Required Report - public distribution

**Date:** 6/24/2005

**GAIN Report Number:** DR5009

DR5009

**Dominican Republic**

**Solid Wood Products**

**Caribbean Regional Report**

**2005**

**Approved by:**

![](media/image1.wmf)David Salmon, Ag Counselor; Paul Hoffman CBATO

U.S. Embassy, Santo Domingo

**Prepared by:**

Carlos Suarez, Sylburn Thomas and Joanna Apergis

**Report Highlights:**

This report is the first Foreign Agricultural Service effort to provide
an overview of the market situation for U.S. wood products in the
Caribbean. It will be updated on an annual basis.

Includes PSD Changes: No

Includes Trade Matrix: Yes

Annual Report

Santo Domingo \[DR1\]

\[DR\]

# Executive Summary

Hurricane reconstruction is, of course, one of the chief factors driving
demand for forest products in the Caribbean region. While recent data on
overall demand is not available, it can only be assumed that, given the
unusually high hurricane activity recorded in 2004 and predictions of a
similarly active season for 2005, demand for forest products in the
region will continue its upward momentum. All this tropical activity is
leading to increased demand for imported wood products, particularly
softwood lumber, panel products, and other wood products. Preliminary
U.S. trade data for 2005 (Jan-Apr) indicate that U.S. exports of
soft/treated lumber and panel/plywood products to **the region are up**
**48 percent and 77 percent**, respectively, for **The Bahamas and
Lesser Antilles.**

# PRODUCTION

######## Forest Situation and Outlook

The Dominican Republic has one of the highest population densities in
Latin America. Of a total population of 8.6 million people, roughly half
live in rural areas with a per capita income of US\$2,100. The rural
poor continue to depend heavily on forests for fuel wood, used both as
firewood and charcoal. In addition, subsistence agriculture creates
additional pressure to the Dominican Republic's limited and decreasing
forest resources.

Starting in the late 1800s, Dominican Republic's forest resources were
threatened mainly by land clearing for sugar production and other
agricultural uses, commercial timber harvesting, and the collection of
wood for fuel. Beginning in the 1960s, as supplies dwindled, the country
became a net importer of wood. In an effort to preserve its remaining
forests, the government banned the harvest of all forest products,
however, enforcement of this ban is less than perfect. Today, the
remaining forests tend to be found in small patches, with very few large
expanses remaining beyond those in remote areas and/or under the
protection of national parks.

In The Bahamas and Lesser Antilles^1^ countries are focused on the
tourism sector (some countries also depend on off-shore banking and
oil/natural gas operations). Consequently, forestry is not a priority on
these islands of limited land mass. Locally, only small sources of solid
wood are found in Trinidad and Tobago, mainly in the form of teak
production. Nevertheless, Trinidad and Tobago largely relies on imported
wood products and supplies other Caribbean islands with minimal import
of solid wood. Trinidad has some wood treating plants, which is uncommon
among the smaller Caribbean islands.

Despite having an estimated 336,000 hectares classified as broadleaf
forestry (248,000 disturbed and 88,000 undisturbed), there is only
negligible commercial production and harvest of forestry products in
Jamaica. The low forestry production is attributed to a general lack of
private interest in commercial forestry activities and the
inaccessibility of the forestry reserves. Further, Jamaica's generally
unmanaged forests are composed of mostly low yield and low demand
species. However, as part of a national sustainable forestry development
plan, the Forestry Department and the National Forestry Conservancy
have, in recent years, been encouraging private investments and
international donations in the establishment of forests, mainly teak,
mahogany and Caribbean cedar. It is estimated that within another seven
years, approximately 5,000 hectares of commercial forests will be added
to the national reserve. Output of commercial forestry products is
expected in the domestic market about 2012.

