FOREST CONVERSION PATTERN IN THE BRAZILIAN AMAZON

Preservation in Brazil is legally set in the Forest Code and water legislation basically by restricting land-uses. The Forest Code, published in 1934 and revised in 1965, regulates the use of wood from forests, defines conservation units, restricts farming and logging activities, set criteria for burning and chainsaw uses and states sanctions and fines. At the same time, water legislation, due to the need to protect watershed mainly for domestic supply, introduced very strict rules and norms for land uses to preserve forest areas at river basins.

Despite the severity of these regulations, forest clearing at large scale has not been avoided in Brazil. No more than 8% of the Atlantic Forest, previously located over the most developed areas of the country, is left standing. The area of the Savannahs of Cerrados, in the central region, has been already cleared in half of its original size for farming purposes. Although less than 10% of the Amazon Forests has been cleared, the annual deforestation rate is still very high.³

Sustainable management practices for logging are already incorporated in the Brazilian environmental regulation. However, they do not succeed since abundant wood supply is available from agricultural expansion and lack of monitoring in such large areas. Nevertheless, even with the introduction of sustainable criteria to agricultural practices, forest clearing will continue to be a major source of wood supply while governmental agencies fail to deter illegal clearing.

Forest land conversion is the main driving economic force on forest use. Therefore, the process of privatization of forest and its land, accomplished by assigning private individual rights based on clearing for further titling, has been very harmful for sustainable purposes in the region. Although a retreat on this driving force could be expected with the recent land taxation law, which offers exemptions for forestry and forest conservation, its enforcement may take several years to be fully implemented.

Summing up, deforestation in Brazil is driven mainly by agricultural and logging activities. The expansion of these activities into open access areas has been very active despite legal restrictions. Apart from institutional fragility to enforce norms and rules, deforestation of important ecosystems is also a result of several economic factors, namely:

• A highly concentrated land tenure system where small farms (less than 10 ha) cover less than 3% of the total farming area while the share of large farms (more than 10,000 ha) represents above 40%. Additionally, agriculture in Brazil still presents very low average productivity levels per unit of area which acts as a push factor for continuous forest clearance.

• Personal income is also highly concentrated with 66.1% of the total income accruing to the 20% richest families while just 2.3% accrues to the 20% of the poorest ones [Bonelli and Ramos (1993)]. Such inequality creates an immense surplus of low-income workers ready to seek occupations in frontier areas.

• Favourable credit and fiscal system to agricultural activities with no regard to soil agroecological features and managerial practices which resulted in a mere replication of agricultural technologies already in place in areas with distinct ecological conditions.

• And finally, regional development programmes in frontier areas, though are nowadays mostly phased out, have immensely contributed to stimulate economic activities and promote migration flows.

Some of these factors cannot be easily reverted since it would require long-term structural adjustments to alleviate social inequalities, accomplish a satisfactory land reform and even create the proper incentives and enhance human resource’s capacity in governmental agencies.

As it was mentioned previously, one of the most important characteristics of the Brazilian Amazon is its open access feature. It is very important to understand the peculiar characteristics that allow agricultural peasants and timber loggers to penetrate the forest clearing it without any concern about resource scarcity and its economic consequences. Some of these peculiarities are presented below:

• Land titling of a property is based on land productive use, such as area allocated to farming. Only very recently has legislation on land taxes been changed⁴ to consider standing forest legally recognized as productive use. Therefore, land titling and taxation have not only legalized clearing, but encouraged it. Forest land conversion to agriculture in the Amazonian region used to be allowed for up to 50% of the farm area. This percentage has been reduced to 20% in 1996 but with no effective enforcement so far. This legal clearing percentage has been used to issue conversion (clearing) permits and has become the main source of timber exploitation. Forestry activities, in fact, are financing forest clearing since extraction for this purpose is legal. Property rights for standing forests can only be viable with high enforcement costs.

