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By Suki Davis

The Uruguayan power and water companies are state owned monopolies. There is no competition, and recently, the state-owned power company, UTE, has signed a 20-year agreement with two large companies for the provision of bio-energy for electricity generation. Currently, most of Uruguay’s energy is derived from diesel generators, and although a small amount is now wind generated, a change of tack must be made.

The entrance of Uruguay’s state power company into Uruguay’s forestry world is a clear sign that the government has seen the risks of having their economy tied to imported conventional fuels, and has made this progressive move to aid the exciting and fledgling industry known as bio-energy. This is good news for all involved.

The companies, Tacuarembo Frigorifico and Weyerhaeuser Uruguay, who both own forestry plantations, have signed agreements for a fixed rate, for a fixed term of 20 years. This gives significant confidence to the companies and encourages further investment. Clearly, the fuel wood needed will not be harvested exclusively from the their plantations—a percentage must be purchased from other forest owners.

For the country itself, the diversification within the existing forest industry will mean the potential for economic development and improvements in the area of new jobs and investment. The trickledown effect will be substantial.

The government has shown its support of the industry by allocating funds for the restoration of the railway lines that were installed in the early 1900’s. Hundreds of kilometers, at a price of thousands of dollars, will be reactivated. Currently, wood is transported by truck but the weight and width of the trucks are damaging highways, and the cost for fuel and highway upkeep does not justify their continued use. The railway will be a reliable, low cost transportation system for forestry, along with transporting other goods for export.

Sustainable fuel wood production is necessary for the success of the bio-energy industry in Uruguay and is encouraged by the government. Legislative policy is in place to offer landowners tax incentives to afforest their marginal land. Without these incentives, much of the land would remain as grass land for grazing cattle.

And finally, the afforestation of the grasslands has another benefit. Forests offset increasing carbon levels and mitigate the harmful effects of pollution. The Kyoto Protocol has sanctioned the earning of carbon credit through afforesting areas such as these. For more on carbon credits see: http://en.wikipedia.org/wiki/Carbon_credit.

Forestry in Uruguay is not just about saw logs and paper—the industry is operating on many fronts. The future of renewable resources development will depend on political choices by independent countries and the international community. Clearly, Uruguay is in the forefront with its support of the diversification of its forestry sector. The international community could take the lead and learn from this tiny county’s forward thinking.