Economic feasibility of timber management in extractive settlement projects of southwestern Amazonia

Ricardo Da Silveira Carvalho,Antônio Donizette De Oliveira

doi:10.1590/s0104-77602010000400010

Abstract

Even recognizing the frailty of an isolated financial analysis for casting a glance at sustainability, it was decided that the analysis should be done because it is the market rationality, more financialized today than ever before, that embraces the macro environment in which to base forestry management, and thus it decisively influences its technical and decision-making foundations. Profitability is the most significant indicator of success, according to hegemonic thought. This work aims to investigate whether extractive forestry management as practiced in two communities of Acre state is financially feasible on the scales adopted for the 2005/2006 crop, and also to test result sensitivity against interest rate and subsidy swings. Net Present Value (NPV) was the indicator of choice to verify financial feasibility. Within the context of this particular subsidized crop, all six scales were found feasible, at all discount rates being considered. However, this feasibility is only confirmed upon evaluation of the cooperative's cash flow - which ultimately is an extension of each forest worker's cash flow -, resulting from subsidies granted on the price paid for timber. In a hypothetical situation, where subsidies are removed, only the larger scale operation (9.8 m³/ha) showed a positive NPV, again at all rates being considered.

Highlights

Community-based forestry management has been a common strategy in programs supporting local populations in preserving forests and improving livelihood conditions (AMARAL & AMARAL NETO 2005)
D. de production costs and sale prices, meaning that profitability prevails over the socioenvironmental aspects that are present in the concept ‘sustainable development’
Extractive forest workers being no price makers, whether working in large or small scale operations, competitiveness will be based on the costs incurred to undertake the activity

Summary

Introduction

Community-based forestry management has been a common strategy in programs supporting local populations in preserving forests and improving livelihood conditions (AMARAL & AMARAL NETO 2005). Moved by the principles of sustainable development, Benatti et al (2003) argue that the vast majority of projects and programs designed to disseminate forestry management among Amazonia communities ‘are a mere adaptation of a business-oriented forestry management model, that is, the harvested timber supplies a sawmill that in turn produces sawn wood’. In this business rationale which, for most development theorists, is key to the development of business minded entrepreneurs, feasibility is verified on the basis of CARVALHO, R. da S. Average costs will be directly dependent on both the productivity and scale adopted, and this will likely lead forest workers to operate on the ssaamee vvoolluummeettrricc ssccaallee((mm3/3h/haa))as their corporate counterparts and/or to rely on subsidies should their strategy be to compete in the same commodity market where timber businesses are operating

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