SUSTAINABLE BUSINESS Amazonia

FINANCIAL TIMES SPECIAL REPORT | Tuesday November 29 2011 www.ft.com/amazonia­2011 | twitter.com/ftreports

Inside this issue Manaus The city should develop its transport links Pristine forest is finite resource and not just rely on tax breaks Page 2 Attaching a value to the Hydroelectric power environment may help Brazil is building lots of dams but several are meeting with popular avoid damaging protest Page 2 developments, writes Venezuela Developing the rainforest John Paul Rathbone is not on the agenda Page 2

Q&A Interview with our months ago, drug traffick- Izabella Teixeira, ers armed with machine guns Brazil’s current seem to have over-run one of environment the world’s last uncontacted minister, and Ftribes. All that was left from their Marina Silva, a encounter in a remote jungle clearing former one Page 3 near the Peru-Brazil border was a 20kg packet of cocaine and a rucksack Guest column Philip Fearnside with a broken arrow inside. examines the threats to the biome Few scenes provide more eloquent Page 3 evidence of what Claude Lévi-Strauss, the French anthropologist, wrote on Harnessing the forest Private his first trip to the Amazon half a initiatives are using the jungle as century ago: “The first thing we see both a market and a source of raw as we travel around the world is our materials Page 3 own filth, thrown into the face of mankind.” The Amazon is mind-bogglingly More on FT.com A Colombian shaman speaks to huge – but also vulnerable. The basin drains an area the size of two Indias Britain’s House of Lords about the or 10 times that of Texas. An esti- perils facing his rainforest home mated 8,000bn tonnes of water evapo- www.ft.com/amazonia­2011 rate from its forests every year. The Amazon discharges more water than the world’s next seven biggest rivers combined. Sustainable business in the Amazon The region, 60 per cent of which lies therefore need not be an oxymoron. in Brazil, is also home to roughly 30m Vale has committed to protecting 1.2m settlers and has already lost a fifth of hectares of primary rainforest around its tree cover. Yet much of the rainfor- its mines. Royal Dutch Shell has pio- est retains the freshness of “the last neered extended-reach oil drilling, unwritten page of Genesis”, as which reduces environmental impact Euclides da Cunha, the Brazilian jour- by using fewer rigs. nalist and geographer, wrote a cen- All this chimes with the rising envi- tury ago. ronmental awareness of South Amer- However, that sense of pristine new- ica’s new middle classes. ness is a deceptive residual of the However, the problem is not the for- area’s immensity. It may also be fleet- mal capitalism practised by multina- ing. First, there is the grave threat of tional companies, or by large farmers global warming, which has led to whose operations can be monitored by increasing numbers of droughts and satellite. forest fires. And, second, there is the Rather, it lies where the rule of law economic boon that the Amazon does not reach – which is much of the promises. Farming in the Amazon: the soya grown in Brazil’s Mato Grosso state supplies much of the world’s incremental demand for protein Reuters Amazon – and sometimes this Carajás, owned by Vale, the Brazil- includes governments themselves. ian mining company, is the biggest upstream from the Atlantic, the river As most deforestation takes place The reason for this change of heart forest’s stock of carbon is perhaps as In Brazil, Bolivia and Peru, indige- iron ore mine in the world. TNK-BP, is still deep enough and broad enough within 80km of a road, the environ- is that Brazil now sees itself as both much as $3,000bn. nous peoples have won the right of the Anglo-Russian oil group, and Eco- to take ocean-going vessels laden with mental impact of these projects is an economic and a biological world The cost of replacing such “forest consultation on large infrastructure petrol, the Colombian state-owned oil commodities and other goods. potentially devastating. Yet they do power. Already a big food producer, it services” is huge – five times the size projects. But Evo Morales, Bolivia’s company, are both prospecting for Brazil, meanwhile, is planning a not necessarily mean the Amazon is aims to become the world’s largest of Italy’s bond market. Halting defor- president, only suspended road con- crude here. Meanwhile, the soya series of trans-Amazonian canals, rail- doomed. food exporter by 2025, overtaking the estation is arguably the cheapest way struction through a national park grown in Brazil’s Mato Grosso state ways and roads that will span the Not long ago, the government urged US. Sustainability is central to this to cut global carbon emissions. after protesters almost toppled his supplies much of the world’s incre- Andes and link its food and mineral- Brazilians to settle in the Amazon, vision. Reducing Emissions from Deforesta- government. Similarly, a lack of due mental demand for protein, either as producing regions directly to Asian and provided them with cheap credit It may not be a pipe dream. Over tion and Forest Degradation (REDD), consultation over the Belo Monte dam vegetable oil or cattle feed. markets. the past 20 years, Brazilian grain pro- a carbon trading scheme, is a global has held up the project in the The Amazon is long familiar with The Interoceanic highway to Peru, duction has increased by 150 per cent, initiative to persuade tropical coun- Supreme Court, for now. such economic booms. A century ago, built by Odebrecht, a Brazilian con- The region has roughly using only 25 per cent more land. tries to do that. BSkyB, the UK satel- Most often, though, the biggest rubber wealth turned Manaus into struction company, and largely 30m settlers, yet retains Some 40 per cent of the forest has lite broadcaster, is one western group threat comes from the informal econ- such a hotbed of conspicuous con- financed by BNDES, Brazil’s