Financing mechanisms in Latin America and Caribbean

One of the main challenges many countries face in reversing forest degradation and deforestation is to increase the competitiveness of good forest management and its attractiveness for investment. To face this challenge, answers are sought to the question of how to broaden and diversify the financial basis for sustainable forest management (SFM). In many countries, financing often remains confined to selected activities, ad-hoc, and limited to a small number of traditional financing instruments such as credits and subsidies. Furthermore, reliance on government and bi- and multilateral aid as main funding sources for SFM remains high.

At the same time, the multiple values of forests are increasingly recognized and several innovative and promising financing mechanisms are emerging and put into practice. They are generating additional and new revenues to forest management and helping to make investments in SFM more attractive and feasible.

In an effort to better understand the variety and effectiveness of forest financing mechanisms in Latin America, a leading region in the development of innovative financing mechanisms, FAO and its partners (list), with the support of (list) carried out two projects with the following purposes:

  • To compile a comprehensive assessment of the Latin America experience with financing mechanisms, and
  • To help increase the capacity of national forest programs for the participatory development of national strategies of forest financing.

Support to developing national forest financing strategies and capacities

Since 2005, FAO and the NFP Facility have been supporting the development of national forest financing strategies (NFFS) in various countries. This is a focused capacity building effort to better understand the variety and effectiveness of various financing options and help the key stakeholders develop a country specific comprehensive forest financing strategy. The work was initiated as a sequel to a Dutch government supported project in Latin America that analysed forest financing in 19 countries and conducted regional and sub-regional synthesis. The initial project was implemented in partnership with IUCN’s Regional Office for Central America (IUCN-ORMA) and the Central American Commission for Environment and Development (CCAD).

The process of holding dialogues and discussions among forest, finance, and other key stakeholders to develop and implement NFFS and selected forest financing instruments to support SFM is ongoing in the following countries in Latin America:
 Guatemala (November 2007), Suriname (June 2008), El Salvador (September 2008), Peru (December 2008), Paraguay (February 2009), Costa Rica (May 2009), Ecuador (September 2009).

Practical, Applicable and Sustainable Financial Mechanisms (PASFM) in Central Amercia

In 2010 the Asociación Coordinadora Indígena y Campesina de Agroforestería Comunitaria Centroamericana (ACICAFOC), FAO and the NFP Facility have launched a Practical, Applicable and Sustainable Financial Mechanisms (PASFM) regional initiative  in Central Amercia. Its objective is to learn from successful forest financing arrangements with the aim of replicating, developing and implementing PASFM. The target group of the initiative are the indigenous groups and small farmers who are working to strengthen community forestry and agroforestry models.

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last updated:  Thursday, December 23, 2010