Half of Peru’s GHG emissions come from the land use sector. Most of these emissions are a result of deforestation processes related to smallholder agricultural producers in the Peruvian Amazon. A major driver of deforestation is the lack of land tenure rights for smallholders which reduces their commercial opportunities, makes access to financial resources difficult, and increases overall risk. 

To address this issue, the Government of Peru has developed an innovative land tenure mechanism to formalize smallholder farmers called the Agroforestry Concession (AfC). AfCs offer a renewable usufruct contract for 40 years to thousands of eligible farmers currently encroaching on public forest domain in the Peruvian Amazon. Upon award, farmers commit to avoid deforesting, conserve remnant forests, maintain or establish sustainably managed agroforestry systems, and implement soil and water conservation measures. 

Public financial incentives need to support the small-scale farmers that choose to enroll in the AfC system and comply with its environmental requirements, but they are currently not aligned towards this goal. A key challenge for AfC adoption is ensuring that tangible incentives are in place. Providing secure land tenure through AfC contracts alone will not be enough to ensure widespread adoption of the AfC system and compliance with its environmental terms. If current public agricultural programs were to support this new mechanism, it would offer increased opportunity to actively engage more smallholder producers than at present. More importantly, support through public funds will lower overall risk in zero-deforestation supply chains of small-scale producers and provide the foundation for green private investment. 

The project objective is to align agricultural public funds or programs with environmental and social safeguards to incentivize the adoption and compliance with the new AfC system, thus reducing deforestation in the Peruvian Amazon and improving livelihoods of small-scale farmers. GGGI will work with the Government of Peru (GoP) to incorporate AfC possession as eligibility criteria for prioritized public incentive programs to promote the formalization of small-scale agricultural producers in the Amazon through the AfCs. 

Impact: N/A 

Outcome: N/A 

Project Outputs completed in 2019: 

i. Green Growth Policies: 

Policy Assignments (3):  

• Each project output produced 1 policy instrument that is directly related to supporting green growth policies of Peru and that are expected to be approved by the government (2 policy instruments in total, one for the Ministry of Agriculture and one for Agroideas). 
• National guidelines for the Ministry of Agriculture mandating that the public funding that will support agricultural programs will include certain basic environmental and social criteria that is aligned to the country’s many environmental policies, plans or laws and regulations, especially to those related to indigenous peoples as well as to climate change. 
• The second policy instrument is an Environmental and Social Management System which captures Agroideas´s commitment to environmental and social management, explains its procedures for identifying, assessing and managing environmental and social risk of financial transactions, defines the decision-making process, describes the roles, responsibilities and capacity needs of staff for doing so and states the documentation and record-keeping requirements.

ii. Green Investments:N/A

iii. Capacity Building and Knowledge Products: N/A

Project Manager: Aaron Drayer 

Ferro Santetti, Lasse Ringius, Pablo Pena, Paola Aparcana, Yunae Nam