SPECIAL REPORT: THE BRAZILIAN AMAZON

Atualizado: 11 de Set de 2019

DIMENSIONS OF THE CRISIS


The outbreak of fires throughout the Amazon catapulted Brazil at the center-stage of international criticism and debate. The dry season began with thousands of fires that left some twenty thousand hectares burned to the ground and exposed the challenges faced by Brazil and its environmental policymaking. The crisis emerged after images surfaced of the fires sweeping through vast forested lands of the coveted Amazon rainforest, sparking activists, environmental specialists, and government officials around the world to weigh in on the issue of deforestation and climate change. Protests erupted in dozens of Brazilian and European cities while European governments discussed responses that ranged from the imposition of trade measures against Brazilian imports to the revocation of the recently signed, but not yet ratified Mercosul-European Union trade agreement. President Jair Bolsonaro understood the criticism as efforts to internationalize the Amazon and a threat to Brazilian sovereignty.


Fueling the international crisis, mounting evidence indicates that deforestation rates in Brazil’s so-called Legal Amazon (including nine states) increased by 8.5% between 2017 and 2018 . Brazil's National Space Research Institute (INPE) reported that the number of fires between 2018 and 2019 spiked by 80%. This evidence was made worse by news that the Brazilian environmental protection agency, known as IBAMA, has reduced the number of non-compliance fines by a full third in the first months of the Bolsonaro administration.

The “environmental issue” has been a source of controversy and debate since last year’s election of Bolsonaro, who campaigned against regulation of Amazon development and railed against strict environmental protection policies, including fines. Bolsonaro and his allies made the case that Brazilian development, including agribusiness and mining, had suffered unjustifiable restrictions on land use. Since the president’s inauguration in January, the environmental question has been a source of constant conflict between the government, regulatory agencies, and civil society organizations, but it was the sweeping Amazon fires that turned the conflict into a front-page international issue.


CONTEXT: CHANGES IN ENVIRONMENTAL POLICY IMPLEMENTATION


Effort to Abolish the Environment Ministry


President-elect Bolsonaro sought to eliminate the Environment Ministry (MMA) and fuse its functions within the Agriculture Ministry (MAPA). The proposal was widely opposed by a host of government entities and non-governmental organizations (NGOs). Today, the MMA is led by Minister Ricardo Salles of the New Party (NOVO). Salles, who served as Environment Secretary for the State of São Paulo, is an advocate of deregulation and helped found the conservative movement known as Movimento Endireita Brasil (MEB). Under Salles, the administration of the National Forestry Service was transferred from his ministry to the Agriculture Ministry. Valdir Collato, a former federal deputy from the Brazilian Democratic Movement party (MDB), was appointed to lead this law enforcement agency. As a legislator, Collato introduced bills to deregulate wild game hunting and lessen the legal land reserve requirements that limit land use on private, rural properties and is the source of consternation within the agribusiness community. Under Collato’s administration, the Forestry Service has lessened its compliance monitoring throughout the Brazilian Amazon.


Changes in Monitoring and Strategic Decision Making


The primary federal environmental compliance monitoring agencies, namely the Chico Mendes Biodiversity Conservation Institute (ICMBio) and IBAMA, have undergone major restructuring and budget cuts under Minister Salles. These changes include replacing ICMBio’s management team formerly led by environmental science and policy specialists) with former state and federal police officials, the promise of reducing environmental reserves, leaving IBAMA’s leading management positions at the regional and state levels vacant, sequestering 95% of the budget for combating climate change, the withdrawal of Brazil’s offer to host the United National Climate Change Conference of the Parties (COP25), the introduction of presidential decree #867 that modifies the Forestry Code (later withdrawn after growing Senate opposition), and IBAMA’s decision to grant an environmental license for oil and gas exploration near the National Abrolhos Marine Preserve. Domestic environmental protection advocates roundly condemned these changes.


As a result of these moves, eight former environment ministers signed a joint letter criticizing the Bolsonaro government’s handling of environmental policy.The Federal Accounts Court (TCU) opened an investigation that intends to check whether government policy is related to deforestation. Also, non-governmental organizations opposed Bolsonaro systematically, especially after a presidential decree that reduces the number of National Environmental Council (CONAMA) members from 96 to 23. Since the 1980s, CONAMA has served as the primary consultation mechanism between civil society and environmental policymakers. President Bolsonaro and his allies blame environmental NGOs for poor stewardship of the Amazon Fund that finances many of their activities. Besides, on more than one occasion the president blamed NGOs for setting the Amazon forest on fire with the aim of discrediting his government.


