Environmental Compensation of Legal Reserve: the Difficulties, Challenges and Opportunities to Implement This Mechanism in the State of Mato Grosso-Brazil

Home , Extractive reserve, State park (Brazil)

ENVIRONMENTAL COMPENSATION OF LEGAL RESERVE: THE DIFFICULTIES, CHALLENGES AND OPPORTUNITIES TO IMPLEMENT THIS MECHANISM IN THE STATE OF MATO GROSSO-BRAZIL

ANA LUIZA AVILA PETERLINI DE SOUZA

A THESIS PRESENTED TO THE GRADUATE SCHOOL OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS

UNIVERSITY OF FLORIDA

2019

To my husband, Adolfo, and my children, João Pedro and Isadora

ACKNOWLEDGEMENTS

Thanks to the Latin American Center for Studies, its staff and teachers, for providing new ideas and insights for my life. I also thank the research participants, state civil servants and landowners who made great contributions to clarify my thesis.

I am grateful to my advisor, Robert Buschbacher, for encouraging me to pursue this master's degree and for all guidance throughout my journey.

I am also very grateful to Susan Paulson and Marianne Schmink for being my inspiration during these two years of study and for sharing so much knowledge.

TABLE OF CONTENTS

page

ACKNOWLEDGEMENTS...... 4

LIST OF TABLES ...... 8

LIST OF FIGURES ...... 10

LIST OF ABBREVIATIONS ...... 12

ABSTRACT ...... 17

CHAPTER

1 INTRODUCTION ...... 19

2 THEORETICAL BACKGROUND OF STUDY ...... 26

3 A HISTORICAL ANALYSIS OF THE LEGAL RESERVE WITH A FOCUS ON ENVIRONMENTAL COMPENSATION ...... 31

Colonial Brazil (1500 to 1821) and Empire (1822 to 1889) ...... 31 The Republic of Brazil (1889 until the present): The Emergence of the Legal Reserve in the 1934 Code ...... 32 The Consolidation of the Legal Reserve (RL) in the 1965 Forest Code ...... 35 The 1988 Federal Constitution ...... 40 From the 1965 Forest Code to the 2012 Forest Code: Consolidations and Changes in Brazilian Forest Policies ...... 42 MP 1511, 1996 - Environmentalist Pressure and Government Response Against Deforestation in the Amazon ...... 44 The Reaction of the Ruralists Group and the Flexibilization of MP 1511, 1996 ...... 48 The Emergence of Environmental Compensation in the Brazilian Legal System ...... 49 From Flexibility to Recrudescence of Forest Protection - MP 1956-50, 2000 Becomes Definite by MP 2166-67, 2001 (67th edition) ...... 50 The 2012 Forest Code - Native Vegetation Protection Law [Lei de Proteção a Vegetação Nativa (LPVN)] ...... 54 The Power Conflict in the Discussion of the 2012 Forest Code ...... 55 The Rural Environmental Register – CAR ...... 62 Environmental Regularization Program – PRA ...... 64 Legal Reserve Environmental Compensation: Forms, Criteria and Terms ...... 67 The New Forest Code (Law 12651, 2012) and the Present Model of Legal Reserve Environmental Compensation ...... 73 Deadlines ...... 73

Criteria ...... 74 Modalities ...... 77

4 ENVIRONMENTAL COMPENSATION SCENARIO IN MATO GROSSO . 83

Study Area: Mato Grosso ...... 83 The Evolution of the State Forest Policy With a Focus on Legal Reserve Compensation...... 86 The Rural Property Environmental Licensing System (SLAPR) and the Single Environmental License [Licença Ambiental Única (LAU)]: Regulating Devices for Environmental Liabilities ...... 87 The First Rules About Legal Reserve Environmental Compensation in Mato Grosso ...... 90 Operation Curupira and the “Golden chainsaw” Prize: Events That Changed Forest Policy in Mato Grosso ...... 93 The Creation of a New Modality of Legal Reserve Environmental Compensation by LC 232, 2005: Illegality ...... 95 Legal MT - Complementary Law 343, 2008 ...... 97 The 2012 Forest Code and Its Effects in the Procedures of Environmental Regularization in Mato Grosso...... 101 Is Environmental Compensation a Reality in Mato Grosso? ...... 107 Environmental Regularization before the 2012 Forest Code ...... 108 Environmental Regularization after the Forest Code 2012 ...... 111

5 DIFFICULTIES AND CHALLENGES FOR IMPLEMENTATION OF ENVIRONMENTAL COMPENSATION FOR LEGAL RESERVE IN MATO GROSSO ...... 114

Difficulties and Challenges in the Environmental Regularization Processes: The Role of the State ...... 117 LAU and SLAPR - Period from 1995 to 2008 ...... 117 CAR-LAU and SIMLAM - From 2009 to 2014 ...... 128 CAR-PRA and SICAR-SIMCAR: 2015 to Present ...... 136 Environmental Commitment Agreement Between the Government of Mato Grosso and the State Prosecutor's Office to Improve the Environmental Regularization Processes of Rural Properties ...... 143 Difficulties and Challenges in the Environmental Regularization Process of Rural Properties: The View of Farmers ...... 144 Rural Properties Profile ...... 144 Degree of Knowledge of the Rural Producers About the Forest Code . 145 Difficulties Pointed out by Farmers to Complete the Processes of Environmental Regulation ...... 151 Legal Uncertainty Caused by Changes in Legislation and Environmental Regulation Procedures ...... 152 Resistance of Farmers ...... 153 Bureaucracy of the Environmental Regularization Process ...... 153 Financial Cost for Environmental Regularization ...... 154

Possibility of Relaxation of the Law and / or Amnesties to Environmental Infractions ...... 156 Environmental Compensation of Legal Reserve from Farmer Perspective ...... 157

6 COMPENSATION OF LEGAL RESERVE IN MATO GROSSO: OPPORTUNITIES FOR ENVIRONMENTAL EARNINGS FOR THE STATE ...... 161

Environmental Compensation Through Donation of Land Subject to Regularization in Public Domain UC ...... 163 Amount of Land Subject to Land Regularization in State UCs ...... 167 Database of the Areas Subject to Land Regularization in Protected Areas 169 Scenario of State Legislation on RL Compensation in UCs ...... 173 UCs As a Priority for Compensation ...... 174 Environmental Compensation through the Acquisition of Areas with RL Surplus in Private Rural Properties ...... 176 Subsidies for the Definition of Priority Areas ...... 180

7 CONCLUSIONS ...... 188

LIST OF REFERENCES ...... 201

BIOGRAPHICAL SKETCH ...... 213

LIST OF TABLES

Table page

3-1 Political motivations for changes in legal reserve legislation...... 60

3-2 Comparison of changes in environmental compensation – 1998 and 2000...... 70

3-3 Comparison of requirements of RL compensation in 1965, 1998 and 2012 Codes...... 81

4-1 Use of soil in savanna and Amazon biomes in Mato Grosso (millions of ha)...... 85

4-2 Comparison between the number of CAR in SICAR and SIMCAR...... 105

4-3 Number of regularized rural properties and rate period of regularization (2000 to 2015)...... 109

4-4 Comparison of the properties that made the environmental compensation- 2000 to 2015...... 111

4-5 Numbers of rural properties with CAR, PRA and compensation (2015 to June 2019)...... 112

5-1 Compensable RL deficit in Mato Grosso ...... 114

5-2 Regularized properties and average time for issuance of LAU - 2000-2008 period...... 119

5-3 Quantity of CAR and LAU and the % of regularized properties in the period 2008-2014 (MT Legal)...... 131

5-4 Procedural situation and amount of CAR in 06/07/2019...... 139

5-5 Amount of validated car, regularized property and compensation effected (06.06.2019)...... 140

5-6 Profile of rural properties of respondents...... 145

5-7 Respondents' degree of knowledge about CF...... 146

5-8 Degree of environmental regularization of respondents' rural properties 146

5-9 Degree of knowledge of respondents about legal reserve...... 147

5-10 Degree of concern about RL regularization...... 148

5-11 Degree of concern of respondents with environmental regularization. ... 149

5-12 Preferred modalities by respondents for recovery RL deficit...... 158

5-13 Environmental compensation modalities: respondent preferences...... 159

5-14 Difficulties to implement environmental compensation...... 159

6-1 Total data, subject to regularization and regularized of Mato Grosso UCs (ha)...... 167

6-2 Areas subject to land regularization in State UCs, by biome (ha)...... 168

6-3 Comparison between State UC area supply and biome-wide RL deficit (ha)...... 169

6-4 Total amount of RL and surplus and class I (ha)...... 177

6-5 Comparison between the total area supply in UC and RL surplus (class I) and the possible compensable deficit of RL...... 179

6-6 Areas of priority for environmental compensation in MT...... 185

LIST OF FIGURES

Figure page

3-1 Map of RL required in Brazil in the forest code (1965)...... 37

3-2 Deforestation rates in the Amazon. Source: INPE/PRODES ...... 45

3-3 Map of legal reserve required in Brazil (MP 2166-67, 2001) Source: Pacheco et al. (2017, p.182)...... 54

3-4 Timeline of the main forest protection laws, beginning in the 20th Source: Brancalion et al. (2016, p. 03)...... 55

3-5 Deforestation Amazon rates- 2000 a 2008 (km2). Prepared by the author based in INPE/PRODES ...... 56

3-6 SICAR data base. Prepared by the author base in Law 12651 (2012) ..... 64

4-1 Map of Mato Grosso with its three main biomes: Amazon forest, savanna and the pantanal...... 84

4-2 Model of a deforestation authorization dispatched by IBAMA...... 89

4-3 Flow of the compensation process in a UC (State Law 7330, 2000). Source: author’s elaboration based on State Law 7330 (2000) ...... 91

4-5 Quantity of CAR and LAU issued from 2009 to 2014...... 101

4-6 Number of LAUs issued from 2000 to 2015...... 109

5-1 Number of regularized properties in MT (2000-2008)...... 118

5-2 Representation of the process of a licensing process according to the SEMA-MT analysis framework...... 120

5-3 Data on deforestation in Mato Grosso - 2004 to 2014. Source: INPE/PRODES ...... 129

5-4 Major threats in SEMA-MT Public Servants (2014)...... 133

5-5 Major Weaknesses in SEMA-MT Public Servants (2014)...... 135

6-1 Data from UCs in Brazil...... 163

6-2 Map of counties with more RL surplus areas (class I)...... 181

6-3 Map of proposed protected areas, UCs and indigenous lands - ZSEE-MT (2018)...... 182

6-4 Map of priority areas for biodiversity conservation in the extremely high category...... 183

6-5 Map of fragile areas – ZSEE-MT (2018)...... 185

6-6 Final map of priority areas for compensation in MT...... 187

LIST OF ABBREVIATIONS

ABC Academia Brasileira de Ciência [Brazilian Academy of Science]

ADI Ação Direta de Inconstitucionalidade [Direct Unconstitutionality Action]

ALMT Assembleia Legislativa de Mato Grosso [Legislative Assembly of Mato Grosso]

APA Área de Proteção Ambiental [Environmental Protection Area]

APF Autorização Provisória de Funcionamento [Provisional Operating Authorization]

APP Área de Preservação Permanente [Permanent Preservation Area]

APROSOJA Associação dos Produtores de Soja [Soy Producers Association]

BNDES Banco Nacional de Desenvolvimento Econômico e Social [National Bank for Economic and Social Development]

CAR Cadastro Ambiental Rural [Environmental Reserve Quota]

CF Código Florestal [Forest Code]

CLPR Coordenadoria de Licenciamento Ambiental de Propriedade Rural [Rural Property Environmental Licensing Coordination]

CNA Confederação Nacional da Agricultura e Pecuária do Brasil [Brazilian National Confederation of Agriculture and Livestock]

COGEO Coordenadoria de Geoprocessamento [Geoprocessing Coordination]

CONAMA Conselho Nacional de Meio Ambiente [National Council of Environment]

CONSEMA Conselho Estadual de Meio Ambiente de Mato Grosso [State Council of Environment]

CPI Comissão Parlamentar de Inquérito [Parliamentary Committee of inquiry

CRA Cota de Reserva Ambiental [Environmental Reserve Quota]

CRF Cotas de Reserva Florestal [Forest Reserve Quota]

FEMA Fundação Estadual de Meio Ambiente [State Environmental Foundation]

FEMAM Fundo Estadual de Meio Ambiente de Mato Grosso [State Environment Fund of Mato Grosso]

GT Grupo de trabalho [Working Group]

HA Hectares [Hectares]

IBAMA Instituto Brasileiro do Meio Ambiente e Recursos Naturais Renováveis [Brazilian Institute of Environment and Renewable Natural Resources]

IBGE Instituto Brasileiro de Geografia e Estatística [Brazilian Institute of Geography and Statistics]

IC Inquérito Civil [Civil Inquiry]

ICMBio Instituto Chico Mendes de Conservação da [Chico Mendes Institute for Biodiversity Conservation]

ICV Instituto Centro de Vida [Center of Life Institute]

IDH Índice de Desenvolvimento Humano [Human Development Index]

INCRA Instituto Nacional de Colonização e Reforma Agrária [National Institute of Colonization and Agrarian Reform]

INPE Instituto Nacional de Pesquisas Espaciais [National Institute for Space Research]

INTERMAT Instituto de Terras de Mato Grosso [Mato Grosso Land Institute]

IPAM Instituto de Pesquisa da Amazônia [Amazon Research Institute]

ISA Instituto Socioambiental [Socio-Environmental Institute]

ITR Imposto sobre a Propriedade Territorial Rural [Rural Territorial Property Tax]

LAU Licença Ambiental Única [Single Environmental Licence]

LC Lei Complementar [Complementary Law]

LPVN Lei de Proteção da Vegetação Nativa [Native Vegetation Protection Law]

LTDA Limitada [Limited]

MF Módulo Fiscal [Fiscal Module]

MMA Ministério do Meio Ambiente [Ministry of Environmental]

MP Medida Provisória [Provisional Measure]

MPE Ministério Público Estadual [State Public Ministry]

MPF Ministério Público Federal [Federal Public Ministry]

MST Movimento dos Sem-Terra [Landless Movement]

MT Mato Grosso

ONG Organização Não-Governamental [Non-Governmental Organization]

PGE Procuradoria Geral do Estado [State Attorney General]

PIB Produto Interno Bruto [Gross Domestic Product]

PNMA Política Nacional de Meio Ambiente [National Environment Policy]

POP Procedimento Operacional Padrão [Standard Operating Procedure]

PPG7 Programa Piloto para Proteção das Florestas Tropicais no Brasil [Pilot Program for Protection of Tropical Forests in Brazil]

PRA Programa de Regularização Ambiental [Environmental Regularization Program]

PRADA Projeto de Recuperação de Área Degradada [Environmental Regularization Program]

RESEX Reserva Extrativista [Extractive Reserve]

RL Reserva Legal [Legal Reserve]

RPPN Reserva Particular do Patrimônio Natural [Private Reserve of Natural Heritage]

SBPC Sociedade Brasileira para o Progresso da Ciência [Brazilian Society for the Progress of Science]

SEFAZ Secretaria de Fazenda [Secretary of finance]

SEMA Secretaria de Estado de Maio Ambiente [Secretary of Environmental]

SFB Serviço Florestal Brasileiro [Brazilian Forest Service]

SGF Superintendência de Gestão Florestal [Forest Management Superintendence]

SIGTERRA Sistema de Informações sobre Consolidação Territorial de UCs Federais [Federal UCs Territorial Consolidation Information System]

SINIMA Sistema Nacional de Informações sobre Meio Ambiente [National Environmental Information System]

SLAPR Sistema de Licenciamento Ambiental de Propriedade Rural [Rural Property Environmental Licensing System]

SICAR Sistema Nacional de Cadastro Ambiental Rural [National Rural Environmental Registry System]

SIMLAM Sistema de Integração e Monitoramento de Licenciamento Ambiental [- Environmental Licensing Integration and Monitoring System]

SIMCAR Sistema Mato-grossense de Cadastro Ambiental Rural [Mato Grosso System of Rural Environmental Registration]

STF Supremo Tribunal Federal [Federal Supreme Court]

TAC Termo de Ajustamento de Conduta [Conduct Adjustment erm]

TCE Tribunal de Contas do Estado [State Court of Auditors]

TC Termo de Compromisso [Term of Commitment]

TCC Termo de Compromisso de Compensação de Reserva legal´ [Legal Reserve Compensation Commitment Term]

TNC The Nature Conservancy

UC Unidade de Conservação [Conservation Unnit]

UDR União Democrática Ruralista [Rural Democratic Union]

UPF Unidade Padrão Fiscal [Standard Fiscal Unit]

ZSEE-MT Zoneamento Socioeconômico Ecológico de Mato Grosso [Ecological Socioeconomic Zoning of Mato Grosso]

Abstract of Dissertation Presented to the Graduate School of the University of Florida in Partial Fulfillment of the Requirements for the Degree of Master of Arts

ENVIRONMENTAL COMPENSATION OF LEGAL RESERVE: THE DIFFICULTIES, CHALLENGES AND OPPORTUNITIES TO IMPLEMENT THIS MECHANISM IN THE STATE OF MATO GROSSO-BRAZIL

Ana Luiza Avila Peterlini de Souza

December 2019

Chair: Robert John Buschbacher Major: Latin American Studies

Environmental compensation is a form of regularization of legal reserve deficits for those rural properties that have not complied with the provisions of the

Forest Code. Although it is the most flexible modality, as it allows the legal reserve to be regularized off-property, studies indicate very low adherence to this modality

(Bernasconi, 2013).

The present study made a historical retrospective of compensation to identify legislative changes over the years and subsequently focused on the difficulties for implementing environmental compensation in the state of Mato Grosso, where the largest legal reserve deficits are concentrated in Brazil.

In addition, the research identified environmental advantages that Mato

Grosso can have with compensation through two modalities: the possibility of maintaining legal reserve surpluses on private property (additionality); and land regularization of private properties in conservation areas.

The qualitative method was used through documentary research and semi- structured interviews with state public servants and farmers who gave their 17 perspectives into the difficulties and challenges for implementing compensations.

Finally, the quantitative method was used, with analysis of secondary data extracted from official databases that allowed identifying the scenario of environmental compensation and regularization in Mato Grosso.

Constant changes in legislation, bureaucracy in the regularization process, resistance from farmers, and poorly designed technology system, were some of the difficulties identified in the research to implement compensations. On the other hand, compensation can bring environmental gains if the State adopts a proactive stance in conducting public policies that allow compensation to occur in priority areas duly identified in this study.

CHAPTER 1 INTRODUCTION

Brazil is a country of great territorial extension that harbors the second largest forest area on the planet, covering 516 million hectares, 60.7% of the national territory (IBGE, 2017). Only Russia has more forest area than Brazil.

Approximately 53% of native vegetation in Brazil is inside private rural properties

(Soares-Filho et al., 2014). The high rate of preservation in Brazilian properties is due to obligations established in forest legislation that goes back to the first

Brazilian Forest Code in 1934, that created the legal reserve [reserva legal (RL)].

This legal reserve is a protected territorial space, inside a rural property, that has the function of ensuring the sustainable use of the natural resources, helping in the preservation and rehabilitation of ecological processes, promoting the preservation of biodiversity, and protecting fauna and flora. The present Forest

Code (Law 12651, 2012) establishes that it is mandatory that all rural producers maintain their legal reserves protected in percentages that vary from 80%, in the

Amazon biome, to 20% in other regions in the country.

However, studies show that, despite these legal obligations, at present, 90% of the Brazilian rural properties show a deficit of legal reserve (Oliveira and Bacha,

2003), imposing the need to regularize the environmental liabilities (Guidotti,

Freitas, Sparovek, Pinto & Hamamura, 2017).

The Forest Code foresees three alternatives for the environmental regularization of rural properties: restoration, natural regeneration, and compensation of the legal reserve. In the first two, the property owners must recover the environmental liability inside the degraded legal reserve.

Environmental compensation, however, allows the rural producer who has deforested before 2008, and only those, to continue to use the legal reserve inside their property, using another area of the same size and inside the same biome to regularize his forest liability (Forest Code, 2012). Therefore, environmental compensation is a form of regularizing the legal reserve liabilities of rural properties

(Milaré, 2015), and it has been the most flexible, because it allows the regularization outside the rural property.

There are four compensation possibilities currently provided for in the Forest

Code (Law 12651/2012): I - acquisition of Environmental Reserve Quota [cota de reserva ambiental (CRA)], where the landowner issues a nominative title corresponding to native vegetation that exceeds the legal reserve area of the rural property, being able to negotiate this title with those landowners that have deficit of

RL; II - leasing of area under environmental easement or Legal Reserve regime, where the landowner with excess legal reserve may lease the surplus area, temporarily or permanently, to those with RL deficit; III - donation to the Public

Authority of an area located inside a Conservation Unit [Unidade de Conservação

(UC)] of public domain pending land regularization, that is, the areas of UC that have private properties inside it, can be acquired by landowners with RL deficit and later donated to the Government; IV - registration of another area equivalent and in excess of the Legal Reserve, where the landowners buys another area with native vegetation and uses it as compensation of RL of their deficit property.

In spite of the several possibilities, the implementation of the compensation is still insignificant; according to Bernasconi (2013), only between 7% and 9% of the rural properties are undergoing regularization in Brazil. Thus, although legal 20 reserve environmental compensation was introduced over 20 years ago by the

Provisional Measure [Medida Provisória (MP)]1605-30,1998, it did not take off. To find the difficulties and challenges in the implementation of environmental compensation is the focus of our study.

The study is structured in seven chapters, (1) introduction, (2) theoretical background, (3) historical retrospective of legal reserve; (4) scenario of environmental compensation in Mato Grosso; (5) difficulties and challenges for implementing environmental compensation; (6) environmental opportunities and gains from the implementation of environmental compensation; (7) conclusion.

The theoretical background of this study focuses on a political science perspective. Through a historical retrospective of the legal reserve focusing on environmental compensation, from the Brazilian Colony (1500) to the current rules established in the 2012 Forest Code, we identified several changes in Brazilian forest law and policy, resulting, most of the time, to the conflict of interests between environmentalists and developmentalists, notably the rural producers.

The antagonism waged between environmentalists and developmentalists reveals the existence of a new protagonist on the national political scene, what political science calls “pressure groups”. According to Bonavides (2000), pressure groups are defined by the exercise of a group's influence over political power, to eventually obtain a certain measure of government that favors its interests.

The study analyzed the influence of environmental and developmental groups in the conduct of forest policy, notably with the legislature, the scene of numerous debates and struggles that resulted in various changes in environmental legislation, an alternation of forces and power between pressure groups. In 21 addition to this visible conflict of interest in forest policy, the study sought to understand, from a historical-legal perspective, the role of the state, as a regulator of forest public policies and as a mediator or not of conflicts and debates triggered within the National Congress and even in backstage of the Executive Branch, which enabled the construction of what is today the legal reserve and the instrument of environmental compensation.

However, as will be seen, the various changes in forest legislation that have occurred over the years have not been sufficient to guarantee the implementation of public forest policies. In fact, although we have numerous environmental laws, research has identified several difficulties in implementing the legislation. The pressure from various interest groups and the constant legislative changes, as will be seen, have impeded progress towards the implementation of forest legislation.

