Legal Amazon What Is It? - ABIOVE - Associação Brasileira das ...

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Legal Amazon What Is It? - ABIOVE - Associação Brasileira das ...

Soy MoratoriumABIOVE and ANEC willnot trade soy from theAmazon BiomeOn July 24, 2006, ABIOVE and ANEC, and their respective member companies, pledged not totrade soy originated after that date in deforested areas within the Amazon Biome.The Soy Moratoriumwill last for two yearsA governance structurefor the region will bedevelopedThis unique initiative, known as the “Soy Moratorium”, will last for two years and seeks to reconcileenvironmental preservation with the region's economic development, through the responsible andsustainable use of Brazil's natural resources. During this period, the sector will work with entitiesrepresenting society (mainly environmental and social NGOs) to develop and implement agovernance structure with rules for operations in the Amazon Biome and to get the Braziliangovernment to define, apply and comply with public policies (ZEE, ecological-economic zoning)regarding land use in this region.Mapping andmonitoring soyproduction in theAmazon BiomeThis joint work looks at questions such as:a) .. Preparation of an effective mapping system and monitoring soy production in the AmazonBiome;b) Environmental education to promote good agricultural practices and information on theBrazilian Forest Code;c) Institutional relationships and legislation to improve the control and development of soyproduction in that region.Repudiation of workanalogous to slaveryThe sector reiterates its repudiation of degrading work. Companies have incorporated into theirsoy purchase contracts a clause stating that the contract is annulled if work analogous to slavery isobserved.05


Environmental ConservationPolicy in Legal AmazonBrazil has an active policy for environmental preservation in Legal Amazon, based on the followingtools:Creation of Environmental Preservation Areas (“APA”), made up of Biological Reservesand Parks;Creation of Indigenous Reserves;Application of the Legal Reserve.According to Provisional Measure 1956-50/2000, the Legal Reserve corresponds to the “arealocated within a property or rural possession, except for the permanent preservation area,needed for the sustainable use of natural resources, for the conservation and rehabilitation ofecological processes, for the conservation of biodiversity and for the shelter and protection ofnative fauna and flora”, where slash cutting (deforestation) is banned.The percentage of the area within a rural property that is destined for Legal Reserve varies inaccordance with the region and vegetal physiognomy.Use of Legal Amazonland was substantiallyrestricted after 1996Starting in 1996, the required Legal Reservepercentage increased significantly from 50% to80% in forest areas and from 20% to 35% inrural properties located in the Cerrados withinLegal Amazon.Use of Legal ReserveUp to 1996 After 1996Rural producersassume the obligationto preserve 80% of theforestTo have the right to use 20% of their property,rural producers accept the obligation topreserve 80% of the forest, without anypayment from the government.AreaForestCerradosMP 1.511/96LegalReserve50%20%LegalReserve80%Availablefor Planting20%35% 65%The Legal Reserveestablishes thepreservation of 143million hectares inLegal AmazonAbout 63% of LegalAmazon are protectedby lawIn addition to the 178 million hectares ofProtected Areas (environmental andindigenous), the Legal Reserve mechanismestablishes the preservation of over 143 millionhectares in Legal Amazon.A total of 321 million hectares is protected bylaw, equivalent to 63% of the Legal Amazonarea.Environmental ConservationPolicy in Legal AmazonProtected Areas (Environmental & Indigenous)Legal Reserve (Forest 80% / Cerrados 35%)Total Protected Area (63% of Legal Amazon)Prepared by: ICONEMillionsof hectars17814332109


