The Effects of Structural Adjustment on Deforestation and Forest Degradation in

Lowland Bolivia
David Kaimowitz
, Graham Thiele
and Pablo Pacheco*
Center for International Forestry Research (CIFOR), Bogor, Indonesia
International Potato Center (CIP), Cochabamba, Bolivia
Research Center for Labor and Agrarian Development (CEDLA), La Paz, Bolivia
Accepted 15 September 1998.
Available online 13 August 1999.

Abstract
Bolivia's structural adjustment policies, initiated in 1985, increased poverty among
certain groups, but this did not lead to widespread migration to the agricultural frontier.
Nor did adjustment greatly affect the average area planted in annual crops by small
lowland farmers. Structural adjustment contributed to large-scale forest clearing for
soybean production for export and, to a lesser extent, forest degradation by lumber
companies. The economic benefits generated by soybean and timber expansion may have
outweighed the environmental costs, but alternative policies might have reduced those
costs and improved the distribution of the benefits.
Author Keywords: Adjustment; Bolivia; Deforestation; Forests; Logging; Soybeans
Article Outline
1. Introduction
2. Deforestaton and forest degradation in lowland bolivia
3. Structural adjustment in bolivia
4. Poverty and migration to the agricultural frontier
5. The SAPs' effect on forest clearing by small lowland farmers
6. Expansion of export agriculture and logging
7. The costs and benefits of soybean and timber expansion
8. Possible alternatives
9. Conclusions
References
1. Introduction
Many developing countries implemented stabilization and structural adjustment policies
(SAPs) over the last 15 years, the environmental effects of which are controversial.
Critics claim SAPs increase poverty and associated environmental degradation; create
incentives to overexploit natural resources, particularly for export; and weaken public
sector capacity to implement environmental policies (Brzovic, 1989; Hansen-Kuhn,
1993; Reed, 1992). Supporters consider them a precondition for economic growth, and
deny they necessarily produce negative environmental impacts (Monasinghe and Cruz,
1994). They also say SAPs promote economic stability, which constitutes a precondition
for sustainable natural resource management (Killick, 1991). Even when SAPs aggravate
particular environmental problems, supporters believe environmental, rather than
economic, policies should be used to address them.
With regard to deforestation and forest degradation, SAPs have been said to contribute to
these problems by:
—inducing migration to agricultural frontier areas, as a result of increased unemployment
and rural poverty (
Cruz and Repetto, 1992);
—stimulating forest clearing for agricultural export products through currency
devaluations, fiscal incentives for exports, and the removal of agricultural price controls (
Frickman Young and Bishop, 1995); and,
—promoting timber exports from unmanaged forests through currency devaluations (
Pimental et al., 1991;
Tchoungui et al., 1995).
1
This paper addresses those claims in the context of lowland Bolivia. Bolivia was among
the first Latin American countries to initiate a far-reaching and relatively orthodox SAP
and has the sixth largest area of tropical forests in the world. Although deforestation and
forest degradation affect the Bolivian highlands as well, the paper concentrates on the
lowlands, where most forests are located.
The paper concludes that structural adjustment did not lead to widespread migration to
agricultural frontier areas, except, perhaps, to the coca-producing Chapare region in
Cochabamba. SAPs contributed to the persistence or growth of poverty in mining
districts and traditional highland agricultural regions, but the resulting migration was
mostly to urban areas and the Chapare. Migration to other agricultural frontier areas was
not greatly affected. Nor did structural adjustment have a major discernible effect on
average forest clearance for food crop production by small lowland farmers.
SAPs did greatly contribute to forest clearing for soybean exports and to higher timber
exports. The devaluation of the local currency, road improvements designed to make the
country more competitive in international markets, and the general economic stability
associated with adjustment were particularly important.
The expansion of soybean and timber exports induced by the SAPs generated large
foreign currency revenues for Bolivia and profits for producers. Alternative policies
however might have yielded higher long-term economic and environmental benefits and
a more equitable distribution of those benefits. Under existing policies, the current and
future generations of Bolivians as a whole, and the populations of other countries have
incurred most of the environmental costs resulting from increased soybean and timber
production, while most benefits accrue to a few hundred wealthy individuals.
Admittedly, none of these conclusions represents more than tentative “best guesses”
based on an exhaustive analytical review of the available data. The processes involved in
the causal chains between macroeconomic policies and microeconomic decisions about
migration, land use, and technological choice are too complex and multifaceted to make
definitive statements possible. In most cases, existing data and methodological tools do
not allow us to separate out and quantify fully the impact of each variable in these
processes. A recent review by Kaimowitz and Angelsen (1998) of some 150 econometric
models of tropical deforestation, for example, reveals that to-date no quantitative model
has been constructed that is fully up to this task. Nevertheless, we believe our conclusions
represent the most plausible explanations that can be given based on current information,
and that important issues such as how macroeconomic policies affect the environment
should not be ignored or avoided, simply because they are difficult to analyze.
Section 2 provides basic background on deforestation and forest degradation in lowland
Bolivia. Section 3 discusses the economic crisis that led to structural adjustment, the
policies implemented, and their effect on the economy. Section 4 is a discussion of
structural adjustment's impact on migration to the agricultural frontier, followed by
Section 5 on its impact on lowland small farm agriculture. Section 6 analyzes how these
policies affected land clearing for export agriculture and forest degradation associated
with timber exports, while Section 7 examines costs and benefits associated with soybean
and timber expansion. Section 8 speculates on alternative policies that might have been
implemented.
The term structural adjustment as used here refers to both short-term stabilization
measures and longer-term adjustment. Stabilization policies are designed to reduce short-
term imbalances in balance-of-payments and budget deficits by restricting aggregate
demand. Typical measures include reducing public sector expenditure and subsidies,
raising taxes and interest rates, and devaluing the currency. Adjustment policies are
longer-term in implementation and effect and address a wider range of obstacles to
growth, such as excessive government intervention in markets, policies biased against
exports, and weak infrastructure (Duncan and Howell, 1992). Export promotion policies
and transportation projects designed to improve a country's long-term competitiveness in
international markets can both be considered part of structural adjustment, although
international financial institutions usually disapprove of export subsidies.
2. Deforestaton and forest degradation in lowland bolivia
The Bolivian Lowlands cover 684,000 square kilometers, and include the Departments of
Beni, Pando, and Santa Cruz, and parts of La Paz, Cochabamba, Chuquisaca, and Tarija
(see Fig. 1). The northern, generally humid, lowlands are in the Amazon Basin, while the
dryer lowlands of the south drain in the Rio Plata.

