I have followed with great interest the controversial public debate in The Netherlands regarding teak plantations in Costa Rica, in particular the case involving the insurance company OHRA and the company Flor & Fauna. A confidential report I wrote over two years ago for the World Wide Fund for Nature [WWF] on this particular case seems to be at the core of the debate. It has been widely circulated and commented upon, on TV, the press and in a court of law. The report, entitled ECONOMIC ANALYSIS OF FLOR & FAUNA'S TEAK PLANTATIONS IN COSTA RICA and dated December 22, 1993, has therefore lost its confidential nature, allowing me to also publicly comment on its findings.

Many misleading statements have followed the release of the report, some attempting to disqualify it. This seems due to the serious conclusions drawn out of the assessment performed on Flor & Fauna's teak plantations in Costa Rica, in which OHRA and WWF-Netherlands also have direct financial interests. Since the dust seems to have settled, at least temporarily, it seems fair that I should have the opportunity to present my point of view on this matter.


One of the issues under consideration is the December 28, 1995 declaration in a court of law in The Netherlands by Flor & Fauna, to the effect that its plantations in Costa Rica have been certified as "well managed" by the Forest Stewardship Council [FSC].

It is not within the mandate of the FSC to certify forest operations anywhere. The FSC is an organization set up to accredit potential certifiers. This is therefore a fictitious statement, meant to mislead both the public opinion and the court of law in which it was presented.

The certificate issued to Flor & Fauna comes from the Rainforest Alliance, an environmental organization in the USA, not from the FSC. As of this date, the Rainforest Alliance has not been accredited by the FSC, or any other organization, as an official certifier. Therefore, its assessments should not in any way be considered endorsed by the Forest Stewardship Council. They are the sole responsibility of the Rainforest Alliance.

Flor & Fauna seems to be using the name of the Forest Stewardship Council to give some credibility to their uncomfortable position in the legal and public dispute in which it is involved. Making this type of fictional statements, with the intention of misleading both the public opinion and a court of law, is an action by itself punishable by law. It seems inevitable that this will eventually backfire on the company itself.

The insurance company OHRA has made claims in brochures and other promotional material that the Flor & Fauna plantations in Costa Rica, in which OHRA has direct commercial interests, has been certified as "well managed" by the FSC. OHRA has also made public claims to this same effect through the press, as in the one- page advertisement published in the October 7, 1995 issue of "De Telegraaf", one of the papers with the largest circulation in The Netherlands. In conjunction with the statements to the same effect by Flor & Fauna, this assertion seems intended to mislead investors and generate credibility through unlawful means.

OHRA's claims to the existence of an FSC certificate for Flora & Fauna's plantations were brought to the attention of the Reklame Code Commissie [Code of Ethics Committee on Advertising] of The Netherlands on January 30, 1996. A ruling is expected within weeks.


A completely different issue is the controversy stemming from the contents of the report I wrote on Flor & Fauna over two years ago, following a request from WWF-Netherlands and WWF- International. Due to the confidential nature of the report, I had to remain silent till now, when the public exposure given to it through the press and TV in The Netherlands allows me to speak up for the first time.

The certificate issued to Flor & Fauna by the Rainforest Alliance dates from early 1995. This is more than a year after my final report on that plantation had been submitted, in December of 1993. Flor & Fauna seems to have deliberately concealed this key piece of information from the certifier during the evaluation process. The Director of the Rainforest Alliance has informed in writing that as late as December of 1995 they were not aware the final report in question had ever been produced.

Out of consideration for the serious nature of the conclusions of that assessment, I made a specific effort to provide Flor & Fauna, OHRA and WWF-NL the opportunity to question its contents, and to submit evidence to back their claims of possible errors or misinterpretations. This was done through the presentation of a draft version of the report, in August of 1993. The final report is dated December 22, 1993, and was presented only after a full reply to the contents of the draft was received in writing through WWF- Netherlands. The Rainforest Alliance had access to this draft. The fundamental issues at the heart of today's controversy were also exposed there.