Thus, given the low implementation of the law, the present study is dedicated to identifying the difficulties and challenges to implement the legal reserve instrument and, especially, environmental compensation. The place chosen to do this was the state of Mato Grosso, one of the states in the Brazilian

Legal Amazon that stands out as having the largest areas of legal reserve, in need of being recovered (Soares-Filho et al., 2014). In addition, the state was one of the pioneers in the regularization of rural properties in Brazil, beginning in 1995

(Azevedo, 2009), with the creation of the single environmental license [ licença ambiental única (LAU)] (Complementary State Law 38 of November 21, 1995), providing extensive experience in managing the legal reserve.

However, although the regularization of rural properties began more than 24 years ago in Mato Grosso, the numbers are still insignificant. The low effectiveness 22 of the process of environmental regularization of rural properties also led to an almost negligible amount of environmental compensation of legal reserve in the state. The compensation is the last stage in environmental regularization, and only after this, is the environmental institution able to identify the legal reserve deficit, and the rural producers responsible for its recovery, through the adoption of one of the alternatives offered in the Forest Code, among them, environmental compensation.

Thus, for legal reserve compensation to happen, it is necessary that the environmental regularization process arrive at its final stage because, if it does not, the compensation will not be possible. In this way, to identify the difficulties and challenges to implement the environmental compensation in Mato Grosso, we analyzed the effectiveness of the environmental regularization processes of rural properties. The study considered secondary data from official data banks, such as the National Rural Environmental Registry System [Sistema Nacional de Cadastro

Ambiental Rural (SICAR)], State Rural Environmental Registry System [Sistema

Mato-grossense de Cadastro Ambiental Rural (SIMCAR)], and information provided by the Secretary of Environmental [Secretaria Estadual do Meio Ambiente de Mato Grosso(SEMA)], that enabled us to identify the number of regularization and environmental compensation processes in Mato Grosso. To complement the data, semi-structured interviews were done with five state public servants and twenty-two rural producers, aiming to find their perceptions and opinions on the environmental regularization process and, especially, on the use of environmental compensation as a means to recover the legal reserve liabilities. The data and the interviews showed us the main difficulties for implementing environmental 23 compensation in Mato Grosso, as well as the challenges that must be faced, especially by the State, for making this mechanism effective.

In light of these findings, chapter 6 looks at the opportunities that environmental compensation could open for Mato Grosso if it were deployed.

Potential environmental gains were analyzed, stemming from the compensation through two mechanisms. The first deals with the effectuation of environmental compensation through the donation of an area subject to land regularization in a public domain. The realization of this type of compensation may, in fact, represent environmental advantages for Mato Grosso since it promotes, at the same time, the regularization of legal reserve liabilities and the land tenure regularization of

Conservation Units (UC), with the “removal” of any private property occupants from within these protected spaces, thus enabling the implementation of the UCs.

The second type of environmental gains deals with the possibility of maintaining legal reserve surpluses (that could be legally deforested) in private rural properties. Analyses of secondary data extracted from the Socioeconomic and Ecological Zoning of Mato Grosso (ZSEE-MT, 2018), from SEMA, and other studies led to the conclusion that maintenance of this RL surplus represents an additionality in the protection of the Mato Grosso’s forest, since compensation in these rural properties can prevent deforestation of new areas, and guarantee financial gains to farmers who have preserved beyond what is required by law.

The success or failure of environmental compensation from these two perspectives will depend on how the government conducts public policy related to the issue. Thus, in order to verify any advantages for the environment arising from the legal reserve compensation, we made a brief analysis of the institutional 24 scenario, focusing on the implementation of environmental compensation, notably the laws, incentives, restrictions and management of the State Conservation Units.

At the conclusion of this study, a synthesis is presented of the difficulties and challenges for the implementation of legal reserve environmental compensation in Mato Grosso, with a few recommendations on how this resource could, in fact, represent environmental gains for the state.

CHAPTER 2 THEORETICAL BACKGROUND OF STUDY

Brazilian forest policy is a process still under construction. Several laws have been created, amended and repealed over the years amidst a conflict of interest led by two apparently antagonistic groups, the environmentalists and the developmentalists, notably the ruralists, in an alternation of forces and power before the state. The formation of interest groups in the political scenario is a new form of expression of the popular will, different from the general will expressed by the democratic electoral process (popular vote). Political science has sought to study interest groups, and more specifically pressure groups (Bonavides, 2000).

Currently, there is a large number of studies and research on the subject, in the most different modalities and perspectives of action, such as the influence that these groups have on party organizations and the body of citizens during the elections, as well as on the branches of the state power - executive, legislative and judiciary - whose decisions often bear the mark of this invisible participation

(Bonavides, 2000).

The participation of pressure groups in the political scene, according to some authors, is old, although it has gained strength in recent years. Bonavides

(2000) mentions that at the beginning of the twentieth century, Munro had already claimed that interest groups formed an “invisible government”, and Friedmann

(1959) said that “government through private groups is an irreversible fact” and

President Truman stated that pressure groups are "true" subjects of political action.

Still according to the author, the importance of pressure groups has taken on such a dimension that pressure groups can be said to be part of the material constitution

26 as much as political parties, regardless of institutionalization or formal recognition.

The pressure groups, according to the author, represent the decomposition of the popular will into the will of groups, which can frustrate the full implantation of a sovereign general will in close harmony with the collective interests.

In fact, what is currently perceived in Brazil is a preponderance of the will of groups over the general will, especially in environmental discussions, and an increasingly cohesive organization of pressure groups, which are present in all spheres of government notably in the legislative and executive. Therefore, the importance of pressure groups in the conduct of state political decisions is a reality that cannot be overlooked. This study, through a historical-legal perspective, sought to identify the influence of pressure groups with state power, especially in the legislature, where the pressure exerted by environmental and ruralist interest groups, are responsible for the main legislative changes over the years.

According to Weiss (2016), the environmental movement is formed by the joint activities of grassroots, indigenous, rural workers, family farmers and supportive environmental NGOs, with alliances with urban workers, groups of professionals, churches, and sectors of the middle class and also with international institutions that operate in the area. Developmentalists, who can also be considered a social movement in the broad sense, represent sectors that seek as much economic growth as possible, with social and environmental issues having lower priority. This movement includes most of the agribusiness, industry, contractors and nationalist positions.

In this study, the highlight of the developmentists is the ruralists, who represent a large part of the Brazilian agribusiness. Ruralists are characterized as 27 a highly cohesive group that has strong political and economic power and great influence in shaping public policy. According to Barbosa (2018) the ruralist movement strengthened from the 80's when the Rural Democratic Union [União

Democrática Ruralista (UDR)] was created, whose main objective was the defense of private property, threatened by agrarian reform, especially by the Landless

Movement (MST). Currently, the ruralists have wide representation in the National

Congress and make up one of the main forces between deputies and senators of the Republic, leading, most of the time, the debates against environmental issues.

(Costa and DeOliveira, 2011).

Thus, it is necessary to analyze the historical context of the formulation and execution of forest public policies to understand the current model of environmental management, notably with the new Forest Code (2012). In Brazil, the state has a central role in the elaboration and implementation of the Brazilian forest policy, and the greater or lesser governance capacity, depends on the state's forms of dialogue with organized groups of society (Weiss, 2016), notably the environmentalist and ruralist movements.

Throughout this study, we can see that depending on the historical moment and the political pressure exerted by antagonist groups, Brazilian forest law has been changed, sometimes becoming more rigid and protective (environmentalist pressure), sometimes becoming more flexible (ruralist pressure). On the whole, the strong political pressure from the groups and the constant legislative changes, as will be seen, have impeded any significant step towards the implementation of forest legislation. In fact, although we have a reasonably complete regulatory framework in terms of environmental protection (Gabeira, 2003; Nalini, 2003), on 28 the other hand we have poor implementation of the laws. According to DoValle

(2018), Brazil is one of the most prodigious countries in environmental protection laws, but also a country in which there are many “non-sticky” laws that are only “on paper” and not enforced.

According to Camargo, Capobianco and Oliveira (2002), legislative changes have not translated into improvements in the country's sustainability, and one of the reasons is what the authors call “excessive formalism” on the part of the legislature, which often conforms to very existence of the rule and little attention is paid to its actual ability to modify reality. The difficulty in implementing forest public policy may be directly related to the state governance model. According to Do Valle

(2018), INECE data indicate that the environmental management model adopted in

Brazil is considered “enforceable”, based predominantly on command and control instruments, that is, rules that establish mandatory standards to be followed, state monitoring and enforcement, and a large number of prior environmental permits and permits for potentially polluting activities.

Therefore, the state has an important regulatory and centralizing role in the

Brazilian environmental public policy. While, on the one hand, it is evident that the state needs to be strong in conducting environmental policy, the difficulty of implementing laws suggests that it need not be so large and not so sovereign. The right measure, according to Pereira (2001) would be to fit the denomination of social-liberal state, that is, the state is liberal because it firmly believes in the market and competition; and it is social because it maintains its commitment to universal social rights. It is liberal and social because it is democratic, and meets citizens' demand for better and more efficient public services. 29

In fact, as will be seen, although the state has an important regulatory role in the environmental issue, the provision of public services and the implementation of environmental protection measures are still extremely inefficient. The state drafts and regulates the law but fails to implement forest policy, and the low practical effectiveness of environmental protection legislation has proved to be more of a rule than an exception (DoValle, 2018).

Besides the low effectiveness of the laws, Brazil also has a greater social tolerance for the violation of environmental rules, which makes the implementation of environmental policy a great challenge in Brazil (DoValle, 2018).

Thus, this study seeks to understand the evolution of Brazilian forest policy and, notably, legal reserve and environmental compensation instrument under the lens of political science, and the power struggle of pressure groups, environmentalists and ruralists and the influence both exercise in political decision making. Still in this scenario, the study analyzes the state's attitude towards pressure groups and the difficulties and challenges for the implementation of the forest policy, especially the legal reserve and environmental compensation instruments.

CHAPTER 3 A HISTORICAL ANALYSIS OF THE LEGAL RESERVE WITH A FOCUS ON ENVIRONMENTAL COMPENSATION

Colonial Brazil (1500 to 1821) and Empire (1822 to 1889)

Interests and conflicts over forests have existed since the “discovery” of

Brazil, in 1500, when the Portuguese Crown, perceiving the importance of forests, adopted measures to regulate their use and exploitation. Portugal’s objective, initially, was merely economic, aiming to ensure the privileges of the

Crown over the exploitation of the resources in the forests of its colony, Brazil.

An example was the extraction and trade of redwood (pau-brasil) and other wood destined for naval construction (Ahrens, 2005).

Magalhães (2001) mentions that there always was a state concern in relation to forest exploitation on private properties, so much so that, in 1605 the first Brazilian forest protection law was issued, “O Regimento sobre o Pau-

Brasil” [The Statute on Pau-Brasil], that determined that this redwood could only be explored in the quantities and with the authorization given by the Crown, imposing serious penalties to those who disobeyed the law1. Also aiming to guarantee the interests and the exploitation of forest resources by the

Portuguese Crown, in 1797, three Royal Charters were written, reserving for

Portugal all woods and thickets along the coast and the navigable rivers, determining that the rural producer preserve them.

Later, in 1821, instructions written by José Bonifácio de Andrada e Silva, when in office as Vice President of the São Paulo Governing Board, established that the owners of rural properties were obliged to maintain one-sixth of sold or

1 See: História do Brasil, https://www.historiadobrasil.net/documentos/pau_brasil.html Retrieved May 15, 2019).

31 donated areas as forest reserves, in order to guarantee the stock of fire-wood and wood (Criado, Melo & Jacomino, 2010). This was the first step towards what was later created as the legal forest reserve.

During the imperial period, the same policy of the colonial period was in general maintained, with Government restrictions and control in the exploitation of forests. According to Kengen (2001), since then, legislation that imposed restrictions to forest exploitation was seen as contrary to colonization and development and, thus, no Government dared to demand that the law be obeyed. Therefore, it can be observed that the protection of the forests, since its beginnings, has been seen as an obstacle to economic development, a view that has not changed until today, as we will see further ahead.

From a constitutional perspective, the first Constitution of the Empire, in

1824, did not mention the topic “forest,” showing total disregard for the subject.

This demonstrates clearly that the intention of the Government in the preservation of forests was only to assure their own economic interests, with no protectionist or ecological motivation (Viana, 2004).

The Republic of Brazil (1889 until the present): The Emergence of the Legal Reserve in the 1934 Code

The absence of constitutional guidelines for the legal protection of forests, verified in the imperial period, was also felt in the first Constitution of the

Republic, in 1891. There was no mention of the topic (Viana, 2004). The

Constitution of 1934, although not having defined any policy for forest protection, did attribute to the Union the competence to legislate on forestry, opening the discussions and later making possible the publication of the first

Brazilian Forest Code at a federal level.

The first Federal Code came into force by the Decree 23,793, 1934. It established that “the existing forests on national territory, considered as a whole, constitute a common interest commodity common to all the population living in the country, having the right to property with the limitations that the laws in general, especially those in this code, establish”2 (Decree 23,793,1934).

According to Ahrens (2005), two expressions in this law are worth noting and show the legislator's concern at the time: “forests considered as a whole and common to all the population living in the country (p. 04)”.For the author, to consider the forests as a whole implies acknowledging that maintaining a minimum of forest heritage was in the interest of the Brazilian society, in order to satisfy the most diverse necessities of all the inhabitants of the country. The expression: “common to all the population living in the country” (p.04), indicated how, at the time, the legislator was concerned with the growing dilapidation of the forest heritage in the country, in case private landowners had total power to freely dispose of forests.

However, in spite of the advancement in the protection of forests, according to DeCarvalho (1990), the first Brazilian Forest Code cannot be characterized as an “environmental” piece of legislation, but rather is part of an old legislative tradition that has always sought to regulate the use and exploitation of forests for merely economic ends, aiming to ensure in Brazil the establishment of a modern project that ultimately aimed at the industrialization of the country. The 1934 Forest Code should be understood, still according to

De Carvalho (1990), in view of the socioeconomic context of the time, when the crisis of Brazilian coffee agriculture, due to the 1929 Great Depression, caused

2 All translations (Portuguese to English) of this thesis have been made by the author

33 the government to abandon the idea of an essentially agricultural country and encourage industrialization, causing a growing dependence on wood as a source of energy, to guarantee production.

As mentioned by Bacha (2005), it was with this objective that the 1934

Code established, for the first time in Brazilian legislation, the legal reserve on rural properties, determining the obligation of preserving 25% of the property, aiming at ensuring the wood stock. Article 23 of the Forest Code (Decree

23,793,1934) determined that the rural landowners could use three quarters of their properties, that is, 75%: “No owner of land which is covered with forest can cut down more than three-fourths of existing vegetation, except what is disposed in articles 24, 31, and 52. (art. 23)”

According to the author, the legislator’s concern in maintaining a reserve to ensure a wood stock is revealed in three passages in the Code: (a) this area was called forest reserve, (b) the native forest could be changed into another planted forest (heterogeneous or homogeneous), and (c) the forest reserve did not have to be close or connected to other forest areas. In fact, the socioeconomic context shows that the forest reserve, one of the main instruments of native vegetation protection in the country, was created in the

1934 Forest Code with the intent of ensuring the timber stock for industrial production. Nevertheless, despite the developmental perspective, the 1934

Code definitively put the power over the forest, whether public or private, in the hands of state, strengthening the role of a regulating and centralizing government (DeCarvalho, 1990), and inaugurating a policy of limitations on the use and exploitation of forests in private property, called a forest reserve, which is now known as the legal reserve.

On the other hand, in spite of the normative advance of the 1934 Code, its rules were not implemented in practice. Alvarenga (1964) points out as the main cause for the low executability, the inertia and carelessness of the state and municipal governments in demanding the enforcement of the law and not creating a forest police force. Without police to oversee and without political will to execute, the devices in the Forest Code became empty words and were, in fact, totally ignored by the population and by the government (DeCarvalho,

1990).

The 1934, 1937, and 1946 Federal Constitutions did not bring anything new in terms of protection for forests, treating the same environmental topics in a fragmented and punctual way, limiting themselves to ensure to the Union and to the States, in a supplementary way, the competence to legislate on forests

(Viana, 2004)

The Consolidation of the Legal Reserve (RL) in the 1965 Forest Code

Given the difficulties to implement the 1934 Forest Code, the Union began to build a legal instrument aiming at properly disciplining the legal protection of the Brazilian forest heritage and implementing its controls. The so called “Daniel de Carvalho Project” sent to Congress by Presidential Message

0411950, on 11/21/1950, after much discussion and many changes, resulted in the draft bill 449/62 that became, at the time, the “new” Forest Code, sanctioned on 09/15/1965 by the issuing of Law 4771 (Ahrens, 2005). The new ruling brought great advances, increasing the environmental protection on

Brazilian territory.

The draft bill was accompanied by the explanatory statement 29/65, written by the Minister of Agriculture, Hugo Leme that began with the following justifications:

The draft bill that I have the honor to submit to Your Honor’s high regard constitutes another attempt that aims at finding an adequate solution to the problem of the Brazilian forests whose progressive aggravation requires the adoption of measures capable of preventing the devastation of our forest reserves that threaten to turn vast areas of the National Territory into veritable descriptions. (Law 4771, 1965)3

Thus, with a more protective bias, and with the objective of creating instruments for the implementation of the law, until then ignored by the population, the new legislation consolidated the legal reserve as an instrument of forest protection and not only an instrument to ensure the supply of wood

(Viana, 2004). The Forest Code (Law 4771, 1965), established new protection percentages for the RL, according to the region where the property was located and not the biome, as the legal reserve percentage is currently defined. In article 16, the law limited the RL to 20% of the total of the property in the

Southeast, South, and the southern part of the Central West regions, and to up to 50% in the North and the northern part of the Central West region, known as the Legal Amazon (art. 44). In fact, the definition of the limits of the Legal

Amazon was established in 1966 by Law 2173 published on October 27, 1966.

3 See: Portal of the Chamber of Deputies, available in: https://www2.camara.leg.br/legin/fed/lei/1960-1969/lei-4771-15-setembro-1965-369026- exposicaodemotivos-149358-pl.html

50% Legal Amazon

20% Other regions

Source: Law 4771, 1965 (Forest Code)

Figure 3-1. Map of RL required in Brazil in the forest code (1965).

According to Bacha (2005), the 1965 law is much more protective than the previous one, as the forest reserve has other aims besides maintaining the wood stock for industrial purposes. The author mentions that another important difference in the new norm is that it no longer allows the substitution of the native vegetation in these territorial spaces for planted forests, as did the 1934

Code. In fact, the new Code saw in the forest, new roles that go beyond the economic ones, based solely on the production of goods such as timber, and recognized the ecological function of forests as producers of services that are essential to the quality of life of the community, including leisure, preservation of fauna and flora, protection of springs and water resources, and maintenance of the soil (Ahrens, 2005).

Kengen (2001) reinforces the double goal of the 1965 Code: the protection, and the development, of the forest. According to the author, concerning protection, the Code brought great advancements such as the establishment of permanent preservation areas (APPs); the definition of legal 37 reserves in the properties; it created Preservation Units; it disciplined the use of fire; and it increased the inspection structure. Concerning forest development, the new Code: defined norms for the rational use of forests; created the concept of forest mandatory restitution; and established a fiscal and financial incentive for the areas covered by forests, among other measures.

We can, thus, state that the 1965 Forest Code was a significant advancement in the environmental legislation, despite the difficulty faced in implementing it. In fact, as occurred with the 1934 Forest Code, there was a considerable discrepancy between the legal precept and its enforcement.

According to Santos (2005), the development model adopted by the Brazilian government in the 1970s was based on the exploitation of natural resources and the encouragement of a policy of expansion of agricultural frontiers and other native vegetation in the country for cultivation and pasture.

Although there are no historical records that show the government openly fostered non-compliance to the restrictions imposed by articles 16 and

44, which mention the mandatory nature of the legal reserve in rural properties in the whole country, it is evident that the policy of expansion of the agricultural frontier was absolutely contrary to the protectionist devices in the Forest Code, and their compliance could, therefore, compromise the Brazilian economic development (Viana, 2004; Kengen, 2001). In Benjamin’s (2000) view, the approval of the 1965 Forest Code with protectionist precepts was surprising, considering the context of a military Executive Power, accused of the most serious violations of basic human rights and under the watchful eyes of a

Congress dominated by representatives of a powerful rural oligarchy. He mentions that with no doubt, only the impossibility of the enforcement and

38 charge of the law (as, for example, the 1934 Forest Code), can explain the passing of a law with such contradictory and instruments.

Regardless, the 1965 Forest Code, despite the difficulty in implementation, was able to ensure legal protection to forests and other native vegetation. According to Veiga (2013), it was at this historical moment that the world began to awaken to the reality of environmental problems, culminating with the first World Conference on the Environment in Stockholm in 1972, where the scientific community was able to raise the awareness of several world leaders about the fact that environmental degradations were affecting the climate and the lives of people. The scientists produced a document titled “The

Limits to Growth”, that stated that industrial society was exceeding most ecological limits and that, if the tendencies in world population growth, industrialization, pollution, production of food, and the intensity in use of natural resources were maintained, the limits for the growth of the planet would be reached in up to 200 or 300 years (Mota, Gazoni, Reganham, Teixeira & Góes,

2008).

Hence, back in the 70s, with these global movements, a veritable awakening of an environmental conscience began and reverberated in several places in the world, including in Brazil. At this time, a series of laws and institutions began to be created in Brazil, such as Law 6938 (1981), that established the National Environment Policy, in which the flora became a good of common interest to all inhabitants in the country, due to its intrinsic value (the value of existence), and not only because of its immediate utility for the human species (the value of use) (Ahrens, 2005). According to the author, establishing

39 the National Environmental Policy reinforced the value of the forest as a source that produced ecosystem services and not merely timber goods.

On the other hand, in a reaction to environmental movements and also to social movements in the countryside, which were fighting for land reform, notably the Landless Movement [Movimento dos Sem-Terra (MST)], rural producers created the Ruralist Democratic Union (UDR) came to defend the interests of the ruralists against the MST, initially, and later, the environmental movements.

Thus, after the 1970s, with the worldwide ecological awareness movement, which led to the creation of important non-constitutional forest protection laws, notably the Forest Code (1965) and the National Environmental

Policy (1981), there was another side, the ruralist reaction with the creation of

UDR in defense of the interests of the rural producers.

The 1988 Federal Constitution

It was, however, only with the 1988 Constitution that the environment and, consequently, the forests, received ample constitutional protection. The environmental issue was no longer treated in a fragmented and isolated manner. It was elevated to a constitutional right of the citizens, establishing their right to a healthy environment as an individual fundamental right.

The environment received a whole chapter in the Federal Constitution, prompting DaSilva (2004) to call it the “Green Constitution,” as he considers the chapter on the environment one of the most important and advanced in the document. Grau (2004) also reinforced that the Constitution, as it was written, gave vigorous answers to the tendencies that proposed the predatory exploitation of natural resources.

According to Benjamin (2005), the constituent was very careful with the implementation of constitutional devices, aiming at avoiding that this higher law, similarly to what happened to the devices in the previous Forest Codes, would take on a rhetorical character - beautiful at a distance but irrelevant in practice.

Therefore, the emphasis in the implementation instruments is one of the most laudable aspects in the 1988 Constitution.

In fact, the constitutional devices brought several instruments to ensure the enactment of constitutional protection of the environment, such as, for example, the requirement to study the environmental impact, the activity of significant impact, the creation of protected territorial space inside the states, the objective accountability of offenders for the damage caused to the environment (principle of polluter-payer), and judicial protection, through public civil action and popular action (Benjamin, 2005).

