Mexico Suffers a Dramatic Decline in Domestic Market for Forest Products; Losing Out to Imports From U.S. And Chile

New studies suggest Mexico’s renowned community-managed forests drowning in high taxes and red tape, damaging national economy, local communities and the environment

Released: 4-Jun-2014 9:40 AM EDT
Embargo expired: 4-Jun-2014 6:00 PM EDT
Source Newsroom: Mexican Civil Council for Sustainable Development (CCMSS)
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Newswise — MEXICO CITY (4 June 2014)—Two new studies show that excessive taxation and a tangle of rules and regulations are crippling forest enterprises Mexico, harming their ability to compete on the domestic market and depriving the sector from a role in reducing a US$6-billion trade deficit in forest products, cellulose and paper.

The economic burden falls particularly hard on community forest enterprises, which pay disproportionately high taxes and suffer excessive regulation, jeopardizing the livelihoods of the 12 million people who depend on forests for their livelihoods in Mexico, according to two new studies published by the Mexican Civil Council for Sustainable Forestry (CCMSS).

"Mexico needs to eliminate the red tape and high taxes on production and sale of its forest products," said Iván Zúñiga, forest policy coordinator CCMSS. "If Mexico’s political leaders want to protect our forests and increase domestic production of wood, and to reduce the nation’s trade deficit, they must take this problem seriously."

The release of the CCMSS studies comes on the eve of the GLOBE World Summit of Legislators (6-8 June), which will bring more than 500 legislators from 100 countries to Mexico City, with the goal of coming up with a common strategy for combating climate change.

Zuñiga said the new studies suggest that the success of community forestry - one of Mexico 's most important contributions to the global forest sector and to combating climate change – is now at great risk.

In one study, CCMSS asked SKATT, an international tax advisory firm, to analyze taxes paid by forestry companies in seven forest nations, including Mexico, Chile, Brazil and the United States. The authors conclude that timber producers in Mexico pay at least 30 percent more in taxes than their competitors in the other nations, suggesting a major cause of the drop in Mexico’s ability to compete on the domestic market for forest products.

“We are seeing local sawmills and other related enterprises closing,” Zuñiga said. “Some of them are in vulnerable areas where people are protecting both forests, as well as rivers and watersheds that supply major cities with water for millions of people. Without the ability to earn a sustainable living, local communities will lose their ability to play the role of guardian of these vital resources.”

Other studies by the CCMSS in the past suggest that the lack of response to the situation disclosed in the new studies could lead to an increase in illegal logging.

Mexico 's forest sector currently generates 0.35 percent of GDP, which represents a drop of 50 percent in the last 20 years, according to Zuñiga. Despite having created a business model that allows communities to harvest timber and other forest products sustainably, Mexico currently uses only 30 percent of the 21.6 million hectares of forests with potential for harvest, causing Mexico to cede to imports a huge market for forest products in Mexico.”

"This means we are not taking full advantage of our potential domestic market for forest products, which is estimated at US$1.3 billion a year," Zuñiga said.

The methods used by forest communities for the use and conservation of forests in Mexico are renowned for their ability to curb deforestation and combat rural poverty.

In 2010, nation’s community forest enterprises were designated as a global model for forest conservation because of their ability to provide poor rural people to educate their children and meet the needs of their families, while preserving the forests that are vital to curb climate change.

But Mexico's position as a world leader in community forest management is now at risk, according to the CCMSS.

"Our studies suggest that Mexico has now a huge flaw in its forest regulatory framework, " Zuniga said. “Government agencies focus on control and compliance, rather than coming up with simple and efficient procedures that recognize the reality of the communities that are trying to manage the country's forests."

The following are some of the findings of the two new studies showing reasons for a dramatic decrease in the economic competitiveness of community forestry in Mexico:

-Forest communities in Mexico suffer a disproportionately high level of taxes compared to producers in other nations, including tax rates that are approximately 35 percent higher for timber production that those of other countries.

-In 2013 Mexico had a deficit of US$1 billion just for imports of timber and a record US$6 billion in wood, paper and pulp products.

-Mexico produces only 25 percent of demand for wood products on the domestic market.

-In Mexico where average consumption of timber is 200 cubic meters per thousand people, domestic production has fallen by 35 percent since 2000, and meets only a quarter of that demand.

-Excessive regulation and excessive taxation in the forestry sector Mexico have boosted the relative price of domestic wood, causing community forest enterprises to lose out to international producers from the US, Chile, Uruguay and other countries.

-Bureaucratic obstacles and long waits for permits to harvest timber have also reduced the ability of Mexican forest enterprises to compete with their counterparts in other countries.

After the Mexican Revolution, "ejidos" and other forest communities in Mexico gained the right to manage their forests as common property. It is estimated that between 60 and 80 percent of the country's forest area is owned by 15,000 ejidos and communities whose livelihoods depend on the use and conservation of natural resources, including land, water, forests and the biodiversity they sustain.

Over the last thirty years a number of government policies have enabled the development of community forest management initiatives. Today, there are about 600 community forest enterprises that have demonstrated their ability to administer and manage forests in the regions of Chihuahua, Durango, Oaxaca, Quintana Roo and other parts of the country.

Mexico has 2,400 communities with a " Forest Management Plan " approved by government authorities and six hundred of them operate their own community forest enterprises. Still, 1,800 communities have not yet sufficiently developed their technical skills to run their own forest enterprises, and have been forced to partner with logging companies.

CCMSS studies offer the following key recommendations to improve the state of forest production in Mexico:

-Implement a system of presumed or “blind” profit to allow forest producers deductions so they don’t have to provide internet-based receipts in order to demonstrate the cost of doing business, a system that currently prevents them from obtaining deductions granted to larger and urban enterprises.

-Reduce the overall administrative burden applied to forest producers to facilitate compliance with tax regulations and speed up the process of getting their products to market.

-Adapt the procedures and regulations for obtaining logging permits, sanitation and transport, to reduce the time and cost of compliance, as well as corruption risks.

"Eliminating unnecessary regulations for forest use and streamlining the fiscal framework should be a priority for Mexico,” Zuñiga said. “The current system damages not only rural economies, it affects local communities and encourages illegal logging. It also harms our national community forest enterprises. In addition, we know that well-managed forests sequester more carbon from the atmosphere, so protecting our community enterprises is one of the best ways to combat climate change."

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The Mexican Civil Council for Sustainable Development, Forestry Civil Association (CCMSS) is a nongovernmental, nonprofit organization that addresses the problems facing communities and "ejidos" in the forest regions of Mexico. The CCMSS also strives to help improve the living conditions of local communities by strengthening the local capacity for governance and by supporting the sustainable management of forest resources.


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