FCL plan put on hold

Press, 7 September 1989, Page 22

FCL plan put on hold

PA Auckland Fletcher Challenge’s proposed expansion of its Brazil newsprint mill joint venture is on hold as management in that country decides whether to fight or unite with a potential rival. The FCL joint venture, PISA-Papel De Imprensa SA, had planned to install a second newsprint machine, but now one of its minority shareholders is building a similar operation 50km from the PISA-Papel mill. Mr Luiz Mesquita, chairman of PISA-Papel and Paranaprint, said the group was considering whether to try to beat the rival into production with a second machine, or whether to await a price rise for newsprint before investing in such expansion.

World prices for newsprint were falling, he said, and it was perhaps not the right time to start a new operation in Brazil. His group was trying to

convince the potential rival to join forces, as the challenger, Brazil’s largest bank, is also a shareholder in Paranaprint. Paranaprint, with five newspaper publishing groups as key shareholders, including Mr Mesquita’s family company, O Estado De Sao Paulo SA, which produces two of Brazil’s largest daily papers, sought FCL help specifically to help with the installation of the second machine FCL had been chosen from several candidates, he said, and had proved to be an ideal partner.

But Brazil was now in the throes of a presidential election, and little investment was taking place in the build-up to the November 15 polling day.

It was unlikely the result would change the ground rules for FCL, as Brazilians realised their country needed foreign investment.

“Nobody will question

FCL’s presence in Brazil,” Mr Mesquita said. “But nobody is investing, so nobody is confident of the near future.”

The campaigning started in earnest on September 1 with candidates awarded free television time based on their party’s past election performances.

He said the impact of television was such that the present frontrunner, who leads a small party, would probably lose unless he formed an alliance with another party. The August inflation rate was expected to be 29.5 per cent, he said, and it was to be hoped the Government would not lose control of its “controlled growth of inflation” leading up to the election.

Mr Mesquita who is visiting New Zealand as a guest of FCL, said inflation was expected to be controlled at the 45 per cent a month level to election day.