develop- already been set aside as national with pilot schemes in Brazil. omy. Illegal loggers, and the small sumption that its inhabitants built an ment bank, was completed this year. the freshness of ‘the last parks. Dilma Rousseff, the president, Better links to international com- farmers that follow them, remain the opera house to rival La Scala in There are domestic projects too, unwritten page of Genesis’ has even said she may veto a revision modity markets are also playing a largest cause of deforestation in Bra- Milan. Money almost literally grew on such as the Belo Monte hydroelectric of the country’s forest code that farm- role. Big agricultural trading and zil. In Peru, informal miners have trees, until Henry Wickham smuggled dam, a controversial $16bn project ers say is overdue but environmental- food-production companies, such as turned the Madre de Dios region into 70,000 seeds out of Brazil and Britain under construction across the Xingu ists argue speeds up deforestation. New York-listed Bunge, no longer buy the country’s largest gold-producing established rival plantations in Asia. river that would be the world’s third and free land to do so. Today, Brasília Backing the environmental cause certain products that are considered province – and also its most environ- A hundred years later, however, biggest. aims to preserve much of the forest as are economists who are waking up to to threaten the rainforest. mentally destructive. this boom promises to be bigger, more Highways are also being improved, national parks, with sprinklings of the Amazon’s latent bounty. Accord- Some governments have gone the Finally, there is the scourge of drug extensive and more prolonged. including the BR-319, which would industry dotted around it. ing to one United Nations-backed other way. Ecuador has floated a trafficking and cocaine production. The river courses through Colombia better link Manaus – a free-trade zone Agriculture at the edges should also initiative, the Economics of Ecosys- scheme whereby it is paid directly to Rising foreign demand for commodi- and Peru and Brazil, three of the most and Brazil’s largest manufacturer of be more productive than in the past, tems and Biodiversity, the amount of leave Amazonian resources undevel- ties may not see the Amazon go up in dynamic economies on the planet. At electrical goods – with the rest of the through increased yields and by mak- carbon the Amazon captures every oped. Others, such as Venezuela, have smoke, but the forest and its peoples Iquitos in Peru, roughly 3,600km country. ing use of abandoned land. year is worth $13bn. The value of the opted for benign neglect. may go up consumers’ noses instead.

Stewardship Farmers help to conserve land

Search for right formula When John Carter first attracted ranches, covering 3m hectares. landowners in the Brazilian Its target is 20m ha by 2016. Amazon to Aliança da Terra A former Texas rancher who (land alliance), he was offering moved to Mato Grosso with to exploit native species them the land stewardship his Brazilian wife in 1996, equivalent of a comfort blanket. Mr Carter has shown dogged Now he is offering them determination in getting Aliança He says: “The pharmaceutical switched to the laboratory and economic advantage. to a point from which he Medicinal potential industry says it has nothing in computer instead. “Producers are in a terrible believes it can really take off. its pipeline of new drugs. If nat- “It is very probable there situation,” he says. “All the In January, Aliança will make Andrew Jack explores ural products are not the right remains huge pharmaceutical stresses of feeding the world its first expulsions of landowners source, I don’t know what is.” potential in medicinal plants in and saving the environment end it has found not to be the legal and practical He points to numerous exam- the Amazon and other rainfor- up on their plate. They’re committed to good stewardship. issues surrounding ples of western medicines ests,” says Martin Everett, head blamed for everything. We give That could be 10 to 15 per cent derived from traditional Amazo- of research at MerLion Pharma- them a tool that shows them of those registered – proof of untapped biological nian treatments – from quinine ceuticals in Singapore, a busi- Panacea: plants, such as the açaí berry, could yield benefits Dreamstime the way to legality and good the project’s seriousness. resources to treat malaria, to beta block- ness with a “library” of more stewardship.” It has also set up Biobrasil, a ers and ACE inhibitors for car- than 40,000 plants it screens for And how should proceeds be company is going to commer- The non­governmental co­operative for landowners. diovascular conditions. clients in the drugs, cosmetic split between competing peoples cialise a product without know- organisation sends geologists “Do you think a retailer or a In his office in Belém on the The drugs industry has often and nutrition industries. “But and governments when owner- ing what the norms that guide and agronomists to run consumer in the Netherlands is fringes of the Amazon forest, found inspiration and source the difficulties in actually realis- ship is disputed, or sources and the market will be.” exhaustive surveys of going to pay you more for your Hervé Rogez, a biologist at Bra- materials in nature. Examples ing this are equally large.” their uses occur in different Meanwhile, Brazil has intro- landowners’ properties. It shows zil’s Federal University of Pará, range from aspirin and penicil- One of the biggest barriers for parts of the world? duced a law to protect its them what they must do to stay John Carter, is regularly contacted by foreign lin, to cholesterol-lowering stat- traditional medicine producers “The most important threat resources. But it is counter- within Brazil’s rigorous the founder of companies seeking to tap the ins, cancer treatments and a trying to win approval