Veracel completes the circle.

On his second visit to the new Veracel pulp line in 2005, Brazilian President Luiz Inacio Lula da Silva officially unveiled the Veracel inauguration plaque. The ceremony marked the ascent of the impressive new pulp mill to the top of the list of global pulp producers. Only the Hainan Jinhai pulp mill in China and Veracel in Brazil produce one million metric tons/year of pulp from a single line (the official rated capacity of Veracel is 900,000 metric tons/yr).

In a way, the wheel has come full circle. Aracruz Line A, started up in 1978, was built in cooperation between Aracruz, Billerud of Sweden as technical partner and Jaakko Poyry Oy of Finland as engineering consultant. The same partners joined forces for the Veracel project. (In 1984 Billerud was bought by STORA and in 1999 STORA and Enso were merged into Stora Enso.)

ELABORATE CEREMONY

The stage setting for the Veracel inauguration was magnificent. The pulp warehouse was turned into a modern conference center with a reception hall, conference theater, and a gala restaurant. Numerous huge air-conditioning blowers were installed. The gala dinner had a Brazilian churrasco as well as a Swedish smorgasbord for the guests to enjoy.

The organization was excellent. But rain, so important for growing the eucalyptus trees on which the mill is based, delayed the festivities a full hour as President Lula had to go by car from the airport in Porto Seguro instead of by helicopter. In addition to the honorary speech by President Lula, the ceremony included speeches by Messrs Renato Gueron, president and CEO of Veracel, Jukka Harmala, CEO of Stora Enso, Carlos Alberto Vieira, chairman of Aracruz Celulose, and Bahian Governor Paulo Souto.

[ILLUSTRATION OMITTED]

All the speakers praised the outstanding growth of eucalyptus in the southern part of Bahia as well as the technical achievement of building a million-ton single-line mill with good results in a very short time. Of course, the positive effects of this major investment on Brazilian society were also emphasized.

The Veracel inauguration was attended by Brazilian and foreign business executives, the Interim Minister of Industry and Commerce Ivan Ramalho, the Minister of Agrarian Development Miguel Rosseto, the Governor of Espirito Santo Paulo Hartung, the Finnish and Swedish ambassadors, and mayors from the region, among others.

In his welcoming speech, Renato Gueron described the new supermill. Gueron also had the privilege of announcing a new production record. He expressed his appreciation to all who helped build Veracel, including the workers, who he described as "anonymous heroes who spared no efforts." Finally, Gueron emphasized the support of federal and local governments.

"Veracel is Stora Enso's first mill in the southern hemisphere, which demonstrates our confidence in Brazil," said Jukka Harmala, Stora Enso's CEO. He assured the audience that South America, and particularly Brazil, will play a key role in Stora Enso's future strategy. He underlined this confidence by referring to Stora Enso's recently announced purchase of land in Southern Brazil and Uruguay. A second fiber line at Veracel, doubling the capacity as soon as enough forest is available, is also part of the strategy.

[ILLUSTRATION OMITTED]

Harmala also emphasized his satisfaction with the Aracruz partnership and the support for the project from the Bahian government, suppliers, and funding banks--especially the Brazilian National Economic and Social Development Bank (BNDES), the European Investment Bank, and the Nordic Investment Bank.

For his part, Aracruz Chairman Carlos Alberto Vieira noted, "Today is an historic date for Aracruz and the global forestry sector. Your return here, Mr. President, reaffirms the commitment of the Brazilian government to the sector, which is, in turn, an industry seeking to play its part in the promotion of economic and social development in harmony with the environment."

The Brazilian forestry sector generates two million jobs and annual sales of US$ 21 billion, while preserving 1.6 million native ecosystems and bringing development to regions that until recently were considered inhospitable, Vieira said.

POLITICAL MESSAGE

In his speech, President Lula said that the project was part of "one of the most promising investment cycles of the past 20 years." He continued, saying that projects such as Veracel help "change the face of society and inaugurate a new era for our people."

President Lula emphasized that the US$ 1.2 billion project has generated 3000 direct and at least 7000 indirect jobs. He also noted the positive impact of Veracel's social investments on local communities in the region, including environmental protection, sanitation, education, and health projects.

President Lula's speech was encouraging to all present. Of course he referred to the above advantages, but to me there was also a touch that most of us "voters" hope to see in politics but seldom find. President Lula dwelled upon the necessity for politicians to plan for the long term--for our children and grandchildren--not only for the election period. Long-term rules and guidelines are certainly important for huge investments such as Veracel, but are just as important for small entrepreneurs to encourage them to take risks that will allow their enterprises to survive and contribute to the economy.

COUNTRY AND LOCAL IMPORTANCE

The benefits to Brazil of having a major export producer like Veracel are obvious, but a less obvious part of the story--Veracel's contribution to the development of Brazil and its provinces--is also vital. Aracruz has a long history of providing additional funding for social projects. For example, the initial Aracruz line A project included investments in local projects not directly related to the mill. Environmental, social and sustainability projects have been a major part of every subsequent investment at Aracruz, and have become cornerstones for future expansion projects.

