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Capacity for Timber Management among Private Small-Medium Forest Enterprises in Madre de Dios, Peru

Permanent Link: http://ufdc.ufl.edu/UFE0024380/00001

Material Information

Title: Capacity for Timber Management among Private Small-Medium Forest Enterprises in Madre de Dios, Peru
Physical Description: 1 online resource (275 p.)
Language: english
Creator: Cossio, Rosa
Publisher: University of Florida
Place of Publication: Gainesville, Fla.
Publication Date: 2009

Subjects

Subjects / Keywords: peru, sfm, smfes, timber
Interdisciplinary Ecology -- Dissertations, Academic -- UF
Genre: Interdisciplinary Ecology thesis, Ph.D.
bibliography   ( marcgt )
theses   ( marcgt )
government publication (state, provincial, terriorial, dependent)   ( marcgt )
born-digital   ( sobekcm )
Electronic Thesis or Dissertation

Notes

Abstract: Madre de Dios is one of the few mega-diverse zones in the world, which possesses some of the last intact commercial populations of mahogany (Swietenia macrophylla). This Department has been suffering from severe forest degradation in the past several years, due principally to illegal logging of mahogany. The forest concession system, the heart of the first legal framework to promote sustainability in the use/management of Peruvian forests (the 2000 Forestry and Wildlife Law Ndegree 27308), is being implemented in the department and private small-medium forest enterprises (SMFEs) have become the most important social actors engaged in forest management there. However, the management and conservation of Madre de Dios permanent production forests, while improving the livelihoods of local inhabitants (i.e., small-medium entrepreneurs) is not a simple task since it also involves the interests and actions of several different actors. Drawing from the literature on capital and political ecology, this study explores the capacities of private SMFEs to carry out forest management for timber production and the influence that the main stakeholders of the forest sector have on that capacity. Data from a census of 29 private SMFEs, and from a purposive sample of 29 representatives of forest organizations (representatives of NGOs, government, and grassroots organizations), were collected from face-to-face interviews. Multivariate analysis of variance was used to determine whether the population means of the sets of dependable variables (types of capital) vary across levels of province, certification status in the Department, and certification plans in the Tahuamanu province. Qualitative data analysis was used for the purposive sample to evaluate the actions and roles of forest actors in the concession system and how they influence private SMFEs performance for forest management. Results indicate that: (1) the forest concession system was not set up with adequate state resources for sufficient oversight to ensure legal forest management; (2) NGO support proved crucial, but constituted a patchwork with little coordination and many shifts in priorities and collaborations due to limited capacity and problematic management of expectations; (3) private SMFEs, while needing assistance from NGOs, received very short-term assistance instead of sustained support over time; (4) private SMFEs vary greatly in their capacity by province and certification status (this especially occurs in terms of their produced and natural capital assets), and while most lack adequate capacity for sustainable forest management certification, those that attained certification received more support for it from NGOs. Important implications of this study include the need for policies that can strengthen the institutional framework to maintain more responsible forest practices in the future and can develop SMFEs capacities for forest management with mechanisms that secure consistent assistance (technical, financial, access to information).
General Note: In the series University of Florida Digital Collections.
General Note: Includes vita.
Bibliography: Includes bibliographical references.
Source of Description: Description based on online resource; title from PDF title page.
Source of Description: This bibliographic record is available under the Creative Commons CC0 public domain dedication. The University of Florida Libraries, as creator of this bibliographic record, has waived all rights to it worldwide under copyright law, including all related and neighboring rights, to the extent allowed by law.
Statement of Responsibility: by Rosa Cossio.
Thesis: Thesis (Ph.D.)--University of Florida, 2009.
Local: Adviser: Perz, Stephen G.
Local: Co-adviser: Kainer, Karen A.

Record Information

Source Institution: UFRGP
Rights Management: Applicable rights reserved.
Classification: lcc - LD1780 2009
System ID: UFE0024380:00001

Permanent Link: http://ufdc.ufl.edu/UFE0024380/00001

Material Information

Title: Capacity for Timber Management among Private Small-Medium Forest Enterprises in Madre de Dios, Peru
Physical Description: 1 online resource (275 p.)
Language: english
Creator: Cossio, Rosa
Publisher: University of Florida
Place of Publication: Gainesville, Fla.
Publication Date: 2009

Subjects

Subjects / Keywords: peru, sfm, smfes, timber
Interdisciplinary Ecology -- Dissertations, Academic -- UF
Genre: Interdisciplinary Ecology thesis, Ph.D.
bibliography   ( marcgt )
theses   ( marcgt )
government publication (state, provincial, terriorial, dependent)   ( marcgt )
born-digital   ( sobekcm )
Electronic Thesis or Dissertation

Notes

Abstract: Madre de Dios is one of the few mega-diverse zones in the world, which possesses some of the last intact commercial populations of mahogany (Swietenia macrophylla). This Department has been suffering from severe forest degradation in the past several years, due principally to illegal logging of mahogany. The forest concession system, the heart of the first legal framework to promote sustainability in the use/management of Peruvian forests (the 2000 Forestry and Wildlife Law Ndegree 27308), is being implemented in the department and private small-medium forest enterprises (SMFEs) have become the most important social actors engaged in forest management there. However, the management and conservation of Madre de Dios permanent production forests, while improving the livelihoods of local inhabitants (i.e., small-medium entrepreneurs) is not a simple task since it also involves the interests and actions of several different actors. Drawing from the literature on capital and political ecology, this study explores the capacities of private SMFEs to carry out forest management for timber production and the influence that the main stakeholders of the forest sector have on that capacity. Data from a census of 29 private SMFEs, and from a purposive sample of 29 representatives of forest organizations (representatives of NGOs, government, and grassroots organizations), were collected from face-to-face interviews. Multivariate analysis of variance was used to determine whether the population means of the sets of dependable variables (types of capital) vary across levels of province, certification status in the Department, and certification plans in the Tahuamanu province. Qualitative data analysis was used for the purposive sample to evaluate the actions and roles of forest actors in the concession system and how they influence private SMFEs performance for forest management. Results indicate that: (1) the forest concession system was not set up with adequate state resources for sufficient oversight to ensure legal forest management; (2) NGO support proved crucial, but constituted a patchwork with little coordination and many shifts in priorities and collaborations due to limited capacity and problematic management of expectations; (3) private SMFEs, while needing assistance from NGOs, received very short-term assistance instead of sustained support over time; (4) private SMFEs vary greatly in their capacity by province and certification status (this especially occurs in terms of their produced and natural capital assets), and while most lack adequate capacity for sustainable forest management certification, those that attained certification received more support for it from NGOs. Important implications of this study include the need for policies that can strengthen the institutional framework to maintain more responsible forest practices in the future and can develop SMFEs capacities for forest management with mechanisms that secure consistent assistance (technical, financial, access to information).
General Note: In the series University of Florida Digital Collections.
General Note: Includes vita.
Bibliography: Includes bibliographical references.
Source of Description: Description based on online resource; title from PDF title page.
Source of Description: This bibliographic record is available under the Creative Commons CC0 public domain dedication. The University of Florida Libraries, as creator of this bibliographic record, has waived all rights to it worldwide under copyright law, including all related and neighboring rights, to the extent allowed by law.
Statement of Responsibility: by Rosa Cossio.
Thesis: Thesis (Ph.D.)--University of Florida, 2009.
Local: Adviser: Perz, Stephen G.
Local: Co-adviser: Kainer, Karen A.

Record Information

Source Institution: UFRGP
Rights Management: Applicable rights reserved.
Classification: lcc - LD1780 2009
System ID: UFE0024380:00001


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1 CAP ACIT Y FOR TIMBER MANAGEMENT AMONG PRIVATE SMALL -MEDIUM FOREST ENTERPRISES IN MADRE DE DIOS, PERU By ROSA E. COSSIO SOLANO A DISSERTATION PRESENTED TO THE GRADUATE SCHOOL OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLME NT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY UNIVERSITY OF FLORIDA 2009

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2 2009 Rosa E. Cosso-Solano

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3 To my parents, sister, brother, and nephew who were always with me, even at the distance, giving me their love and support to reach my goals in life To the memory of my lovely grandparents Luisa and Pedro, who will be always with me

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4 ACKNOWLEDGMENTS Many people and institutions have been gracious and supportive to me in all these years of d issertation development. I am truly grateful to the following for helping me in the development and completion of this small piece of academic work. I thank t he Tropical Conservation and Development Program (TCD) of the University of Florida t he American Association of University Women (AAUW) t he International Tropical Timber Organization (ITTO), and the NSF Human and Social Dimensions Infrastructure Change, Human Agency and Resilience in Social -Ecological Systems Project for its valuable economic funding, which made possible the realization of my Ph D studies and field work. I would also like to take this opportunity to thank m y chair Dr. Steven Perz and co -chair Dr. Karen Kainer T heir guidance patience, and valuable suggestions in all this process of dissertation development were very important to the improvement and completion of this study. I also thank the members of my committee : Dr. Marianne Schmink, Dr. Robert Buschbac h er, and Dr. David Bray for their constructive comments I would like to thank the many other people in the Department s of Madre de Dios and Lima for their acceptance to participate in my study and for their cooperation and patience during the interviews. Particular thanks goes to the representatives of the private SMFEs in Madre de Dios that I interviewed : Hugo, Luis Valdivia, Vctor Espinoza, Ignacio Crdenas Federico Ros, Fernando Quezada, Jil Cesar Gibaja, Elmer Hermoza, Ral Villafn, Abraham Cardozo, Rafael Viena, Sonia Blanco, Wilson Miranda, Julio Chirinos, Moiss Lazo, Mar garita Pari, Justino Palomino, Manuel Martn Mayorga, Vctor Herrera, Segundo, Simen Surez, Hiplito Chulla, Fortunato Cruzado, Isabel Almirn Torres, Marco Antonio Texi, and Apolinario Fernndez

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5 I would also like to thank the following representatives of NGOs, government, and multi stakeholder organizations : Roberto Kometter, Summer Trejo Miguel Pacheco Jaime Semizo Mikel Manrique Favio Ros, Nelson Mel ndez Jorge Alva Juan Carlos Flores Franz Segovia Alonso Crdoba Mariana Cerna, Edith Meza C elim Huamn Jenny Fano, Edwin Ruiz Mishari Garca Vctor Zambrano, Arnaldo Garca Luis Zegarra Cajat Ernesto Villagaray, Deuso Souza Francisco Ruiz Ricardo Estrada Mauro Vela Hugo Che Piu, Wilfredo Ojeda A special note of appreciation is reserved for the following people for their constant support in the realization of my dissertation and for their friendship: Agricultural Technician Tania Yabar, Forest Engineer Edith Condori Forest Engineer Gast n Chucos and Forest Engineer Carlos Ynami. I woul d like to thank m y friends at UF who were there to listen to me in moments of frustration, and excitement Finally, I would like to thank my family (parents, sister, brother, and nephew) for their unconditional love; and to my husband, for his love care, and constant support and especially for his patience and long hours spent in correcting my grammar and helping me to better organize my dissertation. The presence of all of them motivated me to finish my dissertation.

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6 TABLE OF CONTENTS page ACKNOWLEDGMENTS .................................................................................................................... 4 LIST OF TABLES ................................................................................................................................ 9 LIST OF FIGURES ............................................................................................................................ 10 ABSTRACT ........................................................................................................................................ 11 CHAPTER 1 INTRODUCTION: FOREST MANAGEMENT OF TROPICAL FORESTS ....................... 13 Small -Medium Forest Operators in Peru ................................................................................... 13 Current Forest Management Details in the Peruvian Amazon ................................................. 18 Study Objectives ......................................................................................................................... 20 Theoretical Framework ............................................................................................................... 22 Political Ecology as a Theoretical Framework .................................................................. 22 Capital as a Theoretical Framework ................................................................................... 28 Dissertation Organization ........................................................................................................... 33 2 BACKGROUND INFORMATION ON THE STUDY AREA ............................................... 35 Overview ...................................................................................................................................... 35 International Tropical Forest Management Initiatives .............................................................. 37 Historical Overview ............................................................................................................. 37 The Forest Stewardship Council as a Predominant Initiative in Latin America ............. 40 Motivations to attain forest certification ..................................................................... 43 Challenges/limitations of forest certification ............................................................. 44 History of Tropical Forest Management in Peru ....................................................................... 47 From the Republican Era to the 1960s: Uncontrolled Extractivism to Incipient Regulation ......................................................................................................................... 47 Period 19752000: The First Forestry Law ..................................................................... 49 Development of the Concession System: The New Forestry Law ................................... 51 Development of the Forest Certification Initiative: the Peruvian Council for Voluntary Forest Certification ........................................................................................ 57 Study Region: Madre de Dios .................................................................................................... 60 Location and Population...................................................................................................... 60 Biophysical Characteristics ................................................................................................. 62 History of Land Use and Occupation ................................................................................. 63 Contemporary Economic Activities in Madre de Dios ..................................................... 64 Extractive Activities ..................................................................................................... 64 Farming ......................................................................................................................... 66 Conservation ................................................................................................................. 66 Summary ...................................................................................................................................... 66

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7 3 QUESTIONNAIRE DEVELOPMENT, SURVEY ADMINISTRATION, AND DATA ANALYSIS ................................................................................................................................. 68 Introduct ion ................................................................................................................................. 68 Survey Questionnaires ................................................................................................................ 68 Forest Organization Questionnaire ..................................................................................... 68 Small -Medium Forest Enterprise Questionnaire ............................................................... 69 Survey Implementation ............................................................................................................... 72 Small -Medium Forest Enterprise Questionnaire Testi ng and Revision ........................... 72 Sample Size .......................................................................................................................... 73 Implementation of the SMFE and Forest Organization Surveys ...................................... 76 Data Compilation and Management .......................................................................................... 80 Data Analysis: Components of the Analysis ............................................................................. 83 4 THE NEW FOREST CONCESSION SYSTEM: A STAKEHOLDER APPROACH .......... 87 Introduction ................................................................................................................................. 87 Beginning of the Forest Concession System in Madre de Dios ............................................... 91 Implementation of the Forest Concession System .................................................................... 93 Stakeholders and the Evolution of the Forest Concession System in Madre de Dios ............ 98 Governmental Organizations ............................................................................................ 101 1. The National Institute of Natural Resources (INRENA) ..................................... 103 2. The Promotional Fund for Forest Development (FONDEBOSQUE) ................ 111 Environmental NGOs ........................................................................................................ 115 1. The Assoc iation for Conservation of the Amazon Basin (ACCA) ..................... 115 2. Cooperazione e Sviluppo (CESVI) ....................................................................... 118 3. The Peruvian Fund for Nature Co nservation (ProNaturaleza) ............................ 122 4. The World Wide Fund for Nature (WWF) ........................................................... 125 Multi -stakeholder consultative organizations .................................................................. 136 1. The Roundtable for Dialogue and Forestry Consensus (MDCF) ........................ 137 2. Forest Management Committees (CGB) ............................................................... 139 Influence of key actors in the forest concession system ................................................. 141 Summary .................................................................................................................................... 145 5 CAPITAL AND CAP ABILITIES AMONG PRIVATE SMALL -MEDIUM FOREST ENTERPRISES ......................................................................................................................... 147 Introduction ............................................................................................................................... 147 Dimensions of Capitals ............................................................................................................. 148 Forest Management Capacity of SMFEs ................................................................................. 151 Forest Management Capacity in the Tahuamanu, Tambopata and Manu Provinces ............ 152 Produced Capital ................................................................................................................ 154 Natural Capital ................................................................................................................... 161 Human Capital ................................................................................................................... 165 Social Capital ..................................................................................................................... 168 Forest Management Capacity in Certified and Non-certified SMFEs ................................... 172 Produced Capital ................................................................................................................ 174

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8 Natural Capital ................................................................................................................... 177 Human Capital ................................................................................................................... 178 Social Capital ..................................................................................................................... 181 Forest Management Capacity and Certification Status in the Tahuamanu Province ............ 184 Produced Capital ................................................................................................................ 186 Natural Capital ................................................................................................................... 188 Human Capital ................................................................................................................... 190 Social Capital ..................................................................................................................... 192 Implications of SMFEs Capitals and Capabilities for Forest Management Capacity ........... 195 Summary .................................................................................................................................... 203 6 S UMMARY AND CONCLUSIONS ...................................................................................... 204 Overview .................................................................................................................................... 204 Summary of the Findings and Results ..................................................................................... 204 Stakeholder Analysis ......................................................................................................... 204 Forest Management Capacity Analysis ............................................................................ 210 Policy Implications and Recommendations ............................................................................ 217 Differences and Similarities with the Bolivian Concession System ...................................... 223 Limitations of the Study ........................................................................................................... 227 Future Work ............................................................................................................................... 228 APPENDIX A HISTORICAL EVOLUTION OF PERUVIAN FOREST POLICIES AS TO 2007 ............ 230 B FOR EST ORGANIZATION QUESTIONNAIRE ................................................................. 234 C SMFE QUESTIONNAIRE ....................................................................................................... 236 D PARTICIPATING SMFEs ....................................................................................................... 244 E PARTICIPATING KEY EXPERTS ........................................................................................ 245 F FACTOR ANALYSIS .............................................................................................................. 247 G ADDITIONAL FACTORS ANALYSIS PROCEDURES ..................................................... 252 H P -VALUES (MANOVA) ......................................................................................................... 256 I TIMBER SPECIES HARVESTED IN MADRE DE DIOS BY COMMERCIAL CATEGORY ............................................................................................................................. 263 LIST OF REFERENCES ................................................................................................................. 266 BIOGRAPHICAL SKETCH ........................................................................................................... 275

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9 LIST OF TABLES Table page 2 1 Comparison of Decrees N 21147 and N 27308. ............................................................... 52 2 2 Peruvian permanent production forests. ............................................................................... 55 2 3 Peruvian fores t concessions granted (as of October 2009). ................................................. 56 2 4 Peruvian certified areas by harvesting modality (as of September 2008). ......................... 59 3 1 Composition of the SMFE questionnaire. ............................................................................ 71 3 3 Forest experts on the forest concession system (20052007). ............................................. 76 3 4 Group of indi cators from the SMFE questionnaire .............................................................. 82 4 1 Original distribution of concession areas by province within Madre de Dios (2002 2003). ...................................................................................................................................... 97 4 2 Distribution of active concession areas by province (October 2009). ................................ 98 4 3 Certified Area in Madre de Dios (As to September 2008). ................................................. 98 4 4 Stakeholders in the forest concession system in Madre de Dios and their interests ........ 100 5 1 Comparable indicators of capital for private SMFEs in Madre de Dios, 20022006. ..... 149 5 2 Indicators of forest management capacity for private SMFEs in the Tahuamanu, Tambopata, and Manu provinces, Madre de Dios, 20022006 ...................................... 153 5 3 Characteristics of private SMFEs in the three provinces of Madre de Dios .................... 172 5 4 Indicators of forest management capacity for certified and non -certified private SMFEs, Madre de Dios, 20022006 ................................................................................. 173 5 5 Characteristics of certified and non -certified private SMFEs in Madre de Dios ............. 184 5 6 Indicators of forest management capacity for private SMFEs already certified, planning certification and nonplanning certification in Tahuamanu, Madre de Dios, 20022006 .......................................................................................................................... 185 5 7 Characteristics of private SMFEs planning certification in Tahuamanu .......................... 195

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10 LIST OF FIGURES Figure page 2 1 Map of Madre de Dios protected areas It shows protected areas that fal l partly or entirely within Madre de 3 1 Forest concession areas of participating SMFEs. ................................................................. 74 4 1 INRENAs main functions with respect to the forest concession system in Madre de Dios. ...................................................................................................................................... 111 4 2 WWFs main tasks in supporting private SMFEs in Madre de Dios. ............................... 135

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11 Abstract of Disserta tion Presented to the Graduate School of the University of Florida in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy CAP ACITY FOR TIMBER MANAGEMENT AMONG PRIVATE SMALL -MEDIUM FOREST ENTERPRISES IN MADRE DE DIOS, PERU By Rosa E. Cosso Solano December 2009 Ch air: Stephen Perz Cochair: Karen Kainer Major: Interdisciplinary Ecology Madre de Dios is one of the few mega -diverse zones in the world, which possesses some of the last intact commercial po pulations of mahogany (Swietenia macrophylla ). T his D epartment has been suffering from severe forest degradation in the past several years, due principally to illegal logging of mahogany The forest concession system the heart of the first legal framewo rk to promote sustainability in the use/management of Peruvian forests (the 2000 Forestry and Wildlife Law N 27308), is being implemented in the department and private small medium forest enterprises ( SMFEs ) have become the most important social actors en gaged in forest management there However, the management and conservation of Madre de Dios permanent production forests while improving the livelihoods of local inhabitants (i.e., small-medium entrepreneurs) is not a simple task since it also involves the interests of several different actors Drawing from the literature on capital and political ecology this study explores the capacities of private SMFEs to carry out forest management for timber production and the influence that the main stakeholders of the forest sector have on that capacity. Data from a census of 29 private SMFEs and from a purposive sample of 29 representatives of forest organizations ( representatives of NGOs, government and grassroots

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12 organizations ), were collected from face to -face interview s M ultivariate analysis of variance was used to determine whether the population means of the sets of dependable variables (types of capital) vary across levels of province, certification status in the Department and certification p lans in the Tahuamanu province Qualitative data analysis was used for the purposive sample to evaluate the actions and roles of forest actors in the concession system and how they influence private SMFEs performance for forest management Results indicate that : (1) the forest concession system was not set up with adequate state resources for sufficient oversight to ensure legal forest management ; (2) NGO support proved crucial, but constituted a patchwork with little coordination and many shift s in priorit ies and collaborations due to limited capacity and problematic management of expectations ; (3) private SMFEs while need ing assistance from NGOs, received very short term assistance instead of sustained support over time; (4) private SMFEs vary greatly in their capacity by province and certification status (this especially occurs in terms of their produced and natural capital assets), and while most lack adequate capacity for sustainable forest management certification, those that attained certification rec eived more support for it from NGOs. Important implications of this study include the need for polic ies that can strengthen the institutional framework to maintain more responsible forest practices in the future and can develop SMFEs capacities for forest management with mechanisms that secure consistent assistance (technical, financial, access to information).

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13 CHAPTER 1 INTRODUCTION: FOREST MANAGEMENT OF TROPICAL FORESTS Small -Medium Forest Operators in Peru The past three decades have witnessed a growin g international concern for deforestation. Highlighted in particular during this period was the deforestation of tropical forests, and various international initiatives were subsequently undertaken to address this key issue. As such, several approaches wer e suggested to stop deforestation, illegal logging, and other forms of forest degradation. For example, some scholars have argued that protected areas are the most effective strategy for conserving biodiversity ( Bowles et al. 1998, Bruner et al 2001). Others, however, argue that i n places where human populations are already present, sustainable management of forests for environmental services (i.e carbon sequestration1), and timber and non timber forest products can protect biodiversity while at the same time generate income for local people ( Bray 2004, Stern 2007). Thus, forest management by small and medium sized operations (which includes private and communitybased enterprises ) en gaged in commercial timber production has emerged as an alternative to protected areas (e.g. national parks, habitat conservation areas) that ostensibly exclude people, by actually complementing networks of such areas and providing social and economic benefits to different forest users (Bray 2004). In this manner, deforestation is addressed by incorporating local actors into the productive use of forest resourc es; this assumes that subsequent benefits create an incentive to ensure the sustainability of the resource. Small -medium forest enterprises (SMFEs) are defined as forestry business operations with 10 to 100 full time employees or a yearly turnover of US$1 0,000 to US$30 million (Macqueen 2007), and generally include private and community -based enterprises. Private SMFEs hold private rights to the access of forest resources while community based enterprises 1It is estimated that more than 18% of global greenhouse gas emissions comes from deforestation (Stern 2007).

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14 hold collective rights; also private enterprises are governed by rules that depend on the type of legal business partnership, while community -based enterprises governance is generally influenced by local/communal rules and practices, customs or traditions. In any case, SMFEs represent a growing and important se gment of the forestry sector and c ontribute significantly to employment and local economic growth. They constitute 80 90% of forest sector operations in many countries, and over 50% of all forest sector employment (Macqueen 2008) Although there is little evidence on poverty reduction by SMFEs, they offer better perspectives than larger forest enterprises because they tend to be embedded in local cultures which can help in securing resource rights and access to local peoples and accumulate wealth locally; they have also a greater commitment to operating in a specific area than do large -scale enterprises (Auren & Krassowska, Macqueen & Mayers 2006, Macqueen 2008). Despite their potentia l role in reconciling sustainable management with poverty allevi ation goals is being increasingly recognized by governments and development agencies SMFEs present certain characteristics that make it difficult for them to compete with larger enterprises in the marketplace. For example, in comparison to large enterpris es m any SMFEs are informal in order to avoid administrative costs which affects the possibilit y of them receiving incentives and support that may be directed towards this sector. Moreover, SMFEs usually harvest on a small scale and use low levels of capital, relying more on labor than machinery. This may result in struggle s to produce the volume, uniformity, or environmental sustainability of products necessary to secure markets ( Macqueen 2004 2005). T he informality of m any SMFEs has created a gap in the availability of information in many countries with respect to their assets, economic performance, impacts, and how the environmental contexts in which they develop affect their management operations. This is a

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15 hindrance to the better character ization of this important sector and its influence on the development and conservation of tropical forests. In Peru, for example, since 2002 private SMFEs have become the new actors in the management of the permanent production forests of the country follo wing the implementation of the forest concession system (for commercial timber harvesting purposes ) as a new legal framework for forest management. However, virtually no information is available on their performance and capacities. This dissertation begins to address this deficit of information about private SMFEs ; it is the first such analysis of small-scale logging enterprises in the forest sector in Peru. Peru is significant in this context because it currently has a large sector of private S MFEs which h old harvesting rights to all the permanent production forests already granted as forest concessions in the country The new forest concession system is designed around small forest concession contracts intended for private SMFEs In Peru, private SMFEs are defined as enterprises formed by sole proprietors or group s of individuals with gross capital of less than US$ 3,000,000; furthermore, they employ less than 200 permanent workers engaged in timber management through the holding of forest concessions. In t his study, the Department of Madre de Dios is highlighted in particular because it was the first Department in Peru where the forest concession system was implemented as the new model for forest management and it is currently being considered as a model f or the implementation of this system in the rest of the country. As private SMFEs now dominate the forestry sector in M adre de D ios this Department serves as a useful case study for researching SMFEs. M oreover, t he De partment of Madre de Dios is one of the few mega -diverse zones in the world ( Myers et al 2000); it is recognized as the biodiversity capital of Peru ( INRENA 2004), and it is one of the last regions in the world with intact commercial populations of mahogany

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16 (Grogan & Schulze 2008). However, this department has also been suffering from severe forest degradation in the past several years, due principally to the illegal logging of Swi e tenia macrophylla (mahogany ). The 2000 Forestry and Wildlife Law N 27308 is the first legal framework to promote sustainability in the use/management of Peruvian forests by granting long term forest harvesting contracts (renewable for up to 40 years) through a system of f orest concessions, to small and medium sized contractors. S ince the implementation of this forest concession system several years ago t here ha ve only been a few published studies that focus on the general factors constraining implementation of the forest concession system and the debates surrounding its potential as a conservation and development strategy ( Galarza & Serna 2005 Arce 2006, Malleux 2008). Moreover there have been no systematic attempts to understand changes occurring in private SMFEs with reference to the implications for development and forest conservation ; nor has there been an attempt to understand the specific political, social, financial, and technical interests of the mai n social actors influencing the forest concession system. This research contribut es to the understanding of such changes by providing an assessment of the capacities of private SMFEs that operate in the permanent prod uction forests of Madre de Dios and by analyzing the influence that the main stakeholders of the forest sector have on the capacity of those SMFEs. Cha nges in private SMFEs are occurring in the context of alterat ions in forest harvesting concessions Such concessions now exist in a legal framework that recognizes forest certification2 as a very important tool and moreover provides incentives for the mana gement 2 Certification is the pro cess by which an independent thirdparty assesses the quality of forest management based on a set of standards. The certifier gives written assurance that a product or process conforms to the requirements specified in the standard (Rametsteiner & Simaula 2 003).

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17 operations that attain certification. However, forest certification has proven to be difficult for many f orest operations to obtain, which has prompted questions about who can realistically attain certification. Certification imposes daunting requir e ments not just in terms of the procedures and time involved, but also in terms of the viability of a firm to comply with certification requirements, which raises questions about firm capacity and the ability to achieve certification This dissertation add resses private SMFEs in the context of a new concession system in Peru that features forest certification3 as a means of managing the timber sector. In this first chapter I initially discuss the Peruvian context of current forest management in the Amazon region. This is to introduce Peru, the country of focus for this study and highlight its relevan ce a s a country with one of the large st area s of natural tropical forests in the world currently being managed by private SMFEs a n increasing ly important se gme nt of the forestry sector for its potential to influence employment and local economic growth. I then present the research questions and objectives that guide this research and l ater discuss the theoretical framework that support s and guide s this research Fi nally, I close this chapter with a summary of how the rest of this dissertation is organiz ed 3 While the NFWL encourages forest certification, this law does not specify any particular mechanism.

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18 Current Forest Management Details in the Peruvian Amazon Peru a country with a natural forest area of 78.8 million hectares (94% of it in the Amazon) ranks s econd in South America, and ninth in the world, in terms of natural forest area (INRENA 2008c, Schwartz 2004). The Amazon forests of Peru are characterized by a high degree of biodiversity and have a great potential for uses such as timber and non timber forest products, ecotourism, and environmental services. Of these, timber production is the economic activity that is most developed and generat es the largest earnings and exports (INRENA 2008b ). There are approximately 25 million hectares of forest being used for productive purposes in Peru (INRENA 2008a ) with a potential volume of 73.7 m3/ha ( Schwa rtz 2004). Despite this potential, Peruvian forest resources have not been rationally used, nor ha ve they contributed to the economic development of the country. Estimates suggest that the forest sector only contributes 1% or less of the GDP of Peru ( Chirinos & Ruz 2003, Schwartz 2004).4 However, the forest sector is an important source of regional employ ment ( Schwartz 2004) and in departments such as Ucayali and Madre de Dios, it is the main economic activity ( Chirinos & Ruz 2003).5 The sawn timber sector is an important source of foreign exchange, having had a positive balance in the last several years. In 2000 and 2001, sawn timber exports (US$ 52.5 million and US$ 52.2 million, respectively) surpassed imports (US$ 2.1 million and US$ 2.3 million, respectively) ( INRENA 2001, INRENA 2002). More recently this gap has expanded, as sawn timber exports in 2006 (US$ 115.3 million) greatly surpassed imports (US$ 7.1 million) (INRENA 2007). The United States is the main market of Peruvian sawn timber exports with 4 One reason for this low contribution to the economy is the fact that only around 80 species of tree are harvested from the 2,500 timber species that exist in the Peruvian Amazon ( Galarza & Serna 2005), and the forest industry is basically concentrated around two species: mahogany ( Swietenia macrophylla) and cedar ( Cedrela odorata ) (Chirinos 2003) 5 In Ucayali, 40% of the economically active popul ation is dedicated to this activity; and 65% in Madre de Dios (Chirinos & Ruiz 2003).

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19 52% of the total exports, with mahogany being the product in greatest demand. Mexico is the secondlargest market with 31% of the total exports, demanding species such as mahogany, cedar, Virola sp ., Aspidosperma macrocarpon, and Coumarouna odorata, among others (INRENA 2007). However, the overall commercial balance of the forest sector has been negative in the last seven years. For example, in 2006, imports of forest products (US$ 464.8 million) were almos t twice the value of t otal exports (US$ 253.2 million) ( INRENA 2007). Traditionally, three main timber species have been harvest ed through short term contracts6: mahogany, cedar, and Cedrelinga catenaeformis (tornillo ). During the old forest regime (19752000), under which there w ere no clear rules for forest management, these species were over -exploited However, during the new fo rest regime (2000-present) which promotes sustainable use7 of forest resources through a concession system of long term contracts8 and encourages certification new forest areas and timber species have be en incorporated into management regimes As of Octo ber 2009, 7,552 ,8 07 ha of forests 3 0 7 % of the total permanent pr oduction forests of the country h ave been granted as forest concessions to 5 09 private SMFEs in five departments9; an average of 14 t im b er species is being harvested In addition, a total of 355,524 ha of forests have been adapted to forest concession contracts under the new 6 Contracts covering areas of 1,000 ha, designed especially to facilitate access to small loggers for a period of 2 to 10 years, with no requirement of presenting a study of technical economical feasibility. In practice these contracts usually were granted only for a period of 2 years. 7 According to the new Forestry Law, sustainable use of timber resources is represented by the group of operations that include pre and post assessment activities related to the harvesting of trees, ensuring the normal yield of the forest through the application of adequate techniques that allow the stability of the ecosystem and the renewal and persistence of the resource (article 3.2 DS N 0142001AG). 8 Contracts covering areas between 5,000 and 50,000 ha, granted for up to 40 years, with the main obligation of presenting a forest management plan in order to assure a sustainable production and conservation of the forest (Law 27308). 9 The departments of Madre de Dios, Loreto, U cayali San Martn, and Hunuco.

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20 forest regime, favoring 20 private SMFEs. Together private SMFEs manage 7,9 08, 331 ha of forests (OSINFOR 200 9 ). Although the new forest regime is a step forward in terms of the managem ent of tr opical forests in Peru especially after decades of forest over -exploitation and degradation, to date i t s implementation appears to have met with major difficulties. A s of October 2009 the achievements of forest certification have been meager: only 13 of t he 612 forest concession contracts granted and adapted in five departments have attained certification representing an area of 412,296 ha ( i.e., only 5. 2 % of the total concession areas). An additional 204,245 ha belonging to indigenous peoples (community lands) have attained certification for timber management, while 45,136 ha belonging to an association of Brazil nut farmers has attained certification for Brazil nut management (OSINFOR 2009). Also d uring the same period of time, the Timber Forest Resources Super vision Agency has disqualified 5 9 forest concession contracts (held by 4 9 private SMFEs ) due to illegal actions. The disqualified concessions cover an area of 8 50,104 ha which represents 1 0 7 % of the countrys total area granted and adapted as forests conc essions. Study Objectives Peru now has a legal framework (t he 2000 Forestry and Wildlife Law) t o promote sustainability in the management of its tropical forests, by granting long term forest harvesting c oncessions that requ ire management plans These concessions are granted to small and medium sized contractors formally organized as private SMFEs In the few years since the system of forest concessions has been implement ed in the country t here have been very few studies focusing on the factors constraining its implementation. In particular, there have been no systematic attempts to understand changes occurring in private SMFEs with reference to the implications for development and forest conservation This is certainly a gap, especially given

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21 that private S MFEs have become the new actors in the management of the permanent production forests for timber production of the country. Th us, th e overall objective of this research is to generate knowledge and understanding of the capacities and capabilities of privat e SMFEs to carry out forest management and certification compliance in the permanent production forests of Madre de Dios and knowledge of the influence that t he main stakeholders of the forest sector have o n that capacity T his is done through the examin a tion of t wo questions specified below. T he first question highlights characteristics of the relations hips that private SMFEs have wit h other social actors that regardless of enterprises characteristics may also affect management outcomes The second que stion emphasizes characteristics of private SMFEs themselves which may affect forest management outcomes Specifically, the two k ey research questions are: 1. How do the specific agenda s of other social actors involved in the forestry sector influence the possibilities f or private SMFEs to conduct forest management as proposed by the new Forestry law ? An swer ing this question requires two specific objective s: The description and analysis of the interests and actions of the main stakeholders in the forest se ctor in Madre de Dios directly involved in the promotion and implementation of the forest concession system. U nderstand ing the forest concession system in terms of the wider policy context, constraints, and incentives which govern the behavior of the main stakeholders in the forest sector in Madre de Dios. 2. G iven the forest concession system what combination of different types of capital result in the ability of private SMFEs to follow forest management for timber production and with what outcomes (e.g. attain certification, implement forest management according to Forestry law)? To answer this question there are three specific objectives : To quantify and evaluate differences among the capital assets of SMFEs in the three provinces of Madre de Dios.

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22 To quantify and evaluate differences between the capital assets of certified versus uncertified SMFEs in Madre de Dios. To quantify and evaluate differences among the capital assets of SMFEs planning to attain certification in the Tahuamanu province. Theoreti cal Framework To fulfill the objectives of this study, a multi level framework focusing on both the capacities of private SMFEs themselves (through a c apital framework) and on their relations with other social actors in the forestry sector (through p olitic al ecology ) is used as a guiding and supporting theoretical basis The emphasis on c apital (and its various forms) arises because capital scarcity serves as an internal limiting factor to the capacity of SMFEs that likely influence s forest management and certification potential E mphasis is placed on an actor -oriented approach from Third World p olitical ecology because an assessment of stakeholders interests will allow an analysis of external factors that affect the potential of SMFEs in terms of both forest management and certification. Both frameworks complement each other and allow for an integrated analysis since SMFEs as the main actors in forest management, do not operate in a vacuum; they operate in business environments determined not only by the capital they ho ld but also by government policies and the actions of public and private institutions Political Ecology as a Theoretical Framework Tropical deforestation and degradation is an issue that has raised increased concern worldwide S ome in the forestry sector have embraced the concept of sustainable forest management as the best alternative to this environmental problem ; while others like small forest operations (communities, and private small forest enterprises) have become the actual pra ctitioners of this concept in some countries Some SMFEs have thus been successful in practicing forest management and some h ave been successful in attaining forest certification. However, many SMFEs have failed in attaining success in managing their fores t operations due

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23 to several external constraints, related to the same social actors in the forestry sector seeking to support sustainable forest management. SMFEs operate in business environments determined not only by the capital they hold (an internal constraint for successful forest management when lack ing ), but also by the actions and decisions of other stakeholders (external factors for successful SMFEs forest management). Stakeholders refer to any group of people, organized or not, sharing a common i nterest or investment in a particular issue or system. They can be of any size, occupy any position in society, at any level (local, regional, national, and global). Examples of stakeholders in natural resource management include: individuals such as subsi stence farmers and other small -scale resource users (e.g., small -medium forest entrepreneurs), the communities they belong to, governmental administrators and policy makers, commercial interests, and administrators in private and/or public organizations. H owever, the identification of stakeholders and their study at different institutional levels depends on the specific needs of individual cases (Grimble & Wellard 1997). For example, in ThirdWorld political ecology, Peluso (1992) and Bryant (1997) (cited in Bryant & Bailey 1997) examine how the struggle between the state and productive actors (i.e., peasants, businesses) has conditioned forest politics in Java and Burma; and Rocheleau et al. ( 2001) explore the relationships among smallholder farmers, a gr assroots organization, and an international NGO in a social forestry experiment in the Dominican Republic. Thus, various actors participate in political -ecological conflicts in the Third World; however, the main stakeholders usually involved in environment al issues and resource management in the Third World are the State, multilateral institutions, businesses, environmental non -governmental organizations (NGOs), and grassroots actors (Bryant & Bailey 1997).

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24 In Peru, several stakeholders operate in the conte xt of the 2000 Forestry Law for sustainable forest management. However, the key stakeholders are the State, environmental NGOs, private SMFEs, and local consultative organizations; which are, as previously mentioned, emphasized in Bryant and Baileys actor -oriented political ecology approach (1997). Thus, in the context of the Peruvian 2000 Forestry Law, Third World political ecology provides a theoretical framework to consider the interests, characteristics and actions of each of these key stakeholders in their broader political and economic context. A comprehensive analysis of the key stakeholders that support sustainable forest management (i.e., the state, environmental NGOs, and local consultative organizations), through a Stakeholder A nalysis, can also be useful for evaluating the performance and potential of private SMFEs in their broader political and economic context. Consequently, I also focus on understanding the interests, actions, and capacities of key stakeholders as a means of seeing how the age nda of these stakeholders has influenced the forest concession system and the capacity of private SMFEs in carrying out forest management and attaining certification. S ince the 1980s, there has been a growing international concern for deforestation of trop ical forests in particular. Several stakeholders have been involved in various international initiatives to address this key issue; thus, different interests, priorities and concerns of various social and economic actors have been at stake in different app roaches suggested to stop deforestation and forest degradation, and to move towards a more sustainable management and development. However, there have been incompatibilities in the views with respect to the trade offs of development and more sustainable ma nagement objectives (Grimble & Wellard 1997), due to the existence of several different stakeholders involved (e.g., national and local governments, multilateral organizations, NGOs, local organizations, forest users, businesses,

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25 etc.). Stakeholder A nalysi s is an approach that emerged in response to this challenge of multiple interests. Stakeholder A nalysis (SA) is a holistic approach that allows for the understanding of a system and the impacts of changes in that system through the identification of key a ctors (or stakeholders ) and the assessment of their respective interests in that system (Grimble & Wellard 1997). Since policies have consequences that bear differentially on different groups knowing these differential effects makes it possible to evalu ate the value of such policies and their outcomes. SA develops a methodology that identifies the differential consequences for stakeholders given a particular course of action. SA can highlight the needs and interest s of people that are either well represe nted or under -represented both politically and economically. Thus SA identifi es stakeholders and assesses and compar es their set of interests, and allows examin at ion of inherent conflicts, compatibilities and trade offs Unpacking the different interests and objectives of stakeholders in environmental issues, SA can also assist in getting to the heart of problems, identifying incompatibilities and prioritizing objectives ( Grimble & Wellard 1997). The premise of SA is that broad participation of beneficiari es or target groups alone cannot guarantee that projects will work, and a much greater appreciation of the political interests of other stakeholders is required. Thus, for making a project functional, the interests of the whole range of stakeholders who ca n influence or be influenced by the project or policy need to be taken into account (Grimble & Wellard 1997). In the case of forest management and forest certification, several stakeholders are involved; however, key stakeholders usually include government s, environmental NGOs, and local actors. Thus, governments around the world have taken different approaches. Some governments have established legislation and have financed activities to promote the better

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26 management of their forests, while others have not done so (Rametsteiner 2002). For example, the Guatemalan F orest Policy explicitly considers forest certification as a political mechanism (Carrera et al. 2004) and the Mexican F orest Law of 2000 promotes and provides support for certification (Cashore et al. 2006) Also, both the Bolivian and Peruvian new Forestry Laws facilitate certification through the granting of a discount in the concession fees for certified operations ( Cashore et al. 2006, NFWL 2000). However, newly designed legislation and the gran ting of incentives to promote forest conservation and social development through sustainable forest practices, have not always had the expected results. For example, although some governments in Latin America such as Mexico, Bolivia, and Guatemala have fac ilitated the certification process, the weak ness of some governmental institutions and their limited technical capacity have in many cases affected the management of forests in a sustainable manner (Cashore et al. 2006). This has allowed the continuation of illegal activities. In the case of environmental NGOs as key stakeholders in the promotion of responsible forest management, they have been very proactive in the development of the first forest certification scheme to promote sustainable forest managemen t the Forest Stewardship Council FSC (Van Kooten et al. 2005), and in its introduction in different countries. This has been done through the building of technical capacity among forest managers in areas such as forest inventories, reduced impact technique s, business management, and through the provision of financial assistance (Cashore et al. 2006). For example, in Guatemala the financial assistance from NGOs has covered not only direct costs of certification (i.e., assessments, audits, membership), but al so costs incurred in complying with preconditions and conditions (Carrera et al. 2004). However, environmental NGOs initiatives in promoting responsible forest management practices through certification have not always produced expected results. This is

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27 b ecause other factors, such as policies, markets, and capacities, have determined in part whether businesses and local peoples certify their forest operations. Timber producers usually expect economic advantages (i.e., premium prices, market access, lower c osts of production, or enhancement of market share) to participate in forest certification (Van Kooten et al 2005). For example, in Guatemala, where the role of NGOs has been significant in supporting certification, c ertified industrial concessions recogni ze certification as a good investment through gains in security, recognition and market opportunities ; community actors perceive forest certification as a requirement to gain acces s to, or maintain, their concessions; and the majority of private owners are unaware of the certification process (Carrera etal 2004). In Bolivia, although c ommunity and indigenous people are interested in certification, the process is largely dominated by industrial forest companies due to the better forest management capacity th ey possess (Quevedo 2006) In Peru, sustainable forest management practices and certification are new processes and different stakeholders are working on its promotion and implementation. For example, in Madre de Dios, in 2002 when the State i mplemented th e forest concession system as the mechanism for sustainable forest management private SMFEs became the most important forest management stakeholders in the new model H owever INRENA and environmental NGOs such as WWF, ProNaturaleza, and CESVI became key actors in the promotion and implementation of the new forest management model, and they have dominated the scene in support of more or less sustainable forest practices. Since the i mplementation of this new model has required and generated substantial poli cy and management changes (and as a consequence diverse interests, concerns, and values of stakeholders in the timber forest sector have arisen ), it is important to assess th e role played by different stakeholders under the concession system and to underst and

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28 how it has influenced SMFEs efforts in forest management and conservation in the department This is especially important given that public policies and market incentives push different stakeholders into potential conflicts with each other, and in the context of the forest concession system in Madre de Dios this may affect the ability to get certified and engage in legal timber management. Capital as a Theoretical Framework T hroughout the world, measure s of success ha ve varied for communities and privat e small operations that practice forest management as part of different types of projects including conservation and/or development p rojects. Some communities that are financially and technically supported by governments and non -governmental organizations (NGOs) have been successful both in creating and maintaining communitybased forest enterprises, and in attaining forest certification. Meanwhile, many other communities have failed to attain that success due to several internal and external constraints. A significant internal constraint for many SMFEs is a lack of capital; therefore, a comprehensive inventory and analysis of capital can be a useful basis for evaluating the perfor mance and potential of SMFEs. Consequently, I focus on a multifaceted understa nding of the concepts of capitals and capabilities as a means of seeing if such assets differentiate among SMFEs who succeed and fail to attain certification. The term capital comes from (neo-classical) economics and refers to the stock of goods that can p roduc e further goods or utilities in the future (Hinterberger et al 1997). Capital, or productive a ssets10, are not just resources that people need in order to engage in their livelihoods ; they also give people hous eholds, firms, and communities the agency or capability to be and to act ( Bebbington 1999: 2022). Capital ha s been referred to as the three production factors from 10 Assets are various things that yield benefit streams which make future productive processes more efficient, more effective, more innovative, or simply expanded in scale or scope (Uphoff 2000).

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29 which humans deri v e material wealth and welfare: land, labor and man -made infrastructure (Hinterberger et al 1997), which are also referred as natural capital human capital and manufactured capital (Constanza & Daly 1992). In addition, and due to the development of social, political, and cultural systems over time, socio organizational capital has emerged as another important form of capital recognize d in the literature ( De Groot et al 2003). Capital is extremely important for rural development for at least two reasons: (1) the ability to pursue different livelihood strategies is dependent on the basic material and social assets that people possess ( Scoones 1998); and (2) successful rural livelihood activities seem to increase or sustain their access to different assets (Bebbington 1999). Therefore, examining the capital assets held by local actors is important for studying how developing societies reach or en hance their economic and political growth (Ostrom 2000). M easurement of the capacity of organizations to execut e a sustainable deve lopment plan can be accomplished through the measurement of various forms of capital that they manage (Se rageldin & Steer 1994). Knowing that more responsibilities and options for logging are being devolved to local actors (such as the case of private SMFEs) and the vital role this is playing in the local development and conservation of forests it is essen tial to have a clear idea of the most important assets of these local actors. M oreover, developing sustainable forest management p ractices to improve certification compliance will require the identification of necessary and appropriate capital investments which itself relies on knowledge of the variou s influences of capital assets. T here are f our different categories of capital in economic analysis: physical11, natural, human, and social ( Coleman 1988, Katz 2000, Ostrom 2000, S erageldin & Steer 1994, Uphoff 11 This form of capital is also referred as economic or financial according to Scoones (1998).

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30 2000). The Livelihood Framework ( Depar tment for International Development 1999) further subdivides the traditional category of physical capital into two distinct categories: physical and financial capital. Thus, five forms of capital have been identified by this Framework: physical, financial natural, hu man, and social capital. Physical capital refers to the materials and human -made resources such as roads, equipment, buildings, tools, vehicles, etc. ( Ostrom 2000, Serageldin & Steer 1994, Uphoff 2000) that provide benefits to their owners over time, by helping to produce other goods and services (NRTE E 2003). Financial capital refers to pecuniary resources used to achieve livelihood strategies. There are two main sources of financial capital: 1) available stocks like savings (cash, bank deposits, or liquid assets such as livestock or jewelry), and 2) regular inflow of money like pensions, other transfers from the state, and remittances. Although financial capital is an extremely important input into a business, by itself it is not sufficient to guarantee success; other resources such as knowledge and a dequate structure and processes (markets, policies) are required for an enterprise to make a good use of its financial resources ( Department for International Development 1999). Natural capital is usually defined as any stock of natural resources or environmental assets (soils, forests, water, atmosphere, etc.) which yield a flow of useful goods and services that support most aspects of human life ( De Groot et al 2003, MacDonald et al 1999, Ostrom 2000, Scoones 1998, Viede rman 1996). Natural capital can be divided into three categories that are essential to preserve economic options: natural resources (e.g., timber volumes ), land and ecosystems. Natural resources provide raw materials for the production of manufactured goods and also provide many services ( MacDonald et al 1999 ). Land is necessary for economic activities to be carried out, and ecosystems provide numerous essential services ( NRTEE 2003).

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31 Economists have long known that people are an important part of the wealth of nations (Schultz 1961). Human capital is composed of the skills of individuals and acquired knowledge of activities (e.g., experience in logging and/or business) which are in large part the product of broader investments in education and training ( Chhibber 2000, Coleman 1988, NRTEE 2003, Ostrom 2000, Schultz 1961). In the United States (US), differences in formal training have resulted in comp ensatory differences in levels of earnings among different occupations ( Mincer 1958, Schultz 1961). Similar cases are observed for East Asian countries where earnings are found to systematically increase by increasing levels of education. Educational development has contributed significantly, not only to economic growth, but also to improve equitable income distribution and reduction in poverty in the region ( Tilak 2001). Thus, in the last three decades there has been an increasing recognition of the importance of human capital formation (Serageldin & Steer 1994). S ocial capital refers to features of social organization such as networks, norms, and social trust t hat facilitate coordination and cooperation for mutual benefit (Putnam 1995: 67) These features improv e the efficiency of society in its economic and social development ( Dasgupta 2000, Dasgupta & Serageldin 2000, Grootaert & Bastelaer 2002). Social capital also encompasses the so called civic -ness of regional life, includin g such things as participation in the political life of the community and membership in associations ( Viederman 1996: 47). Given t he existence of d ifferent dimensions of capital it is necessary that all of them are considered in an analysis of the viability of SMFEs for forest management. Although SMFEs constitute the majority of firms in many countries and they represent a growing sector capital assets among these enterprises are not well documented due to their relative informality and

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32 great diversification12 in many countries ( May et al 2003, S aigal & Bose 2003, Thomas et al 2003). For example, m any SMFEs in India face raw material shortages due to felling bans and restrictions on timber extraction in several states, and are thus unable to fully utilize their installed capacity ( Saigal & Bose 2003). Also, according to Saig al and Bose (2003) many Indian SMFEs are quite inefficient (e.g., the saw timber conversion rate is 45 55%) ; ho wever there is no literature that addresses the specific capital assets contributing to this inefficiency. Similarly, in Brazil deficiencies and contradictions of available sources of information has made SMFEs difficult to analyze (May et al 2003). However, May et al (2003) report that the low productivity and e fficiency among timber harvesting and primary processing SMFEs in Brazil is due to the ownership of obsolete equipment, and the inadequa cy in storing round wood ; thus more training and expertise are necessary. In Guyana, SMFEs have low levels of production efficiency due to a lack of training and skills among their workers and to the lack of adequate technologies (Thomas et al 2003) SMFEs in India, Brazil, and Guayana also l ack access to finance ( May et al 2003, Saigal & Bose 2003, Thomas et al 2003). In Peru, there is little documented information regarding the different assets that private SMFEs possess. Preliminary data collected for this study in 2005 of 10 private SMFEs13 from the Department of Madre de Dios show ed that only 50% of the managers of t he enterprises surveyed ha d previous experience in logging ( before the formation of their enterprises ), and none of them had previous experience in formal business practices. The same analysis identifie d that the se 10 SMFEs are also characterized by a limi ted level of education of their managers a 12 SMFEs have a varied and diversified production process that ranges from the production of logs and sawn wood, to extraction and commercialization of nontimber forest products, ecotourism, and provision of environmental services (Macqueen & Mayers in prep). 13 The se 10 enterprises represent 25 % of the total population of SMFEs that participated in the first round of public bidding for concessions in the department.