from for a company today is to see its productive, according to Mr environmental laws – up to 80 Aliança da mysteries of the local flora and diabetes drug extracted from the western authorities is that most reputation spoiled by rumours Rogez. “The legislation is slow- per cent of properties must be Terra, is trying fauna for commercial gain. venomous saliva of the Gila plant and animal extracts con- of biopiracy,” says Ahmed ing down the work of Brazilian set aside without subsidy for to promote “I have been asked to send monster lizard. tain an enormous variety of Djoghlaf, executive secretary of researchers, while foreigners native vegetation – and how to good land samples to small companies in The origins of many drugs compounds that interact. Sin- the United Nations Convention can go ahead without these farm sustainably and efficiently. stewardship Britain, France and the Nether- have been obscured – and the on Biological Diversity, who is steps,” he says. Costs are split on a case­by­ lands. Last year, a big German need for natural harvesting optimistic about recent progress For now, he sees little sign of case basis, but, Mr Carter says, beef because you have trees on company offered a good price eliminated – because chemists ‘It is very probable in resolving legal uncertainties Amazon-derived prescription landowners have invested four your land?” Mr Carter asks. for me to send at least 50 sam- were able to synthesise artificial there remains huge after painfully slow steps lasting medicines close to launch. But a dollars for every dollar invested “Of course not.” What Biobrasil ples of aromatic plants,” he versions more efficiently. two decades. company he founded, Amazon in them. The founder bankrolled can do is sell beef from a says. “I don’t accept, but people Others are still derived from pharmaceutical Originally introduced at the Dreams, has negotiated a 5 per Aliança himself to start with, but guaranteed clean supply chain. think they can have access.” plants, such as artemisinin, the potential in medicinal Rio de Janeiro “Earth Summit” cent profit-sharing agreement it has since been funded by, And that is something that His experience reflects a much most effective malaria treat- in 1992, the convention became with local people for its use of among others, the Gordon and wholesalers with a view to broader concern by countries ment, which is extracted from plants in rainforests’ the Nagoya Protocol on access the açai berry, and has other Betty Moore Foundation (a their reputation will focus on. such as Brazil that the enor- sweet wormwood. Tamiflu, the and benefit-sharing of biological nutritional and cosmetic prod- conservation charity), the Archer Daniels Midland, one of mous untapped and under- influenza drug, is developed resources that was finalised last ucts under development International Finance Corporation the world’s largest commodities researched potential of native from star anise; and a variety of gling out the effective and safe year. With countries now sign- The prospect of great riches (the World Bank’s private sector traders, has joined Aliança, plants and animals is being marijuana is legally used for ones, and testing them in clini- ing up, he hopes it will soon be coming to the Amazon from glo- arm), and USAID (the US encouraging and financing its threatened not only by deforest- pain relief in some countries. cal trials as regulators demand, ratified and pass into national bal medical blockbusters seems development agency). suppliers to register. ation, but also by exploitation But most pharmaceutical is extremely complex and costly. laws. remote. But the new framework From two employees and a Mr Carter’s ambition does not that leaves indigenous commu- industry executives remain Another issue is how to calcu- “This is the most important is starting to offer some scope budget of R$40,000 ($22,000) stop at the Amazon. Already nities short-changed. sceptical. late a fair share of any profit legal instrument in the history for negotiations. in 2005, Aliança now has 35 operating in 12 of Brazil’s 27 Mark Plotkin is an ethnobota- In the latter half of the 20th generated. of sustainable development,” he And Mr Everett at MerLion employees and a budget of states, he wants the project to nist and president of the board century, there was much hype Should products derived from says, while conceding that com- points out that the failure of R$2.5m. It has two offices and cover the nation. “It’s going viral of the Amazon Conservation around “bioprospecting” to tap traditional medicinal trigger panies are only just beginning more high-tech drug discovery will open two more next year. and we’re getting ready for it,” Team, a US-based charity that compounds from nature. But higher payments than those to express support. techniques has led to a resur- It has registered nearly 500 he says. promotes partnership with local then, helped by technological from plants or animals whose “With a new drug taking 10 gence of companies approaching properties, mostly cattle Jonathan Wheatley tribes regarding their knowl- advances such as high through- potential had not been tapped years and costing hundreds of him with an interest in natural edge of the natural world. put screening, companies by their communities? millions of dollars to develop, no products. 2 ★ FINANCIAL TIMES TUESDAY NOVEMBER 29 2011 Sustainable Business Amazonia Free trade zone is jungle capital’s passport to success

