Argentine Reforestation Initiative - Forestar 2030 Argentina

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[co-author: Juan Pablo Fratantoni]

Argentine President Mauricio Macri has announced an agreement between the Insurance Superintendency of the National Ministry of Finance and the country’s leading insurance companies to create a “Green Insurance” program to promote both forestation and enrichment of the native forest with the aim of increasing forest plantations from 1.3 million hectares to 2 million hectares by 2030.

To reach 2 million hectares by 2030 would mean expanding forested areas by 62,000 hectares per year. In addition to expanding opportunities for timberland investment in Argentina, this program is expected to absorb approximately 15.6 million tons of equivalent carbon dioxide, compensating for the annual electricity consumption of around 1.5 million homes or the annual use of 564,000 vehicles.

Under the Green Insurance initiative, 1% of the premium of each insurance policy covering motor vehicles, motorcycles and cargo trucks would be allocated to the Forest Promotion Law (No. 25,080), which encourages planting trees to mitigate climate change and to foster economic and social development. These funds will finance tax incentives for plantations and the reimbursement of certain planting costs for qualifying activities.

Law No. 25,080 establishes a regime for promoting investments made in new forestry enterprises and in expanding existing forests. The initiative covers activities such as implementing new forests, including their maintenance, management, irrigation, protection and harvesting; research and development; and timber industrialization. Individuals or legal entities that participate in activities included under this law (including foreign investors) may apply for a special tax regime (which includes, among others, guaranteed tax rates for a term of 30 years, refunds of value-added tax and a differentiated income tax amortization regime) and a monetary contribution in the form of a reimbursement of a certain percentage of plantation costs (depending on the hectares, zone, species and forestry activity involved) (the Monetary Contribution). Pursuant to Decree No. 133/1999, in order to apply for the benefits set forth in Law No. 25,080, foreign investors must set up a legal domicile in Argentina. 

To implement the Green Insurance initiative, the Insurance Superintendency of the National Ministry of Finance and the Ministry of Agro-Industry have enacted their Joint Resolution No. 1/2018 that creates the environmental sustainability and insurance program (the PROSAS), which would collect the 1% insurance premium to fund the program.

The PROSAS will be funded by the voluntary contributions of the insurance companies and its funds will finance the Monetary Contributions for qualifying projects under Law No. 25,080.
The following insurance companies in Argentina have already committed to participate in the Green Insurance initiative: QBE-Zurich, Federación Patronal, Sancor Seguros, La Segunda, San Cristóbal, SMG, Nación Seguros, Paraná Seguros, Cooperativa Mutual Patronal, Boston Seguros, Triunfo Seguros, Seguro Metal and Instituto de Seguros de Entre Ríos.

The Green Insurance initiative will have the following economic, environmental and social benefits:

  • Expanded opportunities for timberland investment;
  • Promotion of the increased use of wood to replace non-renewable fuels and materials;
  • Funding sources to finance the Monetary Contributions required by Law No. 25,080;
  • Reduction of the carbon footprint from vehicle fleets, and compensation for the gases emitted by vehicles;
  • Maintenance and creation of thousands of rural jobs adding value to the produced timber; and
  • Compliance with the UN-FAO commitments assumed by Argentina by 2030.

The Green Insurance initiative is currently in the process of identifying, enlisting and registering the insurance companies that will participate in the program. It is expected that the first funds will be collected in approximately three months.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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