AFIRMAAcceso a las Finanzas Rurales para la Microempresa en Mxico

Ecotourism in Marismas NacionalesEvaluation of the value chain and opportunities for collaboration AFIRMA Project June, 2009.

The AFIRMA Project, managed by Development Alternatives, Inc. prepared this publication for review by the United States Agency for International Development.

Ecotourism in Marismas NacionalesEvaluation of the value chain and opportunities for collaboration AFIRMA Project

Miguel Baca DAI Ivana Fertziger AFIRMA PROJECT / DAI

JUNE, 2009.

The authors views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.

CONTENT TABLE1. 2. EXECUTIVE SUMMARY...................................................................................................... 1 INTRODUCTION................................................................................................................. 7 2.1. Background ......................................................................................................................... 7 2.2. Scope and organization of the study ................................................................................ 8 3. Situational analysis ................................................................................................................ 8 3.1 Characteristics of nature tourism globally ....................................................................... 9 3.2 Tourism in the Marismas Nacionales.............................................................................. 11 3.3 Description of the value chain ......................................................................................... 143.3.1 Access and consumption ...............................................................................................................................................15 3.3.2 Lodging services ...............................................................................................................................................................16 3.3.3 Tourist information centers / Distribution channels..............................................................................................17 3.3.4 Excursions / Tourism Operation Services ................................................................................................................18 3.3.5 Tourism information systems.......................................................................................................................................18 3.3.6 Facilitating environment (regulatory, legal and institutional framework and and financial services)..........19

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Strategic analysis................................................................................................................. 21 4.1 SWOT analysis .................................................................................................................. 21 4.2 Strategic positioning ......................................................................................................... 22

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Strategic planning ............................................................................................................... 24 5.1 Short-term recommendations......................................................................................... 245.1.1 Workshop on Sustainable Practices for Hotels and Tourism Destinations.....................................................24 5.1.2 Establishing Sustainable Construction Regulations in Escuinapa .........................................................................25 5.1.3 Preparing a Tourism Management Plan for the Marismas Nacionales...............................................................25

5.2 Medium-term recommendations .................................................................................... 255.2.2 Strengthening the San Blas Hotel Association ........................................................................................................25

5.2 Medium-/long-term recommendations........................................................................... 265.2.3 Facilitating the development of Financial Services for Ecotourism Companies...............................................26

ACRONYM LISTAFIRMA AMTAVE CIP CONANP CONAPESCA CTO FIRCO FONATUR MN NGO WTO PROCODES SAGARPA SECTUR SEMARNAT USAID WWF Access to Rural Finances for Microenterprises in Mexico Mexican Adventure Tourism and Ecotourism Association Centro Integralmente Planeado FONATURs model for a planned tourism destination National Protected Natural Area Commission National Aquiculture and Fishing Commission Caribbean Tourism Organization Secretary of Agricultures Shared Risk Fund National Tourism Promotion Fund Marismas Nacionales Non-Governmental Organization World Tourism Organization Conservation Program for Sustainable Development Department of Agriculture, Cattle, Rural Development, Fisheries, and Foodstuffs Department of Tourism Department of Environment and Natural Resources United States Agency for International Development World Wildlife Fund

1. EXECUTIVE SUMMARYIn collaboration with local actors working for nature conservation, the AFIRMA Project has analyzed some productive activities that protect the biodiversity in this region while offering an incomegenerating opportunity for families and communities in the Marismas Nacionales (MN). Marismas Nacionales is the largest, most diverse mangrove ecosystem in Mexico, and accounts for around 20% of the total mangrove swamps in the country. Currently, MN is classified as a RAMSAR site, indicating its international importance as a wetlands. The MN ecosystem constitutes a crucial habitat for several migratory birds and is home to plant species with great biological and commercial value. Mangrove swamps are also a refuge for various marine species and play a fundamental role in the conservation of the areas rich biodiversity, on which the fishing and tourism industries depend. Moreover, two proposals are being analyzed to declare the MN a protected area. One corresponds to the area belonging to the state of Sinaloa, and the other to the state of Nayarit. Marismas Nacionales is facing a series of threats to its rich biodiversity. The RAMSAR program 1 assessment report, conducted by CONANP in 2001 identified the indiscriminate use of mangrove wood and wood from other trees, the substitution of native flora with productive species (such as coconut tree or oil palm) and water pollution due to aquiculture and industrial activities both in the mangrove wetland area and in the rivers that feed into it, as some of the main threats to MN biodiversity. A new but important medium-term threat is the growing urbanization of the coast as a consequence of the development of the sun and beach tourism in the region. AFIRMA conducted this study to help evaluate the feasibility of carrying out ecotourism and nature tourism activities in Marismas Nacionales. This was a quick study aimed at understanding the current dynamics and the opportunities to better articulate the nature tourism value chain, particularly for the involvement of local communities and with an ecological, sustainable approach. The intention of this study is to serve as another input for diverse efforts by SEMARNAT and several NGOs in the area to mitigate threats to the wetlands. These recommendations aim to identify a general roadmap for the nature tourism sector in Marismas Nacionales to become a sustainable income generator that protects the regions immense biodiversity. Given that the tourism sector in the area is still incipient and focused on the regional sun and beach tourism, the main focus of the study is to understand the area's potential to attract a more dedicated nature tourism audience and to identify what kind of interventions would have to be implemented in order to fulfill this potential in a tourism sector that is both environmentally responsible and profitable for local businessmen and communities. The following diagram illustrates the nature tourism market value chain in the area:

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Diagram: Marismas Nacionales Nature Tourism Value Chain

The tourist industry has two characteristics which condition the use of the traditional value chain model in the analysis of the supply and demand dynamics. First of all, there is the inseparability of the production of the tourist experience and its consumption. Such inseparability is explained by the need for the tourist to be present in the place where services are offered, as well as their direct participation in the provision of these services. Therefore, the tourist is the ultimate producer of their "tourist experience" and in fact the product does not exist without them. Their presence at the destination determines the existence or nonexistence of the tourist industry. The second characteristic, which derives from the first one, is that the tourist product is highly perishable. Unlike other products and services, a night in a hotel or a ride in a boat that is not for sale are experiences that are impossible to replicate or save, and are lost forever. Thus, the tourist value chain flows start with the consumer, not the producer. In this diagram, value chain flows are represented by different colored arrows. The thicker arrows represent significant flows in terms of commercial exchange volume. The blue-colored arrows represent current flows through specific channels. Orange arrows represent sporadic flows which should not be considered significant commercial exchanges. Finally, green-colored arrows stand for financial subsidies granted by various public and private organizations for ecotourism activities. As may be concluded from this analysis, there is a series of important challenges regarding the way nature tourism is implemented in the region:

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Access and Consumption: Independent and regional tourism dominates, both in Nayarit and in Sinaloa. Most visitors arrive driving their own car. Mainly sun and beach market around the periphery of the Marismas (Mazatlan, Puerto Vallarta, Nuevo Vallarta). Only occasional consumers of nature tourism products.

Lodging Services: Limited to rental houses, small hotels and hostels and increasingly visitors' own homes. The quality of service in the area corresponds mainly to regional and local markets, focusing on price and basic comfort. Hotel occupancy rates for international visitors (generally the main consumers of ecotourism services) to Sinaloa and Nayarit show the following:Year 2006 2007 2008 Average Annual Occupancy Rate - International Visitors Sinaloa 16.08% 15.17% 13.54% Nayarit 39.41% 38.62% 34.65%

Source: Department of Tourism (SECTUR), DataTour Program. Prepared by: DAI

In Sinaloa, the percentage of international visitors as has been consistently declining. Hotel occupancy rate for international visitors in Nayarit is much higher, but is concentrated fundamentally in the Nuevo Vallarta, Punta Mita and southern Nayarit Riviera areas. The substantial distance between these destinations and the MN is a challenge for the development of a robust nature tour market. Information Centers The Sinaloa Tourism Department has an information center in Mazatlan, which only provides tourism information on sun and beach and nightlife products. The Escuinapa municipalitys interest in building an Environmental Interpretation Center for MN in Sinaloa near the new sun and beach tourism center (to be constructed, although they have already secured investment from FONATUR). In Nayarit there are no tourism information centers in any of the recreational areas located in the MN area. Tourism Operation Services: Some tour operators are working close to or within the MN from Mazatlan and Puerto Vallarta. Very low current demand for this kind of excursions in MN. The main distribution channel for existing excursions is direct sales.

