Financial returns from sustainable forest management and selected agricultural land-use options in Costa Rica

Abstract

The ‘front-line’ in the war against deforestation is decision-making by individual landowners and other stewards about land-use allocation which, according to economic theory, involves the unbiased comparison of returns from competing options. In this study discounted cash flow analysis is used to estimate the potential returns from three land-use options available to landowners in Costa Rica: sustainable forest management, cattle ranching, and crop production. A growth-and-yield projection model was used to predict the periodic timber yields from a sample of forests in the three most important timber producing regions: the south, north, and Atlantic zones. Information on product yields and costs for the agricultural alternatives was obtained from interviews with farmers. Price data for both timber and agricultural products including historic rates of change were taken from a recent study investigating price trends. The findings suggest that landowners are not basing their land-use decisions on economic grounds alone, and that alternative explanations for their behavior must be sought. Two possible reasons are that landowners may be averse to the periodic nature of the cash flows associated with forest management and/or they may lack basic information on the potential returns and technical requirements for the forestry alternative. Suggestions for government policies needed to promote retention of the remaining natural tropical rainforests are offered.