Nicaragua Wood Sale to Taiwan (NICARAG)

          CASE NUMBER:          51 
          CASE MNEMONIC:      NICARAG
          CASE NAME:          Nicaragua-Taiwan Log Deal

A.        IDENTIFICATION
1.        The Issue
     In 1991, the government of Nicaragua signed a deal with a
Taiwanese company, Equipe Enterprise, to grant a large timber
concession.  The agreement called for Equipe Enterprise to log one-
eighth of Nicaragua's remaining forest.  The deal would create
4,000 jobs and $15 million would be invested over the first two
years of the project.  Taiwan would also make a loan of $30 million
to Nicaragua to help pay off its foreign debt.  Much opposition
arose to the deal, especially from the Moskito Indians who lived in
the region where the logging would take place.  In 1992, the
Nicaraguan government rejected the offer because of Equipe's
inadequate forest-management plan.
2.        Description
     Nicaragua has the largest tropical rain forest north of
Amazonia.  Although it may be only 1 percent the size of the
Brazilian forest it is disappearing ten times faster (see BRAZIL case).
At this rate the entire forest will be gone in two decades.  In 1960, forest 
covered 60 percent of Nicaragua but now it only covers 20 percent 
or roughly 15,000 square miles.  During the eight year civil war the
deforestation rate declined compared to the steady rate at which
trees were being cut down before the war.  Now that the war is over
the cutting has resumed.
     In 1991, the Chamorro government made a deal with Equipe
Enterprises, which is a subsidiary of a Taiwanese firm, to log in
the north Atlantic coastal area, also known as the Moskito Coast. 
In the agreement, Equipe would log 926,250 acres composed of ceiba,
rosewood and other types of virgin hardwood trees.  The harvest
plan called for logging 42,000 acres annually for twenty years,
while reforesting half of the land grant to ensure the forest's
future.  The benefits to the Nicaraguan economy would be
substantial.  Four thousand jobs would be created and $15 million
would be invested over the first two years of logging.  The plan
would have been beneficial to the Moskito Indians who live in the
region designated for logging because it would have created four
thousand jobs in an area with an 80 percent rate of unemployment. 
Taiwan would also make a loan of $30 million to Nicaragua to help
it pay off its foreign debt.  Equipe would also manufacture
laminated wood and plywood in Nicaragua for export to Asia.  
     Opposition arose against the deal because it was made largely
in secret and without public purview.  Environmentalists opposed it
because it would lead to massive deforestation.  The Moskito
Indians contended that the plan ignored their rights to what they
considered their natural resources and were not consulted
beforehand about the plan.  The Moskito Indians have lived in the
area for centuries and are considered a semi-autonomous entity by
the government.  
     Under mounting domestic and international pressure, the
Nicaraguan government rejected the deal due to technical and
ecological concerns.  The government claimed Equipe did not submit
a detailed enough environment impact statement and allegedly based
their plan on out-of-date forest inventory documents.  The company
wanted to log 325,000 cubic yards of wood per year but at that rate
the forest would have been unable to regenerate itself.  Thus,
the short-term gain to the desperately poor Indians would probably
be minimal.
3.        Related Cases
     Keyword Clusters         
     (1): Bio-Geography            = TROPical
     (2): Forum                    = NGO
     (3): Environmental Problem    = DEFORestation
4.        Draft Author:  Deborah Ullmer
B.        LEGAL Filters
5.        Discourse and Status:  DISagee and COMPlete
     The proposed agreement would allow a Taiwanese firm logging
rights in the northern Atlantic coastal region of Nicaragua.  After
opposition to the plan arose, the government decided the company's
forest-management plan was inadequate and rejected the deal.
6.        Forum and Scope:  NICARagua and BILATeral
     After rejecting the Equipe deal, the government placed a
temporary ban on all logging operations in order to revise the
timber permit process.
7.        Decision Breadth:  2 (Nicaragua and Taiwan)
     The bilateral agreement which was rejected would have been
between Nicaragua and the Taiwanese firm of Equipe Enterprise.
8.        Legal Standing:  NGO
     If the agreement had passed it would have been a non-
government measure between the Nicaraguan government and the
Taiwanese firm, Equipe, to log part of the Nicaraguan forest.  In
exchange the country would have received compensation for its loss
of trees and other types of aid.  Jobs would have been created in
the suffering Nicaraguan economy.
C.        GEOGRAPHIC Filters
9.        Geographic Locations
     a.   Geographic Domain : North America [NAMER]
     b.   Geographic Site   : Southern North America [SNAMER]
     c.   Geographic Impact : NICARagua
     The geographic domain of this case is the Central American
rain forests; more specifically in the northern Atlantic coastal
region of Nicaragua along the Moskito Coast.
10.       Sub-National Factors:  YES
     The logging operation would have taken place in the Moskito
Coast and would have affected this area the most.  The region is
inhabited mostly by the Sumo and Moskito Indians.  Many would have
been employed by Equipe Enterprises if the project had passed. 
