After squatting a piece of land, farmers typically log the best trees, and burn the undergrowth to clear space for subsistence agriculture and/or cattle ranching. The newly cleared area becomes more exposed to the heavy inundations during the rainy season, which wash away topsoil, resulting in reduced crop yields. As the land loses fertility, smallholders must supply more capital inputs (fertilizer, better seed) to maintain productivity. The increased labor and cost of working the land eventually encourages the farmers to seek out a new plot of jungle to begin the process again. In Panama, smallholders often sell their deforested land to Teak forestry companies that plant a monoculture of Teak wood (which kills the biodiversity) or to industrial cattle raisers.
Planting Empowerment (PE)
, founded in 2006 by former Peace Corp volunteers Chris Meyer, Damion Croston, Andrew Parrucci and Andrew Wulf, is addressing this situation.
I was able to speak with Damion Croston and learn more about the company. In essence PE is a sustainable timber investment company. The venture raises “impact capital” from US and European investors to lease deforested land from poor Panamanian landowners in the Darien region – specifically the indigenous community of Arimae and the Latino community of Nuevo Paraiso – then plants new trees on the leased land and harvests them. The Panamanians profit from monthly lease payments and investors are expected to receive a ~7% return on investment from future timber sales. The lease payments are a secondary source of income for farmers, and are intended strengthen ties to their land and promote new, economically sustainable methods of farming. Planting Empowerment integrates the local communities tightly into the operation and management of the plantations so they can learn sustainable practices.
Croston emphasizes that the venture makes sure to plant 70% native species to preserve the region’s biodiversity. The remaining 30% is Teak, which grows faster and has an established market history. Acquiring capital has been the most difficult part for Croston and his colleagues – with a 15-25 year payback period, timber investments can be hard to sell to liquidity-conscious investors. With the goal of generating earlier returns for investors, Planting Empowerment is beginning to plant food crops in between its rows of trees. These crops, including plantain and yucca, are staples in Panama and have an established market. “Investors are attracted by the financial returns as well as the social and economic benefits of our business” says Croston. PE is in the process of creating new secondary markets and exit strategies to make its investments more attractive.
Although the company is not making a profit at the moment, it has already made a positive impact. PE has hired a local book keeper, field supervisors and a forestry engineer. In the Latino community, one lease partner has been able to use his extra income to build a cinder block house (an upgrade from wood and thatch) which has improved his quality of life. In the indigenous community, the land is communal so lease payments have been used to pay legal fees to fight off encroaching squatters and migrants from other parts of the region.
As former Peace Corps volunteers, Croston and his colleagues spent several years with the communities they are helping, and they have become “like family”. By understanding the deforestation/poverty problem from the inside-out, they were able to craft a business model that addresses local needs while demonstrating more sustainable ways to profit from natural resources. Planting Empowerment’s long-term goal is to empower local communities to create their own income-generating tree plantations. As shown by their employee Liriano, who is studying to become a forestry engineer, they seem to be succeeding.
[1] https://www.cia.gov/library/publications/the-world-factbook/geos/pm.html
Photos from Google Images and Planting Empowerment