Land Occupationin Legal AmazonThe Legal Amazon territory is undergoing a natural occupation process, brought about by theregion's population growth and economic development. This movement includes various agents,including:SUBSISTENCEAGRICULTUREEXTRACTIVISMPASTURESMECHANIZEDAGRICULTURETerritory Occupationinthe Legal AmazonTIMBEREXPLOITATIONURBANIZATIONMININGHYDROELECTRICPOWER PLANTSNATIVEPEOPLES{URBANIZATION OF LEGAL AMAZONUrbanization has been an importantvector in the occupation of LegalAmazon.Legal Amazon population has gonefrom 17 million inhabitants (1991) to 23million (IBGE estimate for 2005).One of the main causesof illegal deforestationin the Amazon region ispoorly defined propertyrightsIlegal DeforestationThe Ministry of the Environment, responsible for several studies on deforestation in Brazil, sees theproblem of poorly defined property rights as one of the main causes of illegal deforestation in theAmazon region. About 47% of Legal Amazon is public land or disputed land that ends up the victimof a perverse mechanism, where new areas are cut down first before claiming possession of theland.About 47% of LegalAmazon are public landor disputed landPoorly defined propertyrights is the mainreason whyenvironmentallegislation is unable tocontain illegaldeforestation efficientlyNew parameters fortitle deeds of publiclands, as well as landregularization programsin the region, need tobe established10Therefore, in the absence of a clear policy fortransferring land to private ownership, thegovernment, albeit indirectly, is part of illegaldeforestation, making vacant land and forestsvulnerable to the actions of illegal occupantsand to their appropriation for speculativepurposes.The problem of poorly defined property rights,allied to the vast area needing inspection (510million hectares), is also the main reason whyenvironmental legislation is unable to containillegal deforestation efficiently, as there is oftenno way to identify the offender and apply thepenalties.Mitigation of this problem therefore dependson government actions, such as setting up newparameters for the title deeds of public land, aswell as land regularization programs in theregion.AcreAmapaAmazonasMaranhaoMato GrossoParaRondoniaRoraimaTocantinsTotalLegal AmazonLand Ownership 1996-2001Area1.000 km²1531431.5783339071.2532392252785.110Private1Lands%225238551838136124Protected2Areas%36533411152845511229PublicLands%Source: IBAMA (2002), Ricardo & Capobianco (2001), ISA (1999) and IBGE (1996)1- Total private property area declared in the Agricultural Census (IBGE 1996)2- Includes Preservation Areas and Indigenous Lands[ ]Without revising the country's land policy, itwill be difficult to improve law enforcement.43426451305417362747


Ecological-Economic Zoning (“ZEE”)Another fundamental question related to land occupation in Legal Amazon is the definition ofEcological-Economic Zoning (“ZEE”).The ZEE will make landuse more rationalThe ZEE can be defined as a strategic tool for regional planning and land management, whosemain objective is to contribute to the implementation of sustainable development through therational use of the land.The ZEE takes intoconsideration thepotential andlimitations ofsustainable use of eachregion's naturalresourcesThe ZEE is a Program for Multi-Annual Planning (“PPA”), managed by the Ministry of theEnvironment, with federal, state and municipal executors. Its preparation involves studyingenvironmental systems, including the potential and the limitations of the sustainable use of eachregion's natural resources, in order to orient government investments so that they can be madeaccording to each sub-region's natural characteristics, taking into consideration activities related toenvironmental preservation, agriculture, animal farming and agroindustry, as well as recuperationof degraded areas. The government, the productive sector and society will orient their decisionsand actions based on the ZEE.Ecological-Economic Zoning (ZEE)Areas of Conservationand PreservationDegraded AreasAreas that can be usedfor agriculture(Primary Nature) (Secondary Nature) (Tertiary Nature)These areas, normally primaryforests of high biological value,can be fully preserved.The objective is to preservebiodiversity.These areas can be recovered,with native plants that havecommercial use (e.g., rubberplants, cocoa trees, etc.).Recovery of these areas can besupported by the productivesector.These areas can be preservedby using them, recoveringa l r e a d y d e g r a d e d a r e a s( i n c l u d i n g p a s t u r e s ) f o ragricultural use.In some cases, degraded areascan be fully used for agriculturalactivities, transferring the LegalReserve equivalent to theconservation of non-deforestedareas with high biological value.This process can simultaneouslyo p t i m i z e e n v i r o n m e n t a lconservation and agriculturalactivity, as more intensive use ofareas already degraded cangenerate additional income thatcan be used in the conservationof primary forests.11


