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DE RUEHPE #1451/01 1082243
ZNR UUUUU ZZH
R 182243Z APR 07
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC 5115
INFO RUEHBO/AMEMBASSY BOGOTA 4565
RUEHBR/AMEMBASSY BRASILIA 7294
RUEHBU/AMEMBASSY BUENOS AIRES 2853
RUEHCV/AMEMBASSY CARACAS 0306
RUEHGE/AMEMBASSY GEORGETOWN 0517
RUEHLP/AMEMBASSY LA PAZ APR PARAMARIBO 0153
RUEHQT/AMEMBASSY QUITO 1150
RUEHSG/AMEMBASSY SANTIAGO 1222
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHC/DEPT OF INTERIOR WASHINGTON DC

UNCLAS LIMA 001451 
 
SIPDIS 
 
DEPT FOR WHA/AND, EPSC AND OES/ETC,ENV 
BRASILIA FOR ESTH HUB - J STORY 
USAID FOR LAC, EGAT, J.Kunen 
USDA FOR /AS/FAA/BAILEY,/FAS/ITP/FSTSD/BREHM,/FS/MAYHE W 
INTERIOR FOR USFWS/GABRIEL,ST.JOHN 
 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: EAGR SENV ETRD EAID ECON PE
SUBJECT: MAHOGANY IN PERU: A PRIMER 
 
REF: (A) Lima 707 (B) Lima 658 (C) Lima 4528 (D) Lima 4289 
 
¶1.  SUMMARY:  This cable lays out the basic facts of traded mahogany 
wood in Peru.  2006 Mahogany exports were worth about $30 million, 
about 17% of all timber exported.  Approximately 90% of all exported 
mahogany goes to the U.S market. Mahogany is an Appendix II species 
under the International Endangered Species Convention (CITES), 
allowing trade but requiring the exporting nation to assure the 
legal acquisition of exports and non-detrimental impact to the 
species. In Peru, legal acquisition has become controversial due to 
persistent illegal logging, corruption and poor 
regulatory/enforcement oversight, despite the GOP's efforts to 
improve control and regulation of the forest sector as well as 
promote sustainable forest management in forest concessions and 
indigenous lands.    The issue is complicated by remoteness of 
logging areas and the almost complete lack of state presence. The 
GOP recently reduced its 2007 mahogany export quota.  Non-detriment 
findings by CITES will be helped by completing a comprehensive 
inventory of mahogany in Peru currently underway.  Post has also 
been working on avenues to support the GOP's stated aim to 
sustainably manage mahogany, which include independent certification 
of origin and chain of custody. 
END SUMMARY. 
 
MAHOGANY RANGE IN PERU 
--------------------------------------------- 
¶2. Throughout this cable, mahogany refers to Broad - (or Big-) 
leafed mahogany, a neotropical hardwood naturally occurring from 
Mexico to Bolivia. It is a large tree (up to 50 meters tall and two 
meters in diameter) and found in singular stands (one to ten trees 
per hectare).  Unlike most tropical hardwoods, it has a high unit 
value and unique properties prized for furniture, due to its 
workability and quality of finish.  The ecological requirements of 
the species have not been fully studied, but some data exists. 
 
¶3. In its natural state, big leaf mahogany is relatively slow 
growing (120 - 150 years to maturity), however in plantations which 
have been established in South Pacific and Southeast Asian countries 
it does well and is relatively fast growing (40 - 60 years to 
maturity). In its natural range in the Americas, it is attacked by a 
boring arthropod (Hypsipyla grandella) which greatly limits its 
natural regeneration and limits its possibilities for plantations. 
For this reason, throughout its natural range mahogany has been 
harvested from wild populations.    Mahogany has reportedly been 
mostly logged out in its original natural range and is considered 
commercially extinct in all countries except Brazil and Peru.  With 
Brazil's ban on mahogany exports, Peru is the leading mahogany 
exporter. 
 
