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Monday, June 2, 2003 - Page updated at 12:00 AM

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Weyerhaeuser's world: Forest giant branches out to fertile Uruguay

Seattle Times business reporter

TACUAREMBÓ, Uruguay — A gaucho slowly sidles down a dirt path on horseback, stiff hat cocked and chaps hanging, like generations of South American cowboys before him.

He's part of northern Uruguay's landscape of gently rolling, grass-covered hills, an area that resembles Eastern Washington's Palouse. Uruguayans know this area for "muchas vacas, poco gente" — lots of cows, few people.

But what stands out in this startlingly lonesome landscape are the acres of perfectly planted trees, their branches swaying in a soft breeze like a field of ripe wheat. This is where Weyerhaeuser came to grow trees that mature more than four times faster than in much of North America.

The company has begun what could be a $1 billion investment to turn a swath of this pampas region into a farm of evenly spaced pine and eucalyptus trees that will become expensive decorative wood — all produced at a fraction of the current cost.

This project is a gamble for Weyerhaeuser, struggling with debt and a slumping lumber market at home, but one its executives say they can't afford not to take. World demand for wood is growing, and Weyerhaeuser is thinking globally about how to capture more of the market. The stakes are even higher for Uruguay, a troubled nation with virtually no forests that lured the company with big financial incentives.

Covering 321,000 acres, an area six times the size of Seattle, Weyerhaeuser's Uruguayan tree farms are changing this small country's economy and culture, and promise to impact the environment in ways that aren't yet clear.

But for Ralph Schmidt-Liermann, an Uruguayan who returned from years of working abroad for a job with Weyerhaeuser, it's a risk worth taking. "This country needs change. We have to decide if we want to get on the bullet train or just stand and watch it go by."

From pampas to forests

Weyerhaeuser's plantations here are the brainchild of Steve Hee, a stocky Chinese-Hawaiian who grew up in Kauai. He wanted to quit college in Oregon because a job in a plywood plant was going well. But his dad forced him to stay in class, and by the 1990s he was one of the executives in charge of Weyerhaeuser's future.

Hee was sent in 1996 to investigate opportunities in the fertile region of Brazil, Argentina and Uruguay, a country about the size of Washington. Hee packed up his Puyallup home and moved to Tacuarembó, a town of 50,000. With $2,000 in his pocket, Hee crisscrossed the pampas in a rented Toyota. Bouncing over potholed roads, Hee juggled geological maps and soil data, searching for lands to grow trees.

About 300 miles from the nearest expatriates, Hee settled into the town where slaughterhouses and grain silos are major landmarks. Grasslands spread in every direction, punctuated only by flat rock outcroppings left after millennia of erosion.

Business was done by barter or with cash, and Hee, 58, remembers stares from shopkeepers when he asked for receipts to send to headquarters in Federal Way. "It was a challenge."

To entice Weyerhaeuser, Uruguay granted the company tax breaks on land. It lowered duties on imported trucks and equipment, and exempted forestry from income tax for at least one crop rotation. It also agreed to pay half of the cost of tree planting.

"Other places are better purely for trees," Hee said, "but the total package puts Uruguay on top."

Cloning and good seeds

Weyerhaeuser has stands of 4-year-old eucalyptus trees that already are more than 45 feet tall. Technology has shortened the planting-to-harvest cycle to just nine years.

By contrast, in the Northwest, the company is just now harvesting trees grown since it first replanted clear-cuts in 1965. In Uruguay, the sun, rain and a lack of pests shorten pine-tree crop rotation to 21 years, compared with 35 years in the southeast United States.

"We're able to get much better growth in that environment than where it's native," said Gary Drobnack, head of Weyerhaeuser's international forestlands.

Steve Altsuler, a geneticist who spent his career at Weyerhaeuser nurseries in Oregon, was one of Hee's first recruits. After Hee's call, he went to the library to look up Uruguay and decided to take the job after reading about its exotic wildlife. A fan of poisonous snakes and insects, he spends his free time taking digital photos around his house. "You couldn't get much farther from Oregon."

Together, the two men assembled grassland plots across three provinces. Now fluent in Spanish, they are the only non-Uruguayans on the 108-person payroll of Colonvade, the 50-50 joint venture Weyerhaeuser set up with a unit of UBS, a Swiss bank.

Altsuler oversees the process to produce clear, decorative wood used to make furniture and moldings — similar to the wood coming from tropical forests, much of which is not replanted. Weyerhaeuser Chief Executive Steve Rogel recently remodeled the kitchen of his Tacoma home with Brazilian eucalyptus.