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Fig. 1.Lowland Bolivia.

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Historically, deforestation rates in the Lowlands were low. As of 1990, only 5.6% of the
original forested area in the Bolivian Amazon had been cleared for agriculture and other
purposes.2 During 1986–90, average annual deforestation in the Bolivian Amazon was
only 80,100 hectares, or 0.2% of the forested area (CUMAT, 1992). See Table 1.
Deforestation however is now increasing.

Table 1.Forest cover and deforestation in the Bolivian Amazon, 1985–90

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Santa Cruz, accounts for over half the lowland area, and now has an even higher, and
growing, proportion of its deforestation. Most deforestation in Santa Cruz has occurred in
deciduous lowland forest. Satellite images show that approximately 100,000 hectares of
forest were cleared annually in between mid-1992 and late 1994 (Morales, 1996). This
was 25% more than for 1989–92 (Morales, 1993) and about twice the estimate for 1986–
90 (CUMAT, 1992).3
Most deforestation in Santa Cruz is by large mechanized soybean and wheat farmers,
small agricultural colonists who practice mainly slash and burn rice and maize
cultivation, and large cattle ranchers. The mechanized farm sector has grown rapidly
since the mid-1980s, and now accounts for a majority of forest clearing. Most of this
growth has been in the area east of the Rio Grande river, known as the “expansion zone”
(Muñoz, 1995). Small agricultural colonists have expanded into moister forest areas
suitable for rice growing to the north and west of the city of Santa Cruz. Forest clearing
for pastures is concentrated in northeastern Santa Cruz.
Small farm production of coca and food crops in the Chapare is the source of most
deforestation in lowland Cochabamba. Coca is a labor-intensive and perennial crop,
which requires more than three times as much labor per hectare cultivated than rice
(Sanabria, 1993).4 Each family can cultivate no more than about one hectare of coca,
plus some food crops, without hired labor. As a result, coca farmers clear less land
annually on average than do annual crop producers. The environmental costs in the
Chapare are high, however, because clearing involves largely humid montane and cloud
forests, which are unusually rich in biodiversity, compared to the lower and drier areas.
In Beni, Pando, and lowland La Paz, most forest clearing has been by ranchers, small-
scale agricultural colonists, and former rubber tappers, who turned to shifting cultivation
after rubber prices declined sharply in 1985.
Selective logging by medium and large Bolivian timber companies has biologically and
economically degraded large additional areas of lowland forests. Over twenty million
hectares were in forest concessions in the mid-1990s (López, 1993). More recently, this
has dropped to around six million hectares, due to new tax policies that replaced volume-
based taxes on logs with area-based taxes on the size of concessions. Most exports come
from a small number of species, including mahogany (Swietenia macrophylla), oak
(Amburana cearensis), cedar (Cedrela spp.), morado (Macherium sp.), tarara
(Centrolobium spp.) and tajibo (Tebubuia sp.). Logging in Bolivia is highly selective, and
loggers only extract a small volume of timber per hectare compared to most other parts of
the world.
3. Structural adjustment in bolivia
Bolivia suffered a severe economic crisis in the first half of the 1980s, as a result of
overborrowing, poor performance of traditional mining and natural gas exports, political
instability, macroeconomic mismanagement, and severe drought. During this period,
Gross Domestic Product fell by 2.6% annually and exports by 5.5% annually (Anderson,
Constantino and Kishor, 1995). Inflation rose from less than 10% in the mid-1970s to
275% in 1983, and over 11,000% in 1985 (Laserna, 1994).
The Bolivian government responded to the crisis by implementing a far-reaching
structural adjustment program in August 1985. It partially liberalized foreign exchange
markets and eliminated multiple exchange rates, which led to a large devaluation of the
official exchange rate. It reduced public spending by suspending investment projects,
freezing government salaries, eliminating various subsidies, and cutting public
employment. It also liberalized domestic agricultural markets, lowered import tariffs to a
uniform 20%, removed interest rate controls, and raised real gasoline prices by 1000%.
The initial measures' main objective was financial stabilization. Over the next 10 years,
the government took additional measures to improve the competitiveness of Bolivia's
economy and exports. It established fiscal incentives to compensate exporters for the duty
paid on imported goods and made public services for exporters more efficient. It began
major road construction and improvement projects aimed at stimulating lowland
agricultural exports and offered low freight rates for export commodities on public
railroads. It also reduced tariffs from 20% to 10% (5% for capital goods), and
restructured the tax system to give increasing weight to consumption based taxes, such as
value-added taxes.5
