john dixon galapagos 5-20071 the galapagos – a unique and valuable resource john a. dixon...

John Dixon Galapagos 5-2007 1

The Galapagos – a unique and valuable resource

John A. [email protected] to Environmental EconomicsThe World Bank, May 22, 2007


The Galapagos – islands of myth and magic

Made famous by Charles Darwin (visited in 1835) and his book The Origin of Species (published in 1859). Developed theory of evolution;

Volcanic in origin (formed by a “hot spot” and plate tectonics), 1000 km from coast of Ecuador, never linked to any other landmass;

11 main islands, 7970 km2; 3 main municipios; two main airports and several ports;

Unique flora and fauna – giant tortoises, land and sea iguanas, Darwin finch(s), rich marine life (sea lions, turtles, sharks,..). Reptiles are the apex species.


Map of the Galapagos


The Economy of the Galapagos

Small resident population – Ley Especial de Galapagos (1998) created “citizenship rights” and residency cards were issued – population is about 30,000 people now, maybe two thirds of which are legal “residents”. The main population center is Puerto Ayora on Santa Cruz. The provincial seat is on San Cristobal.

Tourism, government, research and conservation, and fishing are the main economic activities.

Well protected -- 97% of the total land area is under strict conservation, as well as most of the surrounding waters (PNG – National Park of the Galapagos manages both land and marine areas).


Tourism – the 800 lb gorilla in the local economy

Tourism is the driver of the economy A high-end, expensive tourism product; Small in numbers, maybe 120,000 people per year, mostly

international visitors. (In contrast Hawaii receives about 7 to 8 million visitors per year);

A worldwide market – aggressively sold in the US and Europe by “ecotour” operators and others;

Most tourism is still sea-based; tours of 3 to 4 days up to one week are the norm (at an average cost of $250 to $350 per person per day);

High-end scuba diving on “live aboards” also a significant sub-sector; limited capacity, high demand.


Table 1 Tourist Arrivals in the Galapagos

Year National visitors (‘000)

Foreign visitors (‘000)

Total (‘000)

1980 4.0 13.5 17.4

1985 6.3 11.6 17.8

1990 15.5 25.6 41.2

1995 15.5 40.3 55.8

2000 12.6 54.3 66.9

2001 19.8 57.9 77.7

2005 (est) 115-120

2006 (est) 120-130


A finely tuned fee structure: entrance and concession fees for PNG (US$ per person per entrance; paid at the airport by all visitors except those holding “residency cards”)

Category of tourists USD

Foreign tourists 100

Foreign tourists (under 12 years old) 50

Foreign tourists from Andean Community or Mercosur countries

50

Foreign tourists from Andean Community or Mercosur countries (under 12 years old)

25

Citizen or resident of Ecuador 6

Citizen or resident of Ecuador (under 12 years old)

3

Foreign tourists (non-resident) attending a national academic institution

25

National or foreign children under 2 years old

No fee

Type of Boat

Category/Class

Amount per berth per

year– “patente”(USD)

Cruise A 250

Cruise B 200

Cruise C 150

Day Tour R 250

Day Tour E 50


Distribution of entrance fees (about USD$8 to $10 million collected per year)

Recipient Distribution of total fees collected

Galapagos National Park 40%

Galapagos Marine Reserve 5%

Galapagos municipalities (municipios) 20%

Galapagos provincial government 10%

Ministry of the Environment 5%

Galapagos National Institute (INGALA) 10%

Quarantine and control system (SICGAL)

5%

Ecuador National Navy 5%

TOTAL 100%


There are two “Gold Cards” in the Galapagos – each confers rights and benefits

“cupos” or permits for berths on sea-based cruise ships (cruceros); the primary way tourists visit the different islands Some 1800 “cupos” at present used by a total of about 94

boats; growing concentration in ownership Are cupos “para siempre”? or are they a government

granted permit that can be withdrawn/ reallocated? Residency Cards – allows holders to live, work, and

invest in the Galapagos “set” as of 1998, with the new Special Law of the

Galapagos; new Residency Card holders created by birth or marriage


Unique ecological resources generate economic rents

The unique ecosystem of the Galapagos (especially the fauna), with many endemic species, has resulted in a worldwide interest in the islands. Most visitation is sea-based. Tourism, including nature tourism, scientific tourism, and adventure tourism, has grown rapidly in the past decade. The “cupos” are the Gold Card key to this business.

