Subsidies to promote tree plantations have been recently questioned because of potential negative social and environmental impact of the forestry industry. Quantitative evidence on the socioeconomic causal impacts of afforestation subsidies or of tree plantations is elusive, mainly due to data scarcity. We assess the overall impact of such a subsidy in Chile by using an original 20 years panel data set that includes small area estimates of poverty and relate it to the subsidy assignment at census-district scale. We show, with a battery of impact evaluation techniques, that forestry subsidies -on average- do, in fact, increase poverty. More specifically, using difference in difference with matching techniques, and instrumental variable approaches we show that there is an increment of about 2% in the poverty rate of treated (with subsidized tree plantations) localities. We also identify a causal mechanism by which tree plantations induce higher poverty, which is a negative effect on employment. Our research indicates the existence of negative welfare effects of the afforestation subsidy on local populations suggesting a reassessment of the distributional effects of the subsidy and the industry. Acknowledgement :