THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS EIA-GLOBAL .ORG

CONTENTS

3 EXECUTIVE SUMMARY 6 1. INTRODUCTION TO THE FOREST SECTOR 8 2. SYSTEMATICALLY FAILING THE SYSTEM For over 25 years as a non- 20 3. INSTITUTIONS GOVERNING PERU’S FORESTS !"# %&#"'()*+(%*#),&-./& 22 4. THE INTERNATIONAL POLICY CONTEXT 0(1&!*#)22"23&%02&412& 26 5. HOW TIMBER TRADE “SHOULD” 4)32"6#72"&*)721%*'(%*#)1&%#& WORK – AND WHAT GOES WRONG 28!#12&2)7*"#)92)%(:&6"*92& 28 6. HUNDREDS OF SHIPMENTS: THE US-PERU ("#4)3&%02&;#":3<&.)%2::*'2)62& TRADE IN ILLEGAL WOOD "2!#"%1,&3#6492)%("=&27*32)62,& 36 7. LAUNDERING MACHINES: 14 CASE STUDIES 49 8. THE OPEXA CASE: INSIDE THE MAGIC FOREST 6(9!(*')*)'&28!2"%*12&()3& 55 9. IGNORING INCONVENIENT LAWS: THE WATERSHED ()&*)%2")(%*#)(:&(37#6(6=& BANS, 2000-2010 )2%;#">&2)(?:2&-./&%#&(60*272& 63 CONCLUSION AND RECOMMENDATIONS 5("@"2(60*)'&2)7*"#)92)%(:& 66 GLOSSARY !"#%26%*#)&?=&1!4""*)'&60()'21& 67 WORKS CITED *)&9(">2%&329()3,&'#72")92)%& BOXES !#:*6=&()3&2)5#"6292)%&"2:(%23& 7 BOX I: CHINA-PERU TARIFF DISCREPANCIES %#&':#?(:&%"(32&*)&;*:3:*52&()3& 10 BOX II: PERU’S NEW FORESTRY AND WILDLIFE LAW 2)7*"#)92)%(:&!"#346%1<& 14 BOX III: THE HABILITACIÓN SYSTEM AND PACAYA

SAMIRIA NATIONAL RESERVE ACKNOWLEDGEMENTS 16 BOX IV: ANOTHER DIMENSION OF ILLEGAL EIA would like to thank the following funders for their support: LOGGING: FORCED LABOR AND SEXUAL ABUSE Anonymous Donor 23 BOX V: THE FTA ANNEX ON FOREST SECTOR GOVERNANCE Charles Delmar Foundation Climate & Land Use Alliance 24 BOX VI: THE PERU FOREST SECTOR INITIATIVE (PFSI) JMG Foundation 23 BOX VII: LOGGING A CONCESSION, ON PAPER The Lia Fund 33 BOX VIII: EIA SURVEY OF EXPORTERS AND IMPORTERS Norad 34 BOX IX: RESISTING TRANSPARENCY The Overbrook Foundation The Shared Earth Foundation 47 BOX X: FALSE VERIFICATIONS IN LORETO Tides Foundation 58 BOX XI: A REAL REFORM EFFORT, FOILED The Tilia Fund 60 BOX XII: CITES EXPORT PERMITS FOR CEDAR FROM Weeden Foundation EIA is responsible for the content of this report THE YAVARÍ WATERSHED Authors: Julia M. Urrunaga, Andrea Johnson, 61 BOX XIII: ANOTHER CONSTITUTIONAL COURT DECISION Inés Dhaynee Orbegozo and Fiona Mulligan IGNORED IN MAZÁN © Environmental Investigation Agency 2012. No part of this publication may be reproduced in any form or by 62 BOX XIV: TROUBLE IN THE ALTO PURÚS WATERSHED any means without permission in writing from the Environmental Investigation Agency, Inc.

EXECUTIVE SUMMARY

Exporters in Peru and importers in the United carbon emissions from deforestation or forest species trade makes it virtually impossible States and around the world are currently degradation (REDD). However, this investigation to connect the concession of origin with the !"#$%&'()*'&#+),-)')+.+#$/'#!0) ,2),-)!(($%'() suggests that Peruvian authorities currently shipments being exported. timber from the Peruvian Amazon. Sometimes have little capacity to control what’s happening By crossing public information on (a) the intentionally, sometimes through sheer in their forests. The results of this report “supervision” inspections conducted by the negligence, each of the actors and agencies demonstrate that the Ministry of Agriculture Supervisory Body for Forest Resources and involved in this system are working as gears in – responsible for Production Forests – isn’t Wildlife (OSINFOR for its Spanish initials) on a well-oiled machine that is ransacking Peru’s adequately monitoring the concessions in a series of timber concessions with (b) the forests and undermining the livelihoods and its purview; that the Ministry of Environment documentation for CITES export permits for rights of the people that depend on them. – responsible for Protected Forests – isn’t 0$7'&)'"7)/'4,%'".:)536)!7$"#! $7)/,&$)#4'") 3")#4!+)&$*,&#)536)7,08/$"#+)-,&)#4$) &+#)#!/$) +8- 0!$"#(.)*&$>$"#!"%)!(($%'()(,%%!"%)!")#4$) 100 shipments containing illegally logged CITES the systematic export and import of illegal forests under its charge; and that the Regional wood that were exported to the US between wood from Peru to the US. In many ways this Governments do not yet have the capacity to January 2008 and May 2010 – that is, more than report not a new story: the system’s corruption !/*$7$)!(($%'()'0#!>!#!$+)!")#4$) $(7)",&)#,)-,((,2) 35% of all such shipments with CITES permits is something of which everyone in the sector up on the legal cases that do arise. that left Peru for the US during this period. is aware. EIA’s contribution lies in having THE CRIME Peru’s primary exporter, Maderera Bozovich, !7$"#! $7)'"7)*'#!$"#(.)*8#)#,%$#4$&)#4$)*!$0$+) exported shipments under 152 CITES permits of the puzzle to reveal the mechanism that EIA’s investigative work focused on during this time, at least 45% of which included allows this trade to happen: what we call here reconstructing the routes that timber takes wood of illegal origin. It is likely that more the “laundering machine”. from the Amazon to the warehouses of US +8*$&>!+!,"+)!")#4$) $(7)2,8(7)7!+0,>$&)#4'#) There are, of course, individuals and !/*,&#$&+:)#4&,8%4)8+$),-),- 0!'()!"-,&/'#!,") these percentages are actually higher. organizations in this sector who are trying obtained under Peru’s Transparency and to work legally; but corruption and illegality Access to Public Information Law. The &$/'!")#4$)",&/:)",#)#4$)$;0$*#!,"<)=- 0!'(+) links in this chain are willfully obscured to THE MOTIVE AND THE MECHANISM perpetuate confusion about the origins of ,&),- 0$+)'##$/*#!"%)#,)7,)#4!"%+)&!%4#),-#$") Illegal logging is a lucrative business. Expenses almost all timber traded in Peru. EIA was able have their hands tied by lack of resources both other than transport costs are low, without any to reconstruct the chain of custody for trade in +0'()'"7)*4.+!0'(<)))6"7)#4,+$)24,)'##$/*#)#,) concern for decent wages or environmental cedar (Cedrela odorata) and bigleaf mahogany change the system are summarily dismissed or practices. A large old rainforest tree may produce (Swietenia macrophylla) only because both even threatened with physical violence and, in around three cubic meters of export-quality species are protected under the Convention extreme cases, physically attacked. wood, and exporters receive about US$1700/m3 on International Trade in Endangered Species for mahogany or almost $1000/m3 for cedar. 1 In Peru is receiving around 150 million dollars from of Flora and Fauna (CITES) and thus require the US, the prices are even more dramatic: the 7!--$&$"#)+,8&0$+),-)!"#$&"'#!,"'() "'"0!"%) +*$0! 0)$;*,&#)*$&/!#)7,08/$"#+<)?4$)+'/$) wood from a single Peruvian mahogany tree can and national counterparts for programs of illegal modus operandi is being applied for fetch over $11,000 on the US lumber market, and forest conservation and management that – other species, but the even more limited that from a single cedar tree over $9000. directly or indirectly – contribute to reducing information available regarding non-CITES

3 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS

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'0'0%'%2%' ;< "<%8' forest authority, their wood can’t go anywhere. both severe and immediate. In 2006, the World Finally, the extensive corruption associated with Bank estimated that the illegal logging sector in The mechanism that the industry has illegal logging weakens broader structures of Peru generated between $44.5 and $72 million : %
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8 5 therefore developed is simple to describe: the dollars annually, 2)24!($)&$0,&7$7)($%'()*&, #+) concessionaires submit for approval lists of from timber sales in the same year reached trees that do not exist in the real world, and only 31.7 million. 3 Losses to the economy THE INSTITUTIONAL CONTEXT complicit authorities approve the extraction overall were estimated to be around $70 million In recent years, the Peruvian forestry sector has of this non-existent wood. Backed by these as of 2002 due to tax evasion, non-payment been reorganized a number of times. Between “volumes” of imaginary trees, the corresponding of required fees, and devaluation of standing 2006 and 2007, the central government’s ,- 0!'()7,08/$"#+)AB,&$+#)?&'"+*,&#)C$&/!#+),&) timber. By 2011, the government and industry powers regarding environmental management GTFs) are sold in the black market and used to of Loreto, Peru’s largest region, estimated that were transferred to regional entities as part of launder wood extracted illegally from elsewhere illegal logging was causing the country annual a larger national decentralization process. This – national parks, indigenous territories, other losses greater than $250 million dollars – 1.5 decentralization process, rather than improving public lands. No posterior controls will detect times the value of total timber exports. 4 this illegality without returning to the original forest management by empowering authorities concession to verify whether logging was On an individual level, the consequences closer to the forests, has generated confusion actually done. of the current system are also devastating. regarding responsibilities and resources and Indigenous communities are almost universally has even opened new spaces for corruption, at 6"7)$>$")24$")#4$)-&'87)!+)>$&! $7)!")#4$) $(7:) swindled by intermediaries who want to remove least in the short term. #4!+)!+)'**'&$"#(.)",#)+8- 0!$"#)#,)!"#$&>$"$) the most valuable timber from their lands. One aggravating factor is a lack of transparency and stop it. Despite the fact that many of G$'7(.)(,0'()$*!7$/!0+)'"7)>!,($"#)0," !0#) in the sector, which turns simple public supervisions OSINFOR continues to conduct have have resulted from contact between loggers information requests into complex, onerous detected multiple illegalities, the majority of and indigenous peoples in voluntarily isolation. processes. In its third annual report about these concessions known to be at fault continue Poor migrant workers are also frequent victims. the transparency of public organizations with to operate and sell to the export markets. 3")#4!+)&$*,&#).,8)2!(()&$'7) &+#H4'"7)+#,&!$+),-) responsibilities over forests, the Peruvian forced labor and sexual slavery practices from The GTFs and false volumes that support them NGO Derecho, Ambiente y Recursos Naturales men and women hired to work at remote camps are the key to understanding how illegal logging (DAR) found it worrying that the average level and kept almost as hostages for months on is so systemic – and also to combating it. of compliance with respect to transparency end, in exchange for minimum wages – wages Without the necessary paperwork, lumber can’t portals barely exceeded 50%, although that they may never even cash in, if the timber be laundered, the exporters can’t make money, recognizing a slight improvement from 2010 to boss’s business deals go awry or they are '"7)#4$)/,#!>'#!,"+)#,)$"%'%$)!"),&) "'"0$) 2011 (from 46.4% to 52.16%). 6 illegal logging evaporate. injured and have to leave on their own dime. In 2007, the US and Peru signed a free trade As a World Bank report from March 2012 makes In various conversations with US importers and agreement that included a ground-breaking 0($'&:)'")$--$0#!>$) %4#)'%'!"+#)#4!+)+0,8&%$)4'+) their trade association representatives, as well Annex on Forest Governance with binding to look beyond the poor loggers in the forest or '+)2!#4)$;*,&#$&+)'"7)C$&8>!'"),- 0!'(+:)/'".) obligations related to management and trade the petty criminals, and focus on those who are have assured EIA that Peru is not exporting of CITES species, institutional strengthening, truly enriched by this illicit activity: any illegal wood, because everything goes out sectoral governance and support for indigenous “with legal documents” and they are purchasing “In some countries, illegally harvested logs communities’ legal participation in the sector. on “good faith”. This cynical ‘no questions reportedly account for as much as 90 percent of As part of the Annex, if there is evidence '+D$7E)'**&,'04)F.),- 0!'(+)'"7)#&'7$&+)24,) "#$%'% ',-./'0'1%'%2" 2'24%'0'5%78' of illegal timber entering the US from Peru, are perfectly aware of how meaningless these These estimates do not capture the enormous the US government has the right to ask for 7,08/$"#+)'&$)4'+)'((,2$7)!(($%'(!#.)#,) ,8&!+4<) environmental and societal costs of these crimes— '87!#+),&)>$&! 0'#!,"+)'"7)#,)!/*,+$)')>'&!$#.) As long as the current system reigns, the prices how they threaten biodiversity, increase carbon of sanctions, including the delay or denial and practices that responsible logging of the emissions, cause landslides, and undermine the of shipments. Needless to say, almost two Peruvian Amazon would entail will never be resource-based livelihoods of rural peoples, with years after the deadline required of Peru to 5;%4%' "" ;;;F'":"
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<'1%'#4%"4;8' 4 implement its obligations, little has been done !"-,&/'#!,"),"),- 0!'()7,08/$"#+J)-,&$+#) concerned about the situation in the sector. to enforce the agreement—either internally or censuses up to 100% fabricated that generate ="0$)536)4'7)!7$"#! $7)#4,+$)0,"0$++!,"+)2!#4) externally through US pressure regarding a paper “volumes” used to launder real illegal clear illegal activity whose documents were serious breach of contract. 2,,7J)0,"0$++!,"'!&$+)24,)4'>$)",) "'"0!'() linked to cedar and mahogany shipments to the ability to actually log, etc. (Sections 6 and 7) US between 2008 and 2010, each concession’s WHERE A STAMP MEANS NOTHING This second part also includes the history of 0,/*($#$)+8*$&>!+!,")&$*,&#) ($)2'+)0(,+$(.) OPEXA, a concession where EIA established reviewed. EIA also conducted a survey of I$.,"7)#4$)C$&8>!'")+*$0! 0+:)$>$")F$.,"7) &+#H4'"7)#4'#)$;*,&#)*$&/!#+)2$&$)(!"D$7) 2010-11 exporters and US importers of Peruvian the forest sector, this report speaks to a to imaginary trees. In a visit to this remote wood with respect to the measures they take problem applicable to the entire international 0,"0$++!,":)'")536)#$'/)>$&! $7)#4&,8%4) to prevent doing business in illegally sourced trade in plants and wildlife: a “stamp” on an &'"7,/)+#&'#! $7)+'/*(!"%)#4'#)#4$)-,&$+#) wood. The complete responses are available at ,- 0!'()7,08/$"#)!+)",#)+8- 0!$"#)%8'&'"#$$) census was entirely fabricated. This Chapter the online version of this report. of something’s actual legality in many is also the story of Francesco Mantuano, a countries. This is a key issue in the context To capture the social and environmental impacts concessionaire who has spent two years ,-)!(($%'()(,%%!"%:)536)0,"780#$7) $(72,&D)#,) of laws like the Lacey Act, where the buyer attempting to get authorities to acknowledge is legally responsible for their products’ document cases of illegal activity and recorded the illegalities in his own concession, without testimonials from loggers and victims of the local possible illegalities, even if s/he did not set out succeeding attention beyond the ire of his intentionally to buy illegal goods. (,%%!"%)/' '+<)@$)'(+,)4'7)/'".)0,">$&+'#!,"+) trade association. EIA’s journey is documented off the record with experts, authorities, industry This means that importers, to achieve real with maps, GPS, videos and photos in an members and members of the indigenous compliance, need to go beyond asking for an accompanying interactive website (Section 8, movement, as well as analyzing many aspects of ,- 0!'()7,08/$"#)!"),&7$&)#,)-$$()0," 7$"#) also see www.shootunit.com/eia). the legal and institutional framework. about the legal origin of the products they want Third, this section reviews the case of four Given limitations of time and resources, we to purchase. For Peru this could have tough watersheds where cedar and mahogany logging consequences since, if importers conclude that have focused on failures within the concession was theoretically banned between 2000 system and have not examined other types they cannot rely on the oversight of national and 2010, but where a series of authorities authorities, it is possible they will opt for of forest harvest permits and authorizations, approved the extraction, trade and export of but believe this should be considered an suppliers in other countries where the system of wood going explicitly against this law. After control offers better guarantees of legal origin. outstanding need. In addition, authorities did .$'&+),-)*&,>!7!"%)0," !0#!"%)'7/!"!+#&'#!>$) not give us more recent information (post interpretations, as the ban was about to expire 2010), analysis of which is an important follow HOW TO READ THIS REPORT the forest authority acknowledged that the up point for future investigations – both law did not allow for any exceptions. However, by Peruvian authorities and by American This report is divided into three principal parts: until now EIA knows of no internal process authorities, under the FTA Annex on Forest Part One: History and Context, which reviews with this agency to investigate the issue and Governance and/or relevant laws such as the the technical, political, social and environmental sanction those deemed responsible. The General Lacey Act. background relevant to Peru’s forest sector. Comptroller of the Republic, however, does have Why is the extraction of imaginary trees It also includes a detailed diagram where EIA an active investigation on the issue. (Section 9) being authorized? Why are concessions that reconstructs the route that wood should follow Part Three: Conclusions and Recommendations , the government’s own inspections show to from stump to US shores, according to Peruvian where we present suggestions that we hope will F$)!") '%&'"#)>!,('#!,")'((,2$7)#,)0,"#!"8$) laws and regulations, and compares this with serve to open up the discussion about how to operating? Why does it take years even to what happens in reality. (Sections 1 through 5) confront the problems documented here. initiate administrative processes against these Part Two: Case Analysis and Results, which violations? Why is all the information – already presents three inter-related EIA case studies METHODS AND SCOPE public under Peruvian law – not effectively about the methods of illegal timber laundering. accessible to the public in the government’s This information is based on various sources of First, we detail the analysis described above ,- 0!'()2$F+!#$+L)6"7)24.:)'-#$&).$'&+),-)*8F(!0) 0,/*($/$"#'&.)!"-,&/'#!,"<)K,+#),-)#4$),- 0!'() that reveals at least 112 shipments with evidence about Peru’s illegal logging problems, documentation was obtained through public illegal CITES wood. Through description of 14 do US companies continue to import illegal information access requests, with which we emblematic cases – taken from the OSINFOR CITES-protected wood? These are some of the constructed the databases allowing EIA to connect Supervision Reports – we lay out the intrinsic questions that this report invites us all to ask, information about problem concessions with problems of the concession system: the lack with the hope that civil society, the private $;*,&#+<)3")*'&'(($()#,)#4$),- 0!'() ($+),F#'!"$7:) of capacity or political will for enforcement; sector, and authorities who read it will ask many this report also draws from documents obtained impunity for concessionaires, forest consultants more – and that we can begin to work together $;#&'H,- 0!'((.)#4&,8%4),- 0!'(+),&)$;H,- 0!'(+) '"7)*8F(!0),- 0!'(+)0,/*(!0!#)!")*8##!"%)-'(+$) towards solutions. 5;%4%' ""' ;;;<10##%4)*%<6#9B2*( '' "% '4
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'N%8 5 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS

1. INTRODUCTION TO THE FOREST SECTOR

&D#?=&E9*%0B EIA

70% of Peru’s national territory is covered by with the northeast supporting a unique dry raised through the Convention on International some of the most biologically diverse forests forest ecosystem of 22,132 hectares. 4 Only Trade in Endangered Species of Wild Fauna on earth. 1 It is a place where the vast expanse three other countries – Brazil, Indonesia, and and Flora (CITES) and the growing scarcity of of South America’s great rainforest meets the the Democratic Republic of Congo – have accessible mahogany trees led to dramatic towering wall of the Andes mountain range, more tropical forests. Some 26% (17.8 million export decreases beginning in 2008. and the headwaters of the Amazon River hectares) of Peru’s forests are zoned for Even as the commercially viable population of emerge from dramatic canyons and valleys. commercial logging as Permanent Production mahogany began to plummet, the industry was Along the banks of the Ucayali, Marañon, Forests ( O%'<%'5<2"
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% ), expanding its search. Spanish cedar ( Cedrela and Tambopata rivers lie not only a fantastic while another 3.4% (2.3 million hectares) odorata ), another red-colored wood of the same range of ecosystems, but thousands of native lie within protected areas. 5 Over 10 million taxonomic family ( Meliaceae ), has been the communities from 56 distinct ethnic groups, 2 hectares are titled to native communities, but subject of the second intense wave of logging. whose cultural identities and livelihoods are in reality untitled groups occupy just as great Both species are valued for high-end doors, closely tied to the forest. (See map on p.35.) an area throughout the jungle. furniture, windows and other interior design 87% of Peru’s population lives on the coast Although Peru’s forests are abundant, its timber work, as well as cigar boxes in the case of or in the mountains, 3 while the majority of resources have never been a mainstay of the cedar. territory in the jungle regions –Loreto, Ucayali, economy. The country’s primary exports are By value, mahogany and cedar are still an San Martin and Madre de Dios – is occupied by its metals (silver, gold, copper, zinc, tin, lead), important segment of the export market. By the poorest and most disenfranchised segment petroleum and gas, agricultural products volume, a suite of other hardwoods used for of the country’s population, Peru’s indigenous !"0(87!"%)'+*'&'%8+)'"7)0,--$$:) +4/$'(:) ,,&!"%:)>$"$$&+),&)0,"+#&80#!,")",2)/'D$) peoples. For most of its history the Peruvian textiles and apparel. 2010’s total export value up the bulk of exports: cumala ( Q";4'8D' Amazon has been treated as a remote and for wood products (mainly sawnwood, plywood > 4
1%4'8 ), lupuna ( Chorisia integrifolia ), sparsely populated hinterland, with a value and molding) was $168 million, excluding paper tornillo ( Cedrelinga cateniformis ), shihuahuaco determined solely by the resources that can products 6 - in comparison to the country’s or cumaru ( Dipteryx micrantha, Dipteryx spp .) be extracted and sold: oil and gas, gold, and overall exports of $35.1 billion. 7 and capirona ( Calycophillum spruceanun ) chief timber. For years, the inaccessibility of Peru’s Amazon among them. 10 How this extraction takes place historically has limited most logging to extraction of select C$&8E+)/,+#)+!%"! 0'"#)$"7)/'&D$#+) )#4$)NO) been of little concern – the extractive industries species – above all, mahogany ( I "%%
"4' (including Puerto Rico), China, and Mexico – have siphoned wealth out of the jungle without macrophylla ), one of the world’s most account for 89% of the total value of Peruvian restraint, the central government in Lima has valuable timbers, whose beautiful, durable timber sales. After doubling during the early encouraged resource extraction and imposed red wood currently sells at up to $1700/m3 on part of the 2000’s, wood exports leveled off virtually no standards, and the international international markets. 8 After Brazil banned as the global economic crisis hit in 2008. The markets have accepted the products of Peru’s mahogany exports in 2001, Peru became proportion of timber exported to China has, forests without question. the primary global source of non-plantation however, increased rapidly in the last decade, mahogany, exporting highly unsustainable offsetting a reduction in direct exports to the volumes of wood, the majority of which appears 1.1. SNAPSHOT OF THE PERUVIAN US. Chinese importers are particularly focused to have been illegally harvested according to LOGGING INDUSTRY ,")+*$0!$+)-,&) ,,&!"%:)24!($)K$;!0,)#'D$+)#4$) the government’s own inspections and sources. 9 Peru’s rainforests cover 68.0 million hectares, majority of Peru’s veneer and plywood, and This continued until international concerns

6 the US receives high-value sawn wood. 11 An action on record involving timber shipments Reserve and Resort offering to sell him wood, unknown amount of the timber exported to involved the Yacu Puma. In May 2009, the US asking for payment via a money order directly China and Mexico subsequently enters the US Fish and Wildlife Service received information to the individual. after further processing. concerning a shipment of three pallets of NO)'%$"#+)0," )+0'#$7)#4$)2,,7),")%&,8"7+) tropical hardwood scheduled for importation. that the shipment violated Lacey’s declaration According to the court decision, “James Louis 1.2 ONLY TWO WAYS OUT requirements because the buyer’s import King, the owner of the Peruvian business F&,D$&)0('++! )$7)#4$)#4&$$)*'(($#+)'+)0,"#'!"!"%) Amazon Reserve and Resort, S.A.C., provided Almost all documented wood exports from Peru )"!+4$7)2,,7)*&,780#+)24$":)!")-'0#:)#4$)*'(($#+) information that the shipment was being are transported through one of two places. The 0,"#'!"$7)&'2)2,,7<))?4!+)/!+0('++! )0'#!,":) imported on the vessel Yacu Puma with stolen vast majority leaves via the port of Callao, just which the courts deemed to be intentional, and forged documents. King had temporarily ",),-)S!/'),")#4$)C'0! )0)=0$'"<)O!"0$)3T8!#,+) $"'F($7)#4$)!/*,&#$&)#,)'>,!7)4'>!"%)#,) )((),8#) closed his business for tax reasons and became traders can receive better prices for lumber in more detail about the shipment. In addition, aware of the shipment when he received a bill Pucallpa, most high-value wood is transported there was substantial evidence that the ex- from the shipper,” Harlan Crouch of Florida- laboriously up river hundreds of miles on large employee exporter did not have legal title to based Cocobolo, Inc. 16 Mr. Crouch had apparently barges ( chatas ), where the resulting sawnwood the shipment. is loaded onto trucks for transport over the been contacted by an ex-employee of Amazon Andes. 677!#!,"'((.:)')+/'(($&)F8#)+!%"! )0'"#) amount of wood travels down the Amazon from Iquitos. 13 This route – traversing the entire width of the Brazilian Amazon – is actually the only natural water-born outlet to the Atlantic for products east of the Andean mountain range. A single Peruvian shipping company has ships that make this month-long journey from Iquitos to the southern U.S. and Mexico and back several times a year. The departure and arrival dates for these ships are available online. The long-running Yacu Puma 14 was recently retired and replaced by the Yacu Taski. 15 These well-documented shipments should, in theory, make monitoring and enforcement of the legality of this timber particularly feasible for C$&8>!'"),- )0!'(+<) 3")-'0#:)#4$) )&+#)NO)S'0$.)60#)$"-,&0$/$"#) F):=&#)2&?#(%,&%02&G(64&D(1>*,&6(""*21&%*9?2"&5"#9&H#"2%#&3#;)&%02&/9(+#)&%#&!#"%1&*)&%02&IE&()3&J28*6#< &0%%!KBB;;;

Box I: China-Peru Tariff Discrepanies

Trade data analysis by www.globaltimber.org.uk shows that almost all timber leaving Peru declared as exports of molding (4409) bound for China is subsequently recategorized and declared as sawn wood (4407) upon arrival in China. Why? One potential explanation is that the difference in 0('++! )0'#!,")7$0&$'+$+)#4$)$;*,&#)#';$+)"$0$++'&.)!")C$&8)'"7P,&)#4$)!/*,&#)#';$+)!")Q4!"':)0&$'#!"%)!"0$"#!>$)-,&)+.+#$/'#!0)-&'87<))6",#4$&) *,++!F!(!#.)!+)#4'#)Q4!"')+!/*(.)7,$+)",#)&$0,%"!R$)C$&8E+)+'2")2,,7)*&,0$++!"%)'+)+8- )0!$"#)#,)F$)/,(7!"%))A'(#4,8%4)'00,&7!"%)#,)@,&(7) Customs Organization rules the standards should be the same throughout the world to prevent exactly the situation in question). Analysis of the quantity of sawn wood and moldings declared to be exported from Peru as opposed to what China declares has been imported shows another strange discrepancy. Peru is declaring exports of sawn wood and moldings roughly twice as large as what China claims it is receiving. EIA recommends that the two countries engage in customs collaboration efforts to determine what is occurring and ensure that this discrepancy does not signal fraud of some sort. 12

7 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS

L*'0:=&7(:4(?:2&9(0#'()=&()3&623("& ;2"2&%02& "1%&1!26*21&%#&?2&28!:#*%23<& M*'&1!26*92)1&("2&*)6"2(1*)':=&"("2&()3& *)(66211*?:2,&:*>2&%0*1&%"22&*)&%02&?4552"& +#)2&N(6(=(&E(9*"*(&O(%*#)(:&N("><& P()4("=&QRSR<&&L<&M2")*)+#)B-./

2. SYSTEMATICALLY FAILING THE FOREST

2.1. ILLEGAL LOGGING: THE OPEN and sells wood in Peru knows or should know regime. Prior to 2000, Peru’s Forestry and SECRET how the system works. Its high levels of Wildlife Law N. 21147 authorized the granting corruption and illegality have been openly of logging contracts for areas less than 1000 Peru’s forest sector demonstrates a systematic acknowledged by government and industry hectares for periods of two years or less. In failure of governance at all levels, as this report themselves on multiple occasions for many theory, only small-scale extractors personally +4,2+)2!#4) &+#H4'"7)$>!7$"0$)'"7)7,08/$"#$7) years. For example, in 2010 the then-director cutting the wood were supposed to obtain sources. The logging and export industry of the National Institute for Natural Resources these contracts, which were non-transferable, is dominated by a relatively small group of (INRENA), responsible for forest management, and a person could only hold one contract at timber barons. With limited exceptions, these told the country’s primary newspaper regarding any given time. While the intent of the “1000-ha businessmen have built their trade on a system his own agency: “The State doesn’t have contract” system was to support local incomes of intermediaries that stretches into the heart the capacity to monitor the forests…There without generating large-scale extractive of the forest, to local bosses who are known !+"E#)+8- 0!$"#)0,//!#/$"#)'/,"%)&$%!,"'() logging, in practice a pervasive system called to cut illegal and unfair deals with indigenous employees for monitoring. The corruption “habilitación ” developed. communities, operate logging camps with within INRENA is worse than the case of the Under the “ habilitación ” system, industrial forced labor, and/or harvest in national parks petroaudios [a notorious corruption scandal] logging companies paid costs for individual or protected indigenous territories as well as or whatever other thing is happening in this loggers to apply for 1000 hectare logging licensed timber concessions where rules are country. 17 It’s of a magnitude that’s really contracts, and simply conducted the logging often ignored and abused. incredible.” 18 in their names. In some cases, companies National laws and decisions handed down by Similarly, an October 2011 accord between the logged the actual 1000 hectares named in the highest courts of Peru have been routinely regional government of Loreto, a regional the contract. 20 In many cases, however, the ,8#$7:)2!#4)'**'&$"#)!/*8"!#.:)!"),&7$&)#,) concessionaire’s association (ACROFREL) and companies used the volume of wood authorized continue exploiting and exporting the most the government supervisory body (OSINFOR) from these parcels to launder wood they had >'(8'F($)2,,7+<)U,>$&"/$"#),- 0!'(+)'#)'(() stated that joint actions were needed “in light actually cut elsewhere. Much of the mahogany levels are necessarily part of this system, as of the crisis affecting the industrial loggers of and cedar stolen in this way came from the are private forestry consultants, concession Amazonia, caused in great measure by illegal lands of native peoples, including areas owners, and many indigenous community logging, which leads to annual losses greater protected for voluntarily isolated tribes highly ($'7$&+<)=- 0!'(+)24,)4'>$)#&!$7)#,) %4#)F'0D) than $250 million dollars.” 19 These losses are susceptible to diseases from the outside world. 21 have, in some cases, been dismissed, while 1.5 times the value of annual Peruvian timber (See Box III for more on the habilitación system). ,#4$&),- 0!'(+)2!#4)",#,&!,8+)#&'0D)&$0,&7+)'"7) exports according to government statistics The disastrous mismanagement of the 1000 charges of inappropriate conduct have been ($168 million). retained and even promoted. hectare contracts gave way in 2000 to the new Forestry and Wildlife Law N. 27308 – discussion Exporters at the top end of the chain use of which had begun in 1992. The law, which had intermediaries to maintain a distance from 2.2. IT’S NOTHING NEW: THE 1000 HECTARE CONTRACT SYSTEM faced intense resistance from the mahogany what happens in the forests, turning a blind barons, created the system of commercial eye and – in the rare event they are questioned The current crisis in Peru’s forest sector is a concessions and permits for communities and – claiming that they bought everything ‘in legacy of the institutionalized corruption and private land owners that is under operation good faith’. However, everyone who buys abuses set in motion by the previous legal today. In addition, a new law was approved

8 in July 2011 and will go into effect once its international convention”, with the US acting as export markets. During the late 1800s and turn implementing regulations are complete (see the foremost buyer. The cable notes that INRENA of the century, rubber barons transformed box on the new Forestry and Wildlife Law, p10). !#+$(-)8",- 0!'((.)$+#!/'#$+)#4'#)WXHYX)*$&0$"#) Iquitos, the region’s capital, into an outpost of The 2011 law largely retains the same model for of all mahogany exported in 2005 originated European extravagance on the banks of the managing timber extraction and subsequent from illegal sources” and that “since 2002, the Amazon. There were homes bedecked with trade that has led to the current situation. agency’s estimate of illicit exported mahogany hand-painted Italian tiles, an opera house, has been 60,000 cubic meters per year.” 35 even a mansion of iron designed by Gustave Eiffel and imported in pieces from Paris. Such As Stephen Corry of Survival International 2.3. PREVIOUS ESTIMATES OF +#&'"%$)(8;8&.)2'+) "'"0$7)F.)#4$)*!(('%$),-) noted, “The [US] ambassador’s cable shows the ILLEGAL LOGGING the region’s forests for natural rubber for the alarming extent to which the authorities were nascent automobile industry. 38 An estimated An exhaustive report prepared in 2006 for the aware of illegal logging in Peru, did not admit 30,000 indigenous people were enslaved and World Bank described illegal logging in Peru as it, and did little to stop it. Consumers in the forced into labor tapping trees 39 – a situation systematic, characterized by criminal networks US and Europe simply can’t rely on documents with parallels to the habilitación system of in collusion with state actors. Illegal logging is that purport to show Peruvian mahogany is contemporary timber trade. 40 The traumas of rooted in Peru’s own socio-economic dynamics sustainably sourced, as these are clearly not this period are thought to have led a number such as the lack of labor opportunities worth the paper they’re written on.” 36 of tribes to renounce further contact with and basic public services in jungle regions, the outside world and retreat into voluntary migration and land invasion, the marginalization 2.4. THE THREE JUNGLE REGIONS, A isolation. 41 of indigenous communities, and lack of access TROUBLED PAST to capital, etc. But illegal logging in Peru is Often cited as the biggest city in the world -'0!(!#'#$7)'"7)'/*(! $7)F.)'")$",&/,8+)",H Q

9 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS !"#$%%&$'()*+,$-(.$/")(,0)1$2-3$4563657($82.&$9"- $5;0$2-3$9"-,*60205"-

#4&,8%4)'7/!"!+#&'#!>$)&$H0('++! )0'#!,"),-)#4$) land use type.