But that is not all. The 1988 Charter represents a mark in the Brazilian environmental legislation for, beyond being responsible for elevating the environment to the category of state-owned assets by the constitutional legal system, it systematized the environmental matter and established the right to a healthy environment as the individual’s fundamental right.

The 1988 Federal Constitution declared that

Everyone has the fundamental right to an ecologically balanced environment, an asset of common use by the people and essential to a healthy life quality, being the obligation of the Public Power and the collectivity its defense and preservation for the present and future generations (art.225).

According to Varella & Leuzinger (2008), the fundamental right to a balanced environment is a diffuse right, of the third generation, that stems directly from the right to life in its meaning of life quality. Different from the

41 fundamental individual and social rights, one of its main characteristics trans- individuality, applying to all humans. In this way, when intending to defend the healthy environment, it is not possible to do it only for one or for a few people, but similar actions will be to the advantage of all, without distinction. The environment, according to the Federal Constitution is, therefore, a diffuse collective, and intergenerational right, which imposes to the present generation the obligation to preserve it for future ones.

From the 1965 Forest Code to the 2012 Forest Code: Consolidations and Changes in Brazilian Forest Policies

In spite of the great importance given to the environment by the Federal

Constitution, Brazilian forest policies still held to their origin in the Forest Codes, notably the 1965 Code, which established the backbone of what is today the forest policy. Although the 1965 Forest Code suffered several changes and, more recently, the approval of the 2012 New Forest Code, that will be the object of special consideration further on, that norm consolidated the main instruments of forest protection and preservation of the ecosystem services in private rural properties: permanent preservation area [área de preservação permamente

(APP)] and the legal reserve (RL), the latter directly related to the object of this study. Both protected areas constitute the main means of promoting the protection of nature on private properties (Ranieri, 2004).

The APPs are those areas that, because of their environmental functions, cannot be deforested (Milaré, 2015). Such areas are directly connected to environmental functions through the provision of fundamental goods and services for the whole population. Initially, the 1965 Code treated these areas as permanent preservation forests. This denomination generated some doubts, as only forest vegetation was considered area of permanent

42 preservation. This caused the norm not to be put into practice in places where there was no vegetation (Borges, DeRezende, Pereira, Júnior & De Barros,

2011).

This led to the substitution of the previous term and the consolidation of the expression Permanent Preservation Area (APP) in the current legal texts, introduced through one of the several changes made to the 1965 Forest Code through the Provisional Measure [Medida Provisoria (MP)] 2166-67, published on 08/24/2001. At present, the new Brazilian Forest Code (Law 12651, 2012) has endorsed the previous ecological functions, making it clear that protection is given focusing on the area delimited by law, such as marginal strips along watercourses, hilltops, sandbanks and mangroves, areas around springs, among others, independent of the quality of vegetal cover that is eventually present at the protected space (Milaré, 2015).

Besides the APPs, private properties also must protect the RL areas, an instrument that was definitely consolidated in the 1965 Code. However, in spite of the legislative advance that came with the approval of the forest legal reserve, the 1965 Code was not able to implement this instrument, and the legal devices that impose the obligation to preserve the RL were never obeyed by the rural landowners. Oliveira and Bacha (2003), for example, analyzed the effectiveness of the legal reserve in Brazil and found that, from the 70s up to the beginning of the 2000s, less than 10% of the rural properties had endorsed in their property titles their legal reserves and, among those who had complied, a good number did not maintain the minimum defined by the Forest Code.

The lack of implementation of the law brought about a series of legal changes that followed up to the approval of the new Forest Code, in 2012.

Among these changes, one that deserves notice is the Law 7803, published in

1989, that made the registration of the legal reserve in the property title, prohibiting any change in its designation in case of transfer of ownership. The law brought a character of immutability to the designation of the legal reserve, even in the case of transmission, creating an infinite chain (Machado, 2005).

By defining the location of the RLs inside the rural properties, the law made supervision easier and helped in the necessary stability for adequate environmental control (Bacha, 2005). But, according to the author, the annotation of the legal reserve was not sufficient to ensure the enforcement of the law.

The Law 8171, published in 1991, (Law of Agricultural Policy) determined the term of 30 years for the rural landowners to restore any legal reserve deficit there might be on their lands. This was the first time that the recovery of legal reserves was foreseen in Brazilian legislation. In fact, the obligation to recover the deficits of the legal reserve that at present is settled in the Brazilian law and doctrine was, in the early 80s, considered controversial. It is true that the Forest

Code (1965) only predicts the obligation to preserve, but does not mention any means of reparation in case of default. The changes in the Forest Code that followed in the several Provisions Measures (MP), edited and re-edited between

1996 and 2001, contemplated measures to restore the deficits in the legal reserve which we will mention with more detail next.

MP 1511, 1996 - Environmentalist Pressure and Government Response Against Deforestation in the Amazon

The Provisional Measures that brought changes to the Forest Code

(1965) initiated with the MP 1511 published on July 25, 1996. The main change it brought was the increase of the percentage of the legal reserve from 50% to

80% in the forest region of the Legal Amazon. It also prohibited new

deforestation on properties that already had deforested areas that were

abandoned or underused. These measures were motivated by pressure from

environmentalists and the international community who were concerned and

alarmed by the increase in deforestation in the Amazon, whose rates in 1995

reached the highest rates ever recorded in Brazilian history (Siqueira &

Nogueira, 2004), as shown in Figure 3-2. Area per Ha Deforestation Rates in the Amazon 37500 30000 29059

22500 17770 18161 17383 17259 18226 13730 13786 14896 14896 13227 15000 11030 7500 0 Years

Figure 3-2. Deforestation rates in the Amazon. Source: INPE/PRODES4

In truth, the increase in deforestation was a reflection of Brazilian Public

Forest Policies, and the failure to implement the environmental protection and

conservation instruments foreseen in the 1965 Forest Code (Bacha, 2003).

Combined with this fragility, there was the policy of occupation of the Amazon

by the Brazilian military government that stimulated migration, intensification of

cattle breeding, and, also, the improvement of urban infrastructure (Nascimento,

2010). For example, to encourage occupation in the region of Rondônia in

1987, Federal Government created POLONOROESTE, the Integrated

Development Program for the Northwest of Brazil, by Federal Decree 86029,

4See: Instituto de Pesquisa Espaciais (INPE): http://terrabrasilis.dpi.inpe.br/app/dashboard/deforestation/biomes/legal_amazon/rates Retrieved on August 15, 2019

45 that foresaw the paving of the highway BR 364 between the cities of Cuiabá and Porto Velho. According to Santos (2001), the World Bank awarded, for the period 1980 to 1985, an amount of approximately U$ 1.1 billion, to the Program.

Thus, with international resources, the Roadway 364 was paved, contributing significantly, not only to the occupation, but also to the deforestation of the

Amazon.

In fact, at this time, the Brazilian government policy was basically developmentalist, focusing on the production, industrialization and occupation of the Amazon. The protection rules provided for in the Forest Code did not fit into this policy and were therefore ignored by both the population and the government itself. According to DeMello (2006), in the early 90s, two events definitively put Brazil on the international stage, giving the Amazon region visibility: The United Nations Conference on Environment and Development

(Eco-92), held in Rio de Janeiro in 1992, and the International Pilot Program to

Preserve the Brazilian Rainforest (PPG7), that raised US$ 1.5 billion in international resources for investment in public policies and environmental preservation.

However, despite the investments received to increase public policies, in the same period, deforestation reached record rates, jeopardizing Brazil's image abroad, which triggered a reaction from the international community and environmentalists, leading President Cardoso to draft a bill to curb deforestation

(Benjamin, 2000 and ISA, 2000). Fearing, however that the bill would not be approved in Congress, where the rural caucus members were strong and were already reacting against possible environmental actions, the Government, strategically, opted to legislate using the mechanism of the “Provisional

Measure”(MP), which was more agile and effective at that moment (Figueiredo and Limongi, 1999).

The publication of MP expressly provided for in the 1988 Federal

Constitution that allowed a period of 30 days for each one to be assessed by

Congress, under penalty of losing effectiveness:

In cases of relevance and urgency, the President of the Republic can adopt provisional measures, which will have the force of law, and must submit them immediately to National Congress, who, if in recess, will be summoned extraordinarily to meet within five days.

Single paragraph. The Provisional Measures will lose their effectiveness, from their publication date, if they are not converted into law within thirty days of their publication, and the National Congress will discipline any legal relations arising from it (art. 62).

This way, in an emergency, the President was constitutionally authorized to legislate, with the need only to submit the PM to Congress within 30 days

(the 2001 Constitutional Amendment 32 extended this period to 60 days), for conversion into statutory law. However, as will be seen, the environmental provisional measures were never reviewed by Congress, enabling the

President, at the time, to re-edit the MPs as many times as necessary.

Benjamin (2000) affirms that the change in the Forest Code by the use of

Provisional Measures had no environmental motivation. It was, in fact, political for it aimed at reducing international pressure due to the increase of deforestation, and avoiding that the image of Brazil be tarnished abroad. In fact,

MP 1511, 1996 significantly altered the percentage of legal reserves in the

Amazon, increasing it from 50% to 80%, with the argument found in the explanatory statement:

Taking into account that the affected region is considered one of the most complex and fragile biomes on the planet, recognized as an area of obvious forest extractivist and logging vocation, we cannot allow the continuation of exploitation of forest resources on 47

empirical and predatory grounds. Incidentally, the 1988 Constitution gave to the Amazon Forest the status of national heritage, highlighting the necessity of using its resources in national and sustainable ways.

The present proposal also aims at ensuring the best use of the natural areas which are already degraded, converting them for the alternative use of the soil. The measure has the objective of inducing the adequate use of areas that have already been deforested and reducing the increase of primitive forest areas being used for agriculture and cattle breeding (art.44)

This increase in protection, however, aroused the reaction of the ruralist group that began to move to change the MP with the National Congress, through influencing the various deputies and senators that make up the ruralist bench (Benjamin, 2000).

The Reaction of the Ruralists Group and the Flexibilization of MP 1511, 1996

Hence, a series of political negotiations began concerning the MP 1.511,

1996, polarizing once more environmentalists and developmentalists (especially ruralists). Nonetheless, Congress was not able to observe the constitutional deadline (30 days) to do their assessment of the MP, allowing the political discussion to be relocated from the Legislative to the Executive scenario, where the negotiations went “internally”, to an area further away from society

(Figueiredo and Limongi, 2003); the debates were concentrated at the Ministry of Agriculture and at the National Institute of Colonization and Agrarian Reform

[Instituto Nacional de Colonização e Reforma Agrária (INCRA)], under strong pressure from property owners who had great influence over these agencies.

Therefore, due to the political negotiations and the lack of appreciation of the MPs by Congress, in the following years, a series of MPs were issued and reissued (67 in total) by the President, with major or minor changes in relation to the original 1996 MP 1511. Most of these changes were led by ruralists, and

48 focused on making forest protection more flexible. In this context, it is important to mention some of these changes that directly affected the legal reserve device.

The first change in the legal reserve mechanism was due to pressure from the rural group, and allowed the reduction of RL percentages in certain regions if there was indication in the state's Ecological-Economic Zoning Law

(ZSEE), respecting the minimum of 50% of tree cover (MP 1511 -17, 1997).

Another ruralist victory came in 1998, with the issuance of MP 1736-31, which allowed the calculation of APP in the RL area, while reducing the percentage and RL in the savanna of the Legal Amazon from 50% to 20% of the rural property.

The Emergence of Environmental Compensation in the Brazilian Legal System

Among all the modifications introduced by the Provisional Measures, the most important, and the one on which this study is focused, was the introduction of environmental compensation as a method of recovering the degraded legal reserve. In fact, after the publication of MP1511, 1996 and the increase of required of legal reserve in the Legal Amazon from 50% to 80%, the ruralist group was increasingly mobilizing to seek the relaxation or repeal of the law.

One of the results they garnered was the creation of the mechanism of environmental compensation, introduced in the Forest Code via the MP 1605-

30, 1998:

Considering the legal reserve to be set up in areas that already are compromised by alternative use of soil, the owner can choose, when approved by the environmental federal agency, to make compensation giving other areas, provided they belong to the same ecosystems, are located in the same State, and have equal or higher ecological importance compared to the compensated area (art. 44, paragraph 4)

The creation of the legal reserve as an environmental compensation norm opened to the rural property owners in the Legal Amazon a new form of legal reserve, outside the property, as long as it obeyed the following criteria:

The deforested areas are compromised by alternative use of the soil

(agriculture or cattle breeding); the compensated area must be inside the same state, belong to the same ecosystem, and have equal or higher ecological importance as the compensated area (MP 1905-30, 1998)

For Benjamin (2000), environmental compensation produces a discontinuous legal reserve, considering that the compensated area can be located outside the degraded property. Also, the author states that the creation of this mechanism came about, not because of the pressure of land owners, but from the lobbying of a large company, Champion International Corporation, one of the biggest paper companies in the world that, at the time, had a great deficit of legal reserve on its land, close to 169,000 hectares in the state of Amapá.

According to the author, this company’s lobby was so efficient that a highly regarded law office in São Paulo was hired to write a draft of the article that ended up in the MP 1605-30, 1998. Although this lobby cannot be confirmed, it is certain that the change in this MP made the legal reserve instrument more flexible, allowing rural property owners to compensate their deficits with areas located outside their properties, making possible the continued use and exploitation of legal reserve areas with activities already consolidated on the property (Irigaray, 2007)

From Flexibility to Recrudescence of Forest Protection - MP 1956-50, 2000 Becomes Definite by MP 2166-67, 2001 (67th edition)

However, the creation of environmental compensation was not enough to contain the ruralist pressure that demanded measures from its representatives

50 in the National Congress. Thus, a Joint Congressional was formed, with the goal of discussing the matter (Senate, 1999), proposing amendments, and changing the Provisional Measure into law. The discussions by the Joint

Congressional produced the Bill 7, 1999, written by Congressman Moacir

Micheletto. It underwent ample debate among environmental organizations and productive sectors (Limongi, 2006).

During the debates, some jurists offered strong criticism to the changes proposed for the bill, notably considering the reduction of protection of the legal reserve and the increase in flexibility in the instruments of forest protection

(Benjamin, 2000 and Leuzinger, 2001). Given this opposition and the ample environmental mobilization concerning the debates, (ISA, 2000), a consensus was reached between the party leaders and government to send the discussion of the bill to the National Environmental Council - CONAMA [Conselho Nacional do Meio Ambiente], where a group of qualified technicians and proper social representatives could contribute to refine the text of the bill (ISA, 2000).

After three months, CONAMA presented the results to Congress. Their text was called “Contribuição para a elaboração de Projeto de Lei de

Conversão da Medida Provisória nº 1956/47, de 16 de março de 2000”5 6.

According to ISA (2000), instead of what was expected, CONAMA’s contribution was not taken into account by Congress, who bowed to the great pressure imposed by the ruralist caucus and ended up preparing and proposing another bill in Committee, which made forest protection more flexible in several ways,

5 In English: Contribution for the preparation of the bill to change the Provisional Measure 1956/47, published March 16, 2000

51 especially by reducing the required of legal reserve in rural properties in the

Amazon (from 80% to up to 20%). However, facing ample mobilization of environmental organizations, with public manifestations, and considerable repercussion in national media, parliamentary leadership decided to remove the bill that had been approved in the Committee from the Congress agenda, and the Brazilian Government ended up taking on CONAMA’s proposal, with the argument that the text had been amply discussed and represented the consensus of society. It was put into force by a new edition of the Provisional

Measure 1956-50, 2000, consolidating, in this way, a great defeat for the rural property owners (Araújo & Juras, 2000).

The new rule imposed by the MP 1969-50, 2000 ended up becoming definite, as, on August 24, 2001 the last MP 2166-67 (67th edition), although not having been converted into law by Congress due to the Constitutional

Amendment 32, 2001, ended up having legal effect, without having to be reassessed by Congress. The dictates of this MP remained in effect until 2012, when the new Brazilian Forest Code was published (Law 12651, 2012).

The main changes brought by MP 2166-67, 2001 that directly affected the legal reserve and compensation mechanisms were the following:

• Definition of legal reserve. For the first time, the legal reserve was defined in Brazilian legislation, clarifying its importance as an instrument of forest protection in Brazil. Also, the definition mentions the ecological value as reason for preservation and sustainable use of natural resources. A real defeat for developmentists, who saw in RL only one area to secure timber stock. Art. 3, III of the Forest Code (Law 4771, 1965) became effective with the following wording: III) - Legal Reserve: an area located inside a rural property or possession, excepting that area that is of permanent preservation, necessary for the sustainable use of natural resources, the preservation and rehabilitation of ecological processes, the preservation of biodiversity, and the shelter of native fauna and flora.

• Required of legal reserve, that began to take into consideration the criteria of location and biome: I) - 80% (eighty percent) in rural properties situated in a forest area in the legal Amazon region; II) - 35% (thirty five percent) in rural properties located in a savanna area in the legal Amazon region; III) - 20% (twenty percent) in rural properties located in forest areas or other forms of native vegetation located in other regions in the country; IV) - 20% (twenty percent) in rural properties in the general fields located in any region in the country.

• Use of the RL only under sustainable forest management regime, being deforestation prohibited.

• Possibility of instituting RL in condominium, that is, several property owners getting together to establish a single legal reserve.

• Anticipation of types of legal reserve deficit recovery: I) - Recover the owner’s legal reserve by planting, every three years, at least 1/10 of the total area necessary for the complementation, with natives species, and according to criteria established by the competent state environmental authority; II) - Manage the natural regeneration of the legal reserve; III) - Compensate the legal reserve with another area equivalent in ecological importance and extension, as long as it belongs to the same ecosystem and is in the same micro-basin.

• Models of legal reserve compensation: forest easement, forest reserve quotas, and exemption for 30 years by donating to public authority an area inside the Preservation Unit. The topic “legal reserve compensation” will be discussed with more detail ahead.

The changes introduced by the MP 1956-50, 2000, that became permanent through the MP 2166-67, 2001, no doubt represented a great advancement in the protection of the Amazon forest, surprising even the environmentalists that did not expect to see CONAMA’s contribution become law. On this point, we can say it was a considerable victory for the people in face of the economic interests of the landowners (ISA, 2000).

Actually, the percentages of legal reserves at the rates approved in 2000 are maintained until today, even with the approval of the new Forest Code (Law

12651, 2012), being one of the pillars of the Brazilian Forest policy. To better visualize this, we present the following map (Figure 3-3).

Figure 3-3. Map of legal reserve required in Brazil (MP 2166-67, 2001) Source: Pacheco et al. (2017, p.182).

For Cunha and Mello-Thery (2010), comparing the original text of the

1965 Forest Code with the changes imposed by the Provisional Measures

(mainly motivated by the intense deforestation of the Amazon in the 90s), it can be understood that there was an increase in the instruments of environmental protection (APP and RL). Therefore, the groups and actors involved in agribusiness suffered a defeat in the above arenas, albeit temporary.

The 2012 Forest Code - Native Vegetation Protection Law [Lei de Proteção a Vegetação Nativa (LPVN)]

After a broad historic retrospective, we finally arrive at the most recent

Brazilian Forest Code, Law 12651, 2012 which is, in truth a Native Vegetation

Protection Law (LPVN) but has been popularly called Forest Code. For

Brancalion et al. (2016), Law 12651, 2012 is not a code (a set of legal devices about a certain legal field, such as the Penal Code), neither is it restricted to forests. This law covers any and all native ecosystem on earth, including fields, caatingas, and savannas. It is the consolidation into one single law, of a policy of forest protection, whose dimensions were present even in the period of the

Empire of Brazil and have come a long way, full of dichotomies marked by conflicts between environmentalists and developmentalists. It is clear that the law has not stopped the conflicts, which are dynamic and part of an evolving society, but it was able to establish into one single norm, even with some environmental setbacks, a set of rules that regulate the use of soil and protection of forests.

In Figure 3-4 we will present a timeline of the main forest protection laws beginning in the 20th century.

Figure 3-4. Timeline of the main forest protection laws, beginning in the 20th Source: Brancalion et al. (2016, p. 03).

The Power Conflict in the Discussion of the 2012 Forest Code

The increase in required of the legal reserve, notably in the Legal

Amazon, consolidated in the 1965 Forest Code by the publication of the last edition of MP 2166-67 (67th edition), did not please the ruralist that had always mobilized against this change. On the other hand, the simple increase in the percentage of the RL was not capable, in itself, of containing the increase of deforestation, which, in the first years of the 2000s, reached alarming heights

(INPE)7, arriving in 2004, at a total of 27,772 Km2/year, the second highest deforestation rate ever registered.

DEFORESTATION AMAZON RATES - 2000 A 2008 (KM2) 27428 30000 25247 25000 21394 18226 18165 18846 20000 14109 15000 11532 10000

AREA AREA IN KM2 5000 0 1998 2000 2002 2004 2006 2008 YEARS

Figure 3-5. Deforestation Amazon rates- 2000 a 2008 (km2). Prepared by the author based in INPE/PRODES8

Facing the increase in deforestation, the Government decided to adopt harsher measures and, through Federal Decree 6514, 2008 (Contemplates the infractions and administrative sanctions to the environment, establishes the federal administrative proceeding to investigate these infractions, and sets forth other provisions), revoked the previous Decree (3179, 1999), increasing the value of fines for offenders who did not meet the requirements of the legal reserve (Santiago, Rezende, & Borges, 2017). Thus, a fine of R$ 5,000 per hectare or fraction was imposed for any case of preventing or hindering natural regeneration of native vegetation in an area of legal reserve (art. 48 of Decree

6514, 2008).

7 See: Instituto de Pesquisa Espaciais (INPE): http://terrabrasilis.dpi.inpe.br/app/dashboard/deforestation/biomes/legal_amazon/rates Retrieved on August 15, 2019

8 See: Instituto de Pesquisa Espaciais (INPE): http://terrabrasilis.dpi.inpe.br/app/dashboard/deforestation/biomes/legal_amazon/rates Retrieved on August 30, 2019

According to Brancalion et al. (2016), the publication of said Decree reignited the ire of the property owners who were already discontented since the passage of the law of environmental crimes (Law 9605, 1998), that allowed environmental control and defense agencies to increase inspections in the face of non-compliance with the 1965 Forest Code, creating civil, administrative, and penal sanctions, as well as to impose remedial measures on rural producers.

In fact the publication of this law in 1998 and, following that, the increase in the value of environmental fines introduced by Federal Decree 6514, 2008 were the catalysts for the property owner’s movement to gain strength, especially through the Brazilian National Federation of Agriculture and Cattle

Breeding [Confederação Nacional da Agricultura e Pecuária do Brasil (CNA)], that has a strong influence in Congress. A political movement was triggered for the creation of a law that would substitute the 1965 Forest Code, with environmentally lighter measures (Santiago et al., 2017). Brancalion et al.

(2016) show precisely the legal procedures of the Forest Code project in the

Congress, where it circulated for 13 years until it was finally approved and sanctioned by President Dilma Roussef, on May 25, 2012, through Law 12651.

Fearnside (2000) states that the rural caucus always worked tirelessly to flexibilize legislation. Weiss (2016) mentions that the approval of the Forest

Code is a good example of the strength of the developmental movement vis-a- vis Congress the Legislative Power, occupying the Environmental Committee and mobilizing a good number of the discussions rendering, in the end much flexibility in the protection of native vegetation in Brazil.

