Financial analysis of sustained forest management for timber: Perspectives for application of the CELOS management system in Brazilian Amazonia

Abstract

Sustained management of the Terra Firme Forest in Amazonia is financially analysed for an integrated forest management and timber processing industry. Two scenarios are studied, one with reduced impact logging (RIL) and sparing of reserves without silvicultural follow-up in a 100-year harvesting cycle, and another one inclusive of silviculture after RIL, liberating reserves in a 25-year cycle. Cycle lengths are based on CELOS research in Suriname. Acquisition of land is assumed to be complete at the beginning, the 100-year cycle option needing four times as much land as the 25-year cycle option. A cash flow analysis over a 100-year period for both options with a 8% discount rate shows that the total costs in the land-intensive option (25 years) with silviculture are considerably less than in the land-extensive option; the lower cost of infrastructure, log transportation and land acquisition offset the cost of silviculture. Because the annual revenues from timber sale are the same in both options, the NPV of the intensive option is also much higher. A sensitivity analysis shows that the land-intensive option is expected to give still a positive NPV in less favourable situations. The relatively small forest area in the land-intensive option together with the organisational setting, which includes integration with the processing industry, favours a sustainable development. More intensive management gives signals to settlers that helps prevent their encroachment. In addition, the higher annual increment in this option facilitates a contribution to regional development and makes a larger area available for strict nature reserves.