The Costa Rica Ministry of the Environment and Energy (MINAE) Program of Environmental Services Payments (PSA) is among the most advanced in the world. As of 2006 a total of 471,392 hectares (1,178,450 acres) of forest were in the PSA program. Another 28,066 hectares were in the Forestry Management Program and 31,962 hectares had been reforested. This is apart from the thousands of hectares within Costa Rica's extensive system of National Parks. The PSA program is quite generous, paying $64 per hectare per year under five year contracts. PSA is administered by an office of MINAE, Fondo Nacional de Financiamiento Forestal (FONOFIO), see MINAE - FONOFIO Page Funding from international sources and a portion of the local fuel tax seems to be ample to annually bring in new properties and renew expiring five year contracts.
For an investor that is motivated to save the rainforest and combat global warming, while having a personal nature retreat, purchasing a forest is a worthy enterprise. Whether or not it is an investment bringing a reasonable return depends largely on the price of acquiring the land. If 300 hectares of forest can be purchased at $1,000 per hectare and incorporated in the PSA at $64/hectare/year, then the annual income is $19,200 and the rate of return on investment is 6.4%. Add to that rate land appreciation at no less than 5%. Forests that sell at a low price often have problems of road access. Investing in road improvement will usually double or more the value of land. PSA also exempts the owner from local property taxes and national taxes on corporate assets (usually a forest is purchased through a corporation, Sociedad Anónima).
The conservation contract and the Forestry Law do not permit changes in land usage, such as to agriculture or timber (selective logging may be permitted in some instances). However, it is possible to build a home in the forest, or even start an eco-tourism project provided that there is minimal disturbance to the forest and with an Environmental Impact Study and permits from MINAE. See the information under Investments in Tourism Projects and Investments in Residential Development Projects.
Two years ago we had a number of forests for conservation priced at under $1000 to $2000 per hectare. Recently, land prices in Costa Rica have been increasing substantially. We have removed several forests from our website because the owners increased the price to the point that it made no economic sense as an investment in forestry. However, we continue to list a few reasonably priced properties eligible for PSA and will continue looking for such properties.
The Instituto Costarricense de Electricidad (ICE) also has a program for forest preservation in the watershed of their many hydroelectric projects.
Another program of FONOFIFO is reforestation. This applies in the main to lands in cattle pasture. During the 1960s and 1970s half the virgin forests in Costa Rica were cut, the timber sold, and the land converted to raising cattle for meat exports. Beef is no longer a viable export for Costa Rica so cattle pastures are now being converted to export crops, such as pineapple, or to timber crops such as teak or melina or to African palm oil plantations for bio-fuel. Teak and African palm land in the Central Pacific and Southern zones has risen in price, as has teak land in northwest Pacific region of Guanacaste. Since teak is a very long term project (20+ years) the opportunity cost of capital for a teak investment, in my judgment, is too high when the price of land is $10,000 per hectare and up. There are some lands in northern Costa Rica that are reasonably priced and suitable for teak or African palm, and excellent for the rapid growth timber, melina (10-12 years to maturity, the wood is used for furniture, finishings, pallets…). We do have listed a few Pacific area farms with growing teak. To see all forestry listings, click here: Business and Investment in Forest Conservation and Timber.
In northern Costa Rica we work with a private company, Desarrollo Forestal Sostenible, CODEFORSA, that offers consulting services, technical assistance, nursery stock, and project management service. www.codeforsa.org
For a spreadsheet that provides detailed costs and income from melina timber email Dale at email@example.com. Less complete information is also available for teak, a very high priced wood. We are currently looking into bio-fuel from African palm, but it will take some time to complete this research.
For investments in other sectors such as tourism, conservation or residential development - please view our page on: Business Opportunities in Costa Rica. Or click here to return to the Costa Rica Investments index.
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