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33 restriction in f inancial resources and obsolete equipment. Th us, capital assets among SMFEs are not well documented, despite their importance as key input in the production process and there is an increasing ur gency to investigate and assess such information, and to understand the variation of capital among SMFEs due to their important role in forest management and conservation. This dissertation draws on the available literature on SMFEs ( which involves SMFEs p roducing a variety of products ) and expands the existing account of the capital assets that the literature primarily addresse s ( i.e., p roduced assets) among the SMFEs dedicated to timber produc tion This research also address es the capital assets of SMFEs that receive less attention in the literature (i.e., human and social assets). Thus, this dissertation intends a deep study of the most important assets of capital that SMFEs for timber production require in order to sustain their forest management activit y Table 3 4 details the operationalization of the capital indicators that this dissertation addresses Dissertation Organization This study consists of six chapters. Chapter 2 begins with an overview of the main international initiatives guiding global ma nagement of tropical forests. In particular, the FSC certification scheme is discussed as the most important mechanism to promote responsible forest management in Latin America. This is followed by a detailed description of the historical management of for est resources in Peru, through a legal framework. The final section of Chapter 2 provides an introduction to the Eastern Peruvian state of Madre de Dios. A general description of the biophysical characteristics, history of land use and occupation, and econ omic context is presented in order to provide the reader with some basic knowledge of the study location, as well as to demonstrate the challenges faced in the study area. The third chapter describes the development and implementation of the questionnaires that guided the collection of data in this research (i.e., the forest organization questionnaire and the

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34 SMFE questionnaire ), and the overall structure and administration of the survey. The first section describes the questionnaires used to interview repr esentatives of the main forest organizations (e.g., personnel from INRENA) in the framework of the concession system, and key people (e.g., managers) from the private SMFEs. The second section examines some important aspects of how the survey was implement ed. The third section describes the processing and management of compiled data, while the final section of Chapter 3 discusses the two main components of the analysis address ing the two questions that motivate this study. Chapter 4 presents an analysis of the organizational roles and dynamics of the main forest actors (or stakeholders) in the forest concession system in Madre de Dios. The first section examines the antecedents, and the beginning of the concession system in the department, followed by a brie f description of the current state of the concession system there. This is followed by a detailed analysis of the interests, characteristics, and actions of the main governmental organization, environmental NGOs, and multi -stakeholder organizations in the department. Chapter 5 presents, discusses, and summarizes the results of the forest management capacity among private SMFEs in the study in terms of t he ir produced, natural, human, and social capital. It presents a detailed discussion and analysis of the f orest management capacity among SMFEs by province, the certification status in the department, and the certification status in the Tahuamanu province. The final chapter summarizes the study results and offers the overall conclusions and implications derive d from this research study Policy recommendations are also provided in this chapter.

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35 CHAPTER 2 BACKGROUND INFORMATION ON THE STUDY AREA Overview Logging has frequently been the most financially lucrative of all forest uses since timber is abundant and moderately valuable ( Dickinson et al 2004). In the tropics, c onventional l ogging which represents a predatory activity due to the production process1 (Putz et al 2001), has been a common practice in several developing countries During the 1990s, as a consequence of the high rates of deforestation in the tropics, several forms of sustainable forest management ( SFM )2 were impl emented as solutions for a better style of management ( Bawa & Seidler 1998 ). Concomitant with better management techniques, well designed and well implemented forest policies and sound control mechanisms are key components o f sustainability. Thus f or almost three decades, several internati onal initiatives have been undertaken to address the issue of tropical deforestation, and to search for practical approaches t hat promote SFM globally. In 1993, o ne of these approaches was implemented through the creation of the Forest Stewardship Council (FSC) The FSC was the first forest certification scheme introduced as a market -based tool to promote sound forest management ; it currently is the predominant certification scheme in Latin America S ince FSC introduction new proposals for international policies on SFM have 1Logging as conventionally practiced in the tropics is characterized as having a short term focus with no concern for forest regeneration through management (Pearce et al 2003). As practiced in most tropical areas, conventional logging has ca used severe impacts that include d epletion of timber stocks and loss of ecological services such as watershed protection, carbon sequestration, harvest of nontimber forest products, and conservation of biological diversity (Holmes et al. 2000). 2 SFM is d efined as the stewardship and use of forests and forest lands in a way, and at a rate, that maintains their biodiversity, productivity, regeneration capacity, vitality and their potential to fulfill, now and in the future, relevant ecological, economic an d social functions, at local, national, and global levels, and that does not cause damage to other ecosystems ( Ministerial Conference on the Protection of Forests in Europe ). However, SFM is a complex concept to be defined in practice; as such in the last several years there have been several attempts to define the elements of SFM through the use of principles, criteria, and indicators (Higman et al. 2000). The application of SFM practices requires compliance with legislations and management plans, among o ther things. Many tropical countries do not manage their forest in this way because of inadequate funding and human resources for the preparation, implementation and monitoring of forest management plans; and in some cases because of the lack of appropriat e forest legislation, regulation, and incentives to promote SFM (FAO 2009).

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36 been produced and some areas in the tropics have witnessed a transition away from predatory forest practices towards more responsible forest management ( Putz et al 2001). A s a result, s ome communities and private small operations have becom e actors of such changes. In Peru, the first legal framework explicitly promot ing SFM ha s r ecently been implemented which is a pertinent response to the high rates of illegal logging that the Peruvian Amazon has been subjected to for years In this new legal framework that establishe s a forest concession system, small -medium entrepreneurs have become the main actors of the move towards a more responsible forest management. Although the forest concessio n system is relatively new Peru is currently third in terms of total certified forest area in the nations of South America (INRENA 2008 c ). Thus in order to understand the context under which the new forest management regime in Peru has emerged, the first section in this chapter will discuss the different approaches to the management of forests by noting their advantages and problems as found in different parts of the world. Specifically, I present an overview of the main international initiatives guiding global management of tropical forests, emphasizing commercial timber production. In particular, the FSC certification scheme is addressed because of its growing importance in promoting responsible forest management now taking root in Peru. The second sectio n of this chapter describes the historical management of forest resources in Peru, in the context of the legal framework of the country. It starts with the beginning of the Republican era where the first law was given to regulate the use and exportation of natural resource s and almost at the end of this period the first law that attempted to regulate the forest activity in the country was enacted Then, the first major forest regime designed to properly regulate Peruvian forest activity (Forestry and Wild life Law of 1975) is presented. This forest regime included several legal dispositions that contributed disorder and informality in the sector

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37 which has detriment al consequences for forest conservation Next, the discussion turns to the New Forestry and Wildlife Law that was enacted in 2000. This legislation departs significantly from the previous one by, for example, making the elaboration of management plans a requirement for harvesting concessions. This section ends with a detailed description of the main principles of the forest concession system in Peru as the new model of forest management. The third section provides a brief overview of Madre de Dios the study area, including a general description of its biophysical characteristics as an area of g reat biodiversity, as well as a discussion of its economic context, and the history of its occupation and resource management, emphasizing the forestry sector International Tropical Forest Management Initiatives Historical Overview Tropical forests cover around 7% of the Earths land. Despite the relative ly small area that they cover their productive, environmental, and social functions are very important. For example, they are home to about half the worlds species of plants and animals. They are also im portant in influencing the climate, both locally and globally, by regulating air temperatures, maintaining atmospheric humidity levels, absorbing atmospheric carbon, regulating stream flows, etc. ( Whitmore 1998). Moreover, they are home to millions of people who depend on the forests for their way of life ; it has been estimated that forest s directly contribute to supporting the livelihoods of approximately 90% of the people living in extreme poverty (World Bank 2004). S everal international initiatives address deforestation, illegal logging, and other form s of degradation facing tropical forests as a result of the enormous value they are recognized to possess For example, during t he 1980s a time of growing international concern about the extent of deforestation of tropical forests many environmental non -governmental organizations (NGOs) undertook educational campaigns to raise awareness and launched boycotts in an

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38 attempt to reduce pressure on tropical forests ( Cashore et al 2004, Nussbaum & Simula 2005). In addition, the possibility of holding an international convention on forests was explored in order to creat e more political commitment through international action fo r addressing deforestation (Nussba um & Simula 2005). With the recognition that commerci al timber harvesting for trade was one of the factors contributing to forest degradation, the International Tropical Timber Agreement (ITTA) was established in 1983 to promote cooperation and sustainabl e use/conservation of tropical forests ( Alvarenga et al 2006 ). The es tablishment of the International Tropical Timber Organization (ITTO)3 followed in 1987 ( ITTO 2006a ). By 1990, the ITTO established one of its most ambitious objectives: the Year 2000 Objective, which mandated that by the year 2000 all tropical timber traded should come from forests managed in a sustainable manner ( ITTO 2006b ). Although the Year 2000 Objective has not been achieved it set up a framework for the organi zation to look for tools and actions that would help reach this goal. One of these tools has been the Criteria and Indicators for Sustainable Management of Natural Tropical Forests4, while another has been a series of guidelines; together these aim to defin e sustainable forest management ( SFM ) at national levels, allowing governments to monitor and report on the state of their forests ( ITTO 1998 ). In 1992, discussions concerning forests continued at the United Nations Conference on Environment and Development (UNCED) in Rio de Janeiro ; despite agreement on a set of very general forest principles ,5 no framework for action or subsequent efforts were provided 3 ITTOs task is to foster a tropical timber trade that simultaneously contributes to development in tropical countries and conserves the tropical forest resource on which it is based in foreword (ITTO 2001). 4 It was built upon ITTO's pioneering Criteria for the Measurement of Sustainable Tropical Forest Management published in March 1992 (ITTO 1998). 5 During the Earth Summit intense negotiations among governments resulted in the Nonlegally Binding Authoritative Statement of Principles for a Global Consensus on the Management, Conservation and Sustainable

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39 (Nussbaum & Simula 2005). Due to the failure to sign a global forest convention at the Rio Conference, international environmental groups led by the World Wide Fund for Nature (WWF) conver ged to create a private initiative to shape global forest management through the establishment of standards to verify ( on the ground) responsible forest management ; they thus created the Forest Stewardship Council (FSC) program in 1993 ( Cashore et al 2004).6 Since the 1992 UNCED, numerous conferences and workshops have been organized in order to develop a consensus on forest policies and practical modalities to promote SFM globally (Nussbaum & Simula 2005). For example, in the mid 1990s international policy dialogues continued under the Intergovernmental Panel on Forests (IPF) (19951997) and its successor, the Intergovernmental Forum on Forests (IFF) (19972000). These panels together produced the IPF/IFF Proposals for Action: a set of approximately 270 proposals tha t provide guidance to governments, international organizations, and major groups on how to further develop, implement, and coordinate national and international policies on SFM ( United Nations Forum on Forests 2006a ). The United Nations Forum on Forests (UNFF) was established in 2000 to follow up the work of proposals for action by IPF and IFF However, despite these dialogues and proposals for action that fostered an active debate and strengthened the political commitments to SFM, their contributio n to improved forest management on the ground remained limited (Nussbaum & Simula 2005). Development of all Types of Forests, also known as the Forest Principles as well as Chapter 11 of Agenda 21 on combating deforestation (United Nations Forum on Forests 2006a). 6 Due partly in response to perceived inappropriateness of FSCs broadbrush, international approach, and/or by the fact that certain stakeholders perceived themselves to be disadvantaged or excluded from the FSC process (Bass et al. 2001: 5), a number of other schemes began to emerge often emphasizing the national context of certification (Nusbaum&Simula 2005). The Sustainable Forestry Initiative (SFI) was created in 19931994 in the U.S, while the Canadian Standards Association (CSA) was created in Canada. In 19981999, the Pan European Forest Certification (PEFC) scheme was created in Europe; in 2003 the PEFC restructured itself and went global, changing its official name to the Programme for the E ndorsement of Forest Certification (PEFC) (Auld et al 2008). Other national schemes have emerged in Brazil, Chile, Malaysia, Indonesia, Bolivia, etc.

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40 In 2002, the Earth Summit in Johannesburg was held. At this conference, an agenda was developed asserting that the role of forests should be recognized and enhanced in terms of poverty alleviation, bi odiversity conservation, and the conservation of water resources (Nussbaum & Simula 2005). The same year also, due to the significant discussions and controversy generated over forest certification and its different schemes The Forests Dialogue7 held its first multi -stakeholder dialo gue in Geneva to discuss about the maximization of the future potential of forest certification ( Nussbaum & Simula 2004). In 200 4, The Forests Dialogue held its second international multi -stakeholder dialogue to discuss about the impacts of forest certification over the last 10 years, in order to contrast the main certification assessment frameworks and to reflect on the potential ramifications of system proliferation (Nussbaum & Simula 2004). The Forest Stewardship Council as a Predominant Initiative in L atin America Several international initiatives, conferences and workshops have been organized in the last three decades with the aim of developing global policies and practical modalities to promote SFM ( Nussbaum & Simula 2005). In 1992, ITTO established for its member countries the first set of principles as an international reference for the development of more specific guidelines for sustainable management of natural tropical forests for timber production (ITTO 1992). These principles identify criteria and indicators (C&I) for assessing changes and trends in forest conditions and management systems at the national and forest management unit levels. The indicators assess progress towards sustainable management ; however they cannot, by themselves, establish whether management is or is not sustainable (ITTO 1998). Nevertheless in 7 The Forest Dialogue (TFD) mission is to provide a forum for leaders from all sectors to discuss the most pressing issues related to achieving SFM and conservation around the world; one of the five key SFM issues that TFDs international dialogues focuses on is forest certification (Nussbaum&Simula 2004).

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41 time these C&I served as a reference in develop ing the Pan -European Operational Level Guidelines, which are used by the Pan European Forest Certification (PEFC), an international certification scheme, as a referenc e basis and are related to the Pan -European C&I for SFM Also, t he African Timber Organization (ATO) had matched with the ITTO C&I and has included sub -indicators which are directly applicable to certification audits ( Aty -Simula 2002). In 1993, the Forest Stewardship Council (FSC) developed its own set of principles and criteria (P&C) as another approach or instrument to contribute to SFM. Th is set of P&C w as developed independently of any other international set through a consultative process and relies on a globally applicable generic standard under which verifiers are developed for specific conditions (i.e., national FSC standards)8 (Atyi & Simula 2002). T he FSC, which is the predominant certification scheme in Latin America, e merged as a market -based private initiative, designed to verify fulfillment of required standards by a forest operation. It emerged as a voluntary instrument ( Molnar 2003) to link forest conservation with responsible management (Nussbaum & Simula 2005). FSC was the first forest certification s ystem ,9 established in 1993 (Cashore et al 2004 ), and in the almost six teen years since its foundation, the FSC has overseen the certification of 1 15. 6 million ha of forests in public, private, and communal properties in 8 2 countries ( FSC 2009a ). The FSC utilizes a set of ten broad performance based principles and criteria designed to promote economically, socially, and environmentally appropriate and viable practices for the management of forests worldwide ( FSC 2003). These principles and criteria include managerial 8 In comparison, the PEFC relies on a general framewor k that defines the scope of the SFM elements to be covered by national certification standards and respective general principles, and on common rules for standard setting (Atyi & Simula 2002). 9 A certification system is the procedure by which an independe nt body gives written assurance that a product, process, or service conforms to specified requirements (FSC 2009b).

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42 aspects as well as environmental and social requirements10, and form the basis for third -party certification of forests and act as the basis for more specific national and regional standards, as well ( Cashore et al 2004). Once the national standards are accredited by FSC, they can be used for forest evaluations by the FSC accredited certification bodies (FSC 2003) The process of getting a FSC certificate starts with the interest of a forest landowner or manager in becoming certified, and thus contacting an accredited FSC certifier; in developing countr ies this process is usually mediated by an NGO promoting certification. Certifiers engage in a contractual relationship with the landowner/manager to assess the forest operation against the FSC national standard .11 This assessment is carried out by a multi -disciplinary team in the middle of consultations with local stakeholders .12 At the conclusion of the assessment, a summary report is made public.13 If the forest management operation assessed by the certifier is deemed qualified for certification, the landow ner can choose to sign a certification contract. Thus, this results in the operation being certified and the landowner committed to continue practicing forestry in a certifiable manner. Annual audits are required to verify that the terms of the contract are being followed, and also a full reassessment is required every five years (FSC 2009c ). The process of applying for forest certification implies costs (pre -evaluation, assessment, and auditing) which, as explained later, are too high for small operations. This is especially so given the fact that most community enterprises and small private operations have few resources 10 These principles cover key issues that include compliance with laws; tenure and use rights and responsibilities; indigenous peoples right s; community relations and workers rights; use of forest products and services; maintaining biodiversity and high conservation value forests; forestry planning, monitoring, and assessment; and planning and management of plantations. 11 T o check that it pas ses the internationally agreed FSC principles and criteria of good forest management 12 Stakeholders are consulted during the accreditation process and prior to an accreditation decision. 13 However, the companys proprietary information is kept confidential.

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43 and capacities, resulting in numerous pre -conditions or conditions to qualify for certification (Molnar 2003). Motivations to attain forest certification Forest producers have sought forest certification for a variety of reasons Initial motivations included the avoidance of timber boycotts and the assurance that it wou ld be a useful marketing tool that would satisf y consumer concerns with respect to the origin of purchased timber (Bass et al 2001). M arket expectations among producers with forest certification also included: Premium prices : higher prices for certified forest products have been the most expected market ben efit ; however they have often been unrealized ( Bass et al 2001, Cashore et al 2004, Gerez Fernandez & Alatorre -Guzman 2005, Klooster 2006, Molnar 2003). Market access : s ome tropical timber producers have been able to enter new markets others to protect them, and others to maintain or increment their market share s ( Atyi & Simula 2002, Bass et al 2001, Klooster 2006, Schulze et al 2008). Niche markets: some producers have been looking to d ifferentiat e their products in order to access further markets (Bass et al 2001, Gerez Fernandez & Alatorre Guzman 2005, Irvine 1999, Markopoulos 2003, Molnar 2003). In addition to the above motivations, there have also been some n on-market motivations such as the desire for forest producers to be recogn ized as credible and reliable ( Bass et al 2001) and for the social and ecological benefits resulting from forest management. For example, almost all of the certified forest operations in the U.S. and Mexico have realized an improvement in management plans, monitoring, inventories, mapping, and conservation planning ( Newsom et al 2006, Klooster 2006). In developing countries especially, forest certification has improved or increased awareness for better labor, health, and safety conditions i n forest management (Molnar 2003). Forest c ertification has also allowed communities to gain access to financial and technical support from donor agencie s and governments ( Markopoulos 2003, Molnar 2003).

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44 Challenges/limitations of forest certification Despite the benefits of forest certification which in practice are quite variable for different types of communities, small private operations, and industrial businesses, some limitations associated with FSC certification exist. The following paragraphs discuss in detail the three main limitations identified. First, t he distribution of certification has been limited. The initial intention of the FSC program was to protect tropical forests through certification; however, it has not been uniform ly achieved in te mperate and tropical countries. Eighty seven percent of the certified management operations are in temperate and boreal areas, with the major ity being in Eu rope; only around 13% of certified forests are located in tropical areas ( FSC 2008). One of the constraints for good forestry in the tropics is that tropical forests are generally not managed at all, as timber operations seek least cost approaches to logging. Indeed, the change from conventional logging to certified management is difficult According to some analysts, this is partly due to the fact that weak la w enforcement and corruption are common, and business management, marketing, and technical skills are limited in the forest sector and even more in rural communities ( Dickins on et al 2004). For example, none of the Asociaciones Sociales de Lugar (Local Social Associations) in Bolivia are certified which may be the result of their high degree of technical vulnerability and low levels of technical assistance on forest manageme nt, to their deficient organization and administration, and to their lack of capacity in business management ( Quevedo 2006) In the same way, indigenous communities in Bolivia seem to have difficulties in attaining FSC forest certification because of their difficult ies in implementing forest management plans (Quevedo 2006). Thus more knowledge is needed on why forest management via certification is still not common in tropical forests.

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45 A s econd reason often given for the lack of timber management in tropica l areas is that certification has been financially costly The certification costs for a forest management operation include costs for the evaluations (direct), and costs for the actions required to improve forest management (indirect). Additional costs in clude expenditures for any promotional or marketing activities related to certification ( Markopoulos 2003). Costs for certification vary in different regions, and for different types of operations ( Molnar 2003). For example, indirect costs in many temperate forest operations can be relatively small since they already employ good forest management practices before certific ation. In contrast, in many tropical forest operations the indirect costs become very high since current practices do not meet criteria for good forest management ( Atyi & Simula 2002). Also, c ertification costs (direct and indirect) have been especially significant for small -scale enterprises such as family forest owners, small private forestlands, and rural communities (Irvine 1999, Molnar 2003). This is because a t lower levels of output the total cost per unit of production is higher ; thus certification of small-scale operations is likely to be proportionately more expensive than for large operations ( Fischer et al 2005, Klooster 2006). A s a consequence of the significant cost to small -scale operations, certification assessments have largely been subsidized in the case of communities which create s a dependence on donors and governments (Irvine 1999). For example i n countries like Mexico, Guatemala, Bolivia, and Brazil communities have received constant financial and technical support from environmental NGOs, multilateral organizations, and governments (Bray et al 2003; Gmez 2000; Nebel et al. 2005; Stone 2003; Humphries & Kainer 2006). Specifically, in Mexico, communities have received support from private wood proces sing businesses (Klooster

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46 2006) ; and in Brazil communities received aid from voluntary certifiers and from surcharges to industrial -scale clients (Molnar 2003). A t hird concern with certification is that despite the economic emphasis underlying the reasons often given by timber managers for getting certified, certification itself does not guarantee a successful position for competing i n internation al markets The global market for certified wood is dominated by big retailers with high demand conditions (especially lower purchase prices ). Thus, some certified communities, like those in Mexico, have had difficulty mee ting certification standards at co mpetitive prices making certification less worthwhile than initially expected O nly a few of Mexicos largest forest communities have been able to meet the prices and volumes demanded by big retailers in the US and Europe ( Klooster 2006). A challenging situa tion is faced by certified companies and communities in Bolivia, which a re characterized by a deep lack of b usiness management and entrepreneur ial skills and are challenged by the distance s from forests to processing centers and markets and by poor trans portation infrastructure Community -based forest management operations suffer from even more fundamental problems (Dickinson et al 2004). The demands for certification on sm aller communities and enterprises may thus not only be excessively onerous but also insufficiently worthwhile economically. The foregoing discussion suggest that a lthough forest certification has proven to be an important market instrument for improvements in forest management, as well as social and environmental changes its ability to spread broadly and achieve those desired changes in an equitable manner has been limited ; this is true especially for small forest operations ( Gerez Fernandez & Alatorre -Guzman 2005, Molnar 2003). Although many communities have been certified, it has been mainly due to su bsidies from support organizations: subsequent concern

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47 centers on whether or not those communities will continue with the s ustainable commercial management of their forests when external support is terminated ( Bass et al 2001 ). Thus, some analysts r aise many questions about the practicality and utility of F SC certification for small forest operations ( Markopoulos 2003). While others continue to defend certification, an issue on which many agree is that the main impact of forest certification to date seems to be the promotion of a more holistic concept of SFM for communities, private small forest operations, and large industrial forest operations ( Rametsteiner & Simula 2003). Th is dissertation address es th e existing debate on the practicality of certification by approaching the SFM/certification issue through the examin ation of the conditions under which certification is viabl e or not among small forest operators in Peru History of Tropical Forest Management in Peru Although several international initiatives promot ing SFM began in the 1980s, i n Peru the first legal framework that explicitly promotes SFM ha s been recently implemented in 2000. There are almost no documents reporting the situation of natural resources in Peru and their use or management through its history. However, management of resources in Peru has been characterized as being exploitative, and political and ec onomic interests have usually influenced the way natural resources have been used (including tropical timber ) In this section I review the historical policies and regulations that have governed the forestry sector in Peru. My goal here is to illustrate th e variation through time in policy instruments for timber management in Peru. Appendix A shows a list of the main formal regulations established to regulate forest activity in Peru (throughout December 2007). From the Republican Era to the 19 6 0 s: Uncontrol led Extractivism to Incipient Regulation At the beginning of the Republican period (1860) the Amazon was still an isolated region in Peru that gained importance due to the harvesting of rubber ( Ministerio de Agricultura 2002).

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48 This activity was e xploitative and unregulated, and the lack of management resulted in the extinction of rubber trees b y the beginning of the 20th century. In 1898 the first Ley Orgnica de las Tierras de Montaa (Mountain Lands Organic Law) was promulgated to regulate exploitation and exportation of resources. T he Ley de Primas de Gomales (Rubber Taxes Law) followed i n 19 06, and was enacted to tax rubber exportation and create a fund for rubber reforestation. In 1909, the Ley General de Tierras de Montaa (General Law of Mountain Lands) established different modalities for land acquisition in the Amazon such as purchase, c oncession, colonization contract, and free adjudication ( CEPES 2005). In the context of legislation for rubber extracti on, Peru also began to enact laws to regulate timber extraction and trade. Law N 7643 (enacted in 1932) modified the tariff of customs pertaining to imported timber, and established a tax for all national timbers coming from the Amazon that used national ports and were destined for the consumption of the regions of Sierra and Costa It also promoted the creation of a technical institute in the port of Iquitos for researching the commercial and scientific value of timber and other products from the Amazon. A key function of this Institute was to control the technical exploitation, transport, and s ale prices of national timbers. In 1939, Law N 8928 extended the application of taxes previously established (in N 7643) to terrestrial means of penetratin g the A mazon. Law N 10315 of 1945 was enacted to allow Peruvian colonists ( colonos ) to freely exploit and sell timber from the land they settled Until the 1950s a pattern of predatory extraction of raw material s for export characteri zed the use of Peruvian for ests. But beginning in the 1950s a process of industrialization occur red that tend ed to substitute imported products due mainly to an increase in internal demand and to consequences derived from the Second World War. In 1963, the first law that explicitly regulated

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49 forest activity was enacted (Decree Law N14552) This Law created the Forestry and Wildlife Service, as the forest administrative entity with power to grant forest harvesting contracts to individuals or enterprises in the State forests. Period 19752 000: The First Forestry Law In 1975, during a period when the military governed Peru, the Forestry and Wildlife Law14 (Legislative Decree N21147) was promulgated to regulate forest ry activity. It was enacted to complement an existing law (with respec t to forest resources and wildlife, Legislative Decree N2065315) and abolish another (Decree N1455216). U nder the Forestry and Wildlife Law (FWL) forest resources were explicitly declared to be property of the State and their harvesting was granted throug h permissions, authorizations, and contracts. Natural forests were subdivided into production areas and protection areas. The production areas contained the National Forests and the Forests of Free Availability .17 Contracts for forest harvesting carried out in Forests of Free Availability had two modalities: Contracts in areas up to 100,000 ha, with renewable periods of 10 years, and nontransferable. The obligation of the contractors was to present a study of technical 14 This Law contained five regulations: 1) Regulation of Forest Extraction and Transformation (D.S. N16177AG); 2) Regulation of Conservation Units (D.S. N16077AG, 3); Regulation of Forest Organi zation (D.S. N15977AG); 4) Regulation of Conservation of Flora and Wildlife (D.S. N15877AG); and 5) Regulation of Forest Harvesting in National Forests (D.S. N00279AA). 15 It was referred to as the Ley de Comunidades Nativas y de Promocin Agropecu aria de las Regiones de la Selva y Ceja de Selva ( Law on Native communit ies and A grarian P romotion in the Selva and Ceja de Selva regions) enacted in 1974. 16 It was referred as to Ley de Proteccin, Conservacin, Fomento y Aprovechamiento de Bosques y Terr enos Forestales y de la Vida Silvestres and enacted on 11 July 1963. This Decree refers to the creation of the Forest and wildlife Service. 17 National Forests are natural forests declared to be competent for permanent production of timber, other forest pr oducts, and wildlife, which use can only be carried out directly and exclusively by the State. Forests of Free Availability are those declared to be competent for permanent production of timber, other forest products, and wildlife that can be used by any person properly authorized (Legislative Decree N21147).

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50 economic feasibility, the harvesting of no less than 20 species, payment to the State for the harvested timber (or Canon Forestal ), and payment of the reforestation canon .18 Contracts co ver ing areas of 1,000 ha, designed especially to facilitate access to small loggers for a period of 21 0 year s, with no requirement of presenting a study of technical -economical feasibility. In practice, however, large-scale loggers abused this law by hiring many small loggers to request the 1,000 ha contracts allowed to them, and then harvested much larger tract s of forest without a ny technical study and without fulfilling other obligations required for larger contracts. This led to overexploitation of the forest, the widespread proliferation of illegal logging, and the emergence of a patronage relationship betwe en the small and large -scale loggers ( Caillaux & Chirinos 2003). Implementation of the FWL was very disorder ly ; this subsequently led to informality and adverse impact s on f orest s, and also hampered conservation efforts (Hidalgo 2003). M anagement plans that would have helped ensu re replacement of the forest were rare, which implies that timber exploitation was conducted for short term gain ( Ministerio de Agricultura 2002). The National Institute of Natural Resources19 (INRENA) was responsible for the administration, regulation, and control of the countrys natural resources. Unfortunately, most regulations regarding nat ural resources were poorly enforced due to the poor capacity of this institution. On the other hand, there were some efforts for research and establishment of forest plantations in the Amazon in the Bosque Nacional Alexander Von Humbolt in Jenaro Herrera and in the Central Peruvian Amazon (Chanchamayo, Oxapampa, Villarica) ( Lombardi & Llerena 18 Initially the FWL established that contractors should execute reforestation programs, but in 1979 this obligation was replaced with the creation of the Reforestation Canon, a fee paid for cubic m eter of round wood harvested. These fees were administered by the Reforestation Committees to fund reforestation programs. In practice, however, reforestation fees were deviated to other uses (e.g., administrative uses) and thus the reforestation process w as a failure under this system (Hidalgo 2003) 19 It was created in 199 2, to replace the Direccin General Forestal y de Fauna Silvestre

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51 1993). In the Bosque Nacional Alexander Von Humbolt surveys and detailed studies were carried out for utilization of this forest during the 1970s ( with FAO assistance ). Subsequently in the early 1980s, Japan's development assistance agency (JICA) conduct ed further studies on natural and plantation forest regeneration there (Linares Bensimon 1995). Development of the C oncession S ystem: T he New Forestry Law In 1990, after an already existing current of thought for a b etter use of natural resources (Ojeda, pers. comm. 2009), Legislative Decree N61320 mentioned for the first time the issue of sustainability in the use of the nations natural renewable resources, as well as the issue of public participation in the formula tion of policies related to the environment and natural resources. This new legislation also established, in one of its transitory dispositions the need to update the 1975 FWL to be in harmony with this Decree ; as such it was important because it set the stage to change the regime of forest over -exploitation and the proliferation of illegal logging that the country had faced in the previous 15 years. Thus f rom 1990 until July 2000, the State, environmental NGOs, and timber entrepreneurs separately debated the politics of the forest sector and ways to reform it ( Soria 2003) while working on proposals that advocated for what the new Forestry Law ought to contain Finally, a fter 10 years of debate a new Forestry and Wildlife Law (Legislative D ecree N27308, referred as to the New Forestry and Wildlife Law or NFWL ) was promulgated on July 16, 2000.21 20 Referred as to Cdigo del Medio Ambiente y los Recursos Naturales. 21 The need to have a new forestry law was also due to the state of emergency declared in the regions of Madre de Dios and Tahuamanu in 1999 because of the rampant illegal logging (Ministerial Resolution 95199AG). During this period, a US financed sawmill was charged with illegal logging and the buildin g of approximately 100 km of illegal logging roads (Supreme Decree 04799A). This joint venture between Newman Lumber of Mississippi, USA and IMT of Per processed approximately 59,000 m3 between 1998 and 1999, worth approximately $44 million (AIDA 2002).

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52 The approval of the NFWL by the Peruvian Congress was not however, a smooth process. This was a more or less closed process of comments and proposa ls because during the 1990s all attempts to produce a new forestry law were boycotted by some representatives of the timber sector. These representatives refused to recognize other actors interested in the forest policy of the country (i.e., indigenous pe oples, local communities, and environmental NGOs) arguing that since the forest was timber they were the only ones who had the right to give opinions about the forest sector. Despite this problem, the NFWL was finally promulgated in 2000 because of the g overnments desire to move the forest sector of the country towards a sustainable solution (Soria 2003). Thus t he NFWL introduced a series of basic concepts for sustainable forest management (see Table 2 1) that aimed to modify the chaotic s ituation of overexploitation informality and illegality that Peruvian forests were subjected to during the old forest regime (Hidalgo 2003). Table 2 1. Comparison of Decrees N 21147 and N 27308 Decree N 21147 Old forest regime Decree N 27308 Ne w forest regime *Production focus: timber *Production focus: all the forest, its diversity of products, and the diversity of uses and users *Forest access: direct adjudi ca tion, which promoted corruption because of the internal process *Forest access: thr ough public biddings and auctions, promoting transparency in the process due to the competition *Harvesting: short term ( 2 1 0 years) through 1,000 ha contracts ; disorganized; no management plans *Harvesting : long term (40 years) through forest concessions ; organized in permanent production forests; obligation to use management plans *Harvesting activities : in practice by large scale loggers *Harvesting activities : by small and medium entrepreneurs either individually or through the formation of enterprise s (SMFEs) *Administration: centralized; little public participation *Administration: decentralized; participat ory focus *Forest certification: not promoted at all *Forest certification: legal framework promoting it *Harvesting fee: payment only for the harvested timber *Harvesting fee: payment for the total area under concession *Reforestation: payment of fee to fund reforestation programs *Reforestation: obligation to protect and promote natural regeneration

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53 In the framework of the new forest manageme nt regime established by the NFWL, the forests of the country were organized into several categories: production forests (including permanent production forests, and production forests in reserve s ), forests for future harvesting, forests in protect ed areas forests in rural and indigenous communities, local forests, and protected natural areas. The harvesting of forest resources is granted through permissions, authorizations, and forest concessions .22 Forest production, especially harvesting of timber for co mmercial purposes, was concentrated into the category of Permanent Production Forests .23 This category of primary natural forests comprises the harvesting units that are offered for 40 years as a forest concession contract through two modalities: Public auc tions, for harvesting units of 10,000 to 40,000 ha. Public biddings, for harvesting units of 5,000 to 10,000 ha that are intended for small and medium entrepreneurs either individually or through the formation of forest enterprises According to the Bases del Concurso, small entrepreneurs are those with a gross capital of less than US $350,000 and less than 50 permanent workers ; m edium entrepreneurs are those with a gross capital of US$ 350,000 to 3,000,000 and 50 to 200 permanent workers. The main obligati on of the new contractors, which departs significantly from the previous forest regime (FWL), is the presentation of a forest management plan .24 Such plan s must be elaborated by professionals registered with, and approved by, INRENA Such management plan ha s two levels of planning: 22 There are two types of forest concessions: (1) forest concessions for timber purposes, and (2) forest concessions for nontimber purposes (i.e., concessions for nontimber forest products, and concessions for ecotourism, conservation and environmental s ervices). This study entirely refers to the first type of concessions: forest concessions for timber purposes. 23 The organization of the forests allows for an understanding that forest management should be a permanent and a long term activity. In the old forest regime, this was not possible due to the short term of the 1,000 ha contracts and their wide spread dispersal throughout the department. 24 The forest management plan comprises the activities of characterization, evaluation, planning, harvesting, reg eneration, reposition, protection, and control of the forest in order to assure a sustainable production and conservation of the forest (Law 27308).

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54 The General Forest Management Plan (GFMP) which provides the general framework of planning for the 40 years of the concession contract It has to be updated every five years The Annual Operati ng Plan (AOP) which provides detail s of activities to be developed during a given year. Th e AOP requires the realization of a forest census of commercial species for all trees with diameter superior to the minimum cut diameter established (dimetro mnimo de corta). Additional obligations f or the new contractors includes the payment of an annual harvesting fee (in US$) for the total area in the concession. Once a forest concession is granted, the contractor (i.e., the titl e holder of the contract or representative) is the only person respon sible for it. However, the y can also make contracts with third parties for harvesting other resources (e.g., Brazil nut or castaa) in the concession ; such additional resource is allowed under a complementary management plan that must be approved by INRENA T he contractor can also transfer all his rights and obligations in the concession to a third party if previous authorization is obtained from INRENA. Also, in the framework of the new forest management regime, there is a discount of 25% in the payment of the harvesting fee as an incentive for c oncessionaires who attain forest certification and/or develop value added capabilities (i.e., transformation of timber ). The NFWL also established a new organization system for public institutions in charge of the f orest administration. INRENA retains its technical and executive functions as the administrator of forest and fauna resources in the country, subscribing and approving management plans for forest concessions The Timbe r Forest R esources Supervision Agency (Organismo Supervisor de los Recursos Forestales or OSINFOR) was created to supervise and verify periodically the fulfillment of the forest management plans of forest concession contracts. The Forest Management Committees ( Comits de Gestin de Bosques ) we re created to s trengthen citizen participation in forest administration through the collaboration of, or participation in forest supervision and control activities o f forest concessions.

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55 From the inception of the concession program in 2002 through the end of 2003, 24,586,458 ha of permanent production forests were created in the country, distributed among 10 departments (Table 2 2 ). To date, two rounds of public bidding have been carried out for the implementation of the concession system in Peru. In 2002, a first round was carried out in the departments of Madre de Dios, Ucayali, San Martin, and Huanuco; following this, in 2003, a second round to grant forest concessions was carried out in the departments of Madre de Dios and Ucayali, with a first round in the department of Loreto ( INRENA 2008a ). Table 2 2 Peruvian permanent production forests Department Department area (ha) % Permanent p roduction forests respect to total area Permanent production forest area (ha) % of PPF area Loreto 38,685,195 38.21 14,782,302 60.12 Ucayali 10,183,064 40. 16 4,089,926 16.63 Madre de Dios 8,530,054 29.57 2,522,141 10.26 San Martin 5,125,331 29.29 1,501,291 6.11 Huanuco 3,684,885 23.90 880,846 3.58 Junin 3 766, 699 6.65 250,555 1.02 Pasco 2 531, 959 6.84 173,068 0.70 Cusco 7,198,650 2.38 171,644 0.70 Aya cucho 4,381,480 3.34 146.298 0.60 Puno 6,699,712 1.02 68.387 0.28 Total 24,586,458 1 00.00 Source: INRENA Ministerial Resolutions: N 1349 2001 AG, N 026 2002 AG, N 1351 2001 AG, N 549 2002 AG Following the bidding process es as of October 2009 a t otal area of 7,552,8 07 ha of forests (3 0 7 % of the total permanent production forests of the country) ha s been granted as forest concessions in five departments (Table 2 3) These concessions consist of 5 88 contracts held by

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56 5 09 private SMFEs (263 personas jurdicas and 246 personas naturales ).25 In addition, 355,524 ha of forests have been adapted (adecuados ) from the previous forest regime (FWL) to the new forest regime ,26 favoring 20 private SMFEs ( 14 personas jurdicas and 6 personas naturales ). Together these operations manage 7,9 08, 331 ha of forests ( OSINFOR 200 9 ). During the same period of time, OSINFOR has disqualified 5 9 forest concession contracts (held by 49 private SMFEs) due to illegal actions (e.g., presentation of false documentation with respect to the existence and characteristics of tree species declared in the management plan, and/or use of transportation permits so third parties could transport timber from illegal sources ) The disqualified concessions cover an area of 8 5 0, 104 ha which represents 1 0 7 % of the tot al area granted and adapted as forests concessions in the country. Also, three concession contracts covering an area of 68,699 ha (belonging to 2 private SMFEs) have been returned to the State due to impossibilities in managing the forest concession for pr oductive purposes Table 2 3 Peruvian forest concessions granted ( a s of October 2009 ) Department Total area granted (ha) Total number concession contracts Total number private SMFEs Ucayali 2, 871,925 17 1 15 1 Loreto 2,6 40,846 250 21 4 Madre de Dios 1 26 7,111 85 73 San Martn 494,668 34 29 Hunuco 284,343 48 42 Total 7, 558,893 5 88 5 09 Source: OSINFOR (2009) 25 In Peru, personas naturales is the legal term for a sole proprietor while personas jurdicas indicates a legal business partnership. 26 This refers to contracts for other forest products existing during the previous forest regime (NFL 21147) that their contractors wanted to be renewed at the enactment of the Amendment of the New Forestry Law (NFWL N27308) fo r which they needed to adapt (or in Spanish adecuarse ) to the conditions of the NFWL through the presentation of the solicitude and supporting documents (DS 0142001AG).

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57 Development of the Forest Certification Initiative : the Peruvian Council f or Volunt a ry Forest Certification During the 1990s different groups (i. e., the State, environmental NGOs, timber entrepreneurs) were separately debating and discussing the politics of the forest sector in the country and the ways to reform it through the promulgation of a New Forestry and Wildlife Law N 27308. For example, e nvironmental NGOs were looking for ways to disseminate information to promote sustainable practices in the country. Because of this period of separate debates however, a separate section covering NGOs is presented here beginning in the 1990s and moving forward As the pr evious section discussed what the state was doing in the early 2000s, it is now important to review what the NGOs did during the same time period of time While different NGOs were working on proposals that advocated what the new Forestry Law ought to contain, in order to reform the chaotic situation of forest over -exploitation and the proliferation of illegal logging that the country was facing during the previous forest regime, parallel to this the environmental NGOs WWF Peru and ProNatu raleza (together with FSC representatives ) carried out a series of workshops to promote the benefits of the FSC forest certification scheme One of the missions of WWF is to ensure the sustainability in the use of renewable natural resources for which it supports forest certification .27 T hus, workshops on promoting FSC certification were carried out in the cities of Lima, Pucallpa, Puerto Maldonado and Iquitos in November 1997, which constituted an important element of WWFs proposal for the new Forestry La w in promoting SFM. Thus, t he idea of forest certification was welcomed by several representatives of ecological, production, and social org anizations who formed a group of volunte er s to develop a national initiative. 27 WWF acknowledges that several certification schemes may contribute to improve fores t management ; however WWF focus its efforts on improving the FSC system, on adapting FSC certification to different scales and national contexts, and on promoting the FSC logo as an internationally recognized hallmark of responsible forest management (WWF 2007: 2).

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58 In 1998, WWF Peru and ProNaturaleza ca rried out a project for the e stablish ment and strength ening of a national initiative for voluntary forest certification in Peru. Subsequently, the National I nitiative (NI) was formed based on four R egional Working G roups located in Madre de Dios, Lima, Uca yali, and Loreto; it was responsible for promoti on of forest certification and developing regional standards for good forest management based on the FSC Principles and Criteria. In November 2000, after the new Forestry and Wildlife Law was already promulga ted, representatives of the industrial timber sector, forest producers, social groups, professionals in the forest sector, and environmental NGOs got together to define the first Directive for the NI. In June 2001, the Peruvian Council for Voluntary Forest Certification (CP -CFV) was formed ; in October of that year the FSC recognized the CP CFV as a FSC Working Group in Peru On July 20, 2001 the forest management certification standards for wood products from forests in the Peruvian Amazon were approved by the CP CFV and endorsed by FSC in May 2002 (Consejo Peruano de Certificacin Forestal Voluntaria 2002). Th us, g iven that the most important feature of the new Forestry and Wildlife Law is the requirement of management plans ( which are based on detailed exploratory forest inventories ) and that this Law also provides incentives for voluntary forest certification environmental NGOs sought to support the elaboration of management plans and the attainment of certification as essential element s for long -term planning and promotion of sustainability. E nvironmental NGOs ha ve provided technical and financial support to the SMFEs and indigenous communities that attained forest certification in Peru. From the endorsement of the CP -CFV, 13 of the 612 forest concession contracts granted in f ive departments have attained FSC forest certification

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59 representing an area of 412,2 96 ha (5. 2 % of total concession area already granted ) .28 This can be observed in Table 2 4 below. In addition another 204,245 ha belonging to indigenous peoples (community lands) have attained FSC certification for timber management, while 45,136 ha belong ing to an association of Brazil nut farmers has attained FSC certifica tion for Brazil nut management. Although forest certification is a relatively new process in the country Peru is already third in South America (after Brazil and Bolivia ) in te r ms of am ount of certified forest area This dissertation will focus on the department of Madre de Dios where the forest concession system was first implemented in Peru mainly as a response to the high rat e of timber harvest (both legal and illegal) that the fores t s of that region was suffering Another consideration, however, was that the people of the region were generally re cept iv e to having a new forest management regime; in contrast to people in other department s that did not want to accept (at least initially ) the forest concession system. Table 2 4 Peruvian certifi ed areas by harvesting modality ( a s of September 2008) Modality of harvesting Department Area (ha) Forest concession (timber) Madre de Dios 205,593 Ucayali 201,532 Hu a nuco 5,171 Total forest concessions 412,296 Permits in c ommunal land (timber) Ucayali 159,334 Pasco 34,344 Hu a nuco 10,567 Total permits 204,245 Brazil nut concession Madre de Dios 45,136 Total Brazil nut concession 45,136 TOTAL AREA 661,677 Source: INRENA, September 2 008 28 In 2008 two forest contracts had their FSC certificate suspended because of unresolved corrective action requests CARs (WWF 2008). In one case, due to economic problems the SMFE in question has not being able to resolve their CARs to keep its certificate (WWF MDD representative, pers. comm. 2009).

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60 Study Region : Madre de Dios Location and Population Madre de Dios is a key Peruvian department in which new timber concessions were created and in which NGOs were operating in the context of the new forestry law. This department is situated in the Eas tern Peruvian Amazon (Figure 2 1) and was the first department where the forest concession system was implemented It is the third largest Department in Peru in terms of area ( 85, 300.54 sq. km) comprising 6.6% of the total national territory. The 2007 population of Madre de Dios is 109,555, of which 73% (80,309) are urban inhabitants settled mainly in Puerto Maldonado (56,382), the capital of the Department. Although Madre de Dios is the least densely populated department in the country ( 1.3 inhabitants/sq km) and has the smallest departmental population ( with only 0.4% of the total population of Peru) it has experienced the largest proportional increase in population among all departments in the country since 1993 (63.5%) ( INEI 2008).

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61 Figure 2 1. Map of Madre de Dios protecte d areas. It shows protected areas that fall partly or entirely within Madre de Dios The rural non -indigenous population is settled in small, mixed subsistence communities along rivers and roads, with producers engaged in a blend of agricultural and extract ive activities, including Brazil nut harvesting, gold mining, fishing and logging ( Chirinos & Ruz 2003, INRENA 2003, SPDA 2003). Logging is one of the most important economic activit ies employing 65% of the economically active population. The main tree species harvested are Swietenia macrophylla King (mahogany ), Cedrell a odorata M. Roemer (cedar ), and Cedrelinga catenaeformis Ducke (tornillo ); together they represent almost 60% of the total volume

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62 harvested in the region ( Chir inos & Ruz 2003). Ano ther 40 species of l ower value are also extracted in the region in small volumes, although the so -called hard -wood timbers have been increasing in demand in recent years ( Gobierno Regional de Madre de Dios 2006). Biophysical Characteristics Madre de Dios comprises the provinces of Tahuamanu, Tambopata, and Manu, which cover two biophysical units: a) the Cordillera Oriental Faja Subandina (5003 ,967 masl) in the southwest of the department, a ruggedly mountainous region comprised of s hallow soils of low natural ferti lity, and b) the Llanura de Madre de Dios (1765 00 masl) which is the more extensive of the two units, with a soft and undulating relief where floodplains and low hills are predominant In that zone, the soils are deep being floodplains of high fe rtil ity (INEI 2004). Rainfall in the department averages 2,260 mm yr1 concentrated in a rainy season from October to April. The a nnual average temperature in Puer to Maldonado is 26 INEI 2004). The department has 12 life zones, and according to the State zoning plan based on most appropriate land use, the distribut ion of lands in the region is: 66.75% ecological protection zones (protected areas and special treatment zones), 29. 57% permanent production forests, 1.26% agricultural zones, 1.67% fisheries production, and 0.72% other use zones ( Ministerio de Agricultura 2008). Madre de Dios is one of the few me ga -diverse zones identified in the world (Myers 2000), with world records for bird, insect, and mammal biodiversity ( Huertas Castillo 2004 ). This high biodiversity has merited the creation of various protected areas, including : the Manu National Park (1,544,665.7 ha), the Bahuaja Sonene National Park (200,000 ha approximately), the Alto Purus National Park (1,250,000 ha), the Purus National Reserve (202,033.21 ha), the Tambopata Candamo National Reserve (274,690ha), the Amarakaeri Commun al Reserve (402,335.62ha), and the Territorial Reserve for indigenous people in voluntary isolation (829,000 ha) (Felix 2007

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63 personal communication). Together these areas comprise 4.7 million hectares of protected rainforest ecosystems (55.1% of the depart ment area) and concentrate 50% of the Peruvian diversity and endemism, making it the biodiversity capital of Peru ( CTAR -Madre de Dios & IIAP 2000). The region is also home to 9 different ethnic groups of Amazon Indians ( Huertas Castillo 2004). H istory of L and U se and O ccupation Madre de Dios started its insertion in to the international economy with the rubber boom (18901 920). Rubber extraction started in 1894 after the discovery of large concentrations of rubber in the north (Manu, Los Amigos, L as Piedras, and Tahuamanu river s ) and south (around the Tambopata river) of the department ( Huertas Castillo 2004 ). This boom generated the first p eriod of intense immigration and rubber tappers sought access to rubber trees and the cl earing of agricultural fields for food, which began the alteration of forests along the rivers ( Alvarez & Naughton Treves 2003). However, due to the global crash in rubber prices and the decline of the rubber economy in the Amazon in the early 1900s the few rub ber companies remaining in Madre de Dios diversified their production by pursuing gold mining, selective logging and collection of Brazil nut s ( Alvarez & Naughton Treves 2003). In the mid 1960s, the construction of a new road connecting Puerto Maldonado to Cus co opened a new wave of immigration For the next 20 years newcomers from the Andes settled mainly along the new road or in Puerto Maldonado ( Alvarez & Naughton Treves 2003); they came initially to work in the extraction of Hevea brasiliensis (wild rubber ) and B ertholettia excels a (Brazil nut), and later ( late 1970s ) in timber and mining ( Lawrence et al 2005 ). D uring the 1970s and 80s, however, mining of gold became an important activity for the departments economy even as logging and Brazil nut extraction continued (Huer tas Castillo 2004 ). Furthermore, improvements to bridges and highways in Tahuamanu caused an increase in

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64 logging during the second half of the 1980s as well Thus, President Alan Garca s economic policies of access to agricultural credit and land titles led to the expansion of the agricultural frontier in the Department ( Coomes 1996). However, when Alberto Fujimori was elected as the new President in 1990, the new agrarian and economic policies drastically changed primary productive activities. This resulted in the decline of agricultural production and forest extraction due to the implementation of a program of austerity that removed agricultural credit and imposed taxes ( Alvarez & Naughton Treves 2003). Despite the decline in economic activities, an influx of Andean migrants co ntinued and the population of the department has continued to gr o w ( INEI 2008). Contemporary Economic Activities in Madre de Dios There are three main forms of economic activity in Madre de Dios: extraction (gold mining, Brazil nut logging ), farming (agriculture and livestock), a nd conservation -oriented tourism Of all of these, logging is increasingly expanding and has become an important economic activity in the Department due to the amount of employment it generates Extracti ve Activities Gold mining was the departments most d ynamic economic activity during the end of the 1970s and the 80s due to the high concentration of this metal in the alluvial areas of the Madre de Dios and Inambari rivers ( covering approximately 500,000 ha ). Diverse environmental impacts are associated w ith this activity (including water pollution by mercury, soil erosion, and vegetation degradation), although profits reported are significant. It is estimated that the annual production of alluvial gold is between 81 0 tons and the financial flows generat ed by this activity contribute between 15 and 30% of the departments GDP ( IIAP & CTAR Madre de Dios 2001).

