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The following is an excerpt from a 20-F SEC Filing, filed by MASISA S.A. on 6/30/2006.
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MASISA S.A. - 20-F - 20060630 - COMPANY_INFORMATION

Item 4. Information on the Company

Our Company

     Masisa is a leading vertically integrated Latin American forestry and wood products company. We grow and harvest timber in plantations located in most of the fastest tree growth rate areas in the world and sell our manufactured products primarily to the construction and furniture industries, mainly in Latin America and the United States, as well as to customers in other markets such as Europe and Asia. Our main products include sawn lumber, saw and pulp logs wood boards, and solid wood products.

     In 2005, 60% of our sales were in investment grade countries, Chile, Mexico and the United States, which accounted for 17%, 15% and 28%, respectively, of our sales in that year. The rest of Latin America accounted for 34% of our sales in 2005 with Brazil, Venezuela, Argentina, Colombia and Peru accounting for 14%, 8%, 8%, 3% and 2%, respectively, of our sales in that year. The remaining 5% of our sales in 2004 was from exports to 50 countries outside of Latin America and the United States.

     Masisa is a leading wood board manufacturer in Latin America with an annual installed capacity of 2.3 million cubic meters, which accounts for approximately 18% of the region’s installed capacity. Our principal board products include MDF (medium density fiberboard), particle board and OSB (oriented strand board) that are mainly sold in the Latin American region. Latin American board consumption has grown in the past and is expected to continue to grow due to existing housing deficits and expected higher demand for housing in the Latin American region, particularly in Brazil and Mexico. We believe additional housing activity will generate increased demand for furniture and boards.

     In sawn lumber, Masisa also has an annual installed capacity of 707,000 cubic meters. Sawn lumber is sold primarily in the Mexican market.

     Masisa produces value-added products such as MDF mouldings, finger-joint mouldings and solid wood doors with a current installed annual capacity of 224,400, 168,000 and 42,000cubic meters, respectively as of December 2005. These products are sold principally in the United States.

     Increasing environmental concerns around the world have made planted timber a more desirable resource in the forest products industry. Masisa owns 244,139 hectares of planted timber plantations including 136,893 hectares in Chile, Brazil and Argentina, three of four of the fastest tree growth rate areas in the world, giving us access to a sustainable, low-cost source of raw material. Our forests are managed under international environmental standards, including the International Organization for Standardization’s (ISO) 14,001 certification and compliance certifications from the Forestry Stewardship Council (FSC), allowing the Company better access to developed world markets in which compliance with such standards is often of interest to consumers. We expect that the progressive maturity of our forests in Chile will allow us to increase our annual harvest resulting in a higher volume of wood production. Additionally, due to consistent forest management practices that we have followed for more than a decade, we expect to improve the quality of our harvested wood, allowing us to add higher quality products to our product mix. We expect that the combination of improved quality and increased volume of our annual timber harvest will lead to increased operating income and cash flow.

     In Latin America, Masisa’s business is complemented by a substantial distribution network of independently owned stores selling our products called ‘‘Placacentros Masisa’’. Board demand in Latin America is highly fragmented due to the importance of general contractors and independent furniture manufacturers. Placacentros are designed to provide services that increase these contractors’ and manufacturers’productivity and increase demand for our products. The Placacentro concept has been successful in developing our customer base to include more small to medium sized businesses. The network, which is present in 10 countries in the Latin American region, has grown from 49 stores in 2000 to 232 stores in 2004 and 275 stores as of December 31, 2005. Placacentro stores offer a variety of products related to furniture manufacturing and provide related services, such as computer aided furniture design, and customized board sizing and drilling, improving our customers’ productivity. We believe that significant cross-selling opportunities exist for sawn lumber and other solid wood products, allowing us to leverage this Placacentros network. Placacentros have been an instrumental factor in allowing us to

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increase our market share in various Latin American board markets over the last few years, and we believe they have also contributed to the overall growth of several of the markets we have entered. We have grown our board sales through this channel from 14% in 2000 to 23% for 2005.

     In the United States, we have our own direct selling company, Masisa USA. Masisa sells approximately one million solid wood pine doors per year as well as finger-joint and MDF mouldings. Furthermore, Masisa USA owns and operates a MDF moulding plant in order to source customers that value short lead-time deliveries. We also participate in the structural panels market, selling OSB produced in our Brazilian operation. We distribute our products in the United States principally through Masonite as well as wholesale building products distributors such as Builders First Source, OrePack and Weyerhaeuser that resell our products to retailers. Over the last year, principally due to the increase in MDF moulding sales and the increased diversification and more numerous distribution channels for our solid wood door products, we have increased the percentage of our sales that are made to new customers.

Our Competitive Strengths

Quality low cost forest resources.

The location of our forests in fast growth rate areas lowers our raw materials cost, providing us with an important competitive advantage compared to competitors that rely on raw materials from plantations in slower tree growth rate regions. We expect that the progressive maturity of our forests will allow us to increase our annual harvest in the future, and that our consistent forest management practices that we have followed for more than a decade will permit us to improve the quality of our harvested wood, allowing us to add higher quality products to our product mix. Due to increasing environmental concerns around the world, and as industrial capacity has started to match industrial forest availability, planted timber plantations have become a strategic asset.

Modern manufacturing facilities and competitive operations.

48% of our board production capacity, 72% of our moulding production capacity and 86% of our saw mill capacity were built after 2000. Our primary production facilities are located in Chile, Brazil, Argentina and Venezuela where our forests are located. Modern manufacturing facilities, access to low cost raw material, economies of scale derived from the overall size of our operations, and the relatively low labor costs in the Latin American countries in which we operate, provide us with a competitive cost structure.

Leading producer of wood boards in Latin America.

We have approximately 18% of the total installed board production capacity in the region, and a capacity approximately 26% greater than our next closest competitor as of December 2005. This regional footprint provides us with commercial flexibility to optimize production and product sales destinations within the region, based on the dynamics of the different Latin American markets.

Established and expanding distribution network.

Our Placacentro distribution network has proved successful in Latin America, resulting in growth from 49 stores in 2000 to 220 stores in 2004 and 275 stores as of December 31, 2005. Placacentro stores, which are oriented toward independent furniture manufacturers and small contractors, offer a variety of products and related services aimed at improving our customers’ productivity and allow us to be closer to a broad customer base.

Geographic diversification.

We sell our products in every major economy in Latin America as well as the United States. Our largest market, the United States, represents approximately 28% of our sales and our largest Latin American

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market represents no more than 17% of our sales. This geographic diversification diminishes to a certain extent our vulnerability to market downturns in any one country.

Significant cost advantages in value-added wood products.

We are able to capitalize on rapid forest growth and low manufacturing costs to achieve a cost advantage in supplying the North American market compared to manufacturers that serve the North American market from other regions in the world.

History and Development of the Company

     We are a sociedad anónima abierta, or publicly-held corporation, organized under the laws of Chile. We were incorporated into our present form on October 31, 2003 under the name Terranova S.A. Our predecessor company, Forestal Terranova S.A. was incorporated on August 2, 1994. In April 2005, the shareholders of Terranova S.A. and Masisa S.A. approved the merger of the two companies with Terranova as the surviving entity. At the same shareholder meetings, the shareholders of each company approved changing the merged company’s name to Masisa S.A., our legal and commercial name. For additional information regarding the merger see – “The Merger of Terranova and Masisa”.

     We are controlled by our majority shareholder, Grupo Nueva S.A., formerly known as Compañía de Inversiones Suizandina S.A. Grupo Nueva S.A. is a Chilean holding company and is part of a larger group of affiliated investment companies, held by Nueva Holding, Inc. Our legal domicile is Santiago, Chile and our principal executive office is located at Avenida Apoquindo 3650, Piso 10, Las Condes, Santiago, Chile. Our telephone number is +56 (2) 350-6000. Our agent in the United States is Masisa USA, Inc., which is located at 900 Circle Seventy-five Parkway, Suite 720, Atlanta, Georgia 30339. Masisa USA was formerly known as Terranova Forest Products, Inc.

     Our history began in the 1970s with a sawmill operation in southern Chile. In the years up to 2002, through acquisitions and other transactions, we and our predecessor companies expanded our forestry assets in Chile, Venezuela and Brazil; acquired and established manufacturing and marketing capabilities in the markets of northern Latin America and the United States in order to allow us to more efficiently utilize our forestry resources; and worked to improve the coordination and management of those resources. During this period, we expanded our operations within Chile to include additional sawmills and facilities to manufacture MDF and market skin and moulded doors. Outside Chile, we significantly expanded to add forestry assets in Venezuela and Brazil, sawmills in Venezuela and Brazil, board manufacturing facilities in Brazil, Argentina and Venezuela, a moulding mill in the United States and distribution and marketing operations in the United States and numerous markets in northern Latin America. As of 2002, our forestry assets and manufacturing operations were held directly and indirectly through our predecessor, Forestal Terranova, with our U.S. operations being coordinated through Forestal Terranova’s subsidiary, Masisa USA, and our non-Chilean subsidiaries and affiliates being held by, and their products marketed through, Terranova Internacional S.A., also known as TISA.

     In January 2001, Forestal Terranova subscribed to approximately 81 million newly issued shares of Masisa, giving it an approximate 8.8% interest in Masisa. In July 2002, Forestal Terranova acquired Maspanel’s 43.16% interest in Masisa and became Masisa’s controlling shareholder with 51.9% of Masisa’s total shares then paid and outstanding. Effective as of July 1, 2002, Forestal Terranova began consolidating Masisa into its financial results. On May 27, 2003, Forestal Terranova increased its ownership interest in Masisa to 486,861,555 shares (52.43%) of common stock through open market purchases on the Santiago Stock Exchange.

     On November 15, 2005 we increased our participation share in our Chilean forestry company, Forestal Tornagaleones from 60.45% to 94.91% through the purchase of a significant minority shareholder’s interest for US $29.9 million. In addition, during the first quarter of 2006, Forestal Tornagaleones increased its participation share in Forestal Argentina S.A., our Argentinean forestry investment company, from 50.10% to 98.68% through the purchase aggregate minority shareholders’ interests of 48.58% for approximately $24.3 million.

     At the end of 2005 and beginning of 2006 we successfully completed a capital increase, with total proceeds of US$117.5 million, divided into two phases. The first phase, completed on December 7, 2005, yielded

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proceeds of US$75 million. Of this amount, 66% was placed in the U.S. market via the Company’s ADR program. The second phase of this process was completed on January 5, 2006, upon the completion of a preemptive rights offering period. The principal objectives of the capital increase were to finance the Company’s investment projects, which include a new MDF plant in Chile.

The Merger of Terranova and Masisa

     On April 12 and April 13, 2005, respectively, the shareholders of our former majority-owned subsidiary Masisa S.A. and Terranova S.A approved the merger by incorporation of the former Masisa into and with Terranova. At the same shareholder meetings of Masisa and Terranova at which the merger was approved, the shareholders of each company also approved changing the name of the merged company from Terranova S.A. to Masisa S.A.

     The merger became effective on May 31, 2005. As a consequence, the company known as Masisa before May 31, 2005 no longer exists. Terranova’s name was changed to Masisa at the effective time of the merger and continues as the surviving entity and is the legal successor of the former Masisa for all purposes.

Corporate Structure

     As indicated in the following charts, we and a number of our subsidiaries conduct manufacturing operations. However, most of our sales to third parties are made through Masisa USA, Maderas y Sinteticos Mexico S.A. de C.V., Forestal Terranova Mexico, Masisa Chile, Masisa Argentina, Masisa do Brazil, Masisa Madeiras Ltda., Maderas y Sinteticos del Peru S.A.C., Masisa Ecuador, Fibranova C.A.(Venezuela), Andinos C.A. (Venezuela) and Masisa Colombia. The principal exceptions are Forestal Tornagaleones and Forestal Argentina, which are directly responsible for selling their own products.

     Our group’s business structure, as of April 30, 2006, is set forth in the following chart:

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     The following table shows on a consolidated basis our direct and indirect ownership interest in each of our subsidiaries and affiliates that formed a part of our group as of December 31, 2005 as well as the country of incorporation for each such subsidiary and affiliate. Unless specifically noted otherwise, our ownership interest in each subsidiary and affiliate as of December 31, 2005 was equal to our proportionate voting power in that entity.

                 Ownership interest     
 
    Country of        12/31/2005        12/31/2004 
Company    Incorporation    Direct    Indirect    Total    Total 
                     
Inversiones Internacionales Terranova S.A.    Chile    60.0000    0.0000    60.0000    60.0000 
Masisa S.A. (Antigua)   Chile    0.0000    0.0000    0.0000    52.4340 
Forestal Tornagaleones S.A.    Chile    94.9061    0.0000    94.9061    31.6980 
Masisa Inversiones Limitada    Chile    99.9973    0.0027    100.0000    52.4340 
Masisa Concepcion Limitada    Chile    0.0100    99.9900    100.0000    52.4340 
Inversiones Coronel Limitada    Chile    99.9842    0.0158    100.0000    52.4340 
Masisa Partes y Piezas Limitada    Chile    99.8000    0.2000    100.0000    52.4340 
Masisa Overseas Ltd.    Cayman Islands   100.0000    0.0000    100.0000    52.4340 
Maderas y Sinteticos del Perú S.A.C.    Peru    99.0114    0.8897    99.9011    52.3820 
Masisa USA, Inc    U.S.    25.1200    44.9280    70.0480    70.0480 
Maderas y Sinteticos Servicios S.A. de C.V.    Mexico    1.0000    99.0000    100.0000    52.4340 
Masisa Ecuador S.A.    Ecuador    0.1000    99.9000    100.0000    52.4340 
Masisa Do Brasil Ltda.    Brazil    0.0010    99.9990    100.0000    52.4340 
Maderas y Sinteticos Mexico S.A. de C.V.    Mexico    0.0002    99.9998    100.0000    52.4340 
Inversiones Calle-Calle S.A.     Chile    50.0000    0.0000    50.0000.    50.0000 
Terranova Panama S.A.    Panama    0.0000    60.0000    60.0000    60.0000 
Terranova de Venezuela S.A.    Venezuela    0.0000    60.0000    60.0000    60.0000 
Coforven S.A.    Venezuela    0.0000    59.9700    59.9700    59.9700 
Forestal Terranova Mexico S.A. de C.V.    Mexico    0.0000    59.9940    59.9940    59.9940 
Cor.Forestal Guayamure C.A.    Venezuela    0.0000    51.0000    51.0000    51.0000 
Masisa Madeiras Ltda.    Brazil    0.0000    59.9940    59.9940    59.9940 
Masisa Colombia S.A.    Colombia    0.0000    59.9940    59.9940    59.9940 
Cor.Forestal Imataca C.A.    Venezuela    0.0000    60.0000    60.0000    60.0000 
Andinos C.A.    Venezuela    0.0000    60.0000    60.0000    60.0000 
Forestal Argentina S.A.    Argentina    0.0000    47.5418    47.5418    15.8810 
Masisa Argentina S.A.    Argentina    0.0000    100.0000    100.0000    52.4340 
Fibranova C.A.    Venezuela    0.0000    60.0000    60.0000    60.0000 
Masnova S.A.    Mexico    0.0000    80.0000    80.0000    56.2170 

The Grupo Nueva Group and Our Management Framework

     We are controlled by the Grupo Nueva group, or Nueva Holding, Inc., a Panamanian company, which through its Chilean subsidiaries Grupo Nueva S.A. and Inversiones Forestales Los Andes S.A., owned a 76.38% interest in us prior to the merger between us and our former subsidiary Masisa. As a result of and immediately following the merger, Grupo Nueva S.A. beneficially owned in the aggregate approximately 59.5% of the outstanding shares of the merged company. However, following the completion of our capital increase in January 2006, Grupo Nueva’s interest in us was reduced to 52.8% . For additional information regarding our capital increase, see “Item 5— Operating and Financial Review and Prospects.” Grupo Nueva S.A. is, directly and indirectly, a wholly owned subsidiary of Nueva Holding, Inc. Inversiones Forestales Los Andes, is, directly and indirectly, a wholly owned subsidiary of Grupo Nueva S.A. In addition, Grupo Nueva owns directly a 40% interest in our subsidiary IITSA and, as a result, owns 40% of IITSA’s interest in many of our indirect international subsidiaries.

     As part of the Grupo Nueva group, we adhere to certain common management principles. These principles include management and business practices which promote high standards of business ethics and compliance with the law, as well as the use of practices that promote cultural development and social and environmentally responsible objectives.