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Tourism Information Services: Ignorance of the existence of market information that could help providers understand the tastes, preferences and purchasing power of their current and potential clients. However, the Nayarit and Sinaloa state tourism boards, as well as the federal department\ of tourism, publish statistics regularly. Nayarit has developed a tourism development strategy based on circuits. Still, this and other types of information are not produced or communicated in a consistent and timely manner to current or potential tourism entrepreneurs. Facilitating Environment: a) Legal and Regulatory Framework CONANP has a national protected area tourism strategy that provides valuable guidelines for the development of nature tourism. CONANP policy suggests the development of tourism plans in Natural Protected Areas (NPA) to guide this activity. The Nayarit tourism development strategy proposes the development of destinations focused on local nature and culture, including the "Marismas Nacionales Circuit". b) Institutional Framework: Private sector associations are focused on the sun and beach tourism market. The only exception is the new San Blas Hotel Association, which aims at focusing the area's businesses' promotional efforts on nature tourism. However, product development work is not as advanced as product promotion, which may turn out to be counterproductive, as acknowledged by representatives of the Association. b) Financial Services: The formal financial sector is not yet interested in investing in tourism products. There are some alternate financing sources for ecotourism products: seed capital. Initiatives in the area are not fully integrated with the financial sector. Availability of working capital could be a bottleneck once sales increase.

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Additionally, a SWOT analysis of nature tourism in the area was conducted, showing the following results: STRENGTHSGreat potential for development of nature watching tourism with a focus on the dedicated ecotourism market. Existence of some seed capital to develop ecotourism products. Presence of the San Blas Hotel Association, which is focusing on promoting tourism in the area towards nature tourism. Great interest by local authorities in promoting nature tourism.

WEAKNESSESLack of a consistent, strong demand for nature tours or ecotourism products that are several days long. Lack of an ecotourism development strategy in the Nayarit part of Marismas Nacionales. Lack of a lodging supply to address the needs and expectations of the nature tourism segment. Lack of interest and knowledge of the local population regarding commercial and managerial management for tourism or product development.

OPPORTUNITIESCreation of a major tourism distribution center close to the MN, the CIP. Potential improvement of the volume and quality of visitors to the area if the CIP develops successfully. Interest on behalf of federal and state government entities to support ecotourism development. Existence of a favorable legal framework for the development of alliances between the private sector and local communities. Federal standards for the operation of tourism services within Natural Protected Areas (NPAs).

THREATSGreater deterioration of the economy in Mexico and the potential curb on tourism investment in the area. Unrestrained hotel infrastructure growth and consequent process of urbanization in CIP and Riviera Nayarit. Too much emphasis on the promotion of the area as a sun and beach destination, not as a dedicated nature destination. Continuation of unsustainable fishing practices that threaten the area's rich biodiversity. Lack of leadership of the public sector in the field of ecotourism development.

Based on the analysis of the nature tourism value chain in the MN, it is possible to say that it is currently in a stage of potential planning, not yet reaching the introductory stage, with the exception of the area around San Blas, where nature tourism is at an introductory phase. Despite the incipient development of nature tourism, clearly the area has great possibilities of becoming a tourism destination for the dedicated nature/beach market, as is the case with the Manuel Antonio National Park in Costa Rica. Nature tourism coexists with other, more traditional forms of sun and beach tourism that have been adapted to strict construction and environmental management standards. The medium- and long-term strategy proposed to consolidate the MN as a nature and beach destination is based on three guidelines aimed at minimizing the risks and correcting the weaknesses identified in the SWOT analysis. These guidelines include:

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Working with FONATUR and local authorities in construction of planned tourism destination (CIP, for its initials in English). Developing and strengthening a limited, specific offer of tourist products. Strengthening tourism planning in future protected areas.

This study has resulted in the preparation of a series of recommendations towards achieving these objectives. It should be noted these recommendations are aimed at obtaining the following result: Laying the foundations for the development of Marismas Nacionales as a destination for the specialized, dedicated nature market, with a social and environmental sustainability approach. We consider that, given the existing local management capacity and the availability of funds to start tourism ventures, the greatest contribution USAID can make is to become a catalyst for these efforts and to help coordinate the development of nature tourism in the region. For that, we propose working closely with FIRCO, CONANP, the Escuinapa Municipality, the Nayarit SECTUR and the San Blas Hotel Association. These stakeholders have the will and the means to support the growth of the MN as a nature tourism destination. We have divided our recommendations into short-term, which could be implemented with the direct help of USAID, and medium-term, for which USAID could provide initial studies, though implementation would be the responsibility of local stakeholders. A) Short-term recommendations: Workshop on Sustainable Practices for Hotels and Tourism Destinations to raise awareness among key stakeholders about the benefits of a coastal development combining the concept of beach and nature in a harmonious, sustainable manner. Drafting Sustainable Building Regulations with a view to guaranteeing that hotels to be built within and around the Planned Tourism Destination (FONATURs Centro Integralmente Planeado - CIP) stringently implement environmental management systems, both in construction and operation. Preparing a Tourism Management Plan to guide the development of nature tourism in the Marismas Nacionales natural protected area in the short and medium terms. B) Medium-term recommendations: Strengthening the San Blas Hotel Association in two ways: a) to consolidate its position as the main local private sector association promoting nature tourism in the area, and b) so that they are in a position to offer coaching and training services to local entrepreneurs (who could be potential association members). C) Medium/long-term recommendations: Facilitating the development of Financial Services for Ecotourism Companies, working with some financial institutions in the region to help them assess the risk of tourism companies and offer services tailored to this activity, contemplating financial flows and needs for working capital, investment and other services.

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2. INTRODUCTION2.1. BACKGROUNDOne of the goals of the AFIRMA Project, financed by the United States Agency for International Development (USAID) is to support initiatives that reduce threats to Mexicos immense biological diversity through the promotion of sustainable productive activities. The future Nayarit/Sinaloa Marismas Nacionales Biosphere Reserve (MN) is a highly biodiverse area currently facing serious challenges to the conservation of the coastal mangrove swamps and the endemic species inhabiting them. In collaboration with local actors working for conservation, the AFIRMA Project has analyzed some productive activities which protect the biodiversity in this region and also offer an income-generating opportunity for families and communities in the area. MN is an area of mangrove swamps spreading along the Mexican Pacific coast, between the states of Sinaloa and Nayarit. It comprises an area of approximately 2,000 square kilometers and is located in a broad plain with numerous beaches which isolate water and form internal lagoons protected from ocean currents. Currently, the MN are a part of the list of marshes classified as RAMSAR (internationally important wetlands) sites in Mexico. Moreover, two proposals are being analyzed to declare the swamplands a protected area. One of said proposals deals with the area belonging to the state of Sinaloa, and the other one with the sector comprised within the state of Nayarit. The MN is Mexicos largest, most diverse mangrove swamp ecosystem, accounting for around 20% of the total mangrove swamps in the country. They constitute a crucial habitat for several migratory birds and are home to plant species with great biological and commercial value. Mangrove swamps are also a refuge for various marine species and play a fundamental role in the conservation of the rich biodiversity of the area, on which the fishing and tourism industries depend. Additionally, four endangered turtle species use the Nayarit portion as a nesting site. However, the integrity of this magnificent ecosystem is currently threatened by a series of productive activities which are not carried out in a context of sustainability. The RAMSAR program assessment report conducted by CONANP in 2001 identified the indiscriminate use of mangrove wood and wood from other trees, the substitution of native flora with productive species (such as coconut tree or oil palm) and water pollution due to aquiculture and industrial activities both in the mangrove wetland area and in the rivers that feed into it, as some of the main threats to MN biodiversity. A new but important medium-term threat is the increasing urbanization of the coast as a consequence of the sun and beach tourism development. The recent announcement of a new Planned Tourism Destination a few kilometers north of the border between the future protected area (in the state of Sinaloa) poses fears for the negative effects of a large hotel development over the fragile biodiversity in the area. South of the MN, the state of Nayarit has declared the expansion of the "Riviera Nayarit" as a tourism corridor which is to include the entire coast of the state (previously only between Nueva Vallarta and San Blas). Even though there is still little investment in tourism development in and around the Marismas Nacionales, land speculation is reputed to have begun. Some public-sector and non-governmental organizations interested in preserving the MN are implementing activities aimed at reducing or eliminating these short- and medium-term threats. The National Protected Area Commission (CONANP), a decentralized entity of the Department of Environment and Natural Resources (SEMARNAT), has started to support some sustainable activities in2