centre of consumer goods das aguas, where two tlement, the federal govern- subject to seasonal floods, ing on the product; an But even with these guar- where each tries to under- Manaus production. By air, the jour- mighty arms of the Amazon ment awarded the city a but officials claim that the exemption from the federal antees, Manaus needs to cut the other by offering ney time to Miami is little river meet, Manaus had its system of import-duty and zona franca, or free-trade government’s excise duty, remain vigilant. With such incentives to manufacturers Joe Leahy says the longer that to São Paulo. heyday during the rubber fiscal incentives, offering zone, has also helped. which can reach 35 per poor transport links and sit- to settle in their jurisdic- city should focus on Originally founded to boom of the late 19th and generous relief from a taxa- Today, the zona franca cent; and reductions of 55- uated so far from its mar- tions. By law, states are not exploit the jungle, the old early 20th century, when tion system widely seen as employs 120,000 people 100 per cent in value added kets, it would quickly fade permitted to offer tax transport links, not rubber capital is today rubber was the most impor- one of the world’s most bur- directly and 500,000 indi- tax, again according to the back into the jungle with- breaks without the rely on tax breaks being held up as a counter- tant commodity export in densome. rectly. It produces most of product. out its tax advantages. approval of their peers, but intuitive solution to defor- Brazil after coffee. Manufacturers flocked to Brazil’s motorcycles and “Aside from these tax The city seems to have in the past this requirement estation in the Amazon. Some of the city’s most the city. Today, Manaus has bicycles, and a large breaks, there is an extra lost an important battle in has been ignored. At the Fiam international By providing tax breaks impressive monuments, a population of 2m and, number of its electronics. incentive in terms of land,” the competition between Yet for now, even without investment fair, models that encourage industrial such as the pink-and-white with its heavy traffic, con- says Oldemar Iank, acting Brazilian states to win a the iPad project, things are drape themselves over the development in the area, opera house, date from this crete towers and flashy Manaus’s superintendent for Suf- project by Foxconn, the Tai- looking good for Manaus, latest motorcycles, which the government has created period, when fabulously shopping malls, it looks like wealth was rama, the Manaus free-trade wanese electronics manu- which is continuing to range from Brazilian-made urban jobs for labourers rich rubber barons a suburb of São Paulo, even built on zone. The government runs facturer, to produce in the attract new factories. Dafra and Chinese-owned who might otherwise have imported acts from over- though it has few transport rubber but schemes to provide land to country, the iPad for Apple, One of the most recent Kasinski, to Harley-David- been out logging or starting seas. links to the outside world, today it relies manufacturers at virtually the US technology group. newcomers is a sister com- son and Honda, the US and illegal farms. After smuggling out other than the river and an on tax breaks no cost. The $12bn proposal, pany of Flextronics, the Japanese manufacturers. Adalberto Luis Val, direc- seeds, the British eventu- airport. Manaus recently scored which the government electronics group, that is Gleaming South Korean tor of Inpa, the national ally started producing rub- Ironically, this scheme an important victory, when expects would create 100,000 planning to make the Xbox and Japanese-brand flat institute for Amazonian ber in Asia, sending Man- was even less successful at The tax breaks make manu- President Dilma Rousseff jobs, is most likely to go to games console for 30 per screen televisions are on research in Manaus, says: aus into decline, until it achieving the aim of popu- facturing 35 per cent agreed to extend its tax São Paulo state at this stage cent less than it would cost display alongside expensive “This generates social was revived by the govern- lating the state than initia- cheaper here than in the privileges for another 50 – although there are still to import it. smartphones. inclusion and so reduces ments of the 1960s. They tives by previous govern- rest of the country, accord- years. questions over whether it “We are the only region The surprising thing is, the pressure that people put were afraid that if Brazil ments. With 95 per cent for- ing to Ernst & Young, the “This represents a great will go ahead at all. that has this model of we are deep in the Amazon on the forest. We should did not populate the Ama- est cover, it remains one of professional services firm. success for us,” says Mr Indeed, Amazonas stands development,” is how jungle, in Manaus, the capi- find alternatives like that zon region, someone else the best-preserved parts of These benefits include a Iank. “It gives investors to lose the most from the Marcelo Lima Filho, secre- tal of Amazonas state and for other places.” might. the Amazon. This is partly reduction of up to an 88 per security because it is guar- so-called “tax wars” tary of planning for Amazo- the country’s improbable Located near the encontro In order to encourage set- because much of the state is cent on import tax, depend- anteed by the Congress.” between Brazilian states, nas, explains this success. Spate of dam building meets resistance