• Illegal logging has, nevertheless, always been possible since no man-based regulation can be effective in such an enormous area as the Brazilian Amazon (western Europe size), particularly considering the existing social pressure and institutional fragility.

• It is known that sawmills are exploring areas where agricultural activities have not arrived due to the lack of infrastructure, consequently, the partnership between agriculture and sawmills will soon lead to other fronts of clearing.

• The Amazonian timber extraction process is characterized by a formal sector that works "by the books" with high costs and an informal sector working "freely" with low costs. This dual market structure is not economically feasible in such enormous area where outputs are not differentiated to receive compensatory higher prices.

• Amazonian forest is more heterogeneous and grows at lower rates than any other forest. Consequently, standing trees in this forest create low private values. Not only extraction costs increases as well as wood market shrinks to accommodate various species. Creaming is unavoidable without proper economic incentives. Heterogeneity in this case is on tree species as well as on tree incidence in different areas.

• Apart from that, states in Brazil are allowed to have their own state forestry policy and they usually have enough power to use parliamentary forces to curb centralised governmental protection measures in the region. Loggers and farmers are very politically "persuasive" in these states.

Based on these points, it has been claimed that forestry in the region is not undertaken with fully enforceable property rights. In other words, logging is carried out without proper account for scarcity parameters in a quasi-open access case,⁵ as will be further developed.

As can be observed in Table 1, Amazonian wood output share in the national production increased from 40.5% in 1980 to 75% in 1991. Although more up-to-date figures are not available, this impressive expansion in the analysed period clearly reveals the growing importance of Amazonian wood species in logging activities. Moreover, it is estimated that in the last ten years no more than 10% of the logging output is exported and its composition concentrated in few species, particularly mahogany which accounts alone for 50% of the total export value.

Table 1 Round Wood Production in Brazil

Source: Prado (1995)

The importance of logging expansion in the deforestation process can be observed in Table 2. Estimates of effective and potential wood commercial production from agricultural cleared areas⁶ in the Amazonian region are presented for the period 1975/91 also based on Prado (1995).

Effective production is the wood output currently generated and potential production is an estimate of the wood output which could be generated from cleared areas. The ratio of these two output values offers a good indicator of how much wood extraction is taking place as a consequence of the clearing for agricultural purposes.

From Table 2 one may note that ratio values increased from 13% in 1975 to 95% in 1991. That is, wood extraction is currently strongly associated to clearing for agricultural purposes. Thus we have a circular relationship where wood extraction revenues finance clearing and legal licenses granted for agricultural clearing legalize wood extraction. This synergy generates private economic values to deforested lands much higher than those which could be derived from either preservation activities or sustainable agroforestry.

Field surveys in traditional logging Amazonian areas presented in Almeida and Uhl (1995), estimated financial rates of return higher than 300% for wood extraction and processing activities with logging undertaken in rented lands (i.e., land for agricultural clearing). If supply of wood comes from sustainable logging undertaken in lands only devoted for logging activities, rates of return would drop to almost 20%. That is, saw-milling activities can count on low-cost legal and illegal supply of wood which allows for very profitable financial returns to which sustainable logging cannot compete.

Table 2 Effective and Potential Wood Production from Clearing Areas in the Brazilian Amazon

Source: Prado (1995)

This association was also observed for the past in the Atlantic Forest. In fact, logging activities in Brazil are still mostly relying on native forests from which more than 75% of round wood is produced.

Summing up, attempts to estimate timber depreciation in the Amazon have to take three regional features into account: a) the remaining size of the forest is still almost 90% of the original area despite the continuous deforestation process in the region; b) property rights are assigned by clearing which generates a continuous flow of timber output with the frontier advancement; and c) the association of agriculture expansion and logging exploitation seems to perpetuate the low capital and informal profile of forestry in the region. That is, large areas open for exploitation, fragile property rights and informal market structure are key factors preventing economic agent’s perception of scarcity in the region.