9 27.3 28.2 2- Poland 1.0 1.0 Portugal 2.9 2.9 - Sweden 74.0 50.7 124.7 11- United States 172.0 53.0 225.0 19 U.S.S.R. 13.0 1/ 24.0 1/ 37.0 1/ 3 Total 499.3 692.8 1,192.1 100 Sources FAO, 1968a. 1/ Figure for 1966. Less than 0.5%. scale are presentsthroughout the industry and a competitive character of production has already been established. By 1975, Latin America will require to import more than 1.2 million tons of newsprint a year, this is assuming all pro• jects presently planned are carried out and completed on time. 226 Canada should take advantage of this opportunity and consoli• date its position as one of the main suppliers of newsprint to the region. 6.3 Competitive Character of the Canadian Forest Industry Among the numerous factors which determine the com• petitive character of production, raw material supply is pro• bably one of the more important ones. The quantity and type of timber a given area or country has is very often the prime determinant of cost and, through this, of its competitive position as a supplier of wood-based products. Because of the favourable location of Scandinavia, the Soviet Union, and Canada within the Northern Coniferous belt of forest, it is not surprising to find them dominating the softwood markets of the world. Goods, therefore, move fluently from Canada to the United States and from Sweden, Finland, Norway, and the Soviet Union to Europe (Kingston, 1965) . When speaking of availability of raw material, mere physical abundance is not an adequate criterion of compet• itiveness (Shand, 1967). In order to be meaningful, the forest resources must meet some economic standards. Based on 227 this idea, Shand (1967) clearly summarized the concept when he stated that? The raw material issue for the future of the forest industries is not the total cellulose inventory, wherever located, but the economic supply of wood of desired physical qualities available in forms adapted to highly mechanized low cost harvesting, and located so as to minimize transportation costs to the mill. It is, therefore, economic accessibility rather than physical accessibility of raw material that is the real criterion in assessing competitive advantage. A few years ago, Scandinavia began to experience the truth of this statement. In 1963, exports of softwood lumber from Sweden and Finland seemed to be partially stagnated due to raw material shortage, higher stumpage, and increased dom• estic demand (FAO, 1963b). Canada, in a way, could be said is experiencing similar problems because of the country's sustained yield policy which limits the amount of usable raw material. This is especially true in the case of British Columbia where the ultra-conservative calculation of allowable cuts has been one of the main reasons for a slower growth in output. Shand, (1965)? Reed, (1965) , supported this same idea by claiming that without increases in the annual allowable cut of sawtimber, there would be no substantial increase in British Columbia's lumber production. 228 Gedney (1963), has established that among the factors influencing forest development two weigh more than the rest. These factors are the distribution of industrial components and the state of development of the forest industries. If the supply of timber is not as readily available as it should be, development could be accompanied by increasing raw mat• erial costs (Shand, 1967) . Compared with the United States, the forest industry in Canada is not as highly developed relative to raw material supply, so competition for timber has not been as high as in the United States. As an example of this, stumpage in British Columbia is generally lower than in the Pacific North-west of the United States. (Judge, (1965) Edgett (1963) claimed that differential in lumber prices favoured Canada over the U.S. by as much as $10 per thousand board feet. Another part of the problem related to competitive• ness in production, relates to the number and type of in• dustrial components bidding for raw material, often, the forest industries are classified as highly competitive by con• sidering only the high degree of competition prevailing at the output level while neglecting an entirely different situation at the input level (Shand, 1967 and Mead, 1964). High degrees of concentration of ownership of timber resources 229 at the input level tend to increase prices of raw material. In this regard, though still having lower prices for stump• age than the Scandinavian countries, Canada compares un• favourably with them. In Sweden, for instance, of the pro• ductive forest land, 76% of the area is in private owner• ship while the State forests amount to 19%, and acclesiasti- cal and other public forests to 5% (The Swedish Forestry Association, 1966). Canadian woodlands are largely owned by the governments. About 80% of those classified as pro• ductive are owned, and administered by the provincial governments. The remaining 20% included farm woodlots, forest land owned by companies and individuals, and areas for which the federal government is responsible (Canadian Pulp and Paper Association, 1968). Such a concentration of tenure in the hands of the State, eliminates all possibil• ity of a competitive supply of timber to the industry, and despite the fact that some government ownership would be advisable in order to regulate the use of the forests, there is probably little to be said in the defence of an 80% figure. Adequate legislation, though not directly inter• fering with stumpage, can regulate the use of forest land with an equal or higher degree of efficiency. Under an in• crease in supply of raw material, stumpage rates in Canada 230 would no doubt decrease considerably. At present timber prices do still compare favourably with those existing in the U.S., Scandinavia, and Finland, and they will probably continue to do so in the near future. However, a heavier participation of the Soviet Union in world production could change the existing status quo to the point where cheaper raw material will, have to be made available to the Canadian industry. Advanced technology in mill production and lower logging costs can help maintain lower prices, but the key to competitiveness is to be found first in the costs of raw material and then in the way these raw materials are used. Raw material cost is then a decisive characteristic which can encourage or decrease production of industrial forest products. In this regard, it has been rightfully mentioned that a much greater effort should be made by North American foresters on the rationalization of their methods in serving world wood needs (Smith, 1967). Mere physical availability of wood volumes, though desirable to the forest industry, is not enough to assure its future output. Nowadays, economic factors related to growth, log• ging, and transportation are increasingly exercising an equal or greater degree of importance in total production costs. 23.1 Because of this, Smith (1967) concluded that Investments in plantation forestry in all the fast growing regions of the world should be considered very carefully before large sums are spent on re• forestation in the poorer growing regions of North America. This statement should be kept in mind when thinking of the possibilities offered by Latin America, in general, and Chile, in particular, for plantation and forest industry investments. Streyffert (1968) reported the costs of manu• facturing sulphate pulp in the developing countries (Chile and East Africa) on the basis of plantations of quick- growing conifers with the corresponding costs in Canada (British Columbia) and Northern Europe (Finland). Data in Table 42 suggest that Smith's conclusions deserve further study. There are definite cost advantages in developing man-made forests in a number of fast growing regions such as the Central-South area of Chile where Radiata pine yields 3 on the average 24 m per hectare per year. The most remarkable difference in costs between Chile and British Columbia lies in the cost of wood per ton of un• bleached sulphate pulp. While in Chile it is necessary to spend $24.5 for every ton of pulp produced, in British Columbia the cost is $36.8 (38% higher). Due to the high cost TABLE 42 COST OF PULPWOOD AT MILL AND MANUFACTURING COSTS OF SULPHATE PULP IN DIFFERENT FOREST REGIONS OF THE WORLD IN 1966 Location Capacity Cost of Wood per Cost of Wood per ton Unbleached Pulp Cost of of Mill Wood per ton of of Sulphate Pulp _ Wood as % m3(solid) unbleach- Unbleached Bleached Conver- Total of Total ed pulp sion Costs Cost of Cost a/ b/ Unbleached tons/day $ m3 S $ $/ton $/ton Pulp % Finland 300 12 .00 4.7 56 .4 62 .5 16.8 73,. 2 77 Canada c/ 300 7.50 4.9 36 .8 41 .3 33.6 70,. 4 52 500 7.50 4.9 36 .8 41 .3 28.6 65,. 