Download Report - Independent Evaluation Group - World Bank

Summary
subsidies were eliminated as part of economic reforms and general reductions
in subsidies. This study explores the potentially synergistic relationship
between plantation forests and natural forests, as a majority
of Brazil’s wood consumption is domestic and a large portion is used in
the urban manufacturing sector, creating a continued demand stimulus.
Unlike other countries with tropical moist forests, Brazil exports a small
share of its annual harvest, about 14 percent. Increased investment in
plantations in the southern part of Brazil would provide an important
supply substitute for wood from natural forests.
Potential Impacts of Policy Reform
Two quite different themes emerge from the analysis of Brazil’s forest
sector in this report. One, which analyzed the profitability of smallholder
agriculture in the Western Amazon, emphasizes the extent of
tradeoffs between the developmental and environmental objectives in
the short and medium term at the farm level, highlighting the central
issue of the presence of externalities acknowledged but not addressed in
the Bank’s 1991 Forest Strategy. It concludes that reform in forest policies
would marginally slow deforestation—but not stop it altogether.
Indeed, returns to managed forests (on which the 1991 Forest Strategy
itself contained three widely different definitions, with no clarity as to
which one of those was to be applied in Bank operations) do not compare
with the prevailing interest rates or with the opportunity costs of
alternative land uses. Returns to agriculture in the Western Amazon are
so powerful that land conversion is likely to continue even if forest
policies are modified to improve the profitability and sustainability of
forest management.
Government investments in Brazil’s transportation infrastructure reinforce
these returns. Economic and sector work discussed with the government
in the early 1990s had reached a similar conclusion and suggested
that only “economic protection” of forests, caused either by remoteness
or inaccessibility or both, would result in forest protection,
stressing the need for an intensive rather than an extensive transportation
network.
The extent of payments to landowners not to convert forests (in return
for the globally beneficial environmental services of carbon sequestration
and biodiversity conservation), and the mechanisms to
achieve this remain a matter of much debate. Similarly debated is whether
the Brazilian government or other agents within Brazil can afford the
annual per-hectare payments, or if the international community would
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