Views with Smallholder Farmers in Ecuador’S Mazar Watershed Were Combined with Secondary Sources
EL ARADO:
BREAKING GROUND FOR PAYMENT FOR ENVIRONMENTAL SERVICES
BASED ON OPPORTUNITY COSTS OF CONSERVATION IN ECUADOR
A thesis presented to
the faculty of the Center for International Studies of
Ohio University
In partial fulfillment
of the requirements for the degree
Master of Arts
Chela Kirpal Moore
June 2004
This thesis entitled
EL ARADO:
BREAKING GROUND FOR PAYMENT FOR ENVIRONMENTAL SERVICES
BASED ON OPPORTUNITY COSTS OF CONSERVATION IN ECUADOR
BY
CHELA KIRPAL MOORE
has been approved for
the Center for International Studies by
Brad Jokisch
Director, Latin American Studies
Josep Rota
Director, Center for International Studies
MOORE, CHELA KIRPAL. M.A. June 2004. International Development Studies
El Arado: Breaking Ground for Payment for Environmental Services Based on
Opportunity Costs of Conservation in Ecuador (117pp.)
Director of Thesis: Brad Jokisch
Payment for Environmental Services is a market mechanism designed to
achieve sustainable development, with beneficiaries of environmental services paying
landholders whose resources provide those services. This thesis explores how
opportunity costs of conservation can be a tool for designing effective payments.
Interviews with smallholder farmers in Ecuador’s Mazar Watershed were combined with secondary sources. The value of production per hectare per year, a proxy for farmers’ opportunity costs, was calculated for three land uses: potato and corn cultivation, and dairy.
The thesis demonstrates: 1. dairy farming’s value of production is declining and does not constitute the highest return; 2. there are poor conditions for potato cultivation, generating a low value of production; 3. corn cultivation results in the highest value of production. Therefore, two scenarios for designing payments per hectare per year are suggested: the highest value of production, $239.13, and the value from a production mosaic, $190.40.
Approved: Brad Jokisch
Director, Latin American Studies
ACKNOWLEDGEMENTS
While there are many to thank, I have to start with the generous and kind
people of San Vicente and Colepato, Ecuador. I would particularly like to thank Don
Severo Calle and his family for opening their home to me, for providing invaluable
insight, and for being incredibly patient with my Spanish and my weird vegetarian
diet. Thank you to Stuart White and his family for inviting me to the Mazar in the first
place, for giving me my first glimpse of the Mazar’s forest and páramo from their
beautiful home, for giving me the opportunity to work with them and their neighbors,
and for outstanding suggestions and advice. Your work and your organization, FCT,
inspire me. My experience with FCT would not have been the same without Tania,
Maria Augusta, and Soraya, either. You helped me so much with my work, but it is
your friendship that I value most. And, finally, thank you to Ramiro Carrión for his
support and collaboration.
Here in the United States, I would like thank first and foremost Brad Jokisch
for going above and beyond anything I expected from a thesis advisor. How lucky
was I to have my thesis advisor in-country at the same time I was doing my research?
You have been a mentor and a friend. Thank you also to Ariaster Chimeli for making
economics simple (as possible) and for reminding me that the fate of the world (or
even a small part of it) does not rest on me or this study, and to Ann Tickamyer for her
guidance and friendship early on.
Finally, I thank my parents for loving me and for putting up with my frantic phone calls. My extended family, too, has been there even from a distance. In
particular, I would like to acknowledge my Grandfather John Moore, a farmer from
Ohio, who I know would have gotten a kick out of visiting the farms in the Mazar and
who helped to create a tradition of higher education within our family. I would also
like to thank my friends here at Ohio University who made these two years an
amazing trip in itself. And, lastly, to Albert…there is too much to thank you for. But,
most of all, I appreciate your constant support and your love. 6
TABLE OF CONTENTS
Abstract...... 3
Acknowledgements...... 4
List of Tables ...... 8
List of Figures...... 10
List of Acronyms ...... 11
Chapter 1 Introduction ...... 13
Chapter 2 Deforestation and Payment for Environmental Services: A Review of the Literature ...... 17
Deforestation...... 17 PES Markets...... 23 PES Case Studies ...... 26 Conclusion ...... 31
Chapter 3 Background and Research Questions...... 33
Regional Background...... 33 Political Background...... 38 Demographic Background ...... 41 Problem Statement and Research Questions...... 41
Chapter 4 Methodology ...... 44
Institutional Affiliation and Support...... 44 Other Organizations...... 45 Site Selection ...... 47 Interview Design...... 49 Interviewee Selection...... 53 Data Considerations...... 56 Scope of the Study ...... 58
7
Chapter 5 Data ...... 60
Potatoes...... 60 Corn...... 68 Dairy Farming...... 72 Conclusion ...... 75
Chapter 6 Data Analysis ...... 77
Potato Cultivation ...... 77 Corn Cultivation...... 82 Dairy Farming...... 85 Payment Scenarios...... 88 Conclusion ...... 93
Chapter 7 Conclusion...... 95
Significance for PES in the Mazar: Some Practical Suggestions ...... 95 Significance for PES: Suggestions on Theoretical Approach ...... 98 Final Comments...... 105
Literature Cited ...... 107
Appendix 1 Interview Questions ...... 112
Appendix 2 Assumptions...... 116
Appendix 3 Definition of Units ...... 117 8
LIST OF TABLES
Table 2.1 Payment Plans within the Costa Rican PES System...... 27
Table 2.2 Payment Plans within the Pimampiro, Ecuador, PES System...... 31
Table 4.1 Accounting Profits Per Hectare Per Year for Various Crops in Ecuador...... 49
Table 4.2 Inputs and Outputs Considered in the Interviews: Potatoes and Corn ...... 51
Table 4.3 Inputs and Outputs Considered in the Interviews: Dairy Farming ...... 51
Table 4.4 Interview Breakdown...... 55
Table 5.1 Cultivation of Selected Crops in Cañar Province ...... 61
Table 5.2 Various Calculations of Accounting Profits for Potatoes Per Hectare Per Year ...... 62
Table 5.3 Various Calculations of Accounting Profits for Potatoes Per Hectare Per Year ...... 63
Table 5.4 Estimates of Total Costs of Labor for Potatoes Per Hectare Per Year in the Mazar ...... 67
Table 5.5 Potatoes’ Comparative Total Costs of Labor Per Hectare Per Year for Interviews and Secondary Sources ...... 68
Table 5.6 Various Calculations of Accounting Profits for Corn Per Hectare Per Year...... 69
Table 5.7 Estimates of Total Costs of Labor for Corn Per Hectare Per Year in the Mazar ...... 71
Table 5.8 Corn’s Comparative Total Costs of Labor Per Hectare Per Year for Interviews and Secondary Sources ...... 72
Table 5.9 Various Estimations of Inputs and Outputs Per Hectare Per Year for Dairy Farming...... 73
Table 5.10 Estimate of Total Cost of Labor Per Hectare Per Year for Dairy Farming in the Mazar...... 74
9
Table 6.1 Labor Inputs for Corn and Potato Cultivation in the Mazar...... 81
Table 6.2 Land Use Breakdown by Hectare in San Vicente and Colepato ...... 92
Table 6.3 Calculation of Payment Based on a Mosaic of Land Use...... 93
Table 7.1 Comparative Payments in Costa Rica and Ecuador...... 99
10
LIST OF FIGURES
Figure 2.1 Forest Cover Change in South America...... 18
Figure 2.2 Regions of Ecuador ...... 19
Figure 3.1 The Mazar Watershed...... 34
Figure 3.2 Land-Use-Land-Cover in the Mazar in 1987 ...... 36
Figure 3.3 Land-Use-Land-Cover in the Mazar in 1998 ...... 37
Figure 3.4 Location of Research Communities ...... 40
Figure 5.1 Accounting Profits for Corn and Potatoes Per Hectare Per Year...... 61
Figure 5.2 Provinces of Ecuador...... 64
Figure 5.3 Total Costs of Labor in the Mazar...... 75
Figure 6.1 Quintales of Seeds Sown versus Quintales of Potatoes Harvested...... 78
Figure 6.2 Quintales of Seeds Sown vs. Quintales of Corn Harvested ...... 83
Figure 6.3 Milk Production Per Hectare Per Year in the Mazar...... 86 11
LIST OF ACRONYMS
BNF Banco Nacional de Fomento (National Promotion Bank)
BP15 Bosque Protector 15 ( Protected Forest 15)
CEDERENA Corporación Ecológica para El Desarrollo de los Recursos Naturales Renovables (Ecological Corporation for the Development of Renewable Natural Resources)
CDM Clean Development Mechanism
CREA Centro de Reconversión Económica del Azuay, Cañar, y Morona Santiago (Center for Economic Restructuring of Azuay, Cañar, and Morona Santiago Provinces)
CTOs Certifiable Tradeable Offsets
DFC Desarrollo Forestal Comunal (Organization for Community Forest Development)
FAO Food and Agricultural Organization of the United Nations
FCT Fundación Cordillera Tropical
FTAA Free Trade Area of the Americas
INEC Instituto Nacional de Estadistica y Censos (National Institute of Statistics and Census)
INIAP Instituto Nacional Autónomo de Investigaciones Agropecuarias (National Autonomous Institute of Agricultural Investigations)
JI Joint Implementation
LULC Land-Use-Land-Cover
MAG Ministerio de Agricultura y Ganadería (Ministry of Agriculture and Livestock)
NGO Non-governmental Organization
PES Payment for Environmental Services 12
PFP Protected Forest Program of Costa Rica
π profits
TC Total Costs
TCp Total Costs of Physical Inputs
TCl Total Costs of Labor
TR Total Revenues
UMAT Environment and Tourism Unit of Pimampiro, Ecuador
13
CHAPTER 1
INTRODUCTION
In recent decades, there has been growing recognition that environmental degradation affects humankind on a global scale. Conservation programs have since proliferated, in response to local, national, and international concern. Many of these programs, however, are being implemented in areas where intensive land use systems already exist and, consequently, can cause considerable negative effects on the livelihoods of the landholders and landless living in and around the protected areas
(Kachele 2002). It is argued, in fact, that the costs of conservation are largely born by the poor while most of the benefits go to the rich (Ferraro 2002). When the issue of equity is not recognized, local support of conservation can decline and the programs can be undermined in the short and long term. This is particularly true in developing countries, where rural communities surrounding protected areas depend on the resources contained in those areas and/or on the land for agriculture and pasture for cattle. Thus, to achieve equity and to ensure program success, it is especially important to consider the costs born by local residents when implementing conservation programs in developing countries.
Payment for Environmental Services (PES) is an approach which attempts to recognize these costs by placing monetary value on the environmental services that natural areas, particularly forests, provide and compensating landholders whose 14
resources provide these services. Environmental services include, but are not limited to:
• preservation of biodiversity and scenic beauty; • mitigation of the greenhouse effect through sequestration of carbon dioxide and other gases; • regulation or prevention of natural disasters, such as floods and landslides; • protection of hydrological services, such as filtration and regulation of flow; • and, maintenance of soil though processes such as soil formation, nutrient recycling, and treatment of residuals (CEDERENA 2002).
PES recognizes that it is landholders protecting natural areas that effectively provide these environmental services to society. While landholders are acknowledged in other approaches to conservation, it is often through command-and-control legislation that legally binds landholders to protect environmental services and largely ignores the costs they are expected to bear. In contrast, PES programs are based on the premise that landholders, especially resource-deprived farmers, cannot be expected to protect and provide environmental services without fair compensation; rather, farmers deserve direct incentives to conserve.
Thus, PES is built as a market mechanism, with beneficiaries of environmental services paying landholders whose resources provide those services. The earliest PES programs emerged on an international scale, as a result of international environmental treaties. These treaties recognized that developing countries ought to be compensated for the environmental services that they had been providing to developed countries for centuries. Yet, it is the recent development of local level PES programs that has excited practitioners and participants of development. Local level PES promises greater responsiveness to local environmental needs and responsibility to local 15
landholders for socio-economic justice. Although there have only been a few local
level PES programs described in the literature to date, initial results are mostly
positive and indicate significant potential.
Still, some weighty issues remain and must be addressed for PES to fulfill that
potential. Foremost among them is the calculation of payment. Environmental
economists have attempted to determine the value of environmental services, e.g., the
amount of carbon dioxide that forests sequester, as well as beneficiaries’ willingness
to pay for environmental services. Governments and non-governmental organizations
(NGOs) have used these amounts to set payments for PES programs. However, these
calculations are commonly speculative and do not get to the heart of farmers’
decision-making processes. Farmers are often concerned with the opportunity cost of
conservation, that is what could be earned from a hectare of forest if it were cut,
cultivated, and/or grazed with livestock. It is the argument here that this amount is what PES programs need to explore as a tool for designing payments. Surprisingly,
there is a dearth of PES programs and studies which have focused on opportunity costs
of conservation. Further, what studies that do address them are mostly anecdotal or
non-quantitative and have been completed in developed countries (Ferraro 2002).
To address the deficiency in PES practice and literature, this thesis explores the
calculation of opportunity costs of conservation for two communities in highland
Ecuador and the use of those costs as a tool for designing payments in a pilot PES
program in the area. Three land uses serve as the focus for calculating these costs:
corn and potato cultivation, and dairy farming. Interviews with the small-scale 16
farmers of these communities, as well as data collection from local, regional, and national government and non-government agencies, provide a site-specific analysis of the value of farmers’ production of corn, potatoes, and dairy products.
The research area, the Mazar Watershed of Cañar Province, is an interesting
and appropriate location in which to complete this study for several reasons. First, it
contains some of the largest and most pristine tracts of tropical montane forest in
Ecuador but is facing increasing deforestation. Not only has deforestation in the Mazar
Watershed affected local landholders, more significantly it has affected downstream
water users and, in particular, the largest hydroelectric facility in Ecuador. Second, a
local environmental organization which has worked with area communities for several
years has expressed interest in the implementation of a PES program and supported
this research. Finally, the area is undergoing considerable land use changes, as a result
of influential trade policies and out-migration. Consequently, the Mazar Watershed
offers a fascinating setting to examine opportunity cost variability, as well as a chance
to use opportunity costs of conservation in an actual PES program.
The purpose of this thesis, then, is two-fold. First, on a practical level, the
calculation of opportunity costs of conservation in the Mazar Watershed serves as a
valuable tool for the implementation of a pilot PES program in the area. Second, on a
theoretical level, it addresses the deficiency in PES literature concerning opportunity
costs of conservation. The issues and challenges that were encountered in this study
will hopefully stimulate discussion, debate, and use of opportunity costs of
conservation in PES programs. 17
CHAPTER 2
DEFORESTATION AND PAYMENT FOR ENVIRONMENTAL SERVICES: A REVIEW OF THE LITERAURE
Before exploring how opportunity costs of conservation can be used for setting
payments in a PES program in the Mazar Watershed, it is important to first discuss
deforestation and its causes. This discussion clarifies both the need for a conservation
program like PES in the area and illustrates how causes of deforestation may be linked
to the opportunity costs of landholders. It is also useful to examine how PES markets
are constructed to address deforestation and how two specific PES programs have
been implemented. The literature review which follows thus presents a discussion of
deforestation, PES markets, and PES case studies.
DEFORESTATION
Theories and Causes
It is widely recognized that development of agriculture, creation of technology, expansion of trade, and population growth have been major causes of deforestation throughout history (Wunder 2000).1 There is, however, also recognition that these and other factors vary internationally and intra-nationally in their ability to explain deforestation. In other words, some causes of deforestation are relevant in one region
1 The Food and Agriculture Association (FAO) defines deforestation as: “the conversion of forest to another land use or the long-term reduction of the tree canopy cover below the minimum 10 percent threshold” (2003). 18
while they are irrelevant in others. While explanations of current deforestation have
been described in many ways, Sven Wunder2 organizes them this way:
• Poverty Trap o This theory argues that, because of historical inequality particularly in the distribution of land, many rural poor have no access to land and are pushed to unclaimed frontiers where they mine forest resources. • Fuelwood Trap o Describes deforestation as a function of the poor’s daily need for fuelwood for heating and cooking. • Population Pressure o Explains deforestation as a function of a growing population that increasingly places demands on land for more food and housing. • Logging o Places primary blame on logging companies, especially international logging interests, who cut for luxury woods, lumber, wood products, and paper products. • Underlying Causes o Emphasizes “higher order factors of change (population growth, world- market prices, macroeconomic policies) that drive direct impacts on forests (logging, shifting agriculture, cattle ranching, etc.)” (Wunder 2001a: 10).
