Peruvian Export Association Launches Forestry Plan

UNCLAS LIMA 000997

SIPDIS

DEPT FOR WHA/AND,EPSC AND OES/ETC,ENV
BRASILIA FOR ESTH HUB - J Story
USAID FOR LAC, EGAT
USTR FOR B HARMANN, M BURR
COMMERCE FOR M CAMERON
USDA/AS/FAA/Bailey and USDA/FAS/ITP/FSTSD/Brehm

SIPDIS

E.O. 12958: N/A
TAGS: SENV ETRD EINV EAID ECON PGOV SNAR PE
SUBJECT: Peruvian Export Association Launches Forestry Plan



1. SUMMARY: The Peruvian Association of Exporters, ADEX,
announced on March 8 its initiative to revolutionize Peru's
forestry program. The ADEX plan, which received supporting
speeches from the Ministry of Production and other
government representatives, has multiple goals: increase
forestry exports, create jobs/reduce poverty, reduce illegal
logging; sustain forest resources and create a new,
effective corps of forestry inspectors. The GOP natural
resources agency currently charged with logging supervision
is, not surprisingly, against the initiative. With illegal
logging still rampant in Peru, this is a welcome initiative.
END SUMMARY.


2. Econoff and USAID environmental officer attended a
presentation on March 8 by the Peruvian Association of
Exporters (ADEX) on its plan to create a legal, expanding
and sustainable forest products industry. Vice Minister of
Production Antonio Castillo gave an enthusiastic speech in
favor of the plan. Other participants in the presentation
included representatives of the Regional governments from
wood-producing areas, the National institute of Natural
Resources (INRENA, local wood products associations and
civil society forestry stakeholders. The presentation,
which outlined industry actions, also provided a series of
recommendations for the GOP.


3. ADEX president Luis Vega described how his association
views the appropriate expansion of forest wood exports given
Peru's general problems. He listed the main social ills as
poverty, lack of jobs, disparity between urban and rural
wealth and narcotrafficking. Illegal logging concentrates
many of these problems, denying income to rightful owners of
resources, harming rule of law, reducing state revenue and
taxing capacity of state to regulate the economy. While
commercial wood-producing forests comprise around 80 percent
of Peru's territory, wood production, domestic and exports,
account for only 1 percent of GDP and represent enormous
potential for export-driven expansion. ADEX President Vega
stressed that improved law enforcement would also lead to a
decrease in narcotrafficking; he noted aside from the
deforestation associated with expanded coca production, the
precursor chemicals used to make coca paste and cocaine are
soil contaminants that are bad for tree growth. In
addition, drugs are increasingly being discovered in wood
export shipments.


4. Consultant Mauro Rios developed the ADEX plan and
explained the barriers to wood industry development: Peru
lacks tree plantations, which have been successfully
developed in neighboring countries such as Chile. The
mechanization of Peru's forest products industry lags behind
other counties. Deforestation is rampant; most of it is
illegal and motivated by poverty. Exacerbated by the
illegal logging for profit, deforestation is facilitated by
a failure of institutional control over forestry practices.


5. The ADEX plan envisions a Vice Ministry of Forestry
Production in the Ministry of Production, promoting
production of forest products while effectively sustaining
the resource. INRENA would have authority in forested areas
over animal life, genetic and water resources, but control
over forestry concessions, management and law enforcement
would be moved to a new corps of Forest Guards under the new
Vice Ministry. ADEX would lobby for tax incentives to
promote plantations. In the medium term, ADEX would work
with regional and local governments and the Ministry of
Transportation to help finance paving of road systems to
bring wood products to market. ADEX President Vega made an
impassioned plea to move forward with the Peruvian Trade
Promotion Act (PTPA),which he described as a vital step for
stimulating the wood products industry; aside from the
obvious export benefits, the PTPA would enable ADEX members
to import affordable logging and sawmill machinery.


6. INRENA Chief Leoncio Alvarez rejected the ADEX proposal,
stating that it would cast aside all of the INRENA forestry
oversight efforts in place. ESTHoff and USAID have asked
for a meeting with Alvarez to clarify his position and to
discuss reports of corruption in forest concession
oversight.


7. COMMENT: It is unusual for an industry to ask to be
effectively regulated. In this case, ADEX has recognized
that the lack of effective government oversight is hurting
legitimate producers. We are aware of problems with the
forest concession process and the continued prevalence of
illegal logging. We will explore how the ADEX plan can fit
into implementation plans for the PTPA and the accord's
Environmental Cooperation Agreement (ECA). ADEX and its
allies in this initiative are important partners for
promoting the PTPA, fighting narcotrafficking (especially as
wood products continue as a media for smuggling cocaine) and
promoting sustainable growth in Peru. The prospect of the
private sector promoting road improvement is intriguing, as
the GOP and regional governments have largely failed to
adequately improve market access roads.

STRUBLE