TIMBER TRADE AND FOREST GOVERNANCE IN BRAZIL 1
Carlos Eduardo Frickmann Young, Universidade Federal do Rio de Janeiro, Brazil
1.
Introduction
Brazil has the largest area of tropical forests in the world, with 539 million hectares (ha) of native forests and
5 million ha of planted forests in a total territory of 850 million ha (IBGE 2002, based on data from FAO
2001). However, there is a deep regional unbalance in their distribution. Two thirds of the Brazilian forests
are in the Amazonian rainforest, with very low demographic density.2 The forest/population ratio in the North
Region, totally inserted in the Amazon and concentrating 79% of the Brazilian dense rainforests, is of 31.7 ha
per capita. In the partially Amazonian Centre-West region, this ratio is considerably smaller (9.0 ha per
capita) but still much larger than in the rest of the country: Northeast (1.6 ha per capita), South (0.4 ha per
capita) and Southeast region (0.3 ha per capita).
Therefore, it is not surprising that, today, commercial timber extraction from native forests is almost entirely
concentrated in the Amazon, while in other parts of the country the activity is based on planted forests of
exotic species (eucalyptus and pinus). 3 The dynamics within these two groups is very distinct, even though
both are usually treated as a single entity, the forest sector. In this paper, the focus will be on timber extracted
from native forests and its connections with governance and international trade.
The concern about the conservation of tropical forests has increased considerably in the last decades. Since it
has the largest tropical rainforest in the world, the Amazon has received special attention, and many projects
have been developed aiming at a more sustainable use of its vast natural resource endowment. However, the
level of deforestation in the region remains almost as high as in the 1970s and 1980s, when the large-scale
development projects were specifically designed to induce the conversion of forests into agricultural land.
1
This paper is based on research carried out for the Project “Impact Assessment of Forest Products Trade in
the Promotion of Sustainable Forest Management”, sponsored by the Food and Agriculture Organization
(FAO) and the International and coordinated by the Institute for Environment and Development (IIED). I am
thankful for the comments made by Michael Richards and Duncan MacQueen.
2
It is important to distinguish between the Amazonian rainforest, a dense rainforest associated to a specific
biome, and the Amazon, a region that covers more than 50% of the Brazilian territory and where other kinds
of biomes (such as cerrado and natural grasslands) occur. The Brazilian Amazon is officially constituted by
the North Region, about half of the Centre-West region and a small part of the Northeast region.
3
Illegal logging in the Mata Atlântica biome remains a problem in very specific areas, particularly because
the native rainforest has been reduced to less than 7% of its original size (SOS Mata Atlântica 1997).
However, its contribution to the timber industry as a whole can be considered very minor.
This means that the many initiatives and efforts by governments, development agencies and NGOs in the
1990s have failed in halting the deforestation process. This is a consequence, among other factors, of the
incapacity of providing economic alternatives that would induce the conservation of the forest, rather than its
conversion into pasture or cultivation. More than ever, it is important to review the conservation strategies
and the assumptions in which they are based.
Therefore, this paper aim is to rethink the importance of two elements usually associated with the problem,
timber extraction and international trade, and their effect on forest governance, focusing on three specific
questions:
(i)
How forest governance conditions were affected by the increasing importance of foreign trade and
investment in the Brazilian forestry sector?
(ii)
How differently does international trade on forest governance processes cause these impacts if
compared to the ones caused by domestic oriented forestry activities?
(iii)
What are the interconnections between the export-oriented (and/or foreign-owned) forestry firms and
their domestic counterparts in Brazil?
2.
Background
Many studies have already analysed the connection between trade oriented policy reforms and deforestation
in Brazil (for example, Young, 1997, 2001; WWF Brazil, 2000). On the other hand, a number of recent
studies has dealt with the question of forest governance, some of them aiming at the particular conditions of
the Amazon frontier (Mayers et alli, 2002, Schneider et alli 2000, Nepstad et alli 2002) The purpose of this
study is to link these two issues, analysing the impact of trade reforms on forest governance in Brazil,
emphasising the role of the forestry sector.
It is widely recognised that land conversion to agricultural use (cattle ranching and, secondly, cultivation) is
the most important activity fuelling the deforestation process in Brazil. The literature has already shown how
unsustainable logging activities, many times directed to external markets, play an important role in this
process and, therefore, are also a major threat to the forests:
-
The Amazon has become the most important source of timber supply for both domestic and external
markets in Brazil, and there is an increasing concern about the possible outcome of the expansion of
foreign-owned firms in the region. These firms operate at larger scale than the traditional sawmills in the
Amazon, and environmentalists are afraid of a repetition of the unsustainable boom-bust cycles of
Southeastern Asia and other parts of the world where tropical forests were severely reduced after exportoriented predatory exploitation.
-
There are important connections between timber extraction, cattle ranching and agriculture in the
dynamics of deforestation in the Amazon. Often loggers finance land clearing for reforming degraded
pastures, in exchange for the rights of logging commercial species in the property. Almost all of the
timber stock cleared in the expansion of the agriculture frontier is destined to commercial purposes. This
indicates that cattle ranching and cultivation can not be dissociated from logging in the Amazon even
when smallholders or subsistence farmers carry out the deforestation process.
-
Export-oriented activities require the improvement of roads and other infrastructure investments,
reducing the production and transportation costs in the frontier.
-
The quest for land property rights is an additional incentive for further deforestation. Many times the
settler moves to the frontier expecting that, after some “productive” use of the land (timber extraction,
cultivation or cattle raising), they will be assured land property titles (see Young, 2001, for a brief review
on this subject). Given the low capital endowment of many of settlers in the frontier, the revenues from
timber selling are equivalent to an “advance” payment that allows the permanence of the settler in the
first years of occupation – an increasing demand for timber may represent a further encouragement in this
“property rights race”.
On the other hand, there is an important revision about the idea that external trade and foreign capital always
acts against environmental conservation. Many authors consider that export-oriented logging activities may
have a positive role to play in forest conservation:
-
The prospect of future revenues from the royalties on logs and taxes on other economic activities may
result in better endowment for environmental control agencies.
-
Foreign-owned and/or export-oriented firms use better technologies and are more efficient in the use of
resources.
-
These companies are more sensitive to the international pressures for improving environmental
management practices and adoption of sustainable forestry than traditional logging firms. Ecolabelling
initiatives, in particular, are considered a positive outcome from these pressures.
In many cases, the arguments used to support these two opposite perspectives are essentially ideological,
without further support from empirical analysis. Therefore, there is a need to better understand what would be
the consequences for forest governance from the expansion of forestry activities in Brazil, as expected from
expanding investment and exports.
Considering these two opposite perspectives, what would be the consequences of the expansion of forestry
activities in Brazil, as expected from expanding investment and exports?
3.
Governance and timber extraction in the Amazon
There is no doubt that the traditional command-and-control approach, emphasising the legal framework
aiming at the conservation of forests, is not enough for achieving the desired results. Two strong legal
measures were recently introduced aiming at forest conservation: the changes in the Forest Code in 1996,
when it was established that at least 80% of all rural properties in the Amazon should be preserved as legal
reserve, and the Environmental Crime Law (1998), which increased the power of environmental protection
agencies and strengthened the penalties against who practices any environmental “crime” (including illegal
deforestation).
However, these laws are widely disregarded in rural Amazon. The new rules for the Forest Code, in
particular, faced strong resistance by the landowners that consider excessively high the proportion of their
properties in which they are not allowed to use for agricultural purposes. The opposition does not come only
from latifundiários: since there is no difference between small and large properties, any holding of less than
50 ha would become unfeasible because only 20% of the land could be used in agriculture. Therefore, it is
very unlikely that the enforcement of already existing legislation will be accepted within the current
circumstances of the Amazon.