With this range of explanations, governments and NGOs are challenged to recognize
the factors that are relevant in their region and to design conservation strategies
appropriately.
Ecuador
According to the FAO’s most recent Forest Resources Assessment in 2000,
Ecuador has a forest cover of 10,556,876 hectares, but loses an estimated 137,200
hectares per year. With this rate of loss, Ecuador has an annual rate of deforestation of
1.2%, the highest rate in all of South America (Figure 2.1).
2 Discussion of the trends and causes of deforestation in Ecuador draws heavily on Sven Wunder, a noted economist who has multiple publications concerning deforestation in Latin America, Ecuador, and particularly the tropical montane regions of Ecuador.
19
Figure 2.1 – Forest Cover Change in South America (FAO 2000)
5
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c U S F C B G B C P V P E r r u r h o u r o e e a c ug rin en ile liv y az lo ru ne ra ua -1 ua a ch ia an il m z gu d Pe m a b u o y e G ia el ay r uia a na -2
In addition, one must consider that current deforestation is located at the top of a curve of massive deforestation that has occurred over time in Ecuador. The process began centuries ago in the central mountainous region, or Sierra, where relatively large populations of indigenous groups cleared land for settlement, agriculture, and mining (Figure 2.2). However, with the conquest of the area by the Inca and then by the Spaniards in the 15th and 16th centuries, the area was depopulated through disease, war, forced labor, and relocation (Wunder 2001a). As a result, there was a period of forest re-growth, particularly in the Sierra, until the late 19th and early 20th century.
The 20th century, though, saw a rapid rise of deforestation. Ecuador’s coastal plain, or Costa region, was the first to witness considerable clearing, since the expansive, flat, and fertile soils lent themselves to the growth of agro-exports. While the central Sierra and eastern Oriente regions remained relatively sequestered during the first half of the century because of rough topography and relatively limited 20
Figure 2.2 – Regions of Ecuador (Selverston-Scher 2001: xxvi)
21
endowments of minerals and fertile soils, the discovery of major oil reserves in the late
1960s caused deforestation to rise in these regions as well.
The oil boom of the 1970s and early 1980s had several consequences. First,
major roads and infrastructure were built, which opened up previously inaccessible
areas of the Sierra and Oriente. And, as Wunder explains, “roads are the single most important frontier expansion factor; they crucially reduce transport costs, raise land prices, and make feasible the extraction of forest, cattle, and agricultural products”
(2000: 44). Second, growing income from the oil boom led to increasing demand for
“luxury” foodstuffs like milk, cheese, and meat. Ecuador’s rising income was coupled with a rapidly growing population and rural to urban migration which dramatically increased the domestic demand for these foods. Extensification, rather than intensification, was the common response, and large areas of forests were cleared so that more pasture could be established (Wunder 2000). This trend was important because “pastures represent both the most land-extensive production type, and the end use of most deforested areas” (Wunder 2001a: 13). The clearing, during this period, increasingly centered in the Sierra, where major urban centers are located, and in the
Oriente, where colonization efforts were focused.
Beyond clearing for agro-exports, oil, and domestic demand, there were also several other factors that contributed to deforestation in Ecuador. These causes, included: colonization efforts to strengthen national integration between the Costa,
Sierra, and underdeveloped Oriente; geopolitical motives to populate the Oriente, an area characterized by border conflict with Peru; and, land reform efforts, in response 22
to growing public discontent as a result of centuries of unequal land distribution in the
latifundia system.
In sum, while Population Pressure, Poverty, and Logging may explain
deforestation in select areas of Ecuador, Underlying Causes are most relevant to
understanding deforestation in Ecuador as a whole: international agricultural and
petroleum markets, security concerns, national unity priorities, and changing
consumption patterns together created the conditions for deforestation to occur.
Tropical Montane Forests
As indicated earlier, tropical montane forests were the first forests cleared on a large-scale in Ecuador and now represent roughly 25% of deforestation. Wunder
(2000) finds that tropical montane areas have seen: a significant decrease in forest cover; a corresponding increase in pasture land; and, a marginal increase in cropland.
In fact, since the 1970s, Wunder reports a 100 fold increase in pasture in tropical montane areas. This trend, as in Ecuador as a whole, is largely a result of rising income in urban areas which is driving demand for livestock products, such as meat and dairy. Wunder elaborates this point by explaining that it is “pull” not “push”
factors which dominate. He says that push factors such as poverty and tenure do not play a role while pull factors such as market integration and access to credit do play a role: “No es la pobreza que fuerza al campesino a talar el bosque, sino más bien su deseo legítimo de participar en la economía del mercado” - It is not poverty that
forces the peasant to cut the forest, but instead his legitimate desire to participate in
the market economy (2000: 105). 23
Given that deforestation in tropical montane forests is closely tied to the economic pull of pasture and agriculture on landholders, it is appropriate to explore the use of opportunity costs of conservation as a basis for a PES program in the Mazar
Watershed.
PES MARKETS
Since a forest provides many environmental services, PES can function through several different “markets.” PES markets operate through the sale of such environmental services as biodiversity, ecotourism, carbon sequestration, and hydrological services. Until now, however, the primary markets through which PES operates are carbon sequestration and hydrological services.
Carbon Sequestration
Under the 1997 Kyoto Protocol of the U.N. Framework Convention on
Climate Change, developed countries must comply with the Clean Development
Mechanism (CDM). CDM requires them to reduce their greenhouse gas emissions
(e.g., carbon dioxide, methane, nitrogen dioxide, and ozone) by 5% of their 1990 levels by the year 2008, or 2012 for carbon dioxide (Smith 2000). However, under
CDM, countries can satisfy their obligations by engaging in joint implementation (JI) with developing countries. Through JI, developed countries finance activities in developing countries that reduce greenhouse gases. In other words, rather than reducing their own greenhouse gas emissions, they can support conservation programs that reduce or sequester greenhouse gases in forests of developing countries (CIEL
1997). 24
Several countries, most notably Costa Rica, have developed the idea of JI
further. They plan to create a market for certifiable tradeable offsets (CTOs), or
“greenhouse gas emissions expressed in carbon equivalent units either reduced or
sequestered” (Castro et al. 2000: 83). Eventually, CTOs would be traded globally just as sulfur emission permits are currently traded on the Chicago Board of Trade (Subak
2000). Revenues of CTOs or other taxes are then used by a developing country to establish a PES program in which landholders are monetarily compensated for conservation practices. As designed, the program would encourage practices such as preservation of old-growth forest, sustainable forest management, reforestation, or establishment of tree plantations on degraded lands.
Hydrological Services
Unlike carbon sequestration which operates on an international scale, the market for hydrological services operates at the level of the watershed, which is usually a national or sub-national scale. Hydrological services that a forested watershed provides include mitigation of floods and droughts, reduction of erosion and sedimentation of waterways, harvesting of moisture, regulation of water flow, and control of water quality (Pattanayak et al. 2001). Since landholders in upper watersheds have had little economic incentive in the past to practice conservation, the market for hydrological services attempts to connect water consumers downstream with land users upstream.
There are two ways to make this connection: public payment schemes and voluntary contractual agreements (Forest Trends 2003). With public payment 25
schemes, hydroelectric utilities or urban residents are required by law to pay an
environmental services tax. The tax is used to establish a public fund that the
government then allocates to farmers or other rural landholders under the agreement
that they will protect the watershed. Such projects have been implemented in El
Salvador and China (Herridor and Dimas 2000). With contractual agreements, in
contrast, there is no “middleman,” no government intervention: downstream water
consumers, whether rural or urban, directly contract with upstream landholders. Both
water consumers and landholders commonly form associations to facilitate these
agreements. Fees assessed on monthly water bills provide the funds for this type of
program, which have been started in Ecuador, Costa Rica, and Colombia (Rojas and
Aylward 2002)
Participation, Payment, and Monitoring
To participate in a PES program, either based on carbon sequestration or hydrological services, landholders usually submit a management plan to the appropriate agency. In some cases, NGOs help landholders prepare the management plan and other paperwork if their literacy or education level prohibits them from completing them on their own. After the agency accepts the management plan, contracts are signed by both parties to ensure that the management plan is followed for a set number of years. Payment is then distributed to the landholder. The payment is usually a percentage of the total and is distributed monthly or yearly. To ensure that landholders comply with their management plans, certified foresters are hired to complete environmental audits. These audits are usually based on remote sensing 26
methods, but ground truthing is necessary as well. So far, demand to participate in
these programs has been greater than the ability of governments or other organizations to manage them.
PES CASE STUDIES
PES has a short history. Costa Rica, with the most well-established and large-
scale PES program, has only been in operation since 1997. Thus, there are not many
case studies from which to draw. Yet the successes and failures of Costa Rica’s
program, though still in its adolescence, can provide some guidance. So too can the
nascent program in Pimampiro, Ecuador, the only PES program to have been
implemented in Ecuador to date.
Costa Rica
During the 1960s and 1970s, Costa Rica had one of the highest deforestation
rates in the world (Castro et al. 2000). Consequently, in the 1980s, the government
began to experiment with tax incentives to promote conservation. Building on the
success of these market approaches, the Costa Rican government embraced the idea of
JI in the 1990s. Costa Rica signed its first bilateral agreement of intent for JI in 1994
with the U.S., and other countries soon expressed their interest in similar agreements.
In response to this interest, the Costa Rican government established an official office
for JI through the passing of Ley Forestal 7575 in 1997. This office oversees three
umbrella programs: Protected Forests Program (PFP), Protected Areas Program, and a
renewable energy program. PFP, however, is the official program for JI, and it is
through it that CTOs are sold. Norway was the first country to purchase CTOs from 27
Costa Rica, a $2 million transaction at $10/tonne/carbon (Subak 2000). By 2000,
Costa Rica also had agreements with Switzerland, Finland, and a contracting firm in the U.S. for carbon CTOs and with Holland for methane CTOs (Castro et al.2000).
While Costa Rica hopes that future sale of CTOs will provide most of the funding for
PES, a fuel tax currently subsidizes the program.
With the combined funding, Costa Rica has implemented their PES program.
Payments are designed in part on an economic valuation of carbon sequestration as an environmental service and in part on opportunity costs, such that payments equal or slightly exceed income for pasturing the land. Payments are broken down by type of management plan (Table 2.1). It was found, however, that none of the payments were
Table 2.1 – Payment Plans within the Costa Rican PES System (Castro 2000, Yahoo 2004)
Management Plan Total Payment Payment Plan 1st Yr. 2nd 3rd 4th 5th Plantation 120,000 colones/hectare 50% 20% 15% 10% 5% (US$546 in 1997; US$279 in 2004) Conservation 12,000 colones/hectare 20% 20% 20% 20% 20% (US$55 in 1997; US$28 in 2004) Natural Forest Management 10,000 colones/hectare 20% 20% 20% 20% 20% (Sustainable Logging) (US$46 in 1997; US$23 in 2004) competitive with the opportunity costs involved with dairy farming; since dairy farmers’ income is higher than the payment amounts, PES has generally not been successful in dairy farming areas. 28
Payments are largest for plantations because of considerable start-up and
maintenance costs. This reasoning underlies the unequal payment plan for plantations,
as well. Payments are lowest for natural forest management because, unlike
plantations, there are fewer start-up and maintenance costs. Further, it is assumed that
the landholder will earn some money from the land through approved sustainable
logging. Despite the economic opportunities afforded by the plantation and natural
forest plans to harvest some of the forest resources, the vast majority of participants engage in the conservation plan; in 2000, 80% of contracts were for conservation, 13%
for sustainable logging, and 7% for plantations. One reason for this pattern is that plantations are only allowed on land that was already deforested by 1992. This policy aims to protect old growth, bio-diverse forests and to prevent monoculture carbon park
type forests (Subak 2000).
While payment plans are made over five years, landholders are expected to
adhere to the management plan for 15 additional years, making the full contract 20
years. The contract is included in the public register and passes to future owners.
Licensed foresters implement the monitoring program, funded by a small percentage
of payments received. Costs are estimated to be $2/hectare/year for initial
certification, $1/hectare/year for monitoring, and $10/hectare/year for environmental
auditing, with the goal of auditing 5% of all PFP lands per year (2000). Penalties for
non-compliance with the management plan have generally been financial, not legal, in
the form of penalty fees. However, conservation easements have been tried in some 29
areas, such that the government can secure an injunction against violators (Chomitz et al. 1999).
Although Costa Rica’s PES program has been in place less than a decade and still faces challenges, particularly in dairy farming areas, there has been support for the program at all levels; from international donors to rural landholders, there is more demand to participate than there is management to support the program. Payments have monetarily supported landholders, while also buttressing national programs in hydropower, ecotourism, and ecological research. Further, tens of thousands of hectares of land have been preserved or reforested not only because of their involvement with the program, but because some landholders are forgoing deforestation so that they can receive a PES contract in the future (Ferraro 2001).
Pimampiro, Ecuador
Because it operates at a local level in accordance with local concerns, the PES program in Pimampiro is distinct from that of Costa Rica. Pimampiro suffered from severe water shortages throughout the 1980s and 1990s, both for its urban and agricultural households. At the same time, deforestation became an issue in surrounding areas. In response, Desarrollo Forestal Comunal (DFC; Organization for
Community Forest Development), a project funded by the FAO, helped establish the
Nueva América Association in 1994. The Association, a group of some 20 individuals, collectively purchased a large parcel of upland primary forest in the
Pimampiro area. With the help of DFC, members of the Association could obtain title to a portion of the land when they developed an acceptable management plan. Some 30
of the management activities that DFC supported were “agroforestry, soil
management, silvopastoral systems, selective exploitation, and enrichment planting”
and later “orchid commercialization, environmental education, and natural regeneration” (IIED 2002: 23). In 1997, though, DFC began to phase out its direct participation in these programs. At this time, several DFC staff formed the Ecological
Corporation for the Development of Renewable Natural Resources (CEDERENA) which continued to work with the Association. Concurrently, the municipality of
Pimampiro established an Environment and Tourism Unit (UMAT).
In 2001, these two organizations, CEDERENA and UMAT, worked together to
develop a PES program for the area owned by Association members. The program
was to include four projects: hydrological services, carbon sequestration, ecotourism,
and biodiversity protection. The municipality supported the program, and an
ordinance was passed to help develop a fund to pay for it. While the initial fund of
$15,000 was provided by CEDERENA and DFC, the municipality promised to
contribute $500 a month to the fund from a 20% increase in drinking water fees.
Unfortunately, the municipality has yet to contribute the full amount pledged.
Collection appears to be a challenge. The fund is currently managed by a committee
that includes the Mayor of Pimampiro, the Financial Director of Pimampiro, the
Director of UMAT, the President of Pimampiro’s Environmental Commission, and a representative from CEDERENA. 31
According to the committee, payment plans for different land categories have
been based on “political negotiation rather than a technical analysis of the hydrology, water valuation, or the financial planning of the Fund” (IIED 2002: 26) (Table 2.2).
Table 2.2 – Payment Plans within the Pimampiro, Ecuador, PES System (IIED 2002)
Land Category Payment Plan (U.S. $/month/hectare Páramo (no human intervention) 1.00 Páramo (intervened) .50 Primary Forest (no human intervention) 1.00 Primary Forest (intervened) .50 Secondary Old Forest .75 Secondary Young Forest .50
Payments are made every three months, unless the landholder is found to be in
violation of the contract. For the first violation, the landholder loses payment for three
months. For the second, he loses payment for six months. After the third violation,
the landholder is prohibited from further participation in the program. However, by
2002, 20 of the 24 members of the Nueva América Association were receiving
payment through the program and around 600 hectares of forest were being protected
(CEDERENA 2002).
CONCLUSION
These case studies illustrate the potential of PES to achieve conservation and
equity goals. Broad-based support of these programs from the international
community, national and local government, and citizen associations show the
optimism that many have for PES. Yet, the case studies also reveal significant
challenges to the approach. In Costa Rica, despite international support and funding, 32
the program has not been able to offer payments that are competitive with the
opportunity costs of dairy farming and, as a result, those areas have not been involved
in conservation efforts. In Pimampiro, the municipality has been unsuccessful in
collecting the water taxes to provide its portion of the PES fund. Further, payments
are $1 or less per hectare per month, an amount that the participants and managers of
the program admit is too small to support their families and undermines the longevity
of the program (Nueva América Association 2003). Thus, these challenges indicate a need to re-examine the calculation of payment and to explore the potential role of opportunity costs of conservation. 33
CHAPTER 3
BACKGROUND AND RESEARCH QUESTIONS
At the request and with the support of an NGO in highland Ecuador, this study
of opportunity costs of conservation was conducted in the upper watershed of the
Mazar River (Figure 3.1). This chapter provides a regional, political, and demographic description of the study area.
