C H I E P O T E N T I A L P U L P A N D

P A P E R E X P O R T E R

Pulp and Paper Advisory

Group for Latin America

(Economic Commission For Latin America, Food and Agriculture Organization, and Technical Assistance Administration)

UNITED NATIONS Sant iago, Ch i le ,

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P O T E N T I A L ' PULP A N D

P A P E R . E X.1 P O R T E R

Pulp and Paper Advisory

Group For Latin America

(Economic Commission for Latin Amarica, Food and Agricidluro. Organization, and Tii ch nical A ssistun ca A dm in ist ru lion)

E / C N . 1 2 / 4 2 4 / R e v . 1 FAO/ETAP N° 5 6 0 / R e v . 1

T A A / C H I / 3 / R e v . l

August 1957

INTBOHJCTION AND ACKNOWLEDGMENTS

The following study deals with the, technical and economic p o s s i b i l i t i e s for the establishment of a pulp and paper export industry in Chile as one of the l inks in a regional development plan to secure future ¡supplies of paper products for Latin America. I t was undertaken a t ¡the request o f the Government of Chile and the Corporación de Fomento d e , l a Producción.

In the preparation of the supporting background material , contained in the Appendices to the report, great ass is tance was rendered by the Corporación de Fomento. The Advisory Group wishes to express i t s s incere g r a t i t u d e f o r t h e i r invaluable help and c o - o p e r a t i o n to t h i s Organization and i t s s t a f f in general , and in p a r t i c u l a r t o :

Mr. Luis Adduard, General Manager, and Mr. P a t r i c i o Asenjo, Industr ial ' Division, who

c o l l a b o r a t e d in the g r e a t e r par t of the study.

Since the general conclusion reached i s that conditions in Chile are favourable to the creat ion o f an export industry which would be of great benefit t o the country, i t i s hoped that the report , which i s hereby respectful ly submitted, may be useful in planning future development.

Arne Sundelin Chief, Pulp and Paper Advisory

Group to Latin Vnerica

NOTE

Throughout the report an exchange ra te of 500 Chilean pesos to 1 US dollar i s used. Nevertheless, at the time of going to press, the purchasing power of the peso i s equivalent

exchange r a t e of 700. The c a l c u l a t i o n s are not mater ia l ly a f fec ted by t h i s , since the increase i exchange r a t e corresponds approximately t o the r i s e in the domestic c o s t s during this period ( infl r a t e June 1956 to June 1957 has been approximately 37 per c e n t ) .

Ton always r e f e r s to metric tons, unless otherwise s t a t e d .

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TAPLE OF CONTENTS • » Page

Preface t o Second Edition 1

Aim and Scope of the Study ; '5

Giapter I : The International Pulp and Paper Market . . . . . . . . . • ^

1. North America ; . . . . . . . . 2. Europe ? 3 . Latin .America ® 4. Chile 8

5. The other d e f i c i t regions 9 6. Conclusions : • • 9

Chapter I I : Pinus Radiata - Pulp-mood Supply and Cost . . . . . 10

1. Location : . ' . , . . . , . . . . . . . . , r . • • • j • • IP 2. Area and yield ,. I . s . 1 • M • ; • 1 ; • - • • > • • • • 1 0

3. Stumpape value . . . i . . . : . ! I . . i , J • • • • ; - * ,• ; • • f ; • • * * ^ 4. Cost at mill s i t e ^

5. Management and future yields H

Chapter I I I : Other Paw materials and Problems 12

1. Chemicals and fuels 12 2. E l e c t r i c energy 12

3 . Fresh water supply and eff luent disposal 13

Chapter IV: The Transport Problem 14

1. Pulpwood Transport • 14 2. Transport of finished products 14

3. The port s i tua t ion 15

Chapter V; Investment and Production Costs 16

1. Investments and c a p i t a l requirements 16 2. Pulp mills 16 3. Integrated mills 18 4. Newsprint mil ls 18 5. Production c o s t s 18

Chapter VI: Economic Evaluation of the Projects and an Over-All Assessment 20

1. Evaluation on p r o f i t and deferred payment basis - the investors ' viewpoint 20 2. Limitations in wood supply 21 3. Assessment of foreign exchange earning capacity - the national viewpoint 22

4. Over-all assessment of the economic prospects 22

Chapter VII: Recommendations * * *. 24

1. General recommendations 24 2. Specif ic recommendations . . . 25 3. Final recommendation 26

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Page Annex I : The Market situation for Pulp and Paper 27

A. Structure of the International Market 27

1. Short-term fluctuations in prices and balance of supply and demand 27 % The problem of supply over the long term 29

B. A Forecast of Future Demand and the Situation in Different Regions of the World . . . . 31

1. Methods used in forecasting dan and 3l 2. The si tuation in North America 35 3. The situation in Europe 4. Latin America • 50 5. The other d e f i c i t regions 60

C. Conclusions 62

Appendix I-A: Exports of Newsprint from North America and Europe 63 AppemHx I-B: North America and Europe: Exports of Wood Pulp (All grades) 64 Appendix I-C: Latin .%nerica: Production, import and apparent consumption of newsprint. . 65 Appendix I-D: Production, Import and Apparent Consmiption of All Papers and Boards

Except Newsprint in Latin America 66 Appendix I -E : Europe and North America: Reports of Chemical and Mechanical Pulp to Latin

AnKrx03 1937*54 • • • • • • • • • • • • • • • p 67 Appendix I - F : Chile: Projection of Demand for Newsprint and other Papers and Boards in

1960 and 1965 . . . . . . . . . . . . . . . . . . . . 68

Annex I I : Forestry Aspects .... , 69

A. Plantations of Pinus Radiata in the Southern Area of Central Chile 69

1. Forested areas and s o i l s 69 2 . Volume in plantation of pinus radiata (1953) . . . . . . . . . . 72 3 . Growth and yields of pinus radiata plantations 72 4. Forest ownership 73 5. Production and consumption of pinus radiata wood 75 6 . Damages 75

B. Cost of Pulpwood from Pinus Radiata 76

1. Value of standing timber 76 2 . Cost of fell ing and transport to roadside 81 3. Cost of transport from roadside to mill s i t e 81 4. Administration and supervision 84 5. Siflimary of pinus radiata pulpwood costs 85

C. Future Yields from Pinus Radiata Plantations in Chile . . . . . 86

Appendix II-A: Cost of Housing for Transport Personnel 89 Appendix I I - B : Forest Department: Administration and Supervisory Personnel and Cost . . 90 Appendix II-C: Forest Department: Cost of Housing for Administrative Personnel 90

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Annex I I I : Marketing Possibilities for Pinus Radiata Sawnteood . . . 91

1. Introduction . . . . . . 91 2. Production, exports and apparent consumption of Pinus Radiata in Chile, 1946-55 . . . 91 3 . Estimate of potential supply and demand for 1960 and 1965 94 4. Conclusions •

Appendix III-A: Problems Affecting Exports of Pinus Radiata Lumber . . 98

Appendix I I I - B : Saw Timber Stumpage Price and \verage Diameter of Standing Trees . . . . . 99

Annex IV: Availability and Cost of Oieaicals and Fuels 100

Annex V: Electric Energy Situation 103 Appendix V-A: Let ter from the General Manager of Endesa to the Vice-President of Corfo . . 104 Appendix V-B: Let ter from the General Manager of Endesa t o a Private Firm 109

Annex VI: The Transport Problem H I

1. The road network I l l 2. Railways 113 3. Ports 113 4. Floating of pulpwood 113

Appendix VI-A: Recommendations by the Ministry of Public Works and Corrmunicat ions Concerning limitations in Truck Loading Capacity 114

Appendix VI-B: Cost of Transporting Finished Products from Plant to Port 116 Appendix VI-C: Cost of Road-Building 120 Appendix VI-D: Railway Freight [fetes by Carloads 121 Appendix VI-E: Prices of Railway Freight Cars and Cost of Building Sidings . . . 126 Appendix VI-F: Embarkation and Maritime Freight Charges . 126

Annex VII: Investaents and Capital Requirements 128

1. Basis for estimates of investments . . . . . . . . 128 2. Community costs for workers and employees 136

Annex VIII : Production Cost Estimates „ „ 145

Annex: IX: Econoaic Evaluation of the Projects 170

1. Calculation of minimum acceptable profi t 170 2. Venture profit 171 3. Assessment on prof i t basis - the investors point of view 173 4. Evaluation on the basis of foreign exchange earning capacity - the national viewpoint . 175 5. Summary • 177

.Appendix IX-A: Estimate of pulp and paper sales values from mills in Chile 178 Appendix IX-B: Venture prof i ts in industrial operations 179 Appendix IX-C: Foreign exchange earnings . . . 180 Appendix IX-D: Repayments periods for foreign exchange investment 1.81 Appendix IX-E: Amortization 182 Appendix IX-F: Taxes 182

Annex X: Prices in June 1957 related to a specific project 183

1. Cost of wood and other raw materials 183 2 . Building materials and fuel costs . . . " 184 3. Salaries and wages 185

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INDEX OF TABLES Page

Table 1 -1 Production and Consumption of paper and Board by Regions, 1954 27 Table 1-2 Production and Consumption of Woodpulp by Regions, 1954 28 Table 1 - 3 Estimated Increase in Demand for Paper and Board, 1950-52 to 1960-62, by Region and

by Category 30 Table 1 - 4 Estimated Pulp Requirements in 1960-62 31 Table 1-5 Variation of E l a s t i c i t y Coeff ic ients for Paper Consumption with Gross National

Product per Capita 33 Table 1 - 6 Newsprint Production, Consumption and Export A v a i l a b i l i t y in North America 1948-55 . 35 Table 1 -7 Export and Import of Newsprint in North America, 1937-55 36 Table 1-8 United S t a t e s : Comparison of Demand Forecasts for Newsprint 37 Table 1 - 9 Canada: Comparison of Demand Forecasts for .Newsprint 37 Table 1 - 1 0 North America: Estimate of Newsprint Demand, 1955-65 38 Table I - 1 1 North America: Estimate of Newsprint Capacity and Production, 1955-58 38 Table 1 -12 North .America: Production, Consumption and Export Avai labi l i ty of All Papers and » .

Hoards Except Newsprint, 1948-55 39 Table 1 -13 North America: Export and Import of Papers and Hoards others than Newsprint, 1948-55 40 Table 1 -14 North America: Comparative Forecasts of Demand for a l l Papers and Boards, Except

Newsprint, 1955-65 '. . . 41 Table 1 -15 United S t a t e s : Production Capacity for Papers and Hoards, 1955-58 41 Table 1 - 1 6 Canada: balance of Trade in Paper and Board, except Newsprint, 1948-54 42 Table 1-17 North .America: Balance of Supply and Demand for Other Papers and Boards,

1955 and 1958 43 Table 1-18 North America: Production, Consumption and Export Avai labi l i ty of a l l Grades of

Woodpulp 1948-55 . 44 Table 1 - 1 9 North .America: Production, Consumption and Export A v a i l a b i l i t y of Dissolving Grade

Woodpulp, 1948-55 45 Table 1 - 2 0 Europe: Newsprint Production, Consumption and Export Avai labi l i ty 1948-55 46 Table 1 -21 Europe: Newsprint Demand Forecasts 1055-65 47 Table 1 -22 Europe: Production, Consumption and Export A v a i l a b i l i t y of a l l Papers and Boards

Except Newsprint, 1948-54 48 Table 1 -23 Europe: Forecast of Demand for a l l Papers and Boards, Except Newsprint, 1955-65 . . 48 Table 1 - 2 4 Europe: Export of Woodpulp in 1937 and 1948-54 49 Table 1-25 Europe: Change in Net Evjjort of Pulp and Paper, 1937 to 1954 '50 Table 1 -26 Latin America: Consumption, lVahiction and Import Itequirement of Newsprint 1948-55 . 51 Table 1-27 Latin America: Forecast of Newsprint Demand 1955 to 1965 . . . 52 Table 1 - 2 8 Latin America: Comparison of Newsprint Demand Forecas ts 52 Table 1 -29 Latin America: Consumption, Production and Import Requirement o f Papers and Boards,

Except Newsprint, 1948-54 ! 53 Table 1 - 3 0 Latin America: Estimate of Future Demand for Paner and Boards, Except Newsprint,

1955-65. . . . . . . . . 54 Table 1-31 Latin America: Comparison of Demand Forecasts f o r Papers and Boards Other than

Newsprint, 1955-65 . . .' 55 Table 1-32 Exports of All Grades of Pulp From North America and Europe to Latin America,

1937 and 1948-54 56 Table 1-33 Distribution of Pulp Exports from North America and Europe t o Défic i t fegions . 57 Table 1 - 3 4 Lat in America: Estimate of future Demand of Rilp for Regional Paper and Board

Production 57 Table 1-35 Chile: Paper and Board Production, Imports and Apparent Consumption, 1948-54 . . . . 58 Table 1 -36 Chile: Demand Forecast for Papers and Boards, 1956-65 59 Table 1-37 Future Supply and Demand Si tuat ion for Papers and Boards in Other Def ic i t Regions . 61

Table I I - l Area Under Planta t ions , by Provinces and Species in April 1953 . . 70 Table I I - 2 Area Under Pinus Radiata, by Provinces and Age Groups, 1953 70 Table I I - 3 Plantat ions of Pinus Radiata, Relationship Between S i t e Indices and Classes . . . . 71

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Table I I - 4 Pirius Radiata: Area of Plantations by S i t e Class, in April 1953 : 71 Table I I - 5 Actual Cubic Volumes (1953) in Plantations of Pinus Radiata, by Use 72 Table I I - 6 Average Maximum Annual Growth in Plantat ions of Pinus Radiata 73 Table II -7 Pinus Radiata Plantat ions : Future Yields 73 Table I I - 8 Pinus Radiata Plantat ions : Ownership Distribution - • 74 Table I I - 9 Distribution of the Area Lhder Pinus Radiata, by Size of lb 1 dings 74 Table 11-10 Production, Export and Apparent Domestic Consumption of Pinus Radiata Sawntimber . . 75 Table 11-11 Average Cost of Establishing and Maintaining Pinus Radiata Plantations 77 Table 11-12 Stumpage Value of Pinus Radiata According t o Year and Si te . 79 Table 11-13 Minimum Stumpage Value and Age of Maximum Economic Yield for Pinus Radiata

Plantations on Different S i t e s . . . . . . . 79 Taole 11-14 Area Distribution and f i e l d s from Pinus Radiata Plantations According to S i te . . . 80 Table 11-15 Pulpwood Extract ion Costs in Pinus Radiata Plantations 81 Table 11-16 Travel Distance and Transport Capacity of Trucks per \ear • 82 Table 11-17 Transport Costs for Pulpwood 83 Table 11-18 Forest Administration and Supervision by Size of Operation 84 Table 11-19 Estimated Average Transport Distances for Different Supply Quantities of Rilpwood

in the Huepi 1 Area . 85 fable 11-20 Pulpwood Cost as a Function of fAilp Mill Size 86 Table 11-21 Future Annual Yields By Si te Classes . . . . . 87 Table 11-22 Future Annual Yields , . . . , 88

Table I I I - 1 Chile: Production, Export and Consumption of Sawnwood in General and of Conifers . . 92 Table I I I -2 Chile : Production, Export and \p¡>ii rent Consumption of Pinus Radiata Sawnwood . . . . 93 Table I I I - 3 Chile: Estimate of Danestic Consumption ami Export \ v a i l a b i l i t i e s of Pinus Radiata,

1960 and 1965 94 Table I I I - 4 Argentina: Consumption of Sawnwood from Conifers and Gross Investment . . . . . . . 95 Table I I I - 5 Argentina: Project ion of Apparent Consumption o f Sawnwood from Conifers . . . . ' . . 95 Table I I I - 6 Argentina: Project ion of Imports of Conifer and Pinus Radiata Sawnwood from Q i i l e . 96 Table I I I - 7 Chile: Project ion of Export \vai labi litie.s of Pinus Radiata . . . . . 96

Table IV-1 Pr ices of Chemicals and Fuels 100 Table IV-2 Raw Materials : Estimated Cost at Mil! . 101 Table IV-3 Water Requirements in Pulp and Paper M i l l s 102 Table IV-4 Minimum Stream Flow Requirements - 102

Table A Comparative Progress of the E l e c t r i f i c a t i o n Plan lYepared by the Corporación de Fomento and ENDESA, 1942-56 106

Table B Estimate of Probable, Rejected or Postponed Consumption ; 107

Table VI-1 Materials to be Transported at Sulphate Pulp Mills With a Daily Capacity of 250 tons . I l l

Table VI-2 Ministry ox Public Works and Cbnmunications: Road Plan 1954-58 112 Table VI-P-1 Distance of Trips and Transport Capacity of Trucks, Annually . . . . . . . 117 Table VI-B-2 Transport Costs for Finished Products, Including Loading and Unloading 118 Table VI-B-3 Transport Costs for Finished Products, Including Loading and Unloading 119 Table VI-P-4 Housing Costs . . . . . . . . . . • • • 119

Table VII-1 Investments: Pulp Mills . . . . . . ' . . 130 Table VII-2 Investment: Integrated Mills . . 1 3 1 Table VII-3 Investments: Newsprint Mills . . . . . i 132 Table VII-4 Building Volumes: Pulpmills . . 133 Table VII-5 Building Volumes: Integrated Mills . . 134 Ta^le VTI-6 Estimate of Building Volumes: Newsprint Mills ];-S5 Table VII-7 Costs of Community Services and Housing for Employees and Workers in l\ilp Mills . . 137 Table VII-8 Cost of Community Services and-Housing for Workers and Rrtployees in Integrated Mills 13(l Table VII-9 Estimate of Working Capital Requirements 140 Table VII-10 Forest Investment I l l Table VTI-11 Capital Requirements Pulpmills 142

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Page

Table VII-12 Capital Requirements: Integrated ¡¿ills 143 Table VII-13 Capital Requirements: Newsprint Mills 144

Table VIII-1 Reburning of Lime Sludge 145 Table VIII-2 Heat and Power Balance 146 Table VIII-3 Heat and Rawer Balance, Newsprint Mills 147 Table VIII-4 Heat Consumption and Pbsser Generated in Steam Turbine Operation 148 Table VIII-5 Labour Force in Pulp Mills 149 Table VIII-6 Labour Force: Integrated Mills 150 Table VIII-7 Labour Force: Newsprint Mills . . . 151 Table VIII-8 Labour Cost: Pulpnills 152 Table VIII-9 Labour Cost: Integrated Mills 153 Table VIII-10 Labour Cost: Newsprint Mills . . . . . 154 Table VIII-11 Administration and Supervision: Pulpmills 155 Table VIII-12 Adninistration and Supervision: Integrated Mills 156 Table VIII-13 Administration and Supervision: Nswsprint Mills 157 Table VIII-14 Annual Community Maintenance Costs in ftilp Mills 158 Table VIII-15 Annual Coimiunifcy Maintenance Costs in Integrated Pulp and Paper Mills 158 Table VIII-16 Capital Costs: Pulpnills 159 Table VIII-17 Capital Costs: Integrated Mills 160 Table VIII-18 Capital Costs: Newsprint Mills 161 Table VIII-19 Production Cost Estimate: Unbleached FWp 162 Table VIII-20 Production Cost: Estimate; Bleached iHilp 164 Table VIII-21 Production Cost Estimate; Unbleached Kraft Papers 166 Table VIII-22 ft-oduction Cost Estimate; Bleached Kraft Papers 167 Table VIII-23 Production Cost Estimate: Newsprint 168

Table IX-1 Annual Venture Profits Obtained From a Mill Investment of 25 Million Dollars . . . . 173 Table IX-2 Mill Investment Required to Obtain an Annual Venture Profit of 10 Per Cent on

Capital 174 Table IX-3 Venture Profit Per Cubic Metre of Wood at an Annual Supply Level of 400,000

Cubic Metres 175 Table DC-4 Capital Recovery Tine for a Foreign Exchange Part of Mill Investment of 17.5

Million Dollars . . . . . 176 Table IX-5 Foreign Exchange Earnings per Cubic Metre of Wood at an Annual Supply Level of

400,000 Cubic Metres 176 Table IX-6 Order of Econcsaic Attractiveness for Different Pulp and Paper Projects 177

Between INDEX OF FIGURES pages:

Map I Southern ftrt of Central Chile: Pinus Radiata Plantations . . 10 and 11

Map Fresh Water Supply Sources in the Pinus Radiata Zone 12 ' 13

Figure I - I Correlation Between Industrial Production and Paper Consumption in Figure 62 ' 63

Figure I - I I Annual Changes in Price of Newsprint and Kraft FVilp Imported to Chile . . 62 ' 63 Figure I - I I I Relationship Between Elast ic i ty Coefficient for Newsprint and Gross

National Product per Capita 62 ' 63 Figure I - IV Variation of Elas t i c i ty Coefficient for All Papers and Boards, Except

Newsprint, with Per Capita Income 62 ' 63 Figure I - V Relationship Between Newsprint Consumption and Gross National Product

Per Capita 62 ' 63 Figure I - VI Consumption of All Papers and Boards, Except Newsprint, as a Function of

62 ' 63 Figure I - VII Correlation Between Per Capita Gross Product and Paper and Beard Figure

Consumption per Head and Year in All Latin American Countries Except 62 ' 63

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Detweea pages :

figure II - I Stumpage Value of Pinus Radiata 88 ' 89 Figure II - II Pu 1 pwood Transport Capacity and Travel Distance per Truck and Year . . . 38 ' 89 Figure II - III Transport Cost for Pülpwood 88 ' 89 Figure II - IV Atininistration Cost: Forest Department . . . 88 ' 89 Figure II - V Transport Distance and Pulpwood Cost as Function of Supply Quantities . . 88 89 Figure II - VI Future Yields of Pinus Radiala PUlpwood from Existing Plantations . . . . 88 ' 89

Figure VII - I Investment as Function of Mill Size IVib leached i\ilp 144 ' 145 Figure VII - II Investment as Function of Mill Size pleached F\slp 144 ' 145 Figure VII - III Investment as Function of Mill Size Unble.ached Papers 144 ' 145 Figure VÌI - IV Investment as Function of Mill Size Bleached Papers . 144 ' 145 Figure VII - V Investment as Function of Mill Size Newsprint 144 ' 145 Figure VII - VI I busi ne and Conmunity Investment and Operating Cost as Function of

Number of Workmen and Employees » 144 ' 145 Figure VII - VII Investment; Forest Department 144 ' 145 Figure VII - VIII Capital Requirements During Construction Period 144 ' 145 Figure VII - IX Project Investment as Function of Wood Supply 144 ' 145 Figure- VII - X Project Investment as Function of Wood Supply 144 ' 145

Figure VIII - I Production Cost as Function of Mill Size Unbleached Pulp 169 ' 170 Figure, VIII - II Production Cost as Function.of Mill Size Bleached Pulp 169 ' 170 Figure VIII - I II Production Cost as Function of Mill Size Unbleached Kraft Papers . . . . 169 ' 170 Figure VIII - IV Production Cost as Function* of Mill Size Bleached Kraft Papers . . . . . 169 ' 170 Figure VIII - V Production Cost as Function of Mill Sige Newsprint . . . . . . . . . . . 169 ' 170

Figure DC - I Venture Profit After Taxation in Industrial Operations 182 ' 183 Figure IX - * II Venture ft-ofit \fter Taxation in Combined Industrial ami Forest Qperatìms 182 ' 183 Figure IX - III Venture Profi t After Taxation T " . ' . 182 ' 183 Figure IX - IV Foreign Exchange Earnings . 182 ' 183 Figure IX - V Foreign Exchange Earnings 182 183 Figure IX - VI Inpayment Fferiods for Foreign Exchange Investment by Gross Annual FVofits 182 ' 183

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PREFACE TO SECOND EDITION

The present t e x t o f the report "Chile - P o t e n t i a l Pulp and Paper E x p o r t e r " i s a p r a c t i c a l l y un-changed version of the f i r s t edition published i a Asigast 1956. Apart i t m the correc t ion of e r r o r s , only minor changes have been made in tbs t e x t .

In view of the suggestions and s r i t i c i s a r e c e i v e d a f t e r p u b l i c a t i o n o f the f i r s t e d i t i o n end the changes in condit ions which have occurred i a t h e past y e a r , i t was considered n e c e s s a r y t o make some additional c l a r i f i c a t i o n s and comments in order t o bring the report up t o d a t e . In sosfc c a s e s time has p.ot permitted changes to be made in the main t e a t and the various aspects a r e therefore é t a i t with below in the order in which they appear in the report i t s e l f .

The international pulp and paper mrkst (Chapter T)

In the past year demand has continued t o rise, a t approximately eh® r a t e iadicsfeed i a 61» report, •Jhe rapid expansion of production capaci ty» o a i n i y in North America b a t a l s o in Northern Europe, has gradually brought about a s i t u a t i o n with a s l i g h t excess of production over consuaiptiisi. f a r t h e r e d a c i -t y increases « . i l l be rea l ized at the end of the current year and i s 1958 and i t i s sgcpected t h a t produc-t ion wi l l continue t o o u t s t r i p denaxid for » a m time t o come. This s i t u a t i o n wi l l pxwbably be temporary, provided that no major r e c e s s i s the current eco&oeic de-relopaesifc takes p l a c e , and a r e a© i n d i c -ations that the long-tens trend with increasing sugpiy d i f f i c u l t i e s f o r the d e f i c i t £«gicn$, as outlined in the report , will change.

The r e p o r t ' s conclusion that the r a t s of i n c r e a s e its regi<«ai c a p a c i t y does not keep pace with the r i s ing demand is confirmed. In the case o f nesrspri&t the est imated addi t ional c a p a c i t y o f 180 ,000 t e a s in 1958 w i l l not be reached as t h e l a t e s t i n f o s m t i o n i n d i c a t e s a Bet gain of ©aiy 145 ,000 tons , d is -t r i b u t e d as follows:

Chile 55 ,008 tons Colombia 30,000 " Cuba 30,000 " Mexico 30 ,000 "

145,000 tons ' * ^

The Argentine project with a. capaci ty of 3 0 , 0 0 0 tons w i l l be delayed because o f tike lack of foreign exchange and one of the p r o j e c t s in Mexico { 3 0 , 0 0 0 tons) wi l l not go into production u n t i l 19S9- Ch the other hand, i t has been announced that a 30 ,000 ten mill in Cuba w i l l be ready for operation in 1958. As a resul t i t i s estimated t h a t the r e g i o n ' s import requirements s i l l remain unchanged i n 1953 but w i l l then increase by some 100 ,000 tons in I960 a m 485 ,000 tons in 1965; t h i s means that they w i l l reach a t o t a l of more than 900 ,000 tons in the l a s t year , unless fur ther expansion of the industry i s r e a l i s e d .

A lag in the development r a t e for the production o f o t h e r papers and boards s i m i l a r t o t h a t f o r newsprint i s l i k e l y t o o c c u r as a r e s u l t o f t h e f o r e i g n exchange s i t u a t i o n i n A r g e n t i n a . T h i s i s especial ly true for the period up fco I960 , in which year t h e r e g i o n s import requirements w i l l i n c r e a s e from the present f igure of about 200 ,000 t o an est imated 4 5 0 , 0 0 0 t o n s . There i a thus ample confirmation of the heed for determined e f f o r t s t o expand production f a c i l i t i e s , e s p e c i a l l y i a Argent ina , which accounts f o r about o n e - t h i r d o f t h e r e g i o n ' s consumption.

.As regards the s i t u a t i o n i n Chile t h e r e w i l l a l s o be a delay in t h e development prograsme. The newsprint mill at San Pedro did not s t a r t operations unt i l the second quarter of the current year and the pulp m i l l at Laj a ( p r o j e c t 2 ) is not expected t o be f inished u n t i l the middle o f 1958- The projec t o f Empresa Naeional de Celulosa S,A. (projec t 3) i s a l s o delayed and cannot be taken i n t o consideration as a supply source b e f o r e I960 , The plans a f C e l u l o s a s C h i l e S .A. ( p r o j e c t 4 } a r e , however, to -day more d e f i n i t e with a projec t f o r a pulp m i l l o f some 200-250 tons per day which may be completed i a 1960 /61 . As a r e s u l t , the export surplus of sane 100 ,000 tons of pulp envisaged f o r the y e a r 1958 w i l l not be r e a l i z e d u n t i l 1960 or 1961.

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World market pr ices of pulp and paper have regained f a i r l y s table in the past year with a slight increase for newsprint, o ther papers and bleached pulp, whereas in the case of unbleached sulphite a s l ight downward trend has been noted in the second quarter of 1957 as a r e s u l t o f the current surplus s i tuat ion . There are no signs indicating that major changes wi l l take place in the near future and the slow r ise in the price level recorded since the second half of 1953, as a result of increasing production costs , will probably continue at about the same rate .

Pinus radiata - pulpwood supply and cost (Chapter II)

The comments which were received dealt e s s e n t i a l l y with three aspects - p o t e n t i a l y ie lds from the exis t ing plantat ions, wood transport costs and marketing p o s s i b i l i t i e s for lumber.

As t o the question of yie lds i t has been pointed out tha t , ( a ) the s i t e c lass system used by GQPK) in the i r inventory i s unfortunate since less than 2 per cent

of the plantation area f a l l s into c l a s s e s I and I I and 98 per cent in the three remaining c l a s s e s . A c lass system similar to that currently used in New Zealand with only three c lasses and a more even dis-t r ibut ion between the c l a s s e s would have been more adequate and f a c i l i t a t e d the comparison of yields in the two countries;

(b) some areas of very poor s o i l and growth near Canteras are included in the inventory. They are not typical and should not have been planted;

( c ) in calculat ing actual volumes, only the t r e e s with a diameter of more than 5 inches at breast height were included.

The c l a s s i f i c a t i o n system used and the fact that unsuitable areas are included in the inventory do not a f f e c t the yields from ex is t ing plantations but may give a misleading pic ture of the future poten-t i a l . On the other hand, the exclusion of small s ize t r e e s , r e s u l t s in a conservative estimate of the yields, which thus are somewhat higher than indicated in the report .

The calculations of economic yields from the plantations suggested that in the case of plantations belonging t o s i t e c l a s s e s IV and V a policy should be adopted with short r o t a t i o n periods and clear cutting at the age of maximum economic return. As a resul t , i t was recommended that those areas should be set aside for the production of pulp-wood only and that no thinning or pruning o f these stands should be undertaken. I t has been pointed out that such a policy may increase the damage from i n s e c t s , fungi and f i r e . Obviously, the recommendation should t h e r e f o r e be p r o v i s i o n a l , i . e . such sylvicultural measures should be undertaken as to reduce those r isks but not with a view to producing sawtimber since the stumpage value of the t r e e s which are allowed t o grow into sawtimber dimensions in these s i t e classes w i l l be much too high.

Regarding transport costs for pulpwood i t seems likely that the calculations in the report are some-what opt imist ic for two reasons; under present road conditions the assumed average driving speed of 30 kms per hour i s probably too high and the estimated cost of road building may be on the low side. I t has been suggested that an average trucking speed with load of 20 kms per hour would be a more r e a l i s t i c figure. Ch the other hand, the time allowance for loading and unloading is ample, provided modern equip-ment and methods are used.' The combined effect of these factors may result in transport costs which are somewhat higher than estimated but the increase would not be large enough to have any s i g n i f i c a n t in-fluence on the price o f wood delivered at the fac tory . In t h i s context i t should also be kept in mind that the stumpage values indicated in the report , are on the high side as they are calculated with a 10 per cent prof i t on plantation investments. This i s demonstrated by the fact that the current price for pulpwood i s 1,400 pesos per m at roadside which gives an estimated net stumpage value of about 600 pesos as compared with a calculated weighted average of 900 pesos in the report.

The most controvers ia l point in the report i s the estimate o f potent ial markets for Insignis pine lumber which is generally considered too pessimistic. Available data on local consumption and the export trends do not support a more optimist ic view at present. I t has been claimed, however, that the market and demand for this lumber could be considerably expanded by an improvement of the quality through better grading, s o r t i n g , et cetera. Further measures which may r a i s e the domestic consumption include the eventual adoption of a housing development programme in the country based on an increased ut i l iza t ion of wood.

None of these measures i s , however, l i k e l y to have any s i g n i f i c a n t influence on the market in the period before I960 as a q u a l i t y improvement of the lumber, such as would be required by the export

market, would also depend on sylvicultural measures which could only have a long-range e f f e c t . In 1965, the sawtimber avai labi l i ty will outstrip, by three times, the demand as estimated in the report - a margin which must be considered large enough to cover the possible increases in requirements. The conclusion is therefore that the c a l c u l a t e d potent ia l a v a i l a b i l i t y of pulpwood in the year 1965 -about 135 million cubic feet - i s not l ikely t o be affec ted by an increase in the demand for sawtimber. I t i s expected, however, that this question will be further analysed at the end of t h i s year by a special study of a F&) expert on the marketing of lumber.

Other rm» materials and problems (Chatter III)

No additional information has been received as regards supply of chemicals and fuels. Pr ices have increased during the year - f o r fuel o i l as a r e s u l t o f the Suez c r i s i s and for coal and domestically produced chemicals because of the general inflat ion in the country. (See also chapter V, Investment and production c o s t s ) .

The prospects for an improvement in the e l e c t r i c energy supply s i tuat ion are today b e t t e r than las t year as a result of the recent ly authorized increase o f the r a t e s . I t may thus be expected that the i n s t a l l a t i o n of new generating capacity wi l l be encouraged. Also, Guile has recently received a loan from the International Rank for the development of h y d r o - e l e c t r i c r e s o u r c e s . These changes im the situation over that of last year have been introduced in awnex V, which has been modified accordingly. The need for additional measures t o secure a s a t i s f a c t o r y development should, however, be stressed - i n part icular , an amendment of the law governing the rates and which would allow a larger re-investment of profi ts .

The fresh water supply and effluent disposal problems -both deciding factors in the locating of new mills- have not been fur ther invest igated and the need for r e l i a b l e information about those problems should again be s t ressed .

The trmsport problea (Guspter IV)

i t has not been poss ible to obtain addit ional infoffaQtiora abofflfc developments in the t ranspor t sec tor . As pointed out in the report , asi improvement in the exis t ing ccaditiosts i s necessary to secure a rapid expansion o f the industry. An analysis of the transport problems inside the plantation area and for the shipment of finished products i s therefore required in order to assess the industrial development prospects.

The transport s i tua t ion , together with the problems of water supply aad contend nation -apart from wood avai labi l i ty - are the main factors to be considered in selecting potential a i l l s i t e s . To help the Government in assessing these locat ions ! problems, both for immediate and future developments, FAQ has assigned to the country an expert in this f ie ld , who i s at present working in close collaboration with the Corporación de Fomento. His study will be finished at the end of this year and wi l l no doubt be of great value as a follow-up of the present report .

Investment cmd production costs (Chapter V)

In the year s ince the publication of the f i r s t edi t ion o f t h i s report the cost o f pulp and paper machinery has increased by some 10 t o 15 per cent , depending on the country o f or igin . During the same period construction c o s t s in l o c a l currency have increased by 25 t o 30 per cent ; nevertheless as the d o l l a r exchange r a t e has meanwhile increased by about 30 per cent the construct ion cost in terms of dollars has in fac t remained unchanged over the year. As the foreign exchange part accounts for same 70 per cent of the t o t a l investment i t may thus be estimated that the c a p i t a l requirements indicated in the study will have increased by scone 7 to 10 per cent as of today.

I t has been pointed out that some of the investment figures indicated for the separate mill sections are out of l ine and should be c o r r e c t e d . This r e f e r s p a r t i c u l a r l y t o the c o s t s for the e l e c t r o l y t i c plants and the steam and power s t a t i o n s , which a r e both estimated on the low side f o r the small mil l

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units but are too high for the larger plants . I f c6r rec ted , these f igures would tend to increase the price d i f f e r e n c e s between m i l l s of d i f f e r e n t c a p a c i t i e s , but would not be la rge enough t o have any significant influence on the production costs as calculated in the report. Undoubtedly, the estimates of investments in o t h e r m i l l s e c t i o n s should a l s o in some cases be c o r r e c t e d , but i t i s nevertheless believed that the aggregate capi ta l requirements, with the proper price adjustments indicated above, are accurate, enough for the purpose of estimating production cos ts .

Raw material costs have increased over the year but the pr ice movements have not been consistent; thus, while the p r i c e s of coal and fuel o i l have been approximately doubled the cost of sa l tcake has remained v i r t u a l l y unchanged. I t may be estimated that the net e f f e c t of the pr ice adjustments i s a 30 per cent r i s e in t h e c o s t of raw m a t e r i a l s c a l c u l a t e d in l o c a l currency , i . e . the p r i c e level has remained approximately unchanged in terms of d o l l a r s . The same a l s o applies t o operating cos ts and overheads; labour wages and s a l a r i e s have increased by some 30 t o 32 per cent ( l o c a l currency) while repair materials and plant supplies may have increased by 10 t o 15 per cent (in d o l l a r s ) .

Up-to-date information on prices of various raw materials , wages, e t ce tera , has been obtained from one of the groups currently engaged in projecting a new pulp m i l l . I t has been considered of interest that this information from an independent source should be made available t o readers and i t is therefore, included as an additional annex to the report (see annex X).

Since capi ta l charges account for approximately 40 t o 50 per cent of the t o t a l production costs i t may be estimated that these will have increased by some 3 to 5 per cent as a resul t of the 7 t o 10 per cent r i s e in c a p i t a l requirements.

The combined e f f e c t of the price movements over the year on production costs has been estimated at approximately 5 per c e n t . In medium-sized mil l s t h i s increase corresponds t o about 4 dol la rs for un-bleached pulp, 5 dol lars for bleached pulp and newsprint and some 8 to 10 dollars for papers - a r ise in production costs which corresponds approximately to the i n c r e a s e s over the year in the international, prices of these products.

Economic evaluation of the projects and an over-all assessment (Chapter VI)

In the year that has passed since the publication of the f i r s t edition of this report no significant changes have taken place which warrant a re-assessment o f the development p o s s i b i l i t i e s for a pulp and paper industry based on the wood from the Insignis pine plantat ions nor of the economic prospects for this industry. On the other hand, only limited progress has been made towards the implementation of a development programme. The various recommendations made in the report with a view t o encouraging indus-t r i a l development should t h e r e f o r e once again be s t r e s s e d , in p a r t i c u l a r those which r e f e r to the a t t r a c t i o n of foreign c a p i t a l , without which a rapid expansion cannot be achieved.

AIM AND SCOPE OF THE STUDY

The aim of the following report i s to establish, in general terms, the technical and economic possi-b i l i t i e s for the development of a pulp and paper export industry in Chile. I t must be emphasized that the study i s of a general c h a r a c t e r , and cannot be used for the f inal appraisal of s p e c i f i c mil l pro-j e c t s , which must be evaluated according to their individual merits . Such evaluation i s a long and cost -ly process, requiring detai led invest igat ion of a l t e r n a t i v e mill s i t e s , e t c . . and i s thus outside the scope of the present report .

As regards development, prospects, i t must f i r s t be asked whether a market for pulp and paper pro-duced in Chile already e x i s t s or whether i t could be developed in the near future and what i t s s ize i s likely to be. To answer this question, a special analysis has been piade of developments in the different regions of the world during the post-war period (1943-55) . I t includes forecasts of future demand, based par t ly on previous estimates from different sources, which have, however, been revised in the l ight ox l a t e r developments, and p a r t l y on a new technique which s l i g h t l y deviates from standard methods. The market study i s included in annex I to the report and i s b r i e f l y summarised in chapter I o f the main t e x t .

I t was c l e a r even at a preliminary s tage that of the c o u n t r y ' s p o t e n t i a l f ibrous resources the plantations of Pinus radiata in the southern part of Central Qiiie offered by far the best prospects, not only for technological reasons -the prevalence of a s ingle species wifcli long f i b r e s - but a lso from an economic point of view. Furthermore, the amount of wood which these p l a n t a t i o n s wil l produce in the future i s large enough to support a greater industrial capacity than i s l ikely to be established in Chile within the next 10 years . Discussion has therefore been confined to pulp and paper production based on this raw material , and does not take into account the potential resources of the natural f o r e s t s in the south of the country.

The fibrous raw material s i t u a t i o n i s analysed in d e t a i l in annex I I , ehich i s divided i n t o three p a r t s , dealing r e s p e c t i v e l y with the f o r e s t inventory, the probable cost of pulpwood and prospect ive future y ie lds . This annex i s sunsnarized in chapter I I .

Since the a v a i l a b i l i t y of pulpwood depends on what percentage of the t o t a l y i e l d from the planta-tions will be diverted t o the production of sawn goods, annex I I I contains a short review of the market-ing p o s s i b i l i t i e s for lumber from Pinus radia ta .

Chapter I I I , which deals mainly with the a v a i l a b i l i t y and cos t of chemicals and fuels , includes a paragraph on the problem of fresh water supply, since, in many cases, t h i s i s l ikely to present d i f f i c u l -t i e s and limit the choice o f a l ternat ive mill s i t e s .

The greatest obstacle t o a l a r g e - s c a l e development of the pulp and paper industry i s the country 's t ransport s i t u a t i o n , t o which some general considerat ion has been given in chapter IV and annex VI. N'eedless to say, t h i s report cannot indicate ways or means of solving the problem, a task which must be undertaken in a broadest context; i t merely serves to indicate the magnitude of the problem and to add the warning that detailed investigations are necessary for each project and mill s i t e .

Chapter V summarises the ca lcula t ions o f investment and production c o s t s for s ixteen mill p r o j e c t s of d i f f e r e n t c a p a c i t y , and producing d i f f e r e n t q u a l i t i e s o f pulp and paper. Hie es t imates have been made for the following purposes:

( a ) to determine the minimum economic mill unit for each product; (b) to indicate the capital requirements for a new project ; and ( c ) to serve as a basis for the economic evaluation of individual projec ts , as well as for the over-

a l l assessment o f development prospects and t h e i r economic implications, contained %n chapter VI, which evaluates such p o s s i b i l i t i e s , both from the pr iva te investors ' and from the national viewpoint.

In order to preserve a logica l sequence in the main t e x t , i t has been kept in tent ional ly short , and side issues have as a rule been avoided. In few c a s e s only has reference been made t o d e t a i l s in the annexes, which should be considered as separate , and, in most ca se s , enlarged chapters, containing the supporting data.

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CHAPTER I

'HIE INTERNATIONAL PULP AND PAPER MARKET

1. During the l a s t decades, the world market for pulp and paper has perhaps experienced more violent and frequent f l u c t u a t i o n s , both in the balance of supply and demand and in the pr ice l e v e l , than any other. [here are two main reasons for this i n s t a b i l i t y . F i r s t , the consumption of paper and board i s a sensitive indicator of a country's cultural , economic and industrial a c t i v i t i e s ; and, secondly, while in-ternational trade in these commodities is but marginal in relation to tota l production said consumption in Europe and North America, these marginal quantities account for a large share of consumption in the defi-c i t regions. As a result , snail variations in the domestic markets of Europe and North America have fax-reaching consequences on the international paper trade. 2. Two other factors further aggravate the short-term price fluctuations; when the world economy is ex-panding and marginal export a v a i l a b i l i t i e s are small, ocean freight t a r i f f s tend to increase; and, at the same time, importer countries, for fear of supply d i f f i c u l t i e s and further pr ice increases , often make soeculative stock purchases, which give additional momentum to the pr ice movement. 3. Far more dangerous and disquieting for such importer countries than the short-term price fluctuations on the world pulp and paper market i s the uncertainty o f supply over the long-term. This problem has in recent years commanded increasing attention from both national and international bodies, especial ly the United Nations and i t s specialized agencies, which have emphasized in several studies the threat inherent in the long-term supply question. 4. Ihe present study amply confirms the seriousness of this problem. In fact , the estimates of future demand, revised in the l ight of recent developments on the international market, indicate that consump-tion will probably r i s e f a s t e r than was predicted in e a r l i e r f o r e c a s t s . More energet ic e f f o r t s must therefore be made to develop regional resources in the d e f i c i t areas with a view to avoiding a depressed paper consumption, incommensurate with cultural and economic standards. The s i tuat ion in the different regions, as predicted in annex I , is br ief ly reviewed below.

i. North Anerica

5. During the period 1948-55, newsprint consumption increased by a l i t t l e less than 1 . 3 million tons -from below 5 million tons in 1948 to over 6 .2 million in 1955- which represented an annual increment of

s l i g h t l y under 3 per cent . In the seme period production expanded by almost 2 million tons and export a v a i l a b i l i t i e s from 50 thousand tons to 750 thousand tons per y e a r . In 1955-65 demand i s expected to grow more slowly than in 1948-54, at a ra te of 2 . 7 per cent as against the h i s t o r i c a l r a t e o f 3 . 3 per cent annually. Total consimption i s estimated at 6 . 8 , 7 . 1 and 8 . 1 mi 11 ion tons for the years 1958, 19®) and 1965, respectively. Dy 1958, current plans for the expansion of the industry will have raised annual production by more than 1 million tons, which means that the exportable surplus may amount t o some 1.2 million tons in the same year . 6 . Production and consumption o f paper and board other than newsprint has f luctuated considerably i a the post-war per iod, bearing out the contention t h a t paper consumption i s a s e n s i t i v e index o f a country's economic s i tuat ion. From 1948 t o 1955, the volume o f year ly demand rose by almost 5 . 5 million tons, or an annual increment of about 3 . 6 per cent, reaching 25.4 million tons. Production has ^proxim-ately balanced consumption, leaving a net export ava i labi l i ty of some 225 thousand tons as an average for the year 1948-54 . Hie demand f o r e c a s t indica tes that consumption wi l l increase by so&te 3 . 5 per cent annually, a t t a i n i n g 2 7 . 7 5 , 2 9 . 9 and 3 6 million tons in the y e a r s 19§8, 1 9 ® and 1965» r e s p s c t i v e l y . Existing plans for the development of the industry will not meet the expected expansion o f demand, and the present net export a v a i l a b i l i t y wil l probably disappear in 1958. 7. Before the war North America imported a net quantity of more than 1 million tona of woodpulp equal -ly i r o n Europe. In the period 1 9 4 8 - 5 0 t h i s dependence on imports was reduced t o an average o f 450 thousand tons, and by 1955 i t had been converted into an exportable surplus of some 750 thousand. Un-fortunately , no data on future expansion plans were avai lable , but i t seoms l ikely that North America

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will maintain or even increase i t s present net exports during the next few years . On the other hand, the long-term trend will undoubtedly take the form of a decline in export a v a i l a b i l i t i e s , mainly as a resul t of inadequate wood supplies, but a l so because the North American industry wi l l probably be re luctant t o make substantial additions t o i t s production capaci ty for the sake o f exports t o d e f i c i t regions where from time to time d o l l a r shortages may cause changes in the import pol icy . 8. The si tuation in North America may be summarized as folIowas a) i t i s l ikely that the export avai la-b i l i t y of newsprint in the region w i l l expand considerably in the next few y e a r s and approximately balance the glowing d e f i c i t s in the other regions; b ) production o f other papers and boards w i l l cover the internal demand but net exports w i l l probably disappear; c ) the present export a v a i l a b i l i t y o f wood pulp i s likely to be maintained. The long-term trend, however, indicates that North America -as the only surplus region- will not be in a position to cover the increasing d e f i c i t s in the other regions.

Europe ^

9. As a result o f the changes in Europe's economy during and immediately a f t e r the war, production and consumption of newsprint declined sharply from the pre-war l e v e l -production 2 . 6 and consumption 2 . 4 million tons- and not unti l the year 1954 did the market regain i t s 1937 tonnages. Since the population has increased by some 10 per c®it as from t h i s year , i t follows that per capi ta consumption i s s t i l l de-pressed, and i s l i k e l y to r i s e at a f a s t e r r a t e than would normally be expected from the increase in per capita income. The demand forecast sho^a an annual increment in t o t a l consumption of 6 per cent for the period 1955-1965 as against a h i s t o r i c a l r a t e of 11 per cent in the years 1948-55. Consumption i s thus estimated t o r i se from 2 . 6 4 mill ion tons in 1955 t o 3 . 4 5 in 1958 3 . 8 5 in 1960 and 4 . 7 mil l ion tons in 1965. Present expansion plans, as quoted in different sources, indicate that by the year 1958 production will increase by some 550 thousand teas per annum as camp&psd t© an estimated consumption increase of 810 thousand tons. The 1955 export surplus of 170 thousand tons i s thus l ikely t o become a net import r e -quirement of seme 100 thousand tons, an est imate which for several reasons may be on the low side . 10. Production and consumption of papers and boards, other than newsprint, have more than doubled in the* 7-year period 1948-54. Production increased from 4 . 8 4 to 10 .64 and consumption from 4 . 3 5 t o 9 .80 million tons, while the export a v a i l a b i l i t y increased during the same period from about hal f a million tons to a l i t t l e more than 800 thousand. Demand i s estimated t o r i s e by 55 per cent between 1955 and 1965 which corresponds to an annual increment of 4 . 5 per cent as compared t o more- than 12 per cent in the y e a r s 1948-54; thus a considerable slow-down in the consumption i n c r e a s e r a t e i s foreseen. I t i s , neverthe-less , higher than previous forecas ts made by the United Nations and other bodies which -as demonstrated by developments in the 1950-55 period- underestimated the increase in consumption. As a r e s u l t , a more pessimistic view must be taken than previously expressed on Europe's p o s s i b i l i t i e s of s a t i s f y i n g her own demand and at the same time maintaining the present export level . No r e l i a b l e data are available on the i n d u s t r i a l expansion, but es t imates i n d i c a t e that the f o r e s t increment i n Scandinavia may support an addit ional pulping capac i ty of some 1 .5 mil l ion tons. Assuming t h a t an addi t ional quanti ty of h a l f a mil l ion tons could be produced in the r e s t o f Europe, the t o t a l i n c r e a s e of 2 m i l l i o n tons would be suff ic ient to produce about 600 thousand tons of newsprint and some. 2 mil l ion tons of other papers and boards. I f this capacity increase actual ly takes place within the next five years, by 1960 Europe's pre-sent export surplus of about 800 thousand tons of papers and boards (except newsprint) would s t i l l become" a net import requirement in excess of h a l f a million tons, an estimate which presupposes that the net ex-port of pulp i s maintained a t the 1954 level o f 200 thousand tons per year . 11. Annual exports of woodpulp from Europe decreased by more than 1 mill ion tons from 1937 to 1948, ¡aid in the post-war years the amount has remained r e l a t i v e l y s table a t some 700 t o 900 thousand tons, while imports from North America have increased by more than 300 thousand tons. Net exports have, as a r e s u l t , decreased from a pre-war l e v e l of more than 1 . 6 m i l l i o n tons t o only 200 thousand tons in 1955. An interest ing aspect of Europe's pulp and paper exports i s the change in proportion which has taken place between the two items; thus, while pulp accounted for almost 65 per cent o£ the net exports in 1937-1938, i t had decreased t o only 20 per c e n t in 1954. There i s every reason t o b e l i e v e t h a t the tendency towards integrat ion of pulp with paper production, which i s the background f o r t h i s change in expor ts , will continue, and the export surplus o f pulp wil l gradually disappear.

1/ All figures exclude Eastern Europe and the If.S.S.R.

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12. To sum up the European supply and demand s i tuat ion; i t seems l ikely that , by 1960, the present net export surplus o£ 170 thousand tons of newsprint w i l l change t o a net import requirement of some 100 thousand tons, the surplus of other papers and boards, 800 thousand tons, will disappear and Europe will depend on imports from North America for half a mill ion tons of her supply i f pulp exports are to be maintained a t the present leve l . Developments a f t e r 1960 are d i f f i c u l t t o assess but there i s l i t t l e doubt that Europe may have serious d i f f i c u l t i e s in sa t is fying a demand for paper products commensurate with the economic and c u l t u r a l level in the region.

3. Latin Merica

13. Annual consunption of a l l papers and boards in the region i s today s l i g h t l y over 1 . 5 million tons, o f which newsprint accounts for a l i t t l e over 500 thousand. Some 450 thousand tons of newsprint and about 200 thousand tons of other papers and boards are imported, corresponding to 43 per cent o f the t o t a l consumption. In addition, import requirements o f pulp amount to approximately half a million tons per year -more than 50 per cent o f the t o t a l requirements of the local industry. Demand i s expected to r i s e sharply; newsprint consumption i s estimated at 775 thousand tons in 1960 and 1 .5 million tons in 1965, o ther papers and boards at 1 . 6 3 and 2 . 2 4 mil l ion tons , r e s p e c t i v e l y , i . e . a combined annual increment of 8 per cent as compared to about 3 per cent in the period. 1948-54. This increase in consump-t ion r a t e i s mainly accounted for by an expected r i s e in demand in Argentina where consumption has been highly depressed. 14= Additional capacity, plaruted and likely to be constructed before 1960, does not exceed 500 thousand tons per annum, which means that the present d e f i c i t in domestic supply o f some 650 thousand tons will increase to 850 thousand in 1960 and not l e s s than 1 .8 million tons in 1965, of which newsprint will account for 550 and 930 thousand tons respectively. Since i t i s unlikely that these additional quanti-t i e s will be available from North America and Europe, or that Lat in America can afford to spend foreign exchange on paper imports, mainly in d o l l a r s , amounting to some 330 mill ion d o l l a r s (1955 p r i c e s ) per year by 1965, the unavoidable conclusion i s drawn that unless the regional capacity i s expanded at a much f a s t e r r a t e than i s a t present envisaged, Lat in America will s u f f e r a high degree o f deferred consump-tion, detrimental to both economic and cul tural development. 15. Assuming that iiqports of pulp and paper could be maintained a t the present level and that local paper production i s expanded to s a t i s f y the balance in demand, the requirements of pulp, mechanical and chemical, could increase over the 1955 level by 560 thousand and 1 .5 million tons in the years I960 and 1965, respect ively -approximately h a l f of each quality. Aggregate expansion plans for the industry in 1954 comprised 190 and 580 thousand tons of mechanical and chemical pulp, including general objectives which had not yet been studied as to f e a s i b i l i t y . Should these plans be inplemented to t h e i r ful l ex-tent , Latin America would by 1960 have reduced the import dependency to some 200 thousand tons, a quanti-ty which -due to the expected r i s e in demand between 1960 and 1965- would again increase t o an aggregate of more than 1 million tons in the l a t t e r year . As i t i s unlikely that a l l the projec ts wil l be rea l -ized, the d e f i c i t s quoted here are probably on the low s i d e . In addition t o the supply d i f f i c u l t i e s which t h i s quantity i s l i k e l y to impose, Lat in Americ a ' s heavy dependency on the marginal markets of Europe and North America (before the war one t h i r d of the combined e x p o r t s t o d e f i c i t regions, two t h i r d s in the post-war years ) obviously places t h i s region in a precarious s i tuat ion during periods of scarce supply, and strong e f f o r t s should be made to reduce the r i s k by developing local production faci-l i t i e s *

4. Chile

16. Since the present report deals with the development prospects in Chile, s p e c i a l mention should be made of the consumption trends and expansion plans in t h i s country. In the post-war period consumption of newsprint as well as of other papers and boards has remained p r a c t i c a l l y unchanged, except for year to year var ia t ions . Che of the explanations of this fac t probably res ides in foreign exchange r e s t r i c t i o n s applied t o these items and', as a r e s u l t , the country has today a depressed consumption in re la t ion to per c a p i t a income. Consumption o f newsprint i s s l i g h t l y over 2 0 thousand tons, and o ther papers and boards 40 thousand, which correspond to a per c a p i t a consumption o f 3 . 7 and 6 . 2 kilogrammes per year. Future demand i s estimated t o r i s e to 39 and~50~thousand tons of newsprint in 1960 and 1965 respectively,

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and to 61 and 77 thousand tons respectively of other papers and boards. Except for a quantity of some 10 thousand tons of imported newsprint the supply i s met by local production, which, however, depends on imports of chemical pulp. Expansion plans for the industry include three mi l l s , at present under cons-truction, a newsprint mill with a rated capacity of about 50 thousand tons, a k r a f t pulp mill with an annual capacity of some 70 thousand tons and a small sulphate pulp mill with an estimated annual produc-tion of some 7 thousand tons. In addition there is a project under serious consideration for a pulp mill with an annual capacity of some 70 to 90 thousand tons. Taking those p r o j e c t s into consideration, by 1960 Chile will have an export surplus of about 10 thousand tons of newsprint and some 95 thousand tons of chemical pulp, an estimate which presupposes that the e x i s t i n g production capacity for newsprint i s converted to the production of other papers. As will be seen la ter in the report , however, the potential prospects are far in excess of the development plans.

5. The other deficit regions

17. No special study of the s i tuat ion in the other d e f i c i t regions has been made for t h i s report , and the demand forecast below is takers from a report on the world situation prepared by the liiited Nations in 1953 %J• According to this report the t o t a l average consumption in the years 1950-52 was close to 1 .8 million tons of papers and boards of which about 480 thousand tons were newsprint; these figures exclude Japan and Mainland China. Hie t a c i t assumption was that these two countries will be able to meet t h e i r own rising needs. Of the t o t a l consumption some 1.2 million tons i . e . about two thi rds were imported. Demand was expected to increase in the period 1950-52 to 1960-62 by 68 per cent for newsprint and 59 per cent for other papers and boards, to 800 thousand tons and 2 . 1 million tons, respect ively . Development plans f e l l short of expected consumption increase by a l i t t l e over 100 thousand tons o f newsprint and some 225 thousand tons of other papers and boards. Subsequent development in the region suggests that the assessment made above has been too opt imis t i c ; in 1954 production of newsprint had r i s e n by only 30 thousand and of other papers and boards by 100 thousand tons. I t i s therefore likely that the competing claims from these regions on the export a v a i l a b i l i t i e s from North .America and Europe wil l be stronger than indicated above.

6. Conclusions

18. The following main conclusions regarding the future world market in pulp and paper are drawn from the regional assessments in the preceeding paragraphs and from annex I ; a. I t seems probable that the supply and demand of newsprint in the next three years w i l l be approxim-ately balanced. Beginning in 1958 or 59, a gradual tightening of the market wi l l take place unless the present rate of production increase in the d e f i c i t regions i s acce lera ted considerably. The s i tuat ion will be further aggravated in the 1960-65 period, and i f determined e f f o r t s are not made to secure regional supplies, consumption i s l i k e l y to be highly depressed in the, d e f i c i t a reas . b. The supply and demand si tuation for other papers and boards i s more disturbing since there are indic-ations that a world d e f i c i t s i tuation may develop already within the next few years , again provided that regional capacity i s not greatly increased. Tentatively i t i s estimated that there will be a world defi-c i t of close to 1 million tons per year in 1958-59. c . The pulp market is l ikely to experience more or less the same development as i s the case for papers and boards other than newsprint; i . e . a d e f i c i t s i t u a t i o n w i l l a r i s e during the next few years unless regional resources are created. d. Europe will in a r e l a t i v e l y short time change from a net exporter to d e f i c i t area, and North America alone remain as the net exporter to other regions. Consequently i t may be expected t h a t an increasing share of imports to the d e f i c i t regions will have to be liquidated in dollars, as a s i tuation where Europe has to purchase pulp and paper from North America in order to maintain her exports to d e f i c i t areas i s unlikely to continue permanently. e. Summing up for the purpose of this report: a prospective market for pulp and papar produced in Chile already e x i s t s and i s l ikely to expand rapidly in the coming decade.

2J Oorld Pulp and Paper Resources and Prospects. (World Survey) UN/FAO publication. Woa York 19S<3.'

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CHAPTER 11

PINUS RADI ATA - PULPTOOD SUPPLY .AND COST

Jo Location

19. The main s tands o f Piraus r a d i a t a p l a n t a t i o n s are found in the seven provinces o f Maule, Linares, ¡Nuble, Bío-Bío, Concepción, Arauco and Malleco in the southern area o f central Chile (see map I ) . These provinces l i e in a c e n t r a l v a l l e y which runs north and south and i s flanked by the Andes on one side and the C o r d i l l e r a de l a Costa on the o t h e r . I t i s on t h e l a t t e r , which only in a few p l a c e s r i s e s above 1 ,000 metres and which was once covered by nat ive f o r e s t s , that most o f the plantat ions have been established. Other important stands are found on some a l l u v i a l t e r r a c e s in the c e n t r a l val ley .

2. Area end yield

20. The forest inventory prepared by Corporación de Fomento in 1953 shows that the area under plantation in that year {¡mounted t o shout 175 thousand h e c t a r e s , of which more than one third i s in the province of Concepcibn. Ctmsiderable plantation work has been carr ied out in the following years and i t i s estimated t h a t in 1956 the t o t a l area well exceeds 200 thousand h e c t a r e s . - 11 f igures and c a l c u l a t i o n s of future y ie lds given beloss and in the appendices r e f e r , however, t o t h e p l a n t a t i o n s e x i s t i n g in 1953 and are t h e r e f o r e oa t h e c o n s e r v a t i v e s i d e . F u r t h e r , in c a l c u l a t i n g t h e volumes of wood only t r e e s with a diameter a t b r e a s t h e i g h t of 6 inches with bark a r e included. 21. The volume of standing timber, calculated according t o these c r i t e r i a , was 9 . 8 million cubic metres without bark. (All f igures of volumes End yields are given in sol id cubic metres without bark). Of this t o t a l volume alrecst two t h i r d s a r e contained in p l a n t a t i o n s o f 10-15 years o f age, and more than one thi rd in the age group of 13-15 years . This i s important to bear in mind s i n c e , as wi l l be seen la ter , the age of minimum c o s t for the wood varies from 16 to 20 years and i s 16 years for most of the planta-t ions . Consequently, the main part of the plantations is rapidly approaching the age of maximum economic re turn , a f t e r which age the stumpags value of the wood will increase . 22. In the Forest Inventory the plantat ions have been grouped in f ive di f ferent c a t e g o r i e s ( s i t e c lass-e s ) , the c la&si f i ca t iom being based on the average height at 20 "years of the dominant and co-dominant t r e e s of the stand, i . e . on the growth rate which, in turn, depends on s o i l conditions, climate, e tc . J J . The growth ra te var ies considerably between the s i t e c l a s s e s ; from a maximum average annual increment of 9 cubic metres per hec tare for S i t e V to more than 60 cubic metres for S i te I . From the percentage dis-t r i b u t i o n of the s i t e c l a s s e s -about 80 per cent of s i t e s IV and V and l e s s than 5 per cent of s i t e s I and ' II - the average growth ( to the year of maximum yie ld) for a l l plantat ions has been determined at 18.2 cubic metres per h e c t a r e and year,, almost 8 times as high as in the coniferous f o r e s t s of Scandinavia, (annex I I , s e c t i o n A).

' . • • • • 3. Stumpage value

23. To e s t a b l i s h the probable cos t o f pulpwood, a "ca lcula t ion has been made of the stumpage values of Pinus r a d i a t a in ^he d i f f e r e n t s i t e c l a s s e s and a t var ious ages. The est imate i s based on the present p l a n t a t i o n and maintenance c o s t s and assumes t h a t t h e f o r e s t owner w i l l r e c e i v e 10 per cent compound i n t e r e s t on h i s c a p i t a l investment. Since the c a p i t a l grows at an increasing r a t e each year, whereas the increment in wood volume decl ines a f t e r a c e r t a i n age, i t follows t h a t the value of standing timber will resach a minimum point . (See f i g u r e I I - l ) . The age when t h i s point i s reached i s determined for each s i t e . c l a s s by the increment curve and the r a t e of i n t e r e s t . With 10 per cent i n t e r e s t , a s used in the present study, the age of minimum c o s t i s considerably lower than the age of maximum annual y i e l d ; for

I/ For a c o a p a r i s o n with the classi-Sieatioa u s e d f o r t i e P i n u s radiata plantations in New Zealand see 'Preface t o 2nd edition'.

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CENTRO-SUR DE CHILE: PLANTACIONES DE PINUS RADIATA -SOUTHERN PART OF CENTRAL CHILE: PINUS RADIATA PLANTATIONS

(1953)

MAPA 1 MAP. I

instance in the case of s i t e c l a s s V, which accounts for more than 40 per cent of the t o t a l plantation are«, the minimum cost will be obtained at 16 years against a final cutting at 22 years to reach maximum yield,. The weighted average yield from a l l s i t e c l a s s e s , determined at the ages of minimum c o s t , i s 15 cubic metres per hectare and year, against 10 when calcula ted at the age of maximum yield , 24. The stunpage value estimated on the basis outlined in the preceding paragraph, var ies from 1 dollar per cubic metre"for the combined s i t e c lass 1 and I I to 3 dol lars for s i t e V, with a weighted average of 1 . 7 9 d o l l a r s ; t h i s value i s about o n e - f i f t h t o o n e - s i x t h of the stumpage p r i c e o f spruce and pine in Scandinavia in 1955. This low value of the standing timber, which i s due to the very high growth rate of Pinus radiata in Chile, cons t i tu tes the main reason why, (as will be seen l a t e r in the report ) , pulp and paper can be produced in the country at pr ices which are competitive on the international market.

4. Cost at mil stte

The aggregate c o s t of puljwood delivered t o a mill s i t e comprises, apart from the stumpage price , the c o s t of e x t r a c t i o n to road aide, t ranspor t t o the m i l l , and the overheads. Hie e x t r a c t i o n c o s t , which has been est imated on the b a s i s o f a c t u a l opera t ions , i s approximately 1 . 6 0 d o l l a r s per cubic metre. Transport cost and overheads natural ly vary with the s ize of operations and the location of the mil l in re la t ion to the plantations; for a hypothetical mill in the province of Nuble producing 250 tons of pulp per day they have been estimated at 1 . 6 0 d o l l a r s . Thus the t o t a l c o s t o f pulpwood del ivered mill s i t e wil l be approximately 5 dol lars per cubic metre, which i s approximately one thi rd of the cos t in Scandinavia.

