Investing in Amazon Rainforest Conservation: A Foreigner’s Perspective (commentary)
Commentary by Jonah Wittkamper on 21 April 2020
• Deforestation in the Brazilian Amazon has been trending upward since 2012, with a sharp acceleration since January 2019.
• Jonah Wittkamper, President of the Global Governance Philanthropy Network and co-founder of NEXUS, reviews the current situation and provides a perspective on how it might be possible to slow or reverse deforestation by investing in Amazon rainforest conservation.
• Wittkamper wrote this report to help guide investors and philanthropists on their learning journeys on the issue.
• This post is a commentary and does not necessarily reflect the views of Mongabay.
Last December, I flew to Brazil to learn everything I could about Amazon conservation. As a global citizen, I wanted to understand more about deforestation and how I can help. I stayed for two months and met with government officials, NGOs, private sector entrepreneurs, philanthropists and other important stakeholders. I was given some privileged access and came home with hope and a vision for how the international community can help develop a sustainable Amazon rainforest in ways that were never possible before. I wrote this report to help guide investors and philanthropists on their learning journeys and have included many links to help readers do further research and background reading.
Many scientists assert that the Amazon rainforest is the center of the global water cycle, helping to propagate rainfall and other climate patterns globally. In recent years, studies have shown that excessive Amazon deforestation disrupts rain patterns in the US and elsewhere. In 2019, for the first time in history there were unprecedented droughts and wildfires in the Arctic and Australia as well as South America and elsewhere. The Amazon may be at a tipping point, the global water cycle may be at risk, and the global community is taking notice.
According to Script Finance, while rainforests give $4 trillion in value of ecosystem services to the global economy, over $941 billion of annual turnover is at risk due to dependency on commodities linked to deforestation.
Despite these numbers and the underlying issues, throughout 2019 the Brazilian president worked to open the Amazon to the highest bidder and weakened deforestation defense mechanisms while promoting agro-industrial economic development. In response there has been a lot of international pressure and it seems to be working. After investors united their pressure on the Brazilian government through diverse channels, including at World Economic Forum in January 2020, an “Amazon Council” was announced by the Brazilian government to be led by the Vice President, Hamilton Mourao. While Mourao is trusted, Bolsonaro keeps him on a short leash and removed him from public roles for much of 2019.
If Amazon economic development is the goal, yet deforestation-related wealth creation makes up only a tiny fraction of the Brazilian economy (most of the agricultural production is in the southeast of the country), it is worth examining whether new business in the region is dominated by virtuous poverty alleviation interests or by organized crime.
Question of Political Leadership
Many Brazilians believe that President Bolsonaro does not act in good faith on the Amazon. They see a lot of evidence. The president’s rhetoric on indigenous populations often creates outrage and his expulsions of key public officials has raised much suspicion. His administration fired key people, including the heads of government agencies like INCRA to allegedly facilitate landgrabbing, INPE to allegedly thwart reporting of deforestation-related satellite images, and IBAMA to allegedly slow environmental enforcement. Instead of surprise raids on illegal loggers, dates and locations of enforcement visits are now published publicly. Dozens of pesticides which were previously forbidden have now been legalized and the federal government pressured key parties to pull out of the leading Brazilian platform of NGOs and businesses focused on forest conservation and climate. Finally, among much else, months prior to the Amazon Council news, Bolsonaro announced two other national Amazon commissions, but they never materialized.
Despite all of this controversy, some respected Brazilian business leaders are more hopeful about Bolsonaro. The Brazilian economy is doing better today than it was a year ago and there are other signs of progress. For example, through private conversations, I learned that a national, government-aligned blockchain solution may be announced to combat landgrabbing. Others privately suggested to me that after so much criticism, the Bolsonaro administration is hungry to show some progress on Amazon conservation and is searching for answers, yet too proud to ask for help publicly. Like US President Donald Trump, Bolsonaro makes fun of people when he shouldn’t. Some believe he says crazy things but doesn’t really mean them. Some justify it by saying he is just trying to be funny. While such behavior ingratiates himself to some, it offends others. I privately heard and later read about several justifications for the firings of government leaders mentioned above. One official was supposedly over-budget, another supposedly reported deforestation in satellite images as illegal when in fact it was legal. Several people told me that some indigenous people support Bolsonaro, but they are not given much of a voice in the mainstream media for political reasons. The list of justifications and alternative interpretations goes on and on.
