Gold, oil, banks, and cattle rustling at heart of the 'Wild West' culture destroying the Amazon 

Deforestation tied to cattle ranching is about 80% of the damage to forests in any country on the Amazon

By Michael Molinski

(Michael Molinski is a senior economist at Trendline Economics. He’s worked for Fidelity, Charles Schwab and Wells Fargo, and previously as a foreign correspondent and editor for Bloomberg News and MarketWatch.) 

Editor’s note: This is the second in a two-part series on the destruction of the Amazon. Read part 1 here: The big business behind the destruction of the Amazon, and why it's a global problem

SANTAREM, Brazil (Callaway Climate Insights) — Along the banks of the Amazon, Santarém was developed by the riches of gold prospectors who began flocking to its sandy beaches 40 years ago and transformed this sleepy town into what has become known as the “Caribbean of the Amazon.”

With a population of 300,000, Santarém, in the western part of the state of Pará, is the third-largest city in the Amazon and is the midpoint between Manaus and Belem, just a three- or four-day boat ride down the river to either city.

But like many other cities in the Amazon, Santarém is suffering from overdevelopment, which is threatening the Amazon rainforests as deforestation sweeps through the region.

Gold miners are only partially to blame, as are soy farmers, cattle ranchers, oil companies and the financial companies that support all of them.

Beef dominates deforestation in the Amazon

Cattle ranching is the largest driver of deforestation in every Amazon country, accounting for 80% of current deforestation rates. Brazil is by far the world’s largest beef exporter, accounting for about 24% of world beef exports.

Cattle ranching is much easier to clear for than farming, although every year soy farming is encroaching on lands that were previously used for cattle.

In the beef industry, most of the major companies operating in the Amazon are Brazil’s JBS, Marfrig and Minerva. JBS, for its part, has been granted several favorable trade agreements under the Trump administration, including $78 million in government pork contracts funded with the $16 billion bailout funds that Trump approved in 2019.

Anyone who has spent time in the Amazon knows that life there is like the Wild West, where there are no laws, cattle rustling is rampant, and anything goes in the pursuit of profit. Prospectors for decades continue to fight for gold near the now-closed Serra Pelada mine just south of the Amazon, where murders and crime continue to this day.

Gold, oil and banks

Gold mining, oil companies and banks and asset managers are equally responsible for the destruction of the Amazon.

This year, gold prices have spiked more than 35% as a result of the pandemic, and that has prompted a new wave of prospectors to hunt for gold in Brazil, Guyana, Venezuela and Colombia. That has meant invading indigenous lands deep within the Amazon rainforest for gold that can attract $2,000 an ounce, burning and toppling trees in the process.

At its peak, thousands of underage girls prostituted themselves for gold flakes and between 60 and 80 unsolved murders occurred near Serra Pelada every month. Since those days, the Serra Pelada mine has been closed and turned into a 140-meter-deep lake. But artisanal and small scale gold mining still goes on in the Amazon, and contributes to as much as 10% of all deforestation of the Amazon. The release of mercury from the mining process contaminates the lands and water. In the Madre de Dios regions of Peru, where mining has been extensive, 76% of all people tested have levels of mercury in their systems between three and 33 time above what is considered safe, indigenous children being the most affected, according to the Amazon Aid Foundation.

Oil companies that explore for oil in the Amazon include Chile-based GeoPark, Toronto-based Frontera, and Andes Petroleum of Ecuador. However, most of the oil companies that do business in the Amazon are financed by Citibank (C), Goldman Sachs (GS), HSBC (HSBC) and JPMorgan Chase (JPM).

Aside from underwriting and providing debt to the soy, beef and oil companies, asset managers like BlackRock (BLK) hold stakes in these companies. BlackRock is a major shareholder of bonds and equity in Bunge, ADM, JBS, GeoPark, Frontera and Andes Petroleum.

“We are an asset manager, not an asset owner,” says Farrell Denby, a spokesman for BlackRock. “It is our client’s money, not ours.”

While that may be true, the shareholders in some of BlackRock’s exchange-traded funds and mutual funds are inadvertently investing in companies that are destroying the Amazon.

To BlackRock’s credit, CEO Larry Fink announced earlier this year that BlackRock would “make sustainability integral to portfolio construction and risk management, and exiting investments that present a high sustainability-related risk.”

What needs to be done

Clearly, at the rate the Amazon is being destroyed, the entire world needs to agree that actions must be taken now. And we need to stop placing blame on others. All of us are responsible. What needs to be done is:

  • More legislation and more enforcement by the government of Brazil.

  • Outright cancelations of private concessions to grow, buy and export soy and beef from the Amazon.

  • Stop buying products that make use of crops that were grown on deforested land

  • Stop financing operations that make use of deforested land

  • Stop investing in the stocks, bonds, ETFs and mutual fund companies that include companies that operate and use deforested land in the Amazon

  • Create efficient, environmentally friendly products that can be grown in the Amazon, such as palms and palm oil

  • Create, either administered globally or in Brazil, a fund that would compensate the indigenous populations and other low-income Brazilians for land that would otherwise be deforested and create national preserves

Today, the crimes being committed in the Amazon have been transformed into large, organized criminal networks with ties into not only in the police and government but also ties in cattle, soy, gold mining and oil, not to mention the banks.

“They have the logistical capacity to coordinate large-scale extraction, processing, and sale of timber, while deploying armed men to protect their interests. Their ultimate goal is often to clear the forest entirely to make room for cattle or crops,” according to a recent report by Human Rights Watch.