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the area through its Conservation Program for Sustainable Development (PROCODES). Some indicate that the Department of Agriculture, Livestock, Rural Development, Fishing and Foodstuffs (SAGARPA), via the National Aquiculture and Fishing Commission (CONAPESCA), is also supporting fishing and shrimp cooperatives in the area with the same objective. There is great local hope that the tourism activity of the region increases once the CIP is built and the Riviera Nayarit is extended, and that it may become the main income source for many local communities. However, there is still concern about the threats it poses if factors such as the type of infrastructure, building density, etc. are not properly controlled.

2.2. SCOPE AND ORGANIZATION OF THE STUDYAFIRMA conducted this study to evaluate the feasibility of carrying out ecotourism and nature tourism activities in the MN. Thus, a quick ecotourism value chain analysis was done to understand the current dynamics of supply and demand. Given that the tourism sector in the area is still incipient and focused on the regional sun and beach tourism, the main focus of the study is to understand the area's potential to attract a more dedicated nature tourism audience and to identify what kind of interventions would have to be implemented in order to fulfill this potential in a tourism sector that is profitable for local entrepreneurs and communities. The study was done based on a secondary information review as well as interviews with the main participants of the ecotourism value chain at the local, regional and national levels. Interviews took place in Jalisco (Puerto Vallarta), Sinaloa (Mazatlan, Teacapn and Escuinapa), Nayarit (Tepic, San Blas and Playa Novillero) and Mexico City between April 13th and 24th, 2009. This report is organized into three sections. The first part, the situational analysis, focuses on characterizing the current dynamics of tourism supply and demand, using a value chain approach. The second part, the strategic analysis, focuses on identifying the MN's potential to position itself as a nature destination for the specialized market, including a SWOT assessment. The third part, strategic planning, presents a list of suggestions for developing the region's ecotourism development in the short and medium term. Finally, as a methodological note, this report uses the terms ecotourism and nature tourism in very different ways. The reason for that lies in the fact that the definitions of ecotourism (which vary widely) refer to the organization of the supply of tourism products and services in protected areas according to environmental, social and economic sustainability criteria. On the other hand, the term nature tourism refers to preferences of the demand for recreational activities in areas with biological or scenic value, be them protected or not. While it is true that there is a growing interest across all segments of the tourism market to minimize the environmental impact of their activities in the destinations they visit, there are other variables (such as price, distance and safety) which are more important when it comes to making a purchase decision. Therefore, it is clear that the environmental and social sustainability of the MN as a tourist destination will be the consequence of the appropriate structuring of the supply and the gradual education of the demand.

3. SITUATIONAL ANALYSISThe value chain of a tourist destination (understood as a specific geographical region identified by the visitor as a tourism product with specific characteristics) is generally structured around the buyer, in this case, the tourist. This is because the consumer constitutes a fundamental aspect of the process of producing the tourist experience. Unlike what happens in other industries, without a consumer, the

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possibility of "producing tourism" does not exist. Aside from this specific characteristic, in the tourism industry (as in all service industries) the product's features must address the consumer's needs and preferences. Therefore, in tourism value chains, key stakeholders focus on marketing and commercialization functions and tend to subcontract most operations. This situation offers Market segmentation and types of tourists great opportunities for the integration of multiple A practical guide local providers, given entrance barriers are relatively low. Considering how fundamentally important it is to understand the These characteristics make it impossible to talk about a sole value chain when we talk about tourism. Actually, one of the main features of the tourism industry recently is the marked segmentation of the market as a function of both visitors preferences and motivations and the type of activities they perform in the destinations they visit3. Each one of these market segments may be considered as a distinct value chain because it requires different services and products, and therefore, different strategies, providers and distribution mechanisms. Within these segments, nature tourism is one of the fastest-growing and with the greatest potential to generate social and economic benefits in areas with great biological value.market's behavior for the success of a tourism product, it is not surprising that multiple ways of segmenting and typifying the market have developed. Modern tourism marketing uses mainly two typologies: a) cognitive-normative, and b) interactive. The first typology refers to visitors' values and motivations, while the second refers to the activities they carry out in the destinations they visit. Even though one is not better than the other, and they both serve different purposes, cognitive-normative typologies are useful when it comes to understanding and attracting a new or unknown market. On the other hand, interactive typologies are much more useful to sell new products to existing or known markets. Due to the lack of consensus in the definition of ecotourist, the lack of clear segmentation studies and the fact that they do not constitute a homogeneous group, it is preferable to use interactive typologies when evaluating potential clients for a nature tourism destination.

3.1 GLOBAL CHARACTERISTICS OF NATURE TOURISMThe nature tourism market has similar features throughout the world. Due to the methodological issues associated with market segmentation criteria, there is currently no international database to provide a definitive image of the size and features of the nature tourism market. In 2005, the World Tourism Organization (WTO) published its last report on international tourism market trends, which contained information on the nature tourism market. From that information, the following stands out: Relatively small market. It is estimated that the nature tourism and the ecotourism markets account for 7-20% of the total tourism market. In numerical terms, this market would represent between 65 and 185 million people globally. These percentages vary according to the outbound market and the methodology used to measure the size of the market, so this information is controversial and should be taken with a grain of salt. Quick-growing market. The WTO reports that this market has grown 30% a year on average since 1987 and that the average annual increase of visits to national parks and natural protected areas has been 5%. Independent market with limited vertical integration opportunities. The profile of nature tourists corresponds to that of an independent traveler who proactively seeks the different elements to put together their 'tourism experience' (for example, reserves their own flights, hotel stays, looks for providers in the destination, etc.). This profile, which also varies according to the market and3

Banasree Dey and M.K. Sarma. Tourist Typologies and Segmentation Variables with Regard to Ecotourism. Tourism Management Vol. VII (2006), pages 31-39. London: Elsevier Science.

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destination, offers little opportunities for the vertical integration which characterizes the sun and beach segment. In said segment, the vertical consolidation and integration of great tourism operation companies, especially European, is one of the factors imposing relatively high barriers to the entry for new small-scale tourism entrepreneurs. Market with significant Internet use. Even though it is true that most visitors today use the Internet as one of their main information vehicles, the nature tourism segment uses it more than the others. This is mainly due to the preference of this market for independent travel. However, it should be emphasized that even though the Internet is the preferred way of obtaining information on destinations, products and services, it has not yet managed to position itself as the most used medium for the purchase and payment of tourism services. The purchase of these services, especially in new destination where there are no bands visitors know, is very much a consequence of trust. This market is more prone to using the Internet as a purchase and payment medium in destinations or providers which they know or which guarantee the legitimacy of the transaction. A market that influences and is influenced by other markets. The growth of the nature tourism market has produced a sort of 'contagion' towards other markets and vice-versa. In this sense, it is increasingly common to see visitors whose primordial interest is the enjoyment of nature and relaxation in a sun and beach destination as part of their itinerary. Also, there has been a noticeable increase in the number of traditional sun and beach visitors who are interested in taking adventure and nature excursions as part of their trips. For example, the Caribbean Tourism Organization (CTO), an inter-regional organization of which the Riviera Maya is a member, indicates that visitors to resorts and hotels in the main sun and beach destinations in the region manifest great interest in exploring local cultures and places outside off the beaten tourist paths. Sub-segmented market. The fast growth of nature tourism and the continuous interest in these activities among other segments have, in turn, sub-segmented into other identifiable markets, such as adventure tourism, wildlife tourism, research tourism, etc. These highly specialized segments could be considered as other value chains, even though their reliance on natural resources makes them very similar. Using this information on the nature market, we have elaborated what could be called a typical value chain for this segment:Diagram 1: Typical value chain of the nature tourism market

