FEASIBILITY OF TEAK PRODUCTION FOR SMALLHOLDERS IN EASTERN PANAMÁ BY DANIELLA K. ZANIN Submitted in partial fulfillment of the requirements for the degree of MASTER OF SCIENCE IN FORESTRY MICHIGAN TECHNOLOGICAL UNIVERSITY 2005 The project paper, “Feasibility Of Teak Production For Smallholders In Eastern Panamá” is hereby approved in partial fulfillment of the requirements for the Degree of MASTER OF SCIENCE IN FORESTRY. SCHOOL OF FOREST RESOURCES AND ENVIRONMENTAL SCIENCES SIGNATURES: ADVISOR: ____________________________________ Dr. Blair D. Orr DEAN: ____________________________________ Dr. Margaret R. Gale DATE: ____________________________________ ii PREFACE A great education awaits the young, wide-eyed, idealistic environmentalists from the United States. I know it for myself and I have seen it in my fellow, fresh-faced Peace Corps Panamá volunteers. Having been educated in the United States, we are conditioned to fight for all environmental causes by striving to email our congress people and excel as environmental stewards by spending a couple extra bucks to buy the environmentally friendly household cleaning supplies instead of those filled with phosphates that can lead to the destruction of …... The experience of living in a third world country and working shoulder to shoulder with people struggling for survival will bring focus to anyone that craves to know what can actually be done to help and where to start. Initially, this can lead to severe depression and anxiety realizing that your infinitesimal existence will really have no profound affect on reversing environmental destruction in the world. However, once this is acknowledged, the forever-tainted volunteer can reach great levels and be finally useful. It is like the saying, “Once you understand that you know nothing is when you first begin to understand”. I know that this sounds sarcastic although I am really not. Peace Corps was quite a humbling experience for me. I learned a lot about myself when not trapped in the box of comfort we find when we are at home. Panamá did become home eventually and my community, my family. Kate Lincoln said it best, “At first, you think Peace Corps is going to be an adventure everyday then you realize you are just living”. Peace Corps Panamà Haiku By Daniella Zanin Neapolitan ice cream topped with bittersweet chocolate. Owwww wahh!* * (Panamanian saloma) iii TABLE OF CONTENTS LIST OF FIGURES……………………………………………………………… v-vii LIST OF TABLES………………………………………………………………. viii-ix ACKNOWLEDGMENTS……………………………………………………….. x CHAPTER ONE: INTRODUCTION…………………………………………… 1 CHAPTER TWO: STUDY OBJECTIVES……………………………………… 4 CHAPTER THREE: BACKGROUND OF PANAMÁ………………………….. 6 CHAPTER FOUR: TEAK……………………………………………………….. 21 Teak in the world …………………………………………………………. 25 Teak and markets…….. ……………………………………….………….. 39 CHAPTER FIVE: SMALLHOLDERS IN PANAMÁ…………………………… 42 CHAPTER SIX: METHODS AND DATA……………………………………… 47 CHAPTER SEVEN: RESULTS AND DISCUSSION…………………………… 67 CHAPTER EIGHT: CONCLUSIONS AND RECOMMENDATIONS…………. 94 LITERATURE CITED…………………………………………………………….. 98 APPENDIX….……………………………………………………………………... 106 iv LIST OF FIGURES FIGURE 3.1: MAP OF CENTRAL AMERICA HIGHLIGHTING THE COUNTRY OF PANAMÁ…………………………………………………………………………..