II.III. LEGISLATIVE DECREE 1090: 45 MILLION HECTARES OF FORESTS AT RISK Non-Governmental Organizations that specialize in forestry and indigenous issues, the National Board of Engineers, and La Molina Agrarian University – among other institutions at the national level – warned from the beginning that the entry into force of Legislative Decrees 1090 and 1064 would immediately endanger 45 million hectares of Peruvian forest land. In contrast to previous forestry laws, DL 1090 (!/!#$7)#4$)7$ )"!#!,"),-)-,&$+#)&$+,8&0$)'"7) N"#%21%1&%4")&7*#:2)%&*)&M('4(,&QRRU<&&J("*V>2&W2:24BD0#9(1&X4*"=)2) “forest patrimony” exclusively to protected forests, leaving forests designated as production lands out of the new regulatory =")Z8(.)[["7:)[X\\:) )>$)7'.+)F$-,&$)#4$)$"7) p.22), it committed to implementing reforms scheme. In this fashion, 45 million hectares ,-)C&$+!7$"#)6('")U'&0X')CT&$RE+) )>$H.$'&) in different areas of Peruvian legislation that of forest land – equivalent to 60% of Peru’s term, the new Forestry and Wildlife Law N. would theoretically permit better and more forested territory and 40% of the entire 29763 was published. The law states that it will transparent management of international country of Peru – fell outside the forestry enter into force the day after the publication commerce, as well as guaranteeing a set of category (and the biodiversity protection and ,-)!#+)&$%8('#!,"+)!")#4$),- )0!'()%'R$##$: 22 minimum standards in the environmental and sustainable use that it includes). Instead these and that the regulations will be the result of labor sectors. Some of these are laid out in lands were decreed to be part of the agrarian “a participatory process of free, prior, and a ground breaking Annex on Forest Sector category, where the priority is agricultural informed consultation” implemented by the Governance, which is intended to prevent “free production. In January 2009, DL 1090 was Ministry of Agriculture. 23 The law also states trade” from facilitating “illegal trade” through /,7! )$7)F.)S'2)[X`\W:)F8#)$>$")+,)!#)0,"#!"8$7) that the regulations must be approved within a provisions that encourage the legal use of to be strongly questioned. year 24 – that is, before 22 July 2012. natural forests, compliance with international GS)\XYX:)S'2)[X`\W:)'"7)GS)\Xab)2$&$) )"'((.) Law N. 29763 will replace Law N. 27308 and treaties like CITES, stronger law enforcement revoked by the Peruvian government as a its regulations (Supreme Decree 014-2001- and more transparent and participatory forest result of indigenous protests that turned into a AG). However, since the government has management. (For complete text see EIA’s 2010 violent confrontation in June 2009 in Bagua. not approved the new regulations - and report, “PERU’S FOREST SECTOR: READY FOR THE has only recently begun the design of a NEW INTERNATIONAL LANDSCAPE?”) consultation process that the DGFFS estimates II.IV. THE CONFRONTATION IN BAGUA won’t conclude before November 2012 - the II.II. THE 99 DECREES Law N. 27308 remains in force as of this Indigenous protests concerning management report’s writing. In any case, the two laws In June 2008, Peruvian President Alan Garcia of the Peruvian forests and their land tenure are substantively similar with respect to the )"!+4$7)!++8!"%)YY)7!--$&$"#)S$%!+('#!>$) and use rights began in December 2006, when leasing, functioning, obligations and oversight Decrees” under the pretext of adapting the indigenous peoples rejected a bill proposed of logging concessions. Peruvian law to the requirements of the by the Garcia Administration widely known new FTA. 26 Many of these decrees turned as “The Law of the Jungle”. This proposal out to be unconstitutional, and others were was ultimately rejected by Congress. But in II.I. THE US-PERU FTA AND PERU’S rejected by the public as worsening conditions mid-2008, when President Garcia issued the FORESTRY AND WILDLIFE LAW instead of improving them. 27 Among the most 99 Legislative Decrees, he took advantage of the opportunity to re-introduce controversial When the Government of Peru signed the controversial decrees were DL 1090, which in sections of the Law of the Jungle. According to Free Trade Agreement (FTA) 25 with the United practice was a new Forestry and Wildlife Law, AIDESEP, the largest indigenous organization in O#'#$+:) )"'((.)&'#! )$7)!")G$0$/F$&)[XXW)A+$$) and DL 1064, which made it possible to convert state forest lands into private agricultural lands C$&8:)#4!+)"$2)*4'+$),-)0," )!0#)F$%'")24$")#4$)

10 government did not comply with its obligation permits the sharing of documents between Finally, on May 26, 2011, the Peruvian to consult indigenous peoples as required by users), the contributions of the parties government declared that the consultation ILO Convention 169 with regards to at least 9 interested in participating were compiled process had concluded. “For us it is a great Decrees affecting their lands. 28 and published. During the period for open satisfaction that, after two years of work comments, the government received 112 by the Executive branch, the Congress and The dimension and number of indigenous submissions. forestry stakeholders, we have been able to strikes, protests, and road blockades grew arrive at an important agreement and prepare without the government paying much attention, G8&!"%)#4$)C('#-,&/E+) )"'()+$++!,"+:)*'&#!0!*'"#+) together this bill that can be debated on the until on June 5, 2009, when the order was acknowledged the advances made in this ),,&),-)Q,"%&$++)7$0('&$7)#4$"HC&$+!7$"#),-) given to forcibly remove the members of the participatory process in comparison to previous the Congressional Agrarian Committee, Aníbal indigenous communities affected by DL 1090, attempts. However, they also criticized the Huerta. Law 20317 and DL 1064 that had staged a protest process, whereby comments were solicited in the Amazonas province of Bagua demanding without providing an opportunity for discussion O!"0$)#4!+)('2)2'+)#4$)0,8"#&.E+) )&+#) the revocation of these measures. The protest and debate that could have allowed the experience with prior consultation, neither the turned violent and a confrontation between the group to arrive at consensus regarding which government nor the stakeholders consulted indigenous people and police left 33 dead and issues raised were the most important for knew exactly what steps to take or what to 200 injured. inclusion into the new law. Additionally, there expect from the process. This left people was no disclosure of the criteria used by the with very different impressions about the On June 19 2009 the government revoked Government to determine which contributions *&,0$++c),- )0!'()7$+0&!*#!,"+)'"7)+,/$)dU=+) DL 1090 and 1064, and that same day the would be incorporated into the law. The lack claim that it was a success, while statements indigenous strike – underway since April of clear guidelines or processes regarding the from other participants – including AIDESEP – was lifted. 29 Garcia’s administration also Platform created expectations that were not - express dissatisfaction and maintain that created a National Coordination Group for the met, and dissatisfaction on the part of both the process was plagued with irregularities, Development of the Amazonian Peoples (the civil society and government concerning the lies, manipulation attempts, and a lack of a ‘National Group’) convening different sectors Platform and the ultimate outcomes. consensus in the end. of the government and the two most important indigenous organizations, AIDESEP and CONAP, to address all aspects of development. This II.VI. THE PRIOR CONSULTATION group organized itself into four Working Groups, PROCESS including one (Group 2) focused on the new forestry law. According to ILO Convention 169, to which Peru is a signatory, the State is obligated to conduct The National Group agreed that the a consultation process 30 regarding government contributions of Group 2 were to be included decisions that affect indigenous peoples in the next proposal of the new Forestry and “with the objective of achieving agreement or Wildlife Law. However, different opinions consent.” 31 In this context, a forestry law should exist regarding the extent to which all of the clearly be subject to consultation, but this is recommendations were actually incorporated easier said than done. Initially the government into Law N. 29763. attempted to rush the process with its new draft, which provoked immediate reactions: II.V. THE PROCESS FOR THE NEW the indigenous organizations, Peruvian and FOREST LAW international civil society groups, and the =/F87+/'")=- )0$)'(()0'(($7),")#4$)U,>$&"/$"#) In 2010, Garcia’s administration committed to to rethink its strategy or risk exacerbating a more transparent and participatory national +,0!'()0," )!0#+),"0$)'%'!"< consultative process for drafting a new forest In December 2010, twelve international law. The Forestry Law Platform was created for organizations – including EIA – added their this process: representatives of civil society, voices to the chorus, issuing a declaration indigenous organizations, universities, research that called the international community’s centers, and professional organizations were '##$"#!,")#,)#4$)7$ )0!$"0!$+)!")#4$)B,&$+#&.) invited to participate, as well as representatives Law consultation process. The Government of other government agencies. ultimately decided to extend the process for Through face-to-face meetings, email lists, and several more months with the objective of a “Google Group” (a virtual community that calming the furor from all sides. &D#?=&E9*%0B-./

11 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS

D02&"262)%&6#9!:2%*#)&(&!(723&"#(3,&%02&D"()1#62()*6(,&:*)>*)'&M"(+*:&()3& J(3"2&32&W*#1&%#&N2"4Y1&6#(1%&()3&10*!!*)'&"#4%21&%#&/1*(&()3&O#"%0&/92"*6(,& sector has seen, perhaps the most egregious 9(=&0(72&3"(9(%*6&*9!(6%1&#)&%02&5#"21%1&*)&*%1&7*6*)*%=<&&-./ have involved drug dealing and money laundering by Luis Valdez Villacorta, the former mayor. Valdez Villacorta owned a logging operation and plywood production facility. In 2003, 523 kilos of cocaine were found hidden in his company’s plywood, en route to Mexico. 44 Valdez was arrested and then released, but his drug related case is still open in the Peruvian Supreme Court. 45 Valdez Villacorta is also being tried for the murder of a journalist in 2004, who was investigating and reporting on Valdez´s drug dealing and money laundering activities in Pucallpa. Due to irregularities in the process, the Supreme Court has twice annulled the entire murder case and is currently preparing to emit a sentence for the third time.

A US State Department Cable released by Wikileaks recounts the seriousness of this case. “Given that Valdez’s companies employ some 3,000 people in Ucayali and his election twice The private sector logging industry and the Logs come into Pucallpa’s sawmills from as Pucallpa mayor, he enjoys strong support forest authority that oversees it are closely sources both legal and illegal — and by the from the public. After his detention some 30-40 linked in Loreto. One example of this troubling time processed boards are loaded onto trucks supporters blocked streets and the entrance to relationship occurred in 2007, when then- bound for Lima, their origins have become the airport, hoping to prevent the authorities head of the Loreto Forest Concessionaires virtually indistinguishable. Mahogany and from removing him to Lima. Analysts explained Association, Juan Miguel Rengifo Ríos, was cedar from Pacaya Samiria National Reserve, #,)')NO)+#'#$)7$*'&#/$"#),- 0$&)#4'#)g'(7$R) appointed administrator of the regional forest Alto Purús National Park and the Murunahua '"7)4!+),&%'"!R'#!,")0,"#&,(($7)#4$) ,2),-) '8#4,&!#.),- 0$)A#4$")3de5d6f)'"7)+8F+$T8$"#(.) Territorial Reserve for Indigenous Peoples drugs out of Peru to the east and northeast, presided over an investigation involving his in Voluntary Isolation are known to arrive in primarily into Brazil. The organization used its own concession, Forestal Capirona SAC. The Pucallpa’s ports (See Boxes III and XIV). In early commercial network and logistical resources to !"+*$0#!,")#4'#)e$"%!-,E+),- 0$)0,"780#$7) 2007, Peru’s newspaper of record, El Comercio , facilitate the movement out of the country of found no fraud by the concession, even revealed that a Peruvian police plane was large quantities of cocaine, say those observers. #4,8%4)#4$)0,"0(8+!,"+)#4$) $(7)!"+*$0#,&+) involved in transporting illegal mahogany from Even without good estimates of the quantity of drew were highly suspect. An ecologist at the Purús to Pucallpa. In an interview for the same drugs the Valdez network moved, one analyst well-respected Peruvian Institute of Amazonian newspaper on April Research (IIAP), based in Iquitos, minced few 2007, the then words in describing the inspection: “Reviewing Peruvian Forestry the maps I arrive at the conclusion that this and Wildlife concession contains an area where one cedar Director, Gustavo tree grows every 200 meters in straight lines. Suarez de Freitas, And that is essentially impossible.“ 42 stated: “Personally, I am not surprised about this plane, because it has Q

H*24%2)()%&Z#72")#"&P4:*#&Z("6X(&/'(!*%#&;(1&>*::23&*)&QRR\&;0*:2&32%(*)*)'&(&%"46> - :#(3&*::2'(:&9(0#'()=<&L*1&5(9*:=&1%*::&;(*%1&5#"&V41%*62<&&H(&]2!4?:*6( 12 told poloff that Valdez’s arrest was the single a conservative estimate to be around US$70 #&'7!#!,"'() "'"0!"%:)'"7)2!#4)*&!0$+)-,&) F!%%$+#)F(,2)#,)7&8%)#&'- 0D!"%)!"#$&$+#+)!") million in 2002 from tax evasion and fraud, #!/F$&)8"7$&08#)F.)#4$) ,,7),-)!(($%'()#!/F$&:) Peru since the 2004 arrest of Peruvian drug non-payment of stumpage fees and devaluation the industry is trapped in a vicious cycle of kingpin Fernando Zevallos.” 46 of standing timber. 49 This study suggests what illegality, informality and abuse. The economics the Government stands to gain if it could bring of the patronage system are stacked against corruption under control and impose the rule of local laborers, who frequently end in debt after law in remote jungle regions. However, it does a hard season’s work. Logging camps may be QBolivia, and #&'7$),")*$,*($)!")C$&8:)24!04)24!($)7!- 08(#)#,) buy all basic goods at high prices from the contains world famous protected areas such quantify are no less real. *'#&]")'"7)'&$)*&$>$"#$7)-&,/) $$!"%<)@,&D$&+) as Tambopata-Candamo Reserve and Manu injured on the job are not provided any medical National Park. Madre de Dios has somewhat '##$"#!,":)!"+8&'"0$),&)F$"$ #+)'"7)'&$),-#$") less Permanent Production Forest (1,935,162 ha) Q<_!7$7)'"7) a truck carrying illegal mahogany. Garcia and ongoing abuse. (See graphic, p. 19). grossly undervalues the timber harvested by 6%'*!#,)2'+)+4,#)$!%4#)#!/$+)!")#4$),- 0$),-)#4$) the community in order to claim that he is owed (,0'()-,&$+#)'8#4,&!#.)'+)4$)2&,#$)4!+),- 0!'() Under the habilitación system, the exporter is money. The boss demands that the indigenous testimony. 48 To date, no one has been charged assured of a part of the year’s wood production. groups pay off this “debt” by harvesting yet with his murder. At the same time, the laborers cutting the more wood. In its more pernicious form, the wood are separated from the exporters who logging boss demands that the debt be paid off "'"0$)#4$)'0#!>!#.)#4&,8%4)#4$)!"#$&/$7!'&.) by working in a logging camp. lender (habilitador) and the local patrones. 51 2.5. THE ECONOMIC AND HUMAN The system is very effective for disguising IMPACTS “knowledge” by the businessmen and allowing Q<_'!('F($)-&,/)F'"D+)-,&)(,%%!"%) The most vulnerable communities, however, quantitative data are scarce, Pautrat and activities in Peru, due to the many risk factors are indigenous groups who voluntarily remain Lucich’s attempt to estimate annual losses that prevent loan repayments. 52 Without isolated to avoid contact with the outside to Peru’s economy from illegal logging found world. Some, though not all, of the lands they

13 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS Box III: The Habilitación System and Pacaya Samiria National Reserve

3#)2,8(7)F$)4'&7)#,) )"7)')0'+$)#4'#)F$##$&)$;$/*(! )$+)#4$)/8(#!#87$) In November 2009, a park guard of the Reserve informed EIA that illegal of problems inherent in Peru’s logging industry than Pacaya Samiria loggers were still active in the area. “In November and December they National Reserve in southern Loreto, the country’s largest protected area cut the trees, and at the end of December and during January the wood (at 2,080,000 ha, it is 1.5% of Peru’s entire territory). is moved, taking advantage of the high waters of the river.” A community +,8&0$)0," )&/$7)'0#!>!#.)"$'&)#4$)+,8#4$&")0,&"$&),-)#4$)e$+$&>$<) In 2010, EIA investigators visited the e$+$&>$E+)+,8#4$&")0,&"$&:) )"7!"%) evidence of a long history of illegal logging of CITES-listed timber species, '"7) )&+#H4'"7)'00,8"#+),-)#4$)'F8+!>$) labor system through which this wood has been laundered into supply chains destined for export. After four days of travel, the !">$+#!%'#!>$)#$'/)+$#)8*)!#+) )&+#) camp on the side of the Rio Pacaya, six hours from its outlet in the Ucayali River. After about ninety minutes of hiking, investigators found a cedar stump, beside which were remains of chainsaw cutting that the loggers had left behind; it was estimated the tree had been cut 3 years earlier. Several hours later the team found a second stump, this time mahogany, cut 5-7 years earlier. Various pieces of discarded wood lay beside this stump, as well as old cans and a liquor bottle. Over the course of three days, this pattern was repeated. EIA investigators found 13 cedar stumps and three mahogany stumps distributed between the strict protection zone, the restoration zone and the buffer zone of the Reserve. These stumps established a pattern of illegal logging that spanned at least the past seven years, and the amount of sawnwood left behind and wasted was astonishing. Several young cedar trees too small for the loggers were also seen. EIA investigators found that the discarded wood left behind at stump sites was still high quality. When we asked the guide – a local man knowledgeable about logging in the area – why it had been abandoned, he stated that the patrón had dismissed these pieces because the wood was for export and they didn’t comply with the demands of the export market.

D0*1&2)#"9#41&9(0#'()=&%"22,&92(14"*)'&Q2%<&&L<&M2")*)+#)B-./ 14 Chata &?("'21&!:=&%02&"*72"1&%0"#4'0#4%&%02&/9(@ +#)<&D0*1&?#(%&;(1&:#(3*)'&:#'1&(%&%02&?#4)3("=& #5&N(6(=(&E(9*"*(&O(%*#)(:&]212"72&dQRSRe< &&L<&M2")*)+#)B-./

III.I. AN ABUSIVE SYSTEM gave him only 100 soles [aprox US$ 35] and III.II. A ZONE WHERE THE LAW MEANS owed him 4000 soles more for six months of LITTLE EIA conducted interviews with local sources in carrying wood.” order to gain a picture of how the habilitación , In the buffer zone of Pacaya Samiria Reserve or patronage, system worked in the area and Another man told EIA that the residents of near Montebello, the EIA team found 4 stumps who was involved. The basic structure revolves several nearby communities “live by taking cut just the week prior to our arrival, apparently around a local boss, or patrón, who buys wood wood from Pacaya Samiria Reserve”. He had headed to Pucallpa. That same evening, EIA’s cut in Pacaya Samiria and transports it to been a volunteer park guard and recounted team was informed that some local residents Pucallpa for sale. The patrón gives money to watching what happened when the paid park were uncomfortable with our presence because local teams of loggers, chain saw operators and guards seized wood taken from the National they thought EIA may have come to investigate transporters who do the hard work of cutting Reserve. After the seizure, he said, the patrón nearby coca production. The team decided to and hauling wood from the forest. 24,)4'7) )"'"0$7)#4$)2,,7E+)4'&>$+#)2,8(7)*'.) leave for security reasons. the guards 2000 soles [aprox US$750] and they 536)2'+)#,(7),-)')(,0'()*'#&]")24,)4'7) )"'"0$7) would give him his wood ‘back’. He described While returning to Iquitos, EIA’s team the local logging teams and made himself rich the bad conditions of the guard posts, in some encountered various points where wood was with extraction of the cedar and mahogany cases literally falling down. 59 being piled and loaded onto boats at the from the Reserve. “These bosses have become edge of Pacaya Samiria Reserve. During 5 businessmen now and gone to Pucallpa.” Several sources told EIA that in areas like days in the Reserve’s strict Restriction Zone “Of course they become businessmen, these Montebello and other nearby population and subsequently traveling through the bosses, since they’re paying prices amounting centers, “independent” illegal loggers extract e$08*$&'#!,")j,"$:)",),- )0!'()*'#&,(+)2$&$) to robbery.” Many residents of the nearby cedar and take the wood themselves to observed. community who had worked with this patrón Pucallpa in whatever boats came along. They had been cheated. One described how a friend hide the boards in the boat’s storage area had worked carrying wood and at times they until arriving to the port, where traders called didn’t even pay him for this hard labor. The regatones come right onto the boats and buy patrón’s excuse was that the wood had later wood on the spot. been seized by authorities: “The habilitadores

15 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS Box IV: Another Dimension of Illegal Logging: Forced Labor and Sexual Abuse

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18''>'$4%; ';%'0#' cook begins to clean and cook and required products such as rubber my fear, I was always worried that something whatever bushmeat the men have $D'14%D''XJ1"8'' managed to hunt. Then the cook roasts the animal with a bit of For obvious reasons regarding 4':"
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';%%8
'' MARÍA be done before 5 a.m., so that by 2##"%'1%"'"<%
" 8 6 a.m. all of the men have eaten María, a single mother nearing 50 breakfast, lunch, and dinner, but also provide and are ready to leave with their years of age, had no job. Thus, when a neighbor them with sexual favors. lunch rations. “Then I was left alone there. told her about temporary work available as a Sometimes I would listen to the chainsaw cook in a logging camp, she thought she had María remembers each night as being a nearby, and sometimes nothing; silence,” been presented with a good opportunity. The nightmare. “I was there for six months. I remembers María. In order to keep the workers pay seemed good to her: 300 soles per month barely slept from my fear, always worried that happy, she would offer to wash their clothes (approximately US$110), above the average something was going to happen. When I knew and mosquito nets. But even so, they would pay for a cook in the city of Iquitos. She would they wanted to attack me, I couldn’t sleep. demand that the contractor bring another have to leave her children and move to the Thinking they were coming, I would wake up. female cook to “attend” to all of them. camp, but it would only be for three months. So that they would think I was awake, I would Cristian had already worked previously as a Unfortunately, things did not turn out as move, I would get up, I would light my lantern, chainsaw operator for the same contractor, so *('""$7c)+!;)/,"#4+)('#$&:)+4$)$"7$7)8*) )$$!"%< that is the way I was there, I would sleep on my side. And suddenly it was time to wake up.” he knew what was in store: at least 12 hours of In order to convince her to move to the jungle intense physical labor every day for 400 soles and leave her children, the habilitadores gave The worst was that once the three months per month (approximately US$140), out of which her 250 soles (approximately US$90) as an were up, one more week passed, and then the habilitadores would discount the cost of advance payment. She left Iquitos and traveled another, and another, without anyone saying anything extra he needed while in the camp: one day by river to join up with other people anything about an imminent return to the boots, T-shirts, underwear, toothpaste. Soap who knew how to get to the camp. From there, city. María spent months trapped in the camp, and basic foodstuffs – rice or fariña and cooking +4$)#&'>$($7)F.)F,'#+)'"7)-,,#)-,&)'",#4$&) )>$) caught between the fear of being raped at any oil – were included. But they themselves days to the middle of the jungle. time and the panic of traveling through dense needed to hunt down their own protein in the Amazon forest alone and getting lost or being forest, during their free time. U$##!"%)#4$&$)2'+)",#)#4$)/,+#)7!- )08(#)*'&#<)) attacked by wild animals. Maria was the only woman in the camp and was 3")#4$)0'/*+:)$;*('!"+)Q&!+#!'":)#4$&$)!+)",) )&+#H'!7) surrounded by approximately 25 men, most of After her own experience, she does not kit. There is only paracetamol (an analgesic for whom were between the ages of 20 and 30, and recommend anyone to accept work of this moderate pain). If you have an accident, he says, all of whom were strong enough to fell trees kind. “They drastically abuse the new female they do not bother to evacuate you but rather, measuring more than one meter in diameter. cooks. They would say that the female cook they leave you there. “They treat the people as María’s nightmare began when she realized that had to share with all of the male workers. That if they were animals; if something happens to the men expected her to not only cook them is not the way it is for me, for me all of that is

16 them, they are left there. A friend of mine cut the mosquito net. There, too, it was dangerous, estimates that the quantity and quality of wood himself with an ax and they left him there, treating the tigers could come to kill, to eat you.” (Note: mentioned by Cristian would be worth at least his wound with just the bark of a tree. If the “tiger” is the local term used for jungle cats, $US493,000 on the international market. A quick family inquires, they are told, ‘he already left,’” particularly the jaguar ( 54
1%4'
24 ).) assessment of what was “invested” in labor to he remembers. In other words, according to what extract the wood from the forest adds up to Cristian and Maria explain that around their Cristian has seen and heard, the habilitadores approximately US$20,000. To this we probably camp there were other camps, also presumably don’t admit or assume any responsibility if the must add numerous bribes, in addition to the illegal, where other Peruvians, Colombians, worker has an accident, dies or disappears. regular supply chain costs. Even so, it is a very '"7)I&'R!(!'"+)2,&D$7<)?4$&$)2$&$)",#) )%4#+) *&, )#'F($)F8+!"$++)'"7:)8"-,"'#$(.:),"$) After working some six months in the camp, between these camps for access to trees; which carries very little risk. Cristian caught an infection and had no way to instead, they ‘ matean ’ the trees (mark them treat it, so he decided to leave the camp with with the initials of the ‘owners’) and everyone María and Cristian agreed to tell their stories to María. María describes the return journey: “The 2,8(7)&$+*$0#)#4$+$)/'&D+<))?4$.)7,"E#) )%4#) 536)8+!"%) )0#!,"'()"'/$+:)!"),&7$&)#,)*&$>$"#) departure to come back here was horrible. We '/,"%+#)#4$/+$(>$+c)#4$.)0'"",#) )%4#:)F$0'8+$) other people from suffering as they did, but left with practically nothing, with a little bit of at the end of the day, they buy timber from one they are scared of showing their faces. “They fariña ; there was no meat, there was nothing. another. They all have shotguns, but they are [the habilitadores ] work with Colombians and We were thirsty and had prepared several liters just used for hunting. They do not go out armed are connected with people in Lima. If they of ungurahui with fariña and madurito and we when they go to fell trees. No one robs them,” realize it was that female cook, it was that guy, drank it [it is a local drink]. We also put out agree María and Cristian. No one dares to. they could come straight to us and kill us. ‘It ')(!##($)#&'*)'"7)0'8%4#)')(,#),-)(!##($) )+4<))@$) was you, take this so that you will never be able The previous time Cristian had been in a camp 2'(D$7)-,&) )>$)7'.+)!"),&7$&)#,)%$#)#,)#4$) to speak [about it] again.’ They can break your cutting cumala, but this time it had been only place where we could catch the boat back. The neck. That is what we are afraid of.” cedar. He estimates that they cut 500 logs day disappears quickly. The walk is long and of cedar measuring some 12 feet in length. Y''1%';4'2
42'E>F'14<' "1'1%%' the track is horrible. You sink in the swamp. When he left the camp, workers were awaiting sources, they had still not received their pay for You pass through streams, you go over those the rains so that the river would be high 1%'#
1'1% '14<' C%<'"
'1%'24#8''X1%' bridges; you can fall in, drown. We slept in the $",8%4)#,) ),'#)7,2"+#&$'/)#,)Q,(,/F!')'"7) contractor had said he would pay them once he open: we would cut leaves and put them on possibly, eventually, the US. EIA conservatively 14<';<'1%'"#$%8 top of the plastic, then the sheet and on top

.::2'(:&:#''*)'&6(9!&#)&%02&?()>1&%02&Z4()(602&]*72",&H#"2%#&dF6%<&QRSSe<&&&D#?=&E9*%0B-./ 17 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS

nomadically use have been formally set aside tribes. 57 However, the problem continues; in they are clearly not abiding by management by the state into Reserves. Logging groups’ 2009 Survival International documented forced plans, they are not respecting protected invasions into these peoples’ lands places both migration of tribes across the Brazilian border areas, and they take no measures to protect the tribes and the loggers at risk of violent to escape loggers, 58 and in 2011 renewed illegal endangered plants or animals. 61 They are 0," )!0#)'"7)7$'7(.)7!+$'+$+<)3")#4$)\YYX+:)4'(-) logging of mahogany in the same territories has hunting for a few selected tree species ,-)#4$)K8&8"'48')#&!F$)2'+)2!*$7),8#)F.) )8),&) F$$")+$$")F.),>$& )!%4#+<)) whose timber has such a high value on the colds after contact with mahogany loggers, 55 international market that it is worth the risk of while in Purús violent encounters have resulted harvesting. in both loggers and indigenuos people being Q<_<^<&-)7*"#)92)%(:&.9!(6%1K&&&&&&&& killed. 56 ))e$*,&#+),-)+804)0," )!0#+)($7)#4$) Logging in the Peruvian Amazon is a tragedy of Illegal logging activities, in Peru or elsewhere, Inter-American Human Rights Commission the commons. Following the perverse logic of catalyze a chain reaction of environmental in 2007 to ask Peru to implement cautionary “grab what you can” and “do it quickly, before damage. When illegal loggers enter a forest, measures to better protect uncontacted anybody else does”, illegal loggers have for

E%#"*21&%02&:*)>1&?2%;22)&)("6#%"(5 &6&()3&;##3&6#)%*)42&%#&14"5(62<&.)&(&QRRc&6(?:2&#)&*::2'(:&:#''*)'&d"2:2(123&?=& f*>*:2(>1e,&IE&/9?(11(3#"&E%"4?:2&)#%23&%0(%&%02&W-/&?2:*2721&%0(%&141!26%23&10*!92)%1&("2&:("'2<&&f*>*:2(>1

18 years been harvesting the high value species $;'0$&F'#$) ),,7!"%)'"7)('"7+(!7$+<) carbon are released again. The balance between from the more accessible areas of the Amazon carbon-generating human activities and forests’ Also, illegal logging camps typically obtain their forests. 62 At this point, the places where carbon storage was broken a long time ago, and protein from bushmeat; being a temporary substantial quantities of these precious tree !"#$&"'#!,"'()+0!$"#! )0)0,//8"!#.)'%&$$+)#4'#) presence, they hunt without caring whether species remain are mostly on indigenous we have to take action. In this context, the rich the species is threatened or avoiding female community lands, protected areas – such as biodiversity of Peru’s intact rainforests makes or young animals, whose survival is critical for parks or reserves – or the most remote and them one of the world’s most valuable places. maintenance of healthy animal populations. isolated primary forests . These areas are Because of this, Peru has become the object of also the critical habitat for threatened and Another less widely known impact of much interest for many multinational projects endangered species, such as the jaguar ( 54
%4' deforestation is the increase of the incidence working on forest conservation and looking for onca ), the Harpy Eagle ( Harpía harpyja ) and the of malaria in surrounding towns. A recent study ways to avoid the carbon emissions generated giant otter ( 5%
4'$4";"%
" ). 63 published in the American Journal of Tropical by their destruction. 67 Medicine and Hygiene , referenced in a Ministry The economics of illegal logging are similar According to MINAM, Peru is “one of the ten of Environment publication, states that “the to the economics of the production of illegal ‘mega-diverse countries’ globally, it has the 0,"0(8+!,"+),-)')(,"%)#$&/) )$(7)2,&D)7$>$(,*$7) 3.drugs. INSTITUTIONS The high prices paid for rare timber GOVERNING PERU’Ssecond-largest FORESTS area of Amazonian forest, the on the Peruvian Amazon’s areas with different species on the international market, combined biggest area of tropical mountains, 84 of the levels of degradation […] demonstrated that with the low risk of prosecution due to an \Xb)(!-$)R,"$+)!7$"#! )$7),")#4$)*('"$#:)'"7)[W),-) on the deforested areas […] the vector had a absent or corrupt government, make the the world’s 32 climatic zones. Of the four most biting rate 278 times higher than on the forest “investments” required for illegal logging important crops for the human diet (wheat, areas.” 65 MINAM also quotes a previous study, (building roads, paying bribes to public and rice, potatoes and corn), Peru has high levels of based on documentation from 60 tropical forest private authorities, designing elaborate genetic biodiversity for the last two. It also has areas in the world, which concluded that “the arrangements for the transport and launder an abundance of glaciers (71% of the world’s Anopheles darlingi [mosquito] increases its of timber onto the national and international tropical glaciers) that are hugely important for density in those areas with larger sun exposure markets) worth it. 64 human, agricultural and mining consumption due to the disappearance of the forest cover.” 66 as well as energy generation. These glaciers The creation of transport networks by Deforestation and land use change are also have receded 22% over the last 35 years.” 68 illegal loggers on otherwise inaccessible direct drivers of climate change. In a world This is the real dimension of what is at risk in areas precedes more intensive logging of every day more affected by the impacts of Peru from climate change and environmental less valuable species, which leads to forest climate change, forests have huge value as a destruction. degradation and can ultimately set the stage critical pool of carbon whose protection can for forest land conversion into agriculture. mitigate the human-driven imbalance. While Deforestation and degradation destroys activities such as energy generation, industrial biodiversity, displaces the wildlife upon which production and transportation release carbon surrounding indigenous communities depend dioxide (among other greenhouse gases) into on for consumption, and threatens the survival the environment, the vegetation and soils of of certain species. It also causes topsoil forests capture those gases and keep them exposure and subsequent erosion, which has a out of the atmosphere. But when the trees are negative impact on natural waterways and can felled or burned, important percentages of that

Representative Timber Price for Mahogany Through the Value Chain per Cubic Meter (US$)

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19 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS

.O]-O/&F5 62 3. INSTITUTIONS GOVERNING PERU’S FORESTS © EIA

3.1. INRENA AND REGIONAL authorizations for logging in community or were formally transferred to the Regional MANAGEMENT private lands (not considered ‘concessions’ Governments as part of a larger process of and subject to distinct regulations) decentralization in Peru. 75 IN 2008, INRENA was Note: refer also to glossary at end of report 3. Issuing transport permits (GTFs) for timber eliminated altogether, and what remained of its In recent years, management of Peru’s forest and wildlife resources and functions at the central level was sector has been decentralized and reorganized 4. Imposing sanctions on those who break consolidated into a revamped DGFFS, this time several times. In 1992, the National Institute forest and wildlife laws. within the Ministry of Agriculture. 76 DGFFS in of Natural Resources (INRENA) was created ?4&$$).$'&+)('#$&:)#4$)6?BBO),- 0$+)2$&$) turn has three sub-directorates responsible for for the sustainable use and conservation also given the power to approve the Annual different aspects of regulation, administration, 77 of the country’s natural resources. The Operating Plans (POA) of timber forest information collection, promotion and control. Forestry and Wildlife Law N. 27308, passed in concessions within their jurisdiction. 74 Under the decentralization process, 78 the [XXX:)+*$0! $7)3de5d6)'+)#4$)#4$)d'#!,"'() Regional Governments were given powers and Competent Authority” for forests and wildlife, responsibilities that included “ the development including regulation and supervision of forest 3.2. DECENTRALIZATION TO THE of oversight and control actions to guarantee concessions and other types of logging REGIONS the sustainable use of the natural resources 69 authorizations. A year later, INRENA´s under their jurisdiction” and the authority to regulations 70 established that its General In 2006 and 2007, many of INRENA’s powers Directorate of Forests and Wildlife (DGFFS in Spanish) 71 )+4,8(7)4'>$),- 0$+)'#)#4$)(,0'()($>$(:) and 29 so-called Technical Administrations for B,&$+#)'"7)@!(7(!-$)A6?BBOf) )&$%!,"'(),- 0$+) ) were created throughout the country. 72 ?4$)4$'7),-)$'04)6?BBO),&)&$%!,"'(),- 0$:)#4$) “Technical Administrator”, was appointed by INRENA in Lima, and several regulations laid out #4$)&,($+)#4'#)#4$+$)$"#!#!$+)'"7),- 0!'(+)2,8(7) play. 73 These included: 1. Approving General Forest Management Plans (PGMFs) for concessions 2. Granting forest use permits and

f0*:2&%02&:(;1&()3&)(921&*)1%*%4 - %*#)1&9(=&0(72&60()'23,&9()=&%02& !"#?:291&*)&%02&5#"21%&126%#"&"29(*)& %02&1(92<&&D#?=&E9*%0B-./

20 THE MAHOGANY TRADE: “grant forest permits, authorizations, and concessions in areas within How mahogany laundering the region, as well as carry out promotion and oversight actions in worked in its heyday. In the face "2'2#;"4
2%' "1'1%'
4"
4;'0% ';"2 8 ” Such a transfer, of of international pressure, the course, could not happen overnight. Since 2009, DGFFS has gradually government has reduced illegal transferred authority to the Regional Governments of Loreto, Ucayali, mahogany trade, but other Madre de Dios, San Martín, Amazonas, and La Libertad. In other species remain off the radar. &$%!,"+:)6?BBO),- 0$+)0,"#!"8$)#,),*$&'#$)8"#!()#4$)#&'"+-$&),-)-8"0#!,") Illegal loggers cut the can be completed. mahogany trees in zones 1 THE STANDING TREE The Regional Governments, in turn, have created institutions within located outside of the The tree is identified within the concession. Mainly from concession by loggers in the zone. their own structures to take charge of the new functions. For example, natural areas. the Regional Government of Loreto (GOREL) created the Program for Its measurements and volumes Forest and Wildlife Resource Management (PRMRFFS), operative since are calculated 100%. January 1, 2010, which performs most of the same functions that the ATFFS did before under Lima’s direct supervision. 79 2 THE FELLING OF THE TREE Before cutting, the concessioner presents to INRENA, within his Annual 3.3. NEW LAW, NEW INSTITUTIONS Timber merchants declare that Operating Plan (POA), the number of 29% is not lost in the felling, only species he/she will fell as well as the The new Forestry and Wildlife Law, Law 29763, which will enter into 5 or 10%. volume he/she will obtain (the output). force once its regulations are complete (see box “The new Forestry and Wildlife Law”), creates a National System of Forest and Wildlife From this point on, the When the tree is felled, nearly Management (Sinafor). This System is meant to integrate all the differences in yield percentages 29% is lost (in the case of will be covered by illegal wood. mahogany, there is always a various ministries, entities and public institutions at national, regional hole in the lower part of the trunk). and local scales that play a role in management, including local and regional governments as well as the management committees of various forests. The Law also establishes within the Ministry of 3 CUT TIMBER Agriculture a National Forest and Wildlife Service (Serfor), which will be Once felled, the tree is cut into several considered the national authority as well as the secretariat of Sinafor. rolls. The wood should have a Forest The DGFFS will eventually be absorbed into Serfor’s structure. Transport Guide regarding its natural state, in which the number and Here, illegal wood can be dimensions of the pieces of wood are introduced, as more is detailed. The Guide is used to 3.4. OSINFOR BECOMES INDEPENDENT declared in the Guide transport the wood to the saw mill than what they really and is presented in INRENA’s controls The “re-launching” and strengthening of the Supervisory Body for had remaining. so that it can be compared to the POA. Forest and Wildlife Resources (OSINFOR) was a measure taken by the In this cutting process, more Peruvian government as one of its commitments within the framework There are concessioners than 34% of the mahogany of the US-Peru Free Trade Agreement. who sell blank Transport is lost. Guides in order to transfer OSINFOR was originally created in 2000 by Forestry and Wildlife Law illegal wood. N. 27308. (At that time, it was called the Supervisory Body for Timber 4 SAW MILL e$+,8&0$+f<)B,&).$'&+)!#)2'+)4,8+$7)8"7$&)3de5d6)'"7) "'"0$7)F.) The pieces of wood are converted into revenues from timber harvesting, a structure that created perverse planks. A Re-Transport Guide is issued. Illegal wood can also incentives and institutional pressures for an entity charged with be introduced during monitoring logging activities. In 2008, OSINFOR was substantially this stage. The volume of wood is reduced reformed by Legislative Decree 1085, broadening its functions and in this process by an additional 12%. increasing its budget, as well as making it more independent by giving it a place within the Presidency of the Council of Ministers (PCM). (Decree 1085 was one of the less controversial decrees resulting from 5 COLLECTOR the “99 decrees” process, see Box II.) The collectors select the best wood to sell to the export company. A guide OSINFOR’s critical role in the forest sector is to conduct “supervisions”, for the finished product is issued. '+)#4$.)+4'(()F$)0'(($7)!")#4!+)&$*,&#J)#4$+$)'&$) $(7)>!+!#+)F.),- 0$&+) charged with inspecting the forestry practices of concessionaires, In this process, all of the wood private land owners or communities to see whether they comply arrives with the papers in order, 6 EXPORTER with their own annual operating plans (POAs) as well as regional or since it is assumed that only They need a CITES certificate (international 20% has been lost. "'#!,"'()&$%8('#!,"+<)3-)=O3dB=e) "7+)!"-&'0#!,"+:)!#)4'+)#4$)'8#4,&!#.) convention that regulates the commerce to suspend activity in the concession or community while the forest in endangered species of flora and authority conducts further investigation. OSINFOR, too, has undergone fauna) for exporting. a process of decentralization to the regions over the last few years. Stage of the process in which the illegal mahogany is ‘laundered’ (declared as being legal).

D>&Q6$A/&G$ +$&I2>/#$3&E$2+ &7889J 21 .)%2")(%*#)(:&%"(32&*)&1!26*21&"2'4:(%23& THE LAUNDERING MACHINE 4)32"&i.D-E&"2A4*"21&1!26*21&!2"9*%1 HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS

4. THE INTERNATIONAL POLICY CONTEXT

O$>$&'()+!%"! )0'"#)!"#$&"'#!,"'()'"7)F!('#$&'() of CITES-protected animals and plants are A proposal to list cedar ( Cedrela odorata) on *,(!0!$+)!" )8$"0$)-,&$+#)/'"'%$/$"#)'"7) accompanied by legitimate licenses. 81 CITES Appendix II in 2007 was rejected by trade in Peru. Because of their provisions, the range states which agreed to study the issue Big-leaf mahogany ( I "%%
"4'#421 ;;4 ) was consequences for ongoing illegal logging and further. The proposal noted illegal trade in Peru, listed on Appendix II of CITES in 2002. Peru has 0,&&8*#!,")4'>$)7!*(,/'#!0:) )"'"0!'(:)'"7)($%'() among other countries. 85 While this listing was also listed Spanish cedar ( Cedrela odorata ) on implications far beyond the forests. discussed again at the 2010 Conference of the Appendix III. After the mahogany listing, Peru’s Parties, no proposal was put forth. ('0D),-)+0!$"#! )0'((.HF'+$7)","H7$#&!/$"#) 4.1. CONVENTION ON INTERNATIONAL )"7!"%+:)0,/F!"$7)2!#4)!#+)'8#4,&!R'#!,"),-) If a Party is clearly failing to meet its TRADE IN ENDANGERED SPECIES OF export permits for laundered, illegal wood, obligations under CITES, there are a variety of WILD FAUNA AND FLORA (CITES) became a subject of intense debate within increasingly strong measures that can be taken CITES for several years. In 2007, Peru agreed at an international level, including a temporary 3")-,&0$)+!"0$)\YWi)'"7)&'#! )$7)F.)\Wi)C'&#!$+:) to dramatically reduce its export quota and ban on exports. In addition, each country has its the CITES treaty seeks to ensure that implement a range of recommendations, own laws for dealing with violations by traders. international trade in animal and plant species including adoption of a “Mahogany Strategic In the United States, CITES is implemented by or derived products does not endanger their Action Plan”. the Endangered Species Act, and penalties for survival. Species protected under CITES are non-compliance include seizure of goods. Subsequent supervision by the CITES subject to controls on their import, export, and Secretariat, regular reports to the Plants re-export under a licensing system managed by and Standing Committees, and new a Management Authority in every country. 80 4.2. US-PERU TRADE PROMOTION recommendations in the intervening AGREEMENT Protected species are listed in one of three years all indicate that progress has been appendixes. Species listed on Appendix I of made but is still partial. In March 2010, the In 2007, the Democrat-controlled US Congress the Convention are effectively banned from Secretariat “expressed concern that Peru struck a deal with President George W. Bush’s international commercial trade. Species listed had achieved formal or ‘paper’ compliance administration to re-negotiate environmental on Appendix II can be exported only if they but not necessarily real ‘on-the-ground’ and labor provisions in several pending free were legally obtained and “the export will not compliance with the Standing Committee’s #&'7$)'%&$$/$"#+)AB?6+:)+,/$#!/$+),- )0!'((.) be detrimental to the survival of the species”. recommendations.” 82 In July 2011, the called ‘trade promotion agreements’). One of All range states, or countries whose territories Standing Committee considered but declined these was with Peru. Peru agreed to several are home to protected species, are required to to recommend a complete suspension important changes, among them a requirement 8+$)+0!$"#! )0)!"-,&/'#!,")#,)$+#'F(!+4)#4$+$) of trade in bigleaf mahogany from Peru, #,)-8( )(()'((),F(!%'#!,"+)8"7$&)/8(#!('#$&'() k","H7$#&!/$"#) )"7!"%+E)'"7)+$#)'")$;*,&#) instead recognizing the country’s progress environmental agreements including CITES, quota. Species in Appendix III are placed in management and recommending further and an addendum called the Annex on Forest there by individual range states themselves, monitoring and reporting. 83 The same month, Sector Governance (Chapter 18.3.4). The unilaterally, as recognition that a particular a Peruvian organization published its latest Annex was crafted in response to the heavy species or population within their borders report documenting new illegal mahogany debate over Peru within CITES at the time, and is threatened. Appendix III species can only logging in a reserve for the voluntarily isolated contains a series of binding obligations related be exported if they were legally obtained. All Murunahua people, calling into question Peru’s to management and trade of CITES species as importing countries, for their part, are required ‘on-the-ground’ compliance once again. 84 well as overall forest governance. Each Party to monitor trade to ensure that shipments “commits to combat trade associated with

22 illegal logging and illegal trade in wildlife” and Finally, it is worth noting that the main compliance with the Annex. 88 Both the US Trade “commits to take action under this Annex to Environment Chapter (Ch. 18) of the FTA Representative and members of the US House enhance forest sector governance and promote provides that neither Peru nor the US shall of Representatives issued strong messages legal trade in timber products.” waive or derogate from their environmental about the consequences of non-compliance and laws in a way that “weakens or reduces the urged Peru to resolve the situation as quickly as If evidence of illegal timber entering US trade protections afforded in those laws”, nor “fail to possible. 89 streams is found, the US government has effectively enforce its environmental laws […].” the discretion to decide what sanctions will A group of 19 Peruvian and American civil be taken. The Annex states that sanctions Most provisions of US-Peru FTA came into society organizations, meanwhile, released a may include denying entry to shipments and -,&0$)!")Z'"8'&.:)[XXY:)24$")!#)2'+)0$&#! )$7)'+) letter stating: “we would like to reiterate our even, “where an enterprise has knowingly &$'7.)F.)#4$)NO)?&'7$)e$*&$+$"#'#!>$E+),- )0$) support for the process of forest sector reform provided false information to Peruvian or ,")#4$) )"'()7'.),-)#4$)I8+4)67/!"!+#&'#!,"<) and call upon both countries to develop a plan N"!#$7)O#'#$+),- )0!'(+)&$%'&7!"%)')+4!*/$"#:) The Annex on Forest Governance theoretically and reasonable timeframe for the Peruvian denying entry to products of that enterprise came into force 18 months later, in July 2010. government to meet its commitments under derived from any tree species listed in But by the end of July 2010, it was clear to the [FTA]. We strongly believe that the United Appendices to [CITES].” 87 most observers that Peru was far from being in States should take action if this plan is not implemented within the agreed-upon period of time.” 90

Box V: The Annex on Forest Sector Governance 4.3. THE US LACEY ACT & EU TIMBER REGULATION Amongst the provisions in the Annex, Peru protect and increase the capacity of On May 22, 2008, the U.S. Congress passed agreed to: 86 indigenous communities to manage a groundbreaking law banning commerce in their lands for commercial timber ) Increase enforcement personnel in illegally sourced plants and their products, production”. protected areas and implement an including timber and wood products. The new anti-corruption plan for forestry law is actually an amendment to a 100-year-old ,- )0!'(+J ?4$)6""$;)'(+,)0&$'#$7)#2,)+*$0! )0) +#'#8#$)%,>$&"!"%)2!(7(!-$)'"7) )+4:)0'(($7)#4$) ) Establish adequate penalties for a mechanisms for supporting enforcement Lacey Act. The amended Lacey Act now does variety of forest sector crimes; and deterring illegal trade: three main things: 91 ) Implement a series of technical 1. Audit procedures: the United States 1. prohibits all trade in plant and plant studies and measures required by may request that Peru conduct an products (e.g., furniture, paper, or lumber) CITES; audit of a particular producer or that are illegally sourced from any U.S. ) Improve administration and exporter evaluate its compliance state or any foreign country – where management of forest concessions, with relevant laws, regulations and !(($%'((.)+,8&0$7)!+)7$ )"$7)F.)#4$)('2+) including conducting physical measures, and provide a written and regulations of the country of origin; inspections of any concessions +8//'&.),-)!#+) )"7!"%+)#,)#4$)NO< 2. requires US importers to declare the cutting CITES-listed species “prior to 2. g$&! )0'#!,")*&,0$78&$+c the United country of harvest and species name of all approving or verifying an operating States may request that Peru plants contained in their products; plan”; certify whether “with respect to 3. establishes penalties for violation of the ) K'D$)>$&! )0'#!,")&$*,&#+)'"7)'""8'() a particular shipment of timber Act. 92 operating plans publicly available; products from Peru to the United ) Develop systems to “reliably track States, the exporter or producer specimens [of CITES listed species] The Lacey Act’s civil and criminal penalties . . . has complied with applicable vary according to how much the company from harvest through transport, ('2+)<)<)<)g$&! )0'#!,")&$T8!&$+) or individual knew about the crime, whether processing and export”; that Peru visit the premises of they exercised “due care” in establishing ) Establish OSINFOR as an independent all enterprises “in the chain of the product´s legality, and the value of the and separately funded supervisory production or transportation for the good or shipment in question. The highest agency ; timber products” unless the Parties possible penalty (only in cases of prior, proven ) Take the views of local and otherwise agree. The United States D",2($7%$),-)!(($%'(!#!$+f)!"0(87$+)8*)#,) )>$) indigenous communities, NGOs, and /'.)+$$D)#,)4'>$)!#+),2"),- )0!'(+) .$'&+)!")*&!+,")'"7)liXX:XXX) )"$+<)6#)#4$)(,2) companies into account in forest participate in this visit as well. end, if the shipment contains illegal material, management, and “strengthen, it can be seized regardless of whether the

23 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS

deforestation and forest degradation (REDD ,&)e5GGnf)4'+)#'D$")4,(7)+!"0$) )&+#)F$!"%) endorsed by Parties to the UN Framework Convention on Climate Change (UNFCCC) in Box VI: The Peru Forest Sector Initiative (PFSI) Bali, Indonesia in 2007. There is still substantial disagreement on an international level The US Forest Service’s (USFS) in yield determination and methodology, regarding how such a mechanism would work 3"#$&"'#!,"'()C&,%&'/+),- )0$)2'+)0&$'#$7) development of skills in forest and '"7)4,2)!#)2,8(7)F$) )"'"0$7<)?4$&$)'&$)'(+,) to advance US issues in international wildlife management, organized design +!%"! )0'"#)0,"0$&"+)'F,8#)#4$)0,"+$T8$"0$+) forums, increase market transparency, and training to regional governments, that REDD might have for indigenous peoples’ and promote trade in sustainable anti-corruption plans for the forest sector, territories and rights. 94 Even so, the idea has forest products while improving and environmental investigation and already spurred development of both numerous law enforcement activities. USFS %2"
'4"
"
:8
private projects and “REDD readiness” bilateral International Programs is funded largely and multilateral initiatives. by USAID and works in approximately In particular, the forest information and Peru, as the country with the world’s fourth thirty countries around the world. In control system will assist with chain of largest expanse of tropical forest, is a major Peru, USFS has committed substantial custody compliance standards for CITES. target of REDD interest and donor dollars. resources to the Peru Forestry Sector The hope is that the new system will Between loans, grants, and projects there are Initiative (PFSI), which assists the central 4$(*)#,)7$#$&)#4$)-'(+! )0'#!,"),-)4'&>$+#) '&,8"7)NOl\iX)/!((!,")+('#$7)#,) ),2)!"#,)C$&8) government in compliance with the US- records, facilitate detection of fraud, over coming years for forest conservation Peru Trade Promotion Agreement. and make information transparent and and management. Two separate World Bank publically accessible. In addition, PFSI processes, the Forest Carbon Partnership According to the US Forest Service’s is working with closely with groups in Facility (FCPF) 95 and the Forest Investment website, ^1%'2;;4$4"
'"
'5%'02%' other countries such as Brazil to promote Program (FIP), 96 are facilitating Peru’s on the development of an information and communication between key stakeholders, development of a national REDD strategy and control system for chain of custody for supporting lessons learned experiences subsequent implementation. The early process U>XEIJ;"%<'%2"%D''0';4"
' between central players concerning around this strategy has proved contentious, studies for mahogany and cedar, design emerging policies. 91 particularly among indigenous representatives of forest inventories, specialized expertise 24,)'++$&#)#4'#)#4$.)4'>$)",#)F$$")+8- )0!$"#(.) consulted and that the plans ignore the importance of land titling to protect forests. Nonetheless, Peru’s initial grant from the World Bank was approved in 2010. timber from a country like Peru, whose high importer - knew about it or not. One of the Illegal logging and forest sector reform are risk for illegal sourcing has been established few seizures made under the Lacey Act thus minimally discussed within the preparatory repeatedly in publicly available sources over far involved a wood shipment from Peru (see documents for REDD readiness work. 97 There #4$)*'+#) )-#$$").$'&+:),"$)/!%4#)'++8/$)#4'#)') section 1.2). has been extremely poor coordination between higher level of due care would be expected by The concept of due care lies at the heart of the the Ministry of Environment (MINAM) which the US government. Lacey Act. In essence, companies suspected is charged with leading REDD processes, and of violations will be evaluated by the US The US is no longer the only country to have an the Ministry of Agriculture, where the forest government for whether, in conducting their enforceable ban on import, export or trade in authority is housed. This disconnect is likely due care before buying, they should have illegally sourced wood products. The European to cause problems in creating a coherent and known that the wood products in question Union passed its own such legislation in effective strategy. Moreover, unless Peru and its “were taken, possessed, transported, or sold November 2010, 93 and Australia is likely to pass international donors acknowledge the systemic in violation of, or in a manner unlawful under, a similar statute in 2012. failures of governance in the current forest any underlying law, treaty or regulation.” What, sector and judicial system, it is unlikely that any then, constitutes “due care”? There is no one REDD strategy will be successful. +#'"7'&7<)?4$)0,"0$*#)!+) )$;!F($:)'"7)$>'(8'#$7) 4.4. REDUCING EMISSIONS FROM differently depending on factors such as the DEFORESTATION AND FOREST size of the company, the riskiness of the source DEGRADATION (REDD) country, the amount of information available ?4$)0,"0$*#),-) )"'"0!"%)7$>$(,*!"%)0,8"#&!$+) publicly, and current tools and best practices to reduce the carbon emissions from used within the industry. For importers buying

24 Box VII: Logging a Concession, on Paper

Under both the old and new Forestry and Wildlife Laws, to extract wood The local Forest Authority issues an Administrative Resolution ( Resolución -&,/)')-,&$+#)-,&)0,//$&0!'()*8&*,+$+:)#4$)2,8(7HF$)(,%%$&)/8+#) )&+#) Administrativa ) approving the POA. obtain a forest concession from the Government through one of the As of that moment, the concessionaire may begin to cut and sell wood. periodic public auctions. The next step is to prepare a General Forest Each time a concessionaire removes timber from his concession, it must Management Plan (PGMF) to project what trees are expected to be be accompanied by a document known as the Forest Transport Permit $;#&'0#$7),>$&)#4$)"$;#) )>$).$'&+)'"7)24$&$<))="0$)#4$)CUKB)4'+)F$$") (GTF or Guía ), which details among other information the species and approved, the concessionaire must submit an Annual Operating Plan volume of the material and its place of origin. The GTFs are issued (POA) for each year of operation, stating which trees are going to be F.)0,"0$++!,"'!&$+:)'"7)04$0D$7)F.)&$%!,"'()B,&$+#)68#4,&!#.),- )0$+) harvested. whenever wood is transported. Through the information provided by While a forest concession in Peru normally measures between 5,000 and these permits, the Forest Authority registers the cumulative volumes of 40,000 hectares, the concessionaires cannot extract wood when and timber taken from a concession each year in another document known as where they please. The concession, by law, must be sub-divided into the ’Balance of Extraction.’ smaller areas, generally measuring about 400 or 500 hectares, which The “Balance of Extraction” works similarly to a savings account. Once is the entire area that can be utilized for logging during any one year the POA is approved, the concessionaire has a “favorable balance” and is known as an Annual Logging Parcel (PCA). Each PCA, in turn, must specifying the number of trees and the total volume of each species be logged in accordance with an Annual Operating Plan (POA), and in that may be extracted and sold during a given harvest year. As wood is practice the term “POA” is generally used for both the physical area and extracted and transported to sawmills, the volume is “withdrawn” until the paper plan. the “balance” reaches zero or the zafra time period expires. Once the The POA must be prepared and signed by a forest engineer contracted balance of a particular species is exhausted, the concessionaire cannot F.)#4$)0,"0$++!,"'!&$)24,)!+),- )0!'((.)&$%!+#$&$7)2!#4)#4$)d'#!,"'() legally transport any more wood of that species. If by the end of a zafra, Board of Engineers of Peru, as well as being registered in a database +!%"! )0'"#)>,(8/$+),-),"$),&)/,&$)+*$0!$+)4'>$)",#)F$$")$;#&'0#$7)'"7) that the Forest Authority maintains. In the POA, the applicant must sold, the concessionaire may request the right to “re-enter” the concession *&$+$"#)#4$)&$+8(#+),-)#4$)4'&>$+#)!">$"#,&.)0'&&!$7),8#)!")#4$) )$(7:) and continue logging a POA that has technically expired. This request has including a list of trees to be harvested ( árboles aprovechables ) and ‘seed #,)F$)+*$0! )0'((.)'"'(.R$7)'"7)$>'(8'#$7)F.)#4$)B,&$+#)68#4,&!#.< trees’ ( semilleros ) that will be left standing for the purposes of future As an additional monitoring mechanism, the Supervisory Body for Forest reproduction, and identifying the species, DBH, estimated volume, and Resources and Wildlife (OSINFOR) – an independent oversight entity exact GPS coordinates of each. Should a POA contain an endangered attached to Presidency of the Council of Ministers – carries out post- +*$0!$+:)+804)'+)/'4,%'".),&)0$7'&:)'"),- )0!'()-&,/)#4$)B,&$+#)68#4,&!#.) 4'&>$+#) )$(7)!"+*$0#!,"+),-)+$($0#)0,"0$++!,"+:)D",2")'+)+8*$&>!+!,"+:) /8+#)0,"780#)')*&!,&) )$(7)!"+*$0#!,")A >
%22")
'K2;4'5% "4 ) in order to ensure that the wood sold by the concessionaire was, in fact, #,)0," )&/)#4$)#&$$+E)$;!+#$"0$)'"7)>$&!-.)#4$)'008&'0.),-)#4$)!"-,&/'#!,") harvested from the Annual Logging Parcel declared in the POA, and that included in the POA. the concessionaire is acting in a legal, socially and environmentally 6)B,&$+#)68#4,&!#.),- )0!'()2!(()&$>!$2)#4$)C=6)!"-,&/'#!,")'"7)0,/*'&$)!#) responsible fashion. 2!#4)#4$)&$+8(#+),-)#4$)*&!,&) )$(7)!"+*$0#!,":)'"7)2!(()'**&,>$)')+*$0! )0) Unfortunately, as this report shows, in practice these procedures are number of trees and volume that may be extracted in that area (PCA) ,-#$")!%",&$7),&)",#)-,((,2$7:)'"7)#4$),- )0!'(+)24,)$"-,&0$)#4$/)'&$)'(+,) ,>$&)')+*$0! )$7).$'&H(,"%)*$&!,7)D",2")'+)#4$)4'&>$+#).$'&),&)kR'-&'E<))) often ignored or bought off.

D02&M(:()62&-8%"(6%*#)&3#6492)%&;#">1&:*>2&(&1(7*)'&(66#4)%,&>22!*)'&%"(6>&;##3&0("721%23&()3&1#:3< 25 5. HOW TIMBER TRADE “SHOULD” WORK – AND WHAT GOES WRONG

Illegal Logging No Regulation, happens in indigenous lands, national forests and protected areas 4 Annual Operating Plan

1 Access Rights: Communities/Concession LEGAL POTENTIAL PRACTICES PROBLEMS

Drawn up and signed by forest engineer 9)(20(3$.50<"*0$-(;(,,2)1$ $(63.")>$7")$ registered with Forest Authority 9%?@A$,B(;5(,$C726,5 $(3D

Approved by regional Forest Authority, Harvest of cedar or mahogany is approved E2,(3$"-$ $(63$5-,B(;05"-F$57$0<()($2)($-"$ .50<"*0$ $(63$5-,B(;05"-$C726,5 $(3D CITES species inspection may take place after approval False approval of paperwork /5(63$G()5 $;205"-$B)5")$0"$<2)G(,0F$57$9%?@A$ Volumes of commercially valuable species species are included in harvest plan 726,5 $(3$5-$")3()$0"$,(66$G"6*I(,$620()

LEGAL POTENTIAL 3 PRACTICES PROBLEMS Community has title Community has no title General Forest Management Plan Concession: Obtained through Concession: Permit is used to public auction system transport wood from another site (state lands, protected areas, etc)

2 OR Contracts with Third Party Loggers

LEGAL POTENTIAL PRACTICES PROBLEMS

Contract for logging is approved Community members do not by the community’s council know about the contract as it (Asamblea) following correct was approved through manipu- LEGAL POTENTIAL procedures (e.g. quorum) lation of leaders or economic PRACTICES PROBLEMS interest Drawn up and signed by forest engineer 9)(20(3$.50<"*0$-(;(,,2)1$ $(63.")>$ Contractual terms set prices registered with Forest Authority C726,5 $(3D extremely low and leave com- munities legally responsible Location of trees (GPS coordinates, maps) for all illegal practices invented

No contract exists between Volumes of commercially valuable species concession owners and opera- 726,5 $(3$5-$")3()$0"$,(66$G"6*I(,$620() tors that conduct the felling Approved by regional Forest Authority © Illegal logging (H. berninzon/EIA); GFMP 5. HOW TIMBER TRADE “SHOULD” WORK – AND WHAT GOES WRONG (Toby Smith/EIA); logging (H. Berninzon/EIA); 9 Sawmill (Toby Smith/EIA) Export 5 LEGAL POTENTIAL PRACTICES PROBLEMS Logging If a CITES species, a valid CITES permit issued Wood lacks CITES permit by forest authority accompanies shipment CITES permit does not indicate concession or community of origin Export company is legal and registered entity Company does not have legal status

Appropriate export duties and fees are paid Export totals are underestimated to avoid taxes

Species and value are underestimated to avoid taxes

LEGAL POTENTIAL PRACTICES PROBLEMS

Harvest according to Chain saw used to make sawn regulations established to wood in forest rather than protect ecosystem, reduce bringing logs to mill waste, etc. Harvest according to plans Cutting done too close to 8 indicated in POA waterways

Trees designated as “seed Transportation from Sawmill trees” in Management Plan or POA (Step 3/4) are cut down LEGAL POTENTIAL PRACTICES PROBLEMS Harvest only within POA area Cutting in zones outside of POA Unique GTF (forest trans- GTF is duplicated or portation permit) issued by fabricated Loggers measure volumes Loggers understate volume of Forest Authority accompa- honestly and pay community wood cut and species value, nies logs GTF is illegally sold fair price for wood cut and pay community extremely poor prices 7 Sawmill 6 Transport to Sawmill

LEGAL POTENTIAL LEGAL POTENTIAL PRACTICES PROBLEMS PRACTICES PROBLEMS Wood is registered in “Operations book” LB()205"-,$E"">$5,$-"0$ $66(3$"*0 when it arrives at sawmill Valid GTF (permit for K?/$5,$3*B65;20(3$")$726,5 $(3 transport from origin) and lists of species/volumes Wood sawn is of known origin and cor- Wood of unknown or illegal sources is accompanies logs responds to GTFs mixed with known sources

Only wood from authorized Permit is used to transport forest is transported with wood from another site Annual harvest fees paid (formula by Appropriate fees are not paid valid permit (state lands, protected volume and value of wood logged) areas, etc) THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS

6. HUNDREDS OF SHIPMENTS: THE US-PERU TRADE IN ILLEGAL WOOD

© EIA

Between 2008 and 2010, at least 100 of the these documents publically available online request for information, the agency selects CITES permits that were issued for mahogany at the website for this report . For additional which concessions it will visit each year and cedar exports from Peru to the US information regarding the process of creating randomly, and adds in particular concessions included timber which exporters declared as the databases and the information they under suspicion for various reasons. During the having originated in concessions where the contain, please see: “6.3. The Databases.” 0,8&+$),-)#4$)+8*$&>!+!,"+:)=O3dB=e),- 0!'(+) Supervisory Body for Forest Resources and are required to inspect the extraction-related The exporting companies whose shipments to @!(7(!-$)A=O3dB=ef)-,8"7)$>!7$"0$),-)+!%"! 0'"#) activities which have been carried out, assess the US are connected to areas of questionable illegal activity by concession owners or their the degree of compliance with regulations logging activity are found in Section 6.5.1, 0,"#&'0#$7)(,%%$&+<)?4$)!(($%'(!#!$+)!7$"#! $7)F.) and environmental commitments, and verify organized by the number of problematic =O3dB=e)!"0(87$7)-'(+! 0'#!,"),-)8*)#,)\XXo),-) the existence and measurements of a sample CITES export permits. They include: Maderera forest inventories, misuse of permits to launder of trees located at or within 50 meters of the Bozovich SAC, Maderera Vulcano, Transforestal illegally extracted timber, unlawfully felling GPS coordinates which the concessionaire CCC SAC, Comercial JR Molina SAC, Industrias trees in the loggers’ own concessions, or a +*$0! $7)!")#4$)C=6<))3-)')#&$$)2'+)4'&>$+#$7:) Blanco SAC, and Peru Traders Inc, among others. combination of the above. evidence such as a stump should be found. In The US importing companies include BTP Inc addition, the supervisor must compare the data EIA investigated these concessions and (a subsidiary of the Bozovich Group that owns 0,(($0#$7)-&,/)#4$) $(7)2!#4)#4$)>,(8/$+)#4'#) documented illegalities by relying on Maderera Bozovich SAC), North American have been reported and included in the running !"-,&/'#!,")-&,/)#2,)#.*$+),-),- 0!'() Hardwood Products LLC, Maderera Gutiérrez y totals of the trees taken from the concession documents obtained from Peruvian authorities Hernández Ltda., and TBM Hardwoods, among in the Balance of Extraction (see Box VII for an through requests for access to public others (see Section 6.5.2). example of this document). Utilizing all of this information under Peru’s Transparency 7,08/$"#'#!,":)#4$)=O3dB=e),- 0!'()*&$*'&$+) and Access to Public Information Law N. the Supervisory Report. 27806: export permits issued by Peru under 6.1 ANALYSIS OF THE INFORMATION the Convention on International Trade in Based on an analysis of the summaries of Endangered Species (CITES), and results from As described in the Box VII: “ N::"
:'4' the Supervisory Reports in the EIA-OSINFOR on-site “supervision” inspections of many U
2%"
D'
'54%D ” every concessionaire 7'#'F'+$:)2$)!7$"#! $7),>$&)[XX)0,"0$++!,"+) concessions where legal logging allegedly must have an Annual Operating Plan (POA) with different degrees of problems including had been conducted. As part of our work, we approved for the parcel he intends to log that false inventories, timber laundering, and illegal %$"$&'#$7)#2,)7'#'F'+$+)F'+$7),")#4$),- 0!'() year. This POA must include, among other logging. It is entirely possible that additional government data. One database (EIA-CITES) things, a detailed inventory of trees to be 0,"0$++!,"+)4'>!"%)*&,F($/+)!7$"#! $7)F.) contains information about CITES export harvested, specifying their measurements OSINFOR have not made it onto this list. (See permits issued between January 2008 and (diameter at breast height [DBH], estimated 6.4 “The Scope of the Report.”) May 2010, an essential requirement for anyone timber volume) and GPS coordinates. Next, EIA compared this list of problematic wishing to export mahogany or cedar from The function of Peru’s forestry oversight Supervision Reports to the “EIA-CITES” Peru to any country in the world. The second body, OSINFOR, is to perform site visits to a 7'#'F'+$:)+*$0! 0'((.)2!#4)#4$)!"-,&/'#!,") database (EIA-OSINFOR) tracks the results selection of POAs which have recently been regarding the timber’s concession of origin, of supervision visits to forest concessions (,%%$7<))=O3dB=e)",#! $+)#4$)0,"0$++!,"'!&$) focusing on permits that had been used for conducted by OSINFOR during approximately in advance of these supervisions visits; exports to the United States. This resulted in the same time period. EIA has made all of according to OSINFOR’s response to EIA’s #4$)!7$"#! 0'#!,"),-),>$&)\XX)Q3?5O)*$&/!#+)

28 that had been issued and used for wood 7$/,"+#&'#$)7$ "!#!>$(.)#4'#)#4$)$;*,&#$7) The “EIA-OSINFOR” database, prepared by EIA which, according to the paperwork, came from timber was of illegal origin. However, as the 2!#4),- 0!'()!"-,&/'#!,")*&,780$7)F.)=O3dB=e:) 0,"0$++!,"+)24$&$)=O3dB=e)!7$"#! $7)$>!7$"0$) wood is associated with a concession that had contains the supervision code, names and of serious illegal activity. committed grave irregularities in another POA numbers of the concession contracts, types just a year before or after, there are strong of concessions (timber, Brazil nut, etc.), and a c!'") Reports. Again, see Box VIII: “Resisting 6((),-)#4$)+4!*/$"#+)!7$"#! $7)F.)536)'&$) government or the woods’ buyers could lay Transparency” to understand the obstacles EIA connected to concessions where OSINFOR’s these doubts to rest. encountered in this process. supervision visits uncovered serious irregularities. In about one-third of the cases, the export documentation indicates that the cedar or mahogany came from precisely the 6.3 THE DATABASES 6.4 THE SCOPE OF THE REPORT same POA that is the focus of OSINFOR’s report. c<^$(+>& Appendices of CITES (see p. 22 for more on $;*,&#$&+:)!/*,&#$&+:)'"7)%,>$&"/$"#),- 0!'(+) logging 8 In most cases, the concessionaire how CITES works). Anyone wishing to export that are acting outside the law but not 4'7)-'(+! $7)4!+)!">$"#,&.)#,)(!#$&'((.)!">$"#)') #4$+$)+*$0!$+)-&,/)C$&8)/8+#)/$$#)+*$0! 0) mentioned here. Some of the limits to the data “volume” of timber of the desired species from requirements in order to obtain an export sets that EIA analyzed are: thin air. For example, on a concession with no permit, including declaring the place where the ) Missing data. In many cases, OSINFOR did cedar, documentation is submitted to the Forest wood originated. EIA submitted a request of not provide EIA with a summary of the Authority stating that there are 100 harvestable public information to the Peruvian authority in conclusions of the supervision visit and cedar trees. The concessionaire would then charge of the CITES permits. be authorized to issue invoices and receive as such, it is impossible to know if the The “EIA-CITES” database subsequently Forest Transport Permits (GTFs) for this much inspected concession complies with or %$"$&'#$7)F.)536)F'+$7),")#4!+),- 0!'() cedar, and get them registered in the Balance blatantly violates the law. documentation contains the date and code for of Extraction that will eventually show he cut ) Discrepancies between full reports and each CITES permit, along with the name of the and sold close to 100% of the volume he was summaries. In some cases where, in exporter, name of the importer in the country authorized to sell. How does this occur? One addition to the summaries provided by of destination, the species exported and its likely explaination is that the concessionaire OSINFOR, EIA obtained access to the full volume, the place of extraction of the timber in fact sold his GTFs on the black markets for Supervisory Reports, we have found that (concession or indigenous community permit), “volume”, to be used by a broker to provide #4$)+8//'&!$+),-#$")7,)",#)&$ $0#)#4$) and the harvest year of extraction (zafra). It “legal” documentation for illegally logged trees real level of violations and illegalities also includes the names of the “owner” and from somewhere else. Another possibiity is that !7$"#! $7)!")#4$)&$*,&#<))?4$&$-,&$:)!#)!+) “recipient” of the wood, which are the names the concessionaire used his GTFs to launder his *,++!F($)#4'#)2$)4'>$)",#)*'!7)+8- 0!$"#) that appear on the GTFs who in practice are own illegal logging. attention to cases in which the illegalities the individuals or companies that act as are more serious than they appeared in So if OSINFOR’s site visit found that no trees intermediaries between the concessionaire and the summaries provided by OSINFOR. were felled in the POA in question, time after the exporter. time, where did all of the cedar and mahogany ) Selective supervisions. Not all of the 536)$"0,8"#$&$7)+!%"! 0'"#),F+#'0($+)!") exported to the US come from? Perhaps from a concessions in Peru received supervision obtaining this theoretically public information national park. Perhaps from areas reserved for visits. This means that we do not (see Box IX: “Resisting Transparency”). uncontacted peoples. Perhaps from the national have data regarding a large number of forest land not slated for logging. Regardless concessions which may either be operating of origin, if it was not extracted from the POA in accordance with the regulations or in which it was declared, the wood was illegally c<^'!('F($)!"-,&/'#!,")!+)",#)+8- 0!$"#)#,) conclusions stemming from their inspections.