Loyola and Bini (2015) state that in the discussion of the Forest Code the participation of civil society and scientists who had relevant research in the area

57 was timid but, on the other hand, there was an increase in the action of agribusiness, especially after 2009. According to Silva, Nobre, Manzatto and

Joly (2011), although the Brazilian Academy of Science, The Brazilian Society for the Advancement of Science, and the Brazilian Association of Ecological

Science and Preservation sent suggestions and propositions to the Legislative and Executive Powers, the recommendations were not used in the final version of the Forest Code.

Amidst widespread discussions, the 2012 Forest Code was approved and passed in Congress. For Santiago et al. (2017), the new Code was written based on the consensus that the previous versions had little impact on the use of land, as was evident by the great deficits of native vegetation in areas that should have been protected, and also due to the low level of implementation of instruments such as the legal reserve (Oliveira and Bacha, 2003).

In fact, the new Forest Code, unlike the previous versions, arrived with the goal of ensuring economic development, under the assumption that the forest law generated obstacles to agricultural and cattle breeding production and harmed small farmers (Rebelo, 2010). Besides this, it sought to make legal the irregularities that came from not obeying the law (Sauer & França, 2012).

The Forest Code, therefore, focuses more on regulating than on preserving.

While the 1965 law and the following changes (laws, provisional measures) brought more restrictions to the use of forest resources, the 2012 legislation brought flexibility to environmental protection and created a new paradigm of adjustment of the rule to reality, and not reality to the rule (Roriz &

Fearnside, 2015). In fact, the new legislation focused on regulating environmental liabilities, with benefits and amnesties offered to those who, in

58 the past, did not comply with legislation, contributing to the “cunning culture,” and devaluing the property owners who respected the relevant legal demands

(Brancalion et al., 2016).

Although the 2012 Forest Code preserved the legal reserve percentage rates at the levels of the previous code, what could have seemed as a victory for the environmentalists, was lost in the considerable reduction in requirements for the recovering of permanent preservation areas APP and RL.

The 2012 Forest Code altered several aspects that directly impacted native vegetation protection, in particular related to the legal reserve:

• Rural properties with less than 4 fiscal units [módulo fiscal (MF)], (in average, in the Amazon, the size of the MF varies between 30 and 110 hectares, depending on the municipality), are relieved of the requirement to recover the deficits of legal reserve, which was previously mandatory (art. 67).

• The possibility of inclusion of a property’s regular and recuperating APPs as part of the balance of the owed RL, allowing the exchange of areas that should be recovered or compensated to reach the minimum percentage of RL, for areas with native vegetation on APP ( this was permitted by the 1965 CF only in special cases) (art. 15).

• The possibility of reducing the legal reserve to 50% in municipalities in the Amazon biome, where over 50% of its area or over 65% of the state area is under the regime of Preservation Units or Indigenous Lands (art. 12, §4º e §5º).

• The recovering of the legal reserve deforested before 07/22/2008 can be done in the biome or inside the property, using exotic species that have their economic future assured (art. 66).

• Amnesty to fines and sanctions due to illegal deforestation before July 22, 2008, date when the Federal Decree 6514, 2008 became effective (art. 59, paragraphs 4 and 5).

• The possibility of compensation of legal reserve deficits outside the state and in hydrographic micro-basins that may be different and sometimes distant from the deforested area, which would harm the conservation of the biodiversity and the generation of environmental services in regions that are already very degraded (art. 66, paragraph 6).

According to Soares-Filho et al. (2014), the changes in the Forest Code affected the protection of vegetation in Brazil. Just considering the devices in the amnesty in Law 12615 (2012), that reduced the obligation to restore native vegetation (APP and RL), resulted in a reduction of 58% the potential area to be recovered compared to the previous legislation. Approximately 41 million hectares were exempt from the obligation of restoring land, including 36.5 million RLs and 4.5 million APPs (Guidotti et al., 2017). This reduction came from amnesties, benefits and exemptions included in the law for regulating environmental liabilities.

These changes in the legal reserve instrument over the years undoubtedly show us the strength of pressure movements that directly influenced Brazilian forest policy. To some extent, there has been an alternation of forces that sometimes permits the relaxation of laws, with ruralist pressure, or other times the tightening of norms, with environmentalist pressure. Protection of the legal reserve has fluctuated throughout history, notably from the 1990s, with the emergence of the UDR, as a strong representative of the ruralist group, and with the structuring of environmental movements, whose actions had direct repercussions on Brazilian forest legislation.

Table 3-1. Political motivations for changes in legal reserve legislation. Year Legal Reserve Political Motivation

1934 25% all over Brazil Secure supply of wood

1965 50% Legal Amazon Biodiversity Protection 20% other regions

1996 80% Amazon Pressure from environmentalists and international biome; community on increasing deforestation in the 50% Savanna of Amazon the Amazon; 20% in other regions of the country

Table 3-1. Continued. Year Legal Reserve Political Motivation

2000 80% Amazon biome; Pressure from ruralists against 35% savanna the Amazon; the increase of RL percentage; 20% in other regions of the country Pressure from Changes in compensation rules (more environmentalists against stringent) creation of compensation

2012 Rural properties with less than 4 fiscal modules (MF) are exempt from recovering legal reserve deficits;

The possibility of including APPs in the Ruralist pressure to relax the calculation of RL; law Amnesty of fines and sanctions resulting from illegal deforestation carried out before July 22, 2008); Changes in environmental compensation criteria (less stringent)

Prepared by the author based in: Decree 23793 (1934); Law 4771 (1965); MP 1511 (1996); MP 1605-30 (1998); MP 1950 (2000); Law 12651(2012)

In spite of the various legislative changes, the 2012 Forest Code established the possibility of recovering the legal reserve liabilities, which can occur through three different modalities: restoration, natural regeneration and environmental compensation (art. 66, I, II and III). The first two modalities allow the recovery of the legal reserve in the rural property, while the compensation occurs outside the property in another area.

The environmental regularization of the legal reserve deficits, according to the new rules of the Forest Code (2012) must take place through two instruments: Rural Environmental Registry (CAR) and the Environmental

Regularization Program (PRA). Both instruments were created to allow the environmental regularization of rural properties, thus contributing to the

61 implementation of compensation, which is the last step of this regulatory process.

The Rural Environmental Register – CAR

The CAR, that had been created in 2009, by Presidential Decree 7029, to help in the environmental regulating process of rural properties and possessions, was definitively included in the new Code as the main regularization instrument. According to art. 29 of Law 12615, 2012, it is defined as a public electronic register, at a national level, mandatory for all rural properties, with the aim of integrating environmental information about rural properties and possessions, comprising a data base for environmental and economic control, monitoring, planning, and for fighting against deforestation.

The CAR is, therefore, an electronic register, declaratory and mandatory that integrates a data base of geo-referenced information of all rural properties in Brazil. With this register and with the use of technology, notably satellite images, it is possible to identify the rural properties that are at odds with environmental law. The data at CAR includes the location and demarcation lines of protected areas and areas of use in the property. Also, the registration with CAR exempts the owner from the annotation of the legal reserve at registration certificate, mandatory in the previous Codes (Santiago et al., 2016).

According to Azevedo (2009) the CAR aims at reaching three basic goals: give information about the compliance of the rural property with the rules of use of soil prescribed in the Code; monitor, via satellite images, the dynamic of forest cover of these properties; and hold property owners accountable for any environmental unlawful act they, by any chance, commit.

In fact, the CAR is an extraordinary instrument for environmental management and control of rules for use of soil, provided in the new Forest

Code, especially the compliance with the obligation to maintain and restore deficits of legal reserve on Brazilian rural land. The CAR is the first step in the regularization process of the environmental liabilities of rural properties.

The CAR is registered on a nationally based electronic system, and at a federal level, the Government created the National System of Rural

Environmental Register (SICAR)] that is used in most of the states around the country, with the exception of those that created their own systems, as is the case of Mato Grosso, that has recently put in place the Mato Grosso System of

Rural Environmental Register (State Complementary Law 592, 2017).

After the registry of CAR in the electronic system, the state environmental entities analyze the information given by the rural producer, for validation. The register has the potential of becoming Brazil’s main strategy for environmental monitoring and planning. However, the Federal Government, through the Ministry of the Environment [Ministério do Meio Ambiente (MMA)]

(Normative ruling 2,2014), when referring to cases of analysis and validation of information from CAR, did not establish a term for the state environmental entities to carry out these activities, which may hinder or delay the implementation of the Forest Code.

Having concluded the analysis and validated the CAR, in the case of the detection of any liability in native vegetation, the rural property owners can join the PRA (art. 59, Law 12651, 2012) to regulate the deficits and opt for one of the alternatives proposed in the law: regeneration, restoration, or environmental compensation for environmental deficits. And, at the end of the environmental

63 regularization process, the rural properties will be environmentally regularized and the state environmental entities will have a data bank containing the environmental information of the properties, such as consolidated areas, areas of restricted use, fragments of original native vegetation, areas of permanent preservation, legal reserve areas, water resources, forms of legal reserve compensation, among others. All this in a way that the information about the rural properties will be available from one single data base (Figure 3-6).

Figure 3-6. SICAR data base. Prepared by the author base in Law 12651 (2012)

Environmental Regularization Program – PRA

The second step in regularizing environmental liabilities is the PRA. After the validation of the information stored in CAR by the state environmental institution, the properties that have environmental liabilities must be regularized via an established process. State governments have a decisive role in this process, for the Code gives to the States the authority to regulate, install, and monitor the PRAs (art.59 of Law 12651, 2012 and art. 9 of Federal Decree

7830, 2012).

The PRA is a set of rules and actions planned to regulate the environmental liabilities of rural properties, i.e., the obligations of compliance to the legal rules related to the RL and APP (Valdiones & Bernasconi, 2019).

According to the Forest Code (2012), the rural producer that joins the PRA should be ready to maintain the remainder of natural vegetation, if existent, to adopt measures for restoring the APP and RL, and to propose the intended manner of regularization of the RL (regeneration, restoration, or compensation).

Joining the PRA benefits the rural producer who, by doing so, cannot be penalized for infractions committed prior to 07/22/2008, concerning irregular suppression of vegetation on APP, of an RL and of restricted use, and will have any previous infractions suspended (art. 59, paragraph 4 and 5 of the Forest

Code). Besides, when all obligations established in the term of commitment

(TC) are completed, any previous fines will be considered as converted into preservation, improvements and recovering services for the quality of environment, regularizing the use of consolidated rural areas, according to what is defined in the PRA.

Hence, both instruments of environmental management, CAR and PRA, are in fact, the main means of environmental regularization of rural properties and, also, mechanisms of control and protection of native vegetation. The great challenge, however, is in the implementation of these instruments.

Valdiones and Bernasconi (2019), show us that, after seven years of having approved the Forest Code, there are still many difficulties in implementing the PRAs in the states. According to their study, important steps have been taken, mainly in the enrollment of properties in the CAR, but a number of challenges must be overcome to guarantee the environmental

65 regularization of these properties in the country. The authors mention that only

18 states out of 26 have published guidelines regulating the Forest Code, and some of them do not present relevant and fundamental definitions for the implementations of the PRA, such as technical parameters to develop Projects for the Recovery of Degraded Areas [Projeto de Recuperação de Áreas

Degradadas (PRADAs)], that are options for the environmental adjustment of properties' liabilities generated before and after July 22, 2008, and as well as actions for monitoring the compliance to the TCs and PRADAs.

Valdiones and Bernasconi (2019) also identified the structural precariousness of many state environmental organizations that are unable to meet the regularization demands. They suggest that the institutional capacity of the state environmental agencies responsible for implementing the CAR and the PRA be increased through improvement in technology, human resources and infrastructure, suitable to the volume of existing registers, and the raising of extra funds to make these investments possible.

In fact, the implementation of the Forest Code, and notably the environmental regularization of rural properties has been a big challenge for both state and federal governments. One of the main difficulties, however, is the fact that the whole process and the compliance to forest rules depends on the individual initiative of rural property owners. The lack of information, capacity and financial resources can also delay the effective implementation of the code

(Chiavari & Lopes, 2015).

As we have shown, several difficulties are yet to be overcome in the processes of environmental regularization of rural properties, and this fact interferes directly in the implementation of environmental compensation in the

66 legal reserves, which is the final step of this process. We will now consider more specifically the norm for environmental compensation instrument of a legal reserve, and its changes over time. We will then focus specifically on its implementation in the state of Mato Grosso.

Legal Reserve Environmental Compensation: Forms, Criteria and Terms

We have mentioned in the historic description of Brazilian forest legislation, but it is worth repeating that the environmental compensation of the legal reserve was institutionalized in 1998, by MP 1605-30 that altered the 1965

Forest Code and made it possible for the rural producers in the Legal Amazon, who up to then would have to restore the legal reserve exclusively in the same land, to do this restoration outside the limits of the rural property. This could be done by meeting the following requirements: The RL, to be established, had to be in an area that already was affected by alternative uses of soil; and the area to be given to compensation belonging to the same ecosystem, was in the same state, and had the same or higher ecological importance as that of the compensated area (art. 44, paragraph 4).

Thus, the amendment brought in MP 1605-30 (1998) was the first ruralist victory in easing the rules of the legal reserve, allowing rural producers to compensate their deficits with areas located outside their rural properties.

As can be seen, the change introduced by the MP 1605-30, 1998, brought flexibility to the legal reserve topic, allowing rural producers to compensate their deficits with areas outside their properties. However, they were not satisfied with this change because the compensation was limited to only the properties inside the Legal Amazon. They wanted to see this

67 mechanism extended to the other states in the Federation, and this ended up happening (Cunha, 2013).

In May, 2000, President Cardoso signed the new Provisional Measure

1956-50, based on the text sent by CONAMA, that, in spite of making the Forest

Code more rigorous in relation to the original 1965 text, met some of the ruralists demands, such as the compensation for the legal reserve and the inclusion of the UCs in the estimate of the legal reserve (Ganen & Araujo,

2010).

In this new configuration, environmental compensation was extended to the whole nation, with some criteria differing from what was initially established.

Now, the area to be compensated had to be equivalent in ecological importance and extension, belong to the same ecosystem and be located in the same micro-basin. If it was not possible to compensate the legal reserve inside the same hydrographic micro-basin, the competent state environmental institution would have to apply the criterion of closest possibility between the areas, always in the same state (art. 44, III and paragraph 4). Also, a time limit was set for the compensation. Only the rural producers that had eliminated totally or in part an RL, without authorization, prior to December 14, 1998, when the MP

1736-31 (art.44C) came into effect, had the right to compensation.

Finally, three types of compensation were added, besides the giving up of another area, predicted initially: exoneration, forest easement, and the Forest

Reserve Quota [Cota de Reserva Florestal (CRF)].

The exoneration is the modality where the rural owner, for a period of 30 years, is free of obligations referring to the legal reserve, by donating to the competent environmental agency, an area located within Conservation Units

(UCs) in the public domain, such as a National or State Park, National Forest,

Extractive Reserve, Biological Reserve or Ecological Station still pending land regularization (art. 44, § 6). In Brazil, this situation is very common, since most of the Conservation Units were created by the government with private property within their limits, which imposes the need to promote the removal of these owners by paying compensation. This mode of legal reserve compensation is therefore an alternative provided by law to promote the regularization of the

UCs.

In forest easement, the landowner voluntarily renounced, permanently or temporarily, the rights of suppression or exploitation of native vegetation outside the RL and the APP, being able to use this area to compensate the legal reserve, as long as it was registered on the property title. During its validity, the change of designation of the area is prohibited in the case of transmission of title, or dismemberment, or rectification of the limits of the property (art. 44 A).

The Forest Reserve Quota - CRF is document of native vegetation area under the forest easement regime, of Private Reserve of the Natural Heritage

[Reserva Particular do Patrimônio Natural (RPPN)] or legal reserve, voluntarily established over vegetation that exceeds the percentages determined in art. 16 of this Code (art. 44 B). This area can be negotiated among the parties that have excess and deficit of RL.

Therefore, the new setting of environmental compensation brought very different types and criteria compared to the original form of this mechanism

(Table 3-2).

Table 3-2. Comparison of changes in environmental compensation (1998 and 2000). PM 1605-30/1998 PM 1956-50/2000

Place Legal Amazon All other regions

Modalities Give another area with excess Give another area with RL excess RL; Exoneration for 30 years; Forest easement; Forest Reserve Quota - CRF;

Criteria RL area committed with Same ecosystem and with alternative use of soil and: the possibility of flexibility for 1. In the same ecosystem; Basin; 2. In the same State; Same State; 3. Have more or equal Equivalent in ecological ecological importance as the importance and extension. compensated area. Period No restriction Deforested the RL before 12/14/1998

Source: MP 1605-30/1998 and MP 1956-50/2000 Thus, in spite of the environmental compensation having been extended to all regions in the country, revealing a victory for the rural property owners, most of the established criteria ended up restricting the compensation with requirements that were stricter than the original. We have listed some of the aspects that show this increase in severity:

• The compensated areas must be located in the same micro-basin and, only when impossible, and properly proved so, should occur in the same hydrographic basin, however, still in the same state;

• The areas must have the same extension;

• Compensation is only admitted for legal reserve deforested up to 12/14/1998.

Instituto Socioambiental - ISA (2000) shows that even the environmentalist movement was surprised with the level of requirements they had thought would be “negotiated” with the rural caucus in Congress. However, as the text ended up being published via Provisional Measure, without going

70 through any discussion with the representatives, the original text remained with its very restrictive requirements.

Irigaray (2007) states that the norm made the implementation of the legal reserve compensation difficult due to requirements that were very challenging to put into practice. For the author, the imposition of a date for the compensation

(deforestation that occurred up to 12/14/1998) was a very big limitation for its application. Besides, the author emphasizes that there was difficulty in finding an area for compensation in the same micro-basin. Fearnside (2000) considers that the compensation tends to make any inspection by society more difficult because, with the possibility of compensation of the RL outside the property, it is not possible to verify on the spot, the existence of the reserve.

In Nusdeo’s (2007) point of view, considering the economic perspective, the opportunity created by the mechanism of compensation of the RL can be an incentive to the environmental preservation of the remaining forests by the way in which it reduces the cost opportunity of preservation compared to other uses of these areas.

Finally, the environmental compensation of the legal reserve divides the opinions among those that see it as a means to flexibilize the obligation of maintaining the RL, and those that see it as an opportunity with the possible creation of a market for the preservation of the remaining forests.

Due to the difficulties in implementing environmental compensation

(Irigaray, 2007), and aiming at promoting this mechanism, Law 11428, 2006

(that provides for the use and protection of native vegetation in the Mata

Atlântica Biome, and provides other measures), once again altered the 1965

Forest Code and environmental compensation by eliminating the 30 year

71 period of exoneration, allowing the property owner to donate to the environmental organ, an area inside a public domain that was pending land regularization. This property owner would be free ad perpetum of his debt with the legal reserve (art. 44, paragraph 6).

If, on the one hand, this change sought to forward environmental compensation and stimulate the regularization of land inside UCs all over Brazil, on the other hand, there was an outcry from the Federal Public Ministry

[Ministério Público Federal (MPF)], through the Attorney General, Sandra

Cureau, that proposed the Direct Action of Unconstitutionality [Ação Direta de

Inconstitucionalidade (ADI)] 4367 against the exoneration. The understanding was, among other aspects, that, instead of the property owner restoring a degraded area (legal reserve), he would acquire an area inside a UC that is already protected by law. In this option of RL restoration, there is no environmental gain (Cureau, 2010). For the MPF, there was considerable reduction in protection of the legal reserve by allowing the exchange of a degraded area for a protected one.

However, ADI 4367 (unique number: 0000098-47.2010.1.00.000) 9 did not succeed in the Federal Supreme Court [Supremo Tribunal Federal (STF)], as the Minister Marco Aurélio Mello initially denied the injunction and later, on

04/09/2018, judged the action impaired, because the measure had been declared constitutional by the ADI 4901, published on 08/13/2019 (journal of justice, STF, 2019)10, recently proposed against the devices of the Forest Code.

9 See: Supremo Tribunal Federal (STF), 2019: http://portal.stf.jus.br/processos/detalhe.asp?incidente=3820982 Retrieved on August, 18, 2019

10 See: Supremo Tribunal Federal (STF), 2019: http://stf.jus.br/portal/diarioJustica/verDiarioProcesso.asp?numDj=175&dataPublicacaoDj=13/08 72

Thus, the modality was not considered unconstitutional, and recently, the new

Forest Code (2012) kept it in its rule.

The New Forest Code (Law 12651, 2012) and the Present Model of Legal Reserve Environmental Compensation

The most recent change in environmental compensation occurred in the new Forest Code (Law 12651, 2012). In order to render the forest protection rules more flexible, the rural caucus, as mentioned above, succeeded in gaining considerable victories with the new law. One of them refers to the new rules for legal reserve environmental compensation, establishing changes in time, criteria, and modalities.

Deadlines

Initially, the first change occurred in relation to the period when compensation is permitted. If previously compensation was only possible for those who had deforested the RL up to 12/14/1998, now, the new rule, allowed the use of this resource for whoever had deforested up to 07/22/2008 (art. 66 of the Forest Code), extending the benefit by almost 10 years.

According to Brancalion et al. (2016), these amnesties created a dangerous precedent for two reasons. First, they generated the expectation that future revisions of the law would happen and would benefit the landowners who did not follow the law rigorously. Second, by making possible greater economic gains to authors of environmental crimes, by permitting them to be exempt of having to legally respond for the damage they had done and to continue to profit from the cultivation areas that were irregularly occupied in the past, while farmers that had obeyed the previous law were not able to have these benefits.

/2019&incidente=4355097&codCapitulo=5&numMateria=109&codMateria=1 Retrieved on August, 18, 2019

In fact, a very dangerous precedent, that can encourage the commitment of environmental infractions.

Criteria

Besides the deadline, other modifications were made to the Forest Code

(2012) that cast doubt over the ecological benefits of compensation. One of these is about the criteria for compensation between areas. Previously, the area to be compensated had to be located in the same micro-basin, in the same ecosystem, and in the same state as the area that had the deficit. It also had to be equal in area and be ecologically equivalent. Now, the only legal requirement is to be located in the same biome and have the same territorial extension. There was, in fact, a mitigation in the requirement and an extension in the possibilities of RL compensation outside of the rural property, whose requirements are as follows (Forest Code, 2012, art. 66, paragraph 6):

• Deforestation occurred before 07/22/2008 • Compensated area located in the same biome • Compensated area with the same territorial extension

During the discussion phase of the Forest Code project, the Brazilian

Science Academy [Academia Brasileira de Ciência (ABC)] and the Brazilian

Society for the Advancement of Science [Sociedade Brasileira para o Progresso da Ciência (SBPC)] set up a study group [Grupo de Trabalho (GT)] to offer data and technical-scientific arguments aimed at subsidizing the discussions about the Forest Code. One of the conclusions this GT presented was that:

The RL compensation outside of the property should be restricted to areas in the same bio-geographic regions and be equivalent in phyto-physiognomy. In this way, it is impossible to imagine compensation inside a whole biome. These compensations should only be possible in more restricted geographical areas, possibly like those managed by the Basin Committees. In this case, the arrangement of the RLs would allow, not only to consider the best areas for biodiversity conservation, but also, those that would

bring more benefit to the protection of water and soil resources, or the restoration with native forest in areas inadequately made available to agriculture in the past, that are now marginalized due to their low suitability. (Silva et al., 2011, p. 49)

The GT concluded that:

Based on the available information, the most relevant recommendation is to advise that the RL compensation be done in the closest place possible to the area with deficit, considering the same micro-basin or even the closest micro-basin or basins, but they should be ecologically equivalent and not allow indistinctly the compensation in the biome, without any clearly defined mechanism, in order to ensure the ecological and even economic aspects of this compensation (p. 87).