With regard to land tenure, even before the SAPs, the government had begun to reduce its
support from small farm colonization schemes and provide more public lands and titles to
large commercial farmers instead. The SAPs reinforced that tendency and generated new
interest in liberalizing land markets and improving tenure security for large farmers. This
led to the passage, in 1996, of a new agrarian reform law that legalized land markets in
the Bolivian lowlands and limited the government's ability to reclaim public lands that
large landholders had obtained by illegal or semi-legal means.
The SAPs produced mixed macroeconomic results. They succeeded in reducing
hyperinflation to under 15% in 1987 and most of the period since. GNP declined in 1986,
when international tin and hydrocarbon prices fell, then grew 2.5% per year during 1987–
89, and over 4% on average in the first half of the 1990s. Goods and service exports rose
from $721 million in 1985 to $1,183 million in 1994 (World Bank, 1996). Nevertheless,
poverty has remained constant or grown.
4. Poverty and migration to the agricultural frontier
This section focuses on SAPs' impact on poverty and migration to agricultural frontier
regions. As noted previously, studies from other countries have claimed that SAPs
increase poverty, and families migrate to agricultural frontier areas as a result.
The SAPs made tin miners poorer directly. The government's desire to reduce public
employment, combined with a 50% decline in international tin prices in 1986, led the
state-owned mining company COMIBOL to lay off 23,000 of its 30,000 workers
(Chávez, 1992). This affected not only the miners themselves, but also thousands of
others whose livelihoods depended indirectly on the mines.
The SAPs also apparently aggravated rural poverty in traditional highland areas, although
this is less certain. Many authors note that the terms of trade for foodstuffs produced by
small farmers deteriorated during the first four years of the SAPs, compared to the
previous three years (COTESU/MACA/ILDIS, 1990; Godoy, R. and De Franco, M.
(1991) High inflation and Bolivian agriculture. Journal of Latin American Studies 24 61–
37Godoy and De Franco, 1991; Chávez, 1992; Morales, 1991; Morales, 1992).6 These
authors claim the SAPs: reduced effective protection for agricultural products; eliminated
the hoarding of food as a hedge against inflation, which reduced demand for food; and
induced an economic recession, which further lowered demand. In addition, they say
SAPs reduced small farmers' access to agricultural credit and increased the fuel prices
and interest rates they paid.
Still, the evidence that the SAPs increased poverty among highland farmers remains
inconclusive for several reasons. First, while real food prices were lower on average in
the years following the SAPs than during the crisis, they were not much different from
those of the 1970s. Second, the high food prices during the crisis were partially caused by
1983 drought, which greatly reduced national food supply, and not just by
macroeconomic policies. Third, during the drought, producers received high prices, but
many had little food to sell.
In any case, emigration from many poor rural high land regions rose after the 1970s,
partially as a result of growing poverty in those areas — related to the loss of mining
jobs, declining terms of trade, the drought, and ecological degradation. Census figures
show net migration out of traditional mining and agricultural provinces in Potosi, Oruro,
and La Paz increased greatly during 1976–92. Similarly, the 1988 National Survey of
Population and Housing found twice the level of net emigration from Potosi and Oruro in
1983–88 than in 1971–76 (Presidencia de la República, 1992).
With regard to urban poverty, the SAPs initially reduced it, but caused it to rise in the
medium term. Between mid-1985 and 1987, most urban groups' real incomes rose as
lower inflation allowed families to recover lost purchasing power (Eguino, 1993). This
initial improvement, however, was soon outweighed by the negative effect of stagnating
employment opportunities. Public sector employment dropped sharply with the SAPs,
while private job creation was minimal. The percentage of the urban labor force working
in the public sector fell from 11.3% in 1985 to 8.7% in 1989 and the proportion working
in private formal sector jobs was constant (Laserna, 1994). During 1987–91, most urban
families' incomes declined, as growth in the supply of labor outstripped demand (Eguino,
1993).
Eguino's analysis goes only to 1991, but a recent World Bank study found slightly higher
urban poverty and extreme urban poverty in 1993 than in 1986 or 1989 (World Bank,
1996). According to that study, most of the increase was due to the arrival in urban areas
of poor migrants from highland agricultural and mining regions, not changes in the
incomes of long-term urban residents.
Despite growing urban poverty, most migrants move to the largest cities.7 Almost three
times more people migrated from highland and valley provinces to Bolivia's four largest
cities during 1987–92 than to rural or semi-rural lowland provinces. Among migrants to
the lowlands, almost half went to the city of Santa Cruz, rather than agricultural frontier
areas or small towns (see Table 2).