……..7 FIGURE 3.2: MAP OF THE NINE PROVINCES OF PANAMÁ AND THE SAN BLAS TERRITORY……………………………………………………………………..10 FIGURE 3.3: INDIGENOUS EMBERÁ INDIANS IN IPETÍ, EASTERN PANAMÁ………………………………………………………………………………..11 FIGURE 3.4: SLASH AND BURN AGRICULTURE IN EASTERN PANAMÁ…….19 FIGURE 4.1: PLANTATION TEAK WOOD IN PANAMÁ………...………...…...….21 FIGURE 4.2: CROSS-SECTION OF A PLANTATION GROWN TEAK LOG WITH ITS DARKER HEARTWOOD…………………………...……………………………..24 FIGURE 4.3: ZONES OF LIFE FOR EASTERN PANAMÁ…………………….……28 FIGURE 4.4: HOLDRIGE’S ZONES OF LIFE CLIMATE CLASSIFICATION FOR EASTERN PANAMÁ……………….………………………………………………..…29 FIGURE 4.5: NEWLY PLANTED TEAK SEEDLING...…………...….……………..31 FIGURE 4.6: DESICCATION OF UNPROTECTED TROPICAL SOILS..………..…34 FIGURE 4.7: TEN-YEAR-OLD TEAK STAND WITH NO THINNING…...………..38 FIGURE 5.1: A SMALLHOLDER AND HIS FIELD IN PANAMÁ……...……..……44 FIGURE 6.1: REDUCTION IN INITIAL COST OF FENCING WHEN LAND IS SQUARE AND CONNECTED………………………………………………………….57 FIGURE 6.2: NET PRESENT WORTH EQUATION FOR COST ANALYSIS……...63 FIGURE 7.1: NET PRESENT WORTH RESULTS USING VARIOUS DISCOUNT RATES FOR THE DE CAMINO ET AL GROWTH TABLE WITH THE DE VRIEND WEEDING REGIME FOR ONE HECTARE…………………………………..……….69 FIGURE 7.2: NET PRESENT WORTH RESULTS USING VARIOUS DISCOUNT RATES FOR THE DE CAMINO ET AL GROWTH TABLE WITH THE KEOGH WEEDING REGIME FOR ONE HECTARE…………………………………………...70 v FIGURE 7.3: NET PRESENT WORTH RESULTS OF BOTH DE VRIEND AND KEOGH WEEDING REGIMES FOR THE DE CAMINO ET AL GROWTH TABLE WITH AN ELEVEN PERCENT DISCOUNT RATE FOR ONE HECTARE………….70 FIGURE 7.4: NET PRESENT WORTH RESULTS OF BOTH DE VRIEND AND KEOGH WEEDING REGIMES FOR THE DE CAMINO ET AL GROWTH TABLE WITH A FOURTEEN PERCENT DISCOUNT RATE FOR ONE HECTARE………………………………………………………………………….....…71 FIGURE 7.5: NET PRESENT WORTH RESULTS USING VARIOUS DISCOUNT RATES FOR THE ALFARO GROWTH TABLE WITH THE DE VRIEND WEEDING REGIME FOR ONE HECTARE…………………………………………..…………….72 FIGURE 7.6: NET PRESENT WORTH RESULTS USING VARIOUS DISCOUNT RATES FOR THE ALFARO GROWTH TABLE WITH THE KEOGH WEEDING REGIME FOR ONE HECTARE………………………………………………………...72 FIGURE 7.7: NET PRESENT WORTH RESULTS OF BOTH DE VRIEND AND KEOGH WEEDING REGIMES FOR THE ALFARO GROWTH TABLE WITH A NINE PERCENT DISCOUNT RATE FOR ONE HECTARE……………….……….………..73 FIGURE 7.8: NET PRESENT WORTH RESULTS OF BOTH DE VRIEND AND KEOGH WEEDING REGIMES FOR THE ALFARO GROWTH TABLE WITH A TEN PERCENT DISCOUNT RATE FOR ONE HECTARE……………………...……73 FIGURE 7.9: NET PRESENT WORTH RESULTS USING VARIOUS DISCOUNT RATES FOR THE BERMEJO ET AL GROWTH TABLE WITH THE DE VRIEND WEEDING REGIME FOR ONE HECTARE…………………………..……………….74 FIGURE 7.10: NET PRESENT WORTH RESULTS USING VARIOUS DISCOUNT RATES FOR THE BERMEJO ET AL GROWTH TABLE WITH THE KEOGH WEEDING REGIME FOR ONE HECTARE……………………….…………………..75 FIGURE 7.11: NET PRESENT WORTH RESULTS OF BOTH DE VRIEND AND KEOGH WEEDING REGIMES FOR THE BERMEJO ET AL GROWTH TABLE WITH A NINE PERCENT DISCOUNT RATE FOR ONE HECTARE……………………….75 FIGURE 7.12: NET PRESENT WORTH RESULTS OF BOTH DE VRIEND AND KEOGH WEEDING REGIMES FOR THE BERMEJO ET AL GROWTH TABLE WITH A TEN PERCENT DISCOUNT RATE FOR ONE HECTARE………………………...76 FIGURE 7.13: NET PRESENT WORTH RESULTS OF BOTH DE VRIEND AND KEOGH WEEDING REGIMES FOR THE BERMEJO ET AL GROWTH TABLE WITH AN ELEVEN PERCENT DISCOUNT RATE FOR ONE HECTARE……………..