Sustainable Development and Development Banks in the Brazilian Amazon
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SUSTAINABLE DEVELOPMENT AND DEVELOPMENT BANKS IN THE BRAZILIAN AMAZON André Gustavo de Almeida Geraldes A thesis submitted in fulfillment of the requirements for the degree of Doctor of Philosophy Faculty of Law The University of New South Wales 2012 Walker, there is no path, the path is made when walking. [Caminante, no hay camino, se hace camino al andar.] Antonio Machado ABSTRACT The thesis examines the processes of development in the Brazilian Amazon, particularly the role of development banks (DBs) in those processes. It carries out that task by analyzing the performance of two multilateral development banks (MDBs), namely the World Bank Group and the Inter-American Development Bank, as well as two Brazil’s development banks, the National Development Bank (BNDES) and the Bank of Amazon (BASA). The aim of this study is to analyze the DBs’ actions and policies, particularly in the field of sustainable development, in the last three decades (1981-2010), and to draw out what the DBs (and we) can learn from the weaknesses and adverse consequences of those actions and policies for the region. The role of DBs in promoting sustainable development in the region is of considerable importance to all of humanity, in a world facing significant loss of biodiversity and climate change. Nevertheless, based on historical and theoretical analysis, as well as empirical studies such as field research and interviews, the thesis argues that many parts of the Brazilian Amazon have followed a “boom-bust” cycle, underpinned by a predatory model of “development” that has caused environmental degradation, social exclusion and violence in those areas. The central argument is that the DBs see environmental impacts as “a factor to be considered” in their operations in the Brazilian Amazon, but they have not adopted sustainable development as their overarching objective for the region. The thesis also sets forth two subsidiary arguments. The first argument is that the DBs in the Brazilian Amazon have tended to act in the interests of their shareholders rather than responding to the needs of recipients (local people). The second argument - closely linked to the previous one - is that the sustainable development strategies and projects should be formulated by the borrowers, not the lenders. The thesis examines the measures needed to achieve the overriding policy goal. The study recommends the adoption of new mechanisms for promoting sustainable development in the region, highlighting the crucial role of DBs in those mechanisms. It concludes that these mechanisms require new multi-actor arrangements, namely “hybrid-institutions” that comprise international bodies, state, local community and private sector. i ACKNOWLEDGEMENTS I do not know how to thank Fabiana, my loving wife and partner, for supporting me throughout this PhD; her support was extraordinary, from our sabbatical period in Sydney to the field research in the Amazon region and daily activities in São Paulo. Particular thanks must go to my supervisors, Professor Andrew Byrnes and Gillian Moon. They consistently challenged me to produce better work and to be clearer about my arguments. I thank them for their time, guidance, help, and extraordinary generosity. I also thank the many professionals who made time available to be interviewed within their working time. I sincerely thank Garo Batmanian, Eduardo Bandeira de Mello, Oduvaldo Lobato, Justice Carmo Antonio de Souza, Édis Milaré, Marco Condi, Fernando Rei, Vicente Mazzarella, Márcia Leão, Erika Bechara, David Cleary, Marcelo Marquesini, Paulo Barreto, and Luciana Badin. I have good friends in Australia to thank: The Kimptons (Mount Elisa); The Ujimotos (Melbourne); and Robert (“in memmorian”) and Erin Llloyd (Brisbane). I also have many family members to thank, particularly Lourdes and Eduardo, my beloved parents, who inspired me with their good values. This thesis would not have been possible without the financial support provided by the University of New South Wales, which granted me the scholarship UIPA. Finally, responsibility for all errors, omissions, and opinions rests solely with the author. All findings, interpretations, and conclusions expressed in this paper are entirely those of the author and do not necessarily represent the views of the supervisors or the interviewees. ii To Fabiana and our loving kids, Luísa and Victor. iii TABLE OF CONTENTS ABSTRACT ………………..…………………………………………………….…i ACKNOWLEDGEMENT …..………………………………………………….…ii DEDICATION ……………….……………………………………………………iii TABLE OF CONTENTS …………………………………………………………iv LIST OF ACRONYMS AND ABBREVIATIONS …………….………………ix INTRODUCTION …………………………………………………………......