Table 2.Destination of inter-provincial migrants from highland and valley provinces,

1987–92
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Among migrants who did go to predominantly rural lowland provinces, most went to the
coca-growing region of the Chapare, whose population grew from 83,000 in 1981 to
150,000 in 1991 (Laserna, 1993). Initially, these migrants came from poor rural provinces
in the higher areas of Cochabamba, but after 1985 there was a major influx from Potosi,
and, to a lesser extent, Oruro, Chuquisaca, and Cochabamba city (Painter, 1995). The
percentage of Bolivia's agricultural frontier residents living in the Chapare rose from 20%
in the mid-1970s to 40% in 1992 (Muñoz, 1995; Weil and Weil, 1993).
Since small farmers in the Chapare tended to have substantially higher incomes than in
other colonization areas, it is not surprising that it attracted most rural-to-rural migrants.
Coca production not only provides higher incomes but also a regular source of cash, since
the leaves can be harvested almost continuously (Laserna, 1993). Migration to the
Chapare, however, caused much lower rates of deforestation per migrant than migration
to traditional colonization areas, since coca is a very labor-intensive perennial crop and
the coca boom generated large amounts of local off-farm employment.
Even though emigration from poor mining districts and some highland farm areas
increased after the SAPs, migration to agricultural frontier areas did not, except for the
brief surge of migrants to the Chapare. Migration to the Chapare peaked in the late 1980s,
and then declined, as a result of greater government control over coca production, lower
coca prices, and more limited availability of unclaimed land (Laserna, 1993; Painter,
1995). Migration to the Santa Cruz colonization areas actually fell following the SAPs. A
survey of migrants to seven main colonization areas in Santa Cruz found that fewer
people arrived during the five years following 1985 than during the previous five years
(Labadie, 1993). Migration to frontier areas in lowland La Paz and Beni increased after
1985 thanks to improved access, but was too small to affect the general trend.
A number of factors limited migration to the non-coca agricultural frontier areas in the
post-SAP period, some related to the SAPs, others not. Public spending on new
agricultural settlements fell to almost zero, while the amount of public lands granted to
large farmers increased sharply. Together this made it more difficult for potential
migrants to get access to land. Real rice and coca prices were less attractive (Laserna,
1993; Thiele, 1993). Many newly impoverished families from mining districts had little
farming experience or desire to farm. Large cotton and sugar cane farms near Santa Cruz
city, which previously offered highland families the opportunity for temporary
employment before moving to colonization areas provided fewer jobs than in the early
1970s (Cámara Agropecuario del Oriente, 1996).
In summary, the SAPs probably increased emigration from certain traditional mining and
agricultural areas. Most migrants, however, went to cities or coca-producing areas. The
SAPs did not lead to higher migration to non-coca producing agricultural frontier areas.
Thus, outside the Chapare, SAPs did not induce poor families in the highlands and
valleys to move to forested areas and clear new land, and even in the Chapare the
phenomenon was short lived.
5. The SAPs' effect on forest clearing by small lowland farmers
This section analyzes the SAPs' impact on the average amount of forest cleared for food
crops by each small lowland farmer. It focuses mostly on rice, since this is the most
representative crop on small lowland farms. We conclude that long-term structural trends
within the lowland small farm sector, not SAPs, caused most of the observed changes.
Survey data compiled by Thiele (1993) on agricultural colonists in Santa Cruz from six
settlements from different years during 1966–89, show the mean crop area under slash
and burn production in each settlement tended to initially grow and then decline.
Subsequent surveys confirm that the decline continued at least until 1992 (Abrego, El
Hage and Claure, 1990; Soria, 1996). See Table 3.

