Incentives for sustainable watershed management: An integrated analysis for El Salvador

The deterioration of natural resources in El Salvador has accelerated in recent decades, resulting in an agricultural sector characterized by the inappropriate use of natural resources, poverty, and a marginalized rural population. Ninety-five percent of the original forest cover has been destroyed, and 77 percent of its land base manifests severe erosion. Mangroves are rapidly being depleted and water resources are scarce. Child mortality caused by polluted water and air is high.; This dissertation focuses on incentives for the sustainable use of natural resources in El Salvador, and addresses the question---What strategies should be adopted now in order to conserve the natural resource base for future generations, without depriving current generations of the use of resources available today? This study argues for the use of an integrated, multi-disciplinary and multi-sectoral approach to solving environmental problems. It also recognizes that incentives are temporary measures to overcome the market failure of non internalization of environmental costs and benefits.; Analysis of forestry investments in El Salvador indicates that forestry can be a profitable enterprise. Furthermore, providing credit and financial incentives to the private sector does not seem an efficient or necessary mechanism to encourage investing in forest plantations. Reformulation of the forest law of 1973 would appear to be far more important. Five incentives can be recommended for El Salvador's forestry sector: (1) natural incentives---reformulation of current forest legislation; (2) fiscal incentives---creating favorable conditions for private investments; (3) payment for environmental services---purchase of resource friendly services from rural owners managing land in a resource friendly way; (4) credit incentives---providing favorable credit lines; and (5) public sector services---where quality services such as technical assistance, market training, and market information, are provided by a mix of public and private sectors.; The potential for market or regulatory incentives to result in adoption of sustainable practices hinges, to a large extent, on the participatory aspects of the process by which they are formulated. In El Salvador the participatory process that was followed in the formulation of the nation's new forestry and environmental legislation was designed to make institutional change possible.