Cost of forest insurance in the economic viability of eucalyptus plants

Abstract

The objective of this study is to carry out economic and risk assessment of eucalyptus plantations located in Minas Gerais, considering the influence of the cost of forest insurance, evidencing its impact on the project. The costs of implementation and driving come from eucalyptus plantations located in the Jequitinhonha Valley, Minas Gerais. The cost of forest insurance was obtained through a simulation of a quote from an insurer. For the economic evaluation, the Net Present Value (NPV), the Internal Rate of Return (IRR) and the Equivalent Periodic Benefit (EPB) were used. The risk sensitivity analysis was performed by the Monte Carlo method. The economic analysis was considered viable by all indicators used in all three situations. However, by the analysis of investment risk, we have a probability of 11.5% chance of NPV being below zero in situation 1, 18.5% in situation 2 and 25% in situation 3. The cost of Forest insurance increases the likelihood of negative value for economic indicators, as it increases the cost of the project, but it was input that less influenced the final value of the NPV. The government grant reduces the likelihood of investment risk as it lowers the cost of forest insurance.