Despite Bolsonaro, some of the leaders that I met were impressed in 2019 by the leadership of the congress and its protection of the Amazon. The congress has shown itself to be more responsible than it was in years previous, taking action to protect the Amazon and thwart some of the worst advances of the executive branch of government.
There are several Amazon-related debates in Brazil that have been politically useful for some but polarizing for most, thus limiting political collaboration and legislative action. Broadly speaking, these debates circle around: NGO accountability, media integrity, national sovereignty, indigenous rights, environmental regulation/enforcement, and competing visions for economic development. As global organizations that I helped to create over the past decade, NEXUS (a network of young investors) and the GGPN (Global Governance Philanthropy Network) could help to build consensus on these issues, expand access to investors and markets, and support greater international cooperation in service of a sustainable Amazon rainforest.
Consensus Building: Around the world there is a large network of people and organizations that specialize in consensus building and conflict resolution. The sector is under-developed in Brazil including on the subject of Amazon deforestation. Dialogo Florestal facilitates dialog between businesses and environmentalists to help find common ground. Instituto Escolhas is one of the few groups that conducts research about competing interests and works to develop policy consensus and evidence-based proposals for sustainable development. The organization hosts an annual conference in Belem, Para dedicated to uniting diverse stakeholders. The Earth Innovation Institute works internationally at sub-national levels helping to develop consensus on evidenced-based strategies that foster sustainable forest economies. Finally, the Interstate Consortium for the Sustainable Development of the Legal Amazon was created in 2017 to help develop consensus and coordinate action among the nine Brazil states that are part of the “legal Amazon.”
NGO Accountability: While NGOs provide one of the primary channels through which the international community learns about the Amazon, many Brazilians are suspicious of NGOs because of a perceived conflict of interest that is inherent to the non-profit business model: if the problem is solved then the NGOs can’t fundraise. There is evidence to support the suspicion, some if it featured in films like Poverty Inc., but Brazil also has a long history of corrupt NGOs. That said, many NGOs are honest and effective, often addressing root causes, eliminating problems, and moving on to tackle other issues. Both pro-NGO and anti-NGO forces can agree on the value of improving transparency, monitoring and evaluation. The process reduces corruption and improves public trust and correspondingly helps with fundraising. One leading international body promoting NGO integrity and transparency is the International Committee on Fundraising Organizations. The Brazilian chapter is Phomenta. Beyond these certification institutions a lot more can be done to bridge this divide by bringing the work of Accountable Now, the International Aid Transparency Initiative, and the International Development Evaluation Association to Brazil. Finally, many Amazon residents see outside donations go to non-profits yet experience no personal benefit financially and often resent NGOs as a result. Some industries like mining repeat a similar cycle with most wealth transferring to outsiders. Given these patterns and perceptions, it should not be surprising that cooperatives are one of the prevailing sustainable business models in the region.
Media Integrity: There has been a significant drop in perceived media integrity in recent years. The trend has been exacerbated by many factors including the rise of social media and fake news, the collapse of the newspaper industry, the disruption of most traditional media business models, the drive towards sensationalism, and more. The Amazon has suffered as a result, often used as a political football to drive fears about national sovereignty, indigenous rights and many other issues. Several solutions exist. Rubens Martins, a Brazilian investor from Minas Gerais, has identified neutral and independent media as a market opportunity and has purchased the rights to build CNN Brazil. If successful, maybe other Brazilian media will follow suit. Another solution is the prevention and investigation of fake news and conspiracy theories, with several Brazilian groups leading the way like Aos Fatos and Com Prova. The independent, non-profit journalism of groups like Agencia Publica can also help. Finally, some foreign niche-media outlets, like Mongabay, help to unite the international community and develop trusted news stories on Amazon controversies.