Management and future yields

2 5 . An analysis of loca l consumption trends and export a v a i l a b i l i t i e s for sawnwoods from Pinus radia ta (annex I I I ) indicates that only a small f rac t ion of the t o t a l a v a i l a b i l i t y of sawtimber, as determined in the Forest Inventory, could be marketed. In most ca se s thinning and pruning operations which are undertaken in order t o produce more or b e t t e r sawtimber i s a waste of money, and i t i s t h e r e f o r e r e -commended t h a t , as a general pol icy , plantations belonging to s i t e c l a s s e s IV and V should be reserved mainly for the production of pulpwood and c l e a r c u t a t the ages of minimum stumpage value. As a con-sequence, i t i s a l s o recoasnended t h a t the planned t ra ining programme and c r e d i t f a c i l i t i e s for b e t t e r s y l v i c u l t u r a l management of the plantat ions should be revised i 26 . ^ I f the plantations are managed in the way described in the previous paragraph, the annual yield of pulpKocd will gradually increase from about J . 3 million cubic metres in 1956 t o more than 3 .7 million in 1965.L In addit ion, t h e r e i s today an accumulated quantity of some 3 . 4 mil l ion cubic metres a v a i l a b l e from planta t ions which have already passed the age of minimum c o s t . The average quantity produced by plantation^ e x i s t i n g in 1953 i s ca lculated at a minimum of 2 . 8 mill ion cubic metres per year during the period.1956-69 ( see f igure I I - V I ) - a quantity which i s s u f f i c i e n t for a production of some 600 thousand tons of pulp or 850 thousand of newsprint per year. There i s therefore 110 doubt that , judged by the raw m a t e r i a l supply, ;a•considerable expansion o f the industry over and above the present plans can take place, and should taJce place in the near future before the planta t ions pass the age of minimum stumpage value. In f a c t , an expansion o f the pulp and paper industry seems to be the only solution by which the value of the plantat ions -estimated at some 60 million d o l l a r s a t the present cos t of planting- could be saved.

CHAPTER I I I

OTHER RAW MATERIAS AND PRTLEMS

1= Chemicals and fuels (annex IV)

27. In the production of pulp and paper and for ancil lary processes (steam and power generation, produc-tion of caustic soda and chlorine, e t c e t e r a ) , various chemicals and fuels are required, the a v a i l a b i l i -ty of which as to quality and volume should be ensured within reasonable price l imits . The base chem-i c a l s for the pulping operation are :

in the sulphate process; sa l t cake (sodium sulphate) or cormion sa l t and sulphur and lime-stone, and

in the sulphite process; sulphur (or pyrites) and limestone. These chemicals are available in Chile in s u f f i c i e n t quanti t ies and with the requisi tes mentioned

above. They are, however, not available in the pine plantation area and the regular supply does there-fore involve a t ransport problem which must be c a r e f u l l y studied for each p a r t i c u l a r mill s i t e . (See chapter IV). 28. Chile has indigenous resources of coal and the production capacity is in excess of current demand. The mines are trainly located in the coastal zone, the two most important being Lota and Coronel about 30 kilometres from the town of Conception, and thus in the vic ini ty of the plantation centre . The quality is infer ior , but acceptable for industrial use. Oily minor quantities of oi l are produced in the country and requirements are mainly imported. 29. A mill producing unbleached sulphate pulp is pract ical ly self-supporting in energy which is produced in s u f f i c i e n t quantity in the chemical recovery system by burning the organic mater ia l in the waste l iquor. In the case of bleached pulp, various grades of paper and newsprint, however, energy must be supplied from outside, e i t h e r as fuel , or e l e c t r i c energy or both. I f fuel only is supplied, i . e . the mill produces i t s own e l e c t r i c energy, the required quantities are considerable for some of the products. Thus, about 650 kilogrammes of coal are required per ton of product in a mill producing bleached kraft papers and supplying i t s own needs of caust ic soda and chlorine, i . e . an annual quantity of some 45,000 tons for a 200 tons per day mill u n i t . Here again, a v a i l a b i l i t y and pr ice do not pose any problems, whereas the transport s i t u a t i o n at present may cause d i f f i c u l t i e s for a large sca le development of the industry.

2. Electric energy. (annex V)

30. The s i tuat ion as regards e l e c t r i c energy supply in the country today i s far from s a t i s f a c t o r y and demand is greatly in excess of exis t ing supply possibi l i t ies ; the estimated def ic i t in 1955 was more than 200 thousand kilowatts. The reason for the lag in capacity increase is two-fold; the law regulating the t a r i f f s at a level of insuff ic ient return on investments, and the s c a r c i t y of c a p i t a l . Indications are that the s i t u a t i o n w i l l be considerably eased in the next few years as the t a r i f f laws have recently been amended by Congress and c a p i t a l could now possibly be obtained from the funds established through the Agricul tural Surplus Agreement with the United S t a t e s or by loans from the International Rank for Reconstruction and Development. Apart from the development planned by ENTESA (Empresa Nacional de Elec-t r i c i d a d S .A , ) which c a l l s f o r an increase in generating capac i ty of 579 thousand kilowatts by 1964, further expansion i s l i k e l y t o take place in the pr ivate sector, mainly through the a c t i v i t i e s of the Compañía Chilena de E l e c t r i c i d a d (subsidiary of the American and Foreign Power Company), who recently announced their decision to build a thermo-electr ic plant with a capaci ty of 120 thousand kilowatts , to be finished in 1959. 31 . Since a pulp and paper m i l l , and p a r t i c u l a r l y a newsprint m i l l , i s a large consumer of e l e c t r i c energy - f o r instance, a newsprint mil l with a daily capacity of 300 tons needs an e l e c t r i c a l input of

- 1 2 -

RJEfclTES DE AGUA DULCE EN LA 2CMA QIL PI MUS

rRESH WATER SUPPLY SQUBCES IN THE PI RIß R/S9tÄTA 2TOE

LA S U P E R F I C I E FORESTAL EN 1953» HECTARES , se INOICA CO« C I F R A S ¡ENTRE

P A R É N T E S I S ; (IÖ.500) A FÁBRICAS EM CONSTRUCCION EN 1 : " TO« POR OÍa, PAPEL OC OIARtO

A G - 2 0 0 TO« POR o f A , PASTA SULFATO

+ E S T I M A C I Ó N A BASE DE UNA SOLA OBSERVACIÓN

MAXIMUM FLOW, M^/SEC , IND ICATED BY UNDERL INED F I G U R E ; 2 0

MINIMUM FLOW, M^/SEC , IND ICATED BY P L A I N F I 6 U R E J 7

F O R E S T AREA IN 1953, HECTARES , I N D I C A T E D BY F IGURE IN B R A C K E T S ; (18.500) A M I L L E UNDER CONSTRUCTION 1 9 5 6 : A F - 1 6 0 TOW PER DAY NEWSPRINT

A G - 2 0 0 TOM PER DAY SULFATE P U L P

+ E S T I M A T E D FROM "ONE S INGLE OBSERVAT ION

t

ì

some 23 thousand kilowatts- the investment in a thermo-electric plant is considerable but, on the other hand, the scale of operation is large enough to ensure a reasonable c o s t .

In view of the uncertainty of future supplies from outside, i t therefore seems prudent that new mill projects should as far as possible take into consideration the development o f t h e i r own e l e c t r i c i t y supply sources. In a l l the hypothetical projects calculated in t h i s study provisions have thus been made for self-sufficiency in e l e c t r i c energy.

3. Fresh water supply and effluent disposal, (annex IV, tables IF-3 and IV-4.)

32. One of the pre-requisites for the establishment of a pulp and paper industry i s the continuous access to abundant quantities of fresh water both for the production i t s e l f and for ancil lary processes, such as steam generation. Some idea of the large volumes required may be given by s ta t ing that the fresh water consumption in a mill of 300 tons daily capacity producing kraft papers from i t s own pulp i s of the order of 4 ,500 cubic metres per hour. The water must also meet cer ta in specif ica t ions as to purity, differing for the various types of products, the most obnoxious contaminants being manganese and iron. 33. A problem which i s equally important is the question of effluent disposal. For mills located inland there is seldom any al ternat ive to the use of a r iver for this purpose and as these usually flow through inhabited areas and are used for watering c a t t l e , washing, i r r i g a t i o n and so on the problem may often become ser ious . In many countries r e s t r i c t i v e l e g i s l a t i o n determines the amount and quali ty of the eff luents that may be discharged. Such laws also e x i s t in Chile but are inadequate and do not include special regulations for pulp mi l l s . I t would thus be extremely unwise t o s e l e c t a mi l l s i t e without f i r s t giving ser ious considerat ion t o the disposal problem, or without frank consul ta t ions with the Government or such o f f i c i a l departments as are connected with the question of r i v e r pol lut ion. 34. I f the flow of the r iver is large enough, the mill eff luents will be suff i c ient ly diluted to permit discharge (except when the water i s used for drinking) and the minimum flow required for a sulphate pulp mill of 300 tons daily capacity i s then about 20-30 cubic metres per second. Map I I indicates the main fresh water supply sources in the Pinus radiata zone. From the figures of minimum flow indicated on the map, i t will be seen that only in a few cases are the above requirements met. The conclusion i s , there-fore, that great care must be taken when selecting inland mill s i t e s to ensure that the effluent disposal could be solved in a sa t i s fac tory way. 35. I t is reconmended that the whole problem of river pollution as a result of a pulp and paper industry development should be reviewed by the competent authorities .

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C H A P T E R ' I V

T H E T R A N S P O R T P R O C L E M ( A n n e x V I ) .

36 . One of the main problems in c o n n e x i on with an expansion of the pulp and paper industry in the country i s the lack of good transport f a c i l i t i e s , both for the supply of pulpwood and other raw materials for the production, as well as for shipment of finished goods. The magnitude of the problem i s indicated by the f a c t that the t o t a l tonnage to be moved daily to and from a pulp mill with a daily capacity of 250 tons i s of the order of 1 ,500 tons and, since regular dai ly t ransport of the same tonnage i s impossible t o achieve , the t r a n s p o r t system must be developed t o cope with peak loads which may be considerably higher .

i. Pulpt/jood transport

37. Because of the r e l a t i v e l y short average t r a n s p o r t d i s t a n c e s for pulpwood i t i s probable that the t ranspor t in most cases w i l l be by t rucks . However, in the area of the pine plantat ions only about 30 per cent of e x i s t i n g roads are s u i t a b l e for t r a f f i c in a l l weather. Moreover, many of these roads are not in a condition to permit heavy and intense t r a f f i c . I t is therefore v i t a l t o a large s c a l e develop-ment of the industry t h a t a good road network is constructed connecting the plantation c e n t r e s with the best prospect ive mill s i t e s . This road system should be developed not only to serve the e x i s t i n g planta-t i o n s , which are r e l a t i v e l y s c a t t e r e d , but should p r i n c i p a l l y be planned for a future concentrat ion of new plantations in the v i c i n i t y of possible mill locations. Such.planning may be based on the method of l inear programming t o obtain minimum transport c o s t and investment. 38. Although thè e x i s t i n g road network i s i n s u f f i c i e n t and in bad condit ion , i t i s believed that the problem of pulpwood t r a n s p o r t could be solved individually for most of the prospective mil l s i t e s since average trucking d i s t a n c e s w i l l be s h o r t - f o r a pulp mil l of 250 tons d a i l y c a p a c i t y , o f the order of 30-40 kilometres- and therefore c o s t s , even under adverse condit ions, not prohibit ive. Considerable im-provement of the public road system i s a lso t o be expected in the near future and p a r t i c u l a r l y in t h i s s e c t o r o f the country as a r e s u l t of the implementation o f the ".Agriculture and Transport Development Plan for Chile" which will be p a r t l y financed by the Internat ional Rank for Reconstruction and Develop-ment.

2. Transport of finished products

39. For an inland mill s i t e the t ransport distance to port for finished goods, and to the mil l for some raw mater ia ls wi l l , as a ru le , be longer than in the case of pulpwood,- and r a i l transport with the e x i s t -ing f r e i g h t t a r i f f s will be cheaper than by truck. The railway s i t u a t i o n in the plantation area i s , how-e v e r , somewhat s i m i l a r t o t h a t of roads, the r e s t r i c t e d load c a p a c i t y being mainly due t o shortage of r o l l i n g s tock. In addit ion, some of the l ines serving the plantat ion centre deviate from the standard gauge o f the p r i n c i p a l n o r t h - s o u t h 1 ine and r e - l o a d i n g o f c a r s a t the j u n c t i o n s w i l l t h e r e f o r e be necessary . A development plan, c a l l i n g for an investment of 62 mil l ion dol lars and 6 b i l l i o n pesos, has been worked out by the Empresa de F e r r o c a r r i l e s del Estado, the implementation of which wi l l be par t ly financed by the I n t e r n a t i o n a l Bank as a link in the "Agriculture and Transport Development P l a n " . Hie s i t u a t i o n i s thus l ike ly t o improve considerably within the next few years . However, for the purpose of t h i s r e p o r t t r a n s p o r t o f f inished products i s assumed to be made by t ruck and the est imated c o s t s are thus l i k e l y t o Oe on the c o n s e r v a t i v e s i d e .

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3» The port situation

40. From the location point of view, Talcahuano would be the most suitable port for the export of pulp and paper. I t lacks, however, f a c i l i t i e s for docking vessels of deep draught and the loading of ocean freighters would, a t present, depend OF» the use of l i g h t e r s . This system i s expensive and i t must be considered as a pre - requis i te for a development of the industry that this port should ,be expanded and modernised, especially since the alternative ports of Valparaiso and San Antonio cannot handle additional tonnages and would a lso incur much heavier f re ight charges. Plans t o improve the Talcahuano port are under way and will probably be c a r r i e d out in the next few years , thus solving the shipping problem.

CHAPTER V

INVESTMENT AND PRODUCTION COSTS ( A n n e x V I I )

i. Investments and capital requirements

41. Investment and production costs have been calculated for sixteen mill projects of different capaci-t i e s , and producing different quali t ies of pulp and paper, to serve as a basis for the assessment of the economic prospects for an. export industry in Chile. The estimates include four project s i z e s , 50, 100, 200 and 300 tons per day for unbleached and bleached pulp production; two mill s i z e s , 50 and ]00 tons daily for unbleached and bleached kraft papers, and four newsprint mil ls , 100, 200, 300 and 400 tons per day. The investment es t imates are based on current (May 1956) p r i c e s of pulp and paper production machinery in Europe and the United States and local construction cos ts in Chile. The projects are, ex-cept in the case of newsprint, calculated for complete s e l f - s u f f i c i e n c y in steam and power, as well as caust ic soda and chlorine in the case of the bleached q u a l i t i e s . Apart from the investment in the mill i t s e l f , o f f - s i t e investments have also been estimated (housing and community f a c i l i t i e s for the person-n e l ) as well as investments in f o r e s t and t ranspor t departments ( t r u c k s , and housing for transport workers and administrative s t a f f ) since, in most cases, such f a c i l i t i e s do not e x i s t in the area and must be developed as part of a mill project . 42. In the total investments must also be included the capital costs during the construction period, the. amount of which depends on the time required before the mill i s in f u l l operation and the in teres t and other expenses charged to the capi ta l . For the purpose of this report i t has been assumed that the cons-truct ion period will be three years and the charges 8 per cent. F inal ly , to arrive at the t o t a l capital requirement, working capi tal should be added to the aggregate investment. I t has been estimated as equal to the c o s t of 4 months production (exc lus ive of i n t e r e s t on c a p i t a l investment) , plus the value of spares required for mill operation and pulpwood t r a n s p o r t . 43. I t should be noted that in the estimates of investments as well as production costs import duties on production machinery (at present approximately 25 per cent of the c . i . f . value) have not been taken into account, since i t i s recotrenended that Customs franchise for this p a r t i c u l a r kind of machinery should be one of the measures adopted by the S t a t e t o encourage a rapid development of an industry with high foreign exchange earning capacity. Should the customs duties remain, they would add approximately 12 to 13 per cent to the t o t a l capi ta l requirements l is ted in the following paragraphs.

2. Pulp mills

44. Ihe mil ls producing unbleached pulp are based on the sulphate process and include complete and mo-dern equipment for recovery and burning of the waste liquor. Bleached qual i t ies are assumed to be pro-duced by the sulphur-soda process t o u t i l i z e the caust ic soda produced simultaneously with the chlorine required for bleaching. This means, however, only minor changes in the equipment in comparison to the sulphate process, and for the purpose of t h i s report i t may be assumed that the investment will be the same in both c a s e s . Investments and c a p i t a l requirements are as follows:

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UNBLEACHED PULP (IbsusafisU-sLdsUacs)

Capital requirement of which foreign e.xchang©

9, 03C 6 j, 212'

12,425 8,757

17,255 izs046

Mill capacity, tons/dayj 50 100 200 300

Mill investment 6,200 8,420 11,250 15,300 Forest. Dept., trucks 85 180 420 700 Transport Dept® trucks 45 92 187 255 Housing and cosamaxiity 715 908 1,263 1,700 Capital cost during coast?«» 1,205 1,635 2,225 3,035

Total investment 8,250 11,235 15,345 20,990 Working capital 7S0 1,190 1,910 2,755

23,745 16,570

Corresponding figures of total investment and capital requirements for mills producing bleached pulp are. as follows:

Mill capacity, tons/day:

Total investment Capital requirement

50 1 0 , 2 5 0

11,235

100

13,665 15,140

200

18>730 21,105

300 25,140 28,500

45. Investments as well as capi ta l requirements are s t r a i g h t l ine functions of the mill capacity with deviations in aggregate investments from the s traight line of less than plus or minus 3 per cent. I t i s thus believed that within the capacity limits of 50 to 300 tons per day the s t r a i g h t line relationship could be used for estimates of investment and c a p i t a l needs at intermediate mill s izes 1/. The figures for mills producing unbleached pulp bring out two important facts which are valid also for integrated and newsprint mills; the heavy capital costs during construction time, which amount to almost 15 per cent of the t o t a l investment and the large proportion, 70 per cent of the c a p i t a l requirement which i s in foreign exchange.

y On this subject, s e e a l s o : Pulp and Paper P r o s p e c t s i n L a t i n Anerica. United Nations publicati Sales No. 1 9 5 5 . I I . G . 4 .

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3- Integrated mills

46, Two s i z e s , 50 and 100 tons d a i l y capac i ty , have oeen c a l c u l a t e d for i n t e g r a t e d mi Lis producing un-bleached and bleached k r a f t papers from a 100 per cent chemical pulp furnish. On the assimpt ion that the s t r a i g h t l i n e r e l a t i o n s h i p between inves iment and c a p a c i t y i s v a l i d a l s o in t h i s c a s e , p r o j e c t i o n s to l a r g e r m i l l s i z e s , 200 and 300 tons d a i l y , have been made. Tota l investments and c a p i t a l requirements are as fo l lows, ( in thousands of d o l l a r s ) .

Mill capacity, tons/day 50 ICO 200 300

Total investment Capital requirement

12,140 13,315

17,130 18,950

27,100 30,200

37,100 41,500

Total imre stane nt Capital requirement

14,410 15,820

20,170 22,345

31,700 35,400

43,210 48,400

4. Newsprint mills

47. Four mill s i z e s , 100, 200, 300 and 400 tons per day have been c a l c u l a t e d . The p r o j e c t s include a sulphite pulping s e c t i o n for the production of the necessary quanti ty o f chemical pulp (20 per cent of the furnish) , the assumption being that young t r e e s of Pinus r a d i a t a , which have not yet developed any heartwood, could be pulped by t h i s process . I f not, the sulphate process with semi-bleaching must be used, which, however, cannot be e s t a b l i s h e d economically on a small s c a l e .

Inves iment and c a p i t a l requirements a r e ;

Mill capacity toas/day 100 Total investment 12,755 Capital requirement 14,230

200 300 400 19,660 28,045 35,160 22,155 31,710 39,860

As in the case of pulp mil ls the investirent and c a o i t a l requirements are s t r a i g h t l ine functions of the mil l c a p a c i t y . Further , the percentage share of c a p i t a l c o s t s during const ruc t ion , and foreign ex-change requirements in t o t a l investments and c a p i t a l needs are almost the same; i . e . 15 and 70 per cent r e s p e c t i v e l y .

Production costs, (annex VIII)

48. Production Cost est imates have been prepared for a l l the mill p r o j e c t s and are recorded numerically and g r a p h i c a l l y in t a b l e s V I I I - 1 9 t o 24, f i g s . V I I I - I to V. They include d e p r e c i a t i o n of investments c a l c u l a t e d According to t h e sinking fund method with e s t i m a t e d l i f e o f 10 and 15 y e a r s for mill and

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o f f - s i t e investments respectively, and a compound interest rate equal to the current return on securities of 8 per cent per annum. Since the useful l i f e of the assets is much longer, the estimates are conserva-tive. The daily production costs are also straight line functions of the mill size (figures VIII-I to V) with deviations for the single points of less than plus or minus 1.5 per cent. Unit costs are according-ly hyperbolical functions of the capacity and show a steep f a l l with a capacity increase in the small mills and a gradual levelling off towards an assymptotic value for the larger mill s izes . I t i s thus important that a mill should be planned with a large enough capaci ty to take advantage of the main decline in unit cost in order to have maximum competitive power in the world market. For this reason i t i s recommended that the pulpmills in Chile should not be.buil t with a capacity less than some 250 tons and newsprint mills not smaller than 300 tons per day;

49. The production costs in dollars per ton are summarized below

Estim&tsd Mill eisQg toas/ds s 50 100 200 500 400 ( mles valu®

Unbleached pulp 126o69 96O30 77ol6 73°49 115o05 Bleached palp 156O95 118026 95 ®92 90o72 144 0 45 Uablo teaffe papers 1S6O93 145064 125000 119o00 177.53 Bio kraffe papers 22306O 174oO? 145o00 135000 245ol3 Mewspriafc 11 035 98o55 95o39 92ol7 130051

The share of depreciation (including i n t e r e s t ) in the aggregate production costs i s approximately 54 per cent for mill capaci t ies of 50 tons per day and declines with increasing sizes to s l ight ly less than 40 per cent. For the purpose of comparison estimated sales values from mills in Chile (see annex IX app. IX-A) are included in the table. As will be seen, the margins between these values and production costs are considerable in the case of larger mills, a question which i s further dealt with in the follow-ing chapter. 50. As would be expected from the high depreciation charges, ex is t ing import duties on the production machinery have a considerable effect on production costs , which at the existing t a r i f f rate will increase by 6-7 per cent. The importance of customs franchise as an incentive for the development of the industry i s thus further stressed.

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fi

CHAPTER VI

ECONOMIC .EVALUATION OF THE PTOJECTS AMD AN (WEE-ALL ASSESSMENT

51. Hie economic evaluation of the projects has been made from two different aspects; <

i ) The private investors ' viewpoint, which presupposes a maximum return on the invested capital at a minimum risk, and i i ) the national viewpoint,, according to which a maximum earning of foreign exchange should be ob-

tained from available c a p i t a l and raw material resources.

The system used for the assessment i s in the f i r s t case the venture prof i t method, venture profit being defined as the excess p r o f i t over and above the minimum acceptable return on c a p i t a l a f t e r taxa-t ion. The minimum acceptable prof i t should yield a net asset s u f f i c i e n t to cover amortization charges and leave a net profi t of 8 per cent on the capital 1 / . In the second case net foreign exchange earning capacity i s measured in terms of recovery time, which is the period in which the foreign exchange share of the investment is recovered by exchange earnings'. 52. In each of the two cases l imita t ions in c a p i t a l or raw material supply w i l l a f f e c t the r e l a t i v e a t t r a c t i v e n e s s of one operation over the other . This i s only t o be expected and r e f l e c t s the general f a c t that c a p i t a l l i m i t a t i o n s w i l l favour ' the prpduction o f intermediate and l e s s refined products, whereas in the case of raw material r e s t r i c t i o n s maximum profi ts will be obtained from the more refined" products. ; 53. Since i t is common pract ice to finance the- purchase of production machinery through deferred pay-ments, the p r o j e c t s have, in addition, been .evaluated by t h e i r c a p a c i t y to l iquidate such payments. This i s measured by the number of years in which the foreign exchange siiare of the investment can be repaid by the gross annual earnings a f t e r taxat ion . . * 54. I t i s impossible within'the scope of this-sunmary t o give a comprehensive narrat ive of the economic evaluations made in annex IX and i t s appendices which contain more, complete information. In the following paragraph examples wi l l be given i l l u s t r a t i n g some of the assessments.from the investors and the coun-t r y ' s viewpoints, in each case assuming that there is an upper limit on capi tal or pulpwood. avai labil i ty .

l. Evaluation on profit and deferred payment basis - the investors' vieufioint 1 >

55. .Assuming that a t o t a l capi ta l of 25 million dollars (including working c a p i t a l ) i s available, mills of the following sizes could be buil t which would give annual venture prof i t s as recorded below:

1/ In this s t u d y n i n i n u n acceptable profit covers also d e p r e c i a t i o n o f o f f - s i t e i n v e s t m e n t s a i 4 c h , as rule, are recoverable in case o f t i o project's failure. The a s s e s s m e n t i s t l j u s c o n s e r v a t i v e ) .

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, Order of attractive*»

• ne s s Product Approxo mill size

tons per day Annual venture

profit; thousands of dollars

1 Unbleached pulp 400 4,700 2 Bleached pulp 300 4,450 3 Bleached papers 145 3,225 4 Unbleached papers 1Ö0 2,350 5 Newsprint 270 2,330

Besides showing the high venture p r o f i t s which will be obtained from pulp and paper production i n Chi le -almost 20 per cent of t o t a l capi ta l in the case o f unbleached k r a f t pulp and s l i g h t l y l e s s than 10 per cent for newsprint- the f igures also i l l u s t r a t e the point made previously, that c a p i t a l l imitat ion wi l l favour the production of less refined products, unbleached pulp being the most a t t r a c t i v e . In t h i s con-t e x t i t should, however, be remeni>ered that the mills producing k r a f t papers and newsprint are of smaller s izes than recommended. 56. The foreign exchange share in the to ta l capi ta l requirements is about 70 per cent for a l l the mills , and i s thus some 17 .5 mill ion dol la rs in the previous example. At th is level the repayment periods (by gross annual earnings a f t e r t a x a t i o n ) f a l l i n t o two d i s t i n c t groups. The f i r s t group comprises un-bleached and bleached pulp, which have a repayment period of about 2 . 6 years , and the second group con-s i s t s of unbleached and bleached papers and newsprint with a repayment time of between 3 . 3 and 3 . 9 years ( f igure IX - VI) . To these per i<Is must of course be added t h a t part of the p r o j e c t construct ion time during which foreign exchange i s required, and which may be estimated at about 2 years . Judged by t h e i r c a p a c i t y to l i q u i d a t e d e f e r r e d payments in the s h o r t e s t p o s s i b l e time, the d i f f e r e n t products thus maintain the same o r d e r of a t t r a c t i v e n e s s as in the case o f c a p i t a l l i m i t a t i o n .

2. Limitations in wood supply

57 . Mien the p r o j e c t s i z e i s determined by pulpwood a v a i l a b i l i t y and not by c a p i t a l r e s t r i c t i o n s , the maximum venture p r o f i t s which may be obtained from the d i f f e r e n t o p e r a t i o n s change t h e i r order o f a t t r a c t i v e n e s s , as demonstrated in the t a b l e below showing the venture p r o f i t per cubic metre ( s o l i d volume) of wood a t an annual supply l e v e l of 400 thousand cubic metres .

Order of attract! ness

Product Venture profit dollars per m3®

Percentage of profit for bio

papers

1 Bleached papers 14o00 100

2 Unbleach©d papers 8o3 8 60

3 Newsprint S O 59 4 Bleached pulp 6e88 49 5 Unbleached pulp 6 «38 46

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3» Assessment of foreign exchange earning capacity - the national viewpoint

58. Hie economic benefit for the country as a whole, which may be obtained from the al ternat ive invest-ment p o s s i b i l i t i e s , i s measured in the case of c a p i t a l l imitat ion in terms of net foreign exchange re-covery time 2 / , or the period in which the foreign exchange share of the capital requirement i s recovered by the exchange earnings from the exports of the products. This time i s l i s t e d below for projects re-quiring 17.5 million dol lars in foreign exchange.

Order of Forei^i exchange attractive- Product recovery tim®j

nesa years

1 Unbleached pulp 1 »51 2 Bleached pulp 1.58 3 Bisached papers 2o27 4 Mewsprint 2*33 5 Unbleached papers 2o57

The figures emphasize the unusually short time in which the foreign exchange requirements to establish the mill are recovered, varying from approximately one and a half years for unbleached and bleached pulp to about two and a h a l f years in the case of newsprint and kraft paper. A comparison with the table in paragraph 55 shows that the order of a t t r a c t i v e n e s s for the d i f ferent operations i s the sane as in the case of venture prof i ts from projects with capi ta l l imitation, except in the case of newsprint and kraft papers, for which the order of a t t rac t iveness i s reversed. 59. A s imilar reversal in the order of a t t r a c t i v e n e s s for newsprint and kraf t paper production, when judged from the private and the country ' s viewpoint, occurs in the case of wood supply l imitat ions . 60 . Since c a p i t a l a v a i l a b i l i t y in the less industr ia l ly developed countries i s generally the limiting fac tor when a new industry i s created, a natural sequence i s to s t a r t with projects for unbleached and bleached pulp and la ter -when pulpwood supply nay set a limit to further expansion of individual mills as well as of the industry as a srhole- t o i n t e g r a t e paper or newsprint sec t ions with the pulp mills by re - inves t ing p r o f i t s . Needless to say, marketing p o s s i b i l i t i e s for the d i f ferent products may change t h i s sequence or make i t advisable to diversify the production regardless of the prospective profi ts or foreign exchange earnings. I t should further be pointed out that many cases may a r i s e when pulpwcod supply would be the limiting factor from the outset , for instance when the forest stands within economic transport distance from the mill are limited, or when the Company has only small plantations of i t s own, The l a s t point i s important, since i t i s def ini te ly recommended that any large s ize mill should control at l e a s t about half of i t s pulpwood supply to avoid market speculations and interruptions of production because of shortage of wood.

4. Over-all assessment of the economic prospects

61. The importance to the economy of Chile of a pulp and paper industry based on the Pinus radiata plant-ation i s shown by stat ing that the annual foreign exchange net earnings from the industry would amount to some 60-85 mil l ion d o l l a r s , depending on the products exported. These f igures r e f e r to the f i r s t 10 years of the industry's l i f e a f t e r which tin®, when the assets are ful ly depreciated, the earnings will

1 / Nat ioroiqn exchange earning i s ib@ i.o.b. v a l u e o f the p r o d u c t s i n u s depreciation o f /oral9a e z c i a s g e i n v o s t e a n t and i t o a s i n t i o p r o d u c t i o n c o s t ahich i n c u r exchange payaent, sach an spares end e a i a -t e a a n c e m a t e r i a l s .

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r i s e by sonte 25 per cent. As an i l lus t ra t ion , i t may be mentioned that a development programme including annual productions of the following quantities and products, which no doubt could be marketed in Latin America, would resul t in net exchange earnings as follows:

Product Quantity

(Thousands of tons)

Kot exchange earnings First 10 After 10

years (aillionsof dollars)

Newsprint 300 29 37 Kraft papers 100 13 16 Unbleached pulp 200 19 22 Bleached pulp 50 6 7

Total 67 82

A comparison with the present commercial gross exchange earnings in the country - i n 1955 about 490 .2 million dollars corresponding to an estimated net earning of some 426.8 millions- further i l l u s t r a t e s the scale and importance of this industry in the country's economy.

The capital requirements to establish the industry are large - for the development prograirate outlined above some 170 million d o l l a r s i s needed, of which about 50 mill ions i s in l o c a l currency- and Chile will have to rely on foreign financing to carry out a programne o f this s ize in a reasonably short time. I t i s believed, however, that i f the Government adopts an encouraging pol icy , and when the economic p o s s i b i l i t i e s of an industry of this kind in Chile are known, such financing may be obtained. Some o f the measures which should be undertaken by the Government t o create an incentive for foreign and local investment in this f i e l d are siHranarized in the following general recommendations.

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Chapter YII

R E C O M M E N D A T I O N S General recoimendations

1. The Govern¡R2iit should, as a link in the economic development plan for the country, adopt a policy and take measures t o c r e a t e incent ives f o r e s t a b l i s h i n g in the s h o r t e s t poss ible time, a l a r g e - s c a l e pi lp and paper industry, based on the ex is t ing plantations o f Pinus r a d i a t a . This measure should be undertaken for two main reasons; t o improve the t r a d e balance, s ince net foreign exchange earnings would r i s e by some 15-20 per cent , and to recover the value represented by the e x i s t i n g plantations -3ome 60 m i l l i o n d o l l a r s - an a s s e t which can only be saved in t o t a l by the establishment of t h i s i n d u s t r y .

2 . Since a development aiming a t f u l l u t i l i z a t i o n of the output from the plantat ions w i l l require some 120 million dol lars of foreign exchange and since i t i s unlikely that the public or private sec tor in the country could provide t h i s amount, the p a r t i c i p a t i o n o f f o r e i g n c a p i t a l - e i t h e r on an equity basis or through d i r e c t investments- i s v i t a l t o secure a rapid expansion of the industr ia l capacity. In formulating i t s pol icy the Government should therefore c l e a r l y emphasize t h a t the primary aim i s to encourage p r i v a t e e n t e r p r i s e and foreign c a p i t a l as the only present means f o r a successful de-velopment of a l a r g e - s c a l e industry. Tnia does not in any way preclude Sta te par t i c ipat ion in single p r o j e c t s , which may even be necessary to i n c i t e such development.

3 . Neither d i r e c t no? i n d i r e c t foreign investments a r e , however, l i k e l y t o take place unless the in-v e s t o r i s assured t h a t favourable conditions e x i s t in respect t o p r o f i t remit tances , c a p i t a l with-drawal e t c . I f a generous policy towards foreign capi ta l in general , does not already e x i s t , or will not scon be adopted, i t i s reconmended that maximum possible concessions should be granted to t h i s p a r t i c u l a r industry immediately.

4 . I t i s reetHEiasnded that the present import duties on machinery -about 25 per cent of the c . i . f . value-should be locjered or preferably completely abolished for the production equipment in t h i s industry, during a spac i f ied period, s ince t h e i r impact on production c o s t s i s considerable, as a ru le about 7 par c e a t of the t o t a l c o s t . This measure would thus undoubtedly encourage i n v e s t m e n t s and would also give ths iavesfcor a c e r t a i n s e c u r i t y that the State i s a c t i v e l y i n t e r e s t e d in the development.

5 . The commercial policy of the country should be c o r r e l a t e d with the development of the industry and, as soon as d e f i n i t e dates are known «hen new c a p a c i t i e s will s t a r t operations, these export avai labi-l i t i e s should be taken i n t o account in trade negotiat ions with the d e f i c i t countr ies . Trade agree-ments should i f p o s s i b l e be made on a long-term b a s i s , e s p e c i a l l y with the main importers e . g . Argentina and, i n p a r t i c u l a r , f o r bulk products such a s newsprint and unbleached k r a f t pulp.

6... A p i lp and paper industry of the s i z e which could be established in Chile requires a large number of professional employees and s k i l l e d workmen trained in t h i s s p e c i f i c f i e l d . In the i n i t i a l phase of development foreign technic ians and s p e c i a l i s t s would have t o be brought i n t o the country t o t r a i n l o c a l personnel. Although the main t r a i n i n g would take place in the industry i t s e l f , and would be the r e s p o n s i b i l i t y o f the individual companies, i t must r e s t upon the S t a t e t o provide adequate bas ic education in the u n i v e r s i t i e s and technical schools, and through specia l courses. I t i s there-fore reCOHEREnded t h a t the education programme r e l a t e d t o t h i s p a r t i c u l a r subjec t should be revised and enlarged.

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2. Specific recommendations

(a) Forestry problems

7. Since only a f r a c t i o n of the t o t a l potent ia l a v a i l a b i l i t y of Pinus r a d i a t a sawtimber could be marketed, i t i s recommended that the planned training programme and c r e d i t f a c i l i t i e s for b e t t e r sylvicultural management of the plantations should be revised, taking into account that plantations with low growth rates should, as a general policy, be reserved for the production of pulpwood alone, and clearcut at the ages of minimum stumpage value. Thinning and pruning of these plantations, i s , as a rule, a waste of money and should be discouraged.

8. I t is recomrtended that the future plantation programme should be co-ordinated in order to obtain, as far as possible, large and concentrated stands in the v ic in i ty of the most suitable mill locations, to reduce e x t r a c t i o n and t ranspor t c o s t s . Since plantat ion work i s l ikely to remain mostly in private hands, co-ordinat ion could best be achieved by proper information and propaganda.

9 . A moderate s i z e pulp or paper mill i s a large consumer of pulpwood, and since t h i s represents a considerable proportion of aggregate production costs , i t is v i t a l that the industry should exercise control over i t s supply requirements, both as to quantity and price . I t i s therefore recommended that any large size mill should have i t s own plantations, sufficient to cover some 50 per cent of i t s pulpwood needs, in order to prevent market speculations and interruptions of production because of wood shortage or excessive pr ices .

(b) River pollution

10. Restrictive legis la t ion regarding disposal of eff luents in the r i v e r s already e x i s t s in the country (Co'digo de aguas), but i t i s inadequate and does not include regulations s t r i c t l y applicable to water contamination by pulp and paper mil ls , which is a serious problem. Great care must therefore be taken, e s p e c i a l l y when s e l e c t i n g inland mill s i t e s , to ensure that the disposal problem could be solved in a sa t i s fac tory way, and frank consultations with such o f f i c i a l departments as are connected with the stream pollution problem are necessary. I t is recommended that the whole problem of r iver pollution as a resul t of a pulp and paper industry development should be reviewed by the competent authorities and c lear ly defined regulations established to help the industry in i t s location problem.

(c) Transport problem

11. One of the main problems in connexion with an expansion of the pulp and paper industry is the lack of good transport f a c i l i t i e s , both for the supply of pulpwood and other raw materials, and for shipment of finished goods. Responsibility for the development of such f a c i l i t i e s must r e s t upon the public sector , especial ly since foreign investments on a large scale are not l ikely t o be made without an assurance that the transport problem wil l be solved s a t i s f a c t o r i l y . This applies not only to the public road system in the plantation area, but also to railways and, especia l ly , to the port s i tua-tion. Talcahuano seems to be the best prospective port for the export of pulp and paper and i t must be considered as a p r e - r e q u i s i t e for the development o f the industry that t h i s port should be ex-panded and modernized. I t i s recommended that the whole t ransport problem in connexion with the industrial development in the area should be reviewed by the competent a u t h o r i t i e s .

(d) Community and housing facilities

12. The public authori t ies should be responsible for the development of basic community f a c i l i t i e s such as schools, hospitals , communications, water supply, drainage e t c . I t is recoircnended that such faci-l i t i e s should be provided generously and without delay, to f a c i l i t a t e labour movement and to assis t the industry in the problem of acquiring the necessary personnel.

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13. Although the provision o f housing for employees and workmen in most eases would have t o be the res-p o n s i b i l i t y o f the p r i v a t e e n t e r p r i s e , i t i s recommended t h a t the S t a t e should make avai lable long-terra loans a t low cos t for swch housing, as s measure t o ease the financing problem of the industry.

(e) Technical matters

14. In the development of the industry advantage should be taken of the l a t e s t improvements in processing techniques and machinery design ( e . g . continuous cooking systems) t o achieve a maximum competitive power. However, s i n c e a l a r g e s c a l e pulp and paper m i l l c a l l s f o r a v e r y heavy investment, a cautious or even ronservat ive view must be taken t o safeguard against technica l f a i l u r e s , and only such processes and machinery as are already in successful commercial operation should be considered. Informed and o b j e c t i v e advice on the t e c h n i c a l planning of the mil l s i s e s s e n t i a l to ensure t h e i r v i a b i l i t y , and i t i s recommended t h a t well-known c o n s u l t i n g f i rms of high i n t e g r i t y should be employed. Their planning and advice may seem expensive, but there i s no doubt t h a t the absence of highly qualif ied t e c h n i c a l a s s i s t a n c e w i l l prove to be much more c o s t l y .

3. Final recommendation

Since the Pinus r a d i a t e plantat ions c o n s t i t u t e one of the most important raw material resources for the production of pulp and paper in Lat in America, the u t i l i z a t i o n of which would make a large con-t r ibut ion towards solving the future supply problem for these products in the region and be of great economic benefi t t o C h i l e , i t i s recommended that the Government should take e n e r g e t i c measures t o ensure t h a t the development o f the indust ry w i l l take p l a c e r a p i d l y . To achieve a maximum of e f f i c i e n c y , the development programme should be co-ordinated in a l l i t s a s p e c t s , and the o f f i c i a l department or organisa t ion in charge of th is co-ordinat ion should be given adequate funds to car ry out i t s work f o r c e f u l l y .

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ANNEX I

THE MARKET SITUATION FOR PULP AND PAPER

A. STRUCTUPE OF THE INTERNATIONAL MARKET

l. Short-term fluctuations in prices and balance of supply and demand

During the l a s t decades the internat ional market in paper, board and pulp has experienced more violent and frequent changes both in the supply and demand balance and the price level than perhaps any other world market. There are two wain reasons for this i n s t a b i l i t y . F i r s t l y , the consumption of paper and board is one of the most sensitive indicators of a country's cul tural , .economic and industrial a c t i -vity; second, the i n t e r - r e g i o n a l trade in these commodities i s only marginal in r e l a t i o n to aggregate production and consumption in the large industrial regions (Europe and North America) where export avail-a b i l i t i e s represent but a snail proportion of t o t a l production.

The f i r s t point i s i l l u s t r a t e d in figure I - I which shows the c o r r e l a t i o n between the indust r ia l production index and t o t a l consumption of paper and board in the United States during the period 1920-52. I t i s c lear that a close relationship e x i s t s between paper consumption and over -a l l industrial a c t i v i t y in the country.

The second feature i s demonstrated in the following tables 1 - 1 and 1-2 , which show the production and consumption of paper and pulp by regions.

Table X-l

PRODUCTION A ® CONSUMPTION OF PAPER AND BOARD BI REGIONS, 1954 Loaaoi

Production Consumption Ket export as a percentage of production

Imports as a percentage of consumption

13O36 29° 71 0o94 2o20

Rest oî the world a/ 0=50

lurop© Morth America Latin America

12o27 28.B5 lo50 2O66 1 * 1 0

8o2 2o9

Sources FAO, Yearbook of Forest Products Statistics, 1955. ¡J Excluding the Soviet Uniona Eastern Europe and mainland China0

37 21 55

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Table 1-32

PRODUCTION AND GCJMSUMPTIOK OF WQOBPULP jg/ BY REGIONS, 1954 Lor

Region

Europe North America Latin America Asia Rest of the world

Production

11.72 25ol3 0.35 1.71 0.37

11.46 24 »66 0.76 1.86 0„46

Net export as a percentage of production

2 a ¿. 1»9

Imports as a psrcent-ag® o f consumption

55 8 24

Sources.' FAO, Yearbook of Forest Products Statistics. 1955: Woodpulp Statistics 1955« United States Pulp Producers Association,

•-.] so includes other fibre pulps* b/ Including the Soviet Union, Eastern Europe and mainland China.

Tables 1 -1 and 1 - 2 show that , whereas net exports of paper in 1954 amounted t o 8 . 2 per cent of to ta l production in Europe and 2 .9 per cent in North America, corresponding figures for pulp exports stood at only 2 . 2 and 1 . 9 per cent , respect ively . Besides showing how marginal are the surplus quantit ies from the industr ia l regions, the tables a lso enphasize the importance of these export a v a i l a b i l i t i e s to t o t a l needs in the regions which ase less developed i n d u s t r i a l l y . Lat in America, for instance, depends upon imports of paper and pulp corresponding to 37 and 55 per cent , respect ively , of the t o t a l consumption.

I t should also be noted that export a v a i l a b i l i t i e s will become even more marginal in the future. I t has thus been est imated t h a t by 1960-62 consumption of paper and board w i l l have increased in North America by 25-30 per cent and in Europe by some 40 per cent over the 1950-52 l e v e l s , whereas no appre-c iable r i s e in t o t a l exports i s envisaged \J.

From what has been s a i d above, i t i s easy t o understand t h a t even s l i g h t changes in the internal European and North American supply/demand r e l a t i o n s h i p has had and w i l l have - a t l e a s t in the near future- grave repercussions on the international market. This has been c lear ly demonstrated in the post-war years , a period when pulp and paper prices have fluctuated extremely sharply, and when small buyers have had to pay exorbitant pr ices in times of scarce supply _2/.

Two additional f a c t o r s further aggravate the short-term price f luc tuat ions . When the world economy i s expanding and the marginal export a v a i l a b i l i t i e s are small, ocean freight r a t e s tend t o increase and at the same time the importers -from fear of supply d i f f i c u l t i e s and further price increases- often make s p e c u l a t i v e s t o c k purchases ; both give a d d i t i o n a l momentum t o the p r i c e movement. During a slack

j y S e e World Pulp and Paper « « s o u r c e s and Prospects. (World Survey), o p . c i t . As w i l l be s e e n l a t e r in this report, actual c o n s u m p t i o n figures for 19S4 ana 5 5 indicate an a p p r e c i a b l y s t e e p e r r i s e in c o n s u m p t i o n t h a n p a s e n v i s a g e d i n t i e 'World Survey'.

2J It seems probable that the s i t u a t i o n d u r i n g t h i s p e r i o d was aggravated by the p o s t - o a r a d j u s t m e n t o f e c o n o m i e s and trade and by the outbreak of the Korean war and some authorities claim that the narket c r i i l n o s e x p e r i e n c e leas violent changes. True or not, this does n o t nullify the validity of the general conclusion, noe ie l j r , t h a t s o a l l c h a n g e s in t h e d o m e s t i c a a r f e e t s o f Europe and North America uill have far-reaching c o n s e q u e n c e s on the international p a p e r t r a d ® .

- 2 8 -

economic c y c l e , the s i t u a t i o n i s reversed. Figure I - I I , which shows the annual f luc tuat ion in p r i c e s o f newsprint and k r a f t pulp imported i n t o C h i l e , amply i l l u s t r a t e s the shor t - term p r i c e movements.

However d i f f i c u l t ¡and inconvenient periodic interruptions of supply and rapid p r i c e f luctuat ions of an e s s e n t i a l commodity such as paper nay be, an importing country can always lessen thei r e f f e c t s by such means as the maintenance of large s t o c k s and the adoption o f a compensatory p r i c e p o l i c y in order t o s t a b i l i z e the domestic p r i c e l e v e l . Such a pol icy , while easing a temporary s i t u a t i o n in the internal market would not a f f e c t long-term supply problems, and would a l s o be c o n t i n g e n t upon a r i g i d s t a t e c o n t r o l of imports and p r i c e s . I t s e f f e c t on the i n t e r n a t i o n a l market -unless j o i n t l y adopted by the main importing c o u n t r i e s - w a l d a l s o be i n s i g n i f i c a n t .

The problem of supply over the long tc,rr&

Far more dangerous and disturbing for imparting countr ies than, the above-mentioned short - term f l u c -tuat ions i s the u n c e r t a i n t y of supply over the long term. This problem has in recent y e a r s commanded growing at tent ion frran both nat ional and i n t e r n a t i o n a l bodies, in p a r t i c u l a r the United Nations and i t s spec ia l i sed agencies ,

'The following are some important conclusions contained in s t u d i e s which have been c a r r i e d out o r sponsored by the United Nations 3 / .

The (forId Survey concludes that "Pulp and paper production in Europe and North America wil l continue t o grow" end that "new investment i s l i k e l y to be p r i n c i p a l l y guided by the trend in domestic demand in those regions". Also, " i t seems unlikely , for s e v e r a l reasons, t h a t the margin avai lable for export t o other regions w i l l r i s e s u b s t a n t i a l l y in the long terra". Fur ther :

"But though the surplus avai lable for export in the old production c e n t r e s •will f l u c t u a t e , conceiv-ably r i s i n g above present levels from time t o time, c l e a r l y two-thirds of humanity cannot be content t o have t h e i r supplies of an e s s e n t i a l commodity interrupted by per iodica l f luc tuat ions . And in any case a long-term increase in the exportable surplus commensurate with the r i s i n g needs of the d e f i c i t regions does not seem l i k e l y " .

Tables 1 - 3 and 1 - 4 below give a summary o f world consumption of pulp and paper in 1950-52 and of e s t i m a t e s of demand in 1960-62, as p r e d i c t e d i n the p r e v i o u s l y c i t e d r e p o r t .

For farther Informertifflo, boo ffosrid Pajp and Papal1 Rttourcai and P r o s p e c t s , o p . c i t . ; aad Pttlp and Pape Prospects i n Latin America, op.elt.

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Table 1-3

ESTIMATED INCBB&S IN DEMAND FOR PAPER AMD BOARD, 2950=52 TO 1960-62, BY REGION AND BY CATEGORY ¿/

Papor audi board kmr&gß 1950-52

Estimated 1960-62

Absolute increase

Percentage increase

Ewop® 11 »82 16.30 4«56 38 USSR (1.92) (3.00) (1.08) 56 North ha.@ries 28.57 36o83 8.26 29 Latin Amsriea 1.45 1.09 75 Near a®d Middle East 0.10 0.15 0.05 50 Far East 1.92 4.05 2.13 110 Oceania 0.67 1*00 0.33 48 Africa 0o?l

f i'i • 1 x N *• tfftrrr

WorM ktsSQ MksM, XLäk

Newsprint 9J& 1 2 . 9 0 3.49 37 Other ppiatiag mxSd tsrlfciag paper 8.75 IX ©29 2o54 29 Other pap©3? 11.43 1 6 . 0 3 4.60 40 B©ss=ifi 1Z&3L 2ksMt ' 743. U

Ì&2L . f t t f t ¿7*76

Jgl£c®; Food and Agriculture Organization, W o ^ ¿goBb table 1-7» For a ccaparison wit© demand forecasts mad® later in the current report it should be observed tfoatj 1) the figures quoted in the above table include also building board consumption,

which has been omitted from the revised demand figures, and 2) figures for Europe given in this report include Eastern Europe (unless otherwise stated).

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1=4 ESTIMATED PULP ͮQU3MEWTS IH 1960=62

Region Mood pttlp needed to satisfy domestic eceasmptioa palp

¿vera®® Estimated 1950-52 1960=62

Europ® 9 . 3 1 2 » 3 3 . 0 North America 2 2 . 1 2 8 ol 60O USSR (I08) ( 2 o 8 ) (1.0) Latin America 1 . 2 7 2o23 Oo96 Near and Middle East OolO . 0 o l 5 0 o 0 5 Far East l o 53 3 o 4 0 l o 8 7 Oceania O063 0 o 9 5 0 o 3 2 Africa 0 , 3 8 O06O 0 o 2 2

World ~ 3 7 o l ' 5 0 «5 1 3

ood and Agriculture Organization J^iJ Siaa«3CB QPoCit». table 1-90 These t a b l e s show t h a t t h e a n t i c i p a t e d increase in demand during the current decade i s almost 18

million tons of paper (38 per cent of the 1950-52 consumption) and 1 3 . 4 million tons of pulp (about 27 per cent of the 1950-52 l e v e l ) . The lowest r a t e s of increase are those envisaged for Europe and North America, but in absolute quantit ies these regions account for about 70 per cent of the t o t a l .

Market development in the years 1954 and 1955 indicates that the above demand f o r e c a s t s are on the low side. This unexpected increase in demand has made i t necessary to r e v i s e the demand forecas t for the main regions of the world, and p a r t i c u l a r l y for Latin America, in order t o appraise the current and future marketing p o s s i b i l i t i e s for pulp and paper produced in Chile.

B. A FORECAST OF FUTURE DEMAND AND THE SITUATION IN THE DIFFERENT REGIONS OF THE WORLD

1. Methods used in forecasting demand Three d i f ferent methods have been used in forecas t ing future demand;

Method A: the h i s t o r i c a l projec t ion method. This method i s a simple f o r e c a s t based on thè h i s t o r i c a l development trend, usually for the 7-year period 1948-54, assuming that consumption n i l ! r i s e by an equal percentage each year . As a rule the f i r s t 3-year period has been chosen as a base period with 1949 as the base year t o Ììvoid e r r o r s r e s u l t i n g from y e a r - t o - y e a r changes in stocks. From the base year future demand has been calculated by projection of the mathematic-al ly f i t t e d curve (the l e a s t square method) obtained from the base year consumption and the apparent consumption figures for the following years . The method i s crude and in such cases where data a r e avai lable to permit the use of e i t h e r of the following methods, i t has been used only for purposes of comparison.

0

- 31 -

Method B: the h i s t o r i c a l c o r r e l a t i o n method. This method i s based on the observation that papf:r and board consumption i s c losely related to the per c a p i t a income in a country: i . e . a given in-crease in per c a p i t a income will r e s u l t in a defined increase in per c a p i t a consumption of paper products kj . This i s e s p e c i a l l y true in the case of newsprint, where consumption i s c l o s e l y r e l a t e d t o net disposable income on a per c a p i t a b a s i s . The c o r r e l a t i o n between consumption and income i s determined from h i s t o r i c a l d a t a . o f the two e n t i t i e s . Since the e l a s t i c i t y coeff i c ient will change (diminish) with an increase in income this must be taken into consideration i f the forecast i s made for a long time. In most of the f o r e c a s t s made here h i s t o r i c a l data for the period from 1948 to 195^ have been used. J'er capita income figures are the Gross National Products (CJ"iP) per capita, calculated at constant pr ices ¿ / . To determine the t o t a l consumption level in a country or region by the h i s t o r i c a l correlat ion method i t i s necessary to have est imates of future income as well as population. For some countries estimates of income are available but as a rule income levels will have to be deter-mined ei ther from h i s t o r i c a l trends or by some other means of forecasting economic developmeat.

Method C: the general c o r r e l a t i o n method. When data are not a v a i l a b l e to determine the e l a s t i c i t y c o e f f i c i e n t t h i s may be estimated by comparison with o ther countries having a s imilar per capi ta income l e v e l . The procedure to assess future demand i s then the same as in Method B. To f a c i l i t a t e such comparisons the e l a s t i c i t y c o e f f i c i e n t s for a) newsprint and b) a l l other papers and boards, have been calculated for a number of countries with different income levels and are recorded in tables 1-5 and figures I - I I I and I-IV.

4J For a given country the correlation shows a • straight-line relationship between the logarithms for per capita income and consumption; i . e . ^

log Y = k . log x + C, uh e r e y i s c o n s u m p t i o n per c a p i t a , x the i n c o n e p è r capita. C a constant and k the eias-ticity coefficient.

The c o r r e l a t i o n e q u a t i o n i s v a l i d oaly for c o m p a r a t i v e l y s m a l l changes in per capita in come, s i n c e t h e elasticity c o e f f i c i e n t will vary with x as d e o o q s t r a t e d later.

¿ / I t should be n o t e d t h a t , i n o r d e r t o d e t e r s i n e t h e elasticity coefficient alone, it is unnecessary to use a c t u a l i n c o m e f i g u r e s a t c o n s t a n t p r i c e s . l e d e i f i g u r e s f o r per capita i n c o r a e f a t c o n s t a n t prices), which are more readily available, will serve the same purposes as demonstrated by the follow-ing equations;

1) log n = k , • -io? * 2 + C ) > )

Elimination of C between the

2) 1 og r2 = k • log *2 + C

) > ) equation s gives:

3) •

log I I ts i . l o g 1L Thus, i n d e x figures for both rome ana paper consuupt used t o d e t e r m i n e t h e e l a s t i c i t y c o e f f i c i e n t

- 32 -

Table 1-32

VARIATION OF ELASTICITY COEFFICIENTS FOR PA FEB COHSSOTDON TOH GROSS MÏIONAL PRDDUCf PER CAPITA

Counts^ Period

©ÎP pa? capita

(1950 dol

Unitad Sfeat©g 1948=55 1,942 OO36 Ooââ United Sfeat@s 1929-38 1,115 0o?6 (0.83) Canada 1948-54 1,020 0o?3 X &xs Bm&m 1949-54 760 0o97 Xoé?

tssla 1940=54 656 Monday 1949-54 604 lo91

1949-54 418 lo45 lo28 Finland 1948-54 387 2 oQff Europa osselo Uaitod Sis agdoa ©ad Frane® 1949=54 356 lo62 lo5k Latia iMsrieag ©salo Ar; pntiaa 1948-55 222 2o21 lo48 M®sieo 194@=54 208 lo77 India 1948=54 62 3°37

The following conclusions may be drawn from the t a b l e and f igures I - I I I and I - IV. The e l a s t i c i t y c o e f f i c i e n t decreases with an i n c r e a s e in per c a p i t a income, more sharply f o r news-

p r i n t than f o r o t h e r papers and boards . Although d e f i n i t e c o n c l u s i o n s cannot be drawn from t h e s e l imited data , they i n d i c a t e t h a t the c o e f f i c i e n t may be approximately a s t r a i g h t l i n e function of the logarithm of the income. See f i g u r e s I - I I I and ï - I V . The c o e f f i c i e n t s may thus be represented by the général formula:

Hte^S = p l o g x * ci where k i s the e l a s t i c i t y c o e f f i c i e n t , y consumption per c a p i t a , x per c a p i t a income and p and C con-s tants .

In the case of "other papers said boards", there seems to be a d i s t i n c t difference between the c o e f f -i c i e n t s f o r importing and expor t ing c o u n t r i e s , with higher values for the l a t t e r group of c o u n t r i e s . This probably r e f l e c t s the fac t t h a t paper products a r e usually cheap in comparison t o the general price level in exporting countr ies .

The constants p and C in the equation above have been ca lcula ted and are as follows:

P Cj Newsprint 1 .79 6 . 2 3

Other papers and boards importing countr ies - 1 .52 5 . 2 4 exporting countr ies - 2 .10 7 .68 average - 1 . 8 1 6 . 4 6

- 33 -

I f the d i f f e r e n t i a ! e l a t i o n 1) i s solved for log y the following expression for paper consurcptiss as a function of pgr capita income i s obtained:

E q u . ( 2 ) l o g y a p H S L J L L 4- C j l o g K + C g '

Since p has a negative value i t follows that leg y and consequently the per capi ta cosiausapticn will reach a maxirasi point or "sa turat ion value", above which the t o t a l paper consumption in a ceesitry will' r i se caly ©t the sams r s t e as the population increase» The "saturation value", which i s roflcsfcsd in thz c distant Co, varies from esse country to snot he? and depe&ds apparently «m a nunfoer of fac tors , onong thea primarily the exist ing re la t ioa o£ paper consumption to inccsss,

I t seems probable t h a t the saturation level may also vary by the tisae dc=ps;ding en chacges in the consumption pattern, for instance by th® introduction of new paper products on the ¡nark at or by new tases o f exis t ing products. These changes are , however, by t h e i r nature, unpredictable.

In figures I - Y and I -VI , consumption i s recorded as a function of per capi ta incoEss. l a the cess o f newsprint (figure I - V I ) , the consumption curve has been calculated from the United Slates consumption level in the period 1948-55, while for other papers and boards three functions, corresponding t o the consumption levels in the United Sta tes , Europe and Latin America are recorded. Hie Usited States curve i s calculated using ths con stents p and Oj for exporting countries, the curve for Eunops with the average values f o r importing and export ing co- jntr ies , while for L a t i n America the c o n s t a a t s f o r iaportisig c o u n t r i e s have been used.

From figure I-VI i t wil l be seen that the saturation level , ras calculated f r e a equation 2 and pith the United S t a t e s consumption l e v e l as bas is f o r the p r o j e c t i o n , us about 3T kilogrssaraes per head annually, a consumption figure which had almost been reached in that country in the year 1956. I t shotsid also be noted that the consumption -income curve corresponds remarkably well t o fc.hc h i s t o r i c a l develop-ment in the United States ; the consumption figure for the period 1929-38 beiag s l i g h t l y below th® line, which may indicate that the consumption pattern has remained relat ively laichairged. Sicce, ha^evex, zkoes are s igns which show that the consumption o f newsprint in the United S t a t e s in the e a r l y nineteen-f i f t i e s was deflated owing to the impact of te levis ion am newspaper a&rertisimg lineage (see section ca North America) i t i s l ikely that the consumption curve i s also depressed and will tend show too esaail consumption figures. Forecasts of the future demand im the United States have therefore assrasad that the e l a s t i c i t y coefficient has not yet reached the zero vales.

For o ther papers and boards ( f igure I - V I ) , i t should again be noted t h a t the consoisptioss curve corresponds well to the h i s t o r i c a l development in the United Sta tes , The consumption curve for Europe in i t s lower part (up to an income o f about 2 ,000 dol lars par head and year ) i s ahsicst p a r a l l e l t o the U.S. curve. I t indicates higher consumption figures than for United S t a t e s a t the seas inccae level , which probably i s accounted for by the h i s t o r i c a l change i n the consumption pat tern due t o t e c h n i c s ! development. The curve for Latin America i s , at the preserat income level of eboufc 220 d o l l a r s , also higher than the curve for the United States , but the prelection t o higher inccsso i s fcomoicferdbly lecar. This i s probably an indication o f the fact t h a t in the under-developed regions the coas'aEptiffia o f sens paper products i s s t i l l l imited t o s p e c i f i c uses and s e c t i c a s of the population. ' fthsa the industrial development o f these areas proceeds, i t is likely that the consvssnpticn-inccxe r s l a t i c a s h i p for papsr uall approach, or may even exceed, the h i s t o r i c a l data for the United States .

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2 . The situation in Sörth America

(a) Newsprint

(i) DeveIopment in the post-war period

During the post-war period from 1948 t o 1 9 5 5 , a e w s p r i n t production, consumption and export a v a i l a -b i l i t i e s have shown the following development:

Table 1=6 NEWSPRINT PRODUCTION, CONSUMPTION AND EXPORT AVAILABILITY IN NORTH AMERICA

1948=55 (Millions of tons)

Year Production Consumption a/ Export avail~ United Canada Total United Canada TotaL ability

States Canada Total States Canada 1943 0,795 UeZLO 5.005 4.681 0,278 4.959 0 c 046 1949 0.833 4.706 5.539 5.010 0.304 5.314 0.225 1950 0.921 4o830 5.751 5.320 0,322 5.642 0.109 1951 1.020 5.004 6.024 5.474 0.326 5.800 0.224 1952 1.041 5.159 6.200 5.485 0.335 5.820 0.380 1953 0.083 5.190 6.173 5.549 0.361 5.910 0.263 1954 1.099 5.429 6.528 5.498 0.382 5.880 0.648 1955 1.361 5.606 6.967 5.866 0.350 6.216 0.751 (1956) 1.466 5.874 7.340 6.176 0.451 6.627 0.713 Sourcet U»S.; Newsprint Production and Supply, U8S9 Dept. of Commercea Febr0 14s 1956.

1955? Pulpa Paper and Board Industry Report, March 1956, Canadaj 1948-50, FAQ Yearbook of Forest Product Statistics. 1955, Newsprint Data 1953 and 19559 News -print Association of Canada, Montreal, Canada«

Note? Figures for 1956 were taken from Pulp, Paper Board Industry Report , March 1957 (U.S.A) and Pulp and Paper Magazine of Canada , Convention Number, 1957 (Canada)

a/ Consumption in U.S. adjusted for year-end changes in stocks» The table shows that from 1948 t o 55 t o t a l production in North America increased by almost 2 million

tons, of which 1 . 4 mill ion in Canada, and consumption by a l i t t l e l e s s than 1 . 3 million tons. The heavy dependence of the United Sta tes on imports is notable, net import requirements having r isen from about 3 . 9 mill ion tons in 1948 t o 4 . 6 million tons in 1955, p r a c t i c a l l y a l l of which i s covered by Canadian exports. Of i n t e r e s t a lso i s the stagnation of consumption in the United S t a t e s during the period 1950-54, which has been part ly a t t r i b u t e d t o a decrease in newspaper advertising in favour of t e l e v i s i o n . The increase in advertising lineage (and consequently newsprint consumption) which has taken place in 1955 indicates that the impact of t e l e v i s i o n has now lessened. As a r e s u l t of t h i s development i t may be expected that demand forecasts based on the consumption trend from 1948-55 w i l l tend t o be on the low s i d e .

Net export a v a i l a b i l i t y in North America has increased from l e s s than 5 0 , 0 0 0 tons in 1948 t o more than 7 0 0 , 0 0 0 tons in 1955, thereby surpass ing t h e pre-war ( 1 9 3 7 ) f i g u r e o f about 4 6 0 , 0 0 0 t o n s . An a n a l y s i s of the a c t u a l export f igures i s made in appendix I - A o f which the following t a b l e 1-7 gives a summary.