Metzger (2010) says that the compensation only makes sense when done in places that are equivalent in terms of function, composition, and structure, and if it can be done in whatsoever region of the same biome, there could be extinction of species in some areas that have distinct environmental conditions and evolution histories. Also, each biome has its own ecology, and in each one, there are several species and different plant physiognomies. Thus, compensations that take into account only the biome, can generate exchanges among areas that are not totally equivalent in the ecological realm (Silva et al.,

2011). Fearnside (2000) says that, when compensations happen in distant places from each other, there are sensitive losses to biodiversity.

Scientifically, compensation outside of the micro-basin, or distant from the degraded area, which is possible to occur even in another state, has no technical support, being merely a political criterion that has in mind satisfying the rural caucus and reducing the costs of compensation, making it possible that RLs located in regions that are more valuable be compensated by areas economically much cheaper. Brancalion et al. (2016), argues that the high price of land in some regions in Brazil tends to move the compensation areas to other regions with the intention of reducing costs, favoring the economic criterion over 75 the environmental, bringing loss to the recovery of hydrographic basins that are important for the water supply of populations or of landscapes that are a priority in the genetic flow and movement of plants and animals, which has a direct impact on polarization of agricultural farming and on biological pest control.

The criterion adopted by the 2012 Code, therefore, is not ecological, but merely economic, based on the financial interests of rural producers in detriment of the environment. Nevertheless, in a recent trial of the ADI, on

August 13, 2019 the STF (2019)11 incorporated a new criterion to environmental compensations, recovering the discussions that happened during the elaboration of the Code, and enforcing the necessity that the compensated areas have “ecological identity”.

The incorporation of this new criterion was the suggestion of Minister

Marco Aurélio de Melo, and was accepted by the majority of STF Ministers. It conditioned the compensation to the existence of “ecological identity between the areas.” This requirement aimed at limiting the extension of compensation based exclusively on biome, and restricting the areas that have ecologic equivalence. It is worth transcribing part of Minister Marco Aurélio’s vote on ADI

4901:

The use of the biome identity criterion is not sufficient to ensure that the compensation between the areas is in harmony with environmental guardianship. The biome is a space with marked territorial extent, such that, inside this area, many different ecosystems coexist, with biodiversity that must be preserved. To underscore this view, it is only necessary to observe that, according to data provided by the Ministry of the Environment, in the biome savannah there are ecosystems that extend from

11 See: Supremo Tribunal Federal (STF), 2019: http://stf.jus.br/portal/diarioJustica/verDiarioProcesso.asp?numDj=175&dataPublicacaoDj=13/08 /2019&incidente=4355097&codCapitulo=5&numMateria=109&codMateria=1 Retrieved on August, 18, 2019

Paraná to the north of Maranhão. This is to say that, in spite of being located in the same biome, the flora and fauna found there are distinct. The compensation of areas located in different points of the national territory, although in the same biome, is inadequate for the guardianship of the environment, contrary to the constitutional command that refers to the preservation of the diversity and integrity of the Country's genetic heritage - item II, paragraph 1, art. 225, Federal Constitution. It is necessary to confer to the precepts an interpretation in accordance to the Federal Constitution, in order to condition the compensation of deforested legal reserve areas to the existence of ecological identity with the corresponding space located in the same biome (p. 09, DJE 08/13/2019).

Therefore, in order to correct the distortion in the law that foresaw compensation based only on the extension of the area (acre for acre), after the decision of the STF, besides the same extension, the compensated areas must have the “same ecological identity,” that is, they must correspond to the same ecosystems, ecological processes and functions, as well as biodiversity (Tomas et al., 2018).

In spite of the STF not having defined “ecological identity”, and some scientists’ understanding that “ecologic equivalence” would be a more adequate term, it is a fact that the jurist’s intention by establishing this new criterion was to guarantee the correspondence between the compensated areas (Tomas et al.,

2018), no doubt representing an environmental gain that can make compensation a mechanism that is fairer for the environment. Celso de Mello, in his vote during the decision of ADI 4901 pointed out that the compensation is only worthwhile if it benefits the whole community as the holder of an ecologically balanced environment (Conjur, 2018).

Modalities

Concerning the modalities of environmental compensation, Law 12651,

2012 did not bring great changes. Thus, for those properties that had deforested their reserves before 07/22/2008, the owner or rural possessor can 77 opt for one of the following compensation forms (art.66, paragraph 5 of the

Forest Code):

• Acquisition of Environmental Reserve Quota – [Cota de Reserva Ambiental – CRA];

• Leasing of the area under environmental easement or Legal Reserve;

• Donation to the Public Power, of area inside a Conservation Unit of public domain, pending land regularization;

• Registration of another area, equivalent and in excess of the Legal Reserve, on a property of the same ownership, or one acquired inside another property, with established native vegetation that is undergoing regeneration or restoration, provided it is in the same biome.

Leasing can be in the form of forest easement or legal reserve. In both cases, the owner resigns the right of use and exploitation of part of his property, besides his own RL, allocating this area for the compensation of someone else’s RL, through the sale or assignment, which can be definitive or for a certain period (art. 9-A , Law 6938, 1981). The contract is made between the parts and must be endorsed on the property register. It must also be registered on the CAR In this case, the producer that has possession of the easement is responsible for its up-keep (Bachin & Tistão, 2018).

The donation of an area located in a UC pending land regularization, was defined in the previous Code as an exemption. Now, the legislators opted for treating it simply as a modality of compensation, eliminating the term

“exemption,” but maintaining the same criteria. This modality, although having its constitutionality questioned by the MPF (Cureau, 2010) without success in the STF (ADI 4367 - unique number: 0000098-47.2010.1.00.000)12, represents,

12 See: Supremo Tribunal federal (STF), http://stf.jus.br/portal/diarioJustica/verDiarioProcesso.asp?numDj=69&dataPublicacaoDj=11/04/ 2018&incidente=3820982&codCapitulo=6&numMateria=45&codMateria=2 Retrieved on August 30, 2019

78 in fact, a great opportunity for land regularization in UCs in the Country, since, according to the Ministry of Environment [Ministerio do Meio Ambiente (MMA)],

17% of the Brazilian territory is under protection of UCs. Although it is not known for sure the how many of these UCs demand land regularization, it is certain that many of these protected areas still need to go through this process, and the state needs public resources to cover the indemnification of the occupants. Thus, this modality of environmental compensation can, at the same time, be a good opportunity for the regularization of land in these protected spaces, and a benefit for the producer with an RL deficit who, by making a donation, is exonerated ad perpetuam of the responsibility to maintain his legal reserve (Bachin & Tristão, 2018)

On the other hand, Irigaray (2007) alerts to the drawbacks in the implementation of this modality. Besides the difficulty the rural property owner will have to locate and acquire fractions of rural land in conservation units, in this way settling his environmental liability, this model would result in small portions of land inside a preservation unit that is not yet regularized, being sparsely donated to the government. This would bring additional administrative difficulties in terms of management, and would create the possibility of invasion and environmental damage in these areas. Also, the implementation of this form of compensation would require, from the environmental organs responsible for the regularization, an efficient system of registry, control, and monitoring of the areas. According to Silva and Sambuichi (2016), the precariousness and lack of structure in the environmental agencies can risk the implementation of this modality.

In terms of the registration of another area that is equivalent and surplus to the Legal Reserve, the only novelty in the law is the possibility of the compensated area which, besides having an established native plant cover, must have vegetation that is undergoing regeneration or restoration, enhancing the proportion of areas that can be used for compensation. Brancalion et al.

(2016) say that the legal reserves can be allocated in areas of low productivity and little economic return, making it possible to continue to use the land that lends itself to mechanization and that is occupied by agriculture.

However, the most promising modality for legal reserve compensation is the Environmental Reserve Quota (CRA) that substituted the Forest Reserve

Quota (CRF) that had very little success in its original version. Several studies

(Micol, Abad, & Bernasconi, 2013; Rajão & Soares-Filho, 2015; Bachin &

Tristão, 2018; Rajão, Soares-Filho & Santiago, 2015; Gasparinetti & Vilela,

2018) indicate that the CRA could create a genuine preservation market in

Brazil, stimulating the preservation of areas with surplus native vegetation.

However, several challenges must be overcome, especially by the government.

As Micol et al. (2013) mentioned, besides reducing the cost of environmental regularization of rural properties that have deforested beyond the permissible, the CRA could encourage the preservation of areas with natural vegetation in properties that maintained these areas in accordance or beyond the legal requirement, enhancing their economic value.

In fact, the CRA is a market instrument that allows the compensation between legal reserve assets and liabilities. It is a document representing a surplus of legal reserve area, of temporary or permanent nature. Each quota is equivalent to one acre. A property with a deficit of RL can acquire a quota on

80 another property, as long as it is situated in the same biome and has a surplus of RL (art. 44 and 66, paragraph 6 of Forest Code, 2012).

Different from the easement, the producer who buys the CRA is not responsible for its maintenance, but it must be register in the property title

(Bachin and Tristão, 2018).

How the CRA market works is a great challenge and depends on regulatory issues that are not totally defined. Seven years after publication of the Forest Code, in December, 2018, the Federal Government issued Federal

Decree 9640, 2018, regulating the CRA. However, there is no news of its implementation in any of the states in the Federation, as most of the states are yet in the beginning of the process of regularizing rural properties, and many have not even begun to analyze the CAR (Valdiones & Bernasconi, 2019).

Below, we present a comparative table of environmental compensation in the 1965, 1998 and 2012 Codes.

Table 3-3. Comparison of requirements of RL compensation in 1965, 1998 and 2012 Codes. MP 1605-30/1998 MP 1956-50/2000 Forest Code, 2012 Local Legal Amazon All regions of the All regions country

Modalities Give another area with Give another area Give another area excess RL with excess RL; with excess RL; Exoneration for 30 years Perpetual Forest easement; exoneration Forest Reserve Forest easement Quota - CRF; Environmental Reserve Quota – CRA;

Criteria Same ecosystem; Same ecosystem and Same biome; the same microbasin, with possibility of Same State; flexibility for basin; Equivalent in size Have an ecological Same State; importance equal to or Equivalent in greater than the ecological importance compensated area and size

Table 3-3. Continued. MP 1605-30/1998 MP 1956-50/2000 Forest Code, 2012 Period There is no restriction Deforested RL Deforested RL before before12/14/1998 07/22/2008 Prepared by the author base in MP 1605-30 (1998); MP1956 (2000); Law 12651 (2012)

The delay and difficulties to put into practice the PRAs in the Brazilian states interferes directly in the implementation of the compensation of the legal reserve. After all, the regularization of environmental liabilities of rural properties is the last phase in this process, occurring only after the analysis and validation of the CAR by the environmental institution.

However, Valdiones and Bernasconi (2019) show us that the Brazilian states do not have the infrastructure, the financial resources, or enough personnel to meet the demand of work generated by Law 12651, 2012, especially to process the CAR and the PRA. An example of this, according to the study, is that less than half of the states had begun the analysis of registrations (CAR), although since October, 2015, the Brazilian Forest Service

[Servico Florestal Brasileiro (SFB)] made available to state agencies a module of SICAR.

Given this, our study now focuses on the state of Mato Grosso, where initially, we will carry out a historical retrospective of the environmental compensation instrument, seeking to understand the challenges and difficulties to implement this mechanism in the state.

CHAPTER 4 ENVIRONMENTAL COMPENSATION SCENARIO IN MATO GROSSO

To understand the challenges for the implementation of environmental compensation in Mato Grosso, it is first necessary to make a brief historical retrospective of the state forest policy, with emphasis on the legal reserve instrument. The objective is to carry out a bibliographic and documentary analysis, especially of laws, norms and other public acts, which show how the State has implemented the instruments and programs for environmental regularization of rural properties and, notably the legal reserve compensation.

Besides the document research, semi-structured interviews were carried out with five state public servers at the state environmental institution. These interviews contributed with information about the historical view of environmental compensation as one of the modalities of environmental regularization of legal reserve liabilities in Mato Grosso.

Study Area: Mato Grosso

Mato Grosso (MT) is located in the central western region of Brazil and is the third Brazilian state in territorial extension, occupying an area of 903,206,997 Km2.

It has a population of 3.2 million, representing about 1.6% of the total inhabitants in

Brazil (IBGE, 2010).

The Human Development Index is 0.725, putting Mato Grosso in the 11th position among the 27 states in the Federation. The state is considered the greatest granary in the world and has agriculture and cattle breeding as the base of its economy. According to data from BRASIL and from the Ministry of Agriculture,

Livestock and Provision (MAPA, 2015), Mato Grosso is the country's biggest

83 producer of soybean, corn, cotton and beef, having, therefore, in agriculture and livestock the strength of its economy.

Mato Grosso, together with the states of Acre, Amazonas, Pará, Rondônia,

Tocantins, and part of Maranhão make up the Brazilian Legal Amazon, with an extension of 5,217,423 km2 equivalent to 61% of the national territory. Besides having 20% of the savanna biome, the region contains all of the Amazon (forest) biome, the most extensive of the Brazilian biomes, which corresponds to 1/3 of the rain forests on the planet (IBGE, 2010). The Amazon also is considered to be one of the last areas of agricultural frontier in the world. (Campari, 2005).

According to the IBGE (2010), about 20% of the original area of the

Brazilian Amazon forest has already been deforested. This forest represents 40% of the rain forests remaining on the planet (Andersen, Granger, Reis, Weinhold &

Wunder, 2002), and it shelters a diversified wildlife. It is pointed out as the area having the greatest diversity, the largest genetic bank, and 1/5 of potable water reserve in the world (IBGE, 2010).

Source: Instituto Brasileiro de Geografia e Estatística - IBGE, 2010 Figure 4-1. Map of Mato Grosso with its three main biomes: Amazon forest, savanna and the pantanal. 84

The Amazon biome covers 53% of the territory of Mato Grosso, while the savanna covers 40%, and the pantanal (wetlands), the largest fresh water plain in the world occupies only 7% (IBGE, 2010).

Therefore, according to these data, Mato Grosso has a great ecologic diversity, represented by three important biomes while, at the same time, as mentioned above, it stands out for being the biggest agricultural and livestock producer in Brazil (IBGE, 2010). According to information from Soares-Filho et al.

(2014), excepting the pantanal biome, the state has 53% of its total area covered with native vegetation (approximately 48 million ha in the Amazon and the

Savanna), 12.5% covered with pasture (19 million) ha, 9.4% covered with agriculture (8.6 million ha), and 2.5 million ha covered with secondary vegetation in the Amazon. The data also shows us that the territorial occupation of Mato Grosso is marked by the deforestation of large areas for agriculture and livestock in the main biomes: savanna and Amazon.

Table 4-1. Use of soil in savanna and Amazon biomes in Mato Grosso (millions of ha). Biome Agriculture Livestock Native TOTAL Vegetation

Amazon 2.8 11.2 26.4 40.4

Savanna 5.8 7.9 21.5 35.2

TOTAL 8.6 19.1 47.9 75.6 Source: Soares-Filho et al. (2014)

The climate, relief, and agricultural and cattle breeding vocation, combined with its size, drove Mato Grosso to deforest a considerable part of its legal reserves. According to a study done by Micol et al. (2013), there is a RL deficit of

85 close to 8.7 million hectares in the Amazon biome and 1.9 million hectares in the

Savanna biome, totaling about 10.6 million hectares of RL deficit in the state.

Soares-Filho et al. (2014), state that Mato Grosso is the Brazilian state with the largest legal reserve areas in extension to be recovered and a great deficit in legal reserve. As such, it potentially concentrates the biggest CRA buyers, which should be one of the most used alternatives for regularizing legal reserve liabilities

(Gasparinetti & Vilela, 2018). Having the biggest legal reserve areas to be compensated, Mato Grosso therefore is a strategic state to be studied.

The Evolution of the State Forest Policy With a Focus on Legal Reserve Compensation

The 1988 Federal Constitution, in its art. 24 establishes that the competence of legislating in forest matters is shared between the Union and the states. This means the Union legislates on general norms, and the states, in a supplemental manner.

As such, based on its competence, Mato Grosso issued the State

Complementary Law (LC) 38, 1995, known as the State Environmental Code. It became effective at a time when the environmental movement was rapidly growing in Brazil, notably after the Conference in Rio de Janeiro, ECO-92, where the world turned its eyes to the Amazon, alarmed at the high rate of deforestation (DeMello,

2006). At this time, Mato Grosso stood out as the champion in deforestation in the

Amazon.

Concerned with the negative international repercussion of the data on deforestation in the Amazon, Brazil became part of the Pilot Program for the

Protection of Brazilian Forests (PPG7), financed by the G-7 and the European

Union, and coordinated by the World Bank. The tendency in the Federal

Government at this moment was to decentralize forest management so the states could participate in the control over deforestation (Weiss, 2016 and Azevedo,

2009). In this context, the PPG7 contributed to the political moment in the publication of Mato Grosso’s State Environmental Code and the installation of the

Rural Property Environmental Licensing System [ Sistema de Licenciamento

Ambiental de Propriedades Rurais (SLAPR)].

The Rural Property Environmental Licensing System (SLAPR) and the Single Environmental License [Licença Ambiental Única (LAU)]: Regulating Devices for Environmental Liabilities

The State Environmental Code (LC 38, 1995) introduced devices that represented important advances in forest protection. One of these was the mandatory environmental license for agricultural and cattle breeding activities. Art.

19, IV establishes that:

The State Environmental Foundation (Fundação Estadual do Meio Ambiente - FEMA), in the exercise of its competencies, will dispatch the following mandatory licenses:

IV - Single Environmental License (LAU) - is issued in terms of the regulations, authorizing the location, implementation and operation of deforestation, forest exploitation, agricultural, and cattle breeding activities (art. 19, IV).

Mato Grosso was the first to require the environmental license for forest exploitation and agriculture and cattle breeding activities. However, the implementation of the LAU only occurred at the end of 1999, four years after the

Environmental Code became effective, when the state created the SLAPR (Lima,

Irigaray, Silva, Guimarães & Araújo, 2005).

The main goal of the SLAPR was to contain deforestation. In order to do this, according to Azevedo and Pasquis (2006), the system was based on the tripod: licensing, monitoring, and inspecting. The licensing of rural properties was done through the geo-referencing of their perimeters, with the demarcation of permanent preservation and legal reserve areas. Monitoring aimed at detecting the activities that had occurred on the property (especially in terms of deforestation and reforestation in degraded areas) after licensing. Inspection would occur after the identification of critical areas (illegal deforestation, degraded areas), to hold the offenders responsible.

In fact, the great innovation brought by the SLAPR at the time, was the geo- referencing of areas through satellite images. Up to that time, the state’s forest management was done by Brazilian Institute of Environment and Renewable

Natural Resources [Instituto Brasileiro do Meio Ambiente e Recursos Naturais

Renováveis (IBAMA)], the organ responsible for issuing authorization for deforestation (Lima et. al, 2005). The fact is that the authorization documents issued by IBAMA did not locate or individualize the RL or APP areas. The agency only required on the document a sketch of the area that would be deforested and dispatched, and the obligation the proprietor had to preserve and endorse the RL on the property registration, according to the example in Figure 4-2.

Source: Rural producer interviewed Figure 4-2. Model of a deforestation authorization dispatched by IBAMA.

Thus, from the technological point of view, the SLAPR was revolutionary.

Since it was established, FEMA, the State Environmental Foundation, through a

Technical Cooperation Term, signed with the Union on 01/25/2000 (that prevailed until 2004), took over forest management in the state and demanded that rural producers have the environmental license for their properties, including the deforestation authorizations. Through the Technical Cooperation Term, however,

FEMA was only capable of authorizing deforestation on areas over 300 hectares, while IBAMA remained responsible for properties smaller than 300 hectares

IBAMA, however, as mentioned, did not have geo-referencing and neither was there any integration system between the institutions, making the monitoring and inspecting of deforestation more difficult (Lima et al., 2005).

After the publication of the State Environmental Code, the environmental licensing of forest activities was regulated by the State Decree 1401(1997), that established:

FEMA will issue the Single Environmental License - LAU, authorizing the location, implementation, and operation of activities involving deforestation, burning, forest exploitation, agricultural and cattle breeding, forest management, and preservation units statewide (art. 3).

The license process for deforestation activity is conditioned to the endorsement of the legal reserve area on the property registration and to the harnessing plan for wood material (art. 4).

According to Azevedo and Pasquis (2006), two important aspects arise from this regulation: a) it is only possible to “open” new areas with environmental licensing (art. 3), and b) the license to deforest is conditioned to legal endorsement on the property register (art. 4).

And so, with the rules established in the decree described above, and with the SLAPR system, in 1999, SEMA began to issue the LAU for the rural properties, inaugurating a data bank with geo-referenced environmental information, such as property perimeter, RL and APP, so that it was possible to identify the environmental liabilities of rural properties that submitted to the licensing (Azevedo

& Pasquis,2006).

The First Rules About Legal Reserve Environmental Compensation in Mato Grosso

In this period, legal reserve environmental compensation had been created in the Brazilian Forest Code by the change proposed in the MP 1605-20, 1998, but there was no news yet of its implementation. On 09/27/2000, through Law 7330,

2000, Mato Grosso established the compensation system among altered legal reserve areas in areas of State Preservation Units, among other measures.

This norm highlighted the possibility of compensation through the donation of an area inside a State Preservation Unit, which, at the time, was called

“exoneration.” Concerning other modalities (forest easement, handing over another area, and forest reserve quota), the state legislation did not give any directive, implying that the norms established in the Forest Code (1965) should be followed.

We can mention three points in State Law 7330, 2000:

• The property owner is responsible for offering an area inside the Conservation Unit (art. 3);

• After the offer of the area, the state will technically evaluate the state of preservation and location of the area (art. 3);

• The State’s Attorney General (Procuradoria Geral do Estado - PGE) will legally analyze the documents that, if approved, will be registered at the competent real estate registry office. A procedural flow chart of compensation in a Conservation Unit is shown below (Figure 4-3).

UC compensation Technical analysis by LAU request proposal made by and documentary landowner analysis

Legal and Averbation in the RL regularization documentary property registration certificate analysis by PGE

Figure 4-3. Flow of the compensation process in a UC (State Law 7330, 2000). Source: author’s elaboration based on State Law 7330 (2000)

The stages in the flowchart show that the stages in the process can offer difficulties in implementing this type of compensation. Firstly, because Mato

Grosso has a serious land problem where the property titles are not always trustworthy, leaving farmers in a situation of insecurity about the acquisition of an area in a Conservation Unit (Irigaray, 2007). Secondly, because the institution itself

91 had difficulty in the technical analysis for, in the words of the three public servers who were interviewed, the state did not, and still does not have a data bank in the public domain showing the private properties that are registered in the UC. This despite the Federal Decree 2759 (2001) that regulated Law 7330 (2000) having expressly determined, in art. 8, that FEMA would make available to those interested, the names of the private owners of the areas inside in the UCs.