REGIONAL BACKGROUND
Geographic Conditions of the Mazar
The Mazar Watershed (hereafter, the Mazar) encompasses 16,400 hectares
(164 square kilometers) of the Eastern Cordillera of the Ecuadorian Andes and is part
of the greater Paute River Watershed. It rises from an elevation of 2,050 to 4,100
meters above sea level (m.a.s.l.). This rise occurs quickly, as evidenced by a study by
Carol Harden (1993), in which she compares the Mazar with four other tributaries to
the Paute River. She concludes that the Mazar has the sharpest gradient and that the
Mazar’s slopes, when denuded, can be the most efficient transporters of fine sediments
and contributors to soil erosion in the entire Paute Watershed. In fact, slopes range
from 30 to 60% on interior ridges and reach greater than 60% on exterior ridges
(White and Maldonado 1991).
34
Figure 3.1 – The Mazar Watershed (Nicole Stump Cartographer, Ohio University Cartographic Center, published in Jokisch and Lair 2002)
35
Ecology of the Mazar
Land-use-land-cover (LULC) in the Mazar can currently be divided into four
categories:
• agropastoral land (14.20% of total land area), • primary montane forest (28.5%), • secondary forest (20.12%), • and, páramo (26.33%) (Lair 2002).
Montane forests, which normally cover the watershed from 2,100 to 3,500
m.a.s.l., are known to contain “more endemic plants and vertebrates than any other
hotspot in the world” (Myers and Mittermeier 2000). Páramos, highland areas
characterized by shrubs and bunch grasses, also exhibit extremely high biodiversity
and levels of endemism reaching 60% (Mena and Medina 2001).
While the Mazar is still dominated by the rich montane forest and páramo
ecosystems, the area has experienced considerable LULC change in recent decades.
Forests are under serious threat of deforestation. Currently, two large contiguous areas of forest remain on the western slopes of the Mazar, but agropastoral areas and forest fragments can be found on the eastern slopes. Of the agropastoral land, 95% was originally forest while 5% was originally páramo (Wunder 2000).
A 2002 study by Jokisch and Lair details the LULC changes which have
occurred in the Mazar and which are vividly illustrated in Figures 3.2 and 3.3.
LULC in the Mazar had remained relatively stable until the mid-1980s. But, with the
completion of a road connecting the area with the city of Azogues, sizeable changes
can be noted. As Joksich and Lair report, from 1987 to 1998: 36
Figure 3.2 – Land-Use-Land-Cover in the Mazar in 1987 (Jokisch and Lair 2002)
37
Figure 3.3 – Land-Use-Land-Cover in the Mazar in 1998 (Jokisch and Lair 2002)
38
• agropastoral land increased from 2,081 hectares (11.75% of the total land area) to 2,484 hectares (14.20%), corresponding to a 2.45% overall increase and an conversion of 35 hectares to agropastoral use per year; • primary forest cover decreased from 6,252 hectares (35.28% of the total land area) to 5,065 hectares (28.50%), corresponding to a 6.78% overall decrease and a 0.58% annual decrease; • secondary forest cover increased from 3,306 hectares (18.65% of the total land area) to 3,568 hectares (20.12%), corresponding to a 1.47% increase; • and, páramo increased from 3,957.16 hectares (22.33% of the total land area) to 4,648.36 hectares (26.33%), corresponding to a 3.9% overall increase.
Overall, if the changes which occurred with secondary forest and agropastoral land are combined, modified landscapes increased by 422.40 hectares over the 11.5 year study period, at an annual increase of 37 hectares. Moreover, the data show that this increase is at the expense of primary montane forest.
Despite this ecological loss, it is important to note that the Mazar still encompasses some of the largest and most pristine tracts of native vegetation in all of
Ecuador – both in tropical montane forest and páramo. A recent study by Jaramillo and Torres (2002) emphasizes that the Mazar has “the greatest potential [in the Paute
Watershed] because it has the most natural areas remaining” of any of the five tributary watersheds. Further, at 1,050 trees per hectare, the Mazar exhibits the highest tree density of any of its neighboring watersheds.
POLITICAL BACKGROUND
The Mazar is part of Rivera Parish of Azogues County of Cañar Province. Its total population of 1,781 people is dispersed throughout the parish, with only 224 people (14% of the population) living in the parish center of Zhoray (INEC 2001).
Others live in various communities, many of which are located near or along the 39
Mazar River. For this study, however, only two Rivera communities are included: San
Vicente, population 174, and San Carlos de Colepato, population 1,287 (Figure 3.4).
It is also important to consider that parts of Rivera Parish are included in
Bosque Protector 15 (BP15; Protected Forest Number 15) of the National Protected
Areas system. As mentioned previously, the Mazar River flows into the greater Paute
River. Within just a few kilometers of joining the Paute, the waters pass through the largest hydroelectric facility in Ecuador, supplying 60% of Ecuador’s energy. This facility has been severely affected by sedimentation such that its projected life has been significantly shortened. In fact, from its completion in 1983 to 1991, Hidropaute
experienced 17,800,000 cubic meters of sediment enter its reservoir. This amount would correspond to an overall lowering of the land surface of the Paute drainage area by 0.5 millimeters (Harden 1993). In response to the growing problem, the
Ecuadorian government, with the help of the International Development Bank, committed $20 million in 1990 towards dredging the reservoir and soil conservation programs. As part of their conservation efforts, the government declared 19 areas in the Paute watershed “protected” in 1990 (Joksich and Lair 2002). Mazar farmers living within the boundaries of BP15, by law, are supposed to acquire permission to
clear land. Enforcement, however, has been minimal and clearing for agriculture and
dairy farming has continued unabated. A study by White and Maldonado (1991) cites
several reasons for this failure: the resistance of forest guards to accept their police
role; remoteness of the area, which complicates monitoring efforts; lack of reliable
40
Figure 3.4 – Location of Research Communities (IGM/IGS 1969)
41
information regarding land tenure; and, farmers’ resistance to change their practice of
using forested land as a source of new soil.
DEMOGRAPHIC BACKGROUND
Farming is the dominant economic activity in the area. Temporary or
permanent off-farm employment is only practiced occasionally, likely because of time and cost of transportation. However, level of education may also play a role: literacy
rates in Colepato and San Vicente are 71% and 83%, respectfully, compared to a
national average of 92% (INEC 2001, World Bank Group 2003).
The majority of farmers (97.6%) practice a mixture of agriculture and
ganadería (pasturing of cows for the sale of milk, cheese, and meat; referred to here as
dairy farming) (Tierra Viva 1990, cited in Wunder 2000). They are mostly small-scale
farmers, with an average minifundio (small farm) size of five hectares. However,
there continue to be some medium- to large-scale farmers as well, despite land reform
efforts in the 1960s. When including these remaining latifundios (large farms), the
average farm size in the Mazar is 50 hectares (Jaramillo and Torres 2002).
PROBLEM STATEMENT AND RESEARCH QUESTIONS
Although the Mazar is part of the protected area BP15, attempts by the
government at command-and-control tactics to reduce deforestation have failed; the
Mazar is facing increasing pressure on its forests. As reported in the Jokisch and Lair
(2002) study of LULC change in the Mazar, primary forest cover is decreasing at an
annual rate of 0.58%. This rate of loss is greater than any other tropical montane area 42
in Ecuador. Simultaneously, areas for production (either for cultivation or pasture) are
increasing.
Considering the rate of deforestation, the steepness of slopes, and the location
of the Mazar just a few kilometers above the reservoir of the largest hydroelectric
facility in Ecuador, soil erosion and sedimentation of waterways are a serious concern.
As White and Maldonado note, the results of LULC change in the greater Paute
Watershed are that “river flow has become more erratic and sediment loads have
increased, creating difficulties for irrigation, human and animal water consumption,
and hydroelectric power generation” (1991: 38). It is clear, then, that the effects of deforestation in the Mazar may be felt by a wide array of groups, from local farmers to water consumers in downstream localities to regional consumers of electricity, and that an effective approach to the problem is needed.
Given that the causes of deforestation in the Mazar are linked to the economic pull of agriculture and dairy farming, opportunity cost-based PES is a promising approach to the problem. As Jokisch and Lair note, it would be difficult to convince farmers “not to respond to the market demand for timber and cattle products” when
“simply conserving and expanding forest has no immediate or obvious social or economic benefit for the area’s smallholders” (2002: 250). A PES program would, in contrast to previous programs, offer an overt economic benefit to Mazar farmers.
Therefore, this thesis aims to build a foundation for a PES program in the
Mazar by calculating farmers’ opportunity costs of conservation, through the proxy of their value of production, and by analyzing how these costs could be used in the 43
design of fair and adequate payments. To accomplish these goals, two research questions are posed:
• What is the value of production that farmers achieve per hectare per year for the most common land uses – potato and corn cultivation, and dairy farming?
• Based on the values of production, what is an effective payment plan for a PES program in the Mazar, one which would create an adequate incentive for farmers to choose conservation over deforestation?
Beyond these practical goals, however, this study also means to contribute to the broader field and theory of PES. Until now, the calculation of payments has primarily focused on the actual value of environmental services or beneficiaries’ willing to pay for environmental services, both of which are related to the demand for these services. The supply of environmental services, as related to landholders’ opportunity costs of conservation, has not been adequately considered. Since, for any good or service, monetary value is assigned based on both supply and demand, this study’s second goal is to redress the calculation of payments in PES today by focusing on the supply of environmental services by landholders. 44
CHAPTER 4
METHODOLOGY
To collect the data necessary to calculate the value of production achieved through potato and corn cultivation and dairy farming, two trips were made to
Ecuador. These trips were necessary both to conduct interviews in the Mazar and to collect primary data from Ecuadorian organizations involved with agriculture and dairy farming. This chapter describes the institutions which supported this research, as well as the methodology of the study: including, site selection, interview design, interviewee selection, data considerations, and scope of the study.
INSTITUTIONAL AFFILIATION AND SUPPORT
The first trip was spent as a nine week internship with the NGO Fundación
Cordillera Tropical (FCT), based in Cuenca, from June to August 2003. I became
interested in working with this organization when the General Coordinator, Dr. Stuart
White, put out a request for research on the potential for implementing a PES program in the Ecuadorian Andes. As an NGO, FCT is concerned with preserving the biodiversity of the region’s tropical montane forest and páramo through increased
“rural landowner participation” (FCT 2004). FCT has actively pursued these interests by sponsoring independent research in the Mazar as well as outreach programs, such as environmental education, in area communities. In particular, FCT staff and researchers have worked with the communities of San Vicente and Colepato, cultivating positive working and personal relationships with many community members and their leaders over the last several years. 45
During the internship, I visited San Vicente and Colepato several times with
FCT staff. My affiliation with FCT was pivotal because the trust the communities
held for FCT staff was extended to me, as their friend and colleague. While Dr. White
is known throughout the Mazar as the friendly “El Doctor,” I was called “La
Doctorita” (the little doctor). Thus, the visits allowed the communities to become familiar with me and the purpose of the research and allowed me to identify and meet individuals important for the research, whom I planned to interview upon a three week
return trip to Ecuador. The return trip took place in November/December 2003,
during which time I was able to complete both the interviews in the Mazar and data-
collection from other pertinent organizations.
OTHER ORGANIZATIONS
I sought data from Ecuadorian organizations, both governmental and non- governmental, for several reasons. First and foremost, I wanted to determine if any studies similar to my own had been conducted. Second, I needed more current and site-specific statistics than were available on-line or in the literature of agriculture and dairy farming in Ecuador and, particularly, in the region of the Mazar. And, third, I sought data to provide comparison and context for my own results.
I collected data from the following institutions and/or individuals:
• Ministerio de Agricultura y Ganadería (MAG) – Ministry of Agriculture and Livestock • Instituto Nacional Autónomo de Investigaciones Agropecuarias (INIAP) – National Autonomous Institute of Agricultural Studies • Banco Nacional de Fomento (BNF) – National Bank of Promotion • Instituto Nacional de Estadistica y Censos (INEC) – National Institute of Statistics and Census 46
• And, Ramiro Carrión of the Corporación Ecológica para El Desarrollo de los Recursos Naturales Renovables (CEDERENA) – Ecological Corporation for the Development of Renewable Natural Resources.
There are, however, limitations with the data provided by these organizations that should be noted. First, most studies were completed in provinces quite distant and distinct from Cañar Province where the Mazar is located. Comparison is difficult as a result, since each region’s particular characteristics of soil, slope, elevation, precipitation, temperature, and history of land use can result in very different levels of productivity and profits. Second, even those studies which were from Cañar Province were conducted in a centrally located county quite different from Azogues County where the Mazar is found – from physical conditions to precipitation to market integration. Thus, caution is needed even to compare intra-provincially. Third, all of the studies were completed in different years, an important consideration since dollarization in 1999 has caused considerable changes in prices of labor, inputs, and outputs. And, finally, the studies lumped farmers with greatly varying techniques and technology. As Jokisch notes in a study of Cañar farmers,
“yields vary tremendously depending on factors including, but not limited to, the quality of seed, previous land use, level of fertilization, timing and amount of irrigation, disease and pests (chemical treatments)… cultivation practices (timing and frequency of weeding), and whether the field is monocropped or inter-cropped” (1998: 205).
Consequently, other studies’ results are not completely applicable to the Mazar, where small farmers operate with artesenal seeds, minimal inputs, and traditional technology and techniques. 47
In short, the limitations of these data prevented their use in the actual calculation of the value of production in the Mazar. Yet, they did support this study in several ways: they provided broad comparison and context for the interview results; they demonstrated the range of income that might be achieved with increased technology, advanced techniques, and increased market integration; they illustrated production and income variability within Ecuador; and, they demonstrated the volatility of agriculture and dairy farming during recent years.
SITE SELECTION
For the interviews, I returned to the communities of San Vicente and Colepato in December 2003. I chose these communities because, based on conversations with
Dr. White, they are the most likely to be recruited for participation in a pilot, FCT- sponsored PES program. The reasons are several.
First, Colepato is an indigenous cooperative. Since it is a cooperative and makes some of its land use decisions as a group, the possibility of contracting a large number of farmers for a PES program might be higher in Colepato than in other communities which are exclusively based on private land ownership. Moreover, the possibility of contracting farmers with contiguous tracts of land might be higher in the cooperative as well. For conservation efforts such as PES, contiguous tracts of land are important to maintain ecological viability.
Second, both the communities of Colepato and San Vicente have cultivated a positive working relationship with FCT over the last several years. In consequence, the prospect of negotiating a PES program in these communities is greater than in 48
other communities without experience or trust of the organization. In addition, the
work that FCT has done with Colepato and San Vicente has centered on
environmental education in schools and environmental awareness in the communities.
Thus, the topical groundwork has been laid for PES as well.
Third, San Vicente and Colepato still have considerable tracts of tropical
montane forest and páramo and therefore hold particular ecological potential for a
PES program (Jokisch and Lair 2002). In contrast, other Mazar communities, especially those in and around Zhoray, have already depleted their forests. Only small, discrete remnants of forest can be found in these areas, making PES difficult.
Fourth, and finally, the communities of San Vicente and Colepato are largely composed of small farmers using minimal technology. As a result, their value of production per hectare per year is anticipated to be much lower than that of medium- and large-scale farmers who have the benefit of economy of scale, higher quality inputs, and advanced technology. While it is the eventual goal of FCT to incorporate other communities and larger landholders into a PES program, on a practical level it is economically more feasible to begin with small farmers who are expected to have lower opportunity costs. Further, on a theoretical level, PES is supposed to address both environmental and socio-economic justice. For this reason, it is preferable to focus on how payments can be made to the small, mostly subsistence-level, farmers of
Colepato and San Vicente rather than large farmers. 49
INTERVIEW DESIGN
To understand the opportunity costs of conservation of farmers in Colepato and
San Vicente, the interviews needed to focus on the value of production for the most
common and profitable land uses.
