Teak plantations in Costa Rica - Precious Woods' experience

K.-H. Schmincke

Karl-Hermann Schmincke was Director of the
FAO Forest Products Division from 1993 to 1998.

The story of a commercial plantation enterprise aiming to meet the rising demand for teak while contributing to sustainable forest development.

For about 15 years Costa Rica has been one of the most attractive tropical countries for commercial forest plantations; plantation enterprises are encouraged by private landownership and government incentives which give tax breaks on imported equipment and on benefits related to the plantation business. Private companies with foreign capital have been the main investors in these plantations, which have been established on former ranch lands that were originally covered with dense rain forests. Precious Woods Ltd is one of the many companies engaged in commercial planting of teak to meet the rising demand for wood of this valuable species. The author visited these plantations in 1996 and 1999 and was impressed by a number of positive aspects which were in contrast with many teak plantations that he had evaluated in Africa, Asia and Central America during the past 20 years. This article looks at the history, forestry practices, training and research activities and economic and social aspects of the Precious Woods enterprise, which may serve as a good example that could be followed by other companies.

A mosaic of four- to five-year-old timber plantations and conserved patches of natural forest in an area afforested by Precious Woods on the Pacific Coast of Guanacaste Province, Costa Rica

FOREST PLANTATIONS AND TEAK IN COSTA RICA

Reforestation is well established in Costa Rica; various international cooperation projects and national incentives have led to the planting of 135 500 ha with Bombacopsis quinata, Gmelina arborea, small areas of Eucalyptus deglupta and some native tree species, as well as teak (Tectona grandis).

Tectona grandis is planted on 25 600 ha in various locations throughout the country, including some less favourable sites with very high rainfall and no marked dry season, as well as many smallholdings. Tectona grandis was introduced to Central America in 1926 with a shipment of seeds from Colombo, Sri Lanka, to the Summit Botanical Garden in Panama. From this garden seeds were exported in the following 20 years to most of the Central American and Caribbean countries (de Camino, Alfaro and Sage, 1998). In addition to plantations, teak trees (20 to 40 years old) are also found in living fences around ranches, sometimes mixed with other species.

Bombacopsis quinata (spiny cedar or pochote) was the main species planted in the first three years but was mostly abandoned after 1993, as teak was found to be more economically promising

- PRECIOUS WOODS (SWITZERLAND) LTD

FOUNDING OF PRECIOUS WOODS LTD

In 1989 a group of Swiss businessmen decided to establish a forest industries company embracing the idea that sustainable tropical forestry and profitability could be complementary and did not have to be contradictory. Activities started on two fronts: management of dense tropical rain forest in the Brazilian Amazon with harvesting, processing and trade of less-used or little-known species controlled to maintain the biodiversity and productive capacity of forest land; and the establishment of new forest resources in Central America. The latter is the subject of this article.

The first step was the creation of a legal entity - Maderas de Costa Rica S.A. (MACORI), later renamed Precious Woods Costa Rica S.A. - which acquired low-lying ranch land in the province of Guanacaste, in the north Pacific region of Costa Rica, on which to establish a mosaic of high-value timber plantations in pure and mixed stands. Guanacaste was chosen for its favourable conditions including gentle slopes, nutrient-rich soils with a depth of more than 90 cm (particularly rich in calcium), rainfall of 1 500 to 3 000 mm per year and a marked dry season of three to five months. High-altitude areas of the province (above 500 m) are too dry for commercial plantations.

The company originally purchased about 2 000 ha of land at two locations, Garza and Río Tabaco, on the Pacific coast. Most of this land was degraded by earlier overgrazing but currently under fallow. In the mid-1990s additional land was purchased at Ostional, Santa Cecilia and Peñas Blancas in the northern part of the province, close to Lake Nicaragua, bringing the company's holdings to almost 8 000 ha. For some of the properties contracts were signed with the Ministry of Environment and Energy involving reforestation incentives, but most of the costs were borne by the company. Precious Woods Ltd tapped existing knowledge and hired experienced staff to start the plantation business on an industrial scale.

Shareholders had to be found with a long-term interest in forest development and no interest in short-term benefits. To date, there have been 640 shareholders, mostly from Switzerland but also from Brazil, Costa Rica, Germany and other European countries. Investors expect a return rate of at least 11 percent on the invested capital.

PLANTATION ACTIVITIES FROM 1990 TO 1999

Table 1 shows the area planted at the various sites from 1990 to 1999. There were no plantation activities in 1994, as in that year restructuring was under way and new land suitable for forest plantations was being sought (the land that was subsequently found at Ostional, Peñas Blancas and Santa Cecilia).

