Understanding patterns of tropical deforestation is a crucial issue for Mexico, a country that has lost more than 95% of its original rainforest cover. This paper examines the causes of accelerated deforestation in the Sierra Santa Marta, Veracruz, Mexico, by looking at settlement history and the evolution of productive schemes in the villages of Venustiano Carranza and Magallanes. Both settlements were founded in the 1960s, after the government donated land to landless peasants. Conversion of forests into pastures, after several agricultural enterprises failed, resulted in more than 80% of the original tropical rainforests being removed in both communities between 1960 and 1998. The process of deforestation in the villages differed from models proposed for the Amazon and Central America, in which deforestation responded to capital-intensive efforts to open up the tropical frontier. In the villages, transformation of forests into pastures was, from the beginning, a smallholder phenomenon. Misguided policies and institutional malfunctions appeared to direct households toward deforestation. Nevertheless, environmental deterioration could not only be explained by external causes. Inside the communities, demographic pressure over land, the modification of traditional land tenure systems and the cultural adoption of cattle as a way to overcome poverty were significant factors in the relationship between colonization and forest clearance. Deforestation at Venustiano Carranza and Magallanes cannot be considered an ecologically destructive practice performed by peasants. In fact, the process reflects not only a lack of environmental awareness in national development policies, but also the intricate interaction of ecological, cultural, social and economical variables.