29 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS 6.5 WHO IS SELLING AND BUYING?

6.5.1. Allegedly illegal CITES wood: Table of Exporters

G-/]&dle QRR\ QRRU QRSR BFKOFK"RISSJ : 7 3 : : TU= MADERERA BOZOVICH SAC 27 3 4 ^S 5 kR MADERERA VULCANO SAC 7 2 4 S^ TRANSFORESTAL CCC SAC 7 7

COMERCIAL JR MOLINA SAC 4 4

PERU TRADERS INC SAC 3 3 A & A INVESTMENTS PERU SAC S S 2 RAMIRO EDWIN BARRIOS GALVAN 2 2

EXPORTMADERAS SRL S S 2 M2%;22)&P()4("=&QRR\&()3& INDUSTRIAS BLANCO SAC S 3 4 J(=&QRSR,&%0212&6#9!()*21& 28!#"%23&:2'(::=&A421%*#)(?:2& INKA WOOD SAC S S 9(0#'()=&#"&623("&%#&%02& IE,&(66#"3*)'&%#&%02&N2"47*()& INVERSIONES WCA EIRL S S '#72")92)%Y1&#;)&*)1!26@ SOUTH AMERICAN HARDWOODS SAC S S %*#)1&5#"21%&6#)6211*#)1<& D02&)49?2"1&6#""21!#)3&%#& FORESTAL DEL ORIENTE SA C S S %02&A4()%*%=&i.D-E&!2"9*%1& %0(%&326:("23&(&!"#?:29& LUMAT MADERAS SAC S S 6#)6211*#)&(1&%02&#"*'*)& %02&%*9?2"<&& TU= _c 4 SS ^c 5 SSQ

*Year in which export to the US occurred ** C&!,&!#.c)'")536)0('++! )0'#!,"),-)#4$)0,"0$++!,"+)+8*$&>!+$7)F.)=O3dB=e)F'+$7),")'++$++/$"#),-)#4$)+$&!,8+)"'#8&$),-)#4$),--$"+$+)0,//!##$7:)!")24!04) the number 1 is the most serious

D*9?2"&%"(62(?*:*%=%2)& 1%#!1&(%&%02&1(;9*::<&&.9!#"%@ 2"1&)223&%#&(1>&%02*"&?4=2"1& 0("3&A421%*#)1&%#&522:&()=& 6#) &32)62&(?#4%&:2'(:*%=& *)&N2"4Y1&64""2)%&5#"21%"=& 126%#"<

30 © EIA © EIA

6.5.2. Allegedly illegal CITES wood: Table of US Importers

G-/]dle QRR\ QRRU QRSR BFKOFK"R&ISSJ : 7 3 :: TU= BTP INC 22 3 2 24 5 _c MADERERA GUTIERREZ Y HERNÁNDEZ LTDA c c TBM HARDWOODS c c

NORTH AMERICAN WOOD PRODUCTS LLC 5 2 2 U

AYALA MANAGEMENT CORPORATION 3 S 4 CENTRO LAMINADOS Y PANELES LGP 2 S 3 FERRETERÍA TESORO EN MADERAS II 2 2 4 \ SPECIALTY WOODS INC 2 S 3 ALAN MCILVAIN COMPANY S 2 3 DAN K MOORE LUMBER CO. INC S S DIXIE PLYWOOD COMPANY S S LA VEGA CENTRO S S M. BOHLKE VENEER CORP S S

MADERERA Y FERRETERÍA TESORO DEL EBANI- 2 ED/,&.Oi S S MEDLEY HARDWOODS INC S S THE REX LUMBER COMPANY S S BANKS HARDWOODS FLORIDA LLC S S EBANISTERÍA CRESPO S S FERRETERÍA PASTILLO S S ZHFM/H&NHGfFFW&m&HIJM-]&D]/W.OZ,&HHi S S LANE STANTON VANCE LUMBER CO S S TOTEM FOREST PRODUCTS S S TU= _c 4 SS ^c 5 SSQ

*Year in which export to the US occurred ** C&!,&!#.c)'")536)0('++! )0'#!,"),-)#4$) concessions supervised by OSINFOR M2%;22)&P()4("=&QRR\&()3&J(=&QRSR,&%0212&6#9!()*21&*9!#"%23&:2'(::=&A421%*#)(?:2&9(0#'()=&#"&623("&*)%#& based on assessment of the serious nature of the offenses committed, in %02&IE<&&D02&)49?2"1&6#""21!#)3&%#&%02&)49?2"&i.D-E&!2"9*%1&;0*60&;2"2&(11#6*(%23&;*%0&%0#12&6#)621@ which the number 1 is the most serious 1*#)1&;02"2&%02&N2"47*()&'#72")92)%Y1&#;)&*)1!26%*#)1&5#4)3&27*32)62&*::2'(:&!"(6%*621<&D02&%#%(:&)49?2"& #5&10*!92)%1&()3&*9!#"%2"1&;#4:3&(:9#1%&62"%(*):=&?2&0*'02"&*5&)#)@i.D-E&1!26*21&;2"2&(:1#&%"(62(?:2<

31 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS

) CITES species only. The only traceable species under current Peruvian documentation requirements are mahogany and cedar, through the information declared in the process of obtaining CITES export permits. There is, in practice, no feasible way to trace other high value species that are also being over harvested, such as shihuahuaco/cumaru ( Dipteryx 8 ) or cumala ( Q";4'8 ). While some regulations ask the exporters to provide information about the origin of the timber from these other species, this is not a mandatory requirement for the export process and – as far EIA could ascertain – many exporters are not doing it.

c<_<^<&Z"4!#&M#+#7*60 impresario, Agustín Balarín Gustavson, to form the ITTO. Rafael Tolmos Tolmos [sic], currently The company which has by far the greatest Maderera Vulcano SAC, now Peru’s second the president of BTP Inc. in ALabama, was number of shipments of wood of questionable biggest exporter. 100 formerly the Director of Exports at Maderera origin is part of the Grupo Bozovich. According Bozovich, and the head of ADEX’s Timber and to its webpage, Bozovich has “its own companies The Bozovich Group currently consists of Wood Products Committee during 2006-2007, located in Peru, Mexico, the US, and Bolivia; and three closely linked companies in a vertically a period when extensive information about F&'"04),- )0$+)-,&)F8.!"%)'"7)+$((!"%)*&,780#+)!") integrated model: the Peruvian mother illegal logging was made public and discussed in China and Taiwan and for distribution in Puerto company; Bozovich Timber Products (BTP) in national and international forums. Rico and the Dominican Republic.” 98 For the Alabama, established in 2000, which is the purposes of this study, EIA has only analyzed the US’s biggest importer of Peruvian woods; and At the moment, the Bozovich group has three shipments from Peru to the US. Bozovich, S. de R.L. de C.V. (BOZOMEX), opened in 0$&#! )0'#$+)-&,/)#4$)B,&$+#)O#$2'&7+4!*)Q,8"0!() 2002 in Querétaro, Mexico. In 2009 the company (FSC) that claim to guarantee the legality and Maderera Bozovich is the largest wood products ,*$"$7)'"),- )0$)!")I,(!>!'<)?4$)0,/*'".)4'+) sustainability of some of the timber it sells: company in Peru. The family business began ties to several concessions in Madre de Dios one for its Otorongo Forest Management Unit, in the late 1940s when Batrich Bozovich and Ucayali, whose ownership is in the hands of '"7)#2,)Q4'!"),-)Q8+#,7.)0$&#! )0'#$+)-,&) arrived from Yugoslavia and set up business interlocking boards. In addition, it buys timber its Peru and US facilities. According to their in Oxapampa, in central Peru. The patriarch from other producers around the country own website, the Forest Stewardship Council joined together with his sons, Drago and Boris through intermediary businesses that include (FSC) “is an independent, non-governmental, Bozovich Balarín, to form Maderera Bozovich Green Forest SAC, Inversiones La Oroza SRL, and ",#)-,&)*&, )#),&%'"!R'#!,")$+#'F(!+4$7)#,) S.A.C. in 1973. After Drago was killed in a Industrial Volga SAC. promote the responsible management of the kidnapping attempt in 2001, his sons took over. 99 world’s forests.” 101 “FSC chain of custody (CoC) The Bozovich family and key personnel are Maderera Bozovich began exporting its wood 0$&#! )0'#!,")!+)-,&)0,/*'"!$+)#4'#)/'"8-'0#8&$:) well-connected within the industry and politics. in the 1980s, primarily to the United States process or trade in timber or non-timber They have held key leadership positions at the and later Mexico. The company’s fortunes forest products and want to demonstrate to Timber and Wood Products Industry council rose with the plunder of mahogany that took their customers that they use responsibly of ADEX, Peru’s primary export industry place throughout the Peruvian Amazon in the produced raw materials.” 102 However, the association, and the Wood and Wood Products late 1990s and early 2000s. Today, Bozovich information gathered and analyzed for this Committee of the National Society of Industries exports far more cedar than mahogany, and the report demonstrates serious problems regarding (SNI). Both Drago Bozovich and José Alfredo company has expanded into an array of other #4$)($%'(),&!%!"),-)')+!%"! )0'"#)*,&#!,"),-)#4$) Biasevich Bareto, President of the Bozovich- species as well. products sold by the Bozovich group, if not owned Forestal Otorongo SAC concession, have necessarily the wood harvested or exported In 1977, the Balarín side of the family split F$$")/$/F$&+),-),- )0!'()C$&8>!'")7$($%'#!,"+) under FSC labels. off to join the sons of another early timber to international meetings including CITES and

32 Bozovich has been the subject of legal Council (NRDC). These plaintiffs sued the U.S. investigations had recently found that 92 of the complaints before, although they have rarely if Department of Interior, the U.S. Department 150 concessions approved for export permits ever resulted in any sanction. In 2005, INRENA of Agriculture, and four importing companies did not actually have the harvestable mahogany inspectors reported one of its concessions, – Bozovich Timber Products (Evergreen, they claimed on paper.) US government Forestal Otorongo, to be extracting higher Alabama), T. Baird International Corporation agencies should therefore not have been than allowed volumes; 103 however, upon (King of Prussia, Pennsylvania), Maderera allowing imports of Peruvian mahogany when the company’s appeal INRENA shelved the Gutierrez y Hernandez Ltda (Gulf Shores, Peru’s management authority had clearly complaint. 104 Alabama) and TBM Hardwoods (Hanover, ",#)/'7$)#4$)($%'()'0T8!+!#!,") )"7!"%+)'"7) Pennsylvania) – for importing and/or allowing ","H7$#&!/$"#) )"7!"%+)&$T8!&$7)F.)Q3?5O<) the importation of illegal wood, in violation of The companies, for their part, were sued for c<_

^K'#4"
'$a%2" %'"''$%'1%'#4"
'4
%'0'1%'F#4 
'4"
0%'4
<'1%;'%% %'"D'%;;"
:' 4"
4$; '14 %%<' <8888>'"''1%'14';4 0;D'0 4

Box VIII: EIA Survey of Exporters and Importers

In order to gain insight into the ways that traders of Peruvian lumber The responses by EIA varied in level of detail and showed a broad range attempt to ensure – or not – the legality of the wood they buy and sell, of due care practices, or lack thereof. In general, there appears to be a in March 2012 EIA contacted a sample of the Peruvian exporters and gap between the procedures presented in response to EIA’s survey and US importers in this report, as well as the Wood and Wood Products the systemic illegal trade demonstrated by this report. The majority of Committee of ADEX. We informed each company that we were publishing responses center on the “guarantee” which respondents claim that the a report about issues of timber legality and international commerce in Forest Transport Permits (GTFs) offer, while EIA has shown here that the Peru’s forest sector, and asked for the following information: GTFs have no real value. )G,$+).,8&)0,/*'".)4'>$)+*$0! )0)*&,0$78&$+)#,)%8'&'"#$$)#4$)($%'() It is worth noting that in several instances, Forest Stewardship Council origin of the wood it procures from Peru? 0$&#! )0'#!,"+)-,&)Q4'!"),-)Q8+#,7.)2$&$)/$"#!,"$7)#,)!/*(.)#4'#)#4$) 0,/*'".E+)$"#!&$)+8**(.),-)2,,7)2'+)+8+#'!"'F(.)0$&#! )$7)24$":)!")-'0#:) )3-)+,:)24'#)'&$)#4$+$)*&,0$78&$+)'"7)+!"0$)24$")#4$.)4'>$)F$$") Q=Q)0$&#! )0'#$+),"(.)%8'&'"#$$)#4'#)')0,/*'".)!+)0'*'F($),-)4'"7(!"%) applied? FSC wood. )G,).,8)*&,>!7$).,8&)0(!$"#+)2!#4)'".)#.*$),-)2&!##$")2'&&'"#.),&) To retain the original context of the responses, EIA has opted to post documentation regarding the origin of any Peruvian wood you sell, and if them in their entirety rather than extract fragments. They are available so, can you provide an example? online within this report’s interactive website: www.peruforests- )=#4$&)0,//$"#+)&$%'&7!"%)C$&8E+)-,&$+#)+$0#,&)'"7P,&)04'"%$+)!") bosquesperuanos.com sourcing practices in response to the passage of the US-Peru Trade 33 Promotion Act in 2007 and/or the Lacey Act plant amendments of 2008. THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS

Box IX: Resisting Transparency

To access the data necessary for the preparation of this analysis, EIA had to submit several Requests for Access to Information. This process began during President Garcia’s administration in early 2010. Some of these requests were excessively long, complicated, and onerous, which in *&'0#!0$)&$ )$0#+)')('0D),-)#&'"+*'&$"0.),")#4$)*'&#),-)#4$)0,8"#&.E+)-,&$+#)'8#4,&!#!$+<))=")/,&$)#4'"),"$),00'+!,":)'8#4,&!#!$+)7$/'"7$7)#4'#) we explain why we wanted to access the requested information, which is not required by law. We were not given all of the information and had to &$*$'#$7(.)!"+!+#:)&$0$!>!"%)8"*($'+'"#)&$+*,"+$+)-&,/)*8F(!0),- )0!'(+)24,)0,"+#'"#(.)T8$+#!,"$7),8&)'00$++)&!%4#+<))="),"$),00'+!,":)'")8*+$#) ,- )0!'()$>$")2$"#)+,)-'&)'+)#,)T8$+#!,")#4$)*$&+,")+8F/!##!"%)#4$)&$T8$+#:)+#'#!"%c)?4!+)2!(()0,+#)')(,#),-)/,"$.) )'&$).,8)+8&$).,8E(()F$)'F($)#,) afford it?” To build the database of CITES permits – which is available to the public on this report’s website (www.peruforests-bosquesperuanos.com) – an 536)&$*&$+$"#'#!>$)+8F/!##$7)')&$T8$+#)-,&)600$++)#,)C8F(!0)3"-,&/'#!,")#,)#4$)Q3?5O)K'"'%$/$"#)68#4,&!#.),- )0$)2!#4!")GUBBO:)'#)#4$)K!"!+#&.) ,-)6%&!08(#8&$:),")Z'"8'&.)[X\X<)3")>!,('#!,"),-)#4$)('2:)#4!+),- )0$)7!7)$>$&.#4!"%)*,++!F($),")')"8/F$&),-),00'+!,"+)#,)F(,0D)'00$++)#,)#4$) information requested. Thus, a process which by law should have taken no more than 12 business days (a regular procedure of seven days with the *,++!F!(!#.),-)') )>$)7'.)$;#$"+!,"f)$"7$7)8*)#'D!"%)$!%4#)/,"#4+<))?4$)!"-,&/'#!,")2'+)*&,>!7$7)#,)536),"(.)!")*4,#,0,*.)-,&/'#:)'+)#4$)'8#4,&!#.) claimed the information was not available digitally. In a similar way, on August 2011, EIA submitted a request for access to information to OSINFOR, to build the corresponding database. OSINFOR only provided part of the information requested, failing to supply EIA with any information for 2008, and did not include the summary of the 0,"0(8+!,"+)-,&)O8*$&>!+!,"+)0,"780#$7)!")[XXY)'"7)[X\\:)'+)2$(()'+)+,/$),-)#4$)O8*$&>!+!,"+)0'&&!$7),8#)!")[X\X<)?4$),- )0$E+),- )0!'()&$+*,"+$)H)>!') email on August 26, 2011 - was that OSINFOR did not have that information available, and that the law only required them to provide information #4$.)'(&$'7.)4'>$)*&$*'&$7<)d,"$#4$($++:)p8+#)')-$2)7'.+)('#$&)')+,8&0$)!")=O3dB=e)8",- )0!'((.)*&,>!7$7)536)2!#4)#4$)0,/*($#$)#'F($+)-,&)[XXq)'"7) [XXY<))?4!+)+#&,"%(.)+8%%$+#+)#4'#)=O3dB=e)7!7)4'>$)#4$)!"-,&/'#!,")'"7)2'+)",#)-8((.)-,(,/!"%)2!#4)#4$!&),- )0!'()&$+*,"+$)#,)536E+)&$T8$+#< In truth, all of the information utilized in this report should be publicly accessible (without having to pay thousands of soles for photocopies) through the websites of the agencies responsible for them. Making information publicly available for both civil society organizations interested in the forestry sector, and companies interested in conducting due care before buying Peruvian wood, would actually support the work of the authorities in monitoring the sector. The lack of transparency only serves to work against the objectives of the government and the welfare of Peru’s citizens and forests. It is !/*,&#'"#)#,)",#$)#4'#)+!"0$)#4$)F$%!""!"%),-)C&$+!7$"#)=(('"#')r8/'('E+)'7/!"!+#&'#!,":)F,#4)GUBBO)'"7)=O3dB=e)4'>$)/'7$)+!%"! )0'"#) strides in improving information access. Their websites now feature pages where some CITES permit information and some of OSINFOR´s directoral &$+,(8#!,"+)'&$)*8F(!0(.)'>'!('F($:)'(#4,8%4)",#)#4$)-8(() )($+)'"7)&$*,&#+)#4'#)536)'00$++$7)#4&,8%4)!#+)*$&+!+#$"#)&$T8$+#+<) =O3dB=e:)!")*'&#!08('&:)8(#!/'#$(.)&$+*,"7$7)!")')&$('#!>$(.)#!/$H$- )0!$"#)/'""$&)#,),8&)&$T8$+#+)-,&)'00$++)#,)!"-,&/'#!,")A'(#4,8%4)#4$.)7!7) not provide all the information they had, as explained above). Virtually all of this information was provided in digital format, on CDs or via email. However, the data OSINFOR provided to EIA by the second half of 2011 still had a number of blank cells due to information from 2008 that had yet to be processed three years later. We hope that this issue is resolved quickly and that complete information will be uploaded onto the OSINFOR website.

© Toby Smith/ EIA 34 Peru: Protected Areas and Logging Concessions

IQUITOS

J(!&6"2(%23&?=&i:*)%#)&P2)>*)1& 41*)'&3(%(&5"#9&%02&.)1%*%4%#& 32:&M*2)&i#9b)&d*)3*'2)#41& TARAPOTO %2""*%#"*21e,&%02&E2"7*6*#& O(6*#)(:&32& "2(1&O(%4"(:21& N"#%2'*3(1&%02&J*)*1%2"*#&32& /9?*2)%2&d!"#%26%23&("2(1e,& ()3&%02&W*"266*])&Z2)2"(:& `#"21%(:&G&W2&`(4)(&E*:721%"2& #5&%02&J*)*1%2"*#&W2&/'"*64:%4"(& PUCALLPA d:#''*)'&6#)6211*#)1e<

N2"4&1%*::&0(1&#)2&%02&9#1%& *)%(6%&1;(%01&"(*)5#"21%&#)& %02&!:()2%,&(:%0#4'0&:#''*)',& 9*)*)',&!2%"#:249&28!:#"(%*#)& ()3&)2;&"#(3&6#)1%"46%*#)& PUERTO ("2&12"*#41&%0"2(%1<&J()=& LIMA MALDONADO #5&%02&:#''*)'&6#)6211*#)1& (::#6(%23&*)&%02&:(1%&326(32& ("2&*)&28%"292:=&"29#%2&("2(1& ;0#12&(66211&(:#)2&9(>21& AYACUCHO 6#1%1&!"#0*?*%*72< CUZCO THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS

7. LAUNDERING MACHINES: 14 CASE STUDIES

© H. Berninzon/EIA

Below is a representative sample of case studies that help to demonstrate, in sometimes amusing detail, the methods behind illegal logging. These stories, while vivid, are unfortunately not exceptional, unique, or exotic. In fact, the same scenario was found by EIA to be repeated time and again. ?4$)0'+$+)0!#$7)4$&$)'&$),"(.)$;'/*($+),-)#4$)/,+#)0,//,")#&!0D+)'"7) '%&'"#)>!,('#!,"+)&$*,&#$7)!")7,R$"+),-)+8*$&>!+,&.)&$*,&#+)/'7$)F.)=O3dB=e) between 2008 and 2010. 3")#4$) &+#)"!"$)0'+$+)*&$+$"#$7:)#4$)+'/$)2,,7)(!"D$7)A,")*'*$&f)#,)#4$)+'/$)C=6+)24$&$)=O3dB=eE+)+8*$&>!+!,"+)-,8"7)+$&!,8+)($%'()*&,F($/+)2'+) exported to the US. In the other cases, timber exports supposedly came from these same concessions whose legality is seriously challenged, but not "$0$++'&!(.)-&,/)#4$)+*$0! 0)C=6)#4'#)=O3dB=e)$;'/!"$7< It is noteworthy, however, that in cases when OSINFOR has initiated an Administrative Procedure 105 – known in Peru as '52%<"#"%
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"2' (PAU) – to revoke a concessionaire’s usage rights on the grounds of illegal practices, the oversight body has applied precautionary measures by simultaneously suspending the whole scope of the General Forest Management Plan and all of the POAs approved for the concession in question. =O3dB=e)4'+)'&%8$7)#4'#)+$&!,8+)/!+0,"780#)!"),"$)C=6),")#4$)*'&#),-)#4$)0,"0$++!,"'!&$+)0&$'#$+)+!%"! 0'"#)7,8F#)&$%'&7!"%)#4$!&)'0#!>!#!$+)!")#4$) rest of the concession. In other words, the Peruvian authorities feel that if there are such serious faults in a given POA – such as forging a high percentage of the forest inventory, or selling large quantities of wood that were not actually extracted from the POA in question, thus facilitating timber laundering with 0,"0$++!,")7,08/$"#+) )#4$&$)'&$)+8- 0!$"#)%&,8"7+)#,)7,8F#)#4$)($%'(!#.),-)'(()#!/F$&)#'D$")-&,/)2!#4!")#4$)0,"0$++!,"<))?,)F$)7!&$0#c)#4$)*&$0$7$"#),-) severe illegality in one POA is a strong suggestion that all wood from these concessions is potentially illegal.

7.1 CONFESSING TO HIS FALSE POAS U
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:8 ?4&$$)7'.+)F$-,&$)=O3dB=e)!"!#!'#$7)!#+) $(7)+8*$&>!+!,"),-) POA 3 in the concessions of Jaime Perez Garcia (contract 16- Supervisory Report 314-2010-OSINFOR-DSCFFS106 IQU/CJ-047-04) and Manuel Gatica Grandez (contract 16-IQU/ Exporters: TRANSFORESTAL CCC S.A.C. CJ-046-04), the representative of both, José Alberto Bellodas Irrasábal, decided that it was time to confess. He requested a Importers: AYALA MANAGEMENT CORPORATION meeting with the OSINFOR supervisors, Cesar Augusto Zorrilla MADERERA GUTIERREZ Y HERNANDEZ LTDA Padilla and Jesus Gonzalez Oliveros, and together they Exported to the US: 194.227 m3 of cedar prepared a statement in which Bellodas admitted that POA 3 !")F,#4)0,"0$++!,"+)2$&$)-'(+! $7:)#4'#)",)(,%%!"%)4'7)$>$&) #'D$")*('0$:)'"7)#4'#)#4$)B,&$+#)68#4,&!#.),- 0$)2'+)'2'&$) of and in agreement with the situation. At the end of the statement, they added that Bellodas had decided to tell the truth before the supervision took place so that the OSINFOR team “wouldn’t be surprised.” (See p.37, Transcript of Bellodas statement)

36 While EIA’s review of Supervisory reports demonstrates that what Bellodas describes is quite common, this is one of the few cases in which an open confession has been made. In addition, Bellodas goes beyond recognizing illegalities in his own concessions, stating that this is a normal practice in #4$)S,&$#,)&$%!,"<)6+)!#)F$0'/$)!"0&$'+!"%(.)0($'&)#,)=O3dB=e),- )0!'(+)78&!"%)#4$)+8*$&>!+!,")#4'#)#4$)0,"0$++!,"'!&$)4'7)"$>$&)2,&D$7)!")#4$)'&$':) I$((,7'+)'++8&$7)#4$/)#4'#)4$)2'+)p8+#)7,!"%)24'#)$>$&.,"$)7!7<)3")#4$) )$(7)",#$+)-&,/)#4$)O8*$&>!+!,")'##'04$7)#,)#4$)e$*,&#)-,&)CT&$R)U'&0X'E+) concession, the following information is hand-written: ^,O%;;<47'4%'4' %;;'14'

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Bellodas’s statements imply that all timber declared as extracted and traded by Jaime Pérez Garcia (JPG) and Manuel Gatica Grandez (MGG) from POAs 1, 2 and 3 is illegal. He argues that the inventories were created “in-cabinet” – that is, the geo- referenced lists of trees produced for the POAs were simply fabricated at a desk – and that there were no harvesting activities – that is, they did not go into the concession to cut and remove the trees. If the volumes of wood corresponding to these lists were traded but not actually extracted from these POAs, it implies that the concession documentation was used to launder illegally logged timber from other areas. 600,&7!"%)#,)#4$),- )0!'()I'('"0$+),-) Extractions provided for POAs 1, 2, and 3, these concessions laundered nearly 21,000m3 of illegal wood, including a variety of species. Of this total, almost 2,200m3 is cedar that has been extracted illegally. For those interested in the details, it is worth noting that the POA "8/F$&),")#4$),- )0!'()I'('"0$),-) Extraction for Jaime Perez Garcia’s concession does not correspond with the “real” POA number--that is, the POA referred to by the Administrative Resolution (RA) L()3;"*%%2)&6#)5211*#)& that the PRMRFFS emits to approve ?=&P#1T&/:?2"%#&M2::#3(1,& each year’s harvest plan. So while :2'(:&"2!"212)%(%*72&5#"& V J()42:&Z(%*6(&Z"()32+Y1& the Balance links extraction from ()3&P(*92&NT"2+&Z("6X(Y1& POA 4 with the 2007 harvest and 6#)6211*#)1<&M2::#3(1& cites Administrative Resolution %2::1&FE.O`F]&%0(%&?#%0& No. 459-2007-INRENA-IFFS-ATFFS- 6#)6211*#)1&0(3&)#& &2:3& IQUITOS, that RA actually approved ;#">,&%02=&;2"2&#):=&q*)& 6(?*)2%Y&r#)&!(!2"s&;*%0& POA 3 for the 2007-2008 harvest. In 6#)12)%&?=&%02&"21!#)1*?:2& many cases, moreover, we cannot 2)%*%=,[email protected]]-O/<& know for sure if the POA mentioned `4::&%"()16"*!%&(%&#):*)2& in the Balance of Extraction is the 72"1*#)&%0*1&"2!#"%< “real” one or not, since it doesn’t cite the corresponding RA. This is a

37 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS

0,//,")7,08/$"#'#!,")!"0,"+!+#$"0.)#4'#)/'D$+)/,"!#,&!"%)0,"0$++!,"+)$>$")/,&$)7!- 08(#<)d,"$#4$($++:)#4$)!(($%'(!#.)+4!"$+)#4&,8%4)!")#4!+)0'+$< B&,/)24'#)2'+)-,8"7:),&)&'#4$&:)",#)-,8"7)!")ZCUE+)C=6)`) )#4'#)!+)#,)+'.:)#4$&$)'&$)",)F,8"7'&!$+:)",)-,&$+#)0$"+8+:)",)(,%%!"%:)",) $(7H>$&! $7)0$7'&) trees within a circumference of 50 m [around each GPS point],” 110 the supervisors concluded that the concessionaire could not account for the wood he’d sold. “In the case of cedar, according to the Balance of Extraction, the concessionaire has traded 303.256 m3 (99.9%) of the volume, while the +8*$&>!+!,")-,8"7)",)0$7'&J)#48+)#4$&$)!+)",)p8+#! 0'#!,")-,&)#4$)*&$+$"0$:)(,0'#!,":)'"7)#&'7$),-)`X`<[ia)/`),-)0$7'&< 111

ZAFRA CEDAR CEDAR TOTAL WOOD SRk SRU TRADED % OF CEDAR TRADED CONCESSIONPOA dL/]t-ED& REAL POA APPROVED IN DURING YEAR TRADED SR\ 3 d.OiHIW.OZ& E-/EFOe NF/&dJ e dJ3e i-W/]e&J3 JPG NF/&S QRRT Sa TRR