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65 Brazil nut harvesting is an environmentally sustainable activity that covers an area of 1,600,000 ha (19% of the departments area). A significant source of employment in the region this activity is facing difficulty due to the lack of competitiveness among the few companies trading this resource and the relatively low value of t he nut which is s old shelled and unshelled (Huertas Castillo 2004). Logging has increased in the department since 1992, and is primarily selective of the most valuable timber species: mahogany, cedar, and Cedrelinga catenaeformis (torn illo ). Together these three species represent 63% of the total volume harvested in the department. This activity was initially undertaken in an intensive way in Manu and Tambopata provinces where mahogany and cedar are now already exhausted and since the 1990s, logging has focused o n the Tahuamanu province where mahogany can still be found ( Huertas Castillo 2004, IIAP & CTAR Madre de Dios 2001). Since 2 002 when the forest concession system was implemen ted in the Department, private SMFEs start ed managing the permanent production forest for timber production Most of these private SMFEs derived from associations (i.e., small loggers and neighbors) already existing in the three provinces of the Department few enterprises were formed with family members only and few enterprises also were formed by an individual only. Also most of the private SMFEs in the Department (78%) are formed by immigrants coming mainly from Cusco (the neighboring Department) who ha ve been settled in Madre de Dios for an average of twenty six years. These new entrepreneurs harvest in average seven commercial timber species per year, and although mahogany and cedar are still the two most valuable and harvested timber species in the D epartment (particularly in Tahuamanu and Tambopata), more commercial species have been harvested since 2002 including species such as Cedrelinga catenaeformis Amburana cearensis Aspidosperma macrocarpon, Dipteryx alata Tabebuia sp,

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66 among others. This ha s been mainly due to increasing prices and demand for less traditional timber species. Farming Although characterized by low productivity and as having difficulties for commercialization, agriculture is a wide spread activity mainly carried out in areas along the Madre de Dios and Tambopata rivers and in areas adjacent to roads ( IIAP & CTAR -Madre de Dios 2001). It is calculated that 6% of the total area of the department is allocated to farming purposes ( Huertas Castillo 2004); the main crops cultivated are rice, plantain, corn, and manioc. Livestock management consists mainly of famil ies ra ising poultry and pigs, although there is extensive cattle ranching developed mainly along the Iapari -Puerto Maldonado -Puente Inambari road (IIAP & CTAR Madre de Dios 2001), which became more widespread in the late 1980s (Varese 1999) S heep raising has also de velop ed along the Quincemil -Puerto Maldonado and Pilcopata Shintuya roads ( IIAP & CTAR -Madre de Dios 2001). Conservation Since 1973, several protected areas (covering 55% of the depart ment ) were created in Madre de Dios with the main objective of protecting the great biodiversity this Department shelters and controlling the use of natural resources. Conservation is also associated with ec otourism, which in the department is concentrated in the provinces of Tambopata and Manu. It is undertaken mainly through travel companies that take their clients to tourist lodges located along the Tambopata and Madre de Dios rivers (IIAP & CTAR -Madre de Dios 2001, Lee 2000). Summary A key issue concerning SFM and certification involves the constraints and limitations that forest operators may face when applying these practices particularly in the tropics Ini tially, this

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67 chapter pr esented a discussion of the main international initiatives guiding global management of forests, emphasizing the discussion of the FSC certification scheme as one of the most important mechanisms to promote responsible forest management in Latin America an d the constraints that have been faced in its application T his chapter also discusse d the legal framework f or forest management in the Peruvian Amazon where forestry regulations have changed considerably over time. Perus long-standing forestry regime was basically a situation of open access that predictably led to predatory extraction. T he new Forestry and Wildlife Law of 200 0 which established a forest concession system for timber harvesting, sought to change that chaotic situation by requiring manageme nt plans ; this, however, raises questions about the viability of the new concession system. Madre de Dios is a key arena for studying the viability of the new concession system given the size of the department and the large forested area it contains. It is also an important area because it was the first Department where this new concession system was first implemented in the country, and because of its importance as a center of biodiversity where logging is one of the most important economic activities with a long history. Thus, these characteristics make Madre de Dios a useful study case for an evaluation of Perus new forest regime. Further more, given the goals of the new Peruvian forestry legislation, M adre de D ios is also a useful study case to evaluate SFM and certification and their constraints and limitations. Th e last section of this chapter p resent ed the main biophysical characteristics, history of land use and occupation, and the economic context of Madre de Dios in order to introduce the study area T he next chapter will develop the methods and components of the analysis used in this research study to address how the characteristics of private SMFEs influence their management viability and on how SMFEs relate to other organizations.

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68 CHAPTER 3 QUES TIONNAIRE DEVELOPMENT, SURVEY ADMINISTRATION, AND DATA ANALYSIS Introduction Given the lack of data on forest management among private SMFEs in the concession system in Madre de Dios, it was necessary to design questionnaires and administer a survey of the main forest stakeholders and SMFEs in the department. This chapter begins with brief description s of the questionnaire for forest stakeholders (i.e., the forest organization questionnaire ) and the questionnaire for SMFE s The forest organization questi onnaire is used to address the first research question of this study: namely, how SMFEs relate to other social actors T he SMFE questionnaire is used to address the second research question : h ow the characteristics of SMFEs (in terms of their capital as sets) influence their management viability. In particular, I focus on some important aspects of the development, structure, and formatting of the SMFE questionnaire and the implementation of both the forest organization and the SMFE surveys In t h e section that follows, I present a description of how the data were compiled and reviewed for accuracy and completeness. T he chapter then concludes with a description of the components of the a nalysis of the data. Survey Questionnaires Forest Organization Question naire Analysis of the main stakeholders or key actors in the forest sector in the department which have directly i nfluenced or emerged in the course of the concession system is an important aspect of this study. Therefore, the development of the forest organization questionnaire which characterizes the interests and actions of key actors was based upon literature describing the main actors participating in Third World environmental issues ( Bryant & Bailey 1997, Grimble & Wellard 1997 ) in order to understand how the agenda of these actors

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69 influence s environmental pro blems. While this literature p rovided the structural foundation of the questionnaire, the content in terms of specific questions w as mainly derived from unstructured interviews carried out during the first stage of this research study ( May September 2005) with representatives of some forest organizations influencing the concession system in the cities of Lima and Puerto Maldonado, Peru These initial interviews were important; they provided an opportunity to understand the main stakeholders in Madre de Dios and helped to ensur e the practicality of the survey instrument The forest organization questionnaire which is used to address the first research question on how SMFEs relate to other social actors was designed to elicit the following information from the main forest organizations in Madre de Dios : the nature of their relationships amongst each other; length of time they have work ed in Madre de Dios and with what purpose ; their main functions/roles in the process of the concession system in the region; their capacities/limitations t o fulfill their specific roles; the specific actions of support they provide to SMFEs and the factors favoring/constraining this support ; the status of their r elations hips with SMFEs and other actors in the region (in terms o f negotiation or conflict) Questions 11 9 of the survey instrument cover these aspects It also include s (in Questions 203 0) items related to the opinions that the se forest organization s have of the performance and main problems faced by the SMFEs in the region and perspectives of forest management and certification in Madre de Dios The forest or ganization questionnaire is mainly comprised of open -ended questions and was written entirely in Spanish; it has been translated in to English and placed in Appe ndix B. S mall -M edium F orest Enterprise Questionnaire SMFEs in Peru comprise those businesses with gross capital of less than US$ 3,000,000 and less than 200 permanent workers. The SMFE questionnaire which is used to address the second research question on how the characteristics of private SMFEs influence their

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70 management viability, was designed based on a literature review of various types of capital s and capabilities possessed by households and small enterprises in developing regions. S pecifically I d rew on the DFID l ivelihood f ramework that us es the five forms of capital ph ysical, financial, natural, human, and social capital (Department for International Development 1999 ). These forms of capitals defin e the productive assets that households and small enterprises need to strategize, pursue, and secure their livelihoods For purposes of this study the y constitute the main components of SMFE c apacity. Specific concepts of social capital were drawn from the Social Capital Assessment Tool (SOCAT), an instrument of the Social Capital Initiative by the World Bank ( Grootaert & Bastelaer 2002). The development of the SMFE questionnaire was also derived from field interviews administered during the first stage of this research study ( May September 2005) to managers of the private 10 SMFEs receiving support from WWF in Madre de Dios These initial interviews were important to the understand ing of the functioning of private SMFEs in Madre de Dios, and facilitated the overall construction of the survey instrument. The SMFE questionnaire was also designed to elicit inform ation about the capitals and capabilities that SMFEs have for forest management, which is measured in terms of capital accumulated since 2002 (formation of the enterprise) through the 2006 h arvest (last completed harvest year previous to the interview peri od). This period of time is important because it represents th e five year grace period that the State granted to private SMFEs to manage their forests without the elaborati on of a current forest inventor y of their areas ( but using only a governmental study1), and within a promotional regime of discounts in the payment of their harvesting fees. 1 The intention of this was for the SMFEs to avoid initial expenses during this initial state of management where they were capitalizing themselves.

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71 T he SMFE questionnaire contains eight sections; Table 3 1 presents the contents of this instrument with a brief description of each section. The sections are arranged in a logical sequence in which they are administered, beginning with more general questions to build rapport with th ose interviewed. Table 3 1. Composition of the SMFE questionnaire Section Item/Section Description -Introduction Introduction of the re searcher; SMFE name, location 1 Respondents data Demographic information 2 History and Organization Formation, structure, problems 3 Physical Capital Assets and investments 4 Financial Capital Financial information 5 Natural Capital Timber related da ta 6 Human Capital Training, practical experience information 7 Social Capital Organizations, networks, participation, trust, conflict 8 Other Enterprise Aspects Forest management, certification Section one of t his questionnaire includes demographic characteristics of respondents (mainly SMFEs managers or Gerentes2) such as age, education, income, and time of settlement in the area. Section s two to eight cover various characteristics of the SMFE. For example, S ection two includes questions regarding : th e formation of the SMFE (e.g., how it was formed, if there was external support to form it / -from whom / -what type of support) ; specificities of s upport received (e.g., what type of support, who provided support, what were the benefits/limitations of the s upport) ; and the structure of the enterprise ( e g., number of current members and changes over time, changes in number of managers over time, problems inside the enterprise) Section three includes questions regarding assets and investments of the SMFE (e. g., type and purchase costs of equipment held; amounts invested in road construction, supplies, construction of camps or other infrastructure, harvesting fees and the elaboration of forest censuses). Section four includes questions about finances (e.g., a mounts received as loans, 2 In most of the private SMFEs surveyed, the manager has had this position since formation of the enterprise and was the most knowledgeable person about the functioning of its enterprise.

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72 amounts held as savings, the economic contribution of the enterprise s members). Section five includes questions about the size of the concession area granted, and the amount of timber approved and harvested per year. Section six includes questions about the practical experience of the enterprises members i n logging and business, and the training they have received (e.g., how frequently, type, and who provided the training). Section seven includes questions regarding organizationa l density, networks and support organizations, participation of the enterprises members and problems among them, trust and cooperation and resolution of conflicts. Finally, section eight includes questions about forest management constraints in Madre de D ios, certification issues, and constraints in operational management for SMFEs A copy of the SMFE questionnaire (translated into English) used in this research st udy is presented in Appendix C Survey I mplementation S mall -M edium F orest Enterprise Question naire Testing and Revision F ield testing of the survey instrument was important to ensure that all necessary information was being collected, that the wording of individual questions was clear, and to make sure there was no ambiguity in responses to a give n question ( Grosh et al 2000). It also helps in determining the approximate time to complete a survey ( Fowler 2002). For this study, the SMFE questionnaire was tested in Puerto Maldonado during the second week of June 2007. The main finding of the testing was that the questionnaire was somewhat long if written notes were going to be taken to record the answers and some redactions were necessary. Changes included rewriting questions with a simpler wording, and shortening them in order to clar ify the intent and meaning. This especially occurred with questions related to the History and Organization and the Other Enterprise Aspects sections (sections 2 and 8, respectively) Also, the testing revealed that for some questions it would be difficult if not impossible, to get certain information required

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73 due to the lack of records of this information and/or lack of knowledge by the interviewee. Examples of these questions include: information on members of each enterprise (age, education, and forest activity experience), investments made by the SMFE, approved and harvested timber volumes for the period under study, and forest training (e.g., workshops) received by enterprise members. Despite observing some difficulty with such questions, it was decid ed to keep them as part of the survey because of the importance of the information (even if some of it is incomplete) and the novelty of this study. Sample Size This research study was initially designed to obtain a sample of private SMFEs from each of the three provinces of Madre de Dios w h ere forest concessions were granted in the first round of public bidding. However, due to the small population of SMFEs and differences in characteristics among them observed during field work in 2005, I decided to carr y out a census to examine the entire population. The emphasis on concessions from the first round is important because they represent 85.4% of the total area of the permanent production forests currently granted in the Department. Thus, at this point in ti me, these enterprises are the main players of the forests of the D epartment and they will determine the outcome of most forest management there. Twenty nine SMFEs3 (Figure 3 1) representing 76.3% of the entire population (from a total of 38 private SMFEs still active as of August 2007) participated in this study from June 15 to August 28, 2007 (Table 3 2). A list of the SMFEs participating in this study is presented in Appendix D. Non -participating SMFEs include: five enterprises whose administrator alth ough accepting participation in the study never delivered the information required ; three enterprises 3 The 29 SMFEs in this study represent 27 units of analysis, since in the Tahuamanu province there are two groups of t wo enterprises each that are working together.

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74 whose managers and/or members could not be located during the period of the study; and one enterprise that was in an evaluative process to be returned to the state because it had just presented its GFMP and had not harvested at all. Figure 3 1. Forest concession areas of participating SMFEs

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75 Table 3 2. Distribution of active private SMFEs 1st round ( As to August 2007) Province Total SMFEs SMFEs in t he study Tahuamanu 21 14 Tambopata 6 6 Manu 11 9 Total 38 29 This research was also designed to obtain a purposive sample ( Bernard 2002) of the main forest organizations involved in the concession system whose interactions and/or decisions have influenced SMFEs performance. Thus 29 experts on the subject of forest concessions representing 7 2.5 % of the entire population (from a total of 40 experts) participated in this study from May 25 to September 30, 2005, and from June 15 to August 28, 2007 (Table 3 3 ). Nineteen experts were i nterviewed during the 1st stage of the study in 2005, while 16 experts (including some previously interviewed during the 1st stage) were interviewed during the 2nd stage of research in 2007. These experts includ ed government officials, representatives of k ey environmental NGOs forest consultants, and grassroots representatives A list of the experts participating in this study is presented in Appendix E Non -participating experts represent those who could not be located during the period of study

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76 Table 3 3 Forest experts on the forest concession system (20052007) Organization Total experts Experts in the study The National Institute of Natural Resources Madre de Dios 4 4 The Regional Government of Madre de Dios 1 1 The Promotional Fund for Forest De velopment M adre de Dios 2 2 The Timber Forest Resources Supervision Agency Lima 2 1 The National Forestry Chamber MDD 1 1 The W orld W ide F und for Nature ( Lima and Madre de Dios) 6 4 C ooperazione e S viluppo 2 2 The Peruvian Fund for Nature Conservation Madre de Dios 2 1 The A ssociation for C onservation of the A mazon Basin Madre de Dios 2 2 The Roundtable for Dialogue and Forestry Consensus Madre de Dios 2 2 Tahuamanus Conce s sion ai r e s Association 1 1 Madre de Dios Concessionaire Association 1 1 Fo rest Extractorss Federation 1 1 Tahuamanu s Ecology Association 1 1 Association of Small Loggers of Tahuamanu 2 1 Rio Las Piedras Forest Management Committee 1 1 Forest consultants 6 2 Madre de Dios National University 3 1 Total 40 29 Implementat ion of the SMFE and Forest Organization Surveys This research study was carried out in two stages: the first in 2005, and the second in 2007. During the first stage of fieldwork carried out in Lima and Puerto Maldonado from May 25 to September 30, 2005, t he main goal was to obtain general knowledge of the functioning of the concession system in Madre de Dios, and to identify and compile initial information acquired from the main forest organizations. Thus, with help from Forestry Engineer Roberto Kometter, Director of Development of F orest M anagement P lan s (at that time) of the CEDEFOR/WWF Project in Lima, the first names of representatives of the main forest organizations in Madre de Dios were compiled, as well as the list of the SMFEs receiving technical support from WWF in

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77 the Department. Later, s nowball sampling was used to identify further representatives of these forest organizations. Thus, u nstructured interviews were carried out with 19 representatives of forest organizations ( representatives of NGOs government and grassroots organizations ) to investigate the overarching political context functioning and problems of the concession system and these organizations participation and role. Semi -structured interviews were carried out with the managers (Gerentes ) of the 10 private SMFEs receiving support from WWF in Madre de Dios4 and covered the formation capacities and limitations of forest management practiced by these enterprises All interviews lasted between 30 5 0 minutes and were tape recorded; a ll interviews were later transcribed for compilation and analysis. During the second stage of this study carried out in Puerto Maldonado from June 11 to August 28, 2007, the main objective was the implementation of the SMFE and forest organization questio nnaires. Prior to the actual implementation of the survey, preparatory work included presentation of letters to INRENAs Intendente Forestal y de Fauna Silvestre (in Lima) which introduced the researcher and the research topic, and requested information on names and addresses of all private SMFEs managers from the first round of bidding in Madre de Dios. These preparations occurred in May 2007. In June at my arrival in Puerto Maldonado, the information requested from INRENA Lima was not delivered ,5 thus in the middle of June I requested the same information from INRENAs A dministraci n T cnica Tambopata-Manu As the list of SMFEs they provided me was not 4 These enterprises represented the entire population of SMFEs receiving technical support from the C EDEFOR/WWF Project during 2005. They composed 25% of the total population of SMFEs from the first round of b idding 5 I actually got this information (with no current data) by the end of July when I already had located or knew about the location of most SMFEs managers.

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78 complete I started the application of the forest organization questionnaire with representatives I visite d in 2005. Also, the first application of the SMFE questionnaire was done with a SMFE manager I interviewed in 2005, with the objective of requesting the location of other SMFE s managers missing from my list. The application of both questionnaires depend ed on the availability and/or location of the interviewees. For example, I started interviews in Puerto Maldonado where most SMFE s managers and forest organization representatives are located. Then, I moved to Iberia and Iapari cities for a week to intervie w mainly SMFEs managers from the Tahuamanu province. Later, I moved to San Juan Grande and Boca Colorada towns for four days to interview SMFEs managers from the Manu province. And finally, I went back to Puerto Maldonado to locate SMFEs managers that I co uld not locate in their residencies at first due to travel reasons. The first task undertaken during the interview is the introduction of the researcher and research topic to the respondent. This is followed by the reading of the informed consent and obta ining oral acceptance6 from the respondent before beginning the main part of the interview. When meeting a SMFE manager for the first time, an appointment was requested to interview that person at a later, more convenient time. However, only in a few cases was it necessary to schedule an appointment for a later date. D uring the initial application of the SMFE questionnaire it was impossible to get complete information about the enterprises members (age, education, and forest activity experience) and on the ir approved and harvested timber volumes for the period under study. This was mainly due 6 In 2005, during first stage of field work very few people, although approving participation in the study and reading the informed consent, accepted to sign it. With that experience, in 2007 only oral consents were requested, previously showing a hard copy of the consent.

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79 to the lack of knowledge and lack of records kept by most interviewees. Nevertheless, this situation was rectified later using secondary in formation obtained from INRE NA. Information about approved and harvested timber volumes of the enterprises were requested from each of the two INRENA Technical Administration offices in Madre de Dios. Thus, INRENAs database for the Harvests 20022006 (updated to September 2007) was initially used to complete this information as input for the master file. After reviewing this information, however I found some mistakes in INRENAs volume database p articularly on annual harvested areas and approved and harvested timber volumes .7 Also, after reviewing data from the SMFE questionnaires already entered in the SPSS template, I realized that a l ack of consistent information for SMFEs under study existed .8 Therefore, due to these findings, I carried out a couple of additional trips to the stu dy area (March and June 2008) to verify the volume database supplied by INRENA and to compile information to fill gaps found in the SMFE questionnaires (and verify some of this information). As a result, I obtained a newer version of INRENAs database for the Harvests 20022006 (updated to April 2008) and then compiled hard copies of official documents such as the Resoluciones de Intendencia y Administrativas annual harvesting fees summaries, and sections of the Annual Operating Plans (AOPs) and the Genera l Forest Management Plans (GFMPs). This new information was used mainly to verify the approved and harvested timber volumes, size of concession areas, annual harvested areas, and harvesting fees of the SMFEs surveyed for this study. Specifically, the Resoluciones de Intendencia y Administrativas were 7 Previous experience (gained during the first stage of field work in 2005) in reviewing annual operating plans from SMFEs assisted by WWF MDD helped me to recognize these mistakes, because usually the mistaken values were far off from the regular values for most SMFEs. 8 This lack of consistent information is due largely to the lack of a systematic organization inside SMFEs. Most SMFEs in the area have not kept recorded data of their operations and expenses. Only in 2006, did SMFEs applying for forest certification start a process of recording and organizing data from their opera tions.

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80 used to verify the approved and harvested timber volumes and the annual harvested areas. In addition, a variety of other sources were utilized when compiling incomplete and/or missing data. For example: (1) AOP s were used to cross check and complete information on roads because these documents contain records of the length of roads built by a SMFE during the previous management year ; (2) management plan costs were calculated using the value of 5 US$/ha obtained by Pattie et al. (2003) in a study of forest management in Bolivia because th is cost information from AOPs was incomplete for many SMFEs surveyed, and no information on cost per hectare for AOPs exists in Peru ; (3) expertise from Forestry Engineer Alejand ro De La Cruz, a forest concession consult ant in Madre de Dios, helped to verify the equipment for harvesting operations held by enterprises and their associated costs. Data from the FONDEBOSQUE database on small loans provided to SMFEs in Madre de Dios we re also used to verify loans received by the SMFEs under study. E ach SMFE interview generally took between 40 5 0 minutes to complete while interviews of t he forest organization s usually took between 304 0 minutes to complete. T his was a manageable overall length as suggested by G r osh et al (2000) who point s out that a respondent should not be interviewed for more than one hour on a ny given day. The total number of interviews, in this second stage of the study, include s 16 representatives of forest organiz ation s (government, NGOs, forest consultants, and multi -stakeholder organizations ) s ome of which were previously interviewed in 2005an d the mana gers and/or members of 29 SMFEs. Data Compilation and Management Parallel to the application of the questionnai res, qualitative data from the interviews were transcribed into individual Word documents. After the completion of the interviews, a template file was created using the Statistical Package for the Social Sciences (SPSS 16.0 for Windows) to

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81 basically transc ribe quantitative data from the SMFE questionnaire. This allowed data from each SMFE to be easily transcribed into this format using numerical codes for many variables It is important to mention that in the SMFE structured interview, although several vari ables were considered for each one of the initial five capital types (see Appendix C) few er variables than expected were considered for analysis due to the lack of consistent information for all SMFEs under study. This was the case for physical and financ ial capital variables ; as a consequence, this study presents an analysis of both of these capitals combined. Th is decision is not problematic since physical and financial capital are often combined in livelihood frameworks and referred to as produced capit al (see Scoones 1998, Serageldin & Steer 1994). Also, it is important to point out that data on roads value have to be taken with caution since these were based mainly on estimations given by the interviewee and data from AOPs is not very reliable according to the aforementioned expert Sr. De La Cruz. Table 3 4 shows the final group of variables (henceforth indicators) that were considered for analys is from the SMFE questionnaire after a series of factors analys e s were carried out for each group of capital indicators to identify and to understand the interrelations of the indicators that better represent each fundamental construct; namely produced, natural, human, and social capital (see Appendix F).9 In this study, it is acknowledged that some indicators for produced capital can be liabilities also and not just assets (e.g., roads, harvesting fee and management plans ); so caution must be taken when considering th ese indicators. 9 It was also originally intended to use factor analysis to replace the original set of indicators with a new and smaller set of variables created from factors scores (resulting from the series of factor analyses) in order to understand the relation ship between forest management performance (as dependent variable) and the capacity of private SMFEs (in terms of their types of capital serving as independent variables); however, the variables from factor analysis exhibited insignificant relationships, s o I focus on individual indicators. Results from factor analysis appear in Appendix F. I did not use multi regression analysis because the sample is too small and the results were insignificant; those findings appear in Appendix G.

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82 Table 3 4 G roup of in dicators from the SMFE questionnaire Indicators Definition Produced capital Equipment Actual value in US$ of useful equipment owned by the SMFE during Harvest 2006, considering annual depreciation and inflation Roads Value in US$ of roads constructed b y the SMFE until Harvest 2006 Harvesting fee Value in US$ of accumulated annual harvesting fee that SMFEs must have paid for the total area of the concession until Harvest 2006 Loan Amount in US$ received as credit until Harvest 2006 Management plans Va lue in US$ of all annual operati ng plans approved to SMFEs until Harvest 2006 Area Total concession area in hectares Natural capital Approved timber volume Total volume of timber in m 3 /ha approved by INRENA during the Harvest 20022006 A category T otal approved volume (m 3 /ha) of mahogany ( Highly valuable) B category Total approved volume (m 3 /ha) of cedar (Valuable) C category Total approved volume (m 3 /ha) of timber species belonging to category C (e.g., Cedrelinga catenaeformis, Amburana cearensis, Chorisia sp., Aniba sp., Virola sp. ) (Intermediate value) D category Total approved volume (m 3 /ha) of timber species belonging to category D (e.g., Coumarouna odorata, Aspidosperma subincanum Tabebuia sp., Copaifera officinalis ) (Potential) E category Total approved volume (m 3 /ha) of timber species belonging to category E (e.g., Hymenaea spp., Myroxylon balsamun, Manilkara bidentata, Couratari guianensis ) (Other species) S pecies per AOP Average number of timber species approved per harv esting Harvested timber volume Total volume of timber in m 3 /ha that has been harvested by SMFEs during the Harvest 2002 2006 A category Total harvested volume (m 3 /ha) of mahogany B category Total harvested volume (m 3 /ha) of cedar C category To tal harvested volume (m 3 /ha) of timber species belonging to category C (e.g., Cedrelinga catenaeformis, Amburana cearensis Chorisia sp., Aniba sp., Virola sp.) D category Total harvested volume (m 3 /ha) of timber species belonging to category D (e.g., Coumarouna odorata, Aspidosperma subincanum Tabebuia sp., Copaifera officinalis ) E category Total harvested volume (m 3 /ha) of timber species belonging to category E (e.g., Hymenaea spp., Myroxylon balsamun, Manilkara bidentata, Couratari guianensis ) S pecies per AOP Average number of timber species harvested per harvesting Human capital Enterprise members Total number of members in SMFEs during Harvest 2006 Logging experience Total number of members in a SMFE during Harvest 2006 with previous ex perience in logging (before SMFE formation) Business experience Total number of members during Harvest 2006 with previous experience in business (before SMFE formation) Education Managers education; measured as the number of completed schooling years M embers performance Degree of members performance in different tasks in a SMFE. It is measured as percentage of the qualification of performance as low, medium and high

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83 Table 3 4 C ontinued Social capital Density of membership Number of forest associ ations a SMFE belongs to. It is the percentage of SMFEs belonging to none, 1, and 2+ associations Networks Percentage of the existence of people outside the enterprise and/or institutions assisting a SMFE for financial and commercial purposes 100 is the highest possible value Exclusion Percentage of the existence of exclusion among enterprise members due to characteristics such as education, wealth, and political ideas. 100 is the highest possible value Trust Percentage of the extent of trust among ent erprise members overall. 100 is the highest possible value Participation Percentage of membership participation in meetings and in general in enterprise activities. 100 is the highest possible value Conflict Percentage of the existence of internal confli ct in the SMFE Data for most of these indicators were compiled from interviews The following indicators, however, were compiled from INRENA s documents: harvesting fee, management plan s for produced capital ; and for natural capital, approved timber volu me and harvested timber volume Data on harvesting fee came from INRENA s annual harvesting fees summary documents while d ata on management plans came from a calculation using the annual harvested areas data from the Resoluciones de Intendencia y Administ rativas and the value of 5 US$/ha obtained by Pattie et al. (2003) for annual harvested areas in Bolivia Data on approved and harvested timber volumes came from INRENAs database for the Harvests 2002 2006 updated to April 2008. Data on the latter two ind icators were sub -divided in t erms of the five categories of timber species according to their commercial value established by Ministerial Resolution (R.M. N 02452000-AG) Data Analysis : Components of the A nalysis Under the previous forestry code logging in Madre de Dios became a predatory activity. However, with the implementation of the concession system in 2002, when private SMFEs became the new actors of forest management, this activity took a new direction at least in policy terms. Although there is no literature or other documents to provide specific information on the resources and capacities of these new forest actors to carry out forest management under the new

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84 model, it can be inferred that differences exist among them. Thus, there are t wo main c omponents of the analysis that address the two key questions that motivate this study. The first component evaluates the interests and actions of the main forest stakeholders in Madre de Dios influencing the implementation of the concession system during t he first five years (20022006): (1) INRENA, representing the State ; (2) WWF CESVI, ProNaturaleza and ACCA among environmental NGOs ; and (3) the Roundtable for Dialogue and Forestry Consensus and the forest management committees among multi -stakeholder co nsultative organizations INRENA is the actor that has traditionally conditioned the access of different actors to the forest resources of Madre de Dios; its role in the governance of forest resources has generated substantial policy and management changes that ha ve often contributed to more forest degradation and to an increase of illegal logging. The role of environmental NGOs in Madre de Dios has mainly been related to support the various biodiversity conservation projects ; however since the implementati on of the concession system, their conservation role has been extended to support and promote sustainable forest management M ulti -stakeho lder consultative organization s, which in this dissertation are defined as entities formed by an array of organization s wh ose members together consider and deliberate on issues related to the forestry sector, emerged during the implementation of the new Forestry Law in Madre de Dios as suitable forum s for dialogue and participation to address issues related to the impleme ntation of the forest concession system in the Department The second component compares indicators of forest management capacity among private SMFEs for their first five years (corresponding to Harvest period 20022006), and makes three distinctions. Firs t, it is important to recognize that Madre de Dios is a department with three distinct provinces: Tahuamanu, Tambopata, and Manu. Of these three provinces, Tahuamanu is

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85 the least logged in the department; in comparison Tambopata and Manu have experienced m ore years of logging activity (especially Manu ). Th us, a distinction of SMFEs among the three provinces will allow a more informed view of historic, economic, and geographic differences among them in the department, rather than simply speaking of the SMFEs in the department as a whole. Second, as some SMFEs in the department have attained forest certification, it is important to distinguish between these SMFEs and the ones that do not hold forest certification. For example, Irvine (1999) points out that for est certification implies significant costs for small operations. Thus, we should expect to find greater forest management capacities among certified SMFEs than among non -certified, because greater resources are needed to comply with the demands of certifi cation. A third and final distinction is made among SMFEs in the Tahuamanu province since this province has been the least logged in the Department and all SMFEs with certified forest concessions in Madre de Dios are located in this province ; thus it is of interest to evaluate differences among SMFEs in this region : (1) those already certified, (2) those which are planning to apply for certification (next 2 4 years), and (3) those which are not planning to get certified in the short term (within 2 4 years) Summary A common characteristic among private SMFEs that hold forest concessions in Madre de Dios is the lack of data on forest management. This chapter presented the methods used in this research study to gather data to address the two research questions : how SMFEs relate to other stakeholders and how the characteristics of SMFEs influence their management viability. Each research question is addressed with a set of data from interviews derived from the forest organization questionnaire and the SMFE qu estionnaire whose development, structure, formatting and implementation have been explained in this chapter

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86 The analysis of these data has two components The first component evaluates the interests and actions of the main forest stakeholders in Madre d e Dios influencing the implementation of the concession system during the first five years (20022006). Th is component p rovides the general context of the concession system. The second component compares indicators of forest management capacity among priva te SMFEs for their first five years (corresponding to the Harvest period 20022006). The following two chapters pursue the analysis of these two components

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87 CHAPTER 4 THE NEW FOREST CONCESSION SYSTEM : A STAKEHOLDER APPROACH Introduction Around the world, sustainable management of forests has become a continuation of already existing management practices in some developed countries and the beginning of a transition toward better management practices in some developing countries. The Republic of Peru is n ot unaware of this transition process and its new forest concession system, as a system for responsible forest management and social development, is still in the beginning phase of development. For example, s ince the onset of this systems implementation in Madre de Dios in 2002, there have been changes and evolution in the official legislation, in the function and number of the administrative institutions, and in the roles and actions of the forest management actors. There was initial opposition to the im plementation of the forest concession system by some groups; however the system continued its implementation and different actors have played distinct role s in the concession process. For example, small -medium entrepreneurs are the most important actors i n the new model in terms of forest management since they are the actual holders of all concession contracts granted in the Department However, the government and environmental NGOs also play an important role because their actions (e.g., promotion, implem entation, and support) have dominated the implementation of the new concession system. This became clear from observations made during the fieldwork phase of this study. In terms of moving forward into the future, the c hallenge of this new model is to ensu re that the efforts of private SMFEs to carry out responsible management are successful. But that success and thus the viability of the new model in the longterm, depends also on the ability of other forest actors that have an influence on the actions of SMFEs and the management decisions they undertake

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88 In Madre de Dios there is little information on the role played by different social actors involved in the concession system. Thus, there is a need to assess th ose role s and to understand h ow they ha ve i nfluenced the efforts undertaken by private SMFEs in terms of forest management and conservation in the department As such, this chapter addresses the following question : h ow do the specific agendas (actions/roles and capacities ) of other social actors in fluence private SMFEs efforts to conduct forest management under the forest concession system in Madre de Dios ? One of the important elements of this research is to examine th e se roles and dynamics through a stakeholder analysis Stakeholder analysis (SA) is an approach that facilitates the understanding of a system through the identification of key actors or stakeholders and the assessment of their respective interests in that system (Grimble & Wellard 1997). T h is approach is employed because it specifica lly focuses on the interests, characteristics, and actions of stakeholders which is important in terms of delineating problems and identifying incompatibilities in a system Thus, the use of this approach is helpful to understand the forest concession sys tem in Madre de Dios which involves multiple stakeholders. Moreover, because th e concession system is new, it is undergoing a process of continuous transform ation, with the consequence that the interests and actions of different actors are also evolving. The stakeholder analysis will focus on t hree types of actors t he State, environmental NGOs and multi -stakeholder consultative orga nizations P reliminary fieldwork indicated that the first two types of actors play a central role in the new concession syst em and the third may play a potential role as well T he application of stakeholder analysis provides a way to understand the roles of these actors in influencing the outcome s of the new concession system.

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89 This chapter first discusses the process of implem entation of the new forest concession system in Madre de Dios which provides the context for the analysis of the actions and dynamics of key social actors involved in that implementation Then an analysis of the three main groups o f stakeholders in the fo rest concession system in Madre de Dios is presented: the state (through INRENA and FONDEBOSQUE ), environmental NGOs (i.e., ACCA, CESVI, ProNaturaleza, and WWF) and multi -stakeholder consultative organizations (i.e., the Roundtable for Dialogue and Forest ry Consensus and forest management committees ). The organizations in the three main groups of stakeholders are analyzed by examining the mandate/interests of the organization in question, the support to SMFEs, and the discuss ion of what has actually happe ned. Q ualitative data analysis The research design of th is component was based on a purposive sample of the main forest organizations that influence the implementation of the concession system (and directly support SMFEs) in order to obtain qualitative data As such, t he analysis for this component follows the steps recommended by Taylor & Renner (2003) and Auerbach & Silverstein (2003) for analyzing qualitative data. Prior to the initial coding (a procedure used to organize the text of the transcripts and discover patterns ) additional files were created to organize the data collected An individual file was created for every organization, and each file contains answers from the 1or 2 representatives interviewed per organization. These files cover Questions 1 19. This was done because these questions are specifically oriented to the characteristics of individual organizations (roles, relationships, capacities, etc.). In addition, for Questions 20 30, an individual file for each of these questions was created to contain the answers from the 1 6 respondents from 2007.

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90 The same procedure was done for the unstructured interviews obtained from the preliminary research undertaken in 2005. In order to understand respondents views and actions, and actually translate t hat into effective and meaningful codes the initial coding consisted of carefully reading the responses from every answer of a given question and highlighting the relevant text .1 Later, only the highlighted passages were copied into separate files (by que stion) and numbered. After selecting the relevant text, s imilar ideas expressed (in relevant text) by two or more research participants were identified: the repeating ideas This was done in the following way (example for Q20): The file that contains the l ist of relevant text for Q20 was opened. A new file was created that became the list of repeating ideas from Q20. The first selection of relevant text from the relevant text file was highlighted and copied to the repeating ideas file. This first selection is the starter text. After reading through the entire list of relevant text selections, keeping the starter text in mind, every time an idea that seemed related to the starter text was encountered, it was highlighted and copied into the repeating idea file This was done until all the relevant text related to the starter text was highlighted and moved into a group. After returning to the original list of relevant text, the first selection of the text that was not grouped with the original starter text was h ighlighted and moved. This new selection became the next starter idea. After reading down the list of relevant text all the selections that relate to this starter were highlighted and moved. This procedure was repeated until as many of the relevant text se lections were grouped together into the repeating idea file for Q20. After working through the list of relevant text for each individual question there w as some relevant text that did not get repeated. Thus, this text ( i.e. orphan text ) w as compared am ong all orphan texts of all files for other questions and compiled together when possible into repeating ideas. In cases when the orphan text did not match any other text, th e orphan text was kept in order to reflect differences in experience as well as commonalities since this will add information and knowledge t o the analysis. 1 Text that is related t o my specific research concerns.

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91 Once identified the repeating ideas in each separate transcript (each question) were combined (when possible) from all of the transcripts into a composite list for the entire re search sample and named with a short quote that captured the essence of each repeating idea. Specific themes that t he repeating ideas focus on include: the role of the organization (of the interviewee) with respect to the forest concession system, the curr ent support of this organization to SMFEs, and the capacities of that organization to provide such support. Thus, a t this stage, making connections of the different repeating ideas (i.e., having something in common) and comparing them was fundamental and notes were taken in or der to facilitate this process. Beginning of the Forest Concession System in Madre de Dios Prior to the implementation o f the forest concession system in Madre de Dios factors existed that constrain ed advances in the forest sector fo r decades and the transition from a longstanding predatory system of conventional logging to a new system of forest concessions based on more sustainable practices has not been easy Despite changes in the forest policy to improve forest management in th e Department, some factors constraining better management ha ve remained from the previous forest regime, while others have emerged during the first five years of th e concession system implementation The following is a list of factors that constrain ed fore st management during t he previous forest regime and have subsequently persist ed over time : Informality of the forest sector. For 25 years (19752000) there were neither management plan requirements nor any labor or tributary (tax) obligations ; today sever al SMFEs still have not implemented many of the labor requirements Lack of experience in sustainable forest management. There was no previous experience with, or even any knowledge of, SFM practices T hus the implementation of the system itself has been a n experience of learning by doing. Deficient cadastral information. Some forest concession areas overlap ped the acquired rights of third parties (i.e., miners, farmers, and indigenous communities )

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92 No updated information on forestry inventories. The only a vailable data was the Peruvian Forest Map of 1995 ; thus there has been an overestimation of the real forest potential of forest concession areas offered. Illegal logging. This activity has persisted, but new modalities ha ve been used to carry it out (e.g., forgery of transportation permits, presentation of false information in management plans on tree volumes) A s mentioned previously, n ew factors have emerged in the early stages of the implementation of t he forest concession system that have affected the i mplementation itself ; in addition they have constrained better management practices in the Department. S uch factors include : Mis information with regard to the content of the NFWL and the forest concession system itself. There was a lack of di ssemination of this information to all forest actors in the department, creating confusion and misinformation among small loggers. Opposition to the system. Some political authorities large loggers, and some small loggers have been openly against the forest concession system from the beginning, and wanted to keep the status quo. Short time deadlines to participate i n the first bidding. M any SMFEs were formed hastily in order to participate. Also, most petitioners did not visit the areas subject to bidding. Centralized a dministrative functions. INRENAs office in Lima centralized most of the administrative functions until 2005, which re sult ed in d elay s in AOP approvals La te implementation of the supervisory agency. Only in 2005, OSINFOR was finally implemented In the me antime INRENA was also supervising fulfillment of concession contracts. Third party invasions. Some SMFEs have had their concession areas invaded by illegal loggers in locations where the concessionaires were not yet working. Lack of an institution that e ffectively regulates professional activities. Although professionals signing GFMPs and AOPs must be members of a professional association, and be registered in INRENAs registr y some bad professionals have deceived concessionaires when providing assista nce for the development of GFMPs and AOPs. However, some of these actions have been carried out in cooperation with the concessionaire. As can been seen enumerated in the lists above, several factors have constrained the implementation of the concession system in Madre de Dios These factors have been the product

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93 of the direct and/ or indirect actions of different social actors. The following section presents the history of the implementation of the new concession system in the Department and introduces som e of the key actors of this process that are analyzed later in more detail. Implementation of the Forest Concession System Since promulgation of the NFWL, two divergent positions arose among Madre de Dios interest groups: those who favored implementation of the forest concession system and those against it Environmental NGOs supported the system because they believe in a system of sustainable forest management in order to avoid the disorganization, informality, and unsustainability of the previous forest regime. Thus they promoted these beliefs to s everal small loggers who also supported this system in the hope of having better market opportunities and continu ing with the activity that supports their livelihoods In opposition, s ome local political authori ties were against the NFWL from the moment it was enacted because of their agreements with regional timber elites2 to keep the status quo of the previous forest regime of exploitation of large forest areas without management pla n s T he lack of widespread i nformation about this new system and its benefits was used by these local authorities to misinform some small loggers about the NFWL and the concession system ,3 in order to oppose it and to defend the continuation of the old forest regime Nevertheless im plementation continued, and on 11 March 2002 the Comisin Ad hoc ,4 a commission formed by law exclusively to carry out the promotion process 2 These elites co nsisted mainly of large loggers and timber buyers (or habilitadores ), used small loggers as testaferros (i.e., small operators fronting for large entities who remain behind the legal scenes) so as to acces s many 1,000ha contracts. 3 Groups opposed to this new system undertook a campaign of misinformation that included statements like: 1) the new system was going to favor foreign companies; thus small loggers would not be able to have access to the forest an d 2) this new system was supported by conservationist NGOs to prevent forest production. 4 The Comisin Ad hoc was constituted through an INRENA Resolution ( R.J. N 0322002 INRENA ) with the purpose of carrying out the promotion process and delivery in conc ession of the harvesting units of the permanent production forests of the country. In 2002 this Commission was composed of Marco Romero Pastor (President), Jessica Hidalgo Florndez, and Rafael Galvn Landavere.

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94 and the delivery of the forest concessions, c alled for the first round of public bidding. After realizing that this forest concession system was going to continue its course, and that the State was not going to relent in its implementation, some of the small loggers who were initially opposed decided to participate in the first round of bidding because they realized th is was the only option to harvest the forests of the Department in a legal manner Once the official announcement for the first round was given, there was a time limit of 30 days (subsequently expanded to 41 days) for petitioners to read the Bases del Conc urso5 to verify the species and volumes of the harvesting units required for their application, and to prepare the economic and technical proposal .6 Many loggers did not participate in this round due to the short time limit, and because of misi nformation a bout the forest concession system that was disseminated by some political authorities In addition, the short time limit resulted in most petitioners not visiting the areas subject to bidding to observe actual field conditions.7 The first round of public b idding resulted in 56 contracts to 44 private SMFEs (40 personas jurdicas and 4 personas naturales8) for concessions covering a total area of 1,119,937 ha This meant that a total of just 337 people (INRENA database, October 2003) were authorized to harve st the Madre de Dios permanent production forest s, which exc lud ed many small loggers 5 Document containing principles and regulat ions of the public bidding contest, including documentation necessary to participate in the contest, as well as documentation to subscribe the concession contract. Also in the Appendix, it includes a very general description of the type of forests containe d in the harvesting units under contest and their extensions, mentioning the main forest species in those areas. 6 Each interested participant could present 3 offers (economic proposals), indicating his priority for each one. The second offer would have only proceeded when the first offer had already been adjudicated to another participant. A similar case would occur with the third offer. The deadline to present these proposals was April 22. 7 These petitioners simply based their proposals on estimations done using data from a study by INRENA of Madre de Dios forests using the Peruvian F orest Map of 1995, which resulted in over estimat ion of the real potential of those areas. Th us, many petitioners made very high economic offers in order to gain a concession. 8 Personas naturales is the legal term for a sole proprietor while personas jurdicas indicates a legal business partnership.

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95 from harvesting the forests in a legal manner .9 This result led in part, to a strike which followed less than two months later. Due mainly to the widespread opposition to the concession system, but also because the expiration deadline for 1,000 ha contracts signed under the old regime was nearing (on June 30) ,10 small loggers from the Asociacin de Extractores Forestales de Servicios y Comercializacin de Madre de Dios st arted an indefinite forest strike (paro maderero ) on June 25. The strike began when these loggers initiat ed a protest and committ ed vandalism in Puerto Maldonado11 in an effort to bring back the former forest management regime. Th e old r egime had created a system of forest overexploitation where large -scale loggers hired many small loggers to request the 1,000 ha contracts allowed to them, and then harvested much larger tracts of forest without a technical study and without fulfilling other obligations req uired for larger contracts. Also, this regime contributed to the proliferation of illegal logging since many contracts were used to justify logging done in nonauthorized areas. Despite these misfortunes, on 16 May 2003, a new Comisin Ad hoc12 called for a second round of public bidding. With experience f rom the previous round, and realizing that the forest concession system was going to continue, the majority of small loggers who had been initially 9 It has been pointed out that before the implementation of the concession system in the department there were approximately 2,000 illegal loggers, most of whom were testaferros of big loggers who exploited timber in an illegal manner (Mateluna 2003). Testaferros are small operators fronting for large entities who remain behind the legal scenes. 10 Due to political pressure to modif y the forest concession system, a temporary extension of the 1,000 ha logging contracts occurred to allow a smoother transition to the new system. 11 These people believed that through force they were going to bring back the former forest regime of 1,000 ha contracts. The strike lasted for a week and the offices of INRENA, the Ministry of Agriculture and the NGO ProN aturaleza were burnt down with a consequent loss of documents and equipment. Mr. Rafael Ros Lpez, the President of the Asociacin de Extracto res Forestales de Servicios y Comercializacin de Madre de Dios (a group that opposed the concession system from the beginning ) directly was blamed for these acts An expert in Amazon issues, Roger Rumrrill, affirmed that although small loggers were responsible for the vandalism, in reality they were pressured by large timber exporters who buy their mahogany (Lama, 2002). 12 On 11 April 2003 a new Commission Ad hoc was exclusively set up for the concession process in Madre de Dios. It was composed by Norma Revoredo (President), Jessica Hidalgo, Libertad Velsquez, Alfredo Vracko, and Rafael Otero.

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96 opposed to this system applied this time around The Bases de Concurso had some modifications in the second round: Applications were limited only to small entrepreneurs and not to medium entrepreneurs as previously .13 Petitioners could apply for only one harvesting unit (5,00010,000 ha) and not for several as was previously the case. The technical proposal was given more weight than the price bid in the final evaluation score. After the second round was announced, there was a time limit of 60 days for petitioners to present the proposal to the Comisin Ad hoc in a public act on July 16. The results of this round were announced two weeks later (July 30): 29 concession contracts ( covering a total area of 191,768 ha) were awarded to 29 private SMFEs (26 personas jurdicas and 3 personas naturales ), co nsisting of a total of 89 people (INRENA database, October 2003) who were given the right to harvest the Madre de Dios permanent production forests. This round was carried out with fewer problems than the first because there was more knowledge of the concession system and more participation of organized civil society in its implementation. Table 4 1 shows the original distribution of the areas granted, by province during the two rounds of public bidding in the department. 13 Small entrepreneurs are those with a gross capital of less than US $ 350,000 and less than 50 permanent workers; while medium entrepreneurs are those with a gross capital of US$ 350,000 3,000,000 and with 50200 permanent workers.

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97 Table 4 1. Original distribution of concession ar eas by province within Madre de Dios (20022003) Province Concession area (ha) % of Total area # persona jurdica # persona natural Tahuamanu 706,717 53.9 30 2 Tambopata 315,056 24.0 2 5 3 Manu 289,932 22.1 11 2 Total 1,311,705 100 6 6 7 Source of data: INRENA, 2004. http://www.inrena.gob.pe/iffs/manejo/conc_forest_mader/iffs_manejo_conc_forestales.htm After the completion of the two rounds of public bidding in Madre de Dios, new modifications have occurred in the total area granted. In 2004 and 2008, tw o contract s (24,008 ha) from the previous forest regime w ere adapted to the new forest regime. Also in some forest concessions, particularly the ones located in the Manu province, there have been modifications in area granted due to overlapping with other uses. D isqualification of concession contracts due to demonstrated illegal activities in some forest concessions have occurred as well .14 In addition, three concession contracts (33,830 ha) have been devolved to the State due to the alleged impossibility of managing the area for production purposes. Thus as of October 2009, 74 active contracts (held by 6 3 SMFEs) have remained in the Department from the original 85 granted (held by 73 private SMFEs); an area of 1, 114,340 Ha is under management. Table 4 2 sho ws the current distribution of active concession areas in the Department. 14 As of October 2009, the area covered by disqualified contracts was 112,855 ha (i.e., 9 contracts held by 9 SMFEs), representing 8.6% of the area granted in the department.

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98 Table 4 2. Distribution of active concession areas by province ( October 2009 ) Province Concession area (ha) % of Total area # persona jurdica # persona natural Tahuamanu 6 84,383 5 8 5 31 1 Tambopata 2 44,838 2 1 8 18 3 Manu 185,119 19.7 8 2 Total 1,1 14,340 100 57 6 Source of data: OSINFOR database, October 2009 Also, five SMFEs, corresponding to seven concession contracts have achieved forest certification during 2006 and 2007. From them, the certification certificate for the SMFE Forestal Rio Huascar has been suspended because of unresolved CARs15 due to economic problems. Table 4 3 shows the list of original contracts that attained forest certification in the Department. Table 4 3 Certified Area in Madre de Dios ( As to September 2008) Initiative Private SMFE Forest Contract # Forest Certificate Area (ha) M&M MADERYJA SAC. 17 TAH/C J 004 02 SW/FM/COC 2175 49,556 MADERACRE SAC. 17 TAH/C J 001 02 SW/FM/COC 2176 49,376 Foresta l Ro Huscar SRL. Forestal Ro Huscar SRL. 17TAH/C J 022 02 CU/FM/COC 805366 25,533 Aserradero Espinoza Aserradero Espinoza SA. 17TAH/C J 026 02 SW/FM/COC 002327 81,128 COCAMA EIRL. 17 TAH/C J 024 02 COCAMA EIRL. 17 TAH/C J 025 02 COCAMA EIR L. 17 TAH/C J 036 02 Total 205,593 Stakeholders and the Evolution of the Forest Concession System in Madre de Dios As highlighted in the previous sections, t he implementation of the forest concession system in Madre de Dios has been constrained by s everal factors that have persisted over time due to the lack of interest shown by the State in a sector that does not contribute much to the GDP of Peru. Since the adoption of the forest concession system as the new model of forest management, 15 CARs or c orrective action requests are raised by the assessment team if any areas have been identified where current forest management does not meet certification requirements (Higman et al. 2000).

