National Forest Financing Strategies (NFFS): The case of Paraguay

A national workshop on forest financing was held in Paraguay in February 2009. Co-organized by 11 different organizations, the workshop was attended by over 100 representatives of the public and private sector, both of the forest industry and of the financial sector. The capacity building process was initiated against a backdrop of challenging issues (Paraguay has one of highest deforestation rates in South America) but also promising opportunities including a new leadership with INFONA (the National Forest Institute), a supportive private sector group, and the fact of having being selected as a pilot country by both the Forest Carbon Partnership Facility and REDD. Paraguay has also received valuable support from various donors to improve its investment climate, most recently by the IADB and the Spanish Government.

The workshop received attention from national level representatives from both the public and private sectors (two ministers attended the first and last day, along with key decision makers and private sector CEOs), received good media coverage, and offered various presentations on innovative instruments, drawing on both domestic and international experiences.

From the workshop emerged three voluntary working groups, focusing on the design of instruments, review of legal and technical forest information, and cultivation of cross-sector communication.

Some initial achievements have included:

• Two financing instruments were identified for development

• A trust fund (Fideicomiso) that is attractive for private and institutional investors (e.g., pension funds)

• An appropriate credit line through the Agencia Financiera de Desarrollo (AFD)

• Initial elements of a financing strategy were identified and an initial draft of a national Forest Financing Strategy developed

• A declaration was signed by ministers and key private sector representatives in support of forest sector development

• Both the head of the Environment Ministry (SEAM) and the President of the National Forest Institute (INFONA) were nominated as national focal points for REDD activities. Negotiations are underway to have both institutions become focal points on climate change issues related to forests.

• Communication between the two sectors has been strengthened with the help of: (a) a targeted meeting with representatives of financing institutions (such as AFD, pension funds, etc.); (b) the development of an excel spreadsheet for “communication” purposes; (c) a field visit for financing representatives in October 2009;

• Changes in Central Bank regulations that would make it easier to establish trusts (fideicomisos);

• Trust (fideicomiso) structured and established with confirmed investors (pension funds) for a value of $2 million.

In addition, various ideas are being developed, such the contracting of an economist for INFONA, and linking small to large producers through out-grower schemes.

Representatives from Paraguay shared their experiences at the financing workshop in Ecuador in September 2009 and at the side event on financing organized at the World Forestry Congress in October 2009.