On December 20, 2002, Law 7330 (2000) was altered by Law 7868 (2002), that changed parts of the environmental licensing of rural properties, establishing that the owners who presented the degraded RL would have 120 (one hundred and twenty) days to hand in their Recovery Plan for Degraded Area and/or

Compensation Plan (art. 2). The Law also defined the Prata and Amazon hydrographic basins and the Savanna and Forest ecosystems as areas liable for legal reservation compensation.

However, in spite of the Government’s effort to regulate the legal reserve compensation, Lima et. al (2005) show that until 2004, no compensation between private properties had taken place at FEMA. There was only donation of land to the public authority for the creation or regularization of UCs, but no area was effectively incorporated into the state property. According to the authors, at this time, the environmental institution was giving priority to the granting of authorization for deforestation, to the detriment of the analysis of compensations, allowing for a significate reduction of remaining native vegetation.

In fact, the numbers show that the period between 2002 and 2004 was when the largest number of authorizations for deforestation were dispatched in

Mato Grosso. According to Azevedo and Saito (2013), the deforested areas in this 92 period were the largest ever registered in the first decade of the millennium, although many authorizations were also dispatched by FEMA during this period.

The authors show that only in 2004, Mato Grosso deforested 1,841,734 hectares, of which about 31% (575,201) had an authorization for cutting that had been dispatched by FEMA (legal deforestation).

In that context, the political scene for deforestation and use of soil for agriculture and cattle breeding was extremely favorable, as the governor of Mato

Grosso was Blairo Maggi, the greatest soybean producer in the world. Maggi remained as head of the state from 2003 to 2010 (IBGE, 2010). However, in spite of the record rates of deforestation between the years 2003 and 2005, two important events changed the government’s attitude after 2005: Operation

Curupira, and the “golden chainsaw prize,” given to Governor Blairo Maggi by

Greenpeace.

Operation Curupira and the “Golden chainsaw” Prize: Events That Changed Forest Policy in Mato Grosso

Operation Curupira was triggered on June 2, 2005 by the Federal Police and the Federal Prosecutor to fight deforestation and illegal extraction of wood in

Mato Grosso (Estadão, 2005). About 92 people were arrested, among them the

Director of IBAMA and the President of FEMA. The operation had great repercussion on the national and international scene and exposed the frailty of deforestation control in the state. As if Operation Curupira were not enough,

Governor Blairo Maggi, in June 2005, was “honored” by the NGO Greenpeace with the prize “golden chainsaw,” a symbol of deforestation, exposing the governor's personal figure as the greatest responsible for deforestation of the Amazon (UOL,

2005)1. These events resulted in a visible change in the behavior of the state government's actions against deforestation.

The environmental institution, until now a mere Foundation - FEMA - was changed into a State Secretary - SEMA (State Complementary Law 214, 2005), having nominated as its first Secretary, Marco Henrique Machado, a public prosecutor, representative of the Mato Grosso State Prosecution. This clearly signaled the integrity in which environmental policies would be conducted in the state at that moment. Also, with the new law, a new administrative structure was created, increasing technical and commissioned positions in SEMA.

Also in 2005, the state signed a Technical Cooperation Agreement with the

Federal Union - the Ministry of Environment, more specifically, IBAMA and SEMA aiming at managing together forest resources and the sustainable development of

Mato Grosso (Lima et. al, 2005). Through this agreement, besides authorizing, licensing, monitoring, controlling, and supervising the cutting down of native vegetation on rural properties in the state, whatever the size of the property, the agreement foresaw the transfer of responsibility of all forest management in the state to SEMA.

Hence, forest management became the responsibility of SEMA, with the support of IBAMA only in actions of supervision. The Cooperation Agreement also foresaw the exchange of information between SEMA and IBAMA; however, according to the Centro da Vida Institute - ICV (2007), this exchange was

1 See: Website UOL: https://noticias.uol.com.br/ultnot/2005/06/20/ult1928u1185.jhtmone

94 practically inexistent, considerably impairing the control and supervision of deforestation in Mato Grosso.

At the end of 2005, two important state laws were approved, State

Complementary Law (LC) 232 (2005), that made important changes in the

Environmental Code, and Complementary State Law 233 (2005), that created the

State Forest Policy. The LC 233 (2005) became the backbone of State Forest

Policy, regulating all activities related to the forest, such as clearcutting

(deforestation), forest management and exploitation, transportation and depository, repositioning, in short, a series of fundamental norms and measures that now dictated the rules of rural policies in the state, but will not be covered here as they are not the focus of our study. The LC 232 (2005), in turn, brought changes to the

State Environmental Code that directly impacted on the instrument of legal reserve environmental compensation. One of these changes was the creation of a new modality of legal reserve environmental compensation.

The Creation of a New Modality of Legal Reserve Environmental Compensation by LC 232, 2005: Illegality

According to Art. 62 - A, III of the LC 232 (2005), instead of the property owner donating an area in a Conservation Unit pending land regularization, he could opt for paying an amount that would correspond to the value of the area to be compensated, to the State Environmental Fund [Fundo Estadual do Meio

Ambiente (FEMAM)], as stated in the law:

Deposit on FEMAM’s account, the amount corresponding to the area to be compensated, these resources being intended for the land regularization of conservation units or to the creation of new protected areas (art. 62, III)

As can be seen, by this resource, the state of Mato Grosso created a new compensation modality, not foreseen in the federal legislation (Forest Code 1965), flagrantly violating the rules of constitutional competence that allow the states only to legislate in a supplementary form, but not to affront general norms dictated by the Union (art. 24, Federal Constitution, 1988). The LC 232 (2005) not only established a new compensation modality, it also extended this compensation option to those offenders who deforested their RLs up to 06/23/2005 (art. 8, paragraph 2), contrary to the Forest Code that established the deadline at

12/14/1998.

The new rule established by the state sought to meet a demand from the rural sector to facilitate compensation by paying cash. Farmers did not want to bear the burden of seeking and acquiring an area in a Conservation Unit, because they were unsure about the legitimacy of the titles and sought to settle their liabilities by paying the state cash. Therefore, the new rule was created due to pressure from the ruralists to facilitate environmental compensation.

However, given the apparent unconstitutionality of the norm, the State

Public Prosecutor proposed public civil actions against farmers that were taking advantage of this modality of compensation to regularize their legal reserves. The actions were upheld by the Judiciary Power, and SEMA, at the time, stopped adopting this compensation option (Tribunal de Justiça de Mato Grosso – TJMT,

2006, Coded 5946, 5942, 5941).

However, by way of the State Complementary Law 343, 2008, this modality became enforced again in art. 12, III, “b”, being the object of ADI 5051, proposed

96 by the Attorney General’s Office to the Federal Court of Justice, with Minister Celso de Mello as reporting judge. However, there has not yet been a trial, and this probably will not happen, as LC 343 (2008) was revoked in its entirety by LC 592,

May 26, 2017, turning the proposed ADI purposeless. It is worth reinforcing, nonetheless that, according to two civil servants interviewed, there is no knowledge of any occurrence of this modality having been used at SEMA to regularize legal reserves.

Legal MT - Complementary Law 343, 2008

In the early 2000s, with the creation of the SLAPR and the LAU, rural property liabilities in Mato Grosso began to be regulated through these devices.

The owners that had legal reserve and APP liabilities had to get the environmental license to regularize their rural properties.

However, the licensing process became excessively bureaucratic and time consuming. One of the main reasons for this, according to five interviewees, was the land regularization issue. In Mato Grosso, there were many properties with title problems, information lacking on registration, falsehood, land conflicts, in short, all order of problems that ended up making it more difficult to find the location and size of the property, and emit the LAU (Lima et al., 2005).

According to data from INCRA (2014), Mato Grosso has about 155 thousand rural properties, but, in a six year period, from 2002 to 2008, according to information from SEMA, only 6,865 LAUs were dispatched, as shown in Figure 4-4.

LAUs dispatched between 2002 and 2008

2182

1548

1439 LAUs

627 367 431 271 Years 2002 2003 2004 2005 2006 2007 2008

Figure 4-4. Quantity of LAUs dispatched between 2002 and 2008. Source: author’s elaboration based on SEMA-MT (2019)2

The low issuance of LAUs at the time was creating dissatisfaction and great pressure on the productive sector that was being required by banks that financed credit and even by companies in the commodities market, to present documents showing that their lands were environmentally regulated.

According to Azevedo et al. (2014), Presidential Decree 6321, December

2007, established the list of Municipalities in Critical Danger of Deforestation in the

Amazon biome, and vetoed the approval of credit at any federal agencies for agriculture or cattle breeding activities in municipalities on the list. The first list published by Ministry of Environment in 2008, included 19 municipalities in Mato

Grosso, covering a good portion of the northern region of the state. These

2 All quotes from SEMA (2019) refer to information extracted from personal correspondence: Marega A. S. A (2019). OFÍCIO Nº 027/2019/GSEMA/SEMA-MT, on August 12, 2019; Executive Assistant Secretary of SEMA

98 restrictions to bank credits made rural producers seek promptness in the environmental licensing process at SEMA. Later, the restriction to credit, that was limited only to the municipalities on the list, was extended to the whole state of

Mato Grosso inside the Legal Amazon, by the Resolution of the Central Bank

3545, 2008 that made it mandatory to present the document proving environmental regularity for acquisition of any bank credit.

Faced with the strong pressure from rural producers to obtain the environmental regularity document, and with a view to making the environmental regularization process faster, the State Government, meeting the ruralist aspirations, created the Integrated System for Monitoring and Environmental

Licensing [Sistema Integrado de Monitoramento e Licenciamento Ambiental

(SIMLAM)], and approved, in December 2008, LC 343 known as “MT LEGAL.”

With this new law, the process of licensing rural properties obeyed two distinct stages: The Rural Environmental Register (CAR), to regularize the permanent preservation areas; and LAU, to regularize the legal reserve areas (art. 3).

The CAR was added to the Complementary LC 343, 2008 in the legal order and in the forest policy of Mato Grosso as an instrument of control and monitoring

(art. 4). In spite of some conceptual differences, it was this CAR that gave form to what is today the Rural Environmental Register (CAR), introduced in the new

Forest Code, 2012.

Mato Grosso, therefore, has always been at the forefront in the issues of environmental regularization, such as that which was brought in 1999 with SLAPR, a revolutionary system of monitoring and control of deforestation, with the requirement of licensing for agricultural and cattle breeding activities (LAU), or yet 99 with the setting up of CAR as an instrument for environmental regularization of rural property. According to the LC 343, 2008, the CAR is a permanent register and has only a declaratory effect; however, it does not serve as proof of possession of property neither can it be used to authorize deforestation or forest exploitation, but it is a requirement for licensing of any activity inside the rural property (art. 6 and

7).

Besides introducing the CAR as a stage in the environmental licensing process, the LC 343, 2008 created the MT LEGAL, an Environmental

Regularization Program that introduced some benefits for the rural producers who joined the program in its first year. The benefits also are similar to those brought by the new Forest Code to the Environmental Regularization Program - PRA, and it provides for suspension of fines and reduction of up to 90% of the amount for infringement proceedings (art. 14).

In any case, according to one of the interviewees, the main goal of the LC

343, 2008 was to bring speed to the environmental regularization process, prioritizing the CAR and the restoration of APPs that were mandatory at the time, while delaying the regularization of the legal reserve liabilities for the second stage of the LAU. The issuance of the CAR already allowed rural producers to prove their environmental regularity with banks and the consumer market, and for them, that was enough. The regularization of the legal reserve, from the perspective of ruralists, could be done on a second moment, as reported by one of the interviewees.

The data show us that between 2009 and 2014, when the MT LEGAL was in existence, approximately 43,000 CARs were issued (SEMA, 2019). However, in 100 this same period, according to SEMA, only 2,203 LAUs were issued, that is to say, only 5% of the registered properties arrived at the end of the environmental regularization process, a fact that confirms the policy adopted by the state of giving priority to the CAR.

CAR: 2203: 5%

LAU: 43000: 95%

Source: author’s elaboration based on SEMA-MT (2019) Figure 4-5. Quantity of CAR and LAU issued from 2009 to 2014.

In short, if on the one hand, the MT LEGAL made it possible to increase the base of rural properties subscribed in CAR to approximately 43,000 registers, on the other hand, it did not contribute to conclude the environmental licensing processes and, consequently, it did not help with the regularization of the legal reserve liabilities. Through these numbers it is possible to conclude that the regularization of legal reserve deficits in Mato Grosso did not achieve satisfactory levels with the MT LEGAL Program. With the introduction of the new Forest Code, new procedures had to be introduced to suit the new legislation.

The 2012 Forest Code and Its Effects in the Procedures of Environmental Regularization in Mato Grosso

The new LAU model foreseen in LC 343, 2008 lasted until 2014 when the

Mato Grosso government, through a technical cooperation agreement with the

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Ministry of Environment, decided to join the National System of Rural

Environmental Registration - SICAR, publishing the Ordinance 441, September 23,

2014 that dealt with how this would be done.

According to information given by three public servers interviewed, both the

CAR, in the format set up by LC 343, 2008, and the SIMLAM did not meet the requirements in Law 12651, 2012 and would have to adjusted. They mentioned that, with Law 12651, 2012 new environmental information that was not in the CAR became mandatory for the registration of rural properties, such as information about “Consolidated Rural Area” (art. 3, IV) and “Restricted Use Area” (art. 10).

Also, the CAR would have to make adjustments in the system for the benefits foreseen in the legislation, for example, the “ladder APP,” that reduced the areas that should suffer restoration according to the size of the rural properties, and also the adjustments to suit the new concept of consolidated area and remnants of native vegetation, that brought benefits for the regularization of the legal reserve in rural properties, according to the date of deforestation

(07/22/2008), and the size of the properties (smaller than 4 fiscal module - MF).

Thus, the necessity for adjustment of the state CAR to the new federal rules led the government to join the SICAR, a national system that was built by the

Ministry of Environment through the Brazilian Forest Service (SBF). It was made available to all states in the federation art. 29 of Law 12651 establishes that:

The Rural Environmental Registry - CAR is created under the National System of Information on the Environment (SINIMA), a public electronic registry at a national level, mandatory for all rural properties, with the goal of integrating the environmental information on rural properties and possessions, comprising the data base for environmental and economic control, monitoring, and planning, as well as for fighting against deforestation (art. 29). 102

As a result of MT joining SICAR, there occurred a significant increase of

CAR in the data base. According to information from SEMA, in 5 years of using MT

LEGAL, 43 thousand rural properties were registered in the system. However, after one year of the SICAR implementation in Mato Grosso, the data base already showed double the number of rural properties, going beyond 86 thousand and, according to the Brazilian Forest Service Bulletin, on October 31, 2016, the number was 110,530 properties (information of SEMA, 2019). These numbers show how the SICAR was friendlier in relation to the SIMLAM, making it significantly easier to register rural properties in the state of Mato Grosso.

On February 5, 2016, the state government, with Decree 420, regulated the

Rural Environmental Register - CAR, and created the Environmental

Regularization Program - CAR in the state of Mato Grosso. This decree established the procedures and rules for enrollment, analysis and validation of

CAR, and the joining of the rural producers in the PRA. Also, the decree established the SICAR as the technological system for the data bank operations of the CAR and PRA (art. 4).

Concerning compensation for the legal reserve, two aspects come up in this decree:

• The possibility of compensation of legal reserve deficits of the savanna biome in the Pantanal (wetlands) of Mato Grosso (art. 46, single paragraph). The norm presents a plausible justification: that there is a predominance of the phyto-physiognomy savanna in the Pantanal plain, and there is a necessity for the regularization and enlargement of these protected areas in this region.

• The limitation of the compensation of legal reserve deficits in another state in the Federation, when there are no more available areas for compensation in Mato Grosso, if properly attested by SEMA and after technical justification presented by the interested party and approved by the Environmental State 103

Council [Conselho Estadual de Meio Ambiente (CONSEMA)] (art. 47). In fact, the device sought to guarantee that the legal reserve compensation initially be made inside the state and closer to the degraded place. Also, the norm enables the valuation of the forest asset of the producers that have a surplus of legal reserve and can use compensation through easement or emission of CRA to obtain economic gain for the conservation of these areas, avoiding new deforestation.

In spite of this device visibly representing an environmental advantage for

Mato Grosso, that could regularize the legal reserve deficits with forest assets inside the state, and eventually avoid the cutting of new areas, state decree 420,

2010 was completely revoked by LC 592 (2017) and by State Decrees 1031, 2017 and 1491, 2018, that did not establish the same rule that was in art. 47 of the revoked decree, maintaining only the requirement of the same biome and extension (art. 33 of Decree 1491, 2018).

The LC 592, 2017 brought several changes in the procedures carried out by the CAR and PRA, and establishing the SIMCAR, Mato Grosso System of Rural

Environmental Register, as the new technological management platform for CAR and PRA. The changes are linked, according to four interviewees, to the operational difficulties of the SICAR, the federal system. Also notable was the change in political stance in the state government with the appointment of the vice governor, Carlos Henrique Baqueta Fávaro, former president of the Soybean

Producers' Association [Associacao dos Produtores de Soja de Mato Grosso

(APROSOJA)], and linked to the ruralist sector, to the office of State Secretary of the Environment.

The fact is that, after the enactment of LC 592, 2017 and Federal Decree

1031, 2017, in less than 2 years another 8 decrees have been published (Decrees

1182, 2017; 1,317, 2017; 1,340, 2018; 1,491, 2018; 1,593, 2018; 1,647, 2018; 03,

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2019; and 245, 2019) partly changing some provisions of Decree 1031, 2017. This shows an institutional instability and brings considerable legal uncertainty, not only for rural producers, who are directly interested in the application of the norms, but for the public servants who must adapt to the constant changes in procedural rules.

Among the several and successive changes made to the Decree 1031,

2017, it is worth mentioning Decree 1491, 2018, that regulated the forms of environmental regularization of rural properties in Mato Grosso. This norm brought a series of procedures to be applied to the PRA, explaining in detail the regularization of properties and, especially, environmental compensation. There was no change in any federal rule established in the Forest Code (2012), only on details related to deadlines, documentation, subpoenas, fulfillment, among others, that will be focused on in the following sections, where we specifically look at the difficulties and challenges in the implementation of compensation.

It is certain, however, that with the changes in the technological systems, many registers had to be rectified by rural producers in order to adjust to the new requirements. At present, SEMA’s data base has approximately 70 thousand CARs

(06/07/2019), a much lower number than the 113,500 registered in the SICAR, before the migration of the system.

Table 4-2. Comparison between the number of CAR in SICAR and SIMCAR. Situation Quantity

CAR registered in SICAR 113,500

CAR rectified in SIMCAR 70,637

Source: SEMA-MT (2019)

Having done this brief historical retrospective of environmental compensation in Mato Grosso, we can see that several legislative changes were

105 made in Mato Grosso to the instrument of environmental compensation, the vast majority of them influenced by the ruralist sector that exercises a great political power under the state government.

In a very summarized way and focusing only on the environmental compensation of the legal reserve, we can say that in just over 20 years of existence, environmental compensation has already been the subject of four amendments to federal law and ten to state law.3 The constant changes, without taking into account the political motivation that drives them, bring a scenario of insecurity and uncertainties to the recipients of the standard (rural producers) and to the operators of processes and systems (public civil servants). Given this environment of insecurities and uncertainties, since 1995, with the enactment of the State Environmental Code and the creation of the LAU, Mato Grosso has tried to promote the regularization of the legal reserve liabilities of rural properties, but as it will be seen later, it did not succeed.

Within this process of environmental regularization, environmental compensation is the final stage, where rural producers with a legal reserve deficit who have the right to this benefit, opt for any of the compensation modalities provided for in art.66, §5th of the Forest Code and promote the regularization of their rural properties.

3 Federal Legislation: MP 1605-30 (1998);MP 1956-50 (2000); Law 11428 (2006);Law 12.651(2012); State Legislation: LC 38 (1995); Law 7330 (2000); Dec 2759 (2001); Law 7868 (2002); LC 232 (2005); LC 343 (2008); Dec. 420 (2016); LC 592 (2017); Dec.1031(2017); Dec.1491(2018); .

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Is Environmental Compensation a Reality in Mato Grosso?

At this stage, the present study now intends to answer the second question of this research: To what extent has environmental compensation been adopted in the state of Mato Grosso as a way to recover the legal reserve deficits of the rural properties?

The research used a mix of qualitative and quantitative methods. Initially, the qualitative method was used, through interviews with five of the approximately

478 SEMA public servants, who work or worked in the environmental regularization sector of rural properties, and who contributed with complementary information on the implementation of environmental compensation in Mato Grosso. Public servants were selected, from among the most senior, who hold or held positions of direction and leadership and who have worked for more than 10 years in the environmental agency, and therefore have extensive experience and technical knowledge about the processes of environmental regularization of rural properties.

The public servants were contacted by phone or email and all offered to grant the interview which lasted approximately one hour. The interview was conducted under a semi-structured mode, with pre-established questions, but all respondents ended up complementing the questions. The topics of the questions were: identification of the civil service, place and time of work; identification of the difficulties and barriers to the implementation of environmental regularization; and identification of the difficulties and barriers to environmental compensation.

The second method used was quantitative, by collecting data extracted from

SIMCAR, SICAR and INCRA and information provided by SEMA-MT, which has identified the amount of the rural properties environmentally regularized and

107 among them, those who opted for environmental compensation for the regularization of the legal reserve liabilities.

In order to compare different procedures for environmental regularization of rural properties, the data were analyzed in two distinct phases, before and after the new rules established by the Forest Code (2012). The distinction is important because before the Forest Code, the regularization of rural properties was made through the SLAPR system and by the single environmental licensing process -

LAU. After the Forest Code, the regularization was made through SICAR and later on by the SIMCAR, through the instruments CAR and PRA. Although the Forest

Code was enacted in 2012, the environmental regularization of rural properties was only made in accordance with the new rules in 2015.

Environmental Regularization before the 2012 Forest Code

According to INCRA data, Mato Grosso has about 155,040 rural properties and a registered area of 86,376,088 hectares (INCRA, 2019). According to information provided by SEMA (2019) show that between 2000 and 2015, the last year of issuance of LAU, which was later replaced by CAR, properties received a total of 9,275 LAUs.

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LAUs Issued 10000 9275 9000 8000 7000 6000 5000

LAUs 4000 3000 2.182 2000 1.442 1.561 432 492 1000 26 76 302 376 285 390 344 320 333 324 105 0

Years

Source: author’s elaboration based on SEMA-MT (2019) Figure 4-6. Number of LAUs issued from 2000 to 2015.

Comparing the number of properties in the state of Mato Grosso (155,040) and the number of LAUs issued in the period 2000-2015 (9,275), we see that they account for only 5.9% of total regularized rural properties. Considering that in this

15-year period, an average of 618 LAUs were issued per year, at this rate, to regularize the state's 155,040 properties would require approximately 250 years.