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99 additional f actors have emerged that affected its implementation and the forest sector as well (e.g., opposition to the new system, bureaucracy). However there also exist some factors that have favored and facilitated the change towards a model of better forest manag ement practices S uch as pects include participation in debates and bringing up ideas in the formulation of the NFWL, diffusion of the new model of forest management, and financial and technical support to implement the new model As such, different social actors have been the force behind those factors ; the most important are : governmental organizations, environmental NGOs, private SMFEs and multi -stakeholder consultative orga nizations. These actors have played different roles and actions in promoting and helping to implement the forest concession system Due to the holding of concession contracts, private SMFEs are the most important stakeholders in the concession system in terms of forest management Therefore, they are the focus of this dissertation and a detailed evaluation of their characteristics is presented in Chapter 5. The following sections of this chapter however, focus on the ties of other important s takeholders to SMFEs. In particular these sections focus on a systematic analysis of the inte rests, capacities, and actual support to SMFEs by the selected stakeholders: governmental organizations environmental NGOs and multi -stakeholder consultative organizations This analysis then forms a basis for comparisons among these stakeholders and a basis for a broader evaluation of which organization(s) actually provides effective support. This is because these stakeholders have specifically influenced the management decisions undertaken by SMFEs and as a result the implementation process of the fore st concession system in Madre de Dios D iscussing th e contributions of governmental organizations environmental NGO s and multi stakeholder consultative organizations reveals that t he ir interests do not necessarily correspond to those of SMFEs and by dis cussing the capacity of these t hree s takeholders one observes how

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100 well (or how poorly) these social actors pursue their interests, which most definitely has implications for forest management and resolution of conflicts. Table 4 4 shows the list of stakeho lders in Madre de Dios and a summary of their main interests as an introduction to their analysis. Table 4 4 Stakeholders in the forest concession system in Madre de Dios and their interests Stakeholder Interests to the project* Effect of project on in terests of stakeholder Importance of stakeholder for success of project Degree of influence of stakeholder over the project INRENA Promote and ensure sustainability in the use of forest and wildlife resources + Critical player Very influential FONDEBOSQU E Finance projects oriented to promote sustainable forest development + Moderate importance Moderate influence ACCA Support SMFEs surrounding its conservation concession +/ Some importance Some influence ProNaturaleza Provide technical support to SMFEs for forest management, diffusion of information for the 2nd round of public bidding, and strengthening of the Roundtable for Dialogue + Very important Influential CESVI Provide technical support to SMFEs for forest management and strengthening of the Roundtable for Dialogue + Very important Influential WWF MDD Provide technical and financial support to SMFEs for forest management, strengthening of the Roundtable for Dialogue, establishment of the of the Peruvian Council for Voluntary Forest Certification and promotion of FSC certification + Critical player Very influential Roundtable for Dialogue and Forestry Consensus Facilitate implementation of the concession system + Moderate importance Some influence Forest Management Committees Help in the implemen tation of forest management practices + Some importance Some influence *Project: Forest concession system implementation in Madre de Dios

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101 Governmental Organizations The NFWL, which authorizes the forest concession system, establishes an institutional s yst em for several governmental organizations that are responsible f or the administration and management of forest resources in Peru The Ministry of Agriculture (MINAG) has political and regulat ory functions in promoting sustainable use and conservation of forest and wildlife resources. The National Institute of Natural Resources ( Instituto Nacional de Recursos Naturales or INRENA)16 is a decentralized branch of the MINAG and the Peruvian designated authority responsible for the administration of forest and wi ldlife resources. INRENA is organized into four administrative divisions: forestry and wildlife, protected areas, environmental issues, and water and soils. The Intendencia Forestal is INRENAs technical forestry and wildlife division and its functions wi th respect to forest concessions include: monitoring, evaluation, and control of sustainable management, and periodic supervision of forest concessions, permits, and authorizations The Intendencia Forestal is represented at the local level through Adminis traciones Tcnicas which maintain continued coordination with the regional INRENA representative. The NFWL also called for the creation of the Timber Forest Resources Supervision Agency ( Organismo Supervisor de los Recursos Forestales Maderables or OSINFOR ) as a decentralized branch of the Presidency of Ministry Council ( Presidencia del Consejo de Ministros ), in order to supervis e and control fulfillment of the concession contracts ( for timber purposes ), supervise and verify periodically the fulfillment of the forest management plans of concession contracts, and supervise (annually, or if solicited ) the fulfillment of AOPs. How ever 16 INRENA was created on November 27, 1992 (Decreto Ley N25902). It s Function and Organization Regulation ( Reglamento de Organizacin y funciones ) was first established on December 1992 (Decreto Supremo N05592AG); Later it was modified on September 2000 (Decreto Supremo N0522000EF), and on July 2001 (Decreto Supremo N0462001AG).

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102 OSINFOR was only recently created (in 2005); but because of a decision of the Presidency of Ministry Council it was placed as a n office inside INRENA (DS N0362004-AG) which de feats the purpose of its creation as an autonomous organism ( Hugo Che Piu, personal communication 2009). Before the establishment of OSINFOR, INRENA was responsible for fulfilling OSINFORs functions (disp osition 17 of DS N0142001-AG). T he NFWL also provided for the creation of t he National Consult ation Council for Forestry Policy ( Consejo Nacional Consultivo de Poltica Forestal or CONAFOR) as the consult ation agency of the highest level in order to a ssist the MINAG in the formulation and implementation of forest policies in the country and to provide opinion s about the proposal f or the National Plan of Forest Development ( elaborated by INRENA ) and opinions about diverse forestry issues.17 However, thi s entity was never actually established because the Ministry of Agriculture at that time did not convoke to its formation. This was due in part, to the contemporaneous existence of an organization that in some way fulfilled some of the functions that CONA FOR was intended to fulfill: the Roundtable for Dialogue and Forestry Consensus (Mesa Nacional de Dilogo y Concertacin Forestal ), a participat ory forum for dialogue that emerged to legitimize the process of implementation of forest concessions. As the Ro undtable functioned well during 20012003, and more or less during 20042005, there was n either a need nor interest in creating a consult ation space such as CONAFOR (Hugo Che Piu, pers comm. 2009). The NFWL also oversaw the creation of the Forest M anagement Committees (Comits de Gestin de Bosques ) as an element for citizen participation in forest administration. 17 CONAFOR was to be led by the Ministry of Agriculture to include representatives from the forestry public and private sectors (i.e., representatives from the Ministries of Industria, Turismo, Integracin y Negociaciones Comerciales Intern acionales, Transportes, Comunicaciones, Vivienda y Construccin, Economa y Finanzas as well as representatives from research centers, logging companies, indigenous communities, universities, NGOs, and local governments.

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103 T he 2001 amendment of the NFWL led to the creation of the Promotional Fund for Forest Development (FONDEBOSQUE) as an institution responsible fo r contribut ing to and facilitating the development and financing of projects oriented to promote sustainable forest management (DS 0142001-AG). Th e following section presents the analysis of the two governmental organizations with a base of operation in M adre d e Dios: INRENA, and FONDEBOSQUE In particular, it is focus ed o n the interests, capacity, and current support to SMFEs of these two organ i zations 1 The National Institute of Natural Resources (INRENA) In Madre de Dios, INRENA is the national authority responsible for the administration of forest and wildlife resources It is represented by two technical administrations that were established i n October 2001 (RJ 2262001INRENA): the Administracin Tcnica TambopataManu, located in Puerto Maldonado, and the Administracin Tcnica Tahuamanu, located in Iberia. Each has an administrator ( Administrador Tcnico Forestal y de Fauna Silvestre ) wh ose main responsibility is the administration and control of the use and conservation of forest and wildlife resourc es in his administrative area .18 Through time these administrations have had additional responsibilities conferred upon them, such as Approval of forest management plans to concede permi t s or authorizations over 500ha areas, emitting guides for forest trans portation, imposing sanctions to violators of the NFWL (RJ 2282001INRENA); Approval of GFMP s and AOP s on concession areas over 3,000ha for reforestation purposes (RI 0682004INRENA IFFS); Approval of Bra z il nut concession contracts (RJ 0122005INRENA), approval of GFMP s and AOPs for Bra z il nut concession contracts (RI 0722005INRENAIFFS), approval of AOPs for forest concessions with timber purposes (RI 2332005INRENA IFFS), publishing o pinion s regarding overlap of uncultivated lands ( tierras eriazas) with 18 The Administracin Tcnica Tamb opataManu covers the provinces of Tambopata and Manu, and the Administracin Tcnica Tahuamanu covers the province of Tahuamanu.

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104 permanent production forests (RI 2 34 2005INRENA IFFS); coordination, organiz ation and follow up activities referred to the Comit de Gestin de Bosques (RI3692005INRENA IFFS); Regist ration of the titles (i.e., deeds) of forest concession contract s, and provi sion of mortgage contracts aimed to guarantee the debt for harvesting fee from holders of forest concession contracts for timber purposes that agree with the regime of Refinancing Debt for Harvesting Fee (RJ 1922006INRENA). Each technical adm inistration has an office responsible only for forest concession contracts for timber purposes: the Tambopata Manu Technical Administration administers all forest concession contracts in the jurisdiction of the Tambopata and Manu provinces, and the Tahuamanu Technical Administration administers all forest concession contracts in the jurisdiction of the Tahuamanu province. T hese administrations also have offices along the main roads of the department to control the transportation of legally harvested timber. These control offices are located in El Triunfo, La Pastora, Laberinto, Mazuco, Mavila, and Alerta. Since 2002 the specific functions of INRENA MDD, as related to forest concession contracts for timber purposes have mainly involved evaluatin g GFMPs and AOPs, conductin g registration of concession contracts, and enforcing forest legislation. It also handled OSINFORs supervis ory functions until June 2005, when OSINFOR was finally implemented. Additionally i n 2005, authorization to approv e the AOPs was con ferred on the technical administrations (which since 2002 had been carried out by INRENA Lima ) INRENA -MDD also works in c ollaboration with OSINFOR for the periodic supervision of the fulfillment of the forest management plans of concession contract s and with the Ecological Police as the entity providing support in aspects related to the control of illegal logging in the Department INRENA has also had agreements with environmental NGOs in order to develop collaborative projects for conservation and develo pment. For example, INRENA w ork s with ACCA in some research projects related to ACCAs conservation concession; with CESVI in an

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105 agreement to receive financial support for the hiring of person nel to help in the o ffice of non timber forest products ; with Pr oNaturaleza in different collaborative projects for the conservation of natural resources in Madre de Dios; and with WWF MDD in a project to develop the exploratory forest inventory of the Department in order to provide base information for SMFEs elaborat ion of their management plans for their first five years. Support to SMFEs According to the NFWL, INRENAs main function with r espect to the forest concession system has been its promotion during initial implementation and support for private SMFEs that we re granted forest concessions. However, in practice this support to SMFEs has not been realized a s had been expected : There has not been the monitoring [acompaamiento] that the State should have given; if someone receives a concession the only thing INRE NA does is prosecute, but there is not the work of acompaamiento, consultancy, and technical assistance that allow s them to improve (ProNaturalezas representative, pers. comm. 2007). In the NFWL it is stipulated that we should support concessionaires; we only carry out meetings to communicate with them about the procedures to follow for the AOPs approval B ut more than that, we have not been able to do there is no support for training or elaboration of AOPs ; the consultants do that (INRENAs represen tative, pers. comm. 2007). In order to support the concession system and provide SMFEs with an incentive for a greeing t o manag e their forest concessions, in 2003 INRENA e stablish ed a promotional program of discount s in the payment of the harvesting fee for the first five years19 of a concession contract and a regime of annual fractioning in the payment of the harvesting fee (DS 0122003AG, RJ 1282003INRENA). Also, INRENA has established rules for compensat ing forest concession areas that are subject to o verlapping with other uses (RJ 0822003INRENA). 19 For the first two years the discount was of 40% in the payment of the harvesting fee, for the third year the discount was 30%, for the fourth year it was 20%, and for the fifth year the discount was 10%.

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106 Capacity INRENAs capacity to fulfill its functions has been very limited with respect to personnel, funding, and infrastructure. For example, at the Tambopata Manu Technical Administration the personnel re sponsible to oversee the forest concession contracts held by 40 initial SMFEs comprises a Forest Engineer (responsible for the area), a Forest Bachelor (responsible for field inspections), and a technician (responsible for the administrative aspect). At the Tahuamanu Technical Administration the personnel responsible for the forest concession area, which supervised 33 initial SMFEs, is composed of o nly a Forest Bachelor (responsible f or the area) although th at person re ceive s some s upport from a Forest En gineer from the Programa Paralelo Project .20 The limited personnel for oversight of forest concessions ha s limited the supervisory capacity of INRENA. It has been impossible for these two Technical Administrations to approve prior to field inspection, AOPs that consider less er known species (unlike the case of mahogany and cedar ). In the case of mahogany, ocular inspections have been carried out despite the limited personnel due to the economic importance of th at species to the export market. For the most p art, h owever, SMFEs have assumed expenses related to these inspections due to delays stemming from the limited budget and staff of INRENA as pointed out by a governmental representative : priority number one is mahogany; an AOP with mahogany has to have an ocular inspection even though personnel are limited The ideal would be to do the inspection without the concessionaires assuming the cost of it; howeve r, it is not po s sible because we do not have [a sufficient] budget to go with our own resources to the concession area, to do the inspection, and to verify it; we cannot do it. We have to ask the concessionaires support who sometimes does not want to do it; however most of them have to accept it because at the end this is attached to the export quota. If this AOP cannot be verified, then 20 Programa Paralelo is a project carried out by INRENA, with funding from the Corporacin Andina de FomentoCAF, to prevent possible indirect impacts for the construction of the Inter Oceanic Highway.

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107 in practical terms this mahogany cannot be exported, so this is not convenient for them (INRENAs representative pers. comm. 2007) Th us the necessity of some SMFEs to export their mahogany volumes which is only possibl e if previous ocular inspection ha s been conducted to assure the approval of their AOPs, has forced them to assume expenses related to these inspections In general, there ha d been delays in AOPs approval s before the beginning of the harvesting period as a result of both the limited personnel capacity and the centralization of functions at INRENA Lima This mainly occurred before 2006 when AOPs were approved by INRENA Lima, which meant a delay of at least 6 months until its final approval. Th ese delays occu rred because the procedure to approve an AOP was to be reviewed first in the Madre de Dios offices Their observations were sent to the Lima office. It usually took 3 to 4 months for the Lima office to emit an answer. Then these observations were given to the SMFE to correct them. After this the AOP was reviewed again by the Madre de Dios offices and comments were sent again to the Lima office. After an other 3 months the AOP was approved. This situation has also been common in the approval of AOPs in the De partment of Ucayali (Arce 2006) which has affected all of the activities that SMFEs engage in there (e.g., period of harvesting, time to transport timber and selling it, etc). INRENAs budget is constrained and this limits the fulfill ment of all its fun ctions. This problem has grown because over time more legislation has been passed with more mandates concerning the forest concession process with the result that more responsibilities have been laid upon INRENA Technical Administrations. At the same tim e, h owever, INRENA has suffered budget cuts which have restricted th e institutions capacity to consistently and effectively facilitate forest management. Although there was an apparent budget increase from 2006 to 2007

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108 for Tambopata -Manu and Tahuamanu Tec hnical Administrations21, the number of actions carried out by these Technical Administrations w as much higher in 2006 than in 2007 in order to fulfill their operative objectives for those years INRENAs budgetary shortfall is also reflected in personnel t hat are underpaid and overworked : O ur work is from 8 AM to 8 PM and when there were AOPs to reviewyou had to stay until 10 PM including Saturdays and Sundays ( INRENAs representative, pers. comm. 2007). The monthly salary of the technician in the contro l office is $250 (S/. 800), and he does not have employment stability ( Forest consultant, pers. comm., 2005) As a result of low budgets and salaries in INRENA, there is little stability among technical staff Usually the Technical Administrators are hi red for a period of 3 months, which is renewed in some cases ; the same occurs for the other personnel inside INRENA During the first six years of the forest concession system (until December 2007) there were six different Technical Admini strators in Tamb opata Manu and six in Tahuamanu with two additional people temporarily acting as administrators for a one month period. Changes in personnel have also been a reflection of political issues in the institution. Labor instability inside INRENA has been a pro blem also such that not all planned activities have been fulfilled on time for a given period. This is because new personnel often needed to educate themselves about the situation of forest concessions in the Department, as well as learn about the regulat ions framing the concession system. Thus, inadequate financial resources, lack of manpower, and changes in personnel have resulted in the ineffective administration, control and monitoring of forest management acti vities in Madre de Dios w hich has facilita ted the continuation of illegal logging in the Department. 21 In 2006, the budget was US$ 187,764 and US$ 97,723 for Tambopata Manu and Tahuamanu, respectively; in 2007, the respective budgets were US$ 218,221 and US$ 119,036. The data were taken from INRENAs Plan Operativo Institucional 2006, 2007; only data for these two years was available.

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109 However, INRENAs inefficiencies have also been attributed to the corruption of some of its personnel. Concessionaires, representatives of NGOs and grassroots organi z ations and some people from wi thin INRENA menti oned different acts of corruption such as the forgery and sa l e of permits for transport ing timber ( guas de transporte ), personnel receiving bribes for faster approval of AOPs or for allowing transportation of timber without the required p aperwork, and changes in volumes in INRENAs database to authorize harvesting of more high -value species for certain concessionaires. Thus, c orruption h a s ha d both positive and negative effects on the profitability, sustainability, and returns of SMFEs ( Auren & Krassowska 2004). Se veral SMFEs in Madre de Dios have benefited from the corruption of some of INRENAs personnel since they have been allowed to : (1) harvest more volumes of valuable species than what they really had in their forest concession, or (2) harvest timber from una uthorized areas. However, several SMFEs have also been negatively affected because illegal timber is sold at prices lower than timber produced by SMFEs that have to pay several types of fees. This results in unfair competition for certain SMFEs C o rruption of some of INRENAs personnel not only has affected the reputation of the institution, increasing distrust among users toward this institution, but is a factor that has also allowed the continuation of illegal logging in the Department Some interviewees expressed the following : Here there is no control ; you can buy the Engineer [referring to the engineer who evaluates the management plans] the policemen, the engineers or technicians in the control offices [INRENAs garitas de control ]. T here is no contr ol. Th e people from La Pampa that have their reforestation concessions canceled continue harvesting ; where do they go? They go through the control offices; what does INRENA do? They preten d to be blind (Concessionaire, pers. comm. 2007) I tell you, INRENA is an institution that has earned colossal discredit in Madre de Dios, in the light of many scandals; here there has occurred fabrication of transportation permits, the valuable timber is transported below and covered by less valuable timber [madera cor riente ], and a series of things that we have den ounced inclu ding with documents (G rassroot s leader, pers. c omm. 2005).

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110 Some pseudo -consultants act in collusion with the INRENA employees and they do the work [refer ring to the elaboration of AOPs in labor atory without actual field data ]; work that is surprising or dece ptive to concessionaires because the link they have is the person inside INRENA who facilitates and hurries the process of approval (F orest consultant, pers. comm. 2007). T here has been lit tle in the way of formal denunciation of these acts because of the involvement of several people and different actors (i.e., INRENA personnel, concessionaires, timber buyers), because the costs involved in making a denunc iation and the time it takes, and a lso because the se acts are based mostly on oral agreements so there is no formal proof about them Th e only criticized act was in November 2007, when the Tambopata -Manu Technical Administrator Humberto Labarthe was fired f rom his position and prosecuted du e to the illicit authoriz ation to transport approximately 70,000 bf of illegal mahogany from the indigenous community of Monte Salvado, in favor of a forest concessionaire (RJ 2652007INRENA). F igure 4 1 illustrates specific functions of INRENA -MDD as rel ated to forest concession contracts for timber purposes (in dark green) and the limitations in fulfilling those functions (in l ight green ) due to limited capacity (in orange)

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111 Figure 4 1. INRENAs main functions with respect to the forest concession sy stem in Madre de Dios 2 The Promotional Fund for Forest Development (FONDEBOSQUE) The Fondo de Promocin del Desarrollo Forestal (FONDEBOSQUE) is an institution with mix ed legal partnership (private and public) It i s a public institution because it was created by law (DS N 0142001-AG, art. 344) and the members of its Directive Council belonging to the public sector are named by Ministerial Resolution. It is also a private institution because of the norms of its functioning (private rights) in order to ha ve more flexibility in the hiring of its personnel for example, and the members of its Directive Council belonging to the private sector are named by the organizations they represent. FONDEBOSQUE is authorized by law to financ e projects and activities orie nted to promote sustainable forest development (DS 0142001-AG), and thus make the forest concession system viable In Madre de Dios, it was established in

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112 December 2002, and its main function related to the forest concession system is to strength en its im plementation. This has been carried out through the development of two main programs: A credit program for working capital. I nitiated in February 2003 in cooperation with the Caja Municipal de Tacna (a financial institution), t his program provide s small l oans to SMFEs to be paid over a period of 3 8 months with an annual interest rate of 18%.22 Logging is a risky activity and small forest operators do not normally have access to credit in formal financial institutions. Thus, this program aimed to build a cr edit history for SMFEs, so they could secure credit line s from the Caja Municipal de Tacna or another financial institution. A program of funding for SMFEs This program was initiated in May 2003 to promote the use of appropriate intermediate technologies in forest concessions. Three projects resulted : two projects granting portable sawmills (Peterson) to eleven SMFEs through a public bidding process, and a project for lumber processing for carpenters. These projects sought to provide intermediate technolog y of low impact and production cost in order to increase productivity in the primary transformation of timber through the manufacture of a product with superior quality. Due to the nature of FONDEBOSQUE this organization has several agreements with diff erent public and private institutions in the forest sector including environmental NGOs, local organizations, and governmental institutions in order to promote forestry development through the funding of projects from the private sector in the Department and provision of credits For example, FONDEBOSQUE had agreements with the NG O s ACCA, WWF, and CESVI in order to exchange information and provide technical assistance to SMFEs, carpenters, and indigenous communities and agreements with some financial enti ties (e.g., Caja Municipal de Maynas and Caja Municipal de Tacna) to provide financial as s istance to SMFEs. Support to SMFEs The main support that FONDEBOSQUE -MDD provid es is financial credit and portable sawmills to SMFEs in the department. Specifically as of April 2007, 85 small loans were granted to 36 SMFEs from the two bidding rounds for a total amount of credit equaling US$ 22 M ost of t he loans were US$ 2,890 (i.e., exactly 10,000 Peruvian soles). However, some SMFEs took loans that range d from US$ 1,400 to $ 16,504.

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113 288,7 19 Moreover, in 2004, a total of 11 portable sawmills were granted to 11 SMFEs23 through agreements with other organization s such as ACCA and WWF FONDEBOSQUE -MDD has also provid ed technical assistance and training to some SMFEs. Technical assistance was provided on formulation of management plans, forest inventories, and forest harvesting methods ; and training consisted o f wo rkshops on issues related to reducedimpact logging, use of intermediate techn ologies, and business plans. This assistance and training was possible through an agreement signed with CIFOR and INRENA. Capacity FONDEBOSQUEs financial capacity should have be en one of its main strengths. According to the NFWL FONDEBOSQUE must receive funding from t he government ( i. e., 25% of the harvesting fee from forest concessions, 25% of fines from forest/wildlife infractions, and a percentage from external debt reconvers ion for conservation) and from other sources For example, from its beginning through 2006 it has received funding from the Netherlands Embassy, ITTO, and the Fondo Peru-Canada/MEF to develop their projects. Other sources of funding have been the World Ba nk, Inter -American Institute for Cooperation on Agriculture (IICA), and the Belgium Technical Cooperation. Despite th i s funding, FONDEBOSQUEs financial capacity has not been sufficient to push the forestry sector as it was planned when established: The i dea of FONDEBOSQUE is to be a fund to promote the forestry sector. FONDEBOSQUE never had access to economic resources from the State, and effectively the budget never covered the needs of the sector (FONDEBOSQUE -MDD s representative, pers. comm. 2007). 23 SMFEs that were granted portable sawmills were: SHIHUA HUACO TIMBER, MADEBOL, MADEFOL, MAPROIN, EMFORPORTILLO, EMINI, EMETCI, CORPOFOREST, PURUS, SKY and CHATERIA.

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114 In 2007, FONDEBOSQUEs budget was approximately US$ 3 million, with approximately 10% d estined for the Madre de Dios office. In term s of budget specific s for the forest concession component, for the first five years the total was approximately US$ 640, 0 00 fo r the Madre de Dios office With respect to personnel, in 2007, FONDEBOSQUE -MDD had a coordinator, two project managers five field technicians, one forestry specialist, one administrator, and one driver. FONDEBOSQUE -MDDs budget did not help to fulfill it s planned objectives and as a consequence its role in facilitating and financing projects to promote sustainable forest management has been criticized by several forest users: The organizations that emerged to support the concession process have done so to some degree [a media tinta], or some have done so with a drop of ink [i.e., a token amount] such as FONDEBOSQUE ( G rassroots leader, pers. comm. 2007) FONDEBOSQUE had the money to support forest concessionaires in the process ; it was supposed to provi de loans to them To give S/. 10,000 [approximately $2, 890] as a loan to a concessionaire to go to his area was seen by them [ FONDEBOSQUE s people ] as a lot of money [como un mundo de plata], but those people did not know how to do an assessment. You give S/. 10,000 to a Brazil nut harvester to go collect Brazil nut s but giving such an amount to concessionaires is like telling them to go to the corner to drink with their friends [anda a la esquina y chupa con tu gente ] (G rassroots leader, pers. comm. 2007). Also, c oncessionaires argue that not all SMFEs had the same opportunities to access the small loans provided by FONDEBOSQUE. Some of them mentioned that these loans were mainly given to SMFEs receiving assistan ce from WWF -MDD : We are not beneficiaries from FONDEBOSQUE ; very rare ly does this institution give something to our associates T o be honest from the 100% of a non returnable fund, from the $800,000 that they provided, 90% was for enterprises assisted by NGOs [i.e., WWF ] that are formed by small loggers ( Concession a i re, pers. comm. 2004). Also, it has been criticized that FONDEBOSQUE allocated important funding to activities not relevant for people in Madre de Dios instead of providing more funding to logging which is one of the main activities in the Department:

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115 What ha s FONDEBOSQUE mainly done? It has dedicated its time to a beekeeping project here in the region; I really do not know where it can be incorporated into the management plan They have poured more money in to that, tha n in to really s upporting forest concessions (G rassroots leader, pers. comm. 2007). Environmental NGOs Whereas the previous section focused on the participation of governmental organizations in the new concession system in Madre de Dios and elsewhere in Peru, non-govern mental organizations (NGOs) have also sought to provide support for sustainable forest mana gem e n t under the new regime. P articipation of environmental NGOs in the public bidding process and previous discussions regarding the elaboration of the NFWL w ere very important for the viability of the whole process. They openly supported the process of forest concessions by disseminating information, helping organiz e interested people in forming a SMFE, and elaboratin g technical proposals for SMFEs wishing to part icipate in the auctioning of forest concession s Four environmental NGOs have been directly involved in the concession system in Madre de Dios : ACCA, CESVI, ProNaturaleza, and WWF The last th ree h ave had a major in fluence with WWF be ing the most influent ial due to its large budget and its scope of activities. Thus, the following section presents the analysis of the se non -governmental organizations focusing on their interests, capacity, and the actual support t hey provided t o SMFEs in the Department 1 The A ssociation for Conservation of the Amazon Basin (ACCA) The Asociacin para la Conservacin de la Cuenca Amaznica (ACCA) is a non -profit organization whose main objective is the conservation of biodiversity in the Peruvian Amazon In 1999, i ts founding pr ogram provided support for Brazil nut harvesters in Peru as an incentive to protect the forest. In July 2001, ACCA was granted the first conservation concession in Peru for 40 years ; it is referred to as Los Amigos Conservation Concession (LACC). LACC has an

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116 extension of 145,965 ha and is l ocated between the confluence of the Los Amigos and Madre de Dios rivers in the Tambopata region Because it is also located between the borders of some forest concessions for timber extraction, and w ithin 50 kilometers of other concessions for reforestation, gold mining, and Brazil nut ( castaa) extraction in 2002 ACCA started negotiations with forest concessionaires (especially) due to the possibility of conflicts arising from their logging activities close to its conse rvation area This is how ACCA became involved in the concession process. ACCA has four specific objectives: Biodiversity conservation through LACC Research, through the Center for Research and Training CICRA Management of natural resources through the project Conservando Castaales which works with Brazil nut harvesters Training Due to the nature of its concession area (i.e., Perus first conservation concession), ACCA has a direct relationship with INRENA (ACCA representative, pers. comm. 2007) in orde r to help in the preserv ation of the natural resources of this high biodiversity area and to carry out research Also, because of its main role in the Department in promoting the conservation of Brazil nut areas (castaales ) through sustainable management ACCA has also signed agreements with WWF -MDD and FONDEBOSQUE to work in projects related to this issue. Support to SMFEs ACCA is basically an organization with a conservation focus ; however since LACC is surrounded by forest concessions ACCA started ne gotiations with some of the ir managers in order to assure its conservation objectives. In 2002, ACCA signed an agreement with four SMFEs located at the north border of LACC Th ese SMFEs agreed with LACC to establish in

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117 their adjacent areas a buffer zone to assure the conservation work done by ACCA was successful Moreover, ACCA signed an agreement in 2003 with the SMFE Empresa Maderera San Juan Grande (EMAVISJUG) ; t his accord granted LACC an area of approximately 500 ha from this enterprises forest concess ion ( for a period of five years ). When EMAVISJUG was granted its forest concession, some of its area overlapped ACCAs r esearch center ( CICRA ). Thus, ACCA had to remove its research center. However, there was also some research on going in the overlapped ar ea, thus people from EMAVISJUG started pressing for the initiation of extraction of timber in this area in order to receive some compensation from ACCA. ACCA therefore signed an agreement in which it promise d to pay EMAVISJUGs harvesting fee for the whole area of its forest concession for five years in order to exclude such area from its forest management plan during the first years. Under this agreement it was also stipulated that EMASVIJUG concessionaires would avoid killing animals in ACCA study areas. ACCA allied themselves with FONDEBOSQUE MDD in 2004 in order to support the implementation of the use of appropriate intermediate technologies in forest harvesting through the granting of portable sawmills to the three SMFEs with forest concessions adjacen t to the north border of LACC ( i.e., Shihuahuaco, Madebol, Madefol ). Additionally, another SMFE (i.e., Tawari) was also benefited with this project Technical support and training (e.g., in directed felling, and use of portable sawmills) was also provided to th e se SMFEs. In addition, ACCA has provided some indirect support for the four SMFEs (Empefomsba, Inbaco, Epefomsg, and Empefoc Dos) whose forest concessions are located at the south border of LACC ; however th is support has not been very significant.

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118 Capacity The Moore Foundation has been ACCAs principal source of funding ; its budget is approximately US$ 800,000 to US $ 1 mill ion per year. ACCA personnel in Madre de Dios consist of both professionals (among them several Forest Engineers) and technician s and number between 50 and 60 people Since ACCA s involvement in the concession system has been minim al in comparison to the other NGOs, seeking mainly to avoid possible conflicts with their neighboring forest concessionaires its budget and personnel have been more than sufficient to provide some technical support and training to the four SMFEs surrounding its conservation concession and to pay the harvesting fee of one SMFE for five years : There is an agreement with EMAVISJUG because ACCAs concessi on has its center in that forest concession area, and part of the current research is overlapping a small space of the EMAVISJUGs forest concession. That is why we made the agreement with that enterprise so they can give us the use rights of that area whe re our research parcels are located for some years and avoid harvesting timber thereACCA supports this SMFE with the payment of all its harvesting fee only for the first five years as compensation (ACCAs representative, pers. comm. 2005). FONDEBOSQUE held a competition and ACCA participated with four SMFEs whose forest concessions surround ACCAs conservation concession We supported these SMFEs so that in time there would not be pressure over our concession ; that is why there was the need to guide the m for good management. The project ended and th e se SMFEs continue with WWFs assistance (ACCAs representative, pers. comm. 2005). 2 Cooperazione e Sviluppo (CESVI ) CESVI, an Italian NGO w h i ch focus es mainly o n poverty eradication through sustainable develo pment plans, started operation in Madre de Dios in 1999. D ue to the new context of the concession system in the area, in 2002, it modified its initial social objectives to emphasize a more managerial and technical scope In partnership with the NGO Pronaturaleza CESVI obtained funding from the European Union to implement the project Sustainable Management of Forest Resources in the Tahuamanu Province ( Manejo sostenible de los recursos forestales en la provincia de Tahuamanu, Madre de Dios, Per) for a pe riod of 5 years (up to November

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119 2007). The main objective of this project has been to strengthen the NFWL through four sub objectives: Promotion of adequate techniques and methodologies for forest management with the objective of SMFEs attain ing the abilit y to obtain forest certification. Promotion of effective schemes of business administration. Facilitate strengthening of the Roundtable for Dialogue and Forestry Consensus Promote diversification of markets for forest products. CESVI has been developing a project to support the sustainable management of timber and Brazil nut in five indigenous communities in Madre de Dios CESVI has also developed, in partnership with other institutions different projects in order to support sustainable management of natu ral resources in the Department such as : 1) a project in Alerta for a more entrepreneurial vision of Brazil nut management, i n partnership with ACCA ; 2) an agreement with WWF -MDD to provide more specific assistance i n the forest certification process to sp ecific SMFEs; and 3) an agreement with INRENAs Technical Administration in Tahuamanu to pay a Forest Bachelor to assist this office in the work related to nontimber forest products. Support to SMFEs CESVIs initial goal, in terms of support for its proje ct related to sustainable management in the Tahuamanu province was to cover an area of 25,000 ha among five producer associations W hen this project was presented to the European Union and later approved in 2000, they proposed to work with producer associ ations because in the context of Tahuamanu at the time there were these types of associations. However, in 2000 when the NFWL was promulgated, it established the access to forest s through forest concessions granted to SMFEs and no t to producer associations Thus, as CESVI was already assisting two associations in Tahuamanu (the Iapari and Iberia associations) and as the NFWL proposed the formation of SMFEs, these two

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120 associations were divided into SMFEs. Thus CESVI started working with only three of the S MFEs formed inside the two associations due to its assigned budget for this project. Therefore, these assist ed SMFEs were granted larger areas than initially thought so CESVI ended up covering an area of approximately 120,000 ha wh ich represented 1 0% of t he forest concession area granted during the first round of bidding in Madre de Dios Until 2007, CESVI had provid ed serious technical assistance mainly to four SMFEs from the Tahuamanu province. In 2002, they began supporting three SMFEs (Maderacre, Mader yja, and Amatec) while in 2004 one SMFE was incorporated to this support (Forestal Ro Huascar) However, i n May 2007, another SMFE (CATAHUA) was also added to their sponsorship. In general the assistance from CESVI to these SMFEs has consisted in the el aboration of technical proposals to participate in the first bidding, elaboration of the GFMP and AOPs, training in forest management techniques, and institutional strengthening. Thus, the main focus of CESVIs personnel according to one of its project objectives, has been to promote awareness of the real meaning of good forest management through training and technical assistance in forest management (CESVIs representative, pers. comm. 200 5 ): It means train ing people involved in SMFEs, regardless of wh ether they are technicians or not so that everyone knows what forest management mean s for what purpose for est management is done, what goals forest management ha s and how forest management is done ( CESVIs representative, pers. comm. 2005). This awaren ess is reached through a permanent process of training, and demonstrations in the field on how the application of the right techniques of forest management (e.g., mapping trees, design of roads, and use of reduced impact logging) can result in a more organized and more efficient management of a forest concession: We were demonstrating little by little that working using a minimum methodology one could achieve better results; this was demonstrated in the field and at the end they adopted it completely, suc h is the case that now they are going through the first pre -evaluation for certification (CESVIs representative, pers. comm. 2005).

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121 Thus, d uring the first year of support (20022003), CESVI covered 100% of expenses for the realization of the forest censu s and provided a Forest Engineer and a technician to the SMFEs In 2004, they covered 50% of the expenses for the realization of the forest census, and in 2005 the amount covered was decreased to 20% of the expenses. By 2006, the SMFEs themselves began to cover all of their forest census expenses ; in the following year, CESVIs work consisted only of monitoring these SMFEs. In addition to this support, CESVI signed an agreement in March 2005 with WWF MDD and the newly formed M&M consortium (between the SMF Es Maderyja and Maderacre) to carry out an exploratory forest inventory24 of the concessions of the consortium. Capacity CESVI s capacity in terms of personnel and funding has been sufficient to fulfill its functions. They have five projects i n Madre de Dio s (as of 2007), each one having a Forest Engineer as the manager of the project, and some technicians as support personnel. The main financial source for the first five years for these projects ca me from the European Union and totaled 798,888 Euros. Speci fically for the Project related to the support of SMFEs its capacity in terms of personnel and funding has been sufficient since the decision to support a small number of SMFEs was based on such capacity Thus, t he personnel assigned to support SMFEs incl ude s a Forest Engineer as the manager responsible f or the Project, four forestry technicians for field work, a specialist in GIS, and a technician in GIS. 24 This was the first exploratory inventory carried out in Madre de Dios (between July and August 2005), and it was directed by WWF MDD personnel. U ntil that date, only forest censuses of the commercial tree species of interest had been carried out in the department. An exploratory inventory is done over large areas (10,000500,000 ha) with a margin of error of 15 20%; it is done over all the concessi on area. A forest census is done over small areas (100 1,000 ha, and exceptionally over 5,000 ha) and there is theoretically no margin of error since all the population is measured; it is done over the annual harvested area.

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122 CESVIs capacity and institutional commitment has allowed the develop ment of a trust relationship wit h its assisted SMFEs, and a close coordination of their demands with CESVIs project. Their work of strengthening its assisted SMFEs capacities in the production process, the acompaamiento in phases of the productive chain, and the ir support in business strengthening have been recognized as the most important support from th is institution to its assisted SMFEs (CESVI 2005). 3 The Peruvian Fund for Nature Conservation ( ProNaturaleza ) The Fundacin Peruana para la Conservacin de la Naturaleza (ProNaturaleza) is a Peruvian NGO affiliated with The Nature Conservancy. It was founded in 1984 with the objective of conserving Peruvian natural resources especially its biodiversity and promoting sustainable development. It has three lines of action to fulfill its main objective: Biodiversity conservation, through supportive actions in the administration of protected areas. Sustainable development, through the development of integrated projects of conservation, development, and research in buffer zones of protected are as. Promotion of conservation culture, through implementation of environmental education programs, promoting the strengthening of local capacities, and promoting the improvement of environmental laws. ProNaturaleza started operating in Madre de Dios in 199 8. ProNaturaleza has carried out t wo main projects : (1) the Tambopata Inambari Project in which ProNaturaleza w as part of a consortium with CESVI which ha s involved activities related to the gather ing of information about the biodiversity and conservatio n of the Tambopata Inambari watershed (an area that form s part of the Bahuaja Sonene National Park and the Tambopata National Reserve) and in non -formal environmental education to local population; and (2) the Implementation of Conservation P lanning T ools and F orest M anagement Project in Madre de Dios with one conservation component for elaborating the management plans of the Bahuaja -Sonene National

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123 Park and the Tambopata National Reserve and with one development component for supporting the forest conces sion process. ProNaturaleza began supporting the process of forest concessions through its support in the establishment and strengthening of the Madre de Dios Roundtable for Dialogue and Forestry Consensus ( Mesa de Dilogo y Concertacin Forestal MDD ) as a forum for discussion of proposals from all forest actors in the department and by providing support to the Comisin Ad hoc (which held the second round of public bidding ). Also, ProNaturaleza signed an agreement with INRENA to be responsible for the diff usion component for the second round of public bidding. Th us, ProNaturaleza carried out several diffusion events in Puerto Maldonado and along the Inter Oceanic Highway in order to inform people about the concession system and to promote major participatio n in the second round of public bidding. Also, informational brochures were distributed in these events. ProNaturaleza has also signed different agreements with : 1) INRENA for carrying out projects in cooperation related to the conservation of natural reso urces in Madre de Dios; and 2) with the Regional Government to establish collaboration mechanisms in activities related to the promotion of biodiversity conservation and sustainable development in the Region. Support to SMFEs In 2003, ProNaturaleza started providing technical assistance to five SMFEs in the e laboration of proposals to help them to participate in the second round of public bidding. These five SMFEs were selected through a process of evaluation that included certain criteria: E nterprise organization Capital ization Ownership of equipment and machinery Logging e xperience Access to the forest concession area for which they were applying Participation in information meetings

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124 Although the five enterprises were granted forest concession contracts, two of them later abandoned assistance from ProNaturaleza because they wanted to legalize timber harvested from unauthorized areas and ProNaturaleza did not support that action. Thus, ProNaturaleza continued assistance to the other three SMFEs (Forestal Sh ay Jame, Empresa Ecof orestal Camanejo and Empresa Forestal Pumaquiro) from the Tahuamanu province during 2003. In 2004, they terminated assistance to Empresa Ecof orestal Camanejo due to the forgery of documentation by this enterprise .25 D uring the period 2004 to 2006, Pronaturaleza assisted the two remaining SMFEs. The support that Pro N aturaleza provided to SMFEs consisted mainly of technical assistance in the realization of their forest census elaboration of GFMPs and AOPs, and training in goo d forest mana gement techniques To help a given concessionaire realize their forest census, ProNaturaleza contribute d its professional personnel (Forest Engineer and Bachelor, matero ), all materials and equipment (GPS, compass es radio), and some meals for the professi onals. They also process ed information elaborat e d the management plans and monitored them until they were approved by INRENA. ProNaturaleza has also developed training workshops on the importance and implications of doing forest inventories, applying red uced impact logging, and constructing forest roads ( viales de extracci n ). For the first two years of the sustainable development project (2003 2004), they also covered 100% of concessionaire expenses for the realization of the forest census. In addition, 25 In May 2004, this enterprise s legal representative informed INRENA about the forgery of one of its transportation permits (that was subscribed by one unauthorized enterprise member). In July, after INRENA started an investigation, all activities from this enterprise were stopped. After INRENAs inspection of the management plan document in December, field supervision was carried out on this enterprises concession. Following this, a sanctioning procedure was initiated on this enterprise due to irregularities in the management plan. By April 2006 the concession contract for this SMFE was cancelled because its management plan had not been fulfilled (R.G. N0242006INRENA OSINFOR).

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125 since the second year of assistance, ProNaturaleza has conducted a small field evaluation of the previous year activities of the SMFEs that they assist in order to verif y if the clients are functioning in an orderly manner Capacity ProNaturaleza had suffi cient personnel and funding capacity to fulfill its goals for the three years of its project related to sustainable forest development in Madre de Dios (20032005) This project had a budget of US$ 300,000; the source of this funding was the MacArthur Foundation. Personnel responsible for the forest concessions w ere a Forest Engineer, a Forest Bachelor, a matero (tree hunter), and a GIS assistant: During the period of the Project, we had the capacity (in personnel and financial) to fulfill our objectives w ithout any type of problem (ProNaturalezas representative, pers. comm. 2007). ProNaturalezas small project scope and its capacity allowed it to work closely with its assisted SMFEs to monitor SMFEs activities in the field and to provide a closer traini ng opportunity This experience allowed these SMFEs to gradually understand that certain required management activities are useful to them in better planning their management operation s: We are try ing to get them (concessionaires) to understand more, litt le by little W e know that they are not going to change from one day to the next but we are working with them in training workshops about why to do a forest census, why to do the extraction roads (viales de extraccion ) fulfilling certain norms, so in time they realiz e that it is useful for them to plan their time better to use equipment for fewer hours to save fuel (ProNaturalezas representative, pers. comm. 2004). 4 The World Wide Fund for Nature (WWF) WWF is an international environmental NGO that promot es and supports biodiversity conservation and sustainable use of renewable natural resources. WWF began working in Peru during the 1960s ; they were initially involved in the conservation of the vicua ( Vicugna vicugna). WWF established a Program office in Peru in 1998 (Program Peru ). Since then WWF -

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126 Peru ha s collaborated with Peruvian NGOs o n diverse projects related to biodiversity conservation and sustainable use of Peruvian resources. Specifically in the forest sector, WWF Peru and other NGOs established the vision of sustainable forest management as a proposal for change in the forest sector (Soria 2003). Thus, WWF -Peru supported the formulation of the NFWL and the implementation of the forest concession system. This support started through the establish ment of a program of meetings with diverse organizations26 in the forest sector to coordinate actions in favor of the forest concession system WWF -Peru also helped in the establishment of the Peruvian Council for Voluntary Forest Certification (CP CFV) in 2001, and in the development and endorsement by FSC of the Forest management certification standards for wood products from forests in the Peruvian Amazon and the Forest management certification standards for Brazil nut production in Peru (in 2002). In 2002, WWF Peru began support of the concession system in the Departments of Ucayali and Madre de Dios through a small project in M adre de Dios specifically WWF -Peru hired a l awyer to look for interested people there that wanted to form enterprises to par ticipate in the first round of public bidding. However the following year WWF -Peru started a large-scale project called the CEDEFOR project ( Centro de Desarrollo Forestal ) which had as its goal the forest certification of one million hectares of forests i n the country, under the FSC scheme. T he lifespan of this project was originally 5 years (20032007), and its operational plan was initially designed for three regions where the first round of public bidding for forest concessions was completed: Madre de D ios27, Ucayali, and San Martin. L ater this project was extended to cover 26 Organizations such as INRENA, DEVIDA, the Mesa Nacional de Dilogo y Concertacin Forestal Mesas Regionales Regional Governments, forest organizations, the Federacin de Nativos de Madre de Dios (FENAMAD) and NGOs 27 I n January 2003, WWF Peru set up an office in Puerto Maldonado, and in May of that year a Forest Engineer was named as the Director of that office (i.e., WWF MDD).

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127 also the departments of Loreto and Huanuco. CEDEFORs operational plan considered three components: (1) sustainable forest management and forest certification, (2) business administration, and (3) institutional strengthening. A mong the environmental NGOs, WWF w as much more integrally and proactively involved in supporting the implementation of the NFWL. This may be because of its size and its nature as a recognized international NGO sup port ing biodiversity conservation and the sustainable use of renewable natural resource s Thus WWFs support to SMFEs particularly in Madre de Dios, was much broader than the other environmental NGOs in the Department. Support to SMFEs Technical assistance provided by CEDEFOR to SMFEs in Madre de Dios was oriented mainly to carrying out forest censuses the elaboration of management plans (GFMPs and AOPs), training on forest management practices and business management and marketing (by convening workshops and seminars covering th e se topics ), and the development of educational and informative material. Also, some financial support was provided to some SMFEs: There was a loan that was given in cooperation with the Caja Municipal Rural de San Martin (a finan cial institution), so financial support was provided to some SMFEs, but we did not assist a ll SMFEs ; some of them applied and at the end some of them returned the loan (WWF -MDD s representative, pers. comm. 2007). Specifically in the case of each SMFE assisted by the CEDEFOR Project, 100% of the expenses for the GFMPs and 50% of the expenses for the AOPs were covered at the beginning. Later, the amount of AOP expenses covered was reduced in order to encourage the SMFEs to become more independent (WWF -MDD representative pers. comm. 2007) During the first round of public bidding in Madre de Dios WWF helped in the formation of 26 SMFEs by grouping interested people together and helping them to develop technical

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128 proposals in order to submit bids Twent y three of these SMFEs obtained the BuenaPro28 to be granted 32 forest concession contracts O ne SMFE however, did not sign the contract and another later refused assistance from WWF. Thus, by 2002 WWF -Peru was supporting 21 SMFEs with a total of 29 fores t contracts. Following the announcement of the second round of public bidding in 2003, WWF -MDD called for people interested in getting its support. Contrary to the first round, at this point WWF MDD developed an evaluation format for the selection of peop le to support and that would comprise the new enterprises participating in this round. This evaluation format included criteria such as experience in logging activities or timber commercialization, physical capacity (i.e., ownership of equipment and machin ery) and family ties to the area where participants w ere applying for a concession. Thus, durin g the second round WWF MDD helped in the formation of ten new SMFEs and in the elaboration of their technical proposals ; a ll of these SMFEs were granted forest concession contracts. However, only two SMFEs continued with WWF -MDD assista nce: T he others [i.e., 8 SMFEs ] simply used us in order to obtain a contract and once they knew they got a contract they did not want to elaborate the management plan [at that time it was a document of progress to harvest timber ] with us; they did not want to sign with us [the agreement of technical assistance] ( WWF -MDD s representative, pers. comm. 2005) Of the 23 SMFEs (from the 1st and 2 nd round) receiving support from WWF MDD in 2003, three more later refused assistance. As such, in 2004 WWF MDD was assisting a total of 20 SMFEs ( consisting of 25 forest contracts). Because illegal activities were detected in some SMFEs, and because several SMFEs did not fulfill requirements to reach forest certification 28 This basically means that the Comisin Ad hoc declares it to be the winning offer in the bid. A forest concession is only granted after the winner of the bid signs the contract accepting the terms. In Madre de Dios, the timeline t o sign contracts was 30 days from obtaining the BuenaPro.

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129 which was the CEDEFOR projects main goal by June 2005 WWF -MDD was continu ing with assistance to only 10 SMFEs (13 forest contracts) from the 1st round: From all SMFEs that WWF -MDD was assisting, now we are only supporting t he ones that are working through the process of forest management planning. Definitely, the great majority of SMFEs have only been interested in getting their AOP, to have a plan that they can give to INRENA, but they have not been interested at all i n the forest; so now there are also many that do not know the forest and have only been dedicated to sell ing their transportation permits [ guias ], so we cannot continue working in this way (WWF -MDD s representative, pers. comm. 2005). Also during April 2005, W WF -MDD initiated coordination with CESVI and the consortium M&M (formed by the SMFEs Maderyja and Maderacre) to provide assistance to the consortium for the certification process. This assistance included carrying out an exploratory forest inventory in the concessions of the consortium (a total area of 98,932 ha) as the first step in the certification process29; as well as training to strength en personnel with respect to directed felling, reduced impact logging, redesign and improvement of forest roads, and s afety issues. In a meeting in WWFs Lima office in July 2005, a n analysis of the advances of SMFEs being supported in Madre de Dios was developed As part of this analysis a priority list of SMFEs having the best possibilities to get certification was dev eloped. Few SMFEs were part of this list: three SMFEs from the Tahuamanu province (Emetci, and the consortium M&M) which were going to receiv e full assistance ; while two from the Tambopata region (Madebol and Madefol) were going to receiv e only partial su pport However, in September 2005 there was an internal reformulation of the CEDEFOR project. This development was largely due to WWF s budget cuts and included changing its strategy to one o f concentrating technical assistance on a few key forest concess ions with good prospects for achieving forest certification (WWF 2005) 29 This was the first forest inventory carried out in a large area in the department. T he goal of this inventory was to obtain general data of all tree species (e.g., their volumes and distribution) in the consortium concessions, in order to employ better planning and execution of a good forest management, and to start the certification process

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130 As part of th ese new changes WWF MDD terminated support to the SMFEs Madebol and Madefol, made the agreement of support with the consortium M&M ironclad and initiated a conversation with two SMFEs (Grupo Espinoza and Forestal Rio Huascar ) in order to provide assistance for the certification process. Agreements with these last two SMFEs were officially validated in December 2005 and January 2006, respectively Thus by 2006, WWF -MDD al so terminated its support t o Emetci due to internal issues with this enterprise, and then concentrated its efforts only on the five SMFEs from the Tahuamanu region (the consortium M&M, Grupo Espinoza: Aserradero Espinoza&Cocama, and Forestal Ro Huscar) t hat were applying for forest certification These five needed to fulfill the necessary requirements for the evaluation process. Capacity The CEDEFOR project had an initial budget of US$ 10. 4 million, which came from funding from USAID (US$ 9. 4 million), an d WWF (US$ 1 million). This budget was later cut, due to an overall budget reduction of USAID projects in Peru (WWF 2005) and during the lifespan of the project approximately US$ 5 million was spent. For the Madre de Dios office the initial budget for this project was approximately US$ 1.5 million ; however, after budget cuts only around US$ 700,000 was actually spent in developing the projects actions. A t the beginning of the project WWF -Peru sought groups interested in participating in the first round of public bidding WWFs goal was to h elp these groups organiz e, form enterprises, and prepar e their technical proposals for the public auction It appears in retrospect that the main goal of WWF was to recruit as many people as possible who were intereste d in the concession system and in form ing SMFEs in order to have a large representation of SMFEs in the department under its support This became evident because there was only one person

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131 responsible for the identification of potential groups and no body w as evaluatin g the human and financial capacity of these groups to carry out forest management activity: There were no criteria because we did not have an office well established here in Maldonado and the person responsible to form these enterprises was a lawyer that was hired for consultancy services [servicios no personales ] from Lima T his person was told to go and form enterprises in all Madre de Dios, so this person went to Boca Colorada: we have to form two enterprises in Puerto Carlos: we have to form three enterprises, Maldonado: five enterprises, Iberia: ten enterprises; so the greatest number of enterprises this person could have generated with only one template [ con una sola plancha]this person was paid more because certainly the objective of that consultancy was to form more enterprises (WWF -MDD s representative, pers. comm. 2005). In addition, WWF personnel promised grant s of equipment and machinery to those SMFEs under its assistance, a promise that went unfulfilled: When I came to this of fice I was told: we need to give technical assistance to this person, to this other, but what is going on? M any of these loggers were told before [by the person responsible to form these enterprises] that we were going to give them sawmills, that we were g oing to give them a boat, that we were going to give them money, that we were going to give them everything; so these people asked us: when are you going to give us these things? (WWF MDDs representative, pers. comm. 2005). M ost enterprises were formed i n a hasty manner due to the short time notice given in advance of the announcement for the first public bidding for forest concession contracts. Also, most enterprises were formed as Sociedades An nimas Cerradas-SAC (allowing for a membership up to 20 members) with people with diverse interests and backgrounds (e.g., not all of them had experience in logging). Thus, t he non existence of a screening process (to select members to form these enterprises) according to certain qualification criteria for the capa city to carry out forest management and the formation of enterprises as SAC societies ha ve been among the main criticism s leveled towards WWF. M any interviewees (i.e., environmental NGOs, INRENA, concessionaires, and grassroots organizations) consider th e se as the main factor s underlying the disagreements, divisions, and conflicts generated inside many SMFEs, and the failure of several SMFEs to properly manage their enterprise s and forest concession s.