“Brazil has a lot of cash and BNDES Hydroelectric power [the Brazilian development bank] has more investments and loans in the Brazil’s ambitious plans region than the World Bank and other are sparking protests, international finance institutions. There is a lot of pressure for countries says Naomi Mapstone such as Peru to work with them; agree with them,” says Gregor MacLennan, the Peru programme co- eru’s Asháninka people have ordinator of Amazon Watch, a conser- torn down the signs erected vation organisation. by Odebrecht, a Brazilian con- “In the case of the Asháninka, there struction company, but the is the displacement of 10,000 people, Pspectre of the Pakitzapango dam as well as the environmental costs.” remains. The Asháninka, an Amazo- Carlos Herrera Descalzi, Peru’s nian nation decimated in a brutal energy minister, has criticised the civil war in the 1980s and 1990s, say 2008 energy accord with Brazil as a they are once again facing a threat to deal “without planning, analysis or their survival in the form of the 2,000 prior consultation” that prioritises megawatt hydropower project. Brazil’s energy interests over those of “This concession was granted with- Peru. But sceptics note that President out informing or consulting us,” their Ollanta Humala came to power with leaders said in a protest letter. the aid of Brazilian advisers. Their opposition is the latest sign of Back on home turf, Brazil’s govern- regional unease about the scale of ment has attracted international criti- Brazil’s hydroelectric ambitions. The cism – and a stream of high-profile country is already one of the world’s protesters such as James Cameron, biggest generators of hydroelectric the film director, and Sting, the musi- Last chance to see: wildlife such as this squirrel monkey in Yasuní could be threatened if Ecuador decides to extract the vast oil reserves under the park Bloomberg power, but under a 10-year energy cian – over the proposed 11,200MW plan launched this year, its companies Belo Monte dam. Ransom Rainforest held hostage by oil interests unless the world pays to preserve biosphere plan 30 more projects at home and This month, a Brazilian federal abroad by 2020. court gave Belo Monte the green light, Time is running out for Yasuní, a world greatest shape right now to be €50m annually, has since favoured a Correa’s winnings from a defamation Peru, Bolivia, Guyana and the bor- opening the way for what will be the biosphere reserve that sits on top of a donating,” he says. pilot project endorsed by the case he waged against El Universo, an der with Argentina are scheduled to world’s third-biggest dam after fifth of Ecuador’s oil reserves. The “It’s unfortunate, because preserving UN­REDD (Reducing Emissions from Ecuadorean newspaper. The $42m host new dams. Eletrobrás, Brazil’s China’s Three Gorges and the Brazil- government has offered to leave the Yasuní would avoid the release of Deforestation and forest Degradation) ruling will probably bankrupt it and state-owned power company, has also ian-Paraguayan Itaipu. The case is nearly 1bn barrels of oil under the 400m tonnes of CO2 into the programme. Italy is still the biggest Mr Correa has said publicly he will give held talks about a $200m plant in Nic- likely to go to the Supreme Court, national park’s Ishpingo, Tambococha atmosphere, and it’s one of the most donor, with $35m in forgiven debt, and the money to Yasuní. aragua and is discussing projects in after the federal court ruled indige- and Tiputini (ITT) areas untapped if biodiverse places on the planet, [and] Spain has pledged €1m. While the race is still on to preserve Suriname and French Guiana. nous people had no right to be con- wealthy nations contribute $3.6bn over home to two indigenous tribes.” Ivonne Baki, chairman of the Yasuní­ the park’s ITT blocs, Ecuador is Peru has agreed to build six dams, sulted because the dam was not a decade. President Rafael Correa has railed at ITT Initiative, says December is not a planning to begin drilling in Yasuní’s largely for Brazilian supply, as part of directly on their property, although it But this “big idea from a small “wealthy nations” for their poor deadline, just a review. 200,000 hectare Bloc 31 next year. a $15bn energy accord signed in 2008. will divert water they depend on. country” has fallen victim to the response, threatening to reconsider Since July, when the fund had “The elephant in the room is that Violent protests have already forced “There’s a precedent being set in eurozone crisis, global financial turmoil “plan B” – drilling for oil – if donations garnered just $52m, it has opened up there is drilling in the park already. the suspension of Inambari, the first the Amazon by Belo Monte in terms and scepticism about financial to the United Nations­backed Yasuní to donations of as little as $1, creating President Correa has been very clear of the six Peruvian dams, and Pakitza- of the reputational risk for Brazilian guarantees, says Kevin Koenig, a Quito­ fund did not attract $100m by next a civil society movement at home and from the start that this is not going to pango, where the concession lapsed banks, and the legal risks that Brazil- based programme co­ordinator for month. abroad. President Correa “knows what keep all of Ecuador’s oil in the ground,” before Odebrecht could complete an ian developers are facing,” says Zach- Amazon Watch, a conservation Ecuador’s history of political volatility, is going on now is really motivating”, says Mr Koenig. environmental impact study. ary Hurwitz, policy programme co- organisation. and its 2008 and 1999 foreign debt she adds. “But I think you have to start In Bolivia, where President Evo ordinator at International Rivers, an “The northern countries are not defaults, have fostered unease among Recent donations have bumped the somewhere. Past administrations have Morales was recently forced to cancel environmental organisation. interested in making a simple donation some potential donors being asked to number to $70m, she says. “I think in been drooling over these reserves for a Brazilian-backed highway through “There is still a difference between to something like this without carbon accept certificates guaranteeing their the next month we are going to have decades. Even to consider leaving it in the Amazon after protests by indige- how proper standards and best prac- offsets, without getting something money back if the Yasuní lot is drilled. more than $100m.” the ground is historic.” nous people, two dams are under con- tice are understood in the Brazilian back. Economically they’re not in the Germany, which had initially pledged Then there is the question of Mr Naomi Mapstone struction on the Madeira River, and context and how they’re understood two more have been proposed. on the international level.”

