Costa Rica Real Estate Investing – Profitable Reforesting

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HOW TO RESTORE and MAINTAIN AN ECOSYSTEM WHILE EARNING A PERMANENT PROFIT

Written by Ed Ring, www.EcoWorld.com

In the beginning there was a dairy farm.


In recent years demand for tropical hardwoods has increased exponentially.

This is due to rising populations as well as increasing standards of living. But
tropical hardwoods have always been in strong demand. As building materials they
are resilient, renewable, and aesthetically pleasing. India, a nation with a population of 1.1 billion, prizes tropical hardwoods such as teak but must import the wood, since they have lost over 90% of their forests.

China, another rapidly industrializing nation with a population of 1.3 billion, also must import most of their tropical hardwoods. Throughout Asia there is a voracious demand for tropical hardwoods that is almost entirely dependent on imports. Elsewhere, in Europe and the USA, wealthy consumers pay a premium for products made from tropical hardwoods.

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To meet this burgeoning demand, forests have been clear-cut throughout the equatorial regions of the world. From Indonesia to Africa to the Americas, deforestation has robbed the world of nearly half of the original tropical forests. Often this deforestation has been fueled by multinational timber companies who came in, cut everything in sight, and moved on. In their footsteps came farmers, then ranchers, and all too often, deserts, as the unprotected topsoil washed away.

To counter deforestation and to help fill demand for tropical hardwoods, enterprising companies have begun to reforest denuded tropical landscapes with tree plantations. These monocultural tree farms have flourished, but their efficacy is limited.

Only 2% of total hardwoods sold come from plantations, even as advances in equipment have facilitated greater harvests of tropical timber than ever from the rainforests. And while these tree farms do help stabilize topsoil and sequester carbon, as monocultures they cannot support the diversity of wildlife that the original forests could support, and as monocultures they will eventually rob the soil of nutrients and will become dependent on massive inputs of fertilizer. Monocultural tree farming is not sustainable.

 
Fred Morgan riding among newly planted teak

Permanent, profitable reforestation can only occur if
monocultural tree farms are established as transitional crops with mixed tropical
hardwoods replacing them.

A mixed forest of mature tropical hardwoods, cut scientifically on
a rotation where “corridors of light”are created as trees are selectively
removed, mimics the natural ecosystem of the original forest. Properly managed,
understorage of smaller trees and plants is not only permitted along with the
timber trees, but helps the overall ecosystem health. This type of forestry is
sustainable and profitable.

Selecting a specific pioneer species of tree to serve as the monocultural tree crop as the terrain is transitioned from cleared land to forest is a necessary intermediate step. This transitional tree can immediately stabilize the soil and retain moisture, improving the quality of the land so diverse native trees can be reestablished. It can also provide income to finance the reforestation of the native trees.

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In 2002, after extensive study and preparation, Finca
Leola was established in the northern interior of Costa Rica with the
intent of practicing this model for permanent, profitable reforestation. This
enterprise, run by Fred Morgan, Amy Morgan, and Hector Ramirez, so far has acquired
two plantations, both located in the inland areas northeast of Lake Arenal. How
they have gone about establishing their tree plantations is a case study in what
conscientious investors and consumers should look for when considering tropical
hardwoods.

“Sometimes people think they can just stick a few trees in the ground and
come back in 25 years to harvest them,”said Fred Morgan, describing an approach
diametrically opposed to his own, “but nothing could be further from the
truth.”In reality there is a huge amount of knowledge required to successfully
farm trees, and ongoing maintenance is required as long as a tree plantation is
intended to be productive.

 
The verdant countryside of Costa Rica
Central America is one of the best places on earth for growing tropical hardwoods.

Unlike most of Asia and Africa, the land of Central America is geologically
young. The depth of the topsoil in Central America is measured in feet or even
yards instead of inches. Areas that have been deforested in Central America are
much easier to redeem, since it can take centuries for the topsoil to erode after
the tree canopy is lost. In parts of the Amazon or Congo, by contrast, the soil
is only inches thick and utterly dependent on an intact tree canopy to remain
viable. Restoring forest in these areas is far more challenging.

For an optimally productive tropical tree farm, however, just locating in Central
America isn’t enough. The transitional monocropped trees, such as teak, prefer
very specific climates, altitudes, humidity, and soil type. The soils surrounding
the volcanos of Costa Rica are generally more favorable for tree farming compared
to the low-lying coastal areas, where the soils more resemble those of the Amazon.

 
Hopefully someday all the logs that make their way to the mill will be sustainably harvested

“First of all you must select suitable ground for the trees, which requires
soil tests. Then you must select suitable trees for the land based on fertility,
altitude, and slope.

So says Antonio Rodriquez, a forestry engineer who has worked throughout Costa
Rica and who has routinely consulted for Finca Leola, explaining some of the necessities
of good forestry management. Rodriquez’s involvement with Finca Leola didn’t
end with site selection, however. As one of the preeminent forestry engineers
in Costa Rica, Rodriquez advises Finca Leola as to the ongoing care of the trees – determining when to prune and thin, watching for disease, and suggesting
remedies and helps interact with various government programs.

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The first site Finca Leola selected,
located near La Garita de Monterey, was a 67-hectare former dairy farm, located
at an altitude of about 150 meters. The soil was deemed ideal for growing teak,
which would then be transitioned to mixed forest. It quickly became clear the
extra time spent selecting a site and testing the soil was worth it, as the trees grew much faster than all data indicated they should. Within two years most of the teak trees were over eight meters high, and Rodriguez currently predicts the first thinning will probably need to occur after only six years, instead of the standard eight years. At that point, the trees will be roughly nine inches in diameter, producing up to 7-inch-wide boards up to 20 feet long. Their plan calls for the teak to be thinned four times prior to final harvest, which they estimate to take place between 20 and 25 years after the original planting. Each time the teak is thinned, the wood is sold for lumber.

