Case Study on the Financial Viability of Forest Management on Public Lands in the Brazilian Amazon

Abstract

Brazil has a vast reserve of natural forests that belong to the state; hence, the state is responsible for supplying native wood to the market. However, the management in public forests has only begun recently; thus, much research is needed to know about its profitability. This study analyzed the financial feasibility of public forest management by addressing the following aspects: state concession, federal concession, and community forest management. We used the Net Present Value, Annual Equivalent Value, and Average Cost of Production methods to assess financial feasibility and applied the Monte Carlo simulation to estimate the probability of occurrence of NPV values. Community forest management showed profitability and a low occurrence of positive NPV values. The initial subsidies and the absence of royalty payments contributed to their good financial performance. The state and federal forest concessions showed financial unfeasibility and a low probability of profitability, which were justified by a low harvested volume of forest management, a high number of hollow individuals with small dimensions, poor volume estimates, and a high occurrence of species with low commercial values. Financial viability is a critical aspect of public forest management, and the achievement of good results depends on the consideration of several factors and aspects of public forests. Characteristics such as species composition, the distance between the managed areas, and the place of consumption must be considered. Areas that are not financially viable in the current period can be considered for future management and maintenance.