One fundamental point of controversy is the yield expected by the company, which in turn affects the expected financial returns offered to investors. In Flor & Fauna's promotional material, as well as in its correspondence with WWF, the company claimed its teak plantations would produce an average of 40 cubic meters of commercial timber per hectare per year under one scenario, and an average of 48 cubic meters per hectare per year under another, during the 20 year rotation period of the plantation.

The production of timber was expected to increase substantially out of normal range after the first thinning, at the age of 8 years. According to the company, yields would increase to between 40 and 50 M3 per hectare per year between the age of 8 and the age of 12; 60 to 70 M3/ha-yr between the ages of 12 and 16, and an astonishing 68 to 82 M3 per hectare per year between the ages of 16 and 20. {Thinnings were scheduled at the ages of 8, 12 and 16, and a final clear cut at the age of 20].

The silvicultural behavior implied by the information supplied by the company to the public in The Netherlands, to WWF, and to me during the evaluation process, is an absolute anomaly for teak. The unusual and unrealistic behavior expected by Flor & Fauna, both in the magnitude of the yields, and in the effects of each thinning, could not be clarified or supported by the company. Evidence to support such projections could not be obtained, although specifically requested in writing. The report thus highlights:

"The expected yields are unjustified, reverting in equally unjustified expectations on the financial returns to be obtained. Investors are thus led to believe they will receive returns which are highly unlikely. This may be considered fraud".

This issue was highlighted both in my draft report and in the final report of December 1993. The Rainforest Alliance was therefore aware of this controversy during their evaluation process. Nevertheless they decided to issue the certificate to Flor & Fauna, thereby endorsing the company's claim to fictitious yields and rates of return.

I expect a qualified certifier to detect these irregularities, and not provide credibility to professionally unsound allegations, independent of their origin or nature. A consequence of the questionable certificate under consideration is a loss of credibility in the certifier involved. It might also mean a loss of credibility in the Forest Stewardship Council, drawn into the scene by OHRA's and Flor & Fauna's allegations. Unless the FSC requests public disclaimers from Flor & Fauna, OHRA and the Rainforest Alliance, in the same places and through the same means the original allegations were made.

Some adjustment to the rate of return seems to have been introduced in OHRA's promotional material since May 1995, from 15 - 25% to 14 - 18%. However, an official document from the Ministry of Agriculture, Nature and Fisheries of The Netherlands was introduced on January 30, 1996, to the Reklame Code Commissie [Code of Ethics Committee on Advertising] by OHRA, according to which expected yields are even higher than before [De Tak Plantagen van Flor y Fauna S.A. in Costa Rica, LNV, December 28, 1993]. This same document has been introduced in previous court cases by Flor & Fauna. It determines that, as a minimum, the company should expect 1057 M3 per hectare during the 20 year rotation period, or nearly 53 cubic meters per hectare per year of mean annual increment. This is three to four times higher than should safely be expected.

On February 02, 1996, a spokesman from Flor & Fauna is quoted in the Financjeele Dagblad, Holland's leading daily financial newspaper, as follows:

"The organization Rainforest Alliance, which keeps an eye on the Flor & Fauna plantations, does not find the projections on growth and financial returns inaccurate"

This quotations seems based on a report submitted only days earlier by the Rainforest Alliance to the Forest Stewardship Council, in which it is stated:

"Based on interviews, field work, and research data collected in Costa Rica, we did not find that F&F's projections in terms of growth and yields were inaccurate..."


Another key point of concern is related to the costs incurred, and the price to which shares were sold to the public, through OHRA's insurance policies. There is a tremendous gap here, which borders on extravagant speculation. The estimated total cost per hectare during the 20 year rotation period is about 5000 US dollars. But the expected production from each hectare was sold to people in The Netherlands for a net payment of over 65000 dollars.

One issue I have seen contested in the press is the price paid for the land where the plantations were established. Flor & Fauna argues it paid an average of 3000 dollars the hectare. Nevertheless, it could not provide any evidence to support that claim when specifically requested, prior to the production of the final report. The average price indicated in the report [600 dollars the hectare] was corroborated as at the high end of the price spectrum at the time of purchase.