CONFLICT AT THE AMAZON FUND


The Fund


Even before the Amazon fires sparked international outrage, evidence of increasing deforestation and the government’s efforts to change the governance of the Amazon Fund made the front-pages and threw the future of the fund into disarray. The federal government’s Economic and Social Development Bank (BNDES) administers the Amazon Fund and is the subject of President Bolsonaro's scorn. Today, the fund has a portfolio of nearly $450 million USD. Donations to the fund come from three main sources: Norway ($1.2 billion since 2009), Germany ($68 million in 2019), and Petrobras ($7.7 million between 2011 and 2018). The fund has financed 103 separate projects of which 35% are interstate. The states of Pará and Mato Grosso are the largest beneficiaries with 16% and 14% of the fund’s projects. Pará has also been the recipient of 25% of all outlays, the largest of any of the state-participants. Overall, NGOs administer 38% of the projects, state governments direct 31%, the federal government is responsible for 28% with municipalities and international organizations responsible for the balance.


The Crisis


Last May, Environment Minister Salles questioned the administration of the fund, especially its contracts with NGOs, including those identified by the president as responsible for the Amazon fires. The TCU carried out an audit but did not find any financial irregularities. Both Norway and Germany declared that the fund was operating efficiently and appropriately, but decided to suspend current expenditures and future donations because: a) the Brazilian government has failed to achieve the goal of the fund, namely the reduction of greenhouse gas emissions related to deforestation, and b) the lack of agreement with the Bolsonaro administration on the question of using the fund to compensate producers for their compliance with the environmental (or forest) reserve requirement, as proposed by Minister Salles. The fund is now effectively suspended until an agreement between the donors and the government can be reached.


ECONOMIC OUTCOMES: SANCTIONS, EXPORTS, AND FOREIGN RESOURCES


Sanctions, boycotts and exports


Major European countries have now expressed disapproval of Brazil’s environmental policy. French President Emmanuel Macron led the international outcry during the G7 Summit and suggested that his government may not ratify the Mercosul-EU trade agreement. He also led an effort to raise $20 million USD among member states to assist with firefighting in the Brazilian Amazon. During the summit, Germany opposed the French initiative to prevent ratification of the trade agreement and the U.S. also signaled its opposition to sanction Brazil. However, Austria, Ireland, and Luxembourg did not dismiss the idea of suspending the ratification of the trade agreement until Brazil addresses the rise in deforestation. Also, an increasing number of European countries, many weary of trade liberalization of agricultural commodities, began to discuss the use of sanctions and boycotts against Brazilian imports. A group of legislators from the United Kingdom launched a petition drive to install a boycott against Brazilian products. Finland, who currently holds the rotating presidency of the EU, proposed a plan to ban Brazilian beef imports. Several transnational corporations announced boycotts or threaten retaliatory action against Brazilian exports. Some 18 clothing brands, including VF Corporation (Vans, Kipling, Timberland e North Face) and Jansport suspended the use of Brazilian leather in their supply chains. Nestlé plans to review its use of Brazilian products in its supply chains and Mowi is now studying the possibility of suspending imports of Brazilian soy. Aside from trade sanctions against Brazilian animal products, soy and coffee, there is a mounting risk against Brazilian logging and wood product exports and ethanol (sugarcane) because of their possible association with Amazon deforestation.


Investments, Finance, and Philanthropy


The crisis also impacts foreign investment and philanthropy. Sweden will review Brazilian investments made by its public pension system while Norway asked its pension managers to reevaluate investments in Brazil. Governments have asked a number of international non-governmental organizations to review their activities in Brazil, anticipating the possibility of reducing public financial support for NGO programs operating in Brazil should the Bolsonaro government continue to pull back from environmental protection policies. Also, there is a rising concern that future negotiations over the Green Climate Fund, which dispersed $96.5 million USD to Brazil at the beginning of the year for Amazon conservation and reforestation, will become submersed in conflict. The fund serves as the Paris Agreement's financial mechanism geared toward transferring financial resources to developing countries to finance projects that reduce greenhouse gas emissions and strengthen adaptation efforts. Brazil's participation in the global carbon market, regulated in large measure by the Kyoto Protocol since 2004, could be jeopardized because funding is triggered by clean development mechanisms (CDMs) that advance REDD+, emission reductions, and efforts to stem deforestation and environmental degradation. Without these carbon market projects, the country may fail to reach its Paris Agreement commitments. Furthermore, the Brazilian economy has never been the target of investment or trade sanctions, raising doubts about how the Bolsonaro administration will respond to such threats given the national economy's fragility and slow growth.


