Finnfund considers agri, invests in Mexican timber

Finnfund, the €311 million Finnish development finance institution, is considering investing into agriculture in emerging markets, according to Jaako Kangasniemi, its managing director.

The DFI, which has been investing in developing timber markets since the 1990s, is in the early stages of assessing agribusinesses for investment.

“Finnfund does not have an agriculture allocation just yet, but we have a keen interest in the sector,” Kangasniemi said. “We are open minded about where to invest in the supply chain. We have mostly looked at projects that combine primary production with processing and involve both commercial farming and large numbers of outgrowers.”

Elsewhere, Finnfund recently signed a $10 million investment agreement with Proteak, a Mexican timber producer to add to its existing timber portfolio across Latin America and Africa. Proteak has already called down the first $7.6 million tranche of this commitment.

The entire investment will support Proteak’s medium density fireboard products (MDF), which it diversified into in 2013. This recent investment will progress the project to operational stage, with the building of an MDF plant in Tabasco, Mexico. The company aims to be selling MDF to customers in the first quarter of 2015, according to Proteak’s website.

Emerging timber markets are increasingly important and attractive as an investment destination due to a shift in their focus from predominantly supplying export markets to satisfying increasing domestic demand, according to Kangasniemi. Declining natural forests in developing markets has also contributed to rising demand.

Proteak has 18,000 hectares of plantations in Mexico, Costa Rica and Colombia, and exports to more than 15 destinations in North America, Europe and Asia.

Finnfund has invested into timber directly and via funds across Latin America, East Africa and West Africa. These include the Moringa fund, which has €70 million in commitments and is targeting €100 million.