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Business Strategy

     Our business goal is to be a low-cost integrated Latin America forestry and wood products company with planted timber plantations in rapid growth regions, a competitive industrial capacity, a strong distribution network in Latin America and an important presence in the United States, Europe and Asia. The key elements of our strategy include:

Maximize the value of our forests.

We plan to maximize and strengthen (i) our position as an integrated Latin American forestry company with managed forest plantations in fast growing regions and (ii) our ability to fully utilize all tree by-products throughout our production processes or those of third parties.

Three of our plantation locations, Chile, Argentina and Brazil, are among the countries with the fastest average annual tree growth rates in the world, lowering our relative raw materials costs. Our Venezuelan plantation produces trees that grow at a slower rate but the plantation was acquired at a cost that allows as to maintain a low cost structure. As an increasing portion of our plantations in Chile and Argentina reach maturity over the coming years, we expect to increase our annual harvest, thereby increasing our volume of wood production. Additionally, our consistent forest management practices are expected to result in the harvesting of higher quality wood, as a result of which we expect to add higher quality products to our product mix.

As an integrated company, we strive to maximize the complete use of all portions of the trees harvested. Different parts of the trees are used to produce different products ranging from wood doors to solid wood mouldings and lumber. Even the by-products of various production processes, such as sawdust and chips, are used in the production of wood boards.

As part of our forestry investment plan, we increased our ownership in Forestal Tornagaleones S.A. and in Forestal Argentina S.A., purchasing most of the minority interest in both of those companies in November 2005 and January 2006, respectively.

Capitalize on Latin America’s growth opportunities.

We believe that the increasing use of wood boards in the furniture industry in Latin America, combined with the unmet demand for housing in several of the countries in the region, will drive future growth. Based on growth prospects in the region, we are constructing a new MDF plant in Chile and evaluating the construction of new industrial facilities in Brazil.

We plan to leverage our leading presence in Latin America as well as our Placacentros network to capture growth and profit opportunities in the region. See “Information on the Company”

Expand and leverage our distribution network.

We plan to maintain a strong customer-focused approach throughout the production and distribution chain and continue to build upon our strong distribution network.

We particularly aim to focus upon our well-established Placacentro distribution network. We intend to continue to develop Masisa’s Placacentro program in Chile, Brazil, Argentina, Peru, Mexico, Ecuador, Paraguay, Colombia, Venezuela and Uruguay and to extend the Placacentro concept to new countries in the medium term as well. We intend to reach approximately 380 Placacentros branded stores in the region by the end of 2008. We plan to leverage our Placacentro network by offering a broader product mix, including more of our own products as well as third party products such as accessories and complementary products. We intend to develop the best store format in the best locations and offer a complete range of products and services targeted to carpenters and small and medium size furniture producers in order to become their preferred supplier through a “one stop shopping” concept. We will work closely with our customers in the

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construction and furniture manufacturing industries to offer specific solutions to problems they face and to better satisfy their needs. We believe that expansion of this program will further enhance Masisa’s brand name and the distribution of its products.

In addition, we intend to improve our Masisa USA distribution network by expanding our customer base, increasing the range of our product portfolio and adapting appropriately our product designs and manufacturing and distribution processes in response to changes in the markets for our products.

We also plan to develop new markets for solid wood products directing an increasing portion of our solid wood products, historically directed mainly to the United States market, to Latin America and to other markets such as, Europe and Southeast Asia.

• Focus on sustainable development practices.

Ensure that our forestry assets and production facilities and processes are maintained and operated in accordance with various internationally accepted sustainable development and socially responsible development principles. This strategy is intended to reduce our environmental compliance risks and to allow us to provide certain products in accordance with various international environmental standards that are increasingly demanded by end customers.

The business activities within our company are guided by the principle of social and environmental responsibility. Environmentally, this means we seek more efficient uses of raw materials and by-products, and continuous improvement in the environmental impact of each of our group’s companies. With respect to our social responsibility, it is our goal that our businesses and operations have a positive impact on the communities in which we operate and that we maintain healthy relations with our employees and other stakeholders.

Operational Organization

     Prior to the merger between Terranova and Masisa, our businesses were organized by geographic segments within each of Terranova and its subsidiary Masisa. For example, we had a “Chile” segment for Terranova and a separate “Chile” segment for Masisa. Our operations within each of those geographic segments were managed by country heads with administrative, financial and treasury, marketing and related support services being provided out of Terranova’s and Masisa’s respective corporate offices.

     Since the merger, we have combined our operations in each significant jurisdiction in which we operate, resulting in only one segment with respect to each such jurisdiction. We continue to manage our operations within each geographic segment through a country head with responsibility for the overall operations in that jurisdiction, including the manufacturing, marketing and distribution of all products, as well as responsibility for the financial performance of our activities in that jurisdiction. Operations, sales and marketing services and assistance with respect to boards, solid wood and forestry products are provided to each country head by senior officers in our corporate offices who are organized into divisions—boards, solid wood and forestry—and who have company-wide responsibility for the products in their areas. General administrative, financial and treasury, and related support services are provided throughout the Company from our corporate offices. We are continuing to review the combined organization and expect such review will result in additional changes in our reporting structure and changes in management and officer positions.

     As part of the reorganization of our operations following our recent merger, we intend to further modify our structure to create three separate divisions for boards, solid wood and forestry products. If this aspect of the reorganization is completed, the result will be that we will have new segments corresponding to these three divisions.

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Facilities and Offices

     The map below illustrates the location of our principal offices, forests, production facilities and Placacentros as of December 31, 2005. For information regarding our offices, plantations, forests, production and processing facilities, see “—Description of Properties” in this Item.

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Description of Properties

     The following tables show our material properties, excluding our forestry holdings, as of December 31, 2005 and include information regarding the size (in square meters) and use of the properties , as well as whether the properties are leased, owned or used pursuant to service agreements. Service agreements are contracts to use a variable amount of space or services in a facility managed by a service provider and therefore do not constitute a lease. For information regarding our forestry holdings, see “—Forestry Operations—Land ownership and rights” in this Item

LAND / PROPERTIES

Location     Country     Function     Leased/     Size  
            Owned     (square meters)
                 
Santiago (Apoquindo)   Chile    Administrative    Leased    523 
Santiago (Apoquindo)   Chile    Administrative    Owned    1,565 
Santiago (Santa Maria)   Chile    For Sale    Owned    1,515 
Santiago ( Moneda 920)   Chile    Administrative    Owned    159 
Cabrero    Chile    Production    Owned    56,064 
Chillán    Chile    Production    Owned    17,377 
Cabrero    Chile    Production    Owned    26,391 
Concepción (Chiguayante)   Chile    Production    Owned    12,321 
Concepción (Coronel)   Chile    Production    Owned    28,877 
Valdivia (Valdivia)   Chile    Production    Owned    37,651 
Valdivia (Carlos Puschmann)   Chile    Production    Owned    12,429 
Antofagasta    Chile    Distribution    Service    2,125 
Concepción    Chile    Distribution    Owned    3,009 
Concepción (Cintac)   Chile    Distribution    Leased    7,000 
Santiago    Chile    Distribution    Service    10,000 
Valdivia    Chile    Distribution    Service    3,176 
Menque    Chile    Production    Owned    21,886 
Temuco    Chile    Administrative    Leased    150 
Linares    Chile    Administrative    Leased    60 
Curitiba   Brazil    Administrative    Leased    339 
Paraná    Brazil    Administrative    Owned    (included in production facilities)
Rio Grande do Sul    Brazil    Administrative    Leased    80 
Santa Catarina    Brazil    Administrative    Owned    2,062 
Paraná    Brazil    Production    Owned    59,558 
Santa Catarina    Brazil    Production    Owned    70,458 
Novo Hamburgo    Brazil    Distribution    Leased    4,200 
Paraná    Brazil    Distribution    Owned    (included in production facilities)
Bogotá D.C.    Colombia    Administrative    Leased    250 
Cucuta    Colombia    Distribution    Service    14,000 
Bogota    Colombia    Distribution    Service    510 
México D.F.    Mexico    Distribution    Service    15,000 
México D.F.    Mexico    Administrative    Leased    271 
Durango    Mexico    Production    Owned    176891 
Durango    Mexico    Administrative    Owned    8,102 
Durango    Mexico    Distribution    Owned    47,746 
Altamira, Tamaulipas    Mexico    Distribution    Owned    36148 
Atlanta    United States    Administrative    Leased    568 
Wando    United States    Administrative    Owned    557 
Wando    United States    Production    Owned    11,148 

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LAND / PROPERTIES

Location     Country     Function     Leased/     Size  
            Owned     (square meters)
                 
Wando    United States    Distribution    Owned    7,432 
Baltimore    United States    Distribution    Service    5,574 
Long Beach    United States    Distribution    Service    1,858 
Houston    United States    Distribution    Service    2,323 
Oakland    United States    Distribution    Service    1,394 
Savannah    United States    Distribution    Service    3,252 
BolÍvar    Venezuela    Administrative    Leased    278 
BolÍvar    Venezuela    Administrative    Leased    160 
BolÍvar    Venezuela    Administrative    Leased    120 
Estado Anzoátegui    Venezuela    Production    Owned    43,000 
Estado de Carabobo    Venezuela    Distribution    Leased    12,000 
Buenos Aires    Argentina    Administrative    Leased    600 
Entre Ríos    Argentina    Production    Owned    57,400 
Entre Ríos    Argentina    Distribution    Service    1,800 
Lima    Peru    Administrative    Leased    136 
Lima    Peru    Distribution    Service    3000 
Quito    Ecuador    Administrative    Leased    90 
Quito    Ecuador    Distribution    Service    3000 

     A discussion of environmental issues that affect our business generally is presented below under “Environmental regulation”.

Capital Expenditures

     For a description of our principal capital expenditures, see “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Investing activities”, “—Terranova business” and “—Masisa business.”

Principal Products

     The following table sets forth the sales of each of our principal products as a percentage of our total consolidated sales for the years ended December 31, 2003, 2004 and 2005:

 
OUR PRODUCTS  
             
  Year ended December 31,  
     
(as a percentage of consolidated sales)   2003     2004     2005  
       
MDF    32.2%    33.2%    33.6% 
Particle board    20.9%    19.3%    20.7% 
Finger-joint mouldings    15.8%    12.5%    11.2% 
Sawn lumber    7.7%    8.6%    9.0% 
OSB    5.8%    8.2%    8.0% 
MDF mouldings    3.5%    5.0%    6.4% 
Solid-wood doors    6.8%    5.8%    4.4% 
Saw and pulp logs    3.8%    4.2%    4.0% 
Other products (1)   3.5%    3.2%    2.7% 
   Total    100.0%    100.0%    100.0% 
_______________________
(1) Includes principally wood chips, sawdust, door parts, fiberboard doors and wood plies.

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MDF (Medium density fiberboard)

     MDF is manufactured by removing the fibers from wood chips and sawdust, mixing the wood fiber pulp with adhesives and forming the mixture into flat sheets which are dried, heated, pressed, cooled, cut to size and finished. MDF has broad applications in furniture, cabinet and millwork manufacturing. Machining qualities make MDF well-suited for the production of pieces with critically shaped and profiled edges. Its uniformly dense surface gives superior results when grain-printed or painted. MDF shapes and routs with precision, drills easily and cuts cleanly. It is an effective core material for high-pressure laminates, fast-cycle melamine and veneers. MDF is more versatile than particle board. However, compared to the production of particle board, the MDF production process requires higher-quality wood, a greater quantity of adhesives and more energy. Due to its resulting higher production costs, MDF generally commands a higher price than particle board of the same thickness. We produce all the standard thicknesses and densities of MDF, including thin-MDF, some melamine-laminated MDF and a small amount of wood-veneered MDF. Melamine-laminated MDF is MDF covered on one or both sides with paper impregnated with melamine, a plastic laminate. We also produce a high density MDF to be used for flooring. We market our MDF under the brand name “MDF Masisa.” For the year ended December 31, 2005, MDF sales represented 33.6% of our consolidated net sales compared to 33.2% for the same period in 2004.

Particle board

     Raw particle board is manufactured by mixing wood chips, wood shavings and sawdust with adhesives and rolling or pressing the mixture into large flat sheets of varying sizes and thickness, which are then cut, quality-analyzed and packaged. Raw particle board is used in a variety of applications in the construction industry, such as ceilings, floors and closets, and is also widely used in the manufacture of furniture. We produce different types of raw particle board that are marketed under the brand names “Placa Masisa,” “Masisa Panel ,” “Ecoplac,” “Facilplac” and “HR100.” We also produce melamine-laminated particle boards which are raw particle boards covered on one or both sides with paper impregnated with melamine. Melamine-laminated boards are widely used in the manufacture of furniture and cabinets and are also used in construction for walls, counters and in other applications. Melamine-laminated board sales generate a higher margin than raw particle board sales. For the year ended December 31, 2005, particle board sales accounted for 20.7% of our consolidated net sales revenue compared to 19.3% for the same period in 2004.

     Particle board competes, in certain uses, with gypsum and asbestos-cement boards, as well as solid wood, plywood, fiber board (including both hard board and MDF) and OSB. MDF and particle board are competing products in some applications in the furniture industry. Lumber and gypsum board are the main competing products in the construction industry. Plywood may also be substituted for particle board, MDF and OSB in certain applications.

Finger-joint mouldings

     Finger-joint mouldings are produced from small pieces of wood which have been cut and dried. The drying process is followed by a surfacing procedure in which any knots, imperfections or irregularities are extracted. The wood pieces are then joined, shaped and packaged for distribution. We offer four types of mouldings including raw mouldings, painted mouldings, jesso mouldings and stiles. These mouldings are ornamental strips used to decorate a surface, and are often used to accent or emphasize the ornamentation of a structure or to conceal surface areas or angle joints. For the year ended December 31, 2005, finger-joint moulding sales represented 11.2% of our consolidated net sales revenue compared to 12.5% for the same period in 2004.

Sawn lumber

     We produce green and kiln dried sawn lumber from timber harvested from forestry plantations. The timber is sawn into logs, debarked and classified according to its diameter and length. The lumber is sawn into various shapes and sizes. Our sawmills produce high quality dried lateral wood from the outer portion of the log for the remanufacturing process and lower quality dried center wood from the center portion of the log. In Chile and Brazil, the lateral wood is used for manufacturing finger-joint mouldings, door frames, boards, sidings and furniture as well as doors, which are manufactured only in Chile. The center wood is used for manufacturing, packaging and construction. The slower growth rate of the Caribbean pine from our Venezuelan forest plantations results in a high

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quality grade that commands a premium price in Mexico and Venezuela. For the year ended December 31, 2005, sales of sawn lumber represented 9.0% of our consolidated net sales revenue compared to 8.6% for the same period in 2004.

OSB (Oriented strand board)

     OSB is structural panel board manufactured from small logs. The logs are debarked and reduced to thin wood strands. The strands are put into a drying machine to remove humidity from the wood in order to avoid shrinkage and swelling during use. The dried wood strands are placed into a blending machine where they are mixed with chemical adhesives. The resin-blended strands are then mechanically aligned into several layers in a forming line, with each layer laid down separately along the conveyor belt, to build up a mat. This mat is compressed and heated in the main press to form the boards. The compressed and heated boards are then cooled and finished. OSB’s outstanding physical-mechanical properties make the boards highly suitable for use in applications requiring great structural resistance, such as those that occur in the construction and packaging industries. Our Masisa OSB is marketed under the “Masisa OSB” brand name, and is manufactured at Masisa’s Brazilian plant. For the year ended December 31, 2005, OSB sales represented 8.0% of our consolidated net sales compared to 8.2% for the same period in 2004.

MDF mouldings

     We manufacture our MDF mouldings from superior, ultra-light MDF (32 pounds per cubic foot density) which makes them comparable to any standard wood moulding. Their light weight substantially reduces the cost disadvantages associated with transportation, handling and installation of standard density MDF mouldings. We manufacture primed and un-primed MDF mouldings on priming lines yielding high quality waterborne priming. We offer a wide range of patterns for our mouldings, including the casing and base, crowns, jambs and S4S boards. We produce MDF mouldings in 7, 8, 10, 14 and 16 foot lengths. For the year ended December 31, 2005, MDF moulding sales represented 6.4% of our consolidated net sales revenue compared to 5.0% for the same period in 2004.

Solid wood doors

     We manufacture solid wood interior stile and rail doors in Chile, and market them under the brand name “Masisa”. Our doors are manufactured in a range of thicknesses, heights and widths to fit standard doorways and closets. Masisa doors are available in a variety of styles and are manufactured from solid pine wood with engineered stiles and rails that are edge-glued, finger-jointed and laminated with clear veneer. They are also available with solid raised panels with a characteristic double hip pattern, emphasizing the relief. Our solid wood doors are distributed throughout the United States principally by Masonite International Corporation. For the year ended December 31, 2005, door sales represented 4.4% of our consolidated net sales revenue compared to 5.8% for the same period in 2004.