COMPREHENSIVE INVENTORY FINISHED IN 2008 
---------------------------------------- 
¶4. Mahogany was naturally found throughout the Amazonian basin in 
Peru, but after logging and other deforestation now only exists in 
significant commercial quantities in parts of Loreto, Ucayali and 
Madre de Dios regions, with the highest concentrations along the 
Brazilian border in Madre de Dios region. Mahogany is found mostly 
in Protected Areas and indigenous lands. A comprehensive, up-to-date 
inventory of the Peruvian mahogany does not yet exist, due in part 
to the difficulty of access to its range and the large number of 
man-hours needed to inventory a huge area.  The latest estimate of 
the total mahogany population in Peru, made by the National 
Agricultural University La Molina (UNALM), and based on its recent 
inventories of two departments and extrapolated to the rest of its 
estimated range, is approximately  88,000 mature trees. However, 
this figure may be revised, as the national inventory of mahogany is 
still on-going and should be completed by 2008. 
 
INTERNATIONAL PROTECTION - CITES 
-------------------------------- 
¶5. Peru signed the Convention on International Trade in Endangered 
Species of Wild Fauna and Flora (CITES) in 1975. CITES' three 
appendixes list species according to their vulnerability. In 2002, 
the CITES parties (including the U.S.) agreed to include mahogany in 
Appendix II, which regulates species that are not necessarily 
threatened with extinction, but in which trade must be controlled to 
avoid use incompatible with their survival; international trade is 
possible when protective measures are taken to guarantee that trade 
is legal (legal acquisition) and that the trade does not cause 
detriment to species survival. Voluntary Export quotas are a 
management tool for "range" (where mahogany is found) countries to 
assure legal acquisition and non-detriment. 
 
¶6. Appendix II range countries designate a Management Authority and 
a Scientific Authority to comply with CITES requirements.  The 
authorities reside in the same agency in some nations, such as the 
U.S. (U.S. Fish and Wildlife Service) and Brazil (IBAMA).  In Peru, 
the GOP designated its agency National Institute of Natural 
Resources (INRENA) as the Management and the National Agrarian 
University (UNALM) as the Scientific Authorities; at UNALM Forestry 
Engineer Ignacio Lombardi directs the activities of the scientific 
authority and in INRENA management responsibility lies in the 
Biodiversity Unit. Commercial international trade may take place 
only if the Management Authority issues an export permit - and no 
such permits should be issued unless the Scientific Authority of the 
exporting State advises that the trade which is to take place will 
not be detrimental to survival. The finding of "non-detriment" is 
linked to each export permit. In Peru the Ministry of Foreign 
Affairs also signs export permits. 
¶7.  The CITES Secretariat (which manages Convention implementation) 
and member nations established a Mahogany Working Group (MWG) as 
part of the Plants Committee.  Last year, the MWG considered placing 
mahogany into "significant trade review," a mechanism under which 
since 1979 the Plants Committees has a mandate to identify 
Appendix-II species that are subject to significant levels of trade; 
the Committee can make recommendations for action by the range State 
to avoid a recommendation that the species be transferred from 
Appendix II to Appendix I, meaning that all trade is banned. 
¶8. While the Secretariat in 2006 proposed considering a ban on 
mahogany exports from Peru, or failing that a Significant Trade 
Review, the MWG and the Standing Committee did not agree and Peru 
was permitted to continue exporting mahogany.  Peru agreed to 
improve management measures. A delegation from the Secretariat 
recently finished a visit to assess Peru's progress.  A meeting of 
the Standing Committee is scheduled for June 2, followed by the 
Conference of the Parties (COP) on June 3.  While mahogany will 
probably be on the Standing Committee's agenda, it is not clear yet 
if it will be on the COP agenda. 
¶9. The extent to which Scientific Authority UNALM has issued 
effective non-detriment findings is a topic of debate among CITES 
members, the Secretariat and NGO observers.  According to UNALM, non 
detriment findings can be made for each shipment as required by 
CITES, as the volume of individual shipments are not detrimental. 
Critics claim that UNALM has not issued effective non-detriment 
findings due to need to consider the totality of exports rather than 
individual shipments, and the lack of valid scientific information, 
including incomplete inventories. Procedures and criteria for the 
issuance of non detrimental findings are currently being debated in 
Peru, with a view to a pronouncement in April 2007. 
 
