There is a trace of pine resin in the ink of many of our pens, in the colors of the house walls, in many of our perfumes, medicines, clothes, soaps and even chewing gums. All these products are used in one way or another among its ingredients, and although unknown to the general public, pine resins are an essential ingredient of our daily life that for centuries has accompanied the development of humanity.
Among the producing communities of pine resins with industrial destiny stands out Ejido Verde in Mexico, a company formed as a productive alliance that has received support from IDB Invest to improve and expand resin production while promoting adaptation and mitigation to change climate. This focus on preservation earned Ejido Verde to be recognized with the first place in the 2016 Energy Globe Awards, an award for natural resource conservation projects in which the United Nations participates.
The success of Ejido Verde is built on its implementation of reforestation projects for the sustainable exploitation of resin pines destined for resin extraction. Thanks to the support of IDB Invest, the company has financing for the planting and maintenance of 1,250 hectares of resin pine. This operation is part of the ambitious plan of Ejido Verde to grow the plantation up to 12,000 hectares. All this occurs at the heart of Mexico's resin production: the state of Michoacán, which represents between 90 and 95% of the resin produced in the country, which is estimated at 24 thousand tons per year.
The initiative benefits ejidatarios such as Antonio Hernández, who at 39 is not only a land worker, but a school teacher and sculptor, and serves as president of the community property commissioner of the Indigenous Community of Patamban, municipality of Tangancícuaro, Michoacán. Hernández belongs to the Purépecha ethnic group, originally from that state, who dedicates himself with ancestral mastery to the care of the land. To this he owes his knowledge of the highest production periods of pine, between July and September of each year. Therefore, also, even during periods of low production, it monitors the recurrence of forest fires in the area.
"Our work consists of the cleaning of the tree creating a perimeter of 1 m wide around it "fertilization and the removal of grass," explains Hernandez. Although the land where he works employs about 80 workers divided into gangs, the total of Ejido Verde workers reaches about a thousand. "We like to think that we work by finding a balance between the benefit of nature and economic well-being, which of course is an important factor."
Ejido Verde promotes adaptation and mitigation to climate change and expects to capture 25,375 tons of carbon annually. These efforts are fundamental in a country in which, only from 1990 to 2015, the generation of greenhouse gases increased by 54%, under an average annual growth rate of 1.7%, according to data from the Mexican government. Its business model combines reforestation on a commercial scale of degraded lands with the creation of a recurring source of income for indigenous communities and ejidos that work on communal lands. And here is part of the challenge of financing pine plantations: with the time it takes to plant and have the pines ready to be exploited, the final product is seen, at least, after 8 years. It is, in essence, a company that demands working with the future in mind.
“We do the financing through two companies in the resinance industry,” explains Pilar Carvajo, investment officer of the blended finance team at IDB Invest. These two companies, Pinosa SRL de CV and Resinas Sintéticos SA de CV, have been the promoters of the Ejido Verde project since its inception in 2009, and today are responsible for transforming the resin into derived products. The ejidatarios sell the resin to Pinosa, which is the first step in the production chain; Pinosa transforms that resin into pitch and turpentine.
The turpentine is sold in the local market, and the pitch, a commodity with a global market of around 10 billion dollars is mostly sold to Synthetic Resins, which in turn transforms it into derivative chemicals, with multiple applications present in our day to day.
The financing, agreed for a total of 14 years, has been structured as a 10-year senior loan of half a million dollars and a 14-year subordinated loan of one and a half million dollars. In total, the financing reaches 2 million dollars. The transaction was closed in 2019 and represents an innovative model.
"This transaction is unique within IDB Invest," says Carvajo. “Financing reforestation projects with a commercial business model, offering financing to a private actor who seeks to scale the model by working with indigenous communities, is unprecedented. Our support wants to show that reforestation projects can be supported with innovative structures that respect the production deadlines of the new plantations. ”
For Shaun Paul, general manager of Ejido Verde, one of the big issues is to make people aware of the importance of resin extraction. "In addition to the products that are already known, new ones are still being developed, such as biodegradable plastic bottles, alternative fuels to petroleum products, replacements or options for new medicines." "Everyone here in Ejido Verde is very motivated," he says. "It's easy to see the benefits we are generating."
Paul cannot be more proud of the achievements and growth plans of Ejido Verde. Starting from the beginning in which Ejido Verde was financed with its own resources as a pilot, the relationship with the IDB Group, which began many years ago when IDB Invest did not yet exist, now culminates in a first phase in the evolution of Ejido Verde. Today, this company has gone from being a project of industry actors to a reality that changes the use of ejido lands and offers a long-term sustainable source of income for its workers.