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7.2 HE HAD TO FALSIFY ONLY TO “BUY TIME” l%'U
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%1%;%'1% '14 %'4<%<'nDT\o'#h'0' $&! $7)#4'#) Supervisory Report 225-2010-OSINFOR-DSCFFS112 none of the trees in POA 4 actually existed on the ground, the concession representative admitted to the OSINFOR supervisor Exporters: MADERERA BOZOVICH SAC that, in fact, all of the information submitted for this POA was fake. The inventory, the measurements, the georeferencing Importers: North American Wood Products LLC data – all false. “Generated in cabinet” is the phrase commonly TOTEM FOREST PRODUCTS. used in Peruvian forestry circles to refer to data that is !">$"#$7)'#)')7$+D)&'#4$&)#4'")%'#4$&$7)-&,/)#4$) $(7<))?4$) BTP INC reason that all this information was fabricated, explained the BOZOVICH S DE RL DE CV &$*&$+$"#'#!>$:)2'+)#4'#)#4$.)4'7"E#)4'7)#4$)#!/$)#,)7,)#4$) $(7) FERRETERIA TESORO EN MADERAS II work. The POA they submitted, he states, was merely “to buy Exported to the US: 169.955 m3 of cedar time”. Situation: Suspended by OSINFOR Resolution Under the cover of the false documentation, the idea was that they would slowly populate the inventory with real information taken from the forest, and use this information to replace the -'(+$) %8&$+<))r,2$>$&:)78$)#,)#4$)0,"0$++!,"'!&$E+)F'7)(80D:) #4$)C=6)2'+)'**&,>$7)F$-,&$)#4$.)0,8(7) "!+4)#4$)p,F)'"7) replace the old information with real data. Regardless of whether or not this story is plausible, it does

38 not explain why, how, or from where the concessionaire was able to trade 9145.459 m3 of wood, including 831,078 m3 of cedar 113 when there is no evidence of logging activities ever having been carried out in POA 4, 114 no cedar trees were found in the area, and a concession representative admitted that when they actually did the inventory of the entire POA, they only found one cedar tree – which they didn’t even cut. 115 Yet the false POA lists 176 cedar trees of harvestable size, and the Balance of Extraction claims to have harvested all of them 116 in order to be able to trade 99.99% of the total authorized volume. ?4$&$)!+)'",#4$&)!/*,&#'"#)7$#'!(c)#4$)*&!,&)>!+8'()>$&! 0'#!,")F.)6?BBO)#4'#)+8**,+$7(.)#,,D)*('0$)!")[XXY:)'"7)0('!/$7)#,)4'>$)'0#8'((.)-,8"7)'((),-) #4$)#&$$+)7$#'!($7)!")#4$)-'D$)C=6<))?4$)#$04"!0'()&$*,&#)7$#'!(!"%)#4!+)0($'&(.)-'(+$)>!+8'()!"+*$0#!,")!+)[i)*'%$+),-)*8&$) 0#!,")'"7)-'F&!0'#!,"< 117 The =O3dB=e)+8*$&>!+,&)7&$2)'##$"#!,")#,)#4!+)/'##$&:)",#!"%)#4'#)!#)2'+)0," &/$7)#4'#)#4$) $(7)&$*,&#)F.)')+#'--)/$/F$&)'#)6?BBOH3T8!#,+)As$"p.)I&8",) Teran Piña) reports 38 harvestable trees (97.44%) found in the forest, which is completely inconsistent with present supervision, as the entire route (Annex 3) revealed no cedar in any state, whether standing or stump.” 118 The Supervisory Report concludes that “the concessionaire fails to justify the volume traded, rather, to the contrary, the wood was mobilized from an area outside of the PCA ”. Besides the 831,078 m3 of cedar admitted to by the concessionaire representative, the concession illegally mobilized an additional 2168.499 m3 of capinuri and 250.011 m3 of tornillo. 119

7.3 SURPRISED BY HIS OWN FALSE POA l%'U
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'% "8 Supervisory Report: 087-201-OSINFOR-DSCFFS120 In a letter sent in February 2008, a concerned concessionaire Exporters: MADERERA BOZOVICH SAC asked for the support of OSINFOR to distance himself from people Importers: BTP Inc committing illegal logging and to prove that his concession was CENTRO LAMINADOS Y PANELES LGP operating appropriately. FERRETERIA TESORO EN MADERAS II “As you know, the forestry sector in the Loreto region has 0,(('*+$7)78$)#,)')('0D),-)$0,",/!0)'"7) "'"0!'()&$+,8&0$+),") Exported to the US: 155.44 m3 of cedar the part of the concessionaires, in what we consider should be declared an emergency. Concessionaires interested in obtaining >,(8"#'&.)-,&$+#)0$&#! 0'#!,")4'>$)F$$")2,&D!"%)>$&.)&$+*,"+!F(.) in our areas, and we are interested in how to have our own inspections to certify that we are doing well (…). In this sense, the undersigned, the legal &$*&$+$"#'#!>$),-)O'")Z8'")I,+0,)B,&$+#&.)O6Q:)&$T8$+#+).,8&),- 0$)#,)0,"780#)')g=SNd?6et)-,&$+#)+8*$&>!+!,"),")/.)08&&$"#)CQ6:)!")#4!+)0'+$)#4$) fourth POA, and communicates as well that POA 3 was also supervised by OSINFOR.” 121 The general manager of the concession, Roger Reátegui Rengifo, acknowledged and participated in the supervision. According to the supervisor, e$M#$%8!)e$"%!-,)7$/,"+#&'#$7)+8&*&!+$)8*,") "7!"%)#4'#)q[),-)#4$)0$7'&)#&$$+)%$,&$-$&$"0$7)!")C=6)b)A#4'#)!+)#,)+'.:)qXo),-)#4$)+8*$&>!+!,")+'/*($f) didn’t exist in the real world. 122 Although cedar volumes corresponding to 190 trees were declared in POA 4, in the forest they only found evidence of 11 cedar trees being cut down. OSINFOR’s report states: “Of the 103 trees in the sample chosen for the supervision, 94 were listed as of harvestable size and 9 were seed trees; we found these trees to be in the following state: ) Harvestable trees: two naturally fallen trees rotting in their entirety, 5 standing trees, 11 stumps, 74 trees that don’t exist and 2 trees that could not F$)>$&! $7)78$)#,)!"'00$++!F!(!#.),-)#4$)#$&&'!"< ) O$$7)#&$$+c)q)#&$$+)7!7"E#)$;!+#)'"7)\)#&$$)0,8(7)",#)F$)>$&! $7)78$)#,)#4$)!"'00$++!F!(!#.),-)#4$)#$&&'!"< 123

According to the Balance of Extraction, the concessionaire extracted 99.9% of the approved cedar volume in POA 4, that is, 784.612 m3 of a total approved of 784.624 m3. Adding the other species declared in the Balance of Extraction, the concessionaire extracted a total of 6,678.196 m3 of wood under this POA. The Balance of Extraction for the previous year’s POA 3 registers the extraction of 905.006 m3 of cedar out of an approved total of 905.022, corresponding to 170 trees, reaching a total of 12,929.877 m3 of wood from all species taken from – or rather, laundered by – the POA. 124 KI>ilKR'14'4:%<'14'%"'#"2
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39 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS

7.4 THEY GOT THEIR POAS “CONFUSED” k4
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4" %';"'0'%%''$%'% "% %!"%)",#! 0'#!,") of the supervision he attempted to delay it for as long as possible. He was initially advised of the impending visit in June 2007. In July, the concessionaire sent a letter saying that the river level was too low to access the concession, and that it should be postponed until November. In October he sent another letter saying that there was no way to access it before January. Finally, in January 2008 he sent yet another letter saying that he had confused his POAs – that instead of extracting wood from POA 2, he had harvested from POA 4 – and requesting that they inspect the one in place of the other. He provided an alternative list of trees in POA 4 for OSINFOR to supervise – in theory, equivalent to the sample the oversight body had prepared – and suggested that he would just log POA 2 when it came time to log POA 4 in the future. However, the problems turned out to go well beyond this simple solution. Not only was there no cutting in POA 2, but the trees marked for survey didn’t exist in the forest. This means that the inventory submitted for POA 2 was false, that it wasn’t a simple matter of confusion and there would be no possible way to “harvest POA 2 when it was time for POA 4”. When, at the request of the concessionaire, OSINFOR looked for the 17 trees in the alternative list provided for POA 4, they only found three trees (1 cumala tree, one cedar stump, and one standing cedar) within the POA 4 area. Another 10 trees (4 cedar stumps, 4 cumala stumps, and 2 standing cumala trees) were found in a zone scheduled within the General Forest Management Plan to be harvested as part of POAs 10 to 15 126 – that is, 8 to 13 years after POA 2 was up for harvest in use – which means that all of these trees were illegally logged. The four remaining trees did not exist. To clarify: the concessionaire attempted to justify the harvest of 1,091.966 m3 of wood for the 2006-2007 harvest, including 199.992 m3 of cedar and 496.532 m3 of cumala, with a single cedar stump discovered in POA 4. 127 All of this wood was thus extracted illegally from other areas, both inside and outside his concession, and then laundered with the documentation from POA 2. The Supervisory Report mentions that the Administrative Resolution from the Forest Authority which approved the POA “shows discrepancies between the volumes requested and authorized”, and states that “an additional 183.722 m3 of cumala were approved” over the volume requested by the concessionaire. 128 That is to say, none of the trees actually existed, and the solution was to reward the concessionaire with even MORE volume for *&,780#!,")#4'")!"!#!'((.)&$T8$+#$7<)?4$)+.+#$/'#!0)0,/*(!0!#.),-)(,0'()B,&$+#)68#4,&!#.),- 0$+)!")#4$)+$0#,&E+)('8"7$&!"%)*&'0#!0$+)0,8(7)4'&7(.)F$)/'7$) clearer.

H#6(:&5#"21%&(4%0#"*%= 621&:(6>&%02&!2"1#))2:&#"&"21#4"621& %#&25526%*72:=H"122&%02&%*9?2"&*)341%"=,&()3&%02&!"2114"2& %#&(662!%&?"*?21&#"&"29(*)&1*:2)%&*1&0*'0<&&D#?=&E9*%0B-./ 40 7.5 THEY SENT FALSE INFORMATION TO RESOLVE QUESTIONS ABOUT FALSE INFORMATION k4<%%4'r4;"
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'%%8 The Supervisory Report 028-2007-INRENA-OSINFOR-USEC, Supervisory Report 131-2010-OSINFOR-DSCFFS129 from October 2007, encountered a series of problems that Exporters: MADERERA BOZOVICH S.A.C should be grounds for revocation of the concession. Out of 27 cedar trees sampled during the supervision process, only Importers: BTP INC. 6 trunks and 13 standing trees were found, failing to justify Exported to the US: 1.995 m3 of cedar the volumes declared as extracted. 130 In response, OSINFOR initiated an Administrative Procedure (PAU, for its initials in Spanish), and as a precautionary measure ordered the suspension of the General Forest Management Plan, POA 3, and any subsequently approved POAs, as well as the suspension of any issuance of transport permits (GTF) from POA 3 in the future. 131 In parallel, the concessionaire was required to justify the sale of 115,036m3 of cedar outstanding from POA 3. Despite the gravity of the situation, the concessionaire responded to the allegation of fraudulent information with more fraudulent information. When =O3dB=e)&$#8&"$7)#,)#4$) $(7)#,)>$&!-.)#4$)"$2)!"-,&/'#!,")*&,>!7$7)F.)#4$)0,"0$++!,"'!&$)!")4!+)($##$&)-&,/)Z'"8'&.)\Y:)[X\X:)24!04)!"0(87$7)[W)"$2) trees taken from POA 3, OSINFOR found only 11 stumps. Five trees remained standing, one had fallen over naturally and the remaining 10 trees didn’t exist – that is to say, they still could not justify the volumes of cedar declared as extracted from POA 3. 132

7.6 THE MAGICAL CEDAR TREE THAT YIELDED 311 M3 OF TIMBER 5<2%'l%4;%'F424"'U
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' "%;<%<'nn8\o/'0'1%'4;'4 %<' ;#%8' OSINFOR’s supervisory trip only encountered one harvested Supervisory Report 195-2010-OSINFOR-DSCFFS133 tree out of a sample of 44 cedar trees. 31 of the trees listed and georeferenced in the POA didn’t exist, 11 were found still Exporters: MADERERA BOZOVICH S.A.C standing, and one was found cut but abandoned in the forest. Importers: BTP INC. According to estimates made by the supervisor, the one Exported to the US: 30.663 m3 of cedar approved tree that was found to have been harvested could justify the sale of 12.25m3, but in no way the 311 m3 recorded in the Balance of Extraction, which represented 99.45% of the total approved volume for this POA. According to the same POA, production of the 311 m3 of cedar recorded in the Balance of Extraction should require the wood from 44 trees. 134 For those who are unfamiliar with units of forest measurement, this may be slightly confusing. One cubic meter (m3) of lumber is equivalent to 424 board feet of lumber. A board foot is equivalent to a piece of wood about a foot wide (30.48cm) by a foot long (30.48cm) by one inch thick (2.5cm). Thus, if we cut a cubic meter (m3) into sheets 2.5cm thick, we could cover an area of 39,391m2, or the equivalent of about four parking spots. Using this 7'#':)2$) "7)#4'#)2$)4'>$)')+8*$&)#&$$)!")#4!+)0,"0$++!,")#4'#)2,8(7)4'>$).!$(7$7)$",8%4)2,,7)#,)0,>$&)#2,)+,00$&) $(7+),&)*'&D!"%)+*,#+)-,&)\[XX) cars with 2.5cm-thick boards. ?4!+)0'+$)!/*(!$+:)'/,"%+#),#4$&)#4!"%+:)#4'#)#4$)!">$"#,&.)*&$+$"#$7)!")#4$)C=6)2'+)*&$7,/!"'"#(.)-'(+$:)*&!,&)>$&! 0'#!,")F.)#4$)-,&$+#)'8#4,&!#.) was fraudulent, and that the concessionaire never entered the concession to harvest even the few trees that did exist, but instead used the approved volume to launder and export cedar to the United States from unknown locations. I%%'4:%'\g'0'01%'"%:;4""%'42"4%<' "1'5<2%'l%4;%'F424"'4
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41 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS

I)%#46023&:#;:()3&"(*)5#"21%&*)&%02&9*33:2& Supervisory Report 188-2010-OSINFOR-DSCFFS135 #5&(&NF/&14!!#123:=&:#''23&*)&QRRk<&D02&0*'0& ?*#3*72"1*%=&()3&3*5 64:%&(66211&9(>2&9()=& Exporters: COMERCIAL JR MOLINA S.A.C. 6#)6211*#)&("2(1&9#"2&14*%(?:2&5#"&6#)12"7(%*#),& "212("60&#"&14?1*1%2)62&(6%*7*%*21< Importers: TBM HARDWOODS INC Exported to the US: 17.999 m3 of cedar

This is one of the most straightforward cases. According to the Balance of Extraction, the concessionaire harvested 200.000 m3 of the 220.558 m3 authorized for cedar, 136 )F8#)78&!"%)#4$) $(7)>!+!#)=O3dB=e)+8*$&>!+,&+E)0,8(7)",#) "7)')+!"%($) one of the 85 cedar trees chosen as samples: there were no stumps, no harvestable cedar trees, no seed trees, nor even a remote sign of harvest. 137 At the end of the report, the supervisor made the obvious recommendations: “the concessionaire should indicate the exact location of the harvested trees,” 138 “explain the total volume of cedar supposedly traded”, and “indicate the location of the seed trees”. However, another level of explanation should be required (and suspension should have been initiated). For example: how could the forest consultant could sign off on a completely false inventory?

7.8 THERE WERE NO TREES BUT THE TIMBER WAS STILL CUT — CASE II s:'I4
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8 This case is similar to the one above, but with one additional detail. This concession was at some point legally represented by the same Jose Alberto Bellodas Irrasabal © Toby Smith/EIA from Case 1, who, while accompanying the Supervision visits of Supervisory Report 008-2010-OSINFOR-DSCFFS139 other concessions he represented, admitted the POAs were false Exporters: INVERSIONES WCA EIRL '"7)'++8&$7)=O3dB=eE+),- 0!'(+)#4'#)#4!+)2'+)p8+#)#4$)",&/'() practice for all concessions, fully accepted by the pertinent Importers: AYALA MANAGEMENT CORPORATION forest authorities. He also asserted that none of the region’s Exported to the US: 202.424 m3 of cedar concessionaires had actually cut in their POAs 1, 2, or 3 (see case: Confessing to his false POAs). ?4$)+8*$&>!+!,"),-)C=6)`)!")#4!+)0,"0$++!,")7$/,"+#&'#$7)#4'#)","$),-)#4$)[Y)#&$$+)'0#8'((.)$;!+#$7)!")#4$) $(7:)/$'"!"%)#4'#)#4$&$)!+)",)2'.)#4$) concessionaire could justify the extraction of cedar or any other species – yet he claims to have traded almost 2,040m3 of wood. Although there were initially 4 cedar trees found close to the GPS coordinates indicated on the POA, once the supervisors compared the volumetric features (diameter at F&$'+#)4$!%4#)'"7)0,//$&0!'()4$!%4#f),-)#4$)#&$$+)!")#4$) $(7)#,)#4$)(!+#)!")#4$)C=6:)#4$.)0,"0(87$7)#4'#)#4$.)2$&$)!")",)2'.)')/'#04)'"7)#4'#)#4$!&) location in relation to the marked GPS points was merely a coincidence. As in the previous case, there were no trees, stumps, or signs of logging in the POA. According to the Balance of Extraction, “the concession of Mr. Hugo Sanchez Zegarra has extracted… 99.892% for cedar, 99.566% for cumala, 42.687% for lupuna and 99.4% for shihuahuaco.” 140 However, according to =O3dB=eE+) "7!"%+:)!#)!+)!/*,++!F($)-,&)#4$)0,"0$++!,"'!&$)#,)p8+#!-.)#4!+)$;#&'0#!,":)24!04)0'/$),8#)#,)b[`

7.9 THE 21 APPROVED MAHOGANY TREES THAT SOMEHOW ESCAPED SUPERVISION F:"
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'1%'5KF8 While the Supervisory Report of the POA in this concession claims to have found all of the trees recorded in the sample, it is noteworthy that the sample design does not include a single harvestable tree of the two most valuable species in the POA: mahogany and cedar.

42 Supervisory Report: 003-2008-INRENA-OSINFOR-USEC142 Exporters : MADERERA BOZOVICH SAC Importers: BTP Inc Exported to the US: 62.114 m3 of cedar

OSINFOR´s current Manual for the Supervision of Forest Concessions mandates that – given the importance of mahogany – the supervisor must design two sets of tree samples for the concessions authorized to log mahogany: one set for all the species and a second set focusing only on mahogany. The mahogany sample set, according to the manual, must include at least three fajas )A,&)#&'"+$0#)(!"$+f)2!#4) >$)#&$$+)$'04:)!#) is, a minimum of 15 trees. It is true that OSINFOR’s web page has not posted the current /'"8'(:)F8#)536)%,#)'00$++)#,)!#)#4&,8%4)'"),- 0!'()&$T8$+#)-,&)*8F(!0)!"-,&/'#!,"<) In any case, a review of the Supervisory Reports found frequent references to the manual, showing that the supervisors are familiar with it. 143 In addition, among the criteria to be considered during the selection of the sample is the commercial value of the species present in the POA. 21 mahogany trees were approved for POA 5 in this concession, for a total volume of 150.406 m3; of which 149.941 m3 were supposedly extracted. Likewise, six cedar trees with a total volume of 29.520m3, of which 15.236 m3 were extracted. None of these trees were included in the 27-tree supervision sample, “of which 10 are stumps (1 ana caspi, 2 azucar huayo, 2 estoraque, 1 ishpingo and 4 shihuahuaco), and the remaining 17 are still standing and correspond to the species ana caspi (3) azucar huayo (2) cedar (1) estoraque (2), ishpingo (3), pumaquiro (4), quinilla (1), and shihuanhuaco (1).” 144 The only mahogany tree included in the survey was a seed tree. Despite having zero information about the 27 most valuable trees in the POA, the supervisor concluded that the volumes of timber the concessionaire 7$0('&$7)4$)4'7)$;#&'0#$7)2$&$)p8+#! $7<)

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'1%'5KF'14'424;; '% " . OSINFOR´s report on this concession demonstrates all of the ingredients for laundering illegal timber: a POA that lists trees that don’t exist, 146 over- estimation of the size of existing trees, 147 )')-'(+! $7)*&!,&)>!+8'()>$&! 0'#!,")F.)6?BBO: 148 no sign of logging activities in the POA in question, 149 and a Balance of Extraction showing the movement of 770.589 m3 of wood. 150

Supervisory Report: 094-2010-OSINFOR-DSCFFS145 Of the 45 individual trees in the supervision sample, only 31 were found in the forest: 30 still standing and 1 naturally fallen. Exporters: MADERERA BOZOVICH SAC Among the 14 missing are the 3 harvestable shihuahuacos and 151 Importers: BTP Inc 11 of the 14 cedars (8 harvestable, 3 seed trees). The absence of stumps, logging camps, or any evidence of the passage of CENTRO LAMINADOS Y PANELES LGP (,%%!"%)/'04!"$&.)0," &/+)#4'#)#4$)#!/F$&)!")#4$)I'('"0$),-) LA VEGA CENTRO Extraction was not taken from this POA. 152 NORTH AMERICAN WOOD PRODUCTS LLC An anecdotal detail worth noting is that the technical report Exported to the US : 20.621 m3 of cedar ,-)6?BBOE+)*&!,&)>!+8'()>$&! 0'#!,")!+)7'#$7)G$0$/F$&)[[:) 2009, but claims to analyze a POA document dated the 28th of Situation: Suspended by OSINFOR Resolution December, 2009. According to the documents, the POA was approved on December 30, 2009. Quick turnaround, indeed.

43 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS

7.11 THEY PLANTED CEDAR “STUMPS” IN THE GROUND K 4'_<'I8F8U8'2
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%<'"%2%'0' <''4%4'4'#8' In this case, OSINFOR’s original Supervisory Report found no major problems in the concession. It was a subsequent investigation which revealed that \b),-)#4$)0$7'&)+#8/*+)-,8"7)!")#4$)+8*$&>!+$7)C=6)2$&$)!")-'0#)7!+D+),-)&,8"72,,7)08#)-&,/)(,%+)'"7)*('"#$7)!")#4$)%&,8"7)-,&)#4$)F$"$ #),-)#4$) supervisors. According to Directorial Resolution (RD, by its initials in Spanish) 149-2011-OSINFOR-DSCFFS from September 26, 2011, which initiated the Administrative Procedure (PAU) against the concessionaire, OSINFOR found irregularities in reviewing the supervision and decided to conduct another >$&! 0'#!,")>!+!#< 154 This PAU is being processed as we write this report. According to the Balance of Extraction for POA 2, Oroza Wood Supervisory Report: 209-2010-OSINFOR-DSCFFS153 #&'7$7)`[a$)F$$")8+$7)!-)!">$+#$7)!")#4$)+8+#'!"'F($) management of the concession. The RD not only suspended the POA in question, but also suspended the transport permits (GTFs) for all approved POAs as well as the Forest Management Plan for the entire concession, arguing that the severity of the problems in this POA affects the entire concession. The RD thus “proposes to suspend the execution of the General Forest Management Plan, as the concessionaire’s actions do not guarantee that he has formulated POAs with the information necessary to ensure the sustainable use of the forest resources, nor that his execution is suitable. Under such a suspension, the concessionaire will not be able to harvest by any method the POAs that were previously approved and correspond to the Annual Harvest Parcels described in the general management plan. Consequently, this injunction includes the approved POAs and corresponding GTFs.” 157 6+)8+8'(:)#4$)-'(+$)!"-,&/'#!,")!")#4$)-,&$+#)'8#4,&!#.E+)#$04"!0'()&$*,&#)XiaH[XXYH6UHGUBBOH6?BBOH3vN3?=OHO$7$)3T8!#,+PSg6:) ($7)G$0$/F$&)`X)[XXY:) /8+#)F$)",#$7<)?4$)&$*,&#)0,"#'!"+)#4$)&$+8(#+),-)#4$)*&!,&)>!+8'()>$&! 0'#!,"),-)C=6)[)'"7)&$0,//$"7+)'**&,>!"%)#4$)C=6:)4'>!"%)-,8"7)'((),-)#4$)#&$$+) !")#4$) $(7<))3-)'((),-)#4$)#&$$+)4'7:)!")&$'(!#.:)$;!+#$7:)#4$)0,"0$++!,"'!&$)*&$+8/'F(.)2,8(7"E#)4'>$)4'7)#,)%,)#4&,8%4)#4$)#&,8F($),-)*('"#!"%)+#8/*+<

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44 Supervisory Report 286-2010-OSINFOR-DSCFFS158 7.12 NOBODY TOUCHED A SINGLE TREE, BUT WOOD Exporters: MADERERA BOZOVICH SAC WAS STILL EXTRACTED - II Importers: BTP Inc b%'t#4%4'R4#"% '2
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'T...'#h'0' !+!#:)#4$.)-,8"7),"(.)`Y:)'(()+#!(()+#'"7!"%) )!"0(87!"%)\i)4'&>$+#'F($)0$7'&+)'"7),"$)0$7'&)+$$7) tree. The other 13 trees in the sample – 10 cedars and 3 andirobas – didn’t exist. There were no signs of extraction activities in the area . What stands out in a case with illegalities as blatantly obvious as this one is that OSINFOR´s Supervisory Report failed to point them out directly, failing #,)'77&$++)#4$)*&,F($/<)@4!($)*'&#),-)#4$)&$*,&#)7,$+)&$-$&)#,)#4$)I'('"0$),-)5;#&'0#!,")'"7)!"),#4$&)*'&#+)#4$) $(7) "7!"%+)'&$)/$"#!,"$7:)!")",)*('0$) are these two facts put together to demonstrate that this is clearly a case of illegal timber laundering. For the detail oriented: The Balance of Extraction for this concession shows an incongruity between the number of the POA that was registered and the number of the POA that actually corresponds to the year’s harvest. The problem stems from a 171 m3 of cedar that were “returned” in 2006. Under current regulations, when a concessionaire detects illegal logging by third parties on their land, the state seizes the stolen timber and returns it to the concessionaire. 161 This return was registered as a new POA in the Balance of Extraction, after which all future POAs were one number ahead. Thus, the plan approved as POA 5 by the Forest Authority becomes POA 6 on the Balance of Extraction. This appears to be a simple clerical error, but it is a &$($>'"#),"$)!")#4'#)!#)0&$'#$+)0,"-8+!,")'"7)4!"7$&+)#4$)*,++!F($)'0#!,"+),-)/,"!#,&!"%),&)$"-,&0$/$"#)F.),- 0!'(+),&)0!>!()+,0!$#.<))@$)4'>$)-,8"7)#4!+) same problem in several concessions.

7.13 NO LOGGING HAPPENED DUE TO LACK OF FUNDS, BUT WOOD WAS STILL TRADED b%'["
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<'' enter the concession and cut trees, but simultaneously managed Exporters : EXPORTMADERAS S.R.L. '% 42' %'S...'#h'0' <8 MADERERA VULCANO S.A.C In this concession all the trees in the supervision sample were Importers : SPECIALTY WOODS INC found still standing by OSINFOR. The representative of the DAN K MOORE LUMBER CO. INC concession present at the supervision explained that they couldn’t actually conduct any logging “due to economic problems Exported to the US: 11.031 m3 of cedar and the recession in the [forestry] sector.” 163 But despite "$>$&)4'>!"%)$"#$&$7)#4$) $(7)#,)$;#&'0#)#!/F$&:)'00,&7!"%)#,) the Balance of Extraction the concessionaire still managed to mobilize 2,120.740 m3 – of an approved total of 2,969.390 m3 – which included 67.200 m3 of cedar, out of a total of 67.210 m3 approved. 164 ?4$)0,"0$++!,"'!&$)7!7)",#)*$&+,"'((.)*'&#!0!*'#$)!")#4$) $(7)+8*$&>!+!,") )4$)+$"#)')&$*&$+$"#'#!>$)!"+#$'7) )F8#)4$)+!%"$7)#4$),- 0!'()7,08/$"#+)'#) the beginning and the end of the supervision, where a paragraph was added by hand stating that “he signed the documents accepting the veracity of #4$) $(7)7'#'< 165 One unclear aspect of this supervision concerns the endlessly confusing issue of how the harvest years (zafra) correspond to the POAs. While the &+#)*'&'%&'*4),-)#4$)O8*$&>!+,&.)e$*,&#)+#'#$+)#4'#)=O3dB=e)!+)-,08+!"%),")#4$)6""8'()=*$&'#!"%)C('")-,&)#4$)+!;#4)R'-&':)[XXqH[XXY: 166 the report 8+$+)#4$)67/!"!+#&'#!>$)e$+,(8#!,")'**&,>!"%)#4$)C=6)-,&)#4$) -#4)R'-&':)[XXqH[XXY< 167 ))3")'77!#!,":)#4$)($##$&)-&,/)=O3dB=e),- 0!'((.)",#!-.!"%)#4$) concessionaire of the supervision refers to POA 5, zafra 2008-2009 168 while the Balance of Extraction records that the 2008 zafra corresponds to POA 8. 169 Comparing the volumes from the Balance and the details from the RA, it can be seen that all of these references are in practice to the same POA; 4,2$>$&:)#4$+$)#.*$+),-)!"0,"%&8!#!$+)7,)",#)0,"#&!F8#$)#,)#&'"+*'&$"0.:)'"7)/'D$)!#)T8!#$)7!- 08(#)-,&)'(() )'8#4,&!#!$+:)F8.$&+)'"7)0!>!()+,0!$#.) )#,) effectively monitor what is happening.

45 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS

7.14 HE GOT THE LUMBER FROM ROTTING STUMPS Concession of Lombardo Villacorta Pérez, contract 16-IQC/C-J-204-04: "
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<' %'TW..'#h'0' <' %%'% 42%<8 According to the results of OSINFOR’s supervision of this 170 Supervisory Report: 316-2010-OSINFOR-DSCFFS concession, all of the wood that was declared as extracted from Exporters: MADERERA BOZOVICH SAC POA 5, zafra 2008-2009, was illegally cut and laundered. A full A&A INVESTMENTS-PERU SAC 13% were cedar stumps that had clearly been felled years prior to the approved period of harvest. 171 Moreover, according to MADERERA VULCANO S.A.C the conclusions in the report prepared by OSINFOR, the stumps Importers: BTP Inc “appear to have been planted”. AYALA MANAGEMENT CORPORATION The supervisor described the stumps in the following words: THE REX LUMBER COMPANY “the level of sap rot is well advanced, if not completely rotten; Exported to the US: 43.62 m3 of cedar the heartwood also exhibits advanced decay. Moreover, no evidence has been found of branches or foliage that would have come from this tree, from which we can observe that it was harvested a long time ago. Also, in the clearing generated by the felling of the tree and its canopy one can already see natural regeneration occurring, principally by pioneering species approximately 4-5 meters in height and 10 to 12cm in diameter. It should also be noted that there is no evidence of sawdust, which would have been the case if they had cut the logs into pieces [for transport]. Nor were there any skidtrails in evidence to indicate that logs were mobilized for transport.“ 172 The supervisor continued saying that “it is also very important to mention that no evidence exists justifying the volume of the wood extracted, clearly demonstrating that the harvested wood came from an area other than PCA No. 5.” 173 ))?4$)+8*$&>!+!,") ($)!"0(87$+)')($##$&)-&,/)=O3dB=e)",#!-.!"%) the concessionaire of the planned Supervision visit. 174 Although the letter has a signature of receipt in the name of the concessionaire, he did not participate nor delegate anyone to participate on his behalf. ?4$)+!#8'#!,")0,"0$&"!"%)#4$)+#8/*+)'(+,)0,"#&'7!0#+)#4$)*&!,&)>!+8'()>$&! 0'#!,")#4'#)+8**,+$7(.)#,,D)*('0$)F$-,&$)#4$)C=6E+)'**&,>'(:)!")24!04)#4$) (,0'()-,&$+#&.),- 0!'()0('!/$7)#,)4'>$)-,8"7)'((),-)#4$)#&$$+)!")#4$) $(7)'"7)&$0,//$"7$7)'**&,>'()-,&)4'&>$+#< 175 If the analysis regarding the age ,-)#4$)+#8/*+)!+)0,&&$0#:)!#)!+)!/*,++!F($)#4'#)#4$&$)2$&$)+#'"7!"%)#&$$+)'#)#4$)#!/$),-)#4!+)>$&! 0'#!,"<)677)#,)#4!+)#4$)*&,F($/+)2!#4)#4$)$;!+#!"%) >,(8/$#&!0)/$'+8&$/$"#+) )qXo),-)#4$)#&$$+)-,8"7)2$&$),8#+!7$)#4$)'00$*#'F($)4'&>$+#)&'"%$)78$)#,)!"+8- 0!$"#)7!'/$#$&)'#)F&$'+#)4$!%4#)AGIrf:)'"7) 36% were not yet tall enough. 176 In the Balance of Extraction for this concession, as in various others, there is confusion and lack of correlation between the zafra and the POA. The lack ,-)0,&&$+*,"7$"0$)F$#2$$"),- 0!'()7,08/$"#+)/'D$+)!#)$;#&',&7!"'&!(.)7!- 08(#)#,)/,"!#,&)'0#!>!#!$+)#'D!"%)*('0$)!")#4$)0,"0$++!,"+<))

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TOTAL POA AS PER TOTAL Skk CEDAR CEDAR NUMBER OF AUTHORIZED BALANCE OF REAL POA ZAFRA AUTHORIZED TRADED CEDAR TREES TRADED EXTRACTION fFFW&d/HH& WOOD EN-i.-Ee NF/&S a QRRT T\_

POA 5 a QRR\ ------Q,R^_<_UT _TR

NF/&c POA 5 QRRU SST

Source: Balance of Extraction Supervisory Report 316-2010-OSINFOR-DSCFFS, pages 0045 – 0047. Volume in m3. Note that according to the Balance of Extraction for this concession, the 2009 zafra corresponds to POA 6. However, the Resolution cited by the Balance for approving POA 6 (Resolution Sub-Directoral Nº 079-2010-GRL-GGR-PRMRFFS-DER-SDPM, April 15 2010) actually approves POA 5 for zafra 2009-2010.