Although there are small pockets of forest degradation, Jamaica's
forestry reserve is in general sustainable at a "harvest" rate of only
0.1 percent per year. Unlike other Caribbean territories, where charcoal
production accounts for a substantial proportion of deforestation, in
Jamaica bauxite mining is the main contributor. National policies,
however, make adequate legal provisions for the resuscitation of lands
that are mined for bauxite production.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

^1^ The **Office of Agricultural Affairs in Santo Domingo**, Dominican
Republic, has responsibility for the Dominican Republic, Haiti, and
Jamaica. The **Caribbean Basin Agricultural Trade Office** based in
Miami, Florida, covers Anguilla, Antigua & Barbuda, Aruba, The Bahamas,
Barbados, Bermuda, British Virgin Islands, Cayman Islands, Dominica,
Guadeloupe & Martinique, Grenada, Montserrat, Netherlands Antilles, St.
Barthélemy, St. Kitts & Nevis, St. Lucia, St. Martin, St. Vincent & The
Grenadines, Trinidad & Tobago, and Turks & Caicos.

**Solid Wood Products Situation/Outlook**

####### Dominican Republic

Limited forest resources and the ban on logging have made the Dominican
Republic an important importer of wood products. The annual import value
of softwood lumber into the Dominican Republic has varied widely in
recent years, mostly due to reconstruction efforts after major
disasters, such as hurricane Georges in late 1998. The year after the
hurricane, 1999, was an all-time high in forest product imports,
including plywood. After the initial surge in reconstruction, imports
gradually leveled off and reached a low in 2004. The country's current
economic recovery, along with new resort construction, has created
additional demand for wood product infrastructure. This trend is
continuing in 2005, with the country's overall wood product imports in
the first quarter showing a ten percent increase over the same period
last year.

Construction projects, which use mainly softwood and plywood, occupy an
important role in Dominican economy. Although interest rates are high
(18-20 percent per year), sixty percent of the construction is privately
financed, while the rest are built as government projects. In the actual
building though, the vast majority of urban construction is cement
based, while wood is used extensively in roof base (joists for tin sheet
roofing), doors, windows, and kitchen and bathroom cabinets and
furniture making. The use of hardwoods other than mahogany is not
significant. Although there is great potential in using less expensive
hardwoods, very little has been done to explore and expand this market.

####### The Bahamas and Lesser Antilles

The import value of solid wood products into The Bahamas and the islands
in the Lesser Antilles also varies widely from country to country. In
these small economies, various factors contribute to the huge variations
in annual imports. Large housing developments and resort construction
explain some of the variation. However, the principal factor is the
reconstruction efforts that take place after a major hurricane has
passed through an island. In addition, re-exports from U.S. suppliers of
some Honduran and Brazilian softwood products also create some bias in
export statistics.

Large development projects in the region, including resorts, hotels, and
condominiums, have boomed in recent years. Although development on some
islands has leveled off, the islands of Turks and Caicos are an example
of a housing and lodging industry that is gaining momentum.
Refurbishment and reconstruction of these buildings also affects the
long-term market for softwood and solid wood products. Another recent
example of the destruction of a hurricane causing a spike in solid wood
product imports was in September of 2004, with hurricane Ivan. In the
first quarter of 2005, the import of solid wood to Grenada increased by
99 percent over the same quarter in 2004. The same hurricane also
devastated areas of Grand Cayman, which saw a 166 percent increase for
plywood products from the same three-month period in 2005.

Plywood demand is also directly related to the hurricane season,
extending from June through November. Island importers usually stock up
in anticipation of the crowds of island residents that inevitably turn
up to purchase plywood used to board their windows just before a storm
is forecast to pass through. Larger solid wood importers are purchasing
mainly from solid wood consolidators in South Florida. The United
States, particularly Florida, is preferred by these importers, since it
is closer to many other Caribbean islands, which makes importing U.S.
wood products simpler and less expensive.

The Bahamas are an important Caribbean import market for solid wood
products, with total imports from the United States exceeding US\$40
million in calendar (CY) 2004. The combination of a stable economy,
stable supply and quality of U.S. products, the close proximity to the
United States and ongoing resort development are the reason behind the
success of U.S. softwood and other wood products. As a result, the
Bahamas currently imports practically all of its softwood lumber and
plywood from the United States.

While proximity and price does play a role in the preference of solid
wood importers, Caribbean countries further south, such as St. Lucia,
are still importing about 50 percent of their softwood lumber and 75
percent of their softwood plywood from the United States. Competing
products from Honduras and Brazil have entered the market, but the
reliability and high-quality reputation of U.S. products, especially
Southern Yellow Pine (SYP), are keeping these markets accessible.

