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Financial and economic evaluation guidelines for community forestry projects in Latin America (Английский)

A project supporting community forest enterprises (CFEs) and competitiveness in Mexico and Latin America is important for economic development. This report covers the principles of financial and economic analysis to improve the implementation of forestry projects in Latin America. A financial analysis considers costs, prices, and profits of carrying out a project or activity in terms of market prices. The main stages of the financial and economic analysis include defining the project objectives, collecting data for analysis, the estimation of inputs for activities, costs, and prices, the development of cash flow tables, the use of profitability indicators to estimate the financial or economic returns, the actual implementation of the project, and monitoring and evaluation. The Total Economic Value (TEV) is a new method used to estimate the value of all the economic benefits that society derives from a project or activity. For forests, the TEV involves the value of the benefits that society derives from the forest, so that it considers more than just the value of timber or commodities. An economic analysis of forestry projects must be rigorous and well documented. The implementation and monitoring of the project can assess the individual project and its compliance with the plans and identify problems in implementation. This summary reviews the economic and financial analysis of market and nonmarket goods and services, with application to forestry projects in Mexico and Latin America. Financial and economic analyses alone are not sufficient to make all project decisions, but they are necessary to ensure that projects are using scarce capital well and meet the minimum economic standards expected by forestry communities and landowners, foreign aid donors, and technical assistance groups. As noted in this review, financial and economic analysis can evaluate the profitability and selection of investments in market goods and services in present value terms though capital budgeting analyses.

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