- 35 -

Tabi© EXPORT M D IMFORT OF NEWSPRINT IN NORTH AMERICA 1937-55

(Thousands of tons)

Year Export to

Europe

Export to

Latin America

Export to

other regions

Total export

Import fron

Europe Export surplus

1937 330 395 725 267 458 1943 71 167 162 400 236 164 1949 IIS U5 174 437 218 219 1950 31 115 80 233 146 87 1951 99 151 i?l 371 179 192 1952 153 212 162 527 163 364 1953 159 171 12Ö 458 148 310 1954 307 244 16S 719 115 604 1955 388 250 208 846 113 733 (1956) 851 272 579 a/

Sources Newsprint Production and Supply» U«S 0 Dept. of Gammeree, Febr. 14* 1956$ Pulp Paper and Board Industry Report« March 1956 and 19571 F«AeOe Yearbook of Forest Products StatisticsT^H^print Data 1953» 1955 and 19569 Newsprint Association of Ganada Montreal Canada 0

a/ The fall in ©sport surplus in 1956 is mainly due to a rebuilding of stocks by more than 200j>000 tons0

I t should ba noted t h a t the 1955 a c t u a l e x p o r t f i g u r e exceeds the e x p o r t a v a i l a b i l i t y by 95,000 t o n s , i n d i c a t i n g t h a t a withdrawal from s tocks of t h i s q u a n t i t y had taken place during the y e a r .

Actual exports have ¡¡¡sore than doubled in the period from 1948 t o 1955, during the l a s t year exceed-ing the pre-war voluna of 725,000 tons by more than 100,000 t o n s . The l a r g e s t i n c r e a s e i s noted for Europe, which raised imports from North America from about 70,000 tons in 1948 t o almost 3%,000 in 1955, a quantity which i s about 60,000 tons higher than in 1937. The increase i s expected t o continue in the future , a question which w i l l be f u r t h e r examined in the s e c t i o n dealing with Europe. Exports t o other regions ( i n c l . Lat in America) have a l s o increased but l e s s s p e c t a c u l a r l y than t o Europe -from 330,000 tons in 1948 t o 460,000 in 1955, a gain of about 40 p e r c e n t .

Imports from Europe, a l l of which are shipped t o the United S t a t e s , have natural ly decreased during the 1948-55 period p a r a l l e l with the increas ing e x p o r t s from North America t o Europe. In 1948, North America had a net import o f 265,000 tons from Europe, which in 1955 turned i n t o a net export of 275,000 tons -a change in the trade balance of not l e s s than 4 4 0 , 0 0 0 tons in a period o f seven years .

(ii) Forecast of future demand

In a recent ly published study 6/ by the F o r e s t Products Division of the United S t a t e s Department of CoBHserce, a f o r e c a s t was made of future demand for newsprint i n t h e United S t a t e s for the period up to 1965. Hi® forecas t i s based on the c o r r e l a t i o n between consumption and net disposable income per capi ta

SJ KoBSfsP iB« Pa-ado©« Ä®u « a d S o p p i j - , U . S . DopesrtBßat oi Cobdtc», February 14. 1SSS.

- 36 -

during the period 1Q4Q to ]Q55 and the p r o j e c t i o n s o f disposable income and population made by the J o i n t Corrmittee on the Economic Beport ]_/. According to t h i s study, the es t imate o f future consumption would be: 1956, 6 .17 mi l l ion tons; 1957, 6 . 1 7 m i l l i o n ; 1958, 6 .31 m i l l i o n ; 1060, 6 . 5 8 m i l l i o n ; and 1965, 7.4H m i l l i o n tons.

In the present report two e s t i m a t e s of fu ture consumption have been made: one using the h i s t o r i c a l consumption trend (method A descr ibed above) and the o t h e r based on the c o r r e l a t i o n between newsprint consumption and the per c a p i t a g r o s s n a t i o n a l product with p r o j e c t i o n s o f income and populat ion from h i s t o r i c a l developments in the periods 1948-54 and 1946-54 r e s p e c t i v e l y . Consideration has been taken o f the f a c t that the e l a s t i c i t y c o e f f i c i e n t i s l i k e i y to diminish gradually during the period of f o r e c a s t .

A comparison of the three demand f o r e c a s t s i s made in tab le 1 - 8 .

Table 1-8 UNITED STATES: COMPARISON OF DEMAND FORECASTS FOR NEWSPRINT

(Thousands of tons)

Report of Value ac-Year Method A Method B U.S.Dept. cepted for

Commerce t hi s report

.1956 6,080 6,011 6,170 a/ 6,100 a/ 1957 6,252 6,163 6,170 6,200 1°58 6,428 6,3?5 6,310 6,325 I960 6,796 '•,644 6,580 6,650 1965 7,810 7,488 7,480 7,500

a/ Includes 91>COO tons for replacing stocks.

fhe correspondence between the different forecas ts i s very good. As may be seen from table 1-8 , the consumption estimates accepted for' the purpose of t h i s report are approximately the same as those reached by using Method B, but with the exception that about 9 0 , 0 0 0 tons have been added t o the 1956 f igure to allow for the replacement of s tocks , which were dangerously low at the end o f 1955.

For Canada, e s t i m a t e s of future demand have a l s o been made according t o both Methods A and D. A surmiary o f the f o r e c a s t s i s given in t a b l e 1 - 9 below.

Table 1-9 CANADA: COMPARISON OF DEMAND FORECASTS FOR NEWSPRINT

(Thousands of tons) Accçptçd Year Method A Method B value

1956 ÂÔ8 406 ! ™ ! : 425 a/ 1957 426 422 425 1958 444 439 • 440 I960 485 474 480 -1965 602 " 570 600 a/ Includes replacing stocks with 20,000 tons. 7/ Total disposable income (1954 dollars) in 196S es t imated at 383,000 aillions. To ta l population in

1965 estimated at 190 million.

- 37 -

Compilation o f f igures from t a b l e s 1-7 and 1 - 8 g i v e s the following summary ( t a b l e 1 -10 ) o f future demand for newsprint i n North America.

fable 1=10 NORTH AMERICA« ESTIMATE OF NEWSPRINT DEMAND* 1955-6?

(Thousand8 tons)

Year

1955 1956 1957 1958 I960 1965

United States

5,866 6,100 6,200 6,325 6,650 7,500

Canada

350 425 425 440 480 600

Total

6,216 6a525 6,625 6,7 5 ?,130

The demand f igure for 1965 shows a 30 per cent i n c r e a s e o v e r 1955 a c t u a l consumption, o r -2.? per cent annually as a g a i n s t 3 . 3 per cent f o r the

(Hi) Forecast of future products en

In t h e previously-mentioned report oa newsprint prepared by the U.S. Dept. o f Commerce, estimates have been made o f future production c a p a c i t y and a c t u a l production in the United S t a t e s for the period 1956-59 . A s i m i l a r f o r e c a s t for the Canadian industry i s made in Newsprint data 1955 by the Newsprint Associat ion o f Canada. The es t imates are sismaariged i n the following t a b l e 5-11.

Year

Table 1-11 NORTH AMERICAS ESTIMATE OF NEWSPRBST CAPACITY AND PRODUCTION 1955-58

(Thousands of tons)

Estimated capacity Estimated produetioa United States Canada Total

1955 1,400 5,500 6 » 900 1956 1,525 5,640 7,165 1957 1,700 5,965 7,665 1958 1,815 6,270 8,085

United States Total 1,361 1,480 1*590 1*725

5,606 5,800 5,970 6,270

7$2BÖ 7,560 7><

Sourcesf Newsprint Production and Supply„ U„S0 Dept., of Commerce, Febr0 1956j Data 1955s Newsprint Association of CanadaQ

- m -

The sunmary shows that annual newsprint capacity i s estimated to increase by about 1 . 2 million tons during the period from 1955 t o 1958, while ac tual production i s assumed t o r i s e by a l i t t l e over one mil l ion tons per y e a r . A comparison with the demand f o r e c a s t i n t a b l e I - 1 0 , i n d i c a t e s t h a t export a v a i l a b i l i t i e s in North America may r i s e to about 1 . 2 mi l l ion tons in 1958, a gain over the 1055 figure of approximately 500,000 tons. This increase i s inpressive, but the analysis of probable developmr-nts in other regions o f the world made in the following s e c t i o n s shows that the ^ain may be i n s u f f i c i e n t to cover expected d e f i c i t s .

(b) Other papers and boards

fi) Post-war developments

During the period 1948-55, the production, consumption and export a v a i l a b i l i t i e s of papers and boards except newsprint showed the following development in North America:

Table 1-12

WORTH AMSRICAs PRODUCTION, CONSUMPTION AND EXPORT AVAILABILITY OF ALL PAPERS AND BOARDS EXCEPT NEWSPRINT, 1943-55

(Thousands oi

Production Consumption Export avail-ability United

States Canadâ Total United States Canada Total

Export avail-ability

1948 19,093 • 1,122 20,215 18,927 1,008 19,935 280 1949 16,847 1,080 17*927 16,750 0*996 17,746 181 1950 19,979 1,211 a,190 19,869 1,150 a,019 171 1951 21,339 1,341 22,680 21,090 1,256 22,346 334 1952 19,922 i y i,20i 21,123 19,697 i 1,173 20,870 253 1953 21,865 1,457 23,322 21,746 " 1,422 23,168 154 1954 21,734 1,300 23,034 21,487 1,295 22,782 25o 1955 24,303 1,500 25,803 23,912 1,460 25,372 431 (1956) 25,469 1,657 27,126 25s107 1,612 26,719 407

Sourcess 194S=54j FAOs Yearbooks of Forest Products Statistics ! 1955 United States Pulp, Paper and Boards Industry Report, March 1956, U. S.

Department of Commerce0 < 1954=55 Canada Pulp and Paper

• i c i r i « r i a — -^•"•n ^ s w m m o 1956* of Canada, Convention Issue,

Figures for 1956 were taken from Pulpn Paper and Board Industry Report 1957. Pulp and Paper Magazine of Canada0 Convention Number 1957 and United States Exports of Domestic and Foreign Merchandisen May 1957o

y Valus from Wood Pulp Statistics 1955» UoS0 Pulp Producers Associations

- 39 -

As may be seen from t h i s t a b l e , paper production and consumption in the United S t a t e s f luctuated sharply in the per iod 1948-55 bearing out the f a c t t h a t paper consumption i s a s e n s i t i v e i n d i c a t o r of i n d u s t r i a l and economic a c t i v i t y in a country. The i n c r e a s e in U.S. consumption during 1948-55 was aljout 5 million tons (more than 25 per c e n t ) , 2 . 5 million tons of which were in 19 55, almost 50 per cent of the t o t a l increase . Development of production as well as consumption in Canada has been more s table , showing an aggregate i n c r e a s e in demand o f about 450 thousand tons in the seven-year period, a r i s e o f 45 per cent . Hie export a v a i l a b i l i t y has f luctuated during the period 1948-54 between 150 end 334 thousand tons with an average o f 230 thousand, and jurrped in 1^55 to 430 thousand tons.

As might be expected from the r e l a t i v e s t a b i l i t y i n the export a v a i l a b i l i t y , North American i n t e r -regional t rade has remained f a i r l y constant over the period studied, which i s demonstrated in the follow-ing t a b l e 1 - 1 3 .

Tabi© 1-13

NORTH AMERICA? EXPORT AND XEIPOKP OF PAPERS AM) BOARDS OTHERS THAN NEWSPRINT1948=55

ClàsB8ssâs=s£=

Year Total export to

other import Import fresi other

Export surplus

1948 509 371 229. 93L 280 1949 330 234 53 181 1950 310 205 139 34 171 1951 530 390 196 ' 56 334 1952 450 322 164 36 286 1953 391 250 237 96 154 1954 486 359 232 105 254

Total fepor&ss Exports to other Canada obtained

Yearbook of Forest Products Statistics,, s Total exports minus trade figures between UoSoJ

UoSo Trad© Stati sties 0 arci

di) Forecast of demand-

E s t i m a t e s o £ f u t u r e demand Eiave beea racd<2 oepaieateiy icoi? Waited iSiafcea and CaaadQ £ o

\ and B. ; In using Method B i t h&s been assumed t h a t the c o r r e l a t i o n c o e f f i c i e n t wi l l diminish the period o f f o r e c a s t .

Since c o r r e l a t i o n with GNP i s not so c l o s e f o r o t h e r papers and boards as £o f l u c t u a t i o n s in consumption are more pronounced, t h e correspondence between th2 two s e t s not so good as in the case o f newsprint. I t i s believed t h a t a c l o s e r c o r r e l a t i o n , < li«£>le f o r e c a s t , could be obtained i f industr ia l output per capi ta i s used instead o f @3P„ pmvesEent «©uld probably r e s u l t from a breakdown o f the paper and board group i n t o '"writing ¡p^eifs" and " i n d u s t r i a l papers and boards" . Time has , however, not permitted such a n a l y s i s t® be

Dsaaisd f o r e c a s t s a r e recorded in th® corajjarative sujcaasry given ¿¡a t a b I© b©i©o0

esfcsaates as heiaoa a hops ro

Ì E >

- 40 -

Table 1-32

NORTH AMERICA? COMPARATIVE FORECASTS OF DEMAND FOR ALL PAPERS AND BOARDS EXCEPT NEWSPRINTp 1955=65

Year

1955a/ 1956 1957 1958 I960 1965

Method

24,140 25,070 26,040 28,€80 33,940

United States Method

B

24,108 25,056 26o004 27,980 33,376

Canada Accept-» ®d Method Method Acc@pt©d vaimi A . S valu® ' 23,912 = 1,460 24,125 1,670 1, 523 1,560 25,100 1,780 1,607 1,650 . 26,025 -.1,900 1,694 1,725 28,000 2,167 1,882 1,900 33,5 00 3^011 2,437 2P500

Total

25,372 25,685 26,750 27,750 29,900 36,000

Actual consumption figures are quoted for 1955» The table shows that paper and board consumption (excluding newsprint) i s expected t o increase by 18

per cent in the period from 1955 to I960 and by 42 per cent in the ten-year period 1955-65. This increase, corresponds to an average annual increment in demand of about 3 . 5 per cent as compared t o about 3 . 6 per cent for the period 1948 to 1955.

(iii) Future production capacity

United S t a t e s ^ p r o d u c t i o n capaci ty for papers and boards, except newsprint, a t the end of 1955 and 1958 has been est imated as follows from information 8 published i n the March 1956 Pulp, Paper, and Board Industry Report issued by the U.S. Department of Commerce;

Table 1=15 UNITED STATES? PRODUCTION CAPACITY FOR.PAPERS AND BOARDS, 1955=58

(Thousands of tona)

1955 Newsprint Other papers and boards

TotaL capacity

1,400 25,000

26,400

19 58 1,815 26,835 28,650

The recorded capaci ty i s estimated for the end of the years and i t i s t h e r e f o r e unlikely that ac tual production in 1958 could exceed 96 per cent o f the r a t e d c a p a c i t y , a s in 1955 the production averaged 9 5 . 6 per cent and in January 1956 the paper production was 99 per ¡cent and the papsrboard production 100 per cent of the rated c a p a c i t y .

- 41 -

Thus the United S t a t e s ' production of other papers and boards i n 1958 may be est imated a t about 2 5 . 7 5 0 mill ion tons, as compared t o an estimated demand of about 26 mi l l ion . The comparison indica tes t h a t the present n e t e x p o r t surplus of about 400 thousand tons p e r year may change i n t o a n e t import surplus of about 250 thousand tons in the t h r e e year period unless production c a p a c i t y i s ra i sed a t a f a s t e r r a t e than i s at present envisaged. This increase i s f a i r l y probable s ince the paper industry of the United S t a t e s will undoubtedly respond quickly t o a t ightening of the heme market, but i t seems un-l i k e l y t h a t the i n c r e a s e w i l l be s u f f i c i e n t t o cover the expected demand and a t the same time t o maintain the present l eve l of exports .

For the purpose of th is repor t , i t i s assumed that production capaci ty in the United S t a t e s will in-c r e a s e by an a d d i t i o n a l 300 thousand tons over and above the f o r e c a s t made by the United S t a t e s De-partment of Conmerce. Rated production capaci ty for "other papers and boards" in the year 1958 i s thus estimated at 2 7 . 1 3 5 mil l ion tons and ac tual production in the same year -assuming an average operating r a t e of 96 per c e n t - a t 2 6 . 0 5 0 mil l ion tons, which leaves a small export surplus o f about 25 ,000 tons. When a c c e p t i n g t h i s f i g u r e , i t should be borne in mind t h a t t h e f o r e c a s t o f demand i s based on the assumption that economic development in the country wi l l continue a t the average r a t e experienced in the period 1948-55 , 3 . 1 per cent annual increase in gross national product per c a p i t a -and that a change of plus o r minus one per cent in t h i s development r a t e w i l l r e s u l t i n a t o t a l consumption change of about plus or minus 400 thousand t o n s .

Unfortunately no information was avai lable about development plans i n Canada. Certain conclusions may, however, be drawn from an a n a l y s i s of the t r a d e balance between Canada and other r e g i o n s . From t a b l e 1 - 1 3 , and United S t a t e s foreign trade s t a t i s t i c s , the following sumnary t a b l e has been compiled;

Table 1-16 CANADA 8 BALANCE OF TRADE IN PAPER AND BOARD, EXCEPT NEWSPRINT, 1948-54

Hefc Total . Net to frca exporfe ©xport export United States United States to soppiltas to othar

United States regions

1948 112 25 87 114 27 1949 67 29 38 84 46 1950 72 33 39 61 22 1951 95 45 50 85 35 1952 81 47 34 28 / -o 1953 80 a 19 35 16 1954 52 74 -22 7 29

Sources; Trade figures U SAKS an ads from UoSo Tr; ad© Statistieso

Table 1 - 1 6 shows that Canadian t r a d e with the 'United S t a t e s in tfcsse paper items has changed from a net surplus of 8 7 , 0 0 0 tons in 1948 i n t o a net import o f 2 2 , 0 0 0 t o n s in 1954. During the same period the n e t export to o t h e r regions has remained f a i r l y s t a b l e , except for 1952, and averaged about 30 thousand t o n s p e r annum. I t i s assumed here t h a t Canada w i l l esqpand p r o d u c t i o n f a c i l i t i e s in t h e t h r e e - y e a r period 1956-58 s u f f i c i e n t l y t o maintain net expor ts t o o t h e r regioms and t o balance the t r a d e witia the United S t a t e s .

The North American balance of supply and deaand for papers and boards o t h e r s than mewsprimt iia the years 1955 and 1958 may thus be sissssarised as i o l l c s o :

- 42 -

Tmble 1=17 NORTH MSRIGA& BALMG1 OF SJPPLY. AM) BMAMD FOR OTHER PAPERS AMD BOARDS,

Export avail- .

United Qaaada Total United e®aa.da. Tebal ability States Stages total,

1955 24,303 1,300 25,083 23,912 1,46© 25,372 431 1958 26,050 1,755 27*895 26,025 . 1,725 27,750 55

Hie demand arid supply f o r e c a s t s for papers and boards others than newsprint in North America, made above, indica te that net export a v a i l a b i l i t y i n t h e region w i l l decrease from an annual tonnage o f 430 thousand in 1955 t o some 50 thousand in 1958.

(c) Pulp .

(i) Developments in the post-war period-

Production, consumption and net export a v a i l a b i l i t y of a l l grades of. woodpulp have been as follows during the period 1948-55: (For d e t a i l e d f igures on export , see appendix I - B ) .

- 43 -

Table 1-32

NORTH AMERICA; PRODUCTION, CONSUMPTION AND EXPORT AVAILABILITY OF ALL GRADES OF WOODPULP 1948-55 a/

Production Consumption Export availability Year United Canada United Canada U »S© United Total States States U »S©

States 1948 11,002 6,903 12,967 5,302 -1,965 1,601 -364 1949 10,528 7,055 12,348 5,675 -1,820 1,380 -440 1950 12,623 7 , 6 0 6 14,769 5,964 -2,146 1,642 -504 1951 14,133 8,348 15,950 6,346 -1,817 2,002 185 1952 13,930 8,036 15,378 6,327 -1,448 1,709 261 1953 14,864 8,121 16,755 6,392 -1,891 1,729 -162 1954 15,554 8,616 17,005 6,635 -1,451 1,931 480 1955 17,713 9,050 19,064 6,950 -1,351 2,100 749 (1956) 19,014 9,573 »,549 7,404 -1,535 2,169 634

Sourcesg 1948-54 production and consumption! Wood Pulp Statistics 1955, U.S. Pulp Pro-ducers Association®

1955-56 United Statesj Pulp, Paper and Board Industry Report, U.S. Dept. of Gcnanerce, March 1956, March 1957®

1955-56 Canada; Pulp and Paper Magazine of Canada, Convention Issue for the years 1956 and 1957®

j/ Consumption figures for U.S.A. include changes in stocks. The table includes also dissolving grades but not exploded or defibrated pulps used in the production of building boards.

Thus in the eight-year period 1948-55 production of woodpulp in North America has increased from 17.9 million tons per annum to 26 .8 millions -a r i s e of 50 per cent- whereas consumption increased from 18.3 millions to 26.0 millions or 42 per cent. Before the war (J937) North America imported a net quantity of more than 1 million tons. In the period 1948-50 the import dependency had been reduced t o an average of l i t t l e l e s s than 450 thousand tons and in 1955 i t had changed into an export surplus of about 750 thousand tons. Of the t o t a l net change 1948-55 in the trade balance with other regions - 1 . 1 8 5 million tons- United Sta tes accounted for 626 thousand tons and Canada for 559 thousand tons

An analysis of the supply balance for dissolving pulp alone shows the following development in the period 1948-55:

- 44 -

Table 1-32

NORTH AMERICA? PRODUCTION, CONSUMPTION AND EXPORT A7AILABILITY OF DISSOLVING GRADE WOODPULP, 1948=55

( t o n s )

Tear

1 9 4 8 1 9 4 9 1 9 5 0 1 9 5 1 1 9 5 2 1 9 5 3 1 9 5 4 1 9 5 5

( 1 9 5 6 )

Production United Canada States

Total Consumption a /

United Canada Total States

Export availability united. States

Qanad s. Total

381. 340 4 3 5 559 6 4 1 6 1 5 690 8 9 3 8 5 4

310 691 579 32 6 1 1 - 1 9 8 2 7 8

2 3 9 579 456 2 1 4 7 7 - 1 1 6 2 1 8

3 0 5 740 625 4 2 667 » 1 9 0 2 6 3 371 930 741 4 3 7 8 4 - 1 8 2 328 348 989 784 4 3 8 2 7 » 1 4 3 305 391 1,006 3 1 4 45 8 5 9 - 1 9 9 3 4 6 3 8 ? 1 , 0 7 7 - 751 54 8 0 5 - 6 i 3 3 3 354 1 , 2 4 7 886 56 942 7 2 9 8 374 1,2.28 818 61. 3-79 3 6 3 1 3

80 102

7 3 1 4 6 162 1 4 7 272 305 3 4 9

Sources; Productions USA, 1948, Wood PmlP Statistics 1956j 1949-56, Pulp, Paper and Board Industry Report, March 1957J panada, 1948=55, Wood Pulp Statistics 1956, Pulp and Paper Magazine of Canada, Convention Number, 1957» Consumption; USAa 1 9 4 ^ 5 2 , Wood Pulp* etc. op„eit-a 1953 /56 , Pulp, Paper and Board etc., op.cit. Canada, 1 9 4 8 - 5 5 » Wood Pulp etee opVcitoj 1 9 5 6 , Pulp and Paper Magagin», etc. op» elt»

a/ Pycnl953 to 1956 ths consumption figures for UoSoA* were adjusted for changes in stoc

Consumption of dissolving grade woodpulp in North America has thus increased by 54 per cent and pro-duction by 80 per cent in the period 194.8.«55. Most of the production increase has taken place in the United States , which today i s p r a c t i c a l l y s e l f s u f f i c i e n t . The région as a whole has increased i t s export a v a i l a b i l i t y by more than 200 thousand tons result ing in a net surplus in 1 9 5 5 o f 300 thousand tons.

3. The situation in Europe 1/

(a) Newsprint

Production, consumption and export avai labi l i ty o f newsprint in Europe have been as follows durine the post-war period. For details .on trade see also appendix I-A.

jy-Vnloss othorvise s t a t e d figures for Europe exclude Bulgaria. Czechoslovakia. Eastern Corn any, Hungary. Poland. Ruaasia and the S o v i e t Union.

- 45 -

Tàble 1=20 V.

EUROPEI NEWSPRINT PRODUCTION CONSUMPTION AND EXPORT AVAILABILITY 1948-55 (ftoasands of tons)

Production

Sources! FAO, Yearbook of Fbreat Ffrodgots Statistic,a« 19i?0 aad 1951 and 1955, Newsprint Association ©f Gànadaj IMES60, Newsprint • Figures for 1956 (est,testes) were taken frsa Ngwsp^iat Data

Export le ay Swedes

Norway Firalaad

Rest •f 3or®p®

Total Usaited Kingdom

Rest of

larops c Total

avalla} lity

194â 744 .931 . 1,675 m 861 1,274 401 194t 866 1,175 2,043 • 602 978 1,580 463 1950 90S 1*405 2,53.0 • 5§0 1^200 1,790 520 1951 m 1,437 2,330 • 612 1,108 X ao 1952 f2f - i , m 2,300 . 737 1*247 1,984 316 1953 934 1,596 2,539 . 724 1,3&L 2,105 425 1954 935 1,715 Ô2ê ' li 594 2,420 230 1955 ,19 56) .

1,055 . 1,7«5 929 1,741 2,6?0 170 1955 ,19 56) . 1,176 • 1,884 •1*035 ' 1*779. 2, au 246

1953 Trends 1920-51

During the e i g h t - y e a r period 1948-55, production has increased by more than 1„1 million and consump-t i o n by 1 . 4 mi l l ion t o n s . As a r e s u l t the export a v a i l a b i l i t y has decreased iron almost 500 thousand tons in the t h r e e - y e a r period 1948-50 t o l e s s than 200 thousand in 1955.

A comparison with the 1937 f igures -production 2 . 6 and consumption 2 . 4 million tons- shows, that not u n t i l the year 1954 did the market a t t a i n i t s pre-war level in t o t a l tonnages. Since the population has increased by 10 per cent during the same period, i t fol lows t h a t the per c a p i t a consumption i s s t i l l depressed, and i s l i k e l y t o i n c r e a s e a t a f a s t e r r a t e than would normally be expected from the increase in per c a p i t a income.

Table 1 - 2 0 emphasizes the l a r g e share '(37 p e r c e n t ) o f t o t a l production which comes from Sweden, Finland and Norway. On the consumption side i t should be noted t h a t the United Kingdom accounts for 35 p e r cent o f the aggregate demand.

(i ) Forecast of demand

Separate demand f o r e c a s t s h>av® been made for the United Kingdom and for the r e s t of Europe. poth f o r e c a s t s are based on a combination o f the h i s t o r i c a l p r o j e c t i o n and the general c o r r e l a t i o n methods (Methods A and C); i . e . t h e p e r c a p i t a consumption i s assumed t o grow at the 1 9 4 9 - 5 4 r a t e u n t i l i t reaches the level indicated by the ideal consumption-inccsne curves shown in f igures I -V and I-VI. From t h a t point the consunption i s assumed t o follow the curve.

Table 1 - 2 1 g ives the demand f o r e c a s t s in t o t a l tonnages. As a comparison the demand forecast made U the U.S. Dept. o f Commerce i s included j ^ .

8./ Neesprint Production and Supply, op. cit.

- 46 -

Year

1955 1956 1957 1958 I960 1965

Table 1-32

EUROPE? NEWSPRINT DEMAND FORECASTS 1955=1965 (Thousands of ton8)

United Kingdom

Rest of

Europe Total eonsump= tion

United States D@pto

Commerce

930 1,710 2,640 2,667 950 1,905 2,855 2,867 980 2,170 3,150 3,266

1,010 2,440 3,450 3,638 1,075 2,775 3,850 -1,200 3,500 4,700 CO

The demand for newsprint i s thus est imated t o increase by about 80 per cent in the 10-year period from 1955 t o 1965, which corresponds t o an annual increase of 6 per cent as compared t o about ]1 per cent i n the period 1948 t o 55.

The difference between the forecas t made in t h i s study and by the U.S. Dept. of Commerce isacoounted f o r by a difference in the estimate of consumption in Great B r i t a i n . For the year 1958 the United S t a t e s Dept. of Commerce p r e d i c t s a consumption in t h i s country of 1 .360 m i l l i o n tons; i . e . 250 thousand tons higher than the p r e s e n t e s t i m a t e . In a f o o t n o t e t o the r e p o r t on Newsprint Product ion and Supply (loc.cit.) i t i s s t a t e d t h a t S i r E r i c Bowater, head o f the Bowater Organizat ion, a t a meeting of t h e Board of D i r e c t o r s on 18 March, 1954, p r e d i c t e d " t h a t t h e demand f o r newsprint in the United Kingdom could soon reach 2 , 2 4 0 , 0 0 0 short tons" (2 mill ion metric t o n s ) , which estimate was "based on c i r c u l a t i o n increases and a return t o the number of pages prevalent in pre-war y e a r s " . I t i s not c l e a r whether the •figure quoted includes, consumption in the B r i t i s h Commonwealth; in any case i t i s f a r in excess of both the demand f o r e c a s t s shown in Table 21 . I t i s t h e r e f o r e l i k e l y t h a t consumption w i l l be considerably higher than the est imate made in the present study and may exceed the f igure quoted by some 200 or 300 thousand tons by 1958.

(ii) Forecast of future production and balance of supply

Present expansion plans, as quoted in d i f f e r e n t sources , i n d i c a t e t h a t by the year 1958 moderniza-t i o n of e x i s t i n g m i l l s and new m i l l s w i l l add an a d d i t i o n a l annual c a p a c i t y o f 580 thousand t o n s . Counting with an average operat ing r a t e o f 95 per cent t h e production i n c r e a s e over the year 1955 w i l l thus be 550 thousand tons as compared t o an i n c r e a s e in consumption of 810 thousand t o n s . Hie 1955 export surplus of 170 thousand tons i s thus l i k e l y t o change i n t o a net import requirement of about 100 thousand tons, an es t imate which probably i s on the low s i d e .

As wi l l be seen l a t e r the long-term problem i s f a r more dangerous and may lead t o s e r i o u s supply d i f f i c u l t i e s in Europe, and as a consequence a l s o in the o ther d e f i c i t regions o f the world.

- 47 -

(b) Other papers and boards

(i ) Production and consumption in the post-war period

In the period 1948 the production, consumption and export a v a i l a b i l i t y in Europe of a l l papers and boards except newsprint were as follows:

Table 1-22

EUROPEg PRODUCTION j> CONSUMPTION AND EXPORT A¥ AIL ABILITY OF ALL PAPERS AND BOARDS EXCEPT N E W O T I I T ,

sands of tons)

Export Year Production Consumption availabi

lity 1948 4; 840 4,350 490 1949 6,630 6,010 6® 1950 7,6«) 7,080 540 1951 9,084 8,394 690 1952 7,849 7,3)9 . 540 1953 9,057 8,357 700 1954 10,641 9,811 830 (1955) 11,718 10,924 794

Scarcesg FAQ, Yearbooks of Forest Products Statistics and other sources0 Table 22 shows t h a t both production and consumption have more than doubled in the 7 - y e a r period,

while export a v a i l a b i l i t y shows a smaller i n c r e a s e ; from about 500 thousand tons in 1948 t o a l i t t l e over 800 thousand in 1954.

(ii) Forecast of future demand

As in the case of newsprint future demand has been estimated by using a combination of the Methods A and C; h i s t o r i c a l projec t ion up to the point of " i d e a l " consumption and general c o r r e l a t i o n f o r the res t of the period. Table 1 - 2 3 shows the f o r e c a s t for t h e p e r i o d 1 9 5 5 - 6 5 .

Table -1=23 EUROPE; FORECAST OF DEMAND FOR ALL PAPERS AND BOARDS, EXCEPT NEWSPRINT, 1955=65

_ousands o Total

consumption 1955 10,245 1556 10,710

Year T o t a l

1958 11,985 I960 13,165

1^7 - 11,340 i 1965 15 „920

- 48 -

Total increase in consumption i s thus es t imated at about 5 .7 m i l l i o n tons in the 10-year period corresponding t o a 55 per cent r i se from the 1955 level or 4 . 5 per cent per annum, compared t o about 12.3 per cent in the period 1948-54 . A considerable slow-down in the r a t e of increase is thus foreseen. I t i s , however, considerably higher than the previous f o r e c a s t s made by the United Nations. For instance, i n the World Survey ( o p . c i t . ) the i n c r e a s e in European consumption o f o t h e r papers and boards in the period 1950/52 t o 1 9 6 0 / 6 2 i s estimated t o be 35 per cent , o r 3 per cent per annum. Development in the period 1950 t o 55 indicates , however, t h a t t h i s rat<5 represents an under-estimate and as a r e s u l t a more pess imist ic view must be taken than expressed in the '.'Jor.ld Survey, on Europe's p o s s i b i l i t i e s t o s a t i s f y her own demand and at the same time maintain the present export l e v e l .

Unfortunately no r e l i a b l e data are a v a i l a b l e regarding expansion plans f o r the industry pr(s^u cinS pther papers and boards than newsprint, and the ac tual level o f f u t u r e export a v a i l a b i l i t y ig t ^ f ^ f i j ^ d i f f i c u l t to a s s e s s . F igures have been mentioned in var ious sources i n d i c a t i n g t h a t with the present f o r e s t s increment, the pulp c a p a c i t y could be increased by an a d d i t i o n a l 1 m i l l i o n tons in Finland and about 0 . 5 m i l l i o n tons in Sweden. Assuming t h a t an a d d i t i o n a l q u a n t i t y of 0 . 5 m i l l i o n tons could be produced in the r e s t of Europe (excluding Eastern Europe and the U . S . S . R ) the t o t a l capaci ty increase of 2 million tons would be s u f f i c i e n t t o produce about 600 thousand tons of newsprint and an-addit ional 2 mill ion tons of other papers and boards. I f the required c a p i t a l i s a v a i l a b l e and t h i s expansion ac tu-a l l y takes place within the next f i v e years , by 1 % 0 Europe's present export surplus o f about 800 thou-sand tons would change i n t o a net import requirement of more than 500 thousand t o n s . This estimate pre-supposes that the present net export of pulp, about 203 thousand tons per annum, i s maintained.

(c) WaodpulpV/

Exports of woodpulp from Em-ope have been.as fe l lows \n j W ? ¿nt. the post-war period: ( f o r d e t a i l e d figures on dis t r ibut ion , see appendix 1-3).-

'iisplsa

193? 1,404 206 283 1*893 1 5 $ 1948 439 1 4 5 1 0 3 6 8 ? 1 9 2 1949 534 23$ 1.13 855 2-m 1950 537 SSLf H O • 966 1 4 6 1951 395 326 113 • m

1 4 6

1952 374 186 n 634 1953 463 242 .1954 333 320 1 2 4 Til

7 7 9 520

(1955) 320 327 132 Til 7 7 9 ' 6 i f

Source sg FAQs Yearbooks of Foresfe Prodwets Sfcatlstei« igc Source sg Wood i Pulp Statistics 1951» I^STemj^ T%1 l e S o PfSlp Fpofeei

3/ Figure s refer to Stj®desfl JiaLaadl, »• itorway aad yestoKsi. 6a raasg/'o other countries : Is negligible0

9/ F i g u r e s r s f s r t o t i < > abolo of Etitopo,.

l^psri frca

The table shows that the annual export of woodpulp from Europe has decreased by more than 1 million tons from 1937 to 1948. In the post-war years the tonnage has remained re la t ively stable at about 700 to 900 thousand tons. Net export, however, has decreased in the same years by about 500 thousand tons and the resulting balance between t o t a l and net exports has been covered by imports from North America which in 1954 exceeded half a million tons.

An interesting aspect o f Europe's export of pulp and paper i s the change in proportion between the two items which may be seen from the following table 1-25 .

Table 1-25 EUROPE? CHANGE IN NET EXPORT OF PULP AND PAP-ER, 193? TO 1954

(Pre-nraa- figures include Eastern Europe)

1957-33 1950-52 1953 1954 _ (1955) Mills Per Mill. Per Mill. Per Mill» Per Mill. Per tons cent toa cent tons cent tons ©ent tons cent

Wood pulp 1.36 63o5 0,53 33 0*58 34 0.26 20 0.09 3 Paper and board O.78 36»5 1«07 6? 1»14 66 1=05 B0 1.04 92 Total 2.14 1*60 1 . 7 2 1.31 1.13

Aside from the large decrease of 800 thousand tons in net exports the table shows that whereas pulp export was almost two thirds in the pre-war.years, i t i s today only abojit 20 par cent of the t o t a l net exports. There is every reason to believe that the tendency towards integration of palp with paper pro-duction, which i s the background for the change in exports, wil l continue and, as § r e s u l t , the export a v a i l a b i l i t y of pulp will gradually disappear.

To sum up the European supply and don and s i tuat ion in 1960, as estimated in t h i s study: i t seems l i k e l y that the present export a v a i l a b i l i t y o f 170 thousand tons of newsprint wil l change into a net imptort requirement of 100 thousand tons, the export a v a i l a b i l i t y of other papers and boards, about 800 thousand tons, will disappear and Europe wil l have t o depend on imports o f about 500 thousand tons if . pulp exports are maintained a t t h e i r present level .

Developments af ter the year 1960 are naturally d i f f i c u l t t o assess , but indications are that Europe may have serious d i f f i c u l t i e s t o s a t i s f y a demand of pulp and paper commensurate with ecotioaic and cul tural level in the region.

4. Latin Anerica '

(a) Newsprint

During the period 1948-55 consisnption, production and i®t import ¡retirements of menprint have been the following; ( for detailed figures see appeidis I - C ) . '

Table 1-32

LATIN AMERICA? CONSUMPTION, PRODUCTION AND IMPORT REQUIREMENT OF NEWSPRINT 1948=55 (Thousands of tons)

Consumption Year Argen=

tina Rest of Latin America

Production

Total Argen= tina

Rest of Latin America

Total

Net Import requirement

1 9 4 8 1 2 1 2 4 3 364 o o o 32 32 332

1 9 4 9 1 1 7 2 4 6 3 6 3 o o o 3 9 3 9 324 1 9 5 0 1 0 4 2 6 ? 371 3 4 6 4 9 322 1 9 5 1 1 1 2 2 8 9 4 0 1 3 4 5 4 8 353 1 9 5 2 9 3 331 4 2 4 1 51 52 372 1 9 5 3 37 332 3 6 9 8 4 6 5 4 315 1 9 5 4 6 2 3 a 4 2 3 1 8 39 57 365

( 1 9 5 5 ) 1 1 1 377 4 8 8 22 4 3 6 5 4 2 3

Sourcesg See appendix 1=0.

Newsprint consumption in Argentina fluctuated sharply during the period, because import and consump-tion restr ic t ions existed, whereas the consraiption in a l l other Latin American countries has increased at a remarkably steady r a t e o f some 7 . 6 per cent per annum. Aggregate consumption in the region today stands at more than 500 thousand tons, of which only about 65 thousand a r e l o c a l l y produced. Latin America i s thus currently dependent on imports of newsprint from North America and Europe for almost 90 per cent of t o t a l requirements.

Imports have increased about 40 per cent during the 7-year period and are l ikely t o r i s e further in the future as will be seen belew unless regional production f a c i l i t i e s are expanded more rapidly than i s at present envisaged.

(i) Estimate of future demand

Because of the substantial f luctuations in Argentina's consumption «ta-ing recent years , separate demand forecasts have been made f o r t h i s country and the r e s t of Lat in America. This prospects for Argentina are taken from a special study of the country made by the Pulp and Pfeper Advisory Group and are based on the assumption that the Net Geographic Prpduct per capita wil l increase by 3 per cent aimüally from the year 1955. For a l l the other countries, the estimate i s made according to the h i s t o r i c correla-tion method (Method B), sine® there i s a close relationship between paper consumption and GNP per capita in those countries (see f igure ' I -VII ) .

Annual demand f i g u r e s - b a s e d <rn the, f o r e c a s t are as shown i n t ó b l e 31=27 „ . Consumption i s thus aat ic ipated t o increase by more than 100 par cent in the coming dscsde. which

corresponds to sua anmwal i®ci?&íerat o f about 8 per cent as compared to an average f o r the chole o f Latin .America of 5; 4 per cemfc in the l a s t seven y e a r s . .. The increase in the annnal imcronemt i s e n t i r e l y accounted for by an expected r i s e in Argentina's consumption as a, result of the p o l i t i c a l changes that took place during 1955.

The report by ths United States Dept. of Coacaarce 1 0 / predicts a to ta l comsuEjstiora fos- the whole of Latin Aaierica of 635 thousand tens in- the year 1958, i . e . s l ightly loser than the present estimate. io/ Houoprimt Piroáuekloa asé Ssppiyi cp . c i e .

- 51 -

Table 1-27

LATIN AMERICAj FORECAST OF NEWSPRINT DEMAND 1955 TO 1965 (Thousands of tons)

Y e a r Argentina Rest of Latin America

Total

1955 1956 1957 1958 I960 1965

123a/ 131 139 148 167 227

405 b/ 443 480 520 615 940

528 574 &9 668 782

1,167

y Projected figure from th© period 1948-52,base veap 1950o b/ Projected figure frcsa the period 1948-54, base year 1951«

Comparing the present estimate with the demand forecast es tablished by the United Nations in 1954 W -which gives two s e t s of es t imates , Forecast A based on a c o n s e r v a t i v e assessment of econcmic growth in the area and Forecast B assuming a more favourable development, i t w i l l be seen t h a t the former actually exceeds even the F o r e c a s t B f o r Lat in America as a whole, but t h a t demand in Argentina alone w i l l r i se more slowly, ( s e e t a b l e 1 - 2 8 ) .

Table 1-28

LATIN AMERICA: COMPARISON OF NEWSPRINT DEMAND FORECASTS lousands of tons)

Year

I960 1965

Argentina Present United estimât® Nations Forecast B

Rest of Latin âmeriêa United Nations Present estimât©

B 167 227

205 277

615 940

521 70S

Total Present United estimate Nations

775 I . 1 5 0

726 985

(ii) Future balance of supply and demand

Present plans for an expansion of the newsprint industry in the region include the following projects which may be in operation by 1960:

Argentina 30,000 trsis Chile 55 ,000 " ( in operation 1957)' Colombia 30 ,000 " (plans s t i l l uncer ta in) Mexico 65,000 " • (2 m i l l s ) Total 180,000 "

11/ Pulp a n d P a p e r Prospects in Latin A m e r i c a . ' o p . c i t .

Assuming that these p r o j e c t s are a l l r e a l i z e d and t h a t the industry w i l l operate at 95 per cent of the rated c a p a c i t y , an addit ional domestic supply of 170 ,000 tons per annum w i l l be avai lable by I960. Together with the production from e x i s t i n g m i l l s in the region -about 6 5 , 0 0 0 tons- Lat in A m e r i c a could then supply some 2 3 5 , 0 0 0 tons of the t o t a l requirements of 7 7 5 , 0 0 0 tons . Unless addit ional c a p a c i t y xs i n s t a l l e d in the region, the dependence upon imports i s thus l i k e l y t o r i s e by seme 100 ,000 tons by the year I960 and by no less than 480 ,000 tons in 1965, when t o t a l imports would amount t o more than 900 ,000 t o n s .

Since i t i s unlikely that these additional quanti t ies will be available from North America and Europe or t h a t Latin &nerica can af ford t o spend foreign exchange on her newsprint imports, mainly in d o l l a r s , amounting t o seme 140 mill ion dol lars (1955 p r i c e s e x c l . f r e i g h t s ) per year by 1965, i t may be concluded t h a t a vigorous e f f o r t must be made t o develop regional c a p a c i t y in order t o avoid a lower consimiption than corresponds t o the c u l t u r a l and economic l e v e l of the region.

(b) Other papers mid boards

For the post-war period, the following consumption, production and net import requirements of paper and boards other than newsprint are recorded. (For d e t a i l e d f igures see appendix I - D ) .

Table 1-29

. LATH AMERICA? CONSUMPTION, PRODUCTION AND IMPORT REQUIREMENT OF PAPERS AND BOARDS, EXCEPT NEWSPRINT, 1948-54

(Thousands of tons)

leap Argen™ tina

Consumption Rest of Latin Merle a

Total Argen° tina

Producci6n Rest of Latin America

Total Net import requirement

1948 264 554 818 177 397 574 244 1949 283 565 848 178 406 584 264 1950 302 639 941 208 465 673 268 1951 314 695 1,009 228 511 739 270 1952 269 714 983 199 548 747 236 1953 172 762 934 167 570 737 197 1954 225 829 1,054 210 637 847 207 (1955) 299 895 1,194 262 709 971 223

Scarce as See appendix I~De

As in the case of newsprint, the s t a t i s t i c s are separated for Argentina and a i l other Latin American c o u n t r i e s . They show that consumption in Argentina declined during the period, while in the other coun-t r i e s a steady increase of about 7 per cent annually took place . The drop in Argentina's consumption was almost e n t i r e l y due t o import r e s t r i c t i o n s which have not been o f f s e t by a corresponding increase in domestic production. Elsewhere in Latin America, expansion of l o c a l production has almost covered the r i s e i n consumption; net imports have r i s e n only 3 0 , 0 0 0 tons from about 160 thousand t o 190 thousand tons . This i s not surpr is ing , s ince many Latin American countr ies maintain import r e s t r i c t i o n s on these paper and board grades . I t i s thus d i f f i c u l t t o a s s e s s whether t h e supply i n c r e a s e has a c t u a l l y been s u f f i c i e n t t o cover the demand or i f present consumption i s depressed. I t seems reasonable t o assume

- 53 -

th&l the last i s the case and that consumption would have increased at a faster rate i f the res t r ic t ions ©erne l ifted or local production were sufficient to cover the demand.

( i ) Estimate of future demand

Once again separate estimates of future demand have been made for Argentina and the rest of Latin America, As in the case of newsprint, the forecast for Argentina i s based on the assvanption that per capita income in the country will increase by 3 per cent a f t e r 195b. For the rest of Latin America, the demand has been estimated by the his tor ic correlation method (Method B) . (See table 1-30

LAOT AMERICA?

T a b l e 1 - 3 0

ESTIMATE OF FUTURE DEM AMD FOR PAPER AM) BOARD^ EXCEPT NEWSPRINT, 1 9 5 5 - 6 5

(Thousands of tons)

Yeas'.

1 9 5 5 1 9 5 6 1 9 5 ? 1 9 5 8 I 9 6 0 1 9 6 5

323 g 3 4 5 3 6 9 3 9 4

62?

Rest of Latin

America

0 7 4 b / 9 3 5 9 9 5

1,060 1 , 2 0 5 1,660

ïrioâ 1948~52î> base year o 1 9 4 8 - 5 4 w 19 1 9 5 1 o

Total

1 * 1 9 7 1,280 1 , 3 6 4 1 , 4 5 4 1 * 6 54 2,287

Use table shotjs that the demand in the whole of Latin America i s expected t o increase by almost 90 pes during the 10-year period, representing an annual increment of 6 . 5 per cent as against 4.3 per cent foar ths period 1948=54. Tha increase i s entirely accounted for by a rise in Argentina's consumption, sines i s the I§48~54 css-icd ths increment in a l l the other countries together was about 7 per cent per year ,

A cGapafficaa with -fcks dasaad forecast made in 1954 by the United Nations w shows that the present estimate f a l l s approximately i a the middle between the two forecasts A and B. An analysis of the denand estiiaateo for each ccantiy reveals that the present estimate for Argentina corresponds to Forecast A dksrea3 && febs othcc c©sE£ffies tfes estimate ccsaes c lose t o Forecast B, as demonstrated in table 1-31.

XX/ Palp ¿¿à'Pàpòt Pcróapoets in tatia Aaorica. op. c i t .

- 54 -

Table 1-32

LAW AMERIGAs COMPARISON OF DEMAND FORECASTS FOR PAPERS AND BOARDS OTHER THAN NEWSPRINT 1955~65

(Thousands of tons)

Year

I960 1 9 6 5

Argentina Present United estimate Nations

For©5» cast A

449 627

4 5 0

5 5 6

Rest of Latin Meriea Present estimate

1,205 1,660

United Nations Fore^ east B

1,258 1 , 7 7 1

Total

estlaat©

1 , 6 5 4

2 , 2 8 7

Nations A sad B

1,708 2 , 3 2 7

(ii) Future balance of supply and demand

There are no complete data available on the current expansion plans for the industry. The figures o f capaci ty increase quoted below are those contained in the United Nations survey c a r r i e d out in 1954 1 3 / . In t h i s survey a number of p r o j e c t s for expanding the c a p a c i t y of e x i s t i n g m i l l s , as well as for the establishment of new i n d u s t r i e s , a r e given. The l i s t inc ludes :

a) New m i l l s and extensions completed s i n c e 1950. b) New m i l l s and extensions where cons t ruc t ion had already begun in 1954. c ) P r o j e c t s which in 1954 had not yet passed t h e s t a g e o f prel iminary planning. d) General goals which had not yet been t r a n s l a t e d i n t o s p e c i f i c p r o j e c t s ; f o r

i n s t a n c e the Argentine 5 - y e a r plan.

According t o these estimates the planned capaci ty increase amounts t o 465 thousand tons which, i f the programme is f u l l y implemented, would bring the t o t a l c a p a c i t y in the region up t o 1 ,275 thousand tons per year . However, even when the programme is r e a l i z e d t o i t s f u l l ex tent , l a t i n America will s t i l l have a d e f i c i t increase o f more than 150 thousand tons in I960 and not l e s s than 750 thousand tons i n 1965. Judged by the development i n the period 1950 -55 , c o n s i d e r a b l e doubt must a l s o be expressed as t o the p o s s i b i l i t y t o r e a l i z e a c a p a c i t y expansion of more than 450 thousand tons by the year I960 and i t i s therefore l ikely that the t o t a l d e f i c i t for this year w i l l be considerably higher than 350 thousand tons. Consequently, unless the regional capacity i s expanded at a much f a s t e r r a t e than i s at present siviseged, Lat in America must e i t h e r r a i s e imports of paper and board s u b s t a n t i a l l y or must s u f f e r a high degree of deferred demand. This s i t u a t i o n must already be faced now, s i n c e a period o f approximately 3 t o 4 years i s generally required for a new projec t t o pass from i t s o r i g i n a l planning s tage t o f u l l production.

(c) Pulp

Iteliable data on imports and regional production of d i f ferent grades of pulp are not a v a i l a b l e . For the purpose o f t h i s r e p o r t only the d a t a on import requirements a r e e s s e n t i a l and a r e recorded i n table 1 - 3 2 , which summarizes the e x p o r t s of a l l grades o f pulp from North America and Europe t o L a t i n America. For d e t a i l e d f igures see appendix I - E .

13/ Pulp and Paper P r o s p e c t s iu Latin Aaerica, o p . c i t .

- 55 -

Table 1-32

üXPORTS OF ALL GRADES a/ OF PULP FROM NORTH AMERICA AND EUROPE TO LATIN AMERICA, 1937 AND 1948-54

Year Exports to

Rest of Latin America

Total

1937 43 169 212 1948 45 132 177 1949 70 180 250 1950 70 279 349 1951 129 269 398 1952 86 187 273 1953 36 2a 297 1954 167 323 490 (1955) 192 303 495

Sour©Qg Wood Pulp Statistics, 1951s 1953, 1955 and 1956, U8S8 Pulp Producers Association« j|/ Includes dissolving pulp®

The table brings out two important f a c t s :

( a ) l o c a l production of pulp in Latin America has not kept pace with the increase in paper and board production and, as a r e s u l t , imports have more than doubled in the seven-year period 1948-54.

(b) Be cause o f the marginal a v a i l a b i l i t y o f pulp from Europe and North .America and speculat ive stock purchases, imports show great year- to-year changes. This i s par t i cular ly the case in Argentina, where the absence of a consequent import policy has further aggravated the s i tuat ion .

I t i s of i n t e r e s t t o note the large and increasing share which Latin America has obtained of to ta l pulp exports from Europe and North America to d e f i c i t regions. (See table 1 - 3 3 ) .

Table 1 - 3 3 shows that before the war Latin America imported one third of the combined exports from Europe and North America t o d e f i c i t regions, a share which has increased t o two thirds in the post-war years . This heavy dependency on the marginal markets of Europe and North America obviously places Latin America in a most precarious position during periods of short supply; vigorous e f f o r t s should therefore be made t o reduce this risk by developing regional production f a c i l i t i e s .

- 56 -

Table 1-33

DISTRIBUTION OF PULP EXPORTS FROM NORTH AMERICA AND EUROPE TO DEFICIT REGIONS

T o t a l e x p o r t s t o E x p o r t s t o L a t i n America, a s d e f i c i t r e g i o n s , L a t i n America a percentage of

Year ( 1 , 0 0 0 t o n s ) ( 1 , 0 0 0 t o n s ) t o t a l

1937 611 2 1 2 3 4 . 5

1 9 4 8 330 177 5 3 . 5

1 9 4 9 511 258 5 0 . 5

1 9 5 0 4 7 4 349 7 3 . 5

1 9 5 1 589 398 6 7 . 5

1 9 5 2 408 2 7 3 6 7 . 0

1 9 5 3 551 297 5 4 . 0

1 9 5 4 7% 490 67.O

( 1 9 5 5 ) 741 497 6 7 . 0

(i) Estimate of future demand

Assuming that imports o f papers and boards could be maintained a t the present l e v e l and that regional production capac i ty i s expanded s u f f i c i e n t l y t o cover t h e expected b a l a n c e in requirements , t h e f u t u r e demand of chemical and mechanical pulp would be approximately as recorded in t a b l e 1 - 3 4 .

Year

Table 1 - 3 4

LATIN AMERICAs ESTIMATE OF FUTURE DEMAND OF PULP FOR REGIONAL PAPER AND BOARD PRODUCTION

(Thousands of t o n s )

B a l a n c e between p r e s e n t import and e x p e c t e d de~ mand f o r paper and board News- All p r i n t o t h e r s

E s t i m a t e d q u a n t i t y of pulp t o c o v e r b a l a n c e i n paper

and board supply Mechanical

pulp Chemical pulp

Total

1 9 5 6 1 5 1 1 , 0 5 7 225 650 875 1957 1 9 6 1 , 1 4 1 275 7 0 5 980 1 9 5 8 245 1 , 2 3 1 325 770 1,095 I 9 6 0 359 1 , 4 3 1 445 905 1,350 1965 . 7 4 4 2 , 0 6 4 8 4 5 1 , 3 4 5 2,190

57

T h i s t a b l e emphasizes t h e r a p i d i n c r e a s e i n demand f o r paper pulp which may be e x p e c t e d should r e g i o n a l paper and board production be expanded t o cover t h e r i s i n g consumption. According t o the United N a t i o n s ' survey i n 1 9 5 4 J J / , e x i s t i n g p u l p c a p a c i t y i n t h e y e a r 1950 s t o o d a t 120 t h o u s a n d t o n s o f m e c h a n i c a l and 200 thousand t o n s o f c h e m i c a l pulp. Aggregate e x p a n s i o n p l a n s f o r t h e i n d u s t r y i n , t h e y e a r 1954 inc luded 190 and 580 thousand tons o f mechanical and chemica l pulp, r e s p e c t i v e l y . Should these expansion plans , which a l s o inc lude g e n e r a l g o a l s t h a t had not been s t u d i e d as t o f e a s i b i l i t y , in f a c t be implemented t o t h e i r f u l l e x t e n t , L a t i n America w i l l have reduced t h e 1954 import dependency o f about 500 thousand t o 200 thousand t o n s i n I 9 6 0 . The sharp upswing i n demand which i s e x p e c t e d t o t a k e p lace between 1960 and 1965 would, hovsewr, aga in r a i s e t h e d e f i c i t dur ing t h e end o f t h e p e r i o d t o about 470 thousand mechanical and 540 thousand' t o n s o f c h e m i c a l p s l p ; i . e . an a g g r e g a t e o f more t h a n one m i l l i o n t o n s . B u t , s i n c e i t i s u n l i k e l y t h a t a l l t h e p r o j e c t s w i l l b e r e a l i s e d , the d e f i c i t s quoted above a r e probab ly on t h e low s i d e , e s p e c i a l l y f o r t h e y e a r I 9 6 0 .

(d) The situation in Chile

Paper and board product ion , imports and apparent consianption i n C h i l e have shown the fo l lowing trends i n the post -war per iod :

Tabi® 1-3S GHILEs PAPER AND BOARD PRODUCTION IMPORTS AND APPARENT CONSUMPTION;, 1 % 8 ~ 5 4

(Thousands of_ tong)

Y e a r N e w s p r i n t O t h e r p a p e r s a M b o a r d s

Prode a/ P 0 3^ Consumption (kgs/ cap) (kgs/cap)

1 9 4 8 6 o l 1 4 o 7 2 0 * 8 3» 5 5 3 7 o 6 0 o 6 3 8 O 2 60 53

1 9 4 9 8oO 1 4 o 0 2 2 o 0 3 o 6 9 3 6 o l 0 o 8 3 6 o 9 60I8 1 9 5 0 1 1 * 0 1 9 o 0 3 0 o 0 4 = 9 5 3 3 * 9 l o O 3 4 o 9 5 o 7 5

1 9 5 1 1 2 o 4 1 2 O 6 25oO 4 ° 0 4 3 6 oO " 0 o 6 3 6 0 6 5 , 9 2

1 9 5 2 I l o ? 9 o 9 2 1 O 6 3 o 4 3 4 5 oO Op 5 4 5 c 5 7 o 2 2

1 9 5 3 9 ° 4 1 3 o 2 , 22O6 3 o 5 2 4 2 cC 0o% 4 2 0 4 6® 5 9

1 9 5 4 1 2 o 4 H o 3 2 3 O 7 3 o 6 7 3 9 ° 6 0 o 5 4 0 o2 6 o 2 3

[ 1 9 5 5 ) l l o 5 1 4 ° 2 2 5 « 7 3°8Q 4 1 o3 0 o 8 4 2 o l 6 * 2 3

S o u r c e s g N a t i o n a l s t a t i s t i c s and p r i v a t e s o u r c © s 0

a / The p r o d u c t i o n o f b o a r d s , e t c 0 f r o m w a s t e papers^, a p p r o v e 8 , 0 0 0 t o n s p s r y e a r , i s e x c l u d e d o

I t v?il l be seen from t h e t a b l e t h a t the consumption o f newsprint as w e l l as o t h e r papers and boards e x c e p t f o r year t o y e a r v a r i a t i o n s , h a s remained p r a c t i c a l l y unchanged during t h e post -war p e r i o d . One o f the e x p l a n a t i o n s f o r t h i s f a c t probably r e s i d e s i n t h e r e s t r i c t i o n s on f o r e i g n exchange a l l o c a t e d t o imports o f t h e s e i t e m s . As a r e s u l t , C h i l e has today a depressed consumption ;in r e l a t i o n t o per c a p i t a income.

J<?/ Pulp and C a p a r Prospects in L a t i n Aaorica, op.cit,

- 58 -

(i) Development plans

Three m i l l s are a t p r e s e n t under c o n s t r u c t i o n , two o f them b e l o n g i n g t o the Compañía Manufacturera .!<• ¡ ' ape les y Car tones S .A . and f i n a n c e d with a 20 m i l l i o n d o l l a r s l o a n from t h e I n t e r n a t i o n a l Bank f o r i'.cronst ruc t ion and Development.

1 . A newsprint m i l l with a r a t e d annual c a p a c i t y o f about 5 0 , 0 0 0 t o n s a t San Pedro, n e a r t h e mouth o f t h e Bio-HIo r i v e r . The m i l l s t a r t e d product ion in Apr i l 1957 .

2 . A sulphate pulp m i l l with an annual c a p a c i t y o f 7 0 , 0 0 0 tons i n L a j a , near t h e j u n c t i o n o f the r i v e r s L a j a and B i o - B i o . Par t of the product ion w i l l be b leached and t h e m i l l w i l l p r o b a b l y s t a r t o p e r a t i o n s at t h e end o f 1957.

3 . A small su lphate pulp m i l l with an i n i t i a l c a p a c i t y o f about 20 t o n s p e r day, which i s e s t i m a t e d t o be i n c r e a s e d t o 50 tons a f t e r one y e a r , i s a t p r e s e n t b e i n g e r e c t e d i n t h e p r o v i n c e o f Nuble (Trupán) . The m i l l i s e x p e c t e d t o s t a r t o p e r a t i o n s i n t h e middle o f 1957 .

4 . A p r o j e c t i s a t p r e s e n t b e i n g s t u d i e d by t h e Enpresa N a c i o n a l de C e l u l o s a S . A . a company with a share c a p i t a l o f 4 , 0 0 0 m i l l i o n p e s o s , formed by t h e Corporac ión de Fomento, t h e Corporac ión Nacional de I n v e r s i o n e s de P r e v i s i ó n , t h e C^ja de Empleados P ú b l i c o s y P e r i o d i s t a s and the S e r v i c i o de Seguro S o c i a l . A t e n t a t i v e m i l l s i t e has been s e l e c t e d n e a r Huépil on t h e r i v e r I t a t a , c l o s e t o t h e c a n a l j o i n i n g t h e r i v e r s L a j a and I t a t a . P r e s e n t p l a n s c a l l f o r the e s t a b l i s h m e n t o f a s u l p h a t e p u l p m i l l w i t h a d a i l y c a p a c i t y o f about 2 0 0 - 2 5 0 t o n s , p a r t l y producing b l e a c h e d q u a l i t i e s .

The Company h a s i t s own p l a n t a t i o n s w i t h a t o t a l a r e a o f some 1 5 , 0 0 0 h e c t a r e s which - i f managed according t o the recommendations made i n Appendix 2 6 - w i l l y i e l d an annual average o f about 175 thousand c u b i c metres o f pulpwood i n t h e p e r i o d from ]Qf>8 t o 1 9 7 3 , a q u a n t i t y s u f f i c i e n t t o c o v e r about 50 p e r c e n t o f t h e requirements i n t h e m i l l . A d d i t i o n a l p l a n t a t i o n s e x i s t i n c l o s e v i c i n i t y t o t h e s i t e , and e s t i m a t e s i n d i c a t e t h a t the average t r a n s p o r t d i s t a n c e would not exceed 30 k i l o m e t r e s f o r t h e t o t a l pulp-wood requirements .

5 . A new company - C e l u l o s a s C h i l e S . A . - i s a t p r e s e n t under format ion with a proposed s h a r e c a p i t a l o f 3 , 0 0 0 m i l l i o n p e s o s . The Company i s s tudying t h e p o s s i b i l i t i e s t o i n s t a l l a p u l p m i l l i n c o - o p e r a t i o n with a f o r e i g n pulp and paper producer , b u t no d a t a a r e a v a i l a b l e about t h e s i z e o f t h e p r o j e c t .

(it) Estimate of future demand

A s e p a r a t e demand f o r e c a s t f o r paper and board consumption i n C h i l e has been made and i s inc luded in appendix I - F , o f which t h e f o l l o w i n g t a b l e 1 - 3 6 i s a summary:

Table 1 - 3 6

CHUEs DEMAND FORECAST FOR PAPERS AND BOARDS, 195^=65

Year 1,000 tons

capita

Newsprint Other papers Total

1,000 kgs per 1PCÜ0 torn capita

1 9 5 6 3 1 »3 4 o 5 3 5 0 o 4 7 . 3 0 SU «7 1957 3 3 «3 4 «74 53 o 4 7o59 ®6o7 1958 34»9 4° 88 55»7 7 »58 9 0 o 6 19 6C 3 8 0 8 5 »22 61 o4 8o26 l € 0 e 2 1 9 6 5 4 9 ° 5 60O7 7 6 o 7 9 O 4 0 1 2 6 « 2

- 59 -

According to the es t imate , t o t a l consumption o f newsprint and o ther papers and boards i s expected to i n c r e a s e by 60 and 50 per cent , r e s p e c t i v e l y , during the 10-year per iod. The es t imate i s probably on the conservat ive s ide .

A comparison o f the demand f o r e c a s t with t h e present production f i g u r e s and the development plans ( p r o j e c t s 1 - 3 ) shows that in I960 Chile wi l l have an export surplus o f about 11,000 tons o f newsprint and some 9 0 , 0 0 0 t o n s o f chemical pulp. The e s t i m a t e presupposes t h a t the present production c a p a c i t y for newsprint i s converted to the product ion o f o t h e r papers .

(iii) Rayon pulp

S i n c e a p r o j e c t t o e s t a b l i s h a pulp m i l l with i n t e g r a t e d c a p a c i t y f o r the production o f rayon pulp has been under d i s c u s s i o n , s p e c i a l cffimuent should be made on t h e production and marketing problems for t h i s p a r t i c u l a r product .

Rayon pulp - o r more g e n e r a l l y d i sso lv ing pulp- i s t e c h n i c a l l y the most d i f f i c u l t item t o produce and r e q u i r e s grea t exper ience and knowledge o f t h e production process in order t o o b t a i n an acceptable pro-duct . A wide v a r i e t y o f grades are a v a i l a b l e on the market, each o f which i s s u b j e c t t o r i g i d s p e c i f i c a -t i o n s and q u a l i t y c o n t r o l , s i n c e , i n many c a s e s , even s l i g h t changes i n t h e q u a l i t y may r e s u l t i n great economic l o s s t o the custenter because o f i n t e r r u p t i o n s i n t h e product ion o r complete d i s c a r d o f large tonnages o £ end products, \chich do not come up t o standard. As a r e s u l t , t h e t i e s between producer and consumer are strong and the l a t t e r i s always extremely r e l u c t a n t t o change t o a new supply source, even a t a p r i c e i n c e n t i v e .