National sovereignty: After hundreds of years of colonialism and broken promises, Brazil defends its national sovereignty whenever discussing the Amazon on the world stage. In 2019, at the G7 Summit, Emmanuel Macron questioned Brazil’s work on deforestation and suggested giving the Amazon “international status”. Many Brazilians denounced the suggestion and Macron’s statements seemed to unintentionally empower Bolsonaro’s political support within Brazil. Despite seeking a permanent seat in the UN Security Council for years, and deserving but not getting it, Brazil has been shortchanged by the multilateral system. In 2009, at the COP climate negotiations, wealthy countries pledged to donate $100 billion a year to developing countries for climate mitigation. Most of the money has yet to materialize, even for Brazil. The Convention on Biodiversity, the international instrument regulating biodiversity, upholds the Nagoya Protocol to ensure that foreign countries compensate source communities from profits developed through pharmaceutical research. Many countries including the United States have still neither signed nor ratified the treaty, limiting compensation to Brazil and other biodiversity rich countries. Even though Brazil itself has not yet ratified the treaty, the Inter-American Court of Human Rights (IACHR) has been used by some indigenous Brazilians to claim compensation for unfair exploitation. Even though Brazil has not benefited from multilateral institutions as much as it should, the system has helped to protect marginalized people in Brazil through mechanisms like the IACHR and the UN Declaration on the Rights of Indigenous Peoples. Beyond this complex relationship with international justice, there is some debate in Brazil about whether foreign Amazon-centered interests are virtuous and conservation-minded or selfish and profit-minded, for minerals and more. As evidence, in June 2019, Macron threatened to pull out of the Mercosur trade agreements if Brazil didn’t adhere to climate agreements because it would harm French industry and give Brazil and others competitive advantage. Macron said, “We’re asking our farmers to stop using pesticides, we’re asking our companies to produce less carbon, that has a competitiveness cost.” As long as this debate simmers and climate-interests are perceived as a veil for protectionism, it empowers the Brazilian nationalists and clouds more important discussions about climate. The suspicion even fuels Bolsonario’s criticism of the Amazon Fund, an inter-governmental Amazon conservation instrument. He complained that the Fund supported too many NGOs and was controlled by Europeans. After Norway and Germany pulled out of the Amazon Fund, other state governments sought direct bilateral relations for the financial support and Bolsonaro called for unity among the state governments to reject the foreign funding and defend national sovereignty. Despite his demands several states sought the support anyway. Meanwhile the Brazilian electorate sees a narrative that foreign financial support is supporting division between federal and state governments because of the Amazon. They question if other countries are using the environment as a veil to advance protectionism of their industries and as a result the cycle of political division continues. One nationalist suggested that Brazil should always position itself against those that consider Amazon’s problems to be international in scope and then asked, “What is territorial integrity if it is subject to international claims? The foreigners think they are civilizing us.” Other Brazilians also point out the hypocrisy of the global north, as the largest carbon polluter, asking Brazil to reduce its carbon footprint.
As a new observer, I see several ways to mitigate this conflict and facilitate progress. 1) Foreigners should invest in the leadership of local Brazilians (instead of using external forces) to push for domestic Brazilian policy changes; 2) Foreigners can collaborate directly with local and state-level governments as strategies for temporarily bypassing the obstacles of the Brazilian federal government; 3) As an uncharted frontier, numerous Amazon conservation-related projects of the Brazilian military, like Amazonia Conectada (Internet access) and Projeto Rondon (citizen engagement), go under-funded and could benefit from a first-of-its-kind interface with investors and philanthropists; 4) The rise of global currency entrepreneurship and corporate citizenship could give Brazil new avenues to gain the political space in global governance reform that it desires (and that has been denied by the UN system so far) to effectively negotiate an end of French agricultural protectionism in exchange for Amazon ecosystem service payments and climate stability. Several key stakeholders in global governance innovation could include the Responsible Currency and Payment Coalition (promoting transaction fees to pay for the global commons), Libra Association, We Mean Business Coalition, Investor Agenda, the Fourth Sector Group and more.
