Development Progress

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COST A RIC A'S STOR Y:

Costa Rica's

sustai nable resour ce mana geme nt:

Succe ssfully

tacklin g trop ical defore statio n

Jessica Brown and Neil Bird

Development Progress

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Key messages

1. Costa Rica stands out as having addressed high levels of deforestation through a robust Protected Area system and natural resource management legislation, complemented by direct financial incentives offered to private landowners.

2. Economic reform processes need to be aligned with national environmental priorities in order to achieve policy coherence. Costa Rica’s focus on ecotourism as an

economic driver has reinforced its national forest policies.

3. Costa Rica has a strong democratic system, in which environmental issues feature in public debate and government policy. This culture of national leadership and local ownership over development has had a powerful influence on environmental progress.

Costa Rica's sustainable resource management:

Development Progress stories

Successfully tackling tropical

deforestation

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Summary

Costa Rica has a continental area of 5 million hectares, extending from northwest to southeast between the Pacific and the Atlantic Oceans and internally divided by a mountain range. These characteristics result in a variety of microclimates and different life zones, which support one of the highest levels of biodiversity on the planet, with a large number of endemic species.

By the 1960s, Costa Rica had begun to experience rapid deforestation, owing to the expansion of cattle farming and general agricultural development. Between 1973 and 1989, deforestation reached one of the highest rates in the world, with an average of 32,000 hectares of forest cut down each year. Yet today Costa Rica is a pioneer in forest conservation.

This transformation has come about through the establishment of an integrated system of Conservation Areas as well as effective legislation, including a ban on future land-use change on all forested land. Specific elements that have enabled progress in environmental outcomes include the successful development of a National System of Protected Areas and the passing of comprehensive legislation to protect Costa Rica’s forests.

Innovative incentive structures have also been important.

Perhaps the most significant innovation has been the establishment of a national Payments for Environmental Services programme (PSA), which provides direct financial incentives to landowners to conserve forests instead of converting them to agricultural land.

What has been achieved?

A total of 24% of the country’s land area (well over a million hectares) now lies within National Protected Areas, from a starting point of almost zero in the 1960s.

This compares with a developing world average of 13% and a developed world average of 8%. The main areas of primary forest are now found within National Parks and Nature Reserves, which are the categories of absolute protection. These represent approximately 10%

of the national territory.

A significant reduction in Costa Rica’s national deforestation rate is also apparent (Figure 1).

Deforestation reached an all time high in 1985, at 1.4%, but had fallen to almost zero by 2005. This happened despite strong economic growth: in fact, the ecotourism sector is heavily dependent on the country’s forests, and tourism more generally is now the main foreign exchange earner for the country.

Evidence suggests that these two outcomes are related.

Costa Rica’s Protected Area network helped reduce deforestation between 1960 and 1997, particularly as they were introduced at a time of rampant deforestation.

Figure 1: Deforestation rate in Costa Rica between 1960 and 2005 ¹

“A total of 24% o f the land area now within N ational

Protected Areas.”

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4

Deforestation rate (annual %)

1960-1979 1979-1986 1986-1997 1997-2000 2000-2005 Beginning of the first generation of PSA in Costa Rica

1 Sanchez-Azofeifa, G.A., Pfaff, A., Robalino, J.A. and Boomhower, J.P. (2007) ‘Costa Rica’s

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What has driven change?

Structural conditions

The general level of national development in Costa Rica sets it apart from most other countries in the region. The country has a strong democratic system, with figures on income distribution, education, literacy and quality of life comparable with those of industrialised nations. Costa Rica abolished its army under the 1948 Constitution, creating a ‘peace dividend.’ This drew a great many international organisations and research institutions to the country, and also allowed the government to increase the proportion of public funding going towards health and education.

High investment in education has helped focus attention on environmental issues in recent years, particularly among the political classes. Costa Rica also benefits from well-established property rights: the proportion of the population in rural areas without secure land tenure is relatively low. Much of the forested area is under well- documented private ownership. This is an important distinction between Costa Rica and many other forest- rich developing countries.

Economic reform

Before the Latin American economic crisis in the 1980s, Costa Rica’s agricultural policies focused on guaranteed prices, high subsidies and preferential interest rates.

