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Arauco and Mega-Investment in Brazil: "There, Environmental Authorities and Services Want Projects to Happen and Help"

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• Cristián Infante, general manager of the forestry company, highlights that it took them 14 months to obtain the license to start construction, compared to up to 10 years in Chile. The plant will cost US$4.6 billion, employ 14,000 people at its peak, and in steady-state operations will pay between US$300 million and US$400 million in taxes annually. He warns that due to permitting delays and insecurity, Chile is wasting its forestry potential.

Arauco, the forestry arm of the Angelini Group, surprised this week by finalizing the largest investment in its history. The surprise also came because the mega-project is not in Chile, coinciding with a week of harsh criticism from the business sector over excessive bureaucracy for investment projects.

The company will build a new pulp plant, the Sucuriú project, in Inocência, Mato Grosso do Sul, Brazil, where Arauco has operated for 22 years. The investment will total US$4.6 billion, producing 3.5 million tons of pulp annually, surpassing the world's largest plant by Brazil’s Suzano (2.5 million tons). "Our plant will be the most competitive globally, at US$1,300 per ton," emphasizes Cristián Infante, Arauco’s general manager.

At its peak, it will generate around 14,000 jobs and is expected to begin operations in 2027. Earthworks started last June, involving a US$170 million investment.

To supply the plant, they need 350,000 hectares of forests and already own 250,000 hectares, planting 55,000 hectares annually. "Natural conditions are excellent—trees take seven years to grow there, versus 12–15 years in Chile," notes the executive.

Arauco’s current production capacity is nearly 5.3 million tons annually, rising to 8.5 million with the new project, securing the second-largest global position. "Our goal isn’t to be the biggest but to execute good, profitable projects. Suzano, the leader with 14 million tons, got there through acquisitions—we’re second through organic growth. If we acquired a major competitor, we could likely overtake them," he says, adding, "We’re open to opportunities and flexible with a global mindset."

Financing combines multiple sources. "We’ll end this year with net debt/EBITDA of 2.9x, rising to just over 4x in coming years. Once operational, the plant should generate US$1.5 billion EBITDA annually," Infante states.

Another funding source is a capital increase of up to US$1.2 billion, approved October 17. They plan to raise US$300 million this year and the remaining US$900 million between 2025–2027 as needed. Dividend payouts will also drop from 40% to 30% of profits.

—This week’s announcement continues a process started in 2022. What happened in between?
"In 2022, we agreed with Mato Grosso do Sul’s government, which welcomed us warmly—reflecting Brazil’s culture of governors globally seeking investments. We then conducted technical studies, validations, budgets, basic engineering, and rigorous economic assessments, evaluating returns, risks, and timelines."

"A massive effort—our São Paulo office has 60–70 engineers working full-time to ensure readiness."

—What did the agreement with the state and governor entail?
"We signed terms setting basic conditions and launched a streamlined permitting process, with the state providing a single-window approach—no need to navigate multiple agencies. The process is highly regulated, and they committed to certain improvements."

—Like what?

"Upgrading the road from the plant to Inocência, building an airport, and standard tax incentives for Brazil."

—What tax benefits?
"Exemptions and deferrals with a present value of US$400 million—not exclusive to Arauco but part of state policy to attract investment. We pledged US$27 million in social programs, jointly with local and state governments, to mitigate project impacts."

—Beyond local authorities, how does environmental permitting compare to Chile’s heavy process?

"Brazil is highly industrialized with strict licensing. We applied for an installation license, meeting rigorous permits on project design, impacts, emissions, water effects, and socio-economic factors—all at the state level."

—In Chile, approvals are national. Does Brazil’s central government not intervene?

"Mostly state-level, though logistics or connections to national power grids involve federal regulators."

—And timelines?
"Much faster. The state ensures smooth processes. We got the installation license in 14 months. Once built and compliant, they grant the operating license."

—Are Brazil’s environmental standards looser?

"Not at all. The plant will meet top environmental standards."

—How about community engagement?
"Less formalized than Chile, but in Inocência (50 km away), we host open houses—300 attended two assemblies. The mayor actively participates. The town (10,000 people) will host its fifth pulp plant."

—How have communities reacted?

"Exceptionally. People applauded at the launch. In Brazil, the U.S., and Uruguay, authorities support projects rather than oppose them. In Michigan, for our largest U.S. board plant, the state said: ‘Permits in six months if you comply.’ When I asked about objections, they replied: ‘That’s our problem, not yours.’"

—Another Chile difference? Here, permits often face lawsuits.
"In Chile, even with permits, projects get tied up in courts. We need faster permitting and certainty post-approval. These are 30-year investments. Uruguay’s plant, inaugurated by leftist Pepe Mujica, shows state policies matter—now under Lula in Brazil."

—Is Chile’s forestry industry undervalued?
"Globally, forestry is seen positively. Wood is a carbon-absorbing marvel—no machine matches trees. Timber construction is booming (30-story buildings abroad), unlike concrete/steel (14% of global emissions). Countries are expanding forests."

—Is Chile moving backward?

"Five years ago, Chile had 2.4 million hectares of plantations; now under 2 million due to fires, land seizures, and southern insecurity. Wood has huge global potential, but Chile overlooks its forest assets. Corma identifies over 1 million plantable hectares—benefiting water infiltration, erosion control, and carbon capture. Plantations protect native forests."

—Are opportunities being wasted?
"Absolutely. Chile has vast potential but regresses while others advance. Our Brazil plant will pay US$300–400 million yearly in taxes, creating jobs, development, and state revenue. Without permitting reform, Chile loses out to regional peers."

—Why is the industry underappreciated?
"Complex diagnosis. Forest firms haven’t effectively communicated forestry’s benefits, conflated with ethnic/community conflicts. Tax incentives under plantation laws were demonized, despite creating jobs and strong industry."

—MAPA (US$2.85 billion) was Arauco’s last major Chile project. Is another feasible, or is Chile tapped out?
"62% of our assets are in Chile. Brazil diversifies risk. If southern Chile offers security and raw materials, we’ll invest happily. Chile has great forests, ports, and logistics."

—Are projects impossible in Chile now? Has it lost appeal?

"Possible, but permitting delays (5–10 years) raise risks. With capital waiting, long waits reduce project appeal, putting Chile at a disadvantage."

Source: subscription edition ofEl Mercurio