Are Brazil's environmental policies backfiring?

Environmental policies enacted by the Jair Bolsonaro administration are provoking more complications and threaten international investments just as Brazil is facing a record 6% recession this year stemming from the pandemic-related economic crisis.

This week, a group of 30 investment firms, administrating nearly US$3.7tn, requested meetings with government officials to discuss environmental issues.

"The escalating deforestation in recent years, combined with reports of a dismantling of environmental and human rights policies and enforcement agencies, are creating widespread uncertainty about the conditions for investing in or providing financial services to Brazil," the group wrote in a letter.

And during a webcast organized by banking federation Febraban, Itaú Unibanco CEO Candido Bracher said, “The environmental consequences may even come more slowly than those of health issues, such as COVID-19, but they are more lasting and difficult to reverse.” 

Octavio de Lazari, CEO of Bradesco, echoed this sentiment, saying “everyone talked about sustainability, about the problem with the planet, about global warming, reforestation, about the quality of air, water. Everyone talked about it, but in fact we have to recognize that we did very little in relation to that.“

And not only the financial sector is expressing concerns.

“Brazil is entering one of the biggest external image crises in its recent history, due to the fires in the Amazon. It is a troubled political and geopolitical moment. We have to go into an emergency mode because we need to attract investors and investors are going to move away from Brazil in the short term,” Siemens Brasil CEO André Clark said on Wednesday at a webcast hosted by the sustainable development business council (CEBDS).

At the same webcast Shell's country manager, André Araujo, said, “we must have an effective public policy in combating illegal deforestation.”

Last year, the administration already faced backlash from global leaders over escalating deforestation and refusal to deal with the massive fires that destroyed swathes of the Amazon rainforest.

BACKGROUND 

While the fires ignited outrage, discontent escalated in May, after the supreme court ordered the release of a video recorded at an April cabinet meeting.

At the meeting, environment minister Ricardo Salles suggested that the government should dismantle regulations and legalize deforestation and commercial exploitation of land while the public is distracted amid the pandemic.

“We have the chance at this time that the press’ attention is almost exclusively dedicated to COVID to approve infra-legal reforms for deregulation, simplification, all reforms," Salles said.

To control the damage, the government is trying to act.

The central bank seeks to turn Brazil into a major hub for carbon credit trading.

“This market was growing. During the 2008 crisis, the prices of these credits fell a lot. It is a very cyclical market. More recently, this market has recovered again. One way to help with climate governance is to ensure that carbon emissions are subject to pricing,” central bank president Roberto Campos Neto said during a conference organized by the Climate Bonds Initiative.

“Brazil has a very long history of a sustainable economy. We want to create a more robust regulatory framework on the environmental issue. Whoever is not in line with these practices will not receive foreign investments", he added.