On the other hand, there is evidence that these circumstances are changing, with the strengthening of the
institutional capacity for those responsible for environmental conservation and a more pro-environment
perspective from the civil society and the private sector. The federal government is undertaking a review of
land entitlement procedures in the last decades, and a considerable area that was claimed as private properties
were returned to state control given many irregularities and widespread corruption in the ownership
concession process. Considerable shares of these lands were put under the control of IBAMA (the federal
environmental agency), being considered for preservation objectives.
There are new efforts by state governments to enforce the already existing legislation. For example, the state
of Mato Grosso is using remote sensing and GIS technology to enforce forest policy, denying deforestation
permits to land holders who have exceeded the 20% deforestation limit on their property, while the state of
Acre has established 15% cap on deforestation, and is effectively promoting economic activities that depend
upon forests as it suppresses pasture expansion (Nepstad et alli, 2002). 4
4
It is important, however, not to underestimate the remaining strong political opposition to the enforcement
of the Forest Code. In the elections to the government in Mato Grosso in October 2002, the local government
was defeated by a vast majority partially because of the resistance of rural producers against control on land
use issues. Not by coincidence, the new governor is the most important soybean producer in the Brazilian
Centre-West region.
There is also a trend for more involvement from municipal governments with environmental objectives. This
is a consequence of a series of programmes by governments, development agencies and NGOs, including
large-scale initiatives, such as the Pilot Program for Conservation of Brazilian Rainforests (PPG7), and others
more focused on specific issues, such as the “Fire Protocol”, that aims at improving local participation in
environmental protection.
Finally, there are specific efforts aiming at the forestry sector, the most important being the National Forests
logging concessions (FLONAs) in forests controlled by the federal government. So far, there has been a huge
failure in the implementation of large scale of sustainable logging in the Amazon. The idea of the FLONAs is
that long term leasing contracts of large tracts of forests are made with private corporations by international
auction, thus creating economic incentives for adequate management practices without “privatising” the land,
thus avoiding further encouragement for deforestation caused by the “property rights race” (Ferraz and Seroa
da Motta 2001).
However, there remain important challenges for the effective implementation of sustainable forestry
initiatives the Amazon, as expected with the growing flows of trade and capital in the sector. In the political
agenda, the strong resistance from the landowners to submit to environmental laws has been recently
demonstrated by the efforts of the ruralista lobby in the Brazilian Congress that is trying to change the Forest
Code in order to reduce the minimum of 80% of mandatory forest reserves in private properties in the
Amazon region. Other widespread problems are corruption and violence, mainly in the frontier areas, that end
up in the continuity of illegal deforestation and logging.
The economic conditions are crucial for the persisting trend of non-stoppable deforestation, in spite of the
cutbacks in official incentives and large-scale development projects in the region. The lack of financially
feasible alternatives induces the conversion of forests into pastures and cultivation land – a recent series of
studies sponsored by the World Bank has confirmed the hypothesis that cattle ranching and soybean
cultivation are financially sustainable, and that there is a learn-by-doing process that has increased
productivity in these activities. Even though there may be geographical limits to their expansion – particularly
rainfall, as shown by Schneider et alli (2000) 5 -, there is no reason to believe that there will be a reversal in
the deforestation trend in the near future.
5
Schneider et alli (2000) divide the Amazon in three large subregions according to the rainfall average: dry
(less than 1800mm/year), transition (between 1800mm and 2200mm/year;) and humid (more than
2200mm/year). Their argument is that cultivation will be mainly restricted to the dry areas; cattle ranching
can be successful in the dry and transition areas but, in general terms, not in the humid areas. Therefore,
logging will remain the main economic opportunity for the humid areas, equivalent to 45% of the total
Amazon, and rainfall and soil conditions will impose a natural barrier to the expansion of land conversion into
pastures and cultivation.
An important additional threat are development plans of the federal government. These plans foresee
investments in the infrastructure for the period 2000/2007, including the expansion of the road network to
transport soybean, a major export crop, and other commodities. Even if the further expansion of soybean
cultivation will not be based on more forest conversion (because of soil and rainfall conditions, less suitable
in the heart of the Amazon), the infrastructure investment will also reduce the costs of timber transport,
increasing the vulnerability to predatory extraction. The same is valid for the roads opened by loggers that
help ranchers and subsistence farmers to move deeper into previously protected forest areas (or Amerindians
reserves). Based on data from areas around previously paved roads in the Amazon, Nepstad et alli (2002)
forecast a huge threat to the forests around the affected roads: between 120,000 and 270,000 km2 to be
deforested in 25/35 years.
Therefore, there is no doubt that the expansion of the agricultural frontier, particularly for cattle ranching, will
represent an incentive for unsustainable logging. But one crucial question remains: are logging activities in
the Amazon necessarily predatory? And, if not, what are the circumstances in which the timber industry
becomes an ally in the fight for forest conservation?
Our hypothesis is that, even though logging has been traditionally associated with predatory deforestation (but
never its main power), sustainable logging activities can become financially feasible, and they can constitute a
crucial economic incentive (if not the most important) for the rational use-with-preservation of the forest.
International timber trade has an important role on this. In spite of being carried out in a predatory way in the
past, the most active forces that are pressuring a change in the nature of the logging activities in the region are
linked to external pressures. Considering that the most important source of demand is, and will remain,
domestic (with much less concern for the sustainability of the extraction), international timber trade must not
be perceived as an unconditional enemy (as many currently do in governments and NGOs) but as a potential
ally in the fight for controlling the main source of deforestation, which is the expansion of the agricultural
frontier.
4.
Tropical forestry, trade and governance in Brazil
4.1 Characteristics of tropical timber production and trade in Brazil
The decline of logging activities in Southern Brazil, caused by unsustainable extraction resulting in the
exhaustion of commercial reserves, has shifted the activity to the Amazon, which has become the most
important supplier of tropical wood in Brazil. To compensate the decline of primary reserves, plantations of
exotic species (eucalyptus, pinus) became the most important timber source in the Southeast and South
regions.
Table 1 shows the recent evolution of the total wood based exports. The pulp and paper sector is the most
dynamic and steadily increasing their share in total exports – it is already responsible for more than half of the
exports. But there is also a consistent trend of growth in the solid wood sector. Considering the period 19892001, the annual average rate of growth of solid wood exports was 13% (Graph 1).
Table 1. Brazilian exports of wood products (US$ Millions, current prices)
Products
1997
1998
1999
2000
2001
1. Solid wood
1.130
967
1.275
1.361
1.349
1.1. Sawnwood
411
410
483
519
532
1.2. Compensated panels
264
134
345
374
360
1.3. Plywood
97
64
54
49
37
1.4. Compressed fibre boards
79
64
56
54
62
1.5. Other wood products
279
295
337
365
358
2. Furniture
366
338
385
489
484
3. Cellulose pulp
947
970
1.192
1.603
1.248
4. Paper
966
924
901
941
942
Total
3.409
3.199
3.753
4.394
4.023
Source:Juvenal and Mattos (2002), based on Bracelpa, Abipa, Abimci e Abimovel.
Graph 1. Evolution of Brazilian wood exports, 1989-2001 (kg)
4500000000
4000000000
3500000000
3000000000
2500000000
Exports (kg)
2000000000
1500000000
1000000000
500000000
0
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Source: Own elaboration, using SECEX data
Despite of this expansion, foreign markets are not the main destination of Brazilian tropical timber: according
to Smeraldi and Verissimo (1999), the domestic consumers are responsible for 86% of the total demand, and
the state of São Paulo alone is responsible for consuming 20% of the total output of tropical timber from the
Brazilian Amazon (table 3, in Annex 1). Best quality timber is exported or destined to furniture and other
high-value uses in the Southeast and South regions, while most of the low value timber is directed to civil
construction. For the Eastern Amazon, the Northeast is also an important destination of the production.
