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Reconciling biodiversity conservation and economic development through property rights: an analysis of extractive reserves in the Brazilian Amazon

Timo Goeschl, Danilo Camargo Igliori

[January 2003]

Abstract: Extractive reserves have been touted as a novel approach to assigning property rights such that biodiversity conservation and economic development objectives can be reconciled. On this basis, the areas under this peculiar property rights regime are currently being expanded. Here, we analyse the merits of the development aspects of this claim by using a simple model of spatial competition between an extractive reserve and a plantation. We show that an extractive reserve is economically viable as a competitor in markets for existing extractive products only under very restrictive assumptions. Long-run viability is potentially feasible by either a continuous process of product discovery that allows monopolistic rents to be extracted over some period of time or by a shift in the role of extractive reserves from competitors of plantations in the output market to producers of inputs for plantations. We then study the current system of the property rights over the inputs and outputs of extractive reserves to assess how well they align with the various pathways to economic viability. The finding is that current property rights systems over inputs and outputs are efficient only with respect to competition in markets for existing extractive products. This has problematic implications for the development objectives pursued under this property rights structure.