1. 1 Mexican and German Communal Forestry: An Accountability Framework for Comparing Governance Camille Antinori, Visiting Economist, University of California at Berkeley, Department of Agricultural and Resource Economics Chantal Ruppert, Albert-Ludwigs-Universität Freiburg Germany, Institute of Forestry Economics

2. 2 Goals of Research 1.Define and compare common property forestry in each country 2.Show that, although large differences exist, each can learn from the other because of: Shared issues of management accountability and accessing expertise Both have system of collective action at the local level Both share issues of controlling their managers and accessing expertise 3.Developing a framework to compare governance patterns an the base of agency theory and transaction cost economics Result: Fruitful insights for each country emphasizing control mechanisms and merging responsibilities among the actors

3. 3 What is “Common Property Forestry” Mexico: –Agrarian sector: ejidos / comunidades –Ag land: individual use –Forest land: common use –Since 40’s: policies of closing then opening local access to forest for commercialization Germany: –Forest owned by municipalities –Post WWII – state consolidated both in East and West –Post-”unification”: devolution to municipal control

4. 4 Mexican and German Communal Forests Mexico: –About 60 million ha of forest –60-80% (37m ha. in one estimate) are “communal” –“Megadiversity country” in climate, and tree species Germany: –About 11m ha of forest –20% (2m ha) are “communal” –Moderate climate, and moderate tree diversity

5. 5 Goals in Forestry Management Mexico: –Income –Jobs –Environmental services, reduce deforestation Germany: –Recreation –Conservation –Self-financing as a minimum requirement / income

6. 6 Shared issues: Need of…... Access to knowledge of technical and business management skills for forestry... Accountability of both internal and external actors …Greater scope to implement transparency and control measures to carry out community-motivated management objectives

7. 7 Comparing governance structures of community forest management We look for balance of decision-making powers and suggest: The oversight of measurement / accountability measures has big affects on the ability of organization, to invest and to manage. That recent institutional innovations in each country are exactly in response to this need but have to be enhanced.

8. 8 Political-Economic System Green=Community; Yellow=State; Blue=Private Example: German Forestry Management Mayor/council Municipality citizens State Forest Office State / municipality / private workers State Managers

9. 9 Decision Monitors: Ratify decisions Monitor decisions Decision Managers: Generate proposals Implement decisions Owners: Residual Risk Bearing Actors in Productive Organization

10. 10 Decision Monitors: GA JV Advisory councils NGOs Semarnat Profepa Decision Managers: Foresters CBC General manager Jefe de Monte/Patio Owners: Community members Mexican Agrarian Communities

11. 11 Monitors: State forestry office Mayor/Council Forest Council Municipal Supervision Auditors Certifiers Managers: State municipal official private manager private ranger Owners: Municipality German Municipalities

12. 12 Ideas from Agency Theory Internal control e.g. for in-house management, special forest technical advisory board External control e.g. independent controller Nonfinancial control by agents –Agent signaling –Agent securities e.g. contract arrangements and hands-tying like reputation Incentive systems –“Hard” incentives e.g. benchmarking circles –“Soft” incentives e.g. trust and value orientation

13. 13 In forestry, organizing forestry management and timber operations can take the forms of 1) Market (e.g. private company) leading to a separation of roles e.g. hiring a private company to manage a non divers forest 2) Hierarchy (e.g. community-managed operations), leading to a greater combination of roles e.g. vertical integration in Mexico 3) Cooperatives/associations, leading to hybrid of separating and combining roles e.g. special purpose association in Germany Ideas from Transaction Costs Economics

14. 14 Experience from “Field Work”: Different Patterns Why do German municipalities open their doors to private companies for management? Respectively Why don't we see this in Mexico?

15. 15 Mutual lessons: Example for Germany Germany needs help with exploring ways to develop local involvement and break away from the state. Mexico offers to Germany a variety of decentralized contractual arrangements for their timber operations.

