Economic returns from forest conversion in the Peruvian Amazon

Ecological Economics, 6 (1992) 163-173 Elsevier Science Publishers B.V., Amsterdam

163

Economic returns from forest conversion in the Peruvian Amazon Miguel Pinedo-Vasquez,

Daniel Zarin

’ and Peter

Jipp 2

School of Forestry and Environmental Studies, Yale Unioersity New Haoen, CT, USA (Accepted

4 February

1992)

ABSTRACT Pinedo-Vasquez, M., Zarin, D. and Jipp, P., 1992. Economic in the Peruvian Amazon. Ecol. Econ., 6: 163-173.

returns

from forest conversion

Rural people in the Peruvian Amazon both extract the products of intact tropical forest and convert forested land to swidden agriculture. Since the 1950s agriculture has exceeded forest product extraction in economic importance in the region. Little incentive exists for rural populations to pursue land-use strategies with immediate returns lower than those available from swidden agriculture. Land remains relatively abundant in the region, land and resource tenure are rarely secure, and markets for non-timber forest products are less than dependable. The economics of timber extraction, swidden agriculture, and the harvesting of fruits and latexes from intact forest are examined and compared within a single village near the city of Iquitos. Our analysis indicates that rural populations in the region can be expected to continue converting forested land to swidden agriculture unless alternative land uses become more attractive economically.

INTRODUCTION

Rural inhabitants of the Peruvian Amazon (regionally known as ribereiios) engage in a variety of subsistenceand market-oriented landuses: some based upon extraction of forest products, others upon agricultural conversion of forested land. Historically, extractive activities oriented toward external markets have included the harvesting of rubber (Heuea

Correspondence to: M. Pinedo-Vasquez, Yale University School of Forestry and Environmental Studies, 205 Prospect Street, New Haven, CT 06511, USA. ’ Present address: University of Pennsylvania Department of Geology, 240 South 33rd Street, Philadelphia, PA 19104-6316, USA. ’ Present address: Woods Hole Research Center, Post Office Box 296, Woods Hole, MA 02543, USA. 0921~8009/92/$05.00

0 1992 - Elsevier

Science

Publishers

B.V. All rights reserved

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ET AL.

brasiliensis), vegetable ivory (Phytelephas macrocarpa), timbers, and oil. Forest products collected for local use include construction materials, fruits, and medicinals. Additionally, hunting and fishing make important contributions to household and local economies. Agricultural produce of the region is extremely varied; principal crops include cassava (Manihot esculenta), rice (Oryza satiua), corn (Zea mays), plantain (Muss paradisiaca), jute (Urena fabota), and a host of cultivated perennial fruits. Available data indicate that agriculture has exceeded forest product extraction in economic importance since the 1950s (San Roman, 1975; Padoch, 1987, 1988). Other researchers (Myers, 1988; Peters et al., 1989) have reported on the economic potential of intact forest in the Peruvian Amazon, emphasizing the value of non-timber forest products. Here, we examine and compare the economic viability of timber extraction, swidden agriculture, and the harvesting of fruits and latexes. Rural people in the Peruvian Amazon prioritize these activities on a daily basis. They do so within a context of great uncertainty, characterized by fluctuating markets for their products, hyper-inflation, and a lack of secure land and resource tenure. Their priorities and their rationales are ultimately of more importance than any theoretical analysis. For that reason we offer a caveat. A complete comparison of the economic advantages of different land-use alternatives would require full knowledge about the entire range of benefits, market and non-market, accruing from each option. Production and price data for many fruit species and for all forest-dwelling game species are currently unavailable. Efforts to assess the value of forest products in subsistence economies are also lacking (Padoch, 1987). Furthermore, there are no regional economic data assessing the value of ecosystem services of intact forest, such as watershed protection. In the absence of such a complete data set, we will examine the known economic opportunities and activities of a ribereiio population as the best available measure of the relative attractiveness of existing land-use alternatives. STUDY

