Project sponsor and major shareholders of project company

Interforest is a private Guatemalan company owned by three business professionals with experience in the wood industry in Central America, the U.S. and Europe. They are, Mr. Fernando Paiz, who owns 38% of Interforest; Mr. Alberto Tonda, who also is a 38% shareholder; and Mr. Michael Aronstein, who owns 24% of Interforest.

Total project cost and proposed IFC investment

The total project cost is estimated at US$12 million. The proposed IFC investment is a US$5 million A Loan for IFC's own account.

Location of project and description of site

All of Interforest's plantations and forestry properties are located within 150 km of its sawmill facility in Zacapa, Guatemala. The Zacapa processing facility is located 80 miles away from the ports of Puerto Barrios and the Puerto Santo Tomas and are accessible by a major paved highway. Interforest's main forestry properties are located in the municipality of El Estor in the department of Izabal; in the municipality of Cahabon in the department of Alta Verapaz; in the municipality of Morazan in the department of Progreso; and in the municipality of Estanzuela in the department of Zacapa.

Description of company and purpose of project

Interforest is one of the largest owners of private plantations in Guatemala, with forestry resources of above 6,000 hectares, and it ranks as Guatemala’s leading reforestation company. In addition to its core reforestation and forest management activities, Interforest operates a sawmill, (Procinsa, S.A.) which produces dimensional lumber for speciality molding and parts for cabinets, furniture and non-structural construction applications. The project involves: (i) expansion and modernization of Interforest’s sawmill processing capacity; (ii) an upgrading of Interforest’s forestry infrastructure; (iii) investments required to obtain international (FSC) certification for sustainable forest management and ISO certification for its sawmill operation; (iv) working capital and (v) refinancing of existing short-term debts. The concept is to support Interforest’s development as an integrated forestry company by growing the operational side of its business and expanding its cash flows. More specifically, the project will leverage Interforest’s continuing reforestation activities and excellent reputation in the market and strengthen its capacity to transform its wood fiber into value-added hardwood products for export. The goal is to achieve a more seamless integration of the forestry asset side of the company’s business with both its Procinsa sawmill and the end-market for the company’s manufactured products. IFC's Role has included the following contributions: IFC Support at Critical Stage of Company’s Development. IFC has provided Interforest with value-added assistance at a critical time in its development. This support has included, among other things technical assistance: IFC arranged for technical assistance by a leading authority in the field, including extensive recommendations in respect of soil tests; yield and productivity enhancements; forest infrastructure, management and training. Support for Guatemalan Company in Priority Sector. IFC has a clear role in this project in supporting an export-oriented, private-sector company in Guatemala. The Guatemalan government has specifically targeted timber/forestry as a priority sector for development and investment. Access to Long-term Finance. Long-term tenors, of critical importance to Interforest given the nature of its assets (it takes a tree 8-12 years to grow to harvestable size) are unavailable in Guatemala. Foreign commercial banks generally have not been willing to support Interforest due to sector and country considerations and given the small scale of Interforest's operations at the present time. IFC's own potential investment is expected to serve as a catalyst to help raise at least sufficient external financing to complete the Financial Plan. Support for Ecologically Responsible Enterprise. Interforest owns plantations and natural forest assets. In recent years, it has reduced its demand for natural forest timber and implemented sustainable forest management practices. IFC's involvement with Interforest will encourage and support this trend and assist a major Guatemalan timber products company reinforce its commitment to long-term sustainable forestry. Such a commitment, beyond bringing market access opportunities and ecological benefits to Interforest, could also have a demonstration and replication effect for other timber operators in Guatemala. Interforest currently owns 1,950 hectares of Tropical Moist Forest and cloud forest which it has set aside as a conservation area. Reduce Social Exclusion. The sponsors appear to have developed longstanding and good relations with local indigenous communities who work in the plantations and live close to the project site. The inclusion of indigenous people within rural economic activity -- and the wider benefits and spin-offs that the sponsor has provided (health, education, cultural support) is noteworthy. IFC's investment would allow the sponsor to continue to develop these relationships in order to maximize benefits to rural poor and indigenous peoples. The Interforest Project would have an high development impact in Guatemala: (i) Interforest’s activities reduce the exploitation of natural forests and help protect and manage these strategic national assets in an ecologically sustainable way: Guatemala has lost a very substantial amount of its natural forests due to “slash and burn” agricultural practices of its indigenous people. The company plays an important and growing role in Guatemala in helping to reduce this practice by educating local people and improving farming methods (access to better seeds, fertilizers, etc); making local people stakeholders in the forests (titles to land; offering jobs at Interforest); and helping to create more stable communities (construction of schools, access to fresh water and other infrastructure; and entry into long-term fiber purchase contracts). (ii) Interforest has formed cooperative partnerships with local NGOs such as Defensoras de la Naturaleza, which is supported by the Nature Conservancy. Interforest will likely form other such alliances in the future which will elevate its profile and impact as an environmentally and socially responsible enterprise; (iii) Interforest is an important employer in the region (it directly employs over 600 people; 500 involved in reforestation (partly seasonal but all rural) and its activities contribute to development of downstream manufacturing operations; an expansion of its operations as contemplated by the project will increase this impact; (iv) Interforest’s exports provide valuable access to foreign exchange for Guatemala; (v) With successful implementation of the project, Interforest would become the first Guatemalan forestry company to attain both international certification for sustainable management of its forests as well as ISO certification for its manufacturing operations, thus having an important demonstration effect among other domestic players in this sector.

Environmental and social issues - Category

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects, because a limited number of specific environmental and/or social impacts may result which, can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria.

Location of environmental documents in locally affected community

A notice to the general public was disclosed in the local Guatemalan press advising them of where they can find the ERS, translated into Spanish. The contents of the ERS were also discussed with local communities in formal meetings at the farms owned by Interforest; records of such meetings are available, as well as a copy of the advertisement disclosed in the local press.

To contact the project company, please write to:

Interforest 9A Ave. 20-06 Zone 1 Guatemala, C.A. 01001 Fax: (502) 232-4994 Email: interfor@guate.net