MAHOGANY HARVEST IN PERU 
------------------------ 
¶10.  In Peru, mahogany plantations are negligible.  Wild trees are 
generally harvested with chainsaws using riverine access or roads if 
they exist.  Logs are skidded with basic machinery to riverine 
transport to sawmills in Peru's jungle cities such as Pucallpa, 
Puerto Maldonado or Iquitos.  Legal harvest requires a national 
permit from INRENA, the natural resources agency (responsible for 
protected areas and wildlife as well as forest management) under the 
authority of the Ministry of Agriculture. INRENA issues two types of 
harvest permits, to commercial concessionaires as well as to 
indigenous communities. Another agency, OSINFOR, is responsible for 
overseeing the issuance of permits and their compliance; OSINFOR's 
Director reports to the Director of INRENA, which has resulted in 
criticism that there is no independent oversight of the mahogany 
concession process. 
 
MAHOGANY TRADE FROM PERU 
------------------------- 
¶11. Wood products exports from Peru are only a small part of the 
value of overall exports, but wood represents a large percentage of 
exports from the jungle departments such as Loreto, Madre de Dios 
and Ucayali.  Within wood exports, mahogany is similarly a 
relatively small percentage. With around half of Peru's territory 
forested, wood exports have a high potential for growth with many 
currently and potentially valuable species growing alongside 
mahogany.  The value of mahogany exports has increased little, from 
$50.8 million in 2004, $58 million in 2005 to $52 million in 2006. 
Compared to its neighbors, the value of exports are still in 
infancy: Brazil's 2006 wood products exports were reportedly $6 
billion and Chile's $3.5 billion. Over 80% of Peru's mahogany 
exports go to the U.S., exported by six Peruvian firms and imported 
by a number of U.S. import firms. 
 
¶12. Documented mahogany exports have dropped considerably in the 
last decade.  Mahogany is exported primarily as sawn wood, but there 
are exports of finished products such as furniture as well. 
Documented mahogany exports have experienced flow and ebb over the 
past ten years: 
1996- 100,000 m3; 
2000- 36,548 m3 
2002- 52,137 m3 
2004- 30,785 
2005 - 23,621 m3 
2006 - 21,802 m3 (worth around $30 million) 
 
EIGHTY-TWO PERCENT OF EXPORTS GO TO U.S. 
--------------------------------------- 
 
¶13. Of 2006 mahogany exports, at least 82% went to the U.S., 
followed by 12% to the Dominican Republic. As some mahogany 
processed in markets such as the Dominican Republic is re-exported 
as furniture to the U.S., some estimates put more than 90% of total 
exports ultimately arriving in the U.S. market. China's market for 
Peruvian timber is growing considerably, but at this time mahogany 
exports to China are limited.  Mahogany was once the major part of 
Peru's wood exports, but for 2006 was 16% and for 2007 industry 
exporters estimate that mahogany will account for only 8% of wood 
exports as other species become more commercially valuable and are 
successfully exploited. 
 
THE CONCESSIONING PROCESS 
------------------------- 
¶14.  For commercial logging on government lands, INRENA makes a 
determination to allow cutting in a particular section and issues a 
public request for bids, to result in a concession for 40 years. 
(Note: some years ago concessions were for only two years; a 40 year 
concession is intended to motivate the concessionaire to sustainably 
manage the concession.  End Note.) In practice, INRENA does not 
investigate the bona fides of bidders, but relies on submitted bid 
documents.  After awarding a bid to cut a given parcel, the awardee 
must file a forest commercial species inventory, an annual operating 
plan (POA), and a general forest management plan for the entire 
concession.  POAs must specify the amount of mahogany (and other 
species) that will be taken from a tract, but INRENA does not impose 
a quota per tract.  The quota comes into play only at the export 
stage; as a result there may be more mahogany cut than the quota, 
but it would have to be stored until the next year once the quota 
has been reached. Data on mahogany wood production not for export 
has been difficult to obtain. 
 
