|*Reserves under the “Special” domain include those managed by the public-private bi-national hydroelectric dams Itaipú and Yacyretá.
- Mbaracayú Biological Reserve is located partially within Brazil.
(Guyra 2007; FMB 2007; Itaipú 2007)
To date, Paraguay has not had a large investment in forest plantations. Only about 50,000 hectares of plantation forests currently exist in Paraguay. Primary plantation species in Paraguay are Eucalyptus grandis and E. camaldulensis, with smaller areas of Pinus taeda, P. elliotti and Melia azedarach.
Despite little forestry research and development, Paraguay demonstrates potential for high returns on forestry investments. In the Paraná River basin, unimproved Pinus spp. can achieve 25-35 m3/ha/yr, while E. grandis can reach 30-45 m3/ha/yr on good sites. This land is in competition for agricultural production and conservation of native forest. Growth rates are significantly lower in Paraguay River basin (15-20 m3/ha/yr for E. camaldulensis, 20-30 m3/ha/yr for E. grandis). However, lower land values and wage rates would mostly compensate the lower growth rates. There is even potential in the Dry Chaco for a few drought-tolerant species.
Because of the relatively high growth rates and cheap labor, Paraguay can offer forestry investment returns in excess of 20% annually (without land costs) for certain species and sites, e.g. E. grandis and Melia azedarach on good sites in the Paraná River basin (Frey 2007; JICA 2002).
Forest Sector Development
Paraguayan political economy is based on agricultural production to a greater extent than forestry, and the political priorities are oriented towards the agricultural and livestock sectors. Because economic growth is realized in large part by expanding the agricultural frontier, the destruction of native forests has been a constant feature, about 100,000-200,000 ha lost annually over the last decade (Vidal 1995; FAO 2005). Still, the forest sector employs, directly and indirectly, more than 200,000 people in the country, and is an important component of the GDP and public revenues.
Unfortunately, activity in the forest sector in the past has often amounted to little more than high-grading. There has traditionally been little concern for maintaining a resource base or for the well-being of local communities and indigenous peoples.
The industrial index of conversion from roundwood to manufactured wood products is only 40% to 60%, indicating a low technological level in wood industries, except for a few large companies. New investment will be needed to maintain competitiveness (Vidal 2004; Bobadilla 1999).
The continuing deforestation, the over-utilization of the remaining native forests, the inefficient forest management and the poor growth of forest plantation programs, will negatively affect the productive capacity of the forestry sector over the medium to long term (Vidal 2007).
National Forest Policy
The first national forest policy, implemented by Law 422/73 in 1973, created mechanisms for the regulation of forest resources under the National Forestry Service (SFN), but lacked an adequate legal framework to lead the country towards sustainable forest development. Law 536/95 was created to resolve or mitigate these problems by providing subsidies for forest producers, but has been left unfunded. The failure of these policies to establish a sustainable forest industry could lead to lack of wood supply over the medium term.
The national forestry administration currently lacks a strategy to finance sustainable forest management; therefore, there is an urgent need to identify and analyze financial mechanisms which could be used to promote the sustainable utilization of the country’s forests in order to remove barriers to investment in forest management.
The forest sector needs to have adequate financial mechanisms to influence the flow of private costs and benefits and stimulate sustainable forest management. These mechanisms should be economic instruments that take account of political and social aspects, not solely financial aspects. Deforestation and degradation of forests is induced by a growing pressure on the resources, and by subsidies for alternative land uses such as agriculture, which make sustainable forest management unattractive (Vidal 2006).
Future of Forestry
Special mechanisms to finance political and investment reform are urgently needed in order to guarantee the conservation and sustainable use of the existing forests and to promote more active participation by local communities and the private sector in long-term forest land-use planning (Vidal 2006). One important advance has been the creation of the National Forestry Roundtable, including representatives from the public and private sectors, as a cooperative forestry endeavor. Another important place for the analysis and promotion of competitiveness in the forestry sector is the Forest Product Sector Roundtable within the Investment and Export Network (REDIEX).
The National Forestry Roundtable has created participatory forestry initiatives and support mechanisms, allowing them to achieve concrete results and a close inter-institutional and inter-sector coordination, based on objectives which are compatible with each other and within a global framework. This dynamic process constitutes an important effort to move the necessary reforms forward and to strengthen institutions for the implementation of new forest policies (Vidal 2007).
Under the framework of this cooperation, a consensus document was created, entitled “Política Forestal Nacional” (National Forestry Policy), and was presented to the national government for its adoption as a national policy. At the same time proposals for forest regulations were produced for the creation of a new, autonomous State Forestry Administration, a fund for forest development for forestry investments, a new forestry law, and the updating of forest plantation incentives (MFN 2007).
The strengthening of the forestry institutions, the adjustment of the legal forestry framework, and the more active integration of the forest sector in the national planning system and in the formulation of economic development policies will permit Paraguay to mitigate the negative impacts of the macroeconomic and sector policies in sustainable forest management and energize the actions which drive an effective development.
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Greg Frey is a PhD candidate at North Carolina State University, Raleigh NC. Victor Vidal is a Forest Consultant; Professor of Forest Resource Economics and Forest Policy and Administration (Universidad Nacional de Asunción); and International Society of Tropical Foresters Regional Director for Latin America (Term 2002/05).
Posted 19 May 2008