FONDO NACIONAL DE FINANCIAMIENTO FORESTAL

PROJECTS
	REFORESTA

Reactivation of Commercial Reforestation in Costa Rica (REFORESTA)

Background

The rate of reforestation has decreased progressively in Costa Rica since 1992; it is believed that the causes are mainly economical and financial related to the reforestation activity itself. The main limitation factor is the current flow of income that results from reforestation activities. Reforestation requires great investment at the beginning of the production process; this condition impedes small and medium producers to dedicate themselves to this activity because the core of the income is appreciated at the end of the production cycle, 12, 15 or 20 years after the plantation has been established. The National Forestry Development Plan 2001-2010 (PNDF, acronym in Spanish) indicates that a goal for the sector would be the development of a national reforestation program and the management of regrowth of crops for the production of high quality wood that satisfies the needs of the industrial sub-sector. It must be considered that the program is oriented toward commercial production, the consolidation of rural development poles and with select species.

Objective

The objective of the REFORESTA project is to reactivate reforestation in Costa along the development of three lines of work: design of a technical and financial plan favorable for the creation of forestry plantations with commercial purposes; the innovation and development of new products elaborated from wood from forestry plantations; and the design and execution of a marketing campaign for the consumption of wood from the plantations.

Jointly, the three lines of action will make the reforestation process with commercial purposes in Costa Rica sustainable, reduce the pressure over remaining natural forests and their illegal felling, as well as satisfy the national forestry’s sector need for raw material whose activity represents 8% of the GN, creates 18,000 permanent jobs and 30,000 indirect employments.

The lines of action of the REFORESTA project correspond to:

	Design a technical (species, sites, improved seeds) and financial (credit, payment for environmental services and purchase of wood in advance) plan that makes it possible to sustain the reforestation process with commercial purposes in Costa Rica.
	Establish an innovation and development program of new products that makes it possible to use the available raw materials (mainly forestry plantations and residues of use and primary processing).
	Increase the consumption of wood from plantations (melina, teak, etc.) in the national market, through a campaign that promotes the benefits of consuming wood from the plantations, its quality, tyESP of products, etc.

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Donors and Available Resources

Technical and Financial assistance was requested from the International Bank for Reconstruction and Development (BIRF) to prepare a project with combined funding sources that would make it possible to reactivate reforestation in Costa Rica through the design and feasibility analysis of a technical (species, sites, improved seeds), financial (credit, payment for environmental services and purchase of wood in advance) plan, and the innovation and marketing of products from forestry plantations that make it possible to sustain the reforestation process with commercial purposes in Costa Rica.

This project favors the establishment of high quality plantations in areas that are both accessible and highly productive. The studies previously conducted by FONAFIFO indicate that the combination of forestry credit with the payment for environmental services allows a greater distribution of cash flow to the commercial reforestation activity and to obtain higher return rates without having to turn to granting incentives. This new financing mechanism is a healthy financing alternative. The project initiative was accepted by BIRF and has been presented to the Japan Policy and Human Resources Development Fund (PHRD) for financing.

Technical and Financial Plan

The actions under this line of work are aimed at ensuring the supply of improved seeds of the species currently being used in reforestation for commercial purposes, the update and elaboration of field manuals for reforesters and guides to reforest with these species, and design a financial plan that will solve the inadequate distribution of the cash flow of reforesting farmers and which, jointly with other lines of action of the REFORESTA Project, make the reforestation process with commercial purposes in the country sustainable.

RESULTS

Activity	Progress Status
Creation of stands of trees and seed orchards First progress report Second progress report Last Report	Concluded
Field Guides and Reforestation Manuals
Vochysia guatermalensis (Chancho Blanco)	Concluded
Terminalia amazonia (Amarillón)	Concluded
Hieronyma alchornoides (Pilón)	Concluded
Gmelina arborea (Melina)	Concluded
" Tectona grandis (Teca)	Concluded
Financial Plan for Forestry Plantations	Concluded

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Innovation and Development of New Products

The objective of this line of work is to promote the innovation and development of new products that use wood from the forestry plantations existing in Costa Rica, with the purpose of widening the array of products that can be produced with these woods, which in turn, will make it more financial interesting for present and future forestry plantations in Costa Rica. The specific objectives of the consultancy are to identify products that can be easily developed with the wood species from the plantations used in Costa Rica and elaborate technical and financial feasibility studies for its development.

RESULTS

Activity	Progress Status
Research cutting patterns to saw small diameter pieces for the production of wood for construction.	In progress
Technology and innovation of wood structures for the construction sector.	In progress

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Results

The majority of the project’s purposes and activities will be performed satisfactorily and the following results have been obtained:

	Elaboration of five field guides for the main tree species planted in the country. These guides contain: geographic sites for high quality reforestation, definition of forestry standards for these species, wood characteristics and market state .
	Identification of the sources of certified seeds at the national level for the tree species that are used in commercial reforestation activities .
	Design of a financial mechanism to channel the cash flow limitations of the reforestation programs in Costa Rica; it includes feasibility studies to incorporate the reduction of the carbon emissions through the financing of the reactivation of forestry for plantations, so that they can incorporate small forestry organizations to the reforestation program as stipulated by the Forestry Law.
	Two studies on the innovation of high value and massive consumption products based on wood from plantations, besides a contest for the design of furniture using this raw material.
	Based on a research on consumer preferences, there is a campaign in effect to promote the use and consumption of products from tree plantations (relative information on the environment is included as well as the social benefits of these products) .
	Project extension granted by BIRF in December of 2004; the restructure of the executed financing plan and foresees, among other actions: the issue of credit instruments backed by the future value of the plantations of these small and medium producers and the participation of an institutional investor preferably a multilateral entity such as the Central American Bank for Economic Integration and/or Interamerican Development Bank. All documents and necessary elements to reach what has been considered are ready; however, it is estimated that in order to conclude the negotiations with one of these two entities and begin to issue the bonds, at least six more months are needed, perhaps more.
	? On the other hand, valuable documents were prepared with forestry information on the species that are being planted in the country, and furthermore, due to the existence of remaining resources for their reproduction, the project needs to be extended to access them .

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PROJECTS

REFORESTA