Report from Brazil
Pará's Simaspa urges approval of new PMFS

The solid wood sector in western Pará, in the Brazilian Amazon, has laid-off over 13,000 employees since late 2004, according to the Wood Industry Union of Southwestern Pará (Simaspa). Simaspa says that this has created a social crisis, which resulted from the suspension and cancellation of the so-called Sustainable Forest Management Plans (PMFS) by the federal government, which guaranteed the supply of legal sawlogs to local sawmills. Simaspa has urged the federal government to intervene in the crisis and to comply with the Conduct Adjustment Terms (TAC) signed in 2005, which foresaw the approval of forest management areas up to the end of 2006.

According to Simaspa, there are 253 forest companies employing 17,500 workers operating in the area along the Santarém (Pará)-Cuiabá (Mato Grosso) federal road.

Out of this total, 13,125 employees (75%) have already been dismissed and 2,625 more (15%) are about to be laid-off. More lay-offs are contemplated should the suspension of PMFS persist. The Ministry of the Environment has proposed the approval of 10 new PMFS but the sector finds it insufficient since the TAC planned 250 PMFS. The sawnwood sector is the second major economic activity in Pará, with exports of $543 million (56% of which are added-value products). Pará has 33 sawnwood clusters and 1,592 forest companies with annual revenue of $1.1 billion and a total of 60,107 direct and 123,634 indirect employees.

The growing consumption of planted roundwood by the wood pulp and steel sectors (for charcoal) is reducing the supply of wood panels to the furniture sector. Estimates suggest that if furniture sales in 2006 expand over 15%, this will put pressure on wood supply beyond sustainable

production levels, leaving the furniture sector facing serious supply problems. The Brazilian Association of Furniture Industries (abimovel) expects that the sector will grow 10-15% in 2006. Rather than improving companies' profitability, this growth may bring about higher expenses as a result of price readjustments of roundwood, wood panels and furniture products.

Brazil exported 9% less furniture in the first quarter of 2006 in comparison with the same period last year. The USA, Brazil's main furniture importer, decreased imports to $71.9 million in the first quarter of 2006, down 20% from the same period in 2005. This is a direct consequence of the difficulty in passing on increasing costs and the emergence of Chinese furniture in the US market, which have taken market share away from Brazilian furniture. Exports of Brazilian furniture also declined in respect of France (down 23% to $17.3 million), Germany (down 56% to $6.3 million) and the Netherlands (down 38% to $5.8 million) during the first quarter of the year. However, increased exports were registered in the UK (up 11%), Spain (up 19%), Argentina (up 49%) and Mexico (up 49%). Although furniture exports to Chile, Argentina, Uruguay and Mexico are comparatively smaller, these are growing at a fast pace.