Indigenous Rights: Despite a series of historically anti-indigenous actions, in May of 2019, the Bolsonaro government publicized the story of some indigenous Paresi people of Mato Grosso and their soy harvest. With the tribe’s support Bolsonaro hoped to promote such agriculture for other indigenous people even though it is illegal. Brazilian law protects indigenous land by prohibiting GMO farming and leasing to non-indigenous farmers. The great majority of indigenous Brazilians, represented by APIB, COIAB and others, chose environmental conservation and reject such illegal models of economic development. For the moment, the Brazillian legislature has blocked some Bolsonaro efforts to undermine the integrity of indigenous lands, but the challenge is complex. Much of the debate centers around two polarities, leaving the indigenous people and land untouched on one side and cutting down the forest on the other side. The common ground needs to be developed with all stakeholders involved. While some urge bringing material wealth to indigenous communities, others recognize that indigenous-owned territories are historically the most effective at preventing deforestation. There are several needs and opportunities, including: 1) Existing laws need to be enforced and the integrity of the recently-weekend indigenous-protection agencies need to be restored. They include the National Indian Foundation (FUNAI) and the Brazilian Environment Institute (IBAMA). In the meantime, perhaps some of the enforcement work of these agencies could be supported by NGOs and the private sector. 2) A healthy national debate needs to be developed about sustainable economic development in the Amazon region. While there are many ecological agroforestory success stories, they are not yet widely known. 3) The media should avoid sensationalizing the story of indigenous Amazonian economic development and instead showcase solutions in their complexity, featuring indigenous voices from all sides, the Paresi (mentioned above) and the greater majority of conservation-minded indigenous populations. 4) The rule of law, or the lack of it, has limited economic development in the Brazilian Amazon in partnership with indigenous communities. While the year 2019 saw unprecedented dismantling of the deforestation prevention agencies by the Bolsonaro government, there was also a record level of assassinations of environmental activists. In addition to restoring government protections, innovations such as whistle blower protections, floating courthouses and decentralized dispute resolutions systems like Kleros can help improve the rule of law in the region and can correspondingly help advance economic opportunities for indigenous people. 5) Indigenous land and tenure rights can also be restored and advanced by supporting groups like the Free Land Camp and Instituto Socioambiental and by bringing the work of the Tenure Facility to Brazil. 6) Finally, some indigenous communities promote the inclusion of the Rights of Nature in the constitutions of their countries to ensure permanent protection of forest ecosystems.
Regulation and Enforcement: About 90% of Amazon deforestation is illegal. The Forest Code of Brazil requires landowners to leave at least 80% of their land forested. In 2019, though unsuccessful, Bolsonaro allies proposed legislation to remove this limitation claiming that the restrictions limit economic development and that people violate them just to make a living. While the region is trapped in a debate about wealth creation strategies, crime is rising. The Bolsonaro government has worked to dismantle environmental protection agencies, increase access to mining concessions, halted demarcation of new indigenous territories, and weakened the national indigenous foundation. This systematic deterioration is especially bad news because enforcement is key to combatting the illegal deforestation lifecycle. Land grabbers are financed by drug cartels, corrupt politicians and others to set fires and occupy land for cattle and farming. Enforcement agents are bribed or killed and most environmental fines are not collected, often aligned with compromised courts and police who sometimes provide forged land titles and occasional legal amnesties. As mentioned previously, while the Brazilian congress has helped with some protections, there is a lot for the international community, NGOs and the private sector to do. 1) At an international level diplomatic pressure can encourage Brazil to ratify the Ezgazu Agreement which requires states to protect those who defend forests. 2) At a Brazillian level, journalists need to report violations, 3) Media companies need to produce niche resources like EcoAmazonia and awareness raising media properties like the Aruanas TV series, 4) Indigenous populations need security and legal support like that offered by the Inter-American Association for Environmental Defense and the Center for Justice and International Law, 5) Legislators need to do more to reduce corruption and implement other forest protection measures such as expanding the activity of the Interpol Forestry Enforcement team, and 6) Social entrepreneurs need to bring greater innovation, technology and funding to the tasks of forest monitoring and enforcement.
