An unconventional Swedish-Paraguayan joint venture is shaping up to be the biggest private investment project ever announced in Paraguay. The Zapag family, which owns Copetrol, a network of local gas stations, and Girindus Investments, a Swedish family office led by the Norlin family, came together to set up Paracel and develop the South American country’s first pulp mill. The price tag is north of $3bn. 

“There aren’t very many countries with ideal conditions to set up a pulp mill – Paraguay is one of those,” Nils Grafström, who has more than 30 years experience in the forestry industry and who is now leading Paracel’s endeavour as its CEO, tells fDi. 

Powering ahead

Paracel’s project entails building and running a mill producing 1.8m tonnes of pulp per year close to Concepcion, a city along the Paraguay river about 300km north of capital Asunción. Slated to come online in the first half of 2025, the project will create 4000 direct jobs. In addition, it envisions the development of 180,000 hectares of land to secure the supply of eucalyptus trees, the mill’s main production input, and a 220MW power plant powered by the residual material of cellulose production that will provide electricity to the plant and the local grid. 

Mr Grafström says that the project finance for the whole endeavour will see lenders – mostly export credit agencies from countries like Sweden, Finland, Austria, the UK and Italy, as well as development finance institutions like the IDB – provide more than $2.2bn in financing. Meanwhile, the equity part amounts to about $1.1bn and will be shouldered by the Zapag and other local families, plus Austrian pulp producer Heinzel, which chipped in for a 25% equity stake. 

Despite having no such industry at the moment, Mr Grafström argues that Paraguay offers all the necessary conditions for the project to see the light. Among others, he points out the enforceable rule of law, available land, good soil and weather, access to oceanic export routes through the Paraguay river, a functioning electricity grid, a pool of workers in nearby Concepcion, and government support.

As regards the latter element, Paracel’s project will be developed under a free zones regime granting the company customs and fiscal incentives. 

First of many

“All these things created the possibility for us to explore Paraguay as the site for our pulp mill. It’s the first one in the country, but it won’t be the last one; Paraguay has room to accommodate more pulp mills,” says Mr Grafström. 

It’s the first one in the country, but it won’t be the last one; Paraguay has room to accommodate more pulp mills

Nils Grafström, CEO, Paracel

The project promoters also seem unfazed by the country’s risk profile. Paraguay has promoted itself as a fast-growing market economy and liberal democracy since the end of the regime led by Alfredo Stroessner, a general who ruled the country for 35 years until 1989. It has done so with relative success through ups and downs – as recently as 2017, protesters stormed the parliament and set it on fire. 

“We studied Paraguay carefully, and so did the lender. We don’t see higher risks than in many other countries where the pulp industry operates,” adds Mr Grafström. 

This article first appeared in the October/November 2022 print edition of fDi Intelligence.