Forestry in Chile and the Myth of the Trickledown Theory

By Gary Graham Hughes


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Two years ago, in early November 2003, after a ferocious markets-based campaign in the US, an agreement was signed by US and Chilean environmental groups with the two largest wood products companies in Chile. The agreement, facilitated by Home Depot, was received as an important step forward in promoting collaborative resolution to international environmental conflicts. The agreements language binds the companies to a conservation focused solutions process with the environmental groups, and an end to the practice of the substitution of the native forest with exotic tree species plantations.

Disputes over land use and the environmental impacts of the wood and pulp production processes have only intensified in the two years since the agreement was signed. The most notable environmental conflict surrounds the contamination of an internationally recognized wetlands site by the liquid discharges of the new 1 billion dollar CELCO (Grupo Arauco-Copec) pulp plant in San José de Mariquina. The plant is located just up the Rio Cruces from the wetland site, known as the Carlos Andwanter Nature Sanctuary, and the southern university town of Valdivia. In a series of scientific studies the pulp plant was found to be responsible for the death and migration of hundreds of individuals of the emblematic black necked swan species that used the Nature Sanctuary as primary reproduction habitat. Currently the plant discharges waste directly into the Río Cruces, but is attempting to install a highly controversial pipeline through the coastal range in order to discharge waste into the Pacific Ocean, approximately 50 kilometers to the west.

The coastal range of Chile is one of the most important temperate forest regions on the planet. Having escaped the major ice ages as a “glacial refugium,” the cordillera de la costa hosts species found no where else on earth. North and west of where the new pulp plant continues its contested operations, land titles to the last unprotected and intact native forests of the Nahuelbuta area reside in the hands of these same companies that were once targeted by a fierce campaign in the markets of the United States. Forest practices, the long lasting impacts of substitution, and the lack of stewardship of the biodiversity rich native landscapes generate concern about the fate of the endangered forests of the Nahuelbuta area of the coastal range.

Heading into a crucial fourth round of negotiations with the forestry companies Arauco and Mininco, the environmental groups look to make specific conservation gains in the Nahuelbuta area, and to influence the companies’ environmental and social policies overall. The companies apparently will continue to attempt to use their participation in the solutions process as a public gesture of their growing corporate responsibility policies. The US market still absorbs a significant portion of the wood products exports from Chile, and US based wood products distributors and consumers are watching Chile and the next round of negotiations in October 2005 with a careful eye. The protection of globally rare forests, aquatic ecosystems, public health, and the well being of an entire region are at stake. The following article is a background piece on the plantation forestry model, analyzing the political economy, the history, and the social aspects of the expansion of the wood and pulp products industry in Southern Chile.

In the year 2005, any discussion of forest politics and economics in Chile has to recognize the presence of a pervasive regional hegemonic national interest whose overriding power is often used to influence and even dictate economic, trade, environmental, and military policy (Silva 1997, Collins and Lear 1995). To address the social and economic context of conservation in the southern temperate forests of South America without discussing the policies and economic and military agenda of the United States of America is to miss a key dynamic in how forest policy in the Americas is formed, shaped, and implemented (Silva 1997). The ongoing militarization of the region and hemisphere has profound social and economic implications that inhibit investment in conservation and distract human and financial resources from productive conservation uses. As an example, the proposed purchase of 10 F-16 fighter jets by the Chilean Air Force, at a minimum cost of US $600 million dollars, demonstrates how scarce state resources are being directed to the coffers of giant multi-national arms corporations, in this case Lockheed-Martin, as opposed to being invested in conservation and the development of sustainable economies and social systems. It had been estimated in the mid-1990’s that a fund of US $500 million dollars would have been sufficient to acquire all of the holdings necessary to assure the land base for the conservation of biodiversity in the forests of Chile until far in the future (Wilcox 1995). To not address such larger dynamics of how regional hegemony influences policy at all levels within the nations of the Americas is to ignore one of the larger influences on how policy is developed and implemented (Silva 1997).