Many also would have lost their homes.
11.       Type of Habitat:  TROPical
D.        TRADE Filters
12.       Type of Measure:  LICENsing
     The logging plan would have been a licensing agreement.  It
would have allowed Equipe Enterprises to come to Nicaragua and log
42,000 acres of forest annually over the next twenty years.
13.       Direct vs. Indirect Impacts:  DIRect
     The logging project would have substantially diminished
Nicaragua's remaining tropical forest by cutting 325,000 cubic
yards of wood a year.  The loss of forest would have negatively
affected wildlife and other fauna.
14.       Relation of Measure to Environmental Impact
     a.  Directly Related     : YES  WOOD
     b.  Indirectly Related   : NO
     c.  Not Related          : NO
     d.  Process Related      : YES  DEFORestation
15.       Trade Product Identification:  WOOD
     The trees in the area are pine savannas and other virgin
hardwoods.  A few companies are still logging in this area but
these are only small operations.  In 1989, the world sale of
tropical hardwood was worth $7 billion.  
16.       Economic Data
     The logging project would have injected huge sums of money
into the Nicaraguan economy.  Taiwan would have granted a $30
million loan to Nicaragua to help pay off its foreign debt, and an
undisclosed amount of aid would have been given to the army.  As
noted earlier, during the first two years of logging $15 million
would have been invested and 4,000 jobs would have been created.
17.       Impact of Measure on Trade Competitiveness:  BAN
     The logging project was only for the area in the northern
Atlantic coastal region known as the Moskito Coast.  It would have
covered 926,250 acres of land or one-eighth of Nicaragua's
remaining forest (see PFBELIZE case).
18.       Industry Sector:  WOOD
19.       Exporter and Importer:  NICARagua and TAIWAN
     In 1984, the leading exporters of tropical wood were
Indonesia, Malaysia and the Philippines.  Their exports of timber
exceeded $4 billion annually which was one-half of the global
exports of tropical woods.  Japan is the leading importer of logs
and in the early 1980s Japan took in about four-fifths of all
tropical log exports.  Taiwan and South Korea are other major
importers of logs, often for the purpose of exporting them as
plywood.  In 1980, they imported one-third of the world's plywood. 
E.        ENVIRONMENT Filters
20.       Environmental Problem Type:  DEFORestation
     The rejected proposal called for cutting down ceiba, rosewood,
pine savanna and other virgin, hardwood trees.  Already, many
different types of animal species and fauna would have been lost
due to the intended logging.
21.       Name, Type, and Diversity of Species 
     Name:          Tropical Hardwoods
     Type:          Many
     Diversity:     3,256 higher plants per
                    10,000 km/sq (Nicaragua)
22.       Resource Impact and Effect:  MEDium and REGULatory
     Not only would the forest be destroyed but also many different
types of wildlife and fauna would become endangered.  The loss of
the tropical forest would also cause soil degradation and erosion.
23.       Urgency and Lifetime:  LONG and 100s of years
     The plan was rejected but the cutting down of the forest
continues through illegal means.  Although this deal was refused
other proposals in the future may not be.  If the forest continues
to disappear at the current rate, it will be gone in two decades.
24.       Substitutes:  LIKE
     The Taiwanese firm can look to other countries for its timber
needs.  Instead of using lumber for construction they could use
other materials such as cement, brick or even plastic.
VI.       OTHER Factors
25.       Culture:  YES
     The loss of traditional forest lands could drastically change
the cultures of the Indian tribes, who still extensively use the
forest's resources for medicines, foods, shelter and other needs.
26.       Trans-Border:  NO
27.       Rights:  YES
     One objection to the deal was because of its uneven impact;
the plan would not substantially assist them, yet the people were
losing control over traditional lands.
28.       Relevant Literature
"Asia's forests: Trees not Timber."  The Economist  (May 26, 
     1990): 36.
"Debt Deleaf."  Environment (January/February 1992): 23.
"Environmental Concerns Kill Logging Project."  United Press
     International (January 29, 1992).
Jacobsen, Richard.  Reuters (July 30, 1991).
Jagger, Bianca.  "Save the Rain Forest in Nicaragua."  New York
     Times (Nov 12, 1991, late ed).
Laarman, Jan G.  "Timber Exports from Southeast Asia:
     Away From Log Towards Processed Wood."  Colombia Journal
     of World Business (Spring 1984): 77-82.
Martin, Glenn and Swenar, Lisa.  "Honduras Rejects Huge Logging
     Deal: Public outcry for preserving a rain forest sways
     the President."  San Francisco Chronicle (February 29,
     1992, final ed): A10.
"Nicaragua Defends Taiwanese Lumber Concessions."  Reuters 
     (September 21, 1991).
Nietschmann, Bernard.  "Conservation by Conflict in Nicaragua." 
     Natural History (November 1990): 42-49.
Otis, John.  "Nicaragua's Green Movement Gaining Strength."  
     United Press International (June 2, 1992).