4 56 East Africa 300 5.00 4.9 24 .5 27 .5 21.4 45.9 53 Chile 300 5.00 4.9 24 .5 27 .5 28.4 52.9 46 Sources Streyffert, 1968 a/ Excluding Cost of Wood and Capital Costs. b/ Excluding Capital Costs. c/ British Columbia u> to 233 in Chile of capital, energy, and technical skills, the British Columbia disadvantage is reduced to about 6% if the cost of wood as percentage of total cost of unbleached pulp is considered. The place of pulpwood in the total cost of wood pulp and the ensuing impact of the cost of pulpwood on the com• petitive position of wood pulp in different forest regions should then be considered a matter of prime importance both to the industry and to the forest owners (Streyffert, 1968). In order to determine a more rational approach to the future supply of forest products to the world there should be an increasing number of studies which analyze this problem. Only by comparative analysis can the forest manager finally decide which alternative provides the best results. Other costs which severely influence competitiveness of production are those related to the logging operation and transportation of volumes to the processing plants. Logging costs are dependent on many factors. Shand (1967) mentioned as the more important those of average size of trees, volume of timber cut per unit of area, total volume to be removed and the degree of mechanization. These factors vary markedly within and between regions and, therefore, it is 234 rather difficult to assess them correctly. However, Rankin (1963) claimed that the profitability of logging was deter• mined more by the mix of species in the stand, the location and terrain of the stand, and by the prices paid for stump• age, than by the controllable cost elements of logging. Mechanization of logging and transportation systems are as advanced in Canada as in any other major forest country of the world. The sizes of the trees harvested are, generally speaking,as big as those of the Pacific North• west of the United States and in the case of British Columbia, bigger than those of Sweden, Norway or Finland. In relation to terrain factors, the eastern forests of Canada enjoy a position of advantage as compared to those in the West coast of the U.S. In this regard, however, Western Canada cannot be said to be much better-off, as one of the most difficult terrain in the world is to be found in this area. The horizontal integration of the forest industries has made the species mix less important than in the past. Today integrated firms practice more complete utilization of the raw material and thus are able to obtain lower costs 235 of harvesting per unit of volume. According to Ramaer (1964), integrated utilization can be considered one of the major factors which put Canada, and especially British Columbia, in a competitive position on the world market. In Europe, costs have been rising comparatively because loggers have been forced to harvest smaller sized wood (Kingston, 1965) . In 1967, Shand introduced the idea of "State of the Industry Models," as a criteria for evaluating competitive• ness. He based his discussion on a model Rankin analyzed for British Columbia in 1963. This model showed the inter• relationships between market-price, processing costs, and log costs in wood products industries by indicating how they influence the rate of return. Rankin's model indicated that the cost-price structure for B.C. was sound and that it was in a better position to withstand shocks than other producing areas in the United States and Canada. Even Scandinavian producers were found to be in difficulties be• fore recent changes in the European price structure. Finally, one other major item of cost has to be analyzed in order to evaluate correctly the competitive chara• cter of the wood products industry. This is the cost of 235 distributing finished products to various market centers. The estimates of cost of putting goods in overseas markets should include not only transportation but also every other cost which is attributable to competition in these markets. Preferential tariff treatment to other producers should be considered as one of the more important costs in finally marketing the products. In relation to the transportation factor, Shand (1967) established that while assessing the comparative advantage of one region over another, the phenomenon of fluctuating freight rates is not important since the relative competitive positions remain on the average, unchanged. However, seasonal changes do occasional• ly take place, and one route in particular can find itself charging higher freight rates. In North America this hap• pens almost every winter when heavy grain deliveries to Asia produce an accumulation of ships in that area of the world. Based on the law of supply and demand, shippers in Canada are then able to negotiate very favourable freight rates. For the United States, nevertheless, this is not the case because of the existence of very unfavourable leg• islation for national charterers. While Canadian wood-based products can be shipped on cheap foreign-flag boats to the Atlantic Coast of the United States, the U.S. Jones Act of 1920 binds American shippers to use U.S. registered boats for inter-coastal freight (Davies, 1964). This factor could explain, to a great extent, the reason for the large amount of forest products yearly exported to Latin America. One would imagine that a net importer of wood-based prod• ucts such as the U.S. would keep most of its production for domestic consumption, but really this is not what in practice happens. The U.S. exports to Latin America are getting a better price for its produce than at home; at the same time the country imports from Canada so as to meet its deficits, including those created by its exports. Latin America is a region composed of more than two dozen countries, therefore, aggregate demand is made up of a number of small purchases. In this type of market, those vessels which can handle various types of commodities at the same time, offer lower transportation rates than larger specialized boats. The foreign flag boats used by Canada are often designed specifically for handling lumber and pulp products in large volumes. Compared to American shippers which are restricted to conventional vessels which require longer periods of loading time (Crowther, 1964), Canadians enjoy a position of advantage when selling to the U.S. This is emphasized by the fact that most purchases made by U.S. 238 consumers consist of large loads which naturally require specialized treatment. Because of the reasons explained above, this relative advantage tends to disappear in the trade with Latin America. Likewise, the Baltic countries are found to have a comparative advantage over Canada be• cause Baltic products are moved in smaller ships which are easily unloaded at numerous small docks around Latin America. Proximity to Latin America, however, could com• pensate Canada in this regard, as the Scandinavian count• ries have to pay a greater mileage per ton to reach this part of the world. The best evaluation possible of transportation costs is to be found in the freight rates themselves, as a geo• graphical comparison of these rates would finally indicate what location permits a cheaper freight to the market. Un• fortunately, despite the fact that such data exist in the internal accounting records of forest products shippers, it is not readily available because these records are usual• ly too closely guarded. Considering the factors which have been analyzed in this section, it can be concluded that on the whole the Canadian forest industries are well prepared to compete 239 effectively in Latin America. The advantages for marketing Canadian forest products in this part of the world are, however, limited in many senses. Political and economic isolation from the area (see Section 3.1) work against the establishment of trade. Despite this, the ultimate balance should still be considered a positive one. The possibility of marketing, at the minimum, one-and-a-half million tons per annum of pulp and paper alone, not to mention other wood products, ought to provide the industry with suffi• cient incentive to implement a more dynamic sales policy towards Latin America. 6.4 Influence of LAFTA and CACOMA Tariff Agreements on Canadian Exports to Latin America The Central American Common Market (CACOMA) and the Latin American Free Trade Association (LAFTA) provide through preferential tariff systems considerable protection for their forest industries. The Central American countries having formed a Common Market, are one step ahead of LAFTA countries in the creation of a uniform tariff. LAFTA countries have at present only agreed on a number of duties applicable to various lists of products. It is this chara• cteristic of LAFTA which adds considerably to the complexities 240 of the system, making it quite often extremely difficult to differentiate between countries, products and tariffs ap• plied to them. Nevertheless, in the next two pages an attempt to simplify this situation has been made and summary tables of the existing tariffs for forest products have been presented. It must be mentioned that these tables, though showing the general tariff conditions of CACOMA and LAFTA, do not indicate completely all the differences that in practice apply for individual products. These differences are oc• casionally much wider and important than those shown in the tables. For information purposes and general acquaintance with these duties, Tables 43,44,45, 46, 47, and 48 should provide the reader with sufficient information. If, however, a much greater degree of precision is required, it is ad• visable to look directly into the sources of information. For CACOMA it is "Organization for Economic Co-operation and Development (1968b)," and for LAFTA it is "Asociacion Latinoamericana De Libre Comercio (1968)." (For extra general information on Economic Integration in Latin America see Section 3.3). 241 6.4.1 Central American Common Market Tariff Agreements Tables 43, 44, and 45 show the external tariffs for forest products of CACOMA grouped into three categories, sawnwood, wood-based panel products, and pulp and paper products. The rates of duty in the CACOMA tariff apply to all imports from countries outside the Central American Common Market. The specific duties are expressed in the Central American peso which is equivalent to the United States dollar. TABLE 43 CENTRAL AMERICAN COMMON MARKET EXTERNAL TARIFF FOR SAWNWOOD Sawnwood Uniform Duty Common Market Country Specific Ad-valorem in CA $ % CIF All 3.0 /m3 20 Sources Organization for Economic Co-operation and Develop• ment, 1968 b. CA $ Central American Peso = U.S. $ In addition to duties, imports are subject to a sur• charge of 30% of the customs duties and, therefore, total tariffs on overseas imports are greater than those shown by 242 TABLE 44 CENTRAL AMERICAN COMMON MARKET EXTERNAL TARIFF FOR WOOD-BASED PANEL PRODUCTS Wood-Based Panel Products Uniform Duty Common Market Country Specific Ad-valorem ' in CA $ % GIF All - Veneer sheets 0.40 /Kg 10 - Plywood 0.15 /Kg 20 - Particle board 0.35 /Kg 15 - Fibreboard 0.15 /Kg 20 Sources Organization for Economic Co-operation and Development, 1968 b. CA $ Central American Peso = U.S.