Forestry development in Paraguay: a tall opportunity

image of Plantación forestal en Paraguay

Post available in: English Español

Forestry development in Paraguay: a tall opportunity

In the context of decreasing global availability of natural forests and growing demand for sustainable wood products, Paraguay offers forestry opportunities beyond its excellent climate and soil conditions and general advantages for agribusiness investment.

Mild temperature year-round and high precipitation regime contribute to a faster growth rate and good yields of some commercial species and, consequently, to a shorter payback period: 12 years versus up to 40 years in other countries.

The Paraguay native forest has unique wood material (tajy – Tabebuia Hepthapylla, yvyraro – Pterogynenitens, ybyrapyta – Peltophorumdubium, kurupay – Piptadenia macrocarda, etc.) suitable for added value products as timber, profiled and floorboard wood and carpentry and building components.

The country has extensive know-how of the forest industry, especially in wood flooring and biomass production, and the mainly young population is open for training. Finally, land ownership is structured in great surface plots suitable for commercial plantations.


In the 20th Century, the once dense native forest was severely decimated by uncontrolled cropping and transformation into cultivated land. In 1973 forestry law 422/73 declared in the public interest the rational handling of forests to control erosion and protect water basins. Yet illegal exploitation continued as agriculture soared. In 2004 Paraguay had the highest deforestation rate in America when the Government passed the “zero deforestation” law that prohibits the transformation of forest soils into agriculture in the eastern region until 2018.

The National Forestry Institute (INFONA) started projects with the Food and Agriculture Organization (FAO) to encourage sustainable forestry development, and UN-REDD+ aimed to reduce emissions. Paraguay has national plans for forestry competitiveness, agro-forestry policies, inventory, updated thematic maps for investment orientation and a National Forest Monitoring System. Management of indigenous forests, boosting planting programs and modernization of the institutional framework were identified as crucial issues for sustainable development and employment increase.

The National Forestry Inventory (2015) identified 16:700.000 hectares of native forests, 2:400.000 ha of palm trees and 53.000 ha of commercial plantations. The total amounts to 47% of the country’s area.

Forestry development in ParaguayINFONA Maps Project TCP PAR 3304

Location of commercial forest plantations

Forestry development in ParaguayINFONA Maps Project TCP PAR 3304

Areas for potential forestry development

Caazapá, San Pedro, and Alto Paraná departments concentrate almost 60% of plantations (31.000 hectares)High potential areas (less than 100 km from ports or industries) add up to 9:000.000 hectares, mainly in central Paraguay.


The Paraguay forest industry ranges from seed and seedlings production to the final shipment of finished products. It includes at least two industrial chains: mechanical processing (sawn wood, boards, joinery, floorboards, laminates, mouldings and furniture) and energy production (firewood, charcoal and biomass). Agricultural activities include nursery production of reproductive material and seedlings, tree planting, forest grooming and harvesting and industrial. The sector is well served by transport, logistics and associated professional services, including commercialization.

However, both the mechanical processing and the energy production chains have deficits in the continuous supply of raw materials, which ensures steady needs. Timber demand for industrial use keeps growing while the offer has decreased with a more significant gap since 2013. FAO calculated that planting should average at least 10.000 hectares/ year to fulfil the demand of installed industries.

Forestry development in Paraguay

Industrial use timber supply versus demand evolution 2003-2020 source: FAO

Biomass accounts for 46% of the country’s energy consumption, and 78% is produced from wood chips and charcoal. This tendency will continue since fuel oil and electricity are pricey, and most small and medium industries have biomass boilers that are challenging to convert. Planting to meet demand in 2020 should average 25.000 Ha/year.


Considering the raw material deficit, a good initial strategy is to concentrate on agricultural activities, where business engineering allows profiting from know-how and investments already in place. Firms like Paraguay Investments work with land owners supplying clone seedlings, land preparation, planting, cropping and harvesting services and transport to industrial facilities. One possible legal figure is the warranty trust, where one party (the settlor) gives access to another (trustee) to some assets –with or without transferring ownership- to operate towards a certain goal for the benefit of the first party or another beneficiary.

