FONDO NACIONAL DE FINANCIAMIENTO FORESTAL

PROJECTS
	AGREEMENTS

FONAFIFO has subscribed agreements with national and international, public and private companies which have generated funds for the fulfillment of its objectives.

Global Energy of Costa Rica, S.A.

Background	The agreement with Global Energy Costa Rica S.A. was the first one to recognize a specific amount for the environmental service of protecting the water resources, one of the four environmental services defined by the Costa Rican forestry law. The hydroelectric company, Global Energy S.A and the Fundacion para el Desarrollo de la Cordillera Volcánica Central (FUNDECOR, acronym in Spanish), signed this agreement in 1997; the contracts have the technical advice of FUNDECOR. The Fondo Nacional de Financiamiento Forestal (FONAFIFO) and the National System of Conservation Areas (SINAC) are a part of the aforementioned agreement.
Objectives	Recognize the importance of the forests through the environmental services of regulation and quality of the water in the watershed.
Objectives	Contribute to the protection of the water resource in the area, through the protection of the greater amount of forest hectares.
Funding	The agreement with the company Global Energy S.A. is for a total of $120,000. The agreement between the hydroelectric company Global Energy Costa Rica S.A.. and the Fundacion para el Desarrollo de la Cordillera Volcánica Central (FUNDECOR), signed in 1997, stipulates that the former commits to recognize $10 per hectare to FONAFIFO for every ESP contract located within the watershed of the San Fernando and Rio Volcan in the canton of Sarapiqui, in the province of Heredia. In 2003, the signed agreement is renewed for another five years; the amount recognized by Global Energy is increased by $2 more per hectare. An area of 2,144.56 hectares was submitted to the ESP Program under the Forest Protection program in the watershed of the Volcano and San Fernando rivers during the first five years of the contract’s existence. To date, under this agreement, 1,493 hectares are submitted under the ESP Program .
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Platanar Hydroelectric Company S.A.

Background	In 1999, an agreement was signed with the Platanar Hydroelectric company and the Fundacion para el Desarrollo de la Cordillera Volcánica Central (FUNDECOR), with the cooperation of FONAFIFO and SINAC. In this agreement, Platanar Hydroelectric agrees to pay FONAFIFO $15 per hectare in recognition of the environmental service of protecting the water resource lent by the forests under the ESP contract and with the technical advice of FUNDECOR, in the Platanar River watershed, located in Ciudad Quesada, canton of San Carlos, in the province of Alajuela. The Platanar Hydroelectric company decided to subscribe an addendum to the Original Agreement dated December 2000 with the intention of contributing to the protection of the water resources in the area; in this document, the company commits to pay $30 per hectare, per year, for a 10 year period to the owners of the forests located within the Platanar River watershed, who voluntarily submit to the forest protection scheme and due to a lack of resources and/or resources in FONAFIFO, cannot participate in the ESP program, as stipulated in Law 7575 and its regulation.
Objectives	Recognize the importance of forests for the environmental services of regulation and water quality in the watershed.
Objectives	Contribute to the protection of the area's water resources through the protection of the greater amount of forest hectares.
Funding	The agreement with the Platanar Hydroelectric company is for a total amount of US$62,357.
Results	During the first five years of the original contract’s term of effectiveness, an area of 396 hectares in the Platanar River watershed was submitted to the Environmental Services Payment Program and through an addendum, 354 more hectares were included; therefore, 750 hectares are protected under the agreement.
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Florida Ice and Farm Co. - ESPH S.A.

Background	The Agreement for the Payment for Environmental Services between the drink producing company (beer, soft drinks and bottled water) Florida Ice and Farm Co., FONAFIFO and FUNDECOR was signed in October 2001. This agreement established a price per hectare for the Environmental Services offered by natural forests and plantations of $45 ha/year or its equivalent in Colones upon payment. The time of effectiveness is for five years. The agreement for the Purchase of Certificates for Environmental Services between the Public Services of Heredia (ESPH, acronym in English) and FONAFIFO was signed in June 2002. The ESPH grants FONAFIFO $22/ha/year or its equivalent in Colones upon payment. In this manner, the protection of the watershed in the upper watershed of the Segundo River is compensated through forest protection, natural regeneration and reforestation. The agreement has a time of effectiveness of five years. The two aforementioned agreements complement each other. They both seek a greater payment to the beneficiary found within the convergence zones of both companies, located in the upper watershed of the Segundo River. The beneficiary receives an amount of $67/ha/year that is a greater sum than that received in the Environmental Services national market .
Objectives	Protect and increase the forest cover in the infiltration zone of the Hydrographic Watershed of the Segundo River and its ground-waters that supply the companies.
Funding	The agreement with the Platanar Hydroelectric Company totals US$162,357.
Results	The creation of strategic alliances, as the one between the Florida Ice & Farm and the Public Services of Heredia ESPH S.A. have made it possible to protect the water resource for domestic and industrial purposes. The Payment for Environmental Services has become a viable option when compared to other activities with greater financial possibilities for the owner such as the construction of housing projects (farms and housing developments) The alliance between private companies that benefit from the forest have made it possible to attract more financial resources to increase the ESP amount being offered to forest owners in specific zones .
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Compañía Nacional de Fuerza y Luz S.A.