16. 16 Mutual lessons: Example for Mexico For Mexico external controls is still necessary, as well as internal controls. Germany offers to Mexico ideas for external control like community benchmarking circles and stronger court systems, using certification system

17. 17 Conclusions Paper is motivated by a perceived need to systematize the many case study observations across disciplines to improve local accountability to improve management. We looked at where there are accountability weaknesses and strengths by comparing two different but similar cases. Our analysis suggests that the measurement and monitoring problem at various stages of decision making challenge the organisation for forestry.

18. 18 Thank you for your attention

19. 19 Both Theories highlight Moral Hazard Problem The organizational structure is chosen to minimize the costs of moral hazard and the costs of mechanisms to reduce it. In both theories, uncertainty gives rise to the measurement and monitoring problem and affects the organizational structure. Moral hazard is mitigated through the institutional environment for exchange and contractual safeguards.

20. 20 Possible institutional mechanisms - Germany Status quoIdeas with regard to theoryIdeas from status quo in Mexico Risk-bearing attitudes and ability municipality bears the whole risk  Better definition of goals and objectives of the production activity  Having at least one person with specific knowledge about forest in the council  Special contractual relation to reduce natural risk (e.g. leasing) but be aware of moral risk  General meetings among membership to discuss forestry matters  Outsourcing harvesting services (stumpage contracts) External control  state officials control the keeping of law and their control the management plan  State sponsored management plans  Certification company controls the keeping of the certification standards  accounting control by the public office  separating managing and controlling in the case of state management  Using benchmarking circles  Contracting the forest plan maker for controlling the observing the plan by the manager/ Contracting other external institution for this function  Contracts in more details for using the court, when the manager is breaking the contract  NGO involvement in some cases Internal control  Quantitative inventory  Cameralistic accounting system  Council, mayor and in some cases a special forest council with political members  Quanitative and qualitative inventory  double-entry accounting system  reporting system  advisory board with representatives for the different interests of the municipality / having at least one person with specific knowledge about forest in the municipal council  build reserves for the forest because of possible calamities  including citizens  General managers responsible for forestry only  Decisions more related to the citizens Hard Incentives  10 year contracts, without fixed goals and details  Neoclassical contracts with variation in length and details, special arrangement/ securities to reduce the risk  No officials so that the manager can be fired if he is not acting in the sense of the municipality Soft incentives  Education  “Waldgesinnung”  Reputation/ asking for other signals  Giving special securities fixed by contract  Same values (manager from inside the municipality)

21. 21 Possible institutional mechanisms - Mexico Mexico Status quoIdeas from theoryIdeas from status quo in Germany Risk-bearing attitudes and ability Formulation of objectives in General Assembly Self-financing Individually based government support Government forestry programs  Greater access to capital, technical knowledge, marketing and managerial expertise External controlSemarnat Profepa Unions  Market information clearing house  Contract enforcement  Trade assoc separate from production services  state officials control the keeping of law and their control the management plan  Benchmarking circles  Certification company controls the keeping of the certification standards Internal controlGeneral Assembly Jefe de Vigilancia Work groups  More advisory councils and general managers  Involvement of forester in community decisions  improved access to business expertise to create business plans and access loans  Accounting practices  More financial creativity to provide collateral for loan Hard IncentivesSome long-term contracts or relationships  Neoclassical contracts with variation in length and details, special arrangement/ securities to reduce the risk Soft incentivesManager from inside the community Reputation of contractors More training with focus on marketingTraining in sustainable practices

22. 22 Mexico: b/w 14*32’ and 32* 43’ lat N; 86 * 42’ and 118* 27’ long west Germany: b/w 47°- 55° lat N; 6°-15° long W

23. 23 Forests

24. 24 Uses

25. 25 Shared Issues Both economic and political organization combined into one governance system Challenges: –Germany: move to more local control –Mexico: enhancing local management Controlling managers is a question Accessing expertise