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This diagram illustrates the commonly observed dynamics of tourism product and service trading in ecotourism destinations. As can be seen, the flow of products and services offered by local communities to tourists requires the mediation of local hotels, local inbound tourism operators and international operators (or of outbound tourism). These stakeholders act as intermediaries much in the same way as a wholesaler or distributor does for agricultural or fishing products. A common mistake made when designing interventions to support the development of tourism with local communities is assuming these may sell their products directly to visitors, especially through the Internet. The analysis of the nature tourism value chain, as well as the experience of community ecotourism initiatives, shows it is more effective to foster the integration of these communities in the intermediaries' distribution chain and to promote the creation of alliances with the private sector.

3.2 TOURISM IN THE MARISMAS NACIONALESAs was previously mentioned, the Marismas Nacionales area includes territories in the states of Sinaloa and Nayarit. Each of these states has very different tourism strategies and approaches which may affect the growth of nature tourism in the MN directly and indirectly. It should be noted that in neither state does nature tourism constitute the main tourism product in which both the public and private sectors invest. Coastal sun and beach tourism is predominant in the region. This type of development responds to the general policy of the federal Department of Tourism (SECTUR) of positioning Mexico as the quintessential sun and beach destination for the North American market, mainly the United States. This policy has been widely successful and the U.S. has increased their representation as the main outbound market for the Mexico, as illustrated by the following chart:Chart I: International arrivals to Mexico 2004-2008Year 2003 2004 2005 2006 2007 2008 Total international arrivals 18,655,000 20,617,740 21,914,930 21,352,630 21,369,730 22,637,310 Total arrivals from the United States 4,562,351 5,223,552 5,672,740 5,747,999 5,799,865 5,866,545 Percentage of total international arrivals 24.4 25.3 25.9 26.9 27.1 25.9

Source: SECTUR, U.S. Department of Commerce Prepared by: DAI

These percentages rise even higher if we were to consider what the SECTUR's statistics call 'border tourism'. This group is almost entirely made up of United States nationals coming to tourism destinations near Mexico's northern border, in public or private vehicles, or by foot. The following chart illustrates the arrival of border tourists to Mexico and their contribution to the U.S.'s positioning as the main outbound market for the Mexican Republic.

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Chart 2: Total arrivals of U.S. visitors to Mexico 2004-2008Year 2003 2004 2005 2006 2007 2008 Total international arrivals 18,655,000 20,617,740 21,914,930 21,352,630 21,369,730 22,637,310 Total arrivals from the United States 4,562,351 5,223,552 5,672,740 5,747,999 5,799,865 5,866,545 Border tourists 8,312,000 9,065,000 9,381,000 8,745,000 9,278,000 9,337,890 Percentage of total international arrivals 68.9 69.2 68.7 67.8 70.5 67.1

Source: SECTUR, U.S. Department of Commerce Prepared by: DAI

As shown in the chart, the number of border tourists has remained somewhat stable across the last 6 years and undoubtedly constitutes the main source of visitors to the country. Most of these border visitors correspond to the sun and beach segment. Currently, tourism development in the MN area is very incipient and has three main characteristics: The main product is sun and beach, with small concentrations of coastal hotels mainly located in Teacapn (Sinaloa) and Playa Novilleros (Nayarit). Recently, a new very basic supply of nature excursions has emerged, mainly boat trips for bird and whale watching and sightings of other marine species. While the former are operated locally, the latter come mainly from Mazatlan. The main markets for MN beaches are local (Escuinapa in the case of Teacapn and Tepic in the case of Novilleros) and regional (mainly Guadalajara and the rest of the state of Jalisco). The participation of the international market in the area is minimal and consists mainly of American "snow birds" traveling independently in their own vehicles. Two types of new markets have emerged recently: excursionists from Mazatlan and foreign tourists purchasing houses in the area. Tourism in the area presents a marked seasonality, with peaks during summer vacations and long holidays (such as Easter / Semana Santa, etc.). The rest of the year, demand lowers substantially, as stated by interviewees, except for weekends. The Department of Tourism (SECTUR), through the National Tourism Promotion Fund (FONATUR) has recently launched the first phase for the development of a new Planned Tourism Destination to be tentatively called CIP Pacific Coast. This model is the same FONATUR has used for the development of other centers such as Cancun, Los Cabos, Ixtapa and Bahias de Huatulco. The project includes the construction of a 24-square kilometer core area in the middle of the MN, though 10 kilometers north from the limit of the intended protected area. This core area will expand from north to south since its internal development is limited by the presence of the so-called Agua Grande lagoon, which is one of the longest sections of wetlands in the MN. As a result, it is intended for the CIP core area to occupy nearly 12 kilometers of the Sinaloa coast, from the sector called Rancho Las Cabras to La Tambora Beach, near Teacapn. As per the original plans, phase one of the CIP will be completed in 2012 and will have infrastructure and services for an area of approximately 4 square kilometers. The current financial crisis has cast a shadow of doubt over the feasibility of achieving this ambitious target, though it is important to understand that such a delay would be merely temporary. If the CIP is completed as per FONATUR plans, the tourism outlook for the area would change dramatically by the year 2025. Around 3 million tourists a year are expected to use the 33,200 hotel

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rooms, 4 golf courses, two 1,000 ship marinas and 7 kilometers of seafront boulevard, which would be accessible by electric tram. The project also foresees the construction of around 5,000 houses to accommodate the local population working and providing services in the CIP, plus schools, hospitals and other public service infrastructure. Plans to build a new international airport or to refurbish and expand the Teacapn airport are also currently under analysis. The CIP is being promoted as an environmentally sustainable concept, emphasizing design and construction regulations compliant with international environmental standards. For example, in theory, no building may be taller than four stories, and all seafront properties should have a 300-meter buffer zone, starting from the high-tide mark. On the other hand, it has been proposed that a 25% core area be designated for protected areas where no type of construction would be permitted and that 1 square kilometer of mangrove ecosystem directly adjacent to the CIP be kept intact. Despite these safeguards, it is hard to imagine that a project of this magnitude would not become a direct threat to the ecological integrity of the MN. The risks against biodiversity in the MN would derive not only from the coastal urbanization and population growth in the core area, but from the urban development along the coast resulting from the CIP tourism growth. The main tourism poles and distribution centers in the MN area are Mazatlan to the north (state of Sinaloa) and, to a certain extent, San Blas to the south (state of Nayarit). The case of San Blas is quite peculiar, since it is not so much a consolidated distribution center as an excursion destination for the nature and adventure tourism segment, with its main distribution center further south in Puerto Vallarta (Jalisco). In that sense, San Blas is a destination in the process of consolidation with a growing reputation as the main ecotourism center for bird watching in the Mexican Pacific. This positioning reflects on the development of the tourist promotion strategy for Riviera Nayarit, which will be explained in further detail in section 3.3.3, on distribution channels. In that sense, the nature tourism development in MN could benefit from the efforts currently being made by different tourism-related players in this area. The following map illustrates the central part of the Marismas Nacionales. Mazatlan is located north of Boca de Teacapn, while San Blas is south of Boca de Camichin:Map 1: Location of the Central Area of the Marismas Nacionales