Even more incriminating, and as a prime example as to how forest policy is influenced by the regional imperial force, is a paper published in November 2004 by the United States Embassy in Santiago de Chile (GAIN 2004). In this paper, the US Embassy blames the “disruptive activities of ecologists” for the decrease in the rate of planting of exotic tree species, such as radiata pine or eucalyptus, and proposes that the future of the forestry sector in Chile lies in the conversion and development of the still extensive native forests of the south (GAIN 2004). The annual report bemoans the “less favorable” government subsidies for the exotic plantation model (GAIN 2004), even though those subsidies and the growth of the exotic tree species plantation forestry model are widely recognized as being prime factors in increasing environmental degradation and social problems for rural communities in the south of Chile where these plantations dominate (MacAlpin and Solis 2002, Unda et al. 1997, Collins and Lear 1995, Quiroga Martinez 1995). These subsidies now focus on small and medium sized land owners, dispersing the responsibility for plantation expansion, but still encouraging an increase in the actual number of hectares of exotic tree species plantations. It is estimated in Chile that there are just over 2 million hectares of plantations (Neira et al. 2002).

It is essential to recognize all of the different players that can influence the design of economic and policy models that can positively or negatively impact the natural environment and shape investment that will influence conservation efforts (Silva 1997). Alongside the regional hegemonic force, it is important to recognize the influence of trans-national economic players such as major extractive industry and financial sector private corporations (Silva 1997). On the international stage there is still little or no regulation or means of maintaining accountability over these multi-national corporations, although their influence in policy and development is undeniably tremendous (Sachs 2001, Silva 1997, Quiroga Martinez 1995, Escobar 1995, Collins and Lear 1995, Tisdell 1994). The current discussion to expand the North American Free Trade Agreement to an hemisphere wide Free Trade Area of the Americas does not include mechanisms by which multi-national corporations can be held responsible for their environmental, social, and financial crimes (Barlow 2001). The USA-Chile FTA has had little influence in improving environmental management in Chile, regardless of real conservation opportunities that might exist in the articles of the chapter on the environment. As well, the USA-Chile FTA has no real mechanism for claims concerning government or private sector violations of environmental regulation. The USA-Chile FTA has, however, facilitated a growth in exports of wood and pulp products to the US, and has facilitated the ability of extractive industry and financial sector private corporations to move investment and goods.

As influential and untouchable as these trans-national forces are, along with major institutions such as the World Bank, the International Monetary Fund, the Inter-American Development Bank, and the World Trade Organization, there are still forces within society that can influence policy in an effective manner, including forest and environmental policy specifically, especially when the realities of the strength and agenda of the regional hegemonic power and the trans-national players are recognized and strategically addressed (Silva 1997). It is likely that the greatest strategic mistake lies not in losing out to these powerful entities because of their strength and influence but rather in denying their influence and their exploitative goals in such a manner that conservation strategies do not take them sufficiently into account. Civil society, non-governmental organizations, unions, and different professional coalitions and associations can influence forest policy in a way that reflects positive goals, especially when all of the players are taken into account and their agenda anticipated (Silva 1997).

The current global economic model affects the lives of virtually everyone and every environment on the planet (Sachs 2001, Tisdell 1994). Hemispheric and global integration is accepted now not only as a characteristic of potential future economic models but as a defining quality of the global economic system that exists today. The ongoing question is not of whether to globalize or not, but as to who will benefit from these models and how an integrated hemispheric or global economic model will be structured (Sachs 2001). In this regard it is important to briefly describe the global economic system as it is now being implemented.

Some of the most important characterizations of the current global model are a dependence on capital-intensive technologies which rely on non-renewable resources such as fossil fuels, a dependence on chemical technologies, an increased international specialization in production by countries and regions, and enormous and increasing levels of production which tax the environment both in terms of the exploitation of raw natural resources and in terms of its ability to assimilate wastes and pollution (Tisdell 1994). International economic interdependence has encouraged the opening of markets for commodities and the exploitation of natural capital to meet balance of trade and debt payments, encouraging countries with a comparative advantage in supply of these commodities to exploit them more intensively (Sachs 2001, Escobar 1995, Tisdell 1994). There are some arguments that there are economic and conservation advantages to this model, especially in terms of the popular conception of “sustainable development” whereby increasing the income of a “less-developed country” will provide opportunities for conservation through the improvement of quality of life for its inhabitants (Escobar 1995, Collins and Lear 1995, Tisdell 1994). Nevertheless, these benefits for conservation are largely mythical, as “overall pressure on natural living resources has increased as a result of the extension of the global economic system” and “effective means of instituting large scale sustainable exploitation and agriculture are incompatible with capitalism and market globalization in their current manifestations” (Soule 2001, Tisdell 1994).

