Bolsonaro’s dilemma: stop deforestation in the Amazon or European investors leave Brazil

Seven major European investment firms have announced they will divest their investments in the marketing of meat, grains and even government bonds in Brazil if they don’t see progress in solving the growing destruction of the Amazon rainforest. This comes in addition to another threat launched last month by 40 major supermarkets and food distributors in the UK to stop marketing any Brazilian product if approved. a bill that could legalize the private occupation of public land. The boycott could add several other large US companies that have already complained about the same situation through diplomatic channels. A situation that leaves President Jair Bolsonaro, a defender of the advancement of agricultural and animal production in the Amazon rainforest who called himself “Chainsaw captain”, caught in a dilemma: either stop the breeders who support him by creating an internal political crisis, or forget 5,000 million investments and many more losses due to the closure of export markets.

Expectations are centered on the treatment of a old invoice 510/2021, revived by Bolsonaro and his allies in Congress, on the possession of illegally deforested public land covering an area of around 50 million hectares. If approved, it would give way to the destruction of much of the border areas of the Amazon. A project already firmly rejected by a group of 60 bishops from northern Brazil and that is, for the moment, delayed in the Senate. The deforestation of the Brazilian rainforest in 2019, the first year of Bolsonaro’s government, reached the highest number in the last eleven yearss and in the first five months of 2020, it increased another 34%, according to data from the government space research agency INPE. Within 12 months until July of this year some 4,300 square kilometers of forest have been lost, 9.5% more than in the same period of the previous year, still according to official data.

Livestock is a major agent of deforestation and pollution, responsible for 60% to 80% of the loss of the Amazon rainforest, and a critical increase in greenhouse gas emissions. In the sights of investment funds are also JBS, the world’s largest producer of packaged meat, and other livestock companies operating in deforested areas. “The trends we are seeing in Brazil are very worrying,” he told the agency. Reuters, Daniela da Costa-Bulthuis, asset manager of the Dutch investment fund Robeco. “Unprecedented forest destruction is taking place alongside accelerated dismantling of regulatory mechanisms of environmental control ”.

In September last year, 230 international investors signed a letter calling for urgent action to tackle the raging fires in the Amazon rainforest, drawing worldwide attention. Today, seven of the largest asset management companies with investments in Brazil –Storebrand, AP7, KLP, DNB Asset Management, Robeco, Nordea Asset Management and LGIM– went further by exposing the threat of divestment if there is no progress. These companies have more than $ 5,000 million in investments linked to the Brazilian grain and meat trade. Norway’s largest pension fund, KLP, assesses the environmental policies of grain companies such as ADM, Cargill and Bunge. “If our conclusion is negative, divestment will be the likely outcome and we expect other large investors to follow suitJeanett Bergan, chief investment officer of KLP, said via email. Bunge and Cargill adhere to the so-called “Amazon Soy Moratorium,” a voluntary agreement in which they pledged not to purchase soybeans from areas of the Amazon that have been deforested over the past twenty years.

The initiative to put pressure on the Bolsonaro government has been joined by other powerful investor groups such as Norwegian pension and insurance provider Storebrand and Sweden’s largest national pension fund, AP7. The asset management company, NDAFI.HE, one of the largest banks in the Nordic countries, stopped buying Brazilian sovereign debt last year after wildfires broke out, putting in “quarantine” the 112 million dollars it holds in Brazilian government bonds. “Keeping these investments frozen means that if there are no quick fixes, we will sell Brazilian government bonds, which could prompt other funds to follow suit,” Thede Ruest told the agency. . Reuters. “We are disappointed with the current administration’s lack of progress as deforestation rates continue to skyrocket just before another possible fire season.”

The alarm that sparked this escalation in global funds was triggered by a recent video of a Brazilian cabinet meeting, which was made public due to a federal investigation. Environment Minister Ricardo Salles appears there, suggesting to Bolsonaro and other ministers that the government should accelerating environmental deregulation as public opinion distracted by the current coronavirus pandemic. Salles had to resign last week over a corruption case linked to the sale of timber from trees in the Amazon.

The american president Joe Biden also lobbied Bolsonaro step up efforts to curb increasing deforestation in the jungle. Until January, the Brazilian had the backing of then-President Donald Trump, who endorsed his policies that put national economic growth above any other priority, including protecting the environment. And some American companies have already stopped using Brazilian products. The clothing and footwear company VF Corp. -owner of the brands Timberland, Vans and North Face- stopped using Brazilian leather last year to protest the destruction of the environment. France has also joined in the global pressure and cited deforestation as a reason to delay approval of the big trade deal between the European Union and Mercosur – this goes beyond the fact that the issue was also used as excuse to oppose the pact by French protectionist farmers.

The few initiatives that exist in Brazil to stop logging and control the exploitation of livestock are at the state level. A good example is that of Pará, where they install a surveillance system for stop “cattle laundering”. Producers in the Amazon region often move cows from farm to farm to hide that they were raised on illegally exploited land. In this state there is 21 million cows and a population of 8.7 million.

This is a digital platform called “SeloVerde” which allows buyers to know if the livestock sold to them has been raised on illegally deforested land, or on farms that have unpaid, or involved environmental fines. in crimes such as forced labor. An initiative hailed internationally, but which appears like a grain of sand compared to the size of the Brazilian cattle herd, the largest in the world, with 217 million animals.

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