Economic Instruments to ImproveConservation in Legal AmazonEIs are being seen asan efficient alternativeto complementenvironmentallegislationAs environmental legislation and inspection mechanisms are proving insufficient to contain theadvance of illegal deforestation, new strategies must be used to improve environmentalpreservation. Among these strategies, the use of Economic Tools (“EI”) is being seen as an efficientalternative to complement environmental legislation.EIs are based oncommercial propertyrightsThe use of EIs covers a wide range of possible mechanisms. At one end, it includes fines orsanctions linked to the traditional legislative apparatus. At the other end, it includes new and lessinterventionist approaches, such as mechanisms based on commercial property rights andeconomic stimuli. Within this perspective, the following economic tools to reduce deforestation andpreserve biodiversity can be highlighted:EIs that reducedeforestation andpreserve biodiversity:NEW ECONOMIC INSTRUMENTS (“EI”) TO IMPROVE PRESERVATIONPayment for“Standing Forest”Active ForestExchangeVoluntaryCertificationWhatis it?Creation of an internationalfund to pay for ForestEnvironment Services,funded through avoidance ofCO 2 emissions and theeconomic potential of abiodiversity reserve.Creation of an Exchange totrade Forest Reserve Quotas(“CRF”) in the Amazon region.Payment of a bonus formaintenance of a LegalReserve (80%).Creation of RemuneratedVo l u n t a r y C e r t i f i c a t i o n(“Green Seal”) that pays apremium to producers who gob e y o n d t h e d i r e c t i v e sestablished in Brazil'senvironmental legislation.EffectWhile a “Standing Forest” isworth less than forest landwhich has been cleared,there is no economicstimulus for preservation.Payment for not using theexploration quota (20%) thatis the owner's right, thusreducing legal deforestation.Remunerated VoluntaryCertification stimulates thespread of good agriculturalpractices and respect forenvironmental legislation.ResultReduction ofdeforestationGuarantee ofLegal ReserveStimulation of GoodAgriculture Practices12


Diversification and Adding Value to GrainProduction in the CerradosHow to make“EnvironmentSustainability”economicallysustainableA very important question, mainly related to agricultural frontier areas, is how to make“Environmental Sustainability” economically sustainable, as the new socio-environmentalstandards and requirements also generate new production costs. In this sense, the Cerrados grainproducer's income must be improved so that they can remain in this region and look after theenvironment..The solution is addingvalue to grain (soy andcorn) productionthrough meat (poultryand pork) productionfor exportThe solution to this question lies in the development of mechanisms that promote diversificationand add value to grain production. This can be done by transforming grain (soy and corn)producers, mainly in the Cerrados, into export meat (poultry and pork) producers. While,historically, a ton of soy is worth about US$230 and a ton of corn is worth about US$100, a ton ofpork meat is worth over US$1500. Therefore, the possibility of adding value to grain production byproducing meat for export would generate the necessary resources to preserve the environment,i.e., conservation through sustainable use.Conservation through use means using the land in a[ sustainable manner, preserving the Legal Reserve. ]Adding Value to Grain Production in the CerradosConservation through usePoultry and Pork Production in the Cerrados- Good Agricultural Practices- Environmental ConservationSameAgriculturalPropertyCorn and soy meal are the main ingredients of poultry and pork feeds.Adding value to grainproduction reducespressure for newagricultural areasAs value is added to grain production, the pressure for new agricultural areas to maintain theprofitability of the region's producers is lessened. In addition, meat production in the Cerradosmakes it feasible for small and mid-size producers to integrate with poultry and pork processors,with a big impact on the region's job generation. Thus, it would be possible to reproduce in theCenter-West region the agricultural production model present in the country's South region.Meat production in theCerrados for exportmakes small producersfeasible and reducesthat region's soymonocultureThis model's successdepends on theopening of theinternational meatThe feasibility of export meat production in theCerrados also leads to a reduction in theregion's soy monoculture cycle, due to theincrease in corn production for animal feeds,especially in Mato Grosso state (which iscurrently unfeasible due to the cost of movingproduction south). Increasing crop rotation(between soy and corn) brings environmentalgains such as the reduction of pest propagation(e.g., Asian rust) and, consequently, areduction in the use of agrochemicals.However, this model of grain and meat (poultryand pork) production in the Cerrados, whichunites social, environmental and economicFOB-Port PriceNet - Mato GrossoFreight Cost of ExportsParanagua PortFreight - Mato Grosso*Freight / Price (%)CornUS$/tSoyUS$/t100 230PorkUS$/t1.500(88) (88) (176)12 142 1.42488% 38% 12%* Freight cost from Mato Grosso to Paranagua portSource: ABIOVEsustainability, depends on the opening of the international meat market, currently considered to beone of the world's most closed markets, mainly because of protectionism by rich countries.13