The trickle down theory, whereby increased imports lead to greater income for the larger economy and therefore precipitate a “trickling down” of the financial benefits to rural communities, marginalized populations, or even the middle class, is often used to justify the global economic system (Collins and Lear 1995, Quiroga Martinez 1995). Many advocates of the popular conception of “sustainable development” have contended that this “trickle down” will present a society with the economic improvement that will encourage conservation of natural resources and biodiversity (Escobar 1995, Willers 1994). In terms of the conservation of biodiversity, this is now largely considered a fallacy (Soule 2001, Escobar 1995, Willers 1994).

For many years now conservationists have noted that expansion of the market system can “result in a greater exploitation of natural resources, particularly through absentee investors (be they local or foreign), and thus lead to less conservation. Exploitation of resources through absentee owners can rapidly sever the link between humans and nature and induce a laissez-faire attitude toward a crisis in conservation” (Olembo 1989). Even more profound is the perspective that “the modern socio-economic system has become depersonalized and this has adverse consequences for nature and in some cases for the mental health of many individuals” (Tisdell 1994). Suffice it to say that the extinction crisis occurring on the planet today can be directly and negatively influenced by the ongoing expansion of a global economic system dominated by hegemonic state and corporate powers that continue to demonstrate no sincere interest in developing true economic and environmental sustainability (Sachs 2001, Soule 2001, Willers 1994, Hawken 1993). The plantation forestry model as it has been and continues to be implemented in Southern Chile is a prime example.

A brief examination of the last 30 years of economic policy and industrial forest resource exploitation in Chile will assist in articulating the environmental and social degradation associated with the “neo-liberal” global economic model. This is but one example of how the global economy is negatively impacting the southern temperate forests. The time span of 30 years is important, because it was on September 11, 1973 that a military coup deposed the government of Salvador Allende, opening the way for broad economic and socio-political structural adjustment in Chile. In the past three decades the growth of the forest sector in Chile, especially in terms of exports, and the concurrent degradation of the native forest, can be attributed to specific economic and resource management policies that were a result of the military government, which ruled for seventeen years between 1973 and 1990, and the continuation of export oriented policies since democracy was reestablished (Quiroga Martinez 1995, Collins and Lear 1995).

One of the most obvious characteristics of the forest sector policy which was implemented by the US supported Pinochet dictatorship was a rapid and extensive privatization of state holdings in land, production facilities, of businesses, and of decision making processes (Carrere and Lohman 1996, Collins and Lear 1995, Quiroga Martinez 1995). The implementation of a subsidy program embodied in the Forestry Promotion Law of 1974 (DL 701) resulted in millions of dollars of annual subsidies to the largest forest sector interests, even as such subsidies ran against the grain of strict “neo-liberal” policy (Carrere and Lohman 1996, Collins and Lear 1995, Quiroga Martinez 1995). No other agricultural sector in Chile receives such regular and extensive subsidies (Collins and Lear 1995). In all actuality, the historical process of subsidies and privatization has managed to concentrate a majority of the Chilean forestry sector assets in the hands of a small number of the most powerful economic interests in the country, who were able to “pick up valuable assets for scandalously low sums” (Carrere and Lohman 1996, Collins and Lear 1995). These policies were prejudiced against small landowners, and many were forced to sell off their holdings, land which was further concentrated in the hands of the economic elite (Collins and Lear 1995, Quiroga Martinez 1995). This concentration of industry assets in few hands continues apace today, though the subsidy programs have changed to focus on medium and small land owners.

Tax credits, which were established to favor forestry exports, allowed for products to be exported in any form, paving the way for massive raw log and wood chip exports while inhibiting the development of an added value forest products industry (Collins and Lear 1995). This export-oriented model dominates today, and as lax or non-existent regulation and environmental planning accompany it, it has lead to the destruction of a great portion of the most diverse region of native forests (Neira 2002, Quiroga Martinez 1995).

The Chilean forestry model repeats a classic third world pattern in the global economic system, whereby a majority of exports intensively exploit natural resources, often times non-renewable, and add little value or employment through manufacture (Sachs 2001, Carrere and Lohman 1996, Collins and Lear 1995). The United States is the leading importer of Chilean solid wood and pulp products (GAIN 2004). Therefore it could be postulated that consumption in northern hemisphere nations such as the United States, combined with the implementation of draconian foreign policy and economic models, as evidenced in the US support of the installation and maintenance of the Pinochet dictatorship, has driven the destruction of Chile’s native forests, a global natural treasure. This is, however, a simplistic analysis; the causes of forest degradation are very complex. The point is that the most influential motors of environmental change in the southern temperate forests are coming from geographic sources that are often far from the landscape most affected. These distant roots of degradation must be addressed in order to effectively advocate for the conservation of biological diversity and social sustainability.