Saw and pulp logs

     We sell saw and pulp logs directly and through our subsidiaries Terranova Venezuela, Masisa Madeiras, Forestal Tornagaleones, Forestal Argentina and Masisa do Brasil. For the year ended December 31, 2005, saw and pulp log sales represented 4.0% of our consolidated net sales revenue compared to 4.2% for the same period in 2004.

Other products

     Other products include principally wood shavings, wood chips, sawdust, door parts, fiberboard doors and pine veneer wood plies. We manufacture fiberboard doors in Chile, which are marketed under the brand name “Exit”. The manufacture of our doors is the most labor intensive of its businesses. Our doors are made with a cardboard honeycomb core. Our wood shavings, wood chips and sawdust are byproducts of our sawmill and industrial operations and sold to pulp manufacturers and other third party manufacturers. Wood plies, which we sell to third parties, are sheets of solid wood coiled off of saw logs and serve as the principal raw material for plywood.

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     On a consolidated basis, all of our “other products” accounted for 2.7% of our consolidated sales for the year ended December 31, 2005 and 3.2% for the same period in 2004.

Wood Products Sales

     The following tables shows our sales of our principal wood products by millions of US$ and physical volume in cubic meters for the years ended December 31, 2003, 2004 and 2005.

 
CONSOLIDATED SALES OF OUR PRINCIPAL WOOD PRODUCTS  
 
    Year ended December 31,  
   
(in millions of US$)   2003     2004     2005  
       
MDF    $154.6    $ 215.9    $ 250.2 
Particle board    100.6    125.9    154.0 
Finger-joint mouldings    75.6    81.4    83.1 
Sawn lumber    37.2    56.0    66.6 
OSB    27.7    53.4    59.7 
MDF mouldings    16.6    32.8    47.3 
Solid-wood doors    32.8    37.9    32.8 
Saw and pulp logs    $ 18.2    $   27.1    $   30.1 

 
CONSOLIDATED SALES OF OUR PRINCIPAL WOOD PRODUCTS  
 
    Year ended December 31,  
   
(in thousands of cubic meters)   2003     2004     2005  
       
Saw and pulp logs    951.9    1,361.4    1,197.0 
MDF    783.5    931.6    880.9 
Particle board    608.2    649.7    700.1 
Sawn lumber    240.7    299.7    327.8 
OSB    178.1    241.6    261.1 
Finger-joint mouldings    193.7    171.6    180.0 
MDF mouldings    48.1    90.3    113.7 
Solid-wood doors    36.1    42.6    35.7 
_______________________

     Total sales of our principal wood products, which increased by 14% during 2005 compared to 2004, mainly due to a general increase in prices for most of our principal products, are dependent, to a significant extent, on the state of the economies in the United States, Mexico, Chile, Venezuela, Argentina and Brazil, our principal markets. In particular, sales of our processed wood products are related to the levels of activity in the construction and furniture industries in those countries. Construction activity is subject to cyclical fluctuations due to changes in economic conditions, interest rates, population growth and other economic and demographic factors. An economic downturn in any of those countries is likely to materially adversely affect its construction industry and, accordingly, sales of our products.

     The “do-it-yourself”, new residential construction industry and re-modeling industry in the United States as well as the construction and pallet manufacturing industries in Mexico are the principal end-users of our solid wood products. The furniture manufacturing industries in Chile, Argentina, Mexico, Brazil and Venezuela are the principal users of our board products. In addition, we market our boards in Colombia, Peru, Ecuador and Uruguay. See “Item 5. Operating and Financial Review and Prospects.”

     The international market for our processed wood products is highly competitive in terms of price and quality. We compete with producers from the United States, Canada, Chile, Brazil, New Zealand, China and South Africa. Competitive factors within a market area generally include price, species and grade of the logs used in the production of the end-product, proximity to wood consuming facilities and ability to meet customers’ requirements. Environmental certification has also become a point of differentiation. In numerous markets and in the United States in particular, wood products manufacturers are increasingly encouraged or required to supply environmentally certified finished product. Our production facilities and plantations have been certified under ISO 14,001 and

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OHSAS 18,001, and our plantations have received the Forest Stewardship Certification (FSC). The FSC certifies that the wood in a product, whether a finished product or an intermediate product, is produced in accordance with FSC standards.

Markets and Distribution

     We present the information of our company by country within each of our “solid wood and forestry” and “boards” business groups. These country segments include, for our solid wood and forestry businesses, the United States, Chile, Brazil, Mexico and Venezuela, and for our board businesses, Chile, Argentina, Brazil and Mexico.

     In the United States, we operate through our subsidiary Masisa USA. In this market, we sell approximately one million solid wood pine doors per year as well as finger-joint and MDF mouldings. We also participate in the structural panels market, selling OSB produced in our Brazilian operation. We distribute our products in the United States principally through regional distributors that resell our products to retailers.

     In Latin America, Masisa commenced its Placacentro program in 1991 in order to broaden its distribution channels, stimulate and increase demand for its products, improve volume security and remain in close contact with its customers. Placacentros are independently owned and operated retail point of sales for boards, accessories and furniture related products and components targeted to carpenters and small and midium size producers. Placacentro stores are required to carry the full range of Masisa’s products and to display such products in the manner directed by Masisa. Placacentro owners receive training, and operational and technical assistance from Masisa and are permitted to carry other manufacturers’ products and brand with certain limitations. Masisa derives no license fees or revenues from Placacentro stores other than through the sale of its products. Placacentros are an important part of Masisa’s marketing strategy of maintaining close ties to furniture manufacturers and retail customers. The goal of this strategy is to increase the per capita consumption of Masisa’s products and to create competitive advantages to address current and future competition. We also hope to create and capture a greater portion of the profit pool in the value chain.. Masisa has developed its Placacentro distribution network in Chile, Mexico, Brazil, Argentina, Peru, Ecuador, Colombia, Venezuela, Paraguay and Uruguay. As of December 31, 2005, 51 Placacentros stores were open in Chile, 42 in Argentina, 21 in Peru, 40 in Brazil, 63 in Mexico, 15 in Ecuador, 3 in Paraguay, 21 in Colombia, 18 in Venezuela and 1 in Uruguay. The Company expects to grow its network by approximately 51 new stores primarily in these Latin American countries during 2006.

     The following table sets forth our aggregate sales as a percentage of total sales in each of our principal markets by destination for the years ended December 31, 2003, 2004 and 2005.

 
OUR MARKETS
 
    Year ended December 31,  
     
(as a percentage of consolidated sales)     2003     2004     2005  
       
United States    27.4%    29.2%    28.0% 
Chile    18.2%    16.8%    16.5% 
Mexico    15.5%    16.1%    15.0% 
Brazil    15.8%    14.1%    14.0% 
Venezuela    4.9%    6.0%    8.3% 
Argentina    6.0%    6.7%    7.6% 
Other countries    12.3%    11.1%    10.6% 
Total     100.0%    100.0%    100.0% 

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     The following table sets forth our aggregate sales for each of our principal markets by destination for the years ended December 31, 2003, 2004 and 2005.

 
OUR MARKETS  
 
    Year ended December 31,  
   
(in millions of US$)   2003     2004     2005  
       
United States    $ 131.4    $ 190.0    $ 208.1 
Chile    87.3    109.3    122.4 
Mexico    74.6    105.1    111.8 
Brazil    76.0    91.6    104.5 
Venezuela    23.3    39.0    62.0 
Argentina    28.6    43.4    56.3 
Other countries    58.9    72.6    78.9 
Total     $ 480.1     $ 651.0     $ 744.0  

United States

General

     For the 12 months ended December 31, 2005, GDP grew 3.5%, inflation was 3.4% and the trade balance deficit was US$723.6 billion. At December 31, 2005, the unemployment rate was 5.1% . The U.S. economy experienced moderate growth because of an increase in customer demand and business investment spending.

     The following table shows our sales of solid wood doors, MDF and finger-joint mouldings, MDF, OSB and other products in the United States in dollars for the periods indicated.

 
UNITED STATES PRINCIPAL WOOD PRODUCTS SALES  
 
    Year ended December 31,  
     
(in millions of US$)   2003     2004     2005  
       
Solid Wood and Forestry              
Finger-joint mouldings    $ 75.6    $ 81.4    $ 83.0 
Solid wood doors    32.3    37.3    32.1 
Boards              
MDF mouldings    14.8    32.6    46.3 
OSB    5.9    30.8    39.7 
MDF    $   2.6    $   4.2    $   2.4 

Marketing and distribution

     The United States is Masisa’s most significant market as measured by aggregate sales. Our total consolidated sales in the United States for the year ended December 31, 2005 represented 28.0% of total sales compared to 29.2% in 2004. This decrease was partially due to strong demand in our principal Latin American board markets partially offset by increased finger-joint and MDF moulding sales during 2005.

     Most of our products are sold in the United States through approximately 60 customers that serve primarily the “do-it-yourself” and new residential construction industries. The U.S. do-it-yourself market is heavily consolidated and is dominated by large chain retailers such as Home Depot, Lowes and Menards.

Solid wood and forestry

     Our eight largest customers for solid wood products, in terms of sales revenue, accounted for approximately 82% and 84% of sales for the years ended December 31, 2005 and 2004, respectively, in the United States. Our largest customer, Masonite International, accounted for approximately 52% and 53% of such sales during the years ended December 31, 2005 and 2004, respectively. Our principal U.S. solid wood customers are

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Masonite International, Builders First Source, Jim White Lumber Sales Inc. Wholesale Millwork Inc, W. M. Tinder Inc., Bluelinx Corporation, Boston Cedar & Millwork, and Jeld-Wen International supply. We store our products primarily in three distribution warehouses located at Wando, South Carolina, Baltimore, Maryland, and Houston, Texas. We ship our products from U.S. warehouses to our customers primarily by truck. Shipments are delivered to our distribution centers by ship from our production facilities in Chile, Brazil, Argentina and Venezuela.

      Finger-Joint Mouldings Market . We manufacture solid wood finger-joint mouldings which are sold in the United States. Our total sales of finger-joint mouldings in 2005 were US$83.0 million compared to US$81.4 million in 2004. This increase in finger-joint moulding sales was due primarily to higher volume sales resulting from an increased sales focus and new customers, partially offset by lower prices for finger-joint mouldings. The decline in prices for finger-joint mouldings was mainly due to our distributor’s high inventory levels.

     We currently produce our finger-joint mouldings at our Cabrero plant in Chile and our Rio Negrinho plant in Brazil. The market for finger-joint mouldings in the United States is highly competitive. In general, we are able to produce solid wood finger-joint mouldings at our Chilean and Brazilian plants at a low cost relative to U.S. and Canadian manufacturers. Additionally, freight prices from our South American plants are comparatively low and we are able to sell our mouldings in the United States at competitive prices. Our principal competitors in the finger-joint mouldings market are Arauco, Braspine, Woodgrain and Sierra Pacific.

      Solid Wood Doors Market . We manufacture residential interior solid wood stile and rail doors which are sold in the United States, which is considered a niche market. Our total solid wood door sales in the United States in 2005 were US$32.1 million compared to US$37.3 million in 2004. This decrease is primarily due to lower physical volume sales, production declines in Chile and reduced inventory purchasing during the second half of 2005 by Masisa’s largest customer in the United States. However, prices increased due new pricing agreed with our main customer in the United States..

     Almost all of the solid wood doors we sell in the United States are manufactured at our production facilities in Chillán, Chile. Solid wood door sales in the United States is a competitive market. Our principal competitors in this market are Swartland, Woodgrain, Frameport and Sincol.

Boards

     Our eight largest customers for board products, in terms of sales revenue, accounted for approximately 54% and 66% of sales for the years ended December 31, 2005 and 2004, respectively, in the United States. The largest customer accounted for approximately 9% and 12% of such sales during the years ended December 31, 2005 and 2004, respectively. It is important to note that these numbers are not exactly comparable, because in 2004 each of our Chilean, Brazilian and Argentinean subsidiaries sold its products through different brokers while in 2005 they sold only through Masisa USA. Our principal U.S. board customers that purchased through Masisa USA in 2005 are BlueLinx Corporation, North Pacific Lumber Co, Orepac, Weyerhaeuser, Conex Forest Products Inc, Empire Wholesale Lumber, Viking Forest Products Llc and Alexandria Mouldings.

     We store our products primarily in three distribution warehouses located at Wando, South Carolina, Baltimore, Maryland and Houston, Texas. We ship our products from U.S. warehouses to our customers primarily by truck. Shipments are delivered to our distribution centers by ship from our production facilities in Chile, Brazil, Argentina and Venezuela.

      MDF Moulding Market . We manufacture MDF mouldings which are sold in the United States. Our total sales of MDF mouldings during the year ended December 31, 2005 were US$46.3 million compared to US$32.6 million during the same period in 2004. This increase in sales of approximately 42% is principally due to the increase in production capacity in both our Argentina and Chilean production facilities and better pricing as a result of our improved sales effort.

     We currently produce the MDF mouldings that we sell in the United States at the Masisa USA plant in Wando, South Carolina and our Masisa plants in Argentina and Chile. The market for mouldings in the United States is highly competitive. In general, we are able to produce MDF mouldings at our Chilean and Argentinean plants at a low cost relative to U.S. and Canadian manufacturers. Additionally, due to the light weight of these products, freight prices from our South American plants are comparatively low and we are able to sell our

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mouldings in the United States at competitive prices. Our principal competitors in the MDF mouldings market are PacTrim, Arauco (Trupan), Sierra Pine, Polincay and Corza.

      Commission Sales . In May 2004, Masisa USA entered into a sales commission agreement with Masisa to market and distribute Masisa’s board products in the United States. Masisa USA currently sells Masisa’s MDF mouldings under this contract. This contract is still in force.

     Beginning in 2005, Masisa Brazil began marketing most of its OSB sales in the United States through Masisa USA. As a result, our OSB sales in the United States increased by 28.6% in dollar terms, from US$30.8 million in 2004 to US$39.7 million in 2005.

Chile

General

     For the year ended December 31, 2005, GDP grew 6.3%, inflation was 3.6% and the trade balance surplus was US$10.2 billion. At December 31, 2005, the unemployment rate was 8%. Chile’s economic growth in 2005 was primarily the result of generally improved global economic conditions and increased commodity prices, although the unemployment rate remained relatively high.

     The following table shows our sales of solid wood doors, saw and pulp logs, MDF, particle board and OSB in Chile in dollars for the periods indicated.

 
CHILE  
PRINCIPAL WOOD PRODUCTS SALES  
 
    Year ended December 31,  
   
(in millions of US$)   2003     2004     2005  
       
Solid Wood and Forestry              
Saw and pulp logs    $ 13.5    $ 18.2    $ 20.6 
Solid wood doors    0.5    0.5    0.6 
Boards              
Particle board    41.4    49.9    60.3 
MDF    21.7    34.7    29.2 
OSB    $   2.5    $   1.4    $   2.3 

Solid wood and forestry marketing and distribution

     Most of the solid wood and forestry products that we sell in Chile are saw and pulp logs which we sell to pulp and other manufacturers. Our three largest customers, in terms of sales revenue, accounted for approximately 43% and 49% of sales in Chile in during years ended December 31, 2005 and 2004, respectively. The largest customer accounted for approximately 36% and 30% of such sales. Our principal Chilean customers are CMPC Celulosa S.A., Paneles Arauco S.A., Forestal Bio-Bio S.A, and SODIMAC S.A. Our products are shipped mainly by truck to domestic customer locations.

      Saw and Pulp Logs Market . Our solid wood and forestry businesses sell saw and pulp logs to manufacturers in Chile. Our total saw and pulp log sales for the year ended December 31, 2005 were US$20.6 million compared to US$18.2 million for the same period in 2004.

     All of the saw and pulp logs we sell in Chile are harvested at our Chilean plantations. Our principal competitors in this market are Arauco and CMPC.

      Solid Wood Doors Market . We sell a relatively small number of residential interior rail and stile solid wood doors in Chile. Our total solid wood door sales in Chile were US$0.6 million for year ended December 31, 2005 compared to US$0.5 million for the same period in 2004.

