The Cycle of Deforestation and Rural Poverty: Rural Poor Farmer: Acquires the land through squatting Logs virgin forest Slashes and burns the land, depleting the soil Sells to timber plantation company or cattle rancher Relocates to new block of virgin forest Starts cycle over again
… but, what alternatives do they have other than the cycle to feed their families?
PE Project Nuevo Paraiso - 2008 100 Hectares (247 acres at 2.47 acres per hectare) Arimae, Panama Legal Indigenous Reservation (pop. 1000) Nuevo Paraiso, Panama Latino community (pop. 200)
Current Plantation Model INVESTORS Timber Company Rural Landowner Sells Land Exits Transaction OPERATING COSTS Materials Labor Administration Capital Investment
PE’s Solution INVESTORS PLANTING EMPOWERMENT Chico Upfront lease payment Monthly Lease payment % of Timber sales OPERATING COSTS Materials Labor Administration $1.5 million for 100 hectares
Cash Flows to PE Stakeholders Investor: 80% (IRR of 10.8%) PE: 13% (PE’s profit) Communities and Landowners: 7% Assumptions: See Appendix A Year 0 ($1.5 million) Year 8: $793,500 Year 12: $1,244,200 Year 20: $2,158,200 Year 25: $10,310,900 Thinnings Final Harvest Initial Investment
Overview: Global Timber Market Teak prices on the world market rose 3.97% annually from 1997-2005 Mahogany export prices (from Peru) grew 9.7% annually between 1998-2006 Within Panama there is a large market for the 6-8 PE timber species.  ITTO Annual Report 2005, Appendix 4, table 4-2.  ITTO Market Report, December 1-15th 1998; and ITTO Market Report, Jan. 1-15, 2007.
Competition Matrix PE Tropical American Tree Farms Futuro Forestal Other Latin American Teak planters Economic Factor Investor Cost per/ha Social Factors Company owned land Investor owned land Leased land Community partnerships Community profit sharing, scholarships Environmental Factor Teak and mixed native species
Competition Evaluation PE Tropical American Tree Farms Futuro Forestal Other Latin American Teak planters Economic Factor Investor Cost per/ha $15,000/ha$30,000/ha$25,000/ha$15,000-30/ha Social Factors Company owned land xx Investor owned land x X Leased land x Community partnerships x Community profit sharing, scholarships x Biodiversity Factor Teak and mixed native species XXX
SROI to the participating landowners and the communities of Arimae and Nuevo Pariaso, Panama:
SROI Quantifiable returns: 100 ha plantation See Assumptions: Appendix B, Table C Unquantifiable returns: Political empowerment for Indigenous Increased biodiversity Improved reforestation model
Sources of PE’s Capital Who: Wealthy Individuals Conservation Oriented Foundations and Endowments How: Lectures and networking with conservation groups Partnerships with Advantage Tours and Pajaro Jai Foundation Business plan competitions
Management Team PE IN-COUNTRY ONSITE MANAGEMENT 2 Planting Empowerment Team Members (Meyer and Croston) PANAMANIAN FORESTER Carlos Espinosa: Panamanian career forester Advisors WORLD BANK Dr. Gerhard Dieterle, Forester UN DEVELOPMENT PROGRAM Jose Miguel Perez, Global Environment Fund CONSERVATION INTERNATIONAL Dr. Richard Rice, Chief Economist FORMER NY CITY PENSION FUND MANAGER Adam Bluementhal JOHNS HOPKINS, INTERNATIONAL DEVELOPMENT PROGRAM Dr. Francis Fukuyama, Director MOLINA & MOLINA, ATTORNEYS Panama City
Current Status: a going concern January 2007: PE incorporated in Panama Signed long term leases for 10 hectares from rural farmers Ordered 12,000 saplings for May delivery May 2007: Initial Project Plant 12,000 saplings on the 10 hectares leased to PE
Project Cost Structure No maintenance costs after year 7 5% harvest fee of total sale value pays for marketing and harvesting years 8,12, 20 & 25 For Assumptions see Appendix B, Table A