Protection of ecosystems and biodiversity

The qualities of the environment we inhabit respond to the set of ecosystem services. Human activities affect the environment and people’s quality of life through exposure to pollution and loss of ecosystem services. Those who carry out activities with high environmental impacts do so without paying attention to the costs they impose on others, which has led to a broad set of instruments designed to deal with these externalities at the local, national and international levels (figure 4.1). The main actions and pending issues for environmental protection, focused on the protection of ecosystems and biodiversity, are discussed below.

The protection of ecosystems, especially in tropical countries […] is a challenge that requires very strong government action. There is no well-structured market […], there is no organized structure that benefits from ecosystem services. But we know that they are very important and crucial for us […] because they play a role in several global systems that are extremely important for human life.

Based on an interview with Juliano Assunção

Action # 1: Establishing protected areas in neglected ecosystems, strengthening their monitoring and ensuring their interconnection 

One of the most important instruments for the preservation of ecosystems and biodiversity at the global level is the establishment of protected areas (PAs). These involve territorial delimitations where restrictions are imposed on the type of activities that can be developed. Simplifying, they can be of a strict type, where neither the establishment of people nor the development of economic activities is allowed, or of multiple uses, where activities are allowed to a variable degree.

Comprehensively assessing the effectiveness of protected areas is challenging because of the difficulty of establishing a valid comparison. Two central challenges are their location and spillover effects. Evidence on effects on deforestation and vegetation cover, which are the main ones evaluated, shows modest impacts. Positive effects tend to be found in areas with higher degradation pressures. In turn, evidence on spillover results is mixed, sometimes showing positive, sometimes negative effects of protection in surrounding areas, which seem to depend on the productive value of the regions under protection and the proximity of transportation routes (Reynaert et al., 2024).

The region has shown a significant increase in the coverage of protected areas, currently reaching around 22 % of the land surface, exceeding the global aggregate by nearly 10 percentage points. It also has a similar percentage of the maritime surface. Nearly a third of the region’s terrestrial protected areas are of the strict type, while this category reaches half of the maritime areas.

In addition to the proportion of the area covered, it is essential for biodiversity that these areas include a broad representation of the various ecosystems and that they are interconnected, so that species can move between them. In this regard, there are pending challenges in the region due to the heterogeneous progress of countries (figure 4.10) and ecosystems. For example, while the coverage of strict areas reaches 10 % in forests, in areas dominated by grasslands it is only 3 % (Brassiolo et al., 2023). 

Action # 2: Leveraging protection through local communities

As a rule, strict protected areas should offer the greatest protection to the regions covered. However, this is not necessarily the case. Effective protection requires costly and continuous monitoring efforts, and imposes costs on individuals and businesses affected by regulations.

One way to relieve the tension between conservation and economic livelihood needs is through co-management arrangements. This involves transferring to a local community the right to develop economic exploitation in the protected area, in a sustainable manner and with exclusivity. Such arrangements offer a genuine source of income for the communities. At the same time, property rights generate incentives for communities to be active players in conservation efforts.

Evidence suggests that there is no difference in the protection provided by strict areas over mixed areas, once geographic characteristics are taken into account (Reynaert et al., 2024; Rico-Straffon et al., 2022; Kere et al., 2017). Additionally, the combination of demarcation of protected areas with the transfer of exploitation rights to local and indigenous communities within them, or in contiguous transition zones, can improve effective protection (Sims and Alix-Garcia, 2017; Baragwanath and Bayi, 2020; Blackman, 2015).

Resources must be generated and must reach the most vulnerable sectors of the population […] One of these policies shall seek, above all, to improve living conditions in rural areas, where nature is very important […]. We have to think on how we manage to bring financial capital to invest in that natural wealth, to protect it and generate an income we lack today.

Based on an interview with Mauricio Cárdenas

Action # 3: Zoning and regulation focused on key ecosystems

Certain types of ecosystems stand out for their importance to human well-being and play a central role in responding to climate change. For example, mangroves, freshwater wetlands and forests have high carbon potential, while moderating water cycles; glaciers are a natural reservoir of vital freshwater in dry seasons. Consequently, there is a set of regulations focused on critical zones and ecosystems. Examples of these are forest or anti-deforestation laws, as well as those regarding wetlands and glaciers. Among the best-known policies is Brazil’s Forest Code, which regulates the activities that take place within the area known under the legal definition of the Amazon: it prohibits deforestation in areas owned by the State, and establishes that at least 80 % of privately owned land must preserve its natural vegetation. In Argentina, the Forest Law established three categories according to the basic conservation status of native forests, prohibiting any affectation of the natural cover in areas with better conservation (category 3).

The effectiveness of zoning or ecosystem-based regulations depends crucially on monitoring, sanctioning and enforcement capabilities. The territorial scale of such regulations makes effective implementation difficult, in contrast to the relatively more focused efforts of protected areas. In the Brazilian Amazon, for example, almost all recorded deforestation is illegal, and mostly occurs in public forests, in a fragmented manner and in low-scale exploitations (Ferreira, 2023; Valdiones et al., 2021). However, several instruments applied to improve early detection and focus monitoring efforts proved to be effective in drastically reducing the rate of deforestation (Ferreira, 2023). 

Action # 4: Expand and strengthen the design of payments for ecosystem services schemes

Ecosystem protection instruments based on market mechanisms seek to provide economic incentives for households and businesses to participate in conservation actions.

Payments for ecosystem services (PES) are voluntary participation mechanisms that compensate participants for taking a particular conservation action. They typically involve three components: a source of funding, usually from government funds or international assistance; one or more intermediaries who are responsible for monitoring and implementation; and the final beneficiaries, who contractually commit to carry out the conservation actions in exchange for the payment. 

