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

In Guatemala, during a national workshop on forest financing held in November 2007, participants identified three possible financing instruments with potential for development: (1) Securitization of forest based cash flows; (2) “Factoring”, and (3) Repurchase agreements. In 2009, an initial assessment with financial institutions regarding the feasibility and attractiveness of the above instruments pointed to Factoring as an instrument with potential for piloting. CABI, a local business intelligence organization agreed to explore the implementation of factoring and of the expansion of micro-financing as a pilot case. Interestingly, CABI agreed to be compensated only if implementation leads to actual investment.

Participants also identified critical bottlenecks in the development of financing instruments in Guatemala. One such constraint is the availability of economic-financial information needed to properly estimate the value of forest assets and of future forest earnings. Another constraint is the lack of known methodologies in Guatemala for rigorously assessing forest investment risks. In 2009, a Forest Finance Intelligence Unit (Unidad de Inteligencia Financiera Forestal) was created and staffed to address these limitations. The unit is developing its strategy and work plan and will provide forest finance information, capacity building opportunities for foresters and finance professionals and facilitate the development of pre-investment initiatives (business cases).

These activities are deeply integrated within an initiative known as the Growing Forest Partnerships (GFP). Recently launched in Guatemala, it is creating and expanding opportunities for key forest-dependent stakeholders to influence important decisions that relate to sector financing (e.g., international financing mechanisms like the Forest Carbon Partnership Facility, national government programs like PINFOR, PINPEP and PPAFD that are in the process of being discussed and reformulated, and private instruments).