46 !LM$M&$/26,($N()5 $;205"-,$5-$8")(0"$$

While OSINFOR is the body charged with uncovering the great majority of Two cases that deserve more detailed information are Comunidad Nativa the irregularities which occur in the forest sector, the forestry authority Sumac Allpa and Productores Forestales Atacuari. itself also has the right and responsibility to do so. EIA was able to In the case of the &.)3*'2)#41&i#994)*%=&E49(6&/::!(, the POA was &$>!$2)')7,++!$&),-),- )0!'()7,08/$"#+)24!04)F&!"%)#,)(!%4#)')+$&!$+),-) approved based on the recommendations in Technical Report Nº cases in Loreto in 2010 in which the national Forest Authority (DGFFS) 073-2009-AG-DGFFS-ATFFS/IQUITOS-Sede Iquitos/KBTP dated December had itself investigated actions by the Loreto’s Regional Government’s 28, 2009, whose author Kenjy Bruno Terán Piña stated that he had Forestry authority (PRMRFFS) and found serious cases of false >$&! )$7)!"H+!#8)#4$)#&$$+)'"7)!">$"#,&.) )$(7)2,&D)7,"$<)?4$)C=6)!"0(87$7) information. Despite the fact that this indicates the grave nature of 65 harvestable trees and a volume of 341.861 m3 of cedar. The Balance the problems in Loreto, this example is also hopeful, as it indicates that of Extraction for the year reported that the Sumac Allpa indigenous the administration in Lima is willing to act on the basis of trustworthy community had transported 341,846 m3 of cedar: that is, 99.99% of the information which it receives regarding possible irregularities. It is EIA’s '8#4,&!R$7)'/,8"#<)d,"$#4$($++:)#4$) )$(72,&D)#$'/)+$"#)-&,/)S!/')!") hope that the examples contained in the present report also merit the September 2010 documented the nonexistence of the harvestable and same level of attention. seed trees, neither as standing trees or stumps. 179 Clearly, however, the Apparently, DGFFS had cause to doubt the way in which several POAs volume was sold on the black market. for forest concessions and indigenous communities were approved by Similarly, in the case of N"#346%#"21&`#"21%(:21&/%(64("*&E/i – whose #4$)&$%!,"'()B,&$+#)68#4,&!#.),- )0$),-)3T8!#,+)A#4$)6?BBO)!")!#+)('+#)7'.+) magic cedar tree from a previous POA is featured in Case 6 above – the F$-,&$)7$0$"#&'(!R'#!,"f)78&!"%)#4$) )"'()7'.+),-)[XXY<))6-#$&)+$"7!"%) regional Forest Authority approved POA 5 on December 28, 2009, 180 based )$(72,&D)#$'/+)#,)!">$+#!%'#$)')"8/F$&),-)0'+$+:)dT(!7')I'&F'%$('#') on a Technical Report dated December 23, 2009. This Report was drafted Ramírez, the Director of Forest and Wildlife Management in Lima, sent the by the same engineer (Kenjy Bruno Terán Piña) who had supposedly )"'() )$(7)&$*,&#+)#,)@!(-&$7,)C'"78&,)QM&7$"'+:)Q4!$-),-)#4$)CeKeBBO:) 0,"780#$7)#4$)*&!,&)>!+8'()>$&! )0'#!,"),-)O8/'0)6((*') )!")')#,#'((.) noting their conclusion that the POAs contained false information. different remote watershed – just a few days earlier. 181 The harvesting of PRMRFFS responded by referring at least nine cases to the environment 215 cedar trees, with a total volume of 1,232.494 m3, was authorized for 7!>!+!,"),-)#4$)&$%!,"'()C8F(!0)C&,+$08#,&E+),- )0$+)!")3T8!#,+:)&$T8$+#!"%) this POA. The Balance of Extraction indicates that the company then formal actions be taken. (Some of these cases are also listed on the extracted a volume of exactly 1,232.459 m3 of cedar. 536H=O3dB=e)7'#'F'+$)78$)#,)#4$)*&,F($/+)-,8"7)78&!"%)#4$) )$(7) Nonetheless, when the DGFFS team conducted its inspection (work which supervisions conducted by OSINFOR.) The nine concessions/communities took 12 days to complete, although apparently engineer Terán Piña are as follows: /'"'%$7)#,)7,)4!+)*&!,&)>!+8'()>$&! )0'#!,")>!+!#)!")/804)($++)#!/$f:)#4$) ) Alex Tello Grandez (Concession No. 16-IQU/C-J-220-04) team found that “of a total of 237 trees of the species Cedrela odorata ) CN Santa Rosa de LoretoYacu (Permit No. 16-IQU/P-MAD-A-023-06) 7$0('&$7)!")#4$)C=6)24!04)4'>$)F$$")#4$),Fp$0#),-)>$&! )0'#!,":)[`a)#&$$+) ) CN Sumac Allpa (Permit No. 16-IQU/P-MAD-A-011-05) 7,)",#)$;!+#)*4.+!0'((.)!")#4$) )$(7)!")#4$)N?K)0,,&7!"'#$+)7$0('&$7)!")C=6) ) Aserradero y Carpinteria Don Pepe S.R.L. (Concession No. 16-IQU/C-J- 05 and the single cut tree [found] has a DBH less than the legal minimum 030-04) (…). No recent indications exist of forest harvesting (…). We suspect that 182 ) Forestal Valera S.A.C. (Concession No. 16-IQU/C-J-090-04) the volume transported was of illegal origin.” ) CN Nativa San José de LoretoYacu (Permit No. 16-IQU/P- _1' ;<'14 %'%2%" %<'"#$%'% 42%<'0#'1%%'2
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u The MAD-A-022-06) !"-,&/'#!,")24!04)536)4'+)F$$")'F($)#,) )"7)#,)7'#$)7,$+)",#)'((,2)8+)#,) ) Luz Angelica Cabrera Arcentales (Concession No. 16-IQU/C-J-214-04) estimate the percentage of timber from these concessions subsequently ) Valmer Ruthilio Bardales Arévalo (Concession No. 16-IQU/C-J-205-04) exported to the United States or another country. It is possible that the majority of the cedar has remained in a warehouse in Pucallpa; however, it is also possible that it has already left the country under several CITES PRMRFFS also suspended all transport permits associated with POA 5 of permits, laundered with documents from other concessions. At least '#)($'+#)#4&$$),#4$&)0,"0$++!,"+)#,)24!04)GUBBO)4'7)+$"#)!#+) )$(72,&D) one shipment of 109.195m3 of likely illegal cedar with documents from 178 teams. They are as follows: the Sumac Allpa indigenous community POA in question sailed for the ) Agrupación Madera Anidolly S.A.C. (Concession No. 16-IQU/C-J-022-04) Jalisco, Mexico-based company Grupo Tenerife in 2010. Earlier, in 2009, ) Manuel M. Garcia Linares (Concession No. 16-IQU/C-J-049-04) two shipments of cedar with Sumac Allpa documents were also exported ) Empresa Productores Forestales Atacuari (Concession No. by Grupo Vulcano to Oregon-based North American Wood Products and 16-IQU/C-207-04) Texas-based Intrading Hardwoods and Lumber. While the authorities had not conducted inspections in 2009, it seems likely that a similar laundering scheme was employed.

47 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS

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48 E(%2::*%2&*9('2&FN-v/&6#)6211*#)<&D02&?"*'0%&!*)>&("2(&*1& (&;2%:()3&286223*)'&?*#:#'*6(:&"*60)211,&;0*60&6#)%(*)1&)#& 0("721%(?:2&%"221<&D02&%2""(*)&*)&%02&02("%&%02&6#)6211*#)& *1&(&5#"21%&4)34:(%*)'&"*3'21&()3&1;(9!=&32!"211*#)1<

8: THE OPEXA CASE: INSIDE THE MAGIC FOREST

But Mantuano is not waiting with his arms Exporters : 8.1 WHO IS LYING: THE FOREST crossed. During the last year he has compiled AUTHORITY OR OSINFOR? MADERERA BOZOVICH SAC extensive information about both his case and FORESTAL DEL ORIENTE S.A.C. the Loreto forest sector. He has documented a Mantuano got into the forestry business remotely, from Italy, through a childhood friend Importers : series of irregularities which he has submitted, in highly organized and thorough fashion, to who came to Peru named Felice Cosentino. BTP Inc Cosentino obtained a timber concession GLOBAL PLYWOOD & LUMBER TRADING, LLC authorities not only in Peru but in the United States and Europe, in an attempt to draw (16-REQ/C-J-039-04) at public auction in 2006 Exported to the US: attention to the corruption and impunity in the Requena District of the Loreto region, and they became partners in OPEXA SAC. In 120.030 m3 of cedar with which illegally sourced wood is sold in Peru. The Mantuano case is instructive in October 2007, when Mantuano moved to demonstrating the daily, systematic illegality Iquitos, Cosentino was the General Manager which exists throughout the forest sector. and managed the day-to-day operations, while Mantuano was the Comercial Manager. Francesco Mantuano, an Italian living in (Mantuano would become the General Manager Peru with a timber concession in Loreto, ^,5742"24;; '%4C"
:D'"' in October 2010, when Cosentino left the discovered after his arrival to the country that company.) his ex-partner had been performing magic was not an area for a timber tricks, pulling hundreds of trees out of thin It was only in May 2010 that Mantuano began to air and into their concession, Operaciones y 2
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""%' in their concession, as the result of a contract is, although these trees existed on paper in the for the sale of standing timber which his then- !">$"#,&!$+) )+8**,+$7(.)>$&! $7)F.)#4$)B,&$+#) 4
<'0 2"4;D' "1'1%"' partner recommended he sign with timber Authority – they were not actually growing merchant Mauro Paredes Sandoval. in the physical forests. He also discovered maps, wherever they see a Paredes’ company entered OPEXA’s forests that, despite the fact that those trees had in July and worked for only eight days, but never existed and no one had ever entered pair of streams, they put a soon afterwards was pressuring OPEXA for #4$)0,"0$++!,")#,)$;#&'0#)#4$/:)F.)'((),- 0!'() the GTFs (permits) to transport the harvested accounts and paper records they had been 2
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'1%%8''X1%'4#%' wood. Mantuano found this curious, because felled, extracted, transported, and sold. thing happened with my not only is eight days hardly enough time to K'"#8'",)4'+),F#'!"$7)#2,),- 0!'()7,08/$"#+) log hundreds of trees – the average harvest which directly contradict each other, 2
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8''O'"'"'"#"$;%' operation lasts months – but the low water although both claim to be the result of in-situ levels and lack of rain at that time of year in >$&! 0'#!,"+c),"$)-&,/)#4$)B,&$+#)68#4,&!#.)A!") '14 %' <'0#'1%%8' S,&$#,)/'D$)!#)7!- 08(#)#,)#&'"+*,&#)#!/F$&),") this case the Loreto Regional Government’s the rivers. After putting two and two together, ,- 0$:)CeKeBBOf)'"7)#4$),#4$&)-&,/)=O3dB=e<)) j[m'542"24;; '%4C"
:D'1%' Mantuano concluded that Paredes was only Clearly, one of them is lying. Since April 2011 concession has been useful interested in obtaining OPEXA’s GTFs in order Mantuano has been asking the authorities to to launder timber which had already been decide which one is correct and which one is 
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' illegally extracted from other areas. Mantuano not, but has yet to receive a response. was opposed to giving Paredes the GTFs and FRANCESCO MANTUANO #4&$'#$"$7)#,) ($)')-,&/'()0,/*('!"#)'%'!"+#)

49 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS

his ex-partner if Cosentino handed them over. 2010, he was elected mayor of the district of capirona presented: he recommends granting 6(#,)d'"'.)!")#4$)S,&$#,)&$%!,":)'"7)#,,D),- 0$) the permit for only 1,526 m3 instead of the 1,607 In parallel, OSINFOR was conducting a on January 1, 2011. m3 requested. He even includes photos of the Supervision on the concession’s POA 5, which capirona in the report. It would appear that the had been prepared late in 2009 by engineer attention to detail in the inspection yielded very Victor Raul Noriega Montero and submitted *&$0!+$) %8&$+<))d$>$$($++:)#4$)+8F+$T8$"#) to the Forest Authority by Felice Cosentino. \2&NF/1&()3&`(:12&E*')(%4"21& !"+*$0#!,")F.)=O3dB=e)0,8(7)",#) "7)$>$"),"$) According to Mantuano, his partner had assured As described in the Box VII “Logging a capirona tree in the POA 5 parcel. him that there was no need to worry, as the POA Concession, on Paper”, before being able to was perfect. But when Mantuano managed to In fact, a few days after the POA was approved, 08#)#!/F$&)')0,"0$++!,"'!&$)/8+#)4'>$),") ($) get a copy of OSINFOR’s Supervisory Report, he Mantuano began receiving calls from parties ') >$H.$'&)U$"$&'()B,&$+#)K'"'%$/$"#)C('") found statements like “the technical document who wanted to “comprar volumen” [buy and an Annual Operating Plan (POA) with a (POA), being a sworn statement, contains false volume] – that is, buy only the GTF papers 100% GPS-referenced census of commercial information presented to the ex-ATFFS-Requena which authorize the transport of timber, but not trees to be extracted. OPEXA’s POA 5 contains by the concessionaire.” the timber itself. Someone, perhaps from the the signature of the consulting forestry Forest Authority itself, was clearly spreading Cosentino told Mantuano that the OSINFOR engineer Víctor Raúl Noriega Montero, even the word that a new source of magic trees had inspector had asked for a bribe of 10,000 i% ' though Mantuano asserts that this person been approved and would soon be on the black I;% (approximately US$3,700) in order to issue never entered the concession. OPEXA’s POA 5 market. a positive report about the POA 5, and that was approved by the Forest Authority after a Paredes had lent him the money in exchange It is important to note that POA 5 covered the for the right to extract timber from OPEXA’s *'&#),-)#4$)0,"0$++!,")#4'#)2'+) '##$+#)'"7) concession. But if POA 5 were ”perfect”, why most accessible by river routes. According to would the inspector request a bribe? And if the reconstruction that Mantuano has made of Paredes had lent the money to pay off a bribe, POAs 1, 2, 3, and 4 with the limited papers he has why did the report still come out unfavorable been able to get his hands on, legal timber was to OPEXA? 182 never removed from these POAs, although the GTFs based on approved volumes were, indeed, utilized. While Mantuano had put in the money \!"%) OSINFOR’s Supervisory Report of OPEXA’s POA no value to third parties. What papers were 5 took a sample of 76 trees in order to verify stolen? Among other OPEXA documents, all of -./&V#4")2=23&322!&*)%#& their existence, location, and diameter, but company’s invoices issued “from number 001 to FN-v/Y1&5#"21%&*)&12("60& was only able to locate 41 of them: 46.05% of number 258 from the years 2004 to 2009”; “the )#)@28*1%2)%&%"221,&%#&72"*5=& the sample simply did not exist. As shown in invoices for purchases from those same years”; "1%@0()3&%0(%&)#&:2'(:&:#' - the image on p. 51, the only species found in and “the cash ledger for purchases and sales”. '*)'&0(3&(6%4(::=&%(>2)& !:(62<& © Toby Smith/EIA #4$) $(7)!")#4$)T8'"#!#.)+#'#$7)2'+)08/'('<)) In October 2010, Mantuano succeeded in 5"%!"$$&)r8%,)eX,+)C'!/')7!7)",#) "7)'".) getting Cosentino to leave the company. capirona, or 71% of the Shihuahuaco, or 33% K'"#8'",)'(+,)('#$&) ($7)')-,&/'()0,/*('!"#) of the cedar. The forestry consultant invented +8**,+$7)*&!,&)>!+8'()>$&! 0'#!,")F.)$"%!"$$&) alleging that Paredes again entered Mantuano’s numbers, the Forest Authority inspector lied Roy Robin Hoyos Trigoso and sign-off by concession in February 2011 – when the river 24$")4$)0('!/$7)#,)4'>$)>$&! $7)#4$)$;!+#$"0$) Requena’s Technical Administrator Henry ,2)2'+)4!%4$&) )'"7)&$/,>$7)2,,7)2!#4) of these trees, and the Technical Administrator Martín Lagunas Pilco (who now holds a senior neither an authorization nor a GTF. did not ensure that the information was actually position in PRMRFFS). 183 Hoyos’ technical 0,4$&$"#<)))Ad,#$c)=O3dB=e),- 0!'()eX,+)C'!/') While all of this was going on, Cosentino was report makes only one correction to OPEXA’s has previously been implicated in fabricating busy with his electoral campaign. In September POA, concerning the number of cubic meters of

50 information contained in POAs elsewhere and of the scam, OPEXA could still be operating Francisco Palomino García. that he signed as a private forest consultant – normally. That is, despite the fact that OSINFOR Mantuano has almost depleted all his savings +$$)I,;)w33c)B'(+$)g$&! 0'#!,"+)!")S,&$#,<)U!>$") 4'+)'(&$'7.)>$&! $7)#4'#)'(/,+#),"$H4'(-),-)#4$) and has no income in Iquitos to support himself. the obvious concern with assuming that any trees declared do not exist, OPEXA could still Had he sold the “volume” from his POA 5 GTF on document signed by him would be credible, EIA have sold the ‘volumes’ approved fraudulently the black market, he would have obtained about >!+!#$7)=C5w6)#,)0,&&,F,&'#$)#4$)0'+$) &+#H and thereby helped launder hundreds of cubic 200,000 soles (aprox. US$ 75,000). As he says, hand). meters more of illegal cedar and other wood. this money would have made his life a lot easier, However, almost two years later, OSINFOR During the 21 months since suspending his own but would have also destroyed his conscience. has yet to issue an Administrative Resolution operations, Mantuano has also denounced three His actions have also turned him into a pariah &$%'&7!"%)#4$)0,"+$T8$"0$+),-)#4$) "7!"%+) successive Directors of Supervisions at the among his colleagues in the Iquitos timber of their Supervision on OPEXA. Neither, to be &$%!,"'()=O3dB=e),- 0$)-,&)",#)*&,780!"%)#4$) business, and he has even been threatened. sure, have they forwarded the case to Loreto’s aforementioned Administrative Resolution with Public Prosecutor for follow-up. Had Mantuano the results of OPEXA´s Supervision: José Ríos not voluntarily halted operations upon learning Trigoso, Hernán Alberto Gutierrez Merino and

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51 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS

8.2 “NO ONE’S EVER SET FOOT Raul, upon whose traditional hunting lands the should be found in the forest. concession is superimposed. From here, the HERE”: A JOURNEY TO POA 3 In remote parts of the Amazon such as this, team walked inland using satellite images and timber must be transported by river to any GPS units to attempt to locate stumps of some point of sale. Even on a map, it is clear that of the 58 cedar trees that had supposedly been 5;%4%' ""' www.shootunit.com/eia to view C=6)`)!+)'#)($'+#)-,8&)#,) >$)D!(,/$#$&+)'+)#4$) cut and taken from the POA 3 parcel. 4
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'N%8 traded 322.030 m3 of cedar in total from this or cocha, that occupies much of the western POA. half of the concession near Victor Raul. One would expect that the extraction of thousands The rampant corruption and timber laundering In 2008, Maderera Bozovich presented GTF of trees from POA 3 would have necessitated within Peru’s forest sector is an openly documents totaling 53 m3 of cedar volume temporary clearings and construction of skid acknowledged secret, but documenting the from OPEXA’s POA 3 to support CITES permits trails to either the Shincuya or the Guanache, full chain of evidence required to demonstrate -,&)$;*,&#+)#,)!#+)NO)'- (!'#$:)I,R,>!04)?!/F$&) the remains of which would be visible in some it has long proved a challenge. Francesco Products. form three years later, even if a tractor had not Mantuano’s willingness to not only denounce his been used (although the permanently boggy own concession but open it to EIA for inspection soil would make it impossible for forest tractors allowed for a groundbreaking look into a system \'&!,8+)/'*+),-)#4$)*'&0$()) ) It took EIA several days even to arrive at POA 8.2 above) from which Mantuano blocked the an area approximately two by two kilometers 3, because between the site and Rio Guanache extraction or sale of any timber), the EIA-CITES (about 400 ha) – dense with georeferenced lies dense Mauritia palm swamp called aguajal . database shows that the majority of US- points color-coded by tree species. The maps Adjacent to the aguajal for the north-south bound shipments that supposedly contained indicated harvestable trees, trees harvested, length of the concession lies the essentially OPEXA timber were linked to documents that trees left uncut, and seed trees. POA 3 also 184 impenetrable and treeless expanse of the correspond to the adjacent POAs 3 and 4. In included a 38-page list containing every tree cocha , into whose grassy muck anyone and order to investigate, EIA journeyed to these species, its precise volume, suitability for anything over 50 kilos sinks deep. It would be POAs – at the center of Mantuano’s concession – harvest, and GPS coordinates. Tornillo, cumala, $;0$$7!"%(.)7!- 08(#:)+(,2)'"7)$;*$"+!>$)#,) in October 2011. quinilla, lupuna, marupa, and capirona were extract timber to the west. EIA conducted aspects of the mission in a covert some of the most common among the 2070 manner, in order to protect against potential trees on the list, totaling 7866.880 m3 of The terrain of POA 3 itself is low hills intimidation or reprisal both investigators commercial volume. whose steep slopes descend in and out of small pockets of swamp. These hills, in and the local guides and community members The yearly Balance of Extraction indicates that practice, double the distances shown on whom the team employed during the journey. 322.013 m3, or 99.93% of the cedar volume in maps, suggesting that it would require the No guides, boat drivers or other individuals POA 3 was extracted and sold. This precision 0,"+#&80#!,"),-)iH\X)D!(,/$#$&+),-)7!- 08(#)#&'!() traveling with EIA are aware that the ultimate would indicate that (a) all trees in the list were to move logs or sawn timber to Shincuya creek purpose was to collect documentation of actually harvested, and (b) the forest engineer to the east. There is almost no potable water or possible illegal logging and timber laundering. consultant who wrote the POA was so precise '#)'&$')-,&)$+#'F(!+4!"%)0'/*+< On a map (see interactive version at the link !")4!+),&!%!"'() $(7)/$'+8&$/$"#+)#4'#)#4$) above), the OPEXA concession is located in resulting lumber volumes reached an accuracy Indeed, there was no sign that anyone ever had lowland rainforest between two small winding level of two decimal places. (A precision noted logged in here. EIA’s team found no signs of rivers, the Guanache/Buncuya and the Shincuya. in the majority of cases involving POAs with skid trails, walking trails, or timber inventories Public boat transport halts one to two days fabricated data, as the case studies found (either in POA 3 or the adjacent POA 4 through upriver from Iquitos at Tamanco, a one-phone above in this report show.) In OPEXA’s Balance, which the team passed en route). In three frontier logging town on the banks where the most volume of other species is indicated as days of surveying the POA 3, no stumps were Guanache empties into the Ucayali River. EIA extracted and sold as well. These documents all seen. Moreover, the ecosystem type was not travelled four days upriver from Iquitos, past suggest that evidence of inventory (e.g. marking one in which several of the species contained Tamanco, to the native community of Victor tape, trails), harvest (e.g. stumps) and transport in the OPEXA documents would be likely

52 to be encountered. For example, capirona when EIA could not do so. Again, no evidence \<^<&H#''*)'&-72"=;02"2&-862!%&f02"2& (Calycophillum spruceanum ), 229.039 m3 of of logging was encountered, nor a single cedar .%&E0#4:3&M2 which was supposedly taken from POA 3, is tree. %$"$&'((.)-,8"7),"(.)'(,"%)#4$) ),,7*('!"+),-) After a week of work to arrive and survey the The lack of logging in POA 3, or indeed in major rivers such as the Ucayali. Neither did the POA, EIA could corroborate what our local surrounding areas, invites the question: where #$'/) )"7)'".)0$7'&)#&$$+:)+#'"7!"%),&)08#<) guides said: did the timber sold by Mantuano’s business In order to prove the fabrication of the POA associate actually come from? This we will data with additional certainty, EIA conducted never know for sure. But it was clear that ')+8&>$.)8+!"%)')&'"7,/)+#&'#! )$7)+'/*($<) logging was occurring everywhere except in The forest inventory, as per the norm, had ^i'
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53 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS

The human toll is as evident as the the young men in the community were able to men who lacked any intent to actually environmental consequences. The men and to earn some cash income in the logging manage it, even if they’d had the capital to women in the logging camps are paid poorly, camps, the community has not prospered in do so. Its purpose, from the start, has been to 2!#4,8#)F$"$ #+:)+'-$#.)$T8!*/$"#),&)'7$T8'#$) any appreciable way. Village chiefs and elders enable the fabrication of documents allowing +8**(!$+<)?4$.)'&$)$;*$0#$7)#,) +4)'"7)48"#)-,&) reiterated to EIA how many bare necessities are someone to sell timber “volume” to traders bushmeat, depleting biodiversity throughout still lacking. who need to get illegally-logged wood from the zone. When injuries ensue, a common somewhere else into the market. The entire occurrence, people are expected either to work +.+#$/)!+)+8**,&#$7)F.),- 0!'(+)2!((!"%)#,)+!%") through the pain or are sent away without \$(.) the perversities of Peru’s concession system injured in logging camps. One young man’s – and by no means unique. It has always been "%$&)2'+)+2,(($")'"7)%'"%&$",8+)24!($) ')*,,&(.H0,"+#&80#$7)*!$0$),-) 0#!,"<))?4$) another had recently been operated on after concession is exceedingly remote and a sizeable breaking his leg when a log fell on him. Neither portion of it is actually treeless cocha or aguajal was older than 16. with no commercial timber value. Its value for biodiversity and habitat conservation is B!"'((.:)#4$)7$>$(,*/$"#'()F$"$ #+),-)#4!+) probably far higher than what any legal logging environmental pillaging remain far from could bring. OPEXA’s borders were drawn on a clear. Despite the fact that Victor Raul was map ten years ago and the area was auctioned located alongside a concession and many of

H#''2"1&("2&5"2A42)%:=&*)V4"23&()3&"262*72&)#&6("2&#"&02(:%0& ?2)2 %1<&/&:#'&52::&#)&%0*1&?#=,&Sc,&;0*:2&;#">*)'&(%&()&*::2'(:& 6(9!&*)&1#4%02")&H#"2%#<&-./&'(72&0*9&(&"*32&%#&.A4*%#1&;02"2& 02&0#!23&()&#!2"(%*#)&;#4:3&02:!&0*9&;(:>&('(*)<&& &D#?=&E9*%0B-./ 54 9. IGNORING INCONVENIENT LAWS: THE WATERSHED BANS, 2000-2010

© Toby Smith/EIA

Over the past decade, a large but unknown scanned and are publicly available through the immediately. Within weeks, congressmen quantity of cedar and mahogany has been online version of this report.) associated with the timber sector asked illegally extracted from protected watersheds, the Constitutional Court to declare the ban and sold using illegal documentation under 9.1 THE ORIGINAL BAN unconstitutional, arguing that it violated #4$)'>$&#$7)$.$+),-)%,>$&"/$"#),- 0!'(+<)?4$) Article 62 of the Constitution (establishing By the time negotiation of the 2000 Forestry vast majority of this wood was exported under #4'#)')0,"#&'0#)0'"",#)F$)/,7! $7)F.)('2+) and Wildlife Law N. 27308 began, the CITES permits to the United States, Mexico subsequently passed) as well as rights to unsustainable harvest of mahogany and cedar and Dominican Republic. 185 While the story may property and to freedom of labor. had already become a topic of concern. The law '**$'&)'F+8&7),")!#+)-'0$:)#4$),- 0!'(+)'"7) therefore contained the following paragraph, companies involved did it with success and, to called the “Seventh Transitory Provision” as date, with impunity. ')($%'((.)F!"7!"%)*&,>!+!,")78&!"%)')7$ "$7) 9.2 FIRST ATTEMPT TO ELIMINATE Despite Forestry and Wildlife Law N. 27308, ‘transitional’ time period: “Upon entry into THE BAN: SUPREME DECREE which established a ten year ban (2000 to force of this Law, there shall be a ban for 10 While waiting for the Constitutional Court’s 2010) on extraction of cedar and mahogany in (ten) years on the extraction of mahogany decision, and perhaps already predicting -,8&)+$"+!#!>$)2'#$&+4$7+:),- 0!'(+)-&,/)#4$) (Swietenia macrophylla) and cedar (Cedrela that it would not fall in their favor, the ban’s Ministry of Agriculture, INRENA and the General odorata) from the watersheds of the Putumayo, ,**,"$"#+) ;$7)#4$!&)'##$"#!,"),")#4$)0&$'#!>$) Directorate of Forestry and Wildlife (DGFFS) Yavarí, Tamaya, and Purús Rivers as well as interpretation of another provision in the 7$0!7$7)#,) '8"#)#4$)F'")F.)'8#4,&!R!"%)#4$) from other areas declared or yet to be declared Forestry and Wildlife Law, Article 24.2. They extraction, trade and eventual exportation by means of a Supreme Decree.” managed to get two paragraphs inserted into a of these species from the areas in question. seemingly technical Supreme Decree 019-2000- This process involved the systematic violation Authorizing this extraction AG entitled, “Approval of technical study of of Peru’s legal system, sidestepping both the procedures for promotion and determination of original law and a subsequent decision by involved the systematic viola- size of Harvesting Unit in Permanent Production Peru’s highest court, the Constitutional Court. Forests.” 186 This Decree mentions casually The existence of the ban was publicly known by "
'0'5%';%:4;' %#D' among its ‘considerations’ that while the the loggers, traders and exporters of Peruvian Seventh Transitory Provision of Law N. 27308 mahogany and cedar. (Examples of press sidestepping both the original declares the ban, Article 24.2 of that same materials from the time available via online Law “establishes that those areas granted in version of this report.) Over seven years, in fact, law and a subsequent decision concession shall not be affected by bans if the at least four different attempts to eliminate the management plan includes the conservation ban failed. $ '5%'1":1%'2D'1%' of the species.” In other words, without really The chronology presented here has been Constitutional Court modifying Law N. 27308, this Supreme Decree reconstructed based on documentation that re-interprets one of its Articles and one of its 536)4'+)'00$++$7)#4&,8%4),- 0!'()*8F(!0'#!,"+:) Because there were concessions located in Transitory Provisions, creating a loophole in the 4,"$+#),- 0!'(+)7!+0,"#$"#)2!#4)#4$)+#'#$),-) the four watersheds with authorization to new provision. their institution, and the laborious processes extract mahogany and cedar at the time of However, according to the interpretation of of public information access requests. (All the law’s promulgation, those involved reacted legal specialists (and as the Constitutional documents mentioned and available have been

55 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS

Court would reiterate), Article 24 refers Supreme Decree is considered ‘below’ any law to future bans issued by the Ministry of passed by Congress and in no way can modify it. Agriculture, while the Seventh Transitory Basing their actions on the OAJ report’s Provision is an exception for ten years issued interpretation rather than the Court’s initial by the Congress of the Republic, and therefore sentence, INRENA went on to permit the supersedes Article 24. extraction, transport and exportation of cedar and mahogany wood from dozens of concessions and native communities within the 9.3 CONSTITUTIONAL COURT: THE F'""$7)2'#$&+4$7+<)G8&!"%)#4$)-,((,2!"%) >$) LAW IS IN EFFECT years little was done to address the problem, until a shake-up began in 2007 with the arrival In April 2002, after analyzing the situation in of a new Forests and Wildlife Administrator. detail, the Constitutional Court declared the petition of unconstitutionality to be unfounded '"7)+*$0! $7)#4'#)#4$)F'"),")(,%%!"%)!")#4$) 9.5 2007-2008: ATTEMPTS TO four watershed areas applied to concessions CLEAN UP THE SECTOR already given as well as those to be approved in the future. In its sentence, the Court reiterated Edgardo Lizárraga Leguía took the post of the validity and necessity of the ban in order Administrator in 2007. During this time period, to try to restore environmental equilibrium the high levels of illegal logging in Peru had and preserve resources that belongs to all F$0,/$)#4$)-,08+),-)+!%"! 0'"#)0,"0$&")!") Peruvians, “not only to the current generations both the tri-annual meeting of the Conference of citizens, but also to those yet to come.” of the Parties to CITES and at the negotiations #'F($)24$&$)#4$)NO)'"7)C$&8)2$&$) "'(!R!"%) ^_1";%'1%'U
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D' meeting the commitments Peru had made in should not modify through subsequent laws these different forums, Lizárraga settled on the terms of a contract among individuals several actions to clean up some of the most whose object belongs in the sphere of private $%&$%!,8+)!(($%'(!#!$+<)?4$)/,+#)+!%"! 0'"#),-) property, it should however be interpreted that #4$+$)'0#!,"+)2$&$)0,"780#!"%) $(7)!"+*$0#!,"+) the Congress can and should intervene when the in strategic areas; reducing the so-called yield object of the contract are natural resources that factor, 189 a major laundering mechanism; and 4%'% '0'1%'i4"
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' “A Real Reform Effort, Foiled”.) Unfortunately, to protect and conserve, thus preventing their the new Administrator’s efforts soon ran up destruction in the name of the general interest” , '%'!"+#)&$+!+#'"0$)+,) $&0$)!#)&$+8(#$7)!")4!+) stated the Constitutional Court, making things termination. quite clear. 187

9.6 THE OPINION OF CITES 9.4 SECOND ATTEMPT: THE OAJ REPORT During this time, the apparent contradiction between Law N. 27308 and the Supreme Decree Due to external pressure from investors, four X\YH[XXXH6U)$>$")&$'04$7)#4$),- 0$+),-)#4$) months after the Court’s clear opinion, the CITES Secretariat in Geneva, Switzerland (see =- 0$),-)S$%'()Q,8"+$()A=6Zf)2!#4!")3de5d6) Section 4.1 re CITES). In a letter dated November issued a report based on the revisionist 8 2007, the Secretary General of CITES, Willem Supreme Decree, concluding that the ban Wijnstekers, requested then-head of INRENA did not apply to concessionaires in the four and thus Administrative Authority of CITES in watersheds who were in compliance with their C$&8:)e,F$&#)6"%$($+:)#,)0('&!-.)C$&8>!'"),- 0!'() 188 General Forest Management Plans. This interpretation of the issue. (In reality, there report failed to even mention the Constitutional was no need for additional consultation, given Court’s sentence. Furthermore, it ignored that the answer had been given in 2002 by the the hierarchy of legal norms, within which a

