FINAL COMMENTS

This study was primarily concerned with the estimation of forest depreciation in the Brazilian Amazon, measured as the timber scarcity rent. Considering the still large timber stock available in the region, depreciation values were not meaningful. Moreover, taking into account the quasi-open access features of timber exploitation in the region, an important question arises related to the existence and capture of this scarcity rent in the Amazonian context.

Timber industry in the Amazon has also a complex productive structure. Monopsonic sawmill power can be easily enforced when extraction are undertaken in a complete open access region. Recent studies using local surveys, as those mentioned in our database section, have however, pointed out a trend towards vertical integration in the timber industry. This trend is probably a consequence of higher profitability on the logging activity with the enlargement of the frontier vis-à-vis the requirement of heavy investments on milling and more costly transportation.

Stone (1998) brings about net profit data on the timber extractive and processing activities in the Amazon for 1990 and 1995 and it can be observed that in this period, profit margin of the extractive (including transportation to processing facilities) activities has not only dropped from 11 to 8%, but it has come down to losses of about -3% in the processing activity.⁴⁶ This results would suggest that, if scarcity rents are captured by prices, they are captured in the extraction process.

As said before, apart from the still large stock of timber, the quasi-open access features of timber exploitation in the Amazonian region may also lead to poor scarcity rent perception by economic agents in the timber industry structure. Our results on depreciation measures have been consistently low, although their magnitudes were dependent on the assumed discount rates and marginal cost elasticities for which we were not able to estimate objective values. Moreover, other economic factors, as well as institutional and legal aspects, may be affecting logging activities in the region during the analysed period and a distinct trend may take place if these constraints are relaxed in the near future. However, if full scarcity rents are really part of supply pricing is still an open issue considering the quasi-open access features of the Amazonian region. Our results can, however, make a modest contribution to this debate.

Estimated depreciation values for the timber extraction activity in the Amazon as a whole were very low in the ESM and V&H approaches due mainly to very high exhaustion periods. Even considering overestimation biases of our stock figures, say, by 100%, exhaustion time would be significant, over 100 years, and still leading to low depreciation values due to discounting procedures.

Their relative magnitude when charged against the timber activity value added⁴⁷ were close to zero, apart from values at the very low discounting rate of 2%, as shown in Table 6. Even though, user cost and H&V relative values were very low varying from 0.24% to 0.69% of the value added. As it can be observed, the percentage of depreciation as a proportion of the timber value added are only meaningful for the net price approach estimates which accounted for 41.17 % in 1995 and 39.72% in 1990. However, it was already argued that such approach could only grasp scarcity rents in very special cases.

Table 6 Depreciation Measures as Proportion of Timber Value Added (%)

It could be claimed, considering the forestland conversion process in the region discussed in Section 2, that these depreciation values should be instead compared to the regional value added from cropping and cattle raising activities. If we perform such comparisons, these relative values would be even lower since agriculture value added is almost four times bigger than timber extraction’s.

On the other hand, mahogany depreciation measures compared to timber value added have revealed higher percentages, as shown in Table 7, even at 10% discount rate. These results are mainly a consequence of the substantially lower exhaustion time of mahogany in the Amazon.

Table 7 Depreciation Measures of Mahogany Extraction as Proportion of All Timber and Mahogany Value Added (%)

Charges of mahogany depreciation against its own value added may reach up to 36% with i = 2% and β = 1. Although this charging procedure may not be appropriate when mahogany can be substituted for other species, these figures gives again a clear picture of the sensitivity of the results to the exhaustion time of the resource.

As the forest is used up, considering the transversality condition, the ratio between the Hotelling rent and the total rent tends to one, achieving this value when the resource is exhausted completely. This ratio, using our 1990 all timber V&H depreciation values (with β = 1) to total rent (β = 0) at a 2% rate, is very small around 0.012. At higher discounting rates, this ratio decreases dramatically to negligible values, confirming the absence of timber scarcity rent in the Amazonian context.

However, for mahogany, this ratio is approximately 0.62 at 2% discounting and only reduced to 0.34 at 4% rate. These ratio magnitudes suggest that mahogany exploitation is being exhausted in a mining process and scarcity being captured at market transactions. It also emphasises once more the importance of exhaustion time over the discounting rate in the estimation of scarcity rent.

However, taking into account all timber depreciation measures, these results indicate that depreciation charges against the forestry sector as a whole in the Amazon lacks sound economic meaning and will not bring about the sustainability issue of the forest. Charges related to other forest services are, therefore, a paramount to make environmental accounting an useful tool for planning in the Amazonian context.⁴⁸

Consequently, the debate on the controversy of methodological approaches covered in the literature, and put forward in the previous sections of this study, may lose importance when one is planning in regions where high exhaustion time and lack of property rights are the cases.

Although they are not the aim and scope of this study, we also bring about some policy concerns at the light of our results. If scarcity rents are not fully perceived, or they really do not exist in such huge supply conditions as our estimates may suggest, an increase in timber exports may accelerate the deforestation process without the promising trade welfare gains.⁴⁹

Apart from, usually ineffective measures of trade barriers, in term of environmental policy, such perspective leads to actions aimed at the changing of the property right system and enforcement controls. Scarcity has to be introduced into economic agent’s behaviour by market mechanisms. Therefore, the current initiatives of the Brazilian Ministry of the Environment to create large areas of National Forests for concession schemes, for timber exploitation at sustainable basis, are important steps into promoting the exploitation of the Amazon⁵⁰ taking into account user costs. These are issues for which applied economics research may prove to pay high dividends.