Brazil faces $317 billion in annual losses to Amazon deforestation

Brazil faces 7 billion in annual losses to Amazon deforestation

  • Brazil could face losses of $317 billion per year as well as biodiversity depletion and severe social setbacks for millions of people if Amazon deforestation continues, a new report from the World Bank warns.
  • The value is seven times higher than profits from commodities taken from the rainforest, the report concludes.
  • Experts say that infrastructure development connecting coastal cities, rather than within the Amazon Rainforest, can help boost Brazil’s economy and improve social conditions while reducing pressure on the forests.
  • Development efforts must be supported by strong forest governance and international backing in order to be effective, according to experts.

Clearing the Amazon Rainforest and its transition zones into biomes such as the Cerrado savanna and Pantanal wetlands could cost Brazil $317 billion in losses per year, according to a World Bank report released in May. The figure is seven times higher than the estimated economic gain from private extensive agriculture, logging and mining endeavors, revealing that deforestation for commodity growth is less valuable than rainforest preservation.

“The cost of inaction is high, both in the Amazon rainforest and in [the Legal Amazon’s] other biomes,” the report warned. “Beyond the climatic and economic considerations associated with deforestation, the cost of inaction also includes slow social progress.”

The World Bank analyzed data from the Legal Amazon, an administrative region that spans the nine Brazilian states located within the Amazon Basin which sprawls over 5 million square kilometers (1.9 million square miles) — an area larger than the European Union. Most of those states rank among the poorest in the country. A third of the 28 million Brazilians, including 380,000 Indigenous people, residing in this region live in poverty. “Living conditions of the poor remain precarious in both rural and urban areas, particularly disadvantaging Indigenous people, Afro-Brazilians, caboclos (people of mixed heritage), and female-headed households,” according to the report.

Brazil accounts for about a third of tropical deforestation worldwide, mainly associated with cattle ranching, soy crops, logging and mining, and most tree clearing in the Legal Amazon is illegal. “Economic expansion has moved into those ancient forests, destroying them at a rapid rate—especially in Amazônia’s [the Legal Amazon]  southeast, within what is known as the ‘Arc of Deforestation’—and threatening the ways of life of many traditional communities,” the report found.

Deforesting the Amazon Rainforest could cost Brazil up to $317 billion per year in losses. Most deforestation that occurs there is illegal and experts say a change in the development model coupled with stronger forest governance initiatives are required to curb environmental and economic damage. Image © Daniel Beltrá/Greenpeace.

Development model shift

The severe financial losses, social setbacks, and biodiversity loss caused by deforestation in Brazil’s Amazon could be prevented by changing the country’s growth model and reinforcing stronger forest governance, senior economist and the report’s lead author Marek Hanusch told Mongabay by phone.

Land expansion in the Amazon can be linked to a historically embedded mindset that growth is driven through resource extraction and the commodity market, even though this type of development can harm the environment and doesn’t grow the economy as effectively in the long run, experts say. “Deforestation is somewhat structural, it’s part of the Brazilian growth model,” Hanusch said.

According to Ricardo Abramovay, a senior professor at the Institute of Energy and Environment at the University of São Paulo who wasn’t involved in this report, agriculture “continues to occupy new areas, as if the growth of the country as a whole were dependent on its incessant territorial expansion,” he told Mongabay through email.

Sustainable agriculture development needs to be complemented with higher labor productivity growth across Brazil in sectors beyond commodities and coupled with sustainable infrastructure plans, Hanusch said. Shifting to this type of growth model can boost economic progress, reduce poverty and move the development paradigm away from resource extraction, according to the report.

Emphasizing productivity, especially in sectors other than commodities such as agriculture and mining, “would propel development countrywide and help to lift Amazônia’s economies while taking pressure off its natural forests,” Johannes Zutt, World Bank’s country director for Brazil, said in a World Bank statement.

To be effective, this shift needs to be complemented with stronger forest governance reinforcement, including “the designation of large areas of undesignated public land, the implementation of the Forest Code, and effective Command and Control interventions,” according to a World Bank statement.

A focus on commodities, such as agriculture and mining, is prompting both legal and illegal land expansion as a way to achieve economic growth. While the commodity sector remains important to Brazil’s economy and development model, experts say that building the non-commodity sector will help take pressure off the forest while boosting productivity. Image © Daniel Beltrá/Greenpeace.

Investing in infrastructure

Infrastructure in the Amazon is often associated with deforestation such as the potential paving of the BR-319 highway that cuts through the Amazon, which experts say would cause mass deforestation if completed. The report described how connecting cities in the east of Brazil, rather than continuing to build roads through the Amazon, could boost productivity gains across the country while easing the strain on the rainforest

“Brazil could do really well if it focused more on connecting its coastal areas rather than building roads into the Amazon,” Hanusch said. “The Amazon states are only 10% of Brazilian GDP, so what happens in the rest of Brazil really matters for these macroeconomic aggregates that drive deforestation.”

Some economists warn that the Amazon still needs infrastructure development, especially as parts of the region are important economic hubs. “For these people [in the Legal Amazon] to be able to have income and wealth in a productive economy, that in fact can coexist with the forest, we will need a lot of infrastructure within the Amazon and not a little,” Daniel Vargas, economics professor at Getulio Vargas Foundation institute and research center, and who wasn’t involved in the report, told Mongabay by phone.

Manaus, for example, is the country’s second-most important industrial complex after São Paulo, and some agricultural production and extractive economies in the Amazon have “a reduced forestry impact,” Vargas said. “But it is important to build a development project in the Amazon that does not degrade and squander the region’s natural resources,” he added.

One solution presented in the report is to connect urban dwellings in the Amazon using the biome’s immense rivers instead of continuing to build roads. “Most cities in the Amazon basin are along rivers,” Hanusch said. “They can be connected much better by carefully promoting river transport. There are some environmental issues with river transport, but it’s definitely much better than roads.”

The Cuniuá River in the Amazon Rainforest. Most of the main urban dwellings in the Amazonian states are located by the rainforest’s huge river network, which experts claim could be developed as alternative transport options to the construction of roads. Image © Russell Monk/Greenpeace.

Making these changes shouldn’t be the responsibility only of Brazil’s governments, experts say. This is “a world agenda,” Hanusch said. Increased sustainable consumer behavior and embedding sustainability principles in global value chains and trade policies are essential to reducing pressure on the world’s forests, he added.

“The ultimate facilitator of deforestation is a growing demand for commodities. We all have to consume much more carefully, consciously and sustainably,” Hanusch said.

Other solutions include using trade agreements to help Brazil rebalance its growth model, continuing international funding, especially into the Amazon Fund, and developing robust voluntary carbon markets and other types of sustainable finance.

“Very often, when we talk about the economy and the environment, we talk about trade-offs. In Brazil, it’s not actually a trade-off — this is a win-win situation,” Hanusch said. “You can have the same policies that reduce deforestation and in the longer term will also promote prosperity. It’s a mind shift.”

 

Banner image:The state of Pará has one of the greatest shares of deforestation in Brazil, especially along the Arc of Deforestation. Brazil is responsible for a third of the world’s tropical forest clearing, mostly due to cattle ranch expansion. Image © Tommaso Protti/Greenpeace.

Citation:

The World Bank. (2023). A balancing ACT for Brazil’s Amazonian states: An economic memorandum.

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