Visions for Economic Development: In January, 2020, the Brazilian Minister of Economy spoke publicly about poverty as the leading driver of Amazon deforestation. Many critics disagreed pointing to years of evidence that most deforestation-related farming is unsustainable because of the high degradation rate of organic matter, nutrient leaching rainfalls, and oxisol-type soils. This controversy highlights the tendency for misunderstanding and polarization as well as the competing economic visions for the region. To a certain extent, both sides are correct. The boom and bust of commodity prices match the advance and retreat of illegal deforestation, suggesting that locals simply pursue the best economic opportunities around, even if some farming is unsustainable. All parties agree on the need for economic development, but do not yet agree on the time horizon or strategy. It is often said that the forest is worth more standing than cut, yet the financial products that reflect such wisdom have not yet been brought to scale. The evidence suggests that many sustainable economies are ready to scale across the region and across diverse industries. They include biotechnology, ecotourism, carbon sequestration, eco-agroforestry, sustainable agriculture, responsible mining, indigenous handwork, and other kinds of sustainable trade. For these reasons, much of my future work, as a steward of investor networks, will focus on strategies for advancing sustainable entrepreneurship and market development.
When discussing Amazonian economic development some Brazilians say that money is not the answer, pointing to the extensive natural resources available. The right investment strategy and the right entrepreneurial ecosystem have not yet been aligned with the right policies and ecological sensitivities. Until now. Below are several market based solutions.
Carbon Markets: Beyond biotech, artisanal handwork, agroforestry, ecotourism and responsible mining, perhaps the greatest untapped frontier of forest-friendly entrepreneurship is carbon sequestration, t be funded by emergent carbon pricing schemes and multilateral institutions. Ever since the Rio Earth Summit in 1992, the global community has envisioned the development of carbon markets though the Clean Development Mechanism where polluters would be taxed and the search for efficiencies would be funded to help spur innovation and advance carbon reduction strategies. While controversial and of moderate success, the carbon market today is divided in two: 1) Compliance Markets which mostly trade carbon rights within national territories, and 2) Voluntary Markets which are funded by goodwill payments from environmentally responsible corporations and individuals that wish to offset their carbon footprints. In 2019, the Compliance Market was estimated to be worth $214 billion while the Voluntary Market was less than $1 billion. The controversy centers around the ethics of pollution, with many arguing that the Compliance Markets give polluting industries legal permission to “buy” offsets when they should be cut off at the source and replaced with renewable options. Voluntary Markets are less restrictive and help to enable alternative forms of sustainable development outside government control.
First proposed in 2005 through the UNFCCC, the REDD+ (Reduced Emission from Deforestation and Forest Degradation) system aims to pay for “avoided deforestation” with financial resources from carbon markets and other sources. The system is controversial, complicated, susceptible to fraud, and not implemented at scale. It has also unintentionally worsened deforestation in some cases, for example, by encouraging some landowners to put their forests at risk so they too can “avoid deforestation” and qualify for REDD+ payments. In recent months, several systems have been developed to help improve the forest financing system including the TREES standard and ART REDD+, the REDD Early Movers Program, and the California Tropical Forest Standard (TFS). Of note, the TFS supports a pay-for-success model of compensation for ecosystem services, but not until California integrates the system into the state’s cap and trade program thereby allowing California companies to pay into it for credits. Perhaps most significant for REDD+, is the launch of the EMERGENT Forest Finance Accelerator which will offer a floor price for emissions reductions of $10/ton to qualified REDD+ forest protection programs. EMERGENT hopes to “prime the pump” and spur wider global carbon market adoption and REDD+ financing. Finally, in 2015 Brazil prohibited the sale of REDD+ credits to international markets but then in early 2019 accepted its first REDD+ payment from the Green Climate Fund (the largest UN climate financing mechanism) and in late 2019 opened the possibility of market-based trading of Brazilian REDD+ credits for international commitments. This marked a reversal in Brazil’s national climate policy and for the first time opened the door to fund deforestation prevention through international carbon market financing.