Therefore, the share of Brazilian exports in the international timber trade is relatively small. The world market
for timber is estimated in around US$ 300 Billion, and the tropical woods represent around US$ 14 Billion.
Brazil has approximately 4% of the tropical timber market (around US$ 450 Million). Western Europe
(France, Spain, Portugal, UK) has always been a traditional destination of the Brazilian wood exports, but
recently North America (mainly USA) became the most important destination. Asia (Japan) and Latin
America have also increased their importance as importers of Brazilian wood and wood products (Graph 2).
Graph 2. Main destination of Brazilian wood exports, 1989-2001 (% of the total)
3 5 ,0 %
3 0 ,0 %
% of total exports
2 5 ,0 %
2 0 ,0 %
E u ro p e a n U n io n
NA F T A
L a tin A m e ric a (-M e xic o )
A s ia
1 5 ,0 %
1 0 ,0 %
5 ,0 %
0 ,0 %
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Source: Own elaboration, using SECEX data
The most important producer states in the Amazon are Pará, Mato Grosso, Rondônia, and Amazonas. The
state of Pará has an important volume of exports, but the domestic market remains the most important. In
Mato Grosso and Rondônia, the production is predominantly destined to domestic markets. Amazonas is the
fourth largest producer, but in this case the share of exports is considerably higher. As discussed further ahead
in this paper, the main reason for this export-driven trend in logging poles of the Amazonas state is related to
the fact that this state is relatively disconnected to the main road network, and most of the production is
transported via the Amazonas river, in contrast to the other states where roads are the most important way of
circulation of goods.
Another important trend in recent years for sawnwood exports from native forests has been the diversification
of tree species commercialised. In the late 1980s, mahogany and virola were responsible for more than 50%
of exports of sawnwood from Pará and Amapá. However, because of the growing scarcity of these highly
appreciated woods and the need to commercialise more trees in each harvesting plot (in order to reduce
extraction fix costs), their share has reduced even before trade restrictions were declared for these species in
the late 1990s (see Graph 3 for the evolution of mahogany sawnwood exports).
Graph 3. Evolution of mahogany exports (sawnwood), Pará and Amapá, 1987-97 (volume in m3 and % of
total sawnwood exports)
180000
60,0%
160000
50,0%
140000
40,0%
100000
30,0%
80000
60000
% in total sawnwood exports
Volume exported (m3)
120000
Seqüência2
Seqüência1
20,0%
40000
10,0%
20000
0
0,0%
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
Year
So
urce: Own elaboration, using AIMEX data
The aim of the government is to expand the share in world market to 10 % (US$ 1 Billion/year) but one
important constraint is the lack of compliance in terms of technical standards. To change this would require a
sudden increase in quality, something that is very difficult in the short term given the considerable investment
required, since most of the existing equipment is very old, and the difficulties to obtain credit.
4.2 Trade policies
Brazil is one of the countries where import-substitution policies were implemented at their full strength. This
strategy was based on the idea of inducing changes in the productive structure, with a strong presence of the
government leading the path to be followed by the private sector, in order to change the structure of the trade
balance, reducing the dependence on commodities exports and basic industrial goods imports.
For the timber sector, this meant the reduction of exports of raw materials (roundwood) and the increase in
exports of processed goods (sawnwood, pulp and final products). In practical terms, this resulted in the ban on
log exports in the early 1970s, and fiscal and credit incentives for the sector, particularly for the pulp and
paper (P&P) complex. This included vast amounts of money channelled to forest plantations in the South and
Southeast, since the scarcity of native timber was seen as a threat to the emerging P&P sector. Note that until
the 1970s, commercial timber extraction was mostly concentrated in the South and Southeast regions and,
despite its regional importance, the Amazonian logging sector was relatively minor.
However, with the decline of the Southern native forests, and the opening of roads connecting the North and
rest of the country, the Amazon gradually became the main supplier of tropical wood in Brazil. The ban on
log exports did not have the expected effect of increasing high-value exports, and the simultaneous opening of
the agricultural frontier “flooded” the domestic market with cheap timber. The most important processing and
furniture centres remained located in the Southeast and South of Brazil. The use of softwood from forest
plantations became an eventual substitute (even though not perfect, since they have lower quality) to deal with
the problem of increasing wood scarcity.
On the other hand, Amazonian exports became specialised in sawmill products. Despite the low quality of the
processing industry, these exports consist of the best woods, and therefore reach values considerably higher
than those usually paid in domestic markets.
The problem of specialisation in intermediary sawmill products was worsened by trade barriers in importing
countries that increase with the degree of processing of the product: very low for logs or sawnwood but
considerably more for products with higher added value. This creates a contradictory situation for developed
countries: while they internationally criticise unsustainable logging, their import system establishes an
implicit incentive for importing raw material from countries where logging occurs with less concern for
sustainability, and keeping timber prices at low levels.
In the domestic scenario, tariffs and taxes are considerably less relevant than regional development incentives
and sectoral policies for the development of the timber industry and trade. In that sense, "explicit
liberalisation" policies were less relevant than "implicit" policies (and circumstances) that favoured timber
exports. In the Brazilian case, therefore, the macroeconomic changes after the opening of the economy in the
1990s – particularly the removal of import barriers – had a limited impact on the timber industry. But some
aspects related to the macroeconomic management had specific effects that must be considered.
First of all, the high degree of instability is an important barrier against long term planning (a requirement for
sustainable practices). If the very high inflation was successfully controlled in the mid-1990s with the Plano
Real, uncertainty became related to other variables. The very high interest rates, a crucial element for the
short-term benefits of stabilisation, resulted in fiscal crisis, record levels of unemployment, and the
overvaluation of the real that has resulted in deep uncertainty (and speculation) with the exchange rate.
Therefore, external markets became attractive not only because prices (in domestic currency) increased
considerably after the successive exchange rate devaluations since 1999. They are also attractive because
foreign markets present less uncertainty in terms of risks of default, and because of the huge oscillations
within the Brazilian civil construction sector, the main source of domestic demand.
But one important limitation must be addressed. Theoretically, the devaluation of the exchange rate (most
notably in 1999, 2001 and 2002) would have encouraged greatly the expansion of timber exports.
Nevertheless, there are important obstacles for this. Market imperfections in the timber export markets, which
operates like an oligopsony since there are only a few traders in the business, impedes the devaluation gains to
be fully incorporated in the price paid to producers. This depends on the kind of contract that is established,
and in many circumstances the volatility of the exchange rate is a barrier to the access to credit since there is
more uncertainty for long term agreements. The higher the volatility and uncertainty about the exchange rate,
the more difficult is to get external credit to fund the commercialisation of the exports, reducing the incentives
to contracts in which the exporter obtain credit as an anticipation of the payment (ACC – anticipation of
exchange rate contracts) or increasing the interest rate in these operations.
The importer tends to pressure to lower the value of the timber product in US$ terms, arguing that the profit
for the exporter tends to increase because of the devaluation. This pressure may end up in the deterioration of
the terms of trade, resulting in lower international prices: total export values increase but at a smaller rate than
the volume of exports in physical units. In other words, the volatility and uncertainty caused by exchange rate
devaluation create negative impacts (lack of external credit for commercialisation or higher interest rates),
together with the pressure to lower the terms of trade, that may counterbalance the benefits of the devaluation,
and therefore the theoretical link between devaluation and export increase is not automatic.
Another element to be considered is that the international market is much more demanding in terms of
product quality and control of origin, thus requiring forest management plans and investment in the
processing capacity. Both aspects increase the fixed costs in production and, as a consequence, producers
have to increase the number of trees they extract from the same extraction plot (“talhão”) in order to increase
profitability. The recent trend of diversification of commercialised species is, therefore, not only a
consequence of growing scarcity of the most demanded species (mahogany, virola) but also a consequence of
the efforts of reducing the unit costs of production.