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To
monocrop tropical hardwoods correctly is expensive. Regular pruning up to the
first 10 meters of the trunk is required to ensure quality wood.

This will
help the tree grow straight and also will eliminate the knots that form deep into
the tree when well-developed branches are present, distorting the grain of the
wood. Until the trees are over about 10 meters in height, it is also necessary
to regularly clear the undergrowth. After the trees get larger, this isn’t
as important because the trees are well enough established to compete against
the undergrowth, but it is always necessary to prevent creeping vines from climbing
the trees.

The conditions in many of the teak groves all over Costa Rica are examples of
poor plantation management. In addition to failure to prune and leaving the undergrowth
to compete with the teak, the owners either didn’t thin at the appropriate
time or thinned the best trees, leaving poor quality, twisted trees standing to
grow larger.

The model Finca Leola is pioneering may not be unprecedented, but it is unfortunately
quite rare. Those familiar with planting practices in Costa Rica are surprised
to see the towering, native mother trees preserved among the teak fields of Finca
Leola. The norm is to remove them to clear the way for straight rows of monocrop
species. On the Finca Leola plantations, they are kept not only as food trees
for wildlife but to produce some of the seedlings for the future forest.

 
Teak trees barely two years old, benefitting from excellent soil
and excellent forest management


Finca Leola differs from traditional
tree growers in their conviction that it’s not really reforestation if the
end result is not a forest.


Normally, a failed tree among the rows of teak would be replanted with another
teak tree. But Finca Leola plants various slower growing native species in these
spots. These are selected for their diversity, their adaptability to the site,
their ability to support wildlife, and their value as tropical hardwoods. They
include almendro (which the endangered Great Green Macaw depends on), as well
as ron ron, cristobal, corteza, ojoche, tempisque, and mahogany, among others.
Because these trees grow slower than the teak, they don’t compete with it.
These are the foundation trees of a future perpetual forest.

Finca Leola’s second plantation is located in Monte Cristo de Guatuso inside
a government-designated biological corridor. Some 30 hectares located at an altitude
of 350 meters, it is a former cattle ranch and contains considerable primary forest
fringed by pioneer trees that have sprung up in the pastures. There are also some
massive native trees of great value. Monte Cristo will be managed partially by
filling in the pastures with native pioneer species such as laurel, roble coral,
and piln that then will be transitioned to mixed forest, and partially
as an already established mixed forest. This section of mixed, mature trees will
immediately begin having corridors of light created by sustainably cutting large
native trees, then these cut zones will regenerate, sometimes with the help of
selected plantings to increase diversity. As such, this plantation is and will
remain a rich, intact ecosystem and a haven for wildlife.

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The potential for reforestation using a transitional – and very profitable – tree farm to finance the establishment of a restored mixed forest ecosystem
which itself can be managed profitably, is enhanced when others are allowed to
participate by buying blocks of trees. Finca Leola has been able to expand their
reforested areas more rapidly at the same time as they provide an opportunity
for tree owners to not only realize an excellent return on investment, but also
to participate in a forestry business that is systematically restoring ecosystems,
instead of destroying them. For every block of 100 trees purchased, a tree owner
converts 350 square meters of deforested land into perpetually protected rainforest.

Projections provided by Finca Leola for their tree owners rely on conventional
assumptions: a rate of timber growth of 26 cubic meters per hectare per year,
a market price for teak of $350 per cubic meter, and a natural loss of 10%. Based
on these assumptions, a $3,500 investment will return over 25 years a payback
of $33,000, yielding a very healthy inflation-adjusted internal rate of return
of 13.4%. In reality, the returns from an investment in tropical hardwoods may
be far higher. Historically, the price of tropical hardwood has increased on average
6% per year over and above general inflation, due to the factors already mentioned,
increasing demand and diminishing supply. If this trend holds over the next few
decades, then a $3,500 investment in tropical hardwoods today will return over
25 years a payback of $116,500, yielding an astonishing internal rate of return
of 21%.

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Finca Leola is unusual in their
commitment to use a monoculture like teak only as a transitional crop. But by
the time the teak trees are completely harvested, where they were, a mixed forest
of tropical hardwood trees will already be producing food and habitat for wildlife.
Rodriguez points out that “often by removing only the best trees, we are
practicing genetic erosion that destroys the forest just like soil erosion destroys
the land.”In contrast, by removing only trees that are damaged, diseased,
genetically defective, or at the end of their life cycle, the health of the forest
is constantly improved. Many of these trees are so rare that even the poorer quality
ones are quite valuable. By such sustainable harvesting, a rich ecosystem is maintained,
and funds are generated to pay for its maintenance and protection. Finca Leola’s
forestry business model truly is one that allows profitable, permanent reforestation,
something that if emulated, could bring back the forests of the world.

 

COSTA RICA’S PARKS & PROPOSED BIOCORRIDORS

Finca Leola’s tree farms (red dots) are located in the rich, deep
soils of Costa Rica’s interior. The dark green on the map denotes existing parks;
light green the proposed bio-corridor.
(Scale: one pixel = one kilometer)

Source: www.EcoWorld.com

Reprinted with permission – all rights reserved

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