The t o t a l consumption o f d i sso lv ing pulp i n L a t i n America i s today about 60 thousand tons per year, o f which C h i l e accounts f o r about 5 thousand. The main consuming c o u n t r i e s are Argent ina , B r a z i l and Mexico where product ion f a c i l i t i e s with an annual c a p a c i t y -when producing d i s s o l v i n g grades only- o f some 100 thousand tons are a t present under c o n s t r u c t i o n ( 4 5 , 0 0 0 in Mexico, 20 ,000 in B r a z i l and 30,000 i n Argent ina) .

S ince i t i s most u n l i k e l y t h a t a s t a b l e export market i n o t h e r regions^ p r i n c i p a l l y Europe and North America, could be developed, the marketing p o s s i b i l i t i e s f o r d i s s o l v i n g pulp produced in C h i l e are very uncer ta in and i t i s the d e f i n i t e recommendstion of t h e Advisory Group t h a t production should not be con-templated i n the country at p r e s e n t .

5 . The other deficit regions

The following summary i s based on an a n a l y s i s o f f u t u r e demand and supply o f pulp and paper in the Far E a s t , Near and Middle E a s t , A f r i c a and Oceania made i n the World Survey (op.cit.). The f o r e c a s t i s made f o r the year 1960-62 and exc ludes Japan and mainland China, t h e t a c i t assumption being t h a t these two c o u n t r i e s w i l l be a b l e t o meet t h e i r own r i s i n g needs.

" In Japan both paper product ion and consumption are r i s i n g e x t r e m e l y r a p i d l y . Both her pulp and paper i n d u s t r i e s f a c e very d i f f i c u l t raw m a t e r i a l problems, 30 s e r i o u s t h a t Japan cannot be coisited upon t o make any s u b s t a n t i a l c o n t r i b u t i o n towards reducing t h e d e f i c i t i n t h e r e s t of the r e g i o n . I n China, too, paper consumption i s r i s i n g rapidly , and the i n d i c a t i o n s a r e t h a t domestic suppl ies w i l l require t o be supplemented by imports for some time to come". (Palp and Paper Prospects in Latin America, op.cit. pp. 49/50).

- 60 -

Table 1-37

FUTURE SUPPLY AND DEMAND SITUATION FOR PAPERS AND BOARDS IN OTHER DEFICIT REGIONS

( T & o u s a n d s _ o f t p p s )

R e g i o n P r o d u c -t i o n

I m p o r t Consump-t i o n

P r o d u c -t i o n

1 9 6 0 - 6 2

I m p o r t Consumg t i on

F a r ! a s t r 3 e x c l o C h i n a and J a p a n 1 9 0 3 7 5 5 6 5 5 8 2 448 1 , 0 3 0

N e a r and M i d d l e E a s t 27 7 4 1 0 1 9 5 5 5 1 5 0

A f r i c a 9 0 3 6 0 4 5 0 2 1 8 4 9 2 7 1 0

O c e a n i a 2 8 7 3 8 8 6 7 5 4 6 6 5 3 4 1 , oco

T o t a l 5 9 4 l s 1 9 7 1 , 7 9 1 1 , 3 6 1 1 , 5 2 9 2 , 8 9 0

Of w h i c h ?

N e w s p r i n t O t h e r s

5 1 5 4 3

4 2 8 7 6 9

4 7 9 1 , 3 1 2

2 7 0 1 , 0 9 1

474 9 5 5

8 0 4 2 , 0 8 6

'Hie t a b l e shows t h a t consumption i s expected t o r i s e by 68 per cent f o r newsprint and 59 per cent for o t h e r papers and boards . Product ion i n c r e a s e - e s t i m a t e d on t h e assumption t h a t a l l p r o j e c t s under con-s i d e r a t i o n w i l l be r e a l i z e d - i s not s u f f i c i e n t t o cover the r i s i n g needs, r e s u l t i n g in d e f i c i t i n c r e a s e s o f a l i t t l e over 100 thousand t o n s o f newsprint and about 225 thousand t o n s o f o t h e r papers and boards . Subsequent developments i n t h e reg ion suggest t h a t t h e assessment has been too o p t i m i s t i c ; in 1954 the product ion o f newsprint had r i s e n by only 30 thousand tons and o f o ther papers and boards by 100 thousand t o n s . I t i s t h e r e f o r e l i k e l y t h a t t h e competing c l a i m s from t h e s e r e g i o n s on t h e export a v a i l a b i l i t y from North .America and Europe w i l l be much s t r o n g e r than t h a t i n d i c a t e d above. For the purpose o f t h i s r e p o r t i t i s thus assumed t h a t t h e import r e a u i r e m e n t s recorded i n t a b l e 1 - 3 7 f o r t h e o e r i o i l l O ^ - f , . 1

w i l l a l r e a d y be a t t a i n e d i n 1 9 5 8 - 5 9 .

- 6 1 -

C. CONCLUSIONS

The fol lowing main c o n c l u s i o n s regarding the future world market i n pulp and paper are drawn from t h r e g i o n a l assessments i n t h i s r e p o r t :

1„ I t seems probable t h a t the supply and demand o f newsprint i n the next t h r e e years w i l l be approxi-mately b a l a n c e d . Beginning in 1958 o r 59, a gradual t i g h t e n i n g o f the market w i l l take p l a c e unless the p r e s e n t r a t e o f product ion i n c r e a s e i n the d e f i c i t r e g i o n s i s a c c e l e r a t e d c o n s i d e r a b l y . The s i t u a t i o n w i l l be f u r t h e r a g g r a v a t e d i n t h e 1 9 6 0 - 6 5 p e r i o d , and i f d e t e r m i n e d e f f o r t s a r e not made to s e c u r e r e g i o n a l s u p p l i e s , consumption i s l i k e l y t o be h i g h l y d e p r e s s e d i n t h e d e f i c i t a r e a s . 2 . The supply end demand s i t u a t i o n f o r o t h e r papers and boards i s more d i s turb ing s i n c e t h e r e are indica-t i o n s t h a t a world d e f i c i t s i t u a t i o n may develop a l ready w i t h i n t h e next few y e a r s , again provided t h a t r e g i o n a l c a p a c i t y i s not g r e a t l y i n c r e a s e d . T e n t a t i v e l y i t i s e s t i m a t e d t h a t t h e r e w i l l be a world d e f i -c i t o f c l o s e t o 1 m i l l i o n tons per year in 1958-59. 3. Hie pulp market i s l i k e l y t o exper ience more or 1 e s s t h e same development as i s t h e c a s e f o r papers and b o a r d s o t h e r than newsprint ; i . e . a d e f i c i t s i t u a t i o n w i l l a r i s e during the n e x t few y e a r s unless r e g i o n a l r e s o u r c e s a r e c r e a t e d . 4 . Europe w i l l i n a r e l a t i v e l y s h o r t t ime change from a n e t e x p o r t e r t o a d e f i c i t a rea , and North America a l o n e remain as t h e n e t e x p o r t e r t o o t h e r r e g i o n s . C o n s e q u e n t l y i t may be e x p e c t e d t h a t an i n c r e a s i n g share o f imports t o t h e d e f i c i t reg ions w i l l have t o be l i q u i d a t e d i n d o l l a r s , as i t i s un-l i k e l y t h a t a s i t u a t i o n w i l l c o n t i n u e permanently whereby Europe has t o purchase pulp and paper from North America i n o r d e r t o m a i n t a i n h e r e x p o r t s t o d e f i c i t a r e a s . 5 . Summing up f o r the purpose o f t h i s r e p o r t : a prospec t ive market for pulp and paper produced in Chile a l r e a d y e x i s t s and i s l i k e l y t o expand rapidly in the coming decade.

- 62 -

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GROSS NATIONAL PRODUCT PBR C A P I T A ANO RCAR

(DOLLARS oír 1 9 5 ° )

F f l Q u f t a I ® V 8 8 r i o u R c i - V 81

C O R R E L A C I O N E N T R E E L PRODUCTO B R U T O POR H A B I T A N T E Y E L CONSUMO DE P A P E L E S Y CARTONES POR HABITAWE Y AÑO EN TOOOS L O S P A I S E S

LATINQ&MERICANOS COSM EXCEPCION DE A R G E N T I N A

C O R R E L A I I ON B E T Y C E N PER C A P I T A C23QSS PRODUCT M > PAPER AND BOARD C O N S U M P T I O N PER HEAD AND Y E A R IN A L L L A T I N A M E R I C A N C O U N T R I E S E X C E P T A R G E N T I N A

19^8 - 1955

(Kfi POS HAB i tÁííl z ; ( K a * PER C A P I T A )

200 210 220 230 2l>0 250 , , PRODUCTO N A C I O N A L BRUTO,. ( D O L A R E S OE 1950 POR H A B I T A N T E )

G R O S S N A T I O N A L PRODUCT ( 1 9 5 0 U5 $ PER C A P I T A )

E C U A C I O N E S PARA L A S L I N E A S A J U S T A D A S MATEMÁT ICAMENTE :

P A P E L DE O I A R I O t LOG Y 3 2.2112 Loe X - '••86327 TODAS L A S DEMÁS C A L I D A D E S : Loe Y( • I.4718 Loe X - 2 . 7 6 X 5 6

E Q U A T I O N S FOR W A T H E M A T I C A L L Y F I T T E D CURVES :

N E W S P R I N T : Loe Y • 2.2112 Loe X - 4.86^27 ALL OTHERS : LOG Y. Q I » 4 7 I © L o e X - 2 . 7 6 Í 5 6

Appendix I - Â

EXPORTS OF NEWSPRINT FRCM NORTH AMERICA AND EUROPE

1937 1 9 4 8 1 9 4 9 1 9 5 0 1 9 5 1 1 9 5 2 1 9 5 3 1 9 5 4 1 9 5 5

E x p o r t s from Europe t o

3 5 9 4 1 3 Europe 99 150 255 284 2 8 4 3 7 3 3 5 9 4 1 3 1 1 3 North America 267 236 218 1 4 6 1 7 9 1 6 3 1 4 8 1 1 5 1 1 3

L a t i n America 1 2 6 147 2 2 3 1 9 6 1 5 4 147 1 3 6 ) Asia ; 206 7 5 7 4 7 1 a 66 1 1 0 8 9 } 4 0 4 A f r i c a 1 5 1 6 41 31 46 57 4 3 ) Oceania 1 4 8 9 1 2 9 1 3 4 8 5 1 3 4 1 3 9 )

E x t r a r e g i o n a l 5 9 6 517 expor ts? 473 4 6 6 544 610 601 5 U 5 9 6 522 517

Net e x p o r t s 1 4 3 395 426 572 502 361 437 2 1 5 170

E x p o r t s from North America t o

North America 2 9 7 6 2 3 9 5 5 4 3 , 9 4 3 4 * 2 8 7 49 332 4 , 4 0 1 4 , 4 6 1 4 ©417 4 , 5 5 9 Europe 330 71 1 1 8 38 9 9 1 5 3 1 5 9 307 347 L a t i n America ) 1 6 7 1 4 5 1 1 5 1 5 1 2 1 2 1 7 1 2 4 4 ) Asia ) 395 58 4 9 34 59 4 3 4 6 6 5 ) 4 9 2 A f r i c a / 35 51 9 2 1 4 5 2 6 30 Oceania ) 6 9 7 4 37 41 7 4 56 7 3 )

E x t r a r a g i o n a i 4 5 * e x p o r t s 7 2 5 400 437 2 3 3 371 527 4 5 * 7 1 9 8 3 9

Net e x p o r t s 458 1 6 4 219 87 1 9 2 364 310 6 0 4 7 2 6

T o t a l e x p o r t s t o 6 9 4 8 1 9 d e f i c i t régions 601 559 645 659 6 9 4 7 2 5 747 8 1 9 923

Source3g 1937g Newsprint t r e n d s I 9 2 8 ° 5 1 s F e b r u a r y 1 9 5 4 ° H® 20| UNESCO and Newsprint D a t a 1953j Newsprint A s s o c i a t i o n o f 0anadao 1 9 4 8 = 5 5 FM) Yearbook o f F o r e s t P r o d u c t a

S t a t i s t i c S o 1955 Newsprint Data 1955g opQ oit*

- 63 -

Appendix X=B

MORBI AMERICA AM) HJROPE? ES>ORTS OF WOOD PULP (ALL GRADES)

( M i l l i o n ® o f t e a » )

1937 1948 1 9 4 9 1 9 5 0 1 9 5 1 1 9 5 2 1 9 5 3 1 9 5 4 ( 1 9 5 5 )

E x p o r t fresa Eur op® ay tog

Europe b / 3 o l 2 l 2 o l ó 2 2o45S 2 o 8 9 3 3 . 0 3 5 2 , 5 1 8 2o99 8 3 . 4 6 9 3 . 7 4 8 Worth America lo4£>4 0 o 4 3 9 0 * 5 0 4 0 o 5 3 7 Oo395 Oo374 0 , 4 6 3 0 . 3 3 3 0 . 3 2 0 L a t i n America 0 o 2 0 6 0 o H 5 0 o 2 3 a 0 o 3 1 9 0 o 3 2 6 O0I86 0 , 2 4 2 0 , 3 2 0 0 . 3 2 7 Asia O0O68 O0O4I O0O35 0 o 0 9 5 0 s 0 4 4 0 . 0 3 5 A f r i c a 0 o 2 8 3 0 o l 0 3 0 o l l 3 O0OO8 0 o 0 1 4 O0OO7 0 * 0 2 1 0 . 0 2 3 0 . 0 AO Oceania 0 o 0 3 4 0 o 0 5 8 0 o 0 3 2 0 o 0 5 1 0 o 0 5 7 0*057 E x t r a r e g i o n a l e x p o r t sg l o 8 9 3 O 0 6 m O q 855 0 o 9 6 6 0O834 0 o 6 3 4 0 = 8 7 2 0 . 7 7 ? 0 . 7 7 9 Net e x p o r t s l o 6 5 4 0 o 4 9 5 Oo697 0 o 3 2 0 Oo465 0 eSQ6 Oo583 0 . 2 5 7 0 . 0 9 0

E x p o r t £ r m . North America toj 9 >

North America Oo572 l o 473 l o 2 1 5 l o 557 I0683 l o 4 6 6 1O47& 1 . 7 5 2 Europe Ool39 0 o l 9 2 OC25B 0 o 1 4 6 Oo369 0 o 3 2 8 0 o 2 8 9 0 * 5 2 0 0 * 6 5 9 L a t i n America O0OO7 0 o 0 3 2 0 o 0 1 9 0 o 0 3 0 O0O72 O0O87 0 o 0 5 5 0 o l 7 0 0 . 1 7 0 A s i a OoOlO O0O7I O0O48 0 o 0 8 l O0IO4 0 . 0 9 6 A f r i c a 0 o a 5 0 a 05Q 0o041 = OoOOl 0 . 0 0 1 O0OO4 0 . 0 0 5 Oceania O0OO5 O0OO7 O0OI2 0 . 0 0 5 0 . 0 0 9 0 . 0 1 1 E x t r a r e g i o n a l e x p o r t s 0 . 3 6 1 O e 2 7 4 0 o 3 i a 0 o l 9 1 0o 519 Oo476 0 o 4 3 1 0 * 8 0 ?

Net e x p o r t s ° 1 „ 0 4 3 -O0I65 O 0 I 8 6 =Oo346 0 o l 2 4 0 , 1 0 2 0 o 0 3 2 0 . 6 5 1 T o t a l © s p o r t s t o •

d e f i c i t pegioras QO611 0 * 3 3 0 0o51X 0 o 4 7 4 0 „ § 8 9 0 o 4O8 0 o 5 5 1 0 o ? 3 1 0 . 7 4 1

Sourcsg FAQ f e a r ! aook o f F o r e s t P r o d u c t s S t a t i s t i c s * 1 9 5 h 1 2 a » @rs Asso

1 9 5 4 «ad c i a t i o H o

Ì m s ® 1 P a l p Stai i i s t i c ® 1 9 5 1 ss idTT95£TU 0S0 Pul| 3 Prcdue

h 1 2 a » @rs Asso

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a / Stsadenj» Finland^ Norways A u s t r i a asd ßsMffly 0 p o s t w a r ©sport t r m Gsraas^ ia&L o n l y w e s t e r n Germano

b / R e f e r s t o t h e whole o f Europe.

~ 64 -=•

APPENDIX I~C

LATIN AMERICA? PRODUCTION, IMPORT AND APPARENT CONSUMPTION OF NEWSPRINT

(Thousands o f t o n s )

1 9 4 8 1 9 4 9 1950 1 9 5 1 1 9 5 2 1 9 5 3 1 9 5 4 1 9 5 5 P r o Pro P r o P r o P r o P r o P r o P r o due Imp» due" Imp» due" Imp0 du£ Imp0 du]c Imp0 du<[ Imp0 due imp«, du£ Imp0

t i ö n t i o n t i o n t i ö n t i o n t i o n t i o n t i o n

Argentina - 121 117 3 101 3 109 1 9 2 8 29 1 9 4 3 2 2 8 9 B o l i v i a <= s - 3 - 3 - 2 = 2 * » 2 3 CSS 1 B r a z i l 26 53 31 47 31 61 34 7 9 39 8 2 37 1 0 5 27 1 3 0 3 2 1 3 0 Chile 6 1 5 8 1 4 1 1 1 9 U 1 3 1 2 1 0 9 1 1 1 2 1 0 1 1 1 4 Colombia « 1 5 - 1 1 = 20 _ 1 4 - 16 = . 1 7 S9 1 9 21 Costa R i c a 1 rs» 1 - 2 e=> 2 _ 2 - 2 - 2 — 3 Cuba — 27 - 27 - 32 - 28 as 27 CD 27 es 31 28 Dominican Rep® - 2 C9 1 _ 1 = 1 - 1 - 1 2 as 2 Ecuador c= 3 es 2 6 •= 3 = 4 4 = 5 - 5 El Salvador 2 0 2 2 3 CS 3 3 » 3 - 4 Guatemala = 2 2 2 es 2 2 = 2 63 2 „ 2 H a i t i - X es» X = X c=> X . X . X «. X an X Honduras - X a X = 1 » 1 a 1 » X C3> 1 0 1 Mexico = 58 a 58 4 36 = 52 C3 8 2 C9 6 5 G3 ' a a» 60 Nicaragua CS 1 e> 1 = 1 = 1 CO 1 = 1 C3 1 a 1 Panama 3 C3 3 2 = 2 2 GS 2 CO 2 a 2 Paraguay = X = X - X = 1 = 1 O . . X < = X «. X

Peru a 6 e» 1 0 8 = 1 1 = 1 0 1 0 GS 1 2 a 1 5 Uruguay 1 6 = 17 = 1 6 = 1 6 - 20 20 = 2 2 es 24 Venezuela a 8 C9 8 - 1 1 CU 1 3 - 1 4 = 1 4 0 1 6 s 21

T o t a l 32 332 39 324 49 322 48 353 52 3 7 2 54 315 58 365 65 4 2 3

Consumption 364 363 371 4 0 1 4 2 4 369 4 2 3 4 8 8

Sources ; F i g u r e s f o r Argentina? Pulp and Paper Advisory Group0

F i g u r e s f o r B r a z i L ( p r o d u c t i o n ) ? 1 9 5 1 / 5 4 o 0 Papel f l December 1955s 1955* ECLAS

F i g u r e s f o r C h i l e ( p r o d u c t i o n ) ? 1 9 5 1 / 5 5 s P u l p and Paper Advisory Group®

A l l t h e o t h e r f i g u r e s were obtained from t h e f o l l o w i n g sourcess ECLAa Newsprint da ta 1 9 5 3 , 1 9 5 5 and 1 9 5 6 , f o r e i g n t r a d e s t a t i s t i c s o f s e v e r a l c o u n t r i e s and from e s t i m a t e s o f t h e Pulp and Paper Advisory Group0

- 65 -

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1 9 4 8 1 9 4 9 1 9 5 0 1 9 5 1 1 9 5 2 1 9 5 3 1 9 5 4

1 9 4 8 / 5 4 ( 1 9 5 1 ) 1 9 5 4 1 9 5 6 1 9 5 7 1 9 5 8 I960 1 9 6 5

2 0 , 7 5 3 2 2 , 0 2 3 3 0 , 0 3 8 25,000 21,602 2 2 , 6 4 3 2 3 * 6 6 3

2 3 , 6 7 5 2 7 , 4 6 4 3 1 , 2 6 2 3 3 , 3 2 7 3 4 , 9 5 5 38,800 4 9 , 5 0 7

News® Tear print aad

o n 38,231 36,862 3 4 , 9 1 4 3 6 , 6 0 2 4 5 , 4 6 0 4 2 , 4 2 7 4 0 , 1 7 1

39,238 44,613 50,377 53,365 55,728 a , 397 76,666

OP DEMAMD FOR HEWSPRXH? MB Offl® PiSW BOARDS IN I960 AMD

T o t a l

5 8 , 9 8 4

6 4 , 9 5 2 61,602 6 7 , 0 6 2 6 5 , 0 7 0 6 3 , 8 3 4

6 2 , 9 1 3 7 2 , 0 7 7 8 1 , 6 3 9 8 6 , 6 9 2 9 0 , 6 8 3

1 0 0 , 1 9 7 1 2 6 , 1 7 3

a t i c a

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6 off. 60 92 7o30 7 o 5 9 7o?8 8.26 9 » 4 0

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Notesg The f o l l o w i n g e l a s t i c i t y c o e f f i c i e n t s n*ere usqds and boards* l o 5 o The assumption was t h a t t h e g r o s s product p e r r a t e o f 2 per c e n t , o r a t t h e h i s t o r i c a l r a t ® The growth r a t ® o f tfcs p o p u l a t i o n was t h a t per cent®

366

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la 1940/54° t o 1 9 3 7 / 5 5 * ©F le

- 68 -

ANNEX I I

FORESTRY ASPECTS

A. PLANTATIONS OF PINUS RADIATA IN THE SOUTHERN AREA OF CENTRAL C H I L E

For many years f o r e s t e x p l o i t a t i o n has been acquir ing growing importance i n Chi le , both on account ¡ o f the volume and the value o f production. Th is p r o c e s s , however, has damaged la rge s tands o f n a t u r a l

f o r e s t s , whose d e s t r u c t i o n has given r i s e to a rapid p r o c e s s o f e r o s i o n wi th a l l i t s s e r i o u s conse -quences. A p a r t i a l reac t ion against such devastat ion s e t in a t the end of the n ineteenth century and ac-quired remarkable impetus by 1930, when the p l a n t a t i o n o f rapid growing e x o t i c s p e c i e s i a d e f o r e s t e d

' areas u n f i t for o t h e r uses was i n i t i a t e d . The a r t i f i c i a l f o r e s t s thus c r e a t e d have become very s i g n i f i -cant for s o i l conservation, but they are s t i l l more important as an ac tual and p o t e n t i a l source o f indus-t r i a l raw m a t e r i a l s . In o r d e r t o obta in an e x a c t a p p r a i s a l o f the importance o f a r t i f i c i a l f o r e s t s i n t h i s respect , the Corporación de Fomento de la Producción, in 1952-53 made a complete inventory o f f o r e s t p lanta t ions in the Provinces o f "iaule, L inares , Fíuble, B io -B io , Concepción, Arauco and Malleco, t h a t i s the southern area o f c e n t r a l Chi le (approximately between p a r a l l e l s 35° and 38° S. ) which i s where most

^ o f them have been e s t a b l i s h e d . rhe present notes have been taken from the Report _1/ on t h i s survey.

i. Forested areas and soils

The seven provinces mentioned above l i e in a c e n t r a l v a l l e y which runs north and south, f lanked by the Andes, with a maximum height o f some 5,00(1 metres and the o ld , worn-down h i l l s o f the C o r d i l l e r a de

i l a Costa which only in a few p l a c e s r i s e above 1 , 0 0 0 m e t r e s . I t i s on t h e l a t t e r , which used t o be covered by n a t i v e f o r e s t s t h a t r e f o r e s t a t i o n has mainly p r o g r e s s e d . Other important p l a n t a t i o n s are found in some a l l u v i a l t e r r a c e s o f the c e n t r a l v a l l e y , which o f t e n extend t o t h e f i r s t f o o t h i l l s o f the

'Andes. In 1953, the t o t a l a r e a under a r t i f i c i a l f o r e s t s amounted t o a lmost 1 9 0 , 0 0 0 h e c t a r e s , as shown

in t a b l e I I - l . I t should be noted t h a t the i n v e n t o r y e x c l u d e s p l a n t a t i o n s o f l e s s than one h e c t a r e and t r e e s

o u t s i d e t h e f o r e s t (windbreaks , avenues, smal l s t a n d s f o r s h e l t e r , e t c . ) Pinus radiata , which in Chile i s known as "pino i n s i g n i s " , stands out in the fo l lowing t a b l e . I t was

introduced to Chile in 1885 and spread quickly because i t grows very f a s t ; yet the wood n e i t h e r warps nor s p l i n t e r s e a s i l y and i s good f o r a number of uses . I t i s p lanted between May and September, usua l ly a t d i s t a n c e s o f 2 m e t r e s ( 2 , 5 0 0 t r e e s per h e c t a r e ) or, l e s s f requent ly , i t i s reproduced frail seed t r e e s .

In 1953 the Pinus rad ia ta f o r e s t s were c l a s s i f i e d according t o age. (See t a b l e H - 2 ) . The t a b l e shows that in the years 1943-53 between 10 and 15 ,000 h e c t a r e s were planted annually with

t h i s spec ies in the area being considered. Moreover, most s tands are young, although, as w i l l be shown l a t e r , they are already reaching the age o f maximum economic y i e l d .

To determine the q u a l i t y o f Pinus r a d i a t a p l a n t a t i o n s with regard t o y i e l d s , t h e system o f " s i t e i n d i c e s " was used. Th is c l a s s i f i c a t i o n has been based on average t o t a l h e i g h t ( s i t e i n d e x ) which t h e dominant and co-dominant t r e e s of the stand had, have, or w i l l have when they are twenty years o ld . In order t o s impli fy the method, the s i t e i n d i c e s -from 40 t o 140 f e e t - have been grouped i n f i v e groups or " s i t e c l a s s e s " 2/ (See t a b l e I I - 3 ) .

1/ "Mensura de las plantaciones forestales de las provincias de Linares a Malleco" Corporación de Fo, de la Producción de Chile. Santiago. 19SS.

2/ For comparison with N. Zealand cías sification oí sites see: Preface and c o a n e a t s to 2nd e d i t i o n .

" 69 "

Table I I - l

AREA UNDER PLANTATIONS, B í PROVINCES AND SPECIES IN APRIL 1 9 5 3 ( H e c t a r e s )

Pinus E u c a l y p t u s Other fi/ Tota l P r o v i n c e r a d i a t a Sp. s p e c i e s Tota l

L i n a r e s 1 , 907 272 6 9 4 2 , 8 7 3 Maul® 3 3 , 2 5 7 4 8 8 575 3 4 . 3 2 0 Subì© 1 8 , 333 279 1 8 2 1 8 , 7 9 4 Concepción . 6 2 , 3% 7 , 5 8 2 1 , 4 3 4 7 1 , 3 4 7 Árauco 1 9 , 7 6 9 3 , 0 1 7 990 2 3 , 7 7 6 Bio»Bia 21 , 810 20 65 2 1 , 8 9 5 Mal leco 1 6 , 1 3 1 1 7 6 59 1 6 , 3 6 6

T o t a l 1 7 3 , 5 3 8 • 1 1 , 8 3 4 , 3 , 9 9 9 1 8 9 , 3 7 1

P e r c e n t a g e 91 e 6 6 . 3 2 . 1 1 0 0 . 0

a / Populus n i g r a v a r e i t a l i c a , Cupressus Macrocarpa Gord . s Pinus P i n a s t e r Art, , , Acacia melanosq rlon R© Bs and for* a s t a made up o f two or more spec ies»

Table I I - 2

AREA UNDHÌ PINUS RADIATA, B1 PROVINCES AND AGE GROUPSj 1 9 5 3

( H e c t a r e s )

- . • ^

Ag© ( y e a r ) 1 - 3 4 - 6 7 - 9 1 0 - 1 2 I 3 - I 5 1 6 - 1 8 1 9 - 2 1 2 2 - 2 4 2 5 & Total mew©

P r o p i n e s a

L i n a r e s 2 8 2 1 , 0 0 5 262 1 1 3 200 31 8 5 1 1 * 9 0 7 Maul® 1 3 , 4 0 7 1 1 , 3 8 1 5 , 1 2 5 2 , 8 8 0 - 1 8 0 1 5 4 1 5 ) » 3 3 , 2 5 7 Subí© 2 , 5 9 8 3 , 3 9 0 6 , 5 1 6 2 , 9 1 4 2 , 2 0 4 539 6 9 27 7 6 1 8 , 3 3 3 Concepción 5 , 6 3 6 1 2 , 8 3 2 1 5 , 6 9 7 1 2 , 4 3 3 9 , 9 8 3 3 , 5 9 7 7 4 6 8 2 3 534 6 2 , 3 3 1 Arauco 4 , 1 6 3 1 0 , 1 5 3 2 , 7 8 3 1 , 4 3 8 7 8 2 437 CO « 3 1 9 , 7 5 6 Bio-Bio 3 , 3 6 4 4 , 0 4 1 6 , 2 9 7 5 * 6 7 6 1 , 4 4 3 827 1 5 6 1 1 13 a , aio Malleeo 5 , 9 1 3 4 , 4 a 2 , 3 9 9 2 , 1 9 3 8 9 9 1 3 2 1 7 4 5 7 2 16,131

T o t a l ( h a ) 3 5 , 3 6 3 4 7 , 2 6 3 3 9 , 0 7 9 2 7 , 6 9 7 1 5 , 6 9 1 5 , 7 1 7 1 , 1 2 6 911 6 9 6 1 7 3 , 5 4 3 {%) 2 0 * 3 8 2 7 . 2 3 22O52 1 5 . 9 6 ' 9®04 3 . 2 9 0 . 6 5 0 . 5 3 0 . 4 0 100,00

- 70 -

Tabi© 11-3 PLANTATIONS O P T I K U S RADI AT Aß Ä A H O N S H I P HETWEB!

S i t e S i t e c l a s s index

I 1 2 0 « 1 4 0 feet II 1 0 0 - 1 2 0 « HI 80 - 100 » IV 60 » 80 » V 4 0 - 60 »

According t o t h i s grouping, t h e p l a n t a t i o n s o f t h i s s p e c i e s are d i s t r i b u t e d as shown i n t a b l e I I - 4 :

T&bl© I I - 4

PINUS RADIATA« AREA OP PLANTATIONS Bl S I S CLASS, IN APRIL 1953

S i t e c l a s s H e c t a r e s P e r c e n t a g e

I 4 3 5 0 . 2 5 I I 2 » 7 9 3 1 . 6 1

I I I 31*377 1 8 . 0 8 IV 6 6 * 8 5 3 3 8 . 5 2

V 7 2 * 0 8 0 4 1 . 5 4

T o t a l 1 7 3 i 536 1 0 0 . 0 0

The determinat ion o f l i m i t curves f o r s i t e i n d i c e s was made on t h e b a s i s o f r e p r e s e n t a t i v e samples d i s t r i b u t e d evenly throughout the surveyed a r e a . Thus, when the previous t a b l e r e v e a l e d t h a t p l a n t a t i o n s were c o n c e n t r a t e d i n t h e lowest s i t e c l a s s e s , i t c o n f i r m e d one o f t h e f a c t o r s observed i n t h e f i e l d , namely, t h a t the major share o f p l a n t a t i o n s are found in sandy a r e a s , eroded s lopes and o t h e r poor s o i l s .

I f the p l a n t a t i o n s a r e a p p r a i s e d in a b s o l u t e f i g u r e s and w i t h i n t h e g e n e r a l economic framework o f the country, t h e r e i s no doubt t h a t t h e e f f o r t developed in t h e s e provinces i s r e a ark a b l e . But t h e r e i s s t i l l much t o be done. In f a c t , when 189 ,371 h e c t a r e s o f f o r e s t p l a n t a t i o n s were i n v e n t o r i e d , i t was, a t the same t ime, e s t i m a t e d t h a t t h e r e were 1 , 4 7 6 , 4 5 1 h e c t a r e s o f l a n d which on account o f n a t u r a l c o n d i -t i o n s o r e ros ion should be covered by f o r e s t s . T h i s means t h a t only 1 1 . 4 p e r c e n t o f t h e r e f o r e s t a b l e a rea has as ye t been p l a n t e d and t h a t t h e r e a r e v a s t t r a c t lands a v a i l a b l e which a r e only s u i t a b l e , from the economic viewpoint , f o r f o r e s t r y .

- 71 -

2o Volume in Plantation of Pinus Radiata (ig$s)

The volumes i n d i c a t e d below a r e a c t u a l g r o s s c u b i c c o n t e n t , t h a t i s , t h e s o l i d volume, without deducfeitm f o r d e f e c t s .

Diameters 'Were measured at b r e a s t - h e i g h t ( 4 . 5 f e e t above t h e ground) f o r diameter groups of even nraabesQ o f ist'tibeS. Each group ranges from 2n - 0 . 9 t o 2m - 1 i n c h e s . When c a l c u l a t i n g ac tua l volumes only f r e e s frcca S . l i n c h e s up (diameter group 6 ) a t b r e a s t - h e i g h t were inc luded 3/.

lis a s s e s s i n g t h e v o l t e s o f wood s u i t a b l e f o r sarai goods and pulping t h e fo l lowing c r i t e r i a were used: as sawlcgs were deflated logs. 12 f t . long with a minimum diameter o f 12 i n c h e s with bark; pulpwood inc ludes logs 4 f t . lozng with s ndsjifiwsa d i e s e t e r o f 4 inches with baric. According t o these c r i t e r i a , the volumes l i s t e d i n t a b l e - I I - S o b t a i n e d .

feblo Xl°5

OF F M U S RADlATAp B I USE

'V 5MlfW©@i Aefcual wbi© Total

1 = 3 cz> c=> 4 ° 6 2 , 9 0 J , 1 5 0 ca 2 , 9 0 3 , 1 5 0 7 - 9 ' 2 8 , 2 5 4 , 1 4 0 8 5 , 5 0 0 2 8 , 3 3 9 , 6 4 0

1 0 - 1 2 8 7 * 2 4 6 , 5 9 0 . 7 1 5 , 6 9 0 8 7 , 9 6 2 , 2 8 0 1 3 ° 1 5 1 1 5 , 7 2 0 , 1 8 0 6 * 3 7 0 , 9 1 0 1 2 2 , 0 9 1 , 0 9 0 1 6 <* X 8 ' 5 2 , 1 8 8 , 8 4 0 7 , 9 5 0 , 6 5 0 6 0 , 1 3 9 , 4 9 0 I f - 2 1 11 ,977s> 8 6 9 2 , 4 3 7 , 0 6 0 1 4 , 4 1 4 , 9 2 0 2 2 ° 2 4 1 0 , 3 0 2 , 7 9 0 3 * 1 3 7 , 4 0 0 1 3 , 6 4 0 , 1 0 0 25 and over 8 , 5 4 6 , 8 0 0 7 , 1 2 9 , 3 6 0 1 5 , 6 7 6 , 1 6 0

Total 3L7* 3 4 0 * 2 6 0 _ 2 7 , 8 2 6 , 5 7 0 " 3 4 5 , 1 6 6 , 8 3 0

3 . Grovjth mid yields of pinus radiata plantations ±j

F o r e c a s t s o f y i e l d s f o r Pinus r a d i a t a p l a n t a t i o n s have been based on a s p e c i a l study of growth according t o the s i t e c l a s s o f each stand. Rota t ion per iod was c a l c u l a t e d according t o the c r i t e r i o n o f maximum y i e l d , t h a t i s t o say, i t corresponds f o r each s i t e c l a s s t o t h e age i n which annual average growth ( i n u s e f u l volume) per h e c t a r e over the whole p e r i o d i s maximum.

The d i f f e r e n c e i n y i e l d s between t h e c l a s s e s o f s i t e i s l a r g e ( s e e t a b l e I I - 6 ) .

A/ Excluding the ataap (1 f t . froo the g r o u n d and the bark).

4 / Roforriag t o t i e yields, see also Appendix 2c.

- 72 -

Table I I - 6

AVERAGE MUMJM ANNUAL GROWTH IN PUNT AU OMS OF PINUS RADIATA

S i t e g l a s s

I I I III

IV

a / U s e f u l volumec

Maximum average annual growth

(Cofto)

2 , 1 8 9 1,574 1,112

7 2 3 320

0 * 3 ) sJ 62 4 4 31 20

9

Age ( y e a r s )

2 5 25 2 4 2 4 22

On t h e b a s i s o f t a b l e I I - 6 said o f t h e p r o p o r t i o n i n which t h e v a r i o u s s i t e c l a s s e s are found ( t a b l e II-4), th® aversge maximum y i e l d f o r oil Pinus r a d i a t a p l a n t a t i o n s surveyed in 1953 i s 642 c u b i c f e e t ( 1 8 . 2 c u b i c m e t r e s ) o f s o l i d utod cm thorn 5; bark per h e c t a r e and year .

Hie c a l c u l a t i o n ( s tand by stand) on the b a s i s o f r o t a t i o n per iods and c a l c u l a t e d y i e l d s i s shown i n the fol lowing summary t a b l e II-7:

Period

T a b l e 11=7 PINUS RADIATA. PLANTATIONS!

(Bas©? 1 9 5 3 )

FUTURE YIELDS

Tassful volumej e f t p e r y e a r

Pulpwood Sawlogg T o t a l

1 9 5 6 - 1 9 5 8 1 9 5 9 - 1 9 6 1 1 9 6 2 - 1 9 6 4 1 9 6 5 - 1 9 6 7 1 9 6 8 » ! 9 7 0 1 9 7 1 - 1 9 7 3

11,759*883 3 0 , 5 8 9 , 8 2 0 9 4 , 2 8 2 , 8 3 0

105,910,260 1 2 4 , 0 8 1 , 4 7 0 1 2 7 , 7 7 2 , 8 6 0

2 * 3 6 9 , 8 6 0 10,888,770 4 L , 7 9 3 , 6 3 0 4 4 , 8 9 4 , 4 0 0 5 4 , 9 4 7 , 6 9 0 5 4 , 9 5 2 , 3 6 0

1 4 , 1 2 9 , 7 4 0 4 1 , 4 7 8 , 5 9 0

136*076,460 1 5 0 , 8 0 4 , 6 6 0 1 7 9 , 0 2 9 * 1 6 0 1 8 2 , 7 2 5 , 2 2 0

4- Forest ownership

Of the Pinus r a d i a t a p l a n t a t i o n s , 84 .3 per cent ( a r e a ) belong t o pr iva te concerns ,whi le only 0 . 4 per cent belongs t o t h e S t a t e , and 1 5 . 2 per cent t o p a r a - S t a t a l o r g a n i z a t i o n s . A l i t t l e over o n e - s i x t h o f pr iva te stands o f t h i s s p e c i e s have been sold by l o t s t o small i n v e s t o r s who have bought from one h e c t a r e and more cm 3 t o 6 -year paying terms ( s e e t a b l e I I - 8 ) .

- 73 -

Tabi© I I - S PIMI S RADIATA PLANTATIONS? OWNERSHIP DISTRIBUTION

Ownership

S t a t e

P a r a e s t a t a l orjganiaationes

C o r p o r a c i ó n de Fomento C a j a d© EEaPPo y PP® S e r v i c i o de Seguro S o c i a l C a j a de C o l o n i z a c i ó n A g r í c o l a

T o t a l P a r a - S t a t a l

Municipal

P r i v a t e

Small l o t s ( p a r c e l a c i o n e s ) Other p r o p e r t y

T o t a l p r i v a t e

Area

H e c t a r e s

60S

4 , 332 11,676

7 , 6 7 2 2 , 8 5 2

2 6 , 5 3 2

1 4 4

2 5 , 2 1 4 1 2 1 , 0 4 0

P e r c e n t a g e

0 . 4

0 * 5 6 . 7 4© 4 1.6

1 5 * 2

0,1

14e5 69a 8

1 4 6 , 2 5 4 8 4 . 3

Grand t o t a l 1 7 3 , 5 3 8 100.0

The s i z e d i s t r i b u t i o n o f the holdings i s shown i n t a b l e I I - 9 .

Table I X - 9 DISTRIBUTION OF THE AREA UNDER PINUS RADIATA, BY SIZE OF HOLDINGS

Owner gj ( h e c t a r e s )

Number P e r c e n t

age ~~ 1 - 1 0 5 9 1 3 7 . 6

1 1 » 3 0 3 6 9 2 3 . 5 3 1 - 60 1B9 1 2 . 0 61 - 1 0 0 1 1 5 7 . 3

1 0 1 » 25,0 1 5 4 9 . 8 251 - 500 7 5 4 . 8 5 0 1 - 1 , 0 0 0 4 5 2 . 9

1 , 0 0 1 and o v e r 33 2 . 1

T o t a l 1*571 1 0 0 . 0

Area

Hecta= r e s

4 , 5 0 3 6 , 9 5 0 8,086 8 , 8 7 0

2 4 , 0 7 3 2 5 , 8 5 2 31,188 64,016

1 7 3 , 5 3 8

P e r c e n t

2.6 4 . 0 4 . 6 5 . 1

1 3 . 9 14e9 18o0 36O9

IOOOO

a / P r o p e r t i e s sold by l o t s were taken a s u n i t s , s i n c e a c c o r d i n g t o t h e law i n f o r c e , t h e p u r c h a s e r s must remain grouped i n c o - o p e r a t i v e s o r s o c i e t i e s i n o r d e r t o c a r e f o r an e x p l o i t t h e f o r e s t .

-=74-

5- Production and consumption of pinus radiata vjood

Very l i t t l e s t a t i s t i c a l , information i s a v a i l a b l e cm the production and consumption o f wood, and most a v a i l a b l e data are assumed t o be under-estimated. Moreover, no information i s a v a i l a b l e on production in Maule, so that the production o£ t h i s province i s not included i n the t o t a l s given below. Production o f s&wmooà fro® Finns r a d i a t a in t h e s i x remaining provinces u s u a l l y equals o r almost equals t o t a l produc-t i o n in the country ( s e e t a b l e I I - I O ) ,

Table 11=10 mOWGTZO®!, H P Q R Ï AMD APPARENT DOMESTIC '0QBÎS3MPS2OS

OF PIMI S RADIATA S J W m f f i E S

(Thousands o f " p u l g a d a a " ¿ / )

1 9 4 9 1 9 5 0 1 9 5 1 1 9 5 2 1 9 5 3

P r o d u e t i o a • 2 , 1 2 7 2 a 4 9 1 1 , 1 5 6 2 , 3 1 2 1 , 6 2 6

E x p o r t ' 9 6 3 . 1 , 3 1 5 3 5 0 " 1 9 4 8 7 4

Apparent coa®»]pfei< M 1 , 1 6 4 1 , 1 7 6 8 0 6 2 , 1 1 8 7 5 2

a / A Mpalgada53 i a fcha e&m^ o£ P i r n s m a d i a t a i s a b o a r d 1 i n Q ' b y 1 0 i n s o b y 3®2D m e t r e s , wMefe i s e q u i v a l e n t t o about 0<>73 ©£fco

CbnsusBp&icsi o f wood f o r pulping has t o t a l l e d about L 5 m i l l i o n c u b i c f e e t annually, e x c l u s i v e l y f o r t h e production:àS-mechanical pulp. • No s t a t i s t i c s a r e a v a i l a b l e on consumption f o r o ther u s e s .

6« Dtsaages

* Damages in p l a n t a t i o n s are ceased by i n s e c t s , diseases^ f i r e and c l i m a t i c f a c t o r s . Among the most important damages are those caused by the "pine bug" and the "pine c a t e r p i l l a r " . The

former bslcmgs t o t h e hnaoptera o£ the Adelgidae fami ly , c a l l e d t h e Pimeus Ebnier i kan'. I t i s found i n almost a l l P i r n s radiata p lantat ions , , but has not t o date c o n s t i t u t e d a r e a l problem.

The ca tesp i l I caro belong t o t h e Saturnidae Lepidoptera s p e c i e s , and t h e most important s u b - s p e c i e s seems t o be Disphia' smpliwoffl© which i a , i t s l a r v a l s t a t e e a t s the pine needles . Fortunate ly , i t only a t t a c k s some specimens, ' w h i d r a r e then r e k a r & d i n t h e i r growth. Also, a n a t u r a l b i o l o g i c a l e q u i -l i b r i » seems to e x i s t between t h i s plague and i t s natura l predators , so t h a t i t has not become a se r ious nuisance. .

A fungoid c o p i e s a l s o atfcaeks P i sms r a d i a t a . Dxplodia p i n e a (Desm.) K i c k x and Deuteromycete Phffina s p . , have been i d e n t i f i e d i n t h i s complex, c a u s i n g t h e d i s e a s e s commonly known a s " d r y i n g " and " b l i g h t " . 5 / o f t h e n e e d l e a . I n 1953 , t h i s p e s t seemed t o b e c o n f i n e d t o c e r t a i n p l a n t a t i o n s i n the Provinces o f B io-Bio sad Cbmcepci&n, and has not become p a r t i c u l a r l y important . '

F i r e i s undoubtedly t h e u o r s t eneay o f a r t i f i c i a l and n a t u r a l f o r e s t s . I t i s e s t i m a t e d t h a t from 550 t o 660 h e c t a r e s o f p l a n t a t i o n s a r e burnt up annual ly and mainly due t o human n e g l e c t and c a r e l e s s -n e s s .

Losses caused by wind, f r o s t , h a i l , drought, e t c . , a r e s l i g h t and o c c a s i o n a l , and, casing to t h e i r very natura, d i f f i c u l t to a s s e s s . Perhaps t h e most important o f t h e s e damages are caused by f r o s t a t t a c k on yoiBig t r e e s . The l a t t e r , however, are only retarded in t h e i r growth and u s u a l l y recover quicMy.

y Sp. 'tinia*.

B . COST O F PULPWOOD FROM P I N U S RADIATA

The a g g r e g a t e c o s t s o f pulpwood d e l i v e r e d t o a m i l l s i t e c e m p r i s e t h e f o l l o w i n g s e p a r a t e i t e m s :

( 1 ) Value o f s t a n d i n g t i m b e r (stumpage p r i c e ) ; ( 2 ) Cost o f f e l l i n g and t r a n s p o r t t o r o a d s i d e , i n c l u d i n g t h e ¡aaittteneMce o f f o r e s t r o a d s ; ( 3 ) Cost o f t r a n s p o r t from r o a d s i d e t o m i l l s i t e ; and ( 4 ) A c b i n i s t r a t i o n and s u p e r v i s i o n ( o v e r h e a d s ) .

Cost i t e m s ( 1 ) and ( 2 ) a r e n o t i n f l u e n c e d b y t h e s i z e o f o p e r a t i o n ; i t e m ( 3 ) depends on t h e t r a n s -p o r t d i s t a n c e a l o n e ; whi le i tem ( 4 ) i s d i r e c t l y a f f e c t e d by t h s s i s e o f o p e r a t i o n .

Hie d i f f e r e n t c o s t i t e m s a r e e s t i m a t e d s e p a r a t e l y below ead a r e a l l b a s e d on s o l i d volume o f wood wi thout b a r k . The a v e r a g e weight o f green wood has baens c a l c u l a t e d a t 1 t o a per c u b i c m e t r e

Value of standing timber

A l l d a t a r e g a r d i n g t h e p l a n t a t i o n s used i n t h e f o l l o w i n g c a l c u l a t i o n s , s u c h as ¡aanagement p l a n , y i e l d s , e t c . , a r e taken from t h e study prepared by t h e Corposraciom de Fasten t o „_!/ ( F o r a srasmary o f t h i s study s e e s e c t i o n \ o f t h i s annex) .

According t o t h i s s tudy t h e p l a n t a t i o n s a r e c l a s s i f i e d i n f i v e d i f f e r e n t c a t e g o r i e s ( s i t e c l a s s e s ) , by the type o f s i t e and are numbs red from J. t o V. The d i f f e r e n c e between the s i t e s i s the r a t e o f growth which i n t u r n depends uposa s o i l and c l i m a t e c o n d i t i o n s , e t c . S i t e c l a s s I r e p r e s e n t s a g r i c u l t u r a l land, which c o n s t i t u t e s o n l y 0 . 2 5 p e r cemt o f t h e t o t a l a r e a p l a a t e d . B e c a u s e t h e v a l u e o f t h i s land i s d i f f i c u l t t o a s s e s s and v a r i e s c o a s i d e r a b l y accordirag t o l o s a f c i o a arad demand, i t h a s been i n c l u d e d i n s i t e c l a s s 1 1 f o r t h e p u r p o s e s o f t h i s s t a d y . Tine e r r o r r e s u l t i n g f rom t h i s s i m p l i f i c a t i o n i n the c a l c u l a t i o n s i s n e g l i g i b l e .

I t should be noted t h a t a l l y i e l d f i g u r e s quoted i n t h e c a l c u l a t i o n s below i n c l u d e only t r e e s with a d i a m e t e r a t b r e a s t h e i g h t o f 5 . 1 i n c h e s o r B o r e . Hie f i g u r e s t h u s r e p r e s e n t an u n d e r - e s t i m a t e s i n c e t r e e s o f s m a l l e r d i m e n s i o n s c o u l d a l s o bs u s e d a s pulp^ood. Oa t h e o t h e r hand, e x t r a c t i o n c o s t s w i l l p r o b a b l y r i s e s h a r p l y a s d imens ion d e c r e a s e s and i t i s t h e r e f o r e d o u b t f u l whether i t w i l l b e a paying p r o p o s i t i o n t o s a l v a g e t h i s m a t e r i a l e x c e p t i n t h e f i n a l , c l e a r - c u t t i n g o p e r a t i o n .

The c o s t o f e s t a b l i s h i n g and raQimfcaimag tfes p lEatafe ioaa sks>rai i n t a b l e I I - I I r e p r e s e n t s an average o f d a t a s u p p l i e d by s e v e r a l l a r g e o r g a n i s a t i o n s engaged im t h i s f i e l d . Needless t o say , t h e f i g u r e s w i l l vary c o n s i d e r a b l y from one a r e a t o a n o t h e r depending om t h e topography o f t h e c o u n t r y , s o i l c o n d i t i o n s , e t c . , a s w i l l a l s o t h e land v a l u e . Hie f i g u r e s caswot t h e r e f o r e b e a p p l i e d t o any g i v e n s i t e .

1/ S e e 'MooBara d o las Plaatacioaos Forostalos do las Provincias do Liaaros a Malloco, 1SS3-S4'. o p . c i e .

Table H-21

AVERAGE COST ( F ESTABLISHING ÄED m U T A I M U G FÏÏÎÛS R&DXATA PB.HTATIOMS

C o s t s ;

S^Tpo © f ' a i t ©

I and I I . JCPL I?

Land valus 1 3 0 , 0 0 0 2 0 , 0 0 0 . -15»0Q0'. .. 1 4 , 0 0 0 Land p r e p a r a t i o n 1 4 , 5 0 0 4 , 5 0 0 4 * 5 0 0 P l a n t i n g 1 4 , 6 0 0 k 0 6 0 0 4 , 6 0 0 R e p l a n t i n g 2 2 , 4 0 0 2 , 4 0 0 2 , 4 0 0 2 , 4 0 0 S e e d l i n g s 1 • 1 , 7 0 0 ' 1 , 7 0 0 • 1 , 7 0 0 1 , 7 0 0 F e n c i n g 1 1 , 4 0 0 1 , -400 ' - 1 , 4 0 0 . 1 , 4 0 0

M i s c e l l a n e o u s 1 6 0 0 6 0 0 6 0 0 6 0 0 Overheads 1 2 , 8 0 0 • 2s,êQ0 - •2,000 2 , 8 0 0

T o t a l 4 8 , 0 0 0 3 8 , 0 0 0 3 3 , 0 0 0 3 2 , 0 0 0

Maintenance a / E a c h ar 2 , 0 0 ) 2 f f 000 2 , 0 0 0 . , '2,000 1 s t Thinning b / 1 0 , 0 0 0 1 0 , 0 0 0 ( 1 0 , 0 0 0 ) ^ ( 1 0 , 00Q)&

e o s t s s

1 s t Tear 4 5 , 6 0 0 3 5 , 6 0 0 3 0 , 6 0 0 . 2 9 , 6 0 0 2nd Year 2 , 4 0 0 2 , 4 0 0 2 , 4 6 0 -2 ,400 Y e a r o f 1 s t t h i n n i n g 1 0 , 0 0 0 1 0 , 0 0 0 ( 1 0 , 0 0 0 ) j / ( I 0 , 0 0 0 ) j 3 r d Year and f o l l o w i n g 2 , 0 0 0 2 , G00 • 2 , 0 0 0 - . 2 , . 0 0 0

j / Iaelisâ©s ©xpsrdi tur© on t o o l s , c l e a r i n g , f e n c i n g r e p a i r s , c l e a r i n g o f f i r © p a t h s , w a t e r p r o o f c l o t h i n g , e t c 0

b / S i t e s I and 11^, 1 0 y e a r s ? s i t e I I I r 1 1 y e a r s ? s i t ® . I V / 1 2 y e a r s j . s M a i t © 1 5

j s / P a n s n t h e s e s i n d i c a t e an a l t e r n a t i v ® management p l a n f o r t h a p r b d u c t i o a ai a l o n © , i n which c a s e no t h i n n i n g w i l l be mads®

For s i t e c l a s s e s I I and I I I the cos t o f the f i r s t th inning opera t ion has been included, s i n c e t h i s i s a s y l v i c u l t u r a l measure which must be undertaken i f saw timber of good q u a l i t y i s t o be obta ined. I f the p l a n t a t i o n s are managed e x c l u s i v e l y f o r the production o f pulpwood, t h i s expenditure could probably be dispensed with and t h e average c o s t of wood i s consequent ly o v e r e s t i m a t e d . T h i s i s snast d e f i n i t e l y the c a s e for s i t e c l a s s e s IV and V, as t h e c a l c u l a t i o n s show t h a t the maximisa r e t u r n on investosant i s obtained i f the p l a n t a t i o n s are managed f o r pulpwood production, cmly which impl ies a c l e a r »sit t ing before the age when the t r e e s have reached saw timber dimensions. A l t e r n a t i v e c a l c u l a t i o n s excluding t h e f i r s t thinning operat ion f o r these s i t e s have t h e r e f o r e been made.

Ihe second and subsequent th inning o p e r a t i o n s a r e charged as e x t r a c t i o n c o s t s and are t h e r e f o r e excluded from the c o s t s o f maintenance.

- 7 7 -

In c a l c u i e & l n g t h e stumpage v a l u e , a r a t e o f compound i n t e r e s t o f 10 p e r c e n t annual ly has been used. T h i s . i a t ® r e s t , which i s s l i g h t l y h igher than t h a t o f s e c u r i t y investments i n t h e country, i s the r a t e appl ied % A © l a r g e o r g a n i s a t i o n s opera t ing i n t h i s sphere and i s cons idered t o g ive an acceptable re tur ia on t h e ¿BTOOtsaeiBt._2/ The v a l u e o f t h e land h a s n o t been d e p r e c i a t e d over t h e p e r i o d o f t h e r o t a t i o n cy@l©5 s i a c e i t w i l l p r o b a b l y be f u l l y r e c o v e r e d a t t h e end o f t h e p e r i o d .

The vaist© t h e wood e x t r a c t e d in th inning operat ions i s considered as an a s s e t which i s l iquidated i n anticigafci iSa o f l i e f i a a l c u t t i n g y e a r and y i e l d s t h e same r a t e of i n t e r e s t , - 10 p e r c e n t . Mathe-m a t i c a l l y . fc&a valuta o f t h e wood may be expressed as f o l l o w s :

S - V . . x , 1 . 1 0 n ~ r i - V r v L 1 0 n ~ r 2 x ° _ 1 n "

n —~ ——— V n

S o r x - —«, ====^==^»=======================-=-

" ¥ + V,.l.ltf*"rl • Vo. 10 n" r2 + n 1

\shere:

n = the year f o r which the c a l c u l a t i o n i s made

t h e averege value o f the pulpwood per u n i t a t the year n

S a t o t a l iEvest issnt volȣa ot y e a r a

^©Isrza ©£ otssidiEg fciobar a t y e a r m

efcCo a tfes volssss o f t i r i b s r e x t r a c t e d i n the thinning o p e r a t i o n s

r i e&e. ° t h e y e a r iA<sa t h e tMomiog opera t ion i s made

The stumpage v a l u e c a l c u l a t e d i n t h i s way f o r t h e d i f f e r e n t s i t e s and y e a r s are l i s t e d i n t a b l e 1 1 - 1 2 - c a d ox® a l s o r e c o r d e d g r a p h i c a l l y i n f i g u r e I I - I . As w i l l be seen from t h e s t a t i s t i c s and t h e graph, the stump^je values a t t a i n a minimum at a given age o f t h e p l a n t a t i o n s and which i s d i f f e r e n t f o r e a d i o f t h e f a e r s i t e s . The reason l i e s in t h e f a c t t h a t below t h e minimum p o i n t , the volume o f wood i n c r e a s e s f a s t e r than t h e Capi ta l a t the p a r t i c u l a r r a t e o f i n t e r e s t applied, and above the minimum point the c a p i t a l g s w s f a s t e n An increment in t h e r a t e o f i n t e r e s t means t h a t t h e minimum value w i l l b e o b t a i n e d at an e a r l i e r d a t e and, s i n c e a r a t e o f i n t e r e s t o f 10 p e r cent may be considered as a minimum a t t r a c t i v e returfr on t h e c a p i t a l , t h e years o f minimum c o s t s shown in f i g u r e I I - I a l s o denote the maximum age a t which t h e p l a n t a t i o n s should be c l e a r - c u t i n o r d e r to g ive maximum return on the investment.

In the c a s e o f s i t e s IV and V, the maximum r e t u r n i s obta ined during the years 18 and 16 r e s p e c t i v e -l y , a t which age the p l a n t a t i o n s c o n t a i n only very l i m i t e d q u a n t i t i e s o f saw t imber (with dimensions o f 12 i n c h e s and above) . Hence, t h e c o n c l u s i o n i s reached t h a t t h e p l a n t a t i o n s b e l o n g i n g t o these s i t e s should i n p r i n c i p l e be devoted t o the product ion o f pulpwood o n l y . N a t u r a l l y , a f i n a l d e c i s i o n on t h i s po int depends on a number o f c o n s i d e r a t i o n s , such as l o c a t i o n o f a p a r t i c u l a r p l a n t a t i o n , the prospect ive market f o r a m t imber dimensions versus pulpwood, s y l v i c u l t u r a l measures a l ready undertaken, e t c . I t i s

2/ The e<3to oS into root aay soon excessive in eonparison with expected returns from forest operations in Earopo and WortA Anorica. It should houever be taken into account that; (a) data on fields etc., basod ofl losg oaperioncc are auch safer in the case of these forests, (b) the risk of dosages through dissaooB is ouch higher in plantations than in natural forests and; (c) the interest on security investments is lozror in the indus t ri ali zed regions than in Chile.

-=78-

recommended, however, t h a t f o r f u t u r e p l a n t a t i o n work t h i s point o f maximum r e t u r n should be taken i n t o account. (See t a b l e 1 1 - 1 2 ) .

f a b l e 1 1 = 1 2

STUMPAGE M n n OF PBJUS BÂDBÏA âGSOMÏÏIS TO YEAE MD BITS

©

Year I as îd I I I I I r 7 P e s o s B o l l a r © PQSOS D ' o l l a r 8 P®s@® D o l l a r s P e s o s Dollars

p e r pay p a r p p@g> p g r p©r per eUofte wQ em o f t 0 M emoffeG a 3 cu. f t . • 3

1 0 3 9 ° 4 2 2 o ? 8 9 2 . 7 4 6 . 5 5 1 1 - 3 3 083 2 o 3 9 » -

12 = = 0 3 3 . 9 5 2 * 4 0 - -13 o CO = = 4 9 . 4 0 3 4 9 1 4 1 8 * 5 5 lo31 2 0 . 2 4 143 2 5 . 2 5 1.78 4 5 . 0 0 3 . 1 8 15 = = OS «=> = 4 3 . 2 4 3 . 0 5 1 6 1 6 . 4 2 I0I6 1 9 «21 1.36 24.05 1.70 4 2 . 5 1 3 . 0 0 17 = > - = co => 4 3 . 5 1 3 . 0 7 1 8 1 6 063 loi? I80O6 1 . 2 8 24o75 1 . 7 5 4 5 . 0 2 3.18 19 es = = 23.37 1.65 » •

20 1 4 . 5 9 1.03 IÔ0U l o 2 8 2 3 . 6 8 I 0 6 7 — -tCJ-

22 1 4 . 6 9 1 . 0 4 1 8 o U 1.30 2 4 . 5 7 lo74 — 23 — < = 0 e» •

2 4 1 5 . 4 9 lo09 1 9 o 6 l lo3S. 2 6 o é 9 1 . 8 8 <a 25 ' - - - •• • a eo • 7 0 . 0 4 . 9 4 26 1 7 . 2 2 1 . 2 2 2 2 . 4 8 1.59 0 « »

The following uni t values o f s tanding t imber and age o f raaxinaam return f o r t h e d i f f e r e n t s i t e s may be computed from f igure I I - I .

T a b l e 1 1 - 1 3

MINIMUM STUMPAGE VALUE AND AGE OF MAXIMUM ECONOMIC YIELD FOR PINUS RADIATA PLANTATIONS ON DIFFERENT SITUS

"Stumpaga v&hm'

S i t ® c l a s s Age o f msodflnaa r e t u r i i P e s o s p s r c u 0 f t 0 D o l l a r s p a r 193

I and I I ' 2 0 ~~ 14® 2 ~ l o C 0 " I I I I B I 6 0 8 1 ^ 1 9 I V 1 8 2 3 . 2 I.64 V 1 6 4 2 o 5 3 * 0 0

- 7 9 -

Table 11-14

AREA DISTRIBUTION MD YIELDS FECE PEJUS MDIATA PLâMTâTÏOMS âGGOEBIIG TO S I T E

o

( Average tob Id 3 MD

S i t e

Total

I and II a/ i n IV

3 j 228 31p37? 66s853 ?2a080

H©e° C u 0 f t 0 pes? pay t a r e s

I80O8 38.52 41® 54

1 7 3 p 5 3 8 lOOoC

4n5.fl

©®o 1000 Percentage of total

4c 94 30 =08 41*76 23o22

100o00

j/ S i t e I c o v e r s an area of 425 h ctapoa ©£> ©< b / Weighted average®

From the data in t e b l e s £1-13 and 11-14, t f ca ' " l ighted average stumpage value efe the years o f maxiimsn return has been c a l c u l a t e d as fol lows:

a « 0 . 0 1 5 4 x LOO t 0 .3908 * 1 .19 • 0 .4176 s L 6 4 0 .2322 « 3 . 0 0

s = 1 .79 h i l a r s per m^, or 0„051 d o l l a r s per cu. f t .

,4s a comparison t o the value c a l c u l a t e d above, i t raay be mentioned t h a t t h e average sttmpage pr ice paid a t S t a t e Fores t auct ions in Sweden during 1955 cas 0 .2S7 d s l l a r s per c u . f t . and in the same year the pr ice i n Finland f l u c t u a t e d between 0 . 2 1 7 and 0 . 3 4 8 d o l l a r s . 3 / Thus t h e stiaapage value o f i n s i g n i s pine in C h i l e , as c a l c u l a t e d above, would be aboat © ¿ © » f i f t h t o oiae=sixt$i o f t h e average stunspsge p r i c e o f spruce and pine i n Scandinavia . Th is r a t i o a l s o r o i ^ h l y corresponds t o t h e growth r a t e s i n the two re-g ions , t h e average growth i n Scandinavia being abosnfe 2 . 3 es3 per h e c t a r e annual ly . . "

To a s s e s s t h e average production c o s t s ©£ plsip paper made elaewher© 4b t h i s study, a weighted average stumpage va lue has been c a l c u l a t e d f r c a data on area d i s t r i b u t i e a assd y i e l d s conta ined in t h e inventory prepared by the Gorporacibn de Fomento. In t h e case o f s i t e s I I and H I , t h e y i e l d s have been determined according to the management plan suggested in t h i s iavemtory; ' ¿ „ e ^ £br s i t e I I , Q f i r s t thin-ning operat ion in the 10th year , a second i n the 14th amd a t t e ia l i n t h e 3L8t$& ^ea:?; f o r s i t e I I I a f i r s t thinning i n t h e 11th and a second i n t h e 16th year . In the case o£ s i t e s IV and V, t h e y i e l d s have been c a l c u l a t e d on the assisnption t h a t no thinning operat ions m i l be aade end t h a t tine vohssae o f thinnings as i n d i c a t e d i n t h e inventory w i l l have the same r a t e o f growth as the main s tand o f t imber .

The r e s u l t s of these c a l c u l a t i o n s are recorded i n

3/ See Tiaber Bulletin f o r Europa, Genova, Fsöracry ÎOSQ,

- 8 0 -

2. Cost of felling and. transport to roadside

The e x t r a c t i o n c o s t s as i n d i c a t e d in t a b l e 5 are based on a c t u a l e x p e r i e n c e as encountered in a number of operat ions in d i f f e r e n t l o c a t i o n s o f the country. The data which have been supplied by various sources are ra i sed by 30 per cent as a s a f e t y f a c t o r , s i n c e the c o s t s vary within f a i r l y wide margins. On the o ther hand, i t should be borne in mind t h a t t h e s t a t i s t i c s r e f e r to o p e r a t i o n s at t h e i r p r e s e n t staqje o f development, i . e . mainly with manual labour and animal t r a c t i o n . Time has not permit ted any c a l c u l a t i o n s to be made o f the i n f l u e n c e on aggregate c o s t s o f mechanizing the o p e r a t i o n s , but i t i s be l i eved t h a t t h i s would reduce the c o s t , a t l e a s t f o r o p e r a t i o n s in t h e l a r g e r s t a n d s .