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Boards marketing and distribution

     Most of our board products are sold in Chile through approximately 170 independent distributors serving the construction and furniture manufacturing industries. A small portion of our board products are sold directly to furniture manufacturers. Our 30 largest board customers, in terms of sales revenue, accounted for approximately 81% and 79% of sales for the years ended December 31, 2005 and in 2004, respectively. The largest customer accounted for approximately 15% and 12% of such sales for the years ended December 31, 2005 and 2004, respectively. Our principal Chilean customers for board products are Maderas Imperial Ltda., Sodimac S.A., Arauco Distribución S.A., Silva y Compañía Ltda., Polincay Export Ltda., Maderama, Easy S.A., Electrocom S.A., Mafor S.A., Paneles Arauco S.A., and Construmart S.A. In 2005, furniture continued to be one of the leading products imported to Chile, competing with the furniture products of Chilean producers which form a significant part of our customer base. Specifically, “ready-to-assemble” furniture products are becoming an increasingly popular import in Chile, although they account for a relatively small portion of current furniture sales in Chile. We work through our Placacentros to assist our customers in developing ways to use our products to respond to changing market conditions. Although we believe that, under current market conditions, the loss of any one distributor or customer would not have a material adverse effect on us, there can be no assurance that any such loss in the future will not have such a material adverse effect.

     Masisa’s products are stored in four warehouses and sales offices throughout Chile and are shipped mainly by truck to domestic customer locations. Shipments to the Antofagasta warehouse, in the northern part of Chile, are also delivered by ship.

     As of December 31, 2005, there were 51 Placacentro stores in Chile. Masisa expects to grow its network by adding three Placacentro stores in Chile during 2006. The Placacentro chain is the largest chain of stores in the country in terms of sales to furniture manufacturers and small contractors. Of Masisa’s volume sales in the Chilean market during the years ended December 31, 2005 and 2004, respectively, approximately 21% and 25% respectively, were to Placacentros. The remainder were direct sales and sales to other distributors.

      Particle Board Market . We manufacture raw, melamine-laminated and wood-veneered particle board in Chile. Our total particle board sales in 2005 increased to US$60.3 million from US$49.9 million in 2004 due to strong demand for melamine-laminated boards from a strong construction market.

     Rio Itata, which has an installed production capacity of approximately 30,000 cubic meters per year, is the only competitor in the particle board production industry in Chile. The excess of local supply over local demand is exported.

     Due to the economic crisis in Argentina in 2002, which reduced particle board consumption in Argentina nearly to half its 2001 level, and the devaluation of the Argentinean peso, some Argentinean manufacturers began to export part of their production to the Chilean market. This resulted in price pressure for all competitors in Chile. We believe that the excess capacity in particle board production in Chile and the resulting price pressure, combined with high transport costs for particle board imports, are the primary factors that discouraged imports to Chile of particle boards in previous years. The situation experienced in 2002 was unique and as the Argentinean economy and consumption began to recover in the second half of 2003 and continued its recovery during 2004, the situation started to return to prior levels. During 2005 imports from Argentina had no significant effect on our sales. However, there can be no assurance that significant price pressure from imports of particle board into Chile will not occur in the future.

      MDF Market . Masisa manufactures MDF board in Chile. The Chilean MDF market is relatively undeveloped compared to the European and North American markets. Although the first Chilean MDF plant did not begin production until 1988, the market has exhibited strong growth since then. Nevertheless, Chilean MDF producers devote most of their production to exports. Our total MDF board sales for the year ended December 31, 2005 decreased to US$29.2 million compared to US$34.7 million for the same period in 2004 partially due to lowered demand on the first half of 2005, from our Chilean MDF moulding customers, that export to the United States market.

     Masisa’s only established competitor in the Chilean MDF market is Paneles Arauco S.A. which has an annual production capacity of approximately 390,000 cubic meters.

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Mexico

General

     For the year ended December 31, 2005, GDP grew 3.0%, year to year, inflation was 4.0% and the trade balance deficit was US$7.6 billion. At December 31, 2005, the unemployment rate was 3.6% . Mexico’s economy is expected to continue to grow because of the increase in demand from the United States, Mexico’s principal trading partner. The economic recovery has contributed to greater demand for wood products and higher wood prices.

     The following table shows our sales of sawn lumber, MDF, particle board and OSB in Mexico in dollars for the periods indicated.

 
MEXICO
PRINCIPAL WOOD PRODUCTS SALES
 
    Year ended December 31,  
   
(in millions of US$)   2003     2004     2005  
       
Solid Wood and Forestry              
Sawn lumber    $ 34.5    $ 46.3    $ 47.3 
Boards              
MDF    16.8    22.4    30.8 
Particle board    15.3    21.7    24.6 
OSB    $   3.0    $   3.4    $   2.1 

Solid wood and forestry marketing and distribution

     We sell most of our sawn lumber in Mexico either directly or through independent distributors to the construction and pallet manufacturing industry. Our 25 largest customers, in terms of sales revenue, accounted for approximately 70% and 78% of sales in the years ended December 31, 2005 and in 2004, respectively. The largest customer accounted for approximately 17% and 16%, respectively, of such sales during such periods. Our principal customers in Mexico are Maderera Nasa S.A. de C.V., Productora de Tarimas del Sur S.A., Losifra S.A. de C.V., Maderas y Empaques Para Cada Uso, S.A. de C.V., Unipallet S.A. de C.V. and Productos Maderables Gole de RLMI. Although we do not believe that under current market conditions, the loss of any one distributor or customer would have a material adverse effect on us, there can be no assurance that any such loss in the future will not have such a material adverse effect. In addition to our own products, we also sell sawn wood produced by third parties, principally located in Chile. Our products are stored in two warehouses and two sales offices in Durango, Mexico and are shipped mainly by truck to domestic customer locations. The sawn lumber we sell in the Mexican market is harvested and processed primarily in Chile. A smaller amount of the sawn lumber we sell in Mexico is harvested and processed in Venezuela.

      Sawn lumber . Mexico is the principal market in which we market our sawn lumber. Mexico does not have well developed forestry resources and, as a result, our principal competitors in this market are also importers. Our total sawn lumber sales during the year ended December 31, 2005 were US$47.3 million compared to US$46.3 million during the same period in 2004. The increase is primarily due to higher prices partially offset by a slight decrease in physical volume sales.

     Sawn lumber in Mexico is a highly competitive market. Our principal competitor in this market is Arauco. The Mexican market has a good but limited national supply system as well. We plan to expand our market share for our sawn lumber in Mexico by selling it through our Placacentro network. We believe sales through the Placacentros will enable us to reach the small business and independent manufacturing segment in Mexico which we do not presently serve in any significant amount.

Board marketing and distribution

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     In August 2001, Masisa established Maderas y Sintéticos de México S.A. de C.V. (“Masisa Mexico”) as a vehicle for entering the Mexican wood products market. On January 8, 2002, Masisa Mexico acquired a particle board plant located in Durango, Mexico, from MacMillan Guadiana, a subsidiary of the U.S. forestry company, Weyerhaeuser Company Limited. This plant has an installed capacity of 120,000 cubic meters per year. With this acquisition, Masisa now supplies particle boards to the Mexican market mainly from the Durango plant’s production. Masisa imports MDF and OSB into the Mexican market from its plants in Chile, Argentina and Brazil, and also from the Fibranova plant in Venezuela. Our net board sales in Mexico for the years ended December 31, 2005 and 2004 represented 7.7% and 7.3%, respectively, of our consolidated net sales.

     Because Mexico has a population more than six times larger than Chile’s, board consumption levels that are currently substantially smaller than Chile’s and a growing scarcity and increasing cost of sawn lumber (the principal competing product of Masisa’s wood boards), we believe the Mexican market has substantial potential for increased consumption of wood board, whether produced locally at the Durango plant or imported from Masisa plants in Chile, Argentina, Brazil or Venezuela.

     Currently, Masisa sells particle board and MDF to Mexican furniture manufacturers directly and through distributors, with a total of approximately 251 customers. For the years ended December 31, 2005 and 2004, approximately 86% and 81%, respectively, of Masisa’s sales revenue in the Mexican market was generated by 63 principal customers, and the largest single customer accounted for approximately 5% and 10%, respectively, of these sales. Masisa’s principal distributors of board in Mexico are Mexicana Pacific S.A. de C.V., Triplay y Laminados Pega, Triplay Tableros de Ecatepec S.A., Aglomerados y Triplay Vic S.A. de C.V., Promotora Grocer S.A. de C.V., Tableros y Melaminas Zaragoza S.A., Triplay y Aglomerados del Pacífico, Industrial Maderera Puente de Vigas, Triplay Y Maderas Nacionales, S.A., Multimaderas y Tableros, and Rodríguez Gamboa Francisco Javier.

     In 2003 and 2004, Masisa successfully expanded its Placacentros network in Mexico. Masisa Mexico has opened 63 stores throughout the country as of December 31, 2005. We intend to grow our network in 8 Placacentros in Mexico in 2006. For the years ended December 31, 2005 and 2004, approximately 40% and 34%, respectively, of Masisa Mexico’s total volume sales were made through Placacentros.

      MDF Market . Masisa has traditionally supplied the Mexican MDF market from its Chilean facilities, and to a lesser degree, Argentinean facilities. Since 2002, the Fibranova plant in Venezuela has also exported MDF to Mexico. Our total sales of MDF for the year ended December 31, 2005 were US$30.8 million compared to US$22.4 million for the same period in 2004. The increase during 2005 was due to a strong demand. Our principal competitors in this market are Paneles Arauco S.A., MJB S.A. de C.V. and Maderas Conglomeradas S.A. de C.V.

      Particle Board Market . Particle board consumption in Mexico is relatively low. Our total sales of particle board for the year ended December 31, 2005 were US$24.6 million compared to US$21.7 million for the same period in 2004. The increase during 2005 against 2004 was due mainly to higher physical volume sales and prices. Our main competitors in this market are Paneles Ponderosa S.A. de C.V., Rexcel S.A. de C.V., and Duraplay S.A. de C.V.

Brazil

General

     For the 12 months ended December 31, 2005, GDP grew 2.3%, inflation was 6.9% and the trade balance surplus was US$44.8 billion. At December 31, 2005, the unemployment rate was 9.8% . During 2005, the Brazilian economy experienced a moderate recovery following a mild contraction in 2003.

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     The following table shows our sales of saw and pulp logs, sawn lumber, MDF, particle boards and OSB in Brazil in dollars for the periods indicated.

 
BRAZIL  
PRINCIPAL WOOD PRODUCTS SALES  
 
    Year ended December 31,  
     
(in millions of US$)   2003     2004     2005  
       
Solid Wood and Forestry              
Saw and pulp logs    $   2.3    $  4.3    $   4.3 
Boards              
MDF    47.0    65.5    77.6 
OSB    13.6    10.7    11.2 
Particle board    $ 11.1    $  9.2    $   8.4 

Solid wood and forestry marketing and distribution

     The majority of the solid wood and forestry products produced by our businesses in Brazil are sold in export markets. Our total saw and pulp log sales during the year ended December 31, 2005 were US$4.3 million compared to US$4.3 million during the same period in 2004. This increase is principally due to higher prices and appreciation of local currency against the US dollar. All of the saw and pulp logs we sell in Brazil are harvested at our plantations.

Board marketing and distribution

     Masisa established Masisa Brazil in 1995. Masisa Brazil has already achieved a significant position as a particle board and MDF supplier to southern Brazil’s furniture industry. Particle board is supplied and delivered to the Brazilian market principally by truck from Masisa Argentina’s Concordia plant. The strategic location of the Concordia Plant and the establishment of MERCOSUR have made Brazil a favored market for Masisa Argentina’s exports. In the past, MDF was supplied to the Brazilian market from both the Argentinean Concordia plant and the Chilean Mapal plant, but since 2001 these exports have been gradually replaced by production from the new MDF plant located in Ponta Grossa, Brazil.

     Our combined sales in Brazil of particle board, MDF and OSB reached US$97.2 million for the year ended December 31, 2005, compared to US$85.4 million in 2004, representing a 13.9% increase. This was mostly due to a Brazilian currency appreciation against the US dollar and higher board prices.

     Due to the large size of Brazilian manufacturers, sales in Brazil are primarily made directly to the manufacturers. There are generally no independent distributor chains for these materials. However, in order to meet the needs of carpenters, architects and decorators, Masisa has established a sales and marketing network that has been in place since 1996. In addition, in 2005 Masisa opened eight new Placacentro stores in the central and southern regions of Brazil, as part of its policy of developing distribution networks as a strategy for penetrating the markets where it is present. Masisa has opened 40 Placacentro stores in Brazil as of December 31, 2005, and expects to grow its network with approximately 5 stores in Brazil during the rest of 2006. For the years ended December 31, 2005 and 2004, approximately 21% and 17%, respectively, of all the Masisa Brazil’s sales were through Placacentros.

     Masisa is expending considerable effort to develop its sales in Brazil by, among other activities, opening distribution warehouses, expanding its client base and participating in promotional activities, expositions and trade shows. Currently, Masisa sells MDF and OSB through 270 and 70 distributors, respectively, in Brazil. For the years ended December 31, 2005 and 2004, approximately 18% and 20%, respectively, of Masisa’s sales revenue in the Brazilian market was generated by 20 of its customers and our largest single customer accounted for approximately 2% and 2%, respectively, of those sales. Masisa’s principal customers in Brazil are Todeschini S/A Industria e Comercio, Bertolini S/A, Madcompen o Atacadao Comp. Ltda., Solar Madeiras Especiais Ltda., and A. Romanzza Moveis Ltda..

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      MDF Market . Based in part on Masisa’s experience in the Argentinean market, we believe that the MDF market will expand rapidly in Brazil as MDF becomes more widely available as a result of the new domestic MDF production capacity in Brazil. Our total sales of MDF increased 18.5% to US$77.6 million for the year ended December 31, 2005 from US$65.5 million for the same period in 2004. The increase was mainly due to a considerable increase in prices and the above-mentioned currency appreciation.

     Our principal competitors in Brazil’s MDF market are Duratex, Tafisa Brasil, Placas do Paraná and the Isdra Group.

      OSB Market . As the first and only producer of this kind of boards in Brazil, Masisa is currently involved in the introduction phase for this product. Our total sales of OSB increased by 4.5% to US$11.2 million for the year ended December 31, 2005 from US$10.7 million for the same period in 2004. This increase is due mainly to increased prices partially offset by lower physical volume sales.

      Particle Board Market . Particle board consumption in Brazil is relatively low. Since Brazil has a population more than ten times greater than that of Chile, Masisa views Brazil as an attractive market for particle board. Our total sales of particle board decreased by 8.7% to US$8.4 million for the year ended December 31, 2005 from US$9.2 million for the same period in 2004. The decrease during 2005 was mainly due to a reduction in imports from Masisa Argentina as Masisa Argentina increased particle board sales in Argentina due to a recovery in the Argentinean local market.

     Our principal competitors in this market include Duratex, Satipel, Berneck, Placas do Paraná, Eucatex and Tafisa.

Venezuela

General

     For the 12 months December 31, 2005, GDP grew 9.3% and the trade balance surplus was US$31.5 billion. At December 31, 2005, the unemployment rate was 14.0% . At December 31, 2005, the annual rate of inflation was 15.9% . During the 12 months ended December 31, 2005, Venezuela’s economy experienced strong growth due to increased oil revenue and general economic recovery following economic instability during 2003. This growth has increased demand and prices for wood products. No assurance can be given that this level of growth will continue, or that political and economic developments in Venezuela will not deteriorate. See “Item 3. Key Information—Risk Factors—Risks relating to operations outside of Chile—Our Venezuela operations are subject to adverse political and economic conditions.”

 
VENEZUELA  
PRINCIPAL WOOD PRODUCTS SALES  
 
    Year ended December 31,
     
(in millions of US$)   2003     2004     2005  
             
Solid Wood and Forestry              
Sawn lumber    $ 2.6    $ 7.3    $ 14.9 
Boards              
MDF    13.6    24.1    37.0 
Particle board    $ 6.2    $ 7.6    $  9.1 

Marketing and distribution

     We sell most of our products in Venezuela through approximately 74 independent distributors serving the furniture manufacturing and construction industries. Our 20 largest solid wood and forestry product customers, in terms of sales revenue, accounted for approximately 86% and 80% of our solid wood and forestry sales in Venezuela for the years ended December 31, 2005 and 2004, respectively. Our largest solid wood and forestry products customer accounted for approximately 12% and 11% of such sales, respectively. Our principal solid wood products customers in Venezuela are Madera La Ojedeña C.A., Grupo Imeca, and Madenova C.A.

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     Our 20 largest board product customers, in terms of sales revenue, accounted for approximately 95% and 79% of our board sales in Venezuela for the years ended December 31, 2005 and 2004, respectively. Our largest board products customer accounted for approximately 22% and 12% of such sales, respectively. Our principal board products customers in Venezuela are Grupo Imeca, Madenova C.A., and Aserradero El Sol C.A..

