Last year Brazil was at the centre of international controversy because of deforestation and widespread fires across its Amazon region.
As this year’s dry season gets under way, the fires look set to be even bigger. One change is that the government is coming under much-increased corporate pressure to protect the environment.
This year’s fires are already burning strong. Satellite images collected by the government’s space research agency, the Instituto Nacional de Pesquisas Espaciais (Inpe), showed 2,248 fire hotspots in the Brazilian Amazon in June, a 20% increase on the same month last year. Like last year, drifting smoke is likely to reach neighbouring towns and cities and cause respiratory difficulties for part of the population. Unlike last year, Brazil now has the added problem of the coronavirus (Covid-19) pandemic which also attacks the respiratory system, and which has already led to over 70,000 deaths in the country.
There is a proven link between deforestation – caused by illicit settlement, logging, the expansion of extractive industries, and the opening up of large areas for agriculture and cattle-grazing purposes – and the annual surge in fires during the dry season (June to October). Most fires occur in recently deforested land. It is also clear that by cutting the budgets of environmental protection agencies and weakening regulations, the government of President Jair Bolsonaro is driving higher rates of deforestation.
Preliminary Inpe data show deforestation is up by 34% in the first five months of this year compared with 2019. Brazil’s Observatório do Clima, a network of environmental civil society organisations, estimates that this year’s emissions will grow by 10%-20% on 2018 levels, meaning the country will send anywhere between 2.1bn and 2.3bn of CO2 into the atmosphere this year, way above the pledge it made in the 2015 Paris Agreement on climate change to limit emissions to 1.3bn tonnes by 2025. Environmentalists are worried that a long-term trend towards a drier Amazon region will hamper the region’s ability to work as a carbon sink, reduce annual rainfall, and disrupt local communities.
Last year the Bolsonaro government was angered by international concern over the fires, describing it as unwarranted intervention in Brazil’s domestic affairs. Bolsonaro struck a defiant stance, snubbing France’s President Emmanuel Macron over the issue. The first signs of a possible business boycott of Brazil began to emerge then. Nordea Asset Management said it would not buy any more Brazilian debt because of “political and economic circumstances”. A Norwegian pension fund also said it would avoid investment in Brazil. A group of United Kingdom-based supermarkets including Sainsbury’s, Tesco, and Marks & Spencer have said they would consider boycotting Brazilian products if the government passed further legislation weakening environmental protection.
Irritated by these moves Bolsonaro nevertheless set up in early 2020 an ‘Amazon council’ designed to review the situation and work towards sustainable development in the Amazon region, led by Vice President Hamilton Mourão [WR-20-06]. In May this year a small contingent of 4,000 troops was sent into the region with the stated aim of cracking down on illicit clearing, an operation dubbed ‘Operação Verde Brasil II’.
This year business concern is already more vocal. On 23 June a group of 30 global financial institutions from Europe, the US and Japan, collectively managing US$3.7trn in assets, published a letter to the Brazilian government saying that deforestation causes “widespread uncertainty about the conditions for investing in or providing financial services to Brazil”.
One of the signatories, Norway’s Storebrand Asset Management which has assets of US$80bn, said it would only be able to continue investing in Brazilian companies if there was a “change of course” towards a more “stable and predictable regulatory and environmental framework”. Storebrand Asset Management is one of seven investment funds that had previously told Reuters they would consider divesting their assets from Brazilian beef producers, grain suppliers, and even government bonds if the country did nothing to fight deforestation.
Investors are particularly concerned over the meatpacking industry with big Brazilian companies such as JBS accused of buying cattle grazed on illegally deforested land in the Amazon. The International Chamber of Commerce in São Paulo told the Financial Times that the campaign was having a real impact and that alarm over deforestation could put the free trade agreement between the European Union (EU) and the Southern Common Market (Mercosur) – negotiated over two decades but still not ratified after being approved last year – at risk.
Brazilian firms speak up
Big Brazilian firms have for the first time joined the chorus of businesses putting pressure on the government to better protect the environment. The presidents of four agribusiness associations and CEOs of 38 companies spanning the agribusiness, industrial, and financial sectors addressed a letter to Mourão to that effect on 7 July. Signatories included international companies with a presence in Brazil, such as Shell and Cargill, and Brazilian firms of the likes of mining giant Vale, state-owned electricity firm Eletrobras, banks Bradesco and Itaú Unibanco, and food processing company Marfrig.