These incentives encouraged citizens to expand

production to forested areas. When the crisis hit, Costa Rica had to change its development model as a result of several structural adjustment loans, which forced the country to eliminate subsidies, favourable interest rates and price guarantees in agriculture. Bank credit for cattle decreased, coinciding with a steep decline in the international price of meat and other commodities.

Overall, these adjustments contributed significantly to reducing deforestation rates in Costa Rica, by limiting the role of cattle ranching as a prosperous economic activity. Costa Rica then began to transform its economy towards one based on industry and non-traditional agro- exports, all of which took the pressure off land clearing.

The development of forest-based ecotourism during

the 1980s and 1990s supported the shift away from agriculture towards a service economy. There is now a perception that ‘keeping things green’ helps generate both public and private returns. Forested land is now reported to have more value than cleared land in several parts of Costa Rica.

Institutional and legal reform

Much of Costa Rica’s progress owes to improved forest governance, created through institutional and legal reforms. More often than not, reforms of the country’s forest-related institutions and its legal instruments have gone hand in hand. One of the earlier but important reforms came about with the enactment of the 1986 Forest Law, which began the regulation of forest resource use on both public and private lands. A Ministry of Natural Resources, Energy and Mines (MIRENEM) was created, which raised environmental concerns to the Cabinet level and gave more power to national forest policies. A National System of Protected Areas was also introduced in the late 1980s.

The 1996 Forest Law prohibited conversion of forest to other land uses. To ensure implementation of legislative policies, the law enacted the institutional reform of the National Forestry Finance Fund (FONAFIFO), a decentralised organisation mandated to collect and administer the financial resources of the forest sector, including those of the PSA programme. The 1996 Forest Law also restructured MIRENEM into the Ministry of Environment and Energy (MINAE). The National System of Conservation Areas (SINAC), created within MINAE, had the purpose of improving the government’s ability to respond to rising demand for natural resource protection.

SINAC’s major initiative was to divide the country into 10 Conservation Areas, most of which are based around a major National Park, to avoid the Protected Area system representing ‘green islands’ in an otherwise improperly managed landscape.

Development Progress stories

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“Institutional an d legal

reforms have serv ed as key

factors of progres s for Costa Rica”

Financial incentives for conservation

Another important element of progress was the innovation under the 1996 Forest Law to provide direct financial incentives for the provision of environmental services. This changed the concept of incentives, previously oriented towards commercial timber production, to focus on forest conservation. This led to an important change in perceptions as to the value of forests and the benefits that can accrue from the provision of environmental services.

The PSA policy shifted the source of funding from the government budget via subsidies to an earmarked tax and payments from beneficiaries of the services. It also allows payments for environmental services to move beyond a project-by-project approach to one fully integrated and institutionalised in a national policy.

Leadership and local ownership

National leadership and local ownership in Costa Rica have been powerfully demonstrated through the government’s ability to cooperate, reach compromise and engage with interested stakeholders. This cooperation and compromise among government agencies and between domestic and international actors best characterises Costa Rica’s policy style. The government, private sector and conservation organisations have often developed reciprocal relationships. To a large extent, the government negotiated the creation of National Parks with the private sector (landowners) and relied on conservation organisations to help design and implement policies. Consultations on the 1996 Forest Law were held with many different stakeholders, including not just conservation organisations but also private businesses, logging unions and smallholder organisations.

Lessons learnt

• Institutional and legal reforms have served as key factors of progress for Costa Rica. These elements have combined to allow Costa Rica to develop strong policy coherence, whereby legislation, institutions and economic policy and incentives all reinforce one another.

• Leadership and local ownership in Costa Rica is one of the key strengths that have allowed the country to develop new and innovative forest policies, setting it apart from other developing tropical forested nations, where the forest sector is often characterised as an arena of conflict between different stakeholders.

• Costa Rica has successfully balanced regulation with incentives. Progress has owed partly to the country’s innovation in establishing fiscal incentives for conservation – these provide the ‘carrot’ for forest protection. This has led to an important change in perception among forest owners as to the value of the forests, and also the benefits that can accrue from the provision of environmental services.

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This brief is an abridged version of a research paper and is one of 24 development progress stories being released at www.developmentprogress.com

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Photo credits from top to bottom Panos/Dieter Telemans. Costa Rica Panos/Eduardo Martino. Costa Rica Panos/Dieter Telemans. Costa Rica istockphoto/Mayumi Terao. Costa Rica istockphoto/Leungchopan. Costa Rica