AREA

The village of San Rafael is located on the Amazon River, two hours downriver (via river taxi) from Iquitos, the capital city of the Department of Loreto. San Rafael has 323 inhabitants, about 70 households, although the population figures fluctuate continually due to migration between the village and Iquitos. Residents of San Rafael practice shifting cultivation, and they rely heavily on rice, cassava, and plantain for subsistence use and for access to markets in Iquitos. San Rafael borders three other ribereiio villages, but its western boundary abuts a tract of hundreds of hectares of

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165

intact forest. In 1984, the residents of San Rafael declared the forested area a community reserve in order to protect and control the extraction of forest resources (Pinedo-Vasquez et al., 1989). Extraction of forest products from the reserve, about 800 ha of 60-year-old secondary forest, varies both seasonally and from household to household within the community. Local leaders recognize the role of the forest in watershed protection, and the reserve area is also valued as a hunting ground. METHODS

An inventory of trees greater than or equal to 10 cm in diameter was conducted in 1985-86 in the forest reserve. Data collected in the field, with the aid of local residents, included diameter, common names, and economic use information. Timber volumes were determined based on published regression equations (Villanueva, 1986). Species were identified from voucher specimens (CHOTA l-220) at the New York Botanical Garden. An additional set of specimens is deposited at the herbarium of the Universidad National de la Amazonia Peruana, Iquitos, Peru. In order to obtain a representative sample of the secondary forest community, a doubly random sampling procedure was used to identify sampling subplots. A 1 x 1.6 km grid area, representing approximately 20% of the forest reserve, was used to locate all subplots to be measured. Within the grid, thirty 100 x 100 m plots were randomly selected. Within each of the 30 selected plots, four 25 X 25 m subplots were randomly chosen to conduct the inventory. Total area of subplots sampled was 7.5 ha. All data reported herein are averaged on a per hectare basis. Production costs and price data for both timber resources and agricultural crops are based on unpublished data from the Federation Departamental de Campesinos y Nativos de Loreto (FEDECANAL), a regional farmers’ union based in Iquitos, and extensive interviews and surveys conducted in San Rafael. Several analyses of production costs were also consulted (Laur, 1988; Hiraoka, 1988; Chibnik, 1986). Except where noted, all prices given are for November 1989 Peruvian Intis (I) (U.S.$l = I/6000). TIMBER

RESOURCES

The forest reserve adjacent to San Rafael contains at least 29 commercially valuable timber species; per hectare timber volume averaged 66.64 m3 (see Table 1). The Peruvian Ministry of Agriculture levies a nominal yield tax (Decreto Supremo 099-88-AG) on the extraction of most commercial timber species. For an average hectare of the reserve adjacent to San Rafael, the Ministry would be eligible to collect I/67 190 (U.S.$11.20) if all

166 TABLE

M. PINEDO-VASQUEZ

ET AL.

1

Timber resources contained in the community forest reserve adjacent to San Rafael. Volume is in cubic meters and for merchantable stems only ( > 25 cm in diameter). The yield tax is imposed by Decreto Supremo No. 099-88-AG. Log prices listed are paid at the confluence of the Amazon and Napo Rivers (source: FEDECANALI. Monetary units are November 1989 Peruvian Intis except where indicated Family

Commercial name

Bombacaceae Lauraceae Lauraceae Lauraceae Lauraceae Lauraceae Lauraceae Lauraceae Lauraceae Lauraceae Lauraceae Meliaceae Meliaceae Meliaceae Meliaceae Meliaceae Moraceae Myristicaceae Myristicaceae Myristicaceae Myristicaceae Myristicaceae Myristicaceae Myristicaceae Myristicaceae Rutaceac Simaroubaceae Sterculiaceae Tiliaceae

Lupuna colorada Anuje moena Casha moena Cuchiri moena Isma moena Mauba Moena Moena amarilla Moena blanca Moena negra Palta moena Andiroba Cedro colorado Requia amarilla Requia blanca Requia colorada Capinuri Aguanillo Caupuri Caupuri blanco Cumala blanca Cumala colorada Cumala dura Cumala negra Cumalilla Cedro masha Marupa Bolaina Maquizapa naclla

Totals Totals in U.S. dollars (1989)

Volume per Ha 2.02 2.27 0.31 2.72 0.08 0.31 0.64 6.02 0.49 0.97 0.13 3.25 3.02 0.16 2.68 1.90 1.60 3.53 9.55 0.74 7.22 9.47 0.64 0.64 0.12 0.20 1.38 0.04 4.57