Contributors John Paul Rathbone Backwater status benefits environment Latin America Editor

Joe Leahy ing rivers flow into the Ori- Faced with exorbitant the oldest parts of the bia. It’s a huge business,” Brazil Bureau Chief Venezuela noco, one branch of which costs and vehement opposi- earth’s surface, makes it an says the bishop, explaining eventually rejoins the Rio tion from environmental- uninteresting prospect for that much of the petrol is Samantha Pearson Negro, a large tributary of ists, the plans have not industrial-scale agriculture. destined for either illegal Brazil Reporter Development is not on the agenda, says the Amazon. materialised – nor are they Bereft of business oppor- mining or the lucrative Naomi Mapstone The absence of economic likely to soon. tunities – the state bureauc- cocaine trade. Andean Correspondent Benedict Mander activity in Venezuela’s Amazonas only has one racy is by far the biggest “Indigenous people live Amazon region is largely short, poor road that con- employer – many turn to off fishing and farming less Benedict Mander thanks to legislation prohib- nects the rest of the coun- the informal sector and ille- and less,” he says, adding Venezuela & Caribbean Those concerned that the iting the development of its try to its scruffy capital, gal activities. Perhaps the that the situation is made Correspondent Amazon rainforest is van- natural resources that was Puerto Ayacucho, which biggest single environmen- worse by state handouts. ishing at an alarming rate introduced after an influx lies just inside the state bor- tal and social threat to Ven- Although they form part Andrew Jack can take solace from the of wildcat gold miners dur- der. Beyond this dusty ezuela’s Amazon is the pres- of the socialist govern- Pharmaceuticals fact that at least one small ing the 1980s. town, which accounts for ence of illegal gold miners, ment’s attempts to improve Correspondent corner remains largely In addition to this, almost over half the state’s 200,000 who many believe have the lot of the indigenous Jonathan Wheatley unscathed and faces no a third of Amazonas has flourished under the cur- population, they are simply Beyond Brics News Editor imminent prospect of seri- been turned into national rent administration. creating a culture of ous development. parks and conservation The absence of Government attempts to dependency, he says. Jearelle Wolhuter Surprisingly, it is the part areas to protect the land economic activity control mining by sending In Amazonas, the govern- Commissioning Editor that belongs to Venezuela, a and indigenous culture – it in the army have been ment appears to be focused country that in other is illegal even to enter these reflects legislation patchy at best, with numer- on social policy, rather than Small scale: only subsistence farming takes place Alamy Steven Bird respects has been subjected areas without permits from ous reports confirming that promoting economic devel- Designer prohibiting to a battery of radical the local population, as well there are still significant opment. While illegal activity in Venezuela sits on top of Andy Mears changes during the turbu- as the government. development illegal mines in the area. Asked what the govern- the area appears to be flour- some of the world’s largest Picture Editor lent years of President Mr Chávez’s administra- Nevertheless, “there is ment’s policy towards the ishing, the private sector is oil reserves – but distribu- Hugo Chávez’s “Bolivarian tion has introduced legisla- growing militarisation Amazon was, Omar Patiño, withering away, according tion has become politicised For commercial revolution”. tion that strengthens native inhabitants, travel is by throughout Amazonas,” the mayor of the municipal- to Mauligmer Baloa, the after the local company sell- information, contact: Not so the sleepy, isolated rights and could complicate river or air. says José Angel Divassón, ity where Puerto Ayacucho president of the Amazonas ing it was nationalised. John Moncure state of Amazonas, which economic development fur- Unlike other parts of the bishop of the Salesian order is located and a member of state legislature and an “How can we develop +1 212 641 6362 despite accounting for a ther. Amazon, there is an insig- that runs missions in the Mr Chávez’s United Social- opponent of the govern- tourism, for example, when [email protected] fifth of the Caribbean coun- Economic activity is also nificant amount of logging – area. “We are subject to the ist party, explains: “The ment. there are limits to the or your usual try’s land mass contributes stifled by the fact that the although there is believed whim of whichever lieuten- revolutionary government’s “There is no private busi- amount of gasoline that one representative almost nothing to economic region has almost no infra- to be some illegal activity ant happens to be there on policy is to form social com- ness here,” says Ms Baloa. can buy? There is a series growth, even though it is structure, notwithstanding near the Brazilian border – the day,” he says. munity fronts which She says the biggest barrier of obstacles preventing the All FT Reports are fabulously endowed with Mr Chávez’s grand plans to and very little agriculture, Petrol smuggling is also resolve the problems of the to private initiative is the region’s development,” she available on FT.com. natural resources – in par- build the “great pipeline of except for subsistence farm- rife, according to Monseñor areas where they live.” difficulty in obtaining pet- says, adding that Amazonas Go to: ticular minerals. the south”, which would ing in indigenous communi- Divassón. “There are now Various social pro- rol, without which river is largely ignored by the www.ft.com/reports Strictly speaking, only have traversed the entire ties. The poor quality of the entire villages that live off grammes, or “missions”, transport is impossible. national government. about a quarter of Amazo- Amazon jungle to bring soil in southern Venezuela, gasoline smuggling, selling would help tackle problems Not only is it scarce “This country’s central- nas is part of the Amazon Venezuela’s natural gas as which sits on top of the it at 20 or 30 times its price such as housing and educa- across much of the region – ised government is going to basin proper. The remain- far south as Argentina. rocky Guiana Shield, one of across the border to Colom- tion. which is ironic given that be the end of us,” she says. FINANCIAL TIMES TUESDAY NOVEMBER 29 2011 ★ 3 Sustainable Business Amazonia