T a b l e I 1 - 1 5

PULPWOOD EXTRACTION COSTS IN PINUS RADIATA PLANTATIONS

O p e r a t i o n s

F e l i i n g and b u c k i n g

T r a n s p o r t t o r o a d s i d e , m a i n t e n a n c e o f r o a d s and t r a i l s

P e s o s p e r ra3

300

250

D o l l a r s p e r m3

0®60

0o50 M i s c e l l a n e o u s e x p a n s e s

S o c i a l s e c u r i t y p a y m e n t s

T o t a l

100 1 5 5

8 0 5

0o20 0o31

, l o 6 l

3. Cost of transport from \roadside to mill site 4/

C a l c u l a t i o n s have been made f o r d i r e c t o p e r a t i o n a l c o s t s as w e l l as f o r t o t a l " c o s t s ( i n c l u d i n g amort izat ion and i n t e r e s t ) p e r c u b i c metre and k i l o m e t r e d i s t a n c e .

(a) Basis for the calculations Type of truck: Truck with a loading c a p a c i t y o f 11 tons (or 11 ITW.)

P r i c e : 8 , 5 1 9 , 0 0 0 pesos. Diesel oil and oil consumption: D i e s e l o i l consumption i s e s t i m a t e d a t 0 . 4 l i t r e s per km and o i l consumption at 1 l i t r e per 100 k i l o m e t r e s . Present p r i c e : d i e s e l o i l , 3 3 . 8 pesos per l i t r e ; lubr ica-t ing o i l , 370 pesos per l i t r e . Tubes•and tires: One s e t o f tubes and t i r e s i s es t imated .to l a s t f o r a t o t a l , t r a v e l l i n g d is tance o f 30.O00 k i lometres . The p r i c e for one s e t i s 650 ,600 pesos . Labour: Each t r u c k w i l l be operated by two crews, c o n s i s t i n g o f d r i v e r and h e l p e r . T o t a l working time j* ;r crew and year i s 2 , 100 hrs; i . e . 4 , 2 0 0 man-hours. .An allowance o f 5 per cent o f waste time has been included. Monthly s a l a r i e s are 45 ,000 pesos^for the d r i v e r and 3 0 , 0 0 0 f o r the he lper , plus o r ' per cent s o c i a l s e c u r i t y payments. This g ives an annual cos t per crew of 1 , 1 3 4 , 0 0 0 pesos.

For add*t -i onal inioroation on transport coot see Profaco to 2nd edition.

Lubr ica t ion : Cost i s es t imated at 20 per cent o f the c o s t o f l u b r i c a t i n g o i l . Repair and maintenance: The c o s t i s e s t i m a t e d a t 40 per c e n t o f t h e t o t a l o p e r a t i n g c o s t plus a m o r t i z a t i o n .

Amortization: Per iod o f amort izat ion i s 5 years , at the end o f which the t r u c k w i l l have a recovery value of 20 per c e n t . Interest: A r a t e o f i n t e r e s t o f 10 per c e n t on book v a l u e , o r an average o f 6 per c e n t on the i n i t i a l investment f o r the a m o r t i z a t i o n p e r i o d h a s been u s e d . 5 / To c a l c u l a t e operat ing c o s t s per k i l o m e t r e , the fo l lowing t r a v e l speeds and loading and unloading

times have been assumed: average speed 30 k i l o m e t r e s per hour, l o a d i n g and unloading time t o t a l , 60 minutes . Hie annual t r a n s p o r t c a p a c i t y and t r a v e l d i s t a n c e per t r u c k a r e recorded in f i g u r e I I - I I and t a b l e 11-16.

T a b l e 1 1 - 1 6

TRAVEL DISTANCE AND TRâKSPOEf C A P i C H T OF TRUCKS PER I M R

D i s t a n c e T o t a l t i m a Noe o f c y c l e 0 T r a w l C a p a c i t y w i t h l o a d p®y e y e l ® p e r y e a ï d i 8 t a n e « ^ p e r t r u c k

( k m s ) (win) p e r y e a ï

w i t h l o a d and y e a r

5T®&2\) (=>3)

1 0 1 0 0 2 a 3 1 Q &D10(r 2 5 ^ 4 1 0 1 5 1 2 0 1 , 9 2 5 2 8 s 9 0 0 a , 1 9 0 2 0 1 4 0 1 , 6 5 0 3 3 ® 0 0 0 1 8 , 1 5 0 2 6 1 6 8 1 , 3 7 5 3 5 , 7 5 0 1 5 , 1 2 5 3 0 1 8 0 1 , 2 8 5 3 8 , 5 0 0 1 4 * 1 1 5 4 0 2 2 0 1 , 0 5 0 4 2 , 0 0 0 1 1 , 5 5 0

(b) Operating costs

Using the bas ic data given above, t ransport c o s t s have been c a l c u l a t e d as fol lows:

5/ A more accurate method of calculating average annual capital caste is tho pisiiag fund method, thick gives a slightly lover cost than the appro» i n a t o sothod usad ¿ars.

-=82-

Table 1 1 - 1 7 TStf M3F JiT COSTS FOR PULPWOD

Transport dist&aeo sa® wey 1 0 15 2 0 2 6 30 4 0

Opajpatiffig e®oto8 l o DIQSQI © H 2 7 . 0 0 2 7 . 0 0 2 7 . 0 0 2 7 . 0 0 27o00 2?®0O 2o Laalspo o i l 7 «40 7 . 4 0 7 4 0 7 4 0 7 . 4 0 7 4 0 3o X m t e i e a t i o a 1 . 6 0 1 . 6 0 1 . 6 0 1 . 6 0 I06O 1 . 6 0 4e T^eee @sdL tuiteo 43 «20 k3o20 4 3 . 2 0 4 3 . 2 0 4 3 . 2 0 4 3 * 2 0 5» Sataaj? 9 8 - 4 0 7 8 . 5 0 6 8 . 6 0 6 3 . 4 0 5 8 . 9 0 5 3 . 9 0 6o S®pais» e M smiato jj / 9 4 . 6 0 8 2 . 0 0 7 5 . 7 0 72„30 6 9 . 4 0 66£0 To Maisito of hmsaiag b / 14«05 U o 2 5 9 . 8 5 9 . 1 0 8o45 7 . 7 5

286 »2 5 2 5 0 . 9 5 . 2 3 3 . 3 5 2 2 4 . 0 0 2 1 5 . 9 5 2 0 7 . 1 5 0 . 5 7 3 0 . 5 0 2 Oo46? OokkB 0 . 4 3 2 0 4 1 4

•Capital

Bo &msetis&^lcm0 toiels s jg / 5 9 . 0 0 4 7 . 2 0 4 1 <30 3 8 . 1 0 3 2 . 5 0 9® tesrtisafeio% fetmsi ng J / 1 0 , 0 5 8 . 0 0 7 . 0 5 6 . 5 0 6® 0 0 5<50 10olssb®3f®aife ®/ 3 2 . 1 5 2 5 . 7 0 22« 55 20.60 1 9 . 3 0 1 7 . 7 0

1 0 1 «20 8 0 . 9 0 7 0 . 8 0 6 5 4 0 6 0 , 7 0 5 5 . 7 0 ¿«¡Haso 0o202 0 . 1 6 2 0 . 1 4 2 0 . 1 3 1 0 o l 2 1 0.111

o f sMefei d@32&r© 0 . 1 3 8 0 . 1 1 0 0 . 0 9 7 0 . 0 8 9 0 . 0 8 3 0 . 0 7 6

Tgtglg ' g3S@0 • 38745 ' -331.S5 . 304.15 • 2 8 9 . 4 0 2 7 6 0 6 5 2 6 2 . 8 5 M f f l O 0*775 • ©»664 0.609 0 . 5 7 9 0 . 5 5 3 0 . 5 2 5

•J&ifctt&s! >

Ops?afeifflg e@sto8 0.521 0 . 6 8 5 0 . 8 4 9 1.059 l o l 7 ® 1 . 5 0 5 C a p i t a l <g@afe@g 0.18k 0 . 2 2 1 0*258 0 . 3 1 0 0o33© 0 . 4 0 4

» a 0o?05 0 . 9 0 6 1 . 1 0 7 1.369 ' 1 . 5 0 8 1 . 9 0 9

a/ 4 0 p©^ s e a t i f e a o 1 = 5 y Calcula ted a t 7 p s r coa t per a n a » o f investment^ (se® appendix X I - A ) , j / Wiv® y©as°© t d t h 2 .0 pog5 eojat 1 Yalu®„ J/ Ttisaty yoas-oo j / 10 pas3 ©safe ©ia fe® xgi? e®at A! sresfc >m i s y©gi®&»t foi t r u c k s

5 pos? e©afe

-=83-

As may be seen in f i g u r e I I - I I I , the c o s t i s a s t r a i g h t - l i r a e f u n c t i o n o f the d i s t a n c e . I t i s m a t h e m a t i c a l l y e x p r e s s e d as f o l l o w s :

Operating c o s t : s = Capi ta l c o s t : s a

Tota l c o s t : z t r a n s p . « o f which emortization s m =

where x i s t ransport d i s t m c e vi

0 . 0 3 3 1 x 0 . 1 8 5 d o l l a r s per ra^ 0 .00735 x 4- 0 .112 d o l l a r s per IB3 0 .04049 x 0 . 2 9 7 d o l l a r s per m3 0 . 0 0 5 6 x 0 . 0 7 6 5 d o l l a r s per m3 l load in k i l o m e t r e s .

4. Mainistration and supervision

1 4 » ©verttsad c o s t s depend on the s i z e o f o p e r a t i o n . The fo l lowing c a l c u l a t i o n s have been made for animal palpratod VQIWKSS o f 50 , 180, 360 and 540. thousand c u b i c metres , which roughly correspond to the needs ©£ pulp a i l l s with d a i l y c a p a c i t i e s o f 50, 100 , 200 sad 300 tons and operat ing 350 days per annun:

T a b l e 1 1 - 1 8

PG3E3S AXEOHISERMIOBi A ® SUPERVISION B f S I Z E - OF OPERATION i (Zeg&sssjtil)

P o i l B s s a à ^ s o a M . ^ p a y y®ajp ( o 3 ) 9 0 a 0 0 0 1 8 0 s 0 0 0 3 6 0 f l 0 0 0 5 4 0 ^ 0 0 0

SaE&s4@o ß / 1 3 5 = 2 0 7 7 06O 460OO 3 9 . 2 0 â B œ M s s f ë i Œ a s k« ÏIBSLAG 1 2 « 4 0 7 o 4 0 4 3 5 3 - 7 0

1 2 o 4 0 7 o 4 0 4 . 3 5 3 » 7 0

FISTELS P3G®0 I60O00 9 2 <40 5 4 o 7 0 4 6 . 6 0 OS 2 0 O0I85 OOLO? 0 . 0 9 3

j | / Scq a p p o ^ d i s . I I ° @ o mj Ï K 3 S 1 ^ s e s ' s p mo a p p e n d i x I I ~ B „

1 Û ¡532? eeafe isffe®3?@ofc ©a tok a®© a p p e n d i x I I = C

II@fe©& ¡ f e i a t e i s s g q o£ terasiBg i s e h a r g © d t o gorRsral eomnrunity ©xp©nsa©0

its o ä j l b e peea from f i g u r e I I - IV, t h e annual c o s t i s approximately a s t r a i g h t - l i n e funct ion o f the ¡ralpcsod reammü2mts (Q) and the c o s t p e r cubic metre w i l l consequent ly be a h y p e r b o l i c a l f r a c t i o n of t i t s jsralpP®«! volume. The f u E c t i o a may be expressed as f o l l o w s :

D e r a t i n g c o a t

C a p i t a l c o s t

T o t a l c o s t

o f chich amortisation

8 1 c 2 0 . 5 8

0 4-

3 . 8 3 s 2 0

4-

Z 3 -2 4 . 4 1

adm 0 z

sm •= ] . 92 +

Q

0 . 0 3 8 8 d o l l a r s per m3

0 . 0 0 7 5 d o l l a r s per m3

0 . 0 4 6 2 d o l l a r s per m3

0 .0038 d o l l a r s per m3

5. Summary of fiinus radiata pulpuood costs

Summing up the d i f f e r e n t i t e m s 1 - 4 c a l c u l a t e d above, the f o l l o w i n g average c o s t s o f pulpwood delivered to m i l l s i t e are obtained for various transport d i s tances and annual supply q u a n t i t i e s :

Operating cost 3 .62 + 0 . 0 3 3 1 4 x + 20.58 do l la rs per m3 Q

Capital c o s t 0 . 1 2 + 0 .00735 x + 3 .83 d o l l a r s per m3

TOTAL COST 3 . 7 4 + 0 .04049 x + 24.41 d o l l a r s per m3 0

In order t o determine the average t r a n s p o r t d i s tances required f o r d i f f e r e n t annual supply quant i -t i e s o f pulpEood, a study was made o f a hypothet i ca l t a i l l s i t e in the Hugpil area. Table 11-19 shows the r e s u l t s o f t h i s a n a l y s i s . I t i n d i c a t e s the t o t a l a v a i l a b l e supply as wel l as es t imated probable quanti-t i e s -50 per cent o f the t o t a l - which may be taken i n t o considerat ion f o r a pulp m i l l e s t a b l i s h e d i n the area , "ffie d i f f e r e n c e between aggregate and a v a i l a b l e q u a n t i t i e s i s p a r t l y t o be considered as a s a f e t y f a c t o r and i s par t ly accounted f o r by the f a c t that the m i l l i s u n l i k e l y t o contro l the whole f o r e s t area and consequently must buy a proportion o f the pulpwood on the open market.

T a b l e 1 1 - 1 9

ESTIMATED AVERAGE TRANSPORT DISTANCES FOR DIFFERENT SUPPLY QUANTITIES ΠPULPWOOD IN THE HUEPIL AiffiA

Awsrag© teansporfe ^ 2 0 2 6 3 0 3 5 d i s t a n e © ( t e a s )

Total palpwcodl qsiaaiit

la000p®3? a m » 90 180 360 540 840

Available pmlpwocd gasatiti©% ls000 m3 par amvm 45 90 10) 270 420

The a v a i l a b l e volume o f pulpwood in terms o f t r a n s p o r t d i s t a n c e are recorded in f i g u r e I I - V , t o -ge ther with the corresponding pulpwood c o s t s as c a l c u l a t e d from t h e mathematical e x p r e s s i o n s above. These c o s t s are a l s o l i s t e d in t a b l e 1 1 - 2 0 .

-=85-

T a b i © 1 1 = 2 0

PULFWQOD COST AS A FUNCTION OF PULP M U X SIZB

Pulpwocd a pss* ton of uahl®&eh®d

M i l l c a p a c i t y t o n s / d a y

Pulpwocd

o f which

IpOOO m3/y©as? ê2o25 cost| operating 4 o 5 0 eost^ c a p i t a l 0 „ 3 1 c o s t g totsO, 4 o 8 l

M Uisèlc

9 2 o ? 5 1 6 4 c 5 1 9 9 o 5 4o50 4o5ê 0 o 3 1 O o S . 0 o 3 4 4 o 8 1 4 o 8 9 4 O 9 2

® r g»? to® palp

ÏÏSfelo

4o 74 0o27 5 o l 2

o ho

Oo. 5o.

.0 49So5 5 5 6 . 5 4o89 4 . 9 4 0o4® 0S4L 5o29 5» 35

od? odd O0I9 0 o 2 l 0 o 2 1

C. FUTURE Y I E L D S FROM PINUS RADIATA PLANTATIONS IN CHILE

The fol lowing c a l c u l a t i o n s r e f e r t o p l a n t a t i o n s e x i s t i n g i n 1953. S i n c e s e c t i o n B showed t h a t the maximum economic re turn from the p l a n t a t i o n s i s obta ined ohen s i t e

c l a s s e s IV and V are devoted t o the production o f pulpwood alone, the e s t i m a t e o f f u t u r e y i e l d s has been based on c l e a r c u t t i n g t h e s e s i t e s a t the age o f maximum r e t u r n , 18 and 16 y e a r s r e s p e c t i v e l y without previous t h i n n i n g . The volume which, according t o the CDRTO management plans,, showld be taken out i n th inning opera t ions , i s assumed t o grow at the same r a t e as the remaining stands I t s volume contained in s t a n d s o f t h e s e s i t e c l a s s e s , which a t p r e s e n t exceed t h e age l i m i t s , i s c o n s i d e r e d a s i m e d i a t e l y a v a i l a b l e as pulpuood.

In s i t e c l a s s e s I , I I and I I I , the management plans prepared by t h e Gorporacidn d© Foeanto a r e accepted. F o r e s t s which today exceed the c l e a r c u t t i n g ages s p e c i f i e d by the p irns ( 2 5 , 25 ssmd 24 years , f o r s i t e c l a s s e s I , I I and I I I , r e s p e c t i v e l y ) are presraied t o be managed ta®imly f o r t i t s 'product ion o f saotiraber and t h a t they w i l l be cut at 35 years . Moreover, thinning " i s presumed t o Etave prcsagdbd at the appropriate t irae, I t i s is, no ran, however, t h a t such has not been fcKe c e s s i n most s tands , uMch haa had two consequences: a l a r g e r t o t a l volume i s a v a i l a b l e t h s a t h a t shorn by t h e c a l c m l o t i o n s a®d fclss vol use o f sactiraber i s l e s s than t h s assessment; but pulpwocd volumes ore g r e a t e r .

The classification of sawtimber and pulpwood given in section A has been EaaintaiasiS c®dl ia both cases gross v© lusts is given, that is without deduction for defocto a® telks l®jgSo

The f o l l o w i n g t a b l e s 1 1 - 2 1 and 1 1 - 2 2 g i v e a aranaary ©£ y i e l d ostiraQteOo sfeieh is also r e c o r d e d i n g r a p h i c a l form i© f i g u r e I I - V L

- 86»

Table 11=21 FUTURE ANNUAL IXELDS BX SITE CLASSES

(IflQOO cubic feet annually;)

S i t e c l a s s e s Year

I I I I I I I ? ?

PulptfOGd

1 9 5 6 53 l s 0 4 8 3*767 8 2 * 7 9 0 2 8 , 9 8 3 .195? 1 0 4 1 s 0 4 8 3*160 2 4 * 3 4 2 1 5 * 8 7 8 1 9 5 8 . 1 0 4 1 * 2 0 6 3 , 5 1 1 2 4 , 3 4 2 1 5 * 8 7 8 ;1959 1 0 1 6 1 8 1 2 , 1 0 8 4 0 , 4 5 4 1 5 , 8 7 8 i 9 6 0 2 3 1 1 * 5 3 9 1 2 , 7 7 7 4 0 , 4 5 4 2 5 * 0 5 1 1 9 6 1 231 1 , 4 6 3 1 2 * 4 5 2 4 0 , 4 5 4 2 5 * 0 5 1 1 9 6 2 2 3 1 1 , 8 1 9 2 8 , 9 0 4 5 1 , 8 5 8 2 5 , 0 5 1 1 9 6 3 6 5 5 7 * 2 8 3 2 9 , 1 3 6 5 1 , 0 5 3 3 1 , 6 7 6 1 9 6 4 655 7 * 0 9 7 3 0 * 3 7 2 5 1 * 8 5 8 3 1 , 6 7 6 1 9 6 5 655 7 * 0 0 0 3 3 * 8 2 9 6 2 , 1 3 2 3 1 , 6 7 6 1 9 6 6 7 7 4 2*928 3 1 * 9 1 1 6 2 , 1 3 2 3 3 , 7 6 0 1 9 6 7 7 7 4 2j> 925 3 0 , 4 4 7 6 2 , 1 3 2 3 3 , 7 6 0 1 9 6 8 7 7 4 2 * 3 3 9 4 0 , 8 5 1 3 9 * 1 5 2 3 3 , 7 6 0

1 9 6 9 4 8 6 4 * 8 0 4 3 9 , 9 6 7 3 9 * 1 5 2 is/ 1 9 7 0 4 8 6 4s 8 0 4 3 9 , 9 6 7 . 3 9 * 1 5 2 1 9 7 1 4 8 6 4 , 7 9 5 4 3 * 5 7 3 is/

=

1 9 7 2 2 * 4 5 9 4 * 1 1 8 4 3 * 5 7 3 =

1 9 7 3 2 * 4 5 9 4¿>118 4 3 * 5 7 3

- Sawtimber

1 9 5 6 1 , 3 0 2 1957 1 5 6 4 9 =

1 9 5 8 es> 54 9 3 5 =

1 9 5 9 (=3 54 6 * 2 1 4 =

1 9 6 0 33 7 5 6 6 , 2 1 4 -

1 9 a 3 3 7 1 7 6 * 0 6 4 69

1 9 6 2 33 7 1 7 1 6 * 1 6 8 — =

1 9 6 3 221 4 * 8 9 5 1 6 * 1 6 8 ca =

1 9 6 4 221 4 . 8 9 5 1 7 * 2 8 8 « =

1 9 6 5 221 4S 895 - 1 9 * 4 1 1 =

1 9 6 6 201 1 * 7 8 2 1 9 * 4 1 1 =

1 9 6 7 2 0 1 1 » 7 8 2 1 8 , 1 5 5 B

1 9 6 8 2 0 1 1 * 7 8 2 2 4 * 5 4 5 •= =

1 9 6 9 1 * 9 2 1 3» 6 6 6 2 4 * 5 4 5 C » —

1 9 7 0 l j ) 9 2 l „ 3Í>666 2 4 * 5 4 5 = =

T o t a l

1 1 6 S 6 4 1 44s 508 4 5 , 0 4 1 6 9 * 1 5 9 80,052 7 9 * 6 5 1

1 0 7 * 8 6 3 120*608 1 2 1 * 6 5 3 1 3 5 * 2 9 2 1 3 1 * 5 0 5 1 3 0 * 0 3 8 116*876

8 4 * 4 0 9 8 4 * 4 0 9 4 8 * 8 5 4 50*150 50*150

1 , 3 0 2 6 6 4 989

6*268 7 * 0 0 3 6 * 8 1 4

1 6 , 9 1 8 2 1 * 2 0 4 2 2 , 4 0 4 2 4 . 5 2 7 2 1 , 3 9 4 20,138 26.528 3 0 , 1 3 2 3 C , 1 3 2

" e u t t i a g © iffi s i t © c l a s s e s I ? and ¥ a r e r e a l i z e d i n t h e 1 6 t h r e s p e c t i v e l y 1 8 t h y s a ^ tfcs y i e l d s from fchss© si&@s w i l l d i s c o n t i n u e i n the y e a r s 1 9 6 9 and 1 9 7 1 7

' " been takan o f y i e l d s f r c a p l a n t a t i o n s e s t a b l i s h e d a f t e r 1 9 5 3 o

Sine® th® f i n a l

-=87-

F J O U R Ö I I = I S

F I G U R E I I ° I I

C A P A C I D A D O C T M I W L O C M I ® £ R A P A R A P A S T A

Y 0 1 S T A M C 1 A « G O O R R I B & P S i t m m Y P O R AFTO

W L R ^ S ® T B I » ® ? ! C A P A C I T Y

A N D T R A V E L 0 8 § T Ä § ^ P O I TOUQC À M Y E A R

C A N T I O A O V S S M A D E R A P A R A R E C O R R I D O T O T A L

P A S T A P O R C A * < D ' I ? P O R A R O C O N C A R O A P O R A R O

T O T A L P U L P W O O D Q U Ä K : T O T A L T R A N S P O R T O I S T A N C C

06UQ_A_0 B__«l_OJ)0 poeyQE 01) ° 000

COSTO ÏÏX TßAfcSPCm BS LA Pimm Ptm PASTA TOAK§Pg3T ©Ö3T Fra RJ¡LR¿3©

(©QUADSO P@Q M^)

(0)®!.LûnO PEO H^)

2.go

io€9

Ii!

©o

@o Oo Gogol

ol DO

T í ' 0 7 0 0 Y07Û TAL <E@07

LEO y

/

<

x î ^ ©PEB 1 ©PGQûTI

SC1ÔM 3® 6 0 8 7 0

X < r \ r x •

(5ÖUY0U ëAPIYût. <gûP t ?ûc, e s b r o ^ ^

i — n J9 t»

lOTûaeo'û ©s ?Qûaop@QVE eoa sanas §i nota rnv

PIGUS« 0 0 ° CW FO@W£SE SS °

COSTO DE ADMINISTRACION: DEPARTASíINTO FORESTAL ADMINISTRATION COST s F®EST SKEPßRTKENT

( [ .000 DOLASir.9 PO®

©pgßAYiraa e©§? = 2ß = & ®o@S37 ö PER

CûPOVûB. g@8? s 2 g S ©o@§3î 10

T « T A « . eoo? = gûC= ¿ jpL & @o@S0® M

F 8 GURA I O - V

FOGUEE II 11 » V

D I S T A N C I A D E T R A N S P O R T E Y C O S T O D E LA MADERA P A R A P A S T A

EN F U N C I O N DE L A S C A N T I D A D E S S U M I N I S T R A D A S

T R A N S P O R T D I S T A N C E AND PULPWOOD COST

A S F U N C T I O N OF S U P P L Y Q U A N T I T I E S

D I S T A N C I A DE T R A N S P O R T E

T R A N S P O R T D I S T A N C E

(KM)

( I O000 « 3 POR AÑO )

PULPWOOD Q U A N T I T Y ( 1 , 0 0 0 « 3 PER T E A R )

C O S T O DE L A , M A D E R A P A R A - P A S T A ( D O L A R E S P 0 R M J S O L O J

PULPWOOD COST ( D O L L A R S P E R M 3 S )

l e a s t e f f e c t e d by t h i s s u b s t i t u t i o n p r o c e s s , perhaps because t h e use o f a l t e r n a t i v e products has not y e t becon« widespread i n t h e a p p l i c a t i o n s f o r which i t c h i e f l y s e r v e s - c o n c r e t e forms, cabinet-making, etc. .

As regards the d e s t i n a t i o n o f exports o f Pinus r a d i a t a , i t i s worth ishile p o i n t i n g out that during t h e p e r i o d 1951-55 Argentina absorbed almost 98 per cent o f average expor tab le surp luses , the r e s t being shipped t o Peru and t h e Uni ted Kingdom.

3. Estimate of potential supply and demand for iq60 and 1Q65

(a) Availabilities

E s t i m a t e s c o n t a i n e d i n annex I I i n d i c a t e t h a t a v a i l a b i l i t i e s o f P ipus r a d i a t a s a s n w o d w i l l be 9 8 , 0 0 0 and 3 4 4 , 0 0 0 c u b i c metres by 1960 and 1965 r e s p e c t i v e l y . T h i s e s t i m a t e i m p l i e s i n c r e a s e s o f 75 said 500 per cent o v e r t h e average annual output o f 5 6 , 0 0 0 c u b i c metres r e g i s t e r e d for 1951-55 , o r , in o t h e r s words, a cumulative cnnual r a t e o f expansion o f 20 per cent throughout t h e per iod 1956-65 (12 per c e n t in 1 9 5 6 - 6 0 and 29 i n 1 9 6 1 - 6 5 ) .

(b) Domestic deaand As mentioned e a r l i e r , t h e annual per c a p i t a consumption o f Pnnus r a d i a t a decreased from an average

o f 5 c u b i c dec imetres i n 1946-50 t o 4 . 4 c u b i c decimetres i n 1 9 5 1 - 5 5 . For present purposes, the downward trend recorded for 1946-55 has been disregarded, and i t has been assumed that by 1965 per c a p i t a consump-t i o n i n C h i l e w i l l be 100 per cent h i g h e r than in 1 9 5 1 - 5 5 , and w i l l amount t o 6 . 6 and 8 . 8 cubic d e c i -metres in 1960 and 1965 r e s p e c t i v e l y . With these consumption f i g u r e s , expor t a v a i l a b i l i t i e s would be 4 9 , 0 0 0 c u b i c metres i n 1960 and 2 7 2 , 0 0 0 cubic: metres in 1965. ( S e e t a b l e I I I - 3 ) .

Table 111=3 CHILE? ESTIMATE OF DOMESTIC CONSUMPTION AMD EXPORT AVAILABILITIES

OF PINUS RADIATA, I 9 6 0 AMD 1965

1951-55 % • ¿ ^ g ¡g A 9 6 0 - 9 6 ' l o h 3 $ é o é 4 9 4 9

1 9 6 5 S44 # o l 5 é J êoê 7 2 272

a/ a&Leislafced ®& .«to bmL0 of data fs?G3 ths ïïraife©<â Hatioa® Monthly Etellstija ®f gtatis°» ti&&S, Msa?©to 19560 1

fc) Foreign dsocmd

In o r d e r t o e s t i m a t e p o t e n t i a l f u t u r e e x p o r t s , A r g e n t i n e demand f o r impor t s o f sawnwood from ccifti-fers was f i r s t p r o j e c t e d . A per c a p i t a consumption s e r i e s f o r c a j i f e r sawnwood from 1945 to 1955 was t h u s c o n s t r u c t e d ! . However, a s d o m e s t i c p r o d u c t i o n d a t a were a v a i l a b l e o n l y f o r 1951 , 1953 and 1954/ i t was assumed t h a t in t h e r e g a i n i n g y e a r s 89 per cent o f the volume consumed would be made up o f isaports and-11 p e r cent WOTId be s u p p l i e d by domestic product ion , t h e s e be ing t h e p e r c e n t a g e s ob ta ined by averag ing the s h a r e s o f imports and domest ic product ion in t h e y e a r s mentioned. The r e s u l t i n g par c a p i t a cceasnKptiora s e r i e s i s sferom i n t a b l e I I I - 4 .

Table Ï Ï I - i , ARGENTIN I« CONSUMPTION ( )F SÂMtiOOB FROM GOMIPEES AWB tMQSS 1WEÏÏMME

Produs° I&pojpfes Goimmmp^ 3 iE® t i on t i o a ropa ia iá i í m empli a -VQO-ÈS iOSfe

X©«®1 ^•snousaac 1U gas? « (Thousands oí : mS) feica fea (3

( & s ) ( â < § a j

L?39 Las1®) '

1 9 4 5 4 1 » 1 3 3 3 . 1 3 7 4 * 2 X5d2Ô0 2 5 6 3 1 9 4 é 6 é 0 B 540 o3 607 o l X5Î>520 S ? 2)00 1 9 4 7 86o5 700 o0 7 8 6 o 5 50 I S S 1 9 4 8 117o9 953o 6 l 2 0 7 1 o 5 1 6 * 1 0 0 67 1 5 9 1 9 4 9 9 1 o 3 73Öo7 830 oO 1 6 * 5 1 9 50 1 1 2

1 9 5 0 82o2 6 6 4 o ? 7 4 6 o f 1 6 * 9 0 1 4 4 2©T

1 9 5 1 1 1 6 oô 1 * 0 0 7 * 5 l p l 2 4 o 3 1Y¡>422 65 1 2 2 1 9 5 2 6 5 o 2 527«8 593°© 17PÖ55 3$ 1 0 8 1 9 5 3 6 5 o 4 460 oO 525 « 4 1 8 s 2 2 8 2 9 8 5

1 9 5 4 7 0 - 1 5â4o5 6 5 4 o 6 1 8 p 5 6 2 35 1 0 0 . 1 9 5 5 1 0 9 o0 8 8 I 0 8 990oS 1 8 * 9 1 9 52 1 0 1

Soor cea )g P o p u l a t i o n f i g u r e s •sser© t a k e s • i r e a AppsadJj £ 5 ©f th® I a f o r a s P r e l i m i n a r g-sep® itil ¿2. Igg, EE^MBBS, ¿ S I s Indu s t r i a d e l P a g g l j - Gelulosa en l a 4 r g ® n t i a a prepared by t h e United Rat ions Pulp and Paper M^risory Group t o L a t i a Gross i n w s t m e n t d a t a uer® obtained f r c a ite© togentiae © f f i e l a l grafolieaiica Produeto e I n g r e a o d© l a R©pflbliea

Hie per c a p i t a consumption s e r i e s f o r sawnwood from c o n i f e r s was c o r r e l a t e d wi th pier c a p i t a g r o s investment because t h i s was the economic index most c l o s e l y i n t e r - c o n n e c t e d wi th t h e s e r i e s i n q u e s t i r n The c o r r e l a t i o n c o e f f i c i e n t was 0 . 8 2 and the e l a s t i c i t y c o e f f i c i e n t 1. The c h o i c e o f tfie base year > the p r o j e c t i o n was 1953> t o which average v a l u e s o f consumption and g r o s s investment f o r t h e f i v e - v e a per iod 1951-1955 were a p p l i e d ; The p r o j e c t i o n s a r e r e c o r d e d - i n t a b l e I I I - 5 .

Table 111=5 ÂRGENHIÂ8 PROJECTION OF APPARENT CONSOMPTION OF SAÄOOD

• SHCH GOBIFERS ¿/ .To©? Populat ion W

(thousand©/ Per c a p i t a consumption £ o i a l c©nsuspti©:

9? Q3

20» 376

21*951 1*

5:

a/ Figu?es in brackets to aettt&l data0 . . W P®palation data fres tha sam© soiare© a© feg» teblo III=40

Assuming t h a t ccns 'mpt ion w i l l cont inue t o be d i s t r i b u t e d between imports and production i n the sane p r o p o r t i o n s as were e s t i m a t e d f o r 1945-55, . t h a t i s , 89 and 11 par cent r e s p e c t i v e l y .2/, and f u r t h e r , t h a t the share o f C h i l e a n ' c o n i f e r s and Pinus r a d i a t a i n p a r t i c u l a r i n A r g e n t i n a ' s t o t a l imports o f c o n i f e r s w i l l semain t h e same a s in Î 9 5 1 - 5 5 , namely, 10 par c e n t i n t h e f i r s t c a s e and 4 per cent i n the second, Argentine imports frcnn Q i i i e i n I 9 6 0 and 1965 w i l l a t t a i n t h e volumes g iven i n t a b l e I I I - 6 .

j Tabi© in°ó PB0J1GÏÏ0I OF IMPOHSS OP G0BIS3K HO P Ï M S RADIATA

Saports teem C h i l e Yosj?

Pinus O f » 3 r.a/M

2 3 ( 4 2 )

I960 ' 1 , 0 7 0 } 1 0 7 4 3

1 9 6 5 ^ l s 3 é ê . - ~ . i s f 55

_§/ IFlgarso ia teagJsofes if of or t© setual data0 As regards market o t h e r than \rgentina, i t was es t imated t h a t Peru, which in 1951-55 purchased on an

average n e a r l y 2 p e r c e n t o f C h i l e a n e x p o r t s o f Pinus r a d i a t a a n n u a l l y , should be ab le t o absorb some 6 , 0 0 0 c u b i c m e t r e s i n I960 and. about 1 2 , 0 0 0 c u b i c metres i n 1965,

The s tudy o f importer markets was c o n f i n e d t o the two c o u n t r i e s reviewed above, a s , t o judge from a v a i l a b l e detr>, i t seems u n l i k e l y t h a t any a d d i t i o n a l i m p o r t e r s w i l l purchase volumes o f more than n e g l i g i b l e s i g n i f i c a n c e w i t h i n t h e n e x t t e n y e a r s .

id) Projection of export availabilities in I960 and 1965

Consequently , export a v a i l a b i l i t i e s o f Pinus r a d i a t a i n 1960 and 1965 w i l l probably be as shown i n t a b l e I I I - 7 :

Table 111=7

OMLEg PROJECTION OF E2S>0RT A V A I L A B I L I T I E S O f PINUS RADIATA

(Thousaads of

^ ^ „ a v a i l a b l e — - - . . . . . . Met surplus lQSS? lities Asrcsntiaa, Pera . . Total

1 9 5 1 = 5 5 | / 2 i 27 1 2 8 ss

I 9 6 0 4 9 4 3 6 4 9 »

1Ç&5 2 7 2 55 1 2 6 ? 205

g / ftXfèTfZgG) ©2 •

3J For lack al the relovant data, it vas iapossible to e aitaeìo ion this proportion Bill be a/fected b y tho iotiirò dovolopaoat of tho production ol salicacoouo spacies in the Paranà delta.

-=96-

4 . Conclusions ,4 i • f * Even on the assunpt ion t h a t s t a n d s o f P inus r a d i a t a i n c l a s s s i t e s IV and V ( s e e 'snnt'a I I ) as*©

devoted e x c l u s i v e l y t o t h e product ion o f pulpwood, and t h a t o n l y l o g s with a minimum diara i te r o r 12 i n c h e s are used i n t h é product ion o f sawnwood, t h e volumes o f t h i s l a t t e r o b t a i n a b l e op t o ' I 9 6 0 s i l l s a t i s f y end l a t e r f a r o u t s t r i p b a t h f o r e i g n and domest ic demand as f o r e c a s t .

The f i g u r e s f o r t h e s e demands were e s t i m a t e d on t h e b a s i s o f s u b s t a n t i a l i n c r e a e a t s in c u s r e n t volumas or i n those t o be i n f e r r e d from the t rends i n d i c a t e d by a v a i l a b l e s t a t i s t i c a l s e r i e s . This was done i n cons iderat ion o f the p o s s i b i l i t y o f a fu ture expansion o f consumption both i n CM l e assd abroad as a r e s u l t of co-ordinated , i n t e n s i v e and s u s t a i n e d a c t i o n cm t h e part o f p r o d u œ r s . A programs with t h i s o b j e c t i v e would t h e r e f o r e seem e s s e n t i a l .

-=97-

Appendix I I I - A

\ PROBLEMS AFFECTING E X P O R T S OF P I N U S RADIATA LUMBER

E v e r y t h i n g seems t o s u g g e s t t h a t e x p o r t p r o s p e c t s f o r C h i l e a n P i n u s r a d i a t a a r e c l o s e l y connected w i t h an improvemfent i n i t s q u a l i t y from t h e t e c h n i c a l s t a n d p o i n t and with a r e d u c t i o n i n c . i . f . p r i c e s a t t h e p o r t s , o f d e s t i n a t i o n . The f i r s t i m p o r t a n t s t e p towards a t t a i n i n g t h e f o r m e r o b j e c t i v e would be to i n c r e a s e t h e l e n g t h o f the lumber, s i n c e t h e l e n g t h most u s u a l a t p r e s e n t - a p p r o x i m a t e l y 1 0 . 5 f e e t - i s c o n s i d e r e d t o o s h o r t by most b u y e r s . A t t e n t i o n has a l s o been drawn t o the d e s i r a b i l i t y o f proper ly - t imed pruning and t h i n n i n g , and, i n g e n e r a l , o f adopt ing a l l t h o s e s y l v i c u l t u r a l and t e c h n o l o g i c a l improvements t h a t have been put i n t o p r a c t i c e i n o t h e r a r e a s i n t h e S o u t h e r n h e m i s p h e r e which a r e a l s o producers o f P i n u s r a d i a t a , l i k e New Z e a l a n d and t h e Union o f S o u t h A f r i c a .

As r e g a r d s t h e p o s s i b i l i t i e s o f r e d u c i n g t h e p o r t - o f - d e s t i n a t i o n p r i c e of. sawnwood, i t i s f i r s t o f a l l o f i n t e r e s t t o a s c e r t a i n how the v a r i o u s c o s t i t e m s i n f l u e n c e t h i s p r i c e . Ihe s e p a r a t e and aggregate c o s t s p e r " p u l g a d a " , 4/ i n C h i l e a n p e s o s , have been e s t i m a t e d a s f o l l o w s :

Pesos p e r "pulgada" 5/ l j Stumpage p r i c e — 80 2 ) C o n v e r t i n g c o s t and t r a n s p o r t t o r a i l w a y s t a t i o n 100 3 ) T r a n s p o r t t o p o r t and s h i p p i n g expenses 127

f . o . b . p r i c e 307 4 ) Ocean f r e i g h t t o Buenos A i r e s ( A r g e n t i n a ) 213

Ocean f r e i g h t t o E l C a l l a o ( P e r u ) 123 c . i . f . p r i c e Buenos Aires 520 c . i . f , p r i c e E l C a l l a o 430

The Buenos A i r e s and E l C a l l a o c . i . f . p r i c e s i n Chi l e a n p e s o s a r e e q u i v a l e n t t o 1 . 1 0 and 0 . 8 5 d o l l a r s p e r " p u l g a d a " r e s p e c t i v e l y , ' w h i l e t h a t o f B r a z i l p i n e works o u t a t 1 . 6 0 d o l l a r s and t h a t o f Oregon p i n e a t E l C a l l a o i s 1 . 2 5 d o l l a r s . ( F o r A r g e n t i n a : 1 d o l l a r / 4 7 5 C h i l e a n p e s o s ) .

WhiLe i t i s assumed t h a t a l l t h e components o f t h e f i n a l p r i c e can b e reduced, t h e t h i r d and fourth a r e e s t i m a t e d t o be t h o s e f o r which t h e immediate out look i s most h o p e f u l i n t h i s connexion. In the case o f shipment e x p e n s e s , which , t o g e t h e r w i t h t h o s e o f r a i l t r a n s p o r t t o t h e p o r t , amount t o between 2 5 and 30 p e r c e n t o f t h e p r i c e a t t h e p o r t s o f d e s t i n a t i o n , i t s h o u l d b e b o r n e i n mind t h a t c u r r e n t high e x p e n d i t u r e i s l a r g e l y o c c a s i o n e d by t h e u t i l i z a t i o n o f t h e e x p e n s i v e l i g h t e r system f o r t h e loading o f a l a r g e p r o p o r t i o n o f t h e lumber.

Ocean f r e i g h t i s t h e o t h e r f a c t o r which has a heavy p e r c e n t a g e i n c i d e n c e on t h e p r i c e ( 4 1 p e r c e n t i n the^ c a s e o f lumber e x p o r t e d t o A r g e n t i n a and 2 9 p e r c e n t f o r t h a t s h i p p e d t o P e r u ) . The i n f o r m a t i o n g a t h e r e d s u g g e s t s t h a t c h a r g e s c o u l d be c o n s i d e r a b l y reduced.

At t h e p r e s e n t t i m e , under t h e terras o f the t r a d e agreement between C h i l e and A r g e n t i n a , mari t ime t r a n s p o r t from^ e a c h o f t h e s e two c o u n t r i e s t o t h e o t h e r must b e e q u a l l y d i v i d e d between \ r g e n t i n e and C h i l e a n v e s s e l s . C o n s e q u e n t l y , t h e C o n f e r e n c i a de F l e t e s d e l P a c i f i c o S u r , made up o f C h i l e a n and \ r g e n t i n e sh i p -o w ne rs , ho lds what i s v i r t u a l l y a monopoly o f mar i t ime t r a n s p o r t , and has f i x e d i t s t a r i f f a t 45 d o l l a r s per 1 , 0 0 ^ s g u a r e f e e t . I t s h o u l d b e p o i n t e d o u t i n t h i s c o n n e x i o n t h a t t r a n s p o r t t e n d e r s have b e e n - r e c e i v e d from " t r a m p s " f o r a s l i t t l e a s 20 d o l l a r s p e r 1 , 0 0 0 s q u a r e f e e t .

'Ihe g e n e r a l c o n c l u s i o n i s t h a t w h i l e a r e d u c t i o n i n a l l t h e f a c t o r s c o n t r i b u t i n g t o the ' c . i . f . p r i c e o f lumber a t t h e p o r t s o f d e s t i n a t i o n would b e d e s i r a b l e , i t i s i n s h i p m e n t and m a r i t i m e t r a n s p o r t expenses , t h a t such a m o d i f i c a t i o n i s most l i k e l y t o b e f e a s i b l e . I t s h o u l d be t a k e n i n t o account t h a t b e c a u s e o f t h e i r g r e a t i n c i d e n c e on t h e c . i . f . p r i c e ( a l m o s t t w o - t h i r d s i n t h e c a s e o f \rpent in3 and ^^ p e r c e n t i n t h a t o f P e r u ) , t h i s l a t t e r would be g r e a t l y a f f e c t e d by any d e c r e a s e t h a t might be achieved i n t h e above i t e m s . Dy the consequent lowering o f t h e p r i c e i n q u e s t i o n , a c o n s i d e r a b l e impetus would L>o given t o e x p o r t s o f P i n u s r a d i a t a , whose a b i l i t y t o compete wi th o t h e r so f t -woods -which a s a r u l e are o f b e t t e r p h y s i c a l q u a l i t y - i s bound t o depend main ly on i t s more a t t r a c t i v e p r i c e .

4/ The "pulgada" is a Beasure used in Chile, uhich corresponds to a 1 inch plank. 10 inches aide and 3 . 2 0 metres long. It is equivalent to 8 . 7 5 square f e e t .

5 / This price corresponds t o 4 8 pesos per cubic foot, approxiaately. See appendix III-B.

Appendix I I I - B

SAW TIMBER STUMPAGE PRICE ^

C l a s s s i t e o

25 39

n •• in I¥b/ Vb/

24el 29o8 39» 5 203o4

42o2 53oS 75o9 397 ol

2 1 74o8 95-7 139=2 728« 5

Based on the p l a n t a t i o n and maintenance c o s t s gi'rom i a annex I I , w i t h 1 0 p e r c e n t annual compound i n t e r e s t « The v a l u e s a r e e a l e t i l a t o d a s g w d n g t h a t tte© palpijood i s excluded a t th© age o f maoduum o f ©concaaie returns aad @redit@d afc-ih® v a l u e i n d i c a t e d i n t a b l e 11-13o

b/. Without th innings«

AVERAGE DIAMETER OF STAMDIHG f E ® S

C l a s s s i t e

II IH IF

' V

o

25

17 l2oé 10 ol 8o3

30

18„7 13o6

10 »7 8o9

a / At b r e a s t h e i g h t 0

-=99-

\NNEX I V

A V A I L A P I L I T Y AND COST OF CHEMICALS AND F U E L S

For the manufacture o f pulp and paper and f o r a n c i l l a r y p r o c e s s e s , var ious chemicals and f u e l s are r e q u i r e d , t h e a v a i l a b i l i t y o f which as to q u a l i t y and volume should be ensured w i t h i n reasonable o r i c e l i m i t s . In t h i s r e s p e c t , C h i l e i s i n a favourable p o s i t i o n . Mining and i n d u s t r i a l concerns can supply most o f the important m a t e r i a l s r e q u i r e d i n more t h a n . s u f f i c i e n t q u a n t i t y and w i t h a l l t h e mentioned r e q u i s i t e s .

\s t o the p r i c e s shown i n t h e t a b l e below^ t h e y may f o r some c h e m i c a l s be reduced i f purchases are made on the b a s i s o f long-term c o n t r a c t s and by ra i lway c a r l o a d s . A l l q u o t a t i o n s were made for March 1956. (See t a b l e I V - l ) .

Table I V - l PRICES OF CHEMICALS AMD FUELS

P r o d u c t Form o f d e l i v e r y P r i c e ( p e s o s per t o n ) Comments

1« Aluminium sulphate Bulk 2 2 , 0 0 0 FOB 1% A l ^ max.

25% i n s o l u b l e s Saat iag® 1% A l ^ max.

25% i n s o l u b l e s 2o AluB&nim sulphat® Bulk 3 1 , 5 3 0 FOB

S a n t i a g o 1 5 - 1 7 $ AI2O3

0% i n s o l u b l e s 3o K a o l i n P a p s r s a c k s

2 5 Kg® 3 0 * 4 0 0 FOB S a n t i a g o

3DO»300 mesh

4® Goal (culm) Bulk 5 » 7 9 6 . a FOB Coronel

Net c a l o r i f i c values 6 , 7 0 0

5o Sodium s u l p h a t e Bulk 1 5 , 0 0 0 FOB I qui que a/

k c a l / k g e

9 5 « 6 $ N a 2 S 0 4

6o Limestone Bulk 5 , i £ 0 FOB Huachipato a/

l o s s through burning 4 2 . 7 ?

7® Sodium c h l o r i d e Bulk 1 0 , 0 0 0 FOB I qui que

9 9 . 9 per cent N a d

S 0 F u e l o i l b / By c a r s 1 4 , 4 2 0 FOB Talcahuano

C a l o r i f i c value 10 ,OX) k c a l / K g .

9« R o s i n b / Drums 1 6 5 * 0 0 0 9« R o s i n b / FOB V a l p a r a i s o

S o u r c e s : 1 and 2 Química I n d u s t r i a l Sues : 3 Domingo A r t e a g a I ; 4 Compañía Carbonífera y de Fundición Schwag-er; 5 Compañía S a l i t r e r a de Tarapacá y A n t o f a g a s t a ; 6 Compañía de Acero d e l P a c í f i c o ; 7 P l u t a r c o Valenzuela L . ; 8 S h e l l , Chile L i m i t e d ; 9 Compañía Manufacturera de P a p e l e s y Cartones S .A.

i/ P r o d u c e r e s t i m a t e , s i n c e t h e r e a r e ño s a l e s a t p r e s e n t

b / I m p o r t e d ; f 9 o e b e r a i l w a y c a r i n c l u d i n g customs dut ies® I M s t a b l e inc ludes only the more important products . Table IV-2 g ives t h e es t imated c o s t s as well

as t h o s e o f o t h e r c h e m i c a l s and some b u i l d i n g m a t e r i a l s , f . o . b . a t h y p o t h e t i c a l p l a n t l o c a t e d i n t h e l luepil a r e a , some 510 and 135 k i l o m e t r e s from S a n t i a g o , and Ta lcahuano, r e s p e c t i v e l y , by r a i l .

-=100-

Table IV-2

RAW MATERIALS? ESTIMATED COST AT MILL ( P e s o s per t o n )

B a s i s ; a h y p o t h e t i c a l p l a n t l o c a t e d 510 k i l o m e t r e s from S a n t i a g o and 1 3 5 from Talcahuano by r a i l

P r o d u c t O r i g i n Value T r a n s p o r t Cos t a t

P r o d u c t O r i g i n Value Railway Ship

p l a n t

Rosin U 0 S 0 A « 1 6 5 , 0 0 0 5,000 » 1 7 0 , 0 0 0

^ 2 ^ 1 ? 3 (Water t r e a t m e n t ) S a n t i a g o 2 2 , 0 0 0 3 , 9 2 0 83 2 5 , 9 2 0

A 1 2 ( S 0 4 ) 3 ( S i z i n g ) S a n t i a g o 21 s 4 0 0 3s 920 » 3 5 , 4 2 0

K a o l i n S a n t i a g o 30,2)00 3 , 4 7 0 3 3 , 8 7 0

Coal (culm) L o t a 5 , 8 0 0 1 , 0 0 0 » 6 , 8 0 0

Sodium sulphate I quique 1 5 , 0 0 0 1 , 1 5 0 3 , 2 0 0 1 9 , 3 5 0

Sodium c a r b o n a t e Santiago 6 6 , 1 5 0 3 , 4 7 0 ea 6 9 , 6 2 0

Limestone Huachipato 5 , 4 0 0 980 - 6 , 3 8 0

Sodium c h l o r i d e Iquique 1 0 , 0 0 0 980 2 , 8 2 0 1 3 , 8 0 0

Sulphuric a c i d S a n t i a g o 2 3 , 1 0 0 9 , 7 5 0 ea 3 2 , 8 5 0

F u e l o i l Talcahuano 1 4 , 4 2 0 1 , 1 5 0 - 1 5 , 5 7 0

D i e s e l o i l a / Talcahuano 1 7 , 9 2 0 1 , 1 5 0 - 1 9 , 0 7 0

Cement b / C a l e r a _ - » 1 4 , 3 5 0

B r i c k s c / = - - - 1 0 , 0 0 0

Reinforcement iron d/ Huachipato 6 8 , 0 0 0 1 , 4 8 0 6 9 , 4 8 0 - .

By thousands of l i t r e s „

b / I n 4 2 . 5 kg. b a g s . c / Value o f 1 , 0 0 0 b r i c k s (30 x 1 5 x 7 cra0) e s t i m a t e d on t h e b a s i s o f S a n t i a g o p r i c e , d / Based on the c o s t of s t e e l w i t h a d i a m e t e r of one incho

-I'm-

Table 11-14

WATER REQUIREMENTS IN PULP AND PAPER MILLS a /

( m 3 / s e c . )

M i l l c a p a c i t y , t o n / d a y 50 100 200 3 3 0 ADO

Unbleached pulp 0 . 0 9 0 . 1 8 B l e a c h e d pulp 0 . 1 0 0 . 2 1 Unbleached k r a f t papers b / 0 . 2 1 0 . 4 2 Bleached K r a f t p a p e r s b / 0 . 2 1 0 . 4 2 Newsprint 0 . 1 3

0 . 3 7 0 . 4 2 0 . 8 4 0 . 8 4 0.26

0 . 5 6 0.62 1.26 1.26 0 . 3 8 0 . 5 1

a / Uni t water r e q u i r e m e n t s used;

b / I n c l u d e s pulp manufacture®

Unbleacted pulp Bleached pulp P a p e r s Newsprint

160 m 3 / t o n . 180 m3/ton. 360 m 3 / t o n . 110 m3/ton.

Table IV-4

MINIMUM STREAM FLOW REQUIREMENTS ç /

{m3/ s e c )

M i l l c a p a c i t y , t o n / d a y 50 100 200 300 430

Unbleached pulp 3 . 5 7 1 4 21 B l e a c h e d pulp 4 . 5 9 1 8 27 P a p e r s 4 . 5 9 1 8 27 Newsprint 1 1 2 2 33 44

c j To m a i n t a i n d i s s o l v e d oxygen above 3 p . p . m . ; w a t e r temperature ; 2 0 ° C . ,

- 1 0 2 -

ANNEX V

ELECTRIC ENEFGY SITUATION

T n t i l ]<UP, the product ion o f e l e c t r i c energy was e x c l u s i v e l y i n t h e hands o f p r i v a t e e n t e r p r i s e . That w a r marked the e s t a b l i s h m e n t o f t h e Corporación de Fomento de l a Producción which r e c o g n i z e d t h e need to develop a susta ined campaign for the s y s t e m a t i c e l e c t r i f i c a t i o n o f t h e country and without which n a t i o n a l economic a c t i v i t i e s could not b e adequate ly promoted. In consequence an e l e c t r i f i c a t i o n p i s n was prepared, which was put i n t o o p e r a t i o n immediately, and t o c a r r y out t h i s t a s k the Empresa Nacional de E l e c t r i c i d a d , S. (ENDESA) was c r e a t e d . Dur ing t h e f i r s t s t a g e o f t h e p l a n ( 1 9 4 0 - 5 2 ) , ENDESA i n s t a l l e d a capac i ty o f 207 ,200 kW, 98 per cent o f which was in the form o f h y d r o e l e c t r i c power s t a t i o n s . During the second p e r i o d o f work, which w i l l end in 19*4, an a d d i t i o n a l 568 ,500 kW i s to be i n s t a l l e d . \ J

To f a c i l i t a t e the work, ENTES\ divided the country i n t o seven "geographic a r e a s " . The f o u r t h area i s that which o f f e r s p o s s i b i l i t i e s for i n s t a l l i n g new pulp and paper f a c t o r i e s ( 3 6 ° to 38°20 ' S ) . Osñng to e x i s t i n g or planned l i n k s between t h e var ious d i s t r i b u t i o n networks , however, t h e s i t u a t i o n o f each "geographic a r e a " cannot be c o n s i d e r e d a l o n e . In f a c t , the major p o p u l a t i o n and i n d u s t r i a l c e n t r e s o f C h i l e l i e in the t h i r d a r e a , where demand has grown t o such e x t e n t t h a t , d e s p i t e t h e a c t i v i t i e s o f various concerns in t h i s f i e l d , ENDESA has had t o supply energy g e n e r a t e d i n the. fourth area i n o r d e r t o improve the power s i t u a t i o n .

In the fourth area , has i n s t a l l e d the Abanico power s t a t i o n ( 8 6 , 0 0 0 k i l o w a t t s ) , while another p u b l i c u t i l i t i e s company has an i n s t a l l e d c a p a c i t y o f 1 1 , 1 0 0 k i l o w a t t s . Only from t h e former can any increment i n c a p a c i t y be e x p e c t e d .

For f i n a n c i a l reasons , the e l e c t r i f i c a t i o n p l a n h i s been delayed in recent years , c o n s i d e r a b l y so i n some a r e a s . (See appendix V-\) . I t has caused consumar r e q u e s t s from new i n d u s t r i e s t o be r e j e c t e d o r postponed, even i n t h e f o u r t h a r e a which i s t h e l e a s t a f f e c t e d b y such d e l a y s . ( S e e appendix V - B ) . General p o s s i b i l i t i e s f o r making up l o s t ground a r e t o be found i n tu> a s p e c t s :

a) Prompt m o d i f i c a t i o n by Congress o f the present E l e c t r i c - S e w i c e s A c t , so t h a t t a r i f f s may be a d j u s t e d more r a p i d l y t o r e a l c o s t s and t h e v a l u e o f t h e c a p i t a l i n v e s t e d by t h e e n t e r p r i s e .

I f EMJESA, f o r i n s t a n c e , could obta in a mat y i e l d o f 8 per cent on i t s c a p i t a l i n 1956, i t could r e i n v e s t 2 , 3 0 0 m i l l i o n pesos in new wosks.

b) Loans from abroad.

During the f i r s t week o f J u l y EMIESA has announced t h a t i t w i l l o b t a i n 12=5 m i l l i o n d o l l a r s a s t h e f i r s t i n s t a l m e n t o f a c r e d i t g r a n t e d by t h e I n t e r n a t i o n a l Bank f o r R e c o n s t r u c t i o n and Development t o C h i l e . 2 / Moreover, ENDESA i s n e g o t i a t i n g d i r e c t l o a n s from t h e Bank.

I f both aspec ts can be favourably s o l v e d , p r e s e n t problens w i l l be e l i m i n a t e d over t h e s h o r t term, p a r t i c u l a r l y in the f o u r t h a r e a .

In addi t ion , i f a p r i v a t e i n d u s t r y should p a r t i c i p a t e a c t i v e l y i n t h e r e q u i r e d c a p i t a l f o r m a t i o n , ENDESA would have no d i f f i c u l t y i n supplying t h e energy requested w i t h i n a s h o r t p e r i o d .

1/ the 'Ciproaoa' pooor o t a t i o a , o i t i i 8 8 . 0 0 0 bilooaiio. la o p o j r a t i a g , thia ia fcíao / i r o í

p r o j e c t oí the aaeond ataqo.

_!/ Loan granted lor tJ>o oo-eallod 'Agricultural Darolopoost and Traaopoa-t Pie a . (Soo « l o o éranos F I J I . J .

APPENDIX V->A

LETTER FROM THE GENERAL MANAGER OF ENDESA TO THE VICE-PRESIDENT OF GORFO

GERENCIA GENERAL N ° 3 2 5 2 SANTIAGO, 26 APRIL 19 5 6

REF . POWER D E F I C I T IN THE COUNTRY-NEED TO ACCELERATE THE E L E C T R I F I C A T I O N PL4N

Mr. V i c e - P r e s i d e n t :

As you know, the Poard o f d i r e c t o r s o f ENDESA, s i n c e t h e e s t a b l i s h m e n t o f t h i s e n t e r p r i s e has been permanently concerned over the need t o a c c e l e r a t e t h e c o u n t r y ' s e l e c t r i f i c a t i o n plan in order t o prevent the growing d e f i c i t in power s u p p l i e s which i s hampering product ion . The Poard has sought to^obtain the n e c e s s a r y means t o e l i m i n a t e t h i s d e f i c i t by t h e c o n s t r u c t i o n o f new power s t a t i o n s wi th t h e i r c o r r e s -ponding t r a n s m i s s i o n l i n e s and primary s u b s t a t i o n s .

On b e h a l f o f the Board, I am address ing you t o s t r e s s t h e g r a v i t y o f t h e l a c k o f s u f f i c i e n t power and o f t h e need t o s o l v e t h i s problem over t h e s h o r t term.

P u b l i c opinion should be made i n c r e a s i n g l y aware o f t h e fundamental importance o f developing power sources f o r the c o u n t r y ' s p r o g r e s s .

Among many weighty opinions which share t h i s viewpoint , t h e fo l lowing should be s t r e s s e d : , U " B r i e f l y economic development r e p r e s e n t é an i n c r e a s e i n t h e average p r o d u c t i v i t y o f t h e labour

f o r c e . Such i n c r e a s e i s d i r e c t l y in f luenced by the amount o f energy which man i s in a p o s i t i o n t o incor -porate i n t o the productive process and by t h e ways i n which he does s o " .

H y d r o - e l e c t r i c i t y appears t o be t h e main source o f power f o r C h i l e because i t i s p l e n t i f u l . , poten-t i a l r e s o u r c e s a r e w e l l - l o c a t e d and i t can be developed economica l ly on a l a r g e s c a l e .

The u t i l i z a t i o n o f power sources through e l e c t r i f i c a t i o n i s c a r r i e d out by the Corporación de Fcmem-t o through t h e Empresa Nacional de E l e c t r i c i d a d S . A . , ENDESA and by p u b l i c u t i l i t i e s c o n c e s s i o n a i r e s and p r i v a t e companies. ! -

Baring the l a s t 10 or more y e a r s , p u b l i c u t i l i t y - c o m p a n i e s have s u f f e r e d a c u t e d is inves tment and a d e c r e a s i n g i n t e r e s t in t h e i r a c t i v i t i e s and p r o g r e s s , because our e l e c t r i c s e r v i c e l ^ i s l a t i o n i s some-what o l d - f a s h i o n e d and has caused slow and cumbersome procedures f o r e s t a b l i s h i n g u p - t o - d a t e and adequate t a r i f f s . Hie genera l p r a c t i c e o f making p u b l i c u t i l i t y r a t e s a . s u b j e c t o f demagogic po l i cy has a l s o been d e t r i m e n t a l . Thus such r a t e s have lagged f u r t h e r and f u r t h e r b e h i n d t h e l e v e l s o f p r i c e s , uages and s a l a r i e s . ' .

As t o the Corporacion de Fomento and ENDESA, e l e c t r i f i c a t i o n plans based on the u t i l i z a t i o n o f t h e c o u n t r y ' s h y d r o - e l e c t r i c resources have not h i t h e r t o developed w i t h t h e sp^ed which i s considered requi -s i t e . This is» due t o the s c a r c i t y o f the f i n a n c i a l resources^ pl'acéd at the d isposa l o f ENTUSA end to the smal l r e t u r n on e x i s t i n g inves tment , due t o t h e c a u s e s a l ready . 'out l i n e d which a f f e c t t h e r a t e s for fcks s e r v i c e s .

The consequences o f a l l t h i s a r e o b v i o u s ; i n d u s t r i e s have gained no f o o t h o l d , e f f o r t s t o i n c r e a s e product ion have been hampered o r impeded, and a r e a l d e c l i n e i n t h e supply o f e l e c t r i c euergy t o c i t i e s and main touns has taken p l a c e . A l l t h i s has a l r e a d y r e s u l t e d i n heavy l o s s e s t o the n a t i o n a l ee©Kfls¡yt'

2 J ECLñ. ü ataoDciry of tbo Ppollaiaary Rbport os' <tho '0ovofspóo¿8, oi Eaorgy Produeiioa sod UsiJU ootiao '¿a

íertim üaoeíee • Pooaiblliti on oad Problona. fSoeaooBi .É/CK. JL2/S?'a/flo<7. 21

To the Execut ive V i c e - P r e s i d e n t Corporación de Fomento de l a Producción Sant iago

«104°

which w i l l become g r e a t e r i f s t rong i n c e n t i v e s a r e not given t o e l e c t r i f i c a t i o n works. In order t o measure the power d e f i c i t o f the country and t o r e a f f i r m the need f o r a c c e l e r a t i n g the

implementation of e l e c t r i f i c a t i o n p l a n s , the d e f i c i t has been es t imated by two methods. F i r s t , the development o f e l e c t r i f i c a t i o n i n C h i l e was examined on t h e b a s i s o f a comparison with

the f o r e c a s t s in the 1942 E l e c t r i f i c a t i o n Plan prepared by the Corporación de Fomento. Secondly, the power d e f i c i t was c a l c u l a t e d on t h e b a s i s o f t h e consumption which could have been

covered i f e l e c t r i c i t y had been a v a i l a b l e and o f consumer reques ts which had t o be í e j e c t é d or postponed owing t o lack of generat ing f a c i l i t i e s . First method. Deficit in the country's supply of electric energy, calculated on the basis of consump-

tion forecasts made in 1942 for 1956 and of existing generating facilities in 1956. Table A compares the consumption f o r e c a s t f o r 1956 and a v a i l a b l e genera t ing f a c i l i t i e s i n the same

y e a r , f o r each g e o g r a p h i c a r e a . Th is comparison shows the de lay i n t h e E l e c t r i f i c a t i o n Plan bothin terms of power shortage and i n y e a r s . In 1942, fu ture demand for e l e c t r i c energy was f o r e c a s t on t h e b a s i s o f 1940 consumption. As i s usual ly the c a s e , a growth ra te was assumed f o r consumption within each area and for each period. The r a t e was very conservat ive , as exper ience has shown and was considered as such by the experts who rev i sed the c a l c u l a t i o n s . Second method. Deficit in the supply of power, estimated on the basis of consumption which could have

been covered if energy had been available and of requests for service rejected or postponed owing to lack of generat ing faci I it ies.

