Thursday, November 12, 2009

Why invest in private reforestation and afforestation?

Deforestation in Bolivia
It is popular in some sectors to blame the free market for deforestation, which in turn causes high lumber prices and wood shortages. This blame game probably deters some people from investing in reforestation and afforestation by the private sector, because they feel that harvesting the trees later is somehow not “green” or environmentally friendly. But what if in fact the exact opposite is true? The economics of growing plantation wood may in fact be much more environmentally sound than the alternative. Let us consider some examples. In Germany, Spain, Colombia and a number of other countries, there are many privately owned forests. How is it that those forests aren’t permanently clear cut? After all, doesn’t a capitalist want to maximize his or her profits in one sweep of the chainsaw?

The blogger with a Pino Caribe
The answer is really quite simple. A tree farmer or plantation owner with property rights does not log everything in sight, because it is in their best interest to preserve the sustainability of the plantation for on-going, long term profit. Their profit and the sustainability of the land is greatly reduced with a quick one-time windfall. A well managed forest or woodlot provides profit over the length of the tree farmer’s tenure. Common sense says that as markets and prices fluctuate based on supply and demand principles, selling only a few trees at a time while replacing them makes good economic sense. Contrast this with government-owned or community-run forests. When there are no property rights involved loggers tend to maximize their take, simply because they have no certainty for the future. There is no reason to act in a sustainable manner, because what one logger doesn’t take the next one will. For instance, the destruction of the Amazon rainforest can in many cases be traced to a lack of property rights in Brazil. The same can be said for the destruction of forests of Indonesia, India and Africa.

Saladillo after a selective cut
Selling only some trees at a time while replanting guarantees that there will be trees for future profits. Smart plantation and woodlot owners know that demand continues to grow for wood products, meaning that as lumber prices rise they will enjoy even greater profits in the future. A clear cut doesn’t continue to make money, but a sustainable forest does, because the tree farmer can have other on-going revenues, like eco-tourism or paid hunting on private land, or revenues from alternate harvests like fruits, nuts, seeds, saps like maple syrup or latex for rubber, to name just a few. It is hardly surprising that if people can have long term sustained income they will choose that over one short-term windfall cheque. In the case of Amazonia Reforestation, we are counting on our afforestation efforts to provide numerous spin-off industries for the benefit of local communities, like rainforest honey production, eco-tourism thanks to expanded wildlife habitat, and ever healthier soil, allowing the planting of greater varieties of hardwood trees, each with even greater cash values, for future harvest. So if you are thinking about a green investment, then afforestation and reforestation of tropical trees is not only profitable, but sustainable and beneficial in numerous ways.