Even with the high cost structure in the Galapagos, it appears that considerable economic rents exist. The full range of TEV components exist – direct and indirect use values, as well as non-use values.


Economic rents – like the “garua” in the Galapagos

Economic rents are real money and one of three things can happen to them: They can stay with the producer (PS) or with the

user/ consumer (CS); They can be “captured” by one group or another,

often the producers (e.g. extra-normal / monopoly profits) or the government (e.g. park admission fees);

They can be “dissipated” – lost to the system and consumed without benefiting anyone/ or degraded by overuse or mismanagement.


Apart for the cruceros, other sectors of the economy have mixed economic and environmental impacts

Fishermen – small in number (up to 1000 with permits, several hundred boats, a much smaller number fish full-time). Potentially large ecosystem impacts, and a very vocal sector. Over fishing of sea cucumbers and lobster; illegal shark fining.

Land-based tourism -- smaller hotels, lower cost visits, the most rapidly growing part of the tourism industry (in numbers), concentrated in Puerto Ayora. Residency Card owners (another type of Gold Card) can extract economic rents here.

Government services – many agencies are represented at both the provincial and the municipio levels. Overlapping authority and vested interests results in weak governance structure.


Research and conservation – a major sector in the Galapagos

NGOs, Conservation groups, the Charles Darwin Research Station (CDRS), and international organizations constitute a major sector in the economy, with annual budgets in the millions of dollars, and special projects worth many millions more each year.

The CDRS, for example, has a budget of over US$ 4 million per year. The PNG has an even larger budget (largely transfers from admission fees).

At one level there is no shortage of money (e.g. money is not the issue); at another level, it is ALL about money and rent capture!


Estimates of gross economic flows per year in the Galapagos (million USD /yr)

Sector or activity creating the economic flow

“Guesstimate” of the gross economic flow (millions of dollars per year,

ca. 2005)

“Guesstimate” of present

uncollected economic rents

in the sector(millions of dollars

per year)

Where the money is predominately

spent – international level (I),

national level (N), or local

level (L)

Tourism

International tourism (largely sea-based)

$250 - $350 $25 to $35 or more N, I, L

National tourism (largely land based)

$10 $1 to $2 L, N

Fishing $3-6 Probably zero or negative

L, N?

Research and conservation * $10 ?? L, N, I

Public expenditures * $12-$15 -- L, N

Investment projects ($10-$15??) not included in total

L,N

TOTAL $285 - $391 $26 - $37


Rents, rent capture and the sea-based tourism business

+100

+200

Cost of a visit

Number of visits

Boat operator fee

Transfer from int’l tourists to Ecuador

Producer’s surplus

Consumer’s surplus

Visits based on the “cupos” available


Development versus Conservation

The major management issue is how to control/ direct tourism to maximize economic benefits and minimize ecological impacts, but, economic benefits for whom? What about local job creation?

Invasive species is the number 1 resource management problem – the more economic activity, the more danger of new invasive species.

Therefore “tortugas o gente?” – tortoises or people – is the basic tradeoff/ management challenge


No simple solution – but many possibilities given the unique nature of the Galapagos

Sea-based versus land-based tourism development?

Increased rent capture per visitor? Increased rent capture from service providers

(especially the cruceros) How should one use additional income from rent

capture (conservation? quarantine services? education and training?)

How to handle the problem of “illegal” workers/ illegal residents?

The need for a high level “champion” to make changes!

john dixon galapagos 5-20071 the galapagos – a unique and valuable resource john a. dixon...

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