$ the tables. The natural and manufactured products of the Central American countries are exempt from import and export duties, including consular fees, and all other taxes and charges levied on imports. In terms of consumer prices, imports of Canadian forest products are in a disadvantage before domestic production, varying from 7% to 25% depending on the product. Sawnwood, plywood, and particle board production within the common market are favoured by a 20% Ad-valorem duty plus variable specific duties. Wood pulp presents the lowest ad-valorem duty (7% in Guatemala and El Salvador, and 10% in Honduras, 243 TABLE 45 CENTRAL AMERICAN COMMON MARKET EXTERNAL TARIFF FOR PULP, PAPER, AND PAPER BOARD Pulp, Paper, and Paper Board Uniform Duty Common Market Country Specific Ad-valorem in CA $ % CIF Guatemala, El Salvador Free - Wood pulp Honduras, Nicaragua, Costa Rica - Wood pulp Free 10 All - Newsprint 1/ a) Competing against domestic production Free 10 b) Not competing against domestic production Free Free All - Other Printing, Writing, Wrapping papers and Paper boards 0.06-0.15 10-25 Sources organization for Economic Co-operation and Development, 1968 b. CA $ Central American Peso - U.S.$ 1/ Newsprint imported in reels by newspaper establishments shall be exempt from the payment of duty for such period as the Central American industry is unable to supply that product. The administrative authority shall ascertain that the imports above referred to are intended exclusive• ly for the issue of newspapers and, should not be the case, shall cause the sanctions provided for by legisla• tion to be applied. "Second San Salvador Protocol." 244 Nicaragua and Costa Rica), and newsprint imports are free from customs and similar duties as long as they do not compete against regional production. This being the case they will be charged a 10% ad-valorem duty and no specific duty. 6.4.2 Latin American Free Trade Association Tariff Agreements The countries which belong to the Latin American Free Trade Association have agreed upon tariffs for some of the industrial forest products traded in the area. Unfor• tunately no single uniform tariff for every type of product exists, but a number of different tariffs which vary from country to country. Also, the agreements on duties quite often only cover those products which have been produced from species that can be found in Latin America alone, or, if they can be obtained elsewhere, they are not produced in Canada. This is why, most of the time, tariff conces• sions which cover Canadian imports as well as those coming from other Latin American countries are almost non-existent. This is particularly true in the case of sawnwood and wood- based panels. In sawnwood only Brazil has tariffs which apply to conifers and both to intra and extra-regional 245 production. The rest of the countries only state their positions as regards tariffs which apply to species found in Latin America. In Tables 46, 47, and 48 a summary of LAFTA's tariff agreements is presented. These tables were obtained from "Lista Consolidada De Concesiones" published by the Latin American Free Trade Association in 1968, reference which should be consulted if more accurate information is required. In order to produce the tables, all tariffs were arithmetically added, whether they were customs duties as such, or other duties or taxes of equivalent effect. Two groups were finally obtained, one corresponding to the specific duties and the other to the Ad-valorem duties. In the reference cited above the ad-valorem duties are present• ed in three groups, each rating a percentage over the value of the merchandise. These rates are apparently charged on different values, one on the CIF figure, another over an appraised value, and another over an unknown figure. This third rate was called additional. In the absence of further information which could have indicated something dif• ferent, the author decided to add all three rates, and thus were obtained the ad-valorem columns of Tables 46, 47, and 48. A similar procedure was followed in the case of the specific tariffs. 246 TABLE 46 LATIN AMERICAN FREE TRADE ASSOCIATION TARIFF AGREEMENTS ON SAWNWOOD Sawnwood Import Tariffs 1/ LAFTA Country Coniferous Broadleaved Specific Ad-Valorem Specific Ad-Valorem US $ % US $ % Argentina A 10-81.5 31. 5 2/ B 2.3/m2 0- 6.5 2.3/m2 2/ 0.2-19.5 2/ Brazil A - 2/ 56 2/ - 2/ 56 2/ B - 2/ 6 2/ - 2/ 6 2/ Bolivia A * * * * B * * * * Chile A * * 0$ 260/m3 100 B * — Colombia A * * * * B * * * * Ecuador A * * * B * * * * Mexico A - 8 * * B * * Paraguay A *- *- # * B * * * Peru A 0.007/KG 52.5 0.007-0.009 52. 5 /KG B - - Uruguay A - 99.8 - 7622/-239.8 B - 8.3 - 2/ 8.3 -76.22/ Venezuela A * * * B * * * * Sources Asociacion Latinoamericana de Libre Comercio, 1968. A. Duty Rates to non-LAFTA countries. B. Duty Rates to LAFTA countries. 1/ Tariffs valid only for sawnwood produced out of regional species, except for those cases specially indicated. Canada does not produce, therefore, does not export any of these species. (Continued) 247 Table 46 continued 2/ Tariffs valid for coniferous or broadleaved species other than those produced within Latin America. Rates appli• cable to Canada. Where there is one figure, the Ad- valorem tax is valid for regional as well as overseas species. Where there are two, the one marked is valid for overseas species and the other one for regional species. * No special tariff concessions have been granted to either LAFTA members or non-members. Imports of these products from LAFTA countries are subject to the same rates of duty applicable to imports from other sources. Free. m2 Square meter. m3 Cubic meter. KG Kilograms Gross. 0$ Pesos Oro (Golden Coins). K Kilograms Net Looking at the import tariffs for sawnwood in Table 46, it is possible to see that in most of the countries of the Association there is no special treatment for imports coming from outside the free trade area. With the exception of Brazil in coniferous and broadleaved sawnwood, all other countries present the same tariffs to both regional and extra-regional imports. This is a reflection of the abundant production of domestic sawnwood which is known to be able to compete favourably against overseas imports. In Table 47 is shown quite a similar picture in the wood-based panel products sector. Most of the countries do TABLE 47 LATIN AMERICAN FREE TRADE ASSOCIATION TARIFF AGREEMENTS ON WOOD-BASED PANEL PRODUCTS Wood-Based Panel Products Import Tariffs LAFTA Country Plywood and Veneer Particle board Fibre board Specific Ad-valorem Specific Ad-valorem Specific Ad-valorem U.S.? % U.S.$ % U.S.$ % Argentina A * * * ft _ 111.5 2/ B * * * * - 0.3 2/-21.5 2/ Brazil A - 61 2/ - 56 2/-61 2/ - 56 2/ B - 30 2/-50 2/ - 46 2/-50 2/ 6 2/-46 2/ Bolivia A * * * * * * B * * * * ft Chile A * * * ft ft ft B * * * ft * ft Colombia A * ft * * ft * B * * ft ft ft * Ecuador A * * * * 0.19/K 2/ 50 2/ B * ft * 0.12/K 2/ 50 2/ Mexico A ft * * 0.05/KG 21 B * * * * - - Paraguay A * * * ft ft ft B * * * * * * Peru A * * * ft * * B * * * * ft ft Uruguay A * ft * ft * * B * * ft * * Venezuela A * * * * * * B * * * ft * ft Sources Asociacion Latinoamericana de Libre Comercio, 1968. Meaning of Symbols the same as for Table 45. co 249 TABLE 48 LATIN AMERICAN FREE TRADE ASSOCIATION TARIFF AGREEMENTS ON PULP AND PAPER Pulp and Paper Import Tariffs LAFTA Country Pulp Newsprint Specific Ad-valorem Specific Ad-valorem U.S. $ % U.S. $ % Argentina A - 25-25.5 - 0.3 B - 0.3 3/ - 0.3 Brazil A - 21 - 1 B - 1 - 1 Bolivia A * * * * B * * * Chile A 0$ 6/GMQ 35 7/ * * B - 2.6 7/ * ft Colombia A - 23 3 B - 4 4/ - - Ecuador A 0.01/K 40 0.003/K 30 B - 20 - 14 Mexico A 0.06/KG 6/ 23 6/ 0.002/KF 33 B - - - 11 Paraguay A * - 16 B * * - 10.5 Peru A 0.002-0.004/KG 31.5 - 20 o O Uruguay A — 37.3 — — B - " 5/ - - Venezuela A 0.009/KG - 8/ .0.06-0.09/K G - B - - 8/ - - Sources Asociacion Latinoamericana de Libre Comercio (1968). Meaning of symbols the same as for Tables 46 and 47. 3/ Except for short fiber mechanical and chemical pulp where the rate is 7.5%. 4/ Except for coniferous sulfate bleached pulp where the rate is 0%. 5/ Except for coniferous mechanical pulp where the rate is 6%. 6/ Except for Alfa Cellulose where the rate is 8% and the specific duty only U.S.$ 0.001. 7/ Valid only for chemical pulp. No tariff differentiation exists for other types of pulp. 8/ Valid only for coniferous chemical pulp. GMQ Gross Metric Quintals. KF Kilograms Free. 250 not treat imports of wood panel products differently whether they come from outside Latin America or are produced within the region. Canad, however, is clearly in a position of disadvantage in the markets of Argentina, Brazil, and Ecuador.. In Argentina, Canadian imports of fibre board are at a disadvantage before regional production which fluctuates between 90% and 111%. For plywood, veneer, and particle board there are no discriminating tariffs. In Brazil, Canadian fibre board and particle board face a tariff dif• ferential of 10% to 50% and 11% to 15%, respectively. For plywood and veneer the disadvantage would be somewhat greater, fluctuating between 11% and 31% according to the type of product. Tariff agreements on pulp and paper products are the most numerous of all forest products duties. With the ex• ception of Bolivia, which lacks a pulp and paper industry almost completely, every other LAFTA country has agreen upon granting special treatment to regional production in at least one type of pulp or paper. As a general rule, because of the differences on tariffs applied to regional and non-regional pulp, the best markets for Canadian pulp would be those of 251 Venezuela and Bolivia. In these countries either there are no tariffs which burden imports or all purchases are treated equally regardless of origin. Protection in the rest of the countries fluctuates between 20% in Ecuador and Brazil, to 37% in Uruguay. These rates would demand a Canadian price of 20% to 37% lower than that of regional exporters such as Chile and Brazil in order to compete, Because of the negative balance between production and consumption of newsprint in Latin America, newsprint tariffs appear as the most favourable for extra-regional imports„ Because of the rate differential on tariffs, Mexico, Ecuador and Peru are the most difficult markets to compete in against regional production from Chile. Chilean newsprint is protected in these three countries by a 22%, 20%, and 16% differential tariff respectively. In Paraguay the tariff advantage is considerably smaller, 5.5%. Colombia too has a very small differential tariff on newsprint, 3%, and in Argentina, Brazil, Bolivia, Chile, and Uruguay it is reduced to zero. With the exception of Chile, where a considerable surplus of newsprint exists, it is in these countries where the best possibilities for marketing Canadian newsprint 252 exist. All are large importers of the product and unable to increase production because of a shortage of raw material or lack of infrastructure and capital to create new product• ive facilities. 