The above selling values are based on the average of all species according to the proportions found in the virgin forest in the province of Valdivia. By practicing selective cutting, removing all high-value species and a proportion of low-value ones, it is estimated that average selling value can be increased about 16 percent. Obviously, stands containing a higher proportion of less valuable species will show lower average values; for stands containing a higher proportion of the more valuable species and better quality trees, the selling value of the lumber derived will be above average.

Likewise, the costs of production on specific operations will vary widely, depending on such factors as topography, timber size, location and volume per unit of area. Variation in the factors of cost and in selling prices exists within a given province as well as between provinces. There is one constant cost differential between the several lumber-producing centers, however, and that is the cost of transporting lumber to the principal consuming center, the Santiago area. The freight rate differential between Puerto Montt to Santiago versus Temuco to Santiago is roughly in the order of 120 to 140 pesos per thousand board feet. The difference between the Puerto-Montt-Santiago rate and the Valdivia-Santiago rate is about 70 pesos per thousand board feet. If an attempt were made to offset these freight rate disadvantages by reducing wages, for example, it would mean that the wage rate in the south would average only about two-thirds the rate prevailing in the Valdivia area, and only about one-third that paid in the Temuco area. To the area around Puerto Montt and to the south, the meaning of this situation is clear. Only stands of better than average accessibility, or those of better than average quality or species composition, can be economically exploited to any extent at present.

However, opportunities for large-scale development of the forest resource in this area could be made very attractive if water-borne freight rates were reduced to a reasonable level. The spread between water-borne freight rates and rail rates for domestic shipments in Chile is not as great as might reasonably be expected. In addition, no differential is made in the prevailing water rates according to size of shipment, in spite of the fact that it is less expensive per unit to transport a large shipment than a small one. Equitable rates should provide a substantial reduction on large cargo shipments.

Water rates elsewhere in the world are usually much lower for comparable distances, in some instances being as little as 1/3 to 1/4 of rail rates. Comparison of 1943 domestic rail and combination water-rail rates for lumber from Puerto Montt to Santiago is given below: 1

Puerto Montt to Santiago - 450 pesos per thousand board feet

As cited above, the Valdivia area now enjoys a 70 pesos per thousand board feet lumber freight rate advantage over Puerto Montt on shipments into Santiago. This advantage could be equalized by giving Puerto Montt a combined freight rate into Santiago of 380 pesos per thousand board feet. If this reduction were absorbed entirely by the water rate,

recent rise in rail freight rates makes the combination water-rail rate somewhat favorable.

the latter would have to be reduced to 230 pesos per thousand board feet, or to about 38 percent of the 1943 all-rail rate from Puerto Montt to Valparaiso.

Shortage of shipping space caused by the war has undoubtedly been partly responsible for the maintenance of cargo rates at a high level. War-risk insurance has added 9 percent to the basic rate. In the post

war period, when shipping space will become much more plentiful than at present, there should be opportunities for obtaining substantial reductions in cargo rates. If this is accomplished, the economic availability of the timber tributary to Puerto Montt will be substantially improved.

VOLUME ECONOMICALLY AVAILABLE

It is estimated that there will be 75,236 million board feet of timber economically available for development within the next decade, or 43 percent of the total sawtimber volume of the country. This volume is distributed by province groups as shown below and in figure 14:

The economic availability of the remaining 57 percent of the sawtimber volume is dependent upon many factors that cannot be predicted with accuracy at the present time. One such factor is the effect the forest plantation program may have upon the availability of the natural forest in the south of Chile. It seems probable that within several decades existing plantations will have the capacity to supply the volume of lumber cut at present. Since the principal plantation areas have a decided accessibility advantage over much of the natural forest, especially that in Province Groups 5 and 6, it is conceivable that the southern areas might find it practically impossible to compete for the large domestic market, except for the types and grades of lumber which the plantations will be unable to supply. On the other hand, the timber resources of the southern provinces are readily accessible to water transportation, and by virtue of this fact it may be ultimately possible to utilize profitably the great majority of the timber located there.

Any factor that increases lumber sale value, or reduces cost of production improves economic availability. As it seems quite improbable that the lumber industry will be able to expand its market substantially on a higher sale price basis, the principal opportunity for improving economic availability lies in cutting production costs. The comparative elements of cost of lumber to the typical consumer in Santiago are shown graphically in figure 15. It is evident that the margin for stumpage, profit and risk is much the largest factor. Since cost of stumpage is a comparatively small item in Chile, it is believed that a well-organized company could operate on a considerably lower margin, and that the opportunity for cutting this element of cost is substantial. Whatever can be done regarding shipping rates depends largely on national policy. However, there does appear to be considerable opportunity for reducing cargo rates, with perhaps a lesser opportunity for lowering rail rates. It is significant that cost of labor in logging and sawmilling amounts to only 11.2 percent of the total paid by the Santiago lumber consumer. If these labor costs were cut in half, the net corresponding reduction of total lumber cost would be only 5.6 percent. Nevertheless, the employment of more efficient machinery and methods in the logging, milling and hauling operations, and the development of more and better

FIGURE 15. COMPARATIVE ELEMENTS OF COST OF LUMBER TO CONSUMER IN SANTIAGO

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roads will improve economic availability significantly. In view of these trends, it is probable that 90 percent of the total timber in Province Groups 2, 3, and 4 will become economically available within 20 or 30 years, and if the above indicated water-borne freight rate reduction is achieved, probably 50 percent of the timber in Province Group 5 will become available within that period.

The foregoing analyses indicate that, from the national standpoint, there is not now, nor need there be a shortage of economically available timber for continued consumption, or for increased forest industry development.