**Jamaica**

Jamaica's construction sector experienced a major boom primarily in new
building construction during the early to mid-1990's. The plummet in
construction during 1996 and the subsequent sustained contraction is
attributed to the collapse of the Jamaican financial sector in the mid
1990's and the resultant high interest rate environment, which depressed
real estate prices. Corresponding with the upturn in the Jamaican
economy, the construction sector recorded positive growth over the last
four years and is expected to continue along that trajectory as economic
conditions, including falling interest rates and increased foreign
direct investments, continue to fuel increasing demand for commercial
and residential buildings.

Backed by a relatively high net international reserve and stable
exchange rate, the central bank has been gradually reducing interest
rates over the last two years. This, in turn, has sparked increasing
investor interest in the real estate market, particularly in the
residential housing segment. Financial institutions, which have grown
accustomed to the high interest rate environment of the 1990's, have
been aggressively marketing their loan and mortgage products to retail
customer to offset the declining interest profits. This availability of
capital helps to support the renewed buoyancy of the real estate market.

A significant proportion of the increasing foreign direct investment
inflows into Jamaica are channeled into the expansion of bauxite plants
and hotel and resort construction. Additionally, government projects,
including air and sea port expansion, highways and other civil
construction projects have also contributed to the growth in the
construction sector.

There are several well-organized programs that are operated by
government agencies with the aim of providing and or supporting the
development of affordable housing solutions to, primarily, the large
middle and lower income segments of the population. The National Housing
Trust (NHT), the National Housing Development Corporation (NHDC), the
Jamaica Mortgage Bank (JMB), and the Ministry of Water and Housing
(through joint venture arrangements) are the major public agencies
involved in residential housing construction. In addition to
construction, the NHT operates a mortgage facility (US\$16,000/person)
to qualified contributors for private purchase or individual
construction. There are several building societies, commercial banks and
credit unions that extend mortgage facilities independently, and in
collaboration with the NHT. The JMB focuses on commercial customers,
offering financing to developers for projects with ten or more housing
units. Despite the availability of financing, a sizeable proportion of
the population, typically with unstable employment, does not have access
to mortgages and relies on remittances and state aid to finance building
construction.

###### 

###### TRADE

**Overview/Outlook**

######## Dominican Republic

A large part of the forest product imports by the Dominican Republic
(DR) originate in the United States. Total market size is about US\$50
million and the United States holds a 65 percent market share. Dominican
imports of forest products from the United States were estimated at
US\$32.5 million in CY 2004. By the first quarter of CY 2005, the DR
ranked 24^th^ in the world among importer of U.S. forest products. It is
the fourth-largest export market in the Western Hemisphere after Canada,
Mexico and the Bahamas. With US\$23.5 million in purchases in 2004, the
Dominican Republic was the third largest market for U. S. softwood and
treated lumber in the world. It has a softer position as a panel product
importer, with heavy competition from South America, but still imports
US\$2 million of these products.

Reliable data are not available, but major importers indicate that the
wood market in the Dominican Republic is divided into 20 percent
hardwood (mostly Mahogany and Cedar from Central and South America), 14
percent panel products (plywood), and 66 percent, softwood lumber
(pine). The softwood market continues to be dominated by the U.S.
products, with little competition from South and Central America (12
percent market share). U.S. panel products hold 25 percent of the
Dominican market valued at US\$ 2 million, with strong competition with
less expensive South American (45%) and Asian (25%) products.

There are no restrictions on wood imports in the Dominican Republic. All
woods (softwood, hardwood and plywood) have a basic tariff of 3 percent
on CIF Value. Additional taxes include a 16 percent value-added tax
(ITBIS) and a 5 percent foreign exchange fee on the CIF value.

The furniture industry in the Dominican Republic is not well developed
or integrated. There are only a few organized furniture manufacture
companies, such as COMUDID, S.A. (Constructora de Muebles, Diseños y
Decoraciones), Decoraciones y Muebles, C x A, HECO Muebles and VON C x
A.