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SECTUR, through its DataTour program, has some statistics on the arrival of visitors, both international and domestic, to Sinaloa and Nayarit. Unfortunately, the tourism departments of both states have very few statistics on the arrival of visitors to both San Blas and Mazatlan: The statistics presented below were prepared based on a series of interviews with officers of the Nayarit Department of Tourism, statistics from SECTURs DataTour, immigration statistics from the Rafael Buelna International Airport in Mazatlan, and on information provided by hotel owners in the San Blas area:Chart 3: Arrivals of visitors to Nayarit and Sinaloa, 2006-2008Total arrivals Nayarit Domestic 489,621 652,697 1,254,712 International 467,443 464,755 734,330 Total arrivals Sinaloa Domestic 1,736,862 1,871,855 2,001,884 International 332,847 314,436 335,587 Total arrivals Combined total 3,026,733 3,303,743 4,326,513

Year 2006 2007 2008

Source: Nayarit Tourism Department, SECTUR DataTour Program, Grupo Aeroportuario Centro Norte (OMA). Prepared by: DAI

Please note these figures correspond to the aggregate from each state, not only to Mazatlan and San Blas. In the case of Mazatlan, since this is the most important tourism destination in Sinaloa, it can be inferred that the figures relating to international visitors correspond mostly to that destination. In the case of domestic visitors, probably most of them correspond to Culiacan, the capital of the state, whose airport handles 30% more arrivals than Mazatlans airport. In that sense, it may be inferred that Mazatlan receives around 800,000 to 1,000,000 visitors each year. In the case of San Blas, the situation is slightly more complex, since Nayarit is the main tourism destination in the Nuevo Vallarta area near the border with the state of Jalisco so it is possible to infer that most of the domestic and international visitors correspond to that destination. The Tepic airport received fewer than 10,000 passengers in 2008 and at the moment the state has no other airport with enough air traffic to turn it into the gateway for the region. According to the information provided by hotel owners in San Blas, this destination receives in average fewer than 20,000 tourists each year. This number does not include, however, visitors arriving to the area from Nuevo Vallarta, Puerto Vallarta or Punta Mita for one-day bird watching tours. Although this number is not really high nowadays, it is evident that it is growing steadily thanks to the promotion of ecotourism events and the awareness campaign to position San Blas as an ecotourism destination by the specialized press. Although the MN area has great potential for designated nature tourism development (i.e., tourists predominantly interested in nature observation), this has not yet been consolidated, as shown in the value chain analysis presented in the following section.

3.3 DESCRIPTION OF THE VALUE CHAINDiagram 2 illustrates the dynamics of the nature tourism value chain as observed during the field trip. It should be emphasized that the flows shown in this diagram do not currently exist or are so sporadic that they cannot be considered significant commercial exchanges for the time being. However, they have been included in the analysis because they are the basis of many public and private initiatives for the development of nature tourism in the region.

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Diagram 2: Marismas Nacionales Nature Tourism Value Chain

The tourist industry has two characteristics which condition the use of the traditional value chain model in the analysis of the supply and demand dynamics. First of all, there is the inseparability of the production of the tourist experience and its consumption. Such inseparability is explained by the need for the tourist to be present in the place where services are offered, as well as their direct participation in the provision of these services. Therefore, the tourist is the ultimate producer of their "tourist experience" and in fact the product does not exist without them. Their presence at the destination determines the existence or nonexistence of the tourist industry. The second characteristic, which derives from the first one, is that the tourist product is highly perishable. Unlike other products and services, a night in a hotel or a ride in a boat that is not for sale are experiences that are impossible to replicate or save, and are lost forever. Thus, the tourist value chain flows start with the consumer, not the producer. In Diagram 2, transaction flows are represented by different colored arrows. The thicker arrows represent significant flows in terms of commercial exchange volume. The blue-colored arrows represent current flows through specific channels. Orange arrows represent sporadic flows which should not be considered significant commercial exchanges. Finally, green-colored arrows stand for financial subsidies granted by various public and private organizations for ecotourism activities. 3.3.1 Access and Consumption As discussed in section 3.2, tourism in the MN area is mainly independent and regional, both in Nayarit and in Sinaloa. However, the use of public transportation is minimal as compared with the number of travelers who arrive via their own car. This so-called 'resident tourism', as well as the traditional sun and beach market predominant in the area can only be considered as 'casual consumers' of nature tourism products at this time. This means once visitors arrive to the area's beach destinations, they very

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sporadically choose to take nature watching tours. According to anecdotal information offered by most interviewed stakeholders, this situation is a consequence of the lack of an organized, accessible offer of ecotourism products and services, rather than of little interest by visitors in this type of activities. There are two main interrelated reasons explaining this lack of interest in nature excursions in the MN from the consumers' perspective, apart from the main reason for traveling: distance and cost. The main centers with some tourism infrastructure in the MN are located 130 kilometers south of Mazatlan and more than 200 kilometers north of San Blas. The latter constitutes in itself the northern limit for sameday tours offered from Puerto Vallarta, as indicated by several tourism operators in the area. Despite the good condition of the roads in the area, access is through secondary roads, which lengthens excursions. Since San Blas has not yet consolidated its position as an important distribution center, currently most nature excursionists in the MN area come from Mazatlan. However, cost constitutes an obstacle for a market made up mostly of local and regional visitors. For example, Onca Exploraciones, a Mazatlanbased nature tour operator offers whale watching and other sea life sighting boat excursions for US$86 per person (US$68 for children). However, these tours are purchased mostly by Americans or Canadians, while the number of domestic visitors is negligible in comparison. Considering that Onca is a small, seasonal operation attending to only 800 to 1,000 tourists per season, it may be inferred that the public willing to pay the price for this kind of excursions is relatively small. 3.3.2 Lodging Services The lodging supply in the MN area is currently limited to houses for rent, small hotels and hostels and, increasingly, private homes. Hotels and hostels in the area do not belong to international chains and are operated by their owners both in Teacapn and San Blas and in the beaches along the MN. The quality of service in the area corresponds mainly to regional and local markets, focusing on price and basic comfort. Although there are examples of local hotels with a clearly superior service focused on the international market (such as the Garza Canela hotel in San Blas), the profile of most of the lodging supply in the MN does not respond to the preferences of the international tourism market. It is currently difficult to obtain lodging occupancy statistics in specific tourist centers of the area, including San Blas, as well as the percentage of the market that each of this lodging categories holds. However, using the lodging occupancy statistics at a state level for Sinaloa and Nayarit as a reference, it is possible to infer some features and challenges of this sector in the nature tourism market. Since the international market is more likely to be interested in this product, the statistics used focus on that client segment.Chart 4: Average occupancy rates in Sinaloa and Nayarit, 2006 - 2008Average Annual Occupancy Rate - International Visitors Sinaloa 16.08% 15.17% 13.54% Nayarit 39.41% 38.62% 34.65%