¶15.  As a result of the 2000 General Forestry Law, which sought to 
modernize forestry, the GOP has concessioned close to 7.2 million 
hectares out of the approximate 65 million hectares of forest land 
in Peru. Critics point to weaknesses in the concessioning process, 
including lack of transparency in the issuance of awards; lack of 
clear criteria for selection, lack of financial/investment capacity 
and technical expertise by awardees and land conflicts between 
concessionaires and indigenous landowners; there have been calls for 
cancellation of many of the concessions and for a re-organization of 
the entire process. INRENA has put further concessioning on hold 
until these issues are resolved. 
 
¶16.  In addition to forest concessions, INRENA also issues 
authorization to indigenous communities and small agricultural 
holdings for felling of timber. Indigenous communities follow the 
same procedures as those for concessions, with the presentation of 
forest inventories, general forest management plans and annual 
operating plans.  Approximately 3,200 indigenous communities have 
legal land title to an estimated 9 million hectares in the Peruvian 
Amazon.  The GOP, international donors and NGO's have tried in 
recent years to help indigenous peoples sustainably manage their 
forest resources.  Observers have long reported unsustainable 
logging practices take place on indigenous lands by commercial 
loggers who reportedly exploit indigenous peoples with predatory 
contract labor practices, playing on local ignorance of forestry and 
labor regulations. 
 
INRENA's EXPORT QUOTA 
--------------------- 
¶17. INRENA began setting quotas in 2005, set in cubic meters (m3) of 
sawn wood: 
2005 -- 23,621m3 
2006 -- 23,239m3 (Note: actual exports were 21,802) 
2007 -- 13,476m3 
In 2006 a total of 21,802 m3 were exported, less than the quota. 
While a radical cut from historical exports and the 2006 quota, it 
remains controversial (Ref A) and UNALM has made a preliminary 
recommendation that the quota be in trees: 1226 trees for an 
estimated 11,769 m3. 
 
¶18.  To set the quota INRENA states that it uses a variety of 
criteria: documented domestic stocks whose legality is randomly 
verified; available data on populations, some of which is supplied 
by permit holders for commercial concessions or indigenous community 
cutting, and historical trends. INRENA uses in the first instance 
annual operating plans as presented by forest concessionaires and 
indigenous communities, which have been approved though in most 
cases not yet verified.  In addition, estimates of existing stocks 
in warehouses are also used, based on information provided by the 
principle mahogany exporters.  This information is complemented by 
further available data on populations as well as that provided by 
the Scientific Authority UNALM. 
 
LAW ENFORCEMENT 
--------------- 
¶19.  Under the GOP's management system, INRENA inspectors verify 
mahogany in several stages: before approval of the POA; at control 
points between logging areas and sawmills; at the sawmills; as sawn 
wood; at its final destination for local sale or export.  OSINFOR, 
an independent agency responsible to the Prime Minister's office, 
inspects forest concessions at various points to verify that 
mahogany trees are being taken from a legal concession or indigenous 
community.  The tax agency SUNAT also inspects at the final 
destination, and for mahogany, employees from INRENA's biodiversity 
division verify before issuing a CITES export certificate.  Some of 
the personnel used to staff control points are contract employees. 
INRENA has no law enforcement authority, which is employed by the 
Ecological Division of the National Police.  There are no special 
law courts for illegal logging cases. 
 
FOREST CERTIFICATON 
------------------- 
¶20.  A joint USAID/GOP/NGO effort has resulted in certification of 
close to 500,000 of the eight million concessioned (including 
indigenous lands) hectares; Certification means that the NGO Forest 
Stewardship Council (FSC), or its authorized auditors from other 
NGOs certifies that a tract of land has been logged (with an annual 
audit) with consideration for environmental, social and economic 
considerations.  FSC's website is http://www.fsc.org/esp. Within the 
GOP the Minister of Agriculture and INRENA director have praised 
certification as a positive management tool, but INRENA has not 
required mahogany exports to come from certified tracts. 
 