TABLE 1. Planted area by site

Bombacopsis quinata (spiny cedar or pochote) was the main species planted in the first three years (Table 2) but was mostly abandoned after 1993 as its commercial value, particularly for export, was in doubt. Instead, Tectona grandis was found to be potentially more profitable after careful research on soil fertility and other factors affecting the growth of this exotic species.

Each year 400 to 500 ha have been planted. Nowadays, 90 percent are planted with teak and 10 percent with native forest species and ornamental or fruit-bearing trees (Swietenia macro-phylla, Cedrela odorata, Dalbergia retusa, Platymiscium pleistotachium, Enterolobium cyclo-carpum, Hyme-naea courbaril, Albizzia guachapele, Tabebuia rosea, Astro-nium graveolens and Terminalia oblonga). Most of these species are threatened by extinction and some of them are protected under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) (Víquez López, 1998).

TABLE 2. Species planted

About a dozen native forest species and about 30 ornamental or fruit-bearing species are regularly grown in the nurseries. As there has been little or no experience in planting the species that come directly from the native natural forests, a good deal of research and experimentation is necessary to find the best techniques and plant associations to ensure their growth. Ornamental plants on alleys and amenity sites attract a wide variety of birds and butterflies and contribute to the biological diversity of plants and animals in the area. At least one ornamental or fruit-bearing tree is planted for each hectare of plantation.

At the end of 1999, almost 3 800 ha of the 7 931 ha available were planted. An additional 600 to 800 ha seem to be suitable for planting, which would bring the total plantation area across the five sites to about 4 500 ha in 2001. The remaining 2 400 ha include natural forests (primary and secondary with growing stock), infrastructures, buildings and nurseries. Extension of the area is not planned at the moment.

PLANTATION MANAGEMENT

The plantation management methods have evolved over the company's ten years of existence through research in cooperation with the Tropical Agriculture Research and Higher Education Center (CATIE), as well as through lessons learned from some experiences of improper site preparation, failures in testing of genetic material and fire outbreaks.

As most of the plantations are established on flat or only gently sloping land, they are not prone to erosion. Other factors favouring the sound growth of the plantations are the mixture of plantations with natural forests and the protection of watercourses in landscape mosaics. The company has maintained a policy of protecting and conserving the existing patches of natural forests and improving them through managed natural regeneration.

As observed in many other tropical countries, the initial phase of establishing new plantations and treating them during the first three years - by far the most expensive phase - is relatively easy to manage. Breeding trees for production of high-value timber that is free of knots and external and internal defects and maintaining a permanently favourable environment to ensure steady growth are much more difficult.

Spacing, thinning and pruning

In the past, Precious Woods planted teak with relatively wide spacing of 3 x 4 m (830 plants), 3.5 x 3.5 m or 3 x 3.5 m to test the different sites. Since the spring of 1999 the spacing has been reduced to 3 x 3 m (1 100 plants) so as to obtain straight boles without abundant branching. Spacing of 2 x 2 m or 2 x 3 m per hectare should be the final target if the sites prove capable of supporting a higher number of trees.

Spacing is also modified, based on variability in site index and permanent trials to determine the best growing conditions. Mixed stands are also used to determine the best plant associations for healthier, long-term development of trees.

Pruning has also been intensified; it is now begun after the second year. Trees are pruned up to 6 m or two-thirds of the stem height. The objective is the production of high-quality timber, knot- free on the lower part - not biomass without commercial value.

At present, only sanitary thinnings are applied, for elimination of competitors and badly shaped trees. Because of the wide spacing used in the early years and also because of the sanitary thinning carried out in the third to sixth year, the first commercial thinning can be expected only in years 13 to 15. The optimum frequency and intensity of thinnings are still under study; the results of measures first applied in 1999 will be observed closely during the next three years.

Establishing and treating new plantations during the first three years is the easiest phase; shown in the photo, a young teak tree

- PRECIOUS WOODS (SWITZERLAND) LTD

Rotation period

The age at final cut will depend on the stem form and diameter but is expected to be between 25 and 30 years. Pandey (1996) noted that the age of final harvest for teak differs among countries and even among sites, varying from 35 to 80 years, with an average of 50 years. But yield tables and the author's personal observations have shown that in many African plantations and also in Trinidad the growth of teak slows down after 25 years. Slower growth is favourable for formation of heartwood, wood density and dark colour. As modern processing techniques allow the use of smaller wood diameters, trees with a diameter at breast height (DBH) of 35 to 45 cm after a 30-year rotation are acceptable for cutting.

On some sites, however, the rotation period may be extended if the growth patterns show a higher mean annual increment (MAI) after the twenty-fifth year.