Yield tax per unit volume

Yield tax per Ha

Log price per unit volume

78 1150 1150 1150 1150 50 1150 1150 1150 1150 50 1150 1790 1150 1150 1150 78 1150 1150 1150 1150 1150 1150 1150 1150 50 50 39

157 2609 359 3132 90 16 736 6923 562 1112 6 3742 5406 180 3077 2187 125 4061 10980 852 8302 10889 738 735 135 10 68 2 0

52950 59304 59304 59304 59304 31770 59304 59304 59304 59304 59304 59304 169440 55068 55068 55068 57186 55068 55068 55068 55068 55068 55068 55068 55068 105900 84720 25416 31770

66.64

-

67190 $11.20

Log price per Ha 106775 134557 18511 161512 4642 9959 37939 357018 28964 57343 7623 192967 511731 8605 147355 104703 91597 194441 525775 40787 397562 521443 35339 35192 6454 20785 115174 1040 145333 4021124 $670.19

merchantable timber were harvested. The diameter limit on merchantability in the region is 25 cm. Table 1 also lists November 1989 prices paid for logs at the confluence of the Amazon and the Napo, a short distance downriver from San Rafael. Gross revenues accruing from the sale of the

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167

CONVERSION

TAEILE 2 Costs and revenues study area (sources: where indicated

associated with harvesting all merchantable timber FEDECANAL, San Rafael). AI1 values in November

Labor (in person-days) Marking and cleaning timber Felling and cutting timber Cleaning stream to transport timber Transporting timber (forest to port) Total labor

Cost of Labor (I/.5700 per person-day)

12

68400

17

96900

50

285000

90

513000

169 Chainsaw rental (I/15000 per day) Taxes

from 1 ha of the 1989 Intis except

963300 Additional 105000

costs

67190

Total costs Gross revenues

1135490 4021124

Net revenues 1989 U.S.$

2885634 $480.94

66.64 m3 of merchantable timber at those prices would equal I/4 021 124 (U.S.$670.19). Because sustainable forest management for timber production is practiced nowhere in the Amazon Basin (Fearnside, 19891, we have attem@ed to quantify only the economic costs and benefits that could accrue to rural populations from one-time removal of all merchantable timber (see Table 2). Extraction costs, taxes, and the expense of transporting logs from the forest reserve to the river were subtracted from revenues generated by selling logs at the river, resulting in a positive net revenue of I/2 885 640 (U.S.$480.94) for the first hectare of logged forest. Subsequent hectares logged immediately thereafter would prove slightly more profitable as the one-time labor cost of sufficiently cleaning a stream to float the logs from the forest to the river (I/285 000 or U.S.$47.50) would have already been charged against the first hectare. SWIDDEN

AGRICULTURE

Typical swidden practice in San Rafael involves clearing and burning of forested or fallowed lands, followed by one crop each of upland rice,

168

M. PINEDO-VASOUEZ

ET AL

cassava, and plantain. Rice is harvested 4 months after seeding. Cassava is then planted and, 3 months later, plantain is intercropped at 5 x 10 m spacing. Cassava is harvested approximately 6 months after it is planted. Plantain produces racemes twice, following the harvest of cassava. Mortality of the plantain crop is high: up to 50% for the first production period, and 75% for the second. Rice produces an average of 1000 kg/ha, cassava averages 5000 kg/ha, and plantain production averages 150 racemes/ ha. Following the second plantain harvest swidden fields are more or less abandoned. Some farmers may return to their fallows from time to time to collect construction materials or harvest fruits from planted or volunteer fruit species; others may not visit their fallows until they are ready to make a new swidden. Elsewhere in the region the management of fallows, especially for fruit production, is an extremely important land use (Denevan et al., 1984; Padoch et al., 1985; Hiraoka 1986). Fallow management can result in enhanced economic productivity of a given unit of land and often leads to longer periods between the planting of annual crops. In San Rafael, however, typical swidden rotations consist of rice-cassava-plantain-fallow, and last 7 years. The costs and revenues associated with swidden agriculture on an averaged per hectare basis for land converted from secondary forest are presented in Table 3. Unadjusted net revenue for a single rotation is equal to I/5 753 000 (U.S.$958.53). Adjusted revenues from swidden agriculture are calculated for a range

