United Nations Forum on Forests – Sixth SessionUN Headquarters, New York, N.Y. , U.S.A. Room 5, 1-3pm, February 20th, 2006
The Forest Investment Attractiveness Index (IAIF, from its Spanish name) is a new instrument that has the general objective of measuring the business climate for investments in sustainable forest businesses. It allows the systematic, periodic, quantitative and more rigorous analyses of the factors that affect the success of forest direct investments and business decision-making.
More specifically, the IAIF (1) clarifies to stakeholders what are the SUPRA, INTER, and INTRA sectorial factors that affect the success of sustainable forest businesses and their relative importance for a given country in a particular year; (2) helps investors to undertake an initial screening of the countries where investments in sustainable forest businesses are more likely to succeed; (3) serves as a working framework to encourage research, debate, dialogue, and learning; (4) helps to design intervention strategies and more effective better define goals, programs, and policies; (5) provides measurable indicators that allows performance measurements and trend tracking; among others
The measures the business climate for investments in sustainable forest enterprises. Consisting of 20 principal indicators, using more than 80 variables, the IAIF index presents the forestry business climate for each country as a single numerical rating. The indicators include exchange rate stability, political risk, trade openness, rule of law, licenses and permits, social and economic infrastructure, agricultural policies, planting and harvesting restrictions, forest resources stock and flows, supportive or adverse activities, and the forest products domestic market size. In addition to assisting potential domestic or foreign investors in making an initial screening, the index is also expected to clarify policy strategies, improve stakeholders dialog, and indicate areas for further research.
The Inter-American Development Bank (IDB) has developed a set of tools designed to guide investors to business opportunities in Latin America and Caribbean’s forestry sectors, which could also be calculated for other regions.
Sustainable management of forest resources in any country depends on the success of forest-based businesses. To be sustainable, forest businesses need to maximize financial return at same time that they satisfy criteria of environmental and social feasibility. If it is not a good business for the landowners and associated entrepreneurs, however, forests will not be managed and will likely be converted to other uses. Likewise, areas that should have tree cover, the forest vocation lands, will not sustain forestland uses. Therefore, all the social, economic and environmental benefits to society that forests can provide are substantially undermined if forest-based businesses are not successful.
The first edition of IAIF using 2002 data identified Brazil, Chile, Argentina, Uruguay and Costa Rica as the five countries offering the best forestry business investment climate, while in Haiti, Ecuador, Guatemala, Belize, and Paraguay investors face the greatest challenges to conduct successful forest businesses. The IAIF 2004 edition will be published in 2006.
In addition to assisting potential domestic or foreign investors in making an initial screening, the index is also expected to clarify policy strategies, improve stakeholders dialog, and indicate areas for further research.
With the purpose of assisting countries to design and implement successful strategies and actions that make them more attractive to direct investment in sustainable forest businesses, a companion instrument was also developed. The Process to Improve the Business Climate for Forest Investment (PROMECIF), from its Spanish name). Consistent with IDB’s Business Climate Initiative, the PROMECIF uses the models and results of the IAIF in a cyclic process that identifies countries interested in improving their forest business climate; prepares diagnostics and defines strategies; and designs, executes monitors and evaluates projects and actions.
IDB is working to ensure that the IAIF is systematically calculated every two years so as to allow stakeholders to follow-up a country’s performance evolution and the impacts of interventions to improve the business climate for sustainable forest investments.
A long-standing initiative of the Latin American countries, the Inter-American Development Bank was established in 1959 as a development institution with novel mandates and tools. Its lending and technical cooperation programs for economic and social development projects went far beyond the mere financing of economic projects that was customary at the time.
The IDB’s programs and tools proved so effective that soon the IDB became the model on which all other regional and sub-regional multilateral development banks were created. Today, the IDB is the oldest and largest regional development bank. It is the main source of multilateral financing for economic, social and institutional development projects as well as trade and regional integration programs in Latin America and the Caribbean.