Title: Extractive Reserves as Property Right Regime for
1Extractive Reserves as Property Right Regime for
Biodiversity Conservation in the Brazilian
Amazon Timo Goeschl Danilo Camargo
Igliori Fourth Bioecon Workshop on the
Economics of Biodiversity Conservation Venice 28
August 2003
2Research
- Preliminary efforts presented at the first
Biecon workshop, Rome, May 2002 - Progress
- 1. Dynamic Hotelling Model, paper presented at
the Eaere annual conference, Bilbao, June 2003 - (available at https\\www.gruponhaise.com/eaere200
3/session03.htm) - 2. Analysis of Property Rights
3Policy problem
- Maintenance of biologically diverse ecosystems
- Land requirements and the opportunity costs of
non-conversion - ?critical trade-off for developing countries
4Brazilian answer
- In the 1960s and 1970s
- Development programme
- Road building
- New settlements
- Agriculture and pastureland
- From the 1980s
- Conservation becomes part of the development
agenda - New instrument Extractive reserves
5Extractive Reserves
- Objective
- conservation and development in territorial
spaces of ecological and social importance - Approach
- Property rights over land and biological capital
stock held by the federal government. - Property rights over the flow of NWFP contracted
out to indigenous community - Assessment
- Highly ambiguous (Peluso 1992, Allegretti 1994
versus Andersen et al. 2003, Southgate 1998, and
others) - Key problem Competition with plantations
producing NWFP using preferred production
conditions
6NWFP competitors
- Plantation
- Owns all assets
- Free choice of technology
- Free choice of stock of biological/genetic
capital - Cost dynamics (technology vs. genetic
depreciation)
- Extractive Reserve
- Owns only outputs and non-biological inputs
- Restricted to technology approved under use plan
- Fixed biological/genetic capital stock
- No cost dynamics
7Can ER work in theory?
- Competition between highly heterogeneous
producers - Factors in favour of viable Extractive Reserves
- Spatial aspects market power
- Transportation costs, spatial differentiation
- Intertemporal aspects cost dynamics
- Yield loss dynamics, pesticide, genetic
improvement - IO aspects Vertical interactions with
competitors - Supply of germplasm to intensive production
- Are these factors sufficient to generate long-run
positive profits?
8Model
- Positive analysis
- Construct most favourable scenario
- Stylised model of spatial duopolistic competition
between two heterogeneous competitors - Heterogeneous dynamics One competitor features
production cost dynamics of investment and
depreciation of biological capital - gt Dynamic Hotelling model
- Assess long-term viability of an extractive
reserve under this scenario
9Markets for NWFP
- Revenue source for ER
- Commodities Rubber, nuts, oils,...
- Common feature Products produced using a
biological capital stock - Market participants
- Extractive reserves
- Plantations / Quasi-plantations
10Horizontal interaction only
- Proposition I
- If biological inputs are priced and relatively
scarce, then the extractive reserve can sustain
long-run positive profits. - Proposition II
- If biological inputs are not priced or not
relatively scarce and initial production costs
for plantations are high, then the extractive
reserve can earn interim positive profits while
plantation costs converges to limit price at
which reserve exits.
11Markets for biological inputs
- Relies on cost dynamics of plantation
?depreciation of genetic inputs - Critical issue price of biological inputs
- ER as biological input supplier
- Uses locally abundant biological capital
- Uses local human capital (knowledge)
- Neg. link between market share on NWFP and demand
for biological inputs
12Vertical and horizontal interaction
- Proposition III
- If the rate of exogenous technological progress
is low, the reserve will make positive long-run
profits on both the output and input market. - If the rate of technological progress is
moderate, the reserve will make positive long-run
profits on the input market only. - Proposition IV
- Vertical interaction is not strictly improving
reserves welfare position.
13Markets for new NWFP
- NWFP Limited long-run revenue potential
- But evidence of short-run potential through
temporary monopoly on NWFP market - Can ER generate sequences of new NWFP?
- Uses locally abundant biological capital stock
- Returns to product search?
- Cost of product search
- Pool of potential products in capital stock
14Evidence
15Development pathways
- Analysis suggests three possible pathways
- (1) Continued production of existing NWFP
- (2) Discovery of new NWFP
- (3) Supply of biological inputs
- Question
- Property rights in place to support pathways by
- generating rents for relevant inputs/outputs?
16Property rights within the reserve
- STATE
- Land Ownership
- Determines the constraints
- over resource exploitation
Long term concession External Monitoring
Use Plan
COMMUNITY Institutional rights over the
exploitation of NWFP within the Reserve's
designated area
Institutional Support Internal Monitoring
Legitimate the community
- HOUSEHOLDS
- Exclusive rights over the exploitation of natural
resources in individual land plots
17PRs within the reserve Existing NWFP
- Boundaries and population with use rights are
clearly defined - Community designs operational rules
- Monitors are the appropriators themselves
- There is an association, which is a local forum
for conflict resolution - Governmental authorities do not challenge
autonomous institutional building. - Extractive reserves have most of the necessary
institutional - characteristics proposed by Ostrom (1990)
18PRs within the reserve New NWFP
- Critical input search activity directed towards
the discovery of new NWFP with revenue potential. -
- Problem
- individuals in the reserves cannot exclude others
from benefiting potential discoveries - there are few incentives for putting efforts in
RD activities - Also Lack of necessary expertise to carry out
- systematic research and product development.
19PR within the reserve Genetic resources
- Critical input knowledge about
production-relevant characteristics of the local
biological capital stock. - Problem there is currently no mechanism to
reward information with respect to biological
characteristics, productive properties and
resistance to diseases
20PRs in the wider economy
21Discussion
E effective D deficient
22Conclusions
- Three development pathways under ER framework
- PRs supports the extraction of existing NWFP
- Existing NWFP is theoretically viable only under
highly restrictive conditions - Conditions generally not fulfilled in reality
- PRs does not support the other two pathways
- Development objectives unlikely to be realised
under given set of PRs - Questions Is it feasible to change the PR
structure to - enable reserves to pursue the other pathways?