ARCH IV 90096 ACCOUNTS OVERDUE: Natural Resource Depreciation in Costa Rica Raw Solorzano Ronnie de Camino Richard Woodward Joseph Tosi Vicente Watson Alexis Vasquez Carlos Villalobos Jorge Jimenez Robert Repetto Wilfrido Cruz Tropical Science Center World Resources Institute San Jose, Costa Rica Washington, D.C. WORLD RESOURCES I NSTITUTE December 1991 3)9 . 3~ ·, {>t?O • 'l ( (1c?i·(u ) ~ -t '-· ·~ ....... .'" Kathleen Courrier Publications Director Brooks Clapp Marketing Manager Hyacinth Billings Production Manager Wilfrido Cruz Cover Photo Each World Resources Institute Report represents a timely, scientific treatment of a subject of public concern. WRl takes responsibility for choosing the study topics and guaranteeing its authors and researchers freedom of inquiry. It also solicits and responds to the guidance of advisory panels and expert reviewers. Unless otherwise stated, however, all the interpretation and findings set forth in WRl publications are those of the authors. Copyright © 1991 World Resources Institute. All rights reserved. ISBN 0-915825-66-X Library of Congress Catalog Card No. 91-66165 Printed on Recycled Paper Contents Part I: Overview and Recommendations ..... 1 Methodology: Physical Accounts ... 35 Methodology: Economic Accounts .. 39 • Background ......................... 1 Results: Physical Accounts ........ .40 • Shortcomings of SNA ................ 1 Results: Economic Accounts ....... 42 •Recommendations ................... 3 • Economic Depreciation from Off-Site • Overview of Results ................. 4 Erosion ............................ 43 Off-Site Effects of Soil Erosion: Part II: Costa Rica: The Detailed Natural An Example ...................... 46 Resource Accounts ................. 11 Methodology .................. .46 A. Forest Accounts ...................... 12 Results ......................... 46 • Costa Rica's Forests After the Spanish C. Fishery Accounts .................... .47 Arrival ............................. 11 • The Timber Economy in Costa • Overview: Costa Rican Fisheries .... .47 Rica ............................... 12 • Depreciation of Fishery Resources .... 50 • Depreciation of Forest Resources ..... 14 Data Sources and Estimates ........ 52 • Physical Accounts .................. 15 Physical Accounts: Biomass and Results ........................... 17 Maximum Sustainable Yield ...... 56 •Economic Accounts ................. 17 Economic Accounts: Depreciation .. 58 Present Value of Marketable Gulf of Nicoya .................... 60 Timber ......................... 18 Resource Management Sustained Value of Production ..... 24 Implications .................... 61 •Forest Resource Appreciation ........ 25 D. Mangrove and Coastal Resource Secondary Forests ................. 25 Accounts ........................... 64 • Results: Depreciation of Forest Asset ....... ~ ...................... 27 • Physical Accounts: Mangroves in Gulf of Nicoya .......................... 66 B. Soil Accounts ........................ 32 Methodology ..................... 66 • Depreciation of the Soil Resource .... 33 Results ........................... 67 Depreciation: Productivify •Economic Value: Mangroves in Gulf of Measure ........................ 33 Nicoya ............................. 68 Depreciation: Replacement Cost Review of the Literature ........... 68 Method ........................ 34 Direct Production ................. 68 • Valuation of Costa Rica's Soil Indirect Production ................ 72 Loss ............................... 35 • Economic Potential: Mangroves in Gulf of Nicoya .......................... 73 l - Annexes .......................... · ~ . · .. · · 79 • B-1 Soil Depreciation and Productivity Loss ........................... 89 • A-1 Calculating Timber Volumes ..... 79 • B-2 Land Unit Types ................ 94 • A-2 Tropical Forest Volumes and • B-3 Nitrogen, Potassium, and Growth Rates .................. 84 Phosphorous Levels Used in • A-3 Indexes Used in Calculating Estimating Nutrient Loss Through ET&M Costs ........... : ....... 85 Erosion ......................... 98 • A-4 Calculating Stumpage Value and Capital Value ................... 86 • A-5 Value of Secondary Forests, Notes .................. ·...... ············ .99 by Volume ..................... 88 References ............................... 