A small-business loan-assistance pilot project aims to boost the timber industry, foster lumber-town stability and ease climate change
SAN ANTONIO TUK, Mexico (Thomson Reuters Foundation) – Not far from the site of the Cancun 2010 U.N. climate change summit, indigenous people in rural southeast Mexico are doing their part to staunch global warming.
They are perfecting Community Forestry Enterprises (CFEs) to establish long-term profitability through tree farming and related agricultural practices that protect the environment.
“Climate change is a serious problem in the world, caused by bad habits,” says Miguel Cante Chuc, president of the Ya’ax Sot Ot’ Yook’Ol Kaab Environmental Service-Providers Network. “We as Mayan people want to be sure it is reversed.”
The 9-year-old network consists of 12 Mayan jungle villages in the state of Quintana Roo on the Yucatan Peninsula, with the specific objective “to mitigate climate change and obtain financial resources.”
For all their good intentions, however, a big obstacle to success – one that they face together with hundreds of other communities like theirs across the country – is lack of access to loans for logging equipment and operations.
To ease that problem, Mexico’s government has created a Forest Investment Plan that will extend cut-rate credit lines from foreign lenders to support Community Forestry Enterprises.
The plan allows the Inter-American Development Bank (IDB) to administer a novel $6 million, 5-year technical assistance and micro-loan pilot project for local forest production projects.
Now in the design phase, Mexico’s trend-setting small-business loan assistance pilot aims to boost timber industry profits, foster community socio-economic stability, and ease problems associated with climate change.
Bank representatives hope the endeavor will be an example to the country and the world.
“It’s an innovative project offering the possibility to have something new and successful that’s never been done before,” says IDB Senior Climate Change Specialist Gloria Visconti.
It promises at least 60 CFEs will average a 6-percent increase in annual profits, garnering higher income for the 4,900 people involved in them, and providing indirect benefits to 10,680 community members. At the same time, it is expected to result in the capture of the equivalent of 28,610 tons of carbon.
WHY MATCH TREE FARMERS WITH BANKERS?
To understand why something like this was never done before and how it will work, it’s vital to consider Mexico’s peculiar land-tenure legacy.
After the hacienda system provoked peasant rebellion in the Mexican Revolution, the ensuing Constitution of 1917 provided safeguards against plantation exploitation by advancing one of the largest systems of communal land tenure in the world.
Land reform defined common property holdings for comunidades (traditional indigenous ancestral territories) and ejidos (parcels distributed to dispossessed peasants). In each of these units, community members elect officials and hold general assemblies to vote on land-use questions.
Today, communal landholders control the rights to a whopping 60 percent of Mexico’s forest lands, according to independent Mexican CFE specialist David Bray. Some 13 million people live off these lands, about half of whom belong to the country’s 62 indigenous groups, according to the IDB.
Extensive research by Bray and other scientists has established that the local governance of many of Mexico’s forests has made community forestry undertakings more successful than either corporate concessions or protected areas in conserving natural resources, providing employment, and ensuring environmental services that combat global warming.
The combination of legal rights, traditional knowledge, and economic self-interest in Mexico’s community forestry model has made it a beacon for other countries seeking to stem poverty, deforestation and greenhouse gas proliferation.
Timber production in comunidades and ejidos generally is a community-wide endeavor. Alternatively, smaller groups form inside these communities to extract and market timber.
They are now learning that their natural resources could afford significantly more economic dividends to their mostly low-income residents, while helping compensate for industrialised countries’ failure to adhere to mandatory international commitments to reduce carbon emissions.
“Through a program of carbon capture, we can provide economic sustenance to our families, live in the jungle, use it, and produce more environmental services,” Cante Chuc says.
Looking over his shoulder he can see one of the 159 members of the Mayan indigenous community of San Antonio Tuk climbing a gum tree with a machete in hand to score its bark for extraction of the resin that gives Mexican chewing gum the name chicle.
The work of the chicleros, who harvest and make gum, complements softwood lumbering and a protected area set-aside in San Antonio Tuk’s diversification and management plan for a robust woodlot and for greenhouse gas reductions. Tapping the gum tree and processing the product provides income to relieve economic pressure to fell precious and endangered tropical hardwoods like mahogany.