     Although we do not believe that, under current market conditions, the loss of any one distributor or customer would have a material adverse effect on us, there can be no assurance that any such loss in the future will not have such a material adverse effect. Our products are stored in two warehouses, at our Macapaima plant and in Puerto Cabello and are shipped mainly by truck to domestic customer locations. We also have a sales office in Caracas, Venezuela. The wood products we sell in the Venezuelan market are produced at our Fibranova-Macapaima plant in Anazoñtegui, Venezuela.

     In 2004 and 2005, Masisa successfully expanded its Placacentros network in Venezuela. Masisa Venezuela has opened 18 stores throughout the country as of December 31, 2005, and expects to grow its network with approximately 10 new stores in Venezuela during 2006.

Solid wood and forestry

      Sawn lumber market. We sell sawn lumber to distributors and pallet manufacturers and other industries in Venezuela. Our total sales of sawn lumber for the year ended December 31, 2005 were US$14.9 million compared to US$7.3 million for the same period in 2004. This increase is primarily due to a decrease in demand for native timber species that compete with our lumber, which come from man-made plantations, for market share and an increase in demand by pallet manufacturers for the food industry.

     All of the sawn lumber we sell in Venezuela is harvested at our plantations in the Uverito area, and processed at our Andinos sawmill, in the Macapaima complex in Anazoátegui, Venezuela. The sawn lumber market in Venezuela had historically been dominated by wood species native to Venezuela and imported radiata pine from Chile. Caribbean pine wood is relatively new to the Venezuelan market but is growing fast due to its high quality and demand for quality wood from the construction and pallet manufacturing industries. We believe demand from pallet manufacturers will be more important in the coming years due to the fact that the distribution industries are increasingly converting to palletized systems and new regulations in packaging. Our principal competitors in this market are smaller volume local sawmills including Pinoven, Forestal Soledad and Aserradero Carabobo.

Boards

      MDF market . We sell MDF to distributors in Venezuela. Our total MDF sales in 2005 were US$37.0 million compared to US$24.1 million for the same period in 2004. The increase was primarily due to higher prices and physical volume sales resulting from improved domestic economic conditions.

     All of the MDF board we sell in Venezuela is produced at our Fibranova-Macapaima plant in Anzoátegui, Venezuela. We believe we have an advantage in this market as a domestic competitor. We also believe sales through Placacentros will enable us to grow sales significantly.

      Particle board market . Our businesses sell raw and melamine-coated particle board to distributors in Venezuela. Our total particle board sales in 2005 were US$9.1 million compared to US$7.6 million in 2004. The increase was primarily due to higher prices and physical volume sales resulting from improved domestic economic conditions.

     All of the particle board we sell in Venezuela is produced at our Fibranova-Macapaina plant in Anzoátegui, Venezuela. Sales of particle board in Venezuela declined greatly in 2002 and 2003 as a result of economic instability and a general economic recession. The market began to improve in 2004, and continued this trend in 2005 and we are focusing on developing our boards and melamine products.

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Argentina

General

     For the 12 months ended December 31, 2005, GDP grew 9.2%, inflation was 9.6% and the trade balance surplus was US$11.3 billion. At December 31, 2005, the unemployment rate was 11.6% . The Argentinean economy showed strong growth in the period after several years of economic crisis. After depreciating by 237% in 2002, the Argentinean peso appreciated moderately in 2003 and has since stabilized. Additionally, most of the restrictions on cash withdrawals from bank accounts and on transfers of funds from Argentinean to foreign accounts that were imposed during the 2002 economic crisis had been lifted by the end of 2003. In June 2005, the government finished the process of renegotiating most of its defaulted debt. As a result, Argentina’s risk ratings improved. Although 2003 and 2004 demonstrated that the economic situation in Argentina has improved, no assurance can be given that governmental measures or other factors will continue to improve Argentina’s economy or that general improvement in its economy will lead to an increase in the demand for particle board and/or MDF.

     The following table shows our MDF, particle board, OSB and MDF mouldings sales in the Argentinean market for the periods indicated.

 
ARGENTINA PRINCIPAL WOOD PRODUCTS SALES  
 
    Year ended December 31,  
       
(in millions of US$)   2003     2004     2005  
       
Boards              
MDF    $ 14.7    $ 21.4    $ 28.1 
Particle board    10.6    15.8    20.5 
OSB    1.6    1.9    2.2 
MDF mouldings    $   0.1    $   0.2    $   0.3 

Marketing and distribution

     We sell particle board and MDF to Argentinean furniture manufacturers through approximately 150 distributors. For the years ended December 31, 2005 and 2004, respectively, approximately 70% and 69% of Masisa’s sales revenue in the Argentinean market was generated by the 20 principal distributors. The largest customer accounted for approximately 10% and 9%, respectively, of these sales during such periods. Masisa’s principal distributors in Argentina are Cencosud S.A., Distribuidora Aglolam S.A., Madergold S.A., Distribuidora Argentina de Chapas S.A.C., Distribuidora Placasur S.A., Sacheco S.A., Dolinsky S.A., NBC Maderas S.R.L., Trumar S.A.I.C. and Amiano S.R.L..

     Given the successful development of Masisa’s Placacentro program in Chile and Peru, Masisa Argentina started to develop this distribution channel in 2000. 42 stores were opened in Argentina as of December 31, 2005. Masisa Argentina expects to grow its network with approximately 7 stores in Argentina in 2006. Of Masisa’s sales in Argentina during 2005 and during 2004, approximately 42% were through Placacentros for each year.

     We are pursuing several strategies in Argentina to encourage the use of Masisa’s particle board and MDF products in lieu of other materials. As in Chile, Masisa holds regular meetings with Argentinean furniture manufacturers, offers service and technical assistance to these consumers and regularly participates in trade fairs and furniture shows. In addition, Masisa offers technical training courses for Masisa-product installers.

     We have focused our marketing efforts on furniture and cabinet manufacturers and on the construction industry. After the devaluation of the Argentinean peso in 2002 and in response to the adverse macroeconomic scenario in Argentina, Masisa Argentina redirected the majority of production from its Argentinean operations to export markets primarily in Brazil, Mexico, the United States and the Far East. However, with the recovery of the Argentinean local market, this trend has been reversed.

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      MDF Market . We have continued to actively develop the market for this product through advertising campaigns, events held directly with our customers and our participation in trade shows, all of which are designed to demonstrate the board’s quality and multiple uses for furniture manufacturers, architects and decorators.

     Masisa is the largest MDF manufacturer in the Argentinean market. Our total MDF board sales in 2005 were US$28.1 million compared to US$21.4 million in 2004. The increase was due primarily to higher volume sales and prices as a result of strong demand in 2005. The large increase in sales in 2003 followed a steep decline in 2002, when, in order to minimize the impact of the devaluation, Masisa Argentina shifted the main part of its domestic sales of MDF to exports. The Argentinean MDF market was a fast-growing market that we estimate expanded approximately 530% between 1995 and 1999. However, the economic crisis of 2002 adversely affected the market. In 2003 and 2004, the market expanded rapidly compared to 2002. We believe the positive growth trend in the economy will continue in the short-term and that the market for wood board products will continue to recover as a result. However, there can be no assurance that the economy will continue to recover or that sales of wood board products will increase as a result. In the first half of 2002, Alto Paraná (Paneles Arauco) began operations at its new MDF plant in Argentina. In addition to Alto Paraná, there is only one other competitor in this market, Tableros Guillermina S.A.

      Particle Board Market . Argentina has more than twice the population of Chile and has a significant housing deficit. However, following the devaluation of its currency on January 2002, Argentina’s per capita income was reduced to half of its pre-devaluation levels. The low per capita consumption is primarily the result of this economic crisis. As Argentina’s economy has recovered, demand for Masisa’s products has begun to recover as well. We expect that future demand for Masisa’s products in Argentina will be largely dependent upon the growth of the Argentinean economy and particularly on the growth of the Argentinean construction and furniture manufacturing industries.

     Masisa is one of the three largest particle board manufacturers in the Argentinean market. Masisa’s principal Argentinean competitors in particle board are Faplac S.A., Sadepan Latinoamericana S.A. and Cuyoplacas S.A. The other smaller Argentinean particle board producers, such as Tableros del Paraná S.A. have a minimal market presence and use older and less efficient technology than Masisa utilizes at its Concordia facility. We also believe Masisa’s cost of production is lower than that of its Argentinean competitors. As in Chile, however, particle board products compete with other types of board products, such as gypsum, as well as solid wood and plywood.

     Our total particle board sales in 2005 increased to US$20.5 million compared to US$15.8 million in 2004, due to strong demand. The large increases in sales in 2005, 2004, and 2003 follow a steep decline in 2002, when, in order to minimize the impact of the devaluation, Masisa Argentina shifted the main part of its domestic sales of particle board to exports.

Other markets

Colombia

     We sell particle board and MDF products into the Colombian market mainly through exports from Venezuela. Our particle board sales in Colombia increased by 79% from US$6.0 million in 2004 to US$10.6 million in 2005. The growth of such sales was principally due to strong demand for particle boards. Our MDF board sales in Colombia increased by 23% in dollar terms, from US$9.5 million in 2004 to US$11.7 million in 2005. As in the case of particle board, the increase in MDF board sales was principally due to strong demand.

     As of December 31, 2005, 21 Placacentros stores have been opened in Colombia. We expect to grow the network with approximately 13 new stores in Colombia during 2006.

Peru

     We sell particle board and MDF products into the Peruvian market mainly through exports from Chile. We established our Peruvian subsidiary, Masisa Peru, in 1999 to conduct commercial and distribution activities in that country.

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     Our board sales in Peru increased by 37% from US$11.6 million in 2004 to US$15.9 million in 2005. The increase in board sales was principally due to deeper market penetration of MDF board products, and strong demand for particle board.

     As of December 31, 2005, 21 Placacentros stores have been opened in Peru. We expect to grow the network with approximately 2 new stores in Peru during 2006.

Other

     Our board businesses generally achieve higher margins from the sale of their principal products in the markets in which they participate directly (Chile, Argentina, Brazil, Peru and Mexico) than from exports through third parties. Accordingly, our board businesses have traditionally preferred to satisfy demand in these markets first, and then export any surplus products. However, we have built a solid business network outside the markets in which we directly participate in order to diversify our market risk and to enable us to respond promptly to changes in market conditions in Chile, Argentina, Brazil, Peru and Mexico. After the political and economic crisis began in Argentina in 2002, we utilized this export network and experience to substitute sales to foreign markets for lost sales in the Argentinean market. This was possible as a result of the increased competitiveness of products produced in Argentina resulting from the currency devaluation in that country.

     Approximately 10.6% of our total consolidated revenues in 2005 were derived from U.S., Chilean, Mexican, Brazilian, Venezuelan and Argentinean export sales to markets other than the United States, Chile, Mexico, Brazil, Venezuela and Argentina, compared to the approximately 11.1% represented by such sales in 2004.

Production

     We own and operate production facilities in Chile, Venezuela, Brazil, Argentina, the United States and Mexico. Our Chilean production facilities are located in Cabrero, Coronel, Chiguayante, Valdivia and Chillán. Our Venezuelan production facilities are located in Macapaima, near the city of Puerto Ordaz in the southern part of the state of Anzoátegui. Our Brazilian production facilities are located in Rio Negrinho in the State of Santa Catarina and Ponta Grossa in the State of Paraná. Our Argentinean production facilities are located in Concordia, in the province of Entre Rios. Our U.S. production facilities are located in Wando (Charleston), South Carolina. Our Mexican production facilities are located in Durango, in the state of Nuevo León.

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Our production by country

Chile

     The following table shows the product and the installed annual production capacity in cubic meters as of December 31, 2005, for each of our Chilean production lines.

CHILE WOOD PRODUCTS PRODUCTION LINES
Plant   Line   Product   Annual installed  
capacity
(1)
Cabrero (Solid wood) Sawmill  Various  337,000 
  Finger-joint mouldings  Finger-joint mouldings  103,000 
       
Cabrero (Boards) MDF  MDF  160,000 
  MDF mouldings  MDF mouldings  72,000 
       
Chiguayante (Boards) Line 1  Particle board  82,000 
  Laminating  Melamine board  45,000 
       
Chillán (Solid wood) Doors  Solid wood doors  42,000 
       
Mapal (Boards) Line 1  Particle board  95,000 
  Line 2  Particle board  60,000 
  MDF  MDF  140,000 
  Laminating  Melamine board  110,000 
       
Puschmann (Boards) Line 1  Particle board  86,000 
       
Valdivia (Boards) Line 1  Particle board  90,000 
  Laminating  Melamine board  50,000 
  Veneering  Wood-veneered board  40,000 
  Doors  Fiberboard doors  500,000 
_______________________
(1) Units are in cubic meters, except fiberboard doors, which are in square meters. The annual installed capacity may vary slightly depending upon the thickness of the boards produced and other production factors. Actual production can exceed capacity because capacity is estimated assuming an average board thickness and actual board thickness may vary.

      Cabrero (Solid Wood) . Our Cabrero solid wood facilities are located in city of Cabrero, Chile. Its operations include a sawmill and wood drying unit and plants for the production of finger-joint mouldings and solid wood doors.

      Sawmill . Our sawmill in Cabrero was constructed during 2000 and reached full operational capacity in May of 2001. It was constructed to replace our then-existing Cabrero sawmill which we had operated for 15 years and which we still partially operate. The new mill is a state-of-the-art facility equipped with a software control system that provides automatic control of the production line and allows for a high speed production line. The software system also uses special scanners and sensors for the cutting of wood and offers automatic packaging. With this new equipment, the volume of processed wood has increased to 106.8 cubic meters per hour, and the yield of wood per log has increased by 1%. Maintenance costs have also increased due to the technological change, but the labor requirement has fallen from around 180 people to approximately 52 people. Since the sawmill entered into full operation, it has increased wood processing volumes and volumetric output with a corresponding decrease in byproducts production. The mill currently has a maximum annual yield of 337,000 cubic meters of sawn wood, the majority of which is used in the production of finger-joint mouldings and solid wood doors.

     The solid wood industrial complexes also include drying facilities in Cabrero. Their annual operational capacity is sufficient to dry most saw lumber currently produced at the Cabrero sawmill. This enables us to manufacture our wood products with kiln-dried wood with a moisture content of 12% or less.

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      Finger-joint moulding plant . The finger-joint moulding plant has an annual production capacity of approximately 103,000 cubic meters. We designed and constructed this plant to produce high-quality linear mouldings and doorframes of various styles intended for use in interior architecture. Within these product lines, we manufacture products meeting a variety of standardized design specifications as well as custom made products designed and finished according to specifications supplied by our customers.

      Cabrero (Boards ). This plant has been operating since August 1992. It has a single MDF board line with an annual production capacity of 160,000 cubic meters. Additionally, in order to produce a greater quantity of value added products, we added an MDF moulding line with an annual production capacity of 34,000 cubic meters which began production in June 2004. In August 2005, a new MDF moulding line was added to this facility, doubling our production capacity to 72,000 cubic meters per year.

      Mapal . Our Mapal industrial site, which is located in Coronel near the city of Concepción, 320 miles south of Santiago, has two particle board lines, one MDF line and one melamine-laminating line, which includes a melamine impregnating line. The two particle board production lines have an aggregate annual production capacity of approximately 155,000 cubic meters: one for thin particle board (60,000 cubic meters per year capacity) and another for thicker boards (95,000 cubic meters per year capacity). The MDF line commenced operations in January 1996, and has a production capacity of approximately 140,000 cubic meters of MDF per year. The melamine paper impregnating line produces most of the melamine paper used by our melamine-laminating lines. The Mapal facility laminates a portion of its total particle board and MDF production.

     A new melamine-laminating line in the Mapal plant began full operations in 2003, with an annual production capacity of 110,000 cubic meters, replacing the former line. We increased melamine production capacity through this new line in response to an increase in demand generated by our developing Placacentros network as well as an anticipated increase in demand for such boards in our Chilean and export markets.

      Chiguayante . Our Chiguayante facility is located 16 miles from our Mapal facility. The Chiguayante facility has a single particle board line with an annual production capacity of approximately 82,000 cubic meters. We upgraded the facility in 1994 so that particle board manufactured at Chiguayante would be similar in quality to that produced at the Mapal facility.

     The Chiguayante plant also has a melamine-laminating line with an annual production capacity of approximately 45,000 cubic meters.