Having very limited resources of natural forest devoted to wood
production, most of the countries in the Caribbean region have no import
restrictions on wood products, except for individual country
phytosanitary concerns. Import taxes also vary from country to country
anywhere between 3-40 percent.

Competition

The softwood market in the Dominican Republic continues to be dominated
by the U.S. products with little competition from Chile, Brazil and
Central America (12%). U.S. panel products hold only 25 percent of the
Dominican market valued at US\$2 million, with strong competition with
less expensive Brazilian (20%), Chinese (40%) and Taiwanese (25%)
products. The US\$12 million hardwood market is evenly divided between
Mahogany and Cedar coming from Brazil and Peru.

######### The Bahamas and Lesser Antilles

Hurricane reconstruction is, of course, one of the chief factors driving
demand for forest products in the Caribbean region. While recent data on
overall demand is not available, it can only be assumed that given the
unusually high hurricane activity recorded in 2004 and predictions of a
similarly active season for 2005, demand for forest products in the
region will continue its upward momentum. The 2004 Atlantic hurricane
season was the most active since 1950 and was in fact the deadliest and
costliest in history, registering over 3,000 deaths (mostly in Haiti)
and \$42 billion in damages. The season produced an above average 16
tropical depressions, 15 named storms, and 6 major hurricanes (Category
3 or higher). Particularly destructive were hurricanes Charley, Frances,
Ivan, and Jeanne, all of which took place in a two-month period. Ivan,
which pummeled Grenada and the Cayman Islands, was the sixth strongest
hurricane on record. Frances and Jeanne were also particularly hard on
the Bahamas, as well.

All this tropical activity is leading to increased demand for imported
wood products, particularly softwood lumber, panel products, and other
wood products. The Caribbean islands are in fact the sixth largest
regional export market for U.S. forest products, and the region actually
ranks second in terms of U.S. exports of softwood lumber and fourth in
terms of U.S. exports of panel products. In 2004 U.S. soft/treated
lumber exports to the Caribbean increased by 27 percent reaching US\$77
million, reversing a downward trend in U.S. exports to the region
prevalent since the late 1990's. Similarly, U.S. exports of
panel/plywood products to the region reached US\$39.7 million in 2004, a
gain of 65 percent compared to 2003. Preliminary U.S. trade data for
2005 (Jan-Apr) indicate that U.S. exports of soft/treated lumber and
panel/plywood products to the region are up 48 percent and 77 percent,
respectively.

######### 

######### Jamaica

Total imports of plywood and veneer, softwoods and hardwoods into
Jamaica recorded sizeable growth during 2003. The growth was influenced
by a sharp increase in imports of plywood and veneer (sheet plywood \<
6mm thickness. SITC 6343900000) from Brazil. The U.S. share of imports
of plywood and softwood into Jamaica has declined over the last three
years. However, the U.S. is a dominant player in the much smaller
hardwood segment of the market. Honduras has increased its share of the
softwoods market, while Brazil has displaced Indonesia as the dominant
exported of plywood and veneer, including sheet plywood, to Jamaica.

# MARKET SEGMENT ANALYSIS

For almost all Caribbean islands, the imported softwood lumber of choice
is Southern Yellow Pine (SYP). In terms of volume, the Dominican
Republic is the fourth largest importer in the world of U.S. SYP, with
imports exceeding US\$23 million in 2004. The Bahamas, holding the eight
position, is one of the only countries in the Caribbean Basin that
imports more Lodgepole Pine than SYP. Jamaica was twelfth with imports
of US\$7 million. The Dominican Republic imported softwood and treated
lumber valued over US\$23 millions last year. The Bahamas with almost
US\$12 million, Jamaica with US\$9.3 million, Barbados with almost US\$6
million are also important, while Bermuda also imports steady quantities
of Lodgepole Pine, but SYP still leads the softwood lumber market in the
top 25 markets.

####### Construction Sector

The Caribbean construction sector's main use for SYP plywood in
construction is formwork for casting concrete. SYP lumber is used in
building roof structures and some smaller "temporary" housing in rural
areas. Treated lumber is imported in most of the islands, but not as
much in the Dominican Republic and Trinidad. According to industry
sources, about 65 percent of the softwood and treated lumber is used in
the construction of new facilities, particularly in the larger
countries. There is also extensive use of SYP in less expensive interior
sectors of housing constructions. The Dominican Republic and Trinidad
have some of the few pressure treating facilities in the Caribbean.