I t i s d i f f i c u l t t o d e f i n e , a priori, the consequences o f an energy s h o r t a g e wi th i t s consequent r e s t r i c t i o n s and r a t i o n i n g in i n d u s t r i a l development and the growth o f e l e c t r i c i t y consumption.

I t has repeatedly been proved in Chile that a permanent and s t a b l e supply o f e l e c t r i c i t y c r e a t e s and promotes consumption o f t h i s energy. Hie development o f such consumption w i l l be adequate and s t a b l e so long as p r i c e s are l e f t untouched and u n d i s t o r t e d , owing t o c o n s i d e r a t i o n s not based on sound economic p r i n c i p l e s , e i t h e r by e x c e s s i v e r i s e s or d e c l i n e s in t a r i f f s .

A roi^h est imate fol lows o f the probable consumption i f power had been a v a i l a b l e . Consideration was a l s o given t o consumption requests which had t o be r e j e c t e d or postponed f o r l a c k o f genera t ing f a c i l i -t i e s . This i s the second method followed t o appraise the lack o f progress i n t h e c o u n t r y ' s e l e c t r i f i c a -t i o n progranme.

Hie es t imate which appears i n t a b l e B i s only a rough c a l c u l a t i o n o f t h e d e f i c i t o f e l e c t r i c energy i n the country, for the reasons indica ted abové. CONCLUSIONS

Hie two methods u t i l i z e d t o c a l c u l a t e the d e f i c i t o f energy s u p p l i e s l ead t o s i m i l a r r e s u l t s , no t -withstanding the d i f f e r e n c e s inherent i n such d i v e r s e b a s e s o f e s t i m a t i o n and o f t h e varying methods used. Hie two c a l c u l a t i o n s show t h a t t h e r e i s a l a r g e d e f i c i t i n the power supply o f t h e country , a f a c t which, moreover, i s ev ident throughout t h e country .

The d e f i c i t of a v a i l a b l e g e n e r a t i n g c a p a c i t y i s evident and s e r i o u s , t h e more so because e x i s t i n g power s t a t i o n s have inadequate r e s e r v e s . Hiese r e s e r v e s should amount t o 15 t o 20 p e r cent o f i n s t a l l e d capac i ty i n order t o f a c e any contingency o r accident i n a generat ing group. Without these r e s e r v e s , the s e r v i c e s are l i a b l e to s e r i o u s except iona l o r unforeseen r e s t r i c t i o n s , p a r t i c u l a r l y i n autunn and winter when t h e peak demand e x i s t s .

Hie d e l a y s a l r e a d y caused i n supplying t h e c o u n t r y ' s energy r e q u i r e m e n t s and i n i n s t a l l i n g new generat ing s t a t i o n s have been so p r e j u d i c i a l t o t h e n a t i o n a l economy t h a t t o o much i n s i s t e n c e cannot be l a i d on t h e f a c t t h a t t h e a u t h o r i t i e s should proceed t o t a k e a l l p o s s i b l e s t e p s t o a c h i e v e an adequate s o l u t i o n as quickly as p o s s i b l e .

UNFAVOURABLE EFFECT OF THE SHORTAGE OF ENERGY •

Hie BOA study already c i t e d a l so s t r e s s e s the importance o f power suppl ies for a c o u n t r y ' s develop-ment. We reproduce the more important paragraphs i n connexion with C h i l e :

"The preceding paragraph d i s t i n c t l y shows the s t r a t e g i c importance o f the energy supply f o r economic development. An i n c r e a s e i n i t s supply i s almost always a p r e - r e q u i s i t e f o r t h e economic use o f new i n v e s t m e n t in the o ther product ive s e c t o r s . On the o ther hand, i f investment i n energy l a g s behind and the supply o f t h i s s e r v i c e becomes i n e l a s t i c , i t i s almost c e r t a i n t h a t i d l e c a p a c i t y w i l l develop in the o t h e r s e c t o r s o f t h e economy. The e x i s t e n c e o f r e s e r v e c a p a c i t y i n t h e energy s e c t o r i s thus a p r e -

-=105-

TABLE A COMPARATIVE PROGRESS OF THE ELECTRIFICATION P U N PREPARED

BY THE CORPORACION DE FQ-IENTO AND ENDESA, 1 9 4 3 - 5 6

( F u b l i c u t i l i t i e s )

Area Consumption f o r e c a s t ( l )

kW

A v a i l a b l e g e n e r a t i n g

c a p a c i t y ( 2 ) kW

Rough e s t i m a t e o f «tetar i n plan

kW y e a r s ~ ( 3 )

( 2 ) Serena t o I l l a p e l 1 9 , 0 0 0

( 1 6 , 0 0 0 ( 5 )

( 1 3 , 0 0 0 ( 6 )

3 , 0 0 0

6 , 0 0 0

2

4

( 3 ) P e t o r c a t o l i n a r e s

( 4 ) L e s s ( 9 )

6 3 0 , 0 0 0 1 5 . 0 0 0

6 1 5 , 0 0 0 ( A l 5 , 0 0 0 ( 5 ) ( ( 3 7 2 , 0 0 0 ( 6 )

, 2 0 0 , 0 0 0

2 4 3 , 0 0 0 ' _

5

6

( 4 ) P a r r a l t o V i c t o r i a

( 7 ) plus 9 0 , 0 0 0 2 0 , 0 0 0

1 1 0 , 0 0 0 ( 1 1 2 , 0 0 0 ( 5 ) ( ( 8 0 , 0 0 0 ( 6 )

0

3 0 , 0 0 0

0

( 5 ) L a u t a r o t o P u e r t o 1-iontt 7 0 . 0 0 0 3 3 . 0 0 0 3 7 . 0 0 0 ( 8 ) 6,

T o t a l 8 1 4 * 0 0 0 ( 5 7 6 , 0 0 0 ( 5 ) ( 4 9 8 , 0 0 0 ( 6 )

2 3 8 , 0 0 0 " , 3 1 6 , 0 0 0 r •

( 1 ) Consumption f o r e c a s t f o r 1 9 5 6 o f t h e 1 9 4 2 E l e c t r i f i c a t i o n P l a n o f t h e Corporaci<5n de Fomento. ' '• '

( 2 ) I n c l u d i n g r e s e r v e s f o r e m e r g e n c i e s .

( 3 ) Frcrn the moment t h a t f o r e c a s t consumption exceeded a v a i l a b l e c a p a c i t y .

( 4 ) Discount ing consumption r e q u i r e d f o r e l e c t r i f i c a t i o n of t h s S t a t e ^ R a i l w a y s .

( 5 ) Favourable h y d r o l o g i c a l c o n d i t i o n s . ,

( 6 ) Very u n f a v o u r a b l e h y d r o l o g i c a l c o n d i t i o n s .

( 7 ) A d d i t i o n a l consumption o f t h e s t e e l w o r k s o f t h e Compañía de Acero d e l P a c í f i c o . '

( 8 ) The g e n e r a t i n g s t a t i o n s i n the Temuco-Valdivia a r e a were planned t o e n t e r o p e r a t i o n i n 1 9 4 6 . The d e f i c i t c o v e r s t h e a r e a from Lanco-Temuco t o L a u t a r o . ' ^ (

( 9 ) I n c l u d e s consumption o f t h e Braden Copper Co. and i t s power s t a t i o n s a t Coya and F a n g a l .

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TABLE B E S T I M A T E OF PROBABLE, R E J E C T E D OR POSTPONED CONSUMPTION

n PS'i Ares - Aricm to Vallenar

. With t h e exception» o f A r i c a , T o c o p i l l a , Calama and V a l l e n a r , p o w e r s u p p l i e s i n t h e remaining towns a r e c l e a r l y d e f i c i e n t . New tfotics a r e b e i n g under taken i n t h e towns i n l a n d from A r i c a , a t I q u i q u e , T a l t a l , Anto fagas ta and Copiapfe,chich w i l l mean an a d d i t i o n a l 1 4 , 0 0 0 kW i n s t a l l e d c a p a c i t y . T h i s work deeds t o be a c c e l e r a t e d , expanded and ex tended t o o t h e r s e c t o r s o f t h e same r e g i o n . Moreover, t h e Copiapf) sad VaTlenar a reas should be connected with the e l e c t r i c networks o f t h e south in order to ensure regular s u p p l i e s .

j

Second. Area - Serena to 11 lapel ' *

^Deferred consumption in mining, industry and a g r i c u l t u r e are e s t i m a t e d t o be about 6 , 0 0 0 kW

Third Arem- Pctorca to Linares p r o v i s i o n o f power t o new towns and i n d u s t r i e s , p u b l i c t r a n s p o r t , spraying and

r u r a l e l e c t r i f i c a t i o n w i l l require ebout 7 0 , 0 0 0 kW

Consvsqption r e s t r i c t i o n s and d e c l i n e i n vo l tage and frequency which has a f f e c t e d t h i s region s i n c e 1947 may be es t imated at an a d d i t i o n a l u n s a t i s f i e d demand o f about 100 ,000 kW

I t should be s t r e s s e d t h a t e l e c t r i c hea t iEg , promoted u n t i l 1945, has been banned i n recent y e a r s . v' .

Fourth Area - Parral t® Victoria

New i n d u s t r i e s and expansion o f e x i s t i n g e n t e r p r i s e s , p a r t i c u l a r l y steelmaking, pulp end pqper and o t h e r s require dbout 3 3 , 0 0 0 kW

Fifth Area -Lautaro to Puerto Montt . •

. Lack o f .adequate s u l l i e s t o the Teffluco area, from Lautaro t o Lanco accounts f o r a d e f i c i t - o f about " * - - .... . ; • 1 5 , 0 0 0 kW

' . ' v . . T o t a l d e f i c i t i n the country - 224, 000 kW

Mote: P r e s e n t u n s a t i s f i e d power demand s h o u l d b e added t o t h a t which w i l l a p p e a r i n f u t u r e . Thus, EMJESA has p l a n s t o supply t o t h e f o l l o w i n g f u t u r e demand in t h e f o u r t h a r e a :

Cia. de Acero del Pacifico (CàP). I t s expansion píograrane u n t i l 1962-63vwi 11 r e q u i r e an a d d i t i o n a l c q » a c i t y o f 50 t o 55 .thousfind kW.

" Corporación de Fomento de la Producción (GDBFO). I t s pulp and paper programme a t Coelemu, Hufepil, Lebu and Rehaico c a l l f o r on a d d i t i o n a l 30 thousand kW.

-107-

r e q u i s i t e f o r development t o c o n t i n u e with a minimum waste o f c a p i t a l , which r e p r e s e n t s t h e s c a r c e s t f a c t o r .

Considering t h a t , at the present s tage of development o f most o f t h e L a t i n American c o u n t r i e s , the demand f o r energy grows p a r t i c u l a r l y s trongly and that i t s supply f i l l s a s t r a t e g i c r o l e i n a l l phases o f economic development, the conclusion i s i n e v i t a b l e that à dynamic p o l i c y i n the energy s e c t o r i s of prime importance f o r a c c e l e r a t i n g t h e r a t e of growth. I t i s e q u a l l y e v i d e n t t h a t t h e c h r o n i c s h o r t a g e o f energy which e x i s t s in many c o u n t r i e s o f the reg ion today r e p r e s e n t s a d e t e r r e n t t o economic, growth".

F u r t h e r on t h e ECL\ study goes on t o say : , ' . • ' , "The s h o r t a g e o f energy i s among t h e m a j o r o b s t a c l e s hampering economic development in L a t i n

America. "Die r e l a t i v e under-consimption o f energy i s one o f t h e e x p r e s s i o n s o f economic underdevelop-ment and i s r e f l e c t e d in the f a c t that the t o t a l per capita consumption i s l e s s than o n e - t h i r d of that of the countr ies of the world as a whole".

But an abundant energy supply i s not the only r e q u i s i t e t o promote economic development. I t i s a lso necessary t o ensure t h a t t h i s supply w i l l be regular . Thus ECLÀ says :

"The absence o f any guarantee, tha t future supply w i l l expand i s s u f f i c i e n t t o .hamper the development o f many i n d u s t r i e s . In some par ts o f Lat in Vnerica t h i s type o f d e f i c i t has been a c c e n t u a t e d in ^recent years and in o t h e r s a d i r e c t d e f i c i t has developed, forc ing c e r t a i n i n d u s t r i e s i n t o u n d e r - u t i l i z a t i o n o f i n s t a l l e d c a p a c i t y . Many e n t e r p r i s e s in Sao Paulo and Buenos A i r e s , f o r example, had t o introduce very i r r e g u l a r t imetab les and cut down d a i l y hours^of work because of . e l e c t r i c i t y , s h o r t a g e s , whi lè ra t ion ing was very widespread in almost a l l c o u n t r i e s ^r)d s t i l l cont inues in some".

I t i s extremely d i f f i c u l t t o measure the various pernicjious e f f e c t s o f a l a c k o f energy supply on a c o u n t r y ' s a c t i v i t i e s . During the autumn and w i n t e r o f 1947> t h e p r o v i n c e s S a n t i a g o , Valpara iso and Aconcagua were severe ly ra t ioned and there were i n t e r r u p t i o n s i n the s e r v i c e due t o t h e d e f i c i t i n power s u p p l i e s . The f i r s t un i t a t Sauzal o n l y s t a r t e d o p e r a t i o n s i n 1948. The I n s t i t u t o de I n g e n i e r o s de C h i l e c a l c u l a t e d t h a t thé damage caused by rationing during that period t?as greater' than the cost of permanent electric facilities required to prevent them. r j . .

RECOMMENDATIONS ' '' V . -

On v a r i o u s o c c a s i o n s 2/ recommendations have been made t o t h e e f f e c t t h a t p r i v a t e e n t e r p r i s e s , publ i c u t i l i t y companies and ENEES<\ should t o g e t h e r i n s t a l l * « minimum annual a'veragè o f 70,Q00_kW i n new genera t ing p l a n t s . I t i s e s t i m a t e d t h a t o f t h i s t o t a j , between 20 and 2 5 thousand kW-annually could be i n s t a l l e d by mining and i n d u s t r i a l concerns as wel l as by p r i v a t e u t i l i t y companies,, i f - t h e l a t t e r are given e q u i t a b l e t rea tment which w i l l e n a b l e them t o a t t r a c t p r i v a t e c a p i t a l " , ENTESA should i n s t a l l a minimum average o f 50 thousand kW annually at a c o s t ( c u r r e n t p r i c e s ) ¿ i n c l u d i n g l i n e s and primary sub-s t a t i o n s amounting t o 4 , 0 0 0 , 0 0 0 d o l l a r s and about 5 , 0 0 0 , 0 0 ^ , 0 0 0 a d d i t i o n a l investment i n pesos .

N e v e r t h e l e s s , the normal and permanent jbui ld ing r a t e ó f new power s t a t i o n s , t o g e t h e r with t r a n s -miss ion l i n e s and primary s u b s t a t i o n s , shoiild average a r e a s o n a b l e f i g j i r e . o f 1 0 0 , 0 0 0 kW annual ly . 3/ Moreover, during some y e a r s an a d d i t i o n a l 20-000 kW should be i n s t a l l e d i n o r d e r t o make up f o r the lag which has so s e r i o u s l y a f f e c t e d the. country. ' • ' * * ^ . . .'

To t h i s end, the investment quota ass igned t o ENDË3A should be r a i s e d by moré than 70 per; c e n t , t o about 7 m i l l i o n d o l l a r s plus 8 , 6 0 0 m i l l i o n pesos . >

Countries such as the United S t a t e s , France;, Cañada, Norway and o t h e r s have been inves t ing up t ó 1. 4 per cent of t h e i r n a t i o n a l income on e l e c t r i c i t y prqj jectsr> I n q r d e r t o a t t a i n a s i m i l a r r a t e , C h i l e should spend over 28 b i l l i o n pesos annual ly as an average over t h e n e x t 10. y e a r s ¿ »

The fol lowing measures a r e recommended t o . a c h i e v e an adequate power supply f o r t h e country: 1. Prompt acceptance by Congress o f the m o d i f i c a t i o n s t o t h e ; p r e s e n t Act on E l e c t r i c S e r v i c e s , a s an i n d i s p e n s a b l e b a s i s f o r t h e s o l u t i o n o f the problem. ' . 2. Hie

p r o v i s i o n o f s u f f i c i e n t funds s o t h a t ENBESA mjîy undertake t h e basi .c works a l r e a d y planned and i n genera l t o double t h e progress achieved i n recent y e a r s w h e n ; i n s u f f i c i e n t funds.were a v a i l a b l e .

Such measures would a l s o comprise the fol lowing: ensuring through reasonable r a t e s a minimum p r o f i t -________________________ ' • < - • ' . ZJ loiters sent by the General Manageaent of ENDESA to the Executive Vice-P.residont of ti® Corporación

de FOB «A to: 1 September 1952. 30 JFOÇCJI 1955 and particularly on 10 January 19S6. 3J The installed power in the country's generating stations anoupis to J aiiiioo &W and this figura

should at least be doubled during the nextt ten years. , _ •

-108- i

a b i l i t y o f 8 t o in per cent on c a p i t a l , t o be p e r i o d i c a l l y revalued; p l a c i n g among t h e p u b l i c and p a r t i -c u l a r l y among u s e r s , t h e bonds and d e b e n t u r e bonds o f ENDESA and o b t a i n i n g l o n g - t e r m . c r e d i t i n t h e country and abroad. Moreover, the foregoing could be supplemented by S t a t e c o n t r i b u t i o n s which would be appl ied p a r t i c u l a r l y f o r t h o s e i n s t a l l a t i o n s which a r e uneconomic a t t h e b e g i n n i n g but which have d e f i n i t e development p u r p o s e s . " • ' - ' ' . 3) F i n a l l y , and as an immediate and urgent s t e p , in connexion with the provinces o f S a n t i a g o , Va lpara i -so and Aconcagua, t h e Government should come t o an agreement with the C i a . C h i l e n a de E l e c t r i c i d a d Ltda. on the terms for the l a t t e r t o proceed with the thermic i n s t a l l a t i o n s which were programmed long ago and which are already much delayed. ,

Yours s i n c e r e l y

Reinaldo Harnecker General Manager

F/npresa Nacional de E l e c t r i c i d a d S..A.

- \PPENDI X Y-P,

L E T T E R FROM THE GENERAL MANAGER OF ENDESA '

TO A P R I V \ T E FIRM , ;

S a n t i a g o , 9 March 1956

R e f : POWER S U P P L I E S FOR \ NEWSPRINT MILL IN

THE CONCEPCION AREA

Dear S i r :

We r e f e r to your l e t t e r o f 21 J a n u a r y and t o t h e c o n v e r s a t i o n between (name w i t h h e l d ) and our Manager, Mr. Raul Saez , on the p o s s i b i l i t y of supplying power t o a newsprint m i l l which i s t o b e i n s t a l l -ed in the Concepción a r e a . .

In t h i s connexion, we have revised our .demand f o r e c a s t s for the area and our power a v a i l a b i l i t i e s as from 1959 and we are s o r r y t o s t a t e t h a t at the present r a t e o f i n s t a l l a t i o n o f new g e n e r a t i n g s t a t i o n s by ENDESA we s h a l l not be able t o canply with the request . I t has been impossible t o a c c e l e r a t e the irate o f p l a n t c o n s t r u c t i o n owing t o t h e permanent d e f i c i t in t h e f i n a n c i n g o f t h e E l e c t r i f i c a t i o n P l a n a s a r e s u l t o f budget c u t s which have a f f e c t e d the Corporación de Fomento and which have caused lower c o n t r i -but ions from CDRFO to ENDESA,, . . \ .

We b e l i e v e however, t h a t i f the' f i n a n c i a l condi t ion o f FNDESA should improve e i t h e r owing t o g r e a t e r c o n t r i b u t i o n s obta ined from t h e Corporacion de Fomento i n t h e near f u t u r e o r t o t h e a c t i v e p a r t i c i p a t i o n o f t h e customers who a r e i n t e r e s t e d in us ing a p p r e c i a b l e amounts o f ,power, such a s i s t h e c a s e you r e -p r e s e n t , we would have no o b j e c t i o n t o supplying the power r e q u i r e d f o r the newsprint m i l l in the p e r i o d requested . ,

F i n a n c i n g o f t h e g e n e r a t i o n f a c i l i t i e s r e q u i r e d f o r t h e newspr in t m i l l c o u l d be e f f e c t e d by t h e c u s t o m e r ' s c o n t r i b u t i o n in n a t i o n a l or f o r e i g n currency t o cover the purchase o f equipment and a c c e s s o r y b u i l d i n g s t o be c o n s t r u c t e d by ENDESA. This c o n t r i b u t i o n would be p a r t l y compensated by the d e l i v e r y o f EMÉSA s h a r e s .

With r e s p e c t t o t r a n s f o r m i n g and t r a n s m i s s i o n f a c i l i t i e s from t h e power s t a t i o n t o t h e pr imary s u b s t a t i o n s , the c l i e n t should f inance the n e c e s s a r y works t o r e i n f o r c e present i n s t a l l a t i o n s so t h a t the r e q u i r e d power may be t r a n s m i t t e d . These i n s t a l l a t i o n s would be f i n a n c e d by t h e customer but would remain ENDESA's p r o p e r t y . ^

F i n a l l y , the c o n s t r u c t i o n o f t h e t r a n s m i s s i o n f a c i l i t i e s from t h e primary s u b s t a t i o n s t o the p l a c e o f consumption w i l l be f i n a n c e d e n t i r e l y by t h e customer , and w i l l be h i s p r o p e r t y i f they a r e f o r h i s e x c l u s i v e use . The o p e r a t i o n o f t h e s e f a c i l i t i e s would a l s o b e t h e c l i e n t ' s r e s p o n s i b i l i t y . I f , how-e v e r , the t r a n s m i s s i o n f a c i l i t i e s a r e s o b u i l t as t o se rve o t h e r c l i e n t s i n f u t u r e , ENEESA would r e t a i n

-=109-

ownership and would r e t u r n t h e v a l u e o f f i n a n c i n g t h e s e f a c i l i t i e s through a 20 p e r c e n t discount in power b i l l s f o r a term no g r e a t e r than 5 y e a r s . I f at the end o f t h i s per iod t h e r e i s an unpaid balance, t h i s w i l l b e n e f i t ENDESA on account o f the l a c k o f p r o f i t a b i l i t y o f the i n s t a l l a t i o n . t

Supply c o n d i t i o n s would be s i m i l a r t o t h o s e accorded o t h e r i n d u s t r i e s i n the Concepcion area and would i n c l u d e :

Ra tes are t o be f i x e d a c c o r d i n g t o t h e usua l p r a c t i c e ofcENDESA and w i l l be modified in s i m i l a r proport ions as those appl ied t o o ther i n d u s t r i e s in the area . The average l e v e l o f such r a t e s a t present s tands a t about 3 . 8 0 pesos p e r kWh. The agreement w i l l a l s o i n c l u d e a c l a u s e - i n Which the, customer commits h i m s e l f t o r e s t r i c t i n g demand during peakload hours, an o b l i g a t i o n which w i l l be compensated in the way o f applying the r a t e . As i s usual i n t h i s k i n d of agreement, t h e r e w i l l a l s o be a penalty for low power f a c t o r o f consumption.

We are at your d i s p o s a l f o r any f u r t h e r c o n s u l t a t i o n i n connexion wi th t h i s m a t t e r .

Yours s i n c e r e l y ,

R e i n a l d o Harnecker General Manager

Empresa Nac ional de E l e c t r i c i d a d S .A.

-=110-

ANNEX VI THE T R A N S P O R T PROBLEM

B o t h the v o l (ime and t h e n a t u r e o f t h e raw m a t e r i a l s and f i n i s h e d p r o d u c t s w h i c h f l o w t o and from t h e pulp and paper m i l l s make a good t r a n s p o r t system i n d i s p e n s a b l e t o e n s u r e c o n t i n u i t y and economy i n t h e i n d u s t r i a l o p e r a t i o n s . T a b l e V I - 1 i l l u s t r a t e s t h e magni tude o f t h e problem f o r a s u l p h a t e pulp m i l l w i t h a d a i l y p r o d u c t i o n o f 2 5 0 t o n s .

Table V I - 1

MATERIALS TO BS SRMSPORTEQ AT SILPHATE PULP MILLS WITH A DAILY CAPACITI OF 250 TOWS

(Tews d a i l y )

Unbleached pulp Bleached pulp

Traasporfe t o ®HX$

PaLprocd 1 » 1 7 5 ! » 3 2 5

(SSwaiealSi ©to® W 70 F o a L S ( c o a l a n d f u e l o i l ) 2 5

Total transport to ®UJ-8 lj>240 1*480 250 2 5 0

T o t a l t r a n s p o r t ls>490 1>730 ' 'm'. RR» • . ' ii u... . • . • . . - -.'- '. . - 4 MIH»» ^ ^ _ ^ '"J:"'"',"

S i n c e r e g u l a r d a i l y t r a n s p o r t o f t h e same t o n n a g e i s i m p o s s i b l e t o a c h i e v e , t h e t r a n s p o r t s y s t e m must be developed t o c o p e w i t h peak l o a d s which may b e c o n s i d e r a b l y h i g h e r t h a n t h e r a t e s i n d i c a t e d i n ' t h e t a b l e . T h i s i s p a r t i c u l a r l y t h e c a s e when t h e m i l l i s o p e r a t i n g on a y e a r - r o u n d b a s i s .

N e e d l e s s t o s a y , t h e t r a n s p o r t prob len v a r i e s c o n s i d e r a b l y a c c o r d i n g t o the p a r t i c u l a r m i l l s i t e and can o n l y b e d e a l t w i t h h e r e i n summary f a s h i o n . The o b s e r v a t i o n s and comments made i n t h e f o l l o w i n g pages r e f e r t o t h e P i n us r a d i a t a zone, i . e . t h e southern p a r t o f t h e c e n t r a l a r e a o f C h i l e . ( S e e map I a t t h e b e g i n n i n g o f t h i s r e p o r t . )

The t r a n s p o r t s i t u a t i o n i n t h i s a r e a , a s i n most p a r t s o f t h e c o u n t r y , i s f a r from s a t i s f a c t o r y . F o r t u n a t e l y t h i s p o s i t i o n i s today r e c o g n i z e d by t h e r e s p o n s i b l e a u t h o r i t i e s , who r e a l i z e t h a t t h e S t a t e s h o u l d p r o v i d e t h e p o r t , r a i l w a y and most o f t h e r o a d f a c i l i t i e s i n o r d e r t o e n s u r e a sound e c o n o m i c development o f t h e c o u n t r y . As a r e s u l t , p l a n s a r e now u n d e r way t o s o l v e t h e e x i s t i n g problems i n a r e a s o n a b l e , p e r i o d o f t i m e .

1. The road network

I n t h e a r e a o f P i n u s r a d i a t a p l a n t a t i o n s , which p o s s e s s e s a r e l a t i v e l y l a r g e road network , o n l y 30 p e r c e n t o f t h e roads h a v e ( ) a c c o r d i n g t o r e c e n t e s t i m a t e s , an a l l - w e a t h e r s u r f a c e . Many o f t h e s e " f i r s t c l a s s " roads a r e n o t , however, i n a c o n d i t i o n t o c a r r y heavy and i n t e n s e t r a f f i c , owing t o t h e i r s u r f a c e , Width o r l a y o u t . I n a d d i t i o n t h e b y - r o a d s a r e o f t e n narrow and i n s e c u r e . w h i c h p r e c l u d e s t h e use o f l a r g e t r u c k s .

-Ill-

In order t o s o l v e t h i s s i t u a t i o n -which i s not e x c e p t i o n a l f o r t h e country a s a whole- the Min is t ry o f P u b l i c Works and Communications i s c a r r y i n g out a f i v e - y e a r road development programme f o r completion in 1958, whose t a r g e t s f o r C h i l e as a whole a r e shown i n t a b l e V I - 2 .

Table ¥1=2

MINISTRY OF PUBLIC WORKS AMD OOMKIJHICÀÏIOHSG ROAD PLÂM I 9 5 4 ° 5 ê

Main North=South Highroad t o t h s North of S a n t i a g o 135o5 590 D0 $êo0 625O0

Main Worth-South Highroad t o t h a South of S a n t i a g o 6S5O5 Slo© 242oO 603o0

I n t e r n a t i o n a l r o a d s 106 o 5 léûoO 25oO c=»

Localp East=West r o a d s 2$ %2o2 20â93o3 694=3 328 o0

T o t a l 3s240o? 3 Ä o 3 929o3 1S556®0

Sourcsg M i n i s t r y o f P u b l i c Works a®d CcaattBieatioapo

I n a d d i t i o n t o t h e funds a l l o c a t e d by t h e Government f o r t h i s p l a n , t h e r e a r e two o t h e r s o u r c e s of f i n a n c i n g t o supplement t h e planned work: the l i q u i d a t i o n o f s a l e s mads under t h e A g r i c u l t u r a l Surplus Agreements and t h e A g r i c u l t u r a l and Transport Development P lan .

Hie A g r i c u l t u r a l S u r p l u s Agreements enab le G i i l e t o purchase a g r i c u l t u r a l commodities i n the United S t a t e s f o r which t h e r e i s a s u r p l u s in t h a t c o u n t r y . The v a l u e o f such s a l e s , l i q u i d a t e d i n pesos , i s i n v e s t e d in development p r o j e c t s i n C h i l e and i s r e p a i d t o t h e U n i t e d S t a t e s as a l o n g - t e r m loan (30 y e a r s ) . A c c o r d i n g t o t h i s s y s t e m , some 6 , 2 5 0 , 0 0 0 d o l l a r s ( 3 , 1 2 5 m i l l i o n p e s o s ) w i l l b e a v a i l a b l e during 1956, i n a d d i t i o n t o o t h e r funds, f o r c o n s t r u c t i o n , improvement and paving o f roads i n the Pinus r a d i a t a p l a n t a t i o n a r e a . *„ '•

Ihe A g r i c u l t u r a l and t r a n s p o r t Development P lan , prepared i n 1 9 5 3 - 5 4 by t h e government, i s aimed a t r a i s i n g the l e v e l o f a g r i c u l t u r a l production and improving t h e means o f t r a n s p o r t so t h a t t h e y harmonize w i t h t h e g e n e r a l economic l e v e l reached by the country . As t o roads, t h i s programme supplements the plan a t p r e s e n t under way. Hie f o r e i g n exchange f i n a n c i n g i n c l u d e s a r e c e n t l y - g r a n t e d loan from t h e I n t e r -n a t i o n a l Bank f o r R e c o n s t r u c t i o n and Development amounting t o more than 200 m i l l i o n d o l l a r s .

I t i s e s t i m a t e d t h a t i f t h e ' p l a n s and t h e funds a v a i l a b l e a r e used c o r r e c t l y and opportunely , t h e p r e s e n t road problem w i l l b e l a r g e l y s o l v e d by 1959 . .

F o r t h e t r a n s p o r t o f f i n i s h e d p r o d u c t s t o p o r t ( o r raw m a t e r i a l s i n t h e o t h e r d i r e c t i o n ) t h e b e s t economy w i l l b e a c h i e v e d by u s i n g t h e l a r g e s t p o s s i b l e v e h i c l e s c o m p a t i b l e w i t h t h e road c o n d i t i o n s . However, b e c a u s e o f t h e p r e s e n t s i t u a t i o n ; t h e M i n i s t r y o f P u b l i c Works and T r a n s p o r t s has recommended t h a t t r a n s p o r t c a p a c i t y o f t r u c k s should be l i m i t e d . T h e s e recommendations are i n c l u d e d V* appendix Vl-A.

P r o b a b l e t r a n s p o r t c o s t s f o r f i n i s h e d products have been e s t i m a t e d and t h e c a l c u l a t i o n s are included in appendix VI-B„

F o r t h e t r a n s p o r t o f pulpwood from f o r e s t t o m i l l i t i s u s u a l l y p r e f e r a b l e t o s e l e c t l i g h t e r and more manageable t r u c k s which w i l l have no d i f f i c u l t y on f o r e s t ro&ds; t h e l o a d i n g c a p a c i t y w i l l depend main ly on t h e c o n d i t i o n s o f such roads and t h e a v e r a g e t r a n s p o r t d i s t a n c e which f o r most o f t h e m i l l l o c a t i o n s w i l l p r o b a b l y n o t exceed 50 k i l o m e t r e s . The c a l c u l a t i o n s o f pulpwood t r a n s p o r t c o s t , included i n annex I I , a re based on a maximum loading c a p a c i t y o f t h e t r u c k s o f 11 t o n s .

- 112 -

\verage road c o n s t r u c t i o n c o s t s are l i s t e d in appendix VI-C.

2. Railways

The present r a i l s i t u a t i o n i s somewhat s i m i l a r . t o t h a t o f roads. There i s a f a i r l y complete, network in the Pinus r a d i a t a p l a n t a t i o n area and, with some improvement planned f o r t h e near f u t u r e , i t w i l l be q u i t e s a t i s f a c t o r y . R e s t r i c t e d l o a d c a p a c i t y a t p r e s e n t i s a lmost e n t i r e l y due a o t h e s h o r t a g e o f f r e i g h t s t o c k . In the southern network ( S a n t i a g o - P u e r t o Montt ) t h i s l i m i t a t i o n i s p a r t i c u l a r l y marked in March, .April and May, owing t o the movement o f wheat and o t h e r a g r i c u l t u r a l commodities a t the end o f surrmer.

The S t a t e Rai lways own a ] 1 t h e l i n e s i n t h e s o u t h e r n network , and have undertaken, .an-improvement programme for r a i l l i n e s way, r o l l i n g s t o c k and s e r v i c e s which c a l l s f o r an i n v e s t m e n t o f 62 m i l l i o n d o l l a r s plus about 6 b i l l i o n pesos . The f i r s t i n s t a l l m e n t o f the loan f o r the A g r i c u l t u r a l and Transpor t Development Programme provides fore ign exchanore for t h e e x e c u t i o n o f planned works, inc luding e l e c t r i f i -c a t i o n o f the Sant i ago-Chi 11àn s e c t i o n -which w i l l b e n e f i t t h e whole southern network by making communi-c a t i o n s with the c a p i t a l e a s i e r and more speedy- and through t h e p u r c h a s e o f o r d i n a r y and e x c e p t i o n a l replacement equipment. Moreover , a c c o r d i n g t o - t h e same p l a n , t h e Ra i lway Department o f t h e M i n i s t r y o f P u b l i c iVorks w i l l change the narrow gauge ( .1 .00 mertre) t r a c k on t h e Monte Aguila-Huèpi1 branch f o r a wide-gauge t rack ( 1 . 6 9 7 m e t r e ) ; t h i s i s a l i n e which s e r v e s an area o f l a r g e f o r e s t ! p l a n t a t i o n s .

Appendix Vl-D i n d i c a t e s current f r e i g h t r a t e s for c a r loads of var ious products , \f4ien a company has i t s own c a r s , the ra i lway p r o v i d e s t h e t r a c k s .v, e n g i n e s , p e r s o n n e l , e t c . and makes a 5 p e r cent d i s c o u n t o f f r e i g h t c h a r g e s . Appendix VI-D shows p r i c e s f o r v a r i o u s k i n d s o f r a i l w a y c a r s . T h i s appendix a l s o i n c l u d e s a n o t e on t h e c o s t o f b u i l d i n g s . i d i n e s .

Ports Talcahuano would be tho most s u i t a b l e port f o r the export o f products manufactured b y , t h è pulp and

paper m i l l s l o c a t e d in the p l a n t a t i o n z r e a . Die p o r t has v e r y f a v o u r a b l e g e o g r a p h i c l o c a t i o n arid e x -c e l l e n t na tura l c o n d i t i o n s , but does not. Vet p o s s e s s f a c i l i t i e s f o r docking v e s s e l s o f deep draught , : So t h a t loading and unloading must be done by l i g h t e r . l h i s procedure i s complicated, expensive*and hampers the p r o t e c t i o n o f pulp and paper p r o d u c t s from t h e r a i n . For t h e s e r e a s o n s i t i s most ì u n l i k e l y t h a t Talcahuano, in i t s p r e s e n t s t a t e , cou ld be used a s a main s h i p p i n g p o r t f o r pulp and paper e x p o r t s .

Ihe Department o f P o r t s o f the M i n i s t r y o f l ' i l i)l ie Works, however/ has plans under way t o expand t h e e x i s t i n g p i e r t o a l e n g t h of 180 metres and a width o f 120 metres with t h r e e b e r t h s f o r t h e mooring o f deep-draught v e s s e l s . This enlargement w i l l r a i s e the export c a p a c i t y by 600 thousand tons annual ly f o r mixed cargoes , a f i g u r e which w i l l be much l a r g e r i f par t o f t h e cargo i s uniform.

The p r o j e c t i s t o be f inanced by funds from t h e M i n i s t r y " o f P u b l i c Works ^nd from t h e " A g r i c u l t u r a l Surplus Agreements" . In t h e agreement f o r t h e p r e s e n t . y e a r , t h e e q u i v a l e n t o f 2 . 8 m i l l i o n d o l l a r s ( 1 , 4 0 0 m i l l i o n pesos ) has been a l l o c a t e d f o r t h i s purpose. I f t h e r e are no f i n a n c i a l d i f f i c u l t i e s , t h e p r o j e c t should be f i n i s h e d by ] % 9 . ' .. .' v, •

At the Naval l a s e at Talcahuano t h e r e i s a p i e r which can be used f o r deep-draught v e s s e l s and which o c c a s i o n a l l y has been made a v a i l a b l e for merchant s h i p p i n g . T h i s p i e r might be a temporary s o l u t i o n i f the export o f pulp and paper should begin s h o r t l y b e f o r e the new commercial p i e r i s completed.

^jpendix V I - F i n d i c a t e s l o a d i n g and sh ipping t a r i f f s .

4. Floating of pulpwood.

R i v e r f l o a t i n g o f pulpwood may b e contemplated i n some c a s e s , where road and r a i l systems a r e un-developed or n o n - e x i s t e n t . The problems involved w i l l o f course be s p e c i f i c t o each m i l l l o c a t i o n and an a n a l y s i s o f the p o s s i b l e u s e s o f t h i s means o f t r a n s p o r t i s t h e r e f o r e o u t s i d e t h e scope o f t h i s , r e p o r t . I t i s b e l i e v e d , however, t h a t only i n e x c e p t i o n a l c a s e s w i l l t h i s t r a n s p o r t method prove t o be compet i -t i v e .

- 1 1 3 -

Appeadix V I - A

RECOMMENDATIONS BY THE M I N I S T R Y O F P U B L I C WORKS AND COMMUNICATIONS

CONCERNING L I M I T A T I O N S IN TRUCK LOADING C A P A C I T Y

Hie recc®a«si<lLatiomsof t h e M i n i s t r y a r e as f o l l o w s : 1) W i d t h : No v e h i c l e , l o a d e d o r u n l o a d e d , s h o u l d e x c e e d a t o t a l e x t e r s a i w i d t h o f 96 i n c h e s

( 2 . 4 4 m e t r e s ) . 2 ) f f e ight : No v e h i c l e , loaded o r umloaebd, should enc^ed 3 h e i g h t o f 12 teefc 6 i n c h e s ( 3 . 8 1 métras), 3 ) Length : a ) No t r u c k , loaded or unloaded eay have a l e a g t h ( i n c l u d i n g f r o n t and r e a r f e n d e r s )

e x c e e d i n g 35 f e e t ( 1 0 . 6 7 m e t r e s ) . b ) No combinat ion o f t r u c k and t r a i l e r o r s e m i - t r a i l e r , loaded or unloaded, may exceed a t o t a l l e n g t h o f 50 f e e t ( 1 5 . 2 4 m e t r e s ) i n c l u d i n g f r o n t and r e a r f e n d e r s . c ) No o t h e r combination o f v e h i c l e s may c o n s i s t o f more than two u n i t s n o r have a t o t a l length e x c e e d i n g 60 f e e t ( 1 8 . 2 9 m e t r e s ) i n c l u d i n g f r o n t and r e a r f e n d e r s .

4 ) P e r m i s s i b l e l o a d s : a ) No a x l e should support raore than 1 8 , 0 0 0 pounds ( 8 , 1 6 5 k i logrammes) . (Aa a x l e load can be ds f ined as t h a t t r a n s m i t t e d t o the road -by a l l the wheels whose centres

a r e found w i t h i n two p a r a l l e l and v e r t i c a l t r a n s v e r s e p l a n e s s e p a r a t e d by 40 inches ( Ï . Q 2 m e t r e s ) and which e x t e n d throughout t h e t o t a l width o f t h e v e h i c l e ) , b ) No group o f a x l e s should b e a r a h e a v i e r burden than t h a t i n d i c a t e d i n t h e fo l lowing t a b l e , which i n d i c a t e s t h e l e n g t h w i s e d i s t a n c e between e x t r e m e a x l e s o f t h e group rounded t o t h e n e a r e s t v a l u e i n f e e t .

a ^ i o s o f easy gyoap o f a s t o s

Peste

( l o 5 2 ) (lo52)

m ,So05)

II [5om

M s s d o « l o a d on aay ©f a x l e s

S2p000 32pOOO 32s610

35s510 36» 470

3Si>360 39»200 40s230 42,080 42s990

( U , 5 L 5 ) (14*52 5)

( 1 4 a 5 1 5 )

(15*232)

( 1 6 s 5 4 3 )

( 1 6 , 9 7 4 )

( 1 7 , 4 3 0 )

( 1 7 * * 2 6 ) ( 1 8 s 2 4 8 )

( 1 0 . 6 7 0 ) (19,08?) ( 1 9 , 5 0 0 )

( 1 9 * 9 1 3 ) (20,321)

(21A33) . (as532) (a,932)

-=114-

Distance between extreme axles of any group of axles

Maximum load on any group of axles

Feet 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57

Metre 8 (7.92) (8,23) (8»53) (8.84) (9ol4) (9.45) (9-75)

(10.06) v10.36> (10.67) (10*97) (11.28) (11.58) (11.89) (12.19) (12.50) (12. 80) (13.11) (13.41) (13.72) (14.02) (14.3^) (14.63) (14.94) (15.24) (15.54) (15.85) (16.15)-a6.46) (16.76) (17.07) (17.37)

Pounds 49*220 50,090 50 , 950 51,800 52,650 53,490 54,330 55,1^) 55,980 56,800 57, a o 58,420 59,220 60,010 60,800 61,580 62,360 63^130 63,890 64,650 65,400 66,150 66,890 67,620 68,350 69,070 69,790 70,500 71,200 71.900 72,590 73,280

Kilogramme (22,326) (22,721) (23,111) (23,496) (23,882) (24,263) (24,6A4) (25,021) (25,393) (25,764) (26,132) (26,499) (26,862) (27,221) (27,579) (27,933) (28,286) (28,636) (28,981) (29,325) (29,665) (30,006) (30,341) (30,672) (31,004; (31,33^) (31,657) (31,979) (32,296) (32,a4) (32,927) (33,240)

Con e l u s i o n s Since the length of truck and t r a i l e r should not exceed 60 feiet and the t o t a l maximum load i s

33 tons for the greates t distance between axles compatible with the maximum length of 60 fee t , i t wi l l not be possible to transport a greater weight than 33 tons. This tonnage inc ludes the tare of both truck and t r a i l e r so that when t h i s i s discounted (11 tons or one third of the weight), the t o t a l net load which can be transported does not exceed 22 tons for a combination t r u c k - t r a i l e r .

The recommendations on maximum length, height and width l imit the maximum useful volume and length of platform. Taking i n t o account the loss for cabin space, junc t ion of truck t o - t r a i l e r and fenders, the maximum of 60 feet allows a t o t a l length of platform (truck plus t r a i l e r ) of 14 metres. The t o t a l admissible height and width l imit the useful volume to 5 .86 cubic metres per l i n e a l metre of platform, which gives a t o t a l maximum volume of 82 cubic metres.

This volume wi l l e a s i l y allow in the case of pulp and paper for a maximum load of 22 tons.

-115-

Appendix VI-B

COST OF TRANSPORTING FINISHED PiDDUCTS FROM PLANT TO PORT

A. Basis for the calculations:

Type of truck Truck with t r a i l e r , with total transport capacity of 22 tons. Price: 11,600,000 pesos.

Diesel and oil consumpt i on

Consumption of petrolersa has been estimated at 0.67 litres per Km., and oil at 1.15 l i t res per 100 km. Current price: Diesel oil : 33.80 pesos per l i t re ; lubricating oil : 370 pesos per l i t r e .

Inner tubes and tires

A Set of inner tubes and tires is estimated to last. 30,000 Km. Hie price of a set is 1,170,000 pesos.

Labour Each truck will be operated by two drivers, who will travel together, in seven hour shifts each. Total work per team and year: 2,100 hours, which is 4,200 man-hours. Monthly salaries are 50,000 pesos per driver but each earns 2 and a half times this Esaount since overtime is paid with a 50 per cent surchar-ge , Therefore, including 26 per cent for social security, the annual cost of the two drivers is 3,780,000 pesos.

Lubri cation

Is is estimated that this will amount to double the figure estimated for the 11 ton trucks used for wood transport..

Repairs and maintenance

The cost has been estimated at 40 per cent of the total of aperation costs plus amortization.

Amortization The amortization period i s 5 years, at the end of which the truck and t r a i l e r will have a- recovery value of 20 per cent of the ini t ia l value.

In order to calculate costs of operation per kilometre, i t has been assimed that the average speed will be 40 kilometres per hour, that loading and unloading will take one hour and that 30 additional minutes will be lost through stopping on the way. It is estimated that to load and unload 22 tons in one hour, 6 men will be required (3 in the plant and 3 in the port) in the case of pulp and 3 men in tie case of newsprint. On the basis of monthly salaries of 40,000 pesos and 2,100 work hours annually, including 26 per cent for social security, loading and unloading costs are 78.50 pesos per ton for pulp and 39.30 pesos per ton for newsprint. Depreciation for the necessary equipment has been included in the mill cost.

-=116-

Tabi© VI-B-1

DISTANCE OF TRIPS AND TRANSPORT CAPACITY OF TMJCKS, ANNUALI!

Distance with load (km)

50 60 7 0 80 90 100 120 1 4 ° 160 180 200 230 2 5 0 270 300

Total tiros of round trip (min) 2 4 0 2 7 0 300 330 360 390 4 5 0 510 570 6 3 0 6 9 0 780 8 4 0 900 990

of trips annually

( - )

.5

.5

962= 8 2 5 687 c 6 8 7 , 550 550j, 4 1 ^ . 5 412» 5 4 1 2 o 5 2 7 5 2 7 5 2 7 5 2 7 5 2 7 5 2 7 5

Total distance with load (laVyear)

48,100 4 9 , 5 0 0 48,100 5 5 , 0 0 0 4 9 , 5 0 0 55,000 4 9 , 5 0 0 5 7 * 7 5 0 66,000 4 9 , 5 0 0 5 5 , 0 0 0 6 3 , 2 5 0 6 8 , 7 5 0 7 4 , 2 5 0 82,500

Annual capacity of truck (tons)

2 1 , 1 5 0 1 8 , 1 5 0 1 5 , 1 3 0 1 5 * 1 3 0 12,100 12,100

9 , 0 7 5

9 , 0 7 5 9 , 0 7 5 6 , 0 5 0 6 , 0 5 0 6,050 6 , 0 5 0 6,050 6 , 0 5 0

jy' Owing to the nature and conditions of transport, daily trips have been rounded to the lower units or half units, so that there is an irregular regression of th© annual num-ber as distance increases0

B. Costs of operation

Transport costs have been ca lculated , with the b a s i c data indicated above, and are shown in ta~ ble VI -B-2 .

= 117 =

Table VI-B-2

TRANSPORT COSTS FOR HMXSHED PRODUCTS* INCLUDING LOADING AND UNLOADING

t r a n s p o r t d i s t a n c e ° s i n g l e t r i p (km) 70 100 1 4 0 ISO 250

C o s t of o p s r a t i o n

1 9 D i e s e l o i l 45oOO 45®00 45eCO 4 5 * 0 0 4 5 . 0 0 4 5 . 0 0 2« L u b r i c a t i n g o i l 1 1 . 0 0 lloOO l l o O O 1 1 . 0 0 1 1 . 0 0 1 1 . 0 0

3® L u b r i e a t i c a 3o20 3 . 20 3o20 3 . 20 3 . 2 0 3 . 2 0 4« I a a ® r t u b e s and t i r e s 3 7 8 . 0 0 7 8 . 0 0 780QO 7 8 . 0 0 7 8 * 0 0 7 8 . 0 0 5® L a b o a r 7 8 . 4 0 7 8 . 4 0 65o30 7 6 »00 5 4 . 8 0 6« R e p a i r © ®JSQL

8 7 . 6 0 fi&±nt@aanc® h / 1 0 1 0 7 0 1 0 1 o 70 95o?0 S3oB0 1 0 0 . 2 0 8 7 . 6 0 (e i^oacajag ASG IMI.<3SQ2USW

P u l p 34» 5 0 24.70 17o39 1 2 . 3 0 9 . 6 0 6 . 9 0 F & P S F l?o2© 12o40 806D 6 , 2 0 4 . 8 0 3*40

3 5 L @ 342©00 598 .60 3 2 3 . 0 0 2 8 6 . 5 0 d e l l a r s OofOh Ö.6H4 ©063S 0 . 6 1 7 0.646 0 . 5 7 3

Total pa lp ? ps so® 329.7© 310ol© 3 0 2 . 5 0 3 1 8 . 3 ) 2 8 3 . 0 0 d d H a y s Qo6&9 0 o 6 5 9 0 . 6 2 0 0 . 6 0 5 0 . 6 3 6 0 . 5 6 6

C a p i t a l c o s t s ©/ Be A m o r t i s a t i o n t r o e k s 4 \J 38.60 38 .60 33 .80 3 2 . 2 0 3 7 . 5 0 2 7 . 0 0 9« ^ a o r t l s a t i o n housing 2/ 2 . 3 0 2.30 2 „09 1 . 9 0 2 . 3 0 1 . 6 0

Total 1 p e s o s 4 0 . 9 0 4 0 . 9 0 35« 80 34 .10 39 »80 2 8 . 6 0 d o l l a r s 0.082 0.082 0.072 0 . 0 6 8 0 . 0 8 0 0 . 0 5 7

T o t a l @/ p a l pi p e s o s 392.TQ 3 8 2 . 9 0 354 . 60 342 .70 3 6 2 . 8 0 ° 3 1 5 . 1 0 " ~~ d e l l a r ® 0 . 7 8 6 0 . 7 6 6 OoTIO 0 . 6 8 5 0 . 7 2 6 0 . 6 3 0

T o t a l pap®^! p e s o s 3 75 * 40 370 .60 345 .90 336 .60 3 5 8 . 0 0 311.60 d o l l a r s 0 . 7 5 1 O.74I 0.692 0 . 6 7 3 0 . 7 1 6 0 . 6 2 3

Interest tj 6 0 . 2 0 60o20 52.60 5 0 . 1 0 5 8 . 5 0 4 2 . 1 0

T o t a l p u l p i p e s o s 4 5 2 . 9 0 4 4 3 . 1 0 4 0 7 . ^ 3 9 2 . K) 4 2 1 . 3 0 3 5 7 . 2 0 d o l l a r s 0 . 9 0 6 0 . 8 8 6 0 . 8 1 4 0 * 7 8 6 0 . 8 4 3 0.714

Total papers pesos 43506O 4 3 0 . 8 0 398 .50 3 8 6 . 7 0 4 1 6 . 5 0 353.70 d o l l a r s 0 . 8 7 1 0 . 8 6 2 0 . 7 9 7 0 . 7 7 3 0 . 8 3 3 0.707

s/ Maintenance o f h o u s i n g i s i n c l u d e d i n eon iMmi ty o s p s n d i t u r © f o r workers and employees. b/ 40 per eent of i t e a s 1 - 5 and 8 0

e/ Excluding interest« a/ 5 years w i t h 20 pe r een t r e s i d u a l v a l u e 0

bJ 20 years. °tj 10 p e r cen t o f bode v a l u e that i s > 6 pa r e®nt a w r a g e i n t e r e s t o f investment in trucks

and 5 P 8 ? cen t f o r h o n s i n g o

-118-

I f these figures are expressed in pesos per ton for the t o t a l dis tance , the following table i s obtained:

Table VI-B-3 TRANSPORT COSTS FOR FIKISHSD PRODUCTS, INCLUDING LOADING AND UNLOADING

(pesos per ton and total distance) Transport distance = Single trip (Km)

50 70 100 140 180 250 Cost of operation (pulp) 1,600 Cost of operation (paper) 1,530 Capital cost, excluding interest 186

2,176 2,097 2a

2,900 2,818 327

3,926 3,850 433

5,285 5,204 655

6*511 6,432 648

Total paLp, excluding interest 1,786 Total paper, excluding interest 1,704

2,437 2,358

3,227 3,145

4,359 4,283

5,940 5,859

7,159 7,080

Interests 273 382 500 636 982 909

Total pulp Total paper

2,059 1,979

2,819 2,740

3,727^ 3,645

4,995 4,919

6,922 6,841

8,068 7,9S9

Table VI-B-4 HOUSING COSTS

Investment required:

Number of workers Separe metres of construction

Costs 1,000 pesos

' Singles 3 24 y . 576 - . . —

Married 5 350 8,400 Total 8 374 8,976

Annual costs per trucks h 000 pesos Repayment period, 20 year3 112.2 Interest, 10 per cent of bo<& value 112.2 Cost per kilometres Transport distance with freight, Km 50 70 100 140 180 250 Annual distance with freight, 1,000 Km 48.1 4801 55oO 57 08 49o5 68o8 Depreciation, pesos per Km 2o30 2.30 2o00 1.90 2.30 1 o6C Interest, pesos per Km "2.30 2.30 2o00 1.90 2.30- 1.6C ^ Additional area required for community facilities for industrial workers0

Appendix VI-C

COST OF ROAD-BUILDING J J Present road-building costs in the central-southern region of Chile are as follows:

Millions of pesos per kilometre

6-metre gravel road 6-metre concrete road a j b/ 7-metre road:

5 12

Building and levelling Concrete surface &/

8 10

Total 18

a / Road surface 18 eta. deep, b/ Favourable topographical conditions.

The square metre of concrete 18 centimetres deep costs 1,450 pesos. There are no recent data on paving with asphalt since this procedure has not been used for some time, but i t is estimated at 70 per cent of concrete, that is about 1,000 pesos per square metre.

1/ S o u r c e : Ministry of Public Vorks and Comuni cat i o n s .

-120-

Appendix VI-D

RAILWAY FREIGHT RATES BX CARLOADS lo NEWSPRINT ROLLS

Distance Freight charges Freight charges (kilcsaetre) per ton per toa-km

(pesos) (pesos) 5 186 37*20

10 256 25.60 20 395 19.75 30 526 17.53 AO 650 16.25 50 774 15.48 60 8 7 8 14.63 70 982 14.03 80 1,08? 13.59 90 1,191 13.23 100 1,295 12.95 120 1,465 12.21 140 1,635 11.68 160 1,797 11.23 .180 1,951 10.84 200 2,105 10.52 230 2,429 10.56 250 2,645 10.58 2?0 2,853 10.?? 300 3,165 10.55 350 3,685 10.53 400 4,205 „ 10.5L 450 4,60.0 10.24 500 5,015 10.03 550 5.340 9.71 600 5.665 9.44 650 5,990 9.22 700 6,315 9.02 750 6,640 8.85 800 6,945 8.68 Source; Supresa de Ferrocarriles del Est ado <,

-121-

2 . KRAFT PULP

Freight charges Freight charges per ton per ton «-km (pesos) (pesos)

160 32*00 218 21,80 335 16.75 447 14.90 553 13.82 649 12.98 749 12.48 839 12.00 929 11 »61

1,019 11.32 1,109 11.09 1,253 10.44 1.397 9.98 1,534 9.59 Is 664 9.25 1,794 8.97 2,144 9® 32 2,379 9.52 2*551 9.45 2,809 9.36 3,239 9.25 3s669 9.15 4,019 8.93 4,369 8.74 4,649 8.45 4,929 8.22 5,209 8b01 5,489 7.84 5,769 7.69 6,039 7.55

-122-

3„ COMMON SALT, LIMESTONE, KAOLIN AND SODIUM CARBONATE

Distance (kilometre)

5 10 20

30 40 50 60 70 30 90

100 120

110 160 180 200

230 250 270 300

Freight charges per ton (pesos)

Freight charges per ton «»km (pesos)

115 I f i

242 323 400

542 607 672 737 802 902

1»C02 1,101 1,209 1,297 1,627 1,847 1,983 2,187

23 »00 15.70 12.10 10.77 10.00 9.60 9o03 8.67 8.40 8.19 8.02 7*52 7®16 6.88 6.72 6.48 7.07 7.39 7.35 7.29

- 123-

4« MÜS RCÜTOÖOB

m Fr@igMì eteges Freight charge Distane© A.«™ „:* . „ (kilometre) (¡»sos) (pesos)

5 136 27.20 IP li! 18.50 30 2 Ì 5 14.25 30 • .'. ' • ISO 12.67 4 0 4 7 0 11.75 50 ' . 552 11.04 é0 636 10.60

714 10.20 79© 9.88 866 9.62 942 9.42

1*065 8.88 l*lß? 8.48 1.304 8.15 1*415 , 7.86 1*525 7.62

-12 4- .

5o SALT CAKE AND AIUM

Freight charges Freight charges Distance „ r t o n par ton=km (kilometre) (pesos) (pesos)

5 135 27°00

10 186 18o60 20 28? 14»35 30 383 12.77 40 473 11 «82 50 563 11« 26 60 638 10.63 70 713 1°°19 80 788 9.85 90 863 9o60

100 938 9.38 120 1,060 8.83 140 1,182 8.44 160 1,299 8ol2 iao 1,411 7 084 200 1,523 7o62 230 1,862 8o10 250 2,088 80 35 270 2a 242 8o30 300 2o473

,-125-

ANNEX VII

AM) CAPITAL io B&sis for estimates of investments "

The figures submtted by Karlstads ¡fekaniska Verkstad A.B., Sweden to the Pulp and Paper Conference in Birsnos Aires 1954 have been used for the pulp m i l l s and integrated pulp and paper m i l l s . _1/ As a general rale these figures have been increased by 20 per cent, which i s the price increment indicated by the Ccaiftany for the period firam April 1954 to the beginning o f 1956.

Unvestsemtg in newsprint m i l l s are estimated by the Advisory Group, partly from data submitted by Parsons & ISkitteEtare I n c . f New York and'Karlstads Mekaniska Verkstad, part ly from private information by other somsces. (Sse table ¥11=3). cost o f newsprint machines varies widely according to the make and courstry of origin» His sirices ased in the present estimate are European prices .

The fbl 1QOT.ES cost itesns haw been revised beearase ©£ differences in the equipment specif icat ions and local oasts in Qaile:

(a) Pmlp aills

JSeo 17: Tfce investment fcao bcsen increased by 35 per cent over the Karls tad f igures for bleached <paliti.es, since £x"ssh weter io l ike ly to be of poorer quality in Guile and will require more eleborsfee.. fceieeitenfcs, r

liea 13:. To obtain s e l f - s u f f i c i e n c y in poncr for fefee production of bleached qual i t i es t h i s item has beea increased as follows:

300 MiiM.<ssa@3, pssos?,, tSEJo 1 s l

MäiMsasä, te/aefeo £®s> feoÜ,og>0 <ä<Äcs>o ÄfQ® 43,500 MäalfeäsaGä feiofeo £<s®> tesffiMiao gpM&s&opo 2f 0gS® S3>i>§30 134,^30

afidlo SsfcoctaaEfe khz®S© i2s0®0 H

Jtea 23.°; revised Eseogding to Local 1 atoms? (Dosts» 24: 7 .5 t® 10 ¡per cent @£ to ta l o$s& o£ ecpipcsrot depending on mill s ize .

Jfcea 25: lite co3to hove been depreciated i n re lat ion to the estimates by Karlstads because of low cost loeal loSsou:?,, Estimates correspond to approximately 3 .5 per cent o f the c . i „ f . cost o f

.taeclaafflefey» - ^

Tien 27: Local eoastrucfcion cos t s o f industr ia l buildings are 15,000-17,000 pesos per square metre Gaud 28,000 pesos per sqraare metre for o f f i c e s , which correspond to approximately 8 .00 and 17.59 dollars respectively per ctubic eaefcre. Volume o f buildings are recorded in table VII-4.

lien 23: Based ©¡a a ecst of 30,000 dollars per k a , including junctions.

XteD 29: Estimated at 7 .per cemfc o f © i l l investment,,

J!/ So o Palp QQ & P@poe Psaap oeio la Latin Aaoziees: op„c.ie.„ page 150.

* (Sac tablos eod VII-2).

- 1 2 8 -

ISea 31: See tables VII-7 and VIX-8, and figure VII-VI.

(b) Integrated paper aills

Same basis as for pulp mills except for Item 7, which i s estimated according to footnote in the investment table. Building volumes in table VTI-5.

Itea 20: See figure VII-VI.

(c) Newsprint ail Is

ISea 3: Estimates by Parsons & %hittemoie Inc.

It<s& 5: For mills of 109 and 200 toas daily capacity, one paper machine. For mills of 300 and 400 tons 2 p^>er machines.