Table 3.The mean crop area under slash and burn production in selected small farm
colonization settlements in Santa Cruz, Bolivia, 1966–92 (hectares)

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Thiele (1993) gives three explanations for the initial increases in mean crop area. First,
most farms still had forested land that had not been farmed, that could produce high
yields during the first years under cultivation. Second, until 1975, prevailing rice prices
and wage rates made it profitable to hire wage labor to expand annual crop production.
Third, road improvements reduced the cost of transporting foodstuffs to market.
He attributes the subsequent decline in average area to a reversal in the first two factors.
Once all the land available for farming had been cleared, farmers began to face greater
weed infestation and nutrient depletion problems. Although prices fluctuated from year to
year, depending on weather conditions, real rice prices tended to fall after 1974, making
it less attractive to hire labor to grow rice. This decline in real rice prices was not caused
by macroeconomic policies, but rather by the saturation of the domestic rice market, as
output steadily expanded, while high transportation and production costs kept the country
from exporting rice.
Any possible contribution by the SAPs to reducing the average area in slash and burn
agriculture was small. During the crisis, the Bolivian government provided around
$700,000 per year in subsidies for rice and maize production in Santa Cruz through credit
programs and preferential access to foreign exchange at official rates (Thiele and
Farrington, 1988). These subsidies were eliminated under the SAPs, but only a small
percentage of the subsidies had gone for slash and burn agriculture anyway. Moreover,
the downward trend in the average amount of land each farm devoted to slash and burn
production was already firmly established by the time that the government implemented
the SAPs.
The national statistics on rice show that the area planted, most of which is in the
lowlands, fell in 1981 and 1982 and then increased dramatically to its highest level ever
in the last two years of the crisis. It went from 43,459 hectares in 1983 to 113,944
hectares in 1984 and 112,792 hectares in 1985 (UDAPE, 1995). See Table 4. In the first
period, severe flooding simultaneously reduced rice planting and raised real rice price to
unprecedented levels. When the weather subsequently improved in 1984, farmers planted
very large areas of rice to take advantage of the high prices—none of which apparently
had much to do with the crisis.

Table 4.Bolivian Rice Area and Prices, 1981–94 (000 hectares and Santa Cruz wholesale
prices in constant 1991 dollars)

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After 1985, rice area fell and then stagnated for three or four years and then slowly
increased (see Table 4). The return to normal prices and the reduction in subsidized credit
and preferential access to foreign exchange for more commercial rice producers probably
explains the decline and stagnation.
Greater mechanized production by large farmers and the more wealthy small farmers,
stimulated by technological changes and the introduction of new production systems
generated the subsequent increase, despite a continuing downward trend in rice prices.
Changes in weed control, harvest, and post-harvest technologies and rice varieties and the
possibility of planting rice in rotation with soybeans, made mechanized rice production
more profitable after the mid-1980s (Thiele, 1992). This, in turn, helped raise the portion
of rice produced by larger commercial farmers from 10% during 1972–81 to 30% in
1984–91 (Zeballos, 1993).
Little evidence suggests that the expansion of mechanized rice production has been a
major cause of deforestation. Since the mechanized systems do not require farmers to
leave large areas in fallow, some of the increase in mechanized production probably came
at the expense of fallow areas, rather than forests. Other mechanized rice production
areas are on land previously cultivated with cotton and sugar. Where mechanized rice is
grown in rotation with soybeans the major stimulus for forest clearing has come from the
high profitability of producing soybeans, not rice.
In summary, SAPs apparently did not have a major impact on the average amount of
forest cleared by small lowland farmers for food crop production.
6. Expansion of export agriculture and logging
The main cause of deforestation in recent years has been the rapid growth of mechanized
soybean production, which expanded by 400,000 hectares during 1984–96 (see Table 5).
Yearly forest clearing for large-scale mechanized agriculture as a whole went from under
13,000 hectares during 1980–85 to 30,000 hectares during 1986–91, and over 115,000
hectares in 1994, with most of the growth due to soybeans (Davies, 1993; Morales, 1996;
Vilar and Kupfer, 1995).8 Large commercial farmers also expanded their sunflower,
wheat, and rice production during this period, but primarily as winter rotation crops for
lands planted with soybeans in the summer.