ECONOMIC VALUE

As the first plantations with wide spacing will have only two commercial thinnings, in years 13 to 15 and 20 to 22, and as the final cut takes place between years 25 and 30, 1.2 million to 1.8 million m³ of high-value timber will be harvested from the area for each rotation cycle starting in 2004. Prior to harvesting, it will be necessary to decide whether to sell the raw material in log form to local and export markets, to process it for added value in a sawmill owned by the company or to process it in cooperation with already existing factory facilities. For the moment, processing capacities in the region seem to be higher than raw material supply potential.

The harvested area will be replanted with improved planting material and the company promises to be attentive to all aspects of sustainability - yield and environmental and social benefits (see below).

During the plantation establishment period, which is still ongoing, and before thinning is begun on a larger scale, the economic value of plantations can only be evaluated by estimating the accrued commercial value of trees in the growing process. This has been done several times at intervals by independent experts in order to provide the shareholders with reliable estimates of expected revenues.

The MAI was initially estimated at 15 m³ per hectare based on experiences at other places in Costa Rica. On some sites an annual growth rate of 20 m³ per hectare or higher has been observed (Camacho, 1998; de Camino, Alfaro and Sage, 1998; Herrera, 1998).

After growth observations during the first eight years in all of the company's sites and taking into account results derived from the many sample plots, the MAI was estimated again on a more conservative basis in 1998/99 and fixed at 12 m³ per hectare under bark.

A conservative independent economic appraisal carried out in early 1999, which took into account all
parameters such as growth rate, wood quality and actual market prices (US$110 to $550 per cubic metre free on board [FOB] depending on diameter and wood quality) based on recent regional experiences, gave an estimated value of US$29.6 million. In comparison, the book value for the whole investment with a discounting rate of 10 percent at the end of 1998 was calculated at US$14.5 million. In other words, it appears that the assessed actual value has more than doubled during the planting period, implying that the shareholders' prospected internal rate of return (IRR) of at least 11 percent will be reached. This, of course, will have to be proved at the time of harvest.

Mixed stands (shown here, teak, pochote and others) are used to determine the best plant associations for healtheier, longterm development of trees

- PRECIOUS WOODS (SWITZERLAND) LTD

SOCIAL ASPECTS

The forest plantation activities of Precious Woods have had a role in easing the widespread unemployment in the area caused by a downswing in the ranching business. The company has created employment and trained ranch workers for new tasks. At present, 32 persons are employed on a permanent basis and 100 to 500 as occasional workers, on average 150 over the year, most of them as contractors for planting, weeding, pruning and thinning. This has created a new middle class of small family companies which, together with the economic linkage effect, support more than 2 000 people. Since the ranch business is reduced and agriculture is not developed in the province because of poor soil fertility, tree breeding and forest plantation are seen to be activities of importance for the area's future. As Precious Woods is the landowner of its forest plantations and has shown competence in land and plantation management, it is well considered in the province. Other landowners, in particular small farmers, request advice and tree planting material from the company. Every year the Precious Woods nurseries distribute not only forest trees but also ornamental plants to communities, villages, tourist enterprises and individuals. This activity helps promote reforestation in the province and the country.

TRAINING AND RESEARCH

In order to start the company from scratch, it was necessary to set up a training and research programme. Both activities are tied to the reforestation efforts of the company but also have national and transnational importance. Precious Woods' training and research facilities comprise a training school for forest technicians in Garza and a research station for teak cloning and natural propagation at Peñas Blancas.

Training school

The Fundación Escuela de Refores-tación de Costa Rica, established by Precious Woods in 1990 in Garza, provides 15-month training courses for forest technicians. The courses consist of 30 percent theoretical and 70 percent practical instruction through the daily forestry work at the station. The school awards 10 to 15 diplomas each year; by 1999, a total of 124 foresters had received diplomas. Some of these alumni now occupy key positions in the fieldwork of the company, while others are employed by national park administrations and other private companies.

The school is sponsored by a foundation with Precious Woods as the main actor. Initially, foreign technical and financial assistance was of great help. All buildings for teaching, housing and workshops were built by Precious Woods. FAO has supplied textbooks and instruction materials. The school offers students education of a high quality, and the boarding costs are low.

As the school produces forest technicians for the whole country, including State and parastatal entities, the school management is requesting more involvement of government institutions and cost sharing.

Research activities

In the company's first years the planting stock was produced from seed as was traditionally done in the region. The
results were not without problems; these included low germination rate, high variability among individuals within progenies and uncertainty about the inheritance of economically significant traits.