Protectionism andSustainabilityOne of the bigobstacles to meatproduction for export isprotectionism by richcountriesOne of the big obstacles to export meat (poultry and pork) production in the Cerrados is theprotectionism by rich countries, which impose strong barriers to the international meat trade, sothat they import only raw material (in this case, soybeans and corn to produce animal feeds),adding value in their own countries.In addition to hightariffs, the internationalmeat trade is restrictedby Safeguard Measuresand sanitaryRich countries onlyimport raw material(soy and corn) for theirown meat productionProtectionism leads toBrazil's soymonocultureGovernment supportfor agriculture in richcountries has beendefended as one of thecomponents of theirenvironmental policyAccording to the table, it is evident that, apartfrom high import tariffs, the international meattrade to rich countries is also restricted bySpecial Safeguard Measures (SSG) andsanitary restrictions that act as trade barriers.Therefore, rich countries follow a deliberatepolicy of importing only raw material (soy andcorn) for their meat production, which makes itimpossible for developing countries to diversifyproduction and add value to their products. Inthis sense, these countries are alsoresponsible for Brazil's soy monoculture.Another important point relates to thegovernment support that agriculture receivesin rich countries. This support, generally in theform of agricultural subsidies, has beendefended, mainly by the European Union, asone of the components in their environmentalpolicy.Barriers to International Meat TradeDemerara SugarAlcoholPowdered MilkFrozen Chicken PartsPorkFrozen BeefTobaccoOrange JuiceEU USA Japan161* 133* 311*43*46* 2764* 44* 155*94*12*(*) indicates a specific tariff was converted to an Ad ValoremEquivalent (AVE)Underlined numbers indicate the existence of SpecialSafeguard MeasuresIndicates sanitary restrictions that act as trade barriersGovernment Support in Agriculture PSE1243* 0 310*142* 26 5075 350 015 39* 25Source: WTO, APEC, COMTRADE, USITC , TARIC12 and ICONEThe Braziliangovernment does notgrant subsidies to itsagricultural producersfor maintaining theenvironmentRich countries can helppromote sustainabledevelopment byreducing protectionismand supporting the useof EisOn the other hand, in Brazil, agriculturalproducers do not receive subsidies from thegovernment to maintain the environment (oreven to maintain their income through priceguarantees or by covering their losses fromadverse climatic conditions by means ofagricultural insurance).Therefore, in the absence of governmentsupport of environmental preservation inBrazil, adding value to grain productionSwitzerlandNorwaySouth KoreaJapanEUUSAChinaBrazilPercentage of subsidiesin farmers' income in 200516%8%3%68%64%63%56%(through export meat production in the Cerrados) and the development of Economic Tools (EIs) toreduce deforestation and preserve biodiversity could contribute enormously to the sustainabledevelopment of the Amazon region.Rich countries can help promote sustainable development by reducing protectionism andsupporting the use of EIs to preserve the Amazon Forest.32%Source: OCDE14