/5%2"&.O]-O/&!(1123&"2'4:(%*#)1&*)&2(":=&QRR\&%#&6:#12&(&9(V#"&:(4)32"*)'&:##!0#:2,&"2'*#)(:&%*9?2"& (11#6*(%*#)1&?()323&%#'2%02"&%#&!4?:*10&%0*1&)#%*62&*)&N2"4Y1&!(!2"&"26#"3<&D02=&(66412&.O]-O/& 9(>*)'&28!#"%1&()3&%02&'2)2"(%*#)&;2(:%0&*)&%02&/9(+#)&*9!#11*?:2&()3&"2*%2"(%2&%02&)223&%#& *)%2"72)2&*)&%0*1&6(12&*)&#"32"&%#&(7#*3&*""2!("(?:2&3(9('2<&W(=1&:(%2",&%02 6*(:1&"21!#)1*?:2&5#"& 56 %0212&"2'4:(%*#)1&;2"2&5#"623&%#&"21*')<& Constitutional Court.) In the same AIMAL had sent a letter to the President of the communication, Wijnstekers asked if INRENA had Republic, Alan García, complaining about the issued CITES permits for mahogany originating in ban and INRENA “being against their interests” #4$)F'""$7)'&$'+<)A536)2'+)",#)'F($)#,)0," &/)!-) – Lizárraga resigned and left his position. 200 Peru responded to these concerns.) Almost immediately, the Resolutions that &$780$7).!$(7)-'0#,&+)'"7)"8((! $7)#4$)C=6+)!") ?2$"#.)7'.+)('#$&:)Q3?5O)+0!$"#! 0)'8#4,&!#.)!") banned watersheds were repealed. C$&8:)3%"'0!,)S,/F'&7!:),- 0!'((.)&$0,//$"7$7) to the Peruvian government that they “maintain the extraction ban (for mahogany) 9.8. THIRD ATTEMPT: INRENA’S NEW -,&)#4$)2'#$&+4$7+)7$ "$7)F.)#4$)B,&$+#&.) ADMINISTRATION CHANGES OPINION and Wildlife Law (Law N. 27308)” as part of a series of measures for the management of the On March 18, 2008, the new Head of INRENA, mahogany. 198 José Luis Camino, issued a Directorial Resolution reviving the harvest, transport and sale of cedar and mahogany originating in the banned watersheds, going against the Law and 9.7 LIZÁRRAGA’S DEPARTURE the decision of the Constitutional Court. 201 This On January 29, 2008, Lizárraga sent a Resolution was based upon a report by then- 0,//8"!0'#!,")#,)#4$)7!&$0#,&),-)#4$)($%'(),- 0$) K'"'%$&),-)3de5d6E+)=- 0$),-)S$%'()Q,8"+$(:) at the Secretary of Agriculture (OAJ), Carmen Nicanor Asmat Vega. A closer look, however, Beltrán Vargas, and the newly appointed chief reveals an embarrassing attempt by Asmat of INRENA, José Luis Camino Ivanissevich, Vega to negate his own previous opinions. In explaining that during a recent meeting he’d had the space of two years, Asmat Vega wrote two with representatives of the timber sector, they contradictory reports, for two different INRENA acknowledged the watersheds ban and were administrators, supporting opposing resolutions only asking for authorization to trade the timber about whether mahogany and cedar could be they had already logged. This would mean that harvested in the watersheds subject to the ban. it was not necessary to eliminate the Seventh In 2007, in response to a request from Transitory Provision. 67/!"!+#&'#,&)S!RM&&'%')-,&)')7$ "!#!>$),*!"!,":) At the same time, Lizárraga informed his Asmat Vega had concluded that the Seventh superiors at the Forest Authority that, Transitory Disposition was in effect and not '00,&7!"%)#,)#4$)>$&! 0'#!,"+)0,"780#$7)F.) subject to Article 24 of the Law N. 27308. his personnel, all the POAs approved for Yavarí Asmat’s principle reasoning is based in Article F'+!")0,"#'!"$7)+!%"! 0'"#)'/,8"#+),-)-'(+$) 24 being intended for bans that the Ministry information, signifying that illegal wood was of Agriculture might order through Supreme being sold at both national and international Decrees – which, as per the legal hierarchy, are levels. That same day, Lizárraga issued a below the law – while the ban in question is Resolution nullifying the POAs in the banned being ordered by Congress, (at the highest level watersheds and ordering the suspension of all of law), and does not permit exceptions. This transport permits generated from these POAs. 199 &+#)&$*,&# 202 served as legal substantiation for the Managerial Resolution whereby Lizarraga Through his attempts to reduce laundering, "8((! $7)#4$)C=6+)!")F'""$7)2'#$&+4$7+)'"7) 0,"780#)'0#8'() $(7)!"+*$0#!,"+:)'"7) suspended the transport of all wood extracted enforce a ban mandated by the Peruvian in those zones. 203 Congress, Lizárraga invited the wrath of the logging sector. It was apparently too much However, in 2008, Asmat appears to have of a legal crack-down too quickly, Peru’s radically changed his opinion. Catalyzed by commitments under CITES and the US-Peru FTA the protracted protests of the affected loggers notwithstanding. and Lizárraga’s departure, Asmat prepared an '(#$&"'#!>$)&$*,&#)!")24!04)4$)p8+#! $7) repealing Two days later, under intense pressure from #4$)+'/$)e$+,(8#!,")#4'#)"8((! $7)#4$)C=6+< 204 both inside the government and from the In his new environmental analysis, the lawyer impacted industry – in January of 2007, cited Supreme Decrees as though they took Loreto’s main timber industry association,

/5%2"&.O]-O/&!(1123&"2'4:(%*#)1&*)&2(":=&QRR\&%#&6:#12&(&9(V#"&:(4)32"*)'&:##!0#:2,&"2'*#)(:&%*9?2"& (11#6*(%*#)1&?()323&%#'2%02"&%#&!4?:*10&%0*1&)#%*62&*)&N2"4Y1&!(!2"&"26#"3<&D02=&(66412&.O]-O/& 9(>*)'&28!#"%1&()3&%02&'2)2"(%*#)&;2(:%0&*)&%02&/9(+#)&*9!#11*?:2&()3&"2*%2"(%2&%02&)223&%#& *)%2"72)2&*)&%0*1&6(12&*)&#"32"&%#&(7#*3&*""2!("(?:2&3(9('2<&W(=1&:(%2",&%02 6*(:1&"21!#)1*?:2&5#"& 57 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS Box XI: A Real Reform Effort, Foiled

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' 191 inspection reports that EIA obtained copies of: Lizárraga doubtless anticipated that, in addition ) “There have been no recent harvest to the physical risks to which his staff would activities )2!#4!")#4$)C=6)>$&! )$7J)'#)'(() ENFORCING THE BANS be exposed, his insistence of compliance with #!/$+)78&!"%)#4$) )$(7)>$&! )0'#!,":)*&,,-) the law would expose him to intense political On September 27, 2007, Lizárraga sent was seen of a 90% absence of cedar pressure that would ultimately force his removal Memorandum 4872-2007-INRENA-IFFS to his -&,/),- )0$)2!#4!")2$$D+< trees or stumps, hauling roads, collection &$%!,"'(),- )0$+)A6?BBOf)'0&,++)C$&8:)&$/!"7!"%) patios, machinery, and forest equipment…. them of and asking them to enforce compliance 600,&7!"%)#,)#4$) )$(7)$>'(8'#!,"+) with the bans in the four watersheds by annulling carried out, it can be concluded that the any POAs or transport permits (GTFs) for these THE INSPECTIONS IN YAVARÍ POA was developed with nonexistent zones. To incentivize compliance with this memo, TnS Lizárraga also sent technical teams into information .” Lizárraga reminded his technical administrators concessions across the country in late 2007 to ) “The cedar sawn wood that has been that ignoring the Seventh Transitory Provision verify the presence or absence of the mahogany transported and sold with documentation and authorizing logging from those watersheds and cedar that concessionaires claimed to be from the second POA of this contract is was illegal under Peruvian law. He added that any harvesting, including in the banned watersheds. of illegal provenance , as it has not been resolution opposing the ban was illegal, null, and 3de5d6),- )0!'(+)!"+*$0#$7)C=6+)!")\\),-)#4$)ba) extracted from the annual harvest parcel carried administrative and legal consequences. 193 concessions in the Yavarí, and found almost that corresponds to said POA.” In an internal document from December no evidence of the thousands of cedar trees 2007, Lizárraga estimated that there were that the Plans purported to be harvesting. Just =8#),-)#4$)$($>$")A\\f) )$(7)!"+*$0#!,"+:)!#)4'+) approximately 1.2 million board feet of mahogany as in the other examples cited in this report been proved that no one had the trees declared and cedar (excluding wood still in transit) that (see “Hundreds of Shipments” chapter), every by the concessionaires”, stated Lizárraga on had been extracted from the watersheds and one of the POAs which the regional Forest December 2007. 194 After inspection, these 11 were now being held in Lima, Pucallpa and Authority had signed off on was systematically concessions were ultimately suspended and Iquitos, which should be seized as soon as fabricated; the presence of trees and the maps administrative proceedings initiated against 190 possible. According to the same document, one of their whereabouts had been invented so that them. Ten now have precautionary measures of Lizárraga’s primary concerns with respect to the concessionaires and traders with whom placed, and at least two judicial processes have the seizure and decommission of this wood was they were connected could obtain documents been initiated in the Caballococha courts. 195 the security of his staff “given the likelihood of authorizing sale of cedar. In reality, though, this However, all of the wood seized as a result of confrontations as owners attempt to impede the cedar was being cut elsewhere – in national these inspections was released back to the

precedence to the law passed by Congress, recognized that “the State doesn’t have the is, then: for whom does the ban apply, if when the legal hierarchy – and his previous capacity to monitor its forests”, that “regional according to the law, all commercial extractors analysis – clearly establishes the contrary. *$&+,""$()7,)",#)4'>$)+8- )0!$"#)/,#!>'#!,")#,) must present Management Plans? Likewise, he suggested “the elaboration of supervise” and that lack of oversight has meant According to Article 15 of Law N. 27308, “any a proposal that will nullify the ban declared that much wood “which probably should only modality of harvest of forest resources, for by the Seventh Complementary Transitory have gone to meeting community needs, ends commercial or industrial purposes, requires a Provision”. 205 up being exported.” 206 Management Plan approved by INRENA, oriented INRENA’s new head Camino, justifying the at assuring the sustainable production and reversal, explained that it was vital to move conservation of biological diversity and the forward in a full frontal attack against the 9.9 A BAN ONLY FOR ILLEGAL environment”. In that sense, to say that the ban illegal wood trade, and that his personnel LOGGERS? does not apply to concessions that do not have would closely supervise compliance and apply Management Plans that include conservation of In his second report, Asmat makes it utterly corresponding sanctions to any infractions the species is equivalent to saying that the ban clear that the ban doesn’t apply to those who committed. However, in an interview given to El only applies to illegal loggers. Why would a law already have a Management Plan. The question Comercio published nine months later, Camino create a ban to prohibit already illegal activity?

58 markets in 2008 based on Administrative of the wood sold was of illegal origin. It is no l% '4
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Another issue, of course, is whether there is 9.10 THE COMPTROLLER’S ban, in May 2010 the Director General of the any reason to trust in the Management Plans INVESTIGATION GUBBO)=- )0$),-)S$%'()Q,8"+$(:)C$7&,)U'&0!') approved by INRENA during this time, when Córdova, stated that “the Seventh Transitory the inspections conducted in POAs approved 5!%4#).$'&+)'-#$&) )%4#!"%)!"#$"+$(.)'"7) Disposition of the [Forestry and Wildlife] Law, in the Yavarí in 2007 found that every one systematically against the system, the ban’s given its special character, is not subject to any contained blatantly false information. Not only detractors must have thought they had exceptions whatsover.” were any “conservation activities” included in )"'((.)+800$$7$7<)I8#)",<)3")=0#,F$&),-)[XXq:) The special exam of the Contraloria found the Management Plans not being implemented, '"),- )0!'()!")#4$)7!+*'#04),-)#4$)U$"$&'() criminal responsibility for abuse of authority but concessionaires, with active facilitation Comptroller of the Republic was tasked with and incompatible negotiation by high-level F.)%,>$&"/$"#),- )0!'(+:)2$&$)!(($%'((.)(,%%!"%) undertaking a special examination of INRENA, in 3de5d6),- )0!'(+<)r,2$>$&:)24'#)($%'()'0#!,"+) precisely the species the ban was intended to order to see if it had been complying with the 2!(()-,((,2)'+)')&$+8(#),-)#4$+$) )"7!"%+)'&$)",#) protect. ban ordered by the Seventh Transitory Provision of Law N. 27308. clear. 3")&$+*,"+$)#,)')+*$0! )0)T8$+#!,")-&,/)#4$) Comptroller regarding the status of the

59 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS

9.11 THE BAN EXPIRED, THE PROBLEM country shall recuperate the environmental 9.12 WHO BOUGHT AND SOLD THE SURVIVES equilibrium of its forests and the citizens ILLEGAL WOOD? #4 '2
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%''%'1%#'8'8'8 ”. But there After ten years of legal wrangling while the 2'+)",)$0,(,%!0'()+#87.)7,"$),&)+0!$"#! )0) During the time period that the watershed ban remaining specimens of mahogany and cedar rationale ever given to determine whether was in effect, an untold amount of mahogany were cut in an uncontrolled and unsustainable the populations of cedar or mahogany had and cedar was taken from the four regions. Even way in all four watersheds as well as across recovered in the four watersheds by 2010. This '"),- )0!'()0'(08('#!,")F'+$7),")#4$)>,(8/$+) Peru, the inevitable happened: the ban expired is highly unlikely, given the intense selective authorized in POAs is certain to underestimate in 2010. Amidst all the controversies that logging of these species in these regions during #4$)#,#'(:)F$0'8+$)F,#4),- )0!'()!"+*$0#!,"+)'"7) swirled around drafting and passage of a new this time period. NGO documentation [see Box XIV: “Trouble in Forestry and Wildlife Law between 2008 and the Alto Purús watershed”] prove that large 2011, a ban on logging cedar and mahogany ?,)7'#$:)","$),-)#4$),- )0!'(+)24,)0,"#&!F8#$7)#,) numbers of trees were being removed from in the Putumayo, Yavarí, Tamaya and Purús violating Law N. 27308 and the sentence of the protected areas, state lands and indigenous watersheds was not incorporated into law. Constitutional Court, and none the individuals territories in those watersheds but outside the !")#4$)*&!>'#$)+$0#,&)24,)4'>$)F$"$ )#$7)-&,/) concessions or native communities. For the In 2002 the Constitutional Court had expressed the illegal exploitation of Peruvian’s natural same reason, it is impossible to identify the its hopeful opinion that “ 1%'I% %
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Box XII: CITES Export Permits for Cedar from the Yavarí Watershed

CITES VOLUME N° OF CONCESSION VOLUME PERMIT DATE EXPORTER IMPORTER COUNTRY EXPORTED GTF CONTRACT TITLE ZAFRA NUMBER dJ^e dJ^e ALTO YAVARÍ PERU TBM HARD- ESTADOS DE APROV. SSQUS SUBRUB TRADERS \U<\k\ QQQccc [email protected]@ FORESTAL Sk

TRANS- GRUPO FORESTAL RQBRUB FORESTAL MÉXICO [email protected]@ SAN LUIS SSQcc QRR\ D-O-].`-,& S_U

TRANS- MADERERA ENITH VIL- GUTIÉRREZ ESTADOS [email protected]@ SRcQS S_BRSB FORESTAL ^UQ<\^TR Sk\^^S LANUEVA 3.537 QRRc@^ QRR\ Y HERNÁN- UNIDOS P@R_U@RT RÍOS CCC SAC DEZ LTDA.

60 Box XIII: Another Constitutional Court Decision Ignored in Mazán

?4$)Q,"+#!#8#!,"'()Q,8&#E+)7$0!+!,")'- )&/!"%)#4$)>'(!7!#.),-)#4$)2'#$&+4$7) represented by Abraham Vílchez Muñoz, brought a legal case regarding ban in Law N. 27308 is not the only time the Court has weighed in on the environmental impacts of this logging. logging matters – nor the only time its decision has been roundly ignored The plaintiffs argued that because the land was zoned and allocated by the forest authority, local government and logging industry. for concessions without prior consultation with local stakeholders In 2007, the Court overturned a decision made by the Civil Division of the and indigenous groups, without environmental impact studies, and in Superior Court of Justice of Loreto regarding forestry concessions in the violation of the precautionary principle, the concessions of Mazán should Mazán watershed east of Iquitos. be annulled. The groups argued that concession logging constituted a certain and imminent threat of their constitutional right to a balanced Between 1965 and 2010 multiple resolutions were passed approving the and appropriate environment. creation of permanent production forests in Loreto, including in the Mazán basin. A group of civil society plaintiffs, led by the Asociación =")6*&!()\b:)[XXb:)6CO) )($7)'")!"!#!'()*$#!#!,")-,&)&$(!$-)'%'!"+#)3de5d6))))))) de Promotores de Salud del Vicariato San José del Amazonas (APS) and and the Regional Government of Loreto, requesting suspension of logging in the concessions and requesting that the Mazán basin be re-zoned. The Loreto Public Prosecutor claimed that the complaint was unfounded '"7)!")[XXb)'"7)[XXW:)S,&$#'")0,8&#+)'%&$$7:) )"7!"%)#4'#)#4$)*('!"#!--+) had failed to demonstrate the accuracy or impending violation of the right to a balanced environment. However, the Constitutional Court found differently, stating that “despite 1%'2#%%
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of CITES permits from 2008, 2009 and 2010 exported in years prior. S.A.C., was indeed shown to be falsifying its obtained in Peru, EIA found six CITES exports information. 208 The other concessions in Box XII This analysis shows that at least three permits for cedar from concessions located have never been inspected and may continue shipments whose documents irrefutably fully or partially within the Yavarí watershed to cut and sell their wood to this day. However, indicate that they “contained” wood from where mahogany and cedar logging was every concession that was inspected in Yavarí the banned watersheds were shipped to US banned. Taking extra precautionary measures, was found to be including false information in companies: TBM Hardwoods, Inc, and Maderera 536)#4$")'"'(.R$7),- )0!'()B,&$+#)68#4,&!#.)/'*+) its POAs to create volumes of cedar. Gutierrez y Hernández Ltda. More cedar from 7$ )"!"%)#4$)F,8"7'&!$+),-)#4$)2'#$&+4$7< 207 Yavarí went to the Mexican branch of Grupo The wood coming from a concession like this ?4!+)'"'(.+!+)0," )&/$7)#4'#)#4$)'0#8'()6""8'() Bozovich and Grupo Tenerife. can therefore be thought of as “triply illegal”: Logging Parcels corresponding to those permits (1) wood cut in unknown, unauthorized places, were, indeed, located in the Yavarí watershed. But the story is even more surreal, since we (2) accompanied by permits that are the Note that this was the period during which the have already seen that the data contained in *&,780#),-)+.+#$/'#!0'((.)-'(+! )$7)7,08/$"#+:) bans were already publicly controversial (see most POAs is fabricated. The only one of these (3) from a concession operating in a banned above), and it is safe to assume that far more six concessions that received a supervisory watershed. wood from the four watersheds was explicitly visit by OSINFOR, Forestal San Luis Del Yavarí

61 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS Box XIV: Trouble in the Alto Purús Watershed

The Purús region includes one of the four the region. In many cases the loggers had SERNANP and the administration of the Alto watersheds where mahogany and cedar logging simply bought the community’s permit and C8&b+)d'#!,"'()C'&D)0,"780#$7)'"),>$&H )!%4#) were banned by the 2000 Forestry and Wildlife used it to launder wood cut illegally from assessment of the area and found three active Law N. 27308. Illegal logging has been a serious protected areas nearby (as this report has logging camps inside the Murunahua Reserve problem both for the communities within the shown to be a ubiquitous practice). 213 Stricter for Voluntarily Isolated People, as well as one watershed and in nearby protected areas. enforcement was implemented, but in 2009 the inside the Park. 216 region’s most notorious logger and transporter, When formed in 2004, Alto Purús became Peru’s Again in 2010, the organization documented Roland Patrnogic Rengifo, was arrested along largest national park, stretching over 2.5 million ongoing illegal logging as well an extensive 2!#4)#2,)*,(!0$)*!(,#+)-,&) ).!"%)')+4!*/$"#) hectares. Home to the largest remaining stands road network throughout the Murunahua of illegal mahogany from the Alto Purús to of bigleaf mahogany in Peru, the park borders Reserve. The new road network only serves to Pucallpa on a police plane. 214 the 200,000-ha Purús Communal Reserve and $;#$"7)#4$)!">'+!,")F.)-'&/$&+:)7&8%)#&'- )0D$&+:) the 477,000 ha Murunahua reserve, home to at As of 2012, only a handful of communities have hunters and miners, as well as facilitating the least two groups of uncontacted or voluntarily legal permits and logging teams on their lands. transportation of mahogany from the Reserve isolated indigenous tribes. 210 Some 3000 Illegal and exploitative activities continue. and Alto Purús Park across to the Ucayali River indigenous peoples live on bordering titled and downstream. As the UAC report noted: In the Reserves north of Alto Purús National lands. 211 Park, smaller logging groups have moved in, O '1%'"#%'1%' <'%421%'524;;4D' Along the Alto Purús River, from approximately utilizing old tractor roads left behind by larger 4'%:"
4;'F#4 
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'1$D'0 '2"4;'4%' 2000 to 2007, logging teams from outside the companies to extract mahogany from the unable to pinpoint its origin and assume it region brokered agreements with community banks of small rivers. Over the last few years, legal, giving it the government permits that chiefs to trade their trees for overpriced all of the most easily accessible trees near 4;; '"''$%';<'"
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62 CONCLUSION

© Toby Smith/EIA

This report contends that in Peru’s forest Indeed, as the OPEXA case study in this report who were paid a pittance to extract these sector today, despite years of scrutiny and demonstrates so clearly, the model is set up to trees remain in poverty. As the stories in this policy efforts aimed at cleaning things up, fail: by granting impossibly remote concessions report show, the real human toll of illegal illegal logging is still the norm. While there ,")*'*$&)#,)!"7!>!78'(+)8"T8'(! $7)#,),*$&'#$) logging is demeaning and ugly. Peru is selling are certainly companies and communities #4$/:)F.)'((,0'#!"%)-8"7+)!"+8- 0!$"#)#,)4!&$) not only its own economic future but its most whose logging practices are responsible, they the personnel and maintain the equipment disenfranchised citizens down the river, as it are the exception to the rule. Wood from Peru necessary to oversee them, by providing no were. should be currently be considered very ‘high support to many indigenous communities’ But it doesn’t have to go this way – we must risk’ for international buyers concerned about efforts to obtain legal land titles and build not let it go this way. The Peruvian Amazon is a legality and compliance under laws such as capacity for participating in the sector, and by treasure whose cultural richness, biodiversity, the Lacey Act or the European Union Timber '((,2!"%)0,&&8*#!,")'"7)!/*8"!#.)#,) ,8&!+4:) watershed protection, and carbon storage is Regulation, or about possible actions under the the Peruvian government over the past 12 of incalculable value to the entire world. Many US-Peru Free Trade Agreement Annex on Forest years has created a system that almost by different actors bear responsibility to ensure Governance. default conducts its business illegally. The that the long-term future of the forest takes most important reform set in motion by the Moreover, the systemic corruption and illegality priority over short term gain. In this case, 2007 US-Peru FTA, the creation of a stronger 7$+0&!F$7)!")#4!+)&$*,&#)0'+#+)+!%"! 0'"#) cleaning up the sector will mean turning off the and independent OSINFOR, has increased the doubt over Peru’s ability and political will to laundering machine and taking a hard look at amount of oversight – and made clear the implement serious or effective plans to reduce what’s actually happening. extent of the problems that remain. emissions from deforestation and degradation (REDD+). The World Bank and other institutions Some commentators will contend that, legal or have pledged many millions of dollars to Peru’s not, the logging industry provides thousands REDD+ efforts without a clear understanding of jobs and supports of how little control the government has over the economy of the its own forests. EIA believes it is critical for Peruvian Amazon. But these donors and the Peruvian institutions the current model has responsible for developing REDD+ strategies nothing to do with and projects to meaningfully incorporate the meaningful economic logging industry – and the lessons its failures development. Rather, have to teach – into their plans. it is leading – and not slowly – to a future Timber trade and forest management in Peru where the populations requires serious reform. Neither the model of commercial of allocating concessions, the systems for timber species granting logging permits, the mechanisms for 2!#4!")*&, #'F($) control and monitoring, nor the procedures distance from river for issuing export documents including or road transport are CITES permits are functioning to prevent extinguished, and the large quantities of illegal timber from being native communities harvested and traded both domestically and and migrant workers internationally. © Toby Smith/EIA

63 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS

RECOMMENDATIONS

PERU’S NATIONAL AND REGIONAL GOVERNMENTS ) Improve conditions for accessing public information provided by SHOULD: the regional authorities ) List additional species, beginning with shihuahuaco ( Dipteryx ) Raise reform of the logging industry and enforcement against #"24
14D'["% '8 ), on Appendix III of CITES, in order to illegal timber trade to a national priority improve data collection and protection against over-exploitation ) Strengthen the capacity of, and increase the resources and personnel available to the Special Prosecutor for Environmental Crimes [ Fiscalía y)'"7)#4$)6##,&"$.)U$"$&'(E+),- 0$)+*$0!'(!R!"%) OSINFOR SHOULD: in Environmental Crimes [ 524<$4 ], as well as its regional $"#!#!$+:)#,)'77&$++)!(($%'()(,%%!"%)0'+$+)'%'!"+#)0,&&8*#),- 0!'(+:) ) Emit long-delayed Resolutions such as OPEXA’s (p. 49), to begin forestry consultants and companies that have engaged in administrative procedures for concessions where irregularities facilitating or conducting illegal wood trade have been found, and put these Resolutions online in a timely ) O!%"! 0'"#(.)!"0&$'+$) "'"0!'()'"7)*,(!#!0'()+8**,&#)#,)F8!(7)#4$) manner capacity for indigenous community forestry, in order to promote a ) Improve the regulation relating to the deadlines of Administrative legal and more socially and economically sustainable model Procedures (PAUs) to make them shorter and clearer ) Amend the new Forestry and Wildlife Law in line with AIDESEP’s ) Make all Supervisory reports available online, to allow exporters proposals to: facilitate legal logging by indigenous communities, and importers to better conduct due care prevent concessions from overlapping community lands, better ) Review and improve compliance with methodologies under the protect voluntarily isolated peoples, and prevent perverse Manual for Supervision of Forest Concessions, and make this consequences such as the establishment of monoculture Manual available online agriculture plantations in Peru’s permanent forest estate ) Give citizens and organizations the possibility of participation in ) Conduct a thorough assessment of the weaknesses of the current supervisions, in order to guarantee that they are conducted to system as part of the process of developing regulations for the high standards new Forestry and Wildlife Law ) d,#)4!&$),- 0!'(+)24,)4'>$)*,,&(.)*$&-,&/$7)#4$!&)78#!$+),&) ) Raise the standards of technical proposals for forest timber former forestry consultants who have abused the responsibilities concession allocation processes, and establish mechanisms of their profession to ensure traceability in the commercialization chain of wood products. ) Focus on ensuring legal and responsible logging in existing FOREST AUTHORITIES (DGFFS/SERFOR AND REGIONAL Permanent Production Forest rather than allocating new areas OFFICES) SHOULD: for concession forestry – since many concessions haven’t actually ) Require that information regarding concession(s) of origin be been logged, despite what the documents say included on all CITES permits (for both mahogany and cedar), and ) Ensure that REDD+ planning, led by the Ministry of Environment, also accompany all shipments of timber, CITES species or not, and include representatives from forestry and enforcement agencies make this data available online in a timely manner – the Ministry of Agriculture, the General Comptroller of the ) K'D$)*8F(!0)#4$)&$+8(#+),-)*&!,&)>!+8'()>$&! 0'#!,"),-)'(()C=6+) e$*8F(!0:)=O3dB=e:)'"7)#4$)C&,+$08#,&E+)=- 0$)H)'"7)!"#$%&'#$) containing mahogany, as stated in Article 9 of the Departmental reform of the current forestry model in Peru Resolution N° 331-2006, and modify Article 8 of Departmental ) Take legal action to follow up on the conclusions of the Resolution N° 166-2008-INRENA, in order to ensure that the Comptroller General’s report regarding INRENA’s failure to enforce *8F(!0'#!,"),-)#4$)&$+8(#+),-)#4$)C=6)>$&! 0'#!,"+)0,"#'!"!"%)0$7'&) the watershed bans under the Seventh Transitory Disposition is also mandatory ) Follow up on cases of illegality already referred to the Prosecutor ) d,#)4!&$),- 0!'(+)24,)4'>$)*,,&(.)*$&-,&/$7)#4$!&)78#!$+),&) by OSINFOR or the forest authority at both regional and national former forestry consultants who have abused the responsibilities levels of their profession ) Include trade in illegal timber as a crime under the Criminal Code ) Remove any Forestry Engineers proven to have fabricated ) C&,/,#$)'(#$&"'#!>$) "'"0$)+,8&0$+)-,&)-,&$+#)*&,780#+) C=6+)-&,/)#4$),- 0!'()(!+#),-)&$%!+#$&$7)$"%!"$$&+)'"7)!"!#!'#$) extraction and commercialization, in order to end the current administrative and legal actions against them system of habilitación ) 3">$+#!%'#$)'"7)+'"0#!,"),- 0!'(+)*&,>$")#,)4'>$)+!%"$7),--),")

64 fabricated POAs, fake inspection visit reports or other false THE WORLD BANK AND OTHER DONORS SHOULD: documents and initiate legal actions against them ) Dedicate a substantial portion of the REDD+ monies allocated for ) Revise its procedures so that every GTF and Balance of Extraction C$&8)#,) "'"0!"%)')*&,%&'/)#,)#!#($)"'#!>$)0,//8"!#.)#$&&!#,&!$+:) contains the POA number, Administrative Resolution, and zafra, in '+)#4$) &+#)+#$*)#,2'&7+)-,&/'(!R!"%)'".)(,%%!"%),")#4$+$)('"7+ order to reduce the ability to obfuscate and hide irregularities ) Encourage Peru to implement a priority program of forest sector ) Check the operational books of sawmills as a regular aspect of reform, including improvements in the systems of control and oversight increased support for community forestry models ) Give citizens and organizations the possibility of participation in supervisions, in order to guarantee that they are conducted to high standards INTERNATIONAL AND PERUVIAN BUYERS SHOULD: ) Assess the ecological and trade situation of other timber species traded in the international market in high volumes – including ) Request that their suppliers provide credible information cumala ( Q";4'8 ), Iryanthera spp., lupuna ( Chorisia integrifolia ), regarding facts like: concessions or communities of origin of tornillo ( Cedrelinga cateniformis ), shihuahuaco or cumaru ( Dipteryx all timber, and any OSINFOR Supervision report or outstanding #"24
14D'["% '8 ) and capirona ( Calycophillum spruceanun ) administrative procedures linked to these sources – and strengthen the measures used to ensure their legal origin ) When possible, conduct site visits to Peru to understand and inspect their supply chains back to the forest ) Be aware that illegal logging is the norm for all species from Peru, US GOVERNMENT SHOULD: not just mahogany and cedar ) e$T8$+#)'"7)*'&#!0!*'#$)!")>$&! 0'#!,"+)F.)#4$)C$&8>!'") ) I$)'2'&$)#4'#)Q4'!"),-)Q8+#,7.)0$&#! 0'#!,")7,$+)",#)%8'&'"#$$) government, under the US-Peru FTA Annex on Forest Governance, the legality of all the timber being sold by a certain company of the exporters and intermediaries implicated in import shipments that contain wood from any concessions where OSINFOR or DGFFS have found illegal activity INDIGENOUS FEDERATIONS AND CIVIL SOCIETY ) Request audits by the Peruvian government, under the US-Peru ORGANIZATIONS SHOULD: FTA Annex on Forest Governance, of all additional POAs linked to ) Partner with each other or government entities in teaching legal export shipments in concessions where OSINFOR or DGFFS has practices for measuring and evaluating timber, to prevent fraud or found illegalities during a supervision of one POA deception ) Investigate whether Bozovich Timber Products or any other ) Communicate more clearly and regularly with communities company should be held liable under the Lacey Act for its trade in involved in logging to provide them with the information illegally sourced CITES-listed wood products necessary to conduct proper business negotiations, such as the ) Continue to support and strengthen the work of the US Forest fundaments of legal and fair contracts and the market prices for Service’s Peru Forest Sector Initiative (PFSI) program, whose timber, equipment and basic goods technical support is focused on increasing timber traceability, ) Request action under paragraph 3(i) of the US-Peru FTA Annex on sectoral institutional capacity, and viable community forestry Forest Governance, which requires Peru to “Strengthen, protect and increase the capacity of indigenous communities to manage their lands for commercial timber production, including by THE GOVERNMENTS OF THE EU, CHINA, MEXICO AND ensuring that any commercial timber production has the approval PERU’S OTHER TRADING PARTNERS SHOULD: of the Peruvian government.” ) Pass and/or implement and enforce legislation to prohibit import, export, or trade of illegally-sourced wood To view an interactive version of this report, including ) Establish customs cooperation agreements with Peru to allow for data sharing, capacity building, and greater inspection and control additional documents, images, videos, links, and updates, of timber shipments please visit: www.peruforests-bosquesperuanos.com

65 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS

GLOSSARY

ADMINISTRATIVE PROCEDURE (PROCEDIMIENTO BOARD FOOT Authority on Forestry and Wildlife. ADMINISTRATIVO ÚNICO--PAU) A board foot equals the volume of a piece of wood about DIAMETRO MINIMO DE CORTE Procedure that is carried out in order to investigate a foot long, a foot wide, and an inch thick. and determine the administrative responsibilities of Minimum diameter required for cutting, indicating a the title holders in order to check for any potential CENSUS / INVENTORY mature tree (varies by species in Peru’s regulations). legislative violations. Through this process, OSINFOR A representative sample of the forest area in question. may determine any infractions, impose sanctions and EIA – CITES Commercial census is an inventory that samples 100% corrective measures, and demand the forfeiture of rights of the individual comercial species in a PCA that have Database created by EIA concerning the the compilation regarding the use of any forest resources. reached a minimum diameter. The census is carried out and analysis of CITES export permits for mahogany and in order to complete the Annual Operating Plan. cedar between January 2008 and May 2010. ANNUAL LOGGING PARCEL (PARCELA DE CORTE ANUAL, PCA) CITES (APPENDICES I, II, & III) EIA – OSINFOR ?4$)*4.+!0'()'&$'),-)')0,"0$++!,")A &+#)7$ "$7)!") The Convention on International Trade in Endangered Database created by EIA of OSINFOR Supervisory reports the General Forest Management Plan) which has Species, CITES is an international treaty to which both for Supervisions that took place between 2008 and 2010. been approved for annual logging operations. A POA Peru and the US are parties; which aims to ensure that document contains the plan for logging one PCA. trade in wildlife is not detrimental to that species’ EXTRACTED VOLUMES (VOLUMEN MOBILIZADO) survival. The Appendices contain species under ANNUAL OPERATING PLAN (POA) The volume of wood extracted from a forest concession different levels of threat, I being the greatest. or permit that has subsequently been transported with a Annual Operating Plan. A one year operational plan that GTF and recorded in the Balance of Extraction. forest managers must create and theoretically follow CONCESSION during their operations in the annual logging parcel. Forest area titled to an owner by an administrative (one year, which may or may not coincide with the FOREST CONCESSIONS FOR TIMBER EXTRACTION act that confers the right to use the land in question calendar year) A concession located in a permanent production forest under the conditions and limitations established by where the right to harvest timber is conferred from the APPROVED VOLUME the respective title. The land ultimately remains the state to the individual. property of the State. In Peru concessions are given for The volume of wood authorized for harvest by a PGMF or a variety of purposes, not just timber. POA as approved by the forest authority. FOREST USE (APROVECHAMIENTO FORESTAL)

CUBIC METER ATFFS A set of operations, including the planning and assessments related to the harvest of trees and tree 1 m3 of sawn timber is equivalent to 424 board feet of Technical Administration for Forestry and Wildlife. parts useful for sale and/or industrial processing, which lumber Created in 2001 as the local forestry and wildlife are made to ensure that appropriate techniques are '8#4,&!#!$+)8"7$&)GUBBO:),- 0$+)2!#4)#4!+)"'/$)&$/'!") 1 m3 of lumber equals 1.92 m3 of roundwood used to allow for ecosystem stability as well as long- in regions where the management responsibilities term resource sustainability. over forest and wildlife resources have not yet been DBH (DAP) transferred to the regional governments. Diameter at breast height — the diameter of a GENERAL FOREST MANAGEMENT PLAN (PLAN tree measured at a height of one meter and thirty GENERAL DE MANEJO FORESTAL, PGMF) BALANCE OF EXTRACTION centimeters (1.3 meters) above the ground. Document maintained by the local forest authority for The long-term plan by which the forest manager intends every concession or community, containing an ongoing DGFFS (GENERAL DIRECTORATE OF FORESTS AND to intervene in the forest, including description of registry of (a) volumes of wood authorized for extraction WILDLIFE) habitats or species populations present in a forestry as per the Annual Operation Plan, and (b) volumes concession area. The PGMF is formulated for the entire In 2001, DGFFS was established within INRENA. Two actually harvested and sold as per the GTFs submitted to period in which the concession is valid. years later, DGFFS was replaced by the Forestry the forest authority by traders during the course of each and Wildlife Administration (IFFS). In 2008, after year’s trade. GTF (GUÍA DE TRANSPORTE FORESTAL) INRENA was dissolved, a new DGFFS was established within the Ministry of Agriculture as the National The Forest Transport Permit, commonly known as a Guia

66 ,&)U?B:)!+)#4$),- 0!'()7,08/$"#)'((,2!"%)#4$)($%'()#&'"+*,&#) is the public agency responsible for overseeing and or lumber) that are illegally sourced from any U.S. state of wood products in both their natural (log) and processed monitoring the sustainable use and conservation of forest or any foreign Country; requires importers to declare the forms. When logs leave a concession, the concessionaire must and wildlife resources. country of origin of harvest and species name of all plants issue a sworn statement along with his own transport permit, contained in their products.; and establishes penalties known as the Natural State Transport Permit, or Transport PERMANANT PRODUCTION FOREST (BOSQUE DE for violation of the Act, including forfeiture of goods and -&,/)=&!%!")C$&/!#)AU?=f:)24!04)!+)>$&! $7)'#)#4$) &+#)-,&$+#) PRODUCCION PERMANENTE) >$++$(+:) "$+)'"7)p'!()#!/$< authority checkpoint. Once wood products are transported to Areas of forest production made available by lease to a secondary processing facility, shop or premises, a secondary THE US-PERU FREE TRADE AGREEMENT (FTA) individuals for the preferential use of forest resources and permit is required for legal transportation - the Forest wildlife; property rights remain with the Peruvian state. ?4$)NOHC5eN)B&$$)?&'7$)6%&$$/$"#)AB?6f:),- 0!'((.)0'(($7) Transport Permit or GTF, which is issued by the regional forest the Trade Promotion Agreement, liberalizes trade between authority (e.g. ATFFS or equivalent). PERU FOREST SECTOR INITIATIVE (PFSI) #4$)#2,)0,8"#&!$+<)3#)2'+) &+#)+!%"$7)!")@'+4!"%#,")G!,8+(.) analyzed including POAs, Balances of Extraction, etc. USTR Peruvian Ministry of Environment =- 0$),-)#4$)N"!#$7)O#'#$+)?&'7$)e$*&$+$"#'#!>$<))B,08+$7) THE LACEY ACT NRDC on trade issues, USTR negotiates directly with foreign In May 2008, U.S. Congress passed an amendment to a governments to create trade agreements, resolve disputes, The Natural Resources Defense Council is a United States 100-year old statute, banning commerce in illegally sourced and to participate in global trade policy organizations. based NGO dedicated to environmental defense. plants and their products, including timber and wood products. To address illegal logging and other illegal plant ZAFRA (HARVEST SEASON) OSINFOR trade, the Lacey Act now does three main things: prohibits The harvest (zafra) is the season when the weather allows Supervisory Body for Forest Resources and Wildlife, this all trade in plant and plant products (e.g., furniture, paper, the extraction of timber, which varies subject to rainfall.

