Annex 2: Project Description Costa Rica: Ecomarkets

The project will have the following components:

Costa Rica has developed novel financial mechanisms to promote financial sustainability in the medium-term for the ESP program executed through FONAFIFO with close coordination with SINAC (see Section B.2 above). This component will support committed expenditures of the Government of Costa Rica’s ESP program while long-term financing mechanisms for the program are developed and institutionalized. This financing will permit the Government of Costa Rica to meet its long-term commitments to private landowners that have been incorporated into the ESP program.

(i) Programmed ESP contracts: 1995-1999. Since 1995, the Government of Costa Rica has signed environmental service contracts incorporating 224,191 hectares of privately owned forest ecosystems throughout Costa Rica into the ESP program. Of this total, 195,128 hectares of land incorporated into the ESP program have pending payments to be paid over the next four years (see Annex 2a). The project will finance remaining commitments on these contracts as well as incorporate into the ESP program approximately 100,000 hectares of land in MBC/CR priority areas (see below).

The principal criteria for the prioritization and assignation of resources were developed by SINAC-MINAE. The principal document detailing coverage and representivity of priority areas is the 1996 GRUAS Report; in 1999, SINAC updated these priorities in each of the ten Conservation Areas. Priority areas for contracts between 1995 and 1999 include: (i) forest ecosystems in buffer zones of state-owned national parks and biological reserves; (ii) forest ecosystems within the MBC/CR; (iii) forest ecosystems which provide critical hydrological services; degraded forests or those at high risk of fire; (iv) wildlife refuges; and (v) priority areas for recuperating forest ecosystems.

(ii) New ESP Contracts. Beginning in 2000/2001, the ESP program will finance: (A) 50,000 hectares of conservation easements in Tortuguero, La Amistad-Caribe, and Osa Conservation Areas. These areas comprise important portions of the MBC/CR, internalizing the benefits of services provided by small- and medium-scale landowners in forest ecosystems relating to biodiversity conservation; (B) 50,000 hectares of conservation easements in areas of high biological importance as identified in the 1996 GRUAS Report outside of Tortuguero, La Amistad-Caribe, and Osa Conservation Areas. These easements aim to ensure the proper conservation of high priority biological corridors and explicit biodiversity habitat quality characteristics. Each local corridor is a long continuous block of forest covered areas with very small patches of grasslands; likewise, each corridor has significant biological and geographic value given connectivity with existing National Parks and/or other priority areas; and (C) additional hectares of land outside of GRUAS Report areas based upon priorities established by SINAC-MINAE, ensuring regional representivity within the ESP program.

Priority local corridors for targeting within Tortuguero, La Amistad-Caribe, and Osa Conservation Areas (see Map 3) include:

1. The Tortuguero Biological Corridor connects the Reserva del Maíz protected area in Nicaragua with Tortuguero National Park and Barra del Colorado protected area in northeastern Costa Rica. Within Costa Rica, this local corridor covers 87,200 hectares of land, two-thirds of which are public lands belonging to Tortuguero National Park. Approximately 29,000 ha are privately owned and suitable for participation in the ESP program.

2. The Barbilla Biological Corridor connects Barbilla National Park with La Amistad International Park and Cordillera Volcánica Central Biosphere Reserve; in addition, the local biological corridor is adjacent to the Chirripo Reserve, the largest indigenous reserve in Costa Rica. This local corridor covers 106,647 hectares of land, eighty-five percent of which includes private lands covered by dense primary and secondary forests appropriate for inclusion in the ESP program.

3. The Corcovado—Piedras Blancas Biological Corridor located in the Osa Conservation Area connects Corcovado National Park and the Piedras Blancas National Park. This local corridor covers 29,984 ha of privately owned land within the Golfo Dulce Forest Reserve. Eighty-nine percent of the local biological corridor is eligible to be included in the ESP program for conservation easements; the remaining land is suitable for natural forest restoration.

4. The Fila Costeña Biological Corridor located in the Osa Conservation Area includes primary and second growth forest in the Southern Fila Costeña Mountain Range of Costa Rica. The corridor covers an area of 15,000 ha, and it is one of the few remaining forests in the southern part of Costa Rica and it has unique biological populations that have developed on this mountain range. The ESP program has strong support from local environmental groups in the area. This particular corridor has received strong support from local organizations, mainly because it will make viable the development of present and future ecotourism activities of the area, it supplies water to the communities and hotels in the zone, and because it is the refuge of the remaining wildlife populations in the area.

