Como se combate o populismo? "Com eleições", responde Fukuyama

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Last week, the US and Canada have reached a framework agreement to normalise the two nations´ trade relations and put an end to their long-running softwood lumber dispute. The term of this agreement will be seven years and should be presented in one or two months. On the one hand, Canada agreed to impose a new export tax regime for its producers to replace US tariffs under the agreement. On the other hand, the US government has agreed to return 78% of the USD 5bn it has collected in countervailing duties on Canadian lumber since May 2002. To enter into force, the framework requires all companies, provinces and associations involved in the dispute to drop trade litigation. (CBC)

Comment:

Impact: Potentially positive for Sonae Industria. This dispute boiled in 2002 when the US imposed duties of 27% on Canadian softwood lumber, arguing that Canada unfairly subsidized producers of spruce, pine and fir lumber. This situation has been highly negative for Sonae Industria as Canadian and US lumber producers and sawmills have been recording lower activity, producing less saw dust (by-product) and creating scarcity of raw materials. Consequently, Sonae Industria witnessed rising wood prices in the region between 2002 and 2005, which pressured its margins, although it tried to partially offset this menace with an increased use of recycled wood and increased diversification of its source (wood represents around 40% of its variable costs).

In that sense, we expect a successful softwood lumber agreement to imply higher availability of saw dust in the region. This should support lower raw material prices and improved margins of Sonae Industria´s Canadian plant, especially as soon as the second production line is repaired from the recent fire. We recall that that wood panels are not included in the softwood lumber agreement. i.e, no taxes are applicable on particleboard exports to the US. We will contact the company to better access the impact of this news. All in all, Canada accounts 16% of our EV target for Sonae Industria.
IN BPI-Research
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