TMLE

3

Per hectare costs and revenues associated with one rotation of swidden FEDECANAL, San Rafael). All values converted from November except where indicated Rice Seed/plant stock Labor for land-clearing planting and cultivation Labor for harvesting Transport and handling Total costs Gross revenues a Net revenues

agriculture 1985, Intis

(sources: to U.S.$

Cassava

Plantain

10.45 95.00

3.33 33.25

1.67 19.00

15.4s 147.25

30.40 12.67 148.52 183.33 34.82

42.75 70.00 149.33 416.67 267.33

35.15 37.50 93.32 750.00 656.68

108.30 120.17 391.17 1350.00 958.83

a Rice production = 1000 kg/ha at I/1100 per kg; cassava production = 5000 kg/ha at I/500 per kg; plantain production = 150 racemes/ha at I/30000 per raceme.

Total

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TABLE

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CONVERSION

4

Adjusted net revenues per hectare from swidden agriculture. Values calculated using equations (l), (2) and (3), with data input from Table 3. All values are November 1989 Intis except where indicated Present

value of swidden

At a discount

agriculture

rate of 5%

First rotation Second rotation Continuous rotations At a discount

Cassava

Plantain

Total

250821 176750 849342

1539993 1085214 5214800

3568910 2514968 12085221

5359723 3776933 18149363

Plantain

Total

1989 U.S.$ Total 893.29 629.49 3024.89

Rice

Cassava

230555 114490 457982

1460201 725114 2900592

Rice

Cassava

210789 73763 324260

1384416 484459 2129667

3224252 1601116 6404764

4915008 2440721 9763338

11/89 U.S.$ 819.17 406.79 1627.22

rate of 15%

First rotation Second rotation Continuous rotations

of discount

Rice

rate of 10%

First rotation Second rotation Continuous rotations At a discount

rotations:

Plantain 2912639 1019242 4480553

Total 4507844 1577465 6934480

11/89 U.S.$ 751.31 262.91 1155.75

rates in Table 4 such that:

R, = ( - C,)(e-h’l) R, = ( R,)(eph’i)

+ (PI/-

Cz)(eehfr)

(1) (2)

RI

R NP” = 1 _ (ephy where: R, is the adjusted net revenue from rotation one, C, the land-clearing, planting, and cultivation costs, e the base of the natural logarithm (2.1782818.. .>, h the the continuous rate of interest, t, the time of planting, p the gross price per unit volume, I/ the volume produced, C, the costs of harvesting and transportation, t, the time of harvest, R, the adjusted net revenue from rotation two, t, the time between rotations, and R NPVthe net present value of continuous rotations. Adjusted revenues are sensitive to the continuous rate of discount; high discount rates produce lower adjusted revenue values. Leslie (1987) suggests that selection of a discount rate is an entirely subjective process. At a discount rate of 5%, the net present value (NPV) of continuous 7-year swidden rotations is I/18 149 363 (U.S.$3024.89); at lo%, NPV = I/9 763

170

M. PINEDO-VASOUEZ

ET AL.

338 (U.S.$1627.22); at 15%, NPV = l/6 934 480 (U.S.$1155.75). Adjusted revenues are similarly sensitive to changes in the rotation period. A lengthened rotation would produce smaller adjusted revenues, not for the first rotation, but for all subsequent rotations. For example, at a discount rate of lo%, a swidden rotation period of 13 years would result in an NPV of U.S.$1126.05. Rotations shorter than 7 years tend to result in lower production, especially for rice. Also, gains in productivity from longer fallow periods are widely claimed by local farmers, but experimental data on agricultural productivity in shorter and longer rotation swiddens is lacking. TIMBER

AND

SWIDDEN

AGRICULTURE

One-time exploitations of timber resources and swidden agriculture are not mutually exclusive land uses. Villagers may choose to extract merchantable timber from a forested site and then convert the land to agricultural use. The net revenues of timber extraction could then be added to the adjusted net revenues of the first swidden rotation. FRUITS

