This paper evaluates the socioeconomic impacts and allocation effects of reforestation policies in Brazil. Reforestation is understood to be the activity of planting trees, regardless of purpose. Brazil introduced reforestation incentives in 1961 as native forest supplies became even more distant and costly. These incentives - tax exemptions, credits and input subsidies - were designed to make reforestation more profitable by reducing the typically high cost of planting new forests (Bacha, 1993). Boosted by these incentives, reforestation increased more than elevenfold, from 500 000 ha in 1964 to 5.9 million ha in 1984, at an annual geometric growth rate of 13 per cent. Minas Gerais and Sao Paulo states had the most active fiscal incentives programmes. However, the effectiveness of all such programmes was curtailed by problems such as credit diversion to other activities, projects being abandoned as the result of improper management or poor localization, capital loss due to late credit outlay in an inflationary economy, and income concentration following tax exemptions and subsidies that discriminated against small and medium land owners. The paper deals with the influence of fiscal incentives on the dynamics of the Brazilian reforestation programme, following with an analysis of the socioeconomic impacts of reforestation policies and finally commenting on the impacts of the Brazilian reforestation programme on the Amazon region.


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