253 SECTION VII CONCLUSIONS Latin America is a developing region where all economic activity is rapidly expanding. The rate at which economic growth will take place in the next few decades is yet unknown, mainly because of the uncertainties imposed by a number of constraints on growth, such ass population, political in• stability, and sources of capital for investments. By 1980, Latin America's population is expected to increase to 365 million people, this is almost 100 million more than the United States and Canada together, where the combined population will reach only to 276 million. The full effect on the economy of this tremendous expansion of the number of Inhabitants is still subject to debate but if government instability is checked and adequate sources of capital are found, there is very little doubt that it will be highly conducive to an atmosphere of development and economic wealth. From a gross domestic product standpoint, economic activity in Latin America will be concentrated in three countries. In order of importance these are Brazil, Mexico, and Argentina, Except for a few small Caribbean nations and Bolivia, Ecuador and Paraguay, the rest of the Latin American 254 countries are also expected to develop their economies consistently. International trade in Latin America has developed rather slowly. The amount of trade carried on by all countries amounted in 1968 to only 11,560 U.S. million dollars in exports and to 11,100 U.S. million dollars in imports. Reasons for this are to be found in the difficulties the region has encountered in increasing its exports, in the shortage of foreign exchange, in the geographical isolation of most of the area with respect to world markets, in the drastic changes in price of primary commodities basic to the exports of the region, and in the slow development of domestic merchant navies capable of moving the products to overseas markets. Canada is a country with an economy heavily dependent on international trade and with exports in 1968 well above the U.S. 12 billion dollar mark. Despite this impressive figure, only 3% of this trade, U.S. 372 million dollars, is carried on with Latin America. The major trade partner of Canada is the United States which absorbs almost 68% of all Canadian exports. In industrial forest products trends fol• low quite a similar pattern to those of total trade. Exports 255 to Latin America, as compared to total exports, fluctuate from a minimum 0.4% in fibre board to a maximum of 7.2% in newspr int„ Several factors were found to be restricting the ex• pansion of Canadian exports to Latin America. Apart from those already mentioned in general terms above, Canada is affected particularly bys detachment from the inter- American System and consequent political isolation? the trade patterns followed by Latin American countries characteristic of the underdeveloped world, exports of raw materials and pri• mary-commodities, and imports of capital goods and highly elaborated machinery and equipment? and, finally, by economic integration in Latin America, mainly through the creation of the Central American Common Market (CACOMA) and the Latin American Free Trade Association (LAFTA). These institutions by developing a preferential tariff system have considerably encouraged intra-regional trade and consequently diminished extra-regional trade. This has greatly affected forest products imports, which today are first purchased from countries within Latin America and only then from overseas countries such as Canada. Chile, the only net exporter of industrial forest 256 products to the region and with the potential to increase production over the next few decades, is found to be benefiting considerably from LAFTA agreements. Chilean pulp and paper, though presently produced at higher costs than Canadian because of LAFTA1s tariff concessions, finds no great difficulty in being marketed within the free trade area. This is why it must necessarily be concluded that Canada's potential exports to Latin America, and also those of any other country interested in selling in the area, will depend heavily on the future output of the Chilean forest industries and finally on how much it exports to its neighbors. Centering the Latin American hemisphere on Quito (Ecuador), every major Canadian port is found to be closer to Latin America than those of Europe. This is especially true if we consider the position of the Baltic countries and the Soviet Union, large suppliers of forest products to the region. Every Swedish, Finnish, Norwegian, and Russian port lies further away from Latin America than any of the Atlantic or Pacific shipping centers of Canada. This transportation advantage enjoyed by Canada should be carefully considered and given the degree of importance it deserves. Freight costs do not influence price as heavily 257 as other costs do? nevertheless, the high degree of compet• ition existing in the market for forest products, especial• ly for pulp and newsprint, forces suppliers into a position where every cent counts. Shipping costs in this case can easily make the difference between reaching or not a market competitively. Latin America has a wealth of forest. Within its boundaries lie almost 25% of the forests of the world. Despite the abundance of timber, forest products consumption has traditionally been low. This occurs principally be• cause a large proportion of the forests consist of hardwood or tropical softwoods for which no commercial use has been clearly established. The costs of operations is increased by climate and topography, which, added to capital and technological deficiencies, make it difficult to produce at competitive prices. Plantations of exotic softwood and broadleaved species, however, have presented Latin America with an extremely favourable opportunity to increase forest production. Today, man-made forests cover more than one and a half million hectares, and are being established at a rate of over 150 thousand hectares a year. Because of the shortage of long fibred wood and capital, 258 the wood pulp and paper industry has been unable to expand to meet demand. Softwood plantations present a solution to this problem. Given the potential area to be forested with fast growing conifers, Latin America could easily transform itself into an exporter of pulp products. Nevertheless, if this is to happen, it is still far in the future. Plan• tations require the immobilization for long periods of large quantities of capital. This capital will be difficult to find, and its opportunity cost in the region is high. The type of trees most widely used in plantations ares eucalyptus spp., pinus spp., populus spp., salix spp., and Araucaria Augustifolia. Great efforts to industrialize Latin America have recently been made. Trends indicate this process will con• tinue to grow. In these efforts the forest industries have been receiving careful attention and are expected to grow particularly fast in certain areas, namely southern Chile, southern Brazil, parts of Colombia, and in a few Central American countries. The reason for this growth is to be found in the idea that social betterment cannot be promoted without vastly increased quantities of processed wood. 259 Latin America's need for industrial wood in 1985 will be nearly three times greater than in the early 1960's. It is also forecast that by 1985 the region will require two and a half times as much sawnwood, eight times the volume of wood-based sheet materials, and six times as much pulp and paper as it consumed in 1963. The growth of the forest industries, though expected to be satisfactory in many ways, will not be good enough to prevent adverse trade balances on the wood products account. Pulp and paper imports in general, and newsprint in particular, will have the greatest influence on this unfavourable balance. In 1962 it was estimated that in pulp products alone, extra needs by 1975, if met completely through imports, would add around U.S. one billion dollars to the import bill of Latin America. If the extra demand was to be met fully from within, average early investments of up to U.S. 190 million dollars would be required during the period 1963-1975 to create the necessary facilities. The present levels of import indicate clearly that this ob• jective has not been met. Latin America, at least in general terms, has succeed• ed in developing comparative advantages in sawnwood but failed to do so in the wood-fibre related products. The 260 review of the available data showed that this trend will continue in the forseeable future. By 1975, the region will be exporting about 5 million m3 net of sawnwood but most probably will have to import 50 thousand m3 net of plywood and veneer, 150 thousand m3 of particle board, 400 thousand m3 of fibre board, 192 thousand tons of pulp and 1,279 million tons of newsprint. These figures have been obtained under the assumption that all producing countries in Latin America will sell totally within the area. If any nation deviates from this line by deciding to sell outside the region, net imports should be expected to rise accordingly. Of all Latin American countries only Chile, being a net exporter of forest products, imposes a serious threat to Canadian imports. Naturally, every country by system• atically increasing its own production, even if all is consumed domestically, can influence overall imports to Latin