The Big Boom of Mahogany in Central and Southern America in the 20th Century, Its Lucrative Trading Opportunity Leading to Illegal Logging Operations and Later Protection Laws

The big boom of Mahogany in Central and southern America in the 20th century, its lucrative trading opportunity leading to illegal logging operations and later protection laws.

Carolina Sampayo

Susana Martinez

Mariana Posada

History of International Relations

Joshua John Henry Large

Juan Camilo Miranda Giraldo

Maria Teresa Uribe Jaramillo

Universidad EAFIT

Escuela de Administración

Departamento de Negocios Internacionales

March 21th of 2017

Introduction

The word mahogany was mainly known to have an aztec origin, for its discovery in Central America. The first mention of mahogany occurs after the discovery of America when conquerors started its usage mainly for ships equipment and repairs. Though mahogany has been of use and value for hundreds of years, it became a very popular commodity mostly in the eighteenth century. For this paper, we have selected south America more specifically speaking Brazil and Peru, besides from having plenty of natural resources the demand for this commodity increased; developing also black markets and protection laws.

Commodity chain and Lucrative trading opportunity

Mahogany tree was first observed in the early 18th century; when it also started its commercial activity, becoming the leading export in countries like Belize for at least 200 hundred years and also logged over in American tropics for another 400 years. (Steinberg, 2005).

In the early 18th century mahogany was introduced and supported commercially by The

Naval Stores Act of 1721, increasing Britain's demand of mahogany when the office drall of imports from america was demolished.

“The Naval Stores Act of 1721 was one of an early eighteenth-century measures intended to promote the production of naval stores in the North American colonies. Seven of These stores included mast and ship timber (principally softwoods), hemp, pitch, rosin, tar and iron. England lacked all these natural commodities, which were vital to the maintenance of the Royal Navy and the merchant marine, and historically had been supplied from Scandinavia and the Baltic states, collectively known as the territories of the 'Northern Crowns'.” (Bowett, 1994).

Most of mahogany was used for furniture and ships making, it was its adaptability that made mahogany supply’s rise. One of the factors that influenced its likeability was the size mahogany could provide, mainly used for the railways and infrastructure development; but it was also the fact that mahogany was cheaper than the others, that made it so wanted.

When it comes to Peru, there have been documents that shown mahogany’s first sightings in the 16th century, but it was not until the 18th century that mahogany was found in Central America and was taking as an exportable and profitable commodity. Mahogany logs are graded by quality, with 3 classes, and its price is based on the number of board feet. Almost all of mahogany is exported and marketed in the U.S , the biggest wood consumer;  the first class of mahogany is a highly valuable and demanded for its uses in war material, but it can only be sold to certain permitted consumers. (Hoy, 1946).

The so called “Age of mahogany” shows its thrive and evolvement since its start in the market in the 1720s till its main problem such a high demand lead in the 1780.

Political and Illegal operations

Over time, the care for planet Earth and the natural resources that we take from it, has gain importance. Not only conscience has grown on the world’s population but it has reached to governmental leaders and head of states. Hence, different nations have established policies to protect natural resources like mahogany. By establishing these laws the price of these resources rise and it appears the risk of imprisonment for the suppliers, causing that the demand decrease. But, at the same time, as these resources become part of the black market, smugglers don’t pay taxes, evade quality control expenses and certain regulatory policies; creating a great profit. One of these cases can be the endangered tree specie the Big Leaf Mahogany tree (Chimeli, A., & Boyd, R., 2010). With an average price of $1.900 per cubic metre, it can go up to $100.000 when elaborated as a luxury good making it be a very desirable good in the market, able to create a very high profit for its merchants (Youatt, A., & Cmar, T. (2009).

In Brazil, the government established certain regulations to decrease as much as possible the felling of mahogany trees. Its main exports were to the European Union and the United States, we can notice in figure 2 how was Brazilian mahogany exports until the prohibition.

[pic 1]

Chimeli, A.B. & Boyd, R. G. (2010). Prohibition and the Supply of Brazilian Mahogany. Land Economics, 86(1), 191-208. Retrieved from http://ezproxy.eafit.edu.co:2111/stable/27759725

In 2001 they prohibited the cutting, transportation, national and international trading of mahogany, but before that, every logged tree must had a government certificate of the forest management plan. Also, an export quota of 150,000m2 and gradually was decreased across the years (65,000m2 and then 30,000m2)(Chimeli, A., & Boyd, R., 2010). Even though mahogany prohibition, exporters use to smuggle it as a different specie. Thus, as the smuggler follow the whole export procedure, all his export documentation will be completed making it “legal” for international business (Chimeli, A., & Boyd, R., 2010).

When countries such as Brazil and Peru establish certain regulatory or prohibition laws against mahogany's logging, the illegal logging of such commodity increases exponentially. In the search of mahogany trees, loggers enter protected areas. With the invasion of these reserves in Peru, loggers “ [...] destroy the forest, decimated wildlife population, and threatened the survival of the last few hundred families of Mascho Piro, Yora, Matsigenka, and Amahuaca, nomadic indigenous groups living in voluntary isolation” (Youatt, A., & Cmar, T.,2009).

 Also, women, indigenous groups, children and poor people suffer of different ways of forced labour in the logging of mahogany. The International Labour Organization (ILO) calculates that around 33,000 peruvians suffer from unremunerated work, women prostitution, physical abuse, critical working conditions, among others. The effects of forced labour due to mahogany logging was so critical, that the international community had to intervene under the protection of mahogany in the Convention of International Trade in Endangered Species of Wild Flora and Fauna (March the 3rd, 1973)(Youatt, A., & Cmar, T.,2009).