Integration ofCrops and Animal FarmingIn Crop-LivestockIntegration, grain (soyand corn) is producedin degraded pastures,reducing the pressurefor new agricultural andlivestock productionareasHow can grain production in Brazil be increased without increasingdeforested areas?One of the strong tendencies of Brazilian agribusiness over the coming years is the Crop-LivestockIntegration process, in which grain (soy and corn) is produced in degraded pastures, with theobjective of recuperating the soil's fertility and increasing the pasture's productivity.Crop-Livestock Integration has shown that the soil's fertility can be significantly improved throughthis system, which favors the crop-pasture rotation process, minimizing the risks for agribusiness,improving yield for the producers and reducing the pressure for new agricultural and livestockproduction areas.INTEGRATION OF CROPS AND ANIMAL FARMINGProperty is used more intensively, reducing the pressurefor new areas for agricultural productionLivestockPasture Area1Degraded pastures arereplaced bybean/grain plantationsArea receives fertilizersand soil correction.2Grains/BeansCultivation AreaROTATIONPLANTATION - LIVESTOCKINTEGRATIONWith recovered pasturesmore cattle can befattened than before4After some harveststhe area can be usedas pasture again3Soybeans retainnitrogenimproving the soilIn the Crop-LivestockIntegration system, theproducer reconcilescattle farming and grainproduction on the sameacreageThe system is similar to crop rotation. In summer, corn or soy is planted. Under the Crop-Livestock Integration system, the producer reconciles cattle farming and grain production on thesame acreage. In winter, with the pasture recovered, cattle is fed fodder and pasture grasses.Crops are rotated through no till techniques that reduce the risk of soil erosion.There are about 30million hectares ofdegraded pastures inBrazil available for Crop-Livestock IntegrationAccording to the Ministry of Agriculture, there are about 30 million hectares of low-productivitypasture land that should be released for agriculture in the coming years through the Crop-Livestock Integration program.15


Biodieseland SustainabilitySoy oil will be the biglever for biodieselproduction in Brazil, inthe short and mediumtermsRepresenting about 90% of the country's total vegetable oils production, soy oil will probably be thebig lever for biodiesel production in Brazil, in the short and medium term. In the long term, soyshould be gradually replaced by other oilseeds with greater oil content. This competition betweenthe various raw materials is very healthy and should result in lowering the production costs forBrazilian biodiesel over the long term.Starting in 2008, about845 million liters ofvegetable oils will beneeded to meet thedemands for biodieselStarting in 2008, when the compulsory addition of 2% biodiesel to diesel comes into effect, about845 million liters of vegetable oils will be needed to meet the demands of this new market. Therehave been frequent discussions on a possible conflict regarding the availability of vegetable oils tomeet simultaneously the demands of the food and energy markets. One of the most frequentquestions refers to the increase of soy acreage for biodiesel production. Starting with the SoyComplex data, we see that the sector has two options for entry into biodiesel production that do notrequire an increase in Brazil's soy acreage.There have beenfrequent discussions onthe possible conflictregarding the availabilityof vegetable oils inBrazil to meet thedemands of the foodand energy marketssimultaneouslyThe soy sector has twooptions for biodieselproduction that don'trequire an increase inBrazil's soy acreage16OPTIONSoy Complex in Brazil 2007/08 (millions of tons)SOYBEANCROP58.9 SOYBEANPROCESSING29.8EXPORTS26.6SOURCE: ABIOVE / FORECASTSOYBEANMEAL22.8SOYBEANOIL5.7BIODIESELOption 1: Redirecting part of soy grain exports to domestic processing, generating additional soy oilproduction for biodiesel and exporting soy meal (instead of grain). This is the best option for the sectorand for the country because it adds value, generates jobs and reduces the processing industry's idlecapacity, without reducing the sector's export income (which reached 8% of Brazil's total exports in 2006).Option 2: Diverting of part of the soy oil export volume to biodiesel production.EXPORTS12.7DOMESTICCONSUMPTION10.2EXPORTS2.1DOMESTICCONSUMPTION3.61 Entry Routes ofEntry Routes ofthe Soybean Industrythe Soybean Industry 2SOYBEANPROCESSINGSOYBEANMEALSOYBEANOILEXPORTS


