A few steps forward, several steps back: Peru’s timber sector faces its “moment of truth”

What has been happening in Peru’s timber sector in recent years, for so long dominated by illegality, corruption and impunity? Arguably there are few better placed to answer that question than the Environmental Investigation Agency (EIA), which recently released a new report, “Moment of Truth: Promise or Peril for the Amazon as Peru confronts its illegal timber trade.”

“Moment of Truth” is packed with a whole range of extraordinary, explosive material. Here are the 10 things that most caught our attention:

1. There have been some “important advances” in combatting illegalities since the release of EIA’s last report in 2012. These include greater transparency tools developed by the forest inspections agency OSINFOR, new legislation giving greater powers to prosecutors, new legislation increasing jail-time, and several enforcement initiatives which prove that “enforcement is possible.”

2. These enforcement initiatives include busts on two gangs in central Peru supplying timber to two of Peru’s biggest exporters - Maderera Bozovich and IMK - but by far the most significant has been the trail-blazing crackdown on exports dubbed Operación Amazonas in 2014 and 2015. The focus was the Yacu Kallpa ship - the subject of recently released undercover film footage and a report, “Buyers in Good Faith”, released late last year by Global Witness. According to EIA, the Yacu Kallpa was responsible for roughly 25% of all Peruvian timber exports, yet in three out of its five 2015 shipments from the Amazon to the Dominican Republic, Mexico and the US an astonishing 86%, 90% and 96% of the timber that was inspected was illegal.

3. Despite such important advances, “little has changed” regarding the basic methods used to launder illegal timber. Operating plans and tree censuses are falsified, while transport permits to move timber from authorised harvest areas are used to move timber from unauthorised areas. Such documents “are not enough” to guarantee legal origin, EIA states, calling this the timber sector’s “open secret.”

4. Worse, in response to such advances, there has been a severe backlash by the timber sector. This has featured protests and strikes in major Amazon towns, rolling-back the new legislation on prosecutors’ powers, and high-level political lobbying in Mexico and the US as well as Peru itself, where EIA says the environmental prosecutors’ office has been “bullied” and accused of threatening a “trade promotion agreement” between Peru and the US.

In addition, the backlash has included moves to launder timber through different kinds of harvest areas where OSINFOR does not have mandate to make inspections, and claims that tracing timber from point-of-origin to export or commercialisation is “impossible.” EIA calls this a “startling turn-around after years of a nominal commitment to traceability”, and says it raises “serious questions about the heavy investments in traceability programs” made by donors like USAID and GIZ.

5. Arguably it is OSINFOR that has felt the backlash most severely. Its offices have been attacked - one set on fire with a Molotov cocktail - and its president fired and forced to flee to the US in fear of his life, while attempts have been made to muzzle it by putting it under the Agriculture Ministry or Environment Ministry. 

In addition, prosecutors have been curtailed in how they can use OSINFOR’s inspection reports, and proposals have been made to severely restrict how such inspections are planned and made. EIA calls all this “shooting the messenger” instead of “addressing the underlying problems” of the sector, and argues that the aim of “key elements” in government is to ensure that Operación Amazonas can never be replicated.

6. Playing a fundamental role in the backlash has been the national forest authority, SERFOR, which EIA accuses of repeatedly blocking or undermining reform. This includes defending the supposed legal origin of the Yacu Kallpa timber, trying to weaken the new legislation both before and after it came into force, and attempting to “destroy the existing tools for data collection and transparency” - “perhaps most troubling of all for the long-term health of Peru’s forest sector.”

Such attempts are various, according to EIA. They include modifying transport permits in general so unique tax identification numbers of harvest area owners or representatives aren’t required, and publicly promoting an interpretation of the law that transport permits issued by sawmills in particular do not need to identify the point-of-origin. In addition, SERFOR has blocked attempts to include the point-of-origin on Customs Merchandise Declarations, and apparently reduced export inspections at the port in Lima from over 900 in 2015 to 23 in 2016. No wonder that, like others involved with the timber sector, such as the Association of Exporters (ADEX) and the National Society of Industries (SNI), SERFOR has claimed traceability is “impossible.”

7. The largest export destination for Peruvian timber is China - but China has no legislation to stop illegal timber from entering its borders. In fact, EIA argues that the quantities exported there are increasing as the US, the EU, Australia and Japan step up enforcement. “Reform of Peru’s troubled timber sector now depends on decisive action by China,” EIA states in a companion briefing, Destination China.

8. Mexico is another major export destination for Peruvian timber - but it has no legislation stopping illegal products either. 73% of the Yacu Kallpa’s last shipment was destined for Mexico, and EIA alleges that a “high percentage” of the timber being sold there is illegal. The message is clear: “There is an urgent need for Mexico to pass legislation that restricts imports of illegally sourced timber, to safeguard not only national forest products from unfair competition but also indigenous and local communities seriously affected by illegal logging.”

9. Timber sector leader and major exporter Maderera Bozovich has claimed that the transport permits it has been providing to the authorities and its clients do not demonstrate point-of-origin because the “constant mixing of volumes of the same species with different [permits] from distinct geographic locations” makes that a “technical impossibility.” This is a similar claim to SERFOR, ADEX and the SNI - and makes a mockery of the US’s Lacey Act and other legislation in the EU, Australia and Japan, not to mention Bozovich’s own Responsible Purchasing Policy. EIA calls this “an exporter “coming clean”".

10. Exporters could be perversely exploiting one of the transparency tools developed by OSINFOR, known as SIGO, which classifies harvest areas as “red” if there is an “unacceptable risk” of some kind of illegality or “green” if the risk is “acceptable” or “tolerable.” EIA cites a recently-published analysis of 2015 export data by the Centre for International Environmental Law which reveals that countries where “no illegal timber trade prohibition, due diligence or due care standards exist” received much higher percentages of “red” timber than other countries. 

For example, while China’s and Mexico’s imports were 71% and 75% “red” respectively, the US’s and France’s were only 28% and 9% “red.” “It might be that exporters are beginning to use the tools at hand, such as SIGO, to selectively choose cleaner timber to send to Europe and U.S. buyers where due diligence or due care requirements exist,” EIA states, while at the same time sending “red” timber to countries like Mexico and China.

And the conclusion? EIA argues Peru’s timber sector now faces a “moment of truth” or “crossroads”: it can either block reform, blame messengers like OSINFOR and facilitate ongoing rampant illegalities, or build upon some of the recent institutional advances and enforcement successes. The report finishes with numerous recommendations to a variety of actors - including Peru’s government, the US and EU governments, Peruvian industry and importers in countries such as China and Mexico.