Land Uses
Agriculture In regards to agriculture, two crops became logical choices for interview topics. Potatoes were chosen because they have commonly been cultivated in the Mazar and because data from BNF indicate that potatoes can be one of the most profitable crops in Ecuador (Table 4.1). Corn was chosen, as well. While corn is not
Table 4.1 – Accounting Profits Per Hectare Per Year for Various Crops in Ecuador (BNF 2003)
PRODUCT ACCOUNTING PROFITS PER HECTARE PER YEAR Potatoes $2325.14 Colored Onion $2137.53 Horticultural Tomatoes $2136.50 Dried Peas $825.80 Young Peas $428.50 African Palm $363.11 Rice $299.96 Hard Corn $190.36 Soft Corn $174.24 Cotton $107.38 Beans $95.14 Soybeans $71.73 Wheat $10.20
50
seen as being nearly as profitable as potatoes, it is the most widely cultivated crop in the area and is a culturally important crop (INEC/MAG/SICA 2003). In fact, I found that farmers with limited funds will choose to plant corn rather than any other crop.
As for other crops that appear to have greater economic potential than corn, they were not widely cultivated in the Mazar and thus were not appropriate topics for this study; while some farmers I spoke with planted peas, beans, or other crops, they did so on a very small scale. The reasons are several. First, many view the input costs for cultivating more profitable crops to be prohibitive. Second, prices have fallen for many of these crops and, as White (2004b) notes, “most people don’t bother anymore” when costs are high and profits questionable. Third, risk aversion may play a role.
Farmers might be able to earn more from other crops or even from hybrid forms of potatoes and corn, but most do not cultivate them because they are familiar with the cultivation of traditional potato and corn varieties and are hesitant to try other crops that they do not know. Also, some simply prefer the taste or other qualities of the
traditional crops and varieties. And, finally, the physical conditions and elevation of
the Mazar are simply not conducive to some crops like the African palm and rice.
Dairy Farming Like potato and corn cultivation, dairy farming was included
because of its potential profitability and because of its ubiquity in the Mazar. Another
important factor behind choosing dairy farming, though, is its role in deforestation.
As discussed previously, the current literature says that demand for cattle products
such as milk, cheese, and meat is driving deforestation of tropical montane forests and, 51
particularly, the forests of the Mazar (Wunder 2000). Thus, dairy farming was an
important consideration for interviews.
Interview Specifics
To calculate the value of production per hectare per year for potatoes, corn,
and dairy farming, interviews focused on the average quantities and prices of physical
inputs and outputs. Tables 4.2 and 4.3 outline those inputs and outputs.
Tables 4.2 and 4.3 – Inputs and Outputs Considered in the Interviews3
POTATOES DAIRY FARMING AND CORN Physical Inputs Salt Physical Inputs Seed Vitamins Fertilizer Vaccination Fumigation Deparasite Treatment Transportation Outputs Milk Outputs Harvest Cows Bulls
While secondary sources served as guide in outlining relevant inputs and outputs, data were used quite differently in this study as compared to secondary source studies. In short, secondary sources calculated accounting profits, while this study calculated the value of production using an economic profit approach.
To explain, calculating profits (π) involves the concepts of total revenues (TR) and total costs (TC) and is as follows: π = TR – TC, where TR equals quantity of product sold times the price of the product and where TC equals the TC of physical inputs (TCp) plus the TC of labor (TCl). The primary difference between accounting
3 See Appendix 1 for specific interview questions.
52
profits and economic profits is that with economic profits, opportunity costs of labor
and inputs are considered. Basically, it is argued that we must take into consideration
what those physical inputs and labor inputs could have been used for, in this case,
instead of for corn and potato cultivation and dairy farming (Stiglitz 1997). In other
words, economic profits are meant to include the “true costs” of production.
Further, in a competitive market where farmers are price-takers (that is, they
must accept the price observed in the market), economic profits will be driven to zero.
Thus, TR will equal TC. The significance of approaching this thesis through the lens
of economic profits is that, unlike in the studies by other organizations, profits for
farmers are assumed to be zero. The consequence is that rather than basing payments
on accounting profits,4 payments are based on the value of production. The value of production is calculated thus:
Where farmers are price-takers, Where π = 0, And, where labor is self-employed,
TCp + TCl = TR
TCl = TR - TCp
To clarify, in the Mazar, farmers and their families commonly provide their own labor.
Thus, TCl are not calculated as wages paid but as the difference between TR and TCp.
In sum, since profits are driven to zero, TCl can be understood as the value that
4 Basing payments on accounting profits would not be appropriate to this study since: 1. it would ignore the concept of opportunity costs, a concept central to this study; 2. it would be difficult to set payments since accounting profits for the Mazar for both corn and potatoes were found from the interviews to be negative. 53
farmers achieve from production and thus as the proxy for opportunity costs of conservation.
INTERVIEWEE SELECTION
The interviewees from San Vicente and Colepato were chosen non-randomly, as a random sample was difficult if not impossible to compile. The difficulty lay in the public records: both national census data and local records concerning the tenure of the area were neither current nor complete at the parish level. Thus, a list of landholders from which a random sample could be derived was impossible to construct. Instead, interviewees were chosen based upon:
• recommendations from FCT staff • availability • and, willingness to participate.
Factors Influencing Selection
Recommendations Some interviewees were recommended by FCT staff because they were known to be articulate, knowledgeable, and willing to assist research. As interviews were conducted, it was immediately apparent that the interviewees recommended by FCT were incredibly valuable to the research because they were often more capable than other interviewees to grasp the intent of the questions and to make estimations of their inputs and outputs. As will be discussed shortly, many of the other interviewees had a difficult time providing estimations of the average amounts of their inputs and outputs and often responded that “it depends.”
Availability The second variable, availability, was also very influential in the selection of interviewees. Because interviews were conducted in December, in the 54
very midst of a corn planting season in the Mazar, most farmers were in the fields from early morning to evening. Attempts were made to adjust to their schedule, for example arriving very early (7 a.m.) or very late (8 to 9 p.m.) at their homes or simply waiting until they took a break from planting to complete the interview in the field.
These adjustments were successful in many cases, but availability remained a consistent limiting factor in finding interviewees.
An interesting effect the planting season had on the research, however, was that a significant number of women were interviewed. Since the area is quite traditional, with beliefs that men speak for the household and that men are the authority on agricultural activities, I had little expectation to speak with many women.
With the planting season, though, many men were not at home, which allowed me to speak to the women of their households. Other men actually preferred that I speak with the women because they felt too busy to complete the interview themselves. The women were valuable sources of information since they too participate in the process of potato and corn cultivation and in dairy farming, with the possible exception of the products’ purchase or sale at market. And, in fact, they were at times the only authority from a particular household because many men in the area have migrated to the United States or to urban areas and left their women relatives as the heads-of- household.
Willingness to Participate Finally, the third variable affecting the selection of interviewees was simply willingness to participate. This was not a factor in San
Vicente, since every person who was asked for an interview agreed to participate. In 55
Colepato, however, it was quite different. Because Colepato is a cooperative, most of the people I asked to interview preferred that I do an interview with the group as a
whole rather than with them as individuals. While it was always my intent to
complete an interview with Colepato as a group, I explained that I still needed to talk
to individuals. While some farmers then agreed to talk to me individually, most
continued to insist that I wait for the group meeting. Of course, I complied with their
requests at that point and sought other interviewees.
Interviewees
Fifteen semi-structured interviews were completed, each of which lasted from
45 minutes to two hours (Table 4.4). As is shown, nine interviews were with
Table 4.4 – Interview Breakdown
Number of Number of People Interviews Involved Individual Male 4 - Female 5 - Group Male 1 2 Female 3 9 Mixed 2 50 TOTAL 15 70
individuals (four with men and five with women) and six were with small to large groups.
One large, mixed group interview should be noted in particular. This interview was
conducted with around 50 Colepato farmers, and it was important for two reasons. First,
because Colepato’s participation in a PES program as a group would be crucial to the
program’s success, it was very important to me to speak with them both for data
collection and for explaining the purpose of the research and the potential that it might 56
hold. Second, I found that in some individual interviews with Colepato farmers, there was reluctance or difficulty in offering averages of inputs and outputs. Therefore, I viewed the answers given at the Colepato group interview as a proxy for the averages I had difficulty finding during individual interviews.
Finally, I would like to note that even though the interviewees were chosen non- randomly and were not of a statistically significant number for their communities, I believe that they do adequately represent their communities. Together, they were able to supply the necessary data to estimate the opportunity costs of conservation faced by
Mazar farmers and thus to provide a basis for setting payments.
DATA CONSIDERATIONS
There were, however, several challenges to the methodology of data collection and data analysis that I would like to mention here.
Units
On the most basic level, units of inputs and outputs were problematic. Units for quantity of seeds and quantity of harvest were a particular challenge. Although I always posed questions concerning quantities of seeds and harvest by quintal because it was the unit most often used by other Ecuadorian organizations, many interviewees’ responses were in other units such as saco (sack), galón (gallon), or almud. I thought I could overcome this discrepancy by asking farmers how much each unit weighs and converting to quintales, but another difficulty emerged: the units of quintal, saco, galón, and almud are highly perceptual and are used by farmers to describe a range rather than a specific weight. To overcome this challenge, I questioned market vendors in Zhoray and
Azogues where Mazar farmers commonly buy and sell agricultural products about the 57
weight of these different units. From their responses, I was able to calculate weight averages for each unit and thus make conversions of the farmers’ responses to quintales.
Decision-making
A second challenge arose when I realized that some interviewees plant based on
quantity of inputs rather than quantity of land. In the design of my interview questions, I
assumed that when people cultivate a hectare of land, they choose the quantity of seeds
based on the quantity of land they wish to plant. It is the reverse in many cases in the
Mazar. Numerous farmers choose to cultivate a quantity of seeds based on the amount of
money that they have that season to spend on inputs, and they choose the quantity of land
they cultivate accordingly. This difference in approach created a challenge. Many
interviewees chose to give responses for inputs and outputs for a half hectare or even for
a quarter hectare. To include their data in the calculation of opportunity costs per
hectare, I had to make the assumption of constant returns to scale and appropriately
multiply their responses so that they were indicative of a full hectare.5
Reliability
A third challenge concerned reliability of interviewee data. First, many
interviewees were reluctant to give estimations of average inputs and outputs. Common
responses were that “it depends” on the year, the weather, the seed, the cow, the
economy, the family resources, and so on. When I pressed them, many would respond by
giving me low and high estimates rather than an average. Since variability in production
is paradoxically a constant for these farmers, I decided to use their responses to explore
the range of production values achievable in the Mazar. Thus, as will be seen in Chapter
5 A complete list of assumptions made in this thesis is provided in Appendix 2.
58
5, I used the data to calculate low, midpoint, and high estimates of the value of
production.
A related problem was that some interviewees gave extremely high or low estimates which, because of their contrast to other interviewee responses, caused me to suspect their validity. To compensate for these apparent outliers, I used the mode rather than the mean for each input and output presented in the low, midpoint, and high estimates.
Lastly, there was some concern about the reliability of the data provided by
women. While men appear to be involved, either directly or indirectly, in every aspect of
cultivation of potatoes and corn, women are often not involved in pre-cultivation
activities such as the purchase of physical inputs, like seed and fertilizer, and post-harvest activities such as transportation and sale of the products. While women still provided answers to these questions, and it is very likely that they are fully aware of the costs of these inputs as the wives or mothers of the heads-of-household, there is still some risk that their answers were not as accurate as their male counterparts’ responses would have been. Still, the costs that women had difficulty in estimating were also the easiest for me to check and support with secondary data from local markets. Therefore, I believe the risk of an erroneous assessment of costs of inputs and outputs was minimized.
SCOPE OF THE STUDY
Finally, the scope of the study should be noted. It is evident that all of the costs
faced by landholders cannot be taken into consideration in a simple calculation; farmers’
opportunity costs of conservation are not only economic. Inevitably there would be
intangible and socially complex costs to the farmers if they were to participate in a PES 59
program, and these are difficult to assign a monetary value. For instance, participation in a PES program may give rise to equity issues, since PES payment may alter who holds money and other resources within the household. It might also instigate change in perceived and actual food security, cultural norms, and migration trends. All of these issues could weigh heavily on a farmer’s mind when making a decision to participate in a
PES program, and therefore need to be seriously considered by PES practitioners. While these issues are important, they are beyond the scope of this study, which focuses on the economic opportunity costs of conservation of landholders. Therefore, the reader should keep in mind that the calculations made here are meant simply to provide a baseline estimation, a lower bounds, of the costs faced by potential PES participants and are meant to be used as just one of many tools for designing payments.
60
CHAPTER 5
DATA
The data presented in this chapter were collected in Ecuador in order to calculate the value of production that farmers achieve per hectare per year for the most common land uses in the Mazar. The data are presented in three sections: Potatoes, Corn, and
Dairy Farming. Within these sections, data from secondary sources are presented first, followed by data from the primary source – interviews with San Vicente and Colepato farmers. While there is some discussion of these results, an in-depth analysis is reserved for the following chapter.
To facilitate interpretation of the tables and figures which follow, please consult
Appendix 3 for a definition of units. Two units of particular importance, jornal and
quintal, are equal to one person-day of labor and a 100 pound bag, respectively.
POTATOES
Potatoes are widely cultivated in the Mazar and the surrounding area, from
elevations of 2800 m.a.s.l. and higher (White 2004b). Their prevalence is evidenced by
the fact that potatoes represent the third most common crop in Cañar Province by
hectares cultivated and the second by production unit (farm) (Table 5.1).
Secondary Sources
Given potatoes’ pervasiveness in the region, it is not surprising that potatoes show significant economic potential in the studies by secondary sources (Figure 5.1 and Tables
5.2 and 5.3). In fact, three of the four studies place potatoes’ accounting profits at well 61
Table 5.1 – Cultivation of Selected Crops in Cañar Province (INEC/MAG/SICA 2003)
Hectares Production Units Corn 2599 5357 Rice 1897 93 Potatoes 1864 4435 Barley 1402 2871 Peas 677 1299 Bean 530 499 Broad Bean 516 1519 Wheat 370 847 Melloco 125 423 Yuca 87 179
Oats 72 122
Figure 5.1 – Accounting Profits for Corn and Potatoes Per Hectare Per Year (BNF 2003, MAG 2002, INIAP 2000)
$2,500.00 $2,000.00
$1,500.00
$1,000.00 $500.00
$0.00
-$500.00 BNF MAG INIAP BNF BNF MAG INIAP (2003) (2002) (2000) (2003) (2003) (2002) (2000) 62
Table 5.2 – Various Calculations of Accounting Profits for Potatoes Per Hectare Per Year (BNF 2003, MAG 2002, INIAP 2000)
BNF BNF (2003) (2003) U Q UP TP U Q UP TP Clearing hours NA NA $0.00 hours NA NA $0.00 Planting jornales 6 $5 $30.00 jornales 5 $4 $20.00 Weeding&Mounding jornales 26 $5 $130.00 jornales 26 $4 $104.00 Fertilizing jornales 2 $5 $10.00 jornales 4 $4 $16.00 Fumigating jornales 24 $5 $120.00 jornales 20 $4 $80.00 Watering jornales NA NA $0.00 jornales NA NA $0.00 Harvesting jornales 40 $5 $200.00 jornales 30 $4 $120.00 Postharvest jornales 4 $5 $20.00 jornales NA NA $0.00 Seeds quintales 30 $15 $450.00 quintales 20 $12 $240.00 Fertilizer quintales 30 $15 $450.00 quintales NA NA $254.00 Fumigation tanks NA NA $0.00 tanks NA NA $0.00 Herbicides tanks NA NA $381.01 tanks 16 $16 $256.00 Yunta days NA NA $0.00 days 1 $8 $8.00 Tractor days 8 $45 $360.00 days 6 $10 $60.00 Packaging quintales 400 $0.20 $80.00 quintales 400 $0.40 $160.00 Transportation quintales 400 $1 $400.00 quintales 400 $0.40 $160.00 Administrative Costs $107.55 $57.90 Financial Costs $258.12 $138.96 Indirect Costs $0.00 $0.00 TOTAL COSTS $2,996.68 $1,674.86 TOTAL REVENUE quintales 400 $9.00 $3,600.00 quintales 400 $10 $4,000.00 PROFIT $603.32 $2,325.14
Key: U = Unit; Q = Quantity; UP = Unit Price; TP = Total Price; NA = Data Not Available 63
Table 5.3 – Various Calculations of Accounting Profits for Potatoes Per Hectare Per Year (BNF 2003, MAG 2002, INIAP 2000)
MAG INIAP (2002) (2000) U Q UP TP U Q UP TP
Clearing jornales 2 $5.00 $10.00 days NA NA $0.00 Planting jornales 10 $5.00 $50.00 jornales 4 $1.80 $7.20 Weeding&Mounding jornales 50 $5.00 $250.00 jornales 4 $1.80 $7.20 Fertilizing jornales 5 $5 $25.00 jornales 6 $1.80 $10.80 Fumigating jornales 12 $5 $60.00 jornales NA NA $528.94 Watering jornales 8 $5 $40.00 jornales NA NA $0.00 Harvesting jornales 40 $5.00 $200.00 jornales 40 $1.80 $72.00 Postharvest jornales 30 $5 $150.00 jornales 4 $1.80 $7.20 Seeds quintales 20 $15.00 $300.00 kilograms 1200 $0.22 $264.00 Fertilizer quintales 800 $1.50 $1,200.00 quintales NA NA $120.00 Fumigation tanks 4 $50 $200.00 tanks NA NA $0.00 Herbicides hours 88 $0.32 $33.16 tanks NA NA $0.00 Yunta days 16 $1.50 $24.00 days 3 $5 $31.60 Tractor hours 13 $14 $182.00 days 5 $8.00 $40.00 Packaging quintales NA NA $0.00 quintales 400 $0.12 $48.00 Transportation trucks 2 $45 $90.00 quintales NA NA $0.00 Administrative Costs $560.00 $0.00 Financial Costs $140.00 $0.00 Indirect Costs $223.00 $0.00 TOTAL COSTS $3,737.16 $1,136.94 TOTAL REVENUE quintales 450 $12.00 $5,400.00 tm 20 $120 $2,400.00 PROFIT $1,662.84 $1,263.06
Key: U = Unit; Q = Quantity; UP = Unit Price; TP = Total Price; NA = Data Not Available 64
about $1,000 per hectare per year. Still, the BNF studies underline the fact that potato profits can differ widely: their studies, completed at the same time but in two different extension districts, reported profits of $603.32 and $2,325.14.