Latin America and the Caribbean has been a pioneer in the implementation of PES schemes and currently accounts for about half of the 550 globally known programs (Salzman et al., 2018), with examples implemented on a large scale in Mexico and Costa Rica. In the region, there are national-level programs in five countries, although they are mostly at the regional or local level (Alpízar et al., 2020). 

Initially, PES focused on the protection of water sources. Under them, participating producers, located in watersheds, receive payments for forest protection and management actions and reforestation. Gradually, other programs promoted carbon capture and storage, biodiversity and scenic beauty conservation (Wunder et al., 2008).

PES schemes are not exempt from challenges. First, they depend on the pre-existence of well-defined and robust property rights. Participants in PES schemes must be able to demonstrate legitimate ownership and tenure of the area they are applying for. This limits implementation in regions with disputed territories and informal tenure, a frequent situation in the regional context, as well as leaving out informal and illicit activities that take place on public lands. 

Second, they often depend on a source of public funding or international assistance and are therefore vulnerable to changes in the countries’ budget availability or the international context. This is partly due to the difficulties of fully and accurately measuring the services provided and the diffuse nature of the beneficiaries, which sometimes makes it impossible for them to contribute to the costs.

Third, these are voluntary participation schemes, so it is not assured by design that the principle of additionality is met. Taking part in the PSE schemes is attractive to individuals when the benefit outweighs the costs of participation, so it is possible that the plots that apply are those of lower productive value and would have been retained anyway without the need for the program (see, for example, Jayachandran, 2023). 

Fourth, although they can partially replace the income that would have been obtained from the development of an activity with environmental impact, PES schemes are not free from adverse distributional impacts. It is possible that, by giving up certain productive activities, they may reduce employment and income among non-landowner households. The evidence, in this regard, is mixed (Alix-Garcia et al., 2019; Villalobos et al., 2023).

A first dimension to improve PES schemes is to bet on a greater participation of the private sector in their financing, particularly in cases where the benefits are more local and where there are economic sectors directly dependent on these services. The most common cases are the ecotourism sectors and drinking water supply companies. Another way is through compensation mechanisms, whereby companies participate in the financing of PES programs as part of the licensing agreement with the State for the development of an activity with environmental impact in another region.

The second dimension is to reduce selection bias and improve the set of participating plots in the schemes. For this, the introduction of a restriction that prevents the incorporation of properties in a partial way looks promising for reducing deforestation with respect to the traditional design (Izquierdo-Tort et al., 2024).

A third is to carefully evaluate the distributive impacts of programs and identify complementary instruments to address poverty and employment. For example, through the promotion of local economic activities with low environmental impact, leveraging on the natural capital that is preserved.

Action # 5: Strengthen regulations with traceability as a strategy for commercial insertion and consumer positioning

Concern for environmental protection has a growing presence among consumers and companies around the world. Eco-certifications are a way of leveraging this concern in order to channel resources towards sustainable production practices. These consist of labeling products with information on the quality of environmental practices throughout the value chain. This requires mechanisms for traceability of the origin of all inputs and the action of an agency involved in monitoring and certification. Labels allow environmental valuation to materialize in a greater willingness of consumers to pay for products with high environmental standards, which, in turn, encourages companies to adopt better practices.

Currently, there are more than 400 eco-certification schemes around the world, managed by governmental organizations, industry associations and individual initiatives. Some prominent examples from the region include banana, coffee and cocoa production sectors (Blackman et al., 2014). Evidence on the impact of these schemes is promising although incipient and requires further development to establish the most appropriate design features for their effectiveness (Ibáñez and Blackman, 2016; Blackman and Rivera, 2011; Rico-Straffon et al., 2023). 

The agenda and policies implemented at the global level have implications that transcend borders, particularly in the case of large markets or those implemented in blocs. As a growing set of markets put into effect stricter environmental regulations, pressure grows on third countries to implement similar regulations, either because of consumer pressure or to motivate fair competition with companies based in jurisdictions with stricter regulations. Eventually, countries’ environmental regulations may even translate into barriers to trade.

The European Union’s Deforestation Regulation (EUDR, 2023), in force since 2025, requires a group of commodities and their derivatives to be deforestation-free in order to enter or be exported from the European market. These products have been identified as the main ones associated with deforestation at a global level. In the United States, the Forest Act, also focused on trade in deforestation-free products, is currently under discussion in the legislative process. Supply chain regulations applied in international trade result in substantive incentives for current and potential trading partners to implement comparable regulatory measures and strengthen the institutional framework to evidence compliance, which allows them to maintain access to international markets.

In response to these dynamics, ambitious examples of industry agreements to halt deforestation have emerged in the region. The Soy Moratorium is a good example. It is a broad agreement of companies in the agricultural sector, civil society actors and the government, whereby participating companies commit to only buy soybeans produced on land that has not been deforested after July 2016, a condition that was monitored, first, by aeronautical surveys and, later, with remote sensing.

Evidence suggests that the moratorium was successful in contributing to the reduction of deforestation in the Amazon by reducing the returns that producers obtained from expanding the agricultural frontier (Nepstad et al., 2014; Rudorff et al., 2011). In contrast, a similar initiative to discourage the purchase of cattle raised in deforested areas of Brazil would have had limited success due to the difficulty of establishing effective traceability mechanisms on the animals (Ferreira, 2023). Ultimately, the success of supply chain interventions depends on technologies and institutions that allow strict traceability along the entire chain.