Yucatan Peninsula Partnership for Sustainable Intensification Acuerdo Peninsular para la Intensificación Sustentable (APIS))

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1 Yucatan Peninsula Partnership for Sustainable Intensification Acuerdo Peninsular para la Intensificación Sustentable (APIS)) Context The Yucatan Peninsula has 12 million hectares of standing forests. 1 It is the Amazon of Mexico the largest remaining tract of intact tropical forest in the country. These forests are both megadiverse and important storehouses for carbon. Over 70% of the region s forests are owned by ejidos, or local communities, making them key actors in land-use dynamics. Despite their immense value, the Yucatan Peninsula loses 80,250 hectares per year. 2 Extensive ranching and agriculture are by far the biggest drivers of land use change. In the Peninsula, 50% of deforestation is caused by ranching and another 34% is caused by agriculture (see map below). 3 Much of this land conversion is due to inefficient, expansive practices. In ranching, the national average pasture coefficient (number of animals per hectare) is 1.8. In the Peninsula, the average is one. 4 With improved (silvopastoral) practices, heads per hectare can be increased up to at least three for full grown animals and five for calves, while daily weight gain can increase by 75% 5 for beef and daily milk production can increase by 133%. This results in an overall five- to seven-fold productivity increase for beef and milk production per hectare annually. 6 1 Hansen data Hansen data. Global Forest Watch. 3 Alianza Mexico REDD+ - CITRO, Information taken from interviews with the Unión Ganadera Regional de Campeche UGRC, conducted by TNC and Grupo Consultor en Mercados Agrícolas. 2016, and Solorio, From 300 grams to 700 grams for beef, and from 4 to 7 liters of milk daily. 6 Solorio, 2016.

2 In agriculture, nationwide yield gaps for corn are estimated at 43% on rain-fed land, compared to just 10% on the country s larger irrigated farms. Data shows that implementing conservation agriculture practices for corn production could increase productivity by at least 12% for rain-fed corn in the Peninsula while significantly lowering production costs. 7 Additional benefits on soil productivity, erosion control and moisture retention are perceived by farmers and landowners. At the same time, there are significant opportunities to add value to standing forests, further incentivizing their conservation. For example, we have identified the potential to increase sustainable forest management practices. Finally, there are major opportunities for forest restoration. Therefore, there is a significant opportunity to increase production in agriculture and ranching while freezing the footprint of pastures and cropland, effectively stopping deforestation in the Peninsula. If this opportunity is realized, it would provide significant benefits for the climate as well. A national study by McKinsey and Company found that reducing deforestation from pastureland conversion is the biggest single action Mexico can take to mitigate climate change (yielding 30MtCO 2 annually in reductions). Reduced deforestation from slash and burn agriculture (20MtCO 2 ) and restoration of degraded forests (9MtCO 2 ) also represent major opportunities. 8 Figure 1: Drivers of deforestation in the Yucatan Peninsula 7 CIMMYT, field data on conservation agriculture by state, All figures in this paragraph from: McKinsey and Company Updated analysis on Mexico s GHG baseline, marginal abatement cost curve and project portfolio. TetraTech/USAID.

3 Challenges The Government of Mexico identifies the following key challenges to achieve productivity, profitability, and competitiveness while management of natural resources remains sustainable: 9 Unequal distribution of income and resources; for example, only 28% of land devoted to agriculture has irrigation, but 60% of the agricultural GDP comes from irrigated areas. Commercial producers are highly competitive, but 70% of producers are subsistence farmers or are net consumers. Inequality is reflected regionally as well, with the Southern states reporting lower productivity rates for their crops. Atomization of producers; nearly 80% of producers own plots smaller than five hectares, a fact that poses a challenge to designing policies that can include and reach them as well as to organize and bring small producers into sustainable supply chains. Lack of reliable and accessible financial mechanisms for improving productivity (e.g. only 6% of agricultural production units have access to institutional credit). Existing policies provide incorrect incentives for achieving productivity, and there is a prevalence of a culture of subsidies among farmers. High vulnerability in the food sector due to diverse risks such as climate, plant and animal health, price volatility, and a high external dependency on foreign inputs. Finally, weak innovation and technological development in the agriculture sector. Goals The Nature Conservancy aims to facilitate a Yucatan Peninsula Partnership for Sustainable Intensification among key actors from the government, private sector, and organized civil society. The goals of this agreement for 2030 could be (to be refined as the Partnership is structured): Achieve zero net deforestation while increasing beef productivity and corn/soy productivity by at least 15%, Place 2.7 million hectares of land under intensified ranching and agriculture practices Avoid deforestation of 310,000 hectares Avoid emission of 12.5 million tons of CO2e 10 Restore 2.1 million hectares of forests and productive areas Effectively conserve 5.3 million hectares of critical ecosystems 9 Plan Nacional de Desarrollo , IV. México Próspero, p Reduction against baseline is calculated considering a 50 % deforestation reduction by 2020 and zero deforestation by 2030.