Table 4-3. Number of regularized rural properties and rate period of regularization (2000 to 2015). MT Rural Properties 155,040 Regularized Rural Properties (LAU) 9,275 (5.9%) Average emission of LAUs per year 618 Average time required to regularize 250 all rural properties in MT (years) Source: author’s elaboration based on SEMA (2019); INCRA (2019)

LAU and SLAPR, instruments used for environmental regularization, were considered innovative and revolutionary at the time of their creation and implementation, in the late 90's and early 2000's (Lima et al., 2005), but the numbers reveal to us that only 5.9% of rural properties were able to be regularized

109 through these instruments. Even considering this low percentage of regularization, we tried to find out, among the regularized properties, those that used environmental compensation to recompose the legal reserve liabilities, in this same period (2000 to 2015). Although SEMA did not explicitly state the number of offsets made, ISA (2005) shows that, until 2004, no legal reserve offsets had been made in MT. Recently, in an attempt to search the public SIMLAM, which is a platform that allows access to the SEMA database, no compensation could be identified either.

The difficulty in obtaining the information was clarified by one of the interviewed civil servants, who stated that due to the fact that the processes were based on records, the information was not available in the system and therefore, the search had to be done manually, which would require a lot of time and staff.

However, according to the interviewees, a very small numbers of environmental compensations were issued in Mato Grosso. The most optimistic estimate from one of the interviewed public servants suggested that the amount of compensation made in the period prior to the CF does not exceed fifty. For another interviewed civil servant, there were no more than twenty compensations made in the period. Two civil servants reported that for the area donation modality within the

Conservation Units of the Integral Protection, only two compensations were completed in Mato Grosso over the 15 years period.

Whether the number of legal reserve compensations made in Mato Grosso was fifty or twenty, the amount is practically insignificant, considering the total number of rural properties (155,040) and the number of properties regularized in the period (9,275). Thus, just making a comparison between the amount of 110 compensation and properties (total and regularized), according to the information of the civil servants interviewed, and using the most optimistic perspective of fifty compensations made, we have the following numbers:

Table 4-4. Comparison of the properties that made the environmental compensation- 2000 to 2015. Properties Compensations % Regularized (LAU) 155,040 50 0.03% Total 9,275 50 0.5% Source: SEMA-MT (2019) and public servants interviewed.

Environmental Regularization after the Forest Code 2012

The state of Mato Grosso, through Ordinance 441 of September 23rd, 2014 and the cooperation agreement signed with MMA, adhered to SICAR, and from

2015 on, it began to adopt the CAR and PRA procedures as per the Forest Code

(2012). At this time the SEMA had about 43,000 CARs in the SIMLAM database, derived from the MT-Legal. After a year of taking part of the SICAR, in October

2015, the system had already recorded twice as many rural properties, exceeding

86 .000 CARs. Currently, the figure is 113,500 CARs (SEMA, 2019).

Despite the significant increase in SICAR registrations, in 2017, SEMA claimed technological difficulties and aiming to build its own system, creating SIMCAR, a state database, where farmers already registered in SICAR

(federal) were forced to rectify their CARs in order to adapt to the new system

(LC 592 , 2017). According to information from SEMA-MT (2019), approximately

70,637 CARs were registered in SIMCAR on June 7th, 2019, was approximately

70,637, which corresponds to only 62.5% of the total previously registered in

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SICAR and only 45.5% of the total properties of the state (155,040) according to the INCRA (2019)4.

Although the changes in the system led to a reduction in the number of entries, the enrollment in CAR is only the first step in the process of regularizing the environmental liabilities. Thus, after registration, the records will be analyzed and validated by SEMA and, in case of environmental liabilities (deficit of APP or

RL), they will be sent to the Environmental Regularization Program - PRA, where the rural producer will make the commitments to recompose, regenerate or make up for the environmental deficits.

According to the data extracted from SIMCAR and information from SEMA-

MT itself, until June 7th, 2019, only 794 registrations out of the 70,637 thousand registered CARs were in the regularization phase of the PRA. Of this total, 46 farmers opted for environmental compensation, but there was not any process completed by that date. That is, after the new procedures imposed by CF

2012, no environmental legal reserve compensation was made in Mato Grosso.

Table 4-5. Numbers of rural properties with CAR, PRA and compensation (2015 to June 2019). Situation Amount CAR registered in SICAR 113,500 CAR registered and rectified in SIMCAR 70,637 CAR Validated Pending Regularization 794 PRA Compensation Proposal 46 Environmental Compensation Effected 0 Source: SIMCAR and SEMA-MT

4 See: INCRA: https://sncr.serpro.gov.br/sncr- web/consultaPublica.jsf;jsessionid=cpIcbQeU4E6uSaTdMHdJHLF9.sncr-web4?windowId=035 Retrieved on August 31, 2019

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To sum up, the figures show that legal reserve compensation is not a reality in Mato Grosso yet, given that since its creation by the MP 1605-30 (1998), more than 20 years ago, only an estimated 50 compensations were made at most, and since the Forest Code (2012), none. Therefore, the remainder of this study will focus on identifying the difficulties and the challenges for implementing this instrument.

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CHAPTER 5 DIFFICULTIES AND CHALLENGES FOR IMPLEMENTATION OF ENVIRONMENTAL COMPENSATION FOR LEGAL RESERVE IN MATO GROSSO

Environmental compensation of legal reserve is the final stage of the environmental regularization process of rural properties, where farmers, after the validation of CAR information and PRA adhesion, sign the term of commitment for the regularization of legal reserve deficits, through any of the compensation modalities established in the CF (art. 66, §6). Thus, in order to understand the difficulties and challenges for the implementation of RL compensation in Mato Grosso, it is first necessary to analyze the environmental regularization process of rural properties.

According to Soares-Filho et al. (2014), Mato Grosso stands out as the

Brazilian state with the largest extension of legal reserve areas to be recovered through environmental compensation. Micol et al. (2013) state that there is an RL deficit of approximately 8,700,000 hectares in the Amazon biome and 1,900,000 in the savanna biome. In the Pantanal biome, according to the information from SEMA (2019), there is an RL liability of 174,108 ha, adding up to approximately 10,774,108 hectares of deficit in the state.

Table 5-1. Compensable RL deficit in Mato Grosso Biome RL Deficit (Ha) Amazon 8,700,000 Savanna 1,900,000 Pantanal (Wetland) 174,108 Total 10,774,108

Source: Micol et al. (2013) and SEMA-MT (2019)

In addition to the large area to be compensated, Azevedo, Stabile and

Reis (2015), in a study carried out in 2014 on soybean properties in the state of

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Mato Grosso, concluded that 70% of rural properties had some shortage of legal reserve, that is, there is also a large number of rural properties with non- conformities of RL. Given this scenario that indicates high levels of legal reserve deficit in the state, and seeking to understand and identify the challenges and difficulties to regularize these liabilities, notably by the implementation of environmental compensation, this research addressed the matter from two different perspectives: the State’s view, (in charge of controlling, monitoring and inspecting) and the private sector’s view (farmers receiving the standard).

Looking at the state, several types of data and information were collected from SEMA and available public databases, such as SIMLAM, SICAR,

SIMCAR, as well as studies by NGOs on the environmental regularization process of rural properties in Mato Grosso. We also used information extracted from semi-structured interviews conducted with five state civil servants who work or worked in SEMA's environmental regularization sector, as described in the previous chapter.

From the private sector perspective, semi-structured interviews were conducted with 22 farmers, including twelve farmers with rural properties located in the Amazon biome and ten from the savanna biome. All farmers interviewed owned properties with more than four tax modules (MF) in area, as properties with less than four modules were exempt from the obligation to recompose the legal reserve, according to the new rules of the Forest Code

(2012). The interview with farmers from different biomes was important for the study, as the legal reserve percentages are very different as well; while in the

Amazon the RL is 80%, in the savanna is 35%. Differences in RL percentages

115 may influence the respondent's view and willingness to comply with the obligation to maintain the legal reserve.

Rural producers from thirteen different municipalities were interviewed, seven located in the savanna biome and six in the Amazon Biome. Initially, we tried to find only rural producers who had RL deficit and had deforested before

2008, which allowed them to opt for the environmental compensation modality.

However, this selection was not very easy, as none of the producers had had their properties regularized by SEMA, so a possible RL deficit was not very clear for some respondents, who were still waiting for the technical analysis by the environmental agency. Thus, some of the respondents are unsure of their

RL deficits.

Farmers were contacted through rural unions in the region, notably in

Juína and Cuiabá, whose representatives gave us a list of farmers who were willing to be interviewed. The interviews were conducted in person and, on average, lasted 45 minutes. The questions were pre-established, since the chosen modality was semi-structured, although many interviewees ended up complementing all the questions. The questions were structured on the following topics: property identification; degree of knowledge about the requirements of the Forest Code; degree of concern and willingness to promote environmental regularization of legal reserve deficits; difficulties and barriers of the environmental regularization process; choice of environmental compensation as a mode of option for environmental regularization; other perceptions or opinions about the environmental regularization process and environmental compensation.

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Approximately twelve respondents (55%) were afraid to give the interview. The farmers' fear was expressed through short and quick answers and also by the reluctance to record the interview. Most of the producers who expressed fear had properties in the Amazon biome, where the required percentage of preservation of the RL is higher, state inspection is stronger, and the deficits and degrees of breach of the obligation are higher, which may justify the fear of respondents. Despite the limitations of the small sample of interviewees, the interview data nevertheless provided important insights on the difficulties and challenges of environmental compensation.

The research begins with an analysis of the problems identified in the environmental regularization processes of rural properties, which, as it will be seen, end up preventing the implementation of environmental compensation of legal reserve.

Difficulties and Challenges in the Environmental Regularization Processes: The Role of the State

Considering that over time there have been several changes in legislation and procedures concerning the environmental regularization of rural properties, we have divided the study into three different phases in order to facilitate the identification of challenges and difficulties: LAU and SLAPR (1995 to 2008); CAR-LAU and SIMLAM (2009 to 2014); and CAR and PRA (2015 to present).

In the end, we can see that despite the different phases, the difficulties and challenges have many similarities.

LAU and SLAPR - Period from 1995 to 2008

The historical review has shown that the environmental regularization of rural properties in the state of Mato Grosso started in 1995 with the enactment

117 of the State Environmental Code (LC 38, 1995) that created the unique environmental license - LAU, an innovative instrument at the time, that besides authorizing the exploitation of forestry or agricultural activities in rural properties

(art. 19), allowed the identification of the environmental liabilities of APP and RL and forced rural producers to regularize any deficits.

Despite the legal provision, LAU was only implemented in the state in

1999 (Azevedo, 2009), and license data are only known from 2000 on, with the implementation of SLAPR, which was intended to create a database of georeferenced properties for the purpose of avoiding the deforestation and recomposing environmental liabilities of RL and APP. During this 8-year period of operation of the LAU (2000-2008), around 6,682 licenses were issued, according to the annual data provided by SEMA-MT.

If we compare the number of LAUs issued with the total number of rural properties in the state, 155,040 (INCRA, 2014), we find out that the percentage of regularized properties in this period (2000-2008) was approximately 4% of the total, i.e. an extremely low rate.

Rural Properties in MT 6,682; 4%

155,040; 96%

Total LAUs

Source: author’s elaboration based on SEMA-MT (2019) Figure 5-1. Number of regularized properties in MT (2000-2008).

118

Given the low effectiveness of LAU, in 2008 SEMA made a diagnosis to identify the bottlenecks of the environmental licensing process of rural properties (SEMA, 2019). Based on this diagnosis, it was found that on average, the processing of a LAU was approximately 2 years until its conclusion. Therefore, the data show that both in quantity (4.3% of total properties) and timeliness (2 years), LAU numbers are extremely poor.

Table 5-2. Regularized properties and average time for issuance of LAU - 2000-2008 period. Regularized Properties (LAU) Average LAU Dispatch Time

4.3% 2 years

Source: author’s elaboration based on SEMA (2019).

As part of the SEMA diagnosis, several technicians were interviewed to identify the causes of the delay in analyzing these processes. According to the interviewees, the main problem was the handling of processes from one department to another, with constant returns, complementation and divergences, without a single flow, or a standard operating procedure

[Procedimento Operacional Padrao (POP)] that could lead to its conclusion. The procedural flow can be represented in the table below by a hypothetical but common situation, simulated by SEMA technicians, which allows us to understand the comings and goings of LAU procedures at the time:

119

*Interessado/Proprietario: Landowners ** COGEO - Georeferencing Coordination *** CLPR - Rural Property Licensing Coordination ****Impressao: Print The applicant process (Licensing Projects, PRAD, PMFS, PEF, Reforestation, 1 etc.) 2 COGEO* rejects the process due to a non-vectorization of a river 3 The applicant redoes the map and sends it again The COGEO reanalyzes the map and, if it is approved, it sends it for technical 4 analysis 5 CLPR ** rejects the process for lack of documentation 6 The applicant partially complies with need for complementation 7 CLPR rejects the process again for lack of documentation The applicant fixes the pending and submits a new map with up-to-date 8 information 9 CLPR submits the process back to COGEO for map analysis 10 COGEO rejects the process due to a non-vectorization of another river 11 The applicant redoes the map and sends it again 12 COGEO reanalyzes the map and, if it is approved, sends to the technical analysis CLPR rejects again he process for lack of documentation as a normative has 13 changed 14 The applicant meets the pending CLPR re-examines the process and if it is approved sends it for checking and 15 document printing. 16 The checking team reviews the process 17 Checking team concludes that the process is not suitable and resends it to CLPR CLPR concludes that the main issues are in the map information and resends to 18 COGEO COGEO reviews the maps and rejects it because it was found an APPD in the 19 vectorized 20 After several months (years) of frustration the applicant gives up the process. Source: SEMA-MT (2019) Figure 5-2. Representation of the process of a licensing process according to the SEMA-MT analysis framework.

Besides all these back–and-forth procedural steps, SEMA's information indicates that when the LAU process was returned for analysis, it moved to the

120 end of the queue of hundreds or thousands of processes waiting to be reviewed, which increased by months or years the dead time needed for license completion. It is important to mention that, at this time, the environmental licensing process was done manually, with physical documents, where all the licensing data and information should be included in the case file.

In addition to the slow process, the interviewed servants were unanimous in pointing out the land tenure as a major obstacle to the environmental regularization of rural properties. Two excerpts from the interviews of public servants deserve mention:

At first, before environmental regulation was instituted by the Forest Code, at the time of SLAPR, back in 99, that the Code was also complied with, but there was no such nomenclature that was created after environmental regulation, at first the difficulties were closely related to land issues. The land issue made environmental regulation difficult. In the beginning the documents were demanded and the documents did not represent the territory, there was a lot of divergence between the document and the territory and this hampered the regularization...(06/25/2019)1.

The LAU process had many land problems … one never puts the plotted area in the right place. Then I don't know if it was a land problem, or if it was the forest engineer who didn't go to the area to delimit it properly.... the documentation was a problem too. The LAU was delayed more than a year... 2 (06.27.2019)

In fact, Mato Grosso still has a big land regularization problem today. At that time, the land regularization was even more serious. Lima et. al (2005)

1 Interview conducted in Portuguese: Num primeiro momento, antes da regularização ambiental ser instituída pelo Código Florestal, na época do SLAPR, lá em 99, que também era feito o cumprimento do Código, mas não tinha esta nomenclatura que foi criada depois, de regularização ambiental, num primeiro momento as dificuldades estavam relacionadas muito às questões fundiárias. A questão fundiária dificultava a regularização ambiental. No início se cobrava os documentos e os documentos não representavam o território, tinha muita divergência entre o documento e o território e isto emperrava a regularização......

2 Interview conducted in Portuguese: O processo de LAU tinha muitos problemas fundiários, é o principal. A pessoa nunca colocava a área plotada no lugar correto. Aí não sei se era um problema fundiário, ou se era o engenheiro florestal que não ia na área pra delimitar certinho...documentação era um problema também. A LAU demorava mais de ano...

121 reports the existence of several problems, such as land invasions, duplicate titles, lack of geo-referencing in properties registered in INCRA and INTERMAT

(Mato Grosso Land Institute), and lack of connection among the land and environmental agency database such as INCRA, INTERMAT and

FEMA. According to these authors, a report from the Food and Agriculture Organization of the United Nations - FAO (2001), reported that in Mato Grosso, although the properties suspected of land grabbing are only 0.6% of the universe registered in INCRA, these properties represent 17% of the registered area of the state.

Thus, the lack of security of land titles, together with the lack of a reliable database, led LAU processes to an endless back and forth among SEMA’s coordinators, whose technicians did not feel secure to approve the license and kept creating various procedural backlogs.

On the other hand, according to various news reports (Estadão, 20053;

SEFAZ, 20074;), between 2005 and 2008, several police operations were carried out in Mato Grosso to avoid fraud in processes in the environmental agency. We can highlight the Curupira (2005), Guillotine (2007) and

Ghostbusters (2007) operations that culminated in the arrest of several people, among them, some public servants of SEMA. This atmosphere of fraud and mistrust caused a great deal of fear among SEMA's employees, who felt insecure because of the lack of clarity in the environmental licensing procedures

3 See: Estado de São Paulo Newspaper. Retrieved on August, 20, 2019 from: https://ciencia.estadao.com.br/noticias/geral,pf-prendeu-pelo-menos-95-na-operacao- curupira,20050603p598

4 See: Secretaria de Estado de Fazenda de Mato Grosso (SEFAZ-MT). Website. Retrieved on August, 20, 2019 from: http://www5.sefaz.mt.gov.br/-/sema-detectou-fraude-e-evitou-comercio- de-95-dos-creditos-inseridos-ilegalmente-no-sistema

122 and the constant changes in legislation, which caused even more delay in the approval of LAU.

Azevedo (2009) reports the existence of a true “institutional insecurity” within the State Environmental Agency, characterized by constant changes in the norms and the fear of technicians about possible errors or decisions that could make them criminally responsible to the Public Prosecution Service or the

Federal Police. Azevedo affirms that the problem of delayed or low issuance of licenses was not limited to operational issues, lack of human resources or problems in the flow of processes, but also to a workplace where there was not legal certainty, either for LAU applicants or for those who analyze their processes.

To corroborate this point, one of the interviewed farmers reported that the main reason why the process of environmental regularization of rural properties is not completed is the fear of the civil servant that is delaying the process, so that it cannot be finished and consequently the license is not issued:

The server is afraid of the prosecutor... they don't sign anything... just ask the engineers...Every hour there's a police operation at SEMA. Do you imagine how a server, let's say, a large majority, are competent people who want to work, will feel? He says, I do nothing ... how am I going to work?5 (07/03/2019)

Moreover, the management model adopted by the environmental agency at the time also contributed to hamper the implementation of environmental regularization. From the creation of SLAPR in 2000 to the construction of

5Interview conducted in Portuguese: O servidor tem medo do Ministério Público.... Eles não assinam nada...só perguntar para os engenheiros...... Toda hora tem uma operação policial na SEMA. Você imagina como que um servidor, vamos dizer assim, que é uma grande maioria, são pessoas competentes e que querem trabalhar, vão se sentir? Ele diz, eu não faço nada...como que eu vou trabalhar?

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SIMLAM in 2008, the State has chosen outsourced services rather than develop its own system. The first contract of outsourcing service was made in

2001, where besides the creation of the technology system, the service provider also started to manage and maintain the data and to provide most of the employees that worked at the environmental agency at the time (ISA, 2000).

This confusion between the public and the private sector led to a dependence of the state on private enterprise, which was seen as harmful by Lima et al. (2005); since all, according to the authors, there was a lack of transparency in the management of the system, whose access was limited to the servants of the environmental agency and the contracted company, without allowing access to the population. One of the interviewed public servants reported the vulnerabilities of the system managed by the private company:

For a long time this database was not under the domain of SEMA, it was the company that built it that was responsible for the base. So, there were several problems that happened at that time.... The system also had no control over the changes, so I had a property here, so, I went there and I took that polygon off, put in another one, the system did not save the records that there had been a previous polygon, or of who made the changes...6 (06/15/2019)

In 2003 the administrative contract was questioned by the Public

Prosecution Department where, through a Conduct Adjustment Agreement

[Termo de Ajustamento de Conduta (TAC)], it was established that the environmental agency should hold a public tender to replace the employees of the private company that worked at SEMA (Lima et al., 2005). In addition, the

6 Interview conducted in Portuguese: Por muito tempo essa base de dados não ficou sobre o domínio da SEMA, é a empresa que construiu isso, é que ficava responsável pela base. Então tinham vários problemas que aconteciam nessa época...O sistema também não tinha controle sobre as alterações, então eu tinha um polígono aqui, aí eu ia lá tirava aquele polígono, colocava outro, o sistema não guardava o histórico, de que tinha um polígono anterior, de quem fez as alterações...

124 final Parliamentary Committee of Inquiry [Comissão Parlamentar de Inquérito

(CPI)] report filed by the Legislative Assembly of the State of Mato Grosso

(ALMT, 2007) reinforce concern about the state's relationship of dependence with the private technology company.

Azevedo (2009) states that the high turnover and low technical capacity of employees of the private technology company that worked to regulate

SEMA's rural properties contributed to a low emission of LAUs in the period. Data from Azevedo (2009) show us that in 2007, 57% of SGF's employees came from the private company. Still according to the author, there was a large participation of the outsourced company in carrying out core- activities of the state, which constitutes an illegality, since only public servants can operate in the end-activity of the state.

Such illegality was eventually identified by the State Court of Auditors

[Tribunal de Contas do Estado (TCE-MT)], which, through judgment 1589 of

2008, which judged SEMA's accounts for 2007, ordered the State Secretary of

Environment to dismiss all outsourced employees, and hold a public contest, if necessary (TCE, 2008). In fact, the illegal contracting of employees for the purpose of carrying out state end-activity created distrust contracted civil servants who had to share work with outsourced employees, who often lacked experience or technical capacity (Azevedo, 2009).

In addition to the procedural difficulties, land regularization problems, the insecurity of SEMA public servants and the state's dependence on a private company for environmental management, in the course of the environmental regularization process, another difficulty was identified related to environmental compensation for the legal reserve.

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Article 2 of State Law 7868 (2002) stated that “the applicant who opts for the compensation of the degraded reserve in state conservation units or properties located in the same watershed, will have 120 (one hundred twenty) days to submit his project, properly supplied with its documents”. It turns out that many producers, despite signing the Compensation Commitment Term

[Termo de Compensação de Reserva Legal (TCC)], did not fulfill their obligations. According to the civil servants interviewed, most producers did not present the compensation documents, or they took years to do so. Others presented a property with land problems that was eventually rejected by the environmental agency.

