A guide to fostering forest restoration in Brazilian farms

By Marcelo Moreira, Partner and Senior Researcher, Agroicone

There is already a strong consensus in Brazil regarding the potential benefits of forest restoration activity and the recovery of the country’s native vegetation. Regulatory structures, such as the Law on Protection of Native Vegetation (known as Forest Code), the Brazilian Nationally Determined Contribution (NDC) and the National Plan for the Recovery of Native Vegetation (PLANAVEG) demonstrate Brazil’s commitment to the recovery of native vegetation. Bringing in the numbers, the NDC and PLANAVEG commit 12 million hectares of land to reforestation by 2030. Compliance with the Forest Code requires the regularization of 24 million hectares of private lands though different mechanisms, which will in turn increase terrestrial carbon stocks.

However, the implementation of the Forest Code has been postponed several times since 2014 and suffered from legal uncertainties regarding its constitutionality. Although dedicated credit lines for reforestation are available in Brazil, only a small number of related projects are funded on the ground. That’s why, even though the financial sector is interested in allocating additional funds to forest restoration, doubts remain about the demand side of credit intake.

In this context, the new Agroicone study 12 million hectares in 12 real cases: Economic models to promote ecological restoration in Brazil focuses on the demand side of reforestation credit. Financed by KfW with funds from the German Federal Ministry for Economic Cooperation and Development (BMZ) in partnership with Brazilian Ministry of Environment, and with inputs from the Brazilian Development Bank (BNDES), the study was an effort to understand the real situation of rural properties in Brazil and their readiness to start forest restoration activities in the short term. After an interview phase with a larger group, 12 case studies were developed in farms of different sizes, which are located in three biomes (the Amazon, Cerrado and Atlantic Forest) that cover around 86% of Brazilian territory. It was deployed in the 2017 harvesting cycle, with on-the-ground research in three relevant agricultural states: São Paulo, Mato Grosso and Bahia.

The study discovered that – contradicting initial diagnoses that indicated a low level of commitment of producers to carry out these activities – agricultural producers are willing to start reforestation activities in the short term, even before effective law enforcement. The following four elements were found to be fundamental for such behavior.

1. The correct approach: Agricultural producers must trust advisors that are proposing changes to their business-as-usual activities. They already use specific channels and formats for communication and learning, and it is important to be aligned with those channels.

2. Motivation: It was observed that credit conditions advantageous only for reforestation areas has limited influence in the decision-making processes of individual producers, while better credit conditions for properties as a whole has stronger leverage. Poor information and inadequate technical support are additional reasons for low engagement. Producers are prone to legal compliance, but law enforcement is not seen as an immediate risk and therefore has little motivational strength. The country offers vast territory and diverse agricultural production, but recurring postponements of law implementation.

On the other side, the possibility of having further income from forest restoration activity (e.g. from timber and non-timber forest products) is a great incentive. In all 12 cases, restoration activities could increase farms’ net revenues. Costs are high (on a per-hectare basis), so payback periods are usually long (10 or more years). Existing credit lines dedicated to forest restoration are available and significantly reduce deficits in cash flow. Access to such lines, due to high debt levels or farmers’ lack of financial knowledge, is an issue to be solved, but at least five farmers in the study were in good conditions to take credit.

Restoration, however, must be aligned with – and ideally beneficial for – farms’ main activities. And even if reforestation profitability is higher than that of current activities, it is unlikely that farmers will disrupt their usual ways to make any change. Thus, any risks to main farm activity may delay forest restoration that reaches full legal limits. The existence of marginal lands within proprieties is another significant opportunity for reforestation that generates income.

3. Business models: A diversity of business models were identified. For some farmers, such as cattle ranchers, reforestation should be aligned with ongoing operations, using existing resources of the farm (e.g. machinery, labor, inputs and so on). Others farmers – mainly grain producers – prefer to contract outsourced services and keep focus on their main activity. Silvicultural farmers – mostly smallholders in Bahia and Pará – better understand the technical and market risks of reforestation once they have already worked with trees and tree-based products. Finally, partnerships to carry out forest restoration activities between tenants and third parties were observed. The existence of successful business models is essential for reducing risks, allowing large-scale replication.

4. Target audience: Agricultural producers are quite heterogeneous. Some traditional producers are extremely reluctant to change their ways. However, some early adopters are willing to diversify income in innovative production systems, which are often the case for projects with higher risks (specifically related to forest restoration with economic use). Providing good information is a way to transform traditional producers into early adopters.

In brief, the challenge of restoring 12 million hectares of forest is enormous and should be understood in a step-by-step approach. Although good policies are in place, we are still in the early stages of implementation, considering the challenge’s long-term nature. Change is needed to break the vicious cycle between no action and postponement of legislation due to insufficient action. Our study demonstrates that agricultural production and forest restoration can be complementary in a practical and realistic way by taking farmers´ perspectives into account. The 12 cases can be widely replicated on a broader scale, if the four successful behavioral elements are adequately addressed. Correct ways of approaching farmers, providing proper motivation, reducing risks trough successful business models and correctly targeting audiences are the key factors for farmers’ engagement in forest restoration.

We strongly recommend other practitioners to carefully consider the four elements listed above as a way to incite large-scale forest restoration in Brazil and possibly in similar contexts elsewhere. Stepping into farmers´ shoes is crucial for bringing synergy between agriculture and forests on the ground.