This brings up a point made in the Methodology Chapter, namely that the secondary source data were collected in different areas and at different times, making comparison a challenge. The following list defines the areas for which the potato data are representative:
• BNF (2003): Tulcan Extension District and Riobamba Extension District (based in Carchi and Chimborazo Provinces, respectively) • INIAP (2000): Northern Cotopaxi-Chimborazo and Northern Carchi-Pichincha Provinces • MAG (2002): Cañar Province.
Figure 5.2 – Provinces of Ecuador (Earth-Art 2002)
65
Variation can be considerable between provinces and even within a province. For example, the MAG study was conducted in Biblian County in central Cañar, while the
Mazar is located in Azogues County of eastern Cañar. As White (2004b) indicates, central Cañar receives an average of 350 – 500 mm of annual precipitation, while the
Mazar receives 1000 – 2000 mm. As a consequence, Mazar farmers face higher incidences of potato blight and considerably reduced potato production and profits as compared to farmers in Biblian.
In addition to dissimilarity in place and time of data collection, it should be noted that the studies also differed in the type of farm considered. For instance, the BNF and
MAG studies report averages for semi-technical farms. Semi-technical farms are those which complete some or all of the following:
• mechanization of parts of the cultivation process, usually replacing the traditional technology of oxen and wooden plows with the tractor for clearing; • regular and profuse application of chemical inputs, such as fertilizer, herbicides, and fungicides; • utilization of agricultural extension services and products, such as high yield varieties of seeds and soil analysis.
In contrast, the INIAP study and the interviews are representative of farms with minimal technology. These farms can be characterized by:
• use of oxen and wooden plows, instead of tractors; • application of minimal chemical inputs – For example, minimal technology farms might apply just a few quintales of general fertilizer or manure, no herbicides, and two to three fumigations, as opposed to semi-technical farms which apply soil-specific fertilizer several times, herbicides, and over ten fumigations; • artesenal seed varieties.
In sum, none of the studies can be considered to be representative of the Mazar because of the differences in location, date of collection, and type of farm, but broad trends are seen and are useful in providing context to interviews. These trends include: 66
extremely high costs of physical inputs (ranging from $1137 to $3737) and high outputs
(400 to 450 quintales).
Field Data
In stark contrast to secondary sources, interviews indicate relatively little economic potential for potato cultivation in the Mazar, with a midpoint estimate for the value of production of just $157.70 per hectare per year (Table 5.4). In addition, interviews show that the value of production can vary considerably from season to season. As noted in Chapter 4, many interviewees provided ranges of low to high quantities for inputs and outputs.6 As a result, low, midpoint, and high estimates were calculated. These estimates give the reader an idea of the wide range of costs and revenues that Mazar farmers can experience in cultivation.7 For example, in a season when Mazar farmers have limited economic resources, they may spend less on physical inputs (e.g., $470 compared to $720). Minimal inputs, in a wet season, may allow potato blight to severely affect outputs (e.g., a harvest of 40 quintales or less). On the other hand, if conditions are optimal, minimal inputs may not affect outputs as much (e.g., a harvest of 50 quintales or more). In sum, the production values presented in Table 5.4 evidence the considerable variation and risk involved with cultivating potatoes in the
Mazar.
6 When an interviewee provided both a low and high estimate for an input or output, the values were recorded in the appropriate categories while their average was used for the midpoint category. As a result, three values were entered, one each for the Low, Midpoint, and High Estimates. In contrast, when an interviewee provided just one answer for an input or output, this response was taken to represent the midpoint and was recorded in this category. As a result, only one value was entered in this scenario. 7 Because some interviewees provide both low and high estimates and some just provided a midpoint estimate, there are some incongruent results. For example, in Table 5.5, the high estimate of quintales of potatoes harvested is 44.8 while the midpoint estimate is 50. These incongruencies are a result of smaller sample sizes for the calculation of low and high estimates. 67
Table 5.4 – Estimates of Total Costs of Labor for Potatoes Per Hectare Per Year in the Mazar8
LOW ESTIMATE MIDPOINT ESTIMATE HIGH ESTIMATE Unit Quantity Unit Total Quantity Unit Total Quantity Unit Total Price Price Price Price Price Price INPUTS Seeds quintales 8 $12.00 $96.00 11.2 $12.00 $134.40 11 $12.00 $132.00 Fertilizer quintales 10 $12.00 $120.00 6 $12.00 $72.00 20 $12.00 $240.00 Fumigation pumps 12 $20.00 $240.00 12 $20.00 $240.00 16 $20.00 $320.00 Transportation quintales 39.2 $0.50 $19.60 50 $0.50 $25.00 44.8 $0.50 $22.40 TOTAL COSTS OF PHYSICAL INPUTS $475.60 $471.40 $714.40 TOTAL REVENUE quintales 39.2 $12.58 $493.14 50 $12.58 $629.10 44.8 $12.58 $563.58 TOTAL COSTS OF LABOR $17.54 $157.70 -$150.82
8 Interviewees reported that it is common to have two seasons per year for potato cultivation with the chaucha variety. Therefore, the estimates presented here represent two seasons. 68
The situation appears particularly poor when one compares the interview data
with the secondary source data (re-calculated to reflect the economic profit approach), as
is shown in Table 5.5. Mazar farmers’ value of production per hectare per year, even in
the best estimate, is a fraction of that reported in other studies. It is clear that the levels
of inputs and outputs reported in the Mazar are dramatically less than those reported by
farmers in other studies. In conclusion, the interview results reveal that potato cultivation
in the Mazar does not hold the economic potential indicated by other studies.
Table 5.5 – Potatoes’ Comparative Total Costs of Labor Per Hectare Per Year for Interviews and Secondary Sources (BNF 2003, MAG 2002, INIAP 2000)
Interview BNF (2003) BNF (2003) MAG (2002) INIAP Midpoint (2000) Estimate TOTAL COSTS OF $471.40 $2,486.68 $1,334.86 $2,952.16 $503.60 PHYSICAL INPUTS TOTAL $629.10 $3,600.00 $4,000.00 $5,400.00 $2,400.00 REVENUE TOTAL COSTS $157.70 $1,113.32 $2,665.14 $2,447.84 $1,896.40 OF LABOR
CORN Corn, like potatoes, is a culturally important crop and one which is cultivated
widely in the Mazar and surrounding region. In fact, as is shown in Table 5.1, more
hectares of land in Cañar Province are planted in corn than any other crop
(INEC/MAG/SICA 2003). Moreover, more production units (farms) in the province plant corn than any other crop.
Secondary Sources
With the dominance of corn cultivation in the region, it is interesting to consider how little economic potential it holds according to secondary sources. As is shown in detail in Table 5.6, corn often results in minimal accounting profits per hectare per year: 69
Table 5.6 – Various Calculations of Accounting Profits for Corn Per Hectare Per Year (BNF 2003, MAG 2002, INIAP 2000)
BNF MAG INIAP (2003) (2002) (2000) INPUTS U Q UP TP U Q UP TP U Q UP TP Clearing jornales NA NA $0.00 jornales 2 $5.00 $10.00 jornales 10 $2.40 $24.00 Planting jornales 4 $5 $20.00 jornales 5 $5.00 $25.00 jornales 5 $1.20 $6.00 Weeding jornales 10 $5 $50.00 jornales 7 $5.00 $35.00 jornales 14 $1.20 $16.80 Mounding jornales 5 $5 $25.00 jornales 7 $5.00 $35.00 jornales 1 $2.40 $2.40 Fertilizing jornales 2 $5 $10.00 jornales NA NA $0.00 jornales NA NA $0.00 Fumigating jornales 3 $5 $15.00 jornales NA NA $0.00 jornales NA NA $0.00 Watering jornales 15 $5 $75.00 jornales NA NA $0.00 jornales NA NA $0.00 Harvesting jornales NA NA $0.00 jornales 8 $5.00 $40.00 jornales 6 $1.20 $7.20 Postharvest jornales NA NA $0.00 jornales 8 $5.00 $40.00 jornales 11 $1.20 $13.20 Seed arrobas 3 $10 $30.00 kilograms 36.5 $0.73 $26.65 kilograms 40 $0.32 $12.80 Fertilizer sacks 4 $11 $44.00 sacks NA NA $0.00 sacks NA NA $0.00 Herbicide tanks 3 $25 $75.00 bag 1 $5 $5.00 tanks NA NA $0.00 Yunta days 2 $12 $24.00 hours 32 $2.50 $80.00 days NA NA $0.00 Tractor units 4 15 $60.00 hours 7 $14 $98.00 units NA NA $0.00 Packaging sacks 100 $0.25 $25.00 sacks NA NA $0.00 jornales 50 $0.16 $8.00 Transportation sacks NA NA $0.00 truck 1 $45 $45.00 kilograms NA NA $0.00 Administrative Costs $21.40 $23.63 NA NA $0.00 Financial Costs $51.36 NA NA $0.00 NA NA $0.00 Indirect Costs NA NA $0.00 NA NA $257.13 NA NA $0.00
TOTAL COSTS $525.76 $720.41 $90.40 TOTAL REVENUE sacks 100 $7 $700.00 quintales 20 $28.00 $560.00 kilograms 1200 $0.40 $480.00
PROFIT $174.24 -$160.41 $389.60
Key: U = Unit; Q = Quantity; UP = Unit Price; TP = Total Price; NA = Data Not Available 70
$174 in the BNF study and $490 in the INIAP study. And, at times, it can result in
negative returns, as in the case of MAG’s study.
One must consider, though, that again these studies vary by site, time of data
collection, and type of farm. The following list defines the areas for which the data are
representative:
• BNF (2003): Otavalo Extension District (based in Imbabura Province) • INIAP (2000): Imbabura, Pichincha, Chimborazo, Cañar, and Azuay Provinces • MAG (2002): Cañar Province.
Despite these limitations, some broad trends can be identified: costs for physical
inputs are considerably less for corn than for potatoes; labor demands are fewer for corn
cultivation than for potato cultivation; and, outputs (and their corresponding revenues)
are much smaller for corn than for potatoes.
Field Data
While the first two trends are reflected in the field data, the interviews contradict the third and yield some other interesting and surprising results (Table 5.7). First, Mazar farmers are achieving a higher value of production with corn cultivation than with potato cultivation (i.e., $239.13 per hectare per year versus $157.70). This finding contradicts secondary sources, which indicate that potato cultivation is the more profitable crop.
Secondly, costs and revenues are much more consistent for corn than for potatoes: input costs only range between $14 and $18, while outputs range between nine and 12 quintales. This finding suggests that, compared to potato cultivation, corn cultivation represents less risk to Mazar farmers. Finally, in contrast to potatoes, Mazar farmers’ value of production for corn much more closely resembles the data reported by 71
Table 5.7 – Estimates of Total Costs of Labor for Corn Per Hectare Per Year in the Mazar Valley
LOW ESTIMATE MIDPOINT ESTIMATE HIGH ESTIMATE Unit Quantity Unit Total Quantity Unit Total Quantity Unit Total Price Price Price Price Price Price INPUTS Seeds quintales 0.53 $17.36 $9.20 0.75 $17.36 $13.02 0.70 $17.36 $12.15 Fertilizer quintales 0 $0.00 $0.00 2 $0.00 $0.00 0.00 $0.00 $0.00 Transportation quintales 9.29 $0.50 $4.65 10 $0.50 $5.00 12.13 $0.50 $6.06 TOTAL COSTS OF PHYSICAL INPUTS $13.85 $18.02 $18.21 TOTAL REVENUE quintales 9.29 $25.72 $238.94 10 $25.72 $257.15 12.13 $25.72 $311.98 TOTAL COSTS OF LABOR $225.09 $239.13 $293.77
72
secondary sources when recalculated using the economic profit approach (Table 5.8). In
fact, with total costs of labor in the range of $225 to $293 per hectare per year, the value
of production in the Mazar is actually higher than that achieved by farmers in the MAG
study. In conclusion, it appears that corn cultivation is much less risky economically
than potato cultivation and that it in fact achieves the highest value of production of any
of the land uses considered in this study.
Table 5.8 – Corn’s Comparative Total Costs of Labor Per Hectare Per Year for Interviews and Secondary Sources (BNF 2003, MAG 2002, INIAP 2000)
Interview BNF MAG INIAP Midpoint (2003) (2002) (2000) Estimate TOTAL COSTS OF PHYSICAL INPUTS $18.02 $330.76 $535.41 $20.80 TOTAL REVENUE $257.15 $700.00 $560.00 $480.00 TOTAL COSTS OF LABOR $239.13 $369.24 $24.60 $459.20
DAIRY FARMING
Secondary Sources
Data from secondary sources for dairy farming are, unfortunately, quite scarce
(Table 5.9). For example, Carrión’s study is the only one to provide estimates of both inputs and outputs and to offer a calculation of accounting profits. The other studies provide data for just inputs or outputs. Further, the data that are available for comparison present drastically different results. For instance, Carrión calculates that total costs for dairy farming are $49.85 per hectare per year, while INIAP places them at $1,021.56.
Finally, the studies are again from different areas:
• Carrión (2003): Pimampiro (small, highland community in Otavalo Province) • INIAP (2000): Costa region • Wunder (1996): Mazar Valley • MAG (1993): Cañar Province. 73
Table 5.9 – Various Estimations of Inputs and Outputs Per Hectare Per Year for Dairy Farming (Carrión 2003, INIAP 2000, Wunder 1996, MAG 1993)
Carrión INIAP (2003) (2000) U Q UP TC U Q UP TC Maintenance HH 4.00 $4 $16.00 jornales 64.00 $1.80 $115.20 Milking HH 10.00 $2.00 $20.00 jornales 1.00 $832 $832.00 Pasture g MS NA NA $0.00 g MS 3650.00 $0.02 $73.00 Salt kg 5.00 $0.16 $0.80 kg 8.00 $0.04 $0.32 Vitamins cc 5.00 $1.40 $7.00 cc NA NA $0.00 Vaccination cc 10.00 $0.08 $0.80 5 mL 1.00 $0.32 $0.32 Deparasite cc 5.00 $0.60 $3.00 baths 6.00 $0.12 $0.72 Equipment units 0.03 $55.00 $1.65 units NA NA $0.00 Other units 0.03 $20.00 $0.60 units NA NA $0.00 TOTAL $49.85 $1,021.56 COSTS Milk L/ha/year NA NA $0.00 Cheese units 20.00 $1.60 $32.00 Cows UBA/ha/yr 0.07 $300.00 $21.00 Data NA Bulls UBA/ha/yr 0.10 $350.00 $35.00 Calves UBA/ha/yr 0.03 $150.00 $4.50 TOTAL $92.50 REVENUE PROFIT $42.65
Wunder MAG (1996) (1993) U Q UP TC U Q UP TC Maintenance Milking Pasture Salt Vitamins Data NA Data NA Vaccination Deparasite Equipment Other Milk L/ha/year 1053 L/ha/year 807.81 Cheese Cows Bulls Calves PROFIT NA NA
Key: U = Unit; Q = Quantity; UP = Unit Price; TP = Total Price; NA = Data Not Available 74
And, unfortunately, the only studies specifically from the Mazar region (i.e., MAG and
Wunder) just address output data regarding milk and no other factors of dairy farming.