The prices at which the production of timber from these plantations could be sold are also significantly inflated in Flor & Fauna's projections. In combination with the unrealistic yields mentioned above, this leads to highly unlikely rates of return.

Investors were led to believe they would receive between 600.000 and 1.4 million US dollars per hectare, according to the three scenarios presented by Flor & Fauna, the firm Van Rossum van Veen and WWF-Netherlands during the assessment [exchange rate of 1.825 DFL to a dollars as of June 1993]. A more realistic projection would place such a return at below 250.000 dollars the hectare. Although this discrepancy is already serious enough, it would not be so damaging were it not for the way risks were distributed between the different parties involved.

The project has been structured in such a way that the potential risks of failing to achieve Flor & Fauna's expected yields and prices would have relatively little impact on Flor & Fauna's and OHRA's expected returns. The consequences of failing to achieve their projections were transferred mainly to individual investors. Two thirds of all returns to investors depends on production at year 20. While expected returns to Flor & Fauna and OHRA depend only about 10 per cent from such a harvest. This poses ethical questions which should be seriously investigated.


WWF Netherlands seems to be in an unfortunately awkward position due to their involvement in this venture, a situation I and others tried to prevent from the very beginning. It has allowed its name to be associated to an initiative with dubious technical, economic and ethical dimensions. Most important of all, it seems involved in a situation which may seriously affect the credibility of the organization within the general public in a key European country.

The same controversy rumbling now in The Netherlands was exposed in August of 1994 by "The Tico Times", an English language newspaper in Costa Rica. In a written declaration signed by Wim Braakhekke, Director of Conservation of WWF-NL, addressed to that newspaper on August 30, 1994, it is stated:

"WWF Netherlands has sent copies of Julio Cesar Centeno4s report to OHRA, Flor & Fauna and Stichting Continuiteit Flor & Fauna, because we feel that it is important that all parties know of the report".

A very fundamental and interested party is obviously composed by the individual Dutch citizens who invested in this venture. It is not clear the report was ever brought to their attention. The letter further adds:

"The fact that an independent foundation was set up (Stichting Continuiteit Flor & Fauna4) to guard the interests of the investors was essential to WWF-Netherlands before becoming involved in this project"

I understand that this foundation unfortunately does not in fact represent the interest of investors. Its Board of Directors is composed only by the Huizingas [owners of Flor & Fauna], the insurance company OHRA, the firm van Rossum van Veen [a representative of Flor & Fauna], and WWF-NL. The first three hold 80% of the votes, while decisions are taken by majority vote. I fail to see why this is considered an independent foundation [independent from whom?], or how the composition of the board is meant to represent the interests of the individual Dutch citizens who were convinced to invest in this scheme.

We are thus facing a rather unfortunate situation, which I hope will be resolved quickly to the benefit of all parties involved. Specially to protect the interest of the Dutch citizens who trusted the proposals they received, at least partially due to their credibility in WWF. An objective resolution of this case is also necessary to return credibility and trust to other Dutch initiatives struggling to succeed within realistic projections and fair play. It is also necessary to return credibility to the concept of certification as a mechanism to ensure consumers that their purchases or investments respect basic environmental, social and economic principles.

A lot is thus at stake, to be resolved by Dutch citizens and Dutch institutions. The benefits of balanced and objective judgement in this case will reach far beyond the borders of The Netherlands. I trust that, in honor to well ingrained Dutch tradition, truth and justice will eventually prevail.

Julio Cesar Centeno is a forestry specialist from Venezuela from whom WWF requested an economic analysis of Flor & Fauna's teak plantations in 1993. He was one of the key negotiators of the International Tropical Timber Agreement, UNCTAD, Geneva, serving as spokesman for tropical countries. He served as forestry advisor to the Secretariat of the United Nations Conference for Environment and Development [UNCED 92}, and as Director of the Latinamerican Forestry Institute between 1980 and 1990. He was invested by Prince Bernhard of The Netherlands with the Golden Ark Award for his work in the forestry sector. He serves as a member of the Governing Board of SGS-Forestry in Oxford, United Kingdom, and as acting vice-chairman of the TROPENBOS Foundation in The Netherlands.

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