Table 5.Evolution of soybean area and exports and producer prices, 1984–96

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During the economic crisis, government policies discriminated against soybean
production, by fixing producer prices well below world prices (on the basis of
calculations that used overvalued official exchange rates) and by providing scarce foreign
exchange at the official rate to import soybean oil from abroad.9 As a result, during
1981–84, real producer prices declined by 47%, even though world prices increased by
8% (Thiele, 1985).
The government partially compensated soybean producers for these policies by providing
them credit at highly negative real interest rates and access to foreign exchange at official
rates to purchase inputs and machinery. During 1982–85, this subsidy amounted to an
average of $1.5 million yearly, or $1,083 for each of the 1400 soybean producers of Santa
Cruz.10 Nevertheless, these subsidies were too small to outweigh the negative
consequences of overvalued exchange rates, price controls, and subsidized imports.
Consequently, soybean farmers had lower real incomes in 1982–85 than in 1978–81
(Thiele and Farrington, 1988).
After 1985, the removal of price controls on soybeans, devaluation, fiscal incentives for
exporters, road construction, and low export taxes favored soybean production and more
than compensated for the loss of credit and foreign exchange subsidies related to the
SAPs. Expanding soybean exports was at the heart of the World Bank's strategy for
improving Bolivia's foreign exchange situation (Morawetz, 1986), and without these
policies no soybean boom would have been possible.
Thanks to the devaluation and the elimination of price controls, Bolivian soybean
producers received 62% of the world price for their soybeans in 1986, compared to 38%
in 1984 (CAO, 1996).
During 1986–91, the Bolivian government expanded the road network in the Santa Cruz
expansion zone from 430 kilometers to 650 kilometers to promote soybean production
and from 1989 onward a World Bank “Eastern Lowlands” project dedicated substantial
funds to improving existing roads (Davies, 1993).11
Because the SAPs introduced a tax structure weighted heavily toward indirect taxes on
consumers, rather than taxes on production and incomes, Bolivian soybean farmers pay
an average of $20.65 per metric ton less in taxes than their Brazilian counterparts
(Monitor Company, 1994).
Immediately after the 1985 devaluation and removal of price controls, soybean
production rose and the country quickly went from being a net importer of soybean
products to a net exporter. If it had not been for unusually low international soybean
prices in 1986 and 1987, production probably would have increased even more. When
world prices rose in 1988 and 1989, and Bolivian producers continued receiving 60–70%
of the world price, soybean acreage more than doubled.
Although high world soybean prices helped stimulate soybean production in 1988, on
average, real world prices were lower during 1986–96, than during the previous decade.
This implies that had world soybean prices maintained their preadjustment levels after the
government implemented the SAPs the recent soybean boom probably would have been
even stronger.12
In addition to the SAPs, per se, preferential access to the Andean market, low land prices,
and technological change have also contributed to soybean expansion. Most Bolivian
soybean and soybean oil exports go to Colombia and Peru where Bolivia enjoys a $37 per
metric ton tariff advantage over its Brazilian competitors, because of its membership in
the Andean Common Market (Monitor Company, 1994). Land prices in Santa Cruz are
several times lower than similar quality land in Brazil, and this has led to an influx of
large Brazilian farmers since 1992 (Muñoz, 1995). The testing and release of Brazilian
soybean varieties appropriate for Santa Cruz by the public agricultural research center,
CIAT, helped generate a slow but steady rise in soybean yields, which improved the
crop's profitability (Bojanic and Echeverría, 1990). But these factors almost certainly
would have been insufficient to generate the recent soybean boom, had the government
continued to depress domestic soybean prices and failed to improve the regional road
network.
Structural adjustment has also led to greater forest degradation by promoting timber
exports from unmanaged forests. After a period of sharp decline during the economic
crisis, legal sawn wood exports rose from $23 million in 1986 to $79 million in 1996 (see
Table 6). None of these exports came from sustainably managed forests. SAPs that
favored these exports included exchange rate devaluation, fiscal incentives, subsidized
railroad rates, public road construction, and anti-inflationary monetary policies designed
to reduce inflation.