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132 W hen the WWF office was established in Puerto Maldonado (i.e., WWF -MDD) in 2003, the personnel for the CEDEFOR project included a Regional Director (Forest Engineer), four forest specialists ( three Forest Engineers and a Forest Bachelor, each one responsible for SMFEs from a different part of the Department ), a GIS specialist, an economist, an administrator, and a specialist for the forest management committees Also, there was some supporting personnel (i.e., tempora ry hires ) including three forest specialists, an economist, and a lawyer. These personnel were still not enough to manage the large number of SMFEs under WWF sponsorship; for example each forest specialist was initially responsible for 56 SMFEs and due to the great burden of work these specialists mainly spent their time in the office processing information from forest inventories in order to elaborate management plans. Thus, there was a lack of verification of SMFEs in regard to performance in their forest concessions. Limited personnel did not allow WWF -MDD to work closely with each of its assist ed SMFEs, thus there was not a consistent and continuous technical assistance, nor close attention paid to the needs and/or advancements of its assisted enterprises to provide a more efficient assistan ce. This created not only dissatisfaction among some SM FEs, due to the many expectations WWF assistance created among them but they were not successful in strength ening the capacities of SMFEs which was one of WWFs objectives. When SMFEs were formed, the new entrepreneurs did not have any knowledge about th e concept of forest management and its technical implications and demands. Furthermore, they did not possess any business experience or knowledge of how to properly manage a business Thus SMFEs needed constant technical support and monitoring ( acompaami ento ), especially during the first years when the new entrepreneurs were acquiring knowledge about the new concepts and techniques for forest and business management.

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133 Because of limited personnel, technicians had to be hired on a temporary basis to carry o ut forest censuses and to collect data in the field that later was used by the forest specialists to elaborate management plans for their assisted enterprises Due to no field supervision from WWF -MDD personnel, hiring temporary workers ( who did not identi fy with WWF -MDD and its work ) created an environment in which some of them accepted bribes from some SMFEs in order to report more volumes of certain species (particularly mahogany) than what really existed in their concession area This eventually creat ed a serious problem for WWF MDD in March 2005. After a CITES commission conducted a field inspection in a sample of forest concessions to verify the status of mahogany in Peru during 2004, it was observed that non-existent mahogany trees were reported in th e AOPs of five forest concessions (5 SMFEs) from Madre de Dios two of which were supported by WWF -MDD Thus in March 2005 these contracts were cancell ed by OSINFOR This situation created an environment of tension and distrust towards WWF -MDD because WW F was among the first in defending legality in forest management (WWF s representative, pers. comm. 2005); however these two cases revealed a s ignificant mistake by WWF -MDD s Forest Engineers in signing AOPs without verification i n the field of their re al contents Because this problem was a result of the lack of verification of AOPs due mainly to the great burden of work of WWF -MDD personnel, the WWF -MDD s Director decided that from that moment on all AOPs elaborated by WWF personnel had to be ground t ested before signature. But this new decision implied an increased budget. WWF -MDD depends totally on the Lima s office for its budget (WWF s representative pers. comm. 2005) which makes the work of timely ground testing more difficult becau se of the b ureaucratic process .30 30 Besides the fact that personnel from WWF Perus Lima office w ere responsible for the administration of CEDEFOR funding, there were some differences in vision to carry out the projects activities and a lack of

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134 This problem also brought to light the issue of illegal activities (i.e., harvest ing of timber from unauthorized areas ,31 and the sale of transportation permits) being carried out by some SMFEs T hus in order to avoid problems of illeg al activities and ensure a good forest management of its assisted SMFEs, WWF MDD saw the need to focus their technical assistance only on a group of SMFEs that despite their difficulties in doing forest management were trying to work according to the para meters of the NFWL ( WWF s representative pers. comm. 2005) This decision implied the reduction in the number of assisted SMFEs in Madre de Dios By July 2005, in a n annual meeting at WWF -Peru s Lima office and after an evaluation and revision of the CEDEFOR project, a process of reformulation of this projects objectives and strategies began Thus a new proposal for the CEDEFOR project was elaborated for implement ation during August -September of that year. One of the strategies of this proposal includ ed focusing technical assistance in forest certification to a group of viable concessions (WWF 2005) As a result of these new changes by October 2005 WWF MDD terminated its support to their remaining original SMFEs and started assistance to just a few SMFEs that were intending to apply for forest certification There were also changes in personnel, includ ing the hiring of a new Director and reduction of personnel This produc ed not only disappointment among SMFEs that until that moment receiv ed assistan ce from WWF -MDD due to the expectations generated under this stewardship, but also criticism from other organizations in the region because WWF was abandoning some SMFEs that still needed help, while assisting other SMFEs that were better off an d planning forest certification: knowledge about the reality of Madre de Dios concessionaires by this staff. This resulted in disagreements about the time and amount of funds neces sary to carry out certain activities in the field in Madre de Dios. 31 T imber harvested from areas outside a forest concession in an illegal manner is legalized (or Blanqueada in Spanish) using transportation permits ( guas de transporte ) from a concessio n.

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135 WWF abandoned its assisted enterprises in an irresponsible mannerbut soon WWF abandoned them, why? because they realized that it was not what they [WWF people] though it to be, because they want it or not from the 100% they assiste d I think 1% could be referred as reduced impact management; later they [WWF] realized they could not continue and abandoned their assisted enterprises so anyone could say that they are inciting illegality (Forest consulter, pers. comm. 2007). Figure 4 2 illustrates specific tasks carried out by WWF -MDD in supporting private SMFEs (in dark gre en), and the limitations in fulfilling those tasks (in light green ) due to limitation in its capacity (orange). Figure 4 2 WWFs main tasks in supporting private SMFEs in Madre de Dios

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136 M ulti -stakeholder consultative organizations T he participation of environmental NGOs has been influential in the formulation of the NFWL and in the technical and financial assistance to SMFEs for the implementation of sustainable fo rest management practices under the new concession system and attainment of forest certification in Madre de Dios M ulti -stakeholder consult at ive organizations an array of organizations that serve as a dialogue body for its members to consider and deliber ate on issues related to the forestry sector have also sought to provide support for the implementation of sustainable forest man a gem e n t practices in the Department. They emerged due to their potential for effective consensus -building, shar ing of knowledge and expertise, and interest representation (Fransen & Kolk 2007), and as a response to actions of governmental agencies and environmental NGOs T wo multi -stakeholder consultative organizations emerged in Madre de Dios to help in the implementation of the forest concession system: the Roundta ble for Dialogue and Forestry Consensus of Madre de Dios ( MDCF -MDD ), and the Forest Management Committees (CGB). The MDCF -MDD essentia lly accomplished its objectives of being a forum for dialogue of forest issues during the first years of conflicts in the implementation of the concession system and therefore in time it became practically inactive. The forest management committees were created recently in 2004 and are still active; however their functions as entities in helping the forest administration of specific watersheds are constrained because they depend on INRENAs budget to function. The following section presents the analysis of the interests, support to SMFEs, and actual practice and outcomes of the two multi-stakeholder consultative organization s in Madre de Dios.

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137 1 The Roundtable for Dialogue and Forestry Consensus (MDCF) In September 2001, the Agriculture Ministry called together the most important organizations in the productive forest sector of the country32 with the purpose o f initiating a dial ogue about the implementation of the NFWL and the reactivation of productive forest activity. Different actors from the civil society (local and international NGOs, small logging associations, large timber companies) subsequently participated in proposals and debates about the modification of the new Forestry Law while preparing a joint agenda on relevant topics in the forestry sector (DAR 2008) This dialogue resulted in the formalization of the Roundtable for Dialogue and Forestry Consensus ( Mesa Nacional de Dilogo y Concertacin Forestal or MNDCF) in January 2002, as a suitable forum to address forestry issues.33As a counterpart of the MNDCF Regional Roundtables ( Mesas Regionales ) emerged in Ucayali, Madre de Dios, Tingo Mara, San Martn, Huancayo, Lam bayeque, and other important regions (DAR 2008). The Mesa de Dilogo y Concertacin Forestal de Madre de Dios (MDCF -MDD) is a regional group for discussion of issues related to the forest sector in the department. It is made up of different actors and was initiated in 2001 as a forum to discuss and propose modifications to the NFWL ; it wa s recognized by INRENA in 2002. In July 2005, 62 representatives of 41 organizations were part of the MDCF MDD. These organizations include governmental institution s, cooperation organizations, NGOs, independent cooperatives, independent consultants and grassroots organizations. 32 These organizations were the Cmara Nacional Forestal ( CNF), Corporacin Nacional de la Madera (CORMADERA), INRENA, Asesora Legal del Ministerio de Agricultura and the Proyecto Apoyo a la Estrategia Nacional para el Desarrollo Forestal (ENDF). 33 O n January 2, 2002 an agreement was signed by entrepreneurs, NGOs, indigenous groups, and the government in order to move forward with the implementation of the New Forestry and Wildlife Law through public bidding for concession areas between 5,000 to 10,000 ha, oriented mainly for small loggers (Soria 2003).

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138 Support to SMFEs During the first round of public bidding (2002) the MDCF -MDD did not play a leading role because the organizations compos ing it did not reach consensus on concrete proposals Therefore the proposals presented by individual institutions were not taken into account. D uring the second round of bidding (2003) however, the MDCF MDD played a leading role as two of its members we re part of the Comisin Ad hoc to conduct th is bidding round. One of the main attainments of the MDCF MDD was to establish a major priority for the technical proposal in the second round of public bidding instead of the economic proposal as it was in the f irst round. On 7 July 2004, an initiative to carry out the supervision of the forest concessions in Madre de Dios was presented to the Commission of Environment and Amazonia in the National Congress to the Agriculture Ministry, and to the chief of INRENA. However the MDCF -MDD never got an answer from any of these Commissions, nor from INRENAs chief. It was not until August 2005 that personnel from the newly created OSINFOR carried out inspections in the forest concessions of the Department At that time they also collect ed some indicators that provide d a basic idea of the degree of fulfillment of the concessionaires GFMP. Returning to September 2004, the MDCF MDD also presented to the INRENA chief an action plan to fight against illegal logging in the dep artment. As there was no answer from INRENA, in the following September the MDCF -MDD presented this action plan to the Regional Government of Madre de Dios to discuss the formation of the Regional Commission to fight against illegal logging ( Comisin Regio nal de lucha contra la tala illegal ). Capacity The capacity of the MDCF -MDD as a regional group for discussion and composed of different actors ha s depended more on the individual interest of the organizations that constitute

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139 it. Members of the MDCF -MDD met on a regular basis d uring 2002 and 2003 (i.e., between the first and second rounds of bidding) which was a time of uncertainty regarding the implementation of the forest concession system due to the problems generated in Madre de Dios by small loggers and local authorities that were widely opposed to i t (i.e., the paro maderero) However, participation i n the MDCF -MDD waned after the second round of public bidding as the situation became more or less stable with respect to the implementation of the f orest concession system Despite le ss frequent participation of all its members, the MDCF -MDD presented some proposals in 2004 and 2005. However, i n recent years ( 2006 and 2007) the MDCF -MDD has practically been inactive due mainly to the lack of interes t of some of the actors participating in this board which started previous years After the second round of public bidding some grassroots organizations lost interest in participating in th is boards meetings because they saw that there was usually a cons ensus to have the meetings only when governmental organizations (particularly INRENA) had some interest at stake. Soria (2003: 13) mentions that several NGOs have the impression that INRENA utilizes the MDCF only when it is convenient for it that the MDCF help deflate problems that INRENA has allow ed to grow. 2 Forest Management Committees (CGB) The Comits de Gestin de Bosques (CGB) are private civil organizations recognized under the NFWL and cons ist of the local INRENA representative, representatives o f forest concessions and forest authorizations, local government representatives, indigenous communities, NGOs, academic institutions, all of which are located within the limits of a forest administration unit or watershed (DS N0062003-AG) The main func tions of the CGB are (DS N0142001-AG): To control that the use of forest resources is carr ied out according to the NFWL

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140 To coordinat e monitoring services in the respective forest administration unit To promot e conflict resolutions in their designated are as To propose actions to improve forest management and local development To collaborate or participate in forest supervision and control activities The CGBs have an internal regulatory document developed by the Committee itself to regulate its own organiz ation and administration. In Madre de Dios, the Comit de Gestin de Bosque Ro Las Piedras has been the most active CGB. It was constituted on 7 March 2005 by representatives of public, private, and civil organizations from the Fitzcarrald, Iapari, Laber into, Las Piedras, Manu, and Tambopata districts a nd was formally recognized by INRENA on 22 August 2005 (RI N3362005INRENA -IFFS) within the limits of Las Piedras watershed It compris es an area of 2,183,435.13 ha. Other CGBs in the department already recognized by INRENA are: Comit de Gestin de Bosque del Ro Acre recognized on 3 May 2004 (RI N0562004INRENA IFFS), covering an area of 221,451 ha Comit de Gestin de Bosque del Ro Tahuamanu, recognized on 12 March 2004 (RI N0272004INRENA IFFS), covering an area of 1,269,534 ha Comit de Gestin de Bosque del Ro Muymanu-Manuripe recognized on 30 April 2004 (RI N046 2004INRENA IFFS), covering an area of 701,708 ha Support to SMFEs However, as of the date of the interviews conducted in August 2 007, the CGB Ro Las Piedras is the only active CGB in Madre de Dios I n alliance with the MDCF MDD th e CGB Ro Las Piedras presented an action plan to the Regional Government of Madre de Dios (in the same year of its recognition) to form the Regional Com mission to fight against illegal logging. Capacity By law the CGBs must receive budgetary transfers from INRENA (10% from harvesting fees collected from a specific forest administration unit), and they must elaborate and present to INRENA an annual work pl an and/or quarterly reports on the status of their annual work plan

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141 (Directiva N 030 2007INRENA -IFFS). Th us, th e capacity of the CGBs depends on funds transferred from INRENA to implement their work plans for their respective watersheds. However, the CGB Ro Las Piedras had not received any funding from INRENA (as of the date of the survey interview) which has obviously constrained th eir CGB functioning. In fluence of key actors in the forest concession system During the implementation of the forest conces sion system in Madre de Dios, the different political interests and motivations of some social actors, and the actions they undertook, made some of these actors mor e influential than others in terms of being agents of the new changes SMFEs became the cent ral social actors in the management of the natural tropical forests located in Madre de Dios since they hold the total area granted as forest concessions In addition, the State, environmental NGOs, and multi -stakeholder consultative organizations have pl ayed a n important role in this process p articularly in t he development and capacity of SMFEs for carrying out forest management. The examin ation of the interests, actions, and capacities of these three groups of social actors or stakeholders which was pr esented in the previous sections, has been important for understanding and appreciating the specific role of these local actors in promoting and implementing the new forest concession system But also, the interactions (or lack thereof ) among these actors have been important For example, for many decades the state forest administration in Peru has been characterized as being centralized and with weak institutional capacity This generated an environment where disorganization, informality, and unsustainabil ity prevailed in the forest sector. However, in 1990 the Legislative Decree N613 mentioned for the first time the issue of sustainability in the use of the nations natural resources O ne of its transitory dispositions established the need to update the 1975 FWL in order to be in agreement with this Decree Thus from 1990 until July 2000, when the New Forestry and Wildlife Law -NFWL (as the new

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142 framework for SFM through the granting of long term concessions ) was finally promulgated, the State, environmental NGOs, and timber entrepreneurs separately debated ways to reform the forest sector while working on proposals that advocated for what the new Forestry Law ought to contain. These separate debates and proposals occurred because there was a lack of transpar ency among these actors who prepared proposals according to their own interests. These separate debates also occurred because th e State did not implement any mechanism for public participation in the administration of forest resources (Soria 2003). During this period, the strategy of the main exporter of timber in Peru was to delay the implementation of the new model for SFM without divulging clearly the reason for its opposition and without proposing a concrete technical alternative (Soria 2003). S ince p romulgation of the NFWL, two divergent positions arose in Madre de Dios, among the various interest groups: 1) groups such as environmental NGOs, some political authorities, and some small loggers who favored implementation of the forest concession system ; and 2) groups such as some local political authorities, timber elites, and some small loggers who were against it. Some political authorities such as INRENA, supported the implementation of the forest concession system as the new framework for forest man agement because of the recognized need to modify the situation of over exploitation and degradation of forest resources in the Department These political authorities had the support from e nvironmental NGOs who openly supported th is system and initially disseminat ed information related to this new system in workshops. Also, several small loggers attending NGOs workshops became inform ed about the new system and supported this system to continue with the activity that supports their livelihoods ; they also had hope that better market opportunities would emerge In opposition, some political authorities such as the Regional Government, were against the NFWL

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143 implementation from the moment it was enacted because of their agreements with large loggers to keep t he status quo of the previous forest regime Some of them undertook a campaign of misinformation about the new system. S ome misinformed small loggers w ere against it as well as some small loggers who were testaferros of large loggers during the previous f orest regime Despite opposition the implementation of the concession system continue d its course T he role of environmental NGOs in organizing interested parties in forming SMFEs and elaborating their technical proposals to participate in the auctioning of forest concessions, was very important for the implementation of th is new system. Such support was important, especially since this was a new process and the new concessionaires did not have much (if any) expertise in the procedures to be implemented ( Malleux 2008, Arce 2006). However, this support has also been criticized because of the formation of SMFEs without considering any criteria of their capacities to carry out forest management activity and because of the formation of SMFEs using the same ty pe of society for most of them without considering the specific characteristic of each group. Support from e nvironmental NGOs ( providing mainly technical assistance and in a few cases financial assistance) was also crucial for the foundation of these enter prises especially given the limited capacity of INRENA. Although INRENA secured forest access to small medium loggers through the granting of forest concessions, it did not possess the proper mechanisms, personnel, and financial capacity to control that a ccess and to enable their administration to secure a more sustainable management Thus environmental NGO s support proved crucial, but constituted a patchwork with little coordination and many shifts in priorities and collaborations due to problematic management of expectations.

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144 There have been some agreements between INRENA and environmental NGOs d uring the first five years of the implementation of the forest concession system in Madre de Dios as well as agreements among environmental NGOs themselves in o rder to develop some collaborative projects for conservation and development in the Department Most of these agreements have been conservation oriented (e.g., research projects related to ACCAs conservation concession, projects between ProNaturaleza and ACCA for the conservation of natural resources in areas surrounding protected areas, projects among ACCA, WWF -MDD, and FONDEBOSQUE for conservation of Brazil nut areas ). S ome have been related to supporting the concession system (e.g., CESVI s financial su pport to hir e a person to work in the INRENAs o ffice of non -timber forest products WWF -MDD s assistance in develop ing the Departments exploratory forest inventory). In general, however, environmental NGOs have worked mainly according to their own agenda and interests and in short term alliances with limited agreements. In the case of m ulti -stakeholder consultative organizations which emerged as institutions for dialogue and consensus -building for the effective implementation of the forest concession sy stem their role could have been crucial all through the process of implementation This w ould particularly have been the case for the Roundtable for Dialogue and Forestry Consensus of Madre de Dios (MDCF -MDD) A s an organization that grouped representativ es of governmental organizations, NGOs, SMFEs, and grassroots organizations its potential for consensus agreements could have helped t o move the system forward by helping to ful fill certain gaps (e.g., information, dialogue) that were appearing during the implementation of the concession system However, the lack of interest in participating in this board over time (particularly after the second round of bidding) from INRENA and some grassroots organizations eroded the impetus for which this group was for med Over time it became practically inactive.

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145 Thus, there has not been much interaction among the key stakeholders in the concession system in Madre de Dios, at least not in terms of a permanent, collaborative and coordinated work group designed to imple ment this new system for the benefit of better management and conservation of the forests of the Department a s the project objectives of the key stakeholder organizations established In g eneral, while particular agendas of each of the different actors ha v e prevailed there has not been a joint effort of capacities to move the concession system forward. Therefore, in addition to greater resources, m ore coordination and consensus is still needed for a better implementation of this new system Summary The imp lementation of the forest concession system in Madre de Dios, as the new model for forest management, is still a work in progress. Since its i nception, it has been influenced by social actors and factors that have facilitated and/or constrained it. Althoug h the new forest regime is a step forward in terms of the management of tropical forests in Peru especially after decades of forest over -exploitation and degradation t o date its implementation ha s been met with considerable difficulties in Madre de Dios. Th ere was initial opposition to this new system by certain political authorities, and large loggers, as well as some small loggers who wanted to keep the status quo. Also, there ha s not been adequate state resources and capacit y for sufficient oversight to ensure legal forest management And although NGO support proved crucial for the initial implementation of this system it constituted a patchwork with little coordination and much shifting in priorities and collaborations This was due to limited capacity and problem s with the management of expectations. The interests and actions of INRENA and environmental NGOs particularly WWF -MDD have shaped this systems implementation. This chapter presented an analysis of the actions and dynamics of these key stakeh olders, and their influences in the capacity of private SMFEs. This

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146 chapter also presented the analysis of multi -stakeholder consultative organizations that emerged in Madre de Dios as alternative entities searching for solutions to problems which surfaced during the implementation of this system and that have also impacted SMFEs performances As the main stakeholders, t he behaviors and capacities of SMFEs have definitely shaped this system. T he following chapter discus s es the capacities of private SMFEs t hrough the analysis of the variation of the ir capital assets, which they needed to plan, pursue, and secure their livelihoods (and their sustainable forest management practices ).

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147 CHAPTER 5 CAPITAL AND CAPABILITIES AMONG PRIVATE SMALL -MEDIUM FOREST ENTERP RISES Introduction Around the world, small forest operations (i.e., communities, private associations, families) have reached different levels of success in their forest management practices. Communities in Mexico Bolivia, Guatemala, among other countries have been successful in creating and maintaining enterprises for the commercial production of timber while other s have not. Some of them have attained forest certification as well Several factors that favor such success include policies /laws for acces s to forests, incentives for forest management and certification, and technical and financial support from government s, NGOs and other entities. Nevertheless, several factors have also worked to constrain success In particular, l imited capital has been a significant constraint for many SMFEs ( May et al 2003, Thomas et al 2003). E xamining the capital ass ets held by SMFEs is important for understanding whether and how they attain their economic goals. Further, capitals of various types are likely also relevant to the capacity of SMFEs to develop sustainable forest management p ractices and to achieve certif ication compliance T h e present chapter therefore develops a comparative analysis to address the question: What is the capacity for forest management of private SMFEs in Madre de Dios under the forest concession system? T o answer this question, forest mana gement capacity is measure d in terms of the various forms of capital that SMFEs command, and there are three specific comparisons that are evaluated : (1) differences in the capital assets of private SMFEs in the three provinces of the Department, (2) diffe rences between the capital assets of private SMFEs that hold forest certification vs. the ones that do not, and (3) differences among the capital assets of private SMFEs in the Tahuamanu province in terms of their short term plans to

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148 apply for forest certi fication (i.e., private SMFEs already certified, those planning to apply for certification in the next 2 to 4 years, and those not planning to get certified within 2 to 4 years). Capital theory is useful for purposes of this chapter because it specifically focuses on the productive assets needed by SMFEs to plan, pursue, and secure their livelihoods and their sustainable forest management practices. I employ capital theory to organize the analysis around various types of capital. Capi tal theory identifies f ive types of capital1: (1) physical (i.e., material and human -made resources), (2) financial (i.e., pecuniary resources), (3) natural (i.e., stock of natural resources), (4) human (i.e., individuals skills and acquired knowledge), and (5) social (i.e., fea tures of social organization This allows for comparisons of various capitals among private SMFEs in different parts of Madre de Dios and among those with and without certification. T his chapter pursue s a comparative analysis to evaluate variation in the c apitals of private SMFEs by province s of Madre de Dios certification status in the Department and certification planning in the Tahuamanu province. Dimensions of Capitals This chapter evaluates 29 private SMFEs in Madre de Dios in terms of t he ir capacity for forest management .2 I measured four different types of capital that these SMFEs command: produced, natural, human, and social capital Produced capital is comprise d of the material and financial resources held by SMFEs; natural capital is t he timber r esources that SMFEs have in their forest concessions; human capital co nsists of the training and practical experience the members of SMFEs possess in terms of logging and busin ess management ; and social capital is 1 Often in livelihood frameworks, physical and financial capitals are combined and referred as produced capital (Scoones 1998, Serageldin & Steer 1994). 2 O f the 29 SMFEs, there are actually only 27 uni ts of analysis since two groups of two SMFEs work together as a consortium

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149 comprise d of t he social organization and n etwork in which SMFEs participate The various i ndicator s used to measure these different forms of capital are show n in Table 5 13; they were identified after a series of factor analyses An exploratory factor analysis was applied as the first step in the SMFE capital analysis in order to reduce the number of indicators by identifying underlying common factors that represent each fundamental construct; namely produced, natural, human, and social capital. Th e results from that analysis yielded indexes that proved insignificant in models, so individual factor analyses were carried out for each group of capital indicators (see Appendix F) Table 5 1 therefore summarizes the main descriptive statistics for all of the indicators for the 27 units of analysis. Tabl e 5 1. Comparable indicators of capital for private SMFEs in Madre de Dios, 20022006 Indicators Mean Median Std. deviation Max. Min. Produced capital Equipment ($) 56,124 15,706 97,895 341,001 0 Roads ($) 81,100 15,948 286,307 1,500,000 0 Harves ting fee ($) 90,473 66,574 92,233 427,838 6,350 Loan ($) 29,265 6,503 87,654 433,378 0 Management plans ($) 26,847 22,467 26,026 122,354 3,400 Area (ha) 29,729 23,534 22,476 98,932 4,229 Natural capital Approved timber volume (m 3 /ha) 32.96 30.42 16.87 62.09 7.02 A category 1.25 0.78 1.46 4.66 0 B category 1.05 0.92 0.86 3.52 0.04 C category 12.86 7.31 11.11 44.44 0.65 D category 8.04 4.35 7.62 25.94 0.14 E category 9.75 8.78 7.01 30.13 0.91 Species per POA (N) 13.96 13.00 5.58 25.50 6.00 Harvested timber volume (m 3 /ha) 13.98 9.41 14.80 61.20 0 A category 1.08 0.71 1.19 3.84 0 B category 0.64 0.26 0.82 3.52 0 C category 7.69 1.83 11.08 44.17 0 D category 1.99 1.28 2.32 6.79 0 E category 2.58 0.83 4.11 1 5.87 0 Species per POA (N) 7.23 6.30 5.68 23.80 0 3 It is acknowledge that the indicators: road, harvesting fee, and management plans can be assets as well as liabilities for SMFEs, so caution must be taken when considering these indicators since they may modify the interpretation of the analysis.

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150 Table 5 1 C ontinue d Human capital Enterprise members (N) 7.81 6.00 5.81 23.00 1.00 Logging experience (N members) 5.41 4.00 5.34 23.00 0 Business experience (N members) 5.48 4.00 5.32 23 .00 0 Education (schooling years) 11.52 11.00 3.60 17.00 6.00 Members performance (%) 67.92 66.70 21.65 33.30 100.00 % SMFEs with low performance 18.50 % SMFEs with medium performance 59.30 % SMFEs with high performance 22.20 Soci al capital Density of membership (N) 0.56 0 0.75 2.00 0 % SMFEs with < 1 association 48.15 % SMFEs with 1 to <2 associations 33.33 % SMFEs with 2+ associations 18.52 Participation (%) 78.33 76.90 14.49 100.00 53.80 Networks (% of diversity of people assisting SMFE) 55.37 57.10 19.16 85.70 19.00 Exclusion (% existence of member exclusion) 28.57 0 32.43 85.70 0 Trust (% extent of trust among members) 75.00 87.50 24.16 100.00 33.30 Conflict: % SMFEs in conflict 11.11 % S MFEs in peace 88.89 These indicators consider information on SMFEs capital assets accumulated from 2002 (formation of the enterprise) through the 2006 h arvest (the last completed harvest year previous to the interview period). This period of time is important because it represents the five year grace period that the State granted to private SMFEs to manage their forests without the elaboration of a current forest inventory of their areas (but using only a governmental study), and within a promotional regime that offered discounts in the payment of their harvesting fees. Therefore Table 5 1shows the group of indicators that are considered for analysis of SMFEs capacities for forest management. In the specific case of natural capital, the two indicator s considered for analysis ( i.e. approved timber volume and harvested timber volume) are further sub-divided in terms of the five categories of timber species, according to their commercial value established by Ministerial Resolution N 02452000-AG.

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151 Fore st Management Capacity of SMFEs After determining the group of indicators that be st represent and consistently measure each type of capital u nder study, the second step in the analysis of the capacity of SMFEs consisted of comparisons of indicators among p rivate SMFEs in different contexts in Madre de Dios As such, multivariate analysis of variance (MANOVA) was used to examine three distinctions : (1) geographic differences by comparing indicators among SMFEs located in the three provinces of Madre de Dios (2) certification status differences by comparing indicators among SMFEs that currently hold forest certification vs. the ones that do not hold certification in the Department and (3) certification planning differences, by comparing indicators among SM FEs in the Tahuamanu province that already h o ld certification status, that are planning to attain forest certification in the short -term, and that are not planning certification in the short term. Multivariate analysis of variance MANOVA is the solution to the multiple comparison problems when there are two or more groups (Harris 2001). Due to the non-normality of the indicators under study, these were transformed to their square roots (instead of natural logs, for example) because of the existence of sever al zero values among them. In this research MANOVA was used to evaluate whether the population means of the sets of dependable variables (types of capital : produced, natural, human, and social ) vary across levels of the three factors under study (province, certification status, and planning certification). Because two of the factors contain more than two levels, additional follow up tests were performed to determine if significant differences exist among pairs of population means. Those tests involved post hoc pairwise comparisons among levels of the factor, using the method of least 0.05. The post hoc procedure has the following property: the probability of any false rejection of a null hypoth

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152 number of possible contrasts are computed (Harris 2001). Thus, MANOVA helps to assess the question o f what combination of different types of capital result in the ability of SMFEs to follow forest management for timber production. This is through the evaluat ion of the differences among the capital assets of SMFEs in the three provinces of Madre de Dios, between certified SMFEs versus the ones that do not hold certification in Madre de Dios, and among SMFEs planning to attain certification in the Tahuamanu province The following sections present the results of the comparisons for each specific distinction (i.e., geographic differences, certification status differences, and certification planning differences in Tahuamanu) F orest M anagement C apacity in the Tahuamanu, Tambopata and Manu Provinces Madre de Dios is a department with three geographic provinces: Tahuamanu, Tambopata, and Manu. Of these three provinces, Tahuamanu is the smallest the least populated, and the least logged in the department In comparison Tambopata and Manu are larger and more populated provinces that have experienced more years of logging activity (especially Manu) because t he history of land use an d occupation of the Department that was favored by the building of roads and colonization was initiated in these provinces. Tahuamanu is also characterized as having better terrestrial access to its forests through the Inter Oceanic Highway, while Tambop ata and Manu mainly have only fluvial access to their forests. These characteristics particularly make these three provinces distinct Th is section discusses the results of the comparison of the forest management capacity of SMFEs in the provinces of Tahua manu, Tambopata, and Manu in terms of their produced, natural, human, and social capital. Because of different characteristics among these three provinces, it is expected that the forest management capacity of SMFEs in these provinces will also differ. For example, one would expect t o find more forest management capacity in terms of

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153 produced, human, and social capital, among SMFEs in Tambopata and Manu because the y have experienced more years of logging activity (especially Manu). Also, b ecause Tahuamanu p resents a more recent history of logging in the Department it is the a priori expect ation to find more and more valuable timber resources (or natural capital) there than in the other provinces Table 5 2 presents the respective means of the indicators o f forest management capacity for the three provinces which covers the period 2002 to 2006.4 Table 5 2 Indicators of forest management capacity for private SMFEs in the Tahuamanu, Tambopata, and Manu provinces, Madre de Dios, 20022006 Indicators Tahuaman u n=12 Tambopata n=6 Manu n=9 Total n=27 Produced capital Equipment ($) 113,940 a b 14,237 a 6,960 b 56,124 Roads ($) 169,083 b 22,906 2,587 b 81,100 Harvesting fee ($) 122,892 b 88,631 48,477 b 90,473 Loan ($) 55,953 7,504 8,189 29,265 Manageme nt plans ($) 42,222 b 20,380 10,657 b 26,847 Area (ha) 40,595 b 24,242 18,899 b 29,729 Natural capital Approved timber volume (m 3 /ha) 34.54 26.35 35.25 32.96 A category 2.26 a b 0.79 a c 0.22 b c 1.25 B category 0.76 a 1.87 a c 0.88 c 1.05 C category 5.35 a b 16.24 a 20.63 b 12.86 D category 14.10 a b 2.94 a 3.38 b 8.04 E category 12.08 a 4.51 a 10.14 9.75 Species per POA (N) 14.67 12.30 14.12 13.96 Harvested timber volume (m 3 /ha) 6.34 b 13.29 24.63 b 13.98 A category 1.87 b 0.79 c 0.22 b c 1.08 B category 0.23 a 1.54 a c 0.60 c 0.64 C category 0.56 a b 8.72 a 16.51 b 7.69 D category 2.77 0.85 1.71 1.99 E category 0.92 b 1.41 c 5.58 b c 2.58 Species per POA (N) 4.40 b 7.10 11.10 b 7.23 4 Because there are three pairs of comparisons among provinces, Appendix H presents the p (F) values for each pair.

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154 Table 5 2 Continued Human capital Enterprise members (N) 7.42 4.83 10.33 7.81 Logging experience (N members) 7.00 3.83 4.33 5.41 Business experience (N members) 7.00 4.17 4.33 5.48 Education (schooling years) 12.50 11.00 10.56 11.52 Members performance (%) 66.68 72.25 66.68 67.92 % SMFEs with low performance 25.00 0 22.20 % SMFEs with medium performance 50.00 83.30 55.60 % SMFEs with high performance 25.00 16.70 22.20 Social capital Density of membership (N) 0.58 1.17 c 0 .11 c 0.56 % SMFEs with no association 58.33 16.67 88.89 % SMFEs with 1 association 25.00 50.00 11.11 % SMFEs with 2 associations 16.67 33.33 0 Participation (%) 80.75 79.47 74.33 78.33 Networks (% of diversity of people assisting SMFE) 53.96 60.32 53.94 55.37 Exclusion (% existence of exclusion among members) 36.90 16.67 25.40 28.57 Trust (% extent of trust among members) 73.61 79.87 73.61 75.00 Conflict: % SMFEs in conflict 16.70 0 11.11 % SMFEs in peace 83.30 100.00 88.89 Significa nce level of 0.05 a denotes significance between Tahuamanu and Tambopata b denotes significance between Tahuamanu and Manu c denotes significance between Tambopata and Manu Produced Capital Assets of produced capital are crucial to actually implementing fo rest management because material and financial resources are necessary for the activity itself (e.g., to access the forest, the harvesting itself, the transportation of timber). Comparing produced capital among SMFEs across the three provinces of Madre de Dios, we find in Table 5 2 that most of the indicators exhibit significant differences E quipment roads, harvesting fee, management plans and concession area are often significantly higher/larger in Tahuamanu than in Tambopata and/or Manu; however, there are not significant differences in produced capital among SMFEs in Tambopata and Manu. While it shows a similar differential, the loan indicator was not however

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155 significant Nonetheless, t he value of the equipment possessed in Tahuamanu was approximately eight times larger than in Tambopata and sixteen times larger than in Manu. This large difference is due to the heavy forest equipment owned by several SMFEs in Tahuamanu (tractors, band -sawmills, front loaders, etc.) in comparison with the light, less ex pensive, and less durable forest equipment (portable sawmills, chainsaws, peque -peques ) mostly owned by the SMFEs in Tambopata and Manu. In Manu, in particular, the small numbers are also due to the existence of 22% SMFEs that never bought any equipment for the ir enterprise s. There, enterprise members worked their respective assigned area s with their own equipment or rented it to their enterprises Also, 22% of the SMFEs in Manu ha ve obsolete equipment (thus not having any residual v alue ). Although SMFEs in Tahuamanu posses s more valuable and durable equipment in comparison to SMFEs in the other two provinces it is important to point that most of the equipment was also obsolete ; thus most of the equipment in the area only ha s a low residual value. This situ ation has been a generalized characteristic among small -medium loggers in the Peruvian Amazon for several decades (Chirinos & Ruiz 2003) and also is a common characteristic in some countries like Guyana, Uganda, and South Africa where financial barriers o f small -medium forest operators and difficulties in accessing credit reduce the opportunities to invest in new and more equipment ( Auren & Krassowska 2004, Lewis et al 2004, Thomas et al 2003). With respect to cost of roads, in Tahuamanu the cost of SMFEs constructed roads was sixty five times the cost in Manu, where 33% of SMFEs have not constructed any road at all for the period of study. Although the value of SMFEs constructed roads in Tahuamanu was seven times larger than in Tambopata, the difference among th e means was not significant T he higher cost of constructed roads i n Tahuamanu is due to the fact that many SMFEs there (67%) have

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156 terrestrial access to their concessions, thus they had to built and /or maintain their roads in order to access their forest concessions; while in Tambopata and Manu these costs are smaller because all SMFEs in Tambopata and many in Manu (78%) are restricted to fluvial transportation. The higher costs of constructed roads in Tahuamanu are also related to the ownership of more he avy equipment among SMFEs there, for which it was necessary to built and/ or maintain roads in order to use this type of equipment (i.e., tractors, front loaders). The cost of constructed roads is mainly related to the opening of secondary roads ( i.e., inside forest concessions ) for harvesting and in some cases to the maintenance of existing primary roads ( i.e., for accessing forest concession area ); only in a few cases have stretches of primary roads been constructed to access forest concessions of SMFEs f rom Tahuamanu Also it is importa nt to mention that SMFEs in Tahuamanu mainly had hired contractors to construct their roads while, in Manu especially, enterprise members were involved in the labor of constructing their roads and, thus, the cost of const ruction was lower. Concerning the cost of the harvesting fee ,5 SMFEs in Tahuamanu exhibit a larger accumulated harvesting fee value than the other two provinces; however the difference was only significant with respect to the cost in Manu. The average harv esting fees offered at the bidding process were 0.87 $/ha, 0.76 $/ha, and 0.93 $/ha for Tahuamanu, Tambopat a, and Manu SMFEs respectively. These harvesting fees were decided by the participant s without having a detailed forest inventory of species and phys iographic characteristics conditioning their access; only practical experience was the key. In Tahuamanu the offers were higher than in Tambopata due to the knowledge of the existence of mahogany in the area, thus SMFEs offered a higher fee in 5 Fee in US$ per hectare fixed by the winning offer during the public bidding, and that has to be paid for every hectare granted to the concessionaire every year This mechanism forces the new concessionaires to intensify the use of their lands and their capital.

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157 order to get those areas. In Manu, bids were the highest among the three provinces because people in the area wanted to preserve their use rights to the land and the forest that they had been living on for their subsistence; they did not have a commercial purpose in m ind when they bid for a concession area. The baseline harvesting fee established for the bidding process was 0.4 0 $/ha ; however the harvesting fee offered by SMFEs in the three provinces was o n average, almost double the baseline fee. This was because in the Bases de Concurso6 for the first round of public bidding, the economic proposal where the harvesting fee is the main component had an important weight (30%) in the total qualification to grant a forest concession. As a result, 58% of the SMFEs in Tahua manu offered a harvesting fee of $ 1/ha or more, and in Manu 44% of the SMFEs offered harvesting fees of $1/ha or more. In Tambopata, only one SMFE offered a harvesting fee of $2/ha, which was the highest offer in the department; the rest offered harvesting fees below $1/ha. Although harvesting fee offers were high in the three provinces, Tahuamanu presented a larger accumulated harvesting fee value. This is mainly due to the larger extension of concession areas granted to enterprises in this province, which is directly related to the harvesting fee value. It is important to note that although the letter with the economic offer presented by all SMFEs specifies that the harvesting fee is an amount in US$ per hectare per year, most SMFEs members had expressed t hey were not aware they had to do this payment every year. Concessionaires thought this was a one time payment only, and this has resulted in many SMFEs having problems in paying their annual harvesting fees. Thus, until the harvest of 2006, only 5 7 % of SM FEs had paid their total harvesting fees : 67% of the SMFEs paid their total harvesting fees in Tahuamanu, 50% in Tambopata, and 5 6% in Manu. Since payment of the 6 Document containing principles and regulations for the public bidding contest.

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158 harvesting fee is a requirement to transport harvested timber from forest concessions, t his fi nding indicates t hat only some SMFEs w ere able to co mmercialize their harvested timber for the 2006 harvesting period In Bolivia, initially in the case of forest concessions, their operators paid also a harvesting fee (US $ 1/ha) for all the productive he ctares in their concession area every year (usually 70% of the area) while ASLs paid a harvesting fee only for the annual harvesting area. H owever a new legislation modified this regime and since May 2003 all forest operators pay the annual harvesting fee only for the annual harvesting area ( Decreto Supremo 27024). This decision was mainly due to the great concern of different organizations in the sooner reversion to the State of forest concessions due to the inability of many enterprises in the payment of this fee For example in 2001 there was a debt of 60% in the payment of the harvesting fee (Carden 2003). Logging is considered a risky activity, thus most small loggers do not obtain credit through a formal financial institution. Most members of SMFEs ha ve no credit history since most of them were working under short -term contracts ( i.e., 1 to 2 years) or informally prior to the concession system. As of 2003, F ONDEBOSQUE (through an agreement with the financial institution Caja Municipal de Tacna) was the only institution providing small loans7 to SMFEs as seed money for working capital (i.e., equipment, food, fuel ) Banks have also provided some loans to a few of the SMFEs in the years that followed As such 68 % of all SMFEs have received some type of lo an. In Tambopata, 83% of the SMFEs have received loans; as compared to 67% in Tahuamanu and 56% in Manu Despite lower numbers of loans received in Tahuamanu, the total value of the loans received there is seven times greater than in Tambopata and Manu; h owever, no statistical 7 Initial credits were up to $2,890 (S./ 10,000).

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159 differences at p < 0.05 exist among the three provinces (Table 5 2 ). This is because 25% of the SMFEs in Tahuamanu receiv ed large loans (> than US$ 300,000 in average ) from creditors. The main sources of loans for these SMFEs are: 7 8 % only from F ONDEBOSQUE 5. 5 % only from a third party (e.g., timber buyers ), 11% from F ONDEBOSQUE and a financial institution, and 5. 5 % from F ONDEBOSQUE a financial institution, and a third party. Although most loans have been small and were used mainly to finance harvesting activities, some SMFEs from Tahuamanu received larger loans that have been used in the purchase of equipment and the construction of roads However, loans received by most SMFEs have not been sufficient for their operations. Thus almost all SMFEs have relied on the informal system of habilito to finance their harvesting activities ; and some still do, as well. In the habilito system the habilitador (i.e., timber buyer) gives some money in advance to the habilitado (in this case the conc essionaire) for a determined volume of timber. Once the timber is harvested, the habilitado has to sell all the harvested timber to the habilitador for a price determined by th e habilitador Usually this mechanism is a disadvantage to the habilitado (i.e., concessionaire) since sale prices are points8 below market prices and the habilitador usually finds defects in the timber in order to devalue the timber extracted and pay less (which is denominated castigo ). However, concessionaires do not have anot her option than accept the habilitador conditions since there are no formal financial mechanisms that usually provide credit to small forest entrepreneurs T he cost of management plans in Tahuamanu is twice as great as in Tambopata and four times as great as in Manu (Table 5 2 ); however only the latter differen ce is statistically significant The difference in the value of management plans among the three provinces results from the average annual harvested area in Tahuamanu (1,205 ha) being larger than in both 8 Each point refers to S/. 0.10/bf which is equivalent to US$ 0.03.

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160 Tambopata (856 ha) and Manu (477 ha) and a lso because there are more concession contracts and, as a consequence more AOPs were presented in Tahuamanu than in the other provinces In Tahuamanu as well as in Tambopata, one SMFE did not present the 20 06 AOP because of nontotal payment of the harvesting fee for th e p revious p eriod, resulting in the immobilization of their timber. In Manu, only one SMFE had t he 20022003 AOP approved Due to internal problems among members, this SMFE did not present its AOPs during the period established and is now under investigation by INRENA with the possibility of the concession being returned to the government. A second SMFE in Manu only had two AOPs presented and approved (2004, 2006). This is because it had proble ms from the beginning in the formulation of its GFMP which had several observations that were finally fulfilled on November 2007. Anothe r two SMFEs in Manu had presented their AOPs after the established deadline, so their approvals and the mobilization of timber were pending until October 2008. Finally SMFEs from Tahuamanu exceeded the other two provinces with respect to forest concession areas. Areas in Tahuamanu s SMFEs were approximately tw ice as large as in Tambopata and Manu ; however they were signif icantly different only when compared to Manu D ifference s in concession area size were already noticeable right from the beginning of the bidding process in Madre de Dios due to the major availability of harvesting units9 in Tahuamanu (92 units) as compar ed to Tambopata (32 units) and Manu (43 units). In summary, the produced capital assets of SMFEs ( equipment, roads, harvesting fee, management plans, and concession area ) are significantly higher/larger in Tahumanu than in Manu; only the value of equipment is significantly larger in Tahumanu than in Tambopata. There are not significant differences in produced capital among SMFEs in Tambopata and Manu. 9 Harvesting units are the units in which the permanent production forests were divided. Each unit comprises areas betwe en 5,00010,000 ha.

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161 Although no statistical differences at p < 0.05, the loan indicator tends to be higher among SMFEs in Tahua manu than in the other two provinces. Natural Capital Timber, which in this study represents the natural capital of SMFEs, is essential since it is the raw material needed to carry out forest management Moreover the type of timber species an d their volu mes present in forest concessions w ill determine the scale and productivity of a SMFE. Therefore, i n this sub -section there are two i ndicator s of natural ca pital (in terms of five categories of timber species according to their commercial value10) th at are evaluated and compared among the three provinces : approved timber volume and harvested timber volume Appendix I present s a list of the species harvested by SMFEs in Madre de Dios. The results show that s ignificant differences exist among categories of ti mber species for SMFEs in the three provinces. These data are presented in Table 5 2 The SMFEs in Tahuamanu exceed the other two provinces with respect to valuable timber resources. Nevertheless, t otal timber volumes and number of species approved for the SMFEs in Tahuamanu and Manu were similar and some what larger than for the SMFEs in Tambopata (but with no significant differences). However, there were significant differences among SMFEs in the three provinces in the approved volumes for mahogany ( A cat egory) the most valuable timber species in the country, as well as for some differences for cedar ( B category), and for timber species in the C, D, and E categories. In the case of mahogany, its presence among SMFEs in Tahuamanu was three times great er th an among SMFEs in Tambopata, and ten times great er than among SMFEs in Manu. This is a reflection of historical timber activity in the Department, where Tahuamanu has been 10 The A category is represented by mahogany; B category by cedar; C category by intermediate value species such as Cedrelinga catenaeformis Amburana cearensis Chorisia integrifolia Aniba sp., Virola sp.; D category by potential valu e species such as Coumarouna odorata, Dipteryx micrantha Aspidosperma subincanum Tabebuia sp., Copaifera reticulata ; and E category by other species such as Hymenaea sp ., Myroxylon balsamun, Manilkara bidentata Couratari guianensis

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162 the least harvested region due to the more recent construction of roads and the migr ation process of people into the region With respect to the presence of cedar (B category) the second most valuable species in the country, SMFEs in Tambopata have almost double the approved volume of cedar than SMFEs in the other two provinces ; these di fferences are statistically significant The Tambopata region ha d previously been selectively exploit ing both mahogany and cedar; however, in the medium and high sector of the Ro Las Piedras there are still some volumes of cedar (IIAP & CTAR -Madre de Dios 2001). Regarding approved volumes of less valuable commercial timber species, SMFEs in Manu and Tambopata present large r volumes of species of C c ategory than in Tahuamanu that are a lso statistically significant. In contrast, however, the volumes of D category species in Tahuamanus SMFEs were larger than in the other two provinces SMFEs as were the volumes of E category species with regard to the SMFEs in Tambopata All three of th ese differences are statistically significant. The Manu province has been characterized by scarcity of valuable commercial tree species due to exhaustion of such species in all areas of this province (IIAP & CTAR -Madre de Dios 2001). Thus, the forest concession s in this area were characterized by the presence of lower priced and lesser known timber species, which also explains the larger volumes of timber harvested by SMFEs there (see T able 5 2 ). Total timber volumes and number of species harvested by SMFEs were significantly different only between SMFEs in Tahuamanu and Manu ; although v olumes harvested in Manu were almost double those in Tambopata the difference is not statistically significant. F or mahogany and the species of E c ategor y, significant differences in harvested v olumes were found between Manu and the other two provinces. This means that Manu is the province w h ere the least mahogany was harvested due to its l esser abundance and the largest volumes of species

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163 of E category were harvested there. Although species of E category are the least valuable in comparison to the other categories, in 2006 several of these species started having demand in the market, including Hymenaea s p ., Myroxylon balsamun, and Aspidosperma macrocarpon. However, their approved volumes in SMFEs from Tambopata and Manu were not totally harvested This is mainly due to the fact that most of these species are hard woods which makes them difficult to transp ort by river because their high densities does not allow them to float very well ; this problem is common to these two provinces. S ignificant differences were found in harvested volumes of cedar between Tambopata and the other two provinces because of the large volumes of this species in Tambopata Significant differences were also found in C category harvested volumes between Tahuamanu and the other two provinces which mean that Tahuamanu was t he province with the least harvested volumes of species of C c ategory in the Department. In Manu, SMFEs harvested 70% of their total approved volume for the period under study. From this volume, 67% correspond to timber species of C category (which have intermediate commercial value and are the most abundant in the province) and 23% to species of E category In Tahuamanu the situation is completely different. There, SMFEs only harvested 18% of their total approved volume; this is because of the presence of the valuable mahogany which made up to 29% of the total volum e harvested. In addition, species of D category (especially Coumarouna odorata, which has seen an increase in demand since 200 4 ) made up to 43% of the total volume harvested there. Half (50%) of the total approved volume has been harvested i n Tambopata : ce dar (11.5% ) and timber species of C category comprise up to 65.6% of the total volume actually harvested. In average SMFEs in Madre de Dios harvested 7 timber commercial species per year during the first five years of operation, and they have basically sol d round and saw

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164 timber due to the lack of transformation equipment among most SMFEs This situation is different among forest concessions in Bolivia, where operators use d many more commercial species (e. g. an average of 20 commercial spp. in 2001) (Guzman 2002) than in Peru, and have diversified its industry adding value to its products (Guevara et al 2004) It is important to mention that most SMFEs (89%) in Madre de Dios received forest concession areas that had already been logged to some degree. Only 7 % of SMFEs received forest concession areas with little logging and just 3.7% received forest concession areas with no previous logging. This is a result of the more difficult access to these forest concession areas. In summary, SMFEs in the Tahuamanu province have significantly larger volumes of mahogany than SMFEs in Tambopata and Manu, and SMFEs in Tambopata have significantly larger volumes of cedar than S MFEs in T ahumanu and Manu. V olume of species of C category is significantly smaller among SMFEs in Tahuamanu than among SMFEs in Tambopata and Manu and volume of species of D category is significantly larger among SMFEs in Tahuamanu than among SMFEs in Tambopata and Manu. T here are also significantly larger volumes of species of E category among SMFEs in Tahuamanu than among SMFEs in Tambopata With respect to harvested volumes, SMFEs in Manu harvested significantly smaller volumes of mahogany than SMFEs in Tahuamanu and Tambopata due to the smaller amounts of this species in that province which is cha racterized by the presence of lower priced commercial species In the same way, SMFEs in Tambopata have significantly harvested larger volumes of cedar because of the larger volumes of this species in that province. Smaller volumes of species of C category have significantly been harvested among SMFEs in Tahuamanu than among SMFEs in Tambopata and Manu, and larger volumes of species of E category have significantly been harvested among SMFEs in Manu than among SMFEs in Tambopata and Tahuamanu.

