Brazilian state law overturns soy moratorium

A historic agreement that’s helped curb deforestation in Brazil’s Amazon for nearly two decades suffered a major blow after Mato Grosso, the country´s largest soybean-producing state, passed a law ending incentives for participating processing and trade companies.

The law passed last week was designed to void the Soy Moratorium — a 2006 deal in reaction to a Greenpeace investigation that linked soy produced in illegally deforested areas to American commodities giants Cargill, Bunge and ADM. Under pressure, the companies agreed at the time not to buy soy produced in areas cleared after 2006. The date was later revised to July 2008.

Several studies in recent years have shown the moratorium contributed to the Amazon’s preservation. A 2020 study in the journal Nature Food found that the agreement, in combination with public policies, contributed to the steepest reduction of deforestation recorded in Brazil’s Amazon, between 2003 and 2016.

Backed by soybean producers and most of Mato Grosso´s lawmakers and mayors, the new legislation cuts tax benefits to companies that participate in any agreement that imposes restrictions on expanding agricultural activities into areas that can be legally deforested. Governor Mauro Mendes signed the law October 24. It goes into effect on January 1, 2025, but regulations are pending.

It states that only the illegally deforested area of a farm will be prevented from selling soy. In other words, if a 4,000-acre (1,618-hectare) property clears 200 acres (81 hectares) unlawfully, just the output from that specific area is blocked. Specialists warn that such refined monitoring is technically challenging, if not unfeasible.

Under the moratorium, property with any post-2008 deforestation is forbidden altogether to sell its crops, regardless of whether the deforestation is legal.

Supporters of the new state law have long claimed the moratorium´s 2008 limit is stricter than Brazilian legislation that allows the deforestation of up to 20 per cent of a large rural property in the Amazon.

“We will not rest as long as the moratorium harms even one producer,” the Mato Grosso soy producers president Lucas Costa Beber said in a celebratory statement. “And until this agreement is extinct, the trading companies will not have a peaceful sleep.”

‘A setback’

Environmental non-profits and the entity representing leading soybean trade and processing companies have criticised Mato Grosso´s initiative.

“The law is a setback,” said Bernardo Pires, sustainability director of the Brazilian Association of Vegetable Oil Industries, or Abiove, which supports the moratorium. “Companies committed to sustainability should receive twice as many benefits instead of losing them.”

Abiove members, which include Cargill, Bunge and ADM, buy over 90 per cent of Mato Grosso´s soy production. The state tax benefits amount to US$308 million a year.

Pires said the moratorium´s zero deforestation policy is a market demand. “Our European customers demand not to consume any products associated with deforestation,” he said.

Cristiane Mazzetti, coordinator of the forests campaign at Greenpeace Brazil, said the law reveals a double standard among politicians connected to agribusiness, who oppose the moratorium as unnecessary yet seek to weaken these same environmental protection.

The new law sparked mixed reactions within President Luiz Inácio Lula da Silva’s government, which has promised zero deforestation by 2030.

André Lima, secretary of deforestation control at the Ministry of the Environment and Climate Change, said that although state governments have the right to choose which economic activities they want to support, it is unconstitutional to withdraw tax incentives from companies that have adopted sustainability and climate criteria aligned with Brazil’s deforestation reduction goals.

“It also goes against the national tax reform guidelines, which have incorporated sustainable development as an important criterion for promoting more and new tax incentives for the green economy,” he told The Associated Press.

Agriculture Minister Carlos Fávaro, however, praised the law. “The project (moratorium) is stricter than the law, and this creates legitimate dissatisfaction among producers,” he told reporters.