Field Data
Because of minimal secondary data, the interviews are valuable sources of information regarding dairy farming’s value of production. They indicate that the value of production for Mazar farmers, at the time the interviews were conducted, was $170.43 per hectare per year (Table 5.10). I note that it was the correct estimation for the time the
Table 5.10 – Estimate of Total Cost of Labor Per Hectare Per Year for Dairy Farming in the Mazar
Unit Quantity Unit Total Price Price Inputs Salt 0 NA $0.00 Vitamins 0 NA $0.00 Vaccination shots 4.5 $0.50 $2.25 Deparasite treatments 4.5 $3.50 $15.75 TOTAL COSTS OF PHYSICAL INPUTS $18.00 Outputs Milk L/year/ha 649.35 $0.18 $116.88 Cows cows 0.26 $120.00 $31.80 Bulls bulls 0.25 $159.00 $39.75 TOTAL REVENUE $188.43 TOTAL COSTS OF LABOR $170.43
interviews were conducted because since December 2003 milk prices have dropped from
$0.18 to $0.16 per liter. This is a further decline from July 2003 when the price was
$0.22 per liter, and is a result of precursor trade policies to the FTAA that have placed
Mazar farmers in competition with farmers from other provinces and countries. In
addition, prices for the sale of cattle have fallen (White 2004b). Consequently, the 75
current value of production for dairy farming in the Mazar is likely significantly less than
that calculated here.
What is clear from the interview results, however, is that Mazar farmers use fewer
inputs than farmers in the Carrión and INIAP studies and see lower milk production than
farmers in the Wunder and MAG studies. The most interesting aspect of the dairy data,
though, is revealed when one compares the interview results from dairy farming with
potato and corn cultivation (Figure 5.3). According to the literature, dairy farming
should represent the most profitable land use and the primary cause of deforestation. But,
as Figure 5.3 shows, the interviews indicate that dairy farming does not result in the
highest value of production in the Mazar; rather, it is a distant second to corn cultivation.
Figure 5.3 – Total Costs of Labor in the Mazar
$300.00
$250.00 $239.13
$200.00 $170.43 $157.70 $150.00 $100.00
$50.00
$0.00 Potatoes Dairy Farming Corn
CONCLUSION
The data collected in interviews yield some startling results. While secondary sources suggest that potato cultivation has the most economic potential, it has the lowest value of production of the three land uses examined in the Mazar. Corn, in contrast, was 76
not expected to hold much economic potential, and yet it has the highest value of production in this study. And, finally, dairy farming’s economic potential appears to be declining, calling into question its current and future role in deforestation. In conclusion, the data from secondary sources and from interviews indicate that the opportunity costs of conservation for farmers in the Mazar are complex and dynamic. 77
CHAPTER 6
DATA ANALYSIS
In the preceding chapter, the first question posed in this thesis was addressed:
• What is the value of production that farmers achieve per hectare per year for the most common land uses – potato and corn cultivation, and dairy farming?
The answers are unexpected, however, since the interviews indicate that Mazar farmers are achieving the highest value of production with corn, rather than with potatoes or dairy farming, contrary to data from secondary sources and literature on deforestation.
To understand these findings, it is useful to examine conditions in the Mazar more closely. Therefore, this chapter will provide an analysis of the corn, potato, and dairy farming results in the Mazar, and it will turn to the second question posed in this thesis:
• Based on the values of production, what is an effective payment plan for a PES program in the Mazar, one which would create an adequate incentive for farmers to choose conservation over deforestation?
POTATO CULTIVATION
While secondary sources indicate that the value of production should be considerably higher for potatoes than for corn (Tables 5.2 and 5.3), it is clear that potato cultivation in the Mazar does not hold this potential as it is currently practiced (Tables 5.4 and 5.5).
Physical Conditions and Inputs
The explanation is closely tied to an understanding of the Mazar Watershed itself.
As mentioned earlier, precipitation in the Mazar is at least double that seen in other parts of the province. The wet conditions are particularly problematic for potatoes, since 78
“…blight problems are considerable” and “potato harvests are sometimes pitifully small”
as a result (White 2004a). The poor harvests are clearly seen when one compares the
ratio of quintales of seeds sown to quintales harvested in the Mazar versus in other study areas (Figure 6.1). Farmers in other studies are harvesting an average of 17 quintales of
Figure 6.1 – Quintales of Seeds Sown versus Quintales of Potatoes Harvested
500 450 440 450 400 400 400 350 s 300 le a t 250
in
u 200 Q 150 100 30 20 20 26 25 50 5.6 0 BNF(2003) BNF(2003) MAG(2002) INIAP(2000) Interviews Source Seeds Harvest
potatoes for every 1 quintal of seeds sown, while Mazar farmers are getting an average of
only 4.5 quintales for every 1 quintal of seeds. Blight, related to the wet conditions in the
Mazar, is certainly to blame, but there is also a difference in inputs that must be
considered.
First, farmers in other studies fumigate more often than farmers in the Mazar to
control blight and other disease. For example, where farmers in the INIAP study were
reported to fumigate 14 times, Mazar farmers’ commonly applied fumigations just three
times. Fumigation is costly and, for farmers in the Mazar, monetary restraints are
considerable. In fact, many interviewees explained that the quantity of physical inputs 79
used was determined by the amount of extra money that they had that season. In
addition, it may be the case that the few fumigations which are applied by Mazar farmers
are done so inappropriately. As Jokisch notes, “farmers in Upper Cañar demonstrate
alarming misinformation, ignorance, and lack of circumspection regarding agrochemicals
(1998: 202).
This pattern of use is true not only for fumigation inputs, but also for fertilizer
inputs. Fertilizer was a major input in other studies. For example, in the MAG study,
farmers were reported to have applied 800 quintales of fertilizer. In contrast, farmers in
the Mazar reported applying fertilizer in the range of just 6 to 20 quintales. Considering that the Mazar is the steepest watershed in the area and erosion has been high, fertilizer is an important input. Yet, because cost is often prohibitive for farmers, they are unable to adequately compensate for the poor physical conditions of the Mazar with physical inputs and see very poor harvests as a consequence.
Other Factors
Beyond physical conditions and inputs, there are other factors that make potato
cultivation in the Mazar less-than-ideal and which must be taken into account.
Prices First, price volatility is a problem. White (2004b) notes that low prices
have greatly dampened enthusiasm for cultivation of potatoes. An internal report from
the Azogues office of MAG, which collects monthly data on the price of agricultural
crops sold to major suppliers, underscores this point: during 2003, potato prices ranged
from a high of $34 per sack of 110 pounds in January to a low of $10 in June (MAG
2003). What is more, these data were for the Bologna potato variety, which is more
highly valued than the chaucha variety planted by the majority of farmers in the Mazar. 80
Distance from Markets Compounding the situation is the fact that Mazar farmers live three to four hours from major markets in Azogues and Cuenca. Because transportation costs are high, many farmers do not travel to Azogues and Cuenca themselves, where they could have better knowledge of the market and receive higher prices. Instead, many sell their produce to local middlemen in the market in Zhoray.
There, “buyers take advantage of the distance, the Colepato's indianess, and poor knowledge of city prices on the part of farmers” who receive a “substantial deduction in price” as a result (White 2004b). Wunder (1996) also notes the difficult situation faced by farmers in the Mazar, stating that where there are many sellers and few buyers and a need to sell the product relatively quickly, producers’ profits will be poor.
Variety Given these poor market conditions, it appears that now many Mazar farmers do not cultivate potatoes for sale. Instead, they commonly plant the fast- growing, native chaucha variety for consumption alone (Jokisch 1998). There are benefits to chaucha cultivation, such as its short season which allows for two harvests per year and, according to interviewees, its short cooking time and better taste. What chaucha cultivation does not offer, though, is a high market price and thus a high value of production. As White (2004b) notes, “the variety of potato (Chola, Gabriela, Bologna, etc.) can create a difference of 50% between the highest and lowest potatoes.”
Labor Demands Finally, it is important to consider that potato cultivation in the
Mazar requires substantial labor inputs. While the quantity of labor does not figure into the calculation of the value of production, it certainly is a burden for farmers (Table 6.1).
The interviews reveal that even to achieve meager harvests, Mazar farmers expend a tremendous amount of labor on potato cultivation – ranging from 107.5 one-person days 81
Table 6.1 – Labor Inputs for Corn and Potato Cultivation in the Mazar
Potatoes Corn LOW MIDPOINT HIGH LOW MIDPOINT HIGH ESTIMATE ESTIMATE ESTIMATE ESTIMATE ESTIMATE ESTIMATE INPUTS (jornales) Clearing 12 15 18 18 22.5 25 Planting 7 8.5 9 7 7 7 Weeding 32 32 32 30 76 96 Mounding 28 42 56 NA NA NA Fumigating 7 8.5 9 NA NA NA Harvesting 16 20 22 10 11.5 15 Postharvest 5.5 7.25 9 3.5 3.75 4 TOTAL LABOR 107.50 133.25 155 68.50 120.75 147 INPUTS
of labor to 155. These findings are echoed both by Jokisch (1998), reporting 109.8 one-
person days of labor, and Knapp (1991), reporting 108 – 144, who also analyzed potato
cultivation in the Ecuadorian Andes. Furthermore, labor requirements are high throughout the cultivation process and are often gender-specific. First, as Jokisch
explains, “because potatoes are usually the first crop planted on ‘fresh’ soil, preparing the
land from a previous cover is arduous” (1998: 215). It is made even more difficult in the
Mazar where extremely steep slopes prohibit the use of tractors and require the use of the
traditional wooden plow and oxen for the rompe (ground-breaking) – an exclusively male
responsibility. Second, several aporques (weeding and mounding) and fumigations are necessary throughout the season. While aporques can be completed by both men and women, fumigations are usually completed by men. And, finally, harvesting potatoes demands considerable amounts of labor – particularly male labor – since “tons of soil must be dug to retrieve the potatoes and then the heavy tubers must be hauled to the field 82
edges where they are loaded onto mules or horses” (Jokisch 1998: 217). Given that out-
migration (both rural to urban and international) is increasing in the area and that most
migrants have been men, these labor requirements may become increasingly burdensome
for families who lack male heads-of-household and older male children. In sum, farmers
achieve a lower value of production for potatoes than for corn while investing
significantly more labor.
These negative aspects of potato cultivation have not gone unnoticed by Mazar
farmers. Interviewees report that potatoes are being cultivated less and less. White
(2004a) notes that while some farmers keep planting potatoes to minimize subsistence
risk, there has been an overall “reduction of cropland in the region over the last 15 years.”
In fact, it has become clear from interviews that few farmers currently plant potatoes for
the market; they largely plant for subsistence alone. Given these conditions, it is
understandable that potato cultivation represents the smallest value of production in this
study.
CORN CULTIVATION
Corn cultivation in the Mazar reports the highest value of production in this study,
and also one relatively close to that seen in secondary sources. Still, its value of
production is below two of the three other studies (Table 5.8).
Physical Inputs It is again helpful to look at harvests to clarify the situation. If
the ratio of quintales of seeds sown to quintales harvested is compared, it is clear that
Mazar farmers are once more seeing poorer returns than farmers in other areas (Figure
6.2). While farmers in the MAG study achieved a return rate of 25 quintales harvested 83
Figure 6.2 – Quintales of Seeds Sown vs. Quintales of Corn Harvested
245 30 26.45 25 20 20
s e l a t 15 n i 10 Qu 10
5 0.75 0.8 0.88 0.7 0 BNF (2003) MAG(2002) INIAP(2000) Interviews Seeds Harvest Source
for every 1 quintal of seeds sown and farmers in the INIAP study achieved a ratio of
30:1, farmers in the Mazar reported a return ratio of just 14:1. Again, lower production in the Mazar is related to the fact that minimal physical inputs are used for corn cultivation – no pesticides, fungicides, insecticides, and often no chemical fertilizer. In fact, whereas most interviewees used some chemical fertilizer and a few fumigations for potatoes, most did not purchase any chemical inputs at all for corn. Instead, as can be seen in Table 5.9, they applied their own organic fertilizer. Another issue related to fertilizer involves crop rotation. When potatoes are planted before corn, the residual effects of the chemical fertilizer can help improve corn production and reduce the need for additional applications of chemical fertilizer (Jokisch 1998). If Mazar farmers are not practicing optimal crop rotation, then lower corn production can be a result. 84
Labor Demands Despite corn’s less than optimal production in the Mazar, there
are several factors that make corn cultivation more attractive than potato cultivation.
First, as Table 6.1 shows, labor inputs are fewer for corn cultivation: ranging from 70
person-days in the low estimate to 147 in the high estimate.9 The difference in labor
requirements between corn and potato cultivation can, in part, be explained by the fact
that potatoes – not corn – are often the first crop to be cultivated following the rompe
(ground-breaking) of a new field. Consequently, interviewees attributed these labor inputs to potato rather than corn cultivation. Still, corn cultivation has fewer labor requirements for the weeding and mounding process and for harvest and post-harvest and no requirements for fumigation. In short, corn is less labor-intensive and requires fewer male-only tasks than potato cultivation. Thus, with out-migration rising in the area and the labor burden a growing consideration, corn cultivation becomes preferable to potatoes in regards to labor.
Prices A second factor that may make corn preferable to potatoes involves their sale. While the Azogues MAG Office reported that prices for corn ranged from a high of
$20.10 per sack of 70 pounds in January 2003 to a low of $11 in the months from July to
November, corn prices were much less volatile for corn than for potatoes (MAG 2003).
For instance, for five months of the year, prices remained stable. Moreover, it is easier for farmers to wait out poor prices for corn than it is for potatoes because corn is commonly dried before sale and thus is storable for several months. These conditions encourage the continued sale of corn by Mazar farmers, in contrast to the poor conditions that are discouraging the sale of potatoes.
9 Joksich (1998) and Knapp (1991) suggest, however, that the labor inputs might be closer to the low estimate since their calculations were 77.9 person-days and 66 person-days, respectively. 85
Cultural Norms A third factor may play into Mazar farmers’ decision to cultivate corn, as well: corn represents a cultural norm. Mazar farmers and their families eat corn every day at every meal. Hence, when Mazar farmers are choosing which crop to cultivate, it makes sense to choose the crop that they eat most often, requires fewer labor inputs, and provides the highest value of production.
In conclusion, potato cultivation is in decline, but corn continues to be widely cultivated. In part, it is because corn “reduces subsistence risk and because it represents a cultural given” (White 2004b). But, it must also be related to the fact that, even with minimal physical inputs, Mazar farmers are achieving the highest value of production with corn and continue to sell corn in the market – in stark contrast to potato cultivation.
Overall, these factors make corn cultivation a serious consideration for calculation of opportunity costs of conservation in this study. After all, as Lair notes in her comprehensive study of LULC change in the Mazar, “clearing for agriculture at the lower limit of the forest boundary comprises the greatest deforestation mechanism in that it is a persistent and pervasive disturbance” (2002: 59).
DAIRY FARMING
One of the most surprising and important findings of this study is that dairy farming in the Mazar is not producing the highest value of production. This result is unexpected because the available literature says that it represents the most profitable land use and is the driving force behind deforestation.
There appear to be several factors which cause dairy farming in the Mazar to achieve a lower than expected value of production. First, milk production in the Mazar is lower than that reported by other studies (Figure 6.3). This trend is first related to the 86
Figure 6.3 – Milk Production Per Hectare Per Year in the Mazar (Wunder 1996, MAG 1993)
1200
ar 1000 e Y
r e 800
e p 600 ctar e H
r
e 400
s p 200 ter i L 0 Wunder (1996) MAG (1993) Interviews (2003) Source
breed of cattle. Mazar farmers generally raise criolla cattle, which produce less milk than varieties such as Holstein, Brown Swiss, and other crosses commonly raised by large- scale dairy farmers (Wunder 1996). Second, lower milk production is related to physical inputs. As evidenced by Table 5.12, Mazar farmers’ physical inputs are limited to twice a year vaccinations and deparasite treatments per head of cattle. And, they are general treatments at that; Mazar farmers report that they commonly do not have the monetary resources to provide targeted deparasite treatments and vaccinations, special fodder,
vitamins, or regular visits from the veterinarian that significantly improve milk
production.