It is not the environment alone that has paid the price for Machiavellian militaristic, corporate and economic policies in Southern Chile. The social impacts of the plantation forestry model are recognized now to be devastating to rural communities. Contrary to the arguments of advocates of corporate globalization and the plantation forestry model “the evidence shows that the forestry use of soil does not resolve problems of social development, poverty, and unemployment” (Unda et al. 1997). Even with a tremendous increase in exotic species plantations and the increase in the percentage of the Chilean Gross Domestic Product attributed to the forestry sector, “there has been no equivalent growth in forestry employment” (Unda et al. 1997). Along with the dictatorship’s subsidization of the forestry sector came a flexibilizacion laboral, which is the equivalent of reducing the rights of laborers (Carrere and Lohman 1996, Collins and Lear 1995). Many forest workers are kept in a permanent state of classification as temporary workers, resulting in poor salaries and repugnant working conditions (Unda 1997, Carrere and Lohman 1996, Collins and Lear 1995).

Other social and economic impacts of the plantation forestry model are increased rural migration to the cities, a higher rate of poverty for those communities surrounded by the highest percentage of exotic tree species plantations, a degradation of rural infrastructure due to out-migration, and little local establishment of forest products businesses (Unda et al. 1997). The exposure of water, crops, cattle, and people to toxic chemicals used to control pests in the plantations also presents health risks for local communities (REMFO 2001, Unda et al. 1997). As well, disturbances in the water cycle due to changes in soil composition and hydrology attributed to the exotic species plantations has grave impacts on rural peoples (Unda et al. 1997, Carrere and Lohman 1996). It is estimated that these conditions could be seriously aggravated with a continuation of free trade commercial negotiations (Unda et al. 1997, Quiroga Martinez 1995, Barlow 2001). As well, there is every indication that major forest industry interests are planning expansions into the remaining temperate rainforests of the southern Coastal Range (MacAlpin and Solis 2002). This expansion is accompanied by interest in technological advances such as genetically engineered eucalyptus species especially adapted to the colder temperatures of the south, and in a state subsidized road into the last remaining large tracts of intact native coastal rainforests (MacAlpin and Solis 2002, NFN 2001). The acquisition two years ago by conservation interests of a key holding that had been slated for industrial development has changed the focus in the lands nearest the highway though, and the recent establishment of the Reserva Costera Valdiviana is considered by many sectors of Chilean society as a tremendous step forward for conservation and sustainable development.

Researchers have noted that the growth of the forestry sector in Chile since the installation of the Pinochet dictatorship in 1973 has been sizeable and important for the larger Chilean economy (Quiroga Martinez 1995). Nevertheless, the primary beneficiaries of this growth have been the largest forestry companies, whose interests are owned by the most powerful economic groups in the nation, or by trans-national corporations (Quiroga Martinez 1995). Small landowners or producers were left behind by this growth, and in many cases they had to leave the forestry sector altogether, a trend which continues today (Quiroga Martinez 1995). As well, when the macro-economic benefits are discussed, the environmental consequences and the loss suffered by natural capital have not been entered into the equation, an externalization of economic costs that distorts the real costs and benefits of the export oriented exotic species tree plantation model (Quiroga Martinez 1995). The historical combination of laws that favor the exploitation of the forest while exercising an inaccurate economic assessment of the costs and benefits of the forestry model is creating a “vicious circle” with economic and environmental impacts that have yet to be coherently assessed (Giusti 2001, Quiroga Martinez 1995).

As the global economic system flexes military and financial muscle, and whilst regional and global hegemonic interests abandon even the most rhetorical stances of “sustainable development,” the need for implementing alternatives becomes more evident and pressing. One of the advantages of examining the globalized motors of the forestry sector in Chile is that it also reveals the popular concept of “sustainable development” to be falsely constructed on the premise that “peasants” or rural communities are to blame for the environmental impacts of their activities near and in endangered ecosystems, when it is highly likely that the global economic system and massive consumption in the northern hemisphere are a primary culprit (Escobar 1995), and not the local people suffering the consequences of a economic model dedicated to feeding markets overseas. Hopefully, the new and challenging tactics of pursuing collaborative processes with the large forestry companies will contribute to a positive change on the ground for these impoverished local communities and the remaining native forests that are their home.


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