The Uruguay project started with prime seeds imported from Louisiana and South Africa. A new nursery, which will supply all of the seeds it needs in Uruguay by 2010, was built, part of investment that could total $1 billion by 2020, according to company documents. To maintain diversity, six to eight types of trees a year will be planted.

Eucalyptus trees are cloned by carefully stripping, preparing and planting the branches. Already, a row of trees planted six months ago is 6 feet tall.

To develop a product that will fetch a high price, the trees are grown without knots. The trick is to cut off as many branches as possible without harming the tree's health.

The pruning, known as "lifting," maximizes the clear wood in each trunk. Altsuler explains the process on a 750-acre test plantation of 8-year-old pines. Workers have made five "lifts" so far, and the trees are shorn to the point of looking like coifed French poodles.

Upstairs in the nursery office, in a computer room filled with the scent of fresh pine, engineers process aerial photos, maps and GPS data taken with each planting. "We can do the entire process for the same dollar per acre that it costs just to plant" in the United States, Drobnack said.

Preliminary plans call for the first harvest next year, sawmills to be built by 2008, and an annual supply of more than 663 million board feet of timber.

Searching for new markets

Weyerhaeuser's global reach has led it far from Tacoma, where it was founded 103 years ago by Frederick Weyerhaeuser. Spreading across the United States, Canada and overseas, the company eventually owned more than 2 million acres in Asia alone.

By the 1980s, facing criticism for its logging practices, Weyerhaeuser decided to pull back from Indonesia, Malaysia and the Philippines. Logging tropical forests, it reasoned, would invite negative publicity.

But the rising global demand for wood changed the equation. The company continued logging in North America and began eyeing other temperate regions.

Along the way, there were false starts.

During a trip in the early 1990s to explore timber operations in Russia, Hee sat up one night drinking vodka with Russian foresters who were convinced it was impossible to replant Siberian clear-cuts. Hee promised to prove them wrong. The next day, after recovering, he packed seeds into his suitcase and returned home.

But by 1994, Weyerhaeuser decided Russia was too risky and backed out. "It was just too unstable," Hee recalled, sitting on the porch of his ranch house in Uruguay, a full moon in the northern sky. "You never knew who your partners were."

The company sent seedlings back to Russia, marked as "humanitarian aid," but Hee never heard what happened to them.

In 1999, Weyerhaeuser acquired MacMillan Bloedel in Canada, where it holds long-term logging rights to 35.4 million acres of forest. Last year's $8 billion purchase of Portland's Willamette Industries complemented its growing network of sawmills and factories in the United States and Mexico.

While small now, the South American tree farms may one day supply China's growing appetite for wood, Hee said. Because of its attributes, the region will be a competitor if Weyerhaeuser is there or not.

"We're identifying the regions that we might want to do business in and the products or services that we have that might do well there," CEO Rogel said. In Uruguay, "We're pleased both from an environmental standpoint of being able to plant trees in an area that didn't have them, plus we're building for a future base where we can operate in South America."

Uruguay's troubled past

The arrival of Weyerhaeuser is part of a 500-year tradition of outsiders seeking to profit from Uruguay's resources.

Spanish settlers built trading posts on the Atlantic coast, raising cattle, sheep and crops. Trading wealth turned the capital, Montevideo, into an ornate seaport of colorful stone buildings that today looks like it belongs on the Mediterranean coast. With a regional banking hub and a standard of living reminiscent of Europe, Uruguay was known as the Switzerland of South America.

But the economy crashed along with commodity prices in the 1950s, leaving the country with empty land and falling income. The country's resources were tapped and it was left behind, "perfecting the art of being a loser," according to Uruguayan author Eduardo Galeano in his classic book, "Open Veins of Latin America."

It was years before the idea of developing a forest economy blossomed. Settlers had planted small stands of eucalyptus trees to shelter cattle from wind, and today most Uruguayans consider eucalyptus indigenous. But truly native trees grew only along rivers and streams, covering less than 6 percent of the country.

In 1968, the government, seeing the value of logs, started giving tax breaks to foreign forestry outfits and a dictatorship squelched any opposition to the idea. Similar politics in nearby Chile and Brazil led to the startup of even bigger forestry industries.

In Uruguay, tree farms remained small until 1987, when a study by the Japan International Cooperation Agency, an aid group, suggested expanding forestry. Some trees would be ground into pulp to make paper, and others would be shipped as logs to stoke sawmills abroad.

Backed by the World Bank, Uruguay soon introduced new laws to encourage forestry investment. Of the 8.6 million acres in Uruguay that could potentially support tree farms, more than 1.6 million have been planted. Trees could cover 2.5 million acres by 2010.