      Chillán . The door plant, located in the city of Chillán, has an annual production capacity of approximately 42,000 cubic meters of solid wood doors. This plant was designed to manufacture products primarily for the United States and other North American markets. Its principal products are solid raised-panel pine wood interior stile and rail doors. We produce our solid wood doors in a range of widths and market them for use as interior and closet doors. The stiles and rails are composed of a finger-jointed center and face made of laminated clear pine and thin MDF boards. The panels are edge-glued solid wood pieces with a double-hip profile. This structure gives the door substantial stability.

      Valdivia and Puschmann . We have two production complexes in Valdivia, a city located approximately 520 miles south of Santiago. The main facility is referred to as the “Valdivia” plant and has an annual production capacity of approximately 90,000 cubic meters of particle board. The second facility is named “Puschmann”, in memory of Carlos Puschmann, a distinguished Masisa employee who passed away in 1999.

     Masisa acquired the Puschmann plant in August 1998 when it purchased the assets of Tableros Nobel S.A. (“Nobel”), which was a wholly-owned subsidiary of Infodema S.A. (“lnfodema”), for US$17.0 million.

     The Valdivia plant’s machinery employs a particle board production process similar to that used at our facilities in Mapal and Concordia, Argentina. In addition to producing raw particle board, the Valdivia plant produces melamine-laminated boards, wood-veneered particle board and all of the fiberboard doors and wood veneer strips produced by Masisa in Chile. Additionally, the melamine-laminating line purchased from Infodema was moved to Masisa’s Valdivia plant and has been operating at full capacity since February 1999.

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     The melamine-laminating line and the wood-veneering line have estimated annual production capacities of 50,000 cubic meters and 40,000 cubic meters, respectively. Our fiberboard door production line is located in the same facility and has an estimated annual production capacity of 500,000 square meters.

     The capacity utilization rate for our sawmill production facilities in Chile was 100% in 2005, compared to 92% in 2004 and 99% in 2003. The capacity utilization rate for our finger-joint moulding production facilities in Chile was 86% in 2005, compared to 93% in 2004 and 94% in 2003. The capacity utilization rate for our solid wood doors production facilities in Chile was 93% in 2005, compared to 88% in 2004 and 90% in 2003.

     The capacity utilization rate for our particle board production facilities in Chile was 87% in 2005, compared to 83% in 2004 and 75% in 2003. The capacity utilization rate for our MDF production facilities in Chile was 100% in 2005, compared to 103% in 2004 and 94% in 2003. The capacity utilization rate for our MDF moulding production facilities in Chile, that started production in June 2004, was 64% for 2005, compared to 82% for the second half of 2004. This decline in the capacity utilization rate reflects new MDF moulding capacity added in August, 2005. Actual production can exceed capacity because capacity is estimated assuming an average board thickness and actual board thickness may vary.

      Planned Facilities. We began the construction of a new MDF plant in Chile in early 2006 and estimate construction of the plant will be completed during 2007. The plan calls for the new plant to have an estimated annual production capacity of 340,000 cubic meters once it is completed and to cost an estimated US$82.0 million. It is intended for the new plant’s production to be destined principally for export.

Brazil

     The following table shows, for each of our Brazilian production lines, the product manufactured and the installed annual production capacity in cubic meters as of December 31, 2005.

BRAZIL WOOD PRODUCTS PRODUCTION LINES
 
            Annual installed  
Plant     Line     Product     capacity (1)
       
Ponta Grossa (Boards)   Line 1    MDF    240,000 
    OSB    OSB    300,000 
    Laminating    Melamine board    220,000 
 
Rio Negrinho (Solid wood)   Finger-joint mouldings    Finger-joint mouldings    65,000 
    Sawmill    Various    220,000 
_______________________
(1) Units are in cubic meters. The annual installed capacity may vary slightly depending upon the thickness of the boards produced and other production factors. Actual production can exceed capacity because capacity is estimated assuming an average board thickness and actual board thickness may vary.

      Ponta Grossa . In December 2000, we finished the construction of our MDF production facility in the city of Ponta Grossa, in the State of Paraná, Brazil. This facility has an annual installed production capacity of 240,000 cubic meters and reached full production during the second half of 2001. The capacity utilization rate for these MDF production facilities was 102% in 2005, compared to 108% in 2004 and 101% in 2003. In the same complex, we finished construction in May 2001 of a melamine-laminating plant that is used for coating MDF and particle board. Total cost was approximately US$4.0 million. This laminating plant has an annual production capacity of approximately 110,000 cubic meters and when producing the 15 millimeters thickness board, this capacity is equivalent to seven million square meters. In September 2005, we started up our second laminating line with the same capacity.

     The Ponta Grossa OSB plant is the first of its type in Brazil. The plant has an annual installed production capacity of 300,000 cubic meters and became fully operational during the fourth quarter of 2002. The capacity utilization rate for Masisa Brazil OSB production facilities in Brazil was 87% in 2005 and 71% in 2004. The OSB plant’s production was adjusted to correspond to the demand generated by this product.

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      Rio Negrinho . We began operations at Masisa Madeiras Limitada (“Masisa Madeiras”, formerly known as Terranova Brasil) in 1997 with the acquisition of eliotti and taeda pine plantations. The saw logs harvested from Masisa Madeiras’ plantations are processed at its sawmill located in Rio Negrinho in the State of Santa Catarina, Brazil. The 32,000 square meter industrial plant includes a sawmill and a finger-joint moulding processing plant.

     Masisa Madeiras was an important investment by our group for a number of reasons. Brazil offers a well-developed market for forest products and is ranked as the world’s eleventh largest economy with a population of approximately 177 million in 2003. Additionally, a favorable climate and year-round rainfall allow a comparatively greater rate of tree growth compared to other pine growing countries. In addition, the Rio Negrinho area provides an adequate pool of skilled labor that currently supports approximately 500 furniture factories of varying sizes. Our knowledge and experience gained in Chile enabled Masisa Madeiras to supply finger-joint mouldings, primarily to Masisa USA for sale in the United States.

     Masisa Madeiras currently has three principal product lines which are sold into the three following markets: finger-joint mouldings (United States); door parts (Chile); and sawn lumber for pallet manufacturers (Brazil).

     Masisa Madeiras’ mouldings plant is designed to produce mouldings which meet specifications for sale into the U.S. market. The plant’s principal products are raw and primed seven, fourteen and sixteen foot finger-joint mouldings and door frames. These products are then sold through Masisa USA to distributors and wholesalers.

     Currently, all door parts produced at the Rio Negrinho plant are sold to our plant in Chillán, Chile, where our solid wood doors are produced. We produce door parts in a variety of widths (e.g., 21/2, 5 and 51/2 inches), lengths (e.g., 24 ½ and 45 inches and 7 feet), and thicknesses (e.g., 3/4, 5/4 and 6/4 inches). The total volume of door parts produced by Masisa Madeiras depends on the quality of the logs and the drying process. Currently, the Rio Negrinho plant produces up to 1,200 cubic meters per month of door components.

     Wood processed and sold for use in pallet manufacturing is taken from the center of the log. Most of the wood processed by Masisa Madeiras for this purpose is sold in Brazil where it undergoes further processing or is sold directly to the end-user.

     The capacity utilization rate for our finger-joint moulding production facilities in Brazil was 131% in 2005, compared to 115% in 2004 and 126% in 2003. The capacity utilization rate for our sawmill production facilities in Brazil was 87% in 2005, compared to 88% in 2004 and 96% in 2003.

Venezuela

     The following table shows for each of our Venezuelan production lines the product manufactured and the installed annual production capacity in cubic meters as of December 31, 2005.

 
VENEZUELA WOOD PRODUCTS PRODUCTION LINES
 
            Annual installed  
Plant     Line     Product     capacity (1)
       
Andinos (Solid wood)   Sawmill    Various    150,000 
Fibranova (Boards)   Lines 1 & 2    Particle board    120,000 
    Line 1    MDF    250,000 
    Line 1    Melamine boards    60,000 
    Line 1    MDF mouldings    12,000 
_______________________
(1) Units are in cubic meters. The annual installed capacity may vary slightly depending upon the thickness of the boards produced and other production factors. Actual production can exceed capacity because capacity is estimated assuming an average board thickness and actual board thickness may vary.

      Andinos CA . We completed construction of our Andinos sawmill in November of 2000. The sawmill is located in Puerto Ordaz in the Macapaima Industrial Complex, in the southern part of the state of Anzoátegui, Venezuela. The mill’s equipment and machinery are designed to process logs of varying diameters as required by

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the market and custom orders, with the capacity of 150,000 cubic meters annually. The mill includes a treated log yard with a 20,000 square meter paved area and dryer kilns where we dry 100% of the production.

     The pine-sawn lumber produced by the Andinos sawmill is characterized by high density, small firm knots, and greater hardness. Our sawn lumber is used primarily in the manufacturing of pallets and packages. A smaller percentage is sold for use in ceiling and furniture construction. We plan to expand the capacity of this sawmill during 2006.

      Fibranova C.A. Our Fibranova plant processes intermediate wood products to produce MDF board and particle board. Its facilities are located also in Puerto Ordaz and include two processing lines for the production of particle board and MDF board, and a third line for the covering of melamine-laminated board. From January 2003 through the effective time of our merger with Masisa in 2005, this plant was administered and managed by our former subsidiary, Masisa, pursuant to a management contract. Since the merger, the contract has been assumed by us.

     The raw material used in the production process is supplied by the Caribbean pine plantations managed by Terranova Venezuela and from the chips and other by-products produced by the Andinos sawmill. Fibranova’s installations have a current annual production capacity of 120,000 cubic meters of particle board, 250,000 cubic meters of MDF board, 60,000 cubic meters of melamine-laminated boards and 12,000 cubic meters of MDF mouldings.

     During the same time period we also formed a joint-venture with Establecimientos Industriales Oxiquim S.A., a Chilean resins manufacturer, to set up a joint venture in Venezuela to provide resin to Fibranova C.A.’s production processes. The joint venture was called Oxinova C.A., a Venezuelan corporation, which began operations in July 2001 and currently produces and supplies resin to our board production plants in Venezuela.

     The capacity utilization rate for our particle board production facilities in Venezuela was 78% in 2005 and 2004 compared to 46% in 2003. The lower capacity utilization rate from 2003 resulted principally because we were in the initial phase of production during the second quarter of that year. The capacity utilization rate for our MDF production facilities in Venezuela was 88% in 2005, compared to 85% in 2004 and 57% in 2003. Our MDF mouldings production facilities in Venezuela suspended its operations due to strong local market demand for MDF boards, which is the principal raw material for this product. As a result, the capacity utilization rate for our MDF mouldings production facilities in Venezuela declined to 2% in 2005, compared to 31% in 2004 and 11% in 2003. The capacity utilization rate for our sawmill production facilities in Venezuela was 95% in 2005, compared to 86% in 2004 and 63% in 2003. In 2003, the nationwide 63 day strike in Venezuela affected our operations by causing us to temporarily halt production. As a result, production at our sawmill was reduced and the start-up of our board plant was affected.

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Argentina

     The following table shows, for each of our Argentinean production lines, the products manufactured and the installed aggregate annual production capacity in cubic meters as of December 31, 2005.

 
ARGENTINA WOOD PRODUCTS PRODUCTION LINES
 
            Annual installed  
Plant     Line     Product     capacity (1)
       
Concordia (Boards)   Line 1    Particle board    160,000 
    Line 2    Particle board    25,000 
    MDF    MDF    150,000 
    Thin-MDF    Thin-MDF    120,000 
    Laminating    Melamine board    200,000 
    Foil    Foil-lined board    48,000 
    Moulding    MDF mouldings    104,400
____________________
(1) Units are in cubic meters. The annual installed capacity may vary slightly depending upon the thickness of the boards produced and other production factors. Actual production can exceed capacity because capacity is estimated assuming an average board thickness and actual board thickness may vary.

     Masisa Argentina’s production facilities are located in Concordia, an industrial town in the Province of Entre Rios on the Uruguay River, approximately 250 miles north of Buenos Aires, Argentina. The Concordia particle board production facility has the capacity to produce 185,000 cubic meters per year of raw particle board in two lines. The particle board line for thin particle board (under nine millimeters) has an annual production capacity of 25,000 cubic meters. The particle board line for greater board thickness has an annual production capacity of 160,000 cubic meters. The Concordia facility commenced operations in June 1994. The capacity utilization rate for Masisa Argentina’s particle board production facilities was 85% in 2005 compared to 81% in 2004 and 77% in 2003.

     In September 1995, Masisa Argentina completed the installation of an MDF facility adjacent to its particle board facilities, in 1997, Masisa increased this MDF facility’s annual production capacity from 120,000 cubic meters to 138,000 cubic meters. In 1999, Masisa further increased its production capacity to 150,000 cubic meters.

     In October 2001, Masisa Argentina completed the construction of a thin-MDF plant at the Concordia Industrial Complex. The plant, which became fully operational by mid-2002, has an installed capacity of 120,000 cubic meters per year and represented an investment of approximately US$30.0 million, which was financed internally. The capacity utilization rate for Masisa Argentina’s MDF production facilities was 88% in 2005 compared to 93% in 2004 and 85% in 2003.

     The Concordia plant also includes a melamine-laminating line with an installed capacity of 200,000 cubic meters per year, and a new foil lining process with an installed capacity of 48,000 cubic meters per year.

     In March 2002, Masisa Argentina began construction of its first line of pre-painted MDF mouldings in Argentina at the Concordia Complex. Production at the moulding plant is primarily directed to the United States. This line became fully operational during the second quarter of 2003. An additional 36,000 cubic meters of production capacity was added during 2004. The current capacity of 104,400 cubic meters was reached in February 2005 with the addition of a new production line. The capacity utilization rate for Masisa Argentina’s MDF mouldings production facilities was 51% in 2004 compared to 91% in 2004 and 49% in 2003. The low utilization rate during 2003 and 2005 was due mainly to the addition of increased capacity during these periods.

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Mexico

     The following table shows, for each of our Mexican production lines, the product manufactured and the installed annual production capacity in cubic meters as of December 31, 2005.

 
MEXICO WOOD PRODUCTS PRODUCTION LINES
 
            Annual installed  
Plant     Line     Product     capacity (1)
       
Durango    Line 1    Particle board    60,000 
    Line 2    Particle board    60,000 
    Laminating    Melamine board    63,600 
____________________
(1)     Units are in cubic meters. The annual installed capacity may vary slightly depending upon the thickness of the boards produced and other production factors. Actual production can exceed capacity because capacity is estimated assuming an average board thickness and actual board thickness may vary.

     In December 2001, Masisa reached an agreement with Weyerhaeuser Company Limited to purchase from Weyerhaeuser’s subsidiary, MacMillan Guadiana, a particle board plant located in the city of Durango, Mexico. The plant has a total installed capacity of 120,000 cubic meters per year in two independent production lines, as indicated in the table above. The plant also includes a small melamine-laminating line, with a total installed capacity of 21,600 cubic meters per year. In June 2005 the former Mapal’s melamine-laminating line started operating in Mexico, extending the capacity up to 63,600 cubic meters per year. The capacity utilization rate for Masisa Mexico’s particle board production facilities was 92% in 2005 compared to 91% in 2004. Most of the 2005 and 2004 production at this plant was directed toward the local market.

United States

     The following table shows, for each of our U.S. production lines, the product manufactured and the installed annual production capacity in cubic meters as of December 31, 2005.

 
UNITED STATES WOOD PRODUCTS PRODUCTION LINES
 
            Annual installed  
Plant     Line     Product     capacity (1)
       
Wando, South Carolina    MDF moulding    MDF moulding    36,000 
____________________
(1)     Units are in cubic meters. The annual installed capacity may vary slightly depending upon the thickness of the boards produced and other production factors. Actual production can exceed capacity because capacity is estimated assuming an average board thickness and actual board thickness may vary.

     Masisa USA (formerly Terranova Forest Products) was established to market and distribute our products in the United States as part of our strategy of locating our commercial operations as close to our customers as economically feasible. Terranova Forest Products was organized in 1993 as a joint venture with Fiberform Wood Products, Inc. under the name Fiberform Andinos Corporation. In January 1996, we purchased Fiberform’s interest in the joint venture and changed its name to Terranova Forest Products.

     In April 2005, Masisa USA, moved its headquarters and marketing operations to Atlanta, Georgia. Atlanta’s Hartsfield-Jackson serves as a major connecting hub serving destinations around the globe, providing easier access to our customers throughout the U.S. and to our world headquarters in Chile.

     Our MDF mouldings line has a total installed capacity of 36,000 cubic meters per year. The capacity utilization rate for our MDF mouldings line was 78% in 2005 compared to 90% in 2004 and 67% in 2003.

