Economic viability of an agroforestry system for indigenous communities in Brazil: a differentiated approach to risk reduction

In this paper the financial properties, economic viability and the risk of investing in an agroforestry system (AFS) for indigenous communities (IC) are evaluated to address a critical gap in the literature. An AFS proposal was designed by: (1) assessing raw data from a rural extension project, university and IC Guarani Kaiowá in the Indigenous Reserve of Dourados (IRD); (2) collecting notes and data from local field experts and IC; (3) selecting a scheme from the literature. The AFS was prepared to meet the needs of the IC, mainly food security, income generation, medicine, timber, cultural aspects, welfare. The AFS included a wide range of species, aiming at the diversified and continuous food production. The study was conducted in the IRD, Dourados, Mato Grosso do Sul, Brazil. As methods for investment analysis, capital budgeting techniques were applied. The minimum attractiveness rate (MAR) was calculated according to the hybrid CAPM model (HA-CAPM). For risk assessment, the Monte Carlo method was triggered (10,000 interactions with the variables price, productivity, and cost variables) using the triangular probability distribution. The AFS showed economic viability, with NPV and EUAV values greater than zero, IRR and MIRR greater than MAR (12.80%), PI greater than 1 and the payback period less than the project duration. The analysis confirmed the economic viability (probability of a negative NPV was null). The research findings provide a comprehensive insight into the importance of AFS in promoting economic well-being and support the implementation or strengthening of AFS in IC, bearing in mind that problems and solutions should not be narrowed to a capitalist approach.