The lack of quality is not the only barrier to increase exports. The federal government has extended in the late
1990s an important incentive to increase exports: the so-called “Kandir Law” that reduces the incidence of
ICMS (a value-added tax) to timber exports. But those who really benefit from these incentives are the traders
that operate in the end of the chain, and not the producers. Most of the logging companies don’t know about
these incentives and, since many of them operates under circumstances that are not entirely legal, they tend to
avoid involvement with official programmes from the federal and state governments. Therefore, there is a lot
of scepticism about the possibility of increasing tropical timber exports as much as proposed by the Brazilian
government.
Sustainable management involves long tem results and, therefore, credit. The scarcity of funding, related to
the macroeconomic circumstances, worsened the situation because the high interest rates do not allow the
producer invest in the technical upgrade of the productive capacity. The official credit lines (through FINEX,
BNDES) provide better payment conditions for those who hire money, but as already said, traditional logging
companies tend to avoid this kind of involvement, and the official banks do not get involved with the tropical
timber sector because of the risk of supporting illegal activities. In that sense, the governance failures
concerning the tropical timber industry in Brazil has clearly brought negative economic conditions for their
operation. This provides a deep contrast to the planted forest sector, for both charcoal and P&P, which are
among the most favoured sectors in terms of fiscal and credit incentives in the last decades.
A different kind of problems affecting timber trade are related to the protection of endangered species, many
times followed by ban proposals, and the difficulties to enforce environmental protection measures (illegality,
corruption, etc.). These issues are analysed in the next section.
5.
Corruption, illegality and the ban on mahogany exports
5.1 The “predatory legality”
There is a wide consensus about the excessive importance given to the question of foreign markets and
companies in the discussion of the problems caused by logging activities in the Amazon. As already
discussed, the external demand for timber is not the greatest driver of illegality, since domestic demand is
higher. Moreover, even environmental NGOs nowadays recognise that the different circumstances of the
external market may affect positively the sector:
“Most of the external demand – especially those from European markets – tends today to have a
positive effect on the sustainability of wood production, because of the growing requirement of
certification and, therefore, it tends to influence the domestic demand, which remains responsible for
most of the consumption. It is possible to say that most of export companies have a higher level of
concern about the source of the raw material. The current scenario is, thus, compatible in general with
the intention of the National Forest Programme (PNF) in promoting the increase in exports at the same
time it promotes the adoption of sustainable management.” (Smeraldi et alli 2002, p.22)
The major exporters are aware that certification is becoming more and more an obligatory requirement, rather
than an option for getting a premium on prices. Nevertheless, there remain some exporters that keep on with
illegal practices, occupying a market niche that still accepts mahogany with no control of origin (according to
Smeraldi et alli 2002, mainly to the US market). Even though they represent a small fraction of the market,
they guarantee demand for those who operate illegally - international tropical timber trade is not the main
motivation for corruption in Brazil, but one cannot be naive and ignore that it happens (even though in smaller
scale than in domestic transactions).
It is also widely recognised that the most important problem is the lack of control on the timber destined to
domestic markets. While only one tree of mahogany is extracted in a few hectares; in areas such as
Paragominas where low value species are extracted for the domestic market, the destruction is considerably
higher. However, many argue that too much pressure is put on the control of the few forest management plans
that exist in the Amazon, even though the bulk of timber comes from “deforestation authorisations” that
receive much less attention from IBAMA.
The strategy so far to control this problem is through command-and-control practices. However, there are
many difficulties for their implementation:
a)
the degree of detection of illegality and corruption is low
b) even if a judicial process is opened, it requires technical knowledge from the justice staff that will
examine the process
c)
the process is slow
d) many times there are insufficient evidence (according to the law) for the total assurance required for
a guilty verdict
e)
even if there were a condemnation that requires the payment of a fine, this would come only after a
long waiting time. This reduces the value of the fine in terms of net present value, especially in a
country with one of the highest interest rates in the world, if compared to the to the benefit with the
(illegal) sale of the timber.
From the environmental agency perspective, the main problem is related to the complicated network of
intermediary agents that makes very difficult the control of the management plans. The follow up of the
timber can be done up to the first sale of the wood, but after that the extensive chain of forged buyers and
sellers “erases” the footprints of the timber.
Empirical evidence shows that the sawnwood exports that is declared at the end of the chain is not compatible
with the declared volume of logs from authorised management plans. The sawmills argue that they operate
with a higher efficiency in the conversion of logs into sawnwood than the one assumed by IBAMA, but most
of the independent specialists consider that this is not true. Instead, this “surplus” of wood comes from illegal
logging operations, using fake documents arguing that their source is legal. Another possible source, in this
case legal, is the authorisation for deforestation provided by IBAMA that allow landowners to deforest up to
20% of their properties in the Amazon: the extraction is unsustainable even though in most cases, legal
(“predatory legality”, according to Smeraldi et alli 2002).
5.2 Mahogany
The case of mahogany (Swietenia macrophylla) is the most dramatic example concerning the connections
linking trade and illegality. Between 1975 and 2001, Brazil exported around 4 million m3 of sawn mahogany
(equivalent to 12.6 million m3 of roundwood, assuming an average conversion factor of 45%), and 75% of
this were destined to foreign markets, mainly USA and UK. The total extraction in the same period was
estimated in 5.7 million m3 (Grogan et alli, 2002).
However, mahogany is a difficult species to regenerate after the removal of adult species because it requires a
series of circumstances (abundance of seeds, high levels of light and soil nutrients, and low level of
competition with other plant species) that are difficult to be reproduced. The literature usually associates the
higher densities of mahogany with catastrophic events that, somehow, have reduced the competition of other
species. And even if the plant germinates, it has to survive the attack of fungi and predators – the most
important being the shootboring moth (“broca do ponteiro”, or Hypsipyla grandella). Because of this,
experiences of commercial plantations of mahogany have been so far unsuccessful in the Brazilian Amazon,
despite the high value of the species. There are new experiments with positive signals, but yet to be replicated
at commercial scale.
As a consequence of predatory exploitation and difficult regeneration, there is a fast growing scarcity of
mahogany. The reaction of the Brazilian government has been to impose a series of trade restrictions since the
early 1990s.
The first measure was the establishing of export quotas decreasing in time: 150000 m3 in 1990, then 65000m3
in 1998, and 30000m3 in 2001. However, since illegal extraction remained, all exports of mahogany were
banned in December 2001, including those of sawnwood from timber extracted from legal management plans
Another measure was the closure of new mahogany management plans in 1996, and in 2001 the closure of all
remaining mahogany management plans dealing with mahogany because of fraud or technically inadequate
(Grogan et alli 2002). Yet the problem has not been entirely solved since mahogany remains exported, but
“disguised” as another species and, most importantly, the control on domestic market is almost none.
According to Grogan et alli (2002) the consequences of these measures have been disastrous. Since new
forest management plans were forbidden, five companies controlled almost all commercialisation of the
species because they have 81% of the previously issued logging authorisations. These five "mahogany kings”
have a long history of previous infractions, but are the main beneficiaries of the “conservation” policy
adopted for the mahogany since new plans are out of consideration at the moment. Therefore, new logging
initiatives based on sustainable principles have to face a big challenge: the competition from the predatory
logging (at considerable smaller costs) and are excluded from the trade in the most valuable species.
Moreover, because the federal government has concentrated all fiscal and credit incentives to areas already
converted, these incentives are vetoed for those who want to invest in sustainable forest management.