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Forestry Operations

Overview

     We and our forestry subsidiaries manage and operate the cultivation of our tree stock in our nurseries and the establishment and management of our plantations and forests, log manufacturing, log sales and marketing, log trading, transport and supply chain activities. The logs and other raw materials produced by us and our forestry subsidiaries and affiliates are sold primarily to our production and processing subsidiaries. Our sales to unaffiliated third parties representing 56.3% and 52.5% of our consolidated forest products sales for the years 2005 and 2004, respectively. Our forestry operations add value by optimizing the harvest from our forests and complying with our principles of sustainable management.

Land ownership and rights

     As of December 31, 2005, our group’s forestry assets included an interest in approximately 367,318 hectares of land, of which 243,235 hectares are planted with renewable trees. Of our forestry assets, approximately 256,456 hectares (70%) are owned by our group, and the remaining 110,862 hectares (30%) are held under leases, forestry rights and forestry licenses, mainly in Venezuela.

     Our leases enable us to use the land for terms ranging from 16 to 34 years, depending on the location, which is generally the equivalent of one to two rotations. Forestry rights permit a person other than the owner to establish, manage and harvest, or simply manage and harvest, an estate of trees on the land.

Distribution of forestry assets

     Our forests are located in Chile, Brazil, Venezuela and Argentina. On a consolidated basis, Caribbean, radiata/oregon and eliotti/taeda pines are softwood pine species which constitute approximately 43.2%, 34.4%, and 11.2% of our plantations, respectively. In addition, our forests also include 27,362 hectares of eucalyptus trees, equal to approximately 11.2% of our total plantations.

     The following table sets out the number of hectares and types of uses of our land holdings and rights at December 31, 2005 for each of our forestry operations.

 
    Forestry Assets  
(in hectares)   Chile     Argentina     Venezuela     Brazil     Consolidated  
                     
Total forestry holdings    143,363    47,185    148,958    27,813    367,318 
 Owned    143,167    47,185    40,244    25,860    256,456 
 Rights/Leased    196    —    108,714    1,953    110,862 
Total planted land    87,583    33,451    105,102    16,099    243,235 
Plantations:                      
 Caribbean pine    —    —    105,080    —    105,080 
 Radiata/oregon pine    83,611    —    21    —    83,632 
 Taeda/elliotti pine    —    11,062    —    16,098    27,160 
 Eucalyptus    3,973    23,389    —      27,362 
 To be replanted    5,747    1,860    25,227    572    33,406 
 Protected lands    25,773    4,191    2,064    3,569    35,597 
 Native forests    18,306    —    —    1,794    20,100 
 Other (Araucariaconnifer)   1,142    6,684    —      7,831 
 Legal reserve    —    —    —    4,783    4,783 
Roads, encampments and other uses    4,811    —    16,565    990    22,366 
                     

     As part of our effort to match the size and location of our forestry assets with our supply needs and proximity to our production facilities, respectively, and in order to reduce financial debt we determined that we should dispose of certain land holdings in Chile’s Region VII, near Talca. Accordingly, during the third and fourth quarters of 2004, we conducted a private auction for approximately 21,000 hectares of land, 12,000 of which were planted with radiata pine. On November 5, 2004, our board of directors accepted an irrevocable bid from Arauco’s

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affiliate, Forestal Celco S.A., in the amount of US$73,558,000. On December 7, 2004, we signed a definitive agreement with Forestal Celco and completed the sale transaction for a final purchase price of US$73,284,636, or approximately US$6,100/ha.

     Certain of our forestry assets in Chile and all of our forestry assets in Argentina are held through Forestal Tornagaleones S.A. and Forestal Argentina S.A., respectively. On October 26, 2005, Masisa entered into an agreement with the holder of a significant minority interest in each of these companies to acquire that holder's 34.5% interest in the common equity securities of Forestal Tornagaleones S.A. for approximately US$29.9 million in cash and its 29.2% interest in the common equity securities of Forestal Argentina S.A. for approximately US$14.5 million in cash. Before the acquisition, Masisa owned 60.45% of the outstanding equity securities of Forestal Tornagaleones S.A., and Forestal Tornagaleones S.A. owned 50.1% of the outstanding equity securities of Forestal Argentina S.A. The closing of the purchase of the significant minority shareholder's interest in Forestal Tornagaleones S.A. for US$29.9 million occurred on November 15, 2005. Masisa also made an offer to the remaining minority shareholder in Forestal Tornagaleones S.A. to purchase its interests at the same price per share of common equity that was paid to the significant minority shareholder under the Forestal Tornagaleones S.A. purchase agreement. That offer expired without being accepted. Under the terms of the current shareholders' agreement of Forestal Argentina S.A. entered into by Masisa, the holder of the significant minority interest and the remaining minority shareholders, the minority shareholders have (i) a right of first refusal to purchase the interest of the significant minority shareholder and (ii) a tag along right to sell their interests together with the significant minority shareholder. Pursuant to such shareholders' agreement, the significant minority shareholder has delivered to the remaining minority shareholders of Forestal Argentina S.A. a notice informing them of the purchase agreement entered into with Masisa and requesting such minority shareholders to give notice of their intent to exercise or not their right of first refusal or tag along right. During the first quarter of 2006, ten of the eleven remaining minority shareholders of Forestal Argentina S.A. exercised their tag along right. The total purchase price paid by Masisa’s subsidiary, Forestal Tornagaleones, including for shares purchased from the significant minority shareholder, was approximately $24.3 million. On December 20, 2005, the Comisión de Defensa de la Libre Competencia of Argentina declined to review the purchase of the significant minority interest, satisfying a condition to the closing of that transaction. As a result of the purchase of the minority interests, Forestal Tornagaleones now controls 98.68% of the share capital of Forestal Argentina S.A.

Forest management

     Our forestry subsidiaries cultivate, administer and manage our forestry assets in Chile, Argentina, Venezuela and Brazil. We manage our forestry assets to maximize the value of the wood. We seek to achieve this through the use of planting, soil and site preparation, maintenance of optimum soil quality through monitoring and fertilization, underbrush control, and management of tree density through thinning and pruning. This management system in Chile, Argentina and Brazil increases our forests production of larger diameter trees with fewer knots and other defects and, as a result, can produce a higher overall yield of clear wood. Clear wood, whether sold to third parties as lumber or used by our production facilities to produce our processed wood products, generally commands a higher price than knotted wood.

     A significant variable affecting the profitability of our forestry operations is the age at which a tree is harvested, or the “rotation length.” The rotation length has a direct impact on timber quality, unit volume and economic return obtained from the investment. We currently consider our forestry management objectives, described above, to be achievable on an average rotation length of approximately 23, 24, 26 and 22 years for radiata, Caribbean, eliotti and taeda pine, respectively, and 12 years for eucalyptus. The optimal rotation length can vary depending on past management practices, the cost of capital and prevailing market conditions.

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     The following tables set forth the age profile by hectares of our forests at December 31, 2005 on a consolidated basis and for each of our forestry operations.

 
    Consolidated  
           
Age Range (Years)   Pine     Eucalyptus     Other  
             
(in hectares)            
             
0 - 5    33,355    11,284    120 
6 - 10    27,580    12,753    272 
11 – 15    61,535    2,619    226 
16 - 20    61,551    523   
21+    30,861    183    372 
Total    214,883    27,362    990 
             

 
    Chile     Argentina  
                     
Age Range (Years)   Pine     Eucalyptus     Other     Pine     Eucalyptus     Other  
                         
(in hectares)                        
                         
0 – 5    11,520    1,675    99    6,558    9,610    — 
6 – 10    16,009    984    272    4,225    11,770    — 
11 - 15    34,854    1,259    226    —    1,360    — 
16 - 20    14,090    53      259    470    — 
21+    6,169      366    20    180    — 
Total    82,642    3,973    969    11,062    23,389    — 
                         

 
    Venezuela     Brazil  
                     
Age Range (Years)   Pine     Eucalyptus     Other (1)   Pine     Eucalyptus     Other (1)
                         
(in hectares)                        
                         
0 – 5    7,540    —    21    7,738    —    — 
6 – 10    6,014    —    —    1,332    —    — 
11 – 15    26,162    —    —    518    —    — 
16 – 20    45,496    —    —    1,706    —    — 
21+    19,868    —    —    4,803      — 
Total    105,080    —    21    16,098      — 
                         

(1) Other includes Oregon Pine.

Sustainable development and forestry management systems

     We adhere to ISO management systems and certification under the Forestry Stewardship Council (“FSC”). FSC is an international organization funded to support environmentally appropriate, socially beneficial and economically viable management of the world’s forests. The FSC certification standard is recognized by The Home Depot, one of the key end-users to which our products are marketed through Masonite in the United States.

     Certification of our forest products and management systems has enabled us to access international markets such as the United States, where chain of custody certification of products is frequently preferred by customers. It has also given our products greater environmental credibility in the international marketplace by allowing our customers to readily and reliably determine that the product they are purchasing comes from a forest managed according to internationally agreed social and environmental principles and criteria.

Forest protection

     Our forestry assets are exposed to risk of loss due to fire, wind, pests and disease. Accordingly, our forestry subsidiaries have established programs for the prevention and control of each of these risk factors. Our forestry operations’ prevention efforts include, among others, identifying risks neighboring our forests, public education of communities located near our forests and maintenance of firebreaks. We also cooperate with other forestry companies when possible to undertake joint prevention measures with respect to pest and disease control.

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Insurance

     We insure our assets and operations against a variety of risks associated with our business activities. The types and amounts of coverage we maintain depend on the kind of facility or asset being insured as well as its location. These plans include insurance policies against fire damage, loss attributed to natural disasters, risks related to the construction of projects, losses resulting from delays in commencing such projects and business interruption.

     In Chile, we maintain coverage of our fixed assets in an aggregate amount of US$650.9 million. This amount includes US$315.6 million for losses on our plantations and US$335.3 million for losses due to interruptions in the operations of our plants and broken equipment.

     In Brazil, we maintain coverage of our fixed assets in an aggregate amount of US$323.1 million. This amount includes US$71.2 million for losses on our plantations and US$251.9 million for losses due to interruptions in the operations of our plants and broken equipment.

     In Venezuela, we maintain coverage of US$259.4 million for losses due to interruptions in the operations of our plants and broken equipment. Our plantations in Venezuela are not insured because Venezuela’s insurance market did not offer insurance coverage for these types of risks.

     In Argentina, we maintain coverage of our fixed assets in an aggregate amount of US$249.5 million. This amount includes US$40.1 million for losses on our plantations and US$209.5 million for losses due to interruptions in the operations of our plants and broken equipment.

     In Mexico, we maintain coverage of US$51.7 million for losses due to interruptions in the operations of our plants and broken equipment.

     In United States, we maintain coverage of US$24.9 million for losses due to interruptions in the operations of our plants and broken equipment.

     We maintain coverage of US$10.0 million for liabilities arising out of civil corporate responsibility claims.

     As of December 31, 2005, a high number of our personnel have travel and life insurance.

Raw Materials and Suppliers

Solid wood & forestry business

     The most significant direct costs associated with our solid wood products and forestry operations are adhesives, fertilizers, wood fungicides, lumber, water-based paint, plants, chemicals, logs, labor and energy.

     In general, the prices of raw materials we use in our forestry operations are relatively stable. The prices of raw materials we use in our wood products operations depend on factors such as wood, pulp and oil prices and tend to fluctuate according to economic cycles and world supply. For example, wood prices in Chile increased by approximately 15% during 2004 and 7% during 2005. The increase in 2005 is primarily due to increased demand for wood based products and higher transportation costs due to higher energy costs.

     Our principal suppliers in each country in which we have industrial facilities and the products or raw materials they supply to us in connection with our solid wood and forestry business are listed in the following table:

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    PRINCIPAL SUPPLIERS OF RAW MATERIALS FOR SOLID WOODS & FORESTRY BUSINESSES  
 
CHILE     PRODUCT     BRAZIL     PRODUCT  
           
Arauco Distribución S.A.    Sawn Wood    Battistela Ind. e Com. Ltda.    Wood 
Aserraderos Arauco S A    Sawn Wood    Clariant Colorquimica    Chemicals 
Bellavista Ltda.    Temporary Staffing    Comercio de Madeiras    Forestry Services 
    Services       Padilha Ltda.     
Cía Chilena de Navegación    Transportation    Esterer WD GmbH & Co.    Parts 
   Interoceánica             
Cía. Sudamericana de        Imbau Transportes E    Forestry Services 
   Vapores           Serviços Ltda     
    Transportation    JMC COM. Secagem    Wood 
           Madeiras Ltda.     
CMPC Maderas, S.A.    Sawn Wood    LOGASA Serviços    Forestry Services 
           Florestais Ltda. .     
Energía Verde S.A.    Energy    RAFTER Servicios Ltda.    Forestry Services 
Servicios Forestales El    Forestry Services    Rigesa Ltda.    Wood 
   Bosque S A.             
        Sherwin-Williams Brasil    Ink 
           Ind. Com. Ltda.     
             
 
 
           
MEXICO     PRODUCT     UNITED STATES     PRODUCT  
           
Despachos Aduanales    Custom Agents    Alternative Staffing    Temporary Staffing 
   Catañeda S.C.             
Forestal Tromen S.A    Sawn Wood    Bryan Logistics    Logistics 
Productos Forestales S.A.    Sawn Wood    C.H. Robinson    Transportation 
Seaboard Marine Ltda.    Maritime Transport    Kramer Logistics    Logistics 
Servicios Técnicos del    Storage    Montgomery Industries,    Storage 
   Transporte S.A. de C.V.           Inc.—Piedmont     
Transportaciones    Transport, Logistical    Samuel Shapiro Co./IMS    Custom Agents 
   Industriales Gume S.A.    Support and Storage       (Intermodal    Forwarding 
   de C.V.           Management/System)    
Transportes Jaessa Amador    Transport, Logistical    SCE&G    Electricity 
   S.A. de C.V.    Support and Storage         
        Valspar    MDF Primer 
           

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VENEZUELA     PRODUCT  
     
Consorcio Vettor    Transportation 
Servicio y Mantenimiento Macapaima    Services 
Transportes Macapaima C.S    Transportation 
Maersk Logistics Venezuela, S.A    Sea Transportation 
Ewd Sägetechnik Esterer Wd Gmbh & Co    Spare Parts 
Forest Machines, S.A    Harvesting Services 
Servicios Madereros Car-Men, C.A    Services 
     

     In the forestry sector, all operations are carried out through a select set of third-party contractors, who provide their services to our forestry subsidiaries and affiliates in accordance with the technical, legal, and administrative requirements established in our manual for service companies and the specific contracts entered into in connection with the provision of such services. The services contracted by our forestry operations range from logistical support (meals, transport, cleaning and maintenance, security, reception and dispatch of products, among others) to production activities (harvest, transport, planting, thinning, pruning, road construction, and others).

     In the industrial sector, our subsidiaries and affiliates subcontract with third-party providers for a variety of services at our sawmills and manufacturing facilities. These services include, among others, packaging, separating sticks, movement of logs and lumber, and industrial cleaning. Specific contracts are established for each of these services outlining technical, economic and administrative specifications.

Boards business

     The most significant direct costs associated with the production of particle board, MDF and OSB in connection with our board operations are chemicals, wood, labor and energy.

     In 2005, chemical adhesives used in the production of particle board and MDF in Chile and Argentina were manufactured by the chemical plants of Georgia Pacific Resinas Ltda. (formerly GPM) and Resinas Concordia S.A., respectively. These two plants also manufactured most of the chemical catalysts used by the Company in those countries. Until early 2001, Masisa had a 50% interest in both companies under a joint venture with Georgia-Pacific. In January 2001, Masisa sold its participation in those companies to Georgia-Pacific . However, before this transaction, Masisa Chile and Masisa Argentina reached long-term resin supply contracts with GPM and Resinas Concordia S.A. to ensure the normal supply of resins for existing and future operations, including calculations for future growth of the Company in Chile and Argentina. In Brazil, the principal chemical adhesives used in the production of MDF and OSB were supplied by Borden Químicos Indústria e Com. Ltd. and Synteko Produtos Químicos S.A. In Mexico, the principal chemical adhesives used in the production of the particle boards were supplied by Dynea Mexico S.A. de C.V. In Venezuela, we have a partnership relationship as well as a long-term resin supply contract with Oxinova, which supplies 100% of our resin needs. Oxinova was formed as a partnership by Terranova and Oxiquim, and it is managed by Oxiquim.

