The purpose of this study is to analyze the social and economic feasibility of overseas plantation investment in Paraguay. Korea has been actively investing in overseas plantation since early 1990s due to its needs of raw material. In this situation, Paraguay can be a promising alternative for overseas plantation investment because of its excellent plantation growth and favorable reforestation support policy. However, due to the concern on the geographical distance of Paraguay located on the opposite side of the globe, there has been no active consideration of overseas plantation investment in Paraguay. Lack of information is another factor of low plantation investment in Paraguay. In order to verify these concerns, this study analyzed the social environment of Paraguay for foreign direct investment and profitability of plantation investment.
In terms of social environment analysis, Paraguay provides favorable business environment for Korean companies even though there are some obstructive factors. With the geographical location of center of South American Paraguay can be a bridgehead for access a MERCOSUR market. Furthermore low production cost and high level of social and economic stability are other advantages for foreign investors. The investors can take advantage of systematic merits that Paraguay government provides such as financial aid and protection of superficies of plantations. In addition, strong bond between Korea Forest Service and National Forest Institute in Paraguay can provide various assistances to Korean plantation investors.
The economic feasibility of the overseas plantation investment in Paraguay was analyzed by two cases; 1) logs sale in domestic market and 2) exportation of swan wood processed on commission to Korean market. The results showed that both scenarios had high profitability. For domestic market sale of log, IRR was 9.64% and NPV was US$ 2,811,888. On the other hand, for export of swan wood to Korea, IRR was 17.51% and NPV was US$ 38,260,086, which were higher than the logs sale in Paraguay respectively by 7.87%p and US$ 35,448,198.
This study can be used as a basic information for privates companies to review the feasibility of overseas plantation investment in South America. In this sense, these results have a special significance in introducing the possibility of plantation investment in South America, which has not been considered due to geographic distance.