Priority local corridors for targeting outside of Tortuguero, La Amistad-Caribe, and Osa Conservation Areas include areas of high biological importance within the MBC as identified in the GRUAS Report (see Annex 2b and Map 5). This targeting will support SINAC’s and FONAFIFO’s efforts to move progressively from a “scattered” approach of ESP contracting to one in which conservation easements can be contracted to support explicit policy goals of SINAC (i.e., conservation and consolidation of Costa Rica’s MBC sites throughout the country in coordination with other environmental priorities).

The above-mentioned conservation easements will be contracted with small- and medium-sized landowners for twenty years under Article 69 of Forestry Law No. 7575. GEF resources will be utilized to reimburse FONAFIFO US$10/hectares/yr. for each hectare of priority area integrated into the ESP program during the life of the project. In return for the twenty-year commitment on the part of small- and medium-sized landowners in these areas, the Government of Costa Rica will seek continued financing beyond the five-year life of the project. Table 4 indicates the existing contracts for conservation easements in the MBC/CR as well as priority areas awaiting contracts and potential areas for inclusion should increased financial resources be available to the ESP.

Outside of GRUAS Report priority areas, SINAC-MINAE has expressed regional priorities for remaining areas to be incorporated into the ESP program. These include: protection of watersheds, and in particular watersheds that provide water for human consumption and hydroelectric production; and biodiversity protection in local biological corridors.

(iii) Development of revenue capture mechanisms. Incremental resources will support the analysis, design and implementation of revenue capture mechanisms to internalize the value of the environmental services through explicit payment schemes, with emphasis on complementary services to biodiversity in forest conservation areas (i.e., hydrological services and scenic beauty).

Furthermore, the sub-component will support the design and establishment of a trust fund—to be established by 2004—to capture and provide funds to pay for contracts targeting biodiversity conservation beyond the life of the project. This trust fund will be designed in accordance to GEF’s “best-practice” guidelines; the project will also support initial fundraising efforts through the development of a capitalization plan and fundraising.

FONAFIFO and SINAC will carry out day-to-day management and supervision of the ESP program, in coordination with MINAE. Projected expenditures will finance program administration, coordination, financial management, direct contracting of landowners, geographic information systems, and field supervision.

(i) ESP supervision. Project resources, including a 5% administrative fee currently paid to FONAFIFO, will be used to support monitoring, supervision and evaluation of the ESP program as well as implementation of a financial management system for project activities. GEF co-financed activities include refining the administrative organization, the operational system, and the financial controls and disbursements within FONAFIFO, as well as technical training for personnel within FONAFIFO and SINAC.

Furthermore, the project will support technical support for FONAFIFO’s GIS system, such that the monitoring system will allow for the generation of technical data relating to land ownership, forest ecosystems, forest type, forest quality and growth variables, coverage area, identification of priority zones for the conservation of biodiversity outside of national parks and biological reserves, and the monitoring of the consolidation of the MBC/CR utilizing satellite imagery and geographic information systems with field verification to monitor changes in land use. This type of monitoring is additional to FONAFIFO’s and SINAC’s ongoing monitoring efforts, and will provide information to better correlate ecological variables with the level of payments for environmental services.

(ii) SINAC forest protection and field supervision. Committed expenditures of the Government of Costa Rica will be complemented by incremental GEF resources to strengthen forest protection programs and field supervision activities carried out by SINAC. Government resources will cover expenditures related to personnel, operations costs, and goods and services. Incremental resources will support training of regionally based SINAC field staff, implementation of effective field supervision of the ESP program, and field-based monitoring of compliance with existing environmental legislation relating to conservation of forest ecosystems.

Incremental GEF resources will be used to improve the technical and administrative capacity of local NGOs and private sector associations providing these services, including field supervision, contract compliance, preparation of technical and administrative manuals for forest conservation, as well as assistance to individuals lacking land titles. Furthermore, this component will support organizational and technical strengthening of local women organizations to develop capacity to promote natural resources management and increased participation in the ESP program. Prospective activities include recompilation and systematization of the experiences of organizations of woman farmers as well as training of rural woman regarding the political and legal framework of the natural resources sector.