BRAZILIAN GOVERNMENT RESPONSES


Who to blame? NGOs or Farmers


The Brazilian executive's response aggravated rather than subdued the brewing crisis. President Bolsonaro and other government officials initially accused NGOs of starting the Amazon fires to damage the image of the government before investigating credible allegations that groups of farmers organized the burnings themselves. Today, the Federal Police and the Federal Public Ministry are investigating the possibility that farmers organized a coordinated movement to clear the forest through systematic burnings in defiance of IBAMA. Allegations suggest that these farmers organized a "day of fire" on August 10th to informally solicit the government's support for their extractive activities, which start with logging followed by forest clearing through burnings.


Diplomacy


President Bolsonaro showed dismay at friendly nations amidst his government's tussle with international NGOs and Brazilian social movements. His responses coalesced around two fundamental positions: a) that Brazil has the capacity to control the Amazon fires without international assistance; and b) that Brazilian sovereignty overrides any other issue in the conduct of the government's foreign affairs. These arguments were made clear in the Brazilian government's responses to French President Macron who highlighted the principle that the Amazon was an area of legitimate international responsibility.


Bolsonaro rebuked the French president and then lobbied European governments to reject any effort to suspend the ratification of the Mercosul- EU trade agreement. The Brazilian government believes that it was successful in quashing the French initiative. This position also led it to reject the $20 million USD offered by the G7 member-states, as requested by Macron. The Brazilian diplomatic campaign required the suspension of planned vacations by various ambassadors stationed in Europe and was anchored to President Bolsonaro's insistence that the Brazilian Armed Forces take over direct responsibility for fighting the Amazon fires.


Selecting Partners and Announcing Measures


The Brazilian government also responded to the international crisis by partnering with South and Central American nations, especially those members of the Amazon Cooperation Treaty, as well as the United States and Israel. Both countries pledged their support, and the latter through the bilateral cooperation agreement on disaster management. This strategy prevented Brazil's isolation during the heights of the crisis during the G7 Summit.


At this point, the Brazilian government shows no signs of policy reversals and seems intent on moving forward with the same agenda that fueled the crisis. During his recent meeting with governors from the Amazon region, Bolsonaro reiterated his support for pulling back environmental law enforcement, his quest to undo indigenous and federal forest reserves, and his plan to open up the Amazon to mining and agricultural development. It is increasingly apparent that the government responses and policy priorities will deepen domestic and international opposition, and may even provoke tensions and divisions within the president's conservative political base.


Despite these internal divisions, the Brazilian Executive plans to launch a series of measures to prevent further environmental damages. This effort was largely organized by the president’s Chief of Staff, Onyx Lorenzoni (DEM). Bolsonaro also signed a decree that bans burnings for sixty days in some locations.


LEGISLATIVE RESPONSES


The Brazilian Chamber of Deputies and Senate also responded to the crisis by soliciting the establishment of special investigatory committees, known as CPIs, and accelerating deliberations over environmental legislation.


Senate


Senate President Davi Alcolumbre (DEM) established a mixed permanent congressional committee on Climate Change. 12 senators and 12 federal deputies compose the new permanent committee. Originally it was agreed that a congressional member of the Citizenship Party (Cidadania) would preside, but the farmer-supported candidacy of Senator Zequinha Marinho (PSC) of the state of Pará eventually prevailed, a development that should be read as a considerable political victory for the agribusiness lobby. Deputy Sérgio Souza (MDB) of Paraná, a member of the agribusiness caucus, was named as the vice-president of the committee.


The government opposition party Sustainability Network (REDE) has distinguished itself during the crisis and among the thirty political parties represented in the National Congress. REDE senator Randolfe Rodrigues (Amapá) is the leader of the several opposition initiatives and acted swiftly to request the establishment of a CPI to investigate the federal government's actions in the Amazon. Rede senator Fabiano Contarato, of the state of Espirito Santo and president of the permanent committee on the environment, led efforts to submit a public action calling for the federal government to accept the $20 million offered by the G7 to fight the Amazon fires and finance efforts to stem deforestation. Contarato also called for the impeachment of Environment Minister Ricardo Salles for administrative malfeasance. In contrast, Senator Plínio Valério (PSDB) of the state of Amazonas gathered the 30 signatures necessary to launch a CPI in the Senate to investigate the use of government resources by NGOs operating in the Amazon.