These "local" projects include everything from manufacturing machinery for the mill in Brazil to training local crews to run the mill. The projects have always included building local public infrastructure and training local people to participate in construction and support projects. This has created new and improved jobs and careers for a large number of people. If you traveled from Vitoria to Aracruz in the 1970s and travel that same route today, you can see the enormous changes this investment has produced.

Veracel has traveled the same path of social investment. The local impact is already clearly visible in the local communities, but this "journey" has just begun. President Lula, Governor Souto and BNDES have many reasons to be proud of this project.

The Veracel mill has the town of Eunapolis as its official address, but Porto Seguro is the closest airport. In 2000, when Brazil celebrated its 500th anniversary, the entire Brazilian government acted out of Porto Seguro for one day--Porto Seguro being the first port of entry by the Portuguese in the year 1500.

THE ARACRUZ SAGA

I was part of Billerud (with the Celbi mill in Portugal, which is based on eucalyptus), when it began working with Jaakko Poyry Oy on the first Aracruz fiberline. I have been privileged to have experienced a long and interesting "love story" with eucalyptus, Aracruz, and Brazil.

Based on an initiative by the well-known industrialist Eliezer Batista (who at that time was president of Companhia Vale do Rio Doce), a forest tax incentive was implemented in 1967. The large planted areas became a base for an extraordinary expansion of the Brazilian forest industry. With short growing cycles--especially on short fiber trees like eucalyptus--the raw material benefits of Brazilian fiber are obvious.

In the 1970s, the Aracruz partners developed a concept for the largest possible pulp production line at that time, 400,000 metric tons/yr, and approached the World Bank for financing. While the World Bank was interested, it turned down the project because it felt a large mill could not be built "in the middle of nowhere" close to the forests. The Bank also felt the likelihood of successfully training the local population in Espirito Santo was low, and that it was unlikely for 400,000 metrics ton/year of an unknown pulp to be successfully sold on world markets. As a result, the project was delayed, but BNDES stepped in to provide the needed funding.

[ILLUSTRATION OMITTED]

[ILLUSTRATION OMITTED]

The cooperation between Billerud and Jaakko Poyry gave the mill an excellent layout with well-functioning technology. Based on the then recent expansion at the Billerud Gruvon mill, the scale-up from 360,000 to 400,000 metric tons/year was technically feasible. Training took place in Brazil, Portugal and Sweden.

The sales and marketing program for Aracruz pulp was successful largely because wood from Brazil was transported to and processed in the Celbi mill in Portugal. The sales organization was thus able to demonstrate the Aracruz product even before the mill started up. After a few years, all Billerud personnel had left Aracruz and highly qualified Brazilian management had taken over. Aracruz has been a major success story in Brazil. The mill's third line, with a capacity of 700,000 metric tons/year, started up in May 2002, increasing mill production capacity to 2 million metric tons/year.

"GRANDPA" OF ARACRUZ

I had the privilege to visit Erling Lorentzen at home just a week after the Veracel inauguration. Erling Lorentzen and his wife, Princess Ragnhild of Norway, live in a top-floor apartment overlooking the Leblon beach. "We have lived in this apartment 50 years now," Lorentzen said. "The view overlooking the Atlantic is still the same, but with many new apartment buildings being built during this period, the view is not as wide anymore." The front room is filled by prizes from Lorentzen's many sailing competitions. "The number of trophies is much smaller today as many of the important prizes have to be returned," he said.

Lorentzen, 82, has retired from the board of directors of Aracruz. He was chairman of Aracruz for 37 years, from the beginning of the Aracruz organization up to his retirement. He is still just as eager to test new ideas and achieve new results. He works out of an office of Lorentzen Empreendimentos, which was his base in the shipping business even before the Aracruz venture.

"I am very pleased that my son, Haakon, now plays a role in Aracruz as a board member. There has been much speculation about our plans to sell our shares in Aracruz, when the present shareholder's agreement expires in 2008. This is not at all our idea.

"I am, of course, extremely happy that the Veracel joint venture between Brazil and Scandinavia could be formed," he continued. "I was never happy about STORA selling its shares in Aracruz (received when it acquired Billerud in 1984), but accepted its policy of not wanting to be a small shareholder. Today, Stora Enso is a full partner in Veracel. Hopefully the relations can develop further. There are several alternatives where both parties can reach new goals."

Aracruz was the first part of a long-term relationship between Brazil and the Nordic countries: Norway, Sweden (assisted by Portugal), and Finland. That special relationship has now produced another major success: Veracel, after just 174 days, reached 30 days of nominal capacity--a new world record.

ABOUT THE AUTHOR

Olle Alsholm has enjoyed a long career in the global pulp and paper industry. He is based in Lidingoe, Sweden. Contact him by email at [e-mail]

[ILLUSTRATION OMITTED]

WHAT YOU WILL LEARN

* Details on the ceremony that inaugurated the Veracel pulp mill

* The investments in local infrastructure that are hallmarks of Aracruz and Veracel projects

* The thoughts of Erling Lorentzen, former chairman of Aracruz, on the Veracel project

ADDITIONAL RESOURCES

* "Veracel: The wait is over," by L Perecin and R. Mercante, Solutions!, October 2005. To access this article, type the following product code in the search field on www.tappi.org: 05OCTSO45. Or call TAPPI Member Connection at 1 800 332-8686 (US); 1 800 446-9431 (Canada); [phone] (International).