Are community-based forest enterprises

financially viable? Three case studies

from the Brazilian Amazon

Shoana Humphries, University of Florida

Dr. Tom Holmes, USDA Forest Service

Dr. Karen Kainer, University of Florida

Carlos Gabriel Koury, IDESAM

Rosana de Miranda Rocha, IDSM

Edson Cruz, Projeto Ambe

Montpellier, France

March 25, 2010

shoana_h@hotmail.com

Background

• Community forest management (CFM) is growing in importance

around the globe as a tool for improving local people’s livelihoods

and conserving forests.

• For CFM to be successful it must be financially viable and

competitive with alternative land uses.

• After ten years of subsidized CFM in Brazil, knowledge of the

financial viability and impact of community-based forest enterprises

(CFEs) is still lacking.

• This study evaluates the profitability of three CFEs in the Brazilian

Amazon. It will be used to develop a handbook for collecting and

analyzing financial data for CFEs in the region.

Study Area

Ambé

Charac.Ambé

(2007)

Organization Cooperative

Numbers of actors8 communities

50 workers

Forest type Upland

Scale Industrial

Annual harvest

area 300 ha

Annual harvest

volume3,650 m3 logs

Type of extraction Mechanized

(skidder)

Certification

Study Area

Mamirauá Ambé

Charac.Ambé

(2007)

Mamirauá

(2007)

Organization Cooperative Association in

Producer Group

Numbers of actors8 communities

50 workers5

Forest type Upland Flooded

Scale Industrial Small

Annual harvest

area 300 ha 18 ha

Annual harvest

volume3,650 m3 logs

93 m3 logs &

97 m3 boards

Type of extraction Mechanized

(skidder)

Non-

mechanized

Certification

Study Area

Charac.Ambé

(2007)

Mamirauá

(2007)

ACAF

(2006)

Organization Cooperative Association in

Producer Group Association

Numbers of actors8 communities

50 workers5 12

Forest type Upland Flooded Upland

Scale Industrial Small Small

Annual harvest

area 300 ha 18 ha 40 - 80 ha

Annual harvest

volume3,650 m3 logs

93 m3 logs &

97 m3 boards 20 m3 boards

Type of extraction Mechanized

(skidder)

Non-

mechanized

Mechanized

(small ag

tractor)

Certification Yes

Mamirauá AmbéACAF

Ambé & Mamirauá

• 2 4-day workshops

• Training in financial concepts

• Participatory data collection and analysis

ACAF

• Interviews, monitoring sheets, cash box receipts

over 1 year

Scenarios

• Ambé – actual volume (2007)

• Mamirauá – average volumes (2002-2007)

• ACAF – average volume (2006-7)

Methodology

Activity type

• Pre-harvest

• Commercialization

• Harvest

• Skidding

• Processing (portable sawmill)

• Measurement

• Administration (technical

assistance, training)

Methodology

Cost type

• Labor

• Machinery and equipment

(chainsaw)

• Materials and services (fuel)

Cost Data

Revenue data

Analysis

• One year analysis: snapshot

• Profit = Total revenues – Total costs

• Rate of return = Profit / Total costs

Results & Discussion: Costs

• Ambé (industrial scale) had the highest total costs

• The distribution of costs by type was similar for the 3 cases

0

50

100

150

200

250

300

350

400

Ambé Mamirauá ACAF

USD

(in

th

osa

nd

s)

Costs by Type

Labor

Machinery

Materials

Results & Discussion: Costs

• Administrative

costs (including

technical assistance)

were the highest for

Ambé and ACAF

• Processing was the

highest cost for

Mamirauá, followed

by administrative

costs0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Ambé Mamirauá ACAF

Costs by activity Inventory & planningCommercialization

Felling

Skidding

Processing

Product measurementTransport

Permanent plots

Administration

Certification

• ACAF (the smallest scale)

had the highest cost/m3

• Mamirauá had the lowest

cost/m3 for logs due to low

use of machinery

• There were two cases where

the average production

costs/m3 were higher than

the lowest value log price/m3:

• Processing costs/m3 were

higher than the added benefit

in price for ACAF. (but

created a lot of daily wages)

Results & Discussion: Costs

0

200

400

600

800

1,000

1,200

Ambé Mamirauá ACAF

USD

Cost per cubic meter

Cost USD/m3 logs

Cost USD/m3 boards

Results & Discussion: Profits & Income

0

50

100

150

200

250

300

350

400

Ambé Mamirauá ACAF

USD

(in

th

ou

san

ds)

Costs

Income

11%

2% -48%

Income

Profits

• Two cases were profitable

• Ambe sensitive to labor

costs

• Mamiraua sensitive to

number of associations

Ambé Mamirauá ACAF

Wages $2,247 – 3,371 $688 $159

Months worked 8 3 0.5

Wage/month $281 – 421 $234 $318

% over minimum

wage*

30 – 110% 7% 74%

* 2007 minimum was $219/month

Results & Discussion

What factors make CFM so expensive?

• High administrative (fixed) costs and low volumes

• Machinery costs were quite high

• Processing: low efficiencies (time and waste)

• Sales taxes: 12 – 17%

What factors affect revenues?

• Prices were higher for upland forest species and for processed

boards.

• Certification helped ACAF get higher prices for its boards.

• Innovative sales strategies may have helped Ambé and Mamirauá.

• Isolation may also affect price (abundance of cheap illegal

wood, higher transportation costs).

• Total income was also greatly affected by volume sold.

Conclusions: Are CFEs financially viable?

YES - large and small scale CFEs can be financially viable …….

BUT - viability was fragile for these cases

• CFEs must improve economies of scale:

o Increase volume harvested and/or efficiencies

o Collaborate with other CFEs (cooperatives and producer groups)

o Consider objectives of processing (not always profitable, but provides wages)

• Collaborators must help reduce costs:

Subsidize technical assistance (extension service, fee for services)

Low interest loans

Reduce bureaucracy and taxes

• Community forestry is important source of cash income

• Reconsider what we mean by viable -- Community forestry will require

continued support if it is to continue as a viable land-use

Acknowledgements

• Office of International Programs, USDA Forest Service

• National Science Foundation and Working Forests in the Tropics

IGERT Fellowship at University of Florida

• Ambe Project, Mamirauá Sustainable Research Institute, and ACAF

• Marcos Vinicio, EMBRAPA-Acre

• Paulo Amaral, IMAZON

• Johan Zweede, Fundação Floresta Tropical

Thank you