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165 Human Capital Concessionaires are the social actors carrying out forest management ; thus their experience with logging, and their skills and knowledge are very important a nd indeed necessary in the actual implementation of management plans I therefore compare each indicator of human capital shown in Table 5 2 among the three provinces to look for differences in human capital variables as indicators of management capacity. Results indicate that no significant differences at p < 0.05 were found am ong pairs of province means for the indicators under study ; however, these indicator s merit discussion for a better characterization of SMFEs in Madre de Dios. All SMFEs in this study were constituted in 2002 in order to participate in the first public bidding for concessions In their initial state, 16 members (range of 1120) comprised the average membership of 78% of the SMFEs in Manu; whereas 92% of the SMFEs in Tahuamanu consisted of an average of 10 members (ranging from 214), and 83% of the SMFEs in Tambopata had an ave rage of 6 members (ranging from 211). In 2006, however, five years after their constitution there was a reduction in the number of members per enterprise. Thus in 42% of the Tahuamanu SMFEs, the number of members decreased by 50%, while in Tambopata only 17% of the SMFEs have experienced a 33% decrease in their initial membership. In Manu, 44% SMFEs have experienced a reduction of 37% in their initial membership; however, the SMFEs there still were formed by a larger number of members than in the other two provinces. In general, the decline in membership has b een a result of personal differences and other internal problems among members Examples include disagreements and divisions in managing the enterprise and the forest concession, and bad enterprise man agement by some managers Most SMFEs in the study were formed as Sociedades Annima s Cerrada s (SAC) (67% in Tahuamanu and Tambopata, and 78% in Manu) As mentioned in a previous chapter, a SAC

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166 allows up to 20 members and divides the capital of the enterpri se by shares ; it is an advantageous way for small loggers to join their small amounts of capital to form a more solid enterprise (Ley N 26887). H owever this type of soci al organization also became a disadvantage for several SMFEs due to disagreements and misunderstandings among a large number of members in volved in making decisions which finally affected the operations and management of concessions and enterprises: Enterprises composed by a major number of members have been enterprises that had less advancement due to issues of interest and personal conflicts, and almost never could reach consensus. This has caused that every one works individually to his responsibility in its assigned area; this has been one of the main weaknesses (WWF -MDDs represent ative, pers. comm. 2007). From interviews with enterprise managers during the harvest of 2006, responses show t hat a vast majority of SMFEs members in Tahuamanu and Tambopata had some previous experience in logging activities (91% and 85%, respectively) be fore 2002 (i.e., before the formation of the enterprise) In Manu SMFE members had less previous logging experience than the other two provinces, and there is variation in th is experience among the different SMFEs members there. In 22% of the SMFEs the m embers did not have any previous logging experience; in 33% of the SMFEs only 26% of their members had some previous logging experience; in 11% SMFEs 75% of their members had some previous logging experience. Only in 33% of the SMFEs did all members poss ess some type of previous logging experience. After the announcement of a public bidding for forest concessions in Madre de Dios, one of the may or s of Manu (from the district of Madre de Dios) asked the inhabitants there to organize themselves in order to form enterprises to participate in the public bidding This was to avoid allowing people from other places outside Manu t o occupy the forest of the province. Thus some people in Manu that applied for a forest concession were loggers, but most of them had o ther occupations (i.e., miners, merchants among others); most of the m mainly formed associations and applied to the public bidding in order to

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167 preserve their use rights to the land (and the forest ) that they had been living on for their subsistence Exper ience in logging activities has been obtained in some cases from the holding of 1,000ha forest contracts during the previous forest regime (before 2002), but mainly from informal logging activities carried out by most loggers. In these cases most loggers knowledge was limited to the selective extraction of the most valuable commercial timber species (mahogany and cedar). O nly recently with the new forest regime, and the formation of SMFEs, have concessionaires been exposed to the concept of forest manageme nt with its greater technical demands. With assistance from environmental NGOs (i.e. WWF -MDD, Pro N aturaleza, and C ESVI ), these concessionaires started learning new terminology and the basics of forest management. This included how to conduct a forest censu s and how to harvest species using reduced impact techniques. A wide majority of SMFEs members in Tahuamanu and Tambopata also had some business experience prior to 2002 (91% and 93 %, respectively). In Manu, previous experience in business had the same rel ative frequencies as s hown before for previous experience in logging (i.e., members of 22% of the SMFEs did not have any previous business experience ; in 33% of the SMFEs only 26% of their members had some previous experience ; in 11% of the SMFEs 75% of their members had some previous experience ; and in 33% of the SMFEs all members possessed some previous business experience). Respondents expressed that their only business experience had been in the sale of small amounts of timber to intermediaries. Rece ntly after enterprise formation, environmental NGOs in Madre de Dios have conducted workshops and seminars on business management and marketing topics in order to increase the business skills of SMFE members.

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168 With respect to education among SMFEs members, a common characteristic is their limited level of education. SMFEs managers in Tahuamanu have, on average, 2 years of post secondary technical studies while in Tambopata and Manu the SMFEs managers only completed four years of secondary schooling, on aver age (from a total of five years of secondary schooling ). In these enterprises the manager usually is the person with the highest level of education among all the members. Another issue is the low level of education and technical skills of many workers, wh ich are usually temporarily hired within SMFEs. Thus the limited level of education among SMFEs in the three provinces and the low levels of technical capacities of their workers have constitute d one of the factors complicating the successful management of the enterprise, since it requires knowledge and understanding of both forest management and business skills to make an enterprise profitable and to meet all legal responsibilities. Also, 63% of SMFE managers among the three provinces expressed a medium pe rformance rating for their members in different tasks concerning management of the enterprise and its concession area; 16% assigned a low performance rating to their members. In summary, although human capital assets among SMFEs in the three provinces is not statistical different at p < 0.05, there is a tendency that SMFEs in Tahuamanu are formed by a larger number of members with previous experience in logging and business, that have higher education level than SMFEs in Tambopata and Manu Also, there is a tendency that SMFEs in Manu are formed by a larger number of members than SMFEs in Tahuamanu and Tambopata. Social Capital Social assets are important because they have the potential to contribute to better development of forest management and enterprise performance since they facilitate transactions coordination, and cooperation among people. In this sub -section the six indicator s of social capital shown in Table 5 2 are evaluated and compared among the three provinces. The results

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169 show that no signific ant differences at p < 0.05 among pairs of province means were found for the majority of the indicator s examined ; however, a discussion of these indicators follows for a better characterization of SMFEs in Madre de Dios. Only statistical difference in den sity of membership to forest associations/organizations was found among SMFEs i n T ambopata and Manu In Tambopata, 83% of the SMF Es belong to 1 or 2 association s/organizations, while 17% do not belong to any association /organization The main forest assoc iation in the province is the Asociacin de Concesionarios de Madre de Dios (ACOMAD) which was formed in 2002 after the granting of forest concessions as a way for the new concessionaires to have representation and to look for solutions to common problems The o ther association /organization i s the Comit de Gestin de Bosques del Ro Las Piedras a multi -stakeholder organization formed in 2005 with the goal o f monitor ing and promot ing forest management activities in the watershed of the Las Piedras River In the SMFEs of Tahuamanu, 58% do not belong to any forest association, while 42 % belong to one or two forest association s There, the main forest association is the Asociacin de Concesionarios Forestales de Tahuamanu which emerged in 2004 as a way for SM FEs from the Tahuamanu province to have their own representation (especially, given the fact that the ecological, economic, and social reality of Tahumanu is different from that of the other two regions of the department) and with the goal of finding solut ions to their problems The o ther association/organization is the Comit de Gestin de Bosques del Ro Tahuamanu, a multi stakeholder organization for monitoring and promoting forest management activities in the watershed of the Tahuamanu River. In Manu 8 9% of the SMFEs do not belong to any association, while 11% of them belong to the ACOMAD There, SMFEs initially formed a forest association (in 2003) with the objective of addressing specific problems faced by SMFEs in the

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170 area; however this association d id not last more than a year. As a consequence, some SMFEs from Manu became members of the ACOMAD ; however, distance and costs in transportation from Manu to Puerto Maldonado, where the ACOMAD holds its meetings, have kept more SMFEs in Manu from associati ng with this association. Concerning participation of enterprise members with respect to meetings and (in general) enterprise activities, SMFEs in the three provinces report a relatively high percentage ; however Tahuamanu and Tambopata report a slightly hi gher level of participation than those in Manu. SMFEs in Tambopata exhibit a higher percentage, with respect to the Networks indicator than do Tahuamanu and Manu (which have a similar value). This means that SMFES in Tambopata obtained assistance from r elatively more people outside the enterprise and/or by institutions for financial and commercial need than did the SMFEs in the other two provinces. In the case of financial assistance, people that usually had supported SMFEs have been: a) habilitadores (timber buyers), who had provided money in advance (denominated habilito ) to concessionaires in exchange for timber usually sold for lower prices than the market; b) contractors, who enter into a SMFE forest concession to harvest timber with its own equipm ent and personnel in exchange for giving the SMFE a percentage of the harvested timber; and c) banks, although in fewer cases. In terms of commercial assistance, usually the habilitador es have supported the SMFEs. For the E xclusion indicator 37% of the SMFEs in Tahuamanu reported that differences in education, wealth, and political ideas among enterprise members had created exclusion inside the enterprise. In Tambopata, 17% of the SMFEs expressed such exclusion of members, and in Manu 25% of SMFEs report ed it. E xclusion es pecially among SMFEs in Tahuamanu and Manu has restricted a limited number of members from accessing resources and from

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171 opportunities for harvesting and commercialization, thus originating the detachment of the excluded members from th e enterprise and from the rights and obligations that being part of the enterprise implies ( Room 1995). In the end, t his has resulted in several excluded members dropping enterprise membership through the selling of their shares. Trust is an important component of social cap ital A mong the studied enterprises the value for the trust indic a tor represents generalized trust (i.e., the extent to which members in a SMFE trust each other) R eported values of trust were quite similar and relatively high for all of the SMFEs (> 70 %) Confidence in, and/ or reliance on the performance and behavior of SMFE members is important and necessary for carrying out forest management activities such as planning and implementing harvesting, sale of t imber, and administration of the enterprise It is also crucial for the development of the enterprise and in the case of these SMFEs that reliance started with the creation and implementation of rules or estatutos With respect to conflicts inside SMFEs, only a low percentage of the enterprises rep orted any internal dissension: t he vast majority of them (90% on average) reported a stable social situation (i.e., peace and har mony) within their enterprises. In summary, SMFEs in the three provinces have very similar characteristics with respect to thei r members participation in enterprise activities, extent to which enterprise members trust each other, relatively low level of conflicts inside enterprises, and exclusion among enterprise members ( i.e., there is not statistical difference at p < 0.05 for most social capital assets ) However, there is significantly larger density of membership among SMFEs in the Tambopata province than among SMFEs in Manu. Table 5 3 shows a summary of the main characteristics among SMFEs in the three provinces.

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172 Table 5 3 Characteristics of private SMFEs in the three provinces of Madre d e Dios Capital types Characteristics Tahuamanu Tambopata Manu Main purpose to apply for a forest concession commercial commercial preserve use rights for subsistence Produced *Equ ipment larger quantity; heavy forest equipment mainly light, less durable forest equipment mainly light, less durable forest equipment *Roads >value; 67% terrestrial access small value; 100% fluvial access very small value; 78% fluvial access *Harvest ing fee >value; 67% paid total fee medium value; 50% paid total fee lower value; 56% paid total fee *Loan > value; 67% received loans; large loans from banks, large entrepreneurs, and small loans from Fondebosque low value; 83% received it; small loans f rom Fondebosque mainly low value; 56% received it; small loans from Fondebosque mainly *Management plans > value; average annual area 1,205 ha medium value; average annual area 856 ha low value; average annual area 477 ha *Area > area medium size mediu m size Natural *Approved volume > mahogany, D & E category species volumes > cedar volume > C category species volume *Harvested volume smaller: 18% of approved volume; 4 spp. per year. medium: 50% of approved volume; 7 spp. per year larger: 70% of ap proved volume; 11 spp. per year Human *Members reduction in 42% SMFEs in 17% SMFEs in 44% SMFEs *Logging & business experience among all members 91% SMFEs 85% SMFEs 44% SMFEs *Education some post secondary incomplete secondary incomplete secondary Social *Associations membership 42% SMFEs 83% SMFEs 11% SMFEs F orest M anagement C apacity in Certified and Non -certified SMFEs Madre de Dios is the Department in Peru with the greatest area of certified forests under the modality of forest concessions (205,593 ha which represent s 31% of the total area certified in Peru ). There, five SMFE s from the first round of bidding attained forest certification in 2007.11 Research has shown that forest certification is financially costly es pecially for small 11 From a total of 36 SMFEs (from the first bidding) that are still active as to October 2009.

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173 forest op erations due in part to the costs of the evaluations themselves but mainly because of the intensive costs of the actions required to improve forest management (Irvine 1999, Molnar 2003). Thus, one expect s to find greater forest management capacit y among certified SMFEs than among the non-certified particular ly with respect to produced capital because greater resources and investments are needed to comply with the demands of certification. This section discusses the results of the comparison of the forest management capacity for both certified and non -certified SMFEs in Madre de Dios in terms o f their produced, natural, human, and social capital. Table 5 4 presents the respective indicators of forest management capacity for the t wo groups (certified and non -certified) for the period of 20022006 h arvest s Table 5 4 Indicators of forest managem ent capacity for certified and non -certified private SMFEs, Madre de Dios, 20022006 Indicators Certified n=3 Non certified n=24 P (F) Total n=27 Produced capital Equipment ($) 300,229 25,611 < 0.0001 56,124 Roads ($) 593,333 17,071 < 0.0001 81,100 H arvesting fee ($) 204,141 76,265 0.0423 90,47 3 Loan ($) 210,989 6,5 50 < 0.0001 29,265 Management plans ($) 76,640 20,623 0.0007 26,847 Area (ha) 68,531 24,878 0.0040 29,729 Natural capital Approved timber volume (m 3 /ha) 49.15 30.93 0.0998 32.96 A category 3.47 0.98 0.0086 1.25 B category 1.05 1.04 0.9169 1.05 C category 8.57 13.40 0.6135 12.86 D category 20.27 6.51 0.0042 8.04 E category 15.78 9.00 0.0941 9.75 S pecies per POA (N) 18.27 13.42 0.1639 13.96 Harves ted timber vo lume (m 3 /ha) 10. 3 8 14.43 0.9004 13.98 A category 2.91 0.85 0.0095 1.08 B category 0.24 0. 70 0.4655 0.64 C category 1.0 3 8.52 0.3344 7.69 D category 4.04 1.73 0.2707 1.99 E category 2.17 2.63 0.6844 2.58 S pecies per POA (N) 5.80 7.4 1 0.8785 7.23

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174 Table 5 4. C ontinue d Human capital Enterprise members (N) 10 .00 7.54 0.7080 7.81 Logging experience (N members ) 10 .00 4.83 0.2163 5.41 Business experience (N members ) 10 .00 4.92 0.2276 5.48 Education (schooling years) 1 3.67 11. 2 5 0.2697 11.52 Members performance (%) 66.70 68.07 0.9710 67.92 % SMFEs with low performance 0 20.83 % SMFEs with medium performance 100. 0 0 54.17 % SMFEs with high performance 0 25.00 Social capital Density of membership (N) 0 0. 63 0.1479 0. 56 % SMFEs with no association 100.00 50.00 % SMFEs with 1 association 0 29.17 % SMFEs with 2+ associations 0 20.83 Participation ( % ) 84.6 0 77.54 0.4318 78.33 Networks (% of diversity of people assisting SMFE ) 79.37 52.37 0.0271 5 5.37 Exclusion ( % existence of exclusion among members ) 28.60 28.57 0.7258 28 57 Trust ( % extent of trust among members ) 97.23 72.22 0.1098 75.00 Conflict: % SMFEs in conflict 0 12.50 0.5344 % SMFEs in peace 100. 0 0 87.50 Produced Capital Produce d capital is particularly necessary to comply with the demands of certification including the actions required to improve forest management. Certified SMFEs report greater produced capital assets than non -certified SMFEs, with statistically significant differences between the means for all variables defining this type of capital (see Table 5 4) For example, t he value of the equipment owned by certified SMFEs was approximately twelve times larger than the non-certified enterprises. This difference is due t o the larger quantity of heavy forest equipment and trucks owned by certified enterprises in 2006, as compar ed with the smaller quantity and mostly light and less expensive forest equipmen t owne d by non -certified enterprises. Among the certified enterprise s, two of them ( which co mprise only one unit of analysis) are managed by a family which has been in the logging business in the Department for over 20 years and which own s two processing facilities in Puerto Maldonado T hey have

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175 therefore accumulated a lar ge amount of heavy equipment for harvesting processing, and also a fleet of trucks for transportation w hich makes a large difference in comparison to the other SMFEs in the Department and in the study. The other three certified SMFEs ( which comprise 2 un its of analysis) have recently accumulated heavy equipment since the formation of the ir enterprises in 2002. Certified SMFEs have mainly terrestrial access to their forest concessions (67%), while for t he non-certified SMFEs their access vari es For exampl e 42% of them have both terrestrial as well as fluvial transportation, 37% have only fluvial transportation, and 21% have only terrestrial transportation. Thus the amount of constructed roadways is variable. However, the value of roads for certified ente rprises is thirty -f i ve times that of the non -certified enterprises. T he large difference in roads value between these two groups is mainly because of the amount of money invested in road construction and maintenance by the certified SMFEs during 2006 as a pre condition to the certification process. Although the average harvesting fees offered by certified SMFEs was 0.86 $/ha, very similar to the 0 .92 $/ha f or the non-certified concessionaires, certified SMFEs report a larger accumulated harvesting fee value due to the ir larger concession areas. As of the harvest of 2006, all certified SMFEs had paid their total harvesting fees ; however not all non -certified SMFEs ha d fulfilled this obligation. Only 5 4 % of non -certified SMFEs had paid the ir total harvesting fee ; the rest (46%) had paid different percentages of it ( ranging from 10% to 94%). The payment of the harvesting fee is a requirement for the mobilization of harvested timber, t hus those non certified SMFEs that did not pa y their total harvesting fee (according to their payment schedule ) subsequently in curr ed losses Although a discount of 25% in the harvesting fee is offered by law

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176 to SMFEs as an incentive for attain ing certification, at the time of the interview none of the certified SMFEs had received t his discount due mainly to INRENAs bureaucratic issues. With respect to loans to finance enterprise operations, there is a large difference between the two groups. This difference is mainly because certified enterprises (67%) received mostly large loans from banks and large private enterprises, and only small loans from FONDEBOSQUE while 62% of non -certified SMFEs received only small loans from FONDEBOSQUE (the other 38% did not receive any loan s ) As explained previously, logging is considered a risky a ctivity with few formal lines of credit available from banks for small enterprises. However, three of the certified enterprises had accessed bank loans because they had some fixed capital in properties as a guarantee for the loans as well as several years of experience in the activity ( through the holding of 1,000 ha contracts during the previous forest regime ). The cost of management plans is also larger among certified enterprises; it is almost four times the cost reported by non-certified enterprises. This difference is because the average annual harvested area, on which the management plans are based, is larger among certified enterprises (1,488 ha), in comparison with the non-certified (809 ha). Recently in 2005 two certified SMFEs (1 unit of analysis ), and in 2006 three certified SMFEs (2 units of analysis) were the first SMFEs in the Department to produce their general forest management plans (GFMPs) by conducting a n exploratory forest inventory.12 The average concession area among certified SMFEs is almost three times larger (i.e., 68,531 ha) than among non-certified enterprises (Table 5 7) The reason for this is that two certified units of analysis posses s the largest areas in the 12 The GFMP presented and approved by INRENA during the first year of SMFEs operation was based on secondary information with the condition that at the fifth year of SMFEs operation t he GFMP should be reformulated based on an exploratory inventory.

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177 Department (90,000 ha o n average) as a result of grou ping two distin ct enterprises into one in each case. Natural Capital T he results of the comparative analys i s between certified and noncertified SMFEs are presented in Table 5 4 Statistically significant differences between certified and non -certified enterprises were f ound for some categories of timber species For example, there are significant differences in approved volumes for mahogany ( A category ), and for timber species of D category. In the case of mahogany, its presence among certified SMFEs i s three and a half times larger than in non -certified enterprises. Certified enterprises are only located in the mahogany rich Tahuamanu province. With respect to the presence of species of D category, or potential species certified enterprises also report three times mor e volumes than the non -certified ones. Although no statistical differences in total volume harvested between certified and non certified enterpr i ses at p < 0.05 exist, total volumes harvested tend to be larger among noncertified enterprises. The reason wh y noncertified SMFEs harvested more timber in comparison to the certified ones is because of the smaller volumes of the valuable mahogany these enterprises possess T hus they need to harvest more volumes of less valuable species in order to make a profit and continue their operations. Certified enterprises had harvested 21% of their total approved volume for the period under study. From this volume, 39% corresponds to species of D c ategory 28 % to mahogany, and 2 1 % to species of E category. Although the s pecies belonging to D and E categories are characterized as being of lower commercial value (in comparison to A, B, and C categories) in recent years there has been increased demand for certain species of D and E categories. Included in this trend are spe cies such as Coumarouna odorata and Dipteryx micrantha (D category) since 2004, and in 2006 species such as Hymenaea sp ., Myroxylon balsamun, and Aspidosperma macrocarpo n (E category) This has resulted in increas ed prices

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178 for these species and of course, they have subsequently been harvested in larger amounts. In particular Coumarouna odorata and Dipteryx micra ntha (category D), a hardwood species has increased greatly its exports to the Chinese market since 2004 ( Putzel 2009). N on-certified enterprises harvested 47% of their total approved volume, from which 59% corresponds to species of C category (species that have intermediate commercial value) and 18% to species of E category Although species of E category increased in demand since 2005 t he lower percentage harvested with respect to their approved volumes (only 29%) among non -certified SMFEs is because these species are hard wood species ; its transportation is mainly done through terrestrial ways, and among the non-certified SMFEs only 21% of them have terrestrial access, thus those SMFEs are the ones which can harvest these species. Human Capital Although the results of the analysis show no significant differences between the two groups in terms of human capital assets at p < 0.05 (see Table 5 4) it is important to exhibit the characteristics of these assets. For example, as of the harvesting 2006, certified SMFEs have maintained the same number of members that they had at the formation of their enterprise s Certified SMFEs are mainly family businesses ; this is most likely why their members have kept together In contrast, non-certifi ed enterprises have experienced reductions in membership during the first five years of their operation. For example, 42% non-certified SMFEs had experienced a reduction in membership that varied from 17% to 6 7%. This has been mainly a result of disagreeme nts and divisions among members in these SMFEs with regard to managing the enterprise and the forest concession, and due to mismanagement by some managers that generated losses to the enterprise for which some members later quit. All members in certified S MFEs had previous experience (i.e., before the formation of the enterprise) in logging and business activities due mainly to the holding of 1,000 ha contracts

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179 or permits for forest harvesting during the previous forest regime Among non -certified enterpri ses previous experience in logging and in business varies, as follows. All members in 46% SMFEs report having previous logging experience, while 33% of the SMFEs have more than half of their members reporting previous experience. In 12.5% of the SMFEs, bet ween 16% and 36% of their members had previous experience and no members had any previous experience in 8% of the SMFEs. With respect to previous business experience, 54% of SMFEs report that all members had it, while 25% of SMFEs report that more than hal f of their members had previous experience. In 12.5% of the SMFEs, between 16% and 36% of the members had previous business experience, and 8% of SMFEs report no members with any previous business experience. Most members of SMFEs in Madre de Dios gained l ogging experience through onthe job training during the previous forest regime ; no formal training in forest management had occurred. Only recently with the new forest regime and the formation of SMFEs have concessionaires started to learn new terminology and the basics of forest and business managemen t. This formal training has been received by some SMFEs, mainly during their first three years of operation, through the assistance of environmental NGOs (i.e. WWF -MDD, ProNaturaleza, and CESVI). However, in the specific case of certified SMFEs, through a formal agreement of technical and financial assistance by WWF -MDD, formal training has been provided ( previous to the evaluation process for certification) on how to implement: an exploratory forest inventory, reduced impact techniques, road planning, industrial security, and first aid Thus, i n the five years since SMFEs have emerged as viable concessionaires they have therefore acquired some practical training and have become accustomed to the new terminology of forest management. Nevertheless, it is not possible to say how effective this training has been

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180 in terms of performing better forest management; as such a relationship remains to be examined. However, i n the case of certified SMFEs INRENAs speciali sts indicated that these SMFEs were already implement ing better forest management practices (i.e., in terms of what the new forestry law demands) for which the y were later awarded the certification certificate. The level of education among managers (usuall y the person with the highest level of education in a SMFE) in certified and non-certified SMFEs is variable. A mong certified enterprises all manager s completed secondary education: in two SMFEs (one unit of analysis) the manager has some undergraduate education and in two other SMFEs (one unit of analysis) the manager completed undergraduate education. In the case of the managers of non-certified enterprises, 17% of them completed undergraduate education, 25% of them ha ve incomplete undergraduate educati on, 42% of them completed or have some secondary studies and 17% ha ve only primary studies Education gives people an increased ability to process information and knowledge in order to make decisions. T he higher level of education among managers of certif ied SMFEs has definitely influenced enterprises management and negotiations with other social actors For example, these enterprises have better organized their forest management and administrative tasks, fulfill ed their responsibilities with the State, capitaliz ed their enterprises and were able to get better deals in selli ng their timber ( when dealing with habilitadores or contractors ) in comparison with the non-certified enterprises. In the case of certified SMFEs their managers al though by the time of the interview they already had attained certification and were considered in the Department as model enterprises in forest management acknowledged that they still needed to improve several aspects of their enterprises in order to do real sustainable forest management In the case of non -certified enterprises whose managers express ed high performance this was referred to as

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181 f ulfilling the main requirements from INRENA (i.e., presenting AOPs and paying harvesting fees on time). Social Capital S ocial capital assets between certified and non -certified SMFEs presented no significant differences at p < 0.05, with the exception of the Networks variable as shown in Table 5 4 Nevertheless, the characteristics of these assets are shown below. Certified enterp rises d id not belong to any forest association in Madre de Dios H alf of the non-certified enterprises did not belong to any forest association and the other half belonged to either the Asociacin de Concesionarios Forestales de Tahuamanu, the Asociacin de Concesionarios de Madre de Dios (ACOMAD) and the Comit de Gestin de Bosques (del Ro Las Piedras or del Ro Tahuamanu). Certified SMFEs do not belong to any of these forest associations because they have not been welcome to participate i n them ( SMFE representative, personal comm. 2007). This is because, according to one interviewee : from the moment we received the concession contract we had a firm position on fulfilling the contract we signed with the State, the requirements of the new forestry law, and achieving the forest management standards for certification; the other concessionaires di d n o t have the same position (SMFE representative, personal comm. 2007) For example, the other concessionaires opted for: 1) forest managements made in the off ice, 2) studies made superficially and conducted by NGOs that were only interested in statistics and in fulfilling certain goals, 3) exigency with pressure (medidas de lucha) and exoneration of pending debts with the State, 4) sale of transportation permit s without having the timber mentioned on them, and 5) flexibility in the sanctions due to bad management practices. These associations are still being led by SMFEs that still present resistance to adopt the new form of management (SMFE representative, per s. comm. 2009).

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182 The afore mentioned forest associations emerged mainly to represent forest users interests and to look for solutions to common problems faced by these users. However, these associations m ostly exist in name only, and their members get toget her sporadically a few times a year usuall y when t here are new regulations concerning the interests of concessionaires (in the case of the Asociaciones de Concesionarios ) or the interests of other forest users (in the case of the Comit de Gestin de Bosques ). Concerning participation of enterprise members with respect to meetings and enterprise activities in general, certified SMFEs exhibit a higher level of participation from their members (84.6%) than do the non -certified enterprises (77.5%) As mentione d previously, t his is because they are mainly family businesses ; thus their members are in closer contact and there is more interest among them for the activities and management of the business which does not happen with noncertified SMFEs. With respect to networks, certified SMFEs show a significantly higher percentage in comparison to the non -certified concessionaires Th is is because certified enterprises had received assistance by relatively more people outside the enterprise for financial or commerci al purposes (especially by banks and larger enterprises ) than the non-certified SMFEs. However, even though certified enterprises may have relied on banks for acquiring larger loans, still the main source of financial support for their operations has been through habilitadores In the case of non-certified enterprises, 71% of them relied basically on habilitadores for financial support, while 21% of them relied only on the financial support of their own members. In terms of commercial assistance, habilitad ores have been the ones mainly supporting the SMFEs. Regarding exclusion, both groups reported that differences in education, wealth, and political ideas among enterprise members had created some divisions among members inside the

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183 enterprise. However, in t he case of certified SMFEs these differences have been resolved which has allowed these enterprises to move forward This has not been the case f or non -certified enterprises where differences among members resulted in declining membership in several case s. A lthough some internal differences exist among members, the extent to which members in a SMFE trust each other was reported to be much higher in certified SMFEs than among the non certified ones that were interviewed Again, t his is mainly due to the fa mily ties among members of certified enterprises. When asked about conflicts inside the enterprise a low percentage of non -certified enterprises had reported it (12.5%). Generally, and regardless of certification status, a wide majority of SMFEs report a harmonious situ ation inside their enterprises. In summary, certified SMFEs in Madre de Dios have significantly larger/higher produced capital assets (equipment, roads, harvesting fee, loan, management plans, and concession area) than non-certified SMFEs, a nd significantly larger volumes of mahogany and species of D category than non-certified enterprises. Although no statistical differences exist in the total amount of timber harvested among SMFEs in both groups, there is a tendency that non -certified enter prises harvested larger volumes than certified enterprises because of the less volumes of valuable species in their forest concessions With respect to human and social capital assets, SMFEs in both groups have very similar characteristics (there is not st atistical different at p < 0.05 for most indicators ) with the exception of the networks indicators which is significantly larger among certified enterprises than among non -certified. H owever the tendency is that certified SMFEs are formed by larger number of members with previous experience in logging and business that have higher education level and are enterprises with higher levels of trust among their members than non-certified SMFEs Table 5 5 shows a summary of the main characteristics between certif ied and non -certified SMFEs in Madre de Dios

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184 Table 5 5 Characteristics of certified and non -certified private SMFEs in Madre d e Dios Capital types Characteristics Certified Non Certified Produced *Equipment larger quantity; heavy forest equipm ent mainly light, less durable forest equipment *Roads >value; 67% terrestrial access small value; access: 37% fluvial, 21% terrestrial, 42% both *Harvesting fee >value; all paid total fee smaller value; 54% paid total fee *Loan > value; 67% rec eived large loans from banks, large entrepreneurs, and all received small loans from Fondebosque small value; 62% received only small loans from Fondebosque *Management plans > value; average annual area 1,488 ha smaller value; average annual area 809 h a *Area > area smaller size Natural *Approved volume > mahogany and D category volume > C category volume *Harvested volume smaller: 21% of approved volume; 6 spp. per year larger: 47% of approved vol.; 7 spp. per year Human *Members reduct ion no reduction in 42% SMFEs *Logging & business experience among all members all SMFEs 46% SMFEs all members, 33% SMFEs more than half members *Education 67% post secondary 42% secondary Social *Associations membership no SMFE 50% SMFEs Forest M anagement C apacity and Certification Status in the Tahuamanu Province A s was shown in the previous section, forest management capacity of certified SMFEs and non -certified SMFEs differ s especially with respect to their produced capital assets and existence of mahogany (natural asset) All SMFEs with certified forest concessions in Madre de Dios are located in the Tahuamanu province, which is the least harvested province in the Department. Since Tahuamanu is the province with largest volumes of valuable timber resources (especially mahogany), and only a few SMFEs from th at province have attained certification, it is of great interest to evaluate differences among SMFEs in Tahuamanu This section therefore compares the forest management capacity for SMFEs that are : already certified, planning to apply for certification ( next 2 to 4 years), and n ot planning to get certified in the short term (within 2 to 4

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185 years ) These comparisons provide a more conservative test of differences among SMFEs since they are all lo cated in the same province, reducing the variation observed by setting aside the other two provinces, which were shown to be very different in the first part of the comparative analysis in this chapter. Table 5 6 presents the respective means of the indica tors of forest management capacity for the t hree groups in Tahuamanu for the period of h arvest 2002 to 2006.13 Table 5 6 Indicators of forest management capacity for private SMFEs already certified, planning certification and nonplanning certification in Tahuamanu, Madre de Dios, 20022006 Indicators Already certified n=3 Planning certification n=4 Not planning certification n=5 Total n=12 Produced capital Equipment ($) 300,229 a, b 90,095 a 21,243 b 113,940 Roads ($) 593,333 a, b 31,015 a 24,987 b 169,083 Harvesting fee ($) 204,141 95,856 95,773 122,892 Loan ($) 210,989 a, b 4,350 a 4,214 b 55,953 Management plans ($) 76,640 a 26,178 34,407 a 42,222 Area (ha) 68,531 27,293 34,474 40,595 Natural capital Approved timber volume (m 3 /ha) 49.15 b 40.68 c 20.86 b, c 34.54 A category 3.47 b 2.95 0.97 b 2.26 B category 1.05 0.59 0.72 0.76 C category 8.57 b 6.05 c 2.86 b, c 5.35 D category 20.27 b 17.17 c 7.93 b, c 14.10 E category 15.78 13.93 8.37 12.08 Species per POA (N) 18.27 13.08 13.78 14.67 Harvested timber volume (m 3 /ha) 10.38 5.90 4.28 6.34 A category 2.91 2.39 0.82 1.87 B category 0.24 0.03 0.39 0.23 C category 1.03 0.41 0.40 0.56 D category 4.04 2.37 2.32 2.77 E category 2.17 b 0.70 0.34 b 0.92 Species per POA (N) 5.80 3.45 4.32 4.40 13 Because there are three pair s of comparisons among SMFEs planning certification Appendix H presents the p (F) values for each pair

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186 Table 5 6 C ontinue d Human capital Enterprise members (N) 10 6.5 6.60 7.42 Logging experience (N members) 10 6.5 5.60 7.00 Business experience (N members) 10 6.5 5.60 7.00 Education (schooling yea rs) 13.67 10.25 13.60 12.50 Members performance (%) 66.70 75.00 60.00 66.68 % SMFEs with low performance 0 25.0 40.0 % SMFEs with medium performance 100.0 25.0 40.0 % SMFEs with high performance 0 50.0 20.0 Social capital Density of mem bership (N) 0 b 0 c 1.40 b, c 0.58 % SMFEs with no association 100.00 100.0 0 % SMFEs with 1 association 0 0 60.0 % SMFEs with 2+ associations 0 0 40.0 Participation (%) 84.60 84.62 75.38 80.75 Networks (% of diversity of people assisting SM FE) 79.37 a, b 39.28 a 50.46 b 53.96 Exclusion (% existence of exclusion among members) 28.60 35.70 42.84 36.90 Trust (% extent of trust among members) 97.23 70.83 61.66 73.61 Conflict: % SMFEs in conflict 0.0 25.0 20.0 16.70 % SMFEs in peace 100.0 75.0 80.0 83.30 Significance level of 0.05 a denotes significance between already certified and planning certification b denotes significance between already certified and non planning certification c denotes significance between planning certification an d nonplanning certification Produced Capital In terms of produced capital assets for SMFEs that are already certified, planning to attain certification, and not planning to be certifi ed statistically significant differences were found for the following v ariables: equipment, roads, loans, and management plans as shown in Table 5 6 Certified SMFEs significantly exceeded the other two groups in several respects For example, t he value of the equipment possessed by certified enterprises was three times large r than the ones seeking certification and fourteen times larger than the ones not planning to seek certification This difference is due to the larger quantity of heavy forest equipment and transportation items owned by certified enterprises in 2006. Among SMFEs that are not -planning certification some of them possess very little h eavy equipment. Indeed, forest equipment owned by non-certified

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187 enterprises (planning and non-planning certification) was mostly light and less expensive, which explains its low value. With respect to roads value, certified enterprises significantly surpassed the road value of enterprises planning certification by nineteen times, and the road value of enterprises not planning certification by twenty four times. The large differenc e between these three groups is mainly because certified enterprises invested a sign ificant amount of money in road construction and maintenance during 2006 as a pre -condition to the certification process. Also the difference is because while certified ent erprises have mainly terrestrial access to their concession contracts, only 50% of the enterprises planning certification have terrestrial access, and 40% of the enterprises not planning for certification have this type of access. Concerning the harvesting fee value ,14 although no statistical differences at p < 0.05 exist, certified SMFEs report almost twice the accumulated harvesting fee value than the other two groups. The average harvesting fees offered by certified SMFEs was 0.86 $/ha, in comparison to 1 .00 $/ha from the ones planning certification, and 0.77 $/ha from the ones not planning certification. However, certified SMFEs report larger aggregated harvesting fees due to the larger extension of concession areas granted to these enterprises. As of the 2006 harvest all certified SMFEs paid their total harvesting fees as a pre -condition to the certification process. In the case of enterprises planning certification, 50% of them had paid their total harvesting fees, and the other 50% had paid 77% of the total. In the case of enterprises not planning for certification, 60% of them had paid their total harvesting fees while only 40% had paid 85% (as of March 2008). 14 Fee in US$/ha that has to be paid annually for all he ctares in the forest concession.

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188 With respect to formal loans received to finance enterprise operations, there is a significan tly large difference between certified enterprises and the other two groups (which possess similar values). This difference is a result of the large loans from banks and large private enterprises made mainly to certified SMFEs because of the fixed capital the y own ( in term of propert y) and the several years of experience they possess as business enterprises Meanwhile, the other two groups of enterprises which mainly do not have a credit history because most of them have been working in informal logging du ring the previous forest regime, received only small loans from FONDEBOSQUE For example, 50% of the enterprises planning certification received these small loans; 40% of the ones not planning for certification also received such loans. However, all SMFEs in Tahuamanu have received loans through the informal system of habilito in order to finance most of their harvesting activities because loans received through the few formal financial institutions have not been sufficient. The costs of management plans i s almost three times the value for enterprises planning certification (statistically significant), and double the value for enterprises no t planning certification (not significant). This difference is because the average annual harvested area is larger amo ng certified enterprises (1,488 ha) in comparison with the ones planning certifi cation (690 ha), and the ones no t planning to be certified (1,446 ha). Although the concession a reas of certified enterprises are tw o and a half times larger than among enterpr ises planning certification, and twice as large as the ones nonplanning certification, no significant differences were found Natural Capital The results of the analys i s show that a mong the three groups, statistically significant differences exist for som e natural capital assets (see Table 5 6 ). T otal timber volumes approved for certified enterprises and enterprises planning certification are similar, and both exhibit significant differences from the total volumes approved for enterprises that are not plan ning to

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189 seek certification. In this case their volumes were almost half those of the former groups. Specifically, there were statistically significant differences in approved volumes for mahogany (A category), and species of C and D c ategor y between certif ied enterprises and those not planning certification. Also, there were significant differences in approved volumes for species of D c ategor y between enterprises not planning to certif y and those planning to do so. With respect to total timber volumes and number of species harvested by SMFEs in the three groups, there were no significant differences with the exception of differences in harvested volumes of species of E category between certified enterprises and enterprises not planning certification. Certifi ed enterprises harvested 21% of their total approved volume. From this volume, 39% corresponds to species of D c ategory, and 2 8 % to mahogany Enterprises planning certification harvested 15 % of the ir total approved volume from which mahogany and the speci es of D category each comprised up to 40 % of the total volume harvested. In the case of enterprises not planning to certify, almost 21% of their total approved volume was harvested of which 54% comprised species of D c ategory, and 19% consisted of mahogany. Although SMFEs planning certification account for a large percentage of mahogany harvested with respect to their total harvested timber, the percentage of mahogany harvested with respect to their total mahogany approved is similar to the other two group s (84% for certified SMFEs, 81% for SMFEs planning certification, and 84% for SMFEs not planning certification). It was expected a priori that SMFEs planning certification would have harvested more timber than the ones not planning certification because of the major volumes of timber and major terrestrial access to harvest hardwoods (such as species of D and E category) However SMFEs planning certification harvested less timber because, in 50% of those enterprises no harvesting o f any species was carried out for two consecutive years This also explains why their volumes are

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190 much smaller than among certified enterprises although they do have similar total approved volumes. Human Capital T he results of the analysis presented in Table 5 6 show no signifi cant differences a mong the three groups for the indicators under study. As of 2006, certified enterprises maintained their same number of members since the time of enterprise formation. Again, due to the fact that these SMFEs are mainly family businesses w ith greater cohesiveness among their members they also share common goals to a greater extent However, 50% of enterprises planning certification had experienced reductions of 58 % in their memberships and 60% of the enterprises not planning certification had suffered reductions that varied from 17% to 7 0%. These reductions in membership among SMFEs planning and not planning certification have been attributed to differences and internal problems among members in those SMFEs which has caused divisions in m anaging the forest concession and the enterprise, and l ess stability of their business enterprise D uring the harvest of 2006, all members in certified enterprises and in enterprises planning certification had previous experience in logging and business ac tivities. Among enterprises that are not planning to seek certification, only 40% of them reported that all their members had previous experience with logging and business T he other 60% of these SMFEs reported that most of their members had previous loggi ng and business experience Among certified SMFEs, their members gained experience due to the holding of forest contracts and permits during the previous forest regime. This is also true for some of the SMFEs planning certification and those not planning i t ( especially since 1992 when logging became an important activity in the province). However, in most cases previous experience has been gained on the job from informal logging carried out in the province for the selective harvesting of mahogany and

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191 its co mmercialization. Only with the implementation of the concession system and through assistance from environmental NGOs did all concessionaires begin to learn new terminology and the basics of forest and business management However, as previously stated, certified SMFEs have received more formal and personalized training on forest inventory, reduced impact techniques, road planning, industrial security, and first aid because of a formal agreement of technical and financial assistance with WWF MDD for the c ertification process. There are no statistically significant differences in terms of average years of schooling, although some variation in the level of education among the three groups (with respect to education among SMFE members) does exist. Among certi fied enterprises, in 33% of them the manager had completed undergraduate education, in 33% the manager had incomplete undergraduate education, and in the other 33% the manager only had completed secondary education. In the case of the managers of enterpris es planning certification, 50% of them had completed secondary education, 25% of them had completed a 3 year technical education and 25% of them had only completed primary education (6 years of schooling) Among managers of enterprises not planning for ce rtification, 4 0% of them had completed undergraduate education, 2 0% of them had incomplet e undergraduate education, and 4 0% of them had completed secondary education. Managers of certified SMFEs and SMFEs not planning certification have higher level s of ed ucation than managers from SMFEs that are planning for certification. This higher level of e ducation has allowed these two groups to understand better and pro cess information related to the certification process and make decisions whether to attain it or n ot Among certified SMFEs, from the moment they learned about forest certification they understood they ha d to reorganize their administrative and forest management practices and make investments in order to fulfill all

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192 of the certification requirements. Among SMFEs not planning certification they understood that the attain ment of forest certification required great investments and was a costly process that i n the short term could not be an objective for their enterprises. In different tasks concerning enterprise and concession area management, all managers of certified enterprises reported a medium level of performance for their members; they expressed that their members still need to improve in many aspects in order properly conduct forest management. In the case of enterprises planning certification, 50% of them reported a low and medium level of performance for their members. Among enterprises not planning to certify, a large majority (80%) also reported a low and medium level of performance Social Cap ital The results of the analysis (Table 5 6 ) show that the only statistically significant differences observed among pairs of group means were for the indicators density of membership and networks at p < 0.05. For example, enterprises not planning cert ification belonged mainly to one forest association: the Asociacin de Concesionarios Forestales de Tahuamanu; however certified enterprises and enterprises planning certification did not belong to any forest association. The Asociacin de Concesionarios F orestales de Tahuamanu basically functions when there is a problem that affects concessionaires in the province ( SMFE representative, pers. comm. 2007). However, it has been reported that the sporadic meetings celebrated under this association have been mainly to look for endorsement to address problems affecting some members of th is associat ion but n ot problems affecting all members : when there was a problem that affected the President or one of its friends, only in that moment the President wanted the endorsement of the members of the Association, but when the members had problems with other enterprises, the y [ i.e., the President and his frie nd] did not do anything, so they acted by convenience ( Concessionaire pers. comm. 2007 ).

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193 Thus this association has not fulfill ed the expectations of its members and because of dissatisfaction has prevented other concessionaires from looking for membership. Concerning participation of enterprise members with respect to meetings and enterprise activities in general, participation is relatively high among all three groups, but certified enterprises as well as enterprises planning certification do show higher levels of participation of their members than those enterprises that are not planning certification. Certified enterprises are mainly family businesses so they have c lose relationships among their members and greater interest in participating in the enterprise s activities. T he SMFEs planning certification and the ones with no plans for seeking certification are m ainly businesses formed by people with no familia l ties that have neither close nor previous relationship s. Thus, there are no specific characteristics that confirm more participation among members in the first group than in the other. One explanation for the observed differences in participation between these groups is that there is only one owner (or the majority of enterprise shares are held by one person among few members ) in 50% of the SMFEs that are planning certification With respect to networks, ce rtified SMFEs presented a significantly higher percentage in comparison to the other two groups. This means that certified enterprises had assistance by relatively more people outside the enterprise and/or by institutions mainly for financial purposes than the other two groups. While certified enterprises had access to some banks for acquiring (a few) large loans, and also had access to habilitadores for acquiring working capital to develop their harvesting activities the enterprises planning certification had relied totally on habilitadores as their main source of financial support for their operations. The same is true of the SMFEs that are not planning for certification. In terms of commercial assistance, habilitadores have been the ones mainly supporting SMFEs in the three groups.

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194 Regarding the exclusion variable, the three groups reported that differences in education, wealth, and political ideas among enterprise members had created some divisions between members inside the enterprise. Enterprises not p lanning to certify reported the highest values of differences among their members such that in 60% of these SMFEs between 17 % to 70% of their members had dropp ed membership Although there were some internal differences among members of the certified ent erprises, no serious conflicts were reported, and trust (the extent to which members in a SMFE trust each other) is scored much higher than in the other two groups. This is mainly because of family ties among members in certified enterprises. However, some conflict situation s ha ve been reported inside enterprises planning certification, and in the ones that are not planning to certi fy (25% and 20%, respectively). In summary, SMFEs that are already certified in Tahuamanu have significantly larger/higher produced capital assets (equipment, roads, and loan) than non -certified SMFEs in the province (i.e., SMFEs planning and not -planning it). Also, SMFEs already certified have significantly larger v olumes of mahogany and species of C and D category than SMFEs no t planning to get certified. However, very similar characteristics exist among the three groups w ith respect to human and social capital assets T here is not statistical different at p < 0.05 for most indicators with the exception of density of membership which is significantly larger among SMFEs not -planning certification than among certified SMFEs and those planning certification, and networks which is significantly larger among certified enterprises than among non -certified SMFEs (i.e., SMFEs plannin g and not -planning certification) Table 5 7 shows a summary of the main characteristics among SMFEs planning certification in Tahuamanu

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195 Table 5 7 Characteristics of private SMFEs planning certification in Tahuamanu Capital types Characteristics Alread y certified Planning certification Not planning certification Produced *Equipment >quantity & value; heavy forest equipment medium value; mainly light, less durable lower value; mainly light, less durable *Roads >value; 67% terrestrial access smaller value; 50% terrestrial access smaller value; 40% terrestrial access *Harvesting fee >value; all paid total fee lower value; 50% paid total fee lower value; 60% paid total fee *Loan >value; 67% received large loans from banks, large entreprene urs, and all received small loans from Fondebosque lower value; 50% received small loans from Fondebosque lower value; 40% received small loans from Fondebosque *Management plans >value; average annual area 1,488 ha lower value; average annual area 690 ha medium value; average annual area 1,446 ha *Area > area medium size medium size Natural *Approved volume > mahogany & D category volume large mahogany & D category volume smaller volume all categories *Harvested volume > volume; 21% of approve d volume; 6 spp. per year smaller; 15% of approved volume; 3 spp. per year smaller; 21% of approved volume; 4 spp. per year Human *Members reduction no reduction in 50% SMFEs in 60% SMFEs *Logging & business experience among all members all SMFEs al l SMFEs 40% SMFEs (60% most) *Education 67% post secondary 50% secondary, 25% post secondary 60% post secondary, 40% secondary Social *Associations membership no SMFEs no SMFEs all SMFEs Implications of SMFEs Capitals and Capabilities for Forest Man agement Capacity Capi tal is fundamental for the functioning and success of SMFEs and for the economic development of these entities as well as for the economic development of the regions where these enterprises are located Capital, in its various forms ( produced, natural, human, and social), is particularly important in the case of private SMFEs in Madre de Dios because they are the most important social actors in the management of the natural tropical forests of the a rea of great est biodiversity in Peru

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196 Sufficient and reliable access to financial resources is critical for the development of any SMFE. However, financial resources are one of the major limitations to the effective operation of SMFEs ( Auren & Krassowska 2004). Small entrepreneurs in Madre de Dios are characterized by having limited financial resources and basic financial services (i.e., a c hecking account) are rarely granted by formal financial institutions like commercial banks to SMFEs that are starting their activities in the logging business (Lewis et al 2004 ). This is because most SMFEs do not have a credit history, n or business experience. In addition, loans given by banks have high interest rate s which are almost prohibit ive for most SMFEs starting logging activity ; t hus m ost SMFEs cannot access and/or afford these credits because of their low margins ( Lewis et al 2004). Only from 2003 throughout 2004, did FONDEBOQUE15 provide small loans to SMFEs with the aim of building a credit histo ry for these enterprises. However, because of the short term and small amounts of capital provided, almost all SMFEs have relied, and many still do, o n working with contractors and particularly with habilitadores to finance their harvesting activities Thi s is a disadvantage to SM FEs due to the conditions of these system s ; however, they are the only available options that all SMFEs can access In the case of contractors, they use their own personnel and equipment to harvest SMFEs annual forest areas and pr ovide SMFEs a percentage of the harvested timber or the value of this timber which usually favors the contractor. In the case of habilitadores the SMFE carries out the harvesting of their annual forest areas relying on the advance of money from habilita dores on the condition that they later sell all the timber to these habilitadores a t prices fixed by the latter (i.e., prices lower than the market and s ub-estimat ion of timber volumes) This situation of limited financial resources and particularly of l imited formal financial sources is a big constraint not only among SMFEs in 15 An institution established to facilitate financing of projects to promote sustainable forest development in cooperation with a financial institution: the Caja Municipal de Tacna.