Background	The Compañía Nacional de Fuerza y Luz S.A. has established a frame agreement where the foundations for the Purchase of Environmental Services in the areas of interest for the company are stipulated. The agreement recognizes the totality of the payment for Environmental Services to the producers of a specific area. The CNFL, through FONAFIFO, grants the resources for the environmental service payment to those forest and plantation owners located in the following watersheds: - Upper part of the watershed of the Aranjuez River, in the canton of Montes de Oro, province of Puntarenas. - Upper part of the watershed of the Balsa River, in the canton of San Ramon, province of Alajuela. - Cote Lake, between the cantons of Guatuso and Tilaran, provinces of Alajuela and Guanacasate. This project established a price of $40 per ha/year, or its equivalent in Colones upon payment for the ESP contracts subscribed under the forest protection modality. The time of effectiveness of the contracts is 10 years .
Objectives	Protect the forest resource of the watersheds of interests for the CNFL where hydroelectric projects are found.
Objectives	Submit a total area of 10,900 hectares of forest to the ESP program financed by the CNFL.
Funding	The agreement’s investment reaches $5,280,000. This amount is totally financed by the CNFL.
Results	FONAFIFO has managed to submit an area of 7,356 hectares to the ESP program, distributed in 45 contracts with beneficiaries under the forest protection modality. Throughout three and a half years, the project has reached almost 70% of the goal established for five years. In this manner, it becomes one of the most successful ESP projects financed by a private company that works and worries about the natural resources.
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*()**	The differences in the amounts paid by companies for environmental services regarding water resources are due to supply-and-demand market conditions caused by specific conditions that companies have brought about

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Integrated farm forestry approach for the Management of Ecosystems (OP 12)

Background	The cooperation agreement for the execution of the Regional Project is developed jointly in Costa Rica, Nicaragua and Colombia; it was subscribed between CATIE and Banco Nacional de Costa Rica (BNCR), in its quality as Trustee of trust fund nº 544-15 and with FONAFIFO. In the context of the relationship established through the aforementioned agreement between both entities, BNCR commits to manage the resources of the donation disbursed by CATIE in its quality of FONAFIFO’s Trustee. Similarly, it will give the farmer what has been stipulated in the farm plan for the payment for environmental services, according to the group and scheme defined by CATIE. The payment reference is US$, given that CATIE’s transfers are conducted in this currency. They are quoted the same day, that is, the exchange rate reference is made with the date of the day of deposit. The producers are paid with this exchange rate until the transfer amount is finished and later, the same procedure is followed for the next payments.
Objectives	The main objective of this agreement is to allow the participating farmer to make changes in the use of the land. Furthermore, the following objectives are also considered:
	• Show and measure the improvement of the land in the ecosystems, the global environmental benefits and the local social economic benefits that result from introducing farm forestry systems in degraded pasture lands.
	• Try the payment of incentives within the frame of the environmental services systems and measure the change in the use of the soil in the farms and communities.
	• Prove that the benefits provided by an integrated ecosystem reach the improvement of pasture lands.
	• Observe the increase of local environmental benefits through land use systems to reduce erosion, improve the land and the quality of water with an increase in production, income and employment, in degraded pasture lands in rural zones.
	• Show the increase of global environmental benefits through improved or conserved biodiversity and the carbon sequestration services
	• Share the experience of the farmers’ reaction to the ESP, as well as the management of the required incentives to produce the global environmental benefits.
	• Develop Guidelines to create sustainable funding mechanisms for the promotion of farm forestry systems to rehabilitate degraded pasturelands.
	Within the institutional arrangements required for this project, the World Bank and CATIE signed a donation agreement. It indicates that the CATIE has the responsibility of coordinator in the regional area. With respect to the form of payment, the amounts to be paid for environmental services are calculated based on the change in the land use, on the farms and in the case of Costa Rica, it will not exceed $4,500 per farm throughout the contract’s effectiveness. The payment for environmental services will be made proportionally to its increase, measured with respect to a base line established in the year zero. The area of influence in Costa Rica is the Barranca, Jesus Maria and Guacimal rivers in Esparza, located in the Central Pacific. The justification for this project is based on the fact that the traditional management of the cattle herding systems is characterized by economic indicators and low production and by environmental degradation. This translates into loss of biodiversity, emission of greenhouse effect gases and water pollution.
Funding	The funding entity is GEF-WORLD BANK. The estimated budget for this agreement in Costa Rica is $363,000 during 4 years. Note that it was necessary to sign a new contract; the original contract with FONAFIFO was for $441,000 that was later adjusted.
Results	It is important to mention that there were some administrative setbacks and approval on behalf of the General Comptroller’s Office. The solution was to terminate the CATIE-FONAFIFO agreement and sign a new agreement between CATIE and BNCR; the latter acting as Trustee of the trust fund 544 FONAFIFO-BNCR. The payment was increased thanks the negotiations made by CATIE before the World Bank; the payment is now $75 and $110 depending on the scheme). This increase benefited producers but delayed payment in 2004. According to what is established in the CATIE-BNCR agreement, which which was executed in 2004 is presented but also that which was paid during the first base year, in order to share how the project was doing. The land ownership has created some delays in the disbursements to the producers, fundamental aspect to consider in the case of Costa Rica due to the existence of property ownership in place and with respect to private property and legitimate owners of properties or farms. Also attached is the payment detail from the project’s beginnings to December 2004; for 2005, the payments will be made between July and August. Four transfers have been received; two in 2003 and two in 2004 for a total of $119,200. Each transfer is deposited in dollars and turned to Colones in the account 100-01000-209975-2 using the exchange rate of the corresponding day. In this manner, it is paid according to what has been formerly explained. A total of 105 producers are benefited and they have received approximately c40,870,425.00 during the project’s two year life span .
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