In contrast, the predatory logging industry is very mobile and does not depend on official credit schemes for
its funding. Hence, the more strict command and control strategies that have been applied on mahogany (and
on forest management plans dealing with other species) are very unlikely to succeed .
On the other hand, the ban on mahogany exports is a clear indication of the failure of the existing strategies
since it shows that the government agencies are not capable to control the few companies that deal with this
resource. The institutional weakness, particularly referring to the control of domestic oriented markets, has a
strong influence on the results of these policies.
There is an overall consensus among the specialists that the ban on mahogany is ineffective, particularly
because it does not control the mahogany that is destined to domestic markets and the “makeup” of mahogany
that is exported as a different species. However, one positive aspect is that it draws attention to the problem,
empowering those who campaign against illegal logging.
The reaction of some NGOs has been to campaign against imports of mahogany from Brazil. Their actions
have resulted in a legal decision in the USA that has embargoed the unloading of mahogany from ships
coming from Brazil until the Brazilian government declares if this cargo was legally obtained or not. This has
been effective curbing down the demand for mahogany in the developed countries, and has forced IBAMA to
rethink its strategy and action concerning the control of timber flows.
The legal basis for this action has been reinforced after the very recent inclusion of mahogany in the Annex II
of the Conference on International Trade of Endangered Species (CITES). This measure aims at tightening
the control on mahogany trade. The governments of Brazil and other tropical countries originally opposed this
idea with fears of disguised protectionism against their wood products.
However, since the Brazilian
government had already declared a ban on their mahogany exports, the CITES secretariat recommended a halt
on imports of mahogany from Brazil, a decision that was followed by the Environment Directorate of the
European Union. Therefore, there is no reason to believe in considerable changes in the institutional scenario
regulating mahogany trade. The problem will remain, however, at the domestic market, and the new federal
government is expected to reinforce the control on unsustainable mahogany extraction.
6.
Modelling logging activities in the Amazon
There is no doubt that logging activities in the Amazon are heterogeneous. Nevertheless, for analytical
purposes, they can be reduced to two “typical” groups of loggers. The “imediatistas” benefit from the advance
of the agricultural frontier in order to obtain cheap – but unsustainable - sources of timber. They are the
traditional logging sector in the region, operating with low levels of capital and technology, and therefore
offering low quality products. Their competitiveness is based on the lowest production costs, regardless of
the legitimacy of their actions: poaching, corruption, disregard to labour and fiscal principles, etc. Since they
have to move frequently after the exhaustion of local timber reserves, they tend to disregard investments in
the improvements in the process and quality of product. Therefore, their output is of poor quality and, thus, is
commercialised at lower prices and rejected in the top market niches.
The other group refers to “modern” loggers. They operate with high fix costs, and are not able to “move after
the wood” (migrate towards new frontier areas). Therefore, they depend on the maintenance of forest reserves
to continue their activities in the future. This group has perceived that the fight for sustainability is the only
way to preserve their businesses. They are aware that the competition from relatively cheap sources of timber
from land conversion damage their market position, since they have to operate with relatively more expensive
timber from sustainable management practices because (Ferraz and Seroa da Motta 2001):
-
selective extraction has to reckon on rotation, thus the extraction area has to be larger than the actual
pattern of exploitation
-
sustainable logging is more intensive in capital and human resources
-
necessity of post logging care in order to decrease waste
-
efficient infrastructure for transportation and costs associated with auditing, certification and
administration needed in order to attend rules and norms imposed on the concession
One way to surpass this problem is to guarantee a premium prize on sustainable timber or to get access to
better off consumers (usually via certification), but it is crucially dependent on the mood of consumers from
foreign markets – a variable that is very far from the control of Brazilian policy makers. The “modern”
loggers are moving towards certification, much more to get access to developed countries’ markets and to
diversify their products than because of price differential for certified timber.
In contrast, predatory loggers remain attached to less demanding markets, mainly inside Brazil. There is an
urgent need to turn the domestic market more rigorous about the source of the timber (and there is already one
effort in this way).
It is also important to bear in mind the many failures with the concession system involving export-oriented
logging. If the main motivation for the government involvement is to maximise the revenue raising from
charges, royalties and fees for forestry exploitation in the short term, there could be a perverse alliance with
rent-seeking logging companies. The disregard to the sustainability of the harvesting process, with concession
periods that were too short or logging areas that were too large, combined with failures in the implementation
of concession contracts (poor enforcement and/or monitoring problems, lack of credibility on government
sanctions) may lead to uncontrolled depletion of forest resources, as happened in Southeast Asia.
However, a different result can be obtained if the “modern” companies are encouraged under a proper
concession system. This could be the case of the National Forests (FLONAs), protected areas that can be used
for timber extraction under concession schemes, and extractivist reserves (which are oriented towards
communitary management). There are already 16.5 million hectares of FLONAS and 8 million hectares of
extractivist reserves in the Amazon. Their advantage is that they can reduce the supply of timber in the short
term, since they stop the process of frontier expansion (most of the timber that is commercialised today comes
from the conversion of forest into pastures or cultivation areas), thus allowing a scarcity factor that induce the
modernisation of the sector.
The modernisation of the timber industry must be oriented towards more efficiency and productivity in the
sawmill process, and improvements in the forest management plans. However, if not properly conducted, the
results may go to the opposite direction. For example, the growing scarcity in the Paragominas region has led
to the renewal of the truck’s fleet, so timber could be transported from remote extraction areas.
7.
Land tenure
The close connection with the problem of agricultural frontier expansion gives a crucial role to land property
and titling. In that sense, the "openness" of the frontier seems to be much more a challenge to governance than
trade and capital openness.
There was a considerable change in respect of the legality of logging in the Brazilian Amazon. While in the
first half of the 1990s most of the timber extraction was illegal (including mahogany destined to foreign
markets), an estimate for the years 2000/01 points out that around 80% of the wood production in the Amazon
were obtained legally: 75% from deforestation authorisations and 5% from forest management plans in
regular situation. The remaining 20% are obtained from illegal sources: 15% from protected areas and other
forms of poaching, and 5% from forest management plans with no regular situation (Smeraldi 2002).
The main reason for this change is related to more efforts in the enforcement of the legislation, with an
increase in the number of fines and apprehensions of illegal timber. As a consequence, the costs of operating
illegally increased substantially (Smeraldi, 2002, estimates that the cost of “legalising” illegal timber has
increased from five to ten times, thus reducing the incentive for corruption), becoming more expensive than
the raw material.
Smeraldi (2002) also complains that the supervision priorities of IBAMA are wrong: they are concentrating
their efforts looking for irregularities in the forest management plans, while the main priority would have to
be the deforestation authorisations (since they are responsible for most of the deforestation). The total volume
of timber coming from forest management plans cannot exceed 3 million m3/year, which is no more than 10%
of the total Amazonian wood output (the already addressed issue of “predatory legality”).
The causes for reducing illegality are related to the increasing number of legal requirements, and that there is
a cost for the company even if the fine is pardoned:
ƒ
the cost of legal advice and representation,
ƒ
the negative repercussion to the company’s image,
ƒ
access to credit may be affected,
ƒ
part of the raw material that is apprehended by the Justice may not be returned,
ƒ
and there is the risk of a vicious cycle of more bribes being asked within the legal system.
As a consequence, the number of forest management plans authorised by IBAMA has reduced considerably:
from the 2806 management plans that were originally monitored by IBAMA, only 866 were still legal in
December 2000 (plus 34 new plans), and in 2001 the number of forest management plans operating legally
was reduced to 490.
Most of the failures in the forest management plans are linked to problems of land tenure, particularly
grilagem (illegal appropriation of land, usually state-owned, based on falsified documents). Indeed, the
consequence for a serious company aiming at certified production destined to developed countries is to
verticalise the production, buying all the land it requires for the management plan. Moreover, this process is
costly and slow, because the land property titles have to be checked (there is widespread corruption and
falsification in land property issues in the Brazilian Amazon, plus a considerable share of genuine disputes
about border definitions and land rights for Indians and traditional communities).