BREAKING WITH ‘BUSINESS AS USUAL’
The principle climate changing greenhouse gas, carbon dioxide, is absorbed by healthy jungles and forests, partially offsetting emissions released by burning fossil-fuels elsewhere. Contrary to popular belief, managed cutting of forest for timber can actually increase the carbon-absorbing capacity of the trees, because lumber products store the carbon absorbed from the atmosphere (as long as they are not burned), and new growth replaces felled trees, Bray notes.
Yet the efforts of communal landholders have rarely been met with offers of credit, partly because the ejidos and comunidades by definition hold their properties in trusts that have not been considered equity or collateral.
What’s more, Visconti notes, “Asking for credit is a cultural issue.” CFE operators “need consultation so they can be involved and ready to receive credit,” she says.
The IDB project, called Support for Forest Related Micro, Small, and Medium Enterprises in Ejidos and Communities, proposes to bring the lenders and the borrowers to the same table to resolve these issues.
Since neither the CFEs nor the banks have a history of loans for lumber business development, $4.2 million of the project disbursement will go just to technical assistance and $1.8 million will go to loans.
“It’s an innovative project,” Visconti says. “It’s not business as usual. If it was, it wouldn’t be part of the Climate Investment Funds,” she adds.
The Climate Investment Funds (CIF) were established in 2008 to provide scaled-up climate financing to developing countries, with the aim of creating new climate resilient, low-carbon development models. CIF funds are channeled through five multilateral development banks, including the IDB.
Though the Forest Investment Program, one part of the CIF, the Inter-American Development Bank is supporting Mexico’s Forest Investment Plan, including the pilot forestry project in Mexico, and similar projects in Peru and Brazil.
The Forest Investment Program aims to reduce emissions from deforestation and forest degradation, promote sustainable management of forests and enhance forest carbon stocks.
Mexico’s project “is expected to develop models for future global replication,” the approved proposal for IDB administration states.
FIRST PRIVATE-SECTOR LOANS
It is the first time that the bank’s Multilateral Investment Fund will work with the private sector in a project of this type, it notes, “and the lessons learned from its implementation will be important contributions to the national policy for the Reducing Emissions from Deforestation and Forest Degradation in Developing Countries (REDD++) program currently being developed.”
Findeca, a private lender that has experience financing shade-grown sustainable coffee plantations in southern Mexico, has signed on to the project. It will be in charge of delivering the Multilateral Investment Fund money to the landholders.
It will kick in loans only after the non-profit Mexican Fund for the Conservation of Nature (FMCN) has rounded up the technical assistance and consultants to build community acceptance and capacity to use and repay loans.
“We’re still in negotiations for the project,” said FMCN spokesman Juan Manuel Frausto. He expects a final contract with IDB in September, after which the first step will be to identify an initial batch of communities to take part.
The project will focus first on five of the eight states with the highest net forest loss -- Oaxaca, Yucatán, Quintana Roo, Campeche and Jalisco. These states have 1,768 forestry communities with a total population of more than 500,000, average poverty rates of 75 percent and a 40 percent indigenous makeup.
The limited experience with private sector investment in Community Forestry Enterprises in Mexico requires the “demonstration approach” being taken in this project. The money will not start to flow until 2014, Visconti says. Loans will be in the range of $800 to $3,000.
The CFEs could use the micro credits to buy equipment such as tractors or inputs such as seeds “to facilitate efficient production and to make them more sustainable,” Visconti says.
The small amounts are viable for all but the largest and most sophisticated CFEs, Bray says.
“There are many forestry communities in Mexico who need additional support to improve their logging or to move into logging,” Bray says. “Community forestry is a very mature sector with lots of successes, and there are a lot of opportunities in communities that are struggling with lack of support,” he adds.
Talli Nauman is co-director of the consulting firm Journalism to Raise Environmental Awareness, based in Aguascalientes, Mexico. This article is part of a series funded by the Climate Investment Funds.
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