CONTROVERSIES IN EXPORT QUOTAS AND MANAGEMENT 
--------------------------------------------- 
¶21.  The 2007 national mahogany export quota has controversial 
elements that have provoked criticism from NGOs, including some in 
UNALM. 2007 quota is based on the 2006 harvest period.  In 2006, 30% 
of the quota was specifically allocated on the basis of POAs for the 
harvest period 2006 (approximately 7,500 m3). When added to the 
quota of 2007, which is exclusively based on the harvest period 
2006, the total quota for the harvest period 2006 is arguably 21,000 
m3.  Critics allege that allowing 2006 POAs with pending 
verification on site allows later verification to be conducted not 
on the standing tree but on the stump; in that case trees could have 
been cut before the legal time for the concession.  The 2007 quota 
does not provide for mahogany to be cut in 2007, which will harm 
certified mahogany logging operations; this certified mahogany would 
thus have to wait for export until 2008.  While the quota considers 
as criteria for exclusion from the quota areas with less than 2000 
mature mahogany trees, closed areas are not identified. The 
Scientific Authority has suggested that only mahogany from the 
regions of Loreto, Ucayali and Madre de Dios should be exported, but 
INRENA has not defined the quota by area. There are divergent 
opinions between NGOs, the Scientific Authority and INRENA on the 
number of mature trees available for harvest. 
 
¶22.  Longstanding criticisms of forest management include widespread 
illegal logging of mahogany, enabled by: logging in non-concessioned 
tracts and indigenous lands, corruption by INRENA inspectors and 
document issuers, lack of police enforcement and poor results in the 
judicial system for illegal logging cases. INRENA insists that 
exports will be authorized only after field verification, but INRENA 
has been criticized for inadequate verification in the past.  There 
has been little doubt that INRENA and the Ecological Police have 
suffered from underfunding and understaffing. 
 
GOP ACTIONS 
----------- 
¶23.  While issues with mahogany take center stage due in part to its 
place in U.S./Peru trade, its high value and CITES obligations, 
mahogany is only a part of forestry issues in Peru.  The current 
government has been in office less than a year, but President 
Garcia, the Minister of Agriculture and the INRENA Director have all 
spoken publicly of the need to combat deforestation, replant 
deforested areas, combat illegal logging and create a sustainable 
forest products industry to benefit the poor in jungle regions. 
INRENA is currently undergoing a massive reorganization to address 
these issues.  Among other steps, INRENA is planning to decentralize 
forest management by assigning more responsibility for 
identification of concession lands regional governments. 
 
AVENUES FOR U.S. ASSISTANCE:  WHAT TO DO? 
----------------------------------------- 
¶24. The CITES Secretariat representative made encouraging public 
remarks about the GOP's progress in managing mahogany during his 
recent visit, also making positive remarks about certification.  The 
GOP has publicly identified two million hectares of certified forest 
as its objective by 2011. Post believes continued support for forest 
certification is important for mahogany management but not enough. 
USAID Lima's environmental program, with participation from State 
Econ section, supports more effective central planning in INRENA. 
Some recent USAID programs, such as technical support for a 
computerized data entry system at the field level for INRENA 
inspectors had to be terminated after corruption issues surfaced. 
Anti-corruption programs are the primary focus of the Millennium 
Challenge Corporation's plan for a Threshold Program in Peru.  State 
and USAID are working to organize training in environmental law 
enforcement that would be useful for mahogany management.  USDA is 
exploring a capacity building effort with INRENA targeted to 
mahogany management in conjunction with a community forestry 
management project, funded by PL 480 resources.  An aerial imaging 
solution to inventorying mahogany has captured the interest of 
INRENA, but it may be prohibitively expensive and of questionable 
sustainability.   Lastly, the private sector, both U.S. importers 
and Peruvian exporters, appear willing to assist with certification 
and other management measures, and they welcome USG input on where 
to put their resources.  Most agree that support for starting 
sustainable plantations in deforested land would help Peru's economy 
and reduce pressure on indigenous populations. 
 
¶25. Post will work with Washington to ensure that the Work Plan for 
the Environmental Cooperation Agreement between Peru and the U.S. 
(which would go into force if the Peru Trade Promotion Agreement 
goes into force) would have has a prime focus programs to improve 
mahogany management.  Post welcomes other ideas on how to assist the 
GOP, NGOs and other donor nations to ensure legal acquisition of and 
non-detriment to mahogany. 
STRUBLE