Payment for ecosystem services is not new. As a reference, the US Department of Agriculture operates the Conservation Reserve Program which pays out $2.5 billion USD annually to American farmers for removing environmentally sensitive land from agricultural production. The Forest Investment Program of the Brazilian Forest Service is using a similar mechanism to pay for forest conservation in the Cerrado biome of Brazil and the IPAM CONSERV program will soon pay private landowners not to deforest when they are legally allowed to do so in the Brazilian state of Mato Grosso.
It is also worth mentioning several other key players in the development of carbon markets. The Governor’s Climate & Forest Task Force convenes 40+ sub-national and state governments (mostly tropical) to negotiate carbon market mechanisms, a program which led to the TFS as well as bilateral agreements between California, the Brazilian state of Acre and others. Finally, the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) will generate significant revenues for carbon markets for the first time in 2021.
The international community can do a lot to improve carbon markets and finance Brazilian forest conservation, including: 1) Supporting development processes like the proposed Interim Forest Finance Facility to help Amazonian states and landowners qualify for the EMERGENT-related carbon payment REDD+ mechanisms described above, 2) Establishing a blockchain of satellite-verified forest cover to provide a less risky, less complicated and less controversial basis for voluntary carbon market payouts to forest conservationists, 3) Supporting legislation in California and elsewhere to help advance adoption of TFS in carbon markets and promotion of pay-for-success models in REDD+ payouts, 4) Addressing the ethical flaws of Compliance Markets by increasing pollution penalties, incorporating measures of “carbon debt” (a measure of the quantity of carbon emitted into the atmosphere by developed countries since the start of the industrial revolution), and diverting revenues to Volunteer Markets.
Organizing Investors: Large networks of financial stakeholders, like the Network of Central Banks for Greening the Financial System, the Investor Agenda (hundreds of institutional investors concerned about climate change), and the We Mean Business Coalition (climate conscious CEOs), want to support sustainable development in the Amazon but until now have not had access to the right financial products that make it possible. Fortunately, even though short-term capital and unsustainable business models dominate the region by incentivizing deforestation and short-term farming, long term capital and sustainable businesses are more valuable over time. Standing forests resist disease and degradation and offer continuous productivity and revenue, whereas forests cut for farming can produce revenue for only a few years due to rapid soil degradation rates. In the past few months a flurry of new financial products have come to market, including de-risked products like the &Green Fund and the Farmfit Fund (a $100 million fund of de-risked financing for small holder farmers) as well as investment funds like the Athelia Biodiveristy Fund Brazil. Not all such efforts are new. The private equity firm Kaete Investments has been active for 15 years. Greenwood Resources, a sustainable forest asset manager with Brazilian interests, has been around for 20+ years, and the Global Environment Fund, a global alternative investment fund, is 30-years-old. There are other financial products as well. The Responsible Commodities Facility of the London Stock Exchange plans to invest $1 billion over 4 years in sustainable soy and reforestation while COFCO (involving 20 banks) will make $2.1 billion in new loans to sustainable commodities, as the first green bond for low-interest sustainable business development. Brazil’s second largest beef producer, Marfrig has also launched a $500 million sustainable beef bond. Encourage Capital invests in sustainable fisheries and Nia Tero broadly supports indigenous livelihoods. Back in 2014, at the COP in Lima, governments launched Initiative 20×20 to advance land restoration in Latin America in a coalition with 40 technical partners and a network of impact investors, including land use and agroforestry funds like 12Tree Finance, EcoEnterprises Fund, Fondo Accion, LXG Amazon Reforestry Fund, Moringa, Forestry and Climate Change Fund, Urapi Sustainable Land Use, and more single industry funds like Carana Corporation (supply chain redesign), Nespresso Sustainability Innovation Fund (coffee), Root Capital (cocoa, coffee), Permian Global (carbon payments), and Terra Global Capital (carbon payments, land use). Finally, groups like Alimi Impact Ventures, EcoAgriculture Partners, Global Canopy, the Earth Innovation Institute and the Partnership for Forests of the UK government also develop investor-ready projects to help mobilize private sector capital.
