Potential of the Forestry Sector in Peru Economic Report Lima’s Chamber of Commerce
Forestry Sector in Peru has a Big Development Potential* One of the activities with large potential in Peru is forestry because of the advantages related to the extension of natural forest (94% in the jungle region), our jungle is the second position in Latin America, after Brazil, and the ninth position worldwide. It has an extension of 68 million of ha, of which 38 million are adequate for forestry production. Despite of this potential, the forestry activity is far from being exploited because only 9.7 million Has, are currently used in a steady way among forestry concessions managed by the private sector for productive activities, ecotourism and conservation. Furthermore, of about 2,500 wood species found in Peru, around 600 species have been classified and only 195 are used. This can be seen in the poor contribution of the forestry sector to the economic activity in Peru, which reach only 1.1% of the GNP (1,700 million dollars to 2010), towards the quantity registered in Chile (2.6%), Bolivia (2.7%) or Ecuador (2.3%), which are countries with less extension of forest, as the estimates of the United Nation Food and Agriculture Organization (FAO). Contribution of the Forestry Sector to the GNP* (%) Colombia Argentina
0.7 0.8
Mexico
0.9
Venezuela
1
Peru Uruguay Ecuador Chile Bolivia Brasil Paraguay
Source: FAO
1.1 1.2 2.3 2.6 2.7 2.8 3.6
* Data of 2006
The low participation of the forestry sector in Peruvian economy is explained because low added value of these products. The Agricultural department of Forestry and Wildlife, has found that of 8 million of m3 produced in 2010, approximately 90% is destined to firewood for the rural housing, which is one of the main agents of deforestation in the country. Only 800,000 m3 of the wood produced (11%) passes through a transformation process to obtain products such as: parquet, sawn woods, laminated wood, plywood and carbon; among the most important export products. Ucayali, Loreto, Madre de Dios and JunĂn, are the four departments that concentrate more than 2/3 of the national production of wood products.
Potential of the Forestry Sector in Peru Economic Report Lima’s Chamber of Commerce On the other hand, the high logistics costs, the lack of facilities and drying systems; and the difficulty to access from the processing centers to the forest areas, the deforestation and the illegal logging has prevented the sector to grow at high rates during the last decade. For instance, during the period 2000-2010 the forestry production growth was 1.2% per year, which is a low rate, compared to GNP of same period (5.7%).
Production of Transformed and Raw Wood
Sawn wood, laminate, parquet, triplay and other, 9%
Total: 7.8 mill m3 Firewood 89.7%
Carbon 1.3%
Source: Ministry of Agriculture of Peru
The high deficit in transport infrastructure in the jungle region makes uncompetitive the forestry activity, which shows in low profits, in spite of the tax benefits given (10% income taxes, 5% forestry activity taxes). The average cost for transportation of wood from Pucallpa to Lima is 69.2% higher than sending it to China. This is a consequence of having only 5% of surfacing roads in the jungle region. Another serious problem of the area is the deforestation and the illegal logging. Each year, 261,000 Has of woods are lost, this is more than 9.5 million of Has deforestated up-to-date because of migratory agriculture. This activity, which represents 81% of deforestated areas, implies the burning and destruction of large extensions of forests to get open areas for plantations. The new forestry law issued in 2000 established a regime of forestry concessions to make the activity sustainable and socially profitable seeking to get solutions for the economic problems of the country and mainly of the jungle region. The forestry concessions are a way to improve the private investment and a way to guarantee the sustainability in wood management; by giving enough operating time for 40 years renewable each 5 years. Up to 2010, 9.6 millions of Has were given to concession, which 7.9 million of Has were for forestry activity, 1.6 million of Has for non forestry activities (ecotourism and conservation) and 0.2 million of Has for reforestation.
Potential of the Forestry Sector in Peru Economic Report Lima’s Chamber of Commerce This new regime of concessions has not generated the social and economic impact expected in the areas of forestry activity. The economic activity of the forestry sector only grew 1.2% in the period of 2000-2010, due to the production of sawn wood, one of the main export products.
This small growth of the forestry sector is due to low productivity, as shown in the report of the National Forestry Chamber where more than 70% of the forestry concessions have productions lower than 2 m3 Has per year, while the certified concessions produce an average of 5 m3 Has per year. This is also considered to be low compared to 20 to 25 m3 Has per year that could be produced with special conditions such as technology and investment. Studies made by the Forest Stewardship Council (FSC) show that improving the levels of production to 27 m3 Has per year, can give to the country an income of 7,087 million dollars per year. On the other hand, the exports of wood products has been pretty dynamic the last ten years, with an average growth rate of 13.2% per year, which means that it has increased 3 times during 2000-2010. The main destination for forestry exports are China, United States and Mexico; and the main products are parquet, paper & cardboard and sawn woods.
*Written by Cesar Peñaranda, Executive Director of the Economic and Development Institute of Lima’s Chamber of Commerce