Environmental setbacks threaten Amazon and trade deals in Brazil
When Luiz Inácio Lula da Silva returned to the presidency of Brazil in early 2023, he promised to end the predatory environmental practices promoted by his predecessor Jair Bolsonaro (2019-2023), particularly in the Amazon rainforest. Initially Lula made some progress in slowing deforestation and boosting environmental protection. But Brazil’s powerful farming lobby, backed by right-wing legislators allied with former president Bolsonaro, has repeatedly fought back. This summer it launched a counteroffensive to roll back environmental protection laws and practices.
Congress passed legislation in July that was nominally designed to streamline the environmental licensing process. It effectively undermined so much of the country’s environmental safeguards that conservationists dubbed it the ‘devastation bill’. Even though Lula vetoed 63 of the nearly 400 articles of the bill, the law maintains provisions to fast-track controversial development projects which the government deems to be of national interest. These could include a highway through the Amazon rainforest and large-scale hydroelectric dams.
Then, on 18 August, the superintendent-general of the government’s anti-trust regulator (Cade) ordered the immediate suspension the so-called ‘soy moratorium’, a 2006 private-sector agreement that banned the trade of soybeans grown on illegally deforested lands in the Amazon region. The agreement made by companies that trade, process, and export soy was credited with helping to reduce the destruction of the world’s largest rainforest.
The office of the superintendent-general, which initiates and issues guidance on anti-trust investigations for the full collegiate to review, alleged that the moratorium configured an “anticompetitive agreement among competitors, which harms soy exports”. By effectively determining what producers can and cannot sell their products, the Grupo de Trabalho da Soja (GTS), the working group that implemented the moratorium, was acting as a type of cartel, Cade argued. As a result, it ordered the GTS “to refrain from collecting, storing, sharing, or disseminating commercial information related to the sale, production, or purchase of soybeans, and from carrying out audits”.
The Soy Working Group is made up of 30 trading companies, including big names such as Cargill, Bunge, and Louis Dreyfus, as well as two industry groups: the association of vegetable oil producers (Abiove) and the grain exporters’ association (Anec). NGOs such as Greenpeace, The Nature Conservancy (TNC), and the World Wide Fund for Nature (WWF) also participated. The environment ministry, the federal environmental regulator (Ibama), and the national institute for space research (Inpe) were involved, but their participation was curtailed during the Bolsonaro administration.
All the active members were prohibited from publishing documents related to the moratorium in any way or even making reference to it on their websites. If found guilty of market manipulation, the associations could face fines of up to R$2bn (US$370m), while companies may have to pay up to 20% of their annual revenue.
Conservationists were outraged over the ruling, which was prompted by a complaint from the standing committee for agriculture, livestock, supply, and rural development in the lower chamber of congress, which is dominated and influenced by the powerful rural caucus. “Few producers deforest their properties. But those few have a lot of political power,” said Mauricio Vovodic, executive director of WWF-Brasil. “This minority of rural producers on the front lines of deforestation sees [Cade’s decision] as a green light for forest destruction,” he added.
Abiove, which represents the companies that produce, process, and trade soybeans and their derivatives, enforced the soy moratorium by crossing deforestation data with certificates of origin. It said that Cade’s allegations are entirely wrong because it does not have access to specific production data and instead uses publicly available information. It appealed Cade’s decision, arguing that “the GTS does not share sensitive information. There is no information about price, there is no information about production volume, marketing volume, destination of the volume. There is no information about this type of circulation.” Specifically, the GTS shares public data from the Cadastro Ambiental Rural (CAR), the rural environmental registry, and from Inpe on deforestation. Auditing companies are hired to verify if soy was produced on land that was deforested after 2008 or has been embargoed due to inadequate labour conditions.
Legal experts also questioned the reasoning behind Cade’s decision, saying that unlike a cartel-like organisation, the GTS exchanged non-confidential information, did so not secretly but transparently, and even had the backing of parts of the federal government. “It doesn’t seem to make sense to treat a widely known environmental self-regulation agreement, endorsed by the administration itself, as a hardcore cartel,” Ticiana Lima and Marcela Mattiuzzo, partners in the law firm VMCA Advogados, wrote for the legal news website Jota. There is also no evidence of actual market manipulation, they added.
At the time of writing, the suspension of the soy moratorium had not been implemented due to a legal petition filed by Abiove. On 25 August a federal court in Brasília, the federal district, sided with Abiove and granted an injunction to temporarily block Cade’s decision. According to the ruling of federal judge Adverci Rates Mendes de Abreu, the decision of the superintendent-general’s office was not made with sufficient consideration of technical and legal arguments, so the order to suspend the soy moratorium can only go into force after being reviewed by the full panel of Cade’s collegiate board.
Potential trade impact
The US government in July launched a so-called Section 301 investigation into Brazilian trade practices that allegedly create disadvantages to US producers, including the lack of environmental protection by Brazilian soybean farmers. A suspension of the moratorium would play right into the hands of the US and could prompt additional tariffs or other punitive measures. Similarly, the EU, which in December will start enforcing a 2023 law that prohibits importing commodities linked to deforestation, could ban Brazilian exports and even put on ice the pending approval of the EU-Mercosur trade agreement, which still requires parliamentary approval on both sides.
Ministry concerns
Following the decision by Cade’s superintendent-general, the environment ministry (MMA) issued a statement expressing its concern over the temporary suspension of the moratorium. It said the accord was an internationally recognised and effective tool that allowed an increase in output with productivity gains, while ensuring free competition without destroying the Amazon biome. Between 2006 and 2023 the area used to grow soy increased by 427%, while 97.6% of all deforestation wasn’t tied to the expansion of the crop, the MMA said.