4 Key Actors The success of the Partnership depends on a clear value proposition for the key actors. No single actor is able to achieve these ambitious goals on its own. Collaboration through an integrated landscape approach is needed. The table below is a summarized analysis of the key actors, the actions needed from each to achieve the goals, and the benefits to them of taking those actions. ACTOR ACTIONS NEEDED VALUE PROPOSITION Farmers and Ranchers Farmers and ranchers Associations of farmers ranchers Increase productivity, freeze footprint of the agricultural frontier. Restore degraded lands and forests Organize to gain better access to markets Increased profits in the medium term Improved farm management Increased access to markets Adaptation to climate change Technical Assistance Agents & Researchers Hubs Ex: CIMMYT, national and local universities and research centers Train producers on improved productive practices and on financial and market incentives Experiment/Innovate Centers for Landscape Innovation to support capacity building and enhance networks for innovation and value chain integration. Commodity buyers Feedlots Processors Ex: SuKarne, Bimbo, Nestle, Kellogg s, Gruma Retailers Ex: Walmart Implement/adopt traceability systems Preferencial sourcing from sustainable producers and/or from ZPS defined zones Socio-environmental awareness programs Supply chain monitoring and traceability Less time of cows in feedlot = significantly lowered costs Known point of origin/deforestation-free product Improved relationship with producers Reduced supply risks Known point of origin/deforestation-free product

5 ACTOR ACTIONS NEEDED VALUE PROPOSITION Provide adequate credit lines Provide working capital Use ZPS to define eligibility zones Support for project design/entrepreneurship Financial Players Private banks Development Banks Impact investors Ex: FIRA Municipal Governments Municipal governments Inter-municipal associations State Governments Ministry of Environment Ministry of Ag Ministry of Rural Development Complete and adopt POELs Implement inter-municipal investment plans Champion the Partnership Use ZPS to target investments Monitor and enforce Net present value versus present value of investment: 1.35 Social, environmental, and climatic benefits Increased investment in the municipality Social and environmental benefits Meet stated development goals International recognition Solidify legacy of innovation and economic progress Increased investment in the state Social, environmental, and climatic benefits Strengthen Yucatan peninsula Climate Action Fund Federal Government CONAFOR SAGARPA Use ZPS to target subsidies Improve subsidies to support the Partnership Coordination across Ministries Monitor and enforce Meet stated rural development goals Resource efficiency Social, environmental, and climatic benefits International recognition Meet NDC goals by 2030 Investment Opportunity (Sustainable ranching example) We are quantifying the investment opportunity for achieving these goals through investments in the ranching, agriculture, and forestry sectors. Here we share numbers on sustainable ranching as an example. The economics of intensification investments are compelling for cattle ranchers due to a big productivity boost. The date below corresponds to beef production, which is the prevalent activity for cattle ranching in the Peninsula.

6 $30,000 Gross Margin $25,000 $20,000 $15,000 $10,000 $5,000 $- Conventional Intensified Gross margin The estimated investment for doubling production through improved practices is of $ 9.74 million dollars which could be done on 100,000 hectares. The analyses consider a seven year payback period. Existing Tools and Enabling Conditions The Government of Mexico, the State Governments, The Nature Conservancy, and our partners have already made significant progress on some of the key analyses, models/pilots, and tools to inform and shore-up the Partnership. The following are some key enabling conditions already in place: State and National REDD+ Strategies: Each of the three states of the Yucatan Peninsula and the National Government have completed strategies for Reducing Emissions from Deforestation and forest Degradation (REDD+), which define the principles, objectives, and main lines of action necessary to reduce deforestation. Though they are high-level strategies, they can provide general guidance for the Partnership. Inter-municipal Investment Plans: In three critical zones, covering 5.5 million hectares (3.9%) of the Peninsula, municipal governments have joined together to create investment plans for REDD+, which define specific actions to increase productivity and reduce deforestation as well as possible sources of finance. Yucatan State has already pledged $1M per year for five years to implement the plan in the region of the state with the largest remaining tract of standing forest. Sustainable Production and Conservation Zoning (ZPS) map (see below): TNC and our partners have completed a map that spatially defines the most important areas for maintaining forest cover and the areas with the highest biophysical and socioeconomic potential for 15 important crops/land uses. This map can be used by the Partnership to target and align public and private investments. Additionally, the Partnership can use the map as a target against which to monitor success. The Yucatan Peninsula Climate Action Fund: This recently established public-private fund can receive and manage multiple sources of funding to promote and scale-up improved productive practices throughout the Peninsula.

7 The Maya Forest Watch: This collaborative land-use monitoring platform that can identify, in near real-time, deforestation events and monitor land-use dynamics across the Peninsula. It can be used by the Partnership to monitor implementation. Centers for Landscape Innovation (CITERs): These hubs build capacity of ranchers and farmers to adopt the improved productive practices necessary for stopping the advance of the agricultural frontier and connect them to new finance and markets. Each hub includes a training center with experimental plots and a training curriculum, a network of model farms, and networked partner institutions that provide access to financing and markets. Figure 2: Sustainable Production and Conservation Zoning Map. Preliminary.