Private initiatives Harnessing the forest ‘No trade­off ’ to Inclusion means business for Peru’s mobile phone groups Deep in the Amazon, the call of a macaw or toucan is far more common than an electronic ringtone. balance growth But, as governments and operators strive to extend coverage beyond Lima and state capitals such as Trujillo and Arequipa, mobile phones are finding a foothold in the jungle. and conservation “Inclusion is business,” says Javier Manazares, president of Spanish­owned Green beauty: sustainable sources are best Telefónica Peru. Q&A government is providing a in particular Norway and As Telefónica’s network branches out Partnerships help Natura find stipend to poor families to Germany. Brazil’s efforts in across six Amazon regions, Mr Manzanares the ingredients for success Izabella Teixeira encourage them to this matter have already says a cottage industry has sprung up for conserve the natural shown significant results: phone owners who do not yet have Sustainability has become a buzzword in and Marina Silva vegetation in rural areas we have seen a reduction electricity at home, highlighting the region’s the Brazilian corporate world recently, as where they live. in deforestation from 21,000 yawning infrastructure gap. marketing departments compete to prove Samantha Pearson MS In Brazil’s case, the square kilometres in 2005 “Pece­peces [small canoe­like boats] will the environmental credentials of their interviews Brazil’s way to reconcile growth to 7000 sq km in 2010. take all the phones into the nearest town to respective companies. and preservation is to This represents more be charged up overnight,” he says. However, Natura, Brazil’s biggest environment integrate development with than 60 per cent of the Telefónica was awarded the contract to cosmetics group, has long been almost minister and one of protecting the voluntary goal regarding deliver fixed­line and mobile services to evangelical about it. environment. the reduction of some 200 communities late last year by From using recycled packaging to her predecessors This may seem greenhouse gas emissions Fitel, the telecommunications investment sourcing ingredients directly from paradoxical, but it is that Brazil announced at fund. Fitel will contribute up to $14.7m to co­operatives deep in the Amazon possible. We need to invest the Copenhagen climate roll out services to about 130,000 rainforest, the company has been building How can Brazil reconcile more in innovation, change conference in 2009. customers in Amazonas, Loreto, Junin, San its business on the concept of sustainability its desire to grow and technology, and science. These results have been Martin, Madre de Dios and Ucayali, many of for more than 40 years. boost national income with We need to work hard to obtained thanks to a whom are likely to favour pre­paid services. “It’s in our blood,” says Alessandro the need to preserve the make sure that the combination of Gilat to Home, a subsidiary of Israel’s Carlucci, chief executive. “Sustainability for rainforest? [Nagoya Protocol on sophisticated satellite Gilat, won the tender for another 764 us is not just a concern with the IT There is no such trade- Access and Benefit monitoring systems; communities in two other jungle regions of environment, but also with social and off. Brazil has consistently Sharing] on biodiversity command-and-control Peru. economic questions,” he says. pursued a green – and starts to be implemented, policies on the ground, The company has installed satellite dishes Getting the right ingredients for its inclusive – growth agenda so that both rich and including the use of in villages across the northern jungle to products, which range from açaí body oil to and this has gained developing countries can environmental inspectors; provide fixed­line and internet services, shampoo made from andiroba seeds, as momentum since [former and positive incentives to reducing the average distance between well as discovering new species, is the president] Luiz Inácio Lula promote sustainable phones from 97km to 7km. biggest challenge for the company. da Silva’s government. ‘We are promoting development via, for Claro, a subsidiary of Mexico’s América Natura has found the best way to do this It has paid off: the initiatives that instance, the Amazon Fund Móvil, won the contract for the sparsely is by setting up partnerships not only with country has grown [an organisation that Marina Silva: ‘We need to invest in science’ Getty populated central coast and high Andes. conservationists, universities, NGOs, consistently in the past tackle poverty and provides incentives to aid Fitel’s mission is universal access to scientists and government agencies, but decade, and we have preserve forests’ conservation of the [the capital of Amazonas pressure on the forest, telecommunications. Endowed with also with farmers and traditional achieved increasingly rainforest]. state in the Amazon] Manaus has helped a lot, 1 per cent of gross revenues of communities in some of Brazil’s most impressive results in MS When we came up through tax incentives. as it provides an telecommunications operators in Peru, remote areas. environmental with the plan to combat What environmental alternative to transforming it seeks bids from companies in For Mr Carlucci, this means frequent development. exploit their resources in a deforestation, which was impact could this have the forest into pasture or lowest­subsidy auctions. vaccinations. “I’ve been to the Amazon We think that fair way. during my time in office, on the region? cutting down wood. We Mr Manzanares says the auctions many times: Manaus, Belém, Altamira . . . I sustainable development is For example, it is we created three IT From an environmental can invest in encourage innovation for public­private once spent 16 hours on a boat,” he says. the key to preservation perfectly possible to objectives: eradication of point of view, Manaus is biotechnologies, and this partnerships to service remote regions with Top executives frequently travel to remote and growth. Conservation increase or even double illegal practices; land an enclave. Investments in will help to give our few residents and relatively low demand for parts of Brazil to assess suppliers, says is a dynamic concept. The agricultural growth in the organisation; and support its industrial district do products added value. services. Rodolfo Guttilla, an anthropologist and challenge lies in Amazon region without for economic sustainability. not play a big role in This economic model Natura’s corporate affairs officer. calibrating values, visions, cutting down one more Unfortunately, the only terms of environmental should be extended to Naomi Mapstone “We go there to talk to the local programmes, projects and tree, by using the one that was really impact in the region. other cities in the Amazon. communities, to the people who collect resource allocation. technologies already implemented was the Regional authorities, Manaus has 70 per cent of some of the ingredients we use. We also Moreover, via our Green developed by Embrapa [a combat of illegal practices. entrepreneurs and the population of the state, find people who really know the forest and Grant programme, we are government agricultural The other directives were academics have discussed but people in other cities can show us the region,” he says. promoting initiatives that research institute]. the responsibility of other Manaus’s regional need to have a good Natura’s biggest contribution, both to the tackle poverty and ministries [and] we still economic role for a long quality of life too. industry and the environment, is proving preserve native forests What can or should