Market Solutions to Deforestation
June 20, 2002
by Dennis T. Avery
One of the few places in Latin America where species-rich forests are not being lost is a Multiple Use Zone of 1.2 million acres located in northern Guatemala. In a country where economic misery and rapid population growth combine to drive yearly deforestation above 2.0 percent, the Zone is largely untouched. Its annual rate of forest loss, 0.2 percent, is half the rate in nearby national parks. Elsewhere in the region, annual deforestation averages 3.0 percent.
The Multiple Use Zone is thriving not because of the advice and largesse of environmentalists from wealthy nations. Instead, this forest conservation is due to property rights and free markets. In 1994, the national government, the original land-owner, decided to divide the Zone into 25-year concessions for sustainable forestry, which were awarded to thirteen local communities and two private firms. Initial earnings were meager for communities that had little prior experience in the timber trade. They often sold uncut stumpage to the first buyer to come along, at very low prices. But commercial savvy has accumulated and competition has intensified. Consequently, timber prices have risen, which has strengthened conservation incentives. For example, forest fires are much less common in the Multiple Use Zone than anywhere else in northern Guatemala, including the national parks.
Apparently, none of this impresses Conservation International (CI)—a Washington-based organization that has received hundreds of millions of dollars from development agencies and private foundations. In 2001, it developed a proposal with two local communities to use CI funds and matching monies (reallocated from other environmental projects in Guatemala) to buy out the communities’ logging rights. Several weeks ago, the proposal was sprung on national authorities along with the demand that the scheme be accepted or rejected within a couple of months.
Sometimes, the purchase of logging rights by outside groups makes sense. For example, a similar CI initiative in Guyana appears to be working well. However, Guyana has fewer than one million inhabitants and 94 percent of its 76,000 square miles is forested. Under these circumstances, protecting its natural habitats is easily accomplished by paying loggers to lay down their chainsaws.
Perhaps CI is keen to try the Guyanese approach in Guatemala—a country with half as much land and 12 times as many people—because soliciting contributions is easier if donors can be convinced that they’ve got the “silver bullet” for saving all tropical forests. Perhaps cajoling donors is problematic if an alternative approach—community concessions—is yielding demonstrable benefits. Either way, pressing for a buyout of loggers imperils Guatemala’s concession system and jeopardizes the very forests that CI says it champions.
These threats are thoroughly understood by Guatemalan environmentalists. They are certain, for instance, that communities will not be punished severely for violating agreements with CI. Monitoring these agreements, it turns out, is to be the responsibility of CI’s local partner. Neither it nor the folks in Washington will eagerly turn up cases of communities continuing to extract timber after selling logging rights. After all, this would be tough to explain to donors. And once one community gets away with cheating, all concession-holders will clamor for the same deal. If they are refused, there will be general disenchantment with the concession system, which will guarantee its collapse and an ensuing wave of deforestation.
Almost alone in the developing world, Guatemala is relieving pressure on natural habitats by harnessing market forces and strengthening property rights. With tens of millions of Africans, Asians, and Latin Americans living within striking distance of tropical forests, this innovation holds more promise than misguided attempts to convert forest dwellers into green welfare-cases. Guatemala, by no means a wealthy country, deserves to have its conservation successes applauded and reinforced—not subverted by ugly Americans who consider themselves better qualified than anyone else to solve other countries’ environmental problems.
The message from Guatemalans is clear: Greengos, ho home!
Dennis T. Avery is based in Churchville, VA, and is director of the Hudson Institute's Center for Global Food Issues.
Dr. Douglas Southgate is an Ohio State University professor and works frequently in Latin America. Readers may write him at firstname.lastname@example.org.