Deforestation, Subsidies, and Subnational State Capacity in Argentina

ALCAÑIZ, ISABELLA; GUTIÉRREZ, RICARDO A.

Bogotá

Congreso; REPAL 2018 Annual Meeting; 2018

Red para el Estudio de la Economía Política de América Latina

Can states effectively slow down or stop deforestation? The trade reforms of the 1990s and the commodity boom of the 2000s significantly expanded the agriculture frontier in Latin America, with devastating effects to native forests. Interestingly, some of the governments that presided over the commodities super cycle also sought to reform the forestry sector to reduce rampant deforestation, despite promoting and benefiting from agricultural expansion. National legislation passed during this time period was to be implemented in local districts, where the battle against climate change is fought. Consequently, the success of new forest protections is contingent on the capacity of subnational governments to implement the law. In this paper we offer a comparative analysis of the effect of financial capacity and state autonomy by 16 of the 23 provinces of Argentina on deforestation rates. We explain changes in the rate of deforestation by province partly as a function of two types of payment for environmental services (PES) distributed by subnational governments to land holders. We argue that one clear limit to the capacity of provincial bureaucracies to implement any PES scheme is the strength of agricultural producers given existing economic conditions. Specifically, we expect a trade-off between the effectiveness of subnational payments and demand for locally-produced commodities in deterring deforestation. We test our argument against an original database that includes subnational values on two types of PES offered by provincial governments to land holders; a measure of bureaucratic autonomy of the disbursing agency; farm land prices by province; and the total amount of commodities exported by province. The results of our analysis show that deforestation can be slowed down by PES disbursed by local governments. Furthermore, subnational funds with the most stringent conditions ?no economic use of forest trees of any kind? and disbursed by environmental regulators with greater autonomy from the agricultural sector, have the greatest drag on deforestation. As expected, export pressures translate into increased cleared land, in spite of the provision of PES. Our findings indicate the importance of a well-funded and autonomous local state in the fight against climate change and the adoption of both adaptation and mitigation policies. A recent surge in scholarship on subnational state politics supports this claim (Toni 2011; Giraudy 2012; Luna and Soifer 2017; Amengual 2015; Niedzwiecki 2018). These studies examine how subnational governments build capacity in regulation and enforcement as a function of ties with partisan and economic actors, recognizing that the local arena is a critical space of policy implementation. This can be seen clearly with the case of Argentina?s national forest law or for that matter, any other PES scheme. As a vital mitigation tool in the developing world, the success of complex anti-deforestation laws hinges on local execution. In Argentina, while the law and funds originate in the federal government, implementation and ultimately, the results, are local. By identifying key conditions under which state capacity matters for local conservation of the natural environment in 16 provinces, our work contributes to the literature on subnational politics and environmental policy. Furthermore, our research carries special implications for Latin American contemporary politics. Acting as an irresistible incentive to expand the agricultural frontier, the 2000s super cycle of prices helped decimate forests in commodities-exporting countries across the Global South. In Latin America during the 2003-2014 period, many center left governments enjoyed windfall profits from exports in agriculture and energy. Those profits, paradoxically, allowed those governments to commit significant funding to anti-deforestation policies in order to appease their green constituents, including indigenous communities. This tension between extraordinary international commodity prices and ?often for the first time? a state endowed with some programmatic funds for environmental conservation was experienced by Argentina but also Brazil, Uruguay, and Ecuador, to name a few. A comparative empirical analysis of this tension helps answer critical questions, such as which demands wins, whether conservation or development; how can a government with competing mandates be effective; and how do this all play out at the subnational level? The paper is organized as follows: First, we discuss the political economy of deforestation in Argentina and why subnational state capacity is critical to slowing it down or halting it altogether. Here we also explain how Argentina?s forest law and related PES scheme work. Next, we formulate our main hypotheses and discuss them in relation to the literature on subnational state capacity and our field research. We then present the data and model specifications used to test our argument. We discuss the models? results and conclude with some ideas for future research and examination of the policy implications.