By Phel Meyer, Erb ’13
My MAP team is working with Rainforest Expeditions, a Peruvian ecotourism company that owns and operates hotel lodges in the Amazon rainforest. We are looking at the financial feasibility of building a new tourist lodge on their land. Aside from the usual benefits of MAP that we all know about, this project has brought up many points that all business students should think about.
The words tourism, economic development, ecology, and sustainability cannot be separated when discussing South America. The continent has some of the most spectacular natural wonders in the world – from the Amazon to Patagonia to the Galapagos – but also conflicting social, political, and economic interests. While my team focuses on marketing and finance issues, our client constantly juggles its economic interests with environmental realities.
As an Erb student, I’m often asked how I feel about the concept of developing deep in the rainforest. Isn’t that bad for the environment and local communities? Shouldn’t we be solely focused on conservation? Ideally, no one would build or do anything on the land, and the natural surroundings would stay the same. But Peru is a growing country with aspirations of improving its standing in the world and creating betters lives for its citizens. It needs economic growth, and sees the rainforest as one of the many tools to achieve that growth.
For many years, the main economic activity in the region has been gold mining. Although this brings enormous economic benefit to a chosen few, it results in extreme environmental degradation. Gold miners use large amounts of mercury to separate gold from other minerals, and as a result the highly toxic mercury ends up in the many rivers crisscrossing the region. Mining also requires space, and to make space the miners cut down trees.
Gold mining is also not socially sustainable. Due to a lack of government enforcement of anti-mining laws, it’s essentially a free for all. Given that it’s a high-risk, high-reward type of business, people do it illegally and don’t pay taxes to the government on their earnings, and as a result the government has less tax revenues to give back to its people.
Another activity in the region is cattle farming, which is very common in neighboring Brazil. The incredible amount of deforestation that has taken place in the Brazilian Amazon over the past 50 years has mainly been for cattle ranching, not for logging or mining as some might expect. Fortunately the same has not yet happened in the rainforest we visited in Peru.
It has been great to work with our client because they understand the environmental and social risks inherent in the region. I’d say they are the Peruvian rainforest equivalent of an Erber: they want to make money and help the local economy thrive, but not at the expense of the environment. They bring the same passion as many of my classmates do.
Given that economic development is going to take place whether we like it or not, why not have it come in the form of an intelligently-designed lodge for tourists? The benefits are numerous, so I’ll list out only a few. Foreign money – in the form of tourist dollars and investments in attractive projects – comes directly to the rainforest. To respond to a need for more guides, drivers, cooks, hotel workers, etc. locals have more opportunity to become educated (in new languages, in natural sciences, etc.), resulting in employment opportunities locally in the short-run and elsewhere in the long-run. With these new jobs, locals are less likely to pursue other activities like gold mining or cattle ranching. Due to our clients’ understanding of the local ecosystem, the land is only partially built on, resulting in more available land for tourists and locals alike to enjoy. Our client uses its profits to help the local economy develop sustainably so that tourism is not the sole source of sustainable business in the region.
Obviously, this model would not work everywhere. But in a place like the Peruvian rainforest, which for now still has everything from howler monkeys to spiders 18 times more poisonous than a black widow, it’s not such a bad option.