As a consequence, there is a serious trend of land concentration by the logging/sawmill companies, with
obvious problems concerning the demands from the landless movement, and simultaneously a trend of capital
concentration: only large companies have the capital requirements to buy vast track of land. The risk is that
small scale logging companies that are not able to buy the land may be forced to illegality or out of the
market. There is a trend of land concentration and the improvement of forest management, particularly for
those aiming at external markets that result in potential governance conflicts even if "pure" environmental
goals are achieved.
This failure in targeting the main source of deforestation (deforestation authorisations within 20% of the
property) is connected to the expansion of the agricultural frontier and the land property problem in Brazil.
Most of the projects that provide land to landless farmers are in the Amazon, and since most of them do not
have funding, their easiest source of capital is the wood resources in the plots of land in where they are
settling. Since it is legal to deforest up to 20% in Amazonian properties (and the enforcement of this law is
very weak), these settlers become suppliers of the sawmills, who get cheap (but unsustainable) sources of
timber. Therefore, new supplies in “new” areas replace the scarcity effect in “old” regions.
8.
Certification and FLONAs
There is a strong association between international trade and certification: about 80% of the certified forest
management plans in the Amazon are destined to exports (Paulo Barreto, personal communication). The main
reason for export companies to obtain certification is to get access to certain markets where consumers (and,
therefore, retailers) are much more concerned about the sustainability of its origin. 6
Opening the access to these markets, the main advantage is not because of price premiums (in the beginning,
there was some expectation that this would increase prices, but the current perception is that certification is an
obligation of the supplier) but the possibility of introducing new species in the market. This is because the
implicit association between certification and better quality standards in the production process: even though
environmental certification does not assure product quality, it is an evidence that the company has a good
infrastructure and is able, if it wishes, to obey technical standards as well as environmental ones. As pointed
out by May and Veiga Neto (2000, p.4):
“A series of motivations stimulate an enterprise to seek certification, but paramount to these is the conquest
and/or maintenance of its market share. In an extremely competitive market, lack of certification is perceived
by various enterprises as a growing barrier both to access and retain markets. Although disagreement exists
between companies, another very important rationale is the price premium that can be obtained by
certification. For example, although Gethal’s primary motivation to attain certification had been its
positioning in the external market, the anticipated premium was also very significant. Most agree however
that any premium will be diluted as more firms enter the certified timber market, eventually disappearing as
costs are internalised across the board.” (may and Veiga Neto, 2000, p.
This process towards certification has been limited because of the relatively higher costs of “good
management” timber. The main financial barrier to certification does not refer to direct costs related to the
certification process itself but to the acquisition of land and more productive but expensive infrastructure and
machinery (mainly skidders). Land has to be bought because of the already addressed problem of illegality,
increasing the amount to be invested in the transition towards good forest management practices. Under the
macroeconomic circumstances of Brazil, where real interest rates are among the highest in the world, the
financial burden of the required investments creates a serious barrier to conversion to sustainable management
and certification since it has to compete with very cheap timber obtained either from legal deforestation
allowances or clandestine logging.
Nevertheless, for the companies that have the means of paying for it, it seems that the productivity gains
justify this transition towards better forest management. The overall impacts on governance are also positive,
since it helps the action of governments and civil society. The demand for independent certification has
6
“The external market is still the principal dynamic force motivating the impulse toward certification, despite
the recent creation in Brazil of the Certified Wood Buyers’ Group aimed at the domestic market. Enterprises
contacted were unanimous in pointing to their fear of losing their external market position, as well as the
possibility of opening channels to new business opportunities, as the primary rationale for certification.”(May
and Veiga Neto, 2000, p.7)
shown that there was a lack of credibility on the control actions by IBAMA and other official agencies,
forcing them to improve their performance. This has not been restricted to environmental issues. For example,
since labour rights are also expected to be respected in certified systems, the respect for the right of labour
unionism increases the capacity of organisation within the civil society.
This provides a deep contrast with the “typical” logging and sawmill companies where basic labour rights are
not respected - even though it is a big exaggeration the idea of associating the usual working conditions in
rural Amazon to hidden slavery, the fact that it has happened in some specific cases show that labour rights
tend not to be respected. Note that under the FSC certification, the most common among in the Brazilian
export sector, companies are expected not only to fulfil their legal requirements but also to go beyond the
existing legislation.
Another consequence was the establishment of a Brazilian certification system, CERFLOR, with support of
the federal government. CERFLOR is accredited by INMETRO (Brazilian Institute of Metrology), and its
five standards have been discussed mainly between the Brazilian Forestry Society (Sociedade Brasileira de
Silvicultura) and, more recently, with ABNT (Brazilian Association of Technical Standards). Nevertheless,
there is not yet any international recognition, and NGOs are suspicious about what they consider excessive
involvement of the forestry sector in the establishment of the certification. Therefore, it is not clear that this
initiative will be successful: since the demand for independent certification comes mainly from abroad, it is
unlikely that it will have the same credibility and acceptance within foreign consumers and investors.
The most important changes are within NGOs and their relationship with the private sector. Instead of acting
only as watchdogs, it created the opportunity for more participatory action with the private sector, with
partnerships being created between them and private companies. One good example was the active
participation of Brazilian NGOs in the structuring of FSC International in 1993, and the election of WWFBrazil as the executive secretary of FSC in Brazil in 1997.
Since it was clear that the main source of demand for tropical timber was within the country, there was further
NGO incentive to the creation of the Brazilian Association of Buyers of Certified Wood in 1998. This process
was heavily influenced by the expansion of certification in external markets, and a Brazilian branch of Friends
of the Earth (Amigos da Terra – Amazônia Brasileira) led the process with the support of other NGOs
(IMAZON, SOS Mata Atlântica, Greenpeace, and IPAM). The number of memberships within this
association, unique in tropical countries and including both tropical and non-tropical timber, has increased
quickly: in the period 1999-2002, the total area of certified forest management plans increased from 50,000 ha
to 330,000 ha (Mauro Armelin, personal communication).
However, the scarcity of certified raw material is the main constraint for its expansion. This imposes a
dilemma for the buyers: the lack of reliable supply of certified tropical timber shifts the demand for planted
species (eucalyptus, pinus), even though the quality of these products is considered inferior than the best
tropical hardwoods. This means that certified planted forests operate as a regulator of stocks in the timber
market.
On the other hand, there are specific markets for certified planted wood that will compete for this product,
increasing its scarcity. This problem of crowding out effect was clearly perceived when Plantar, a PCF
accredited project of pig iron and steel production using sustainable charcoal instead of coal, has increased its
purchasing, thus reducing the amount available for household and small business consumers of this product
(Mauro Armelin, personal communication).
There is some debate within the sector about the level of commitment with certification. A group of more
dynamic companies is establishing a Brazilian Association of Certified Producers, again with an
overwhelming participation of foreign-oriented companies. Their perception is that the traditional associations
of wood producers, the most important being AIMEX (Association of Wood Exporters from Pará and
Amapá), are too slow in the incorporation of these new trends.
On the other hand, AIMEX has also reacted. Originally created to organise local exporters and therefore to
have better co-ordination in price making (particularly mahogany), this association is becoming more
involved in issues such as forest management and the creation of a laboratory of tropical species seeds. There
is a pioneer experience of plantation of a tropical species (paricá). They share the diagnostic of increasing
scarcity of wood supplies in the medium term, and the need of impeding illegal extraction and the expansion
of concession schemes in public owned land (i.e. FLONAs).
