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Innovative tax credit takes aim at deforestation in Peru

Bags of Peruvian coffee beans. Photo by Terra Nera via Wikimedia Commons

Bags of Peruvian coffee beans. Photo by Terra Nera via Wikimedia Commons

  • The credit line aims at combating deforestation while supporting economic stability.
  • Peru’s San Martin region is home to the largest producers of rice and coffee in Peru.
  • Production of key agricultural resources and the general expansion of agriculture are closely linked to Peruvian deforestation

A new $88 million line of credit promises to help small shareholders in San Martin, Peru to increase production of the region’s seven largest resources. Last week, the Global Canopy Programme (GCP) with CEDISA and Agrobanco signed a Memorandum of Understanding to will help coffee, cocoa, palm oil, palm hearts, rice, sacha inchi and aquaculture shareholders with competitive rates and technical assistance.

The biggest producer of rice and coffee in Peru, the San Martin region is also home to a number of key agricultural products including palm oil, palm hearts, cocoa, and sacha inchi.

The production of these resources and the general expansion of agriculture are closely linked to Peruvian deforestation. A whopping 90 percent of deforestation stems from land use change set in motion by agricultural expansion, according to GCP. Small scale farming is responsible for 75 percent of annual deforestation. It is this exact reason that the three institutions have come together to find a solution to protecting the environment and its indigenous species, as well as ensuring economic growth.

Simone Bauch, GCP’s director in Latin America, notes that the new line of credit will be essential to help Peru meet its commitment to a 20 percent reduction  in greenhouse gas emissions by 2030. Peru has also committed to reduce deforestation by 54 million hectares by 2021.

“The Unlocking Forest Finance approach developed by GCP and its partners in San Martin provides a replicable and scalable model for doing this,” stated Bauch in a GCP announcement about the deal.

Since 1970, about 300,000 square miles (77.7 million hectares) or 19 percent of the Amazon rainforest has disappeared. With Peru set to lose another tenth of that number by the year 2050, it begs the question of how environmentalists can and should convey the urgency of forest protection as well as economics.

“When we think of [solutions] in economic terms we can look to carbon trading as an economic outlet for Peru – and then carbon sequestration,” says Nicole Kellett, an assistant professor of anthropology at the University of Maine at Farmington. “As long as people in the so-called global north continue to not feel the same impacts of climate change as those in the so-called global south, I’m afraid it is an upward battle for a larger call to action.”

An aerial view of deforestation in the Peruvian Amazon. Photo by Rhett A. Butler
An aerial view of deforestation in the Peruvian Amazon. Photo by Rhett A. Butler

Kellett, an expert in economic development and political ecology, has spent a great deal of time researching in Peru’s Andean highlands. She says that every little bit helps.

“Since Peru has become increasingly dependent on mining for revenue, any efforts towards sustainable production is a positive move,” said Kellett. “With the impacts of climate change starting to be felt everywhere, people need to be educated on the role of forests in mitigating, as well as contributing to climate change.”

She adds that Peru “has a great deal to gain from this investment.”

The deal will clearly be a boon to the local economy.

A major issue surrounding economic stability in the area is access to fair interest rates that allow for a more sustainable practice of farming. Moving forward with the San Martin deal certainly will not solve every environmental or economic issues in the region, but should begin the path to a sustainable and profitable model for farming.

“The agreement between Agrobanco and CEDISA is an important step forward in the design of an innovative financial product for the producers in the main supply chains,” stated San Martin congressman Cesar Villaneuva in a press release. “This… will allow access to credit and technical assistance in a permanent and opportune manner.”


Global Canopy Announcement

Photo: Bags of Peruvian coffee beans. Photo by Terra Nera via Wikimedia Commons

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