…01 PART 1 THE AMAZON AND ITS DEVELOPMENT ACTORS Chapter 1 - The Amazon, its Global Importance, and the Many Threats Facing It …………………………………………………………………………………...11 1.1. The Amazon Basin …………………………………………………………....11 1.2. The vital role of the Amazon ……………….………………………………....20 1.3. The Brazilian Amazon ……………………………………………………...…22 1.3.1. A region of great diversity ………..…..………………………………...23 1.3.2. Economic activities ……………….……………………………………26 1.4. Main threats to the vital role of the Amazon ….………………………………31 iv 1.4.1. Biodiversity loss ……………………….……………………………….33 1.4.2. Climate change ……………………….………………………………...35 1.4.3. The energy crisis ……………………….………………………………40 1.5. Global concern versus national sovereignty …………………………………43 Chapter 2 - Development Banks Operating in the Brazilian Amazon ………..51 Chapter 3 - Sustainable Development …………………………………………..58 3.1. Overview ……………………………………………………………………...58 3.1.1. The rise of environmental awareness ……………………………….….58 3.1.2. The concept and core elements of sustainable development …………...63 3.1.3. The absence of clear and precise content ……………………………....72 3.1.4. The legal status of sustainable development …………………………...74 3.2. Integrating the three dimensions of sustainable development ………………...78 3.2.1. Tensions between economic growth and environmental protection …..78 3.2.2. Tensions between economic growth and social justice ………………..82 3.2.3. Tensions between environmental protection and social justice …….…83 3.3. Sustainable development, domestic law, and the mandates of Brazilian institutions influencing development in the Amazon …………………………..….85 PART 2 DEVELOPMENT IN THE BRAZILIAN AMAZON Chapter 4 - The Processes of Development in the Brazilian Amazon ………..91 v 4.1. Historical periods …………………………….……………………………….91 4.2. Development in the non-forested zone ……….……………………………….97 4.3. “Development” in the Amazon frontier ……….…………………………….102 4.4. Development in the forested zone ……………………………………...……107 PART 3 DEVELOPMENT BANKS, DEVELOPMENT, AND SUSTAINABLE DEVELOPMENT IN THE BRAZILIAN AMAZON Chapter 5 - The Anatomy of Four Development Banks ……….…………..…115 5.1. The World Bank Group ……………………………………….……………..117 5.2. The Inter-American Development Bank ……………………….……………138 5.3. The National Development Bank (BNDES) …………………….…………..151 5.4. The Bank of the Amazon (BASA) ……………………………….………….162 Chapter 6 - Case Studies of Development Financing in the Brazilian Amazon (1981-2010) …………………………………………………………..…………..168 6.1. State-led development period (1980s) …………………………….…………168 6.1.1. The Northwest Region Integrated Development Program (Polonoroeste)…………………………………………………………………… 169 6.1.2. The Great Carajás Program …….…………………………………….179 vi 6.2. Donor-led development period (1990s) …………………………….……….185 6.2.1. Global Environmental Facility (GEF) ……………………….………..186 6.2.2. The Pilot Program to Conserve the Tropical Forests of Brazil (PPG7) …………………………………………………………………………………….191 6.3. Hybrid model-led development period (2000s) ……………………….….…198 6.3.1. The Hydroelectric Power Plants (Jirau, Santo Antonio, and Belo Monte)…………………………………………………………………………… 200 6.3.2. The Meat-Packing Plants ……………………………………….…….209 PART 4 NEW MECHANISMS FOR PROMOTING SUSTAINABLE DEVELOPMENT IN THE BRAZILIAN AMAZON: THE ROLE OF DEVELOPMENT BANKS Chapter 7 - International Community-led Mechanisms ……………….…….219 7.1. Protected Areas ……………………………………………………….……..219 7.2. Non-reimbursable financing mechanisms …….......………………….……...222 7.3. Cooperation among the Amazon Countries ………………………….…...…226 Chapter 8 - State-led Mechanisms ……………………………………….….…232 8.1. Incentive mechanisms ………………………………………………….……………………………........232 vii 8.2. Financing research to build a local economy based on the standing forest ...239 Chapter 9 - Market-led Mechanisms ………………………………….……….247 9.1. Disclosure-based mechanisms ………………………………………………248 9.2. Self-regulation in the financial industry …….……………………….………255 9.3. Carbon markets …………………………...………………………….……...263 Conclusion ……………………………………………………………….………268 Bibliography….……………………………………………………….…………284 Annex ………………………………………………………………….…………309 Maps and figures …………………………………………………..……………313 viii LIST OF ACRONYMS AND ABBREVIATIONS ACTO Amazon Cooperation Treaty Organization ARPA Amazon Region Protected Areas BASA Bank of the Amazon [Banco da Amazônia] BB Bank of Brazil [Banco do Brasil] BC Central Bank of Brazil [Banco Central do Brazil] BNDES National Development Bank [Banco Nacional de Desenvolvimento Econômico e Social] CEF Federal Economic Bank [Caixa Econômica Federal] COP Conference of the Parties DB Development Bank FAO Food and Agriculture Organization of United Nations GEF Global Environment Facility IBAMA National Environment Agency [Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais Renováveis] IBRD International Bank for Reconstruction and Development IDB Inter-American Development Bank IDFC International Development Finance Club