AND

LATEXES

For the most part, neither traditional logging practices in the Amazon Basin nor swidden agriculture are spatially compatible with the collection of fruits and latexes from intact forest. Consequently, collection of fruits and latexes for the limited markets that exist in Iquitos (Padoch, 1988) must be considered as a distinctly separate alternative management scenario for forested land. Peters et al. (1989) have posited extraction of these non-timber forest products as the principal market value of intact forest inventoried at Mishana, a small village on the Nanay River about 30 km southwest of Iquitos. After deducting costs of collection, transportation, and regeneration, they calculated a perpetual annuity (V) of U.S.$316.50 for the 1 ha of forest at Mishana. At a discount rate (r) of 5% the NPV of that perpetual annuity was determined to be U.S.$6330, where NPV = V/r. At Y= lo%, NPV = U.S.$3165; at r = 15%, NPV = U.S.$2110. All of these values are higher than the corresponding values we have calculated for continuous rotations of swidden agriculture in San Rafael. However, only half of the 12 commercial fruit and latex species inventoried in Mishana appeared in the San Rafael forest reserve, evidence of the inherent diversity of the two forested sites that belong, respectively, to blackwater and whitewater watersheds. In the San Rafael reserve the combined worth after costs of those species offers a perpetual annuity of

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only U.S.$19.97, and no one is gathering any fruit or latex from the reserve area for sale in Iquitos, even though additional species with markets similar to those reported for Mishana (Peters et al., 1989) are present. The discrepancy in the two potential values of fruit and latex extraction reflects differences in species composition that are related to ecosystem type and site history throughout the region. A MORE REALISTIC

CALCULUS

Socio-economic reality in the Peruvian Amazon contradicts certain assumptions implicit in future-benefit analyses. Predictions of future benefits rely on estimates of future commodity prices. In order for such forecasts to be reasonably accurate, prices must be either relatively stable or at least relatively predictable; prices for perishable goods with limited markets (forest fruits in Iquitos, for example) are neither (Padoch, 1988). Markets for agricultural staples are more dependable, presenting a relatively lower risk for producers. Prices for rice are set by the government, and credit is available for the production of rice, cassava, and plantain, providing further incentive for their cultivation (Hiraoka, 1988; Chibnik, 1986). Furthermore, calculations of the present value of perpetually accruing net revenues may not be relevant to the land-use decisions made by ribereiio populations (Pinedo-Vasquez et al., 1990). The current lack of secure land and resource tenure for individuals and ribereiio communities in the Peruvian Amazon is a disincentive to pursuing land-use options with immediate returns lower than those available from swidden agriculture, regardless of potentially realizable future benefits. Ribereno villagers cannot prevent the Peruvian Ministry of Agriculture from licensing a logging company to harvest timber within a reserve area, nor can they legally maintain individual usufruct rights to unconverted forest. In practice, the longest term land-use investment typically made by a ribereiio household is the allocation of labor to clear a swidden for a rotation of agricultural crops (I/376 200 or U.S.$62.70). As long as land remains relatively abundant, examination of adjusted net revenues for the economically productive phase of a swidden rotation may therefore provide a better window than adjusted perpetual revenue calculations for understanding land-use decision making by rural populations in the region. The economically productive phase of the clearing-rice-cassava-plantain-fallow rotation described above lasts 2 years. Before the end of the economically productive phase of the swidden rotation, the ribereno household will generally begin a new rotation on a different site. A comparison of revenue possibilities from 1 ha of forested land during a 2-year period for selected land-use alternatives is revealing. At a 5%

172

M. PINEDO-VASQUEZ

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continuous discount rate the net revenues resulting from extraction of fruits and latexes for 2 years from the hectare of forest inventoried at Mishana (Peters et al., 1989) is equal to the net revenue produced in year 1 (1987 U.S.$316.50) plus the net revenue produced in year 2, discounted by 5% (U.S.$300.68), or U.S.$617.18. Brought forward 2 years, at a 5% rate of inflation, to 1989 dollars, the adjusted figure is U.S.$680.44. For the same species in the San Rafael forest reserve the adjusted net revenues for the 2-year period would equal U.S.$42.93. At the same discount rate, revenues from swidden agriculture would produce U.S.$893.29 (see Table 5); with the addition of income generated by one-time extraction of merchantable timber (U.S.$480.94) that figure grows to U.S.$1374.23. Examining the actual land-use choices made by the San Rafael population emphasizes the logic of their decision making within the current context in which rural populations prioritize their economic activities. Within that context, ribereiios can be expected to continue converting forested land to swidden agriculture unless alternative land uses become more attractive economically. ACKNOWLEDGEMENTS

