Working with Brazil’s agricultural businesses could be the key to a healthier Amazon.
The fate of the Amazon is intertwined with the fate of the world. If 20-25 percent of its tree cover is cut down, scientists estimate, the basin’s capacity to absorb carbon dioxide would be severely compromised, taking out of operation one of the world’s largest carbon sinks. Owing to accelerating rates of deforestation to make way for cattle, soy farming, and gold mining, this tipping point could be reached within a decade.
The Amazon basin plays a critical role in stabilizing the global climate. It is vast, spanning almost 3 million square miles and incorporating 40 percent of the world’s tropical forests, 20 percent of its fresh water supply, and producing 20 percent of the air we breathe. Through a process called evapotranspiration, it also influences the planet’s cloud cover and circulation of ocean currents.
But the Amazon basin is in trouble, particularly the nearly 2 million square miles of it located in Brazil. Deforestation rates there were almost 50 percent higher between August 2018 and July 2019 compared with the same period a year before. The country’s far-right president, Jair Bolsonaro, has made the opening up of the Amazon to massive resource extraction a central pillar of his government’s economic agenda.
Backed by powerful rural politicians and the agricultural and mining lobby, Bolsonaro has sought to dismantle Brazil’s environmental protections and agencies and ramp up access to mining concessions, especially on protected indigenous land. To hasten the process, the president is freezing the demarcation of new indigenous land and stripping the national indigenous foundation, known as Funai, of its powers. Such strategies are dangerous; the protection of indigenous lands is widely considered to be among the best strategies to conserve forests and avoid loss of biodiversity.
Already, deforestation is rising and illegal mining spreading. The chief culprits for deforestation include cattle ranchers, who are responsible for more than three-quarters of land clearances. But widespread mining of iron, gold, and other minerals is credited with up to a 10th of all forest loss. Agri-industrial giants are also clearing tracts of land to make way for soy and corn, although their direct impact on deforestation is more limited because their footprints are smaller.
Despite evidence to the contrary, the Brazilian government denies that there is a problem. Confronted with remote sensing data showing rising forest loss from the National Institute for Space Research, Brazil’s national scientific agency, the president sacked the agency’s director, describing its findings as “fake news.” That same week, he publicly rebuked the leaders of Germany and France after they expressed concern about soaring levels of deforestation and widespread human rights abuses in indigenous and Afro-Brazilian communities. On learning that the French foreign minister had met with local environmental groups, Bolsonaro called off a planned meeting, potentially imperiling the ratification of a massive new trade pact with the European Union.
Most Brazilians disapprove of their government’s moves, and more than 86 percent of them oppose opening up protected indigenous areas to mining. A number of environmental and indigenous organizations have started resisting deregulation efforts in Brazil and holding protests in the capital. In the past month, eight former environment ministers, a former agriculture minister, and seven state governors have publicly rejected the federal government’s measures. And after months of verbal jousting, Germany and then Norway suspended their contributions to the more than $1 billion Amazon Fund, a mechanism created in 2008 to help Brazil protect its forests and 300 tribal groups living in the Amazon.
Not surprisingly, conservation and protection efforts face an uphill battle. A big part of the problem is that the federal government simply dismisses all opposition. Several top officials do not believe that climate change is real and seem convinced that foreign governments and civil society groups are intent on sabotaging Bolsonaro’s administration. His foreign minister, Ernesto Araújo, has denounced climate change as a Marxist plot. He has the backing of some in the armed forces, which have long been suspicious of indigenous and environmental groups, and of many conservative governors who support the federal government’s agenda, especially when it comes to the economic development of forested areas.
But there are ways to put pressure on Bolsonaro. Domestically, increased investment by public and private groups in the scientific detection of illegal deforestation and environmental crime, measures to reduce land grabbing and the unproductive use of land for cattle grazing, incentives for producing alternate crops, and sustained enforcement of existing laws are all essential. To be sure, given the current hostility of the federal government, most of these measures are off the table. But the international community has other options available, including penalties for companies with dirty supply chains, divestment strategies targeting key violators, product boycotts, and public campaigns.
Meanwhile, one of most powerful ways to protect the region is by working with businesses, rather than against them. Take the case of the cattle industry: It might not seem like a likely candidate for progressive policy, but many international importers and sellers are increasingly sensitive to “greening” their supply chains given global consumer backlash about the Amazon. Domestic meat producers in Brazil are particularly wary since the larger chains that sell their products in Brazil—Carrefour, Casino, Walmart, and others—are foreign-owned (and are committed to zero-carbon standards, in principle).
Several Brazilian business coalitions are already pushing back. The Brazilian Business Council for Sustainable Development and the Brazilian Agribusiness Association have criticized government proposals to open up protected forests. And Brazilian policymakers could face more pressure soon. Given that Brazil’s finance minister has promised to phase out a wide range of subsidies to local producers, businesses will soon need to turn to much more demanding international creditors for access to capital. If they don’t change their practices, their businesses will suffer. Already, as part of the Brazilian climate, forestry, and agriculture coalition, some of the country’s largest beef-packing companies, agricultural producers, and land owners are taking steps to clean up their supply chains.
They can be encouraged along. The London Stock Exchange recently unveiled its Responsible Commodities Facility, essentially the world’s first green bonds scheme to provide low interest credit lines for sustainable food production. Farmers who commit to avoid clearing forests for agriculture will have access to up to $1 billion over the next four years to produce close to 190 million tons of soy and corn. The facility also seeks to protect and restore tens of thousands of square miles of natural habitat in the Brazilian savanna regions in order to take hundreds of millions of tons of carbon dioxide out of the atmosphere.
Although still in its early days, Marfrig Global Foods, one of the world’s largest beef producers, also launched sustainability bonds last month. The $500 million, decadelong offering brings together several large banks—Bradesco, Santander, BTG, Nomura, HSBC, XP, and Rabobank, among others—to support practices that avoid deforestation and reduce carbon emissions. Marfrig already launched several initiatives to encourage suppliers to adopt zero-carbon practices.
Meanwhile, a Chinese-owned trading firm—COFCO International—has also joined forces with 20 banks to issue a $2.1 billion financing facility to support sustainability in Brazil’s agricultural sector. COFCO has decided to assess loan repayments based on local companies’ progress in meeting environmental, social, and corporate governance targets. The goal is to promote the sustainable production of soy and reinvest savings into reforestation and protecting land in the Amazon.
Rival traders such as Olam and Louis Dreyfus have agreed to renew similar arrangements valued at over $750 million. Both companies are already among the biggest exporters of soybeans in the country and have linked performance to sustainability goals. Many others are following suit. While some critics label these types of financing arrangements as “greenwashing”—that is, attempts to make a company or practice seem more environmentally friendly than it is—the reality is that growing numbers of banks are under scrutiny from their own compliance departments and the wider public and are wary of the reputational risks associated with inaction.
There is no doubt that a combination of incentives and penalties is needed to help promote better stewardship of the Amazon basin. A healthier Amazon is in the interest of not just the international community but also Brazilians, who could suffer greatly should deforestation rates cross a point of no return. In the short term, resistance is crucial to keep a bad situation from getting worse. But in the longer term, the best solution brings responsible governments, civil society groups, and businesses together to create solutions.
Robert Muggah is the founder of the Igarapé Institute and SecDev Group.