Year 2006 2007 2008

Source: Department of Tourism (SECTUR), DataTour Program. Prepared by: DAI

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In the case of Sinaloa, the percentage of international visitors has clearly been consistently declining. This information confirms the comments from different interviewees who discuss a gradual change in the profile of Mazatlan, from an international tourist destination to one mainly oriented to the domestic and regional markets. This represents a great challenge for the nature market, since it is clear that most of the domestic and regional markets are not too interested in those activities. In the case of Nayarit, hotel occupancy by international visitors is much higher than in Sinaloa, but likely concentrated mainly in Nueva Vallarta, Punta Mita and the southern part of Riviera Nayarit. As previously mentioned, the travel time between these destinations and the MN is an obstacle for the development of a robust nature tour market. Due to the absence of demand, until now the region lacks an emblematic ecotourism lodging proposal with the unique personality, service and architecture necessary to become a tourist attraction on its own or a true option for international tourists. 3.3.3 Tourist Information Centers / Distribution Channels This link is generally absent from the nature tourism value chain in MN. During the field visit, we perceived a noticeable lack of sources of information to potential nature tourists on the various nature sites in the area. Although the Sinaloa Tourism Department has an information center in Mazatlan, it only provides tourism information on sun and beach and nightlife products. At said center, visitors can find information on the area's tourism attractions, service providers, opening hours, etc. However, the center does not function as a nature tourism product distribution channel, since they do not offer information, make reservations or directly operate any tours. Mr. Rufino Prado, Director of Economic Promotion for the municipal government of Escuinapa (where the future CIP is to be built, as it is encompasses the Teacapan delegation) expressed the municipality's interest in building an Environmental Interpretation Center for the MN in the Cristo Rey ejido, which is adjacent to Teacapan and very close to the CIP core area. This center would fulfill a very important information and interpretation function which would contribute to strengthening the nature tourism value chain in the area. Among the prospects discussed with Mr. Prado, there was the possibility of having the center work with a distribution channel for reservations visitors arriving from the CIP to go on nature tours operated by members of the local communities. However, given that financing for this Environmental Interpretation Center would mainly come from a FONATUR grant, its execution would depend on the implementation of the CIP. Therefore, this initiative would mostly likely happen in the long term. In the case of Nayarit, at the moment there are no tourism information centers in any of the recreational centers located in the MN area. Despite the great effort made by the state Department of Tourism to promote nature tourism in the San Blas area, the creation of information or sales centers for this type of tourism has not been consolidated by either the public or private sectors. It is interesting to note that the sale of nature tourism products in the MN area (both in Sinaloa and Nayarit) is currently done directly between operators (mainly locals) and clients, who must diligently look for the right person to organize a boat ride or a bird sighting excursion. Even in the case of consolidated tourism operators, such as Teacapan Tours (which operates sporadic nature tours in the MN area), it is hard to make reservations because they do not offer this service online and also because they have to be paid in cash or through bank deposits. All of this creates additional hindrances for the commercialization of nature tourism in the area.

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3.3.4 Excursions / Tourism Operation Services The main nature tourism and culture excursions currently offered in the MN area are those offered around Teacapan and San Blas by tourism operators in Mazatlan in the case of the former and Puerto Vallarta in the case of the latter. These consist fundamentally in boat rides in Teacapns Laguna Agua Grande and visits to La Tovara, a crocodile farm where they are bred to reproduce. However, the demand for these types of excursions in both places is currently low. For this reason, they do not constitute commercial exchanges consistent enough to generate an important economic impact on the local population. Jos Alfredo Andrade, administrator of the Ecotours de Mxico office in Puerto Vallarta, said that currently less than 1% of his clients buy nature and bird sighting tours in the area, primarily to Baha de Banderas. Tourism packages or excursions to San Blas are much more seldom sold, an average of around 4 per year. Also, Oscar Guzn, manager and owner of Onca Exploraciones in Mazatlan, said that even though his operation has been relatively successful, it has been limited to rides that last for a few hours for beach tourists already visiting the area. Perhaps more importantly, due to a lack of demand, Onca closes for most of the year and focuses on operating only during the high season, from December to February. Its main target market for the future is American science tourists specialized in whale and other sea life sighting for which the area of Teacapan is one of the most attractive sites. However, for the time being, he lacks the necessary capital to launch this initiative. At the moment, participation of the local population in the nature tour supply is very limited, which could become a social and economic problem in the future. According to information provided by Rufino Prado, fish and shrimp fishermen in the MN area are the most affected by the closed season imposed by SAGARPA in order to limit the impact of fisheries on the area's biodiversity. This situation will become even more difficult when MN is officially declared a protected area, since the traditional productive activities of the area's population will be affected. SAGARPA, SEMARNAT and the Escuinapa Municipality Economic Development Department are currently implementing a series of programs to support the diversification of the local fishermen's productive activities. The Department of Land Reform has provided financing to local NGOs to promote training of young fishermen in productive activities that are complementary to fishing. Through the "Young Entrepreneurs" program, a group of young fishermen from the Paso Puerta del Ro area, at the entrance of Playa Novillero in Nayarit, received capital to purchase ecological boat engines and to finance basic training to become operators of bird sighting tours in the Laguna Agua Grande. However, in conversations with the consulting team, the youngsters said that the lack of interest from the market, as well as their limited experience running this business, have resulted in just a couple of sales throughout the high season. The sum of these characteristics demonstrates that the nature tourism in the MN area is very incipient, not yet consolidated into a tourism market that is viable for the sun and beach segment that frequents locations to the north and south of the region. This situation partly responds to the absence of a distribution center connected to international markets and to the regional and national nature of the closest tourism center (Mazatlan). 3.3.5 Tourism Information Systems This link of the value chain has to do with market information systems used by producers to understand their respective segments. In the case of nature tourism in the MN, it is one of the weakest links. All interviewed nature tourism entrepreneurs (as well as other actors) said they knew nothing about

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market information which could help them better understand the tastes, preferences and purchasing power of their current and potential clients. However, the Tourism boards for Nayarit and Sinaloa, as well as the federal department of tourism, publish statistics regularly. On the other hand, there are no known qualitative market studies (focused on visitors' socioeconomic and psychographic profiles) of the region's tourism market or nature tourism. As part of the research conducted for this report, we found some market research studies written by the Nayarit and the federal departments of tourism which are highly relevant to the MN nature market. Some of these studies are: El Desarrollo Turstico de Nayarit a travs de Circuitos [Tourism Development in Nayarit via Circuits], prepared by the Nayarit SECTUR, published and presented in July, 2008, Programa Estatal de Desarrollo Turstico 2008 2011 [2008-2011 State Program for Tourism Development], prepared by the Nayarit SECTUR, no publication date. Perfil y Grado de Satisfaccin del Turista que viaja en Mxico por motivos de Ecoturismo [Profile and Satisfaction of Tourists Traveling to Mexico for Ecotourism], published in 2006, Estudio Estratgico de Factibilidad del Segmento de Ecoturismo en Mxico [Strategic Study on the Feasibility of the Ecotourism Segment in Mexico], published in December, 2001, Estudio del Turismo Fronterizo: Caracterizacin y Posibilidades de Desarrollo [Border Tourism Study: Characterization and Development Possibilities] (no publication date), and Comportamiento y Tendencias de la Pesca Deportivo-Recreativa en Mxico [Behavior and Trends of Recreational Sport Fishing in Mexico], no publication date. The Nayarit tourism development strategy via circuits is a highly important document since it analyzes the potential to diversify the tourism supply in the state starting from special interest tourism market demands, where nature tourism is highlighted. Still, this and other types of information are not produced or communicated in a consistent and timely manner to the various tourism entrepreneurs or those who interested in entering this market in the future. Without market information it is impossible to determine spending and consumption patterns for informing investments and diversifying supply. Having regular, simplified and complete market intelligence could contribute to encourage local communities to invest in tourism products and services. 3.3.6 Facilitating Environment (Regulatory, Legal, Institutional and Financial Services Frameworks) This link in the value chain may be divided into three key components: a) a regulatory framework for the development of ecotourism, b) the institutional framework which supports the development and advancement of this type of initiatives, and c) the financial services which make it possible to develop ecotourism businesses. Regulatory framework. The development of nature tourism activities in protected areas have a regulatory framework established by the CONANP, the National Commission for Natural Protected Areas. CONANP has developed a National Tourism Strategy in protected areas which offers valuable guidelines to manage these activities. Among other things, this policy acknowledges that not all protected areas have inhabitants with tourism experience and therefore, those which decide to carry out these activities should develop tourism plans to guide them. One important aspect of this policy is urging authorities to foster activities which actively involve local communities.