America. However, because of the considerable ex• pansion in production forecasts for Chile, this country is the only one that can have a sizeable impact on overseas imports. The success of the Chilean forest industries is mainly 261 related to the extensive creation of softwood plantations. The situation can be compared in many ways to that of New Zealand where Radiata pine (pinus radiata D.don) is today the basis for the majority of the wood using industries. In the same way, this tree, originally brought from Cali• fornia, has become the largest supplier of raw material to the Chilean pulp and paper and sawnwood industries. Total plantations in Chile now cover more than 380 thousand hectares. By 1980 radiata pine forests alone are expected to increase to 918 thousand hectares. This area will permit a considerable expansion of the wood-based in• dustries and annual production is expected to reach, by 1980, 920 thousand tons of cellulose, 380 thousand tons of newsprint, 29 thousand tons of fibre board, 36 thousand tons of particle board, 1.05 billion board feet of sawnwood, 3 and 56 thousand m of plywood. The exportable surplus in the same year, most of which is expected to be shipped to other Latin American countries, will reach 708 thousand tons of cellulose, 280 thousand tons of newsprint, and 100 million board feet of sawnwood. Wood-based panel production is expected to be almost entirely consumed domestically. Evaluating the possibilities for Canada to expand 262 exports to Latin America, the most encouraging products to work on are pulp and paper, with a special emphasis on newsprint. More than 1.5 million tons of these products will have to be imported from outside the region by 1975. Depending on how well the Latin American industry grows, wood-based panel products might also provide an area into which Canada could expand, especially in the case of fibre board. The greatest competition with Canada's interest in Latin America, apart from that presented by Chile, is ex• pected to come from the United States, Sweden, Finland, Norway, and the U.S.S.R. Nevertheless, the Canadian forest industry has been found to be producing at competitive prices compared to these countries and it should thus find no great difficulties in increasing sales in Latin America provided an adequate marketing effort is made. However, considerable doubt exists as to whether Canada will be able to maintain this comparative advantage in the long run. A basic prerequisite for this to happen would be to assure a continuous supply of raw material at competitive prices to the wood processing industries of the country. Finally, though reluctance to increase the marketing 263 effort in Latin America could exist for the reason that in other parts of the world the same amount of effort could yield a larger profit and for a longer period of time, it should not be forgotten hat this might not be the case in years to come. A drastic increase on the Soviet Union's forest production could well induce such a change both in Europe and in the Asia Pacific region. In the meantime, somebody will have to supply Latin America's net deficits. Canada is probably the country best suited for this job. There are many advantages in paying greater attention to Latin America, none of which will ever go against the in• terests of Canada in the United States, Japan or the United Kingdom. On the contrary, they will probably complement them. 264'. BIBLIOGRAPHY Adams, R. D.? El-osta, M.L.; and Wellwood, R. W. 1968. Index of Selected Articles from Canadian Journals Per• taining to the Forest Products Industries. 1965- 1967. Faculty of Forestry. University of British Columbia, Vancouver. 23 pp. Alcazar, R. 1968. Economic Evaluation of a Cellulose Plant Project in the Pine Area of Tome. In Spanish. (Evaluacion Economica de un Proyecto para una Planta de Celulosa en la Zona Pinera de Tome). Thesis. Forestry Engineer Degree. University of Chile. Santiago, Chile. 118 p. Aguilar, A. 1968. Pan-Americanism from Monroe to the Present. Monthly Review Press. New York. 192 pp. Alexander R. 1962. Labor Relations in Argentina, Brazil and Chile. New York, McGraw Hill Book Co., 411 pp. Allen, G. A. 1927. Development of Canadian Trade with Latin America. M.A. Thesis. Department of Economics. Faculty of Arts. University of British Columbia, Vancouver. 225 pp. American Paper Institute Inc. 1968. Wood Pulp Statistics. Pulp Division, 32nd Edition, October. 245 pp. Anglin, D. G. 1961. United States opposition to Canadian Membership in the Panamerican Unions a Canadian View. Int. Org., XV/l. 1-20 pp. Asociaci6n Latinoamericana de Libre Comercio. 1968. Lista Consolidada de Concesiones. 2 Volumes. Montevideo, Uruguay. 1371 pp. Atlantic Development Board. 1969. Forestry in the Atlantic Provinces. Background Study No. 1, Queen's Pr inter, Ottawa. 265 Aullo Urech, M. 1965. Report to the Government of Perus Forest Resources in Economic and Social Develop• ment. In Spanish. Food and Agriculture organi• zation, U.S. Expanded Tech. Assistance Program. FAO Report 2106. 42 pp. Bailey, N. A. 1967. Latin America in World Politics. Walker and Company. New York. 250 pp. Ball, M. M. 1944. The Problem of Inter-American Organ• ization. Stanford University Press. Stanford University, California. 117 pp. Bank of Montreal. 1970. Foreign Exchange Quotations, 30th January. Montreal. 1 pp. Beazley, R. 1965. Planning and Developmental Requirements in the Forest Land Sector of Less-Developed Countries. Reprint. Proc. Soc. of Amer. For. Detroit, Michigan. Beggs, A. K. 1964. Geographic and Economic Influences on Development of the World's Forest Resources. Western Forestry and Conservation Association. 54th Western Forestry Conference, People's Stake in Land Use. p. 19-23. Benham, F. and Holley, H. A. 1964. A Short Introduction to the Economy of Latin America. Oxford Uni• versity Press. London. 169 pp. Beresford-Peirse, H. 1968. Forests, Food and People. Freedom from Hunger Campaign Basic Study, FAO No. 20. Rome, Italy. 72 pp. Besley, L. 1967. Canada's Pulp and Paper Industry. Jour. Forestry 65(10)s699-705. October. Blasier, C. (ed.) 1968. Constructive Change in Latin America. University of Pittsburgh Press. Pittsburgh. 243 pp. Bowers, C. 1958. Chile through Embassy Windows, 1939-1953. Simon and Schuster. New York. 266 Bowland, J. G.,° Fitzpatrick, J. M. ? Taylor, D. E.s and Sudbury, A. E. J. 1968. The Use and Production of Construction-Grade Plywood in Canada. Forest Economics Research Institute, Department of Forestry and Rural Development. Ottawa. 28 pp. British Columbia, Department of Industrial Development, Trade, and Commerce. 1963. The Pacific Rim of Latin America—a Trade Aid for British Columbia Businessman. Bureau of Economics and Statistics. September. Victoria. 47 pp. Burr, R.N. 1967. Our Troubled Hemisphere. The Brookings Institution. Washington, D. C. 256 pp. Butland, G. J. 1956. Chile, an Outline of its Geography and Politics. Royal Institute of International Affairs. London. 123 pp. Canada, Department of Forestry. 1965. Timber Trends and Prospects in Canada. Review Draft. September 7th. Queen's Printer, Ottawa. Canada, Department of Forestry. 1966 a. National Forestry Conference. February 21-24, 1966. Summaries and Conclusions. Queen's Printer, Ottawa. 43 pp. Canada, Department of Forestry. 1966 b. Canada's Forests 1965. Economics Division. Queen's Printer, Ottawa. Canada, Department of Forestry. 1967. Annual Report 1965. Queen's Printer and Controller of Stationery Ottawa. 80 pp. Canada, Department of Forestry and Rural Development. 1968 a, Canadian Forest Products Exports—Highlights and Outlook. Research News. 11(3)sl-8. Canada, Department of Forestry and Rural Development. 1968 b, Annual Report. Fiscal Year 1967-1968. Queen's Printer, Ottawa. 64 pp. 267 Canada, Department of Industry. 1966. A Study of the Particle Board Industry. Wood Products Branch Reprint. Ottawa. 47 pp. Canada, Department of Industry, Trade and Commerce. 1969. A Study of the Canadian Hardwood Veneer and Plywood Industry. Wood Products Branch. March, Montreal. Canada, Dominion Bureau of Statistics, Industry Division. 1961. Pulp and Paper Mills 1961. Queen's Printer Catalogue No. 36-204. October, Ottawa. 31 pp. Canada, Dominion Bureau of Statistics. 1965. Canadian Forestry Statistics, 1962. Ottawa. 24 pp. Canada, Dominion Bureau of Statistics. 1969. Canadian Forestry Statistics, 1966. Manufacturing and Primary Industries Division, May. Queen's Printer, Ottawa. 28 pp. Canada, Forest Economics Research Institute.,1968. Canada's Forests. Department of Forestry and Rural Development. Queen's Printer, Ottawa. 9 pp. Canadian Pulp and Paper Association. 1968. The Forest Harvest. Sun Life Building. Montreal. 38 pp. Canadian Pulp and Paper Association. 1969 a. From Water• shed to Watermark. 7th Edition. Montreal. 21 pp. Canadian Pulp and Paper Association. 1969 b. Reference Tables 1969. 23rd Edition, July. Montreal. 28 pp. Canadian Pulp and Paper Association and American Paper In• stitute, Pulp Division. 1969. World Wood— Pulp Data 1967-1968. September, Montreal. 31 pp, Casasempere, A. 1967. A Comparative Land Rent Study be• tween Sheep Raising and Radiata Pine, Provinces of Bio-Bio and Malleco. In Spanish. (Estudio Comparativo de Rentabilidad entre Ovejeria y Pino Insigne (Pinus Radiata D.Don), Provincias de Bio- Bio y Malleco). Thesis Forestry Engineer Degree. University of Chile, Santiago, Chile. 148 pp. 268 Casasempere, A. 1968. The influence of the Forester over the Chilean Forestry Economy. Graduate Student Seminar. Faculty of Forestry. University of British Columbia. Vancouver. 9 pp. Casasempere, A. 1969. An Outline of the Chilean Forest Economy. Paper prepared as a Direct Study in Forest Economics. Unpublished. Faculty of Graduate Studies. University of British Columbia, Vancouver. 80 pp. Carter, R. L. J. 1968 b. The Market for Wood Pulp, a Global and Regional Study. Praeger Special Study in International Economics and Development. Frederick A. Praeger, Publishers. New York. 92 pp. Catano, A. R. 1964. Role of Forestry in the Economic Dev• elopment of Mexico. Thesis. M.S. University of Washington. Chile, Instituto Forestal. 