The big business behind the destruction of the Amazon, and why it's a global problem

Brazil leader Jair Bolsonaro says the Amazon belongs to Brazil, but banks, oil and gold companies, and soy conglomerates all play a role

(Editor’s note: This is the first in a two-part report on the impact of global corporations, finance and politics on the resource-rich 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.) 

BELEM, BRAZIL (Callaway Climate Insights) — The Archer Daniels Midland port, near where the mouths of the Amazon and Tocantins rivers meet, may look like any industrial port in the world. But what distinguishes it is the cargo that it ships: some six million tons of soy and other grains per year, bound mostly for Asia and Europe.

The Archer Daniels Midland Co. (ADM) port is a collecting point for much of the soy and other grains that arrive by boat, truck and rail from an “increasingly productive western and northern regions of Brazil,” according to ADM.

What the operations of this port don’t tell is the key role that it plays in the destruction of the Amazon rainforest.

Environmentalists are quick to blame the Brazilians for their role in the destruction of the Amazon, but it’s not just the Brazilians to blame. Western corporations are equally responsible for destroying the rainforests. Many of those products — soy, beef, oil and gold — are products that were made from Amazon lands that were cleared or burned so those products could be enjoyed by people reaching from New York to London to Beijing.

“The problem is not the fires that have blanketed the Amazon. The problem is deforestation,” said Paulo Artaxo, a global climate change researcher at the University of Sao Paulo. “The rainforests have been transformed into agriculture to grow soy and for cattle to graze.”

In the paragraphs below and the article following this about gold, oil and banks, I’ll summarize the politics behind climate change as it relates to the Amazon, both from a global perspective and from the Brazilian point of view. Then I’ll describe the destruction of the Amazon rainforest and what’s behind it, and finally I’ll go into detail about who and what companies stand to profit from it.

Politics of the Amazon

U.S. President-elect Joe Biden has made it clear that one of his first steps as president will be to return the U.S. to the Paris Climate Agreement. But that may not be enough. Five years after the agreement was adopted by nearly every nation, countries like Brazil, China, Russia and India are already falling behind on their goals to reduce carbon emissions by 2030. One of the pledges that Brazil agreed to was achieving zero illegal deforestation in the Brazilian Amazon by 2030.

Brazil is well behind in this effort, according to a report earlier this month by the independent watch-dog group Observatorio do Clima. Brazil’s right-wing government of President Jair Bolsonaro has been widely criticized for allowing the Amazon to burn and for private-sector interests to gobble up land in the Amazon.

Bolsonaro, a staunch ally of President Donald Trump, initially campaigned in 2018 that he planned to withdraw from the Paris Climate Agreement once elected. Then he reversed course, backing the agreement, and since then has pledged to meet the climate reduction goals set out under the accord.

Yet he continues to lambast environmentalists and rallies the Brazilian people behind his cause, saying the Amazon belongs to Brazil, not the world.

There may be something behind Bolsonaro’s claims. Many Brazilians claim that the United States and Europe destroyed their own forests for centuries, only to come to the conclusion over the past few years that doing so was bad for the climate. With no way to rectify earlier deeds, the world is trying to enforce their own environmental ideas to protect the resources in Brazil, Africa, South and Central America, and Southeast Asia. In the minds of many Brazilians, Brazil is only trying to feed its people. In the Amazon, more than half the rural population live below the poverty line. So if there is a way to help the poor through economic measures, even if it means destroying the Amazon, many Brazilians side with the people over the environment.

In the meantime, “the deforestation and carbon emissions have increased, not decreased, under the current administration” of Bolsonaro, said Artaxo.

“Brazil’s initial response to the pandemic has further weakened environmental regulations,” writes the Climate Action Tracker, an independent science research group. “It appears likely, based on past performance, that the Bolsonaro administration will continue in the wrong direction. We expect that Brazil’s GHG emissions in 2020, excluding LULUCF, will drop by about 4% from 2019 levels. Emissions from agriculture are set to maintain an upward trend.”

Most Brazilians, and indeed much of the world, agree that something needs to be done to balance out the economic interests of the Brazilian people with the destruction of the Amazon and climate change.  

In his debate with Trump on Sept. 29, Biden said “the rainforests of Brazil are being torn down,” and offered on the behalf of the rest of the world (without permission) to pay Brazil $20 billion to stop the destruction. While that statement may make political points for Biden, it is far from realistic.

Capitalistic interests in the Amazon

Both Brazilian and global corporations are profiting now from the destruction of the Amazon, principally in beef and soy. In the soy industry, the major players are privately held Cargill of Minneapolis, Chicago-based ADM, New York-based Bunge Ltd. and Brazil’s Amaggi

For its part, ADM says it has a “no deforestation policy” in place. “We do not source from any newly deforested areas in the Amazon, and we have satellite technology in place to ensure that we can enforce our policy,” says Andre Degasperi, head of corporate communications for ADM in South America.

Still, the farmers that supply soy to companies like ADM, Cargill, Bunge and Amaggi have ways of getting around those rules. Under the Amazon Soy Moratorium that major companies signed in 2006, those companies agreed not to buy soy that was planted on “newly deforested areas in the Amazon.”

To get around that, farmers simply plant another product other than soy, and a year or two later they switch back to soy. Yes, it’s illegal, but in the Amazon, the government and police are not watching. Soy harms the environment more than most crops like palms because they destroy carbon-absorbing rain forests and they replace them with soy, which absorbs very little carbon from the atmosphere.

Since 1990, the area of land planted with soybeans in Amazonian states has expanded at the rate of 14.1% per year and now covers more than eight million hectares, according to Mongabay, an NGO.

Brazil and the United States account for about 83% of the world’s soy exports.

Yet the amount of soy is far less than the amount of land that is cleared to make room for cattle to graze.

Coming next week, Part 2: How beef, gold, oil and banks are destroying the Amazon.