103 Acknowledgments his report was prepared by the Tropi­ Our special thanks go as well to Eduardo cal Science Center (San Jose, Costa Madrigal, Direcci6n General de Recursos T Rica) in conjunction with the World Pesqueros y Acuacultura, Ministerio de Resources Institute (Washington, DC). Agricultura y Ganaderfa, for his contribution of data and suggestions, and to Javier Saborio at Funding for the study was provided by the the Centro Agron6mico Tropical de United States Agency for International Devel­ Investigadon y Enseftanza (CATIE) for his help opment, the International Development with the digitized maps used in this study. We Research Centre (IDRC) of Canada, and the also appreciate the invaluable help given by Government of the Netherlands. A start-up project consultants Elemer Bornemisza and grant was provided by the Noyes Foundation. Jorge Fonseca; translators Karen E. Steffensen, We also thank Vernita Fort of USAID, Frits L. and Wendy Hitz; and computer programmer Schlingemann of the Netherlands Ministry of Hernan Badilla. Foreign Affairs, and David Brooks of IDRC for their wholehearted support of this project. We would also like to extend our gratitude to Kathleen Lynch for her skillful editing and to We wish to express our sincere gratitude to Hyacinth Billings for her production coordina­ the members of the project's advisory commit­ tion. Rosemary McCloskey and Lori Pierelli tee for their helpful guidance and constant deserve thanks for their competent research support, to Dr. Alvaro Umana for his encour­ and in-house production work, and Katy Perry agement to undertake this study, and to for her administrative assistance. Michael Ward for his helpful review and suggestions. TSC WRI v , Foreword he UN System of National Accounts, be given a misleading picture of economic the world's yardstick for measuring performance. T economic performance, is a flawed framework for appraising the sustainability of Costa Rica is a case in point. In the twenty economic growth. While it measures how such years between 1970 and 1989, the country lost man~made assets as factories and equipment natural resources worth more than one year's depreciate as they are used in current produc­ gross domestic product (GDP). Appropriate tion, it leaves out the effects of resource deple­ national income accounting methods would tion and degradation. For example; national have recorded this 5-percent-of-GDP loss each income accounts record timber output, fish har­ year as depreciation of capital. Instead, the vest, and crop production as income but ignore annual accounts calculated during those two the costs of deforestation, overfishing, and soil decades sho_w only a continuous rise in erosion. A nation's depletion of its natural national income and a high rate of capital resources-consumption of natural capital-can formation-right up to the crash of the· 1980s. therefore· masquerade as growth for decades, The economic crash, when it came, was called even though it will clearly reduce income a debt crisis, but it was just as much an prospects from resource sectors in the future. environmental crisis. · Just as ignoring the deterioration of man-made assets skews economic assessments, so does In Accounts Overdue, the Tropical Science overlooking the degradation of natural assets. Center in Costa Rica and the World Resources Institute collaborated to analyze the changing The national income accounting framework is state of the country's forests, soils, and fisher­ a relic of the 1930s, when raw materials were ies from 1970 to 1989. The study was set in cheap and only a few visionaries could foresee motion when Dr. Alvaro Umana Quesada­ the environmental threats that are common then Costa Rica's Minister of Natural concerns today. Today's accounting framework Resources, Energy, and Mines-asked WRI to is particularly inadequate for countries where help carry out in Costa Rica a study similar to natural resources are among the principal eco­ Wasting Assets: Natural Resources in the National nomic assets. In recent years, thanks in part to Income Accounts, which was done in Indonesia. WRI's work on natural resource accounting, Dr. Umafta's successor, Hernan Bravo, has many economic analysts have endorsed the supported the project as strongly. Both recog­ view that national accounts should be revised nize the importance for policy formation of to treat natural resources the same way that making the economic costs of environmental man-made capital is trea~ed. Until such revi­ degradation explicit. After two years, the sions occur, policy-makers and the public will project team concluded that the standard vii accounting system's blind spot has led Costa Disturbing as these findings are, they repre­ Rican decision-makers farther and farther from sent only a fraction of Costa Rica's actual natural development choices that would have been resource losses. The authors measured only the economically and environmentally sustainable. loss of timber, the depletion of certain soil nutrients, and the decline of principal species in Consider just a few of the study team's one important fishing area-leading indicators of findings: how these three sectors are faring, but by no means the whole story. In other