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On the other hand, the Nayarit tourism development strategy proposes to complement the sun and beach development which prevails in the southern coast of the state with the development of destinations focused on local nature and culture. As part of this process, it identifies the so-called Marismas Nacionales Circuit as one of the priority products to be developed. This circuit consists of a series of tourism centers currently in operation and concentrated mainly around San Blas that would be joined with others to be developed to the north (towards the section of the MN that is adjacent to Sinaloa) through theme routes linked to bird watching, marine life, mangrove swamp biodiversity and the area's cultural traditions. The strategy also contemplates the needs of local entrepreneurs regarding training, marketing, and infrastructure that would be necessary for consolidating the tourism route (a public disclosure version of the Strategy is presented in Appendix 2). Unfortunately, this excellent strategy has not been implemented by the state government. Due to a restructure within the Nayarit Tourism office, the Product Development department which was in charge of devising the strategy, has been recently moved and the head of Ecotourism (and architect of this strategy) is currently working in the Statistics Department. Due to that restructure, there is no sign of follow up to the Ecotourism strategy. Finally, SEMARNAT prepared a voluntary ecotourism standard for the operation of hotels and tourism companies in protected areas which no operator in the area (and only two in the country) has adopted. Institutional framework. Even though the public sector, and especially SAGARPA, CONANP and the federal Department of Tourism support and foster nature tourism development, the few private sector associations in the area focus on businesses serving the sun and beach market. Both the Mazatlan Hotel Association and the Riviera Nayarit Organization, the main private sector initiatives in charge of promotion, focus on promoting the main product in the area but do not have a clear support or lobbying policy to benefit small nature tourism companies. For this reason, the money procured through the visitor tax charged in lodging establishments (equivalent to 3% of the total value of the state) and used by trust funds to pay for tourism promotion, is allocated almost exclusively to the promotion of residential and sun and beach tourism. For the time being, companies directly linked to the operation of nature and local culture tours do not have an organization looking out for their interests, with the exception of the new San Blas Hotel Association, led by Doris Vsquez, owner of the Garza Canela hotel. This association, also a member of the Mexican Adventure Tourism and Ecotourism Association (AMTAVE), became independent from the Tepic Hotel Association last year in order to focus promotion efforts of the businesses in the area on nature tourism. Now that it is administratively independent, the association decides how to spend the revenues generated by a 3% visitor tax charged in hotels in the area. Under Mrs. Vasquez's leadership and in collaboration with Riviera Nayarit, the Association has initiated several tourism promotion efforts focused on nature tourism. However, product development work is not as advanced as promotion, which may turn out to be counterproductive, as is acknowledged by representatives of the Association. Financial Services. Currently, the formal or traditional financial sector is not the main financing mechanism for the development of the very few ecotourism activities in the area. The public sector or NGOs, through various nature conservation initiatives, have become the main sources of seed capital and technical counseling for the implementation of these activities. SAGARPA and SEMARNAT, through different entities such as CONAPESCA, CONANP and the Escuinapa Municipality Economic Development Department stand out as the main source of financing for the few existing ecotourism entrepreneurs in the region. The Shared Risk Trust Fund (FIRCO), a SAGARPA agency with the mission to promote agribusinesses, just launched its 2009 Nature Tourism program, which intends to support the development of small rural tourism businesses throughout the country. The program has supposedly designated 100 million pesos (equivalent to around $9 million dollars), to cover a range of ecotourism related endeavers, from

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feasibility and marketing studies to investments in capital assets, equipment, etc. Despite this availability of capital, the lack of interest of the local population, which is in turn due to the absence of an adequate market in terms of motivation and consistency, determines the low level of expenditure in nature tourism products and services. Lack of financing from the formal financial sector is not surprising, since in most economic contexts, tourism is seen as a very risky economic activity, and is therefore difficult to finance. On the other hand, the local MN population is poorly integrated to the formal financial sector (i.e., they do not have bank accounts, credit histories, etc.), increasing the challenge of accessing traditional financial services. The existence of other financing sources for the development of this kind of initiatives can minimize the negative impact of a disinterested formal financial system on the growth of the ecotourism industry. However, with increased interest in developing ecotourism micro-companies in the region, surely linking them with formal financial services will be an important step towards their consolidation and future growth. The consultants found some cajas populares as well as microfinance institution CrediAvance operating in the region. In order to foster the future growth of the ecotourism companies in the region, it would be important to stay alert of formal financial service providers in the region and to work with these entities so that they learn to analyze the financial flows and the risks of ecotourism businesses and can therefore design financial products that are appropriate for these activities.

4. STRATEGIC ANALYSISBased on the situational analysis, we have determined the main problems and opportunities facing the nature tourism industry in the MN. The results of analysis of the strengths, weaknesses, opportunities and threats (SWOT) of the value chain are presented as follows.

4.1 SWOT ANALYSISSTRENGTHSGreat potential for development of nature watching tourism with a focus on the dedicated ecotourism market. Existence of some seed capital to develop ecotourism products. Presence of the San Blas Hotel Association, which is focusing on promoting tourism in the area towards nature tourism. Great interest by local authorities in promoting nature tourism.

WEAKNESSESLack of a consistent, strong demand for nature tours or ecotourism products that are several days long. Lack of an ecotourism development strategy in the Nayarit part of Marismas Nacionales. Lack of a lodging supply to address the needs and expectations of the nature tourism segment. Lack of interest and knowledge of the local population regarding commercial and managerial management for tourism or product development.

OPPORTUNITIESCreation of a major tourism distribution center close to the MN, the CIP. Potential improvement of the volume and quality of visitors to the area if the CIP develops successfully. Interest on behalf of federal and state government

THREATSGreater deterioration of the economy in Mexico and the potential curb on tourism investment in the area. Unrestrained hotel infrastructure growth and consequent process of urbanization in CIP and Riviera Nayarit.

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entities to support ecotourism development. Existence of a favorable legal framework for the development of alliances between the private sector and local communities. Federal standards for the operation of tourism services within Natural Protected Areas (NPAs).

Too much emphasis on the promotion of the area as a sun and beach destination, not as a dedicated nature destination. Continuation of unsustainable fishing practices that threaten the area's rich biodiversity. Lack of leadership of the public sector in the field of ecotourism development.

4.2 STRATEGIC POSITIONINGBased on the analysis of the nature tourism value chain in the MN, it is possible to say the chain is currently in a stage of potential planning, not yet arriving at the introductory stage, with the exception of the area around San Blas, where nature tourism is at an introductory phase. As seen in the analysis of the Upper Gulf value chain conducted by the same authors, the introductory stage is characterized by the little variety and duration of offered products, due to the lack of market incentives to motivate other competitors to enter the market. Also, sales are low because consumers are not yet convinced of the product's characteristics or perhaps are unaware of their existence, so the promotion strategy is predicated on product information and brand development. Marketing and sales face the additional challenge that distribution channels are very limited, so intermediaries are generally used intensively (in this case, tourist operators). Finally, prices must be constantly reassessed to find optimum elasticity of supply. As seen in Diagram 3, as the product matures and its lifecycle progresses, opportunities of increasing sales will also grow (as long as supply is adhered to).Diagram 3: Tourism Product Life Cycle

Sales Volume

Despite the incipient development of nature tourism, clearly the area has great possibilities of becoming a tourism destination for the dedicated nature/beach market, as is the case with the Manuel Antonio

Introduction

Maturity

Growth

Decline

Time

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National Park in Costa Rica. Nature tourism coexists with other, more traditional forms of sun and beach tourism that have been adapted to strict construction and environmental management standards. The consolidation of this potential, however, is not easily achieved nor guaranteed by the mere fact that some excursions are currently offered. There is an old saying that the easiest thing to sell is more of the same thing to the same people. The next most challenging is to sell different things to the same people, more of the same to different people and (the most difficult of all), selling different things to different people. Perhaps that explains FONATUR's insistence on developing the MN area under the CIP model, which, despite its problems, has been successful at replicating the marketing formula of selling the same thing to the same people. A new tourist product is a good or service which is an entirely new both for consumers and producers, and 9 out of every 10 new tourist products fail once they are launched to market. The medium- and long-term strategy proposed to consolidate the MN as a nature and beach destination is based on three guidelines aimed at minimizing the risks and correcting the weaknesses identified in the SWOT analysis. These guidelines include: a) Working with FONATUR and local authorities for CIP planning. This guideline aims to integrate good international practices in hotel planning, design, construction and environmental management into the plans to develop the CIP. The CIP has the potential to serve as a visitor distribution center for the MN area. However, the proposed center is enormous and, if it becomes a reality, it would negatively impact not only the area's biodiversity, but also the prospects of the MN of becoming an ecotourism destination for the dedicated market. Therefore, it is important for both the CONANP and the Escuinapa municipality to actively participate in planning the CIP so that it addresses the interests and concerns of all relevant stakeholders. b) Developing and strengthening a tourism product supply. This guideline is based on the need for the area to have a menu of products (which may be one-day tours or several-day packages) which allow for a better concentration of resources, quicker penetration in the market and the creation of a more focused brand for the ecotourism value chain. Handling a limited number of products will also allow for greater experience and their management, which could be then used as lessons learned. This would facilitate the development of additional products and services in the future. However, this guideline should be framed within a strategy that facilitates the development of products and services that satisfy the needs of the dedicated nature market and which includes the participation of local communities. c) Strengthening tourism planning in future protected areas. This guideline is based on the need to determine possible tourism uses once the Nayarit and Sinaloa protected areas have been declared. Among the elements that should be defined are the issues of tourism concessions in protected areas, entrance policies, participation of the local communities in offering services, limits on load capacity, etc. Based on conversations with Vctor Hugo Vzquez, head of the CONANP in Nayarit, these ideas were welcomed as a way of laying the foundation for the development of nature tourism in the region. These three guidelines are the conceptual framework which will guide the preparation of strategic recommendations proposed in the following section.