     We have a long-term resin supply contract with Georgia Pacific Resins Ltd. in Chile to ensure the normal supply of resins for existing and future operations, taking into account the future growth of the Company. Payments made under the contract in 2005 totaled US$38.8 million. The contract is not a financial obligation since it does not oblige us to purchase a minimum amount from Georgia Pacific Resins Ltd. In Argentina, Resina Concordia, an affiliate of Georgia-Pacific Resins Ltd., supplies Masisa with resin.

     We believe that the market for the chemicals our board operations need is sufficiently competitive and accessible such that we could satisfy our chemical requirements through other suppliers on terms similar to those obtained from our current suppliers. There is more than one producer of chemical raw materials in each country in which we have industrial facilities, granting us flexibility as to our suppliers. We also have a number of suppliers for the raw materials used in its production processes. We believe that the loss of any one of these suppliers, individually, would not have a material adverse effect on the Company. Raw materials are also available from countries in the region as well as more distant ones, such as the United States and Japan.

     Fluctuations in resin prices affect our production costs because adhesives, a combination of resin and chemical additives, represent approximately 35% of our board production costs. Urea and Methanol, components of

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resin, are derived from natural gas. The increased price of natural gas during 2005 therefore led to increased resin prices.

     Historically, Forestal Tornagaleones provided Masisa’s Chilean plants with small supplies of wood. Masisa, however, has not purchased a material amount of wood from Forestal Tornagaleones since 2000. In Argentina, approximately 92% of the wood consumed by Masisa Argentina in 2003 was purchased from several unrelated saw mills and forest growers and the other 8% of the wood was purchased from Forestal Argentina. The wood consumed by Masisa for the production of MDF in Brazil was purchased either from owned forests or several unrelated saw mills and forest growers. With respect to the particle board plant in Mexico, Masisa obtains wood from suppliers that serviced the plant under its previous ownership.

     We believe that adequate supplies of wood are available. We do not use material amounts of native wood for our production processes. With respect to wood supply, we have several alternatives in forestry companies, including our subsidiaries Forestal Tornagaleones and Forestal Argentina. We may also obtain supplies from the forest plantations that we own in Brazil.

     The steam we use in our manufacturing operations is largely generated by burning our own scrap wood and defective wood products. Other energy requirements, such as electricity, are obtained from commercial suppliers.

     In general, the prices of raw materials we use in our forestry operations are relatively stable. The prices of raw materials we use in our wood products operations depend on factors such as wood, pulp and oil prices and tend to fluctuate according to economic cycles and world supply.

     In 2005, high and steadily rising oil prices increased our energy costs as well as the cost for the adhesives we use to manufacture board products.

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     Masisa’s principal suppliers in Chile, Argentina, Brazil and Mexico and the products or raw materials they supply to us in connection with our board businesses, are listed in the following table:

PRINCIPAL SUPPLIERS OF RAW MATERIALS FOR BOARDS BUSINESSES

           
CHILE     PRODUCT     ARGENTINA     PRODUCT  
           
Aserraderos Arauco S.A.    Wood    Forestal Argentina S.A.    Wood 
Derquim S.A.    Paraffin Emulsion    H.B. Fuller Argentina S.A.I.C.    Moundings Adhesive 
Georgia-Pacific Resinas    Resins    Isogama Industria Quimica     
   Ltda.           Ltda.    Paraffin Emulsion 
Interforest S.A.    Wood    Lamigraf S.A.    Paper 
Masa Décor S.A.    Paper    MD Papeis Ltds.    Paper 
Oxiquim S.A.    Resins    Multilogística S.A.    Shipping Line 
        Resinas Concordia    Resins 
        Schattdecor    Paper 
        SIA Ltd    Sanding Belts 
        Forestal Argentina S.A.    Wood 
           
 
 
           
BRAZIL     PRODUCT     MEXICO     PRODUCT  
           
Aguia Florestal Industria de             
   Madeira    Wood         
Araupel S.A.        Aprovechamientos Forestales     
    Wood       Auro    Wood 
Bayer do Brasil    Polyurethane Resins    Casco Impregnated Papers    Impregnated Paper 
Borden Química e Industria e        Combustibles Industriales de     
   Com Ltd    Resins       Durango    Fuel 
Dynea Brasil S.A.    Impregnated Paper    Dynea de Mexico, S.A. De     
           C.V.    Resins 
Isogama Industria Química        Isogama.     
   Ltda.    Paraffin Emulsion        Paraffin Emulsion 
Madereira Rickli Ltda.    Wood    Masa Decor S.A.    Paper 
Magor Ltda.    Wood    Pinelli Universal, S.A. De C.V.    Wood 
Masisa Madeiras    Wood    Interprint Inc.    Paper 
Synteko Produtos Químicos             
   S.A.    Resins         
           

     
     
VENEZUELA     PRODUCT  
     
Oxinova C.A    Resin 
Isogama    Paraffin Emulsion 
Transportes Macapaima C.A    Transportation 
Coveright Surface    Melamine Impregnated Paper 
Construcciones 2E-B, C.A    Labor 
Masisa Argentina S.A    Melamine Impregnated Paper 

Environmental Regulation

     We are dedicated to the sustainable growth of all our operations and seek to achieve a positive balance between economic, social and environmental objectives. Our business philosophy is based on sustainable development principles, and our policy is to maintain high standards of environmental performance and to make all efforts to comply with all applicable environmental laws and regulations. During 2003, 2004 and 2005, we spent on a consolidated basis US$5.7 million, US$3.2 million and US$ 3.6 million, respectively, on environmental projects related to complying with environmental regulation. We expect to continue to make the necessary expenditures to comply with such environmental requirements.

     Certifications: The ISO 14,001 certification is a voluntary procedure in which an operation’s environmental practices are evaluated against a specified set of criteria. Our forestry and production operations have obtained the International Organization for Standardization (the “ISO”) 14,001 compliance certifications. Our solid wood

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operations in Chile and plants in Brazil will recertify under a unified management system in September 2006, including OHSAS 18001.

     Additionally, all of our forestry and production operations, except our forestry operations in Argentina and our solid wood and board production facilities in Venezuela, have obtained the Occupational Health and Safety Management System (the “OHSAS”) 18,001 compliance certifications. We are in process of achieving OHSAS 18,001 compliance certifications for all our production operations by the end of 2006.

     Our forestry operations also obtained Forest Stewardship Council (“FSC”) compliance certifications regarding sustainable management of forestry assets, except in Argentina where we expect to achieve FSC certification during 2006. Our solid wood and particle board production operations in Venezuela will obtain the Chain of Custody FSC certification that allows identifying the products with the FSC seal. This certification was already obtained for our MDF production in Venezuela and solid wood production in Chile and Brazil.

     In addition, in 2003 our MDF production plants in Chile, Brazil, and Argentina obtained the “Certificate for Recycled Content” granted by the Scientific Certification System (“SCS”). This certificate confirms that the raw material used in production comes from material recycled from other forestry processes. This practice helps reduce the demand for forestry resources, recycle materials considered waste in other lines of business and reduce manufacturing costs.

     We are subject to extensive and frequently changing environmental regulation in the countries in which we operate. Such regulations cover, among other things, the discharge of water and discharges into the water and air. A discussion of some of the key environmental regulations for each country in which our most significant operations are located is set forth below.

      Chile : Chilean companies, including Masisa, are subject to several national and local environmental laws, regulations, decrees and municipal ordinances concerning, among other things, discharges into air and water, handling and disposal of solid and hazardous wastes and health. Chilean environmental regulations have become increasingly stringent in recent years, particularly for the approval of new projects, and this trend is likely to continue. We have made and will continue to make substantial expenditures to comply with such environmental laws, regulations, decrees and ordinances.

     We have further developed our environmental activities and compliance in Chile by subscribing, along with 13 other companies, to the Acuerdo de Producción Limpia , an environmental cooperation agreement between environmental authorities and industry for managing our solid wood operations in Chile. We are currently discussing a similar Agreement for the production of boards.

     Chilean legislation to which we are subject includes the Chilean Environmental Basic Law (Law 19,300 of 1994), based upon article 19 No. 8 of the National Constitution, which establishes the general structure of the Chilean environmental law. Law 19,300 defines the Government agencies responsible, among other things, for assessing environmental impact studies, overseeing the implementation of projects in accordance with their environmental impact statements and coordinating environmental regulations.These agencies are Comisión Nacional del Medio Ambiente (National Environmental Commission or “CONAMA”) and Comisiones Regionales del Medio Ambiente (Regional Environmental Commissions or “COREMA”).

     We are subject to other regulations, such as:

  • DS 146 (Ministry of Health) on environmental noise, DS 609 (Public Works Ministry) on potable water and DFL 725 (Ministry of Health) on human health.
  • DS 594 (Ministry of Health), and DS 298 (Transportation Ministry) on handling and transportation of waste and hazardous waste, and
  • DFL 1 (Ministry of Health), DFL 725 (Ministry of Health) and DS 594 (Ministry of Health) on health issues in the work place. Regulation DS 95 (Ministry of the Presidency) requires us and all companies in Chile to conduct environmental impact studies of any future projects or activities that may effect the environment.

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     During 2005 our plant in Valdivia was fined by the Superintendencia de Servicios Sanitarios , the effluents control agency, because of a delay in the submission of discharge information. The sanction was applied by the authority at its minimum level (approximately US$3,500). We immediately paid the fine and submitted all the information requested.

     New norms to be applied in 2006 include DS 46 (Ministry of the Presidency) on discharges of industrial effluents to underground water bodies, DS 90 (Ministry of the Presidency ) on discharges of industrial effluents to surface water bodies, DS 148 (Ministry of the Health ) regarding management of hazard industrial waste. Masisa believes it has made the necessary investments in order to fully comply with these new norms. In 2006, we expect new legislation with a three year compliance period with respect to air emissions.

     Affected persons, including private citizens, public agencies and local governmental authorities, can sue under the Chilean Environmental Basic Law to enforce environmental compliance. Enforcement remedies can include temporary or permanent closure of facilities and fines. Private citizens are also allowed to object to the plans or environmental impact studies submitted by project owners. While we seek to implement our business strategy by complying with environmental legislation and by being proactive with environmental and community matters, the application of environmental laws may have an adverse affect on our operations.

      Brazil: We are subject to Brazilian environmental legislation, including regulation by municipal, provincial and federal governmental authorities. We believe that our operations are currently in material compliance with applicable local and national environmental regulations. In addition, because our production processes are based on wood from planted trees and because all of our forestry operations involve planted trees, we do not believe that there are material environmental concerns applicable to us that result from the use of natural forest resources.

     Laws 6938/81, 9605/98, and 4771/65 give the general framework for environmental legislation in Brazil. Other norms applicable to Masisa in Brazil include Resolution 237/97 on environmental licenses, SEMA 41/02, which defines norms for air emissions, Law 9433/97 and Resolution 357/05 which regulate effluents, Law 12493/99 that regulates management of waste and dangerous waste and Resolution 01/90 on noise. Regional norms applicable to our plant in Ponta Grossa include Law Paraná 13.448/02 on environmental audits, and Law Paraná 13.806/02 – Resolution SEMA 41/02 on air emissions. We expect such requirements on air emissions to be extended to our plant in Rio Negrinho by 2007.

     Our plants in Brazil possess the necessary environmental permits and licenses issued by FATMA (Foundation for the Environment) and lAP (Environmental Institute of Paraná), SUDERHSA ( Superintendência de Recursos Hídricos do Paraná ), and IBAMA ( Instituto Brasileiro de Meio Ambiente ).

     All of Masisa’s operations in Brazil have obtained ISO 14001 and OHSAS 18001 certifications. Our forestry plantations and Chain of Custody are certified under FSC, and our Ponta Grossa plant has been audited to obtain FSC certification this year. As a result of the merger between Masisa and Terranova, we have to update certifications for both plants and will obtain a new integrated system certification in 2006.

      Venezuela: Our Venezuelan operations are subject to Venezuelan environmental legislation, including regulation by municipal, provincial and national governmental authorities. Masisa Venezuela already complies with the new Organic Law for Prevention, Conditions and Work Environment, published in 2005, and expects some minor regulatory changes because of decrees enforcing this law in 2006. Decree 638 regulates air emissions, and norm COVENIN 2253:2001 regulates emissions in the work place. Management of waste and hazardous waste is regulated by Decree 1257, Decree 2635 and Decree 2216. Transportation and management of chemical products is regulated by Decree 1847 and by norms COVENIN 2268:96 and 2817:91. Effluents to water are regulated by Decree 883, and Decree 2217 regulates environmental noise. Safety at the workplace is regulated by the Organic Law of Prevention, Conditions, and Workplace Environment.

     In 2006 Masisa Venezuela will apply for the FSC Chain of Custody certification for solid wood and particle boards, and will obtain OHSAS 18001 certification together with its recertification of ISO 14001.

      Mexico: Our plant in Durango possesses an Environmental License (Licencia Ambiental Única) from the State of Durango, and we believe that we are in material compliance with all environmental laws and regulations affecting our facilities and products in Mexico. Our operations in Mexico are subject to the National Environmental

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Law—2001 (Ley General de Equilibrio Ecológico y la Protección al Medio Ambiente, 1998), and to the local Environmental Law issued by the State of Durango (Ley Estatal del Equilibrio Ecológico y Protección al Ambiente, 2001, enforced by the Secretaría de Recursos Naturales y Medio Ambiente, Durango. Air emissions are covered by NOM-043-SEMARNAT-1993, enforced by the State of Durango, Secretaría de Recursos Naturales y Medio Ambiente, and by the national norm, "Reglamento de la Ley General del Equilibrio Ecológico y la Protección al Ambiente en materia de Registro de Emisiones y Transferencia de contaminantes" , 2004. Federal Laws 052 and 054 and the General Law for Prevention and Management of Waste, 2003, enforced by local authorities, regulate management of dangerous waste. We believe national waste norms will probably be modified in the near future, but we expect those changes will not require significant investment by Masisa Mexico. Water management is regulated by the National Water Law of 2003 and 2004, the Federal Rule on Wastewater Control of 2003 ( Reglamento del Gobierno del Estado sobre Control de Aguas Residuales), and by local norm NOM-002-ECOL-1996.

     Masisa Mexico obtained ISO 14001 and OHSAS 18001 certifications in 2004.

      Argentina: In Argentina we have made new investments in management of waste water to allow its complete re-utilization. Industrial facilities have ventilation systems, including the moulding plant, where systems were installed in 2005. We possess Sanitary Authorization from the Department of Development, Ecology and Environmental Control from the Province of Entre Ríos.

     All companies in Argentina, including Masisa, are subject to several national and local environmental laws, regulations, decrees and municipal ordinances concerning, among other things, discharges into air and water, handling and disposal of solid and hazardous wastes, and health. Provincial Law No. 6260 “Contamination Prevention by the Industries” with its Reglamentary Decree No. 5837 regulates the wastewater discharges and air quality, solid waste handling, noises and vibrations. National Law No. 24051 “Hazardous Wastes—generation, handling, transport and treatment” and its Reglamentary Decree No. 831 regulate the management of hazardous wastes and air emissions.

     Our Integrated Management System is externally verified and ISO 9001, ISO 14001 and OHSAS 18001 certified. The next audit to maintain our external certifications is scheduled for October 2006. We also have the SCS certification (Scientific Certification Systems), which certifies that our boards have 100% recycled and reclaimed fiber content.

      United States : our production facility operates under several environmental permits and regulations. The Conditional Major Air Quality Permit is issued under the provisions of the Pollution Control Act, Sections 48-1-50(5) and 48-1-110(a), and the 1976 Code of Laws of South Carolina, Regulation 61-62. The permit allows an emission rate of 100 TPY of VOC’s and PM emissions, and we have successfully maintained levels of less than 1.3 TPY VOC’s and less than 30 TPY PM Emissions. The facility operates a closed loop waste water recycling system that is permitted under the Clean Water Act, CERCLA 40 CFR 302 and the NPDES General Permit No. SCR000000. The production facility does not generate any hazardous wastes and maintains an extensive recycling program for waste disposal under South Carolina US Code Title 44. As a result of the recycling efforts the company has recycled 94.7%, 92.3% and 73.2% of all waste products, by volume, in 2004, 2005 and thus far in 2006 respectively. The Masisa USA operation does not foresee issues with environmental legislation in the USA, but continues to monitor trends and to seek out opportunities to further reduce its environmental impact.

     Masisa USA was certified ISO 14001 and OHSAS 18001 in December of 2003 and has successfully maintained these certifications with no major non conformities. Our operating philosophy is to minimize all environmental impacts through sound engineering and operational practices and continuous improvement.

     As part of the GrupoNueva group, we are committed to transparency in our environmental and social performance, and publish sustainability reports every two years.

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Item 4A. Unresolved Staff Comments

Not applicable.

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