Large-scale developers are more likely to have a distinct preference for
SYP than other solid wood products, based on their quality. A good
indicator of current and future major development plans is the Caribbean
Hotel Association's construction report. (Membership is required in
order to access this report. Go to www.caribbeanhotels.org for more
information.)

Retail outlets are often smaller versions of U.S. retailers like Home
Depot but small hardware stores are popular in the Dominican Republic,
Jamaica and some of the other major Caribbean Basin countries. However,
since these stores mainly cater to individual homeowners and small
businesses, they tend to carry more price competitive wood products,
mainly Chilean, Honduran and Brazilian softwoods.

Some Caribbean construction companies attend annual trade shows in the
Dominican Republic, Nassau, Bahamas and the United States (including
CONEXPO in Las Vegas, Nevada and MIACON in Miami, Florida). Architects
in the Caribbean Basin region are often members of a network called
Periferia. This group is very active in holding meetings and
participating in projects about architectural topics. Another source of
indirect information on the market is the ASONAHORES (Dominican
Association of Hotels and Restaurants), which represents 70 percent of
the hotels with over 33,000 rooms in the Dominican Republic. An
additional source is the Caribbean Hotel Association (CHA). The CHA
compiles an updated database on current and future hotel and resort
construction and refurbishment in the Caribbean. This is an important
source since, as mentioned previously, larger contractors usually prefer
U.S. products and SYP in their projects.

####### Furniture & Interior Sector

The softwood products used for furniture and cabinetry vary from 5 to 25
percent of the total imports from country to country or island to
island. Some islands, such as the Dominican Republic, Jamaica or
Trinidad and Tobago, have a larger base of manufacturers, whereas
Barbados mainly imports manufactured, unassembled furniture. SYP
products are also the softwood of choice in this interior manufacturing
sector. About half of the hardwood imported by the Dominican Republic,
such as Mahogany is imported from Brazil (40%) and Peru (60%), while the
other half, cedar is all from Brazil. Hardwoods are used in furniture
and interiors sector.

####### Material Handling Industry

Regulations to control the spread of pests in Solid Wood Packing
Material (SWPM), such as crates and pallets, are not currently enforced,
except for countries exporting to the United States. The association of
foreign pests present in SWPM has become a worldwide problem that
requires attention from the exporting nations, particularly now that
international standards have been created to control these materials.
These restrictions are making some of the larger exporting countries
fumigate the SWPMs or consider alternative materials, such as plastic,
for their export pallets.

**Jamaica**

### Residential House Segment

There is a severe shortage of residential houses in Jamaica,
particularly in the middle and lower income segments of the population.
This is especially evident in the customary heavy over subscription of
the modest NHT housing units, and the industry requirement of a
pre-construction payment of up to 50 percent of the final price to
secure properties. Several private contractors operate in the
residential housing market, targeting the entire socioeconomic spectrum.
Housing prices in the middle to lower end of the market are informed by
the NHT's mortgage policy. This gives rise to a proliferation of
relatively smaller detached "starter" units, which are expanded and
upgraded over time. The upper middle-income segment exhibits a
preference for townhouses, while the upper quintile occupies detached
units. The most recent government survey shows that 78.5 percent of
dwelling types in Jamaica are detached units, followed by 15.5 percent
being what is termed a \"part of a house\" and 3.5 percent being
semi-detached.

Housing starts in Jamaica have rebounded during 2002, approaching the
1995 historic peak. The improvement was noticeably buoyed by heavy
involvement in the market by the public sector entities. In fact, since
the downturn in the sector in the mid-1990's public sector entities have
remained the major players in providing housing solutions in Jamaica.
Majority of these housing would therefore be targeted at the mid to
lower end of the market.

The positive economic outlook for Jamaica and the associated increase in
business and consumer confidence has been slowly attracting financial
and insurance institutions back to the real estate market, mainly to the
lucrative residential housing segment. Housing starts, especially in the
middle to higher end of the market, are projected to increase at an
increasing rate over the medium term, eclipsing the 1995 peak by
2006/07.