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5. STRATEGIC PLANNINGThis section of the report presents a series of recommendations for developing nature tourism in the region. These recommendations include specific steps for implementing the guidelines described in previous the Strategic Positioning section. It should be noted these recommendations are aimed at obtaining the following result: Laying the foundations for the development of Marismas Nacionales as a destination for the specialized, dedicated nature market, using a social and environmental sustainability approach. We consider that, given the existing local management capacity and the availability of funds to start tourism ventures, the greatest contribution USAID can make is to become the catalyst of these efforts to help guide the development of nature tourism in the region. For that, we propose working closely with FIRCO, CONANP, the Escuinapa Municipality, the Nayarit SECTUR and the San Blas Hotel Association. These stakeholders have the will and the means to support the growth of the MN as a nature tourism destination. We have divided our recommendations into short-term, which could be implemented with the direct help of USAID, and medium-term or medium/long-term, for which USAID could provide initial studies, and the implementation of which would be the responsibility of local stakeholders.

5.1 SHORT-TERM RECOMMENDATIONSThese recommendations are designed to be implemented over the next 3 to 6 months.

5.1.1 Workshop on Sustainable Practices for Hotels and Tourism DestinationsThe urbanization of the coast as a consequence of the massive development of the CIP is one of the main threats to the ecological integrity of the MN. The degradation of the coastal habitat, due to pollution or excessive sedimentation, has very serious impacts on marine biodiversity. This recommendation is aimed at raising awareness among FONATUR, the Escuinapa Municipality and the CONANP about the benefits of a coastal development that mixes the concepts of beach and nature in a harmonious, sustainable manner. This recommendation is based on USAID's success stories in other Mexican tourism destinations,. In the Mayan Riviera, USAID supported the efforts of the Solidaridad municipality (where Playa del Carmen is located) to implement an environmental certification program for hotels in the area. This program focused on implementing an Environmental Management System (EMS) which helped reduce the use of electric power, water and contaminating products, as well as the generation of solid waste and sewage. Also, the EMS promoted the use of alternative technologies like solar power, low-energy light bulbs, efficient heating systems and natural ventilation. Although EMS were originally developed with the goal of obtaining the Green Globe 21 environmental certification, many hotels participating in the program realized that its implementation generated direct savings of water and electricity bills, use of pesticides and even maintenance. Thus, another reason to promote this kind of system is the efficient use of resources such as running water and electricity. Finally, such a program could contribute to positioning the area as an environmentally sustainable destination.

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In an initial stage, this could be implemented via a workshop on good international practices for sustainable design and construction and the presentation of a case study on the economic and social benefits this type of development has brought to locations such as the Manuel Antonio National Park in Costa Rica.

5.1.2 Establishing Sustainable Construction Regulations in EscuinapaGiven the CIP is located in territories which belong to the Escuinapa Municipality, the latter has some authority regarding regulations on land use, type of construction allowed, etc. To help guarantee that hotels to be built within and outside the CIP stringently implement environmental management systems, both in terms of construction and operation, USAID could work with the municipality in updating the Construction Manual and Regulations. According to information provided by the Escuinapa Municipality, this manual should be updated shortly, which poses an ideal opportunity to incorporate sustainability components in the document that will govern the municipality's building patterns in the future. This way, the use of sustainable construction principles, including recovering traditional technologies and architecture and the use of local materials, could be combined with sustainable technologies such as the use of solar energy (particularly abundant in this region), efficient water consumption and solid and liquid waste elimination systems, etc. The use of these systems will not only allow for an efficient management of the hotel from an economic and environmental standpoint, but also allow for its positioning within the more dedicated nature market. 5.1.3 Preparing a Tourism Management Plan for the Marismas Nacionales This recommendation has to do with the preparation of a plan to guide the development of nature tourism in the two Marismas Nacionales protected areas in the short and medium term. This plan will serve to determine the target market or markets for this type of tourism, the products which will have to be developed in order to satisfy said markets, the best tools to develop such products (concessions, direct management, etc.), policies on protected area entering fees, as well as the role of the local communities and populations in offering such products and services. A document of this kind will help guide and channel tourism investments in the Marismas Nacionales and allow for the development of a tourism destination vision. Said vision is critical to develop a spirit of systemic competitiveness through which all stakeholders collaborate and complement each other to compete, not one against another but all together against other tourism destinations or products. To develop this strategy, it is fundamental to understand the interest of current visitors to the area in taking local nature and culture tours, determine what their needs are and their willingness to pay for them and for activities which protect the environment and contribute to the development of local communities. Therefore, we recommend that a market research study be conducted as part of this process.

5.2 MEDIUM-TERM RECOMMENDATIONS:These recommendations are designed to be implemented over the next 12 to 24 months. 5.2.2 Strengthening the San Blas Hotel Association During the value chain analysis, it was observed that the San Blas Hotel Association is the only one of its kind to currently group companies interested in developing nature tourism. This organization could report several benefits for the local populations interested in offering tourism products and services. Benefits would range from greater weight in the making of decisions which could affect them (such as

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the use of funds to promote the area as a nature destination) and the provision of specific market intelligence services that are currently lacking, to assistance in developing and managing tourism businesses, via training, through forging alliances, etc. Other benefits the local people could derive from the association include negotiating affordable prices in insurance coverage for associates (an indispensable requirement when negotiating the sale of packages with tourism operators and hotels) or organizing familiarization tours for specialized press, as they have already been doing. For that purpose, it would be necessary to strengthen the Association in two ways: a) consolidating its position as the main local private-sector association promoting nature tourism in the area, and b) placing it in a position to offer training and coaching services to the locals (who might be potential members of the association). These initiatives were discussed with Mrs. Gladis Vsquez, current president of the Association, who had a very positive response to suggestions.

5.2 MEDIUM/LONG-TERM RECOMMENDATIONS:5.2.3 Facilitating the development of Financial Services for Ecotourism Companies Currently, the few ecotourism companies in the region are starting operations with seed capital from subsidies such as those from CONANP and the Land Reform Department. With the limited flow of tourism to the Marshes, aside from the uncertainty of whether the demand for ecotourism services will really increase, there is little demand for financing ecotourism activities. Even though it is true that today, access to financing is not a bottleneck in the Marismas Nacionales ecotourism chain, if the sector is actually strengthened with a clear strategy to develop nature tourism in the region, aside from a greater, stable transaction volume, the situation is likely to change. Ecotourism companies may require access to financing to be able to expand and/or adapt their businesses to greater value-added and income generating opportunities. In the medium and long term, it is advised to work with some financial institutions in the region to help them assess the risk of tourism companies and offer services tailored to this activity, their financial flows and working capital, investment and other service needs. A starting point could be a market study of financial service supply, and then to identify who is interested in developing products for ecotourism companies so as to work with them in a responsible, effective manner.

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AFIRMA Project Horacio 124, piso 14 Mxico, Distrito Federal, DF11560 Mexico

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PMP Baseline SOWs