Table 6.Volume and value of Bolivian wood exports, 1980–96

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Based on an econometric model of Bolivia's sawn wood exports during 1970–91,
Anderson, Constantino and Kishor (1995) conclude that 25% of the increase in sawn
wood exports during 1984–91 was due to the 1985 devaluation. Improved world timber
prices were responsible for an additional 25%.
The authors explain the remaining 50% of official export growth by the fact that
exporters no longer had an incentive to illegally export logs and not report those exports
once the gap between the official and parallel exchange rates was eliminated in 1985. To
estimate the size of this effect, they assume the amount of illegal logging is directly
proportional to the difference between the official and parallel exchange rates. That
allows them to use the difference between the two as a proxy for illegal logging in their
model and incorporate it as an explanatory variable. It is also possible, however, that
since the economic crisis was the only period when the official and parallel exchange
rates differed substantially, this variable also reflects the economic and political
instability that characterized the crisis, which might also have kept timber exports
unusually low. Thus, part of the growth in reported exports that Anderson et al. attribute
to a decline in illegal logging may have been due to greater stability promoted by the
SAPs.
During 1991–94, sawn wood exports rose an additional 40%. This increase can also be
partially attributed to the SAPs since it almost certainly would not have occurred or been
so large had official exchange rates remained highly overvalued or if hyperinflation had
continued.
In summary, the currency devaluations, restoration of economic stability, and road
construction associated with the SAPs, greatly increased forest clearing for soybean
production in Santa Cruz and timber exports from unmanaged forests. Other SAP-related
policies such as tax rebates for exporters, tenure policies that favored large commercial
producers and a tax structure weighted toward indirect taxes on consumers worked in the
same direction.
7. The costs and benefits of soybean and timber expansion
The previous section demonstrated that SAPs promoted forest clearing for soybean
production and logging in unmanaged forests. This section examines some of the costs
and benefits that soybean and logging expansion produced.
Davies and Abelson (1996), provide evidence showing that even using conservative price
and yield estimates, commercial soybean and maize production in Santa Cruz is
profitable, as its recent rapid expansion reflects. By the second year in operation, a 2000-
hectare farm can expect to generate $50,403 in profits. Even when they used a 10%
discount rate, they found a hectare of land dedicated to mechanized soybean/maize
production in 1992 had a Net Present Value of $1500.
In contrast, the environmental costs that result from these land uses are apparently much
smaller, although Davies and Abelson were unable to quantify several major costs, such
as lost biodiversity and soil erosion.13 They calculate that the reduction in carbon
sequestration produced by land clearing in these systems generates a one-time cost of
$160–190 per hectare.
Most soybeans are grown on land with relatively fertile soils and adequate precipitation,
deemed appropriate for this use by a recent comprehensive land planning exercise
(CORDECRUZ/Consorcio IP/CES/KWC, 1994). On the other hand, some soybeans have
been sown in areas that have poorer and more fragile soils, and/or climatic conditions less
favorable for soybeans. In those areas forest clearing for soybeans is harder to justify.
A related concern is that while soybean farming in Santa Cruz is clearly profitable in the
short-run, it may not be sustainable in the long run. Davies and Abelson conclude that
after approximately ten years yields tend to decline and operating costs rise, and that
eventually much of the soybean land might end up as low-productivity pastures (1996).
With regards to timber, again the short-term economic benefits have been quite
substantial, generating almost $80 million in export earnings in 1994 (BCB, 1997).
Nevertheless, a majority of sawn wood exports come from mahogany trees, and many
authors doubt this species can be sustainably logged on a commercial basis (Jiménez et
al., 1996; Snook, 1994).
Logging mahogany or similar timber species on a large-scale for 10 or 20 years as if they
were nonrenewable resources can hardly be the basis for long-term economic growth.
Instead, such an approach simply postpones efforts to implement sustainable
management of timber species which regenerate more easily and grow faster and hinders
the possibility of using mahogany logging as a sustainable complement to small farmers'
incomes. Bolivia has already greatly depleted its mahogany reserves and similar
problems may be emerging with several other species (CORDECRUZ/Consorcio
IP/CES/KWP, 1994). Indiscriminate logging has led to a loss of genetic resources needed
for breeding programs aimed at growing mahogany in plantations. Local mammal, bird,
and fish biodiversity have decreased as the result of logging disturbances, the use of
short-lived bridges made of wood that is toxic to fish, and hunting by logging crews
(Davies and Abelson, 1996; López, 1993).
Constructing timber roads for selective logging provides small farmers access to large
areas of land with high timber potential but low agricultural value. Historically, once
timber access roads have been opened slash and burn farmers have frequently followed
(Royden and Wennergren, 1973).
Estimating the costs of these problems is difficult and no attempt has ever been made to
do so for Bolivia.
There are also important equity issues regarding the distribution of the costs and the
benefits associated with forest clearing for large-scale export agriculture and timber
production. Most benefits from forest clearing for soybeans accrue to a few hundred
soybean producers with more than 50 hectares of soybeans each, and a handful of
processors and exporters (Vilar and Kupfer, 1995). Eighty percent of soybean producers
are not Bolivians, but rather Mennonite and Japanese immigrants or Brazilians, and in
1994–95 these non-Bolivians controlled 65% of the total soybean area (Muñoz, 1995).
Soybean production directly generates less than 10,000 jobs, provides little tax revenue
and has few backward linkages.14 Similarly, only 173 companies had timber concessions
in 1994, and logging provided only 16,000 jobs (Cámara Nacional Forestal, 1995).
Meanwhile, the entire Bolivian and world population suffers from the loss of
biodiversity, carbon sequestration, and wildlife caused by the expansion of soybeans and
timber. The Bolivian government loses potential timber royalties from the burning of
valuable wood and logging-related damage to unlogged trees. While individual
landowners bear the cost of degraded soils, these owners often received their land from
the government at little cost, so society has incurred a large opportunity cost in its
allocation of the land.
In summary, available information does not permit us to accurately assess whether the
economic and social benefits of soybean and timber expansion outweigh the
environmental costs or the opportunity costs associated with not distributing resources
more equitably. Nevertheless, the evidence currently available suggests that the
expansion provided substantial short-term economic benefits, with a cost to the
environment that was probably lower yet still significant. On the other hand, the overall
distribution of the economic, social, and environmental benefits and costs was inequitable
and doubts remain regarding whether the economic benefits will prove sustainable.
8. Possible alternatives
In addition to considering the relative importance of the economic, social, and
environmental benefits associated with the SAPs' role in promoting soybean and timber
