São Paulo, Brazil, July 29, 2015 -
IFC, a member of the World Bank Group, will lend USD 22 million to Companhia do Vale do Araguaia (”Araguaia”), a teak producer in the Mato Grosso State, to support the sustainable management of its planted forests. This investment will promote improved sustainability standards in the region, especially in the management of legal reserves (
reservas legais
), make a contribution to climate change mitigation through carbon dioxide sequestration, and provide diversified job opportunities in a rural area in the country’s Midwestern region that has been economically dependent on a very narrow range of agricultural commodities.
IFC’s financing will allow Araguaia to manage and preserve more than 9,600 hectares of land, including 6,300 hectares of plantations to produce teak, which can be expected to sequester carbon for an especially long period. Araguaia’s investment program for next two years entails the sustainable management of its planted forests and the construction of a wood processing facility near the town of Água Boa, Mato Grosso State, to produce and sell teak products to both regional and international markets.
Global demand for teak has far outstripped what can be supplied sustainably from natural forests and demand is expected to continue to grow. Teak is a prized tropical hardwood for its durability, natural water resistance and milling properties. Teak plantations such as those of Araguaia have been a response to the growing gap in teak supply and growing demand. A well-managed plantation has a positive impact on surface water balance, guards against drying in microclimates, especially in areas with significant degraded pasture. Because the early thinnings and scraps from wood processing can also be sold to local industries which rely on biomass boilers, Araguaia is also reducing the pressure on the remaining stands of natural forest in its surroundings.
“We are pleased to establish this valuable partnership with IFC, which goes beyond financial support and has already helped us to improve our organization, said Guilherme Frering, Chairman of Araguaia’s Board. “We are sure that we will continue to make significant progress in building a stronger and more competitive company.”
“Sustainable forestry management can strengthen an important economic industry by helping it balance the economic and environmental benefits of forests amid growing demand for wood products,” said Hector Gomez Ang, IFC Country Manager in Brazil. "We are pleased to support Araguaia and help improve the standards for sustainable management of forests in Brazil."
IFC’s global forestry strategy focuses on reducing the conversion of natural forests, generating employment in downstream wood-based industries supplied with sustainable wood, increasing the productive use of degraded lands, supporting internationally recognized and certified forest management practices, and supporting access to carbon markets and the use of wood waste for renewable and biomass energy. Over the past decade, IFC has invested more than USD 1.5 billion across the forest product supply chain. In addition to wood production such as in this project, IFC invests in pulp and paper production, wood panel fabrication, and production of downstream wood products such as furniture and doors.
About Araguaia
Companhia do Vale do Araguaia (“Araguaia”), founded in 2005, is a privately owned Brazilian company engaged in the sustainable management of teak plantations in Midwestern Brazil. Araguaia planted nearly 6,300 hectares of teak on about 9,600 hectares near the town of Água Boa, in the eastern part of Mato Grosso State.
About IFC
IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. Working with private enterprises in about 100 countries, we use our capital, expertise, and influence to help eliminate extreme poverty and boost shared prosperity. In FY14, we provided more than $22 billion in financing to improve lives in developing countries and tackle the most urgent challenges of development. For more information, visit
www.ifc.org
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