We thank the community of San Rafael and C. Lavi and M. Sequeda of the Federacihz Departamental de Campesinos y Natives de Loreto for their patient responses to our inquiries. J. Chota and M. Rios provided invaluable assistance in the field. Also, we thank C. Binkley, W. de Jong, H. Gregersen, R. Mendelsohn, C. Padoch, C. Peters and K. Vogt for reviewing portions of the manuscript. Recent fieldwork has been supported by the Inter-American Foundation, the Tropical Forestry Program of the World Wildlife Fund/ Conservation Foundation, the Homeland Foundation, and the Tropical Resources Institute of Yale University. REFERENCES Chibnik, M., 1986. New sources of credit in Peruvian Amazonian communities. Paper presented at the Annual Meeting of the American Anthropological Association. Philadelphia, Pennsylvania. 7 December 1986 (unpublished). Denevan, W., Treaty, J., Alcorn, J., Padoch, C., Denslow J. and Flares Paitan, S., 1984. Indigenous agroforestry in the Peruvian Amazon: Bora Indian management of swidden fallows. Interciencia, 9: 346-357. Fearnside, P., 1989. Forest management in Amazonia: the need for new criteria in evaluating development options. For. Ecol. Manage., 27: 61-79. Hiraoka, M., 1986. Zonation of mestizo riverine farming systems in northeast Peru. Natl. Geogr. Res., 2: 354-371. Hiraoka, M., 1988. Agricultural systems on the floodplain of the Peruvian Amazon. In: J.O. Browder (Editor), Fragile Lands of Latin America: Strategies for Sustainable Development. Westview Press, Boulder, Colorado, pp. 75-101.

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Departamental de Lam, P., 1988. Como calcular 10s costos de production ? Federation Campesinos y Nativos de Loreto. Iquitos, Peru. Leslie, A.J., 1987. The economic feasibility of natural management of tropical forests. In: F. Mergen and J.R. Vincent (Editors), Natural Management of Tropical Moist Forests: Silvicultural and Management Prospects of Sustained Utilization. School of Forestry and Environmental Studies, Yale University, New Haven, Connecticut, pp. 177-198. Myers, N., 1988. Tropical forests: much more than stocks of wood. J. Trop. Ecol., 4: 209-221. Padoch, C., 1987. The economic importance and marketing of forest and fallow products in the Iquitos region. Adv. Econ. Bot. 5: 74-89. Padoch, C., 1988. Aguaje (Muuritia ,fkxuosa L.f.) in the economy of Iquitos, Peru. Adv. Econ. Bot., 6: 214-224. Padoch, C., Chota Inuma, J., de Jong, W. and Unruh, J., 1985. Amazonian agroforestry: a market-oriented system in Peru. Agrofor. Syst., 3: 47-58. Peters, C., Gentry, A. and Mendelsohn, R., 1989. Valuation of an Amazonian rainforest. Nature, 339: 6.5-656. Pinedo-Vasquez, M., Zarin, D. and Jipp, P., 1989. Community forest and lake reserves in northeast Peru: a local alternative for sustainable use of the tropical forest. Paper presented at the National Wildlife Federation symposium on extractive economies in tropical forest, 30 November 1989. Washington, DC (unpublished). Pinedo-Vasquez, M., Zarin, D. and Jipp, P., 1990. Amazon land-use. Nature, 348: 397. San Roman, J., 1975. Perfiles Historicos de la Amazonia Peruana. Ediciones Paulinas, Lima, Peru. Villanueva, A., 1986. Inventario Forestal de Santa Maria de Ojeal. Universidad National de la Amazonia Peruana, Iquitos, Peru.