Forest management and competing land uses : an economic analysis for Costa Rica

Abstract

This note aims at explaining why sustainable natural forest management, is rarely observed in the Latin America and Caribbean region, even though this sustainability is a declared governments' goal. Private landowners mine the forests, either for cattle ranching, or conversion to forest plantations - only a few exceptions of no commercial relevance, are accounted for. Using site specific data from Costa Rica as an example, it argues that sustainable natural forest management cannot compete financially with alternative types of land management. It indicates that existing structural policies are not conducive to promote sustainable forest management, but that the likelihood of an economically viable solution, may lie in direct incentives, as the best policy instrument, to be offered to small farmers, rather than corporate owners, for better effectiveness. The paper develops an analytical model for the investigation of factors affecting land use and deforestation, applicable to other countries, and, because environmental benefits, to a certain extent, accrue to the world as a whole. Special attention is given to explaining the importance of discount rates regarding deforestation land use decisions, since results show that incentives to deforest increase, as the discount rates decreases.