In addition to scrutinizing new capital deployment opportunities for profitability and impact, investors should examine preexisting portfolios in order to divest. While the research sites of Deforestation Free Funds and Script Finance help guide the way, activists pressure fund managers like BlackRock to follow suit, and investors engage in shareholder activism to advance top down policies that prevent deforestation.
Supply Chains: Commercial agriculture drives two-thirds of tropical forest deforestation. In addition to starting new sustainable businesses, a lot of work needs to be done upstream on supply chains to educate consumers, convince corporate buyers, and ensure integrity of processes. Recent work in Brazil has linked indigenous handcraft and small-holder farmers with commercial markets through Origens Brasil to help foster independent livelihoods free from deforestation. Also in Brazil, Imaflora has helped to build the sector of responsible supply chain monitoring and development. At an international level, IDH Sustainable Trade helps to link sustainable Amazon producers with green consumers. The Rainforest Alliance helps agricultural companies certify produce that is forest friendly and offers a Tailored Supply Chain advisory service to help ensure responsible sourcing. The Sustainable Procurement program of the World Resources Institute helps procurement managers make choices about wood and paper-based products. As companies commit to reduce the ecological impacts of their commodity supply chains, Supply Change provides transparency to their progress – and tracks commitments. Some governments like the EU have also passed legislation requiring deforestation free supply chains. Finally, at the global level, the Fourth Sector Group is aggregating large purchasers to create demand for a sustainable economy based on a new corporate charter that ensures social and environmental accounting.
Biodiversity and Biotech: Perhaps the greatest endogenous opportunity for economic development breakthroughs in Brazil will stem from biodiversity and biotechnology. Beyond commercializing already known fruits, nuts and other regional produce, there can be significant biomimetic and pharmaceutical entrepreneurship. The Amazonia Third Way Initiative promotes the “Amazonia 4.0” model of development which argues for the creation of a “vibrant, socially inclusive biodiversity-driven ‘green economy’ in the Amazon by harnessing nature’s value through the physical, digital, and biological technologies of the 4th industrial revolution.” There are many aligned stakeholders like government-supported entrepreneurship and research programs including the Consultative Group for International Agricultural Research (CGIAR), Embrapa (Brazilian Agricultural Research Corporation), Instituto Mamiraua, Museu Goeldi, and the Centro de Biotecnologia da Amazonia. There are also private sector research centers like the SENAI Innovation Institute and Natura’s Ecopark as well as academic centers like the CERTI Green Economy program. Meanwhile, the Global Gastronomy Center and Instituto Ata work on food innovation and the new Rainforest X Prize offers to award $10 million USD to teams who develop the best new biodiversity assessment tool, an innovation which could scale and help facilitate the valuation of vast areas of previously under-examined Amazon forest.