There are a number of advantages of the establishment of FLONAs: there is no risk of the “race for property
rights”, since the land remains under federal or state government ownership. Land use decisions can be
decided according to social planning goals, under ecological-economic zoning principles, which theoretically
enables the consideration of the social values of the forest and is not subject to market failures. At the same
time, if properly enforced, they avoid the increase in cheap supplies of timber from the expansion of the
agricultural frontier, allowing that the scarcity factor increases the value of timber from forest management
plans. Since logging companies have to pay only for the concession, it reduces their fixed costs because they
do not have to buy the whole land to have their management plans approved. Reducing the need of
verticalisation, resources can be directed to the modernisation of sawmills, while it would avoid the need of
land concentration in the hands of loggers, and allows the operation of firms with less capital endowment.
Some companies are already investing in the improvement of quality (for example, Tramontina) trying to
increase their share in the international markets. Nevertheless, most of the exports are concentrated in low
value intermediate goods (sawnwood), and their commercialisation is controlled by an oligopsony of traders
specialised in primary benefiting. Producers have great difficulty in getting in foreign markets. Most of the
firms are low capital, family based, with low levels of managerial capacity and communication skills, unable
to prospect potential buyers abroad. Therefore they depend upon these middlemen to get access to foreign
markets (even though most of the rent is appropriated by those traders, the price paid to the producers is
higher than what is paid in the domestic market).
9.
Regional differences
Regional differences are also important to consider in the understanding of the governance impacts of
international timber trade. The Amazon is a complex region, and its heterogeneity is often forgotten in the
analysis. The objective of this section is to highlight the relevance of regional aspects, considering two
harvesting sawmill poles, one in Paragominas (State of Pará) and the other in Itacoatiara (State of Amazonas).
The reason for this choice is that they present an interesting contrast of circumstances, particularly in terms of
proximity of the agricultural frontier and closeness to domestic markets and roads, density of commercial tree
species and capital ownership, even though the states’ policies concerning forestry issues are relatively
similar. As a consequence, one became much more domestic-oriented (the Paragominas pole) and the other
more export-oriented (Itacoatiara), and this contrast provides interesting insights for understanding the
governance and trade connections. However, there is no intent to reduce the rich diversity of situations in the
Amazon in only two cases. The experience of self-organised “seringueiros” (rubber tree tapers) in the State of
Acre and the agricultural-led colonisation in the State of Rondônia are two examples of “models” with
different characteristics from those described below.
The pattern of timber and sawmill production in Paragominas follows the typical pattern of boom-bust
described for many other). The pole of Paragominas (east of Pará) started in the 1960s, mainly associated to
the opening of the Belém-Brasília road (the most way connecting the Amazon to the rest of country). At the
end of the 1980s, 124 sawmill were operating within the city, consuming 2 million m3/year. There was an
important component of external demand, particularly for mahogany, but the main driver of the process was
clearly the domestic demand.
However, this wood was obtained in an unsustainable way and during the 1990s production has
systematically declined: in 2001, less than 50% of the sawmills companies has been reduced to less than half,
with an output of 0,9 million m3/year (Veríssimo et alli 2002). The remaining companies have to face the
problem of obtaining logs more than 150 km away, thus increasing considerably the transportation costs.
Another way the survivors are managing to deal with the scarcity problem is to operate with secondary
products, such as furniture, that guarantee higher value products. However, there is no doubt that there was a
considerable decline in terms of employment and income generation in the region with the logging crisis. The
timber scarcity in the Eastern Pará forests has shifted the sawmill activities towards Novo Progresso, a new
booming pole in the west of Pará. In the early 1990s, there were no sawmills in the region. In 1998, the
number of sawmills were 19, consuming 0.3 million m3/year, while in 2001 there were already 60 companies
consuming 0.7 million m3/year. But this expansion is based upon the same predatory pattern, and if no
changes are introduced, there is no doubt this pole will face the same pattern of collapse observed in the
Paragominas region.
In contrast, the sawmill industry in the Itacoatiara pole presents some aspects that deeply differ from the usual
characteristics of this industry in the Amazon, particularly with the main sawmill centre in Paragominas, state
of Pará. First of all, exports represent the most important demand for the state’s production. This is connected
to the natural isolation of Amazonas, with no perennial roads connecting to the Centre-South regions, made
the river the main way of trading, in contrast to other areas of the Amazon which are connected by roads to
the rest of the country. Secondly, the degree of capital concentration in the logging and sawmill activities is
considerably higher. The main production pole is in Itacoatiara, 250 km from the state capital Manaos
(connected by the Amazon River and a paved road). There, a few companies are responsible for most of the
output, all of them in hands of foreign investors. The most important companies are foreign-owned, and their
production is almost completely directed towards foreign markets. Indeed, these four companies were
responsible in 1997 for 67% of the total value in wood exports from Amazonas, and more than 13% of the
total state exports.
Another important difference refers to a higher of concern about getting a “green” image in order to guarantee
export markets in the Northern Hemisphere. As a consequence, there was more concern about obtaining
certification of adequate forestry management practices.
Part of the reason for such a different pattern of behaviour if compared to other sawmill industries in the
Amazon is the relatively lower density of commercial species in the Itacoatiara region. Once-for-all timber
removal in this condition is much less profitable, and does not justify the intensive concentration of sawmills
observed in naturally more endowed areas of the Amazon (Paragominas being the most known example).
There was an attempt by the government of Amazonas to attract loggers from the Paragominas region in
1995, when it was already clear that scarcity was closing down many sawmills in Pará, but the loggers did not
show interest moving to the region.
Another difference in the Itacoatiara pole is that property rights are better defined, thus allowing the logging
companies to buy land and to assure reliable sources for their forest management plans. As a consequence, it
was widely reported that corruption was much less a problem in the Amazonas’ sawmill industry than in the
rest of the region.
However, maybe the single most explanation for the difference with the other logging poles in the Amazon is
the relatively stagnant agricultural production in the region. In the absence of the cheap wood supply from
forest conversion into agricultural land, there was less incentive for low-capital, rent-seeking companies.
Since the density of high-value species was smaller than in the neighbouring states of Pará and Mato Grosso,
this acted as a barrier for producers with low level of technology.
Altogether, in spite of episodes of corruption and unsustainable logging practices in some specific regions (for
example, the demand for fuelwood around earthware poles and Manaos), it can be said that logging activities
in the state does not represent the same threat to forest preservation as in other parts of the Amazon. Data
based on satellite images confirm that Amazonas is the state with the highest degree of forest preservation in
the Brazilian Amazon, with a total loss of less than 2% of its original area (see tables 2 and 3).
Nevertheless there is no reason to believe that this scenario will not change if the state of Amazonas becomes
connected to the main Brazilian road network. One of the objectives of the “Avança Brasil” development
programme is to pave the 663 km of the BR-319 road, connecting Manaos to Humaitá, which is already
connected to the rest of the country through the BR-364 (Cuiabá-Porto Velho) road. Since Manaos is already
connected to the state of Roraima through the recently paved BR-174 (which leads to Venezuela), this would
represent a North-South paved road axis that could open the centre of the Brazilian Amazon to the agricultural
frontier. Nepstad et alli (2000), based on previous patterns of deforestation cause by road projects in the
Amazon, forecast that paving the Br-319 could result in a deforestation area between 14,000 and 28,000 km2
in a period of 25-35 years. I this happens as in the other frontier areas, there is no doubt that there will be a
change in the nature of logging and sawmill activities in Amazonas.
In other words, the difference in logging activities between different poles is much more a consequence of the
specific circumstances in which they were developed than a higher degree of environmental concern. If the
example of Itacoatiara shows that export-oriented activities present less harm to the forest, if conditions are
levelled (i.e. the supply of timber from deforestation in areas of forest conversion to agriculture) there is no
reason to believe a priori that unsustainable practices will not prevail in Amazonas.