I Sea ii: Estimates made' m follows: (See also table VIII-3).

is ICO 209 ^XJ

15oS 31o& 4 7 o 5 6 3 o 5

Mf lj

a© g©ao?afc®3? • 290 400. 50© teaasforaepoo cak>°c3Gti@ao CJES

2S9 .57® 760 —i • "

TOO' 1»165 2,030

Items 23 © ^ 24.* Sae taMe VH-6^

I$&3 27: Sss figuups VM-ML

= 129 =

Table VII-1

INVESTMENTS* PULP MILLS

(Thousands of

M i l l s i z © 50 tons/day 100 tons/day 200 tea as/day — ÌWT— "" "l'1 'It1 ' 300 tons/day Unfal. 01. Uiiblo Bl. Unbl. BX o Uabl. HI.

lo Logyard 125 125 135 135 150 150 280 280: 2o Wood prep, depfc» & chip

silos 370 370 525 525 650 650 880 ¿80 3o Digester & diffuser depts 3. 455 455 525 525 830 8 30 1,160 1,160 4° First screening dept. 250 250 425 425 610' 610 790 790 5= Bleaching dept. = 300 . 430 565 - 695 6o Electrolytic plant &

bleach, liq.prep. » 625 765 „ 880 995 7o Salt store 5 <= 6 7 - 8 So Sscond screening dept. = 95 = 145 - .190 255 9o Pulp drying machine dept 330 330 540 540 990 990 1,435 1,435 10 o Pulp store 15 15 18 18 20 20 • 23 23 Ilo Evaporation plant & soda

recovery 950 950 1,205 1,205 1,460 1,460 2,«JO 2,200 Sulphate stor® 15 15 IS 18 S 20 23 23

13. Caustieizing dept. 255 255 485 485 690 690 910 910 14 o Piping between different

buildings 70 81 93 110 130 145 150 170 15» Electrical motors & eablss 140 175 230 280 .395 450 535 600 16. Insulation material &

woodwork 21 25 28 31 36 41 43 43 17. Water purification plant

& pump station 115 ,150 170 ' 220 310 400 405 525 18. Steam & power station 600 670 720 835 810. 995 880 1,115 19. Machinery in repair shop 185 185 210 210 230 230 255 255 20. Machinery in fire station 28 28 28 28 28 28 28 2l>o Laboratory equipment 17 17 23 23 23 23 23 22. Office equipment 23 23 28 28 35 35 46 46 23. Excavation & planning of

sit®. 125 130 170 180 235 250 310 330 24. Cost of freight 375 420 495 550 665 740 960 1,070 25. Cost of erection 150 190 205 275 . 280 365 420 535 26. Administration during

erection 75 75 120 120 170 170 190 190 27. Cost of buildings,

chestss ete» 15,010 1,255 1,175 1,415 1,595 1,910. 2,175 2,545 28. Railway lines on mill sit© 90 90 120 120 150 150 180 180

29. Enginesring fees 401 511 549 673 738 911 999 1,211 30. Total mill investment 6,190 7,815 8,2)10 10,320 11,250 13,905 15,300 ,18,520 3Lo Investment in housing

and community 620 700 740 840 930 1,060 1,170 1,330 32. Grand total 6,810 8,515 9A50 11,160 12,180 14,965 16,470 19,850

= 130 =

Sabla m - d

s a ? n a s t s u r a » CHAS s ©f

lo 2o So lo éo 7o @o

PeùLp aill O^MESS^ P&psr B£11 OQgMESgy 2 H©@tïdi8 a©fe©s>o and ©afeloo Pip&ssg bottÂ3©B baiXdiiago lasalatica agèesial ccssbosis !ï&tQF gasdf&g&èica jpâQS) asâ paQg> sèafeiesi

aaâ psijos3 pLsœrè fo ia fis^ ofcafcio

Ho

13-Ifo léo l?o 18o

éteins ©E sfeica OS=®@ti(S3

lESglJ£D05?iS)Q 2cQG ®a£l€iE!i|8s ©fcsoèoj, ctè@0 3âssav®feî®a osâ ©S c&feo Soâlt^ liHOO CsLfeO

-3.5

li 2 . S

125 •âO©

IcSif 11® M ®

©59

1 5 5

2SS

1 ^ 5

19o rcm tevootoi^G %èo Sesoisg mû @s m> 1Î>@SI U3&-

Sofed âjawoËDcafes i

n<sfe08 Basio ooMnofèo s«et> ao £©5? p2 S© ©fefeeàgi cdLi' Gaf ieieffiQy

aiUoo 7©? i-feee f feao fe« ¡©m. £a§s,©ai3®â a© •8'

ElOT, S® jggi jllSL $©¡30 jp©s> dey ElOT, » l o llo fÉlo Mo Mditi@aal ©ffeet s ai cfi K7 Mâifeifîîûl toafe gas> teo ECxçais^ SfôaT

ê>25 IsSOO 1*259 ëoèê 14o4)@

gGfèlnsèéi <sm%8 to?MBO/g©ss©s>a,è<eE:> SofeioafeQâ e®©t.8 fe@Slo5? ^o®

33oO o® SLoO

Mûo £ave©t£a@sife ?©cpi3?câ &éoû ÊÛU© . Ê3o®

-=133 =

Table VII=3

XiWiSTMEM'Ss MSfeíSPRIMT Í3XLLS

(Thousands off dollars)

newsprint mill capacity Sulphite pulp section 30 tons/day

200 tons/day 40 tons/day

bons/day 60 tons/day

lo Logyard equipment 130 150 170 .210 2o Barking department HP 190 290 370 3o Chemical palp section 900 1,540 2,150 2,750 4» Mechanical pulp section«

inclo f i r s t screening depto m 1,950 ±?2<?a 3,130 MM 4,350 2,330 5,530 Paper mill

5o Papsr machine Sj, in el o drives rselers and rewinders 2,750 4 ,450 7 ,000 8, SOO

6» Stock prep» equipment 190 305 440 560 7» Finishing depto 25 40 60 7 5 8 . Motors, cables &

intrument a 150 200 300 380 9o Pipings 3,175 a 5,085- 120 7,920 1&) 9 , 9 7 5

1 0 o Water purification & pump station 170 310 405 530

i i o Steam and power sta= tion inel0 transform» er station 700 1,165 1,570 2,030

1 2 o Piping between build= ings 140 300 240 280

1 3 o Machinery in rapair shop 200 300 350 390

14« Machinery in f i re station 30 30 30 30

1 5 o Laboratory equipment 25 25 30 35 l 6 o Office equipment 3 ° 1,295 35 2,065 45 2,670 SL 3 , 3 4 5 1 7 o Freights, and export

packing equipment 810 810 1,280 1,280 1,870 1,870 2 , 3 5 0 2 , 3 5 0

1 8 o Total Coiofo 2,230 11,560 16,810 a , 200 1 9 o Cost of erection 250 "395 58O 730 20o Adm„ during erection 130 200 290 360 2 1 , Engineering fees 630 1,010 1,000 Is 595 IJLM 2 , 3 4 0 1,830 2 , 9 2 0 22o Excavation and plan^ —rr*

aing of site 130 IK) 225 280 23o Buildings, chests.

etc» 1,050 1,400 1 , 8 0 0 2 , 1 5 0 24o Buildings, offices 70 80 85 90 25o Railway lines on

mill s i te 140 1,390 ¿22, 1,830 190 2,300 210 2 , 7 3 0 26o Mill investment 9,630 14 ,W5 21,450 2 5 , 8 ? ) 27o Cost of housing' and

= 132 =

Tabi® ¥11-4 BUILDING VOLUMES g H3LPMILLS (Thousands of cubie aistres)

Mill gjjgog teas ps>r day 50 100 200 300

Untolo BXo U i & l e B l o U n b l o Blo Uziblo Bl» Wood pr®pD d©pto and chip ©ilo® 9*7 9*700 11,600 11,600 15,600 15*600 a , o o o a , o o o Digester and diffusser depto 15P0 15*000 23*000 23,000 40,000 ¿¡0,000' 55*000 55*000 First screening dept«, 9»2 9*200 12,100 12*100 16,690 16,600' 33,500 20,500 Bleaching depto 11,200 13* 500 15,200 17*500 EleetraLytie plant and bleaebo liqc prep0 8,900 9*500 11*100 13,200 Salt store 900 1,000 1,100 1,200 Second screening dept» 6,900 8^000 10,800 14,500 Pulp drying machine depto 7«9 7*900 10,OCX) 10*000 12,500 12*500 20,100 20*100 Pulp store 6o0 6*000 8,000 8,000 13*000 13*000 18*000 18,000 Evaporation, plant and soda •

recovery 19o5 19*500 21*1000 21*100 28,500 28,500 38*500 38,500 Sulphate store lol 1,100 1*300 1*300 1*500 1*500 1*700 1*700 Oausticising depfco 6*8 6*800 12,600 12,600 16*500 16,500 25*300 25* -JQÓ Water purification plant and pomp station 10 o4 10,400 11,000 11,000 14,800 14*800 20,000 20*000, Laboratory 2 o 0 2,000 2*000 2,000 2,000 2,000 2*000 2,-000 Steam and powsr station 1 2 o 6 12*600 12*900 12*900 17*400 17*400 28*500 28,500 Repair shop I 6 0 8 16,800 16,800 16*800 16,800 16,800 16,800 16,800 Fire station 0o3 300 300 300 300 300' 300 300

Total industrial bid,ding 117o3 145*200 142,700 172*700 195*500 234*700 267*700 314*100 Offices 4o0 4*000 4*000 4*000 4*000 4*000 '4*000 4*000

Total constructiosa 121o3 149*200 146*700 176*700 199*500 238*700 271*700 318,100 COST OF CONSTRUCTION

(IsOOO dollars) Industrial 938 1*154 1,142- 1,382 1,564 1,8? 8 2*142 2*513 Offices 70 70 70 70 70 70 70 70

Total pOOS 1,224 lpZL2 1,452 1,634 1,%8 •2$ 212 2,583

= 1 3 3 =

Table VI1-5

BUJLDXMG VOLUMES? INTEGRATED MILLS

(Thousands of cubic metres)

Mill eapacity 50 tons/day

Uableaefoed Bleaehsd

100 tons/

Unbleaek®

day

d Bl®ach«

Wood pr©p. d©pt. aad e !xip s i l o s fo7 9°7 U o 6 11.< Digester and áíítamr i®pto f 15o0 15.0 23 .O 23.C First screening dept. 9.2 9.2 12ol 12.3 Bleaching d©pt0 l l o 2 13.! E l e c t r o l y t i c plaat asá bleach liq0 pr©p. 8.9 9.! Salt storQ 0.9 l.C Sseond sereoraing d@pto 6.9 8.C Evaporation depfco and soda ree@very If o 5 19*5 21.1 21 o. Salphat© ©tor© l o l l o l lo3 1 . : Gsastieiaiag dopt. 6oi 6.8 12.6 12.é Beater room and sias pj 3.6 3.6 6.7 6ol Paper machine rocs 25oQ 25.0 49.0 49 .C Sorting asd fiaishiag iepfeo 10 oO 14.0 18.0 25.0 Papar store 3.8 3.8 5.0 5.0 Water pur i f icat ion 'pLm at & pamp station 10. 10.4 11.0 ""11.0 Laboratory 2.0 2.0 2.0 2.0 St©® and power plant 14.0 16.0 16.0 18 .C Repair shop A, . 16.8 16.8 16.8 I608 Fir® statioa 0.3 0.3 0.3 0.3

Total industr ia l bir Lld±a¡g 147 o 2 181.1 336.5 247.5 Offieo \ 4.0 4.0 4.0 4.0

Total • 1 5l> 0 185.1 210.5 251 "5

XadnastriaX buildiag© Offie® Total bnailding cost

GOST OF COMSTRUGTXON (IflOOO daLLesps)

1*17* 70

1»449 70

Is 519

l s 652 70

Is 722

1,980 70

2,050

- 134-

Tabi© VX2=é

S3SEUTK OF BUILDIMO TOUJMSS? KlWg>RXMT MILLS

(Yhgaearcds off eubie

MH1 eap&cifey» toas/tìa 100 200 ' ' .300 4Q0

Salpfeifc© jaalp ssetica 25oQ !

^oQ P37.0 45.0 Msebaaieel gsalp esotica 15.0 19o2 22 «2 26.2 P&per sdii 50o0 %o0 108 » 8 Papnp ©ter© 5.0 7o0 9o2 Uo2 Sta® uà pomr plaafe ?o5 10o© 12o5 15.0 W&t®? psrìLfieatieaa mà psap statica SoO 12*0 • 16.0 30 oO R®p&lr stop La@©pat@ef

20 oO Z5S 35 oO R®p&lr stop La@©pat@ef 2»0 2o0 2o0 2.5

f®t&L lE astrial bmiltìiaigs 132o§ l fS .2 222® f 263» 7 ®££Ì@@s> ho® 4® 5 4.8 5.0

M S Ì . . . ... 13éo5 177-7 127.7 267.7

GOST OF CONSTEUGTION (Thcusands of doli ars)

Isatasisdal 1*050 1*400 i*aoo 2,150 Offi@@s 10 do 85 90

fótal ' 1*120 1*4^0 1*885 2*240

= 135 =

2„ Community costs for wrkers and employees

Bases:

(a) 65 per cent of workers and employees aged from 18 to 59 years are married.

(b) Enployers: Houses of 140 m (average). Cpnununity building with 15 m2 per inhabitant. Cbst per m plus urbanization 30,000 pesos.

(c) Workers: ifouses of 70 m2 (average). Community building with 8 m per inhabitant. Cost per m2 plus urbanization, 24,000.

(d) Store: Q

1.5 per cent of the sum of areas oî houses and community buildings.

Hospital: 1.5 per cent of the sum of areas of houses and community buildings.

Club: 2.0 per cent of the sum of areas of houses and community buildings.

Church: 1.5 per cent of the sum of areas of houses and community buildings. I h i t cost per m2: store 24,000 pesos

church and hospital 30,000 pesos school and club 26,000 pesos

- 136-

Kies ioé ÏOfeQl -

ISÈÊ,

fable ¥11=7 ;W8g& ©F ©Û2SSKŒH mmm> MB HOUSING FOR MPLOÏEES AND WORKERS IN PULP MILLS

0° ûsoa Dg

kÊO

l a 7„52

162 23.6 162

U a o / é a y

Total a 1.000 dollars

10@Ü® EP

IS

11

2pT00

S0|>990

620

195

250

100 t o n s / d a y Unbleached

isooo r p©s@o

14 25

?â»250 39

124

1,000 ES sos

210 3,500

14 25

3,710 111,300 39

584 6,680

87 149

Bleached Àrea m2

210 3,500 3,710

696 10,430

5,61© 6,500 5,610

4,000

2,700

354*314

710

260 195 195 260 195

6,760 4,6a) 5,850 6,760 5,850

5,000

4,000

372,536

750

297 223 223 297 223

1,000 pesos

11,300

9,1% 220,656 197 9,264 222,336 236 11,126 267,024

7,722 5,352 6,690 7,722 6,690

5,000

4,0C0

421,500

340

Table VH-7 (continued)

COST OF COMMUNITY SERVICES AND HOJSING FOR WORKERS AND EMPLOYEES IN PULP MILLS

CO 00

Production capacity

2 0 0 t o n s / d a y

N° Unbleached Area m2

I5OOO pesos

Bleached Area m2

1,000 N° P 8 S 0 S

Unbleached Area m2

3 0 0 t o n s / d a y Bleached

1*000 N° pesos

Total Workers

Singl© Married Total

School Store Hospital Glub Cfairch Sport fields, green areas„ fitc. Houses for

1^000 dollars

6,000

5,lOU

466,358

^,000 t.

¿,100

5 33s 152 J.,070

7,000

7,500

593,720 1,190

Area m2

1,000 pesos

is 2 7 0 18 27O 22 330 2 2 330 % 4 , 3 4 0 3L 4,340 38 5,320 38 5,320

4 9 4,610 138,300 49 4,610 138,300 60 5,650 169,500 60 5,650 169,500

9 1 728 1 1 1 888 118 944 142 1,136 1 5 6 1 0 , 9 2 0 190 13,300

I 202 14,140 241 1 6 , 8 7 0

2 4 7 11,648 279,552 301 14,188 340,512 320 15,084 362,016 383 18,006 432,144 325 8,450 C3 376

j

9,776 Π415 10,790 - 473 12,298 244 5,856 C9

2 8 2 ¿,768 e n 311 7,464 - 355 8,520 244 7.320 CSD 282 0,460 0 311 9,330 - 355 10,650

= • 325 8,450 376 ^,776 C3 415 10,790 = 473 12,298 244 7,320 282 0,460 <= 311 9,333 « 355 10,650

7,000

7,500

070,560 1,340

Table VXX-8

COST OF OOMüBITi SERVICES AMD HOUSING FOR WORKERS AM) EMPLOYEES IN INTEGRATED MILLS

50 t o n s / d a y 100 te o a o. ' ¿1 a sr Size of ; Unbleached Bleached liable aehsd B3 ed Bill . N® m2 1*000

pesos sn2 .1,000

pssos I® E2 1*000

pSSO® M° ¡32 1,000

pesos

Employees rtrmi 'lim i ."iiBaaao Sixigl® Married Total

15 29 44

225 4,060 4 p285 128,550

15 30 45

225 4*200 4*425 132*750

20 36 56

300 5*010 5*340 160,020

29 37 5i 57 5*

soo 1 8 0 460 164*400

Workers Single Married Total

78 625 145 10 A 50 223 10,775

99 183

258,600 282 795

12,810 13*605 326*530

103 192 295

825 13*440 , 14*265 342*360

132 Is 244 17*

060 QgQ 140 435*369

Seb.©©! 300 7,800 451 11*725 490 14*700 5?Q ' 17*700 Stop® 226 5*425 2?0 6*480' 294 7*060 354 8 , 5 0 0

Hospital 226 6,780 2?0 8,100 .294 8a 820 10*620 Club 300 7*800 451 11,725 490 14*700 a 590 17*.700 Church 226 6,789 ' 270 8*100 2 % ©*8S0 354 10*620 parks* reerea< tioasji ete0 Housing for eozKuaity stsJ

5*00

4*000

6*000

5*000

6*000

>

7*000

7*500 Total 1*000 pesos ¿BBsasaeD 450*735 S16*SSO <S?9i>&CO

1*000 dollars 860 1*035 1«1S5

= 139=

Table VII-9 ESTIMATE CK WORKING CAPITAL REQUIREMENTS

1. Pulp mills (Thousands of dollars)

Mill capacity, tons/day 50 100 300 300

Unblc Bl0 Unblc Bit Unbl, Bio Unbl.

Total Annual interest, US$ ls000 Interest per ton, dollars

1,475 147 o 5

4o21

2,497 249° 7 3° 57

3,666 366.6 3.49

Bl< Prod, value per ton, dollars 94.78 117°47 74.38 91.99 62.14 77.52 59.67 74.19 Value of 4 months8 prod. 553 685 867 lj>073 1,450 1,809 2,088 2,594 Value of spare parts, mill 218 281 305 384 418 517 562 685 Value of spare parts, forest dept. 9 9 18 23 42 49 70 81

Total 730 975 1,190 1,480 1,910 2,375 2,720 3,360 Annual interest] US$ 1,000 78.00 97 c 50 119.00 148.00 191.00 237.50 272.00 336*00 Interest per ton^ dollars 4.45 5.57 3»Lß 4o23 2.73 3.39 2.59 3.20

* o Integre ted alila

Produe. valus par ton- dnVK. 1 /,n. =n 1 A« l.o n o ¿-fl IOC TO Value of 4 months» prod. 820 932 1,313 1*577 Value of spare parts, mill 346 419 488 575 Value of spare parts, forest department 9 9 19 23

1,175 1,410 1,820 2,175 Annual interest, U3$ 1,000 117.5 141 °0 182.0 217°5 Interest per ton, dollars 6.71 8.06 5.33 6o2l

3 o Mewsp rint Mills

Mill capacity, tons/day 100 200 300 400 Prod, value per ton, dollars 92.83 79 ©78 77.89 75.53 Value of 4 month's prod. 1,083 1,862 2,726 3,525 Value of spare parts, mill 380 608 895 1,115 Value of spare parts, forest dept. 12 27 45 64

4,704 470,4

3.36 Voie: Capital required is estimated to equal the value of 4 months' production, exclusive of interest

on capital investment, plus value of spare parts, 5 per cent of the c . i . f . value of machinery and 10 per cent of the cost o f trucks in the Forest Department. I'he working capi ta l i s estimated to cover also the needs of the Transport Department. Hate of interest i s estimatr 1 at 10 per cent, since working capital may be considered as a short term loan and intf-r.-st on security investments i s 8 per cent.

= 140 =

Table VII-IO FOREST INVESTMENT

roduct Production capacity

of factory <|/ Annual de~ m and for wood b/ (solid m3)

Average f0= rest area of

s u p p l y Cha.)

0/

Averago valu© of supply area

â 7 roduct

(ton/day) (ton/year)

Annual de~ m and for wood b/ (solid m3)

Average f0= rest area of

s u p p l y Cha.)

0/ 1 , 0 0 0 p a s e a lj££DdlSc raft pulp 50 1 7 s 5 0 0 8 2 , 2 5 0 5 s 4 8 0 6 6 5 * 8 2 0 1 , 3 3 2

1 0 0 3 5 , 0 0 0 1 6 4 , 5 0 0 1 0 , 9 7 0 1 , 3 3 2 , 8 5 5 2 , 6 6 6

2 0 0 7 0 , 0 0 c 3 2 9 , 0 0 0 a , 9 3 0 2 , 6 6 4 * 4 9 5 5 s 3 2 9

3 0 0 1 0 5 , 0 0 0 4 9 3 , 5 0 0 . 3 2 , 9 0 0 3 * 9 9 7 * 3 5 0 7 , 9 9 5

leached pulp 5 0 1 7 s 5 0 0 9 2 , 7 5 0 6 , 1 8 0 7 5 0 , 8 7 0 1 , 5 0 2

1 0 0 3 5 , 0 0 0 1 8 5 , 5 0 0 1 2 , 3 7 0 I s 5 0 2 , 9 5 5 3 * 0 0 6

2 0 0 7 0 , 0 0 0 3 7 1 , 0 0 0 2 4 * 7 3 0 3 * 0 0 4 * 6 9 5 6 , 0 0 9

3 0 0 1 0 5 , 0 0 0 5 5 6 , 5 0 0 3 7 , 1 0 0 4 , 5 0 7 * 6 5 0 9 s 0 1 5

raft paper 5 0 1 7 s 5 0 0 8 5 s 7 5 0 5 s 7 2 0 6 9 4 * 9 8 0 1 , 3 9 0

1 0 0 3 5 , 0 0 0 1 7 1 , 5 0 0 1 1 , 4 3 0 I s 3 8 8 , 7 4 5 2 , 7 7 7

hite papers 50 17,500 92,750 6,180 750,870 1,502 200 70,000 231,000 15,430 1,871,100 3,742 300 105,000 346,500 23,100 2,806*650 5,613 400 140,000 462,000 30,800 3*742,200 7*484

/ 350 working days annual 11 y Equivalents useds Kraft pulp

Bleached pulp Kraft paper White paper Newsprint

4°7 solid m3 per ton» 5o3 solid m3 per ton0 4o9 solid m3 per ton0 5o3 solid m3 per ton® 3o3 solid m3 par ton0

%J Average forest yield when cutting at the age of maxjbaaum economic yield? 15o0 .solid m3 Ì per heetareo ij Average value (including land) by site class©sg

Site class area

( psreent)

Ag©

(years)

average valu© per hsetar©

(pesos) (doury I and II I 0 8 6 1 = 2 0 2 0 1 , 6 0 0 4 0 3 o 2 III I 8 0 O 8 1 = 1 8 1 4 2 , 0 0 0 2 8 4 o 0 IV 38o52 1 = 1 8 1 2 5 , 0 0 0 25O0O V 4 1 o 5 4 1 = 1 6 1 0 5 o 8 0 0 2 1 1 „6

121,500 243o0

- 141-

Table VIII-16

CAPITAL REQUIREMENTS PULPMILLS

(Thousands of dollars) . M i l i s i z e

50 tons/day 100 tons/day 200 tons/day 300 tons/day Unblo B1 o Unblo B io Unbl. Bl. Unbl. Bl.

Millg Machinery, freight, eree= tion Engineering fees Railway lines on mill site

4,564 401 90

5,829 511 90

6,396 549 120

7,932 673 120

8,532 738 150

10,684 911 150

11,636 999 180

14,254 1,211 180

Subtotal 5,065 6,430 7,065 8,725 9,420 11,745 12,815 15,645 Buildings, chests» ©te0 Housing & ecaamuaity

1,135 620

1,385 710

1,345 750

1,595 840

1,830 930

2,160 1,070

2,485 1,190

2,875 1,340

Subtotal 1,755 2,095 2,085 2,435 2,760 3,230 3,685 4,215 Working capital y 780 985 1,190 1,480 1,910 2,375 2,755 3,360

A VWCUs 1 $ wv 9,510 10,350 12,640 14,090 17,350 19,245 ¿3,220 Forest Departments Transport bj Housing b/

85 85

85 90

180 150

230 180

420 290

485 325

700 460

810 525

Total 170 175 330 410 710 810 1,160 1,335

Transport trucks e/ Housing e/

45 10

45 10

92 18

92 18

187 43

187 43

255 50

255 50

Total 55 55 110 110 230 230 305 305 Capital eost during cons-» truction d/ 1,205 1,495 1,635 1,980 2,225 2,715 3,035 3,640

Grand total o£ tihieh foreign exchange Percent foreign exchange of total

9-,030 6,212 68c8

11,235 7,828 69o7

12,425 15,140 8,757 10,778 70o5 71o2

17,255 12,046 69.8

21,105 14,895 70.6

23,745 16,570 69.8

28,500 20,084

70« 5 a/ See tahle V I I - 9 . b/ See figure VII-VII which gives investments in trucks and housing calculated from basic

data in annex IIe e/ Based on basic data in annexes VI and VII (Section 2)0 d/ See figure VII=>VIII0 65 per cent of the capital cost during construction and 30 per

cent of the working capital is estimated to be foreign exchanges

- 1 4 2 -

Table VIII-16

CAPITAL RSqJIRMENTSs INTEGRATED MILLS

(Thousands of dollars)

M i l l s i z © 50 tons/day • 100 tons/day

Unbleached Bleached Ubieached Bleached Mills

Machinery, freight, ersction Engineering fees Railway lines on mill sit©

/

7 , 1 8 8 6 0 9 1 0 0

8 , 5 2 3 7 1 8 1 1 0

1 0 , 1 3 4 8 5 9 1 4 0

1 1 , 9 3 5 1 , 0 0 5

1 5 0

Subtotal 7,897 9 , 3 5 1 1 1 , 1 3 3 1 3 , 0 9 0

Buildings, chests, etco Housing and community

1 , 4 0 3 8 6 0

1 . 6 8 9 1 * 0 3 5

1 * 9 1 7 1 * 1 3 5

2 , 2 7 0 1 , 3 6 0

Subtotal 2 , 2 6 3 2 , 7 2 4 3 , 0 5 2 3 , 6 3 0

Working capital jg/ 1 , 1 7 5 1 , 4 1 0 1 , 8 2 0 2 , 1 7 5

Total 1 1 , 335 1 3 * 4 8 5 1 6 , 0 0 5 \ 1 8 , 8 9 5

Forest department Transport trucks b( Housing b/

85 8 5

8 5 9 0

1 9 0 1 5 0

2 3 0 1 8 0

Total 1 7 0 1 7 5 340 <+¿0

Transport truck® e/ 4 5 4 5 9 2 92 Housing e/ 1 0 1 0 1 8 1 8

Total 55 55 1 1 0 n o

Capital cost during construction &/ 1 , 7 7 5 2 , 1 0 5 2 , 4 9 5 2 , 9 3 0

Grand totals 1 3 , 3 1 5 1 5 , 8 2 0 1 8 , 9 5 0 2 2 , 3 4 5 of which foreign exchange 9 , 5 3 5 1 1 , 2 7 2 1 3 , 5 8 3 1 5 , 9 7 0 percent foreign exchange of total 7 1 o 6 7 1 o 3 7 1 o7 7 1 » 5

a/ See table VII»9o jV4 b/ See figure VII-VII which gives investments in trucks ànd housing calculated from basic

data in annex Ilo c/ Based on basic data in annexes VI and VII (Section 2)0 d/ See figure VII-VIII0 65 per cent of the capital cost during construction and 30 per

cent of working capital is estimated to be foreign exchange,,

-143-

Table VIII-16

CAPITAL REQUIREMENTS; NEWSPRINT MILLS (Thousands of dollars)

Mill size, tons/day

100 200 300 400

Mills Machinery, freight, erection Engineering fees Railway lines on mil.1 site

7 ,ao 630 140

12,155 1,000 170

17,680 1,470 190

22,290 1,830 210

Sub-total 8,380 13,325 19,340 24,330

Buildings, chests, etc. Housing and cacmunity

1,250 930

1,660 1,105

2,110 1,445

2,520 1,680

Sub-total 2,180 2,765 3,555 4,200

Working capital 1,475 2,495 3,665 4,700 Total 12.035 18,585 26,560 .33,230

•OX'BSI/ department: Transport trucks b/ Housing b/

120 105

270 200

450 305

640 420

Total 225 470 755 1,060

transport department; Transport trucks c/ Housing c/

92 18

187 43

255 50

370 70

Total 110 <• 230 /

305 440

¡apital cost during construction d/ 1,860 2,870 4,090 5,130

Grand total 14.230 22,155 31,710 39,860 , J •

of which foreign exchange percent foreign exchange of total

9,994 70.2

15,367 69.4

22,284 70.3

28,175 /70.7

i/ See table VII-9. ~J See figure VII-VII which gives investments in trucks and housing calculated from basic

data in annex II. \J Based on basic data in annexes VI and VII (Section 2). j/ See figure VII-VIII. 65 per cent of the capital cost during construction and 30 per

cent of the working capital is estimated to be foreign exchange.

- 1 4 4 -

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o 59 îtâ 15s 200 259 300 TÛMAS© ©G lù Fabroea (î®tt P©Q ®»û) MIUL OISE (T@ao/®AV$

. _ CÂPITAU ©S TCJÂQÛJ® ©miraa eApiTñí.

©FFSIYg 10WEOTOEÊ3TS

PI GURA Vfl 0 - in PIGUBE VFL 0 - 000

«WVER3.I0M EM (RUMS-IEA S S L Y A M ® 9 ©E LA FAE^ ICA PAPELES CÁ© ©LAK§UEASS3

INVESTKSTJT AS FUWCNCS 07 M I L L S I Z E UMBLEACKHÜ P A F E ^

IMVUAAIEW TOTAL P©Q TONEL&BA D I A R I A SE CAPACIDAD (MLLE9 OS BOLAQG8) TOTAL IMVESTMEMT PER 8 A I L V TOM o r CAPACITY (THOU9A6J&9 0F @@LLAQS)

|BVSB0l®M (MILL6MEO ®G ®lLA£3go)l

LATFESTKIGMT (WlLLIQM ©OLLAQOj

goo 250 300 TAMAS® ©G LA ? A B 0 I 6 A (Teco pon si a)

M I L L aigs (TOMS/DAY])

I - C A P I T A L DE TRABAJO FEJOQBIMG CAP ITAL

I N V E R S I O N E S NO INDUSTR IALES OPTS ITE INVESTMENTS

F IGURA V I I - I V RTCUFTE V I I - I V

I N V E R S I O N E N F U N C I O N D E L TAMAFLO O E LA F A B R I C A

P A P E L E S B L A N C G S

I N V E S T M E N T A S F U I C T I O N O F M I L L S I Z E

B L E A C H E D P A P E R S

I N V E R S I O N TOTAL POD TONELADA DI^RIA DECAPACIOAO ( M I L E S OC D O L A R E S ) TOTAL I N V E S T M E N T PER DAILY TON or CAPACITY (THOUSAWOS o r D O L L A R S )

I N V E R S I O N

( M I L L O N E S DE D Ó L A R E S )

I N V E S T M E N T

( M I L L I O N O O L L A R S )

250 3OO TAMAHO DE LA F A B R I C A

( T O N POR D I A ) M I L L S I Z E

( T O N S / D A Y )

C A P I T A L DE T R A B A J O W O R K I N G C A P I T A L

2 - I N V E R S I O N E S NO I N D U S T R I A L E S OrrsiTE I N V E S T M E N T S

FO©yRû VO 0 = V F 0 ©UKE VO 8 - y-

I M M E S S I C I M FUKX IQ Î ) D E L TAMAKQ E S LA F A S I C A IO

IMVESTKEMT A3 FUKCTKW OF M I L L S I Z E NEbSPaiWT

INVKDOI M T@TAL POR T@fcSLA©û ® 0131 A ©G CAPACI DAD (Wilœo ©e B@LAQG8) Î6TAL INVESTMENT -PER ©AILV TOM OF CAPACITY (Tn©UOAW@g OP ©OLLABS)

iMVGRSll« (MILLOMES OE DIìadgs)

I WWE8TMENT (MILLION ©ÔLLABS)

125

160

75

2 5

\ \ V /

f A y

A y X X .

/ / r

1 MVERÂL OHE8 E

M I L L IWVEOTOS

.M P & 3 Q I C A

MTO

Y

?

ÌJO

3 0

20

100 geo TAHAS©

ÎJCO LA PÛDR(,G

©W P©R S I A M I L L 012

( T O M S / S A Y

I -

2 -

C A P I T A L ©E TOABAJ® I N 6 C A P I T A L

| N V E R 3 I O N E 9 NO I N O U 3 T R I A L E 0

O R R S I T E I NVE9TMENT9

FieuRA VII - VI ncu«e VII - VI

INVERSIONS EM WSV§D®AS Y HBlACKSa Y OE OPCRACION ZU FUNCIFFIL ®£L NUNERO OE Y 0«£&>GS

HOUSING ANO C08W9IITY LIWESTFCMT AND OPERATING COST ^S function OF W M X ER « » S I S A ® EMPLOYEES

N V C R 9 I ON 1.000 DOLAR£s) MVESTMEKT 1,000 ©©LLAKS)

£®8T©8 OE 0PRBACSOW ( 1 . 0 0 0 O O L A R C T )

OPERATION COST (11,000 collars)

N er cMRLOYEes, (c) M OP WORKWIW, ( A )

TO T A L M E M B E R S , ( A )

NQTA : L O S C O S T 0 8 9 P E R A C I ® N V L A S I M V E R S I O M C S «EMEBA8 .E3 C E M T U T A A S E

e@WTBA EL T0T&L O E C H P I C A D G S V O B R E R O S .

HOTE : 0?ERATIM® C03T AND 6ENERAL mVESTMEMT ABE COMPUTES A6AIM8T T O T A L GTAPLORCCA AM® W O R K M E W .

ROÊUKA VOS - V I I

F O G U ß E V I I - V I 8

I N V O L S I J DEP/ÄTÄKEWTO F G M 3 T A L

i N V E S T K E N T I F O R E S T D E P A R T M E N T

( I O0(X) D O L A R E S )

. M A D E R A P A R A P A S T A ( MO L E S DE M J S O L . P O S A N O )

P U L P Ü O O D ( T H O U S A N D « 3 S P E R T E A R )

/ /

F I G U R A V I I - V I I I F I G U R E V I I - V I I I

C A P I T A L N E C E S A R I O D U R A N T E E L TO I O D O B E C O N S T R U C C I O N

C A P I T A L R E Q U I R E M E N T S D U R I N G C O N S T R U C T I O N P E R ICS)

( P O R C I E N T O D E L C A P I T A L T O T A L )

( P E R CENT OF TOTAL C A P I T A L )

( A R O S )

( Y E A R S )

E L C O S T O DE C A P I T A L TOTAS, A L CABO O I L T E R C E R AR© E S DC

1 7 , I POR C I E N T O CON UNA T A S A OC I N T E R E S A C U M U L A T I V O A N U A L

DEL 8 POR C I E N T O O

T O T A L C A P I T A L C O S T AT .HE END o r THE 3 — Y E A R P E R 1 0 0 i s 1 7 , I P E R CENT W ITH A C C U M U L A T E D A N N U A L I N T E R E S T R A T E OF

8 P E R C E N T .

F I G U R A V I I! - I X

F I G U R E V I ! - I X

I N V E R S I O N E S E N E L P R O Y E C T O E N F U N C I O M D E L A B A S T E C I M I E N T O D C MADERA

1 0 0 / 1 0 0 B O S Q U E S P R O P I O S

P R O J E C T I N V E S T M E N T A S F U N C T I O N OÍ" WOOD S U P P L Y

¡ 0 0 / 1 0 0 F O R E S T O W N E R S H I P

( M I L L O N E S DE D O L A R E S )

( M I L L I O N D O L L A R S )

5 0

ko

3 0

20

IO

/

A / f \

/ y f

y

i / )

s A

s À

¿r

( ^

r

c M À M

•¿i

y ¿w

/ X r 1

¿y'

O

k

5 3

1 0 0 2 0 0 3 0 0 to ' 5 0 0

A B A S T E C I M I E N T O DE M A D E H A DE B O S Q U E S P R O P I OS ( M I L E S DE M J )

WOOD S U P P L Y FROM OWN F O R E S T ( T H O U S A N D M 3 )

Ic 2.

P A S T A 9 1 N B L A N Q U E A R

P A S T A B L A N Q U E A O A

P A P E L E S S I N B L A N Q U E A R

P A P E L E S B L A N C O S

P A P E L DE D I A R I O

I O U N B L E A C H E D P U L P

2 0 B L E A C H E D P U L P

U N B L E A C H E D P A P E R S

5 . B L E A C H E D P A P E R S

5„ N E W S P R I N T

F I S U R A V I I - X f! CURE V I I - X

I N V E R S I O N E S E N E L P R O Y E C T O E N F U N C I O N D E L A B A S T E C I M I E N T O D E MADERA

5 O / I O O B O S Q U E S P R O P I O S

P R O J E C T I N V E S T M E N T A S F U N C T I O N OF WOOD S U P P L Y

5 O / I O O F O R E S T O W N E R S H I P

( M I L L O N E S DE D O L A R E S )

( M I L L I O N D O L L A R S )

50

Ho

30

20

10

/ s <

-•

<

A • y A

' ¿ S ' '

4 /

*

s A s S

/• y 4

^ y

*

/ / V

/y "A <À r * ^ ^ ^

2 I

50 100 150 200 250 A B A 9 T C C I M I E M T 0 DE MADERA

DE 8 0 S Q U E 8 PROP I OS ( M I L E S DE M 3 ) WOOD S U P P L Y FROM

OWN F O R E S T ( T H O U S A N D M 3 )

2.

5»

P A S T A S I N B L A N Q U E A R

P A S T A B L A N Q U E A D A

P A P E L E S S I N B L A N Q U E A R

P Á S E L E S B L A N C O S

P A P E L DE D I A R I O

1. U N B L E A C H E D P U L P

2 . B L E A C H E D P U L P

U N B L E A C H E D P A P E R S

. B L E A C H E D P A P E R S

5 . N E W S P R I N T

ANNEX Vili PRODUCTION COST ESTIMATES

Tablé VIII-1

RESUMING OF LIME SUJDGB a/

Us&t cost. Total eost

Lime sludge Limestone Fuel oil Power Repair materials

Total b/ Labour Depreciation and interest of

Total cost per ton of lime d/

H O kgo 200 kgo 25

lo40 ma^/teOc

6O38 702 15o57 3*124 3o50 as

4*154 32É •

%»2Z?

5*709

a/ Calculations based on production of 7S500 tons annually,, b/ Since labour s depreciation and interest costs sap© ecaput©c

in the calculations of palp production cost 8j this total £>©pres©nt© should be assigned to quicklime within that calculation«

e/ 10 years and 12 per cent respectivelys on th® basis of ©oiofo Which amounts to 115*000 dollars or 57^500^000 pssos0

d/ The kiln and supplementary equipment are of the minima aim respond to a production of 100 tons of palp daily0 In the ease ing 50 tons daily, therefore^ only half of the equipment® s izedp so that labour^ depreciation and interest costs are twic© at a total of 7»264 pesos0

aill as a whole ths eost wfaiefo

and COÎ>= I mill produe-will be util-

s-

= 145 =

Table V I I I - 2

H3AT AND POWER BALANCE

(Per ton of product)

Bleeding Pulp mills Integrated mills pressure kg/cm2 Unbleached Bleached Unbleached Bleached pressure kg/cm2

r ; « x r kcal.

kwh 1701X3 kcal

kWh 1,000 kcal

kWh 1,000 kcal

KWh

Heat for evaporation 2 .6 Heat for cooding 8„5 Heat for bleaching 2.0 Heat for drying 2.0 Heat for miscellaneous 2.0

Total power required

720 900

860 200

485

720 1,100

800 860 100

910

720 900

1,750 250

900

720 1,100

800 1,750

150 1,375

Turbine bleeding Turbine condensing

495 145

430 55

675 845

585 325

" 695 765

605 295

" " 8 7 0

hOSL 755 320

Total heat consumption 3,320 5,100 5,080 7,000 Produced by recovery unit Produced by bark burning &/ Produced by add. fuel

2,770 370 180

3,130 415

1,555

2,770 370

1,940

3,130 415

3,455

Additional fuel required b/ Fuel oil c/s kg 25 195 245 430 or coal d/, kg 35 290 360 645 or wood fuel e/, kg. 100 845 1,055 1,875

y From barking operation. Estimated quantity: 200 and 220 kg per ton of unbleached and bleached pulp, respectively,

b/ Excludes fuel oil required for reburning lime sludge. Efficiency of boiler estimated at per cent.

oj Calorific value; 10,000 kcal per kg. d/ Calorific valuej 6,700 kcal per kg. ej Calorific valuej 2,300 kcal per kg.

= 146 =

Table VIII-18

HEAT AMD POWER BALANCE» NEWSPRINT MILLS

8 1% 1& assvmod that the mills will produce electricity by bleeding turbines in a qiaaatity eorreaponding to the consumption of steam in the chmical pulp and aocj'spsdBt sections o

(Per ton of newprint)

0o20 tons sulphite palp per ton of nswprint

H@at for cooking Heat for gpcjordtjocd section Heat for papsr aachin® Heat for miscellaneous Total power required

pressure kg/cm2 8o0 3«0 3o0 3o0

Purchased Total teat coasiisaptlcm

Produced by bark burning a/ Produced by addL fuel

Mditioaal fu@l retpiredg coal kgs0 b/

1,000 keal

330 250

1,800 200

6 6 5 .

1 8 5 2 , 7 3 0

410

1,833 405

1 , 4 1 5

a/ Estimated quastitjp 100 kgsQ per ton of newprinto Calorific value IgSf© keal/kg< W Calorific value 6S?00 keal per kgo

-147 -

Table ¥111=4

HEAT CONSUMPTION AM) POWER GENERATED IN STEM TURBINE OPiStATIOM Original stem pr©s®ar©j 40 kg/ea2

« M temperature^ ' 1>QQ°G

Pressure after

turbiae kg/em2

Heat content of steam

1,000 keal per ton

Heat loss in turbi&s

la000 keal per toa

kWh per toa of original steam s^

kWh' per 1,000 ¿poo in origi »1 AL E^A AW»

¿¡0 768*5 C3 0 1 0 688*5 80 oO 70 90 8 6

67So 5 90 e0 78 102 8 6 663o5 1 0 5 o 0 91 119 4 648» 5 l 2 0 o 0 104 136 3 643o 5 I25o0 109 142 2 632o5 136 oO 1 1 8 154 1 613° 5 155 oO 135 176

Goradeaso 1 0 0 oO 66a 0 5 257 335

^ Based on experience values in middle size turbines with an o^er-all effieiency of 75 psr eenta which require 1*150 keal per kWfo in bleeding aad 2^600 keal iathe con-densing operation®

= 148 =

I

Table VIII-5

LABOUR FOKCE IN PULP MILLS

(Numbers employed)

(Daily production capacity of the mill tons)

By shift Total in mill 50 ton 100 t. 200 to Un- Bl.Un BloUn BÌo Un

50 to 100 ton 200 ton U n Bio Û X T B X O U n Bio U n 0 Bl«

1. 2. 3. 4. 5c 6. 7®

a. 9.

>10. 11. 12. 13.

•1U. 15. 16. 17. 18. 19. 20. 21.

Log yard a/ Wood preparation dept.jy' Digester dept. Diffuser dept. First screening dept. Bleaching dept. Electrolytic plant and preparation of bleaching liquour Second screening depto Pulp drying machine Pulp store Causticizing dept. Evaporation plant Soda recovery Lime recovery Chemical stores Water purification plant and pump station General services Transport workers Repair workshop Boiler house Power station

bio bl . bl . bl . bl. bl . bl . bl .

6 6 6 6 8 8 10 10 16 16 16 16 19 19 23 23a/ 3 4 4 5 4 8 5 10 8 11 11 13 11 21 13 3 3 3 3 3 3 4 4 12 12 12 12 12 12 16 16 1 1 1 1 2 2 3 3 4 4 4 4 8 a 12 12 1 1 2 2 3 3 4 4 4 4 3 8 12 12 16 16

1 == 1 1 w 1 4 4 4 4 4

e» 4 5 6 8 16 20 24 a 32 c= 1 1 - 1 - 1 4 4 - 4 = 4 4 4 5 5 8 8 12 12 16 16 20 20 32 32 48 48 2 2 3 3 4 4 4 4 8 8 12 12 16 16 16 16 1 1 2 2 2 2 3 3 4 4 8 8 8 8 12 12 1 1 1 1 1 1 1 1 4 4 4 4 4 4 4 4 3 3 3 3 3 3 5 5 12 12 12 12 12 12 20 20 1 1 1 1 1 1 2 2 4 4 4 4 4 4 8 8

1 2 1 2 1 2 1 2

1 1 1 1 1 1 1 1 4 4 4 4 4 4 4 4 11 13 16 X) 21 27 27 33 14 15 20 20 27 27 33 33 27 31 33 37 40 45 47 53

2 2 2 2 3 3 3 3 8 8 8 8 12 12 12 12 1 1 1 1 1 1 1 1 4 4 4 4 4 4 4 4

Total

Of which skilled workers unskilled workers

161 196 1 97 236 247 301 320 383

68 82 74 93 91 112 100 125 93 114 123 143 156 189 220 258

Items 1 to 14; operation; Item 19s repairs; Items 15 to 18 and 3D and 21: services, a/ Two shifts, with additional workers to make a total work week of 42 hours.

/ /

- I i ') -

Table ¥111-6

LABOUR FORCEg INTEGRATED MILLS

Per shift Total in mill IHI eapacity, toas/day 50 100 50 100

UrsbloBlo Uablo Bla Unblo Bio Unblc BL> BaLpaillp ©sselo d^yiag aad ©es- ies >s 69 97 80 111 Beater tq<bm. 1 1 2 2 4 4 8 8

prepa afcloa d®pfe0 1 1 2 2 4 4 8 8 Paper mashia© 6 9 6 9 24 36 24 36 Sè—ïôièlisjrs) 3 3 5 6 12 12 18 18 Baplex ©attar ^f 2 2 4 4 6 8 12 16 BaXiag 3 4 4 6 Rsol pack©? s 4 3 8 6 R®=S>@®1®PS FOP «all R@@ls 1 1 2 2 S^t©?© 15 25 25 20 Oil©?® 1 1 2 2 4 4 8 8 Uàt©? jmrifieatioia & par p statioa 1 1 1 1 4 4 4 4 Steaa aad p&mr plant 4 4 4 4 16 16 16 16 Repair shop 30 35 40 45

îsfoal 223 282 295 376 ©f whieh skilled workers 98 124 112 146 unskilled workers 125 158 183 230

Item 1 = 10 and 13s ®p«®.t>i®si w H °12 aaâ 14 œ 15s % 0 168 ©P&ii?

F@r uiobleaetod pap®^® operation ifi 2 shift® onlj bmt «Ith on® swing shift«

= 1 5 0 =

Mill capacity, tons/day

lo Log yard s/ 2o Barfcing and ©hipping 3o Chemical pulp section 4o Mechanical pulp section

Table VIII-7

LABOUR FORCE? WEWSPRIMT MILLS

>ers employee

By shift Total in mill

100 200 900 400 100 200 300 ¡¿1

6 6 8 8 16 16 19 19 7 10 17 20 28 40 68 80 10 12 14 16 AO 48 56 64 5 6 7 10 20 24 28 40

$0 Stock preparation d©pte 2 3 4 4 8 12 16 16 60 Sis© preparation depto

Paper machine 1 2 2 3 4 8 8 12

7o Sis© preparation depto Paper machine 6 6 12 12 24 24 48 48

aD R®°reelers 3 3 6 6 12 12 24 24 % Reel packers 2 4 6 8

2D0 20 25 30 35 11 o General services, ecaB®unitys ate. 15 20 25 30

Oiler© 2 2 4 4 8 8 16 16 13o Water purification and pamp station 1 1 1 1 4 4 4 4 14. Steffi astd power plant 3 4 6 8 12 16 24 32 15. Repair shop 40 45 50 50

Total 253 306 422 478 ©f uhiehg skilled workers 96 116 144 164 mn§kill@d workers 157 190 278 314

I teas 1 = 9 opsratioaj items 10=14 serviceitem 15 repaid ^ fcjo shift operation with additional workers to make a t otal work week of 42 hours®

labour costs per hour have been calculated on the following basis (See tables ¥111°8 to VIII-10).

a) 2S100 working hours a year per workers^ that is 42 hours weekly. To this end, the operations will bs handled by 4 teams of workers, in three shifts 5 opera-» tions done in tw© shifts will be handled by two teams of workers plus the num-ber of men required for replacement (33 per cent).

b) Social security 26 per cent of wages. c) Annual paid holidays2 15 days. d) Weekly wages?

Unskilled worker? 5®000 pesos; Skilled worker; 7,500 pesos; Fore-man? 9,000 pesoso Cost pgr hour of effective work«- Unskilled workers 156 pe-sos! Skilled workers 234 pesos; Foreman? 281 pesos; Annual cost.- Unskilled worker? 328,000 pesos; Skilled worker? 491,000 pesos; Foreman: 590,000 pesos.

-1r, 1 -

Table ¥111-8 LABOUR GOSTi FULPMILLS

Mill capacity 50 tona/day

Unbleached Bleached 100 tons/day

Bleached

N8 ton N° ton pesos/ ton a ton

Operation Skilïëï 41 1,151 53 1,488 44 a s a 856 Unskilled 51 955 66 1,236 67 627 80 749 Sobtotal 92 2,106 119 2» 724 XXL 1,245 141 1,605

Man-hours/ton 11.04 14.28 6066 8*46 Services Skilled 14 393 14 393 14 197 14 197 Unskilled 28 524 32 599 39 365 44 412 Subtotal 42 917 46 992 53 562 .58 609

Man-hour s/t on 5.04 5° 52 3el8 3.4$ Maintenance Skilled 13 365 15 421 16 225 18 253 Unskilled 14 262 16 300 17 159 19 178 Subtotal 27 6 2 7 31 .. 7 2 I 33,. . . - _ _ - - yiA . m eft T«<"">

Man-hours/ton 3.24 3 72 1O98 2 a 22 Total 161 3*690 196 4» 437 19? 2,191 236 2,645

Man-hours/ton 19*32 23*52 14sl6

200 toï is/daj T 3Ö0 t< ms/day Operation -

-—.- ;• . >

80 Skilled 53 372 72 505 58 271 80 374 Unskilled 85 398 108 505 134 418 162 505 Subtotal 138 770 160 1,010 192 689 242 879

Man-hours/ton 4.14 5*40 3o84 4e&4 Services Skilled 18 126 18 126 19 89 19 89 Unskilled 51 239 58 271 62 193 69 215 Subtotal 69 365 76 397 81 282 as 304

Màn-hours/ton 2.07 2.28 1.62 1.76 Maintenance Skilled 20 140 22 154 23 108 26 122 Unskilled 20 94 23 108 24 75 227 84 Subtotal 40 234 45 262 47 183 53 206

Man-hours/tan 1.20 1 = 35 0.94 1.06 Total 247 1,369 301 1,669 320 1,154 393 1,389

Man-hour s/t on 7.4I 9o03 6*40 7 , 6 6

-Table VIII-9

LABOUR COST: INTEGRATED MILL

50 tons per day 100 tons per day Mill capacity Unbleached Bleached Unbleached Bleached

No Pesos/ ^ pesos/ Pesos/ ^ pesos/ ton ton ton ton

Operating: Skilled Unskilled

6 9 77

1 , 9 3 8 1 , 4 4 1

97 1 0 1

2 , 7 2 3 1 , 8 1 6

a 1 1 6

1 , 2 0 ? 1 , 0 8 6

1 0 8 1 5 1

1 , 5 1 6 1 , 4 1 3

Subtotal 1 4 6 3 , 3 7 9 1 9 8 4 , 5 3 9 1 9 7 2 , 2 9 3 2 5 9 2,929

Man-hours 1 7 « 52 2 3 . 7 6 1 1 . 8 2 1 5 . 5 4

Mill services: Skilled Unskilled

1 5 32

4 2 1 5 9 9

1 6 3 3

4 4 9 a s

1 6 4 2

2 2 5 3 9 3

1 7 4 5

239 4 a

Subtotal 4 7 1 , 0 2 0 4 9 1 , 0 6 7 53 6 1 8 6 2 6 6 0

Man-hours 5 . 6 4 5 . 8 8 3 . 4 8 3.72 Repair: Skilled Unskilled

1 5 1 5

421 281

1 6 19

4 4 9 3 5 6

1 8 22

253 2 0 6

20 25

2 8 1 234

Subtotal 30 702 35 805 4 0 4 5 9 4 5 515

Man-hours 3 . 6 0 4.20 2.Z)D 2.70

Total pesos/ton Dls./ton Man hrs.

(223) 26.76

5*101 10.20

(282) 33.&

6,411 12.82

(295) 17.70

3 , 3 7 0 6 . 7 4

(366) 21.96

4 , 1 0 4 8.21

- Ir,:»-

Table VIII-18

LABOUR COST? HEWSPRIHÏ MILLS

Mill capacity, tons/day

Operatiagg «AnBOMOMfi Skilled Unskilled

62 92

Subtotal

I 1 . IU&A SSiVACBS« Unskilled

Subtotal 59

Repairs """skilled

Unskilled Subtotal

18 22

AO

Man hours per ton

8?0 74 8a 114

154 Man hrs. per to® ^«24

16

Man hours per to® % 54

240

225 4 0 2

253 206

520 90 534 183

1,731 188 1*054 273

22 51

627 73 2ol9

20 25

459 45 1.35

155 239

140 117

257

32

394 99 1*98

22 28

421 102 571 209 992 311

150 209

103 87 190

1,00

77

359 117 1.76

22 28

50

0.75

Total Pesos/ton (253) dollars/ton MaVhrs/ton

2,817 (306) 5.63

15 »18 1,705 (422) 3*41 99.18

1,541 (478) 1,309 3.08 2.62 8 .44 7.18

- 1 5 4 -

Table VTII-ll

AQMINISTR An ON AND SUPERVISION? PULPMLLS (Thousands of pesos annually)

Mill capacity 50 tons/day 100 tons/day 200 tons/iay 300 tons/day N° rie s N< ries N< » ries N° ries

Managing director 1 4S 800 1 5,400 1 6,000 i Mill manager => - 0 - 1 4,800 1 5,280 Mill superintendent 1 3,240 1 3,600 1 3,960 1 4*320 Assistant superintendent - - •=• - 1 3*480 1 3,840 Chief chemist 1 2,400 1 2,760 1 3,120 1 3,430 Superintendent, mech» workshop 1 2,160 1 2,4GQ 1 2,640 1 2,880 Superintendent, electr« workshop - « - 1 2,400 1 2.-640 Shift foremen, production t 11 6,720 4 6,720 4 6*733 8 13*440 Foreman, meeh» workshop 1 980 1 980 1 980 2 1,960 Foreman, power plant 1 980 1 980 1 980 1 980 Foreman, boiler house - = 1 1,320 1 1,3 20 Foreman, wood yard 1 9«) 1 1,230 1 1,320 1 1,480 Foreman, transport 1 980 1 1,200 1 1*320 1 1,480 Shift chemists 4 3,360 4 3,363 4 3,360 4 3,360 Laboratory assistants 2 1,200 2 1,200 3 1,800 4 2,400 Draught anen 1 720 2 1,440 3 2,160 4 2,880 Adm<, assistant 1 2,400 1 2,760 1 3*120 1 3*480 Chief accountant 1 1,920 1 2,160 1 2,400 1 2,640 Typists and clerks 5 2,400 8 3,840 10 4,800 12 5.760 Store keeper 1 420 1 433 1 430 1 420 Assistant store keeper and clerks 2 733 2 733 3 1,080 4 1,44C Porters 4 1,440 4 1,440 4 1,440 4 1,400 Messengers 2 648 2 648 3 972 4 1*296

Subtotal 35 38,468 39 43s228 49 60,592 60 74*816 Social security payments and bonuses, 25,477 28,630 ' 40,130 49*551

Annual total; 1,000 pesos 63,945 71*858 100,722 124*367 dollars 127*090 143^718 201,2,44 248,734

Dollars per ton 7o30 4=10 2 o 8 8 2 o 3 6

y 32„9 per cent social security and bonus equivalent to 4 months salario

= 155 =

Table VIII-16

ADMINISTRATION AND SJPERVISIONs INTEGRATED MILLS (Thousands of pesos annually)

50 tons/day 100 tons/day Mill capacity

N° Salaries N® Salaries

Managing director 1 6P000 1 6,600 Mill manager 1 4,800 1 5,280 Mill superintendent 1 3,960 Assto mill superintendent 1 3,4«) 1 3,840 Chief chemist 1 3,130 1 3,480 Superintendent, workshops 1 2,640 1 2,880 Shift foremen, production 8 13,440 12 20,160 Foreman, mech«, workshop 1 980 1 980 Foreman, electr. workshop 1 980 1 980 Foreman, steam & power plant 1 1,320 1 1,320 Foreman, wood yard 1 1,320 1 1,320 Foreman, transport 1 1,200 1 1,320 Shift chemists 4 3,360 4 3,360 Laboratory assistants 2 1,200 3 1,800 Draughtsmen 2 1,440 3 2,160 .iCuu o aoisiaboint 1 2,760 1 3,130 Chief accountant 1 2,400 1 2,6 Ifi Typists and clerks 6 2,880 10 4,800 Storekeeper 1 420 1 420 Asst» storekeeper and fclerks 2 720 3 1,080 Porters 4 1,440 4 1,440 Messengers 3 972 3 972

Subtotal 44 56,872 56 73,912 Social security and bonuses 37,666 48,952 Annual total, 1,000 pesos 189,076 254,728

dollars 189,076 254,728 Dollars per ton; 10.80 7.02 Note; For bleached qualities one a

additional foreman required (incl. sec. and bonus) 1 2,793 1 2,793

Total for bleached paper 1,000 pesos Dollars Dollars per ton

(45) 97,331 194,662 11.12

(57) 125,657 251,314

7.18

-156-

Table VIII-13

ADMINISTRATION AND SJPERVISIONs NEWSPRINT MILLS

(Thousands of pesos annually)

Mill capacity, tons/day 1 0 0 2 0 0 3 0 0 4 0 0 Mill capacity, tons/day 1 0 0 Mill capacity, tons/day

N® ijaj.a° W SaLa- sala- N® _ r i e s N® r ies W r i e s N® r i e s N® _ r i e s Managing director 1 6 , 6 0 0 1 6 , 6 0 0 I 6 , 6 0 0 1 7 , 2 0 0 Mill manager 1 5 , 2 8 0 1 5 , 2 8 0 1 5 , 2 8 0 1 5 , 2 8 0 Mill superintendent 1 4 , 3 ^ ) 1 4 , 3 2 0 1 4 , 3 2 0 Assista superintendent 1 3 , 9 6 0 1 3 , 4 8 0 2 3 , 4 8 0 2 3 , 8 4 0 Chief chemist 1 3 , 4 8 0 1 3 , 4 8 0 1 3 , 4 8 0 1 3 , 8 4 0 Superintendents, workshop 1 2 , 8 8 0 1 2 , 8 8 0 2 5 , 2 8 0 2 5 , 7 6 0 Shift foremen, production 1 2 2 0 , 1 6 0 1 2 2 0 , 1 6 0 1 2 2 0 , 1 6 0 1 6 2 6 , 8 8 0 Foreman, mecho workshop 1 9 8 0 1 9 8 0 2 1 , 9 6 0 2 1 , 9 6 0 Foreman, electr® workshop 1 9 8 0 1 9 8 0 1 9 8 0 1 930 Foreman, steam & power plant 1 1 , 3 2 0 2 2 , 3 0 0 2 2 , 3 0 0 2 2 , 6 4 0 Foreman, wood yard 1 9 8 0 1 9 8 0 1 1 , 2 0 0 1 1 , 2 0 0 Foreman, transport 1 9 8 0 1 9 8 0 1 1 , 2 0 0 1 1 , 2 0 0 Shift chemists 4 3 , 3 6 0 4 3 , 3 6 0 8 6 , 7 2 0 8 6 , 7 2 0 Laboratory assistants 2 1 , 2 0 0 ' 2 1 , 2 0 0 3 1 , 8 0 0 4 2 , 4 0 0 Draughtsmen 1 7 2 0 2 1 , 4 4 0 3 2 , 1 6 0 4 2 , 8 8 0 Adm. assistant 1 2 , 4 0 0 1 2 , 7 6 0 1 3 , 1 2 0 1 3 , 4 8 0 Chief accountant 1 2 , 4 0 0 1 2 , 6 4 0 1 2 , 7 6 0 1 2 , 7 6 0 Typists and clerks 5 2 , 4 0 0 8 3 , 8 4 0 1 0 4 , 8 0 0 1 2 5 , 7 6 0 Storekeepsrs 1 4 8 0 1 4 8 0 2 8 4 0 2 8 4 0 Asst. storekeepers & clerks 2 7 2 0 3 1 , 0 0 0 3 1 , 0 8 0 4 1 , 4 4 0 Porters 4 1 , 4 4 0 4 1 , 4 4 0 4 1 , 4 4 0 4 1 , 4 4 0 Messengers 3 9 7 2 3 9 7 2 4 , 1 , 2 9 6 4 1 , 2 9 6

Subtotal 4 6 6 3 , 9 6 2 52 7 1 , 6 3 2 6 6 8 2 , 2 5 6 7 5 9 4 , 1 1 6 Social security and bonuses 4 2 , 3 6 2 4 7 , 4 4 2 5 4 , 4 7 8 6 2 , 3 3 3

Annual to ta l 1,000 pesos 1 0 6 , 3 2 4 1 1 9 , 0 7 4 1 3 6 , 7 3 4 1 5 6 , 4 4 9 dollars 2 1 2 , 6 4 8 2 3 8 , 1 4 8 2 7 3 , 4 6 8 3 1 2 , 8 9 8

Dollars per ton 6 o 0 8 3o40 2 o 6 0 2 o 2 3

-157-

Tabi© ¥111=14

$

AMI AL GOMMITI MAXHEEHANCB COSTS ÏM KJLP MLLS â/

( M U S S I )

go 100 200 300 Mill eapaeity, toas/day - - - — - — — — ÜEM.O Bl® Urisl. Bio Usfclo Bl. Unbl» B1.»

Maintenance materials and insurance 6sSX> 7*300 7,400 8,400 9,200 10,600 11,700 13,200 Electricity 300 400 400 300 500 600 TOO 800 Water 50 •70 10 ao 80 100 120 130 Salariesj doctor®^ ©t@® 8,000 8,000 8,000 10g000 14^000 16,000 17,000 19,000 Unforeseen expenditure 1,450 1*530 I* 5 30 1*950 2, "320 2,700 2,980 3,370 Total maintenance e@at lèâ000 17*300 17s400 20i) 900 26s100 20,000 32,500 36,500 Id« (1,000 dollars) 32 e© 24o6 &3U8 60o0 65.0 73.0 Tri _ noi» t.nn ni pSLÌp •

(dollars) 1.83 1*98 Oo99 lo l9 Oo75 Oa86 0e62 0o70

Tabi© ¥111=15 ANNUAL COMMINITI MAINTENANCE COSTS IH IMTEGRATED PULP AS® PAPER MILLS a/

Mill capacity, tons/day

a/ See also figtms VII-VI«

100 Bl«

Maintenance materials and insurance 8,600 10¿,330 11,330 13,600 Electricity 450 550 600 750 Water 75 9P 100 130 Salaries, doctors, etc. 1JD»000 X5^000 16^000 19,OX) Unforeseen expenditure lj8?5 2,5éO 2 s 800 3,320 Total maintenance cost 21,000 2®S5Q0 30s800 36,800 Id, (1,000 dollars) 42<>Q 5C?0@ 6106 73.6 Id. per ton of pulp

(dollars) 22o40 3o2é lofé 2.10

= 158 =

Table VIII-16

Capital requirement

Mill investment b/ Offsite investments cj Capital costs dur-ing construction d/

Total

CAPITAL COSTS; PULPNILLS. (Depreciation and insurance) a/

Mill capacity

50 tons/day. 100 tons/day 200 tons/day 300 tons/day Unblo Bl. Uribl. SI. Uribl. Bl. Unbl. Bl.

1,000 dollars

6,185 7,310 8,470 10,430 11,520 14,240 15,820 19*150 795 890 1,020 1,140 1,370 1,545 1*830 2,045

1,235 1,495 1,635 1,980 2,225 2,715 3,035 3,640

8,185 10,195 11,125 1 3,550 1 5,115 18,500 20 , 68 5 24,835

Depreciation Mill investment Offsite investment Capital costs during construction

Total

Dollars per ton;

921.8 1,164 92.9 104

179.6 223

1,000 dollars per year

1,262 1,554 1,717 2,122 2,358 119 1 33 160 181 214

244 295 332 40 5 452

1,194.3 1,491

68.25 85.20

1,625 1,982 2,209 2,708 3,024

46.43 56.63. 31.56 38.70 28.80

2,854 23S

545

3,63i

34.6;

Insurance e/ 1,000 dollars per year Dollars per ton

63.30 80.15 86.10 106.00 115.25 I42.9O 157.00 19O.5C 3 . éO 4.60 2.45 3 . 0 5 1 . 6 5 2 . 0 5 I . 5 0 1 . 8 C

a/ Depreciation according to sinking fund method (the depreciation quota ¿Amortizes capital plus the interest that it could have earned) whith 8 per cent interest and the following capital recovery periods5

Mill investments; 10 years Offsite « 15 years Capital costs during constr. 10 years

b/ Includes machinery, bui ldings , engineering f e e s , fores t transport t rucks , c/ Housing and community, railway l i n o3 on mi l l site and housing for f o r e s t workmen, d/ oee f igure VI I -VI I I e/ Insurance calculated at 1 per cent annual r a t e on value of machinery, oui ldings ,

engineering f e e s and spare ^'-rts, the value of which i s calculated at 5 per cent of ;.richinery value. Insurance on housing and ccmmunity investment i s charged to s e p t a t e cost item

-159-

Table VIII-17

CAPITAL COSTS; INTEGRATED MILLS

(Depreciation and insurance)

M i l l c a p a c i t y 50 tons/day

Capital requirements, 1,000 dollars Mill investment Offsite investments

Unblo

9,285 1,045

Capital costs during construction 1,775

Total 12,105

Depreciation, 1,000 dollars per year Mill investment 1,384 Offsite investments 122 Capital costs during construction 265

Total

Dollars per ton

1,771

101.20

31c

11,015 1,235 2,105

14,355

1,642 144 314

2,100

120.00

100 tons/day

Unbli

13,100 1,465 2,495

17,060

1,952 171 372

2,495

71.29

Bl<

15,440 1,690 2,930

20,060

2,301 197 437

2,935

83.86

.a/ See footnotes table VIII-16.

= 1 6 0 =

Table VIII-18

CAPITAL COSTSs NEWSPRINT MILLS

(Depreciat ion and insurance) a/

M i l l c a p a c i t y

100 200 300 400

KI¥A/ IIR' Ì W S /

Capital requirements, 1,000 dollars Mill investment 9*610 15,085 21,710 27,28C Offsite investments 1,175 1,475 1,940 2,2LC Capital costs during construction 1,860 2,870 4,090 5,13C

Total 12,645 19,430 27,740 34,72C

lepreciation 1,000 dollars per year < Mill investment 1,432 2,248 3,235 4,06< Offsite investments 137 172 227 27C Capital costs during construction 277 428 610 76i

Total 1,846 2,848 4,072 5,10] Dollars per ton 52.74 40.69 3^.78 36.42

Insurances 1,000 dollars per year 98.70 154.23 221.44 277.5! Dollars per ton 2.82 2.33 2.11 1.9*

a/ See footnotes table VIII~16.