Another factor related to lower than expected production may be that Mazar
farmers lack the optimal quality and quantity of pasture to support their cattle. As
Wunder explains, “the biggest obstacle for ganadería [dairy farming] is the size of the
parcel” (1996: 67). Unlike large landholders who have considerable tracts of land on
which to rotate and graze their cattle, the farmers that I interviewed had a modal 87
landholding of just five hectares. This size of landholding is also the average throughout
the Mazar Watershed (Jaramillo and Torres 2002). Consequently, Mazar farmers face the
choice of grazing their cattle on the minimal areas that are in fallow on their own
property or seeking open-access areas for pasture – both of which generally do not
contain the high quality grasses needed to support a higher production of milk.
Yet another factor to consider is the distance between Mazar farmers and the major markets in Azogues and Cuenca. This situation forces them to depend on local negociantes (middlemen) who collect and transport the milk, and who take advantage of the Mazar farmers’ circumstances. Falling prices of milk and meat, stemming from precursor trade policies to the FTAA, have worsened the situation by placing Mazar farmers in competition with farmers in other provinces and nations. For example, within the last year, negociantes’ prices of milk for farmers in the Mazar have fallen from $0.22 per liter to $0.18 and recently to just $0.16. Thus, from the milk prices alone, the value of production in the Mazar would have fallen from $196.41 (with $0.22 per liter) to
$157.45 (with $0.16 per liter) – a difference of $38.96 – just within the last year. And, since meat prices have also fallen, the difference is most likely even larger.
Understandably, “people are feeling a bit desperate because they see their income from cattle eroding” and “they see no alternative land uses” (White 2004b).
This feeling of farmers that there are no other choices is one of several factors that may contribute to the continued practice of dairy farming in the Mazar, despite its lower than expected value of production. Another factor is that dairy farming, compared to other land uses like corn and potato cultivation, is seen as a relatively stable investment.
Corn and potato cultivation are constantly at risk because of disease, drought, and volatile 88
market prices. In contrast, cattle have commonly been perceived as a monetary reserve,
since farmers believe they can wait out changes in prices for cattle. Unfortunately, many
are waiting now, with little hope that prices will improve. Another factor which may sustain dairy farming is related to labor. Farmers need to invest considerably less labor in dairy farming than they do in agriculture, particularly in the Mazar (Wunder 1996, White
2004a). Further, it is common for children to supply the labor for milking and putting cattle to pasture, which reduces the perceived and actual labor burden for dairy farming.
In fact, Wunder (2001a) argues that dairy farming has proven to be the best return to farm labor of any land use. Finally, a significant factor that supports continued dairy farming is the emphasis placed on cattle ranching as a basis for credit. BNF, the dominant lending institution working in rural areas of Ecuador, provides credit almost exclusively for cattle ranching (Wunder 2000).
In conclusion, Mazar farmers are in the midst of a dramatic period of change and fluctuation in the Ecuadorian agricultural sector. The effects of falling prices on dairy farming and cultivation are certainly being felt by Mazar farmers and are evidenced by the results of this study. Still, we have yet to see how these changes will fully manifest in land use patterns and in deforestation trends. The data of this study do provide, however, a picture of current opportunity costs of conservation in the Mazar and provide a foundation from which to build a PES program.
PAYMENT SCENARIOS
While there is little mention in the literature of opportunity costs of conservation as a tool for designing payments, the case studies do offer some indication of the complexity involved with the process. In Costa Rica, for instance, payments have 89
primarily been based on an economic valuation of carbon sequestration and roughly on
opportunity costs of conservation. However, the Costa Rica program decided not to
consider dairy farming in the design of payments because they felt that they simply could
not compete with the opportunity costs of dairy farming. Thus, they chose to focus on
areas where other land uses are practiced and where lower values of production are
achieved. In the Mazar, a decision will need to be made based on similar issues: should
FCT look at the land use which achieves the highest value of production and offer a
payment based solely on it? Or, should the program examine a mosaic of common land
uses and base a payment on their integrated values of production? Two payment
scenarios are conceivable, and are outlined below.10
Scenario 1 – Highest Production Value
In the first scenario, a PES program would design payments using the highest production value achievable in the area. In the Mazar, this would mean corn cultivation, as it surpasses dairy farming by nearly $70 and potato cultivation by $80 per hectare per year (Figure 5.2). The argument for using this value of production would be the following: if payment is not equal to or greater than the highest production value possible
to landholders, then landholders would have little or no economic incentive to participate
in a PES program. They could earn more by putting the land to their own use. In other
words, from the landholder’s economic perspective, it would not be reasonable to
participate if the payment did not match his/her maximum opportunity costs. From the
10 Recall that this study addresses the economic costs faced by landholders when participating in a conservation program. There are other intangible costs that are involved as well, but these are beyond the scope of this study. Thus, the scenarios presented here simply provide a baseline estimation, a lower bounds, of payments for potential PES participants.
90
findings of this study, then, a payment in Scenario 1 would be designed using the amount
of $239.13 per hectare per year.
There are, however, several difficulties that might arise with this approach. First,
it opens the door for landholders to argue that even higher production values are possible.
For instance, Mazar farmers might perceive their opportunity costs of conservation to be the value of production achieved through corn cultivation in their best year. Since this study focused on average inputs and outputs, they could certainly make this case. Or,
Mazar farmers might argue that there are other crops with an even higher value of production than corn (Table 4.1). Because this argument is conceivable, although not necessarily true, negotiation will be a critical part of the process of setting payments in a
PES program. There will need to be an emphasis made during negotiations that the production value be feasible and reasonable. First, it is not feasible for farmers to cultivate, for instance, the African palm or rice in the Mazar Watershed (two land uses which potentially result in a higher value of production than corn) because climate, altitude, and other physical conditions are prohibitive. Second, it is not reasonable at this time to consider colored onions, horticultural tomatoes, or peas because, even though they can feasibly be grown in the Mazar, they are grown infrequently, on a very small scale, or not at all.
A second difficulty with this approach is that it does not consider the reality of cultivation and land use in the Mazar. It is clear that if a hectare of land was continually cultivated in corn, the value of production would not remain constant. Rather, as nutrients are mined from the soil, more and more physical inputs would be needed to maintain productivity. As a consequence, the value of production would decrease over 91
time. Thus, it is more realistic to consider a land use mosaic which helps to maintain the
value of production. When, for instance, potatoes are rotated with corn, the problem of
nutrient leaching (particularly of nitrogen) is reduced. Or, when pasture is alternated
with fields for cultivation, the manure from the cattle helps to return nutrients to the soil.
And, in fact, it is evident from interviews that Mazar farmers do use these techniques.
They do not use a hectare of land for just one land use, rather they typically will plant
part of a hectare in corn, another part in potatoes or another crop, and the rest might be
used for pasture. Therefore, if the intention of PES is to base payments on the actual
economic opportunity costs of conservation for Mazar farmers, several land uses – not
just one – should be considered.
Scenario 2 – Value of Production Mosaic
In the second scenario, then, payment would be based on corn, potatoes, and dairy farming, to reflect the mosaic of land uses practiced in the Mazar. Unfortunately, I was unable to locate data concerning the land use breakdown within a hectare in any area of
Ecuador, let alone in the Mazar. Consequently, to discuss payment using a mosaic
approach, I must use the testimony of Stuart White who has cultivated in the area. White
(2004b) reports that land is relatively abundant in San Vicente and Colepato, and
therefore the majority of land is in pasture. But, he notes, the breakdown of land use by
hectare varies by the overall size of the landholding. Large landholders, for instance,
tend to have a much higher percentage of their land in pasture. Smallholders also place large areas in pasture, but crops occupy a significant percentage of the land as well.
Table 6.2 provides the breakdown White suggests as an average for landholders in San
Vicente and Colepato. 92
Table 6.2 – Land Use Breakdown by Hectare in San Vicente and Colepato (White 2004b)
Small: 2 - 5 hectares Large: 10 hectares+ Pasture 60 - 70% 90% Corn 25 - 39% 5 - 9% Potatoes 1 - 5% 1 - 5%
While my interview questions focused on inputs and outputs per hectare and thus
did not directly address the breakdown of land use within a hectare, many interviewees
explained that they did not plant by hectare but rather by fraction of a hectare. As a
result, some patterns of the land use mosaic seen in the Mazar were indirectly revealed
through the interviews. For corn cultivation, five of the 15 interviewees indicated that
they do not plant an entire hectare. Instead, four interviewees said that they plant one-
half of a hectare and one replied that they plant only one-quarter of a hectare. In regards to potatoes, 11 of the 15 reported that they do not cultivate one full hectare. Instead, two said they do not plant potatoes at all, four said they may plant just one-quarter hectare, and five replied that they plant just one-half of a hectare. All interviewees pastured cattle.
In sum, both White’s suggestions and the interviews indicate that pasture continues to dominate, while corn plays a lesser but consistent role and potatoes play a small and diminishing role in land use. Table 6.3 presents how a payment could be calculated based on the land use mosaic present in the Mazar. It uses the land use breakdown provided by White and the values of production calculated in this study. It suggests that a payment, using the Mosaic Approach, would be designed using a value of
$190.40 per hectare per year. 93
Table 6.3 – Calculation of Payment Based on a Mosaic of Land Use
Area/hectare Value of Value/hectare Production Pasture 0.65 $170.43 $110.78 Corn 0.30 $239.13 $71.74 Potatoes 0.05 $157.70 $7.89 TOTAL VALUE $190.40
Note that this calculation is for a farmer/landholder of less than 10 hectares. The payment appropriate to small landholders is emphasized here since interviews were primarily with landholders of 10 hectares or less and were the focus of this study.11 It would, in fact, be inappropriate to calculate a payment for large landholders in the Mazar based on the values of production calculated in this study for several reasons. First, as mentioned, large landholders were not adequately represented in the interviews. Second, the values of production for large landholders would be expected to be higher than those for small landholders, both because of economy of scale and because large landholders tend to have the monetary resources to purchase higher quality inputs and higher-yielding
varieties of corn, potatoes, and cattle. Therefore, this study does not provide payment
suggestions for large landholders.
CONCLUSION
In conclusion, the results of this study indicate that a payment for a PES program in the Mazar under Scenario 1 would be designed using an opportunity cost of $239.13, while under Scenario 2 an opportunity cost of $190.40 per hectare per year would be used. To clarify, these amounts are meant to serve as a framework for approaching a PES
11 Twelve of the 15 interviews involved landholders of 10 hectares or less. There were just three landholders with larger holdings of 15, 20, and 40 hectares. 94
program in the Mazar and as a tool for setting payments. It is not suggested here that economic opportunity costs are the only ones to consider. Clearly, there are other intangible costs for landholders that must be figured into the design of payments and which, all together, will affect the supply side of environmental services. Further, the demand for these environmental services will also play into the amount ultimately set for payments. FCT, or any organization implementing a PES program, will need to engage in discussion, negotiation, and cooperation with landholders, downstream water users, donors, and other relevant parties to come to an agreement for appropriate payments based on the supply and demand for the environmental services. The purpose of this study was, however, to go through the process of calculating opportunity costs of conservation, to offer a vision of how those opportunity costs might be used as tool to design payments, to identify key issues and areas for future research, and, overall, to suggest that the costs born by landholders be seriously considered in conservation programs so that we might see greater sustainability and socio-economic and environmental justice. 95
CHAPTER 7
CONCLUSION
This thesis evolved from a literature review which revealed that there is a considerable deficiency in the PES literature and practice of using opportunity costs of conservation as a tool for designing payments. It succeeded in calculating opportunity costs of conservation for Mazar farmers in San Vicente and Colepato and providing FCT with two scenarios from which to structure payments in those communities. The results of this study, however, have additional lessons to offer – both practical and theoretical.
In this final chapter, some broader points will be shared regarding the significance of this study for PES in the Mazar, for PES in general, and for future areas of research.
SIGNIFICANCE FOR PES IN THE MAZAR: SOME PRACTICAL SUGGESTIONS
An overriding message of this research is that FCT will need to spend
considerable effort in developing institutional mechanisms to effectively implement a
PES program in the Mazar.
Evaluation Mechanisms
It is clear that this is a time of dramatic change in the Ecuadorian agricultural sector and, with the further implementation of trade policies which integrate Mazar farmers into a larger national and international market, it is likely that prices will continue to be volatile. As a consequence, it will be necessary for FCT to complete regular studies of production value, perhaps annually, in the Mazar so that payments will continue to address the opportunity costs of conservation faced by farmers. As illustrated by the falling milk prices of the last year, values of production can change considerably 96
in a relatively short period of time, making the land use mosaic a dynamic structure. It is
also crucial that mechanisms be in place to make payment plans flexible to reflect other
changes in the Ecuadorian economy, in particular, inflation.
These continued studies, however, must be based on a comprehensive baseline
study of opportunity costs of conservation in the Mazar Watershed as a whole. This
thesis does not provide that baseline, rather it provides direction for such a study. It became apparent during my interviews with farmers that a longer-term study is needed.
As Jokisch (1998) notes in his study of agricultural change in several other communities of Cañar Province, farmers’ accounts of their inputs and outputs are not always reliable.
Some farmers suggest inputs and outputs based on ideal conditions or on nostalgic perceptions of past production. Others are hesitant to share realistic figures with the interviewer because of the sensitive nature of income calculation or out of fear that the
data will be used by the government. And, others may simply not remember correctly.
Thus, it would be helpful for a researcher to record inputs and outputs first-hand as an
observer throughout the process of corn and potato cultivation and maintenance of cattle
in the Mazar. Researching and recording this information directly is crucial for
calculating values of production as true to reality as possible. It is also suggested that
future research focus on sources of variability of opportunity costs within the Mazar,
specifically from elevation, proximity to the road, and size of landholding. From this
foundation, FCT will better be able to understand and predict how changing conditions
and prices will affect farmers in the Mazar and correspondingly affect a PES program in
the future. 97
Prioritization Mechanisms
A comprehensive understanding of the Mazar will also be important for prioritizing areas to be included in a PES program. Consider the amount of forest present. According to Bridget Lair’s (2002) LULC assessment of the Mazar, 5,065 hectares of primary forest remained in 1998. At an annual rate of loss of 0.58%, a rough estimate for the area of primary forest remaining in 2004 would be 4,891 hectares. Based on a payment of $239.13 per hectare per year in Scenario 1, including all primary forest in a PES program would require a budget of $1,169,650 for the payments alone. Or, based on a payment of $190.40 per hectare per year in Scenario 2, payments would equal
$931,299. Looking at these figures and considering that the PES programs in Costa Rica and Pimampiro have been unable to completely fund their programs, it is clear that unless major funding is procured some prioritization mechanism will be needed.
There are several ways that land could be prioritized for inclusion in a PES program, based on the priorities of FCT and other parties. For instance, on a purely ecological basis, FCT’s priority may be areas of intact and contiguous primary montane forest. On the basis of hydrological services, FCT might prioritize areas with steep slopes, abandoned fields, or other major conduits of soil erosion in the area. On the basis of socio-economic justice, small landholders would be prioritized over larger landholders.
Or, on the basis of economic longevity, FCT may need to consider which landholders
have the lowest opportunity costs of conservation, since those areas would be cheaper to
involve in a program than those with higher opportunity costs.
There are legitimate arguments for all of these scenarios, which makes decision-
making difficult. In fact, some priorities may be at odds with each other. As Subak 98
(2000) explains in an article analyzing PES in Costa Rica, large tracts of land (often
owned by large landholders) may be a priority for preservation of biodiversity,
hydrological services, and carbon sequestration. In ecological terms, then, involving
large landholders would contribute to the program’s success. But, in terms of socio-
economic justice, it would be a failure since small landholders would tend to be excluded.
This need not, however, lead to an either-or situation; a prioritization mechanism could be designed to take into account several objectives of a PES program. For instance, a GIS index weighing priorities and showing which areas satisfy most of these priorities would be very useful. Efforts could then be made to incorporate these areas into a PES program. But, this prioritization mechanism would need to be regularly updated since economic conditions, infrastructure, and enforcement levels, can change rapidly and can correspondingly change the areas under deforestation pressure (Ferraro
2001). Thus, certain areas may be a priority now, but others may be in the future.
SIGNIFICANCE FOR PES: SUGGESTIONS ON THEORETIAL APPROACH
This study also offers suggestions for the PES field as whole, particularly for re- conceptualizing the calculation of payment and the program structure.
Payment Calculation
The most important message of this study is that current PES programs, which largely use economic valuation and “willingness to pay” to design payments, are offering payments which are dramatically less than the opportunity costs of conservation of their participants. Although currently there is only information regarding payment amounts for the PES programs in Costa Rica and Pimampiro, Ecuador, it is arresting to consider 99
that their total payments per hectare per year are just a fraction of the total payments
proposed in this study (Table 7.1).