67 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS WORKS CITED

1. I'++:)K'&%,:)$#)'(<)U(,F'()Q,"+$&>'#!,")O!%"! 0'"0$),-)508'7,&E+) tribal communities(?) merely requires government to conduct a t'+8"/)d'#!,"'()C'&D)[X\X) consultation in good faith and with the view of reaching agreement— however, agreement itself—i.e. the approval of the respondents—is 2. http://www.aidesep.org.pe/index.php?id=6 not a mandatory requirement for progress. The United Nations Declaration on the Rights of Indigenous Peoples (DRIP) is the entity 3. Población censada, según región natural, 1993 y 2007 (ww.inei.gob.pe) #4'#)4'+)7$ "$7)'"7)*&,/,#$7)-&$$:)*&!,&:)'"7)!"-,&/$7)0,"+$"#<))?4$) Also see Peru en Cifras – Población, Instituto Nacional de Estadística e key here is to note that the ILO has actual constitutional statues in Informática , (www.inei.gob.pe) Peru—that is, binding or mandatory—while the UNDRIP legislation is 4. The State of Forests in the Amazon Basin, Congo Basin and Southeast viewed as non-binding. It is generally understood that the spirit of Asia, FAO June 2011 Convention 169 is to perform free, prior, and informed consent of all parties involved, but in Peru, this is left open to interpretation of the 5. ibid consultative law, which is still under debate. To be precise, article 19 of UNDRIP states “States shall consult and cooperate in good faith 6. Anuario Peru Forestal 2010. (http://dgffs.minag.gob.pe/pdf/estadistica_ with Indigenous peoples through their representative institutions forestal/anuarios/ANUARIO_PERU_FORESTAL_2010.pdf) before adopting and implementing legislative or administrative 7. La Gestion. Las exportaciones superarían los US$ 45,600 millones measures that affect them, in order to obtain free, prior and este año. http://gestion.pe/noticia/710621/mincetur-exportaciones- informed consent”. In contrast, article 6 of ILO Convention states: superaran-us-45600-millones-este-ano “Governments should…consult the peoples concerned, through appropriate procedures…every time it is considering legislative or 8. http://www.itto.int/tfu/ administrative measures which will affect them directly…with the 9. “Illegal Logging Thrives in Peru”, cable from US Embassy in Lima to objective of achieving agreement or consent about the proposed David W. Cox at US Secretary of State, April 2006. (http://elcomercio. measures”. pe/wikileaks-peru/10). 29. Lawsuit of unconstitutionality against DL 1015. Human Rights 10. Anuario Peru Forestal 2010. (http://dgffs.minag.gob.pe/pdf/estadistica_ Ombudsman. 2009. Lawsuit of unconstitutionality against DL 1064. forestal/anuarios/ANUARIO_PERU_FORESTAL_2010.pdf) 30. ILO Convention 169: http://www.ilo.org/ilolex/cgi-lex/convde.pl?C169. 11. ITTO Tropical Timber Market Report, Volume 16 Number 15, 1st - 15th 31. ibid. August 2011 32. Pautrat & Lucich. Análisis Preliminar Sobre Gobernabilidad y 12. http://www.globaltimber.org.uk/peru.htm Cumplimiento de la Legislacion del Sector Forestal en el Peru. 2006 13. An unknown quantity of timber is imported or exported via roadways 33. ibid. with Chile, Brazil, Bolivia, Colombia or Ecuador 34. Buczynski, Beth. Wikileaks: 70% of Peruvian Timber Felled Illegally. 14. http://www.peruvianamazonline.com.pe/mnyacupuma.htm March 2011 15. http://www.peruvianamazonline.com.pe/sb.htm 35. ibid. 16. Department of the Interior. Decision in Response to Petition for 36. C$&8)'7/!#+)#!/F$&)0$&#! 0'#$+)-'D$7)!")+$0&$#)0'F($<)`)K'&04)[X\\<) Remission. (June 2010). Also see Hansen, Craig. Declarations and Due http://www.survivalinternational.org/news/7061 Care: Insights from another Lacey Case. World Resources Institute. April 2011 (http://www.wri.org/stories/2010/10/declarations-and-due- 37. http://dgffs.minag.gob.pe/pdf/mapas_tematicos/Bosques%20de%20 care-insights-another-lacey-case) Produccion%20Permanente.pdf 17. Known as the “petroaudio” case, this is still under investigation. 38. Lane, John. A Brief History of Iquitos. http://www.iquitosnews.com/ O$"!,&)%,>$&"/$"#),- 0!'(+'!"0(87!"%)#4$")C&$+!7$"#),-)#4$)Q,8"0!() page02a.html of Ministers of the Garcia administration and right hand man to the 39. Casement, Roger. The Putumayo Report: Treatment of British president of the republic Jorge del Castillo—have been accused of Colonial Subjects and Native Indians employed in the collection creating a network favoring prívate companies willing top pay bribes of rubber in the Putumayo district: Presented to both Houses of in order to improve negotiations with the state. Parliament by command of his Majesty. 1912 18. Amancio, Nelly Luna. El Comercio. Interview with Jose Luis Camino 40. Eduardo Beydoya Garland & Alvaro Bedoya Silva-Santisteban, Trabajo December 8, 2008 Forestal en la Extraccion de la Madera en la Amazonia Peruana, 19. OSINFOR Comunicado: “Gobierno Regional de Loreto, Concesionarios Internationa Labour Organizaion (ILO), 2005 y OSINFOR unidos para promover el desarollo forestal sostenible con inclusion social.” October 2011 41. ibid. 20. AIDA and SPDA. Illegal Mahogany logging in the Districts of Iñapari 42. El Comercio. Amancio, Nelly Luna. Jefe de Inrena-Iquitos sería juez y and Iberia, Madre de Dios, Peru: The Role of the Newman Lumber parte en el control de concesiones forestales. May 2007 Company. 2002 43. “Hay que descaobizar la gestión.” El Comercio, 17 April 2009. Interview with GUSTAVO SUAREZ DE FREITAS, by Nelly Luna 21. Pautrat, L. and I. Lucich. Análisis Preliminar Sobre Gobernabilidad y Amancio. http://elcomercio.pe/impresa/notas/hay-quedescaobizar- Cumplimiento de la Legislacion del Sector Forestal en el Peru. 2006 gestion/20090417/274288 22. Law 29763, Sixth Transitory Disposition. 44. El Comercio newspaper. Lavado de dinero: Investigan a empresas del 23. Law 29763, Seventh Transitory Disposition. alcalde Valdez que envían madera a México. By Oscar Castilla. April 6, 2008. See http://elcomercio.pe/edicionimpresa/html/2008-04-06/ 24. Law 29763, Seventh Transitory Disposition. investigan-empresas-alcalde-valdez-que-envian-madera-mexico.html 25. The agreement is formally called the US-Peru Trade Promotion 45. ibid. Agreement. http://www.ustr.gov/trade-agreements/free-trade agreements/peru-tpa 46. Wikileaks cable from Embassy Lima to SECSTATE WASHDC, October 31, 2008. 26. Law N. 29157, “Law that Delegates to the Executive Branch the Power to Legislate on Diverse Issues Related to the Implementation of the 47. AIDA and SPDA, “Illegal Mahogany Logging in the Districts of Iñapari Peru-United States Agreement of Trade Promotion, and Supporting and Iberia, Madre de Dios, Peru: The Role of the Newman Lumber the Economic Competitiveness for its Use,” issued on December 20, Company.” February 2002 2007. 48. “La Ley de la Selva”, La Republica, 8 April 2008. Miguel Gutierrez. 27. Eguiguren, Francisco. Análisis de la conformidad constitucional del Also see Andy Revkin, http://dotearth.blogs.nytimes.com/2008/03/17/ uso de las facultades legislativas otorgadas por el Congreso al Poder murder-on-the-resource-frontier/ Ejecutivo mediante la ley N. 29157. 2008 49. Pautrat, L. and I. Lucich. Análisis Preliminar Sobre Gobernabilidad y 28. There is a substantial difference between “consultation” and Cumplimiento de la Legislacion del Sector Forestal en el Peru. 2006 “consent”. ILO Convention 169 (Convention on Indigenous and

68 50. U'&('"7:)578'&7,)I$7,.')})O!(>'HO'"#!+#$F'":)6(>'&,)I$7,.'<))= 0!"') 75. Supreme Decree 060-2006-AG declared INRENA to be under the Internacional de Trabajo (OIT) Trabajo Forzoso en la Extraccion de la process of reorganization. Supreme Decree 011-2007-AG approved the Madera en la Amazonia Peruana. 2005 transfer of INRENA’s powers to the Regional Governments. 51. ibid. 76. Supreme Decree 030-2008-AG, published on December 11, 2008, 0&$'#$7)#4&$$),- 0$+)!"+!7$)#4$)GUBBOc))#4$)G!&$0#,&'#$),-)B,&$+#)'"7) 52. Maravi et al, “Timber extraction and trade in Peru”, ETFRN News. 2008 Wildlife Promotion; the Directorate of Forest and Wildlife Management; 53. 4##*cPP222$()!")04'&%$) 85. http://www.cites.org/eng/cop/14/prop/E14-P33.pdf of the forests, they found that only 3 of them had a working vehicle and only one had a working boat. “La Política Forestal y la Amazonía 86. See Annex on Forest Sector Governance, Sections 1-14. Peruana: Avances y obstáculos en el camino a la sostenibilidad.” 87. Annex on Forest Governance, Section 13(a)(ii). Defensoría del Pueblo. Serie de Informes Defensoriales – Informe 151. Lima, Peru, 2010. http://www.defensoria.gob.pe/inform-defensoriales. 88. Environmental Investigation Agency. Peru’s Forest Sector: Ready for php the New International Landscape? 2009. 60. A slang word used to refer to girls, adolescents, or very young women. 89. See online report for these statements. 61. Campos, J. et al. CATIE. La Tala Ilegal en Costa Rica. Un analisis para 90. Letter to US Trade Ambassador, Peruvian Ministers of Agriculture and la discussion. External Trade and Tourism, 18 August 2010 . 62. MINAM. El Peru de los Bosques. Lima, 2011 91. Environmental Investigation Agency. The U.S. Lacey Act: Frequently Asked Questions About the World’s First Ban on Timber. 2008. 63. WWF. Alto Purús. Biological and Cultural Paradise. March 2005. 92. ibid. 64. Interpol and the World Bank. Chainsaw Project: An Interpol Perspective on Law Enforcemnt in Illegal Logging. 2011. 93. Illegal Logging/FLEGT Action Plan. European Commission. http:// ec.europa.eu/environment/forests/illegal_logging.htm 65. The effect of deforestation on the human-biting rate of Anopheles darlingi, the primary vector of falciparum malaria in the Peruvian 94. Espinoza, Roberto Llanos and Feather, Conrad. AIDESEP and Forest Amazon. American Journal of Tropical Medicine and Hygiene. Cited by: People’s Program. La Realidad de REDD+ en Peru, entre el dicho y el MINAM. El Peru de los Bosques. 2011. hecho…Análisis y alternativas de los pueblos Indígenas Amazónicos. [X\\<)4##*cPP222<-,&$+#*$,*($+<,&%P+!#$+P-**P ($+P*8F(!0'#!,"P[X\\P\\P 66. Impact of deforestation and agricultural development of Anopheline la-realidad-de-redd-en-peru-entre-el-dicho-y-el-hecho-para-el-sitio- ecology and malaria epidemiology. American Journal of Tropical web_0.pdf Medicine and Hygiene. Cited by: MINAM. El Peru de los Bosques. 2011. 95. http://www.forestcarbonpartnership.org/fcp/ 67. The Forest Carbon Partnership Facility (FCPF), UNREDD, REDD Partnership, and FIP are some of the programs where Peru is 96. http://www.climateinvestmentfunds.org/cif/node/5 participating. 97. http://www.forestcarbonpartnership.org/fcp/node/80 68. MINAM. Segunda comunicación nacional del Peru a la Comisión Marco de las Naciones Unidas sobre Cambio Climático. Resumen ejecutivo. 98. http://www.bozovich.com/quienes-somos.php Lima, 2010. 99. Soko, Miluska. Los Barones del cedro y la caoba. http://servindi.org/ 69. Numeral 3.4 of article 3° and article 6° actualidad/6030 70. Approved by Supreme Decree DS N° 046-2001-AG, Reglamento de 100. http://www.vulcano.com.pe/vulcano/home-es.htm Organización y Funciones del INRENA, article 26 101. http://www.fsc.org/faq.html 71. The DGFFS has had a complicated trajectory. In 2003, the DS 02-2003- 102. 4##*cPP222<-+0<,&%P#.*$+H,-H0$&#! 0'#!,"X<4#/( AG eliminated the DGFFS and replaced it with the Intendencia Forestal y de Fauna Silvestre (IFFS). In 2008, when INRENA had already been 103. Technical-legal report No. 005-2005-INRENA-OSINOFOR-URBAN-USEC disolved and its responsibilities had been absorbed by the Ministry of Agriculture, the DS 031-2008-AG re-created the DGFFS to replace the 104. Managerial Resolutions No. 006-2005-INRENA-OSINFOR, 18 Ag 2005 IFFS. 105. See glossary for more on the PAU. 72. Departmental Resolution 226-2001-INRENA. Note that the number of 106. According to the Resolution that approved the POA and is cited in the ATFFS changed through the years and that some regions had more Balance of Extraction. In some cases no approved resolution is cited than one ATFFS while in other cases one ATFFS could cover more than and it is imposible to know which POA is “real”. one region. 107. According to the Balance of Extraction 73. Departmental Resolution 228-2001-INRENA and 302-2002-INRENA, among others 108. According to the Balance of Extraction 74. Resolución de Intendencia 233-2005-INRENA-IFFS, May 13, 2005 109. According to the Resolution that approved the POA and is cited in the

69 THE LAUNDERING MACHINE HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM ARE DESTROYING THE FUTURE OF ITS FORESTS

Balance of Extraction. In some cases no approved resolution is cited 158. Supervisory Report 286-2010-OSINFOR-DSCFFS and it is impossible to know which POA is “real”. 159. Supervisory Report 286-2010-OSINFOR-DSCFFS, folios 0052-0054 110. Supervisory Report 314-2010-OSINFOR-DSCFFS, folio 0024 160. Supervisory Report 286-2010-OSINFOR-DSCFFS, folio 0017 111. Supervisory Report 314-2010-OSINFOR-DSCFFS folio 0012 161. Acording to Article 379 of the regulations of Law N. 27308, “where 112. Supervisory Report 225-2010-OSINFOR-DSCFFS folio 0007 the offense is committed by others within communal lands, or within the areas granted under concessions, management contracts, 113. Supervisory Report 225-2010-OSINFOR-DSCFFS, folio 0008 '8#4,&!R'#!,"+),&)*$&/!#+:)3de5d6)7$(!>$&+)#4$)*&,780#+)0," +0'#$7) and the community or holders, which to proceed with industrialization 114. Supervisory Report 225-2010-OSINFOR-DSCFFS, folio 0031 and / or marketing must pay retail prices established natural state 115. Supervisory Report 225-2010-OSINFOR-DSCFFS, folios 0002-0003 (...). “This article is controversial, since it has been reported cases where the same dealers hire people who illegally harvest timber from 116. Supervisory Report 225-2010-OSINFOR-DSCFFS, folio 0055--0080 their concessions and then cause the seizure of these products and 117. Supervisory Report 225-2010-OSINFOR-DSCFFS, folio 0012 have them ready to be legalized and sold through a return. 118. Supervisory Report 225-2010-OSINFOR-DSCFFS, folio 0014 162. Supervisory Report 192-2009-OSINFOR-DSCFFS, page 0006 119. Supervisory Report 225-2010-OSINFOR-DSCFFS, folio 0015 163. Supervisory Report 192-2009-OSINFOR-DSCFFS 120. Supervisory Report 087-201-OSINFOR-DSCFFS 164. Supervisory Report 192-2009-OSINFOR-DSCFFS, folio 0006 121. Supervisory Report 225-2010-OSINFOR-DSCFFS, folio 0066 165. Supervisory Report 192-2009-OSINFOR-DSCFFS, folio 0030 122. Supervisory Report 225-2010-OSINFOR-DSCFFS, folio 0017 166. Supervisory Report 192-2009-OSINFOR-DSCFFS, folio 0001 167. Supervisory Report 192-2009-OSINFOR-DSCFFS, folio 0002. It is about 123. Supervisory Report 225-2010-OSINFOR-DSCFFS, folio 0008 RA Nº 1868-2008-INRENA-ATFFS-TAM-MAN from December 17, 2008. 124. Supervisory Report 225-2010-OSINFOR-DSCFFS, folio 0063--0064 168. Supervisory Report 192-2009-OSINFOR-DSCFFS, folio 0016 125. Supervisory Report 002-2008-INRENA-OSINFOR-USEC 169. Supervisory Report 192-2009-OSINFOR-DSCFFS, folio 0030 126. Supervisory Report 002-2008-INRENA-OSINFOR-USEC, folio 00461 170. Supervisory Report: 316-2010-OSINFOR-DSCFFS 127. Supervisory Report 002-2008-INRENA-OSINFOR-USEC, folio 00460 171. Supervisory Report 316-2010-OSINFOR-DSCFFS, folio 0011 128. Supervisory Report 002-2008-INRENA-OSINFOR-USEC, folio 00454 172. Supervisory Report 316-2010-OSINFOR-DSCFFS, folio 0011 129. Supervisory Report 131-2010-OSINFOR-DSCFFS 173. Supervisory Report 316-2010-OSINFOR-DSCFFS, folio 0016 130. Supervisory Report 131-2010-OSINFOR-DSCFFS, folios 0065-0066 174. Supervisory Report 316-2010-OSINFOR-DSCFFS, folios 0071 – 0072 131. Supervisory Report 131-2010-OSINFOR-DSCFFS, folios 0067-0069 175. Supervisory Report 316-2010-OSINFOR-DSCFFS, folios 0055 - 0064 132. Supervisory Report 131-2010-OSINFOR-DSCFFS, folio 0017 176. Supervisory Report 316-2010-OSINFOR-DSCFFS, folio 0017 133. Supervisory Report 195-2010-OSINFOR-DSCFFS 177. That is to say, the number of the POA indicated in the resolution that 134. Supervisory Report 195-2010-OSINFOR-DSCFFS folios 0012-0013 approved the POA. 135. Supervisory Report 188-2010-OSINFOR-DSCFFS 178. Memorandum N. 202-2010-GRL-GGR-PRMRFFS-DER, October 27, 2010. B!$(7)>$&! 0'#!,")&$*,&#+)&$/!##$7)#,)CeKeBBO)F.)$"%!"$$&)dT(!7') 136. Supervisory Report 188-2010-OSINFOR-DSCFFS folio 0003 I'&F$%$('#')e'/X&$R:)=- 0!'()S$##$&)d,<)\\`bH6UHGUBBOHGU5BBO:) 137. Supervisory Report 188-2010-OSINFOR-DSCFFS folios 0009--0010 received October 20, 2010. 179. Directorial Resolution Nº 0359-2010-AG-DGFFS-DGEFFS dated August 138. Supervisory Report 188-2010-OSINFOR-DSCFFS folio 0011 \\:)[X\X)'**&,>$7)#4$)0&$'#!,"),-)#4$) $(72,&D)#$'/)($'7)F.)$"%!"$$&) 139. Supervisory Report 008-2010-OSINFOR-DSCFFS U$+#!]")Q480,+)S'R,J) $(7)>$&! 0'#!,"),-)#4$)O8/'0)6((*')!"7!%$",8+) coommunity’s forest permit Nº 3018-2010-AG-DGFFS-DGEFFS. DGFFS 140. Supervisory Report 008-2010-OSINFOR-DSCFFS folio 0011 &$*,&#$7)#,)6?BBO)3T8!#,+)F.)/$'"+),-)=- 0!'()S$##$&)d-)\XWXH[X\XH6UH DGFFS-DGEFFS dated September 24, 2010. 141. Supervisory Report 008-2010-OSINFOR-DSCFFS folio 0011 180. R.A. N. 446-2009-AG-DGFFS-ATFFS-Iquitos. POA 5 had been developed 142. Supervisory Report 003-2008-INRENA_OSINFOR-USEC by the same forestry consultant, Hugo Paima Ríos, who developed the 143. As an example, see Supervisory Report 188-2010-OSINFOR-DSCFFS POA for Alex Tello Grandez, and later went to work for OSINFOR. 144. Supervisory Report 003-2008-INRENA_OSINFOR-USEC folio 0014 181. N. 065-2009-AG-DGFFS-ATFFS-/Iquitos-Sede Iquitos/KBTP 145. Supervisory Report 094-2010-OSINFOR-DSCFFS 182. Report N. 3103-2010-AG-DGFFS-DGEFFS, September 28, 2010. 183. Technical report 012-2009-AG-DGFFS-ATFFS-REQUENA/rrht; 146. Supervisory Report 094-2010-OSINFOR-DSCFFS folio 0010 Administrative Resolution 064-2009-AG-DGFFS-ATFFS-REQUENA 147. Supervisory Report 094-2010-OSINFOR-DSCFFS folio 0012 184. OPEXA can be found in supporting documentation for the following 148. Supervisory Report 094-2010-OSINFOR-DSCFFS folios 0057-0066 CITES permits from 2008: 11474, 11444, 11313, 11262, 11252, 11233 (exporter Maderera Bozovich); and 11301 (exporter Forestal del Oriente). The 149. Supervisory Report 094-2010-OSINFOR-DSCFFS folio 0014 supporting documentation indicates zafras or harvest periods that 150. Supervisory Report 094-2010-OSINFOR-DSCFFS folio 0015 correspond to POAs 3 and 4. 185. CITES Trade Database, http://www.unep-wcmc-apps.org/citestrade/ 151. Supervisory Report 094-2010-OSINFOR-DSCFFS folio 0010 trade.cfm 152. Supervisory Report 094-2010-OSINFOR-DSCFFS folio 0014 186. DS No. 019-2002-AG 153. Supervisory Report 209-2010-OSINFOR-DSCFFS 187. Sentencia del Tribunal Constitucional, Exp. N. 006-2000-AI/TC. http:// 154. Directorial Resoultion 149-2011-OSINFOR0-DSCFFS www.tc.gob.pe/jurisprudencia/2002/00006-2000-AI.html 155. Directorial Resoultion 149-2011-OSINFOR0-DSCFFS folio 0002 188. Report No. 142-2002_INRENA-OAJ 156. Directorial Resoultion 149-2011-OSINFOR0-DSCFFS folio 0003 189. Yield factor: the percentage of a standing tree’s volume that can be converted into export-quality lumber. 157. Directorial Resoultion 149-2011-OSINFOR0-DSCFFS folio 0005

70 190. Memo 6029-2007-INRENA-IFFS, 11 December 2007 a Pucallpa.” 2 March 2009. El Comercio. 191. Memorandum error. His real name is Juan Carlos (rather than José 215. Fagan, Chris. Illegal Mahogany Loggers Penetrate Heart of Carlos). According to an artiicle published November 22 2007 in Uncontacted Tribal Reserve in Peru. Upper Amazon Conservancy. the ATFFS Tumbes Piura blog, “Jose Carlos Barahona Sanchez was August 2011. savaged by illegal loggers, who spoke last Sunday, in an area of the town of Puerto Maldonado. 216. =>$& !%4#)e$>$'(+)3(($%'()S,%%!"%)Q'/*+)!")#4$)K8&8"'48')?$&&!#,&!'() Reserve. Round River Conservation Studies, 2009 192. ?$04"!0'()>$&! 0'#!,")&$*,&#),-)[7,)C=6)d,<)WY[H[XXWH3de5d6H IFFS(DACFFS)-RCU-IHM (Anexo N.16), concesión No. 16-IQU/C-J-167-04 217. Fagan, Chris. Peru: Illegal Mahogany Logging Continues in Reserve for Forestal San Vicente SAC. Uncontacted Tribes. Upper Amazon Conservancy. 2010 193. ?$04"!0'()>$&! 0'#!,")&$*,&#))[7,)C=6)d=<)WW`H[XXWH3de5d6H IFFS(DACFFS/IBRR (Anexo N.20), concession No. 16-IQU/C-J-214-04 Luz Angelica Cabrera Arcentales. 194. Memo 6029-2007-INRENA-IFFS, 11 December 2007 WORKS CITED: EXECUTIVE SUMMARY 195. http://diariolaregion.com/web/2010/11/09/edictos-169/ 196. Directorial Resolution 002/2008 (for mahogany) and 017/2008 (for 1. Kometter, R., and E. Maravi. 2007. “Methodology for Developing cedar) National Volume Conversion Tables (Standing Volume & Export Grade 197. A resolution of the Eighth Court of the Constitutional Court, passed Sawnwood).” ; ITTO Market Information Service monthly report, March on January 8th 2011, provides that the plaintiffs be reinstated to 2012. #4$!&)p,F+)'(,"%)2!#4)'(()*&$>!,8+(.)/'"7'#$7)F$" #+<))B$F&8'&.) [X\\)2'+)#4$) &+#)#!/$)#4'#)('2.$&)e,7,(-,)g'(0'&$(:)G!&$0#,&),-)#4$) 2. Pautrat, L. and I. Lucich. Análisis Preliminar Sobre Gobernabilidad y personnel unit of MINAG, informed them that there was no budget Cumplimiento de la Legislacion del Sector Forestal en el Peru. 2006. for their positions. Months passed, and after the third diligence they 3. http://www.fordaq.com/fordaq/news/logs_softwood_plywood_26553. 2$&$),--$&$7)')#$/*,&'&.)0,"#&'0#<))?4&$$),-)#4$) >$)-8"0#!,"'&!$+) html '00$*#$7<))?,)7'#$)2$)4'>$)F$$")!"-,&/$7)#4'#)#4$),- 0!'(+)2!(()F$) informed immediately when they may return to their jobs. 4. OSINFOR Comunicado: “Gobierno Regional de Loreto, Concesionarios y OSINFOR unidos para promover el desarollo forestal sostenible con 198. S$##$&)-&,/)3%"'0!,)S,/F'&7!):)+0!$"#! 0)'8#4,&!#.:)Q3?5O)N"!>$&+!7'7) inclusion social.” October 2011. Nacional Agraria La Molina, Facultad de Ciencias Forestales, a Edgardo Lizárraga, Intendente Forestal y de Fauna Silvestre del INRENA. La 5. World Bank, “Justice for Forests: Improving Criminal Justice Efforts Molina, 28 de noviembre del 2007. to Combat Illegal Logging,” March 2012. http://web.worldbank.org/ WBSITE/EXTERNAL/TOPICS/EXTFINANCIALSECTOR/0,,contentMDK:231461 199. Managerial Resolution (Resolución de Intendencia) 020-2008-INRENA- 60~pagePK:148956~piPK:216618~theSitePK:282885,00.html IFFS 6. Derecho, Ambiente y Recursos Naturales (DAR), ”Informe Anual 2011- 200. http://elcomercio.pe/edicionimpresa/html/2008-02-01/ Transparencia en el Sector Forestal Peruano,” 2012. funcionario-inrena-renuncio-discrepancias-madereros.html 201. Directorial Resolution No. 076-2008-INRENA, just a few days after the implementation of the US – Peru FTA, which has explicit forestry standards. 202. Asmat Vega’s report, No. 407-2007-INRENA-OAJ 203. Resolución de Intendencia 020-2008-INRENA-IFFS, January 29, 2008 204. Asmat Vega’s report, No. 084-2008-INRENA-OAJ 205. ibid 206. Amancio, Nelly Luna. El Comercio. Interview with Jose Luis Camino. December 8, 2008 207. POAs are annual harvesting plans created for smaller units of land within a 40,000 ha concession, so it is theoretically possible that a concession may lie partly “inside” and partly “outside” the watershed, and the application of the ban would depend on which part of the concession in which a POA unit lies.) 208. “the inventory data is false, as none of the harvestable trees or seed trees included in the supervision were found; additionally, there are signs that the volume of harvestable wood has been over- estimated” 209. Sentencia del Tribunal Constitucional, Exp. N. 1206-2005-PA/TC. Loreto. Asociación de Promotores de Salud del Vicariato San José del Amazonas “Blandine Masicote Peru”. 20 April 2007. http://www.tc.gob. D02&:2(32"&r(!4s&t*6%#"&](4:,&%02&7*::('2&(%&%02&23'2&%02& pe/jurisprudencia/2007/01206-2005-AA.html FN-v/&%*9?2"&6#)6211*#)&*)&1#4%02")&H#"2%#,&1%()31&;*%0&%;#& 210. Fagan, Chris & Shoobridge, Diego. The Race for Peru’s Last Mahogany %02&6#994)*%=Y1&5#4)3*)'&929?2"1,&?#%0&*)3*'2)#41&i(!()(04(<& Trees: Illegal Logging and the Alto Purús National Park. Round River t*6%#"&](4:&1%*::&:(6>1&?(1*6&)26211*%*21&:*>2&(&"2'4:("&160##:& Conservation Studies. March 2007. %2(602"&#"&923*6(:&!#1%,&#"&272)&%*%:2&%#&*%1&:()31,&321!*%2&%02& 211. ibid. *) 48&:#''*)'&6#)6211*#)1&()3&#*:&28!:#"(%*#)<&i#994)*%*21& 1460&(1&t*6%#"&](4:&3212"72&(&?2%%2"&60()62&(%&92()*)'54:& 212. Stacy, Megan. Alto Purús. The Sacred Land Film Project. July 2010. 3272:#!92)%,&)#%&29!%=&!"#9*121<&&&D#?=&E9*%0B-./ 213. Fagan, Chris & Shoobridge, Diego. The Race for Peru’s Last Mahogany Trees: Illegal Logging and the Alto Purús National Park. Round River Conservation Studies. March 2007. 214. Luna, Nelly. “Antonov de la Policia transportaba caoba illegal de Purús

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