Financial Indicators of Reduced Impact Logging Performance in Brazil: Case Study Comparisons

Indicators of financial performance are compared for three case studies in the Brazilian Amazon. Each case study presents parameters obtained from monitoring initial harvest entries into primary forests for reduced impact logging (RIL) and conventional logging (CL) operations. Differences in cost definitions and data collection protocols complicate the analysis, and suggest that caution is necessary in interpreting results. Given this caveat, it appears that RIL can be competitive with or superior to CL in financial returns to initial harvest entries if the financial costs of wood wasted in the harvesting operation are fully accounted for. Standardization of study methods, and replication of studies across different forest types, levels of industrial scale and markets, would allow more rigorous tests to be made of RIL relative profitability. Adoption of RIL techniques as part of a longterm forest management system faces additional challenges related to the opportunity cost of timber set aside to maintain productivity and ecosystem integrity, as well as issues regarding land tenure security. Introduction The neo-classical theory of the firm is built on the presumption that businesses attempt to maximize profits, where financial profits are simply the difference between the revenue received by a firm and the costs it incurs. Economic theory says that, for a given technology, the firm evaluates the various ways it can utilize labor, land and capital inputs to produce outputs. Maximum profits are gained by choosing input levels so that the value of the marginal product produced by each input is equal to its cost (Varian 1984). If inputs to the production process are non-priced (such as environmental quality), or underpriced (such as standing timber) then they will be over-utilized from a social perspective. In the case of forestry, the result has historically been timber mining, degradation of environmental quality and industrial migration. The cycle of timber depletion, environmental degradation and industrial migration is not a new story. It occurred in the primary forests of the United States (Williams 1989) and has proceeded to such tropical countries as Brazil (Nepstad et al. 1999). The demand for tropical timbers suggests that this process will continue unless significant changes in technology and/or policy are implemented. Tropical forests formerly under little pressure for timber production are now increasingly the focus of logging industry development, Growth in the Latin American and African share of total tropical timber production will likely continue to beyond turn century, as few Asian countries have the potential to substantially increase sustainable log production (ITT