Table 7.1 – Comparative Payments in Costa Rica and Ecuador (Castro 2000, IIED 2002, Yahoo 2004)
Total Yearly Payment (US$) Monthly Payment (US$) Costa Rica $6 $0.50 Pimampiro, Ecuador $12 $1.00 Mazar, Ecuador $239 $19.92 $190 $15.83
Looking at the monthly payments in the other programs compared to the monthly
payments suggested by this study, it becomes clear that farmers would be hard-pressed to
support their families if they gave up agriculture or dairy farming to receive payments of
just $0.50 or $1.00 per month per hectare. Unfortunately, there are no studies available
which calculate opportunity costs of conservation in Costa Rica, so it is impossible to say
how close or how distant their payment is to the opportunity costs of their participants.
Still, intuitively, it seems unlikely that small-scale farmers like those in this study could
afford to continue to participate in a PES program if they depended solely on a payment
of $0.50 per month. It is interesting to note, however, that this payment might be
acceptable for farmers with mid- to large-landholdings since they could place just part of
their property, perhaps an area that they are not using, in the program. Since they would
still be earning an income from the rest of their property, then they might be able to afford to accept a low payment. For small farmers to participate, though, they would
need to have other means of subsistence. 100
This appears to be the case in Pimampiro. Upon visiting the community, some of
the participating landholders admitted that the payments are considerably less than they
would like and need (Nueva América Association 2003). In fact, in a preliminary study
of opportunity costs in the area, opportunity costs of conservation were estimated to be
$41.90 per hectare per year (Carrión 2003).12 This amount would roughly indicate a
payment of $3.50 per hectare per month – a small amount, but still more than what they
are receiving now. Fortunately, CEDERENA has worked with the Nueva America
Association landholders to develop alternative livelihoods, including the sale of
medicinal plants and orchids and the development of an ecotourism center, to offset the
difference between their opportunity costs and the payments. Payments in cases like this
could be seen more as a complement to current income rather than a substitute (Ferraro
2001).
In conclusion, we know that the PES programs which are currently described in the literature do not include their participants’ opportunity costs in the design of payments, rather they base payments on calculations of the value of a particular environmental service or of beneficiaries’ willingness to pay. In short, they are only taking into account the demand for environmental services, while they are ignoring the supply of environmental services. As a result, it appears that their payments are much below the opportunity costs of conservation of their potential participants. While this may not be quite as important if the PES program works with large landholders, who can participate in a PES program even when the payments are low because their subsistence is not threatened, it is very important if the PES program works with small landholders.
12 This estimation of opportunity cost of conservation was based solely on dairy farming, and was based on slightly different input and output factors than those in this study. 101
Small farmers, who depend on their land for subsistence, would have a much more
difficult time accepting payments if they were not close to their opportunity costs. They
could not survive, otherwise. Thus, if a PES program wishes to emphasize socio-
economic justice and the participation of small farmers, it is suggested by this study that
they design payments considering the opportunity costs of their participants.
Program Structure
From this research, it also becomes immediately apparent that PES programs cannot stand alone; there need to be accompanying projects to make a comprehensive program to achieve conservation over the long run.
Environmental Education This sentiment is echoed by CEDERENA. In particular, they recommend that “la propuesta tiene que estar acompañada por un fuerte programa de educación y comunicación ambiental” – the proposal has to be accompanied by a strong program of environmental education and communication (2002:
40). In the case of the Mazar, it is fortunate that FCT has been implementing a program of environmental education in both Colepato and San Vicente for the last several years.
This type of program not only lays the groundwork for discussing environmental issues and addressing the problem of deforestation, it creates trust between the communities and the organization. In the Mazar, it has convinced area farmers that FCT is not like other national or international agencies who have come and gone, that FCT is there for the long term and that they want to involve area landholders.
These messages are crucial and build the necessary foundation for the PES idea to be broached with the community. An example clarifies this point. When I went to my first Colepato meeting, FCT staff asked me to explain the purpose of my research and the 102
fundamentals of PES. While I had the Spanish to do that, what I did not have was the
trust and the understanding that FCT staff have with these communities. I was met with
much skepticism and misunderstanding. I was lucky to have FCT staff to step in and to
explain, in ways that farmers were familiar with, the purpose of my research and PES.
This is a just a small example of how an environmental education program can facilitate
the implementation and long-term success of PES by building trust and common
understanding of environmental issues.
Sustainable Agriculture Beyond environmental education, a project addressing
sustainable agricultural practices is also highly important to long-term conservation
success (Barzev ND). PES is unlikely to cause a complete abandonment of agriculture, since landholders will likely continue to cultivate for subsistence security and cultural norms. Therefore, a PES program would do well to consider how they might promote intensification, as opposed to extensification, and sustainable agriculture.
Take the Mazar for an example. It has been noted that,
“current conservation practices among southern Sierra farmers are restricted to localized use of organic fertilizers (manures and crop residues), some contour plowing and planting, and very occasional construction of water diversion channels or cross-slope vegetation barriers” (White and Maldonado 1991: 41).
As a result, the number of years that farmers can cultivate their land is relatively few. As
Wunder (2000) estimates, cultivation of corn and potatoes in the Sierra may just be feasible for two to five years. And, cultivation may be followed by only seven to 10 years of pasturing for cattle. Afterwards, the land would need to be put into fallow to recover. In short, land in the Mazar may currently be used for just nine to fifteen years.
If, however, a program promoting sustainable practices was implemented, it is possible 103
that the effective time period might be extended. This extension would help to ease the
pressure on remaining forests.
The program in Pimampiro has been visionary in incorporating this idea into their
program. During a visit to Pimampiro, I found that in addition to the set payments for
preservation of primary and secondary forest and páramos, landholders can receive payments for sustainable practices like tree-planting to create windbreaks (Nueva
América Association 2003). In conclusion, implementing a partner project in sustainable agriculture makes sense for PES: it addresses one of the very causes of deforestation, it extends the amount of time agricultural land can be used, and thus takes pressure off of forests.
Reforestation While payments to motivate conservation are the nucleus of this
research, there are other categories of payments to consider as well. As just mentioned,
the PES program in Pimampiro has already begun to offer payments for sustainable
agriculture practices. In essence, they are providing a financial incentive to try new
methods, an approach which has proven particularly effective when dealing with risk-
averse and monetarily-constrained farmers. Considering that one of the ultimate goals of
PES is to preserve and restore forest, another payment is one that that offers a financial
incentive to actively reforest. And, in fact, some PES programs have already begun to
offer such payments (Castro et al. 2000; CEDERENA 20002; IIED 2002; Wynn 2002).
In essence, reforestation payments help speed the process of recovery for the area and,
when practiced well, can provide another form of sustainable income for the participating
landholders. 104
Since initial costs are considerable, higher payments than those for conservation
have been deemed necessary to encourage reforestation. It has also been necessary to
design the payment schedule for reforestation differently. In Costa Rica, for example,
50% of the total payment is provided in the first year to help mitigate the large start-up
costs. In addition, payments are only offered for five years, since after that time it is
expected that the landholder can make some earnings through selective logging approved
in the PES contract. Some caution is needed, though, since certain reforestation projects
have more closely resembled plantations, focusing on exotic species that may bring in
more money but “clash with the local landscape, deplete soils, cause habitat disturbance,
and cater to an export market rather than local demand” (Subak 2000:288, Silva 2000).
For example, in Ecuador, some “reforestation” projects have focused on eucalyptus, an exotic species that can actually harm the local environment.
Thus, to implement a reforestation project, a PES program would need to consider its priorities and local factors. Most likely, another study would need to be conducted in order to answer the following questions:
• What are the initial costs, per hectare, to reforest? • What are the maintenance costs, per hectare? • What is an appropriate ratio of native to exotic species, in order to satisfy the goals of conservation of native forest and of providing an alternative, sustainable source of income for the landholder? • Based on this ratio and on sustainable extraction, how much could the landholder expect to earn per hectare per year? • Based on these costs and revenues, what would be an appropriate payment and for how long would it be offered?
For this study, I contacted two organizations, one governmental (CREA) and one non-
governmental (DFC), for answers to some of these questions. I found that CREA (2003)
has a per plant start up cost of $0.54, compared to $0.50 for DFC (2003). Based on a 3 105
meter x 4 meter planting design for 880 trees, suggested by CREA and DFC, these
figures would indicate start up costs of $440 to $475 per hectare. What became clear in
speaking with these organizations, however, is that much more needs to be considered
than just start-up costs. All the aforementioned questions would need to be considered
and figured into a payment design. Unfortunately, it was outside the scope of this
research to do so.
Alternative Livelihoods Finally, visiting with farmers in the Mazar and in
Pimampiro revealed that an organization truly interested in helping both farmers and
forests would do well to implement projects which develop alternative livelihoods.
CEDERENA again serves as an example. It was apparent that the landholders in their
program are equally proud of their PES program as the sustainable businesses that they
are developing. Their excitement is tangible, from individuals who are selling medicinal
plants and orchids in Quito to the community completing their new eco-tourist lodge.
Not only are these activities instrumental in allowing them to participate in the PES
program when payments are quite low, they help to address the deteriorating agricultural
situation and rural to urban migration. For the Mazar, alternative livelihood programs which support camelid pastoralism, native tree nurseries, or ecotourism may also be
possibilities. Other organizations wishing to implement PES should consider the
example of Pimampiro and the ideas of FCT, and incorporate alternative livelihoods
projects into their overall program.
FINAL COMMENTS
In conclusion, this thesis has contributed to the emerging field of PES by
addressing the dearth of information in the literature concerning the opportunity costs of 106
conservation to landholders. As Paul Ferraro notes in his study of PES in Madagascar,
“if the opportunity costs are not recognized, analyzed, and addressed, the long term success of conservation is bleak” (2002: 273).
Yet, it is also clear that there is much to be discussed and debated so that PES can fulfill its potential. There is need for dialogue amongst PES practitioners of the issues and challenges involved with opportunity cost calculations. For instance, what sources of data should be used in their calculation? How should small landholders and mid- to large-landholders be incorporated into the same program, when their varying levels of technology and technique result in very different opportunity costs? Must the payment be 100% of the landholders’ opportunity costs, or is there some lesser amount that would be fair and adequate to motivate conservation? How could the involvement of landholders be encouraged while minimizing strategic behavior that puts the program at risk? How should landholdings be prioritized to be included in the program? How much does the program focus on sister projects, like alternative livelihoods, environmental education, and promotion of sustainable agriculture, compared to its focus on PES?
These questions are formidable, and will need to be answered if PES is to succeed. Still, the promise of PES is considerable. Programs in Costa Rica and Ecuador have shown that there is substantial support from multiple actors at various scales: from the international community to national and local government, from major hydroelectric companies to small community associations. Further, local level PES programs, like the one FCT wishes to implement in the Mazar, hold particular potential since it is through their process of exploration and experiment that PES will advance. This study hoped to contribute to that process. 107
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APPENDIX 1
INTERVIEW QUESTIONS (translated from Spanish)
I. Basic Information A. How many hectares do you have? B. Do you own or rent? C. How many people live here? 1. How many adults live here? 2. How many children live here?
II. Potato Cultivation A. Inputs 1. Seeds a. What variety of potatoes do you prefer to plant? b. How many quintales of seeds do you need to plant one hectare? c. How much does one quintal of seeds cost? d. Where do you usually buy the seeds? 2. Labor a. How much time does it take to prepare one hectare for planting? i. How many people are working during this time? b. How much time does it take to plant one hectare? i. How many people are working during this time? c. How much time do you need for fertilizing one hectare? i. How many people are working during this time? ii. How many times do you fertilize a season? d. How much time does it take to weed one hectare? i. How many people are working during this time? ii. How many times to you weed a season? e. How much time do you need for fumigating one hectare? i. How many people are working during this time? ii. How many times do you fumigate a season? f. How much time does it take to harvest one hectare of potatoes? i. How many people are working during this time? g. If you were to hire somebody to do this work, how much is that person paid? 3. Fertilizer a. Do you use organic or chemical fertilizer? b. How many quintales of fertilizer do you use in each application for one hectare of potatoes? c. If you buy the fertilizer, how much does one quintal cost? 113
d. Where do usually buy the fertilizer? 4. Fumigation a. How many pumps do you need for each fumigation? b. How much does a pump cost? c. Where do you usually buy the pumps? 5. Transportation a. When you send your harvest to market, how much do you pay per quintal to transport it? B. Outputs 1. Potato Harvest a. In an average year, how many quintales would one hectare produce? b. For how much would you be able to sell one quintal of potatoes at the market? c. Where do you usually sell the potatoes?
III. Corn Cultivation A. Inputs 1. Seeds a. What variety of corn do you prefer to plant? b. How many quintales of seeds do you need to plant one hectare? c. How much does one quintal of seeds cost? d. Where do you usually buy the seeds? 2. Labor a. How much time does it take to prepare one hectare for planting? i. How many people are working during this time? b. How much time does it take to plant one hectare with corn? i. How many people are working during this time? c. How much time do you need for fertilizing one hectare? i. How many people are working during this time? ii. How many times do you fertilize a season? d. How much time does it take to weed one hectare of corn? i. How many people are working during this time? ii. How many times to you weed a season? e. How much time does it take to harvest one hectare of corn? i. How many people are working during this time? ii. Does this include the selection and the storage of the corn? iii. If not, how much time does the selection and the storage take? iv. How many people work to complete the selection and the storage? 114
3. Fertilizer a. Do you use organic or chemical fertilizer? b. How many quintales of fertilizer do you use in each application for one hectare of corn? c. If you buy the fertilizer, how much does one quintal cost? d. Where do usually buy the fertilizer? 4. Transportation a. When you send your harvest to market, how much do you pay per quintal to transport it? B. Outputs 1. Corn Harvest a. In an average year, how many quintales would one hectare produce? b. For how much would you be able to sell one quintal of corn at the market? c. Where do you usually sell the corn?
IV. Dairy Farming A. Carrying Capacity a. What breed of cows do you have? b. How many head of cattle do you have? i. How many cows? ii. How many calves? iii. How many bulls? c. How many cows with their calves would you be able to pasture on one hectare of pasture for one year? d. How many bulls would you be able to pasture on one hectare for one year? B. Inputs 1. Vaccinations a. How many times a year do you vaccinate your cattle? b. How much does each vaccination cost? c. Where do usually buy the vaccinations? 2. Deparasite Treatments a. How many times a year do you deparasite your cattle? b. How much does each deparasite treatment cost? c. Where do usually buy the treatments? 3. Vitamins and Minerals a. Do you give your cattle any vitamin or mineral supplements? b. If so, how many times a year do you provide vitamin and mineral supplements? c. How much does it cost to provide the vitamin and mineral supplements? d. Where do usually buy the supplies? 115
C. Outputs 1. Milk a. How many liters of milk does a cow produce daily, on average? b. How many months does a cow lactate, on average? c. For how much do you sell each liter of milk? d. Where or to whom do you usually sell the milk? 2. Meat a. How many bulls do you sell yearly? i. For how much could you sell a bull? b. How many cows do you sell yearly? i. For how much could you sell a cow? c. Where or to whom do you usually sell the cattle?
116
APPENDIX 2
ASSUMPTIONS
• Assumption 1: There are constant returns to scale.
• Assumption 2: When an activity is completed more than one time per season or per year, e.g., fertilization, fumigation, vaccination, or deparasite treatments, the costs are equal each time.
• Assumption 3: The prices of inputs and outputs collected at local markets equal the average annual prices of those inputs and outputs.
• Assumption 4: Interviewees’ perceptions of unit weight, i.e., for quintales, sacks, almudes, buckets, and gallons, equal the average weights calculated from local market data.
• Assumption 5: The number of liters of milk produced per day per cow remains the same throughout the lactation period.
• Assumption 6: A quintal of fresh or dried corn on the cob equals one-half quintal of dried, degrained corn. 117
APPENDIX 3
DEFINITION OF UNITS
UNIT DEFINITION almud 30 pounds (potatoes); 13.61 kilograms (potatoes) 35 pounds (corn); 15.88 kilograms (corn) arroba 25 pounds; 11.34 kilograms bucket 7 pounds; 3.18 kilograms gallon 5 pounds; 2.27 kilograms hectare 2.50 acres jornal one-person day of labor quintal 100 pounds; 45.36 kilograms sack 140 pounds (potatoes); 63.50 kilograms (potatoes) 245 pounds (corn); 111.13 kilograms (corn) tank 5 gallons