the need to work on [them]. time. The newer approach that its way of doing business can be simultaneously. This is government do to slow the You can take away illegal tends to see the merits of Izabella Teixeira has been profitable. part of the “Brazil without rate of deforestation? activities, but you need to encouraging “light and Brazil’s environment “Sustainability is also about earning misery” plan – a [poverty IT We have contained put something else in their clean” firms to set up minister since April 2010. money, earning money by creating social reduction] initiative led deforestation, thanks to place. there. Research and Marina Silva is a former and environmental value,” Mr Carlucci says. jointly by President Dilma efforts at different levels of development investments Green party presidential Rousseff’s office and the government – federal, state The government has done are perceived as an candidate and was the Long distance: phones in the Amazon Samantha Pearson ministry of social and local – and the support much to attract foreign essential part of this. environment minister development. The federal of international partners, manufacturers to Manaus MS By not putting from 2003-2008. The biome faces a variety of increasing threats

commodity exporters deeply, as all approximately half of what remains Guest Column their expenses remained in reals of Brazil’s Amazon forest accessible PHILIP FEARNSIDE while their revenues were in to migration. diminished foreign currencies. In addition to outright The Amazonian biome faces multiple Such macroeconomic “windfalls” deforestation, climate change threats, ranging from deforestation can help contain deforestation, but represents another significant threat. to climate change. Although the they are only temporary. Much of Amazonia is expected to forest’s vastness can give a false Indeed, the fragility of the decline become hotter and drier because of sense of security, many of the forces in deforestation was exposed this global warming. The conversion of leading to its destruction are year, when clearing advanced, ever more forest into cattle pasture, expected to increase. especially in Mato Grosso. which reduces water recycling, only Deforestation in the Brazilian This was in anticipation of a adds to this process. Amazon continues, with various general pardon of past environmental Amazonia is already experiencing forces and actors dominant in crimes as part of a congressional severe droughts, and these are different locations. Other Amazonian revision of Brazil’s “Forest Code”. expected to become more severe countries, such as Bolivia, Peru and The revised code, passed by the and frequent. Ecuador, hold approximately one- lower house in May and nearing a Droughts are caused by two third of the biome and also have critical vote in the Senate, did not phenomena, both linked to global advancing deforestation. include forgiveness for violations warming. The first is El Niño, the Cattle pasture is the main cause of committed in 2011. However, the warming of surface water in the deforestation in most of the Brazilian lower-house version granted tropical Pacific Ocean (as happened Amazon. But soyabeans are also “amnesty” for violations to 2008, before the forest fires of 1997-98 and important along the southern edge of fuelling expectations of further 2003 in Roraima state). the forest, especially in the state of amnesties. The second is the Atlantic dipole, Mato Grosso. Soya is pushing cattle The revised law is only part of the caused by a warming of surface into the interior of the Amazon, tremendous headway recently made water in the Atlantic (as happened causing “indirect” deforestation. in weakening environmental before the fires of 2005 and 2010 in In addition to the visible economy, protections. Pending legislation Acre state). based on the sale of products such as tabled by the “ruralist bloc”, the There is substantial uncertainty in beef and soya, there are illegal forces congressional representatives of global climate models as to the linked to deforestation, including large landholders, would strip severity and timing of future illegal logging. This is as true of IBAMA, the federal environmental Amazonian droughts. The UK small (if increasingly organised) agency, of its power to inspect Meteorological Office’s Hadley Centre landless squatters as it is of large farmers and fine wrongdoers. model has traditionally been the land grabbers, called grileiros, who Another proposal aims to prevent most catastrophic. illegally obtain claims to vast tracts the federal government from creating However, a new version tested in of forest. more protected areas and indigenous 2011 showed much less forest die-off Deforestation also plays a role in reserves unless local politicians than its predecessor. Most other land speculation and the laundering agree, which they rarely do. models also show Amazonia of money from drugs, corruption and In addition, Dilma Rousseff, the becoming drier and hotter. These tax evasion. president, has pushed hard to curtail include the NCAR model from the Deforestation in Brazil remains a the environmental licensing process US, and models from Germany, serious problem despite the fall in for infrastructure projects. Japan and Canada. rates between 2005 The government has The GFDL model from the US and 2010. Only launched a projected more rain in Amazonia at part of this The creation of pasture programme to build the time of the last report from the decrease was the for cattle is one of the dams and open Intergovernmental Model on Climate result of main causes of highways, pipelines Change. But it has since had an government deforestation and electrical error corrected and no longer shows programmes or transmission lines this encouraging result. stricter into Amazonia. Such Be that as it may, substantial enforcement of initiatives mean more, areas of forest are near their limits environmental laws. rather than less, for tolerating greater heat and The main reason was deforestation. drought, especially in eastern and that the international The worst is the BR- southern Amazonia. price of beef and 319 highway that Forest fires, which are not soya fell from 2003 would connect included in current climate models, to 2007, and this Manaus in increase the risk. Forest death would was followed central be followed by transformation either by the global Amazonia to savannah or low-biomass woody economic with the vegetation. collapse that “arc of International agreement to control began in 2008. deforestation” global warming is therefore an Over that along the forest’s urgent priority. period, the southern edge. Otherwise, forest die-off implies Brazilian real The existing significant carbon emissions, making almost doubled road network in climate change even more difficult to relative to northern control at a global scale. currencies such Amazonia, plus as the US dollar. planned Philip Fearnside is a researcher at This cut the additional roads, the National Institute for Research profits of would make in Amazonia at Manaus, Brazil. 4 ★ FINANCIAL TIMES TUESDAY NOVEMBER 29 2011