A research programme was set up at Peñas Blancas in 1996/97 with the main objective of propagating trees with superior stem form and wood quality, fast growth in height and diameter, boles free from fluting, buttressing and epicormic branches and resistance to leaf skeletonizers and defoliators.

Teak of different provenances (i.e. from Trinidad, the United Republic of Tanzania, Thailand, Panama, Colombia and other locations in Costa Rica) has been planted in pilot areas for testing and comparison of performance and for subsequent selection and use in genetic improvement programmes at the research station.

Research and experimentation are ongoing to optimize and rationalize in vitro propagation procedures and reduce costs at the same time. Some 33 000 plants obtained through in vitro propagation of cuttings obtained from selected trees with apparently good genetic features, both from within and outside the plantation area, were planted in the plantation sites in 1999.

Some other forestry companies in the region are interested in the results of this research, and Precious Woods is promoting these activities for the benefit of others. Although the research was undertaken in the company's own interest, results have been published to serve the scientific community at large (Monteuuis, 1994, 1998, 1999, 2000).

Only two years after the initiation of mass propagation on an industrial scale it is premature to judge whether the success will be lasting. Training is still needed and experiences should be exchanged with forest research institutes in the country and abroad. However, the first steps have been encouraging.

OUTLOOK

Not all forest plantations in the tropics are successful. Some have failed or have little economic or ecological value for various reasons which may include poor planning (e.g. inattention to distance to the market accompanied by high infrastructure and transportation costs), the use of species not well matched to the sites, and financial constraints.

Lack of political and economic security in the country or the region may be another factor (FAO, 1993).

The availability of land and the acceptance or preferably the involvement of local populations in the plantation enterprise are prerequisites for success. Clear land tenure and land security are also fundamental. Plantation investment is long-term, and investors will continue to support this kind of business only if they feel confident that they will profit from it.

Precious Woods has carefully considered these constraints in the planning and operational phases.

Some commercial forest plantations are prone to speculation in shares and frequent change of shareholders. Often shares are sold even during the planting period with a fictive value based on potential yield. In such cases, maximization of profits works against sustainable forest management, as activities that are not profit-oriented such as maintenance and conservation of biological diversity and social development may be reduced or even eliminated.

Such a development is not likely at Precious Woods, as most of the current 640 shareholders are expected to maintain their shares in the long term and to support the management in efforts to raise the company's profit levels.

Forest plantations in Costa Rica like those of Precious Woods have the prospect of becoming a valuable asset in
sustainable forest development in the country. In respecting the values of natural forests and biological diversity, in addition to economic and social considerations, Precious Woods can also serve as a good example for a holistic industrial plantation business.

Bibliography

Camacho, P. 1998. Flor y Fauna S.A., Costa Rica reforestation program. In R. de Camino, M. Alfaro & L.F. Sage. Teak (Tectona grandis) in Central America, Appendix 3, p. 36-45. FAO project GCP/INT/628/UK. (Unpublished document)

de Camino, R., Alfaro, M. & Sage, L.F. 1998. Teak (Tectona grandis) in Central America. FAO project GCP/INT/628/UK. (Unpublished document)

FAO. 1993. The challenge of sustainable forest management. Rome.

Herrera, R.Q. 1998. Reforestation project of Bosque Puerto Carillo S.A., Guanacaste, Costa Rica. In R. de Camino, M. Alfaro & L.F. Sage. Teak (Tectona grandis) in Central America, Appendix 5, p. 51-55. FAO project GCP/INT/628/UK. (Unpub-lished document)

Monteuuis, O. 1994. Recent advances in mass clonal propagation of teak. In Proceedings of the international workshop, BIO-REFOR, Kangar, Malaysia, p. 117-121. Tawau, Malaysia, CIRAD-Forêt/Innoprise Corporation Sdn. Bhd. (ICSB).

Monteuuis, O. 1998. Teak propagation by in vitro culture. Bois et Forêts des Tropiques, 256: 43-53.

Monteuuis, O. 1999. About the use of clones in teak. Montpellier, France, CIRAD-Forêt.

Monteuuis, O. 2000. Propagation of teak by cuttings and microcuttings. Bois et Forêts des Tropiques. (In press).

Pandey, D. 1996. Estimating productivity of tropical forest plantations by climatic factors. Stockholm, Swedish University of Agricultural Sciences (SLU).

Víquez López, E. 1998. Maderas Preciosas Costa Rica S.A., plantation program. In R. de Camino, M. Alfaro & L.F. Sage. Teak (Tectona grandis) in Central America, Appendix 4, p. 51-55. FAO project GCP/INT/628/UK. (Unpublished document)