expansion versus the costs, it is also important to examine whether any better alternatives
might have existed. This section address that question.
Among the policies we believe might have avoided some of the problems aggravated by
the SAPs and produced more sustainable, equitable, and environmentally sound
economic growth are the following: (a) land tenure and forest resource policies favoring
small farmers and foresters; (b) fiscal, commercial, and technology policies designed to
shift Bolivia's logging activities toward more sustainable sources of timber; (c) greater
support for research and extension to promote natural resource management technologies;
(d) participatory (but normative) land use planning; and (e) international payments to
Bolivia for the environmental services provided by its forests.
Large areas of the Bolivian lowlands are either publicly-owned or formerly publicly-
owned land that large farmers and ranchers obtained through illegal or semi-legal means.
Thus, the Bolivian government could have promoted a more equitable distribution of land
with a larger role for small farmers, without having to expropriate private lands obtained
legally by their owners. Small farmers would probably have grown some soybeans,
wheat, and sunflowers, just as the large farmers have done, but with a more complex
mosaic of land uses involving diverse cropping patterns and forested areas and less heavy
machinery. This would have favored soil conservation, the presence of seed carriers,
pollinators, and natural predators of pests, and the continued availability of forest
resources for local use.
Similarly, rather than leasing 20 million hectares of forest to 173 concessions, the
government could have promoted community forestry. This might have provided greater
economic and social benefits, while avoiding encroachment for agriculture, using animal
traction or lighter machinery, and making greater use of fallen trees and other wood often
discarded by large timber companies.
To promote the use of species which have better natural regeneration than mahogany,
appropriate measures might have included: fiscal incentives for exporting products made
with those species and for purchasing machinery designed to process them; a royalty
system based on area rather than timber volume; a moratorium on mahogany logging;
and research on the use and markets for nontraditional species. Support for reduced
impact logging, proper timber road design and construction, strict control of hunting by
logging crews, and maintaining seed trees could also make timber production more
sustainable.
Greater support for research and extension focusing on agricultural sustainability could
have reduced some of the environmental costs of soybean production. Most soils used for
soybeans, for example, while fertile, are fragile. Sustainable production requires
windbreaks, proper soil preparation practices and conservation measures to limit soil
compaction and wind erosion, but these are often lacking (Barber, 1995).
Finally, international payments to Bolivia for the environmental services offered by its
forests may be the only viable means to internalize the negative crossborder externalities
arising from the impact of forest clearing on global warming and biodiversity. Preferably,
these payments should go to small landholders for maintaining land that is marginal for
agriculture as forests.
None of these alternatives were seriously considered when the SAPs were initially
implemented, although a few steps have been taken since. During the late 1980s, the
World Bank and the Overseas Development Administration began supporting
agroforestry and soil conservation research and extension activities to ameliorate effects
of land clearing in the expansion zone (Baudoin et al., 1995). A few years later, the
Government of Santa Cruz, with German support, formulated a plan to regulate land use
in the department (PLUS), based on technical information and negotiations with different
stakeholders. Most recently, in 1996, Bolivia passed a forestry law that replaced volume
with area based taxes, has new provisions making certain public forests available for
community groups, and requires logging companies to design and implement plans to
manage their forests sustainably. The United States and Bolivia have also taken initial
steps toward establishing joint implementation projects through which American utility
companies will compensate Bolivian entities for carbon sequestered in certain areas as a
result of their efforts. But even in these four cases just mentioned, to date, effective
implementation on the ground has been modest.
What has been lacking, both during the initial SAP period and since, has been political
will on the part of both international agencies and the Bolivian government to carry out
policies such as those mentioned above. No powerful domestic political constituencies
have been interested in promoting these policies. In those cases where increasing global
concern for the environment has led policy-makers to officially adopt them, despite the
lack of powerful interest groups that support them, the results have been lack luster, due
to limited public pressure to ensure effective implementation.
In summary, alternatives policies existed that could have reduced the environmental and
social costs of the SAPs related to soybean and timber expansion while preserving many
of the economic benefits. These policies were never seriously considered when the SAPs
were designed, however, because no powerful political constituencies lobbied for them.
9. Conclusions
SAPs in Bolivia did not promote large-scale migration to the agricultural frontier or
greater deforestation by small farmers, but they did increase forest clearing and
degradation related to soybean and timber exports. Promoting these exports had
substantial short-term economic benefits, but might have produced greater long-term
economic and social benefits and fewer environmental costs had it been accompanied by
measures designed to make land and forest ownership more equitable, promote the use of
less environmentally degrading technologies, avoid agricultural expansion onto marginal
lands, encourage reliance on timber species that can be sustainably managed more easily
than mahogany, and compensate Bolivia for the environmental services it provides to the
international community. More effort could also have gone into developing the capacity
to anticipate the negative environmental and social impacts of Bolivia's macroeconomic
policies before they occurred.
The Bolivian case raises important questions regarding the capacity of developing
country governments to implement macroeconomic and environmental policies. In
theory, the most appropriate way to address undesirable environmental effects of SAPs
might be through environmental policies, rather than adjusting the economic policies
themselves. In practice, however, developing countries typically lack the political will
and institutional capacity to implement such environmental policies, so the undesirable
effects continue.
Compared to many other tropical countries, the environmental problems of Bolivia's
lowlands are still relatively small. Large forests remain. Forest clearing, while growing,
continues to be low by international standards, and much of it has been on soils suitable
for agriculture. Forest degradation from logging has also been much more limited than in
certain Asian and African countries.
Many of the arguments regarding how SAPs have affected forests in Bolivia, however,
probably also apply to countries with little remaining forest, high rates of conversion of
forest into low-productivity pastures and crops, and heavy direct and indirect damage
from logging. Unless environmental issues receive high priority when designing both
macroeconomic and sectoral policies in these countries the potential negative
consequences could be even more severe.