It should be noted as well that strategic, long term government-scale investing has been vital for helping many nations, including the US, to scale their technology and industrial sectors, a step that both Brazil and all deforestation-concerned governments should consider. In fact, the Information Technology policy of the Western Amazon of Brazil requires companies to spend 5% of their revenue on local research and development, a potential source of bio-economy investment. Last year the process mobilized over R$600 million, but only R$2 million went to bio-centric R&D. The attention of foreign investors could make a difference. Instead of investing in traditional technology ventures, local Amazon businesses could use their geographic advantage to invest in rainforest biotech products in partnership with foreigners. The government-sponsored Priority Program for Bio-Economy is leading the way by engaging local companies like Samsung which earned R$23 billion from manufacturing work in the region in 2018.
Bioprospecting, the search for commercially viable compounds from plants and animals, is a well-developed industry with potential benefits to conservation. Biopiracy, the theft of such biodiverse patrimony, is also well developed with the rise and fall of the Amazon rubber industry as a significant historical example. So far, 25% of Western pharmaceuticals, including some from Brazil, have come from rainforest materials yet the legal mechanisms to compensate sources communities were not in place when most of those scientific discoveries were made. Some NGOs like ETC Group work today to ensure that profits are shared with source communities. There are many genetic bioprospecting companies and organizations that could become allies, including the Missouri Botanical Garden, Novozymes, Swissaustral, Jaguar Health, and many others backed by venture capital. However promising, the odds of identifying new, profitable pharmaceutical drugs are small and big pharma is not a likely partner.
As a promising idea, some legislative changes can help improve bioprospecting and benefit sharing like the Nagoya Protocol mentioned previously, but also federal legislation. In 2001, the Brazilian government created CGEN, the Genetic Heritage Management Council, in an effort to reduce biopiracy. The underlying law, unintentionally outlawing significant beneficial research, was not updated for years, ultimately becoming a bureaucratic obstacle to even virtuous biotech research in recent years. Updated in 2015, the legislation requires companies that experience wealth creation sourced from Amazonian biodiversity to pay 1% of their annual revenue into the National Benefit Sharing Fund. While the fund earned almost $5 million in 2019, the payout mechanism to fund local conservation was stuck on bureaucratic obstacles until earlier this year when the Brazilian Development Bank (BNDES) signed a contract with the Environmental Ministry. Advocacy and transparency will still be needed to ensure wise conservation investing over time.
In the era of COVID-19, the potential pharmacological value of the Amazon rainforest cannot be underestimated, but it is also worth mentioning the threats of novel viruses. For every venture that pushes into the Amazon, there are new people and animals that come out of it. Whether leaving for survival or livelihood, each entity is a potential vector of a new pandemic. For these reasons and many others, responsible management of Amazon genetic diversity is essential for the future of humanity.
Ecotourism: According to the International Ecotourism Society, ecotourism is defined as “responsible travel to natural areas that conserves the environment, sustains the well-being of the local people, and involves interpretation and education.” According to a recent study, 60 percent of travelers are dedicated to giving back to the environment just as much – if not more – than they take. With millions of potential customers, ecotourism in the Amazon rainforest could become a much larger industry. Two of Brazil’s largest ecotourism companies include Ambiental and Freeway, while in Peru Rainforest Expeditions has had some significant success. The Brazilian Association of Eco-Tourism Companies could be a valuable ally in designing new economic development strategies in the Amazon region.
Sensitive Implementation: Many stakeholders want to help, but sustainable entrepreneurship is complex and the thirst for quick profit can have negative externalities. The boom of açaí production, for example, brought hope, wealth and conservation but also child labor. There are several common mistakes. Instead of disorganized production without buyers, producers need to understand market demands and should only expand when purchase contracts are in hand. Instead of fostering competition within vulnerable communities, purchasers should partner with cooperatives that secure social and environmental sustainability as well as consistent production. Upstream market changes are needed as well. Instead of prioritizing price, corporate procurement agents need to integrate environmental accounting in their decision-making processes. While implementing these ideas is challenging, Beraca SA, a large natural products conglomerate, has a long experience developing safety and labor standards with producers in the region and created the Beraca Institute to teach other corporations how to do the same. While supply chain design will take us far, for many raw materials like babaçu oil, government subsidies will be needed to make many products commercially viable internationally.