The economic impact of the forest sector in Uruguay
Morales Olmos, Virginia
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Uruguay is a South American country surrounded by Argentina and Brazil. Its economy has traditionally been based on agriculture. Since the 1960s, the government has been encouraging forestry as an alternative use for marginal agricultural lands in an effort to promote economic development, diversification, and environmental services. The Forestry Law of 1987 introduced subsidies and tax exonerations for the development of forest plantations and wood manufacturing industries. As a result, the new forest sector has been growing rapidly, attracting foreign investment. While several studies have examined the impact of individual forest firms, no study to date has examined the impact of the forest sector from the point of view of the entire economy. This research project evaluated the impact of the new forest sector by conducting a Cost-Benefit Analysis. The results indicate a positive net impact when compared with livestock: the Net Present Value for the forest sector was 630.2 million US$, and the Internal Rate of Return was 36.4%.