-161 -

Unit

Raw materials Pulpwood m3 Saltoake kg Limestone kg

Operating costs Fuel o i l kg

¡L Coal (culm) kg S Labour; operating man hrs.

mill services repair

Repair and maintenance materials Clothing, fel ts , wires Lubricating oi l

Overheads Aditu and supervision Insurance Community expenses Interest on working capital

Production cost, excl. depr. and interest

Dépréciation, sinking fund method

Total production cost

Tab],e VIII-19

PRODUCTION COST ¿STIMATE] UNBLEACHED PULP

(Dollars per ton)

Quanti U n i t Mill capacity Q^antl- U n i t M i i i yuarici c o s t — - cost —" — — - — ~ t y (dol- 50 tons per day y (dol- 100 tons per day

lars) lars)

4.7 4.50 21.15 4-7 4.58 a . 5 3 100 0.0387 3.87 100 0.038? 3.67

47 0.0128 0.60 25.62 47 0.0128 0.60 26.00

52 0.0312 1.62 52 0.0312 1.62 35 0 . 0 1 3 6 0 . 4 8 2 . 1 0 35 0 . 0 1 3 6 O . 4 8 2 . 1 0 11.04 4.21 6.66 2.49

5.04 1 .83 3ol8 1.12 3.24 1.25 7.29 1 .98 0-77 4.38

3.5O 3.5O 2.25 2.25 0.50 6.25 0.50 6.25

7.30 4.10 3.60 2.45 1 .83 0 .99 4.45 17.18 3» 4P 10.94

53.44 49.67 68.25 46.63

126.69 96.30

Table VIII-19 (continued)

PRODUCTION COST ESTIMATE) UNBLSACHiiD PULP

(Dollars per ton)

Quanti Unit Mill capacity Quanti Unit Mi:.l c ipacity

Unit ty cost (dol 200 tons/day ty cost

(dol- 300 ton.5/d=.y l a r i ) lars)

Raw materials; Pulpwood m3 4.7 4.74 22.98 4-7 4.89 22.98 Saltcake kg 100 0.0387 3.87 100 0.0387 3.37 Lime stone kg 47 0.0128 0.60 26.75 47 0.0128 0.60 27.45

Operating costs» 1.62 1.62 Fuel oil kg 52 0.0312 1.62 52 0.0312 1.62

Coal (culm) kg 35 0.0136 0.48 2.10- 35 0.0136 0 . AS 2.10 Labour; operating man/hr 4.14 1 .54 3.84 1.38

mill services it 2.07 0 .73 1.62 0.56 reDair n 1,30 0.47 2.74 0 .94 0.37 2.31

Repair and maintenance materials 3.25 3.00 Clothing, feltSj, wires 2,25 2.25 Lubricating oil 0 .50 6.00 0.50 5-75

Overheads; Administration and supervision 2.88 2.37 Insurance 1.65 1.50 Community expenses 0.75 0.62 Interest on working capital 2.73 8.01 2.59 7.08

Production cost, excluding depreciation and interest 45.60 44.69 Depreciation; sinking fund method 28.80 Total production cost; 77.16 73.49

Table VIII-20

Unit

PRODUCTION COST ESTIMATE; BLEACHED PULP (Dollars per ton)

Quanti Unit tj~ cost

(dol-lars)

Mill capacity 50 tons per'day

Ottanti Unit ty ~~ COSt

(dol-lars)

Mill capacity 100 tons per day

o\

Raw materials

Depreciation] sinking furai method Total production cost

85.20 156.95

Pulpwood m3 5.3 4 .5) 23.85 5.3 4.58 24.27 Salt kg 150 0.0276 4.14 150 0.0276 4.14 Limestone kg 100 0.0128 1.28 100 0.0128 1.28 Sulphur kg 25 0.0659 1.65 30.92 25 0.0659 1.65 31.34

Operating costs Fuel oil kg 58 0.0312 1.81 58 0.0 3L2 1.81 Coal (culm) kg 290 0,0136 3.94 5.75 290 0.0136 3.94 5.75 Labours operating man hrs 14.28 5.45 8.46 3.21

mill services n 5.52 1.98 3-48 1.22 repair H 3.72 1*44 8.87 2.22 O086 5.29

Repair and maintenance materials 4.00 3.75 4.00 Clothing, fel ts , wires 2.25 2.25 Lubricating oil OlJO 6.75 0-50, 6.75

Overheads Adm. and supervision 7.30 4.10 Insurance 4.60 3.05 Community expenses 1.98 1.19 Interest on working

capital 5.57 19.46 4.16 12.50 Production cost, excl. depr. & interest 71.75 ¿1.63

56.63 118.26

Unit

Raw materials Pulpwood m3 Salt kg Limestone kg Sulphur kg

Operating costs Fuel oil kg Goal (eulm) kg Labours operating man hrs

mill services 1

repair 1

Repair and maintenance materials Clothing, felts, wires Lubricating oil

Overheads Administration and supervision Insurance Community expanses Interest on working capital

Production cost, exclo depr<> and Interest * Depreciation; sinking fund method

Table VIII-20 (continued)

JOST ESTIMATE; BLJ (Dollara per ton)

PRODUCTION COST ESTIMATE; BLEACHED PULP

Quanti Unit ty cost

(dol-lars)

Mill capacity 200 tons/day

Quanti ty ~

Unit cost (dol-lars)

M i l l capac i ty

300 tons per diy

5o3 4.79 25.39 5.3 4.94 26.18 150 0.0276 4.14 150 0.0276 4.14 100 0.0128 1.28 100 0.0128 1.28 25 0.0659 1.65 32.46 1 25 0.0659 1.65 33.25

58 290 5< 2< 1< 40 28 35

0.0312 0.0136

58 290 4.84 1.76 1.06

0.0312 0.0136

1.81 3.94

T7W 0.61 0.41

5.75

2.78

6.25

2.88 2.05 0.86 3.39

57.22 38.70

2.37 1.80 0.70 3.20 8.07

56.10 34.62

95.92 90.72

Table VIII-21

PRODUCTION COST ESTIMATE UNBLEACHED KRAFT PAPERS

(Dollars psr ton)

Raw material g Pulpwocd Salted© Limestone Rosin

Operating eostg ISeloïl Coal (culm) Labours

saaterials Clothingj Imbricating oil

Administration aM gupar vision Insurance Gcmunifcy expanses Intelsat on working

Production costa

Depreciation; sinking fund method Total production cost

Unit Quanti

ty ~ Unit cost (dol= laps)

Mill capacity Quanti ty

Unit cost (dol-la rs )

Mill capacity Unit

Quanti ty ~

Unit cost (dol= laps)

50 tons psr day Quanti

ty

Unit cost (dol-la rs )

100 tons psr day

m3 4o9 4o50 22o05 4.9 4.58 22.44 kg 104 0.0387 4o02 104 0.0387 4.02 kg 49 0 „0128 O 0 6 3 49 0.017.8 0.63 kg 20 0.3k0 6 0 8 O 20 0o340 60 SO kg 30 O 0 O 6 3 1.89 35.39 30 0.063 1.89 35.78

kg % 0o0312 1.68 54 3.0312 1.68 kg 360 0o013ó 4o90 6.58 360 0.0136 4.90 6.5 8

sa hps 17° 52 "677S 11.82 4.59 11 5.64 2.04 3.48 1.24 H 3o60 lc40 10.20 2.40 0.92 6.75

3°75 3.75 3o00 2.75 Mi 7.50 0.75 7o25

Ilo 50 7ol8 5°45 3.85 2o40 1.76 6o71 26.06 ilaSSL

85.73 74.35 101.20 71*29 I 8 6 0 9 3 145.64

Table VIII-20

PRODUCTION COST ESHMITE; BLEACHED KRAFT PAPERS (Dollars per ton)

—1

Quanti» Unit Mill capacity Quanti*» Unit Mill capacity Unit ty cost Mill capacity

ty cost ty (dol° 50 tons/day ty (dol- 100 tons/day lars)

50 tons/day lars)

Raw materials Pulpwood m3 5.3 4.50 23.85 5.3 4.58 24.27 Salt kg 150 0.0276 4.14 150 0.0276 4.14 Limestone kg 100 0.0128 1.28 100 0.0128 1.28 Sulphur kg 25 0.0659 1.65 25 0.0659 1.65 Rosin kg

kg 2) 0.340 6.80 20 0.340 6.80

Alum kg kg 30 0.063 1.89 30 0.063 1.89

Gaol in kg 60 0.065 3.90 43.51 60 0.065 3.90 43.93 Operating costs

Fuel oil kg 58 0.0312 1.81 58 0.0312 1.81 Coal (culm) kg 645 0.0136 8.77 10.58 645 0.0136 8.77 10.58 Labours operating man hp 23.76 %o§ 15.54 5.86

mill services re 5.88 2.13 3.72 1.32 repair n 4.30 1.61 12o$2 2.70 1.03 8.21

Repair and maintenance materials 4.00 4.00 Clothing, fe l t s , wir@s w 2.75 Lubricating oil 0.75 7.75 7.50

Overheads Administration and sapsrvisd Lea 11.12 7.18 Insurance 6.50 4.50 Community expenses 3.26 2.10 Interest on working capital 8.06 28.94 6.21 19.99

103.60 120.00

223.60

90.21 ©.86

174.07

s I»

en cv A M M > ® á C0 E-i

M E-) W O O s o B o B s a,

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-0» U S m » g

S i «s-í •es

0 o « © «M

42

» O 8

en \0 H

5 o o Ol oH »—flu

vo G> to vO tf\ »rv £ O

IftíO to N cn in >r\ o on cn o o o o o o ^ O H H O H H

400000

CA

ÍÍNO

nQ NO en -O o

o o

mNO^i

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o a

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en <ao

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o o o o esj H

m © ©

4»

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= 168 =

Table VIII-23 (continued)

OS

PRODUCTION COST ESTIMATES NEWSPRINT (Dollars per ton)

• Quanti- Unit Mill capacity (pianti» Unit Mill capacity Unit ty cost ty cost Unit ty

(dol- 300 tans/ day ty

(dol- 400 tons/day lars) lars)

Raw materials Pulpyocd m3 3.3 4.76 15.71 3.3 4.87 16.07 Limestone kg 30 0.0128 0.38 30 0.0128 0.38 Sulphur kg 24 0.0659 1.58 24 0.0659 1.58 Rosin kg

kg 3 0.340 1.02 3 0.340 1.02

Alum kg kg 15 0.063 0.95 15 0.063 0.95

Gaolin kg 20 0.065 1.30 20.94 20 0.065 1.30 21.30

Coal (culm) kg 410 0.0136 5.58 410 0.0136 5.58 Electricity kWh Is 415 0.0076 10.75 16.33 1,415 0.0076 10.75 16.33 Labours operating aan hr 5.46 1.98 4.67 1.69

mill service© n 1.98 Oc f i 1.76 0.64 repair H loOO 0.38 3.08 0.75 0.28 2.61

Repair and maintenance ©atorials 3.2 5 3.25 Clothing, felts, wirss,. grinding stones 3.25 3.25 Lubricating oil 0.75 7.25 0.75 7.25

Overheads Adsu and supervision 2.60 2.23 insurance 2.11 1.98 Community expsnse s 0.79 0.67 Interest on woxking eapital 3.49 9.01 1*36 8.24

Production costi exclo depr« 1 & int. 56.61 55.73 Depreciations sinking fund s SATHOD • c

38.78 36.44

Total production cost 95.39 92.17

F O ©URA V I 8 11 = 0

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ANNEX IX

ECONOMIC EVALUATION OF THE PROJECTS

The system used for the economic evaluation of the different projects i s essentially^the "venture p r o f i t a b i l i t y " method as described by Happel ] J and by Aries and Nevvton. 2/

Venture prof i t i s in this study defined as the excess prof i t over and above the minimum acceptable prof i t a f t e r taxation. The minimum acceptable profit d i f fers for the different fractions c f the total investment and i s determined by two factors: the minimum acceptable rate of interest , (equal to the rate of interest on securi t ies) , and the estimated lifetime of the investment, which i s the number of years in which the capital should be fully recovered.

On this basis the tota l investment in a project has been divided into three different groups: a) Mill investments, i . e . investments in mil l production f a c i l i t i e s (including pulpwood transport

equipment). Capital recovery time for t h i s investment has been fixed at 10 years. b) O f f s i t e investments in community, housing, railway l ines e t c . which can generally be xully

salvaged in case of an early business fa i lure . The capital recovery time for these investments i s 15 years.

c ) Forest investments, which can be completely salvaged at any date is: case of business f i lure since the capital requirement includes an annual expenditure for establishing new plantations; i . e . there is-no depletion of the forest capital . (See annex I I , section B).

l. Calculation of minimum acceptable profit

The"following nomenclature i s used throughout the study:

I r uapiLai investment as aexinea aoove. i = safe annual i n t e r e s t rate ( f r a c t i o n ) , i . e . i n t e r e s t ra te as may be obtained on security

investments. n - number of years in which the different fractions of t o t a l investment are recovered. t = income tax rate ( fract ion) . y = probability of success. May also be considered as a safety factor to be used for projects

where processes, markets, etc . are untried or doubtful. The factor i s 1 for established pro-cesses and markets.

Pg = gross annual earnings as a fraction of investment. PG = gross annual earnings, tota l . Pgm = minimum acceptable gross annual earnings, fraction of investment. Pv = venture profit a f ter taxation, fraction of investment. PV = tota l venture profit after taxation; i . e . PV = Pv.I T = payout time in years; i . e . capital investment divided by gross annual earnings. The annual depreciation of fixed capital investments according to the sinking fund method is :

D = [ L_ ] . i . y (1 + i ) n - 1

Taxable income i s equal to probable gross annual earnings minus depreciation, or:

y - P G " y ' ( l T i r T I 1 - - " f t i T T T b l 1 1

JJ John Happel, 'Nev Approach to Payout Calculations', Cheaical Engineer. New York. October 19S1.

2/ Robert S . A r i e s and flofcert D. Neston, 'Chemical Cost Engineering'. McGrat? H i l l , Ne» York. 1955.

- 170 -

Net annual income a f t e r taxes i s thus:

y 4 - - t ( y J L - y [ i - s ] l j = ^ T V T (1 + i ) - 1 '

The net assets of these annual earnings a f t e r n years i s :

p„ i l + i l L z - 1 or; y -i— ( 1 - t ) x Ì U _ Ì l l z _ I + I „ t . y ; 3 / b i T i

An al ternat ive investment in s e c u r i t i e s w i l l y ie ld an asset a f t e r n years of ; I (1 + i ) n . ^ p l y i n g the c r i t e r i o n that the to ta l asset o f net annual earnings must a t l e a s t equal the a s s e t

produced by investment in secur i t i es in order to make the p r o j e c t f i n a n c i a l l y i n t e r e s t i n g , we have:

I ( l + i ) n - y J L ( 1 - t ) ( 1 • + 1 > t . y Am i

Solving for TJ,, gives:

Since Tm = - 1 -P&n

T - V (1 - t ) [ (1 • i ) n - 1] . i [ (1 • i ) n - t y ]

Pgf„ = i t ( l + i ) n - ty] y (1 - t ) [(1 + i ) n - 1]

According to prevail ing conditions in Chile, the i n t e r e s t r a t e on s e c u r i t y i n v e s t m e n t s may be estimated at 8 per cent per annum and the income t a x r a t e i s 1 7 . 2 5 p e r c e n t . Employing t h e s e v a l u e s and assuming that the probabi l i ty of success i s 1, the minimum a c c e p t a b l e gross annual e a r n i n g s a r e as follows: - ,

Capital recovery time 10 years 15 years

Minimum acceptable earnings, fract ion 0.1657 0 .1335

2. Venture profit

Since, according to the def in i t ion , the venture p r o f i t i s :

Pv " (Pg - Pgn) ( 1 - t ) , in f ract ion of . thè investment, the annual venture p r o f i t (P ) wil l be the following; v

For the purposes of this Btudy, it la aaaunod that tho projoct oil! ho tho o a l j > .baainooo activity o! the operating company, i . e . , it uill n o t bo poasiblo t o DOQ any t a n crodito IS TII® p r o j a c t f a i l s .

- 171 -

Pv = 0.8275 ( P g I t o t - 0.1657 - 0 .1335 I 2 - 0.0967 I 3 ) 4/ where;

I t o t = total capital investment

I j = mill investment

12 = o f f s i t e investments in housing, conmunity e tc .

I 3 = investment in forests.-5/ To calculate the venture prof i t i t i s thus necessary to assess the gross annual earnings and the

separate fractions of the to ta l investment. Gross annual earnings have been determined on the aasumption that aggregate production wi l l be sold on export markets in Latin America, and that the prices received are equivalent to the current c . i . f . prices in Latin American countries for pulp and paper products ex-ported from North America and Europe. Hie prices have been determined from the f . o . b . sales values l i s ted in the United S ta tes ' export s t a t i s t i c s and the OEEC s t a t i s t i c a l bullet ins for Canada and Sweden for the year 1955 by adding an estimated price increase between 1955 and 1956 of 5 doll ars per ton of pulp and newsprint and 10 dollars for other paper grades, as well as an average ocean freight to Latin America of 25 dollars for pulp and 35 dollars for paper. Hie prices are l i s ted in appendix IX-A, which also gives an estimate of the net sales values at the mi l l in C h i l e , obtained by deducting from the c . i . f . prices an average ocean freight from Chile to the Latin American countries (See appendix VI-F), inland freights to port, sales expenses and discounts.

Gross annual earnings -equal to the net sales value minus production cos ts - are recorded together with the investments in appendix VX-B as are also the venture prof i ts calculated from these data accord-ing to the mathematical expression derived above.

In assessing the relative economic attraction of the different projects the relation of venture pro-f i t s to capital requirements and pulpvnod avai labi l i ty are compared: i . e . t.hp projects ars judged against limitations in capital and pulpwcod supply. .6/

For this purpose, venture prof i ts are recorded graphically as functions of; ( i ) to ta l mil l investment,

( i i ) tota l project investment, including capital required for complete ownership of plantations large enoi^jh to cover the pulpwood needs,

( i i i ) pulpwood requirements, and are included as f igures IX - I to I I I . As production cost , mill investment and wood supply are a l l s t ra ight - l ine functions of mill s i z e ,

i t follows that gross and venture prof i t s must be s t r a i g h t - l i n e functions of both investment and wood requirements.

Since i t i s the usual current pract ice in the less developed regions to finance the purchase of production machinery through deferred payments, the pro jects are also evaluated by t h e i r capacity to liquidate such payments. I b i s may be measured by the number of years in which the foreign exchange share of the total investment can be repaid by the gross annual prof i t s af ter taxation.

The repayment time i s c a l c u l a t e d as f o l l o w s : Gross annual prof i t af ter taxation i s equal to -

PQ - t (PQ - D), where D i s the annual depreciation.

4 / The value of the f o r e s t investment has been calculated with 10 p e r c e n t accuaulati ve interest. For strict c o n p a r i s o n t h e tfaiue s h o u l d h a v e b e e n calculated aith an interest of 9.67 per c e n t t o yield 8 per cent n e t profit after t a x a t i o n .

_sy In the case of industrial operation alone the factor including Ig nill disappear.

J1/ There is also an obvious limitation set by the prospective aarkets for the different products. in the case of bleached paper and maybe also pulp this limit is probably reached before the 1iditj s«t by e i t h e r capital availability or uood supply, uhereas. in the case of neusprint and unbleached uuif. markets will not be the i i o i t i n g factor. (See annex 1).

- 172 -

I

The gross annual prof i ts will a f te r n years produce a total asset of:

[ PG - t (PG - D)] i l - L i l L z - l

which at the end of the period should equal the value of the foreign exchange investment If. Thus, for an income tax rate of 17.25 per cent and an interest of 8 per cent we have;

[ PG - 0.1725 (PG - D)] - ^ ¡ g " 1 • I f I - 0 8 "

The repayment periods have been calculated according to t h i s equation and are recorded in figures and graphically in sppendix IX-D and figure IX-VL

The assessments outlined above refer to single projects; i . e . they re f l ec t the re la t ive attraction of alternative investments in pulp and paper projects as judged by the private investor or the enterprise.

An equally important evaluation i s of the economic benef i ts , which may be obtained for the country as a whole from the a l t e r n a t i v e investment p o s s i b i l i t i e s . This benef i t may be measured in terms of foreign exchange earning capacity, which -as in the case of prof i t s from a single project- must also be judged against limitations set by capital avai labi l i ty and raw material resources. The foreign exchange earnings by different products and mill capacities are l i s t e d in appendix IX-C and g r a p h i c a l l y r e -presented in figures IX-IV and V.

3« Assessment on profit basis - the investors point of view (a) Limitation of capital

A comparison of the venture p r o f i t s in industrial operations (as d i s t inc t from combined industrial and forest operations) as functions of capital requirements (figures IX-I ) shows that i f the investment alternatives are judged from the capi ta l l imitat ions point of view the order of at tract iveness is the f o l l o w i n g : ^

Unbleached pulp - Bleached pulp - Bleached papers - Unbleached papers - Newsprint J5/ By way of i l lustrat ion two examples will be given; ( i ) Assuming that the available capital i s 25 mill ion dollars, the following annual venture profit

will be obtained: fable 11=3

ANNUAL tyENTUHE PROFITS OBTAINED FROM A MILL INFESTMENT OF 25 MILLION DOLLARS

Order of attractive ne ss

Approxo mill siz©£ tons par day

Annual venture profit , 1,000

dollars

Annual venture profit as per-centage of pro f i t for unbi.pul

1 Unbleached pulp 400 4,700 100 2 Bleached pulp 300 4,470 95 3 Bleached papers 145 3*225 69 4 Unbleached papers 180 2,315 49 5 . Newsprint 270 2,330 50

2J In this and the following comparisons the aost attractive alternative is listed f i r s t .

j f / The venturo profit is approx. the saoe for unti, papers and nsaspriat oitb a alight advant ago for newsprint at a louor investaent level and vice-versa for larger invostDoat a.

- 173 -

Table IX-1 shows that the venture p r o f i t s for unbleached and bleached pulps are r o u g h l y twice as high as for unbleached papers and newsprint and about 40- 45 per cent higher than for bleached papers (at. t h i s leve l of investment).

( i i ) In order t o obtain an annual p r o f i t of 10 P e r c e r i t o n the m i l l investment the f o l l o w i n g c s p i t a l i s required:

Table IX-2

MILL INVESTMENT RETIRED TO OBTAIN AN ANNUAL VENTURE PROFIT OF 10 PER CENT ON CAPITAL

Approx. mill Investment ? Per cent sizej, 1*000 dollars investment of

Product tons per day requirements for unblo palp

Unbleached pulp 165 13*390 100 Bleached pulp 155 3-6,305 117 Bleached papers 110 21,220 153 Unbleached papers 230 26S81Q 193 Newsprint 300 27 s 580 199

To obtain a venture p r o f i t of 10 per cent on m i l l and o f f s i t e investments, the minimum capita l re-quirement wi l l thus be double for newsprint and unbleached papers and for bleached papers one and a ha l f times as high as for unbleached pulp. This explains why newsprint m i l l s are general ly b u i l t in larger units than kra f t pulp m i l l s and wi l l require heavier investments t o o f f e r equal economic a t t r a c t i o n .

Hie annual venture p r o f i t s from combined indus t r ia l and f o r e s t operations are the same as from in-dustr ia l operations alone, s ince pulpwood stumpage values are ca lcu la ted with a p r o f i t on fores t invest-ments which, a f t e r t a x a t i o n , y ie lds a net asset equal t o the i n t e r e s t on s e c u r i t i e s . But,because pulp-wood consumption per ton i s not the same for the d i f f e r e n t products and consequently the fores t capi ta l p a r t of t o t a l p r o j e c t investment v a r i e s , i t fol lows t h a t the r e l a t i o n between venture p r o f i t s in the d i f f e r e n t operat ions w i l l not be the same as ft>r i n d u s t r i a l p r o j e c t s a lone.

Figure I X - I I shows the venture p r o f i t which may be expected from f u l l y combined operat ions as funct ions o f the t o t a l p r o j e c t investment. Hie f igure shows that the order of a t t r a c t i v e n e s s remains unchanged, whereas the r e l a t i v e magnitude o f the venture p r o f i t s i s d i f f e r e n t . In the rwge o f invest-ments between 30 and 40 mil l ion d o l l a r s , two d i s t i n c t groups of operations may be dist inguished; i ) un-bleached and bleached pulp and bleached papers, and i i ) unbleached k r a f t papers and newsprint. The f i r s t group gives a venture p r o f i t of about 13 per cent and the second about 8 per cent on the investment.

fa) Limitations in wood suply

When the p r o j e c t s i z e i s determined by pulpwood a v a i l a b i l i t y and not by c a p i t a l r e s t r i c t i o n s , the maximum venture p r o f i t s which may be obtained from d i f f e r e n t operat ions , w i l l change t h e i r order of a t t r a c t i v e n e s s . This w i l l be seen by comparing f igure I X - 1 I I -showing the r e l a t i o n between venture p r o f i t s and wood supply- anf f igure I X - I , showing venture p r o f i t s versus investment. Hie order is thus in the case o f wood supply l i m i t a t i o n :

Bleached papers - Unbleached papers - Newsprint - Bleached pulp - Unbleached pulp. This order of a t t r a c t i v e n e s s i s natural s ince , in the case o f wood s c a r c i t y , maximum p r o f i t s would

be expected from those products which require the most e l a b o ra te treatment. Hie a t t r a c t i v e n e s s nay be measured in terms of venture p r o f i t per cubic metre of wood. (See tab le IX-3 ) .

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T a b l e I X ~ 3

Order o f attractive^ ness 1 2 3 4 5

VENTURE PROFIT PER CUBIC METRE OF WOOD AT AN ANNUAL SUPPLY LEVEL OF 400,000 CUBIC METRES

Product

Bleached papers Unbleached papers Newsprint Bleached pulp Unbleached pulp

Dollars per m3

14o0 8,38 8o25 6088 6C38

Per cent of profit for bio papers

100 59o9 58.9 49.1 45o6

(c) Repayment of foreign exchange investment

At a foreign exchange investment level of 17 .5 mi l l ion dol lars -corresponding t o example i ) of ca-p i ta l l imi ta t ion- the repayment periods for the d i f f e r e n t products f a l l i n t o two d i s t i n c t groups. The f i r s t groip comprises unbleached and bleached pulp which have a repayment period o f about 2.6 years and the second group unbleached and bleached papers and newsprint with a repayment time of between 3 .3 and 3 .9 years . (See f igure I X - V I ) . To these periods must, o f course, be added tha t part o f the p r o j e c t construction time during which foreign exchange i s required and which may be estimated at approximately two years.

From figure IX-VI i t w i l l thus be seen that - i f judged by t h e i r capacity to l iquidate deferred pay-ments in the shortest poss ib le time- the d i f fe rent products wi l l maintain the same order o f a t t r a c t i v e -ness as i n the case o f capi ta l l imi ta t ion .

4. Evaluation on the basis of foreign exchange earning capacity - the national viewpoint

fa) Limitations in capital

When foreign exchange earnings are assessed against the l i m i t a t i o n i n c a p i t a l ( fore ign exchange share of the mil l investment), a somewhat s i m i l a r p ic ture i s obtained as in the case of venture p r o f i t s versus m i l l investment. This may be seen by comparing the f i g u r e s in f i g u r e s IX-IV and I . The most a t t r a c t i v e operations are i n both cases the production o f unbleached and bleached pulp. On the other hand, i t should be noted that newsprint has a higher foreign exchange earning capacity than kraf t papers; the order o f a t t r a c t i v e n e s s for these products i s thus reversed to i t s pos i t ion i n the case o f venture p r o f i t s .

The a t t r a c t i v e n e s s may be measured in terms o f fore ign exchange recovery time; i . e . the annual period in which the foreign exchange share of the m i l l investment i s recovered by net foreign exchange earnings. This time i s l i s t e d below for a foreign exchange requirement of 17.5 mi l l ion d o l l a r s , which approximately corresponds t o a t o t a l investment of 25 mi l l ion d o l l a r s .

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Table

CAPITAL RECOVERY TIME FOR A FOREIGN EXCHANGE PART OF. MIO. INVESTMENT OF 1? .5 MILLION DOLLARS

Order of a t t rac t ive -ness

Product Foreign exchange

recovery time, years

Recovery tine in per cent of time for unblo pulp

1 Unbleached pulp 1.5L 100

2 Bleached pulp 1 . 5 3 105

3 Bleached papers 2o27 150

4 Newsprint 2 .33 154'

5 Uribleaehed papers 2.57 170

Table IX-4 emphasizes that the foreign exchange recovery time i s unusually approximately one and a half years for unbleached and bleached pulp to about two and pajys nf npWRnnnf onr? Iryof

short -a half

•varying from years in the

Limitations in wood supply. In the case of wood supply limitations^ the maximum foreign exchange earnings are obtained from the

more highly refined products - in accordance with expectations. (See figures IX-V), In this case, as in that of capital limitation, newsprint production yields higher foreign exchange earnings than kraft paper and i s -next to the production of bleached papers- the most attractive operatiois as demonstrated in table IX-5 which shows foreign exchange earnings per cubic metre of wood.

Table IX-5

FOREIGN EXCHANGE EARNINGS PER CUBIC METRE OF WOOD AT AN ANNUAL SUPPLY LEVEL OF 400,000 CUBIC METRES

Order of a t t rac t ive -ness

Product Dollars per cubic ¡astra

Per cent of earnings on bl® papers

1 Bleached papers 33oÖ 100

2 Newsprint 29 oU 37.0

3 Unbleached papers 25oS lb. 3 4 Bleached pulp a»o 62 . 1

5 Unbleached pulp 19o3 57.1

- 176 -

Summary.

The economic a t t rac t iveness o f a new pulp or paper pro jec t i s judged from two d i f f e r e n t aspects; ( i ) The private inves tor ' s viewpoint, which presupposes a maximum return on the invested capi ta l a t a

minimum r i sk , and ( i i ) the national viewpoint, according to which a maximum earning o f foreign exchange should be ob-

tained from a v a i l a b l e c a p i t a l and raw mater ia l resources . In each of the two cases l i m i t a t i o n s in c a p i t a l or raw m a t e r i a l supply w i l l a f f e c t the r e l a t i v e

a t t r a c t i v e n e s s of one operation over the o ther . This i s to be expected and only r e f l e c t s the general f a c t , t h a t c a p i t a l l i m i t a t i o n s w i l l favour the production o f intermediate and l e s s r e f i n e d products wire re as in the case o f raw material l imitat ions maximea p r o f i t s w i l l be obtained from the more ref ined products. i f

The order of a t t r a c t i n e n e s s o f the d i f fe rent pulp and paper products - a s judged from the angle ol the investor and the natioro- i s shown below.

Tabl© 11=6

ORDER OF EGOMMIG ATTRACTIVENESS FOR DIFFERENT PULP AND PAPER PROJECTS

Order of attractif®= ne ss

National viewpoint

tiOEL l imit a=

t ioa

Raw material 1imitation

1 2

3 4 5

U n b l o palp Bio palp Ble papers Unblo papers

Bio papar© Uablo papers

B i o palp

Uablo pulp

Unblo pulp Bio pulp Bio papers

Uablo papers

Ble papers

Uablo papers Bio pulp

pal p

As may be seen from t a b l e IX-6, pr ivate and n a t i o n a l i n t e r e s t s coincide, except in the case of pr int which has a higher p r i o r i t y from the national viewpoint than from the private angle.

Since c a p i t a l a v a i l a b i l i t y i n the l e s s i n d u s t r i a l l y developed countr ies i s genera l ly the limit»:.-; factor when a new export industry i s created, a natural sequence i s to s t a r t with pro jec ts for vsibleacheu and bleached pulp and l a t e r - when pulwood supply i s the l imit ing f a c t o r - t o integrate paper or aswsprint sect ions with the pulp mi l l s by re- invest ing the p r o f i t s .

- 177 -

Appendix IX-A

ESTIMATE OF PULP AND PAPER SALES VALUES FROM MILLS IN CHILE

(Dollars per metric ton)

US ex- Estimât Estimât Estimât Estimât Freight Estimât port ed US ed ocean ed CIFe ed aver to port ed sales price export f re ight value ag© sales value 1955 price t o L»A* in fre ight expenses from mil l FOB. 1956. average XJ©ÂO rate , and dis» in Chile

Chile- counts LoÂo

Unbleached sulphate pulp 125*00 130.00 25.00 155.00 30.00 9.95 115.05 Bloachcu ¿uipn<iL>e paxp 155.00 160.00 25.00 185.00 30.00 10.55 144.45 Unbleached k r a f t papers 205.00 215.00 35.00) 235.00 45=. 00 12® 47 177.53 Kraft sack papers 170o00 180eOO 35*00

235.00 45=. 00 12® 47 177.53

Bleached k r a f t papers a/ 260.00 270.00 35.00 305.00 45.00 14.87 245.13 Newsprint 146.00 151.00 35.00 186.00 45.00 10.49 130.51

Source; Export prices FOB. port are obtained from the following sources; Unbleached sulphate pulp:

Bleached " » Unbleached kra f t papers

Kraft sack papers Bleached papers Newsprint

U.S. Export S t a t i s t i c s 1955 and Wood Pulp S t a t i s t i c s 1955® Wood Pulp S t a t i s t i c s 1955® U.S. Export S t a t i s t i c s 1955* OEEC S t a t i s t i c a l Bulletins on Foreign Trade of Sweden and Canada. U.S. Export S t a t i s t i c s ¿955. n n n it m » » " OEEC S t a t i s t i c a l

Bul le t ins on Foreign Trade of Sweden and Canada. (Figures for export to LoA0 countries)

a/ Pr ice estimated equivalent to that of "Book papers printing and converting".

- 178 -

Appendix IX-B

VENTURE PROFITS IN INDUSTRIAL OPERATIONS

(Thousands of d o l l a r s )

M i l l s i z e » t o n s /

50 100 200 300

Unbleached pulp Mill investments 7,400 10,105 13,745 18,855 Offsite investments 795 1,020 1,370 1,830 Gross annual earnings 1,003 2,282 4,841 7,400 Venture profit per year =272 391 1,969 3,336 Venture profit in per cent of

I606I total investment =3« 32 3° 50 13o03 I606I Bleached pulp

Mill investments 9,305 12,410 16,955 22,790 Offsite investments 3Ç0 1,140 1*545 2*045 Gross annual earnings 1,287 2,887 6,088 9,289 Venture profit per yea? =309 562 2,543 4,336 Venture profit in per cent of

17 8 46 total investment =3*03 4ol5 13*75 17 8 46

Mill investments 11,060 15*595 24,665 33*735 Offsite investments 1,045 1*425 2,185 2,945 Gross annual earnings 1,614 3,619 7*629 11,639 Venture profit per year =297 699 2,689 4,680 Venture profit in per

12o76 cent of total investment °2o45 4°11 lOoOl 12o76 Bleached papers

Mill investments 13*120 18,370 28,870 39*370 Offsite investments 1*235 1,690 2,600 3,510 Gross annual earnings 2,477 5,422 11,313 17*204 Venture profit per year 114 1,781 5,116 8,450 Venture profit in per cent of to total investment Oo79 8088 16O26 19° 71

Newsprint Mill investments 11,470 17,955 25,800 Offsite investments 1,175 1,475 1*940 Gross annual earnings 2,331 5,047 7,763 Venture profit per year 227 1,552 2,672 Venture profit in per cent of to total investment lo80 7°99 9o63

400

- 179 -

Appendix IX-C

FOREIGN EXCHANGE 'EARNINGS

valu© FOBo

Unbleached pulp Mill size; 50

100 » 200 n 300 »

Bleached pulp Mill sises 50 tose,

100 85

200 w

3ÛQ w

.ay 121 o 90 0 S3 S3 W H CO

s / d a y 151o30 to ss co a ra »

Unbleached papsrs . Mill sis@| 50 tons/day 185« 30

100 Bleached papsgs

Mill size?

Newsprint Mill siasi

100 W

100

3QQ w

i/day 253o 90 H I«

137° 28 ta ne m ti w a

in prode cost dol

9o21 8o89 8o44 8 o l 3

10o23 9o83 9° 33 9o02

17®99 17 » 29

22o68 2lo87

I lo 58 10o89 10 062 10o 58

Foreign exchange part of invest« ment 1 siOOO dollars

5*833 8*188

11,136 15*308

7*396 10,122 130845 I8064I

9*036 12*805

10*694 15p075

9*569 15*291 22*258 28*094

Capital recovery charge on fo-reign exchange

1*000 dollars

869 1,220 1,660 2 »281

1,022 1,509 2,063 2*778

1*347 1,908

1*594 2* 247

1,440 2,279 3*137 4*187

Foreign exchange earnings dollars per year ( f i r s t 10 years)

1,103 2,735 6,283 9,664

1*446 3*443 7*875

12,161

1*531 3,972

2,453 5*874

2,960 6,569 9*982

13,551

5o29 2c 99 1.77 1,58

5oll 2-94 1O76 1.53

5.72 3.22

4.36 2o 57

3o23 2.33 2.23 2.07

Notes Foreign exehange earnings arej 10 yearsg (a ° f ) „ 350 x

(a ~ f) o 350 Xo Wh@r® x i s the mill

a f ter 10 year ss capital recovery charge on foreign exchange,

capaeityo

- 180 -

Appendix IX=D

REPAYMENT PSIIODS FOR FOREIGN EXCHANGE INVESTMENT

Unbleached papers

Bleached pulp

Unbleached papers

Bleached papers

Newsprint

Produc tion " capaci= ty tons/

day

Foreign exchange invest" ment

(1,000 dollars)

Gross annual profit

PG (1,000 dollars)

Venture profit

V (1,000 dollars)

De pre c i a= tion

(1,000 dollars

year)

Repayment period By gross By vent-profit ure af ter , profits taxation . . NG(year) V 7 * ^

50 5 , 8 3 3 1 , 0 0 3 = 2 7 2 1 , 1 9 4 7 o 7 9 1 0 0 8 , 1 8 8 2 , 2 8 2 3 9 1 1 , 6 2 5 4 o 6 8

7 » 8 3 2 0 0 1 1 , 1 3 6 4 , 8 4 1 1 , 9 6 9 2 , 2 0 9 2 o 9 5 7 » 8 3 3 0 0 1 5 , 3 0 8 7 , 4 0 0 3 , 3 3 6 3 , 0 2 4 2 o 6 5 5 o 9 4

50 7 , 3 9 6 1 , 2 8 7 = 3 0 9 1 , 4 9 1 7 o 7 2 1 0 0 1 0 , 1 2 2 2 , 8 8 7 5 6 2 1 , 9 8 2 4 O 5 8 2 0 0 1 3 , 8 4 5 6 , 0 8 8 2 , 5 4 3 2 , 7 0 8 2 o 9 2 7 » 4 3 3 0 0 1 8 , 6 4 1 9 o 2 8 9 4 , 3 3 6 3 , 6 3 5 2 o 5 7 5 »48

50 9 , 0 3 6 1 , 6 1 4 = 2 9 7 1 , 7 7 1 7 o 5 5 1 0 0 1 2 , 8 0 5 3 , 6 1 9 6 9 9 2 , 4 9 5 4 o 6 1 2 0 0 2 0 , 3 4 3 7 , 6 2 9 2 , 6 8 9 3 , 9 4 3 3 o 4 4 1 0 . 0 4 3 0 0 2 7 , 8 8 1 1 1 , 6 3 9 4 , 6 8 0 5 , 3 9 1 3 o 9 0 8 , 4 2

50 1 0 , 6 9 4 2 , 4 7 7 1 1 4 2 , 1 0 0 5o70 1 0 0 1 5 , 0 7 5 5 , 4 2 2 1 , 7 8 1 2 , 9 3 5 3 o 5 9 1 4 . 6 9 2 0 0 2 3 * 8 3 7 1 1 , 3 1 3 5 * 1 1 6 4 , 6 0 5 2 o 7 0 6 o 0 6 3 0 0 3 2 , 5 9 9 1 7 , 2 0 4 8 , 4 5 0 6 , 2 7 5 2 o 4 2 4oS2

1 0 0 9 , 5 6 9 2 , 3 3 1 2 2 7 1 , 8 4 6 5 o 4 2 2 0 0 1 5 , 2 9 1 5 , 0 4 7 1 , 5 5 1 2 , 8 4 8 3 o 9 5 2 0 „ 2 0 3 0 0 2 2 , 2 5 3 7 , 7 6 3 2 , 6 7 2 4 , 0 7 2 3 o 7 4 1 4 o 2 7 4 0 0 2 8 , 0 9 4 1 0 , 4 7 9 3 , 9 7 2 5 , 1 0 1 3 o 4 9 1 0 „84

- 181 -

Appendix IX=E

AMORTIZATION

According to the regulations laid down by the Superintendencia de Compañías de Seguro, Sociedades Anóni-mas y Bolsas de Comercio, the minimum percentages of amortization referred to i n i t i a l values and costs are as follows:

Machinery and instal la t ions Furniture and utensils, draught animals Automobiles, trucks and vehicles

Organization expenditure, tools , materials Patents, concessions

Buildings and constructions, miaing property, railways, underground pipes, telegraph and telephone networks, boats, rolling stock, etc .

S per cent annually 10 per cent annually 25 per cent during the f i r s t year 15 per cent during the second year 10 per cent annually thereafter 20 per cent annually Payment by annual instalments so that they will be fully paid for on expiration No minimum is set for these and other accounts

Moreover, the Office o£ Internal Revenue, by virtue of paragraph f ) of Article 17 of the Income Tax Law accepts "a reasonable amortization to compensate for depletion, wear or destruction of the goods used in the business or enterprise, including a prudent allowance for those which have become obsolute. The Office of Internal itevemue u i l l determine the amount of the deductions which can prudently be made "r or. ? -idering replaceaent costs,"

Appendix IX-F

TAXES

1) Turnover. A tax of 6 per cent i s levied on the value of sales, t o be paid for by the purchaser, but i s not applicable to exports.

2) Income tax - third category .This tax applicable to industrial and business concerns amounts to 17.25 per cent on liquid profits . In addition, i t is necessary to pay a 5 per cent tax (Law 7,600) for the construction of workers' houses (Corporación de la Vivienda). I f the business has disbursed money for this purpose, the 5 per cent is deductible from such expenditure and is not payable.

3) There is no tax on ezcess profits.

1/ S o u r c e : Di r Q c c i d a Go&Qrol do Xopuocfcoc l o t o r n o s i

- 1 8 2 -

meuoA OE - 0 irò ©uns S» ~ 5

U T I L I D A D E S POS COMPENSACION DE R I E S G O S EN OPERAC IONES I N D U S T R I A L E S , DE SPUES DE IMPUESTOS

E N F U N C I O N D E L A I N V E R S I O N

VENTURE PROF IT AFTER TAXAT ION IN I N D U S T R I A L OPERAT IONS

F U N C T I O N OF I N V E S T M E N T

(M ILLONES OE DÓLARES POR ARO)

( M I L L I O N DOLLARS PCR YEAR)

U T I L I D A D E S POR C O M P E N S A C I Ó N D E R I E S G O S , P O R C I E N T O D E L A

I N V E R S I O N T O T A L

V E N T U R E P R O F I T , P E R C E N T OF T O T A L I N V E S T M E N T

30 l o 50 I N V E R S I Ó N T O T A L ( M I L L O N E S D E O O L A R E S )

T O T A L I N V E S T M E N T ( M I L L I O N D O L L A R S )

1 . PASTA S I N B L A N Q U E A R 2 . P A S T A B L A N Q U E A D A

3 . P A P E L E S S I N B L A N Q U E A R 4 . P A P E L E S B L A N C O S 5 . P A P E L OE D I A R I O

1 . U N B L E A C H E D P U L P

2 . B L E A C H E D P U L P

3 . U N B L E A C H E D P A P E R S B L E A C H E D P A P E R S

5 . N E W S P R I N T

FD6URA IK ~ 18 F 0 ©UK£ §H = Í 11

UTIL IDADES POR CCMPINSACIOM DE RIESGOS EN ¡B5R.0TAC ICMES INDU3TRI ALES Y FORESTALES COMBINADAS; DESPUES ¡JE IMPUESTOS

E N F U N C I Ó N DE LA I N V E R S I O N

VENTURE PROFIT AFTER TAXATION IN COC INEO LF®USTRIÄL A ® FOREST OPERATIONS

F U N C T I O N OF INVESTMENT

M I L L O N E S DE DOLARES POR AÍJO) M I L L I O N DOLLARS PER Y E A R )

U T I L I D A D E S POR COMPENSAC IÓN DE R I E S G O S * P O R C I E N T O DE LA

I N V E R S I Ó N TOTAL

VENTURE PROFIT, , PER CENT OF TOTAL INVESTMENT

£ /

/ // 3

0

/ //' K // y

/ft > A / /// y A/ v /

/ Ma J/ VA W\

J t A

w f/U //

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10 20 30 1}0 50 60 I N V E R S I Ó N TOTAL

( M I L L O N E S DE D O L A R E S ) TOTAL INVESTMENT

( M I L L I O N D O L L A R S )

1. PA S T A S I N BLANQUEAR 2. PA S T A BLANQUEADA

3 « P A P E L E S S I N BLANQUEAR 5 . P A P E L E S BLANCOS

5 . P A P E L DE D I A R I O

I. 2o

5«

U N B L E A C H E D PULP B L E A C H E D PULP UNBLEACHED PAPERS B L E A C H E D P A P E R S NEWSPR I NT

P D G U ß A OK - I 11 II

M G U F L E HU - 0 Q 0

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K S L L I E A ®@LLAQS PEP VEÛQ)

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200 to) 500 M 9P©DI S I L I ® A © OC TTA®E8Â PÄQA PASTA

(toOÜO ©S «3 PM AS®) L?>ULPW®©@ AWA I LAB I L I T V (tpCCO @e «3 PSB vgäßj

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P A P E L E S BLAMC@O 5„ PAPEL ©E © I A D I ®

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1. PASTA A I S BLABQUEAQ 2 . PAST* BLARQUEASA ?0 PAPELES S IM BLAEQUEAR

• PAPELE9 6LAM€00 PAPEL DE D I A 8 I O

15 20 25 30 « E C C 8 I O A O I « DC A < V I S A S

(niLLonsa OC N L A K S ) feegieej esetmaaE hcqwirwcht

( M I L L 1 A A DDLLARS )

1. UHBLCACMC* PULP 2 . B L C A C M D PULP

U M L C A C M E O PAPERS . BLCACMKO PAPERS

5 . MCVSPR INT

F Î G U R A IK - V

F I G U R E I K - V

GANAUCIAS £ W D I V I S A S

EN F U N C I O N DEL A B A S T E C I M I E N T O DE WADERA

F<miiw ixmmcg. earn I WIS FU N C T I O M OF aooo S U P P L Y

( M I L L O N E S DE D Ó L A R E S PQR A H O )

( H I L L I O N D O L L A R S PER Y E A R Î

12

10

8

5,

"i /

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Sa IF a

f } 100 200

1. PA S T A S I N B L A N Q U E A R

2. PA S T A BLANQUEADA

3„ P A P E L E S S IM BLANQUEAR

΄ P A P E L E S B L A N C O S

5 . P A P E L DE D I A R I O

300 &30 5OO 6OO Â D Û S T E € ( 6 S I 5 M T O OC O A S E SA

( I O G O O M » 3 ) S U P P L Y

{ 1 , 0 0 0 m 3 )

I «, U n b l e a c h e d P U L P

2 . B L E A C H E © P U L P

3» U * B L E A C K E O P A P E R S I » B L E A C H E D P A P E E S

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REPAYMENT P O I C O S FOR FOÜC INQ EXCHAM<£ I N V E S T S « « ! BY GROSS ANNUAL P R O F I T S

AHos ) Y E A R S )

2

I

10 20 30 . ¡K) I N V E R S I O N EN D I V I S A S

( M I L L O N E S DE D O L A R E S ) INQ EXÇHAN6E INVESTMENT

( M I L L I O N D O L L A R S )

I . PASTA S I N BLANQUEA® 2O PASTA BLANQUEADA

J. P A P E L E S S I N BLANQUEAR . P A P E L E S BLANCOS

PAPEL DE D I A R I O

I . UNBLEACHED PULP 2O BLEACHED PULP

3« UNBLEACHED PAPERS S . BLEACHED PAPERS 5« MCWSPRI NT

ANNEX X

PRICES IN JUNE 1957 RELATED TO A SPECIFIC PROJECT ^

i. Cost of wood and other raw materials.

Pulpwood. The present cost of this material, delivered at the mill s i t e , has been estimated as follows:

Stumpage Ch.$ 1,000 ^ Fel l ing and cutting 420 Logging and woodland roads 540 Miscellaneous 140 Social insurance, other insurances, e t c . 270 Main roads 330 Transport, average, railway and lorry combined 2,000

Total cost , per solid cubic metre, at mill Ch.$ U,7oo Availability and cost of other raw materials

The following l i s t shows that most raw materials required for the production o f pulp and paper are available in Chile from domestic sources. Hie prices indicated refer to the present costs at practically any of the possible mill s i t e s within about 100 kilometres of the port of Talcahuano.

(1) - LIME Domestic supply, from the same source that now supplies the Huachipato Steel Mi l l , near Concepción. Hiis material i s shipped from Guarello Island to San Vicente Bay in the v ic in i -

ty of Concepción and the price i s about Qi.810,000 per ton at possible plant s i t e s . (2) - SODIUM SILICATES Can now be obtained domestically, 40 Bfe., a t about Ch.$62,000 per ton, de-

l ivered in Santiago. Freight t o poss ible plant s i t e s i s estimated now at Ch.88,500 per ton.

(3) - RICE OR OORN STARCH From domestic sources, now being delivered at Llay-Llay at a price ranging from Ch.§190,000 to Ch.§210,000 per ton. Ch.$8,600 per ton should be added

for delivery t o plant s i t e . (4) - DEXTRIN From domestic sources delivered at 'L lay-Llay at about Ch. $230,000 per ton. Freight

charges t o plant s i t e would amount t o Ch.$8,600 per ton. (5) - GUM RQSINDomestic production i s very limited, from a small plant near Concepción. Ihis material

must normally be imported. I t can be brought in from Portugal at about US$300 per ton, CIF Talcahuano, M or N grades. I f imported from the United States (I or bet ter grades) i t could be delivered GIF Talcahuano at US$230 per ton. TTiese prices are increased by about 50% due to customs duties and tax. Freight to possible plant s i t e s would amount to about Ch.$1,350 per tcm.

(6) - SALTCAKE Within about two years the n i t ra te industry in Chile w i l l be able to del iver th i s raw material with a purity of about 97%, containing approximately 1.2% sodium chloride,0,6% -

sodium nitrate , 0.4% magnesium sulphate and 0.008% iron. The price i s now estimated at US$ 20 per ton Chilean port and about Ch$10,000 per ton should be added for freight to Talcahuano and inland freight to the plant s i t e .

At the present time th is product with a purity of about 90% or less i s a lso available from domestic sources-

(7) - SODIUM CARBONATE The n i t r a t e industry in Chile has considered producing t h i s material , but i t must now be imported at the pr ice of US$ 75 per ton, Q F Chilean port, con-

taining 97% carbonate. Clearing through customs would raise th is price by about 60%, Hiere would

1/ The information in this annex about v a r i o u s p r i c e s as of June 1957 has been s u b m i t t e d by the C e l u l o s a s Q i i i e S.A. to which enterprise tile Advisory Group oishes to express its sincere thanks both for the permission to publish the da ta o a

a l s o for the aany fruitful and interesting d i s c u s s i o n s about various i n d u s t r i a l probleas ohich have taken place s i t h the officials of this coapany

2J ill these values should be convartod i n t o U.S. dollars at the rate of Cb$6S0 to the dollar, in order to have as true a picture as possible of those costs in United States currency at this t i n e .

- 1 8 3 -

be an inland f re ight charge to plant s i t e o f about Ch$l,350 per ton. (8) - FORMALDEHYDE Domestic industry produces only a smal 1 lquantity of wood alcohol of poor quality

a by-product o f wood d i s t i l l a t i o n . Therefore t h i s product must be imported at an estimated cost o f USS 43 per ton, Q F Talcahuano, and about 10% should be added to t h i s price for customs duties , plus about Ch$],330 per ton for inland f r e i g h t .

(9) - AI1MNIM &JLPHATE This product can be obtained domestically at about Qi$6R,000 per ton, delivered in Santiago, containing approximately 15.5% ^L.203 and 0.2% to 0.3% iron.

There i s a lso a less pure substance, used for t rea t ing water, delivered at Santiago at about Oi l 85,000 per ton.

For e i t h e r product, the f r e i g h t charges between Sant iago and p o s s i b l e plant s i t e s would amount to Ch$8,000 per ton.

(10) - SJLPHUR Hiere are several domestic producers in the northern zone of the country, who can deliver at the present time at the price o f Ch$ 50,700 per ton, CIF Talcahuano. The material i s

refined, in lumps, containing approximately 99.5% sulphur' and 0.5% ashes. Inland freight to the plant s i t e would amount t o about ChSl,350 per ton.

(11) - CASEIN Domestic production i s small and the material i s imported from Argentina at a cost estimat-ed at US$350 per ton, FOB, ^oint o f o r i g i n , but addit ional charges, including fre ight ,

customs duties e t c . , bring the price in Chile up to Qi$680,000 per ton at Chilean ports . Inland fre ight would amount t o about Ch.$1,350 per ton.

(12) SODIUM CHLORIDE For chlorine and c a u s t i c soda, i s in abundant supply, containing 98.98% sodium chloride, 0.19% sodium sulphate, 0.54% calcium sulphate, no n i t r a t e s or n i t r i tes ,

potassium, magnesium or l i t h i um s a l t s , to be del ivered in bulk, with an average s i z e of 3/8", which i s commonly accepted for e l e c t r o l y s i s . The price i s about US$6 per metric ton FDD port of origin. Freight from this port to Talcahuano i s estimated at about US$7 per ton and for shipments o f about 1,500 tons per ship i t might amount to only US$6. Inland f re ight to plant s i t e would be about Ch$I,c!50 per ton.

(13) - UTANIUi DIOXIDE This product « s s t be i,-sported at pr i ces prevalent fox del ivery in united S ta tes por t s . The f re ight from United S ta tes ports to Talcahuano, for the product in

sacks, amounts to US$50 per metric ton. To t h i s CIF Chilean port cost about 35% must be added for customs duties and tax, plus about Gi$l,350 per ton for inland f re ight .

(14) - CHINA CLAY Of domestic o r i g i n , in lumps. I t i s estimated that during the October/April season the p r i c e w i l l amount to Ch|32,000 per ton, FOB railway truck at Santiago s ta t ion .

Railway f r e i g h t charges to .plant s i t e are estimated at Ch$8,000 per ton. This China c l a y contains only t r a c e s o f iron and approximately 25% alumina, and 70% s i l i c a .

There are other products with a s l i g h t l y h i g h e r . c o n t e n t o f alumina and a lower proportion of s i l i c a ; the m a t e r i a l i s 80-84% white .

(15) - TALC P r i c e s o f t h i s mater ia l are quite s imi lar to those o f China c lay , for del ivery at Licantén s ta t ion , from domestic sources and with freight charges t o the plant s i t e amounting to about

Ch$8,000 per ton. Hie material i s 65% white. (16) - SODIUM aJLPHIDE Produced domestical ly, obtainable in Santiago at about Ch$140,000 per ton, con-

ta in ing approximately 58% sulphide. The f r e i g h t charges from Santiago to the plant s i t e amount t o Ch$8,000 per ton.

(17) - SODIUM PEROXIDE T h i s m a t e r i a l i s not being produced in Chile now, but there i s domestically produced hydrogen peroxide o f 100 oxygen volume. Perborates are now produced in

Q i i l e and i t i s there fore poss ib le t o produce sodium peroxide, in which event and given s izeable consumption, the p r i c e could be ad jus ted t o the value o f t h i s m a t e r i a l in the i n t e r n a t i o n a l market, plus 40%, corresponding to the customs duties and tax now levied on the imported product.

2. Building materials and fuel costs

(a) Building materials

Puilding c o s t s can be est imated on the following bases : from Ch$35,000 t o ChS55,000 per square metre; Ch$13,000 per cubic metre o f foundations; and Ch$30,000 p e r ' c u b i c metre of reirafo'recd coacirete.

The following are some of the c o s t s of individual building mater ia l s . Cement Normal domestic production i s about 750,000 tons, but 900,000 tons can be produced. Delivered at

Concepción at approximately Ch$26,000 per ton.

- 184 -

Steel rods for reinforcing concrete Available from nat ional s t e e l m i l l , near the probable construction zone atOhS125 ,000 per ton.

Roofing Cement-asbestos domestically produced, del ivered at Talcahuano port at approximately Ch$l,100 per square metre. Galvanized s t e e l ( corrugated) from domestic sources can be de l ivered at

Talcahuano for about Ch§l ,100 per square metre. Steel piping Made in Santiago up to 4" and in the Concepción area in larger diameters, to meet s p e c i f i c -

at ions. Black pipe in diameters used inside the buildings, c o s t s approximately C2iS200 per kilogramme delivered at Santiago, with a f re ight aggregate o f about Ch§9 per kilogramme for del ivery t o the Concepcion area. The p r i c e for pipe over 4" , manufactured within the zone, i s about Ch8170.00 per ki logramme. Copper piping Manufactured in Chile at a price somewhat higher than s t e e l piping and in diameters up to

5". Proportionally t h i s pipe i s l e s s expensive than imported pipe. Ceaent tubing For pressures up to 20 atmospheres, with c a s t - i r o n couplings, i s produced in CMle and

delivered at Santiago at pr ices ranging from Ch§700 per metre for the 2" diameter s ize to C3i$2, 500 for the 6" diameter s ize . The freight aggregate to the Concepción areas amounts t o approximate-ly Ch$9 per kilogramme. Concrete tubing (not reinforced) This tubing f o r sewer systems i s a l s o produced in the country i n

s u f f i c i e n t quant i t i e s and del ivered in the Concepción area a t px i -ces ranging from Ch$250 per metre for the 3" diameter s i z e to Ch83,500 f o r the 32" difpsster s i z e . Bricks Delivered in Concepción at pr i ces from Ch$14 to Ch$18 each, depending on q¡onlifcy. Also in the

same area, r e f r a c t o r y b r i c k s can be obtained for about Ch832 each. Nails Produced in the Concepcibri area , in ample supply, for the p r i c e of about Ch8200 per kilogramme. Black wire Also ava i lab le within the area at an approximate pr i ce o f Ch8200 per kilcgrcmiEe. Sand Obtainable within the zone of probable construct ion, a t about Ch$650 per cubic metre. Crushed-stone Delivered in the Concepción area a t about Ch83,000 per cubic metre. Lumber Ih ample supply in the Concepción area, at about Ch§40 per board foot , f o r s t r u c t u r a l purposes,

and about ChS26 per board foot for concrete moulds and s i m i l a r purposes. Conductors and electric wires Manufactured i n Santiago, both i n standard types and t o meet a number o f

s p e c i f i c a t i o n s . For a pro ject l ike t h i s , the prices would, on tits average, be only s l i g h t l y higher than those of the imported products, i f f re ight and import charges are included in the l a t t e r case. (b) Fuels

Wood Obtained from thinnings and the clearing of f o r e s t s . Could be supplied in s i z e s averaging 2" x 2" x 1" approximately, dry, with a c a l o r i f i c value o f 3 ,200,000 c a l o r i e s per kilogramme; 60% y i e l d , with

25% moisture, and 0.5% ash. The pr ice at the mi l l can be estimated at Ch.§1,300» Coal-breeze (culm) As the probable s i t e o f the m i l l w i l l be within the major coal-producing region of

Chi le , there i s an abundant supply of t h i s by-product in s i z e s ranging from 1/8" to 1/2" or l a r g e r . An average ana lys i s shows: f i x e d carbon, 43%; v o l a t i l e matter , 34.5%; ash, 19.5%; and moisture, 3%; c a l o r i f i c power, 6 , 3 1 5 , 0 0 0 c a l o r i e s per kilogramme, sulphur content , 1.4%. Hie pr i ce est imated for the Concepcion a r e a , aboard rai lway t r u c k , i s Ch$9,500 per metr i c ton . Coal Screened m a t e r i a l , not much smal ler than 1" , at the minimum, with the fol lowing a n a l y s i s : f ixed

carbon, 47 .4% v o l a t i l e mater ia l , 40.2% ash, 8.8%; moisture, 2.6%, C a l o r i f i c power, 7.076%, with 0 . 9 % sulphur. The est imated p r i c e , aboard railway t ruck , in the Concepción area i s approximately Ch. $12,350 per ton. Fuel Oil 5 Delivered a t Concepción can be estimated around Ch$39,000 per ton, with a c a l o r i f i c value

of 10.5 to 10 mi l l ion c a l o r i e s . A s izeab le amount of the supply i s imported, but e f f o r t s are being made to make the country s e l f - s u f f i c i e n t in t h i s f u e l .

3- Salaries and mages

This c l a s s i f i c a t i o n includes o f course employees and manual workers.

(a) Labour This group i s subdivided i n t o agr icu l tura l labour and construct ion and i n d u s t r i a l labour. Nhnimum

agricul tural wages vary depending on the sect ion o f the country, but in the areas around Concepcion they

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can be estimated to average Ch$300 per day. I t must be pointed out that , in Chile agr icul tura l labourers frequently work more than eight hours a day which may o f f s e t de f i c i enc ies in performance or y ie ld . At any r a t e , i t i s pre ferab le not to give hourly r a t e s because o f the p e c u l i a r features o f t h i s type o f work. I t i s important t o mention that the workmen used for logging around Concepción are paid Qi$530 per day as a r e s u l t o f circumstances inf luencing wages in th i s highly i n d u s t r i a l i z e d area. Further inland, fores t workers receive wages somewhere between the minimum agr icul tura l pay (Gi$300 per day) mentioned above and the higher f igure paid in the Concepción are (Ch$530 per day).

Minimum industr ia l building wages amount to Ch$500 per day for eight hours of actual work throughout the country. Actually, in the Concepci'on area a manual worker earns approximately Ch§650 per eight-hour day; semi - sk i l l ed workers, such as masons, earn approximately Ch$850 per e ight-hour day, while s k i l l e d workmen (concrete s t e e l re in forc ing e r e c t o r s , plumbers, e l e c t r i c i a n s , e t c . ) are paid from Qi§l ,000 to Ch$ 1,200 per day.

There are severa l features concerning t h i s subject that raost be borne in mind so faff as the cost o f labour to the company i s concerned. For instance, ÍG.$¡% mst be added to ell agricultural or industrial wages due to what i s c a l l e d in Chile the "semana corride,™; in o ther words workmen who attend s i x days a week are e n t i t l e d t o payment for the seventh day as & bonus for t h e i r attendance. Furthermore, s o c i a l l e g i s l a t i o n and o t h e r r e l a t e d legal provisions increase the cos t o£ labour t o the company by 35%, t h i s percentage being applied a f t e r the addition o£ the previously mentioned 16.66%. The net r e s u l t , on the average, i s t h a t t o a l l labour wages paid an approximate t o t a l o f 58% must be added ( t h i s percentage includes acc ident insurance , which i s not compulsory) i n order t o evaluate the t o t a l rea l cost to the company.

Summarizing, the cost t o the company, based on above d a i l y ra tes , would be as follows ( a l l f igures in Chilean currency):

Agricultural workers (forest):

Dsi ly : (530 + 1 6 . 6 % ) 1 .35 = 834

Non-skilled construction workers

Hourly: [ (650 + 16.6%) 1 .35 ' ] : 8 = 128

Semi- skilled construction workers

Hourly: [ (850 + 16.6%) 1.35 ] : 8 = 1 6 7

Skilled isonstruction workers

Hourly: [ (1 ,100 + 16.6%) 1.35 3 : 8 = 217

For industrial operators an addit ional 10% must be added to the above f igures (b) Salaried Personnel:

Unski l led o f f i c e help i s hired in the Concepcion area for s a l a r i e s f luc tuat ing from Ch$26,000 t o (1838,,000 per month. The average figure paid in an o f f i c e i s ca lculated to amount to about OiS45,000 per GUDth.

Foremen in charge o f construct ion workers arte a lso paid, on the average, Ch§45,000 per acnfch, bofc the supervisor o f a construct ion j o b of average importance rece ives about Ch$90,00() per rcorath.

To continue with the higher-ranking employees, i t may be mentioned t h a t an accoumfcairst rece ives between Qi$110,000 and Gi$125,000 per month; a s h i f t foreman, or siupervisor, receives about Qt$90,000 per month; the average engineer i s paid about Ch§200,000 per month, and a c h i e f engineer or Sisad o f pmfcctfen between Gig260,000 and Qi8350,000 per month.

Legal p r o v i s i o n of various s o r t s , including legal bemuses, increase the cost to the company by in addition t o the above figuras paid d i r e c t l y t o individuals.

I t i s a common p r a c t i c e in Chi le tha t adminis t ra t ive personnel , i n p o s i t i o n s Siigher tSwara (Shos© mentioned above, earn both a salary and a par t i c ipat ion percentage, ca lcu la ted on the b a s i s outpffit off

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f>

prof i t s . Naturally the legal provisions apply only to the i r respective s a l a r i e s and therefore the per-centage increase in cost to the company for th i s personnel i s proportionally reduced from 65% to 30-60%. ) '/At the present moment, a rate of exchange of $650 per dol lar nay be applied to convert the sa lar ies jand wages paven herein to the i r dollar equivalents.

I t my be assumed that any further depreciation of the national currency wi l l not appreciably upset, I for a,ir&asonable period of time, the calculations that are based on dol lars . In other words the corres-jponaing amounts of wages and s a l a r i e s in Chilean currency may increase as people press to maintain the j j ize of t h e i r income in proportion to a given ra te o f i n f l a t i o n , but inasmuch as, for a l l p r a c t i c a l purposes, the dollar i s s t a b l e , the dollar equivalents quoted should not normally undergo any sizeable increase and there would normally be only a s l ight r i se to allow for a gradual improvement in the standard of l iving.

For a l l these reasons, i t i s f e l t that these estimates of wages and s a l a r i e s wi l l provide a reason-ably accurate guide, notwithstanding further depreciation of the Chilean currency os s i m i l a r unforeseen developments.

I

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