1962. Apparent Structure of the Basic Forest Products Industry in Chile. Infor• mation Paper No. 1. Santiago, Chile. 12 pp. 1 map. Chile, Instituto Forestal. 1963. Estadisticas Forestales. Informe Tecnico No. 6. Santiago, Chile. 72 pp. Chile, Instituto Forestal. 1965 a. Proyeccion de la Demanda de Productos Forestales. Informe Tecnico No. 14. Santiago, Chile. 29 pp. Chile, Instituto Forestal. 1965 b. Estudio de Mercado de la Madera Terciada. Informe tecnico No. 15. Santiago, Chile. 32 pp. Chile, Instituto Forestal. 1966 a. Estadisticas de Pro• ductos Forestales. Informe Tecnico No. 28. Santiago, Chile. 67 pp. Chile, Instituto Forestal. 1966 b. Inventario de las Plantaciones Forestales de la Zona Centro-Sur de Chile. Informe Tecnico No. 24. Santiago, Chile. 93 pp. 1 map. 269 Chile, Instituto Forestal. 1967 a. chile Exportador de Pinus Radiata, Folleto, Santiago, Chile, 17 pp, Chile, Instituto Forestal, 1967 b. Balanza Comercial de Productos Forestales de Chile y de la ALALC en el Quinquenio 1961-1965, Nota Tecnica No, 10, Santiago, Chile, 8 pp, Chile, Instituto Forestal. 1967 c. Precios de Productos Forestales. Boletin Informativo No. 13. Santiago, Chile. 33 pp. Chile, Instituto Forestal. 1967 d. Precios de Productos Forestales. Boletin Informativo No. 15. Santiago, Chile. 27 pp. Chile, Instituto Forestal. 1968 a. Precios de Productos Forestales. Boletin Informativo No. 17. Santiago, Chile. 23 pp. Chile, Instituto Forestal. 1968 b. Precios de Productos Forestales. Boletin Informativo No. 18. Santiago, Chile. 40 pp. Chile, Ministerio de Agricultura, Departamento Forestal. 1966. Plan Nacional de Reforestacion. Informe Final. Santiago, Chile. 58 pp. Chile, Ministerio de Agricultura. 1967. Plan Nacional Contra Incendios Forestales. Informe Final. Santiago, Chile. 167 pp. 1 map. Clark, M. G. 1964. Canada and World Trade. Staff Study No. 7 Economic Council of Canada. Queen's Printer, Ottawa, Canada. 64 pp. Cole, J. P. 1965. Latin America an Economic and Social Geography. Butterworth & Co. Ltd. London. 468 pp. Corporacion Chilena de la Madera. 1966. Plan de Desarrollo Forestal, El Maderero No. 16-17. Editorial Lord Cochrane. Santiago, Chile. : 7-24. 270 Corporacion de Fomento de la Produccion. 1965. Geografia Economica de Chile. Tomos I, II, III, IV y V. Fundacion "Pedro Aguire Cerda." Santiago, Chile. Crowther, J. W. 1964. An Investigation of the Movement of British Columbia Softwood Lumber to U.S. Markets. M.B.A. Thesis, University of British Columbia, Vancouver. 196 pp. D'Adamo, O. D. 1965. The Forest Economy of Latin America. Lat. Amer. Conf. Food Agr. 1965 s 91-100. D'Adamo, O. D. 1967. Financing Forestry Plantations in South America. In Spanish? summary in English. World Symp. Man-Made Forests Indus. Import. (Position Paper) 24/2, 13 pp. Davis, T. E. 1963. Eight Decades of Inflation in Chile. 1879-1959. Journal Polit. Econ. 71 (4) Aug ; 389-397. Davis, CM. 1964. The Export Market for British Columbia's Forest Products to 1975. B.S.F. Thesis, University of British Columbia, Faculty of Forestry. 47 pp. Davis, T. E. 1965. Changing Conception of the Development Problem s The Chilean Example. Econ. Develop. Cult. Change. 14 (1) Oct.s 21-32. Davis, H. E. 1968. History of Latin America. The Ronald Press Company. New York. 784 pp. De Leeuw, P. B. 1964. An Analysis of Present and Potential Markets for British Columbia Forest Products in the European Economic Community and the United Kingdom. B.S.F. Thesis. Faculty of Forestry, University of British Columbia, Vancouver. 192 pp. Dell, S. 1966. A Latin American Common Market? Oxford University Press. London. 336 pp. 271 Delwart, L. 1960. The Future of Latin American Exports to the United States? 1965 and 1970. National Planning Association, Washington, D. C; 130 pp. Deymonnaz, Y. W. 1966. Significance of the Plywood Industry in the Argentine Forest Economy. Bol. Argent. Forest. 24(255).4. June. Dobrow, M. C. 1966. World Market Prospects for Pulp and Paper. American Paper Industry 48(1)s50, 53-55. January. Downs, J. R. 1965. Export Projections to 1970. Staff Study No. 8 Economic Council of Canada, Queen's Printer, Ottawa, Canada. 38 pp. Dubois, R. 1968. The Paper Industry in Uruguay? the Present Situation and the Future Outlook. In French; Summary in English. Bois Forets Trop. 117s31-48. January/February. Dumitrescu, N. St. and Fuchs, A. 1966. Planning the Development of the Forest Industry. In English, French, and Spanish. Paper presented at Sixth World Forestry Congress, Madrid. 21 pp. Dusting, N. 1965. British Columbia's Future in Forest Products Trade in Asia and the Pacific Area. Proceeding of a Seminar held in February 19, 1965 at the University of British Columbia, s22-24. Editorial Correspondents. 1968. World Wood Review. World Wood, 9(4)s68. July. Editorial Correspondents. 1969. World Wood Review. World Wood, 10(8)s68. July. Export Subcommittee of the International Trade Committee. 1966. Foreign Markets for U.S. Paper and Paper- board in Brazil, Peru, Venezuela. American Paper Institute. New York. 26 pp. Export Subcommittee of the International Trade Committee. 1967 Foreign Markets for U .S. Paper and Paperboard in Ecuador, Honduras and Mexico. American Paper Institute, New York. 37 pp. October. 272 FAO. 1948 a. Information on Forestry and Forest Products in Latin America. Unasylva (1) s 36-37. FAO. 1948 b. The Latin America Conference on Forestry and Forest Products. Unasylva 2(3)s95-126. FAO. 1948 c. Forest Resources of the World. Report. Unasylva 2(4)s 160-182. FAO. 1953. Prospects for Agricultural Development in Latin America. Rome, Italy. 146 pp. FAO. 1957 a. Report of the United Regional Meeting on Food and Agricultural Programs and Outlook in Latin America. Rome, Italy. 99pp. FAO. 1957 b. Report of the Fourth Regional Conference for Latin America. Rome, Italy. 89 pp. FAO. 1961. World Demand for Paper to 1975—A study of Re• gional Trends. Rome, Italy. 159 pp. FAO. 1962. Yearbook of Forest Products. Rome, Italy. FAO. 1963 a. Pulp and Paper in Latin America; Present Situation and Future Trends of Demand Production and Trade. Expanded Tech. Assistance Program. Report 1346 rev. Rome, Italy. 81 pp. FAO. 1963 b. Timber Bulletin for Europe. Rome, Italy. FAO. 1964 a. Yearbook of Forest Products. Rome, Italy. FAO. 1964 b. Expansion of Exports of Forest Products from Developing Countries. Forestry and Forest Pro• ducts Division. Unasylva 18(l)s3-ll. FAO. 1964 c. Prospects for Expanding Forest Products Exports from Developing Countries. Rome, Italy. 43 pp. FAO. 1965 a. World Forest Products Statistics, a Ten-Year Summary 1954-1963. In English, French, and Spanish. Rome, Italy. 350 pp. FAO. 1965 b. Situation and Prospects of the Board Industry in Latin America. Bol. For. Ind. For. Amer. Lat., FAO, 45s12-14, Jan-March. Santiago, Chile. 273 FAO. 1965 c. Balance of Supply and Demand in the Pulp and Paper Industry in Latin America. Bol. For. Ind For. Amer. Lat., FAO, 45s14-26. Jan-March. Santiago, Chile. FAO. 1965 d. Latin American Pulp and Paper Review Con• sultation . Bol. For. Ind. For , Amer. Lat., FAO, 46sl3-17. April-June. Santiago, Chile. FAO. 1966 a. Yearbook of Forest Products. Rome, Italy. FAO. 1966 b. Chile. Bol. For. Ind. For. Amer. Lat., 50s23-25. June. Santiago, Chile. FAO. 1966 c. Chile. Bol. For. Ind. For. Amer. Lat., 51s21-24. July-Sept. Santiago, Chile. FAO. 1966 d. Trends in the World's Production, Trade and Consumption of Wood and Wood Products. Repr. from Monthly Bulletin of Agricultural Economics and Statistics, 15(4). Rome, Italy. 8 pp. FAO. 1966 e. Consultation on the Development of the Pulp and Paper Industry in Latin America. Bol. For. Ind. For. Amer. Lat. 49s7-8. March. Santiago, Chile. FAO. 1966 f. Main Features of the Recent Development of Forestry and Forest Industries in the Region. Bol. For. Ind. For. Amer. Lat., FAO, 49s4-7 March. Santiago, Chile. FAO. 1967 a. Ninth FAO Regional Conference for Latin America. Forestry and Forest Industries Develop• ment. Bol. For. Ind. For. Amer. Lat. 53s1-12. March. Santiago, Chile. FAO. 1967 b. Tenth Session of the Latin American Forestry Commission. Bol. For. Ind. For.Amer. Lat. 56; 3-6. December. Santiago, Chile. FAO. 1967 c. First Session on the FAO Committee on Wood- Based Panel Products. Bol. For. Ind. For. Amer. Lat. 53;14-19. March. Santiago, Chile. 274 FAO. 1967 d. Woods World Trends and Prospects. Rome, Italy. 130 pp. FAO. 1967 e. A Preliminary Survey of the Wood-Based Panel Insustry in Latin America. Advisory Group on Forest Industries Development for Latin America. June. Santiago, Chile. 85 pp. FAO. 1968 a. Yearbook of Forest Products. Rome, Italy. FAO. 1968 b. Expansion of Exports of Forest Products from Developing Countries. Commodity Report. Unasylva 22(Is 2)s30-40? 31-44. FAO. 1968 c. Tenth FAO Regional Conference for Latin America. Bol. For. Ind. For. Amer. Lat. 60s 2-3. Santiago, Chile. FAO. 1968 d. Ninth Session of the FAO. Advisory Committee on Pulp and Paper. Bol. For. Ind. For. Amer. Lat. 59s1-3. September. Santiago, Chile. FAO. 1968 e. The Wood-Based Panel Board Industry in Central America. Bol. For. Ind. For. Amer. Lat. 58s1-4. June. Santiago, Chile. FAO. 1968 f. National News. Bol. For. Ind. For. Amer. Lat. 57s20-24. March. Santiago, Chile. FAO. 1968 g. Forest Industries in Latin America and Pro• spects for their Development. Bol. For. Ind. For. Amer. Lat., FAO, 59s6-29. September. Santiago, Chile. FAO/ECE Secretariat. 1965. Recent Trends and Future Pro• spects in the Sawmilling Industry. In English, French, and Russian. Food and Agriculture Organi• zation of the United Nations. Economic Commission for Europe. Supp. 2 to Vol. XVIII of the Timber Bui. for Europe. Is 1-36. June. FAO/ECLA/BTAO Pulp and Paper Advisory Group for Latin America. 1966. Research on Pulp and Paper in Latin America. Organized jointly by the Economic Commission for Latin America and the United Nations Centre for 275 Industrial Development. Latin American Symposium on Industrial Development. Santiago, Chile. March 14-22, 66 pp. Fellows, E. S. 1965. Canadian Forest Resources in Rela• tion to Projected Demands upon them. Pulp and Paper Mag. Canada 66(6)s WR290-WR291, WR294- WR295, WR298-WR299. June. Fowler, R. M. 1966. Subject I Summary p. 7-12 in Summaries and Conclusions. National Forestry Conference. Dept. of Forestry, Ottawa. 