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The Laundering Machine

The Laundering Machine

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An investigation from the Environmental International Agency that exposes ilegall wood cutting of two endangered species: mahogany and cedar, which takes place in the Peru's Amazon. This also violates certain conditions in the Free Trade Agreement that Peru holds withe the United States, since this wood is being exported to that country.

An investigation from the Environmental International Agency that exposes ilegall wood cutting of two endangered species: mahogany and cedar, which takes place in the Peru's Amazon. This also violates certain conditions in the Free Trade Agreement that Peru holds withe the United States, since this wood is being exported to that country.

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Categories:Types, Research, Law
Published by: Karina Montoya Guevara on Jan 06, 2013
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09/17/2013

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THE LAUNDERING MACHINE
HOW FRAUD AND CORRUPTION IN PERU’S CONCESSION SYSTEM AREDESTROYING THE FUTURE OF ITS FORESTS
EIA-GLOBAL.ORG
 
 
CONTENTS
 
3EXECUTIVE SUMMARY61. INTRODUCTION TO THE FOREST SECTOR82. SYSTEMATICALLY FAILING THE SYSTEM203. INSTITUTIONS GOVERNING PERU’S FORESTS224. THE INTERNATIONAL POLICY CONTEXT 265. HOW TIMBER TRADE “SHOULD”WORK – AND WHAT GOES WRONG286. HUNDREDS OF SHIPMENTS: THE US-PERUTRADE IN ILLEGAL WOOD367. LAUNDERING MACHINES: 14 CASE STUDIES498. THE OPEXA CASE: INSIDE THE MAGIC FOREST559. IGNORING INCONVENIENT LAWS: THE WATERSHEDBANS, 2000-201063CONCLUSION AND RECOMMENDATIONS66GLOSSARY67WORKS CITED
BOXES
 
7BOX I: CHINA-PERU TARIFF DISCREPANCIES10BOX II: PERU’S NEW FORESTRY AND WILDLIFE LAW14BOX III: THE
HABILITACIÓN
SYSTEM AND PACAYASAMIRIA NATIONAL RESERVE 16BOX IV: ANOTHER DIMENSION OF ILLEGALLOGGING: FORCED LABOR AND SEXUAL ABUSE23BOX V: THE FTA ANNEX ON FOREST SECTOR GOVERNANCE24BOX VI: THE PERU FOREST SECTOR INITIATIVE (PFSI)23BOX VII: LOGGING A CONCESSION, ON PAPER33BOX VIII: EIA SURVEY OF EXPORTERS AND IMPORTERS34BOX IX: RESISTING TRANSPARENCY47BOX X: FALSE VERIFICATIONS IN LORETO 58BOX XI: A REAL REFORM EFFORT, FOILED60BOX XII: CITES EXPORT PERMITS FOR CEDAR FROMTHE YAVARÍ WATERSHED61BOX XIII: ANOTHER CONSTITUTIONAL COURT DECISIONIGNORED IN MAZÁN62BOX XIV: TROUBLE IN THE ALTO PURÚS WATERSHED
For over 25 years as a non-
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ACKNOWLEDGEMENTS
EIA would like to thank the following funders for theirsupport:Anonymous DonorCharles Delmar FoundationClimate & Land Use AllianceJMG FoundationThe Lia FundNoradThe Overbrook FoundationThe Shared Earth FoundationTides FoundationThe Tilia FundWeeden Foundation
EIA is responsible for the content of this report
Authors: Julia M. Urrunaga, Andrea Johnson,Inés Dhaynee Orbegozo and Fiona Mulligan
© Environmental Investigation Agency 2012.No part of this publication may be reproduced in any form or byany means without permission in writing from the EnvironmentalInvestigation Agency, Inc.
 
3
Exporters in Peru and importers in the UnitedStates and around the world are currently
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timber from the Peruvian Amazon. Sometimesintentionally, sometimes through sheernegligence, each of the actors and agenciesinvolved in this system are working as gears ina well-oiled machine that is ransacking Peru’sforests and undermining the livelihoods andrights of the people that depend on them.
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the systematic export and import of illegalwood from Peru to the US. In many ways thisreport not a new story: the system’s corruptionis something of which everyone in the sectoris aware. EIA’s contribution lies in having
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of the puzzle to reveal the mechanism thatallows this trade to happen: what we call herethe “laundering machine”.There are, of course, individuals andorganizations in this sector who are tryingto work legally; but corruption and illegality
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have their hands tied by lack of resources both
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change the system are summarily dismissed oreven threatened with physical violence and, inextreme cases, physically attacked.
Peru is receiving around 150 million dollars from
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and national counterparts for programs offorest conservation and management that –directly or indirectly – contribute to reducingcarbon emissions from deforestation or forestdegradation (REDD). However, this investigationsuggests that Peruvian authorities currentlyhave little capacity to control what’s happeningin their forests. The results of this reportdemonstrate that the Ministry of Agriculture– responsible for Production Forests – isn’tadequately monitoring the concessions inits purview; that the Ministry of Environment– responsible for Protected Forests – isn’t
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forests under its charge; and that the RegionalGovernments do not yet have the capacity to
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up on the legal cases that do arise.
THE CRIME
EIA’s investigative work focused onreconstructing the routes that timber takesfrom the Amazon to the warehouses of US
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obtained under Peru’s Transparency andAccess to Public Information Law. Thelinks in this chain are willfully obscured toperpetuate confusion about the origins ofalmost all timber traded in Peru. EIA was ableto reconstruct the chain of custody for trade incedar (Cedrela odorata) and bigleaf mahogany(Swietenia macrophylla) only because bothspecies are protected under the Conventionon International Trade in Endangered Speciesof Flora and Fauna (CITES) and thus require
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illegal modus operandi is being applied forother species, but the even more limitedinformation available regarding non-CITESspecies trade makes it virtually impossibleto connect the concession of origin with theshipments being exported.By crossing public information on (a) the“supervision” inspections conducted by theSupervisory Body for Forest Resources andWildlife (OSINFOR for its Spanish initials) ona series of timber concessions with (b) thedocumentation for CITES export permits for
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100 shipments containing illegally logged CITESwood that were exported to the US betweenJanuary 2008 and May 2010 – that is, more than35% of all such shipments with CITES permitsthat left Peru for the US during this period.Peru’s primary exporter, Maderera Bozovich,exported shipments under 152 CITES permitsduring this time, at least 45% of which includedwood of illegal origin. It is likely that more
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these percentages are actually higher.
THE MOTIVE AND THE MECHANISM
Illegal logging is a lucrative business. Expensesother than transport costs are low, without anyconcern for decent wages or environmentalpractices. A large old rainforest tree may producearound three cubic meters of export-qualitywood, and exporters receive about US$1700/m3for mahogany or almost $1000/m3 for cedar.
1
Inthe US, the prices are even more dramatic: thewood from a single Peruvian mahogany tree canfetch over $11,000 on the US lumber market, and
that from a single cedar tree over $9000.
EXECUTIVE SUMMARY

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