One must bear in mind that the environmental impacts of sawmill activities are not restricted to the threat of
deforestation. For example, only part of the sawmills residuals are used for energy generation, and the
remaining disposal is destined to a “lixão” (unmanaged area of waste disposal, which does not respect the
required safety standards for waste landfills) where they are burned without any control. This “lixão” is
relatively close to some residential units, and the smoke is a problem in the dry season. The industrial use of
these residuals for energy generation, using modern equipment, would reduce this problem, and if properly
adjusted, air emissions can be controlled in order to avoid local air pollution problems.
Finally, another problem is that much of the wood extracted and milled in the region is exported without
further transformation. The potential generation of income and employment is, therefore, reduced if compared
to higher value products. The Municipality of Itacoatiara is trying to aggregate the isolated furniture
producers in the city, providing technical assistance and other facilities, in order to establish a furniture pole
that could generate higher value added products and more skilled jobs.
10. Foreign investment and capital ownership
There were many concerns within the environmentalist community when Asian companies declared in the
mid-1990s that they were intending to operate in large scale the Amazon because the natural reserves of South
East Asia were declining rapidly. Indeed, despite of an important number of large, export-oriented companies,
the timber industry is predominantly composed by domestic-owned companies – according to Laplane et alli
(2001), the timber sector were responsible for only 0.1% of the total stock of foreign owned companies in
Brazil until 1999 (in contrast with the pulp and paper sector, which has received 3.3% of the foreign capital).
However, the so feared “Asian invasion” in the Amazon did not happen since only a few companies were
effectively bought, and many of them are out of the market now. The most important reasons for this are:
-
Technical problems: in the Amazon, there is more diversity of species, with lower density of high value
trees, than in South East Asia
-
“Visibility” problems: the issue caught a lot of attention in the Brazilian media, and the civil society has
shown a huge concern about the action of the foreign companies. The consequences were the increase of
controls and inspections, with positive benefits for raising the issue of illegal logging in the overall
Amazon. Indeed, many of the specialists agreed with the idea that there was a very positive outcome for
governance from the “Asian” episode: there was more visibility to the problem of illegal logging and, in
general, the sustainability of logging in the Amazon, empowering those responsible for the enforcement
of legislation in the region.
-
Political problems: logging companies in South East Asia were used to deal with authoritarian regimes,
with high degree of corruption and lack of control by the civil society. This resulted in spurious links
between the bureaucracy controlling the access to the forest resources and the logging companies, but
these links could not be established in the Brazilian Amazon. Even though widespread corruption is also
a problem in the region, there is no doubt that the democratisation process in Brazil has created stronger
mechanisms for the civil society to control economic activities. Therefore, in this particular case at least,
the final outcome of the process was deeply affected by the advances in the political regime, with a
virtuous cycle of improving democracy and governance. An interesting counterfact question is whether
the permanence of the military-authoritarian regime would have resulted in a different scenario, and my
hypothesis is that similar links as established in South East would have been predominant, with perverse
consequences for forest conservation and governance as a whole.
-
Economic problems: the logging industry is recovering its dynamics in South East Asia, among other
reasons because their governments have reacted to the scarcity problems in their regions, with new
schemes to reduce the volume of log exports (such as bans in Indonesia and the Philippines, or incentives
to exports of benefited products in Malaysia). On the other hand, the slowdown in the world economy
demand for timber, has shown that the original scenario was excessively optimistic about tropical timber
demand projections.
But a positive outcome of this process was to increase the visibility previously existing governance failures.
This point was raised by many of the specialists (and, most importantly, for those responsible for repression
activities): there was a positive effect of the expansion of international trade and transnational companies
activities (particularly the "Asians") because environmental agencies were empowered to enforce the law after
the media exposure of the problem, and it became evident that there was a need to increase the managerial
capacity for the sector in all aspects, including the lack of sustainability in their extraction practices.
Therefore, under the specific conditions of the Brazilian Amazon in the 1990s, the possibility of expanding
the “globalisation” of the timber industry has resulted in a “shock of visibility” of structural problems, with
mostly positive consequences for forest governance. However, this cannot be dissociated to the political
stability under democracy that was simultaneous to the expansion of timber exports in the Amazon. This has
affected governance as a whole, and there is no doubt that the empowerment of the society has increased. This
resulted in more awareness about decisions that were previously decided by the technocratic elite, with no
effective debate in the society. In particular, the expansion of NGOs in Brazil and, more specifically, in the
Amazon region, has contributed to a more effective control of environmental actions, including true attempts
to put in practice legislation that previously was not enforced.
11. Conclusion
There is no simple answer to the question on how forest governance was affected by the increasing
importance of foreign trade and investment., since there were different mechanisms connecting both issues.
Nevertheless, it can be said that the positive impacts have surpassed the negative ones. Among the positive
effects, it can be said that the growing attention to international trade and capital in logging and sawmill
activities has brought more attention to the problem, especially because the high degree of sensitiveness that
Brazilians show about foreign interference in the Amazon. With more visibility, particularly associated with
the coverage of problems of illegal logging in programmes with national TV broadcasting and the fear of an
“Asian invasion” in the Amazonian forests, there was more empowerment for those responsible for
controlling the forest sector.
Another positive outcome was the incentive for certification schemes. There is no doubt that export-oriented
firms have pioneered this process, with an important demonstration effect that has resulted in the creation of a
Brazilian association of buyers of certified wood and an embrionary Brazilian association of certified wood
producers. This brings a very positive aid to governance since one of the most important requirements for the
FSC certification (that dominates the Brazilian scenario) is that the company is fully obeying the national
laws, not only concerning environmental standards but also in terms of labour rights, land tenure and fiscal
issues.
On the other hand, there remain some specific problems to governance that can be associated to international
trade. There was some additional fuel for corruption in specific market niches, mainly connected to mahogany
exports. Even though the volume of timber is relatively small if compared to the illegal practices within the
domestic market, they are an important source to finance corruption. The attempt of the Brazilian government
to control this by banning new concessions for mahogany exports has not solved the problem, and according
to many specialists, has increased the practice of corruption.
Another problem has been the change of priority in the inspection and control practices by IBAMA. Because
of the higher concern with activities connected to foreign companies in the Amazon, there was an excessive
concentration on the control of forest management plans, and relatively less concern for the supervision of the
deforestation authorisations, which represent a considerable higher volume of logging activities and usually
carried out under much worse circumstances for sustainability.
In that sense, the governance problem cannot be detached from the question of land tenure and settling in the
Amazon. The growing demand for certification has reduced the problem of timber coming from deforestation,
but at the cost of increasing land property concentration: usually, the only way to be sure that the wood has
come from sustainable practices is to buy all the land involved in the management plan. The logging
companies end up becoming “latifundiários” (big landowners), with problems of:
-
allocating resources to buying land instead of the modernisation in production
-
capital concentration: the cost of acquiring and legalising land becomes a barrier to smaller
companies that would like to be involved in sustainable logging
-
social tensions, since “latifúndios” are an usual target for invasions
In any case, there is no doubt that these problems to governance associated to foreign trade and capital are not
bigger than those associated with the domestic markets. Since most of the output is directed to domestic
commercialisation, which is less controlled (exports can be supervised at the ports, while most of the
domestic consumption comes via roads by trucks, much more difficult to control) and less concerned for the
question of the origin of the wood, there is no doubt that a cessation of exports would not solve the problem
of governance. By the opposite, there is a growing concern that the role of external pressure on foreign
importers and investors is crucial to improve governance in the region. There is a need to improve the control
on logging activities as a whole, and even though the incentive to domestic markets for certified timber is an
important step, it won’t be enough to solve the problem.
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