43 pp. Fowler, R. M. 1969. Pulp and Paper Report. CPPA. Montreal. 7 pp. Galdames, L. 1941. A History of Chile. Chapel Hill, University of North Caroline. 308 pp. Garrasino, L. M. 1966a. Argentine Forestry and the Im• portation of Wood from Paraguay. In Spanish. Bol. Argent. Forest. 25(258)s5-6. November/ December. Garrasino, L. M. 1966 b. Panorama of Argentine Forestry. In Spanish. Bol. Argent. Forest. 24(255)s8-10. June. Gedney, D. R. 1963. Towards Complete Use of Eastern Oregon's Forest Resources. U.S.F.S. Resource Bulletin. PNW-3, May. Georgette, M. D„ 1967. Latin America an Annotated Biblio• graphy of Paperback Books. Hispanic Foundation. Bibliographical Series No. 11. Library of Con• gress. Washington, D. C. 77 pp. Gil, F. and Parrish, C. J. 1965. The Chilean Presidential Election of September 4, 1964. Institute for the Comparative Study of Political Systems. Washington, D. C. Gil, F. 1966. The Political System of Chile. Houghton Mifflin. Boston. 276 Gilmour, J. D. 1946. The Exotic Forests of Chile. British Columbia Lumberman. 30(5)s89-90. Glesinger, E., Westoby, J. C, and Gimenez-Quintana, L. 1966. Report to the Government of Chile by the Forestry Mission of the FAO—1966. In Spanish. Organizacion de las Naciones Unidas para la Agricultura y la Alimentacion. Programa de las Naciones Unidas para el Desarrollo, FAO No. AT 2230. 44pp. Greeley, W. B. 1953. Forest Policy. McGraw-Hill Book Company Inc. New York, Toronto, London. 278 pp. Gregersen, H. M. 1969. Economic Integration and the Develop• ment of Industry—the Case of Forestry and Forest Industries in the Central American Common Market. Ph.D. Thesis, University of Michigan. Gregory, G. R. 1965. Forests and Economic Development in Latin America a challenge for the American Forestry Profession. Jour. Forestry 63(2)s83-88. February. Gross, L. 1967. The Last Best Hope % Eduardo Frei and Chilean Democracy. Random House. New York. 240 pp. Haig, I. T. 1945 a. Forests and Forest Industries in Chile. Caribbean Forester. 6s191-207. Haig, I. T. 1945 b. Forests of Chile. Timberman, Aprils 52-53. Haig. I. T. et al. 1946. Forest Resources of Chile as a Basis for Industrial Expansion. By Irvin T. Haig, L. V. Tessdale, Philip A. Briegleb, Burnett H. Payne and Martin H. Haertet. Forest Service U. S. Department of Agriculture in Cooperation with Corporacion de Fomento de la Produccion, Chile. 256 pp. 1 map. Hair, D. and Ulrich, A. H. 1969. The Demand and Price Situ• ation for Forest Products 1968-69. U.S.D.A. Forest Service, Misc. Public No. 1086. 74 pp. 277 Hale, W. F. 1948. Chileans Sell Forestation Bonds. Journal of Forestry. 46(9).686. Halperin, E. 1965. Nationalism and Communism in Chile. Massachusetts Institute of Technology. Cambridge, 267 pp. Hanson, E. P. 1950. The New World Guides to the Latin American Republics "Chile" (Vol.11) Duell. New York. Harper, D. A. 1965. "British Columbia's Future in Forest Products Trade in Asia and the Pacific Area." Proceedings of a seminar held on February 19, 1965 at University of British Columbia, s17-22. Haviland, W. E. ? Takacsy, N. S.; and Cape, E. M. 1968. Trade Liberalization and the Canadian Pulp and Paper Industry. Canada in the Atlantic Economy. University of Toronto Press. Toronto, Canada. 107 pp. Heinsdijk, D., and Glerun, B. B. 1967. Inventories and Commercial Possibilities of Brazilian Forests. Turrialba 17(3).337-347, July/September. Herbrien, J. D. 1963. Canada and the Organization of American States. Washington, D.C., National Planning Association. 38 pp. Herrera, S. A. and Julio, G. A. 1967. Recursos Forestales de Chile. Ministerio de Agricultura. Departa- mento Forestal. Cartilla No. 2. Santiago, Chile. 20 pp. 2 maps. Hirschman, A. 0. 1963. Journeys Toward Progress. Twenti• eth Century Fund. New York. 308 pp. Holland, I. I. and Judge, G. G. 1965. Softwood Lumber Imports are of Continuing Concern. Forest Indust• ries, 92(6)sl6-19. Humphrey, J. P. 1942. The Inter-American System. A Canadian View. The Mac Millan Company of Canada Limited. Toronto. 329 pp. 278 Hutchison, I. D. 1967. Report on the Preliminary Study of the Forests of Bolivia. Food Agr. Organ. UN Expanded Tech. Assistance Program. FAO Report 2323. 101 pp. Illing, W. M. 1967. Population, Family, Household and Labour Force Growth to 1980. Economic Council of Canada, staff Study No. 19. September. Queen's Printer, Ottawa. International Monetary Fund. 1966. International Financial Statistics. 18(19). Washington, D. C. International Monetary Fund. 1966. International Financial Statistics. 21(12). December. International Monetary Fund. Washington, D. C. International Monetary Fund. 1969. International Financial Statistics 22(9) September. International Monetary Fund. Washington, D. C. Jennejohn, R. G. 1965. Factors and Trends in the Export of British Columbia Forest Products to Japan. B.S.F. Thesis. Faculty of Forestry. University of British Columbia, Vancouver. 79 pp. Johnson, J. J. 1958. Political changes in Latin America % The Emergence of the Middle Sectors. "Chile, the Middle Sectors Politically Entrenched" (Chapter 5), Stanford University Press. Palo Alto California. 272 pp. Kendrew, W. G. 1953. The Climates of the Continents. The Clarendon Press. Oxford. 607 pp. Kingston, J. T. B. 1965. Canadian Forest Products and Changing World Markets. Reprinted from the Canada Yearbook. 1965. D .B .S . 8 pp. Koehler, W. 1967. European Common Market and its Influence on the Production of Timber and Forest Products. Journal of Forestry 65(2)s90-95. 279 Kraemer, J. H. 1967. Report to the Government of Mexico on Policy for the Development of Forest Management. Food Agr. Organ. UN Expanded Tech. Assistance Program. FAO Report 2378. 21 pp. Latin American Center. 1965. Periodicals for Latin American Economic Development, Trade and Finance s An Annotated Bibliography. University of California. Los Angeles. 72 pp. Leslie, A. J. 1968. Tropical Forestry and Economic Develop• ment. Common For. Rev. 47(1)s13,40-51. MacGregor, J. J. 1967. Forestry and the European Economic Community. Commonw. For. Rev. 46(4)% 328-336. Mead, W. J. 1964. Resource Control as a Basis for Market Powers the Case of Timber. Paper Presented at the Conference on "Tax Treatment of Exhaustible Resources." University of Wisconsin, Milwaukee. August 17-19. 26 pp. Munro, D. G. 1960. The Latin American Republics s A History, "The River Plate and Chile," (part III). Century Crofts. Appleton, New York. National Geographic Magazine, 1960. "Chile," February, 1960. Nautiyal, J. c, and Smith, j. H. G. 1967. Acceleration of Economic Development depends on Harmonization of Technical and Economic Objectives for Forestry. Fac. of Forestry. University of British Columbia, Vancouver. (Pap. 9th Commonw. For. Conf., New Delhi 1968). 20 pp. Nehemkis, P. 1964. Latin America Myth and Reality. Alfred A. Knopf, Inc. New York. 2 86 pp. Newsprint Association of Canada. 1969. Newsprint Datas 1969 Statistics of World,Demand and Supply. November. Montreal. 32 pp. Newsprint Information Committee. 1969. Newspaper and News• print Facts at a Glance 1968-1969. Eleventh Edition. March. New York. 36 pp. 280 Osara, N. A. 1963. Expansion of Forestry and Forest Industries in Underdeveloped Countries. Unasylva 17(3) No. 70x115-119. Organization of American States, Department of Economic Affairs. 1964. Economic Survey of Latin America 1962. The Johns Hopkins Press, Baltimore. 444 pp. Organization of American States, Department of Economic Affairs and Social Affairs. 1967. The Alliance for Progress and Latin-American Development Prospects s A Five-Year Review, 1961-1965. The Johns Hopkins Press, Baltimore. 213 pp. Organization for Economic Co-operation and Development. 1968 a. Technical Assistance and the Needs of Developing Countries. Paris. 44 pp. Organization for Economic Co-operation and Development. 1968 b. Commodity Trade % Exports. Market Summaries Statistics of Foregin Trade. Series C Jan-Dec 1968. Paris. Pendle, G. 1960. The Land and People of Chile. Adam and Charles Black. London. 96 pp. Petras, J. 1967. Chilean Christian Democracy s Politics and Social Forces. Institute of International Studies. University of California. Berkeley. Petriceks, J. 1965. Las Funciones de los Bosques y del Manejo Forestal en el Futuro. Revista Forestal Venezolana 12/13s5-18. Petroff, G. 1969. A Pulp and Paper Plant in Brazil—The Klabin Association Monte Alegre, Parana. Bois For. Trop. (123).37-45. Powelson, J. P. 1964. Latin America—Today's Economic and Social Revolution. McGraw Hill Book Company. New York. 303 pp. Pulp and Paper International. 1966. 1966 Review number. Pulp and Paper International 8(9)s282 pp. August 25. 281 Ramaer, J. W. 1964. Possibilities of Expanding Lumber Markets in Europe and the U.K. with Special Reference to Western Hemlock and Western Red Cedar. B.S.F. Thesis, Faculty of Forestry. University of British Columbia, Vancouver. Rankin, A. G. 1963. Cost-price Relationships in the Forest Industry. Forestry Chronicle. 39(1)s 69-77. Reed, F. L. C. 1965. British Columbia's Share of Asian and Pacific Markets, 1923, 1943, 1963, 1983. Proceedings of a Seminar held on February 19, 1965 at the University of British Columbia. % 29-39. Renwick, R. F. 1968. International Trade in British Columbia Forest Products. Paper presented at Pacific Northwest Trade Association Confer• ence, Eugene, Oregon. April 22. 19 pp. Resources for the Future, Inc. 1967. U. S. Timber Re• sources in a World Setting. REF Annual Report 1967. -.29-35. Reuber, G. L. 1964. Canada's Interest in the Trade Problems of Less-developed Countries. Canadian Trade Committee. Private Planning Association of Canada. Montreal. 101 pp. Reynolds, C. W. 1963. Domestic Consequences of Export Instability (Chile). Amer. Econ. R. 53(2), May 63. Pan. and Proc. % 93-102 and 103-111. Roberts, D. 1965. British Columbia and its Forest Re• sources. Pulp and Paper Mag. Canada 66(8)s73-78. August. Rockefeller, N. A. 1969. The Rockefeller Report on the Americas. The Official Report of a United States Presidential Mission for the Western Hemisphere. The New York Times Edition. Quadrangle Books. 