…..76 vi FIGURE 7.14: MANUAL AND CHEMICAL WEEDING COSTS TABLE BASED UPON THE DE VRIEND AND KEOGH WEEDING REGIMES……………...……….80 FIGURE 7.15: COSTS OF KEOGH AND DE VRIEND WEEDING REGIMES BASED ON MANUAL OR CHEMICAL WEEDING…………………………………………...81 FIGURE 7.16: A DISCOUNT RATE OF ELEVEN PERCENT WITH THE DE CAMINO ET AL GROWTH TABLE CAN MAKE A PROJECT FEASIBLE WITH THE MANUAL WEEDING METHOD………………………………………………….…...82 FIGURE 7.17: NET PRESENT WORTH RESULTS USING VARIOUS DISCOUNT RATES FOR THE ALFARO GROWTH TABLE WITH THE DE VRIEND WEEDING REGIME FOR ONE HALF HECTARE…………………………………….…………..83 FIGURE 7.18: NET PRESENT WORTH RESULTS OF SCENARIO TWO PRICES WITH THE DE VRIEND WEEDING REGIMES FOR THE ALFARO GROWTH TABLE WITH BOTH AN EIGHT PERCENT AND NINE PERCENT DISCOUNT RATE FOR ONE HALF HECTARE……………………………………………………84 FIGURE 7.19: NET PRESENT WORTH USING VARIOUS DISCOUNT RATES OF ALFARO GROWTH TABLE FOR ONE HECTARE……………………..………….…86 FIGURE 7.20: NET PRESENT WORTH USING VARIOUS DISCOUNT RATES OF ALFARO GROWTH TABLE FOR TWO HECTARES…….…………………………...86 FIGURE 7.21: NET PRESENT WORTH OF SCENARIO TWO PRICES FOR ALFARO GROWTH TABLE OF ONE AND TWO HECTARES ON A PER HECTARE BASIS…………………………………………………………………………...……….87 FIGURE 7.22: ALFARO PROJECT FEASIBILITY WITH NO LAND COSTS……...90 FIGURE 7.23: ALFARO GROWTH TABLE: DISCOUNT RATE CHANGES FOR NO LAND OR FENCING COST…………………………………………………….....91 FIGURE A.1: HOPPUS FORMULA………………………………………………….119 FIGURE A.2: BRERETON FORMULA……………………………………………..120 FIGURE A.3: THE DIFFERENCE BETWEEN THE HOPPUS AND BRERETON FORMULAS……………………………………………………………………………120 vii LIST OF TABLES TABLE 3.1: CENSUS 2000 OF INDIGENOUS POPULATIONS IN PANAMÁ……....9 TABLE 6.1: INFORMATION NEEDED FOR A TEAK PLANTATION FEASIBILITY STUDY……………………………………………………...……………………….…..47 TABLE 6.2: GROWTH TABLES……………………...…………………………….…51 TABLE 6.3: TEAK IN COSTA RICA WITH GOOD MANAGEMENT INCLUDES PROPER WEEDING, PRUNING, AND THINNING. WITHOUT PROPER MANAGEMENT, TEAK PLANTATIONS RESULT IN SMALLER HEIGHT AND DIAMETER GROWTH………………………………………………………….……...52 TABLE 6.4: TEAK SALE IN IPETÍ OF TREES WITH NO PAST MANAGEMENT..53 TABLE 6.5: PROPER MANAGEMENT OF A TEAK PLANTATION IN COSTA RICA RESULTS IN OPTIMUM DIAMETER AND HEIGHT LEVELS…………….54 TABLE 6.6: TWO DIFFERENT WEEDING REGIMES……………………...…….....60 TABLE 6.7: COMPARISON OF THREE DIFFERENT THINNING SCHEDULES AND THE NUMBER OF TREES THINNED PER YEAR…………………...…….…..62 TABLE 6.8: PRICE LISTS OF TEAK TIMBER PRICES IN EASTERN PANAMÁ IN US DOLLARS……………………………………………………………………..…64 TABLE 6.9: A SENSITIVITY ANALYSIS IS PERFORMED ON THE VARIABLES IN THIS TABLE TO FIND IF THERE ARE DIFFERENCES IN NET PRESENT WORTH THAT WILL AFFECT PROJECT FEASIBILITY…………………..……….66 TABLE 7.1: PRICE TABLE WITH FOUR PRICE SCENARIOS USED IN THIS REPORT TO QUANTIFY RETURNS ACCORDING TO SMALL END DIAMETERS FROM THINNINGS AND HARVESTS……………….……………………………….68 TABLE 7.2: TABLE OF PROJECT FEASIBILITY FOR EACH GROWTH TABLE WITH BOTH WEEDING REGIMES. BLACK AREA SIGNIFIES PROJECT FEASIBILITY FOR ALL