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If Brazil Guts its Forest Code,Will it Kill the Rural Economy?

Raquel Orejas

If signed into law by President Dilma, Brazil’s newly-amended forest code will give farmers the right to chop down more trees than they’ve had at any time in the last 50 years.  That might, however, not bring the economic boom many are hoping for, as evidence suggests short-term economic gains will give way to long-term degradation and poverty.

If signed into law by President Dilma, Brazil’s newly-amended forest code will give farmers the right to chop down more trees than they’ve had at any time in the last 50 years.   That might, however, not bring the economic boom many are hoping for, as evidence suggests short-term economic gains will give way to long-term degradation and poverty.

27 April 2012 | Brazil’s agribusiness sector scored an apparent victory this week when the lower house of Congress passed sweeping changes to the Cí³digo Florestal (Forest Code), which for decades restricted the amount of privately-owned rainforest that can be cleared for development.

Indeed, the lower house scaled back protection even more than the upper house had.   The version passed Wednesday leaves it up to states to decide how they deal with Permanent Preservation Areas (PPAs), which established the protection of forest along riverbanks, hills, and meadows – areas prone to erosion and landslides that leave land degraded and rivers full of mud and agricultural fertilizers.

President Dilma Rousseff has long vowed to veto the bill if it provides amnesty for farmers, as the current version provides amnesty for farmers who cut more than their share before July 2008.   Under Brazilian law, she can veto all or part of the Bill, and must do so within 15 days of Wednesday’s vote.

What Changes?

The new code replaces the earlier 1965 Forest Code, which established for the first time the concept of Legal Reserve (RL). It stated that private landowners had to conserve 80% of their forested land if they were in the Amazon region, 35% in the Cerrado region within the Amazonian states, and 20% in other regions of the country.

Supporters of the new law say the current Forest Code has never worked: it has too many loopholes, too many rules and lacks adequate supervision or enforcement. The research, however, calls this into question.

Deforestation

Brazil is the world’s fourth biggest emitter of greenhouse gas (GHG), and 75% of its GHG emissions come from deforestation.   That number is sure to increase under the new forest code – continuing the reversal of a trend identified by Dan Nepstad et all in “
The End of Deforestation in the Brazilian Amazon
”.   They found that an average of nearly 20 thousand square kilometers of forests were cleared in the Brazilian Amazon annually from 1996 to 2005, but that deforestation rates plummeted after peaking in 2004. One of the main reasons for this plunge has been the increase of the Amazon Protected Areas from 1.26 to 1.82 million square kilometers, which accounts for 51% of the region’s remaining forests.

The Economic Argument: Fact or Fallacy?

Brazil’s economy is expected to outpace the average among countries belonging to the Organization of Economic Cooperation and Development (OECD), but only if its agriculture sector delivers. Agribusiness employs roughly one-third of the working population, and Brazil is a leading exporter of soybeans, orange juice, sugar, coffee and meat. In 2010, Brazil became the world’s-third largest exporter of agricultural products, behind the United States and European Union.

The more flexible Forest Code is designed to feed that economic beast, but here, again, the evidence is lacking.

Indeed, when Giulio Volpi collected data from deforestation, agricultural surveys and demographic censuses in the Amazon and the Atlantic Forest for a paper called “Climate Mitigation, Deforestation and Human Development in Brazil”, he found that economic benefits and costs from deforestation balanced each other out, leaving the Human Development Index in deforested areas no better or worse than it was before – even though they were environmentally impoverished.

Ecosystem Services

In the long term, this robs the land of ecosystem services, according to Carlos Eduardo Young of the Federal University of Rio de Janeiro (UFRJ).

He contributed to a recent paper entitled “The Contribution of Brazilian Conservation Units to the National Economy”, which examined the economic value of Conservation Units that Brazil established under its obligations as part of the Convention on Biological Diversity (CBD)

The paper showed, among other things, that the cost of treating water soars once the forest is gone – something people in US cities like Denver and New York have also learned.   Both cities are using water fees to pay for forest preservation because of the role that forests play in filtering and regulating water.

In addition to watershed services, Young’s paper identifies the following ecosystem services on Conservation Units:

  • The production of timber in the Amazon’s national and state forests, from areas managed according to the model forest concession, has the potential to generate between $ 1.2 billion to $ 2.2 billion per year, more than all of the native timber currently extracted in the country;
  • Rubber production in the 11 Extractive Reserves identified as producers, results in R$ 16.5 million per year, whereas the production of Brazil nuts has the potential to generate R $ 39.2 million per year, considering only 17 of the Extractive Reserves analysed. In both cases, these gains can be increased significantly if the conservation units receive investment to develop their productive capacity;
  • Visitors in the 67 existing National Parks in Brazil have the potential to generate between R$ 1.6 billion and R$ 1.8 billion per year, based on estimates of the projected flow of tourists (approximately 13.7 million people, including Brazilians and foreigners) by 2016, the year of the Olympic Games;
  • The sum of estimates of public visitation in federal and state conservation units considered by the study indicates that if the potential of the units are adequately exploited, some 20 million people will visit these areas in 2016, with a potential economic impact of approximately R$ 2.2 billion that year;
  • The creation and maintenance of Brazilian conservation units has prevented the emission of at least 2.8 billion tonnes of carbon, with a monetary value estimated of at least R$ 96 billion;
  • The estimated value for the annual “rental” of the carbon stock whose emissions were prevented by conservation units totals ranges from R$ 2.9 billion and R$5.8 billion per year. This amount exceeds the current spending and investment needs for further consolidation and improvement of these units;
  • In relation to the different uses of water by society, 80% of the country’s hydroelectricity comes from sources that have at least one tributary downstream of a conservation unit, 9% of drinking water is directly collected in conservation units, 26% is collected from sources downstream of conservation units, and 4% of the water used in agriculture and irrigation is taken from sources inside or downstream of protected areas;
  • In 2009, the actual revenue of Ecological VAT passed on to municipalities by the existence of protected areas in their territory was R $ 402.7 million. The potential revenue for the 12 states that do not yet have legislation on Ecological VAT would be $ 14.9 million, assuming a rate of 0.5% for the criterion “conservation unit” that the municipalities are entitled to.

 
 

Additional resources
Raquel Orejas is a Research Assistant in the Carbon Program of Ecosystem Marketplace.  She can be reached at rorejas@ecosystemmarketplace.com or +1 (202) 446-1990.

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