144 pp. 282 Rosas Mata, H. 1965. Enfoque Economico de la Industria Maderera en Venezuela. Boletin Forestal 7s35-54. Rousseau, L. Z. 1965. Forest Resources of the World and their Implications. Pulp and Paper Mag. Canada 66(9) sWR388-WR390. Rousseau, L. Z. 1967. Federal and Provincial Forest Policies in Canada. For. Chron. 43(l)s21-23. Sable, M. H. 1967. A Guide to Latin American Studies. Vol. 1 and 2, Reference Series No. 4. Latin American Center. University of California. Los Angeles. Sartorius, P., and Henle, H. 1968. Forestry and Economic Development. Frederick A. Praeger, New York. 340 pp. Sauve, M. 1965. Forestry—A look at the Future. For. Chron. 41(4).391-396. Schneider, R. M. 1965. An Atlas of Latin American Affairs. Frederick A. Praeger, Publishers. New York. 136 pp. Scott, C. W. 1954. Radiata Pine in Chile. EPTA Project Report Expanded Tech. Assistance Program. Unasylva 8(4):159-164. Scott, C. W. 1960 a. Radiata Pine as an Exotic. Unasylva 4(1) s6-16. Scott, C. W. 1960 b. Pinus Radiata. FAO Forestry and Forest Products Studies No. 14. Rome, Italy. 328 pp. Scott, C. W. 1966. The Changing Aims of Forestry. Jour, of Forestry. 39(1)slO-16. Shand, E. A. 1967. Assessing the Competitive Position of British Columbia in Meeting World Wood Needs % A Market Oriented Approach. Research Paper. Faculty of Forestry. University of British Col• umbia, Vancouver. 21 pp. 283 Shapiro, S. 1968. Cultural Factors in Inter-American Re• lations. University of Notre Dame Press. Notre Dam. Indiana. 368 pp. Silvert, K. H. 1965. Chile s Yesterday and Today, Holt, Rinehart and Winston, New York. Slater, D. W. 1968. World Trade and Economic Growth Trends and Prospects with Applications to Canada. Canada in the Atlantic Economy. University of Toronto Press. Toronto, Canada. 94 pp. Smith, G. C. 1966. The Inter-American System. The Royal Institute of International Affairs. Oxford University Press. London. 376 pp. Smith, J. H. G. 1967. Implications for Forest Industries and Management of an Expanded Role for North American Forestry in Meeting World Wood Needs. Paper prepared for Joint Meeting of the Canadian Institute of Forestry and Soc. of Amer. Foresters, October 1967. Ottawa, Canada. 24 pp. Stahelin, R., and Everard, W. P. 1964. Forests and Forest industries of Brazil. U. S. Forest Serv. Forest Resource Report 16. 50 pp. Streyffert, T. 1966. The World's Forest Resources and their Adequacy. In English, French, and Spanish. Paper presented at Sixth World Forestry Congress, Madrid. 12 pp. June. Streyffert, T. 1968. World Pulpwood. A Study in the Competitive position of pulpwood in different forest regions. Almgvist and Wiksell. Stock• holm, Sweden. 213 pp. Subercaseaux, B. 1943. Chile, a Geographic Extravaganza. MacMillan. New York. 424 pp. Suzaeta, E. 1966 La Alternativa entre Bosques Naturales y Plantaciones. Escuela de Ingenieria Forestal. Universidad de Chile. Boletin Tecnico No. 12. Santiago, Chile. 13 pp. 284 Suzaeta, E. 1954. Consideraciones sobre Politica y Economia Forestal Chilenas. Escuela de Ingenieria Forestal. Universidad de Chile. Tesis mimeo- grafiada. Santiago, Chile. The Council of the Forest Industries of British Columbia. 1968. Annual Report. Vancouver. 20 pp. The International Customs Journal. 1969. Central American Common Market. Number 126 1st Edition. Up to date translation of the CACOM External Tariff and Amendments published in March 1969 by the International Customs Tariffs Bureau, 38 Rue de L'Association, Brussels. 235 pp. The Swedish Forestry Association. 1966. Swedish Forestry Guide. Stockholm, Sweden. 20 pp. Ticoulat, G. J. 1966. Forestry Investment from Industry's Point of View. In English, French, and Spanish. Paper presented at Sixth World Forestry Congress, Madrid.. 11pp. United Nations. 1961. Statistical Yearbook, 1960. New York. United Nations. 1962. Multilateral Economic Co-operation in Latin America. E/CN. 12/621. New York. 165 pp. United Nations. 1963 a. Demographic Yearbook, 1962. New York. United Nations. 1963 b. Statistical Yearbook, 1962. New York. United Nations. 1963 c. Towards a Dynamic Development Policy for Latin America. E/CN.12/680/rev.1. New York. 103 pp. United Nations. 1964. Possibilities of Integrated Industrial Development in Central America. E/CN,12/683/rev.1 New York. 54 pp. United Nations. 1965. A Contribution to Economic Integra• tion Policy in Latin America. E/CN.12/728. New York. 185 pp. 285 United Nations. 1966. Statistical Yearbook, 1965. New York. United Nations. 1968 a. Demographic Yearbook, 1967. New York. United Nations. 1968 b. Statistical Yearbook, 1967. New York. United Nations. 1968 c. Yearbook of National Accounts Statistics, 1967. United Nations. 1969. Statistical Yearbook, 1968. New York. United Nations, ECLA. 1958. Manual de Proyectos de Desarrollo Economico. Estudio preparado por el Programa CEPAL/AAT de Capacitacion en Materias de Desarollo Economico. Mexico, D. F., Naciones Unidas. 264 pp. United Nations, ECLA. 1964. Statistical Bulletin for Latin America. Vol.1(1). Santiago, Chile. 221 pp. United Nations, ECLA. 1966 a. The Investigations concerning Pulp and Paper in Latin America. CEPAL/FAO for Latin America, presented in Santiago, Chile. United Nations, ECLA. 1966 b. Pulp and Paper in Latin America Economic Commission for Latin America. Food and Agriculture Organization of the United Nations, presented by CEPAL in Santiago, Chile. United Nations, ECLA„ 1967. Statistical Bulletin for Latin America. Vol. 4(2). September, New York. 249 pp. United Nations Technical Assistance Administration, ECLA and FAO. 1957. Chile Potential Pulp and Paper Exporter. Santiago, Chile. 187 pp. 1 map. United Nations, ECLA/BTAO/FAO/Pulp and Paper Advisory Group for Latin America. 1966. Needs of Technological Education and Training for Personnel of the Latin American Pulp and Paper Industry. Sponsored joint• ly by ECLA, FAO, and BTAO. Review Consultation on Pulp and Paper Development in Latin America held jointly with Latin American Symposium on Industrial Development, Paper III/2 March 17-22, 1966. Santiago, Chile. 33 pp. 286 United Nations and FAO. 1963 a. Latin America Timber Trends and Prospects. New York. 117pp. United Nations and FAO. 1963 b. Pulp and Paper Prospects in Latin America. New York. 81 pp. United Nations Development Program and FAO. 1967. Institute for the Development of Forest Resources and Industries. Chile/General Report. Rome, Italy. 139 pp. 3 maps. United States, Department of Commerce. 1967. Population Estimates. Illustrative Projections of the Population of States 1970-1985. Series P-25, No. 362. March 7. Washington, D. C. 8 pp. United States, Department of Commerce. 1968. Basic Data on the Economy of Chile. Overseas Business Reports. U. S. Government Printing Office. February, 1963. Washington, D. C. 29 pp. Urquidi, V. L. 1964. The Challenge of Development in Latin America. Frederick A. Praeger, Publishers. New York. 209 pp. Wellwood, R. W. 1968. Consultant's Report on the Wood- Based Panel Board Industries of Venezuela. Rough Draft of a Report to FORESTAL—Forestry and Engineering International Limited, Vancouver. 70 pp. Westoby, J. C. 1968 a. The World's Wood and Some Contem• porary Issues. Inst, of Agric. University of Minnesota. St. Paul, Inst. Agric. Series No. 9. 20 pp. Westoby, J. C. 1968 b. Woods World Trends. Repr. From Advanc. Sci. 24(121)s343-353. Wilkinson, B. W. 1968. Canada's International Trades An Analysis of Recent Trends and Patterns. Canadian Trade Committee. Private Planning Association of Canada. Montreal. 200 pp. 287 Wilson, D. A. 1964. The Use of Demand Projections. in an Under-developed Country, and an Outline and Ap• praisal of Methods of Projecting the Demand for Forest Products. (Summary in French) Canada Department of Forestry, Economics Div. Department of Forestry Publication No. 1084. 14 pp. Wilson, D. A. 1966. "What is the Present State of Canada^ Forest Resources?" wood Products—the Supply of Timber from Canadian Forests. National Forestry Conference. Subject 2, Workshop 1, Montebello, Quebec. 35 pp. February 21-24. Wilson, D. A. 1969. Forest Resources and Industries of Canada. Commonw. For. Rev. 48(2)% 127-143. Wionczek, M. S. 1966. Latin American Economic Integration. Frederick A. Praeger, Publishers. New York. 310 pp. Wionczek, M. S. 1968. Latin American Common Markets where do they stand? In Ceres/FAO Review. Vol.1, no. 6 p. 32-37. Nov-Dec. Wish, J. R. 1975. Economic Development in Latin America, an Annotated Bibliography. Frederick A. Praeger, Publishers. New York. 144 pp. Zivnuska, J. A. 1966. The Integration of Forest Development Plans and National Development Plans, how to make the Forestry Case at the National Level. In English, French, and Spanish. Paper presented at Sixth World Forestry Congress, Madrid. 15 pp. June o Zivnuska, J. A. 1968. The Role of North American Forestry Resources in World Forestry Development. Jour. Forestry 66(2)s100-105. February. 288 APPENDIX I Conversion Factors SYMBOLS m metre ft. feet m2 square metre b.f. board feet m_3 cubic metre m.t. metric ton Km Kilometre ha hectare Km2 square Kilometre U.S.$ United States dollar m„m. milimetre C.$ Canadian dollar GENERAL MEASURES LENGTH AREA 1 metre = 3.281 ft. 1 m2 = 10.76 sq. ft. 1 Kilometre = 0.621 miles 1 Km2 = 0.3861 sq. miles 1 ha = 2.471 acres 1 Km2 = 100 hectares VOLUME MASS 1 m3 = 35.31 cu. ft. 1 Kilogramme = 2.205 pounds 1 litre = 0.2642 gal. (U.S.)l m. ton = 10 quintales 1 litre = 0.2200 gal. (Imp.) 289 Appendix I Continued PROCESSED WOOD Product Unit Solid Volume Cubic Cubic 1,000 bd. metres feet feet Sawnwoods Cubic metre 1 35.31 0.424 Cubic feet 0.02832 1 0.012 1,000 bd. ft. 2.36 83.33 1 Coniferous 1 metric ton 1.82 64.3 0.771 Broadleaved 1 metric ton 1.43 50.5 0.606 Plywood 1 metric ton 1.54 54.3 per 1mm thickness 1,000 m2 1 35.31 per 1/8 in. thickn. 1,000 sq.ft. 0.295 10.42 Veneer sheets 1 metric ton 1.33 47 per 1mm thickness 1,000 m2 1 35.31 per 1/10 in. thickn. 1,000 sq.ft. 0.236 8.33 Particle boards 1 m3 0.650 1 35.31 Fibre boards compressed 1 m3 0.950 1 35.31 non-compressed 1 m3 0.250 1 1,000