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197 Madre de Dios (as this study has demonstrated) and Ucayali (Arce 2006), but also among the most successful SMFEs in Bolivia, Brazil, Colombia, and Ecuador (Tomaselli & Tuoto 2004) Thus restrictions of small loggers financial resources and lack of formal financial mechanisms have not only perpetuated the informal system of habilito but have also restricted operation possibilities and fulfillment of obligations of SMFEs. For example, financial barriers and difficulties in accessing credit have reduced the opportunities of SMFEs in investing in new and more equipment. Most SMFEs do not have adequate equipment to carry out forest management in an efficient manner, and the equipment t hey do own is mainly light, less durable and obsolete Thus little investment in technology has led to sell ing mainly round -wood a t lower prices because of the lack of transformation equipment by most SMFEs, and to the high levels of wastage of timber. Alt hough this last point has not been evaluated in this study, it is known that in the Peruvian Amazon (specifically in the Department of Ucayali the main center of timber production) the wastage of timber from log to sawn -wood for several species is around 4548% (Vsquez 2007). Financial barriers and restrictions in accessing credit have also reduced the opportunities of SMFEs in fulfilling their obligations. For example, relatively few SMFEs (a n average of 43% ) ha d been able to pay their total harvesting fees through the 2006 h arvest despite the promotional program of discounts set up by INRENA for the first five years of the forest concession contract operation This has resulted in most than half of all SMFEs (i.e., 57%) not being able to mobilize (i.e., transport and commercialize) their harvested timber from their forest concessions s ince payment of the harvesting fe e is a requirement for this thus incurring losses for these enterprises and in some cases engaging in illegal actions (e.g., selling of guias de transporte ) in order to fulfill this obligation It is also important to note that certified SMFEs have receiv ed financial

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198 support from WW F -MDD in preparation for the certification process, for the evaluation process, and also for the audit process (i.e., first evaluation audit after receiving the certification certificate) Although no information regarding the a mount of the subsidy has been released by the interviewees, it has been mentioned that the attainment of forest certification would not have been possible at the time it was obtained (and its evaluation continued ) without the subsidy from WWF -MDD A simila r situation has occurred in Guatemala where the NGO providing technical assistance to a community enterprise has subsidized more than 50% of the condition costs for the second phase of certification ; if the subsidy did not exist this community would have not been able to meet the necessary condition s to keep i t s forest certification certificate (Soza 2003). Availability and secure tenure of land as well as trees is important to the success and profitability of SMFEs ( Auren & Krassowska 2004). Private SMFEs in Madre de Dios were gra nted forest concessions for a period up to 40 years (following evaluations every five years); thus they have secure land and forest resources. However, the type of timber species and their volumes present in forest concessions are significant for SMFEs operability and profitability Mahogany, cedar, and tornillo are the three most valuable species in the country (2.8 US$/board feet 1.1 US$/b oard feet and 0.4 US$/b oard feet respectively). However, over time mahogany and cedar have been over -exploited in t he Department and in some areas like Manu they have been almost exhausted. Thus SMFEs in Manu are characterized by the presence of lower priced and lesser known timber species This limitation h as resulted in the harvesting of larger volumes of timber by t hese enterprises (in comparison with SMFEs in the other two provinces) in order to compensate for the lack of valuable resources (even though some lesser known species start ed having demand in the market since 2004) T his has also reduced their financial possibilities to

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1 99 invest in equipment to fulfill their obligations in paying their total harvesting fees, and to carry out their AOPs on time. In contrast, commercial populations of mahogany are still present in the Tahuamanu province, the least harvested region in the Department, and endowments of this species have provided a special advantage to SMFEs there This is because mahogany or red gold ( oro rojo ) is readily convert ible into cash (CESVI 2005). Th us mahogany became the main source of financing s hort term activities (e.g. purchase of consumables, paying for forest censuses and /or road building) and a strategic tool in the process of capitalization (CESVI 2005) Th is provided SMFEs with more financial advantages that resulted in the better fulfill ment of their operations (i.e., carrying out AOPs on time), of their obligations (i.e., payment of harvesting fee), and in the possibility of investing in equipment As a result SMFEs with mahogany in their forest concessions have proven to be better off ; th is has been especially the case of SMFEs which attained forest certification CESVI (2005) notes that if the price of mahogany had not reach ed the attractive level it did, many SMFEs would have bec o me bankrupt. Thus the question that remains is what is going to happen when SMFEs do not have any more ma h o g any in their concessions? The experience of the SMFE La Chonta (Bolivia) suggests that the introduction of lesser known timber species is important when adopting sustainable forest management especial ly when valuable timber species (mahogany and cedar) are rar e However, the processing of lesser know n timber species (because of their low market values) requires increasing the scale of production and the adopti on of improved technologies to reduce produ ction costs and increase product value to obtain profitability (Tomaselli & Tuoto 2004). Thus SMFEs in Madre de Dios will progressively have to find new species to u se in their operations in order to retain their economic viability. Putzel

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200 (2009) indicate s that s ome lesser know n species are progressively being introduced due to new demand from the Chinese market ; this should help those SMFEs willing and able to adopt these alternative species The levels of technical skills for forest management tend to be low among SMFEs ( Auren & K rassowska 2004), which is also a restriction to their effective operation In Madre de Dios m ost members of 73% of the SMFEs had previous experience in logging activities before the formation of the SMFE. However, this was mainly practical experience in s elective logging obtained from the holding of 1,000ha forest contracts and from informal logging activities carried out by most loggers during the previous forest regime (before 2002) But no formal training in forest management and business was previously provided to these small loggers. Only recently with the formation of SMFEs, have concessionaires been exposed to the concept of forest and business management due basically to the assistance from environmental NGOs (i.e. WWF -MDD, ProNaturaleza, and CESVI).16 Concessionaires have recognized that they did not understand anything about these topics at the beginning; for example, they did not know what a forest census was, how to carry it out, what its cost was, or the value of its utility (CESVI 2005). Also, t his formal training has been limited to some SMFEs under assistance by these NGOs ; it has not been permanent T hus there ha s not been any follow up training after the assistance by NGOs ended Th e training provided to SMFEs has also be e n mainly in technica l aspects of forest management ; however a more specialized and permanent training is necessary especially in areas related to enterprise organization and management, conflict resolution, community relationships, among others. 16 Other institutions such as the Cmara Forestal Nacional FONDEBOSQUE, and ITTO conducted some workshops on issues related to forest management for all concessionaires.

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201 In addition to the limited tr aining opportunities and almost no investments in human capital, there is the issue of the low level of education of most members of SMFEs and of the casual employed workers hired within SMFEs which has resulted in difficulties in managing the enterprise and the forest concession. The tempora ry nature of many workers employed within SMFEs and their limited skills base may have also led to losses and inefficiencies because of the few incentives to produce efficiently ( Auren & Krassowska 2004). Knowledge and understanding of both for est management and business skills are necessary to make an enterprise profitable and to meet all legal responsibilities. Start up SMFEs in Madre de Dios did not have the skills and capacity to prepare management and business plans ,17 n or did they realize t he importance in keep ing financial records. T he ability to undertake effective budgeting, preparation of business plans, and keep accurate financial records is important in helping a business to secure capital and to engage in multi -stakeholder interaction s ( Auren & Krassowska 2004) which includes engagement in the market. Thus SMFEs in Madre de Dios due to their limited human capital and the novelty of the process they have undertaken, needed more external support in building their skills and capacities in order to have better opportunities for their development. O rganization and networking among SMFEs are typically poor which restricts opportunities for effective operation ( Auren & Krassowska 2004). In Madre de Dios most SMFEs have weak organization. This has been particular ly true during the first three years of enterprise operation whe n members tend ed to operate as individuals resulting in competition among member s and mutual distrust, which generat ed internal conflicts and weakening of the 17 Assisting NGOs helped SMFEs in the elaboration of these plans.

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202 enterprise In many cases these problems resulted in exclusion of members and as consequence dropping in enterprise membership: There was bad management of the enterprise so we did not believe in the managerso we decided to work individually dividing the volume of the annual harvesting area among all the members. Th e manager did not participate in the meetings, but we had to pay the harvesting fee that he must have paid ( Concessionaire, pers. comm. 2007). Gradually members started transferring their actions to other people [outside the enterprise] remaining less me mbers. There was not agreement, we had too many internal disputes [ mucho pleito interno], and we never reached a consensus (Concessionaire, pers. comm. 2007). Weak organization led to enterprises not fulfilling the payment of the harvesting fee on time bec ause of disagreements among members in providing the amount necessary to fulfill this responsibility and also in illegal actions due to the harvesting of more volume s or species than the ones only contemplated in the AOP and/or because of the s ale of guias de transporte used to legalize timber harvested in illegal ways: Initially we were 17 members, but in time several members left the enterprisethere has been pillage [ saqueo] promoted by the previous managers of this enterprise and by some members. Th ey had benefited with the illegal logging [i.e., harvesting in different areas of the concession, sell of transportation permits] and when I received the enterprise [as the fourth manager] I did not receive any document of the enterprise and realized the e nterprise owns all the harvesting fees since 2002 (Concessionaire, pers. comm. 2007). Failure of SMFEs to better organize themselves has restricted their opportunities to participate in ongoing assistan ce (training and support) offered by governmenta l and nongovernmental programs, and also has reduced their opportunities for advocacy and lobbying (Auren & Krassowska 2004). Thus understanding and internalization of the awareness for group action is an aspect that still needs to be resolved among SMFEs ( Auren & Krassowska 2004). Although participation by ind ividuals in social networks increases their possibilit y of accessing information and/or transactions (Grootaert & Bastelaer 2002 ), enterprises in Madre de Dios have seen these possibilities restricted for them This is because networking among S MFEs

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203 is poor, and the main social network is formed by the habilitadores who manage a clientele (i.e., patronage) relationship because of the lack of economic resources and financial opportunities available to SMFEs. Summary This chapter presented the resu lts and analysis of the forest management capacity of private SMFEs, in terms of the type of assets that the SMFEs possess. Factor analysis helped to verify that the indicators selected represent each type of capital for forest management capacity (produce d, natural, human, and social capital) among the private SMFEs in Madre de Dios (Appendix F ). All of these items were later used as dependent variables in the MANOVA analysis. Three MANOVA analyses explored differences in the assets pertaining to each type of capital among the SMFEs by province, certification status in the department, and certification status in the Tahuamanu province (Tables 5 2 5 4 and 5 6 ). In general, the results reported in this chapter offer evidence that the capacities for forest m anagement among private SMFEs in Madre de Dios exhibit significant variation among the three provinces, and especially between the certified and non -certified SMFEs. Significant differences are particular ly observed for the produced and natural capital ass ets that these SMFEs possess. However, very similar characteristics in terms of their human and social capital assets are common for SMFEs in the department. A synthesis of the results of these MANOVA analyses, as well as policy implications drawn from the se results, is presented in detail in the next chapter.

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204 CHAPTER 6 SUMMARY AND CONCLUSIONS Overview This final chapter contains four sections. The first section presents conclusions drawn from the results derived from the stakeholder analysis discussed in chapter 4, as well as the results of the forest management capacity analysis discussed in the previous chapter. In particular, the role and influence of the main forest stakeholders in the concession system and the capital assets held by private SMFEs in Madre de Dios are discussed. The second section discusses the policy implications of this study; especially in regard to the possibilities of the forest concession system continu ing to promote long term sustainable forest management in Madre de Dios, as we ll as in other areas of Peru. Some recommendations are also provided that might help to improve the forest concession system. The third section describes some limitations of this study while the last section suggests some future work and areas of focus tha t are worth investigating further. Summary of the Findings and Results Stakeholder Analysis The forest concession regime in Peru, a s a system for responsible forest management and social development is still in the initial phase of development In M adre d e Dios the first department where the system was implemented in 2002, the role and actions of social actors in the forest sector have been very important in influencing the policy changes and management and conservation of forests there Although initial opposition to the forest concession system by some groups of small loggers existed, and local authorities wanted to bring back the old forest regime of overexploitation the new system continued t o be implement ed Thus from the moment of its inception, sm all and medium entrepreneurs became the most important forest management actors because they were involved in direct implementation of timber concessions

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205 and management plans The State (represented by INRENA) and a few environmental NGOs became key actors of the system b e cause the y were promot ing it and providing support for its implementation. In addition, their actions subsequently influenced the efforts and decisions of private SMFEs as they proceeded in carrying out forest management Thus, the state a nd these NGOs have significantly influenced the viability of the new forest management model in the long run. INRENA has been responsible for the administration of forest concession contracts (evaluation of GFMPs and AOPs, and r egistration of concession contracts) and for concession s supervision until June 2005, as well as approval of the AOPs since 2005. Although administration of forest concession contracts also implies support to SMFEs in terms of the different aspects related to the implementation of t heir contracts (e.g., legal and technical aspects) INRENAs role has been mainly one of communicating procedures involved in the implementation of the system They have not, however, b een good at monitoring nor as consulta nts in support of training and/or other matters related to the p ermanent promotion of the system and its more sustainable practices. This has been mainly due to INRENAs limited capacity in personnel, funding, and infrastructure. Thus, INRENA has not been able to fulfill all of its funct ions a ppropriately and this has affected program development. For example, limited personnel in each Technical Administration two people responsible for the administration of 40 and 33 SMFEs per Administration, respectively has been a main constraint in th e operative capacity of INRENA to evaluate AOPs in the field. Moreover, the centralization of INRENAs functions in the Lima office has produced delays in AOP approvals which have resulted in delays in starting the harvesting period and losses to concessio naires. A s imilar situation has occurred among communities in Brazil, where it has taken an average of 2.5 years to approv e

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206 forest management plans; this has happened at least since before 2006, when IBAMA was the central agency responsible for approving m anagement plans (Amaral & Amaral 2005). In addition, INRENA has suffered from budget limit ations that have made it impossible to carry out field inspections in all forest concessions; instead, they only carry out these inspections in forest concessions hav ing mahogany due mainly to funding provided by the SMFEs holding those AOPs. Despite INRENAs budget limitations and additional cuts through time, other tasks to support the forest concession process and responsibilities have been delegated to the local Te chnical Administrations thus restricting even more th e institutions capacity to intervene effectively in the forest management of the region I n addition to personnel limitations, labor instability, and budget cuts inside the institution, corruption of s ome INRENA personnel has hampered the new concession system The primary acts of corruption mentioned by all types of respondents (i.e., from concessionaires, NGOs, and even some people from within INRENA itself) are: p ersonnel receiving bribes to hurry pa per work, the forgery and sale of timber transportation permits and changes in volumes in INRENAs database to authorize larger timber volume s in AOPs Despite the widespread comments about these actions, no formal denunciations have been recorded; the on ly exception was the case of t he Tambopata Manu Technical Administrator who was stripped of his position in November 2007 (and later prosecuted), due to illicit acts committed during his administration. In the case of environmental NGOs, t he ir participatio n from discussions in the elaboration of the NFWL, to assistance provided to interested participants in the public bidding process and later assistance to SMFEs has been vitally important for the viability of the forest concession process. They have provi ded technical assistance in the form ation of SMFE s, in the development of SMFEs technical proposals to participate in the bidding process in the

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207 elaboration of management plans (GFMP and AOPs), and for training with regards to forest management and busin ess topics. They also have provided financial assistance to carry out forest inventories covering almost 100% of the expenses related to this activity in the first year of SMFEs operation, and reducing this assistance gradually in some cases. And, in the specific case of WWF, full payment of evaluation assessments was provided to the SMFEs currently holding forest certification certificates. CESVI and ProNaturaleza provided assistance to selected SMFEs in the Tahuamanu province from 2002 to 2006. The narrow scope of their projects, and their sufficient capacity in terms of personnel and funding has allowed these NGOs to work closely with their SMFEs. This has resulted in the fulfillment of management responsibilities by th o se SMFEs. In the case of ACCA, it signed an agreement with only one SMFE from the Manu province due mainly to overlapping land claims between ACCAs conservation concession and th at SMFE forest concession. Thus, ACCA has paid the harvesting fee of this SMFE from 2003 to 2007. WWF -MDD has been the most influential NGO in the department due to the large budget and scope of its CEDEFOR project. It has provided initial assistance to 23 SMFEs and worked in all three provinces of Madre de Dios However, the number of assisted SMFEs declined over time, and in 2006 WWF -MDD assisted only the 5 SMFEs that were applying for forest certification ; moreover, these concessionaires were not even part of the pool of SMFEs initially assisted by th e organization. This reduction in the number of assisted SMFEs over time has generated controversy among the various entities involved in forest management in the department. WWF -MDD personnel pointed out that the main reasons for this reduction in assistance are : (1) a debugging process of focusing technical assista nce on only one group of SMFEs that were working according to the NFWL standards, and were progressing in fulfilling

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208 all requirements to reach f orest certification ; (2) budget cuts; and (3) limited personnel However, some concessionaires have asserted tha t this reduction in assistance has instead been due to : (1) SMFEs refusing WWF MDD assistance due to disappointment with the organization in not fulfilling its promises ; (2) disagreements o ver operational issues in developing the GFMP;1 and particularly (3 ) WWFs priority in fulfilling its certification goals When WWF -MDD later realized that, although it ha d the largest pool of SMFEs under assistance in the department, none of its assisted SMFEs were ready to reach certification (which was the project s ma in goal) it changed its focus by dropping assistance to SMFEs that still needed assistance. WWF -MDD then offered support to SMFEs that were better off (and that were not under its original assistance) in order to at least partially fulfill its certificati on goal. One person interviewed commented that the problem with WWF is that they work only towards numerical goals T he important thing for them is to have a certain number of hectares of forest under management : to have one million hectares of certified forests, so you are simply one more token in its interests ( SMFE representative pers. comm. 2007). The broad scope of the CEDEFOR project, its ambitious certification goal, and its limited capacity in terms of personnel and funding in Madre de Dios, did not allow this organization to work closely with the SMFEs they were assisting. WWF -MDD assistance created m any expectations among SMFEs that ultimately could not be fulfilled For example, WWF personnel promised equipment grant s to their assisted SMFEs, something that was much needed by these small loggers who did not possess adequate and sufficient forest equipment. WWF also promised funding to cover several forest activities something that was also necessary given the constraint s 1 A concessionaire commented that WWF initially established a h arvesting cycle of 30 years for its assisted enterprises, which was not agreed by some SMFEs. Also, it has been pointed out that WWF imposed certain behavior rules to its assisted SMFEs and some of them did not like it, refusing its assistance. Only one co ncessionaire has expressed that some SMFEs did not agree with WWF in following all regulations established by law, thus considering WWF as an impediment for them to do illegal logging.

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209 in financial resources these enterprises had, and the lack of formal financial institutions providing credit to small entrepreneurs. D ifferences in vision in carrying out CEDEFORs activities and assistance directed to concessionaires, and a lack of knowledge about the reality of Madre de Dios concessionaires by WWF Lima staff also generated certain frictions between WWF -Lima and WW F -MDD Other differences emerged, especially under the centralized administration of CEDEFOR funding by the Lima office This resulted in disagreeme nts in allocation of necessar y funds and the tim ing of these allocations to carry out certain activities in the field in Madre de Dios which a ffect ed the effectiveness of assistance to SMFEs (e.g., the work of timely ground testing AOPs and close monitori ng [acompaamiento] of concessionaires a ctivities). Although two multi -stakeholder consultative organizations emerged in Madre de Dios to support the new system and to look for solutions to problems generated during its implementation their functioning ha s depended on specific circumstances of each of these organizations. For example, t he Mesa de Dilogo y Concertacin Forestal de Madre de Dios (MDCF MDD ) became the main forum for the di scussion of issues related to the forest concession system, and more generally the forest sector in the department They presented some proposals that included help for better implementation of the second round of public bidding in the department They also exerted pressure o n government agencies to carry out s uperv ision of the forest concessions Finally, the MDCF MDD insisted on the formation of a Regional Commission to fight against illegal logging Despite important a chievements, the MDCF -MDD w as practically inactive during 20062007 due to the lack of interest of some of the actors participating in this institution For example, as the situation became more or less stable with respect to the implementation of the forest concession system after 2003, INRENA did not have

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210 the same participation on this board. In the case of grassroots organizations, their participation waned in time because they realized that there was mainly a consensus to have th is boards meetings when INRENA had some interest at stake. This situation seems to have been common in other Departments where s imilar forums for dialogue have been formed in Peru; Soria (2003) points out the perspective of several NGOs on INRENA s self -interested use of this type of dialogue forum In the case of local Comits de Gestin de Bosques (CGB), the y were established in the department as civil organizations to control harvesting activities, to coordinat e monitoring services, a nd to promot e conflict resolution in their respective forest administration unit s. However, as the functioning of these organizations is dependent on budgetary allocations from INRENA, their work has been limited because of a failure in obtaining these funds due mainly to bureaucratic procedures from INRENA Forest Management Capacity Analysis As shown in Chapter 4 and summarized in the previous sect ion, stakeholder analysis is an important tool for understanding how the forest concession system works in M adre de Dios. Similarly the analysis of the capacities of SMFEs (shown in chapter 5 and summarized in this section) is important also since both t ypes of analysis interact and reinforce each other. In tandem, they provide explanations for the performance of the new concession system in Madre de Dios, by incorporating the characteristics of SMFEs as well as their broader context. In terms of produced, natural, human, and social capital, the capacity of a SMFE is extremely important for its development particularly when carrying out sustainable forest management practices to improve certification compliance In Madre de Dios, private SMFEs are the most important actors in the management of the permanent pr oduction forests. Among them, their capacities for forest management vary greatly by province and certification status; this

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211 especially occurs in terms of their produced and natural capital assets. The re is not much variation in terms of their human and social capital assets, however. Amongst the different assets, produced assets are crucial to actually carrying out forest management because material and financial resources are necessary for the activit y itself and for fulfilling all economic responsibilities of a business. Thus in terms of produced capital assets, SMFEs in the Tahuamanu province (which also contains the only SMFEs certified in the department) have larger concessions and annual operating areas, possess more value in equipment, have invested more in roads, and have received larger loan amounts than SMFEs from the Tambopata and Manu provinces. In Tahuamanu there are more harvesting units, and thus larger areas of permanent production forest s, than in the other provinces because of the more recent history of land o ccupation in that province In Tahuamanu SMFEs possess more value in their equipment because of their heavy forest equipment ; however most of the equipment is obsolete and ineffic ient. In general, SMFEs from Mad re de Dios and the Peruvian Amazon do not have necessary and adequate equipment to carry out their harvesting activity in an efficient way This is because of the restricted financial resources of SMFEs members and the diffi culties in accessing credit which reduces the opportunities of SMFEs to invest in forest equipment and innovati ve technologies. Th is lack of adequate technology has resulted in most SMFEs sell ing ( mainly ) a product without any transformation (i.e., round -wood), low prices and t he high levels of wastage of timber. The lack of adequate formal financial mechanisms for the forest sector in the Peruvian Amazon has limited the effective operation of SMFEs and has facilitated the predominance of the informal cli entele system of habilito in the department, and in the entire Amazon region, as the m ain source to finance timber harvesting activities Restrict ion in financial resources among

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212 SMFEs and the lack of financial mechanisms have resulted also in the inabilit y of several SMFEs to pay their obligatory harvesting fees which has impaired the mobilization of their harvested timber This ultimately affects the management of their enterprises since several of them have effectively been paralyzed T imber resources or natural capital assets are fundamentally essential for a logging operation since they are the raw material needed to carry out their business. I n the case of the SMFEs in Madre de Dios in particular the type of timber species and their volumes present in forest concessions appear to determine the productivity and outcome of a forest operation. In Tahuamanu, for example, SMFEs (especially the certified ones) have more valuable timber resources than concessionaires in the other two provinces. T he most si gnificant timber species in Tahuamanu is mahogany (2.8 US$/bf )2, the presence of which is a reflection of the more recent logging activity there In Tambopata, the most significant timber species is cedar (1.1 US$/bf) However, o ver time mahogany and cedar have been over -exploited in the Department and in Manu they have almost been exhausted. Manu is characterized mainly by the presence of lower priced and lesser known timber species and tornillo (0.38 US$/bf) is t he most significant timber species there T his limitation of SMFEs in Manu to only having lower priced timber species has resulted in the harvesting of larger volumes of timber by these enterprises (in comparison with SMFEs in the other two provinces) in order to compensate for the lack of valuable resources. This has also reduced their opportunities in terms of their financial possibilities to invest in equipment, to fulfill their obligations in paying their total harvesting fees, and to carry out their AOPs on time. 2 Prices as of September 2005, considering the best selling scenario.

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213 On the other hand, SMFEs in Tahuamanu have harvested the smallest volumes of timber (in comparison with SMFEs in the other two provinces) due to their larger endowments of mahogany ( the most valuable timber species in the country ) and timber species of category D (particularly shihuahuaco ). The lower harvested volumes among SMFEs in Tahuamanu together with the high capital endowments do not necessarily imply better management of forest resources. It is mainly a refle ct ion of market trends and also in part to enterprises capacit ies a nd delays in AOPs approval In the case of Madre de Dios the main species with market demand are mahogany, cedar and since 2004 species of category D (i.e., shihuahuaco). Thus SMFEs in Tahumanu ha ve harvested mainly species with market demand, which mea ns they ha ve harvested almost all their approved volumes of mahogany and started harvesting volumes of species of D category since 2004, leaving species with no market demand in the forest until they observe demand for them Also, SMFEs in Tahumanu have not harvested higher volumes of approved timber species because of financial and technical limitation of many SMFEs there Another reason to harvest less volume of approved timber has been because of delays in approval of the AOPs which restricted the harve sting operations to mainly the dry season since most SMFEs in Tahuamanu are restricted to terrestrial transportation. Thus, t he presence of mahogany in forest concessions of Tahuamanus SMFEs has provided a special advantage to these enterprises due to its high value and demand; t his species b ecame the main source of financing short term activities thus providing more financial advantages that resulted in the better fulfillment of their operations, of their obligations, and in the possibility of investing in equipment in comparison to SMFEs in the other provinces As a result, SMFEs with mahogany in their forest concessions are proven to be better off Moreover the SMFEs of Tahuamanu with the highest volumes of mahogany have been able to attain forest

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214 cert ification (although it should be noted that these SMFEs have also received financial assistance from NGOs for actions re quire d to improve forest management and for the evaluation process). Thus, m ost SMFEs operations in Madre de Dios have been based on th e three t raditional species (i.e., mahogany, cedar, and Cedrelinga catenaeformis ) because of their commercial high values and established markets. This has occurred particularly during the first two years of operation whe n mahogany and cedar were almost ex clusively harvested. However, since these species are rare in some concessions, s ome SMFEs have started increasing the number of species harvested since 20042005; in particular some lesser known species (LKS) have progressively been introduced in Madre de Dios due to new demands from the Chinese market (Putzel 2009). However, still the average number of timber species ( seven species per AOP) and volumes ( 2.9 m3/ha ) under harvest is low when compared to operations in other countries in Latin America such as Bolivia The experience of the SMFE La Chonta in Bolivia shows that in order for this enterprise to improve its forest practices and adopt SFM it was ne cessary to introduce lesser known species (LKS) into its harvest ing in order to harvest higher volum es of timber per unit area (3 8 m3/ha) This allowed this enterprise to reduce its harvesting costs, especially because of the scarcity of mahogany and cedar (Tomaselli & Tuoto 2004). However, the process of introducing new LKS is not easy since the proces sing characteristics of many of them may be unknown Moreover, it requires t he adoption of improved technologies and investments in developing new processes and products to reduce production costs and increase product value in order to obtain profitability (Tomaselli & Tuoto 2004). Also, many of these species are unknown in the international market and the probabilit y is low that LKS are harvested while the supply of the current traditional species remains stable On the other hand, however many of these s pecies

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215 are locally marketed at low prices (Youngs & Hamme t t 2000) and therefore do offer somewhat of an opportunity Thus SMFEs in Madre de Dios will face technological and market challenges as they start widening the us e of new LKS in order to manage their forest concessions and in order to increase and /or keep their economic viability Experience in logging, knowledge, and skills (h uman capital) are also very important in the actual implementation of forest management In Madre de Dios, SMFEs share simil ar characteristics in education, and in previous logging and business experience. A common characteristic among SMFEs in the department is their limited level of education. Only in Tahuamanu have SMFEs managers had some post -secondary technical studies wh ile in Tambopata and Manu, managers of the SMFEs only had some secondary schooling. The low level of education among most members of SMFEs in Madre de Dios may ha ve affected their possibilities to look for new markets, to negotiate, and to find cost -effect ive ways to carry out their operations This is so particularly since their previous logging experience was mainly related to gaining some mechanical skills in the practice of selective logging under short -term businesses managed by large loggers This has constituted one of the factors complicating management of forest concession areas and management of the enterprise for many concessionaires, since it requires knowledge and understanding of both forest management and business skills to make an enterprise profitable and to meet all legal responsibilities. Although several SMFEs in the department have received training in aspects related to forest management and business planning, especially from the NGOs assisting them, this training has been limited in the sense that it has not been continuous through time Moreover, the limited level of education of many SMFE members (and their lack of exposure to long-term businesses ) ha s affected their full understanding of the real implications of sustainable forest man agement. However, it can be

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216 pointed out that in the five years since SMFE emerged, they have acquired some practical training, and have become accustomed to the new terminology of forest management. Nevertheless, it is not possible to say how effective thi s training has been in their performance in doing better forest management since it has not yet been measured. There is some indirect evidence from comm unity f orest concessionaires in Guatemala. While the level of education within the community concessiona ires there is not directly reported Cortave (2003: 26) points out the impressive development of enterprises human capital in forest management due to the constant technical support received by their monitoring NGOs Yet, other researchers point out tha t these Guatemalan concession a ir es still need to improv e their business capacity in terms of production, market, sales, reinvestments among other things (Carrera & Prins 2008). In the Mexican case, Antinori (2005) found a positive explanatory effect in an index of human capital stock for the vertical integration of 45 community enterprises from Oaxaca This effect was based on labor skills. During a concession period, community members w orking for large concessionaires learned mechanical skills in extraction and processing, and some technical skills in administration and documentation. Social assets are important because they have the potential to contribute to better development of forest management and enterprise performance since they facilitate transactions among people. Among SMFEs in the three provinces, social capital assets are similar with respect to the variables networks, exclusion, level of trust, situation of conflict and participation in the enterprise; however there are differences in networks between certified and non -certified enterprises. In Madre de Dios, networking among SMFEs is poor, thus the possibilities offered by social networks of increasing availability of information and/or transactions are restricted among the examined enterprise s. This is because t he main social network is formed by the

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217 habilitadores (timber buyers who lend money to SMFEs through the informal system of habilito ) who manage a clientele (i.e., patronage) relationship because of the lack of economic resources and financial opportunities available to SMFEs. Most SMFEs in Madre de Dios have weak organization. This has most particularly been during the first three years of operation whe n members tend ed to operate as individuals resulting in competition among member s and mutual distrust which generated internal conflicts and the weakening of the enterprise. In many cases these problems resulted in exclusion of members and as a consequence, the reduction in enterprise membership. Weak organization has resulted in sever al enterprises not fulfilling the payment of the harvesting fee on time because of disagreements among members in providing the amount necessary to fulfill this responsibility Weak organization has also resulted in divisions among members in managing thei r concessions This has resulted in illegal actions by some SMFEs due to the harvesting of more volumes or species than the ones only contemplated in the AOP and/or because of the sell of guias de transporte used to legalize timber harvested in illegal w ays. Failure of SMFEs to better organize themselves has also restricted their opportunities to participate in ongoing assistantship offered by non-governmental programs Policy Implications and Recommendations The main conclusions from this study are that : (1) the forest concession system was not implemented with adequate state resources for sufficient oversight to ensure legal forest management, (2) NGO support proved crucial but constituted a patchwork with little coordination and much shifting in prior ities and collaborations due to limited capacity and failing to manage expectations realistically (3) private SMFEs did need assistance from NGOs, but received very short -term assistance instead of sustained support over time, and (4) private SMFEs vary i n their capacity, and while most lack adequate capacity for sustainable forest

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218 management certification, those that attained certification received more support for it, a problematic allocation of scarce resources by NGOs among private SMFEs. Although Per u has committed to international conventions to promote and implement sustainable forest management, it is n ot sufficiently prepared to offer the political, legal and administrative conditions to ensure sustainable forest management in practice This is be cause the State has not made regulation of the forestry sector a high priority (Smith et al. 2006, Malleux 2008) Consequently, in adequate State resources (directed to INRENA) have been allocated for the implementation of the forest concession system as th e new model of forest management. Parallel to the limited financial and technical capacity of INRENA, the administrative capacity of this institution ha s also proven to be inefficient. This is attributed to the concentration of roles (i.e., granter of fore st contracts, regulatory, monitor judge and jury [ juez y parte ]) in this on e institution which has not improved efficiency and transparency in forest administration (Chirinos & Ruiz 2003). A different situation seems to have occur red in Bolivia where Contreras Hermosilla & Vargas (2002) point out that the political will of the State and the democratic participation of the main forest actors have led to successful efforts to reform the forestry sector to restructure government institutions to the implementation of sustainable forest management practices, and to promote forest certification However, Pomeroy s study (2008) in Santa Cruz, Bolivia presents discrepancies about the effectiveness of a decentralized administration of the forestry sector ther e and shows that challenges and conflicts emerged among different social actors due to this process Under the Peruvian forest concession system, private SMFEs (which differs from community -based enterprises in the type of access rights to forest resources and the type of enterprise and forest resources governance) are o bligat ed to elabor at e and implement forest

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219 management plans However, there is a parallel scheme of forest harvesting (i.e., p ermits and authorizations ) for small farmers and local communit ies to harvest timber in favorable conditions in comparison to the exigencies for private SMFEs .3 These parallel schemes generate an important distortion of the timber market and private SMFEs lose competitiveness due to the lower prices of timber coming from these legal parallel schemes (Malleux 2008). This duality in the forest ry norms along with the l imited capacity of INRENA are barriers that not only limit INRENAs fulfi l l ment of its functions and operat ions to better implement the concession system and forest management in the country ; they also limit the capacities of private SMFEs to carry out proper forest m anagement due to the market competition of the other legal harvesting schemes and due to the incapacity of INRENA in properly administering and supervising forest contracts and their management. All these issues (in conjunction with limited private SMFEs capacity) make the operation of private SMFEs more difficult. For example, it makes more difficult the decision of a private SMFE to engage i n important investment s that are adequate to the requirements of the certification process. This particularly occurs in a context where there are no conditions of security, stability, and fair competitiveness that guarantee that private SMFE investment s an d effort s are going to be properly compensated and/ or successful and sustainable (Malleux 2008). Thus, i t is imperative that the State allocate adequate resources for the proper implementation of the forest concession system and to secure legal forest management in the country. It is important to strengthen the capacities of INRENA through the allocation of sufficient financial resources, by increasing the number of qualified personnel, and the provision of continuous training to its 3 Although users of permits and authorizations also have the obligation of elaborating management plans (i.e., the presentation of only annual operating plans) (DS N0482002AG), they pay harvesting fees only for the timber harvested and not for the total area of their contracts as SMFEs do. Also, conditions and requirements for forest access are simpler for users of permits and authorizations (Directiva N001 2003INRENAIFFS) in comparison to concessionaires (i.e., SMFEs) which allows for timber production with l ower costs of production.

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220 personnel to increase t heir capacities. It is also important to make improvements in INRENAs organization and administrative procedures in order to make the organization more effective in its operation supervision, control, and enforcement mechanisms but mainly in its promoti on (i.e., diffusion of norms, regulations, and administrative procedures to forest users) and assistance roles. This is because INRENA is an organization that mainly controls the fulfillment of norms and regulations by the forest users (i.e., following doc umentary procedures established in regulations); however, it has not provided any technical support or training to private SMFEs There is therefore an important need to improve these aspects. With respect to e nvironmental NGOs they have been in favor of the forest concession process from the beginning since they understood that the model of forest concessions is conceptually adequate for the sustainable management of the forest resources in the country (Malleux 2008) They have therefore been very influen tial in the viability of th is process from its inception. Support from e nvironmental NGOs proved to be crucial ; they became the main source of private SMFE technical support and the main source of financial support for forest certification in Peru. However they have worked according to their own interests wit h out a group vision or teamwork for a common agenda of sustainable development in Peru; they have worked in short -term alliances, with limited agreements, and suspicion among them (Soria 2003). Despite the support to private SMFEs by the three main environmental NGOs it was not continuous and instead chang ed over time due to shifting priorities and to their respective projects scopes. Thus, the impact of their support on the performances of the priva te SMFEs has been different CESVI and ProNaturaleza, both with project s of narrow scope, worked closely and provided constant assistance to the private SMFEs they assist ed. A s a result, these

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221 concessionaires were able to fulfill their management responsib ilities better though this impact was not widely felt In contrast, WWF -MDD had a broader project scope, an ambitious certification goal, and a limited capacity in terms of personnel and funding in Madre de Dios The result is that they did not work close ly n or provide sufficient assistance with any individual private SMFE The projects implemented by these NGOs lasted the first five years since the concession system began A t the end of these projects, assistance to private SMFEs from these actors was fin ished for all practical purposes since there ha s not been any other support of this magnitude in the department. This affected private SMFEs management operations and, especially among certified private SMFEs, it created uncertainty of not being able to continue holding the certificate due to impossibilities in paying the assessments. Thus it is important that environmental NGOs understand that the forest concession system is a process of social change, where the people are the ones doing and deciding the f orest management (Soria 2003) Th erefore, more assistance and longer commitment is necessary to support these real actors of forest management E specially necessary is an understanding that forest management is a gradual process of social learning and adap tation; that is, it is not only a technical and administrative process as some NGOs in Peru seem to have thought since they ha d as final goals of their projects numbers of managed or certified areas. It is also crucial that the State establish mechanisms that secure consistent assistance (technical, financial, access to information) for these private SMFEs, in order to develop their capacities for forest management. This is particularly important given the fact that private SMFEs suffer from several constraints that include limited human, financial, technical and managerial capacities which restricts their opportunities to carry out responsible forest

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222 management. Although there has been training in forest management, this has generally been restricted mai nly to some private SMFEs (the ones with assistance from an NGO, and the ones whose managers liv e in Puerto Maldonado) with little continuity. Also, these trainings have been restricted mainly to technical aspects of forest operations but not to managerial issues; thus it is necessary to generate capacities among concessionaires establishing a program of technical training, tranference of technology, and access to technical, economic, and market information. Private SMFEs lack or are restricted in financ ial resources There is a lack of adequate financial mechanisms for the forest sector ( considered a risky sector ), which ha s restricted tremendously the operational possibilities of private SMFEs (i.e., harvesting activity, transportation, elaboration of m anagement plans, payment of harvesting fees, etc .) This ha s contributed to perpetuat ion of the informal system of habilito (clientele system) despite the disadvantages it represent for private SMFEs due to reductions in timber prices and volumes Despite financial restrictions for most private SMFEs in Madre de Dios, the enterprises with mahogany in their forest concessions (i.e., enterprises from Tahuamanu) have proven to be better off and have been able to fulfill their management responsibilities a nd in some cases their certification objectives. Thus in the middle of the financial instability most private SMFEs face it is imperative that credit lines be established for these enterprises with low interest rates, and also incentives for enterprises ful filling all management requirements. Although the forest concession system is the new model of forest management in Peru that ha s captured the interest of many small loggers, it demands more responsibilities by the new concessionaires and their private SMFEs4 that are not easy to assume This is e specially true after decades of disorder and over -exploitation of resources in the forest sector, the limited 4 For example, it demands the elaboration and implementation of management plans, payment of annual harvesting fees for the total area of the concession, and fulfillment of legal and labor requirements.

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223 capacity of most enterprises (although some important exceptions) the limited capacity and interest of the State in the forest sector, and a more individualistic agenda of environmental NGOs in the sustainable management of forest resources in Peru. Therefore, much more effort is needed to reinforce the logging experience and the acquired management knowledge of private SMFEs, and especially to strengthen the institutional framework to maintain more responsible practices in the future. This is particularly important in this stage of the forest concession system when some results of the introduction of the fi rst large scale policy effort to introduce sustainable forest management and increase equity, through the granting of forest concessions to private SMFEs, into the Peruvian Amazon are already noticeable. Differences and Similarities with the Bolivian Conce ssion System New logging concession systems have been instituted in many other tropical countries in recent years. Perus neighbor Bolivia has a solid framework of forest policies and regulations and thus constitutes a useful case for comparison to the Per uvian experience in Madre de Dios In fact, much of Bolivias 1 996 legal forest framework inspired the Peruvian forestry reform enacted in 2000 (Traffic & WWF 2006) : the new Forestry and Wildlife Law N 27308, which established the forest concession system The Amendment to th is new Forestry Law ( Reglamento de la Ley Forestal ), which was approved in 2001, has experienced several modifications whi ch reflect the instability of a forest sector that does not favor long term investments and ha s poor governmental institution s In Bolivia however, the Forestry Law N 1700 was enacted in 1996 and the Amendment to this Law was also approved in the same year In contra st to the Peruvian case, the Bolivia n forest regulations have experienced little alteration wh ich ha s allowed stability and credibility in the forest sector, and has subsequently facilitated investments in the sector (Guevara et al 200 4 ).

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224 T he Forestry Superintendence is a strong and trustworthy institution in the Bolivian legal framework (Guzmn 2002, Gu zmn & Quevedo 2007) This position is responsible for the administration and regulation of the forest sector, has a considerable degree of independence from political influences and has autonomy from the Ministry of Sustainable Development (Guevara et al 2004, Guzmn 2002). Th e situation is much different in Peru because INRENA, the institution responsible for the administration of forest resources, is an organization that is somewhat compromised because the appointment of its director and personnel is a function of political considerations and/or political favors Also, as previously shown in the section on Madre de Dios, INRENA is invested with limited capacities by the government Consequently t h e s e factors ha ve generated instability in the forest poli cies of Peru The advancement in sustainable forest ma nagement in Bolivia is notable This has been due mainly to its solid legal framework and to the significant support of several institutions (Jack 1999), but also to the fact that Bolivia is currently t he country with the largest area of natural tropical forests certified in the world. Bolivia has 28.8 million hectares of forest for production, of which 7.4 million ha ve been granted as forest concessions for 40 years to private timber companies and local social groups ( A grupaciones Sociales del Lugar ASL) ,5 as harvesting permits to indigenous groups ( Tierras Comunales de Origen TCO) and to private properties, and as harvesting contracts in public lands (Guzman & Quevedo 2007) As of September 2009, 1.7 mi llion hectares under forest production have been certified there ( FSC 2009a ). Although the Bolivian experience with concessions has been positive overall Guzman and Quevedo (2007) 5 An ASL is a grou p of people with personeria juridica formed by traditional users, comunidades campesinas indigenous groups, or other users that use forest resources inside the jurisdiction of a municipality benefited with forest concessions. These groups are similar to the private SMFEs in Peru in terms of area granted, and capacities.

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225 report that the greatest success has been with the forest concessions grant ed to private timber companies as compared to ASLs Despite the fact that there are 24.6 million hectares of forest for production in Peru of which 7.5 has also been granted as forest concessions for 40 years to only private SMFEs the advancement of sus tainable forest management is still incipient and the implementation of the forest concession system ha s met with major difficulties For example, 10.7% of the total area granted and adapted as forests concessions in the country (i.e., 850,104 ha) have bee n disqualified due to illegal actions Moreover, an additional area of 68,699 ha ha s been returned to the State due to impossibilities in managing the forest concession for productive purposes. The attainment of forest certification has been meager as wel l ; as of September 2009, only 623,224 hectares under forest production have been certified (FSC 2009a). One of the difficulties in the implementation of the concession system in Peru has been the lack of adequate financial resources For example, the major financial support came from the CEDEFOR WWF Project (with financial support from USAID) which had a budget of approximately US$ 5 million for the entire lifespan of the project (20032006) Although the CEDEFOR WWF project was key in the implementation o f the concession system (particularly given the limited capacity of the State) and in the establishment of the Peruvian Council for Voluntary Forest Certification, its support to private SMFEs was limited to a v ery short duration instead of being sustained over time which was needed since most SMFEs lack adequate capacity for sustainable forest management. However, i n Bolivia the implementation of the Forestry Law N 1700 and the new system of forest management ha s been fa cilitated mainly by the significan t technical and financial support received For example, the BOLFOR Project, with support from USAID, had a budget of US$ 25 million for the 10 year s (19942003) of its first

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226 round BOLFOR has also contributed to the establishment of the Bolivian Council f or Voluntary Forest Certification provided extension services to rural communities and forest industries, granted fellowships to Bolivians for post -graduate study, hosted international students and scientists carried out applied research and helped in t he creation of ( or strengthening of existing) public and private organizations to carry out activities ranging from regulatory control to research Due to the success of t his project USAID planned a second six -year phase (20042009) that maintain s the sam e overall goals (Chemonics International 2004). Thus, the forest concession system in Bolivia has been a relatively successful tool for forest management. This relative success has been evident in the concessions granted to private timber companies (usuall y with large areas) that had previous logging experience and tended to be capital ized with a certain degree of vertical integration. Such characteristics help ed these companies to advance in the better management of their forest operations and to attain FS C certification in most cases with the possibility of s ell ing their products in international markets However, the results have been less obvious in concessions granted to ASLs These groups were previously informal forest users, with no technical exper tise in forest management and very little capital; they have been granted much small er areas in comparison to the private timber companies (Guzmn & Quevedo 2007). None of the ASL is certified, which may be the result of their high degree of technical vuln erability, low levels of technical assistance, deficient organization and administration, and lack of capacity in business management (Quevedo 2006). In the same way, indigenous communities in Bolivia have trouble attaining forest certification because of their difficulties in implementing forest management plans (Quevedo 2006). In Peru, the implementation of the forest concession system is still a process in transition towards better forest management and although some private SMFEs have attained certific ation,

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227 most private SMFEs lack adequate capacity (financial, human, technical and managerial cap ital) for sustainable forest management. This is because many of the sm all loggers forming private SMFEs ( that were later granted forest concessions ) had previ ously been informal loggers that possessed neither entrepreneurial skills nor sufficient capital assets. Thus, i t is important to establish mechanisms that secure consistent assistance to private SMFEs in order to further develop their capacities for fores t management Furthermore it is also important to strengthen the framework of forest policies and regulations in Peru to provide stability and credibility in the forest sector so as to reach advances in forest management as Bolivia has demonstrated is po ssible Limitations of the Study Although t he researcher became familiar with the study area and many of their actors, the main limitation of the study has been the l imited availability of directly comparable information for the studied private SMFEs T he non participation of the enterprises managed by the Schipper family also limited this study somewhat U nfortunately most enterprise concessionaires have not recorded any information related to costs of their forest operations, which (1) limited the scope o f this study to fewer variables than expected, and (2) obligated the research er to rely on estimat es for several variables related to costs (produced capital) more than on factual data. The private SMFEs administered by the Schipper s did not participat e in this study because their administrator never delivered the information required, despite agreeing to do so. These enterprises are lo cated in the Tahuamanu province and present different characteristics from the ones studied here especially since they hav e sufficient financial resources and capacity as a result of the longer history of timber exploitation by this family in the Peruvian Amazon. Thus the inclusion of these enterprises in this study would most likely have confirmed the significant difference s observed for private SMFEs produced capital (i.e., material and financial resources)

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228 between Tahumanu and the other two provinces (i.e., Tambopata and Manu). However, the real differences among these provinces with respect to this type of capital are li kely to be larger and more pronounced than what is suggested in this study T hus the participatio n of these enterprises i n this study would have provided more detailed differences among private SMFEs from Tahuamanu, and it would have enriched the results o f this study. Future Work In order to continue investigating the capacities for forest management of SMFEs in Madre de Dios and elsewhere, it is essential to have sufficient information that is reliable Thus it is necessary to implement a system of record ing the basic operational information of these SMFEs SMFEs capacities (in terms of produced, natural, human, and social capital) var y over time and space ; this study focused on one period of time (accumulated capital in five years) and was limited to only one region Thus, studies focusing on more regions in Peru where the forest concession system has been already implemented ( such as Ucayali and Loreto ) would be useful especially given the limit ed information on private SMFEs encountered in this study A lso it w ould be useful to revisit the private SMFEs already contacted in this study and see what their progress is in the near future, especially since a new study c ould provide more info rmation on their management status after the assistance of environmental NGOs has practically been terminated. In the specific case of Madre de Dios the next step on research about private SMFEs capacities w ould be to study each stage of the forest operation (i.e., forest censuses, harvesting, transportation, timber s ales ) and record in detail all costs and times involve d in carrying out these This information w ould be useful for having detailed information on the main restrictions of every one of these stages, and also for purposes of estimating the efficiency of these f orest operations and valuation of timber resources This is important in order to generate more

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229 integra ted information about the real capacities for forest management and the use of the timber resource which would be very useful as a basis to focus suppor t and assistance to SMFEs in specific areas of major identified limitations. Future research should also consider focus ing on a comparative analysis of SMFE s capacities for forest management among countries in Latin America that ha ve experienced similar forestry polic y reform s and that have adopted similar forest management systems. For example, due to the adoption of the forest concession system as their systems for forest management, a comparison of SMFEs capacities for timber management among Peru Bo livia and Guyana would be very interesting and informative. This type of research project w ould increase the limited information and knowledge about the SMFE sector in Latin America allowing for a more detailed and informed characterization It would als o facilitate additional exploration of the specific factors and actors that positively or negatively affect the capacity of SMFEs to carry out forest management in the region, as well as t he impacts of such management (and the policies regulating them) on the natural resource base and its conservation.