The most common plantation types of new commercial forests are:

  • Solid timber from cloned Eucalyptus grandis or urophylla, with commercial cutting at 24 and 60 months and full cut at 14 years. Median annual increment (MAI) 30 m3/hectare/year.
  • Solid timber from Eucalyptus grandis from seeds, with commercial cutting at 24 and 60 months and full cut at 14 years. MAI: 26 m3/hectare/year
  • Biomass from cloned Eucalyptus grandis or camaldulensis, with no commercial cutting and full cut at 7 years. MAI: 60 m3/hectare/year

At the full cut, all types have better internal return rates (IRT) than cattle (bovine raising and wintering) and agriculture (soy and its chain) though the profit is reaped only at the full cut. In a 2014 study of returns over investment in cloned eucalyptus for solid timber published by INFONA, IRT in 10 years was 17.04%, factoring in land cost and 18.87% when expected price increment in the period is considered.

Forestry development in Paraguay

Cash flow of commercial forestry plantations. Source INFONA return on investment in timber forestry.

Another option is working with native species, either from managed natural regeneration, rational use of mature trees and planting of good size and high commercial value species as lapacho (Tabebuia spp,), cedar (Cedrela sp.), petereby (Cordia trichotoma), or incense (Myrocarpus frondosus). There are about 20 such species identified in western Paraguay (Chaco), of which about 14 are also present in the eastern region. Mature trees typically have great dimensions and a relatively fast growth rate. The productivity of native forests in sustainable production is lower than in commercial plantations (MAI 1.6 m3/ha/year) but is compensated by higher prices and may be improved with genetic manipulation and forest husbandry techniques.

The most valuable product is solid timber for industrial processing, with a wide range of technological characteristics among species that make them useful for many products. Installed industries export railway sleepers, profiled or floorboard pieces, construction carpentry components, serrated timber, laminated wood sheets and composite wood panels.

Forestry development in Paraguay

Eucalyptus combined with yerba mate.

Both exotic and native plantations can be managed with other types of land exploitation to improve and diversify farm production, prevent soil degradation, conserve water and capture carbon. Agro foresting and silvopastoral systems associate ligneous species with annual crops, fruit trees, grazing and refuge for cattle. The combination offers the investor better returns and earlier positive cash flow.


Paraguay offers ample benefits for foreign and domestic investments, including some specific to the sector. The most important general benefits are 60/90 Law (fiscal investment incentives regime); 1.064/97 Law (Maquila, a regime of subcontracting for the productive process and re-export of goods and services); Free Zone system (temporary suspension of customs and internal taxes on machinery, capital, and raw materials) and MERCOSUR rules of origin that require 40% of components to be national, less than in any other member country.

Some specific incentives are 422/73 law (fiscal exemptions for forestry elements imports), 125/91 law (income tax reductions for re-planting), 536/95 law (incentives for planting and re-planting and low interest- long term loans) and dedicated credit lines for forestry offered by the Financial Development Agency (AFD) through the PROFORESTAL program with loans up to 12 years payable at terms end.

Research: Alice Bonet

Contact the Gateway to South America team to learn about the best investment opportunities in the region. The company is a benchmark for foreign investors wishing to invest in Argentina, Brazil, Chile, Paraguay, Peru and Uruguay, providing expert advice on property acquisition and investment tours.

(Visited 2,318 times, 1 visits today)

About Gateway to South America

Established in 2006, Gateway to South America began as a single office in Buenos Aires. Since then, it has grown into a vibrant regional network, providing professional real estate marketing services to clients in Argentina, Brazil, Chile, Paraguay, Peru, and Uruguay. If you enjoy reading our news site, please share it on your social media!

Post available in: English Español

Comments are disabled
Real Estate and Investment News from South America
Visit us on LinkedInVisit us on FacebookVisit us on TwitterVisit us on Pinterest