Integrated Planning for the Forestry and Infrastructure Sectors in Corrientes, Argentina

1. Integrated Planning for the Forestry and Infrastructure Sectors in Corrientes, Argentina Gustavo Braier, Javier Marenco Braier & Asociados Consultores - www.papyro.com Luis María Mestres, Jorge Vara Ministerio de Producción, Trabajo y Turismo, Gobierno de Corrientes - www.corrientes.gov.ar ALIO/INFORMS Joint International Meeting - Buenos Aires, June 6-9, 2010

2. Outline • Overview of Argentina and Corrientes situation • Forestry development • Negotiation issues • Policy to get a sound provincial development • Development of a linear programming model to assist • The planning process • Model features • Software application • Conclusions

3. Overview of Argentina and Corrientes situation • Argentina • It is a developing country • Most of its population and industrial production is concentrated in urban centers • It has high economic and social uncertainty for forest and industry investors • Corrientes • It is one of the poorest provinces in Argentina • The public sector is the highest employer • It lacks basic infrastructure • It has 420 thousand hectares of fast growing forest plantations, which means a continuous supply of 13 MM tons of wood per year. Supply is increasing.

4. Overview of Argentina and Corrientes situation • Forestry development • Argentina, Brazil, Uruguay and Chile are very efficient wood producers • Products coming from forest basins include pulp, paper, MDF, sawn wood, remanufactured wood, plywood and energy • Residues from plantations and industry go to pulp, MDF or energy • Without these industries, the other industries are inefficient • Huge amounts of capital investment are necessary

5. Overview of Argentina and Corrientes situation • Negotiation issues • Argentina and Uruguay have a conflict about a pulp mill • Environmentalists groups are very active • Population thinks it is a very pollutant sector and sees government as unable to control big companies • Population thinks it does not offer enough labor opportunities • This is not the case • There exists a trade off between production and environmental care • BATs are the baseline to deal with this issue • The development of this highly infrastructure-demanding sector may be related with other sectors’ needs and civil investment

6. Policy to get a sound provincial development • Issues • Forestry sector can change Corrientes province • Its development can multiply by 3 the Gross Domestic Product in 10 years • Employment may increase in 120 thousand positions. Economic active population is 350 thousand. Total is 1 million inhabitants • Environmental issues can be minimized and controlled. Stronger government capacities may be necessary. • Way of working • Integrated planning issues are not in the public agenda • Previous work involved several massive meetings without tracking of tasks and responsibilities • The most powerful participant may influence in the way of working • Key players were not part of the process

7. Policy to get a sound provincial development • Proposal • To create an Executive Committee • To create Work Commissions • To create a VIP Advisor Committee • To create Consulting groups to validate propositions • Way of working • Planning as a continuous and interdisciplinary work • To use mathematical and modeling tools to analyze and to help to solve misunderstandings and discussions • Analyze different alternatives • Analyze shadow prices for principal constraints

8. Development of a linear programming model – The planning process • Linear Programming is widely used in forestry issues • The problem to face exceeds, but includes, forestry issues • Availability of investment capital • Availability of infrastructure to support forest complex • Availability of labor force • Market availability and competition • Social constraints • Interactions among actors (sawmills providing chips to pulp or MDF plants; pulp mills providing energy to sawmills; generation of pollutants against social and legal limits) • Objective: to model the real world maximizing value added at the regional economy • Valuation and comprehension of real-world constraints

9. Development of a linear programming model - Features • Decisions (annual detail with a 30/50 years horizon) • Forest to be planted or renewed • Classified by actors, areas and species • Quantity (hectares) • Quality (silvicultural treatments, including pruning) • Forest to be harvested • Age • Different uses • Industrial production and location • Productivity varies according with the diameter class • Market sales • For example, if total industrial costs, including freight and taxes, are higher than market prices, the model will suggest not to plant 20 years before, being the planning horizon larger than 20 years.

10. Development of a linear programming model – Features European markets Asian markets USA markets Forests Pulp mills MDF Plants Energy Sawmills Local market Chips + pulp Remanufacturing

11. Linear programming model • Size of the model depends heavily on the data incorporated by the user through computational interface. • 140.000 variables. • 120.000 constraints. • 2.000.000 non-zero elements. • The model was coded in AMPL, and involves 50 groups of variables and 89 blocks of constraints. • Model generation and solution (with Mosek 5 LP solver) in 15/20 minutes.

12. Software application • We developed a software tool to manage scenarios, solve the model, and analyze the results. • Easiness of use and flexibility were basic conditions. • Unveil “lp secrets” to manage and analyze scenarios was a driver.

13. Software application • Interface to query and analyze shadow prices and reduced costs. • Set of pre-solving and post-solving experts to help with model construction and scenario analyses.

14. Conclusions • Models can help to the deployment of economic policy. • Economic and social actors are willing to use these kind of tools. • Linear programming is an acceptable technique to deal with these challenges with enough detail. • The Province of Corrientes is willing to go in depth with this way of working, not only with forest areas, but also with other sectors. • A further step could be to model together different sectors regarding Corrientes inhabitants welfare.

15. Integrated Planning for the Forestry and Infrastructure Sectors in Corrientes, Argentina Gustavo Braier, Javier Marenco Braier & Asociados Consultores - www.papyro.com Luis María Mestres, Jorge Vara Ministerio de Producción, Trabajo y Turismo, Gobierno de Corrientes - www.corrientes.gov.ar ALIO/INFORMS Joint International Meeting - Buenos Aires, June 6-9, 2010