Study points out that the standing Amazon Forest is worth R$ 1.5 trillion a year

Keeping the Amazon Forest standing can yield up to R$ 1.5 trillion a year (US$ 317 billion) according to a study by the World Bank released on Tuesday night (9), which is equivalent to “up to seven times more than the estimated value of private exploitation linked to extensive agriculture, logging or mining” (see full text).

The memorandum “Delicate Balance for the Brazilian Legal Amazon” took into account the influence that the forest has on the region’s climate, its potential for sustainable exploitation of ecological goods and services, and the impacts that environmental devastation can cause – such as increasing poverty extreme in the country.

According to a survey by the World Bank, the Brazilian rainforest has an annual impact of BRL 98 billion on agriculture in South America, with the rain needed for crops and protection against soil erosion and fires. Already at a global level, carbon storage in the forest is estimated at just over R$ 1 trillion.

The production of non-timber products or sustainable tourism with the forest standing are estimated at R$ 59 billion.

“Therefore, the cost of inaction is high, both in the Amazon Forest and in the other biomes of the Legal Amazon. Preventing illegal deforestation is not only an economic and environmental prerogative, but it is also in line with the commitments assumed by Brazil under the Paris Climate Agreement. The realization of this commitment is important for the Brazilian government to demonstrate its political credibility to its citizens and to the world and, at the same time, fulfill its obligations to contain global warming as a member of the international community”, points out Marek Hanusch, editor in charge of the report.

Government policies do not help in preservation

The World Bank report points out that government policies to encourage agricultural and industrial production in the region go against the grain of environmental preservation. One of them, he portrays, is the granting of rural credit to the detriment of other sectors.

“Instead, policies should focus on supporting climate-smart agricultural practices, such as integrated landscape approaches, which require a shift in attitude: instead of incentivizing private goods through relatively low-cost credit, targeted, offer incentives for public goods, as in the case of Plano ABC do Brasil”, says Hanusch.

Another is to encourage industrialization in the Amazon region through the Manaus Free Trade Zone, which consumes around 0.4% of the national Gross Domestic Product (GDP) for the installation of manufacturing production in the Amazonian capital. Despite generating jobs, the institution claims that tax benefits have not helped to boost the state’s economy – which has been decreasing competitiveness and losing companies.

According to the World Bank, “offering more tax incentives to companies is not the solution, because it introduces distortions that encourage companies to locate in places where they would not otherwise locate and result in reduced productivity — the exact opposite of that a productivity-focused growth model would try to achieve”.

The institution also points out that trade barriers imposed by Brazil in the manufacturing and services sectors make the country’s economy one of “the most closed in the world, and its participation in global value chains tends to be concentrated in the export of primary commodities”.

The report also signals a point of attention in Brazil’s commercial relationship with the world, especially under the terms of the agreement between the European Union (EU) and Mercosur, of which Brazil is a member. “The EU will open its markets to more Brazilian agricultural exports, while Brazil will gradually open its manufacturing sector. Several environmental safeguards are intended to reduce the impacts of this enhanced market access on deforestation. The effects of these safeguards vary according to the case: it is important that they are implemented and applied properly”, he points out.

“Trade agreements that include agricultural liberalization will continue to pose a risk to the conservation of Amazonian forests until economic and institutional maturity is sufficiently advanced,” adds Marek Hanuscg, editor of the report.

Brazil’s growth was due to deforestation, but it needs to change

The World Bank points out that Brazil’s favorable position as an upper-middle-income nation was due, among other reasons, to deforestation for the production of agricultural and mineral commodities. However, the institution states that “the world has been waking up to the impact of its demand on deforestation and its devastating natural, social and economic consequences”.

“Sometimes these trends are seen as a threat to economic growth in Brazil and the Legal Amazon. They also indicate an opportunity to replace the country’s growth model with one that simultaneously provides for the protection of natural resources and sustainable and inclusive development. A change in the growth model is important for Brazil and the Legal Amazon,” she says.

The institution indicates that Brazil’s future prosperity will depend on the ability to increase productivity in sectors other than commodities, such as the manufacturing and services industry, despite the fact that the export basket is still mostly made up of agricultural and mineral goods.

The World Bank points out three measures that could be implemented to reduce the economic burden on the Legal Amazon region that would help preserve the current forest cover:

• Productivity growth in other parts of the country would increase demand for goods produced in the Legal Amazon, especially benefiting states, such as Amazonas, which are integrated into domestic markets.
• Furthermore, it would attract workers out of the Legal Amazon, reducing the supply of local labor and thus raising local wages.
• Finally, it would reduce deforestation, attenuating the external competitiveness of the region’s commodities, reducing pressure on rural lands and, therefore, on the natural forests of the Legal Amazon.

The report also indicates, among other points, the need to improve the region’s logistics infrastructure without compromising the forest, mainly stimulating transport on the region’s rivers – currently low and highly concentrated, increasing the amounts paid.

“Reducing transport costs by 12.5% ​​(say, reforming the cabotage system) would increase state GDP [do Amazonas] by about 38%, more than the annual value of the current tax incentives for the Manaus Free Trade Zone”, registers Hanusch.

Finally, the report points out that reforms in the granting of rural credit and land taxes and the acceleration of land tenure regularization would help to preserve the Amazon forest in parallel with the increase in economic gains.