Planting led to investment in buildings and infrastructure: more than $900 million through 2000, according to government figures. Forestry employment rose to 14,000 in 2000 from 1,000 a decade earlier.

"Uruguay's private and public sectors don't have the capacity to invest," said Martin Aguirrezabala, deputy minister of Livestock, Agriculture and Fish, during an interview in his office overlooking the blue sea off Montevideo. "We are dependent on outside investors."

Still, the government is making a down payment. In addition to new roads, it's constructing two ports and plans to spend $100 million to $150 million in the next five years upgrading railroads for logging.

Change brings new worries

Forestry already has brought big change to Uruguay, a country of 3.5 million. Juan Pedro Pusse, 36, started school in Uruguay to be a mechanical engineer but soon switched to forestry. He graduated in 1990 and is now one of 30 technicians and geneticists at Colonvade. "I'm fortunate an opportunity came just when I needed it."

His wife, Fernanda Romero, said she takes home $1,300 a month from her job at Colonvade, while technicians earn $800 to $1,000. The workers live in houses at the nursery.

Today, people in Tacuarembó may carry themselves with more confidence than those in much of Latin America, but that is an illusion, according to Cesar Ortiz, a retired banker and opponent of tree farms.

Jobs in the slaughterhouses have fallen by half in just a few years. Plantation forests have made a few technicians wealthy, but most of the area's poor still live in rented shacks, he said.

Over tea, Ortiz explains that his government's pro-forestry policy is risky because companies could leave, taking subsidies and resources with them. "It's not a solution."

Shell and other multinationals are logging and shipping the logs abroad. The downed timber stacks up on the docks on the industrial end of Montevideo's harbor. A Spanish paper company is building a new port to send even more.

The increasing number of tree stands is replacing a way of life with megabusinesses that make things many Uruguayans don't use, said Ricardo Carrere, a forester at the World Rainforest Movement. Some Uruguayans wryly say they'll someday be forced to find a way to make beef steaks out of pine.

Wood is rarely used for building in Uruguay, and even basic paper products, taken for granted in developed countries, are rare: The only toilet paper in stores is coarse and single-ply.

But in a poor country, there is always a price for change.

"You can't say that it's good or bad any more than you can say growing wheat or rice is good or bad," said Atilio Ligrone Greco, director of the forestry department. "When something big happens, it's hard to be sure there's no problems. We're trying to make that improvement."

Those lucky enough to land non-union jobs pruning Weyerhaeuser trees — operating chainsaws in hot and humid tree stands — earn up to $103 a month, compared with about $69 average for cattle hands.

Andres Caceres, 42, switched to forestry after years running a tractor and now earns about $4 a day, money he needs to support a wife and son. "There are no other jobs," he said.

But Ortiz and others worry about the future of the ecosystem. It's too late to change policy after the trees start growing even if they eventually drain the water table or lead to the spread of new pests.

"Weyerhaeuser is the biggest in the business," he said. "What can we do? If there's a problem, it's not theirs, it's ours."

A new generation

Giving a tour of Weyerhaeuser's farms from an air-conditioned king cab, Schmidt-Liermann, 42, increasingly is the public face for the company.

Having worked around the world on ill-fated development projects, he's convinced Weyerhaeuser will be different. It's bringing forestry practices that were honed decades ago in the United States but are new to Uruguay, he said. It builds bridges across streams, preventing siltation and erosion, and is developing worker-safety rules new to the country.

Weyerhaeuser is funding environmental tests in cooperation with North Carolina State University to study erosion, chemical use and water patterns. "Before, all we had was Uruguayan capital," he said. "And no one gave a damn about pesticides or bridging streams, or sampling water tables."

Weyerhaeuser held a forestry mascot contest in schools to come up with a Smokey Bear-like icon that can be used to teach children about trees. The hope, Schmidt-Liermann said, is that the mascot, a local bird called a chajá, will provide a lovable image to children and will eventually influence their parents. "It's just beautiful."

Bradley Meacham: 206-515-5066 or at bmeacham@seattletimes.com

INFORMATION

TODAY, NEW TECHNIQUE IN URUGUAY: In a land of gauchos and grasslands, Weyerhaeuser is planting cloned eucalyptus and pine seedlings that grow far faster and cheaper than at home.

YESTERDAY, LOGGING IN CANADA: Weyerhaeuser has acquired the rights to log 55,000 square miles of public lands, stretching in a vast arc from British Columbia to Ontario. To read yesterday's story, go to www.seattletimes.com

Copyright © 2003 Seattle Times Company, All Rights Reserved.

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