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230 APPENDIX A HISTORICAL EVOLUTION OF PERUVIAN FOREST POLICIES AS TO 2007 Date Norm Description of Policy 1963 DL 14552 Creation of the Forest and Wildlife Service 1974 DL 20653 Indigenous community and agra rian promotion Law for Selva and Ceja de Selva regions 1975 DL 21147 Forest ry and Wildlife Law (FWL) 1977 DS 161 77 AG Regulation of forest extraction and transformation DS 160 77 AG Regulation for conservation units 1987 DS 021 87 AG Suppression of f orest extraction permits 1990 DL 613 Formal necessity to up date the FWL in the Environmental and Natural Resources Code 1995 DS 010 95 AG Forest extraction contracts in free availability forests 1997 L 26821 Organic Law for sustainable use of natural re sources RM 1024 99 AG Extension of operation of forest extraction contracts 1998 Prepublication of the Amendment of the protected natural areas Law for public opinion 1999 L 26834 Protected natural areas DS 047 99 AG Declaration of prohibition of ma hogany and cedar extraction from Madre de Dios DS 010 99 AG National strategy of protected natural areas Plan Director 2000 DL 27308 New Forest ry and Wildlife Law (NF W L) RM 245 2000 AG Establishment of the price for timber in its natural state by comm ercial categories 2001 L 27506 Canon Law, creation of the Forest Canon DS 038 2001 AG Approval of the A mendment of the Protected natural areas Law DS 015 2001 PCM Constitution of a multi sector special commission for indigenous communities DS 014 20 01 AG A mendment of the NFWL RJ 226 2001 AG Establishment of 29 Technical Forest Administrations RJ 095 2001 AG Approval of reference terms for the GFMP and AOP RM 1351 2001 AG Creation of permanent production forest (PPF) in Madre de Dios RM 1349 2 001 AG Creation of PPF in Loreto RM 0566 2001 AG Complementary dispositions for granting conservation concessions 2002 DS 058 2002 AG Approval of size of harvesting units for PPF in Pasco DS 052 2002 AG Conformation of a multi sector commission that w ill design a strategy against illegal logging DS 048 2002 AG Modification of the A mendment of the NF W L (article 128) DS 036 2002 AG Modification of the A mendment of the NF W L (21 st complementary disposition) DS 026 2002 AG Modification of the A mendmen t of the NF W L (article 383 ) DS 019 2002 AG Promotion and determination of the size of harvesting units in PPF DS 006 2002 AG Modification of the A mendment of the NF W L (article 106)

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231 DS 005 2002 AG Approval of the A mendment of the Canon Law RJ 296 20 02 AG Approval of formats for the three reports with character of judicial declaration and terms for presentation RJ 280 2002 AG Approval model for timber transportation permits ( gua de transporte ) for forest co ncessions RJ 032 2002 AG Conformation Ad hoc Commission to conduct process of forest concessions granting RM 632 2002 AG Inclusion of zone 6 in Pasco PPF RM 549 2002 AG Creation of PPF in San Martin, Huanuco, Pasco, Junin, Ayacucho Cusco, and Puno departments RM 260 2002 AG Creation of PPF in Ucayali department 2003 DS 037 2004 A G ? Approval harvesting units in Loreto DS 033 200 3 AG Modification of the A mendment of the NF W L (article 70, and 86) DS 014 2003 AG Approval of number and surfaces of harvesting units in Madre de Dios for the second public bidding DS 012 2003 AG Fractioning in harvesting fees for the 1 st year of concession DS 011 2003 AG Modification of DS 052 2002 AG about the Commission to fight illegal logging DS 006 2003 AG National interest declaration against illeg al logging DS 004 2003 AG Regulation of FONDEBOSQUE as a private institution in promoting sustainable forest management RJ 160 2003 AG Resolution of PMFC ZE surface RJ 129 2003 AG Reference terms and formats for reports with character of judicial dec laration RJ 128 2003 AG Approval of promotional program and chronogram to pay harvesting fees RJ 109 2003 A G Approval of presentation format and baselines to elaborate GFMP and AOP RJ 082 2003 AG Approval of Directive for exclusion and compensation o f areas in forest concessions RJ 031 2003 AG Conformation of Ad hoc Commission for public biddings in Loreto PPF RJ 010 2003 AG Restructuration Ad hoc Commission 2004 L 28204 Law of transference of confiscated timber by the forest authority DS 036 2 004 Fusion of INRENA and OSINFOR DS 029 2004 EF Modification of D S 005 2002 EF of Canon Law DS 029 2004 AG Dispositions about forest concessions previous to D S 033 2003; incorporation of article 91A to the A mendment of t he NF W L DS 011 2004 AG Modific ation of the A mendment of the NF W L (article 109) RJ 178 2004 AG Creation of Transitory Commission to carry out OSINFOR functions until its installation RJ 161 2004 AG Regularization of harvesting fees for 2002, 2003 and 2004 RJ 149 2004 AG Extension of 120 days in the deadline to present PGMF and POA for 2nd harvest ( zafra ) in San Martin department RJ 148 2004 AG Extension of 60 days in the deadline to present PGMF and POA

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232 for 2nd zafra in the Madre de Dios and Ucayali departments RJ 112 2004 AG Extension deadline to mobilize approved balances RJ 104 2004 AG Promotional regimes (discounts in harvesting fees) RJ 019 2004 AG Approval procedures of authorization for mobilization of timber balances RM 586 2004 AG Resize of Ucayali PPF RM 441 2 004 AG Resize of zone 3 of Madre de Dios PPF 2005 DS 034 2005 AG Modification of the Amendment of t he NF W L (article 74 numeral 70.2, article 91A) DS 033 2005 AG Modification of the Amendment of the NFFL (article 74, 74.1, 74.2, articles 346, 365) DS 009 2005 AG Declare without effect Pasco PPF (disqualify R M 0632 2002 AG and part of R M 0549 2002 AG referred to creation of Pasco PPF) DS 005 2005 AG Modification of the Amendment of the NF W L (article 3 numeral 3.96) DS 004 2005 AG Modification o f the Amendment of the organization and functions of INRENA; incorporation of OSINFOR (supervisory of forest concessions for timber purposes) to INRENA RJ 298 2005 AG Modification of R J 163 2004 RJ 296 2005 AG Resize of zone 1 of Puno PPF RJ 252 2005 AG Resize of zone 3 of Madre de Dios PPF RJ 244 2005 AG Approval of the Amendment of the financial debt for harvesting fee RJ 215 2005 AG Basis to strength forest concessions for timber purposes RJ 206 2005 AG Resize of zone 1 of San Martin PPF RJ 181 2005 AG OSINFOR functions RJ 174 2005 AG Suspension of R J 041 2004 RJ 107 2005 AG Resize of zone 1 of Ucayali PPF RJ 105 2005 AG Approval National mahogany volume for 2005 RJ 097 2005 AG Resize of zone 1 of Madre de Dios PPF RJ 094 2005 AG R esize of zone 3 of Madre de Dios PPF RJ 083 2005 AG Suspension of R J 073 2005 application RJ 073 2005 AG Establishment of a payment regime for the harvesting fee RJ 012 2005 AG Revoke articles 4 and 5 of R J 102 2004 RM 670 2005 AG Modification of R M 0549 2002 (article 2) RM 0235 2005 AG Formalization of the Mesa de Dilogo y Concertacin Forestal RM 144 2005 AG Suspension of R M 0549 2002 referred to creation of Puno PPF 2006 L 28852 Law of promotion of private inversion in reforestation and agroforestry DS 048 2006 AG Modification of the Amendment of the NF W L (articles 109.5, 110, 114, 119 y 120) DS 007 2006 AG Modification of the Amendment of the NFW L (articles 46, 51, 52, 54, and from 53 section g and i, and addition of sectio n j) RJ 347 2006 AG Approval National mahogany volume for 2007 RJ 331 2006 AG Enforced measures to assure mahoganys sustainable harvesting and conservation

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233 RJ 238 2006 AG Manual of administrative procedures for mahogany harvesting, transport and exp ort RJ 232 2006 AG Approval of referential terms to formulate forest management plans in indigenous communities RJ 216 2006 AG Resize of zone 3 of San Martin PPF RJ 209 2006 AG Procedures for disqualification plans of forest concession contracts RJ 176 2006 AG Modification of the Amendment of the refinancing regime for harvesting fee debt (article 7) RJ 162 2006 AG Resize of zone 1 of San Martin PPF RJ 136 2006 AG Resize of zone 4 of Loreto PPF RJ 081 2006 AG Modification of R J 102 2004 AG (a rticle 2) RJ 016 2006 AG Establishment of the National volume of mahogany exports RM 434 2006 AG Modification of R M 0586 2004 AG (article 2) RM 318 2006 AG Resize of zone 6 of Loreto PPF RS 002 2006 AG Approval of National reforestation plan 200 7 L 29020 Modification of Law 28204 DS 011 2007 AG Transference of INRENA faculties to Regional Governments RJ 056 2007 AG Resize of zone 2 of Huanuco PPF RJ 032 2007 AG Constitution of the Commission to fight illegal logging (COATCI) L: Law DL: Law Decree D S: Supreme Decree RJ: Chief Resolution RM: Ministerial Resolution RS: Supreme Resolution

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234 APPENDIX B FOREST ORGANIZATION QUESTIONNAIRE The School of Natural Resources and Environment at the University of Florida is conducting an independent resear ch study about forest concessions in Madre de Dios. In order to understand the factors affecting the development of forest enterprises and forest management, Ms. Cosso is conducting face to face interviews with forest organizations You have been selected to be a respondent. Privacy is a key principle of this survey. There are no wrong or right answers, most importantly candid and honest answers are the most useful. If you have any questions about this survey, please feel free to contact either the followi ng people: Dr. Stephen Perz ( sperz@soc.ufl.edu 352 392 0265 ext. 234), or Dr. Karen Kainer ( kkainer@latam.ufl.edu ). N Interview: Date: Name Organization: Locatio n: *Province: District: Section I. RESPONDENTS DATA 1 Name: 2 Position in the organization: 3 Sex: (1) Male (2) F emale 4 Age: 5 Education: 6 Where are you from (city / department) ? 7 How long have you been settled in this area ( Puerto Maldonado, Iberia, Iapari, Bajo Colorado) ( years) ? Section II. POLITICAL ECONOMIC CONTEXT 8 Who are the main individuals or organizations with whom the organization has links with respect t o the forest concession system? Wha t is the nature of those links? Do a map with arrow showing intensity of relationships (record objectives underlying linkages, and functions of the most important partners). 9 Since when does this organization is working in Madre de Dios? 10 What are your main functions/roles? 11 What is your capacity to fulfill your func tion/roles (personnel, financial)?

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235 12 How did this organization get involved with the forest concession system/concessionaire enterprises/certification? 13 How many and what enterprises is this organization providing support to?, what type of support? For how long? 14 What are/were the main factors favoring this support? 15 What are/were the main factors constraining this support? 16 How is/was your relationship with enterprises and/or other actors in the forest sector (negotiation or conflict)? 17 When did these relations s tarted? For how long? 18 If there were conflicts what was the main cause of conflicts and when it happened? 19 How would you characterize the organizations relationship with other regional organizations ? Could you describe your relationship with the government ? 20 What is your perspective on enterprises performance? 21 What do you think are the main problems faced by SMFEs in Madre de Dios? And in other departments? (e.g., Ucayali, Loreto, etc) 22 What are the big steps in carrying out forest management in Madre de Dios? 23 What is your perspective on constraints/difficulties in forest management? 24 What are the big steps in carrying out certification? 25 What is your perspective on constraints/difficulties in certification? 26 What is your perspective on constraints/difficulties in preventing to attain certification? 27 What have been/are crucial events and problems in the forest management process? 28 What have been/are crucial events and problems in the certification process? 29 What is your perspective for the future of forest management in Madre de Dios? 30 What is your perspective for the future of certification in Madre de Dios?

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236 APPENDIX C SMFE QUESTIONNAIRE The School of Natural Resources and Environment at the University of Florida is conducting an independent research study about fore st concessions in Madre de Dios. In order to understand the factors affecting the development of forest enterprises and forest management, Ms. Cosso is conducting face to face interviews with forest enterprises from the first public bidding. You have been selected to be a respondent. Privacy is a key principle of this survey. There are no wrong or right answers, most importantly candid and honest answers are the most useful. If you have any questions about this survey, please feel free to contact either th e following people : Dr. Stephen Perz (sperz@soc.ufl.edu 3523920265 ext. 234), or Dr. Karen Kainer ( kkainer@latam.ufl.edu ). N Interview: D ate: Enterprise Name: Location: *Province: (1) Tahuamanu (2) Tambopata (3) Manu District: Access: Distance from concession to main road (hr. or Km): Section I. RESPONDENTS DATA 1 Name: 2 Position in the enterprise: 3 Sex: (1) Male (2) F emale 4 Age: 5 Education (# years complet ed) : 6 Where are you from ( city / department) ? 7 How long have you been settled in this area (years) ?: 8 Do you carry out other activities besides logging? Which ones? 9 What is your current annual income for logging activity? Section II: HISTORY AND ENTERPRISE ORGANIZATION 10 Enterprises type of society: (1) SAC (2) SRL (3) SA / EIRL (4) Natural person 11 Why did you decide to form the enterprise?

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237 12 How was the enterprise created? Who was most responsible for its creation? (e.g., government mandate, some people decision, suggestion of outside NGO)? 13 Did you have external support to form the enterprise (from who), or did the members do it by themselves? How did the members become involved? 14 As the enterprise developed, what sort of help has it received from outside? Has it re ceived advice and/or funding or other support from the government? What about from NGOs? How did you get this support? Who initiated it? How was the support given? What benefits and limitations has the enterprise derived from this support? 15 In what ways has the enterprise changed its structures (e.g. managers )? 16 How is the Manager of this enterprise selected? How are decisions made? 17 What is the enterprise structure? 18 How many members does the enterprise have? Have there been any changes in member numbers? Why? # memb. Sex Age # years educ. # years previous experience logging, before 2002 # years previous experience business, before 2002 Relation members (Fam, Neigh, Ind) # times training/last year # days training 1Ger 2 3 4 19 How are the utilities and activities distribution among enterprises members? 20 What are your main markets/buyers? 21 What do you think about the performance of this enterprise in carrying forest management? 22 What would you do to make this enterprise more effective? 23 What are the main problems inside this enterprise? Section III. PHYSICAL CAPITAL 24 Enterprise assets Asset Number Year of purchase Unitarian Cost ($ or S/. ) Fabrication year Motosierra Serrucho de trozar Sierra mecanica Sier ra circular Sierra cinta Traca traca

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238 Bote con motor Canoa con motor Peque peque Carreta Aserradero complete Aserradero portatil Castillo manufacturado Mesa con disco circular Mesa con sierra circular Tractor Camion Cargador frontal Volquete 25 What has been the amount ($ or S/.) invested in road construction and maintenance of them since enterprise formation (2002 2006) ? 26 What has been the amount ($ or S/.) invested in supplies (c omputer, office materials, etc.) since enterprise formation (2002 2006) ? 27 What has been the amount ($ or S/.) invested in buildings since enterprise formation? 28 What has been the amount ($ or S/.) invested in the following: harvesting fees : *PGMF elaborati on: *POAs elaboration (2002 2006): Section I V FINANCIAL CAPITAL 29 What has been the amount received ($ or S/.) as loan since enterprise formation (20022006) ? By whom? Explain process of loan. 30 What has been the amount received ($ or S/.) as support by NGOs or other organizations since enterprise formation (2002 2006) ? explain 31 What has been the economic contribution ($ or S/.) of enterprise members since enterprise formation (2002 2006) ? 32 What is the amount ($ or S/.) of enterprise savings in the bank? 33 What a re the mechanisms to finance the harvesting activities (bank credits, habilito, other)? Explain. In case of habilito explain who are main habilitadores and the process.

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239 Section V. NATURAL CAPITAL 34 What is the concession area (ha) per contract? 35 What is the total timber volume (m3) (approved and extracted ) since enterprise formation (2002 2006) ? POA Total (m3) Timber Category A (m3) B (m3) C (m3) D (m3) E (m3) 2002 2003 2004 2005 2006 36 What was the total number of speci es (approved and extracted) per POA (2002 2006)? 37 How did you find the concession when you got the contract in terms of forest resources? Was it logged before? Section V I HUMAN CAPITAL 38 How many members in the enterprise had previous experience in logging activities to the formation of the enterprise? 39 How many members in the enterprise had previous experience in business activities to the formation of the enterprise? 40 What is the amount ($ or S/.) invested in training of personnel since formation of enterpri se (per year)? Amount ($) 2002 2003 2004 2005 2006 41 How many times did enterprise members receive any training from NGOs or GOs? 42 What is the level of education of the Administrator (Gerente) (years of schooling)? 43 What is your annual salary (for all activities) ? 44 How would you rate the performance of this enterprise members: Low ( 1 ) Medium (2) High (3) Section VI I SOCIAL CAPITAL 6A. Structural Social Capital 6A1. Organizational density and characteristics 45 Are you or is someone in the enterprise a member of any groups, organizations, or associations (forest related) in the region? Name them.

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240 46 Which of these groups is the most important to you (the 3 most important) ? 47 Overall, are the same people members of these different groups or is there little overlap in membership? No overlap (1) Some overlap (2) Much overlap (3) 48 About the members of these three groups Yes (1) No (2): Group 1 2 3 Are members mostly of the same gender? Do members mostly have the same occupation? Are members mostly from the same age gr o up? Do members mostly have the same level of education? 49 How does the group usually make decisions? Group 1 2 3 The leader decides and informs the other group members The leader asks group members what they think and t hen decides The group members hold a discussion and decide together Other (specify) 50 Overall, how effective is the groups leadership? Group 1 2 3 Very effective Somewhat effective Not effective at all 51 Do you think that by belonging to this group you have acquired new skills or learned something valuable? Group 1 2 3 Yes No 6A2. Networks and Mutual Support Organizations 52 If there is a financial problem in the enterprise, who is the first person or institution the ent erprise ask for help to deal with the situation? 53 If there is a technical problem in the enterprise, who is the first person or institution the enterprise ask for help to deal with the situation?

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241 54 Identify up to 3 specific individuals/institutions who asssit ed the enterprise in the following areas: a Borrowing money: b Trading timber: c Taking care of enterprise : 6A3. Exclusion 55 Differences often exist between people working in the same enterprise. To what extent do differences such as the following tend to divide people in the enterprise? Not at all (0 ) Somewhat ( 1 ) Very much ( 2 ) 56 Do these differences cause problems? Yes (1) No ( 0 ) 57 How are these problems usually handled? : Members work it out between themselves (1) The manager intervene (2) Judicial authoriti es mediate (3) 6A4. P articipation 58 How often the members of the enterprise get together in enterprises meetings ? F ew times/month ( 5 ) Once/month ( 4 ) Few times/year ( 3 ) Once/year ( 2 ) Never ( 1 ) 59 Do you consider that enterprises members are active in the entreprise, such as by attending meetings, or are you relatively inactive? Very active ( 3 ) Somewhat active ( 2 ) Not active ( 1 ) 60 Overall, how would you rate the spirit of participation in this enterprise? Very high ( 5 ) High ( 4 ) Average (3) Low ( 2 ) Very low ( 1 ) 6B. Cognitive Social Capital 6B1. Trust and Cooperation 61 Do you think that in this enterprise people generally trust one another in matters of roles? Do trust ( 3 ) More less trust (2) Do not trust ( 1 ) 62 Do you think over the last two years this l evel of trust has gotten better, gotten worse, or stayed about the same? Better ( 3 ) The same (2) Worse ( 1) 63 Compared with other enterprises, how much do people of this enterprise trust each other in matters of roles?

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242 More than other enterpris es (3) The same as other enterprises (2) Less than others (1) 64 Tell me whether in general you agree or disagree with the following statements : Strongly agree ( 3 ) More less Agree (2) Disagree ( 1 ) Most people in this enterprise are basically honest and can be trusted People are always interested only in their own welfare Members of this enterprise are more trustworthy than others In this enterprise, one has to be alert or someone is likely to take advantage of you If I have a problem, there is always someone to help me I do not pay attention to the opinions of others in the enterprise Most people in this enterprise are willing to help if you need it This enterprise has prospered in the last two years 6B2. Conflict Reso lution 65 In your opinion, is this enterprise generally peaceful or conflictive? Peaceful (1) Conflictive (2) 66 Compared with other enterprises, is there more or less conflict in this enterprise? Less (1) The same (2) More (3) 67 Are the relationships among people in this enterprise generally harmonious or disagreeable? Harmonious (1) Disagreeable (2) 68 Compared with other enterprises, are the relationships among people in this enterprise more harmonious, the same, or less harmonious than other enterprises? M ore harmonious (1) The same (2) Less harmonious (3) Section VII I : OTHER ENTERPRISE ASPECTS Institutional Capacity 69 How many managers did the enterprise have? How has been the relationship between the manager and members?

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243 70 How is members participation in enterprises meetings, decision making, informal opportunities to discuss ideas? 71 Do you think the enterprise have organizational culture? Is it well organized? Are there rules that members know about? Were there problems of theft of property or supplies? I f there is conflicts what are the resolution mechanisms within the enterprise? 72 What do you think about the organizational capacity of this enterprise, in terms of carrying out specialized activities (e.g., credit, commercialization)?, reflecting on and learning from previous experiences? Forest management 73 What is your strategy for doing your forest management plan? 74 What is your situation carrying out forest management according to Forest Law (harvesting fee payment, presentation of POAs up to 2006) ? 75 What ar e the big steps you have to go through to follow forest management according to what the Forest Law says? 76 Did you pursue certification? Yes (1) No (2) 77 Are you planning to pursue certification? why? Yes (1) No (2) 78 What are the big steps you had to go thr ough to attain forest certification? 79 Do you think there are limitations in forest certification? 80 How did the certification process work (costs, NGO support, etc.) ? 81 What is the next step for you? what do you anticipate to do? 82 Why do you want to continue? 83 Ho w long do you think the concession system will last? Why? P olitical Economic Context 84 Who are the main individuals or organizations with whom the enterprise has links in order to c arry out the forest management? 85 What do you think are the main problems face d by SMFEs in Madre de Dios ? 86 What are the big steps in carrying out forest management in Madre de Dios ? 87 Were there constraints/difficulties in doing forest management? 88 What is your perspective for the future of forest management in Madre de Dios? 89 What is y our perspective for the future of certification in Madre de Dios?

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244 APPENDIX D PARTICIPATING SMFEs Person Interviewed Name SMFE 1 Hugo Agroindustrial Victoria SAC 2 Luis Valdivia Maderera Amazona Tecnificada SAC, AMATEC 3 Vctor Espinoza Grupo Espinoz a (Aserradero Espinoza SA, Maderas Cocama EIRL) 4 Ignacio Crdenas Rojas Empresa Maderera Catahua Tahuamanu SAC, CATAHUA 5 Federico Ros Corporacin Forestal Tres Fronteras SRL, CORPFOREST 6 Fernando Quezada Echevarra Empresa de Extraccin, Transformac in y Comercializacin Iberia SAC, EMETCI 7 Jil Cesar Gibaja Peralta Empresa Forestal Portillo SRL, EMFORPORTILLO 8 Elmer Hermoza Empresa Maderera Industrial Isabelita SAC, EMINI 9 Ral Villafn Castillo Forestl Ro Huscar SRL 10 Abraham Cardozo Consorcio Maderyja&Maderacre (Maderera Ro Yaverija SAC, Maderera Ro Acre SAC) 11 Rafael Viena Empresa de Productores Forestales Iberia SAC, MADERERA IBERIA 12 Sonia Blanco Empresa Maderera Paujil SAC, PAUJIL 13 Wilson Miranda Shihuahuaco Timber SAC, SHIHUA HUACO 14 Julio Chirinos Medina Maderera TresFronteras SAC, TRES FRONTERAS 15 Moiss Lazo Empresa Maderera Boleo SAC, MADEBOL 16 Margarita Pari Maderera Forestal Lagarto SAC, MADEFOL 17 Justino Palomino Mercado Maderera Tawari SRL 18 Manuel Martn Mayo rga Martin Mayorga 19 Hugo Empefomsba 20 Vctor Herrera Empresa Maderera Ecolgica Manu SAC, EMECOMANU 21 Segundo Empresa Maderera Victoria San Juan Grande SAC, EMAVISJUG 22 Simen Surez Empresa de Pequeos Extractores Forestales Colorado Dos SAC, EMP EFOC DOS 23 Hiplito Chulla Empresa de Pequeos Extractores Forestales con Manejo Sostenible Guacamayo SAC, EPEFOMSG 24 Fortunato Cruzado Inversiones Maderera Bajo Colorado SAC, INBACO 25 Isabel Almirn Torres Empresa Maderera Forestal Punkiri Chico SAC MAFOPUNCHI 26 Marco Antonio Texi Marco Antonio Texi 27 Apolinario Fernndez Inversiones Apolo SRL

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245 APPENDIX E PARTICIPATING KEY EX PERTS Person interviewed Institution represented 2005 1 Miguel Pacheco WWF -Lima 2 Summer Trejo WWF MDD 3 Jaime S emizo WWF MDD 4 Mikel Manrique ProNaturaleza 5 Miguel CESVI -MDD 6 Nelson Melendez CESVI MDD 7 Jorge Alva ACCA 8 Franz Segovia FONDEBOSQUE 9 Mariana Cerna INRENA -MDD 10 Edith Meza INRENA MDD 11 Jenny Fano OSINFOR 12 Edwin Ruiz Cmara Forestal Nacio nal MDD 13 Mishari Garca UNAMAD 14 Vctor Zambrano Mesa de Dilogo y Concertacin Forestal MDD 15 Arnaldo Garca Mesa de Dilogo y Concertacin Forestal MDD 16 Wilson Miranda Asociacin de Concesionarios de Madre de Dios 17 Federico Ros Asociacin d e Concesionarios de Tahuamanu 18 Luis Zegarra Cajat Federacin de Extractores Forestales de Madre de Dios 19 Mauro Vela Consultor forestal

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246 Person interviewed Institution represented 2007 1 Edith Condori WWF -MDD 2 Mikel Manrique Pronaturalez a 3 Nelson Melendez CESVI 4 Juan Carlos Flores ACCA 5 Alonso Crdoba Fondebosque 6 Celim Huamn INRENA MDD 7 Gastn Chucos INRENA MDD 8 Ernesto Villagaray Gobierno Regional MDD 9 Wilson Miranda Asociacin de Concesionarios de Madre de Dios 10 Feder ico Ros Asociacin de Concesionarios de Tahuamanu consultor 11 Deuso Souza Asociacin de Ecologa y Medio Ambiente del Tahuamanu 12 Francisco Ruiz Asociacin de Pequeos Extractores de Madera de la Provincia del Tahuamanu, APEMAP T 13 Arnaldo Garca Comit de Gestin de Bosques del Ro Las Piedras 14 Luis Zegarra Cajat Federacin de Extractores Forestales de la Regin de MDD 1 5 Ricardo Estrada Consultor forestal, Rainforest 16 Mauro Vela Consultor forestal

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247 APPENDIX F F ACTOR ANALYSIS Because there are many indicators relative to the number of observations, an exploratory factor analysis was applied as the first step in the SMFE capital analysis to assess the underlying patterns of relationships for the capital indicators It was also used to redu ce the number of indicators by identifying underlying common factors that represent each fundamental construct; namely produced, natural, human, and social capital. Thus, individual factor analyses were carried out for each group of capital indicators. Pri ncipal component analysis was used to determine the factor structures for the six indicators designed to measure produced capital, the two i ndicators that measure natural capital, the five indicators measuring human capital, and the twenty three i ndicators that measure social capital. Due to the small population in this study, as well as the larger number of i ndicators representing social capital, I performed multiple factor analyses instead of just one. The most widely used orthogonal factor rotation metho d (i.e., Varimax) was used to rotate the factor structures in order to get a simple structure and to make the factors more meaningful ,1 in order to facilitate interpretation ( Hair et al 1998 ). Components with eigenvalues2 greater than 1.0 were considered in this analysis; when they were close to 1.0, a scree plot of eigenvalues was used to arrive at a final number of factors. In addition, i ndicators with component loading of 0.50 or greater were kept ( Hair et al 1998). Cronbachs a lpha was used to measure reliability3 of the i ndicators in every construct, considering a value of 0.50 or greater as acceptable ( Baumgartner & Jackson 1995). The Kayser -Myer Olking (KMO) statistic was used to check for 1 According to Hair et al (1998), rotation improves interpretation of the factors by reducing some of the ambiguities that often accompany the initial unrotated factor solutions. 2 It is the variability of a factor. 3 Reliability determines how consistently the selected variables measure some construct

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248 appropriateness of exploratory analysis as a method of analysis for the i ndicators in each construct. For this study, the value of KMO for all con structs was larger than 0.5 (see Tables below ); thus the use of exploratory factor analysis was deemed to be appropriate. For produced capital I employed the six relevant indicators in the first factor analysis. The produced capital indicators are positively related and loaded high in one of two factors, which together accounted for 88.6% of the total variance in those six indic ators, as shown in Table F 1 In the first, factor indicators are more related to the SMFE liabilities; while in the second, factor indicators are more related to fix ed capital (fix ed assets) or what for SMFEs usually becomes fixed capital (in the case of loan amount). Harvesting fee, cost of management plans, and size of concession areas constitute important dimensions of produced capital for SMFEs, thus accounting for most of its variance. The six indicators representing produced capital yielded a reliability coefficient of 0.67 (Cronbach alpha). In the case of natural capital, the two indicators used to measure it are loaded into one single factor. The two indicators are positively related and account for 82.7% of the total variance, yielding a reliabilit y coefficient of 0.79, as shown in Table F 2 For human capital, two factors were identified by factor analysis which explains 76.7% of the total variance, as shown in Table F 3 The first factor is related to members previous job experience, and the seco nd factor is more related to a members current performance in the enterprise. The five items under human capital yielded a reliability coefficient of 0.77. In the case of social capital (Table F 4 ), as this indicator is composed of other constructs (i.e., Networks, Participation, Trust, and Exclusion ), and particularly because of the large number of indicators being considered, I performed multiple factor analyses instead of just one. For Networks two factors were identified by factor analysis and account for 66.8% of the total

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249 variance; and its six indicators yielded a reliability coefficient of 0.63. For Participation a single factor was identified accounting for 86.2% of the total variance; and its two indicators yielded a reliability coefficient of 0. 73. For the concept Trust a single factor was identified that explains 67% of the total variance; and its eight indicators yielded a reliability coefficient of 0.92. Finally, Exclusion (also a single factor) was identified and accounts for 90.8% of the total variance; and its three indicators yielded a reliability coefficient of 0.91. Although two factors were identified in the case of the Networks concept, there is no particular meaning for each of these separate factors. Thus, the factors analyses for th ese constructs of social capital (i.e., Networks, Participation, Trust, and Exclusion) validate the creation of individual scales that are used in the analysis of SMFEs capacities as new indicators of social capital as shown in Table 5 1. Also, in this fac tor analysis series the indicators conflict and density of membership were not considered for analysis because they are formed by a single indicator each. Table F 1 Factor loadings of produced capital dimensions Indicators Factor 1 Factor 2 Loan .9 80 Roads .920 Equipment .724 Harvesting fee .971 Concession area .909 Management plans .891 Eigenvalue 3.79 1.52 Percentage of variance explained 63.19 25.38 Cumulative variance explained 63.19 88.57 Cronbach alpha 0.67 KMO 0.59 Table F 2 Factor loadings of natural capital dimensions Indicators Factor 1 Total approved volume .910 Total harvested volume .910 Eigenvalue 1.66 Percentage of variance explained 82.74 Cumulative variance explained 82.74 Cronbach alpha 0.79 KMO 0.50

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250 Tabl e F 3 Factor loadings of human capital dimensions Indicators Factor 1 Factor 2 Logging experience .963 Business experience .960 Enterprise members .782 Members performance .826 Education .504 Eigenvalue 2.78 1.06 Percentage of variance expla ined 55.58 21.14 Cumulative variance explained 55.58 76.72 Cronbach alpha 0.77 KMO 0.64 Table 4 Factor loadings of social capital dimensions Networks Factor 1 Factor 2 2 nd person/institution to commercialize timber .806 2 nd person/institution to lend money .799 3 rd person/institution to lend money .772 3 rd person/institution to commercialize timber .715 1 st person/institution to ask for financial help .883 1 st person/institution to lend money .868 Eigenvalue 2.48 1.53 Percentage of vari ance explained 41.26 25.50 Cumulative variance explained 41.26 66.76 Cronbach alpha 0.63 KMO 0.57 Participation Factor 1 Qualification of participation spirit .929 Members participation in meetings .929 Eigenvalue 1.73 Percentage of variance explained 86.24 Cumulative variance explained 86.24 Cronbach alpha 0.73 KMO 0.50 Trust Factor 1 Members trust other members .946 Most members are honest and can be trusted .893 Trust improved in the last 2 years .853 If any problem there is alw ays someone to help .840 You have to be alert so no one takes advantage .802 Most members are able to help if you need .784 Enterprise prospered in the last 2 years .701 Members interested only in their own benefit .694 Eigenvalue 5.36 Percentage of variance explained 66.97 Cumulative variance explained 66.97 Cronbach alpha 0.92 KMO 0.87

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251 Table F 4 C ontinued Exclusion Factor 1 Differences divide members .968 Differences had caused problems .959 Problem solved by .927 Eigenvalue 2.72 Per centage of variance explained 90.77 Cumulative variance explained 90.77 Cronbach alpha 0.91 KMO 0.74 The factor analyses, which considers KMO values higher than 0.5, component loadings of 0.50 or greater, and Cronbachs alpha of 0.50 or higher, sho w that the indicators of the various capitals do in fact form coherent factors. The factor analysis thus validates the conceptual framework. This provides the basis for a series of comparisons of capabilities of SMFEs across Madre de Dios .4 4 The series of factor analyses performed here resulted in factor scores or indices for each type of capital under analysis. These resulting indices were used in further multi regression analysis and Multivariate analysis of variance with the purpose of understanding the relationship between the dependent variable forest management performance (for which an index variable was created) and the capacity of SMFEs (in terms of indices for each type of capital serving as independent variables). These analyses a re presented in Appendix G because no significant differences were found for this type of analysis.

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252 APPENDIX G ADD ITIONAL FACTORS ANALYSIS PROCEDURES In order to understand the relationship between forest management performance and the capacity of SMFEs in terms of their capital assets, a multiple regression was performed. For the regression analysis several variable indices were constructed. Indices of each type of capital served as independent variables and the index of forest management performance served as dependent variable. The original set of variables used in this dissertation to represent each type of capital was replaced with a smaller set of variables. These new variables or indexes of each type of capital are the result of the factors scores constructed by developing the series of factor analysis presented in Appendix F. Three variables that are important i n knowing the status of a SMFE in following forest management according to the NFWL (Table G 1 ) were replaced by a new variable which resulted from the factor score: the the index of forest management performance variable. This new variable is defined as the overall performance of a SMFE in carrying out forest management according to the regulations of the new Forestry and Wildlife Law Table G 1 Factor loadings of forest management dimensions Items Factor 1 Situation management plans .931 Number AOPs mobilized .886 Harvesting fee paid .870 Eigenvalue 2.41 Percentage of variance explained 80.25 Cumulative variance explained 80.25 Cronbach alpha 0.81 KMO 0.71 The results of the multiple regression analysis show n below, shows that there is not st atistic al significance of differences among the variables under study, which may be better explained by the low number of degrees of freedom. Usually in regression analyses, the degrees

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253 of freedom need to be at least 30; however in this case the population sample is 27 for which the degrees of freedom are 19. The value of R2 is 0.555, which means that approximately 55% of the variation in the index of forest management performance is explained by the indices of capital. Table G 2. Model Summary Model R R Square Adjusted R Square Std. Error of the Estimate 1 .555 a .308 .054 .780671 a Predictor s. (Constant), Index Produced Cap, Index Human Cap, Index Natural Cap, Index participation, Index trust, Index exclusion, Index networks. Table G 3 ANOVA b Model Sum of Squares df Mean Square F Sig. 1 Regression 5.165 7 .738 1.211 .344 a Residual 11.580 19 .609 Total 16.744 26 a Predictor s. (Constant), Index Produced Cap, Index Human Cap, Index Natural Cap, Index participation, Index trust, Index exclusi on, Index networks. b. Dependent variable: Index Forest Management Table G 4 Coefficientsa Model Unstandardized Coefficients Standardized Coefficients t Sig. B Std. Error Beta 1 (Constant) .000 .150 .000 1.000 Index Produced cap .218 .332 .185 .65 7 .519 Index Natural cap .408 .209 .421 1.954 .066 Index Human cap .318 .356 .236 .894 .382 Index Networks .241 .444 .146 .544 .593 Index Participation .154 .251 .166 .614 .547 Index Trust .797 .465 .665 1.713 .103 Index Exclusion .558 .3 78 .631 1.476 .156 A multivariate analysis of variance (MANOVA) was also performed in order to examine differences in the capacity of SMFEs in terms of their capitals through the three distinctions made in Chapter 5 (i.e., by province, certification sta tus in the Department, and certification planning in Tahuamanu). This time the dependable variables used were the indices of each type

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254 of capital created as result of the factors scores constructed by developing the series of factor analysis presented in A ppendix F The results below (Table G 5) show that there are significant differences in produced capital among the SMFEs in the Tahuamanu and Manu provinces, but not other significant differences were found among SMFEs in the three provinces for the other types of capital. In the case of certification status, results (Table G 6) show that there are significant differences between certified and noncertified SMFEs in the Department in terms of their produced capital and their index of networks. Among SMFEs i n Tahuamanu, the results (Table G 7) show that significant differences were found for produced capital among SMFEs already certified and the ones planning certification and the ones non-planning it; significant differences were found for natural capital am ong SMFEs already certified and the ones nonplanning certification; and significant differences were found for the network index among SMFEs already certified and the ones planning certification and the ones nonplanning it. Table G 5 MANOVA by province Source Dependent Variable Type III Sum of Squares df Mean Square F Sig. prov Index Produced cap 3.090 2 1.545 4.137 .029 Index Natural cap 2.044 2 1.022 1.557 .231 Index Human cap 1.135 2 .567 1.690 .206 Index Networks .009 2 .005 .018 .982 Index Participation .526 2 .263 .336 .718 Index Trust .212 2 .106 .222 .802 Index Exclusion 1.356 2 .678 .811 .456 Index Forest Management 1.536 2 .768 1.212 .315

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255 Table G 6 MANOVA by certification status in Madre de Dios Source Dependent Variable Typ e III Sum of Squares df Mean Square F Sig. certific Index Produced cap 5.986 1 5.986 24.665 .000 Index Natural cap .358 1 .358 .513 .481 Index Human cap .613 1 .613 1.787 .193 Index Networks 2.328 1 2.328 15.366 .001 Index Participation .065 1 .06 5 .084 .774 Index Trust 1.196 1 1.196 2.858 .103 Index Exclusion .010 1 .010 .011 .916 Index Forest Management .790 1 .790 1.239 .276 Table G 7 MANOVA by certification planning status in the Tahuamanu province Source Dependent Variable Type III S um of Squares df Mean Square F Sig. certplan Index Produced Cap 3.748 2 1.874 4.406 .046 Index Natural Cap 1.831 2 .915 3.898 .060 Index Human Cap .184 2 .092 .168 .848 Index Networks 2.870 2 1.435 13.223 .002 Index Participation .575 2 .287 .377 .696 Index Trust 1.834 2 .917 1.765 .226 Index Exclusion .212 2 .106 .093 .912 Index Forest Management .322 2 .161 1.389 .298

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256 APPENDIX H P -VALUES (MANOVA) Comparison of Forest Management Capacity between private SMFEs in the Tahuamanu and Tambopata provinces P -values based on MANOVA. Indicators Tahuamanu n=12 Tambopata n=6 Mean Mean P value Produced capital Equipment ($) 113,940 14,237 0.0331 Roads ($) 169,083 22,906 0.204 3 Harvesting fee ($) 122,892 88,631 0.360 4 Loan ($) 55,953 7,504 0 .394 7 Management plans ($) 42,222 20,380 0.0764 Area (ha) 40,595 24,242 0.1566 Natural capital Approved timber volume (m 3 /ha) 34.54 26.35 0.4359 A category 2.26 0.79 0.0343 B category 0.76 1.87 0.0101 C category 5. 35 16.24 0.0052 D category 14.10 2.94 0.0002 E category 12.08 4.51 0.0182 S pecies per POA (N) 14.67 12.30 0.4510 Extracted timber volume (m 3 /ha) 6.34 13.2 9 0.2249 A category 1.87 0.79 0.0930 B category 0.23 1.54 0.0004 C category 0.56 8.72 0.0113 D category 2.77 0.85 0.3650 E category 0.92 1.41 0.7721 S pecies per POA (N) 4.40 7.10 0.2704 Human capital Enterprise members (N) 7. 42 4.83 0.4167 Logging experience (N members ) 7.00 3.83 0.3656 Business experience (N members ) 7.00 4.1 7 0.4481 Education (schooling years) 1 2 50 11.00 0.3918 Members performance (%) 66.68 72.25 0.5399 Social capital Density of membership (N) 0. 58 1. 17 0.0719 Participation ( % ) 80.75 79.4 7 0.8070 Networks (% diversity people assisting SMFE ) 53.9 6 60.32 0.5075 Exclusion ( % existence of exclusion among members ) 36 90 16.67 0.2730 Trust ( % extent of trust among members ) 73.61 79.8 7 0.5264 Conflict: % SMFEs in conflict 16.70 0 0.3172

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257 Comparison of Forest Management Capacity between private SMFEs in the Tahuamanu and Manu provinces P -values based on MANOVA. Indicators Tahuamanu n=12 Manu n=9 Mean Mean P value Produced capital Equipment ($) 113,940 6,960 0.0017 Roads ($) 169,083 2,587 0.0142 Harvesting fee ($) 122,892 48,477 0.0409 Loan ($) 55,953 8,189 0.2526 Management plans ($) 42,222 10,657 0.0009 Area (ha) 40,595 18,899 0.0246 Natural capital Approved timber volume (m 3 /ha) 34.54 35.25 0.9279 A category 2.26 0.22 <0.0001 B category 0.76 0.88 0.8491 C category 5. 35 20.63 0.0001 D category 14.10 3.38 <0.0001 E category 12.08 10.14 0.4185 S pecies per POA (N) 14.67 14.12 0.7646 Extracted timber volume (m 3 /ha) 6.34 24.63 0.0078 A category 1.87 0.22 <0.0001 B category 0.23 0.60 0.2283 C category 0.56 16.5 1 <0.0001 D category 2.77 1.71 0.9948 E category 0.92 5.58 0.0070 S pecies per POA (N) 4.40 11.10 0.0251 Human capital Enterprise members (N) 7. 42 10.33 0.2183 Logging experience (N members ) 7.00 4.33 0.1735 Business experien ce (N members ) 7.00 4.33 0.1740 Education (schooling years) 1 2 50 10. 56 0.1986 Members performance (%) 66.68 66.68 0.9816 Social capital Density of membership (N) 0. 58 0.11 0.1129 Participation ( % ) 80.75 74.33 0.3261 Networks (% diversity peopl e assisting SMFE ) 53.9 6 53.94 0.9877 Exclusion ( % existence of exclusion among members ) 36 90 25.40 0.4775 Trust ( % extent of trust among members ) 73.61 73.61 0.9787 Conflict: % SMFEs in conflict 16.70 11.11 0.7028

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258 Comparison of Forest Management Capacity between private SMFEs in the Tambopata and Manu provinces P -values based on MANOVA. Indicators Tambopata n=6 Manu n=9 Mean Mean P value Produced capital Equipment ($) 14,237 6,960 0.4306 Roads ($) 22,906 2,587 0.3401 Harvesting fee ($) 88,631 48,477 0.365 2 Loan ($) 7,504 8,189 0.875 2 Management plans ($) 20,380 10,657 0.1806 Area (ha) 24,242 18,899 0.5418 Natural capital Approved timber volume (m 3 /ha) 26.35 35.25 0.4157 A category 0.79 0.22 0.0368 B category 1.87 0.8 8 0.0201 C category 16.24 20.63 0.4296 D category 2.94 3.38 0.9164 E category 4.51 10.14 0.0991 S pecies per POA (N) 12.30 14.12 0.6400 Extracted timber volume (m 3 /ha) 13.2 9 24.63 0.2245 A category 0.79 0.22 0.0291 B category 1.54 0.60 0.0101 C category 8.72 16.5 1 0.1323 D category 0.85 1.71 0.3868 E category 1.41 5.58 0.0386 S pecies per POA (N) 7.10 11.10 0.3626 Human capital Enterprise members (N) 4.83 10.33 0.0779 Logging experience (N members ) 3.83 4.33 0.7678 Business experience (N members ) 4.17 4.33 0.6636 Education (schooling years) 11.00 10. 56 0.7828 Members performance (%) 72.25 66.68 0.5737 Social capital Density of membership (N) 1. 17 0.11 0.0042 Participation ( % ) 79.4 7 74.33 0.5512 Ne tworks (% diversity people assisting SMFE ) 60.32 53.94 0.5211 Exclusion ( % existence of exclusion among members ) 16.67 25.40 0.6491 Trust ( % extent of trust among members ) 79.8 7 73.61 0.5624 Conflict: % SMFEs in conflict 0 11.11 0.5243

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259 Comparison o f Forest Management Capacity between Certified and Non -certified private SMFEs P -values based on MANOVA. Indicators Certified n=3 No t certified n=24 Mean Mean P value Produced capital Equipment ($) 300,229 25,611 <0.0001 Roads ($) 593,333 17,071 <0.0001 Harvesting fee ($) 204,141 76,265 0.0423 Loan ($) 210,989 6,5 50 <0.0001 Management plans ($) 76,640 20,623 0.0007 Area (ha) 68,531 24,878 0.0040 Natural capital Approved timber volume (m 3 /ha) 49.15 30.93 0.0998 A category 3.47 0.98 0.0 086 B category 1.05 1.04 0.9169 C category 8.57 13.40 0.6135 D category 20.27 6.51 0.0042 E category 15.78 9.00 0.0941 S pecies per POA (N) 18.27 13.42 0.1639 Extracted timber volume (m 3 /ha) 10. 3 8 14.43 0.9004 A category 2.91 0.85 0.0095 B category 0.24 0. 70 0.4655 C category 1.0 3 8.52 0.3344 D category 4.04 1.73 0.2707 E category 2.17 2.63 0.6844 S pecies per POA (N) 5.80 7.41 0.8785 Human capital Enterprise members (N) 10 .00 7.54 0.7080 Logging experienc e (N members ) 10 .00 4.83 0.2163 Business experience (N members ) 10 .00 4.92 0.2276 Education (schooling years) 1 3.67 11. 25 0.2697 Members performance (%) 66.70 68.07 0.9710 Social capital Density of membership (N) 0 0. 63 0.1479 Participation ( % ) 84.6 0 77.54 0.4318 Networks (% diversity people assisting SMFE ) 79.37 52.37 0.0271 Exclusion ( % existence of exclusion among members ) 28.60 28.57 0.7258 Trust ( % extent of trust among members ) 97.23 72.22 0.1098 Conflict: % SMFEs in conflict 0 12.50 0.5344

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260 Comparison of Forest Management Capacity between private SMFEs already certified and planning certification in the Tahuamanu province. P -values based on MANOVA. Indicators Already certified n=3 Planning certification n=4 Mean Mean P value P roduced capital Equipment ($) 300,229 90,095 0.0095 Roads ($) 593,333 31,015 0.0276 Harvesting fee ($) 204,141 95,856 0.2933 Loan ($) 210,989 4,350 0.0054 Management plans ($) 76,640 26,178 0.0490 Area (ha) 68,531 27,293 0.0672 Natural capital Approved timber volume (m 3 /ha) 49.15 40.68 0.5711 A category 3.47 2.95 0.5432 B category 1.05 0.59 0.4289 C category 8.57 6.05 0.3527 D category 20.27 17.17 0.6694 E category 15.78 13.93 0.7038 S pecies per POA (N) 18.27 13.08 0.2 874 Extracted timber volume (m 3 /ha) 10. 3 8 5.90 0.3428 A category 2.91 2.39 0.4591 B category 0.24 0.03 0.2867 C category 1.0 3 0.41 0.1791 D category 4.04 2.37 0.5847 E category 2.17 0.70 0.0764 S pecies per POA (N) 5.80 3.45 0.3187 Human capital Enterprise members (N) 10 6.5 0.6319 Logging experience (N members ) 10 6.5 0.6418 Business experience (N members ) 10 6.5 0.6418 Education (schooling years) 1 3.67 10.25 0.1435 Members performance (%) 66.70 75.00 0.7998 Social ca pital Density of membership (N) 0 0 1.0000 Participation ( % ) 84.60 84.62 0.9853 Networks (% diversity people assisting SMFE ) 79.37 39.2 8 0.0062 Exclusion ( % existence of exclusion among members ) 28.60 3 5. 70 0.9640 Trust ( % extent of trust among me mbers ) 97.23 70.83 0.2401 Conflict: % SMFEs in conflict 0.0 25.0 0.4505

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261 Comparison of Forest Management Capacity between private SMFEs already certified and nonplanning certification in the Tahuamanu province. P -values based on MANOVA. Indicators Al ready certified n=3 Non planning certification n=5 Mean Mean P value Produced capital Equipment ($) 300,229 21,243 0.0011 Roads ($) 593,333 24,987 0.0195 Harvesting fee ($) 204,141 95,773 0.2618 Loan ($) 210,989 4,214 0.0045 Management plans ($ ) 76,640 34,407 0.1079 Area (ha) 68,531 34,474 0.1361 Natural capital Approved timber volume (m 3 /ha) 49.15 20.86 0.0237 A category 3.47 0.97 0.0487 B category 1.05 0.72 0.5471 C category 8.57 2.86 0.0121 D category 20.27 7.93 0.0299 E category 15.78 8.37 0.0850 S pecies per POA (N) 18.27 13.78 0.3064 Extracted timber volume (m 3 /ha) 10. 3 8 4.28 0.1286 A category 2.91 0.82 0.0572 B category 0.24 0.39 0.6929 C category 1.0 3 0.40 0.1771 D category 4.04 2.32 0.5040 E category 2.17 0.34 0.0348 S pecies per POA (N) 5.80 4.32 0.4281 Human capital Enterprise members (N) 10 6.60 0.6745 Logging experience (N members ) 10 5.60 0.5053 Business experience (N members ) 10 5.60 0.5053 Education (schooling years) 1 3.67 1 3 6 0 0.9812 Members performance (%) 66.70 60.00 0.6461 Social capital Density of membership (N) 0 1. 4 0 <0.0001 Participation ( % ) 84.60 75.38 0.3821 Networks (% diversity people assisting SMFE ) 79.37 50.4 6 0.0262 Exclusion ( % existence of exclusion among members ) 28.60 42 8 4 0.8411 Trust ( % extent of trust among members ) 97.23 61.66 0.1032 Conflict: % SMFEs in conflict 0.0 20.0 0.5258

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262 Comparison of Forest Management Capacity between private SMFEs planning and non -planning certificati on in the Tahuamanu province. P -values based on MANOVA. Indicators Planning certification n=4 Non planning certification n=5 Mean Mean P value Produced capital Equipment ($) 90,095 21,243 0.2042 Roads ($) 31,015 24,987 0.9225 Harvesting fee ($) 9 5,856 95,773 0.9746 Loan ($) 4,350 4,214 0.9647 Management plans ($) 26,178 34,407 0.5339 Area (ha) 27,293 34,474 0.5717 Natural capital Approved timber volume (m 3 /ha) 40.68 20.86 0.0479 A category 2.95 0.97 0.1123 B category 0.59 0.72 0.79 92 C category 6.05 2.86 0.0475 D category 17.17 7.93 0.0470 E category 13.93 8.37 0.1314 S pecies per POA (N) 13.08 13.78 0.9171 Extracted timber volume (m 3 /ha) 5.90 4.28 0.5128 A category 2.39 0.82 0.1700 B category 0.03 0.39 0.11 71 C category 0.41 0.40 0.9500 D category 2.37 2.32 0.9130 E category 0.70 0.34 0.6809 S pecies per POA (N) 3.45 4.32 0.7722 Human capital Enterprise members (N) 6.5 6.60 0.9286 Logging experience (N members ) 6.5 5.60 0.8403 Busine ss experience (N members ) 6.5 5.60 0.8403 Education (schooling years) 10.25 1 3 6 0 0.1056 Members performance (%) 75.00 60.00 0.4365 Social capital Density of membership (N) 0 1. 4 0 <0.0001 Participation ( % ) 84.62 75.38 0.3532 Networks (% diversi ty people assisting SMFE ) 39.2 8 50.4 6 0.2824 Exclusion ( % existence of exclusion among members ) 3 5. 70 42 8 4 0.7877 Trust ( % extent of trust among members ) 70.83 61.66 0.6013 Conflict: % SMFEs in conflict 25.0 20.0 0.3532

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263 APPENDIX I TIMBER SPECIES HA RVESTED IN MADRE DE DIOS BY COMMERC IAL CATEGORY Category Scientific name Common name A Swietenia macrophylla Caoba B Cedrela odorata Cedro C Cedrelinga catenaeformis Tornillo Amburana cearensis Ishpingo Aspidosperma macrocarpon Pumaqu iro Aniba sp Moena Aniba panurensis Moena alcanfor Aniba roseadora Moena rosada Calophyllum brasiliense Lagarto caspi Hura crepitans Catahua Virola sebifera Cumala Virola sp. Cumala Chorisia integrifolia Lupuna Chorisia sp Lup una Juglans nigra Nogal Juglans sp Nogal D Copaifera reticulata Copaiba Copaifera officinalis Copaiba Coumarouna odorata Shihuahuaco Dipteryx micrantha Shihuahuaco Dipteryx alata Shihuahuaco Dipteryx spp. Shihuahuaco Dip teryx odorata Charapilla Tabebuia sp Tahuari Tabebuia impetiginosa Tahuari Aspidosperma subincanum Quillobordon Aspidosperma vargasii Quillobordon Jacaranda copaia Achihua Huberodendron swietenoides Achihua Calycophyllum spruceanum C apirona Cinnamomun camphora Alcanfor, Pepa de alcanfor Dialium guianense Palisangre Ficus killipii Matapalo Ficus guianensis Renaco Vochysia sp. Alcocaspi Chimarrhis sp. Papelillo Podocarpus sp. Romerillo

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264 Ormosia sunkei Huayruro E Myroxylon balsamun Estoraque Manilkara bidentata Quinilla Hymenaea spp Azucar huayo Hymenaea courbaril Azucar huayo Hymenaea palustris Azucar huayo Hymenaea oblongifolia Yutubanco Couratari guianensis Misa Couratari spp Tau ari Mezilaurus itauba Itahuba Mezilaurus sp Itahuba Apuleia leiocarpa Ana caspi Apuleia mollaris Ana caspi Matisia sp sapote Schizolobium sp Pashaco Schizolobium amazonicum Pino chuncho Ocotea marmellensis Moena negra Vismia sp Inca pacae Ocotea sp Moena Ceiba pentandra Huimba Quararibea cordata Sapote Astronium sp. Palo baston Clarisia racemosa Mashonaste Nectandra rediculata Laurel Protium sp Copal, incienso Brosium alicastrum Manchinga Bursera gr aveolens Palo santo Cordia alliodora Laurel Ficus insipida Oje Guarea guidonia Requia Myroxylon sp. Palo peruano Pourouma cecropiifolia Uvilla Pouteria neglecta Caimito Castilla ullei Goma Spondias mombin Ubos Unonopsis matewsii Maraon del monte Ocotea costulata Alcanfor Anacardium occidentale Cashu Castilla ulei Goma Cedrela dugesii Nogalillo Ficus sp Oje Hevea brasiliensis Shiringa, Jebe

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265 Inga sp Shimbillo Minquartia guianensis Huacap Ocotea je lskii Ishpinguillo Protium aracouchini Isica Vouacapoua americana Huacapu

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275 BIOGRAPHICAL SKETCH A native of Peru Rosa Cosso grew up with a keen interest in the natural world. Educated in forestry sciences at the Universidad Nacional Agraria La Molina (UNALM) s he soo n developed a thesis on biological control in order to get her Forestry Engineer degree. After working as a forest specialist in the UNALM greenhouse, and participating in the Andean Amazon Rivers Analysis and Management ( AARAM ) project, she enrolled in th e graduate program at Florida International University in order to pursue interests in riparian environments and people After obtaining a m aster s degree in E nvironmental S tudies s he moved to Gainesville to continue the study of people and their relationships with both forests and the environment She received her Ph.D. from the University of Florida in the Fall of 2009.