investments in the forestry sector alone does not appear in any statistics
. However, it is known that for example
Chile for years has been the most attractive country in Latin America for foreign direct investment in the forest
sector. This result though would have been never obtained by the current methodology of the IAIF, which leads to
some critical thinking and so the three mentioned points above will be analyzed in the next step.
4.1. Reviewing the application of linear distribution of score for the indicators: “VFL” and
“Domestic Market” and, to lower extent “Forest Resources”
As the results of the INTRA sub-index show, Brazil is the country which received by far the highest scores. The
reason for this is that the current methodology of the IAIF assumes a linear function between factors such as
production, market size and forest land and their implicit benefits, as it is shown exemplarily in Chart 6. However,
since there is a general agreement that a the bigger the industry or the bigger market the better for the business
climate, this benefit doesn’t follow a linear function but more like a function with a decreasing marginal benefit, as
practically all processes of factor inputs do in economics. Additionally, assuming a linear function leads to
enormous distortions in the evaluation of the individual indicators of the IAIF.
Chart 8: Distribution of scores in the case of round wood production
6
UNCTAD: http://www.unctad.org/Templates/Page.asp?intItemID=3198&lang=1
Convention