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).

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 Junín, are the four

departments that concentrate more than 2/3 of the national production of wood products.

3.6

2.8

2.7

2.6

2.3

1.2

1.1

1

0.9

0.8

0.7

Paraguay

Brasil

Bolivia

Chile

Ecuador

Uruguay

Peru

Venezuela

Mexico

Argentina

Colombia

Contribution of the Forestry Sector to the GNP* (%)

Source: FAO * Data of 2006

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%).

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.

Carbon 1.3%

Firewood 89.7%

Sawn wood, laminate, parquet, triplay and other,

9%

Total: 7.8 mill m3

Production of Transformed and Raw Wood

Source: Ministry of Agriculture of Peru

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 the

Commerce Chamber of Lima.