Best Practices

INSTITUTION:

National Fund for Forestry Financing (FONAFIFO)

DESCRIPTION OF THE INSTITUTION:

FONAFIFO is an organization of maximum de-concentration, with instrumental judiciary status, under the Ministry of Environmental and Energy (MINAE), which objective is to finance for the benefit of small and medium size producers through credits or other development mechanisms of forest management, involved or not, the process of reforestation, forestation, forest nurseries, agriculture and forestry, recovery of deserted areas and technological changes in the industrialization and utilization of forest resources. Additionally to attract financing for the payment of environmental services offered by the forest, forestry plantations and other necessary activities to strengthen the development of the natural resources sector.

The objectives of FONAFIFO are:

• To finance the reforestation, forest preservation grounds, agroforest systems, recovery of bare fields, and the technological changes considering the industrialization in the forestry sectors, for the benefit of small and medium producers by means of credit and other intervening promotional forest control mechanisms.
• To acquire financing for the payment of environmental services which offer the forests, forest plantations and other necessary activities to strengthen the development of the natural resources sector.

The institution possesses instrumental legal function, which is authorized to do all types of legal business non speculative or required licitations for the proper administration of internal resources, including the trusts constitution.

Establishment of FONAFIFO:

In 1990 FONAFIFO is created through the Budget Rule No. 32 Law #7216.

In 1996 its constitution is formalized with article 46 of the Forestry Law #7575.

Project: PAYMENT PROGRAM FOR ENVIRONMENTAL SERVICES (PES)

PROJECT OBJECTIVES:

? Pay the Forrest land owners for the environmental services they provide to society.

? To develop innovative financing instruments to allow for technical, economic and social sustainability, to the conservation, recovery and maintenance for the country’s forest coverage.

? Control and monitoring mechanisms for forest projects.

LEGAL INSTITUTIONAL FRAME: Forestry Law 7575.

PROJECT DESCRIPTION:

The environmental services were considered inexhaustible therefore it was thought that it was not necessary to invest in its preservation. Nonetheless, recent experiences have demonstrated that the environmental services are goods that can be exhausted if they are not preserved, of which means that not only a damage is done to the ecosystems but also it translates to economic and social losses.

The environmental services according to the Law 7575 “rendered by the forests and forestry plantations that fall directly into the protection and improvement of the Environment”, these are the following:

• Protection of water for urban, rural or hydroelectric use, as well as for agricultural and industrial use
• Protection of ecosystems, life forms, and natural scenic beauty for tourist and scientific purposes.
• Protection of the bio diversity for its conservation and sustainable use, scientific and pharmaceutical, research and genetic improvements
• Reduction of gas emissions with greenhouse effect (setting standards for reductions, rent, and absorption), with great impact on the global health and well being of all.

The concept of the Payment Program of Environmental Services, is based on the principle that all the forest and forest plantation owners will receive payments to compensate for the environmental services that these render to the forest and plantations, in particular to the Costa Rican society and humanity and general.

All those small and medium land owners will benefit from the Program, as well as those who carry out protection activities and adequate management of the forests as well as the establishment of forest plantations.

After evaluating the characteristics of the properties, FONAFIFO negotiates a contract with the owner of which the owner receives payments for environmental services, the owner is responsible for satisfying a series of protection norms according to the applicable management methods for forests. The fulfilment of these dispositions are verified.

The system of payments for environmental services is a new financing mechanism, worldwide for the protection and recovery of the forest coverage of Costa Rica.

This system of charge and pay has been financed through a tax levied on fossil fuel consumers, which must be paid by all Costa Ricans, under the principle that “whoever pollutes, must pay” and a acknowledgement on the part of private enterprises that benefit themselves from environmental services in their productive processes such as companies that produce electricity and offer public services.

This way a new principle was established in the field of protection and conservation of the environment, that is, TO CHARGE whoever benefits from environmental services and to PAY IT to those who produce it.

RESULTS AND IMPACT OF THE PROJECT:

The program of Payment for Environmental Services (PAS) has become a marketing mechanism to modify the behavior of private owners with respect to the use of the land. The PSA pays for environmental services generated when the land is maintained with forest.

These payments are directed to priority areas carefully selected, being able to conserve habitats of high bio diversity, protect hydrographic basins of socioeconomic importance, and consolidate biological corridors that connect national parks and existing biological reserves.

During the period 1995-2003 they managed to incorporate 420 hectares of forests and plantations from the PSA. By the end of 2003, FONAFIFO will have destined a total of 90 million dollars to the forest and forest plantation owners. With which an amount superior than 5500 families have been benefited directly in national territory.

With regard to the forest coverage, in 1998 the State of the Nation reported that the national forest coverage had decreased from a 56% to a 32% in the period between 1960 to 1990. With the execution of programs like the PSA, they achieved the increase in forest coverage to a 40.3% in 1998, according to the Coverage studies compiled by FONAFICO, CCT and CIEDES.

The increasing tendency continues, such that in the year 2000 it was determined that the coverage would be of a 45.3% of the national territory, composed of primary and secondary forests, swamps and forest plantations.

SPECIFIC INSTITUTIONAL OFFER

The institution is capable of sharing its experience in the following subjects:

o Recovery and Maintenance of the Forest Coverage of Hydrographic basins.
o National, International and Institutional Legal Structure.
o Follow Up and Monitoring Program of Forest Projects.
o Novelty Instruments for the Purchase-Sale of Environmental Services Rendered by the Forest.
o Institutional Development of an Outline of Payment for Environmental Services.
o Negotiation of Voluntary Agreements for the Financing of Programs of Purchase-Sale of Environmental Services with the Private Sector.

For more information : http://www.fonafifo.com/