With respect to construction materials, the overwhelming majority of
residential houses in Jamaica are constructed with block and steel,
followed by wood and concrete nog.

The choice of construction material in Jamaica is influenced by
geological and psychological variables. The geographic location of
Jamaica dictates the necessity to build with construction materials
sufficiently durable to withstand repeated hurricanes and possibly
flooding and earthquakes. In this regard, block and steel becomes the
material of choice for outer wall construction. On the other hand, the
prevalence of wooden dwelling structures among poorer parts of the
population has created a negative view of the materials for outer wall
construction of affordable dwellings. With increased emphasis on
affordability and durability (hurricane and earthquake resistance) most
lower and middle-income housing project are being constructed with
prefabricated concrete walls. However, most of houses in Jamaica are
constructed with wooden roof structures.

As expected, wooden structures account for a progressively lower
proportion of residential houses across the social groups from the
poorest to the wealthiest segments. However, within all segments there
is a fair proportion of wooden structures, and consequently demand for
wood products. While the proportion of wooden structures in the upper
two quintiles is relatively small, they are the heaviest users of wood
products in interior and exterior design (roofs, floors, windows, doors,
rails, and decks) in residential construction and an important market
for such products. Conversely, lower income houses make greater use of
treated softwoods and plywood for the construction of outer walls and
roofs. Since the majority of houses in Jamaica are constructed with
wooden roofs, doors, and windows, the demand for wood products will grow
proportionately with the residential construction sub-sector. Further,
wood is used as a versatile interior and exterior decoration and design
material in Jamaica.

### Hotel Construction

Within the hotel construction segment, hardwood products are used
extensively in interior design and decorating. Softwoods (plywood and
form wood) are used during the building construction process. The rapid
expansion in the Jamaican hotel sector and the continued renovation of
existing properties will create a respectable demand for both hardwood
and softwood products over the short to medium term. Major hotel
projects that are being undertaken or will be undertaken in the
short-term that will increase Jamaica's lumber wood products demand
include:

-   A 450-room RIU hotel,

-   three 600-room and two 850-room hotels by Spanish investors,

-   and a luxury shopping village and a government-backed luxury resort
    village on 1,400 acres of land, which is conceptualized to include
    four five-star hotels, three golf courses, 200 upscale villas and
    apartments, a marina and a private airport.

### Government Infrastructure Development

The Government of Jamaica (GOJ) has been actively supporting a wide
variety of projects in the construction sector. Generally these projects
consume a reasonable volume of softwood and plywood products. The major
GOJ projects that are currently been undertaken, or are advanced in
conceptualization, include:

-   A major highway linking Kingston (southeast) with Montego Bay
    (northwest) and St. Catherine (southeast) with Ocho Rios (north
    central).

-   Development of a two major seaports in Eastern (port Antonio) and
    Western (Lucea) Jamaica.

-   The privatization of operations at the Montego Bay Airport, which
    involves extensive renovation and expansion.

-   A major residential high-income community in central Jamaica.

-   An air transshipment port in south-central Jamaica.

-   A new stadium in North Central Jamaica and the renovation and
    expansion of another stadium in Kingston in preparation for the 2007
    world cup cricket.

**STATISTICAL INFORMATION**

# U.S. Softwood Lumber Exports to the Caribbean in 2004

# ![](media/image10.wmf)Percent

Source: Department of Commerce, U.S. Census Bureau, Foreign Trade
Statistics.

**[TRADE TABLES: Softwood Lumber]{.underline}**

![](media/image11.wmf)Source: U.S. Census Bureau, Foreign Trade
Statistics, and Post and industry estimates.

![](media/image12.wmf)

**[TRADE TABLES: Softwood Plywood]{.underline}**

Source: U.S. Census Bureau, Foreign Trade Statistics, and Post and
industry estimates.

![](media/image14.wmf)

![](media/image15.wmf)

**[TRADE TABLES: Tropical Hardwood Lumber]{.underline}**

![](media/image17.wmf)Source: U.S. Census Bureau, Foreign Trade
Statistics, and Post and industry estimates.

![](media/image18.wmf)

![](media/image19.wmf)