Chamber of Deputies


Chamber President Rodrigo Maia (DEM) maintained a critical stance in relation to the executive branch and assumed two two commitments before European governments. First, the Brazilian Congress would act to preserve the Amazon and refuse to lessen the rigor of environmental laws, including the process of approving two controversial reforms, the environmental licensing reform (Public Law 3729/04) and any changes to the indigenous rights law (PEC 187/16). Maia also promised to lobby the Bolsonaro government to use the Petrobras fund, a product of the judicial settlement between Petrobras and the U.S. Department of Justice regarding the Lava Jato corruption scheme, to finance efforts to control fires and combat deforestation. Maia's efforts are fully supported by the state governors of the Amazon region.


The congressional environmental caucus and the Chamber's permanent environmental committee, led by deputies Alessandro Molon (PSB) and Rodrigo Agostinho (PSB), maintain close relations with civil society. As a result, they received a petition with over a million signatures demanding congressional action to halt illegal Amazon deforestation. Also, members of both the environmental caucus and environment committee joined with members of the agribusiness caucus to discuss joint cooperation to target illegal deforestation while distinguishing between legal and illegal forest clearings. Federal deputy Molon and other representatives in the opposition, such as Tabata Amaral (PDT) and Felipe Rigoni (PSB), are considering the establishment of CPIs to investigate the Amazon fires.


PERSPECTIVES AND STRUCTURAL LIMITS


Government Environmental Agenda: Economy Needs a "foot on the brake"


The Bolsonaro government's environmental policy orientation is not expected to change in the near future, but the crisis of the Amazon fires has forced itto slow down efforts to open up the Amazon to extractive economic development. The crisis revealed that the environmental policy challenge is also economic. The threat of tariff-based sanctions is minimal given World Trade Organization disciplines preventing the use of such measures for political purposes. However, the threat of investment and trade related sanctions are growing, including the installation of non-tariff barriers targeted against major Brazilian exports. These threats make environmental policy a major point of contention and deliberation within Bolsonaro's inner circle and among major policymakers in Brasilia. International pressure continues to mount in an effort to force Brazil to comply with its Paris Agreement commitments and will likely come to a head during this month's General Assembly of the United Nations. Executive and legislative responses may mitigate the crisis in the short term but are unlikely to recede completely given that the Bolsonaro administration's environmental policy is subordinated to its commitment to liberalize the economy and boost growth in the short term.


Congressional Limitations


Congressional actions do not significantly change the risks associated with Brazil and the crisis unleashed by the Amazon fires. According to the Brazilian Legislative Observatory (OLB-UERJ), federal deputies opposed to strict environmental protection by government authorities are a majority is all states, with the exception of the small state of Espirito Santo. According to the OLB-UERJ, there are eight states whose legislators demonstrate the greatest opposition to environmental protection, all of which are located in the agricultural belt. Although data was collected from the prior legislature (2015-2018), more recent numbers published by the Brazilian Agribusiness Observatory show that little has changed in the new legislature. Many senators and federal deputies are large landowners with significant agribusiness investments or business ties. Taken together, current congressional landowners control approximately 190,000 hectares, much of which is located in the Amazon basin. It should be noticed, however, that the crisis and the events leading up to it have also sparked intense legislative action, including sponsorship of 262 environmental legislation bills in the Chamber of Deputies since February. It is uncertain whether the environmental policy crisis will continue to fuel congressional attention to the Amazon and thereby reduce focus on the economic agenda.


In The Short Term


The crisis will not recede. The dry season is just beginning with nearly 1,000 separate fires burning in the Amazon. Deforestation and environmental degradation could worsen if the government remains firmly committed to its environmental policy design. A recent public opinion survey by Ibope/Avaaz reveals that 90% of Brazilians favor efforts to contain or diminish deforestation but it is unlikely that the Bolsonaro government will change its course in the near term. The likelihood is that , Bolsonaro's administration will continue to push back against the rising tide of domestic and international opposition, and pursue policies that essentially pit the economy against the environment.

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