Significant Numbersof the Soy Complex in BrazilThe soy complex unitesthe productive chain ofsoy and its derivatives(meal and oil)The national vegetable oils industry is mainlyactive in the soy complex, uniting the soy andderivatives productive chain. The industrialprocessing of soybeans produces soy proteicmeal, widely used in poultry and pork feeds,and soy oil, an important item in Brazil's basicfood basket. In addition to these products, thevegetable oils industry also produces severalother products for the food market, includingfats, margarines, vegetal creams, lecithins,tocopherol (vitamin E) and proteins.SOYBEANSSOYBEANPROCESSINGINDUSTRYSoybean and Its ProductsProduction ChainINPUTSSEEDS / FERTILIZERSPESTICIDES / AGRIC EQUIP.PROTEICMEALCRUDESOYBEANOILFOODINDUSTRYSOYBEANOILREFININGINDUSTRYAGRICULTURESOYBEAN PROCESSING INDUSTRYOTHER INDUSTRIESREFINEDSOYBEANOILNEW USES(BIODIESEL)MEATINDUSTRY(POULTRY AND PORK)HUMANCONSUMP-TIONSoy is Brazil's mainagricultural crop, involume and in incomegenerationBrazil is the second largest soy producer andexporter in the world, behind only the United States. With the 2007 crop estimated at about 58.9million tons, soy production represents about 45% of Brazil's grain production. This crop is alsoresponsible for 30% of the national agricultural income (according to CNA, the National AgriculturalConfederation) and answers for the activity of over 243,000 small, medium and large producers,spread over 17 states (IBGE, Brazilian Geographic & Statistics Institute).Over 30 years ofresearch by EMBRAPAand private foundationsThe Brazilian soy production success is the result of over 30 years of research by EMBRAPA andprivate foundations. The evolution of crop techniques adapted to national conditions and geneticimprovements have resulted in soy's “tropicalization”, which allowed the extensive andrudimentary occupation of the Cerrados to be replaced by an activity based on technology witheconomic, social and environmental sustainability.17


Over 80% of Brazil'ssoy crops use DirectPlantingAnother important point related to crop techniques is that over 80% of Brazilian soy use the no tillsystem (the soil remains covered and not subject to erosion), which is the best soil conservationpractice for tropical countries.Soy productionpromotes riches in theinterior of the countryThe development of soy crops has improved the quality of life and developed infrastructure(transport, education and health) in the interior of the country. Of the 20 towns with the best HumanDevelopment Index (HDI) in Mato Grosso state (the nation's largest soy producer), about 15 havesoy production as their main economic activity (the HDI value for these towns is significantly higherthan the national average).Soy meal isfundamental forpoultry and porkproductionSoy oil is the mainvegetable oil producedand consumed in BrazilAs for soy derivatives, soy meal accounts for about 94% of the domestic proteic meal productionused in animal feeds, fundamental for the production of poultry and pork.In addition to being the main vegetable oil produced and consumed in Brazil (over 90% of domesticproduction), soy oil should also be an important supplier of raw material for biodiesel production.The sector generatesover 1.5 million jobsBased on data from the BNDES Job Generation Model, the sector generates an estimated 1.5million plus direct and indirect jobs for the economy, considering the income-effect generated inthe economy.The soy complex is oneof the main items inthe trade balanceIn addition to its importance in the domestic market, the soy complex (soybeans, meal and oil) isone of the main items in Brazil's trade balance, responsible for 7% of exports in 2006, generatingUS$9.1 in foreign exchange. In 2007, the sector's total exports will rise to US$11.4 billion.18


ABIOVEABIOVE represents thevegetable oils andproteic meal sectorABIOVE, the Brazilian Vegetable Oils Industry Association, was founded in 1981 and has 11member companies that are responsible for about 72% of Brazil's soy processing volume.ABIOVE's objective is to represent the vegetable oil industries, cooperate with the Braziliangovernment in the execution of the policies that govern the sector, promote Brazilian products,support its member companies, generate statistics and prepare sectorial studies.The companies which form ABIOVE are: ABC-Inco Indústria e Comércio; ADM Brasil Ltda.;Amaggi Exportação e Importação Ltda.; Baldo S/A-Comércio Indústria Exportação; BungeAlimentos S/A; Cargill Agrícola S/A; Eisa Empresa Interagrícola Cooperativa; Imcopa ImportaçãoExportação e Indústria de Óleos Ltda.; Louis Dreyfus Commodities Brasil S.A.; Óleos MenuIndústria e Comércio Ltda.; Produtos Alimentícios Orlândia S/A-Comércio e Indústria.E M P R E S A A L G A R19


ABIOVEAssociação Brasileira das Indústrias de Óleos Vegetais(Brazilian Association of Vegetable Oil Industries)Av. Vereador José Diniz, 3.707 - Cj. 73 - CEP 04603-004 - São Paulo - SP - BrazilPhone: 55 (11) 5536.0733 - Fax: 55 (11) 5536.9816abiove@abiove.com.br - www.abiove.com.br

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