One of the interviewed public servants told us about the difficulty of the

Environmental Agency to accept the properties for compensation:

The main reason was land matrix. Because what happened, the property process that the owner offered within protected areas, when documentary analysis of the legitimacy of the area checked, the applicant could not prove who the owner was. Then, our State Attorney, who was responsible for land regularization, rejected the documentation. Then a new deadline for the owner was given, he looked for a new area and offered it. Then there was a process that I followed at least five, six years, every year the owner, within the TCC deadline, which is where they made an additive, he offered a different property. So the big problem of land regularization in the Amazon Biome, in Brazil as a whole, not only Mato Grosso, is that you have no territorial legitimacy. So, when it comes to buying land within a conservation unit, this will always be the bottleneck. Until you solve the land problem and understand who owns it…7 (06/15/2019)

7 Interview conducted in Portuguese: O principal motivo era questão da malha fundiária. Porque o que acontecia, o processo que o proprietário ofertava dentro de UC, quando se fazia análise documental da legitimidade da área, não conseguia comprovar de quem era o dono. Então, a nossa PGE, responsável pela regularização fundiária, reprovava a documentação. Daí dava um novo prazo para o proprietário, ele procurava uma nova área e ofertava. Então teve processo que, que eu acompanhei pelo menos 5, 6 anos, todo ano o proprietário, dentro do prazo do TCC, eles faziam aditivo, ele ofertava uma propriedade diferente. Então o grande problema da regularização fundiária no Bioma Amazônia, no Brasil como um todo, não só Mato Grosso, é você não ter legitimidade territorial. Então, quando é compra de terra dentro de unidade de conservação, isso sempre vai ser o gargalo. Enquanto você não resolver o problema fundiário, entender de quem é o proprietário... 126

According to Azevedo (2009), SEMA had great difficulties in monitoring the TCCs and, thus, the compensations ended up not being effected due to non-compliance with the obligations. One of the interviewed public servants told us the following:

Some producers made the agreement...then what happened? Some processes have filed because as SEMA also has no structure to meet the deadline, because there in the agreement it says, you have 120 days to submit the compensation project, some never submitted, others presented...There are people who still protocol even today, I think it was last week, I got a process that the guy filed now in 2019, after 13 years... And those who submitted, the project is there, sitting without analysis. Because there was a lot of system change, so there's no way I can analyze it now.8 (07/04/2019)

In short, the difficulties identified during this period for the completion of the environmental regularization of properties and the implementation of environmental compensation are:

• Absence of a single flow or POP in the LAU process, resulting in a back and forth of documents among SEMA Departmentss which causes the delay or even the lack of issuance of the license;

• Land problems: duplicate titles, land invasions, fraud or lack of information in the property documents that often prevented the follow-up of the LAU and its approval;

• Insecurity and fear of SEMA staff to approve the LAU through the possibility of being investigated in operations promoted by the prosecutor or police for errors in licensing processes.

8 Interview conducted in Portuguese: Alguns produtores fizeram o termo.... aí o que aconteceu? Alguns protocolaram porque como a SEMA também não tem estrutura para ver o prazo, porque lá no termo falava assim, você tem 120 dias para apresentar o projeto de compensação, alguns nunca apresentaram, outros apresentaram... Tem gente que protocola até hoje ainda, eu mesmo, acho que foi semana passada, eu peguei um processo que o cara protocolou agora em 2019, depois de 13 anos..... E aqueles que apresentaram tá lá, parado sem análise. Porque foi muita mudança de sistema, aí não tem como eu analisar agora...

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• Dependence of the state environmental agency on a private company characterized by hiring servants without public contest, weakening the processes of environmental regularization

• Lack of state monitoring of TCCs and compliance with the obligation by farmers to present property for compensation within the legal schedule.

This scenario led to SEMA to rethink its environmental regulation of rural properties model and in December 2008, and the state of Mato

Grosso launched the program MT LEGAL through the LC 343 (2008).

CAR-LAU and SIMLAM - From 2009 to 2014

The LAU procedure was modified by State LC 343 (2008) with two main objectives, to speed the environmental licensing process and at the same time, and increase the database of regulated rural properties in order to control and monitor, especially regarding deforestation.

The first objective was to meet a demand from farmers who were being pressured by both the commodity market and the financing banks to present the environmental regularity of their activities (Azevedo, 2009). The second objective was to increase the number of rural properties and registered areas in order to control and to supervise them. Thus, the government divided the regularization process into two distinct stages: CAR aimed at regularizing permanent preservation areas; LAU, aiming at the regularization of legal reserve areas. (art. 3).

The first stage was extremely successful in the period, as both banks and commodity-buying companies accepted the CAR as a document proving environmental regularity, which met the demand of the ruralist sector. According to the information from SEMA, between 2009 and 2014 approximately

43,000 CARs were issued in Mato Grosso (SEMA, 2019). There was, in fact, a

128 significant increase in the SIMLAM rural property database, which enabled a greater control, monitoring and supervision of deforestation.

According to Azevedo et al. (2014), between 2008 and 2012, there was a significant reduction in deforestation in MT, and the introduction of CAR in the state's environmental policy certainly contributed to this decrease, as shown in the figure below.

MT deforestation

15000 11814 10000 7145 4333 LAU 5000 2678 3258 1049 871 1120 757 1139 1075 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Years

Figure 5-3. Data on deforestation in Mato Grosso - 2004 to 2014. Source: INPE/PRODES9

The authors also argue that for different reasons, the CAR has become crucial for economic and governmental agents in MT. Firstly, it allowed several counties in the state to leave the critical list of deforesters, as more than

80% of the rural producers in the municipality joined the CAR (article 14, I of Presidential Decree 6321 of December 2007). Secondly, many medium and large-scale farmers sought CAR in order to be able to obtain low interest bank loans and to market their products with slaughterhouses and agricultural commodity companies. Being so, the CAR ceased to be an instrument focused exclusively on environmental sustainability, becoming a centerpiece for the

9 See: Instituto de Pesquisa Espaciais (INPE): http://terrabrasilis.dpi.inpe.br/app/dashboard/deforestation/biomes/legal_amazon/rates Retrieved on August 15, 2019

129 economic sustainability of the counties and the private sector, enabling us to understand the significant participation of farmers in the CAR MT.

One of the public servants interviewed in this research stressed the importance of CAR as a tool for controlling deforestation:

The idea of creating the CAR because the impediment of LAU was always the legal reserve, which is harder for you to achieve who had compensation and such .... was the most complex. Then the CAR was created in order to expand the database and gave more time for you to regularize the legal reserve. So, first you arranged APP liabilities, presented the PRADA APP then had a period of up to three years to rectify the legal reservation...... the CAR was the first phase of regularization after would come the LAU. With the LAU you had the legal reserve regularization and with CAR you had only the degraded APPs. The second stage continued with the same difficulty as usual.... What we tried to do was to expand the number of properties in the base, because the properties in the base were the existing subsidy to control deforestation. The goal in the end was to control deforestation. If I had more people inside the base, I could control more of the deforestation. If I had deforestation outside the base I didn't know who it was, I had to go to the field, it was more complicated to do this control, inspection and then environmental responsibility.10 (06/15/2019)

However, if on the one hand there was a significant increase in the CAR base, the same increase was not revealed in the issuance of LAUs.

In the period between 2009 and 2014, Mato Grosso registered a total of

43,000 CARs and only 2,203 LAUs (SEMA, 2019). This clearly indicates that

10 Interview conducted in Portuguese: A ideia de criar o CAR, porque o impeditivo da LAU era sempre a reserva legal, que é mais difícil de você efetivar, quem tinha compensação e tal....era o mais complexo. Então criou-se o CAR no sentido de ampliar a base de dados e dava um prazo maior para você regularizar a reserva legal. Então você arrumava primeiro os passivos de APP, apresentava o PRADA de APP depois tinha um prazo de até 3 anos para regularizar a reserva legal...... o CAR era a primeira fase da regularização e depois a LAU. Com a LAU você tinha a regularização da reserva legal e com o CAR você tinha só as APPs degradadas. A segunda etapa continuava com a mesma dificuldade de sempre.....O que se tentou fazer foi ampliar um número de imóveis na base, porque os imóveis na base era o subsidio que tinha para fazer o controle do desmatamento. O objetivo ao final era controlar o desmatamento. Se eu tinha mais gente dentro da base eu conseguia controlar maior área do território o desmatamento. Se eu tinha desmatamento fora da base eu não sabia quem era, tinha que ir a campo, era mais complicado fazer este controle, fiscalização e depois a responsabilização ambiental..

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MT prioritized the issuance of CARs, and the signing of commitment terms for regularization of APPs, meeting the demand of the ruralists, leaving aside for a second moment the issuance of LAUs and regularization of legal reserve deficits. That is, only 5.1% of properties registered in this period were able to finalize the LAU process and regularize their legal reserve liabilities and if we compare with the total of properties in the state (155,040) only 1.4% of the rural properties were regularized in the period.

Table 5-3. Quantity of CAR and LAU and the % of regularized properties in the period 2008-2014 (MT Legal). CAR LAU Properties in % Properties regularizes MT 43,000 2,203 155,040 1,4 Source: author’s elaboration based on SEMA (2019)

Thus, the CAR issuance prioritization policy at the expense of LAU, contributed significantly to the low settlement of the legal reserve liabilities in this period, in the state. After all, the new model of LAU, brought by LC

343/2008, gave the farmers a longer period for the regularization of legal reserve deficits, as provided in Art. 8th:

Having formalized the registration, the owner and / or possessor of rural property shall provide the location and regularization of the legal reserve, by presenting the required documents in the roadmap provided by SEMA, within the following deadlines:

I - 01 (one) year for properties over three thousand hectares;

II - 02 (two) years for properties from over five hundred to three thousand hectares;

III –03 (three) years for properties of up to five hundred hectares (art. 8th).

Thus, with policy of prioritizing CAR and postponement of the legal reserve regularization, the implementation of environmental compensation was

131 also relegated to a second stage, which partly explains the low adherence to this mechanism in the state of Mato Grosso.

Moreover, because CAR is a declaratory instrument, DeSouza Passos

(2015) points out some inadequacies of the system (SIMLAM) that may have contributed to fraud, omissions or errors in the issuance of the register. The author cites some inconsistencies, such as the large number of overlapping records generated by the lack of an official database of land agencies (INCRA and INTERMAT). Inconsistencies in SEMA’s hydrographic database enabled the producer, through his technical manager, to reduce the actual size of watercourses or even to omit protected areas such as swampy areas, hilltops or natural lagoons. In addition to these shortcomings, according to the author, the satellite images used by SEMA lacked high resolution, and even the usual hired servants did not have the necessary skills and expertise to perform the technical analysis.

DeSouza Passos’s findings were corroborated by the statements of one of the interviewed public servants, talking about the low quality images and the difficulties of identifying the hydrography used by SEMA.

....we used a 30-meter image; it was the landsat, used today still. So sometimes with a very small property I had difficulty, because in Landsat will not appear some water courses, which are very small, that you will not see, especially if it is in a region of Forest and it has closed, you will not see it. When you have an image with greater precision, it will show you better hydrograph! And then you will see that the property has more rivers than it shows that it has...11 (06/15/2019)

11 Interview conducted in Portuguese:....a gente usava uma imagem de 30 metros que era a Landsat, que usa até hoje ainda. Então, às vezes, um imóvel muito pequeno eu tinha dificuldade, porque na Landsat não vão aparecer algumas hidrografias, que são muito pequenas, que você não vai enxergar, ainda mais se for numa região de Floresta e ela tiver fechada, você não vai enxergar. Quando você pega uma imagem com uma precisão maior, ela vai te mostrar uma hidrografia melhor! E aí você vai ver que o imóvel tem mais rios do que ele mostra que ele tem.... 132

In addition to these difficulties, during the SEMA planning process held in

2013 or 2014 (SEMA, 2015)12, a strategic diagnosis was made with the agency's public servants, in order to identify, in their view, the weaknesses, strengths and threats to which the environmental agency was subject and how it reflected in the quality of the public services provided to society. The diagnosis provides important data on the perception of SEMA public servants, which corroborate the respondents' answers. The threats listed by the public servants, included: the low priority of the environmental area in government policies; the instability and financial and economic interference in the agency; discontinuity of environmental policy; political interference in the technical area; and instability in the environmental legislation. See the percentages in figure 5-4 below:

Source: SEMA (2015)13 Figure 5-4. Major threats in SEMA-MT Public Servants (2014).

12 Information extracted from "Relatório de Ações e Resultados 2015”, prepared by SEMA

13 Information extracted from "Relatório de Ações e Resultados 2015”, prepared by SEMA

133

In fact, the low priority of the environmental area in state public policy is linked to the developmental profile of the government, notably led by Governor

Blairo Maggi from 2003 to 2010, who is a great representative of the ruralist group. The Maggi government's focus was always on strengthening the agricultural sector, which is the basis of the state's economy (IBGE, 2017). In addition to economic interference, political interference and instability in legislation, other threats identified by public servants are also a reality, as we were able to identify in this study several changes in forest legislation, often motivated by pressure from the rural group and interference in the hiring of civil servants public by political indication, which weakens the institutional environment.

Weaknesses pointed out by the public servants, include two highlights that affect directly the quality of services provided by the environmental agency: lack of communication and internal interaction (13%) and lack of operational procedures (11%).

In fact, the diagnosis of SEMA corroborates the difficulties identified in this study, which indicate the lack of both single procedural flow and internal communication, with the stop-and-go processes among the coordination office and the constant changes in legislation and environmental policy.

In fact, the diagnosis of SEMA corroborates the difficulties identified in this study: the lack of a single procedural flow, that is, a standard procedure that allows the conclusion of the regularization process; the lack of internal communication; and the constant changes in environmental legislation and policy promoted by a government that bowed to pressures and political influences, especially of rural producers.

134

Source: SEMA (2015)14 Figure 5-5. Major Weaknesses in SEMA-MT Public Servants (2014).

To sum up, from 2009 to 2014, the following difficulties were identified in the implementation of environmental regularization of rural properties:

• Policy of prioritizing emission of CAR to server farmers and postponement of regularization of legal reserve deficits and issuance of LAU, which reduced to insignificant numbers (5.1%) the properties regularized in Mato Grosso in the period.

• Inconsistencies in the CAR system, with numerous properties overlaps, alterations in watercourses and protected areas, low resolution images and lack of training of contracted technicians.

• According to the view of SEMA servants there is low environmental priority in government policies; instability and financial and economic interference in the agency; discontinuity of environmental policy; political

14 Information extracted from "Relatório de Ações e Resultados 2015”, prepared by SEMA

135

interference in the technical area, and instability in environmental legislation

CAR-PRA and SICAR-SIMCAR: 2015 to Present

In 2012 the new Forest Code amended the procedures for environmental regularization of rural properties, creating the CAR, at the federal level, and the

Environmental Regularization Program for Rural Properties - PRA.

Although the CAR designed in the Forest Code bears some resemblance to CAR-MT, the differences required the State of Mato Grosso to make some adjustments to its management model and in the technology system. Due to the need to promote changes and as the SIMLAM system had already presented some inconsistencies that were difficult to correct, SEMA decided to join the national system, SICAR, which was being built by the MMA, through the

Brazilian Forest Service (SBF), in accordance with the new rules of the Forest

Code. Thus, through Ordinance 441 of September 23rd, 2014, the Government of Mato Grosso joined SICAR, and started to share the data and its system with the Federal Government.

As soon as the State of Mato Grosso joined the new system, there was a significant increase in number of CAR which increased from 43,000 in 2014

(MT-Legal) to 86,000 in October 2015 and about 113,500 CARs (by June 7,

2019) (SEMA,2019). The significant increase in the number of CARs demonstrates how much friendlier SICAR was if compared to SIMLAM, facilitating significantly the registration of rural properties in the state of Mato

Grosso.

However, despite the significant number of rural properties registered in

SICAR, during 2015 and 2016, according to the statements from three interviewed servants, the system presented several inconsistencies during the

136 technical analyzes, which did not allow SEMA’s analysts to fully complete the validation of the information stated in the register. According to two public servants interviewed, a maximum of 1000 CARs were analyzed by SEMA during this period, and the vast majority were not validated, as frequent rectifications and corrections were necessary in the system to complete the process.

The system, therefore, which was friendlier, became, in fact, a barrier to the finalization of the environmental regularization processes of rural properties in MT. Through official letter 2538/2015/GAB/SEMA-MT of October 13th,

2015, forwarded by the Secretary of Environment of Mato Grosso to the

Minister of Environment and the Director of the Brazilian Forest Service - SBF15, responsible for the construction and maintenance of the SICAR, it was expressly stated that the state could not perform the analysis of CAR information, given a number of difficulties of the analysis module. It was also stated that it was not possible to continue PRA and CRA because of the lack of these tools in SICAR.

Thus, despite the anticipated advances in SICAR, MMA could not implement them, and the technological difficulties eventually prevented Mato

Grosso from advancing the environmental regularization of rural properties. In fact, according to one interviewee, MMA was, at that time (2015 and 2016), more concerned with increasing the number of CARs than effectively analyzing the information and promoting the regularization of environmental liabilities.

15 Information extracted from: TCE-MT Retrieved from: https://www.tce.mt.gov.br/protocolo/detalhe/num/218685/ano/2016

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Due to these obstacles, Mato Grosso chose to build its own system. To this end, the state contracted for the amount of R$ 6,926,000 (about US $

1,727,182)16 from the same private technology company that builds SIMLAM, whose contracting process is being questioned in the TCE on suspicion of illegalities (TCE, 2019).

Nevertheless, SEMA created a new system - SIMCAR, which has been in operation since 2017. Implementing this system required farmers once again to rectify their CARs, now in the SIMCAR database, to meet the system's new technology requirements. This procedure meant that many farmers did not rectify their registrations and the number of CARs was reduced from 113,500 to about 70,000 registrations, according to the data provided by SEMA-MT

(07/06/2019).

According to one of the interviewed public servants SIMCAR brought back the same requirements of LAU, turning the current CAR into an old LAU, full of bureaucracies. For the interviewee, the only difference between LAU and

CAR is the platform: that is, LAU was manual, physical (paper file), and CAR is digital (electronic), which currently does not imply improvements, as there are still many technological limitations in the system that prevent or complicate the completion of the environmental regularization process. In his view, the national

CAR (SICAR) was simpler and more practical.

Either way, whether SIMCAR is simpler or more complex, only time will allow us to know. However, the numbers of the system currently indicate very few analyses of CAR and PRA processes. Looking back at the SIMCAR numbers, on June 7th, 2019, we can see that only 794 CARs were submitted to

16 U$ 1.00 = R$ 4.01, on October 24, 2019 (Brazil Bank)

138 the PRA to regularize environmental liabilities. An extremely low number compared to the total of properties registered in the systems, 155,000 (INCRA),

113,500 (SICAR) and 70,638 (SIMCAR). According to the report extracted from

SIMCAR (2019) we have the following CAR numbers:

Table 5-4. Procedural situation and amount of CAR in 06/07/2019. Situation Numbers CAR registered in SICAR 113,500 CAR rectified in SIMCAR 70,637 CAR awaiting review 62,767 CAR Validated Pending Regularization 794 Source: SEMA (2019)

According to the data, 7,870 CARs were analyzed and only 794 were validated, which shows that only 10% of the records analyzed have their information confirmed and validated by the environmental agency. One of the interviewed servants was asked about SIMCAR numbers and reported that, on average, a CAR goes through about 4 or 5 technical analyzes to be validated. Another public servant said that many CARs that had already been validated, were rejected when they went to the PRA phase and returned for further analysis.

Interviews with the public servants reveal that the regularization of processes continues with the same problems already registered in previous phases, of delayed approval due to the back and forth processes within SEMA, because even a validated CAR can be rejected by the analyst at the PRA phase, returning for further analysis.

Regarding the environmental compensation numbers, of the 794 CARs validated, only 46 rural producers signed the commitment term for recovery of

139 environmental liabilities, and among these, no environmental compensation was made.

Table 5-5. Amount of validated car, regularized property and compensation effected (06.06.2019). Situation Amount CAR Validated Pending Regularization 794 Numbers of regularized properties in PRA (Signed in 46 terms of commitment) Environmental compensation effected 0 Source: SEMA (2019)

According to three interviewed servants, the compensation is not effective because there is not an environmental compensation module implemented in SIMCAR, which makes it impossible to complete the processes.

In short, it is currently not possible to effect environmental compensation of legal reserves in MT because the system that manages the regularization of rural properties – SIMCAR - does not have yet the necessary tools to implement this instrument. Thus, we can conclude point out that the technology system, which should be the solution to the bureaucracy and delay in the environmental regularization of rural properties, has in fact become a barrier to the completion of the regularization processes and also for the implementation of the legal reserve environmental compensation in Mato Grosso.

Besides this technological barrier, other difficulties were identified in the regularization process that, in fact, only reinforce the problems already pointed out in previous years. It is a repetition of the same problems without proper solutions. Recently, temporary civil servants, not selected by public tender process, were hired to work in the environmental regularization sector. After a few months, the Public Prosecutor's Office and the Civil Police identified several

CAR frauds, which triggered the December 2018 Operation Poligynum, which

140 led to the arrest of about 20 people, including contracted servants, farmers and private technicians (MPE, 2018). The frauds were carried out by the farmers who, through their technical managers, presented false environmental information that was later validated in collusion with public servants of the environmental agency.

According to the state prosecutor’s information:

Several forms of fraud were found, one of them due to polygon displacement. In this modality, for example, the engineer hired by the owner presents false information to the environmental agency, shifting the location of the deforested rural property to a place where there is forest cover. This procedure is replicated in the SEMA system and the area looks legal in appearance. The environmental agency, co-opted, approves the Registry. When everything is regular it is possible to issue APF17 (Provisional Operating Authorization), indicating total environmental regularity. With this document it is possible to obtain financing from banking institutions, exemption from forest replacement payments and amnesties of fines for illegal deforestation (which in Amazonian forest areas is R$ 5,000 per hectare). In a hypothetical example, a farm that has 200 hectares of deforestation may avoid payment of R$ 1 million just as fines. (MPE-MT, 2018)

Still regarding the operation, the Public Prosecution Service pointed out that:

other facts have been found that identify the fragility of the system, ranging from hiring public servants through political indications, lack of updating of SEMA geospatial data, vulnerabilities in the analysis module, lack of greater transparency and insufficient information sharing among public servants, lagging technology structures, lack of goals, need for legislative adjustments and standardization of procedures. (MPE-MT, 2018)

Therefore, the fragility of the system, the hiring of servants by political indication, the lack of standardization of procedures, among others, has led to

17 Definition of APF (State Decree 230 of August 18, 2015, Art. 2, I): Provisional Authorization for the Operation of Rural Activities - APF: declaratory, discretionary and precarious administrative act for the provisional exercise of extensive and semi-extensive agriculture and livestock activities in areas consolidated until July 22, 2008 or subject to deletion, except for reserve areas, permanent preservation, restricted use, Conservation Unit of the Integral Protection group and those of the Sustainable Use group of the RESEX (Extractive Reserve) and RDS (Sustainable Development Reserve) categories.

141 many uncertainties and insecurities that not only allow corruption and environmental fraud, but also complicate the implementation of environmental regularization of the rural properties and, consequently, the effectuation of the environmental compensation.

According to one SEMA public servant interviewed, the frauds identified in Operation Polygonum were committed by four public servants holding commissions of trust (not selected by a public tender process) that worked directly on the CAR analysis. Also, according to the interviewee, most CAR analysts were temporary civil servants, not selected by a public tender, about

17 contractors. This note only reinforces that the technical analysis made by unskilled public servants exposes the environmental agency to a series of weaknesses, inconsistencies and frauds, discrediting the process of environmental regularization and further complicating its conclusion.

In short, the difficulties identified in the process of environmental regularization of rural properties in the post-2015 period were as follows:

• Technological inconsistencies in SICAR that did not allow the analysis and validation of CAR information and the implementation of PRA.

• The creation of SIMCAR reduced from 113,500 to 70,666 the number of CARs in the system, as many farmers did not rectify their registrations.

• Several technical analyses for CAR validation, indicating a continuous back and forth of environmental regularization processes, including possible return for further analysis after validation, when it is already in the PRA phase.

• Lack of development of the environmental compensation module in SIMCAR, which prevents the implementation of environmental legal reserve in Mato Grosso

• Hiring temporary civil servants for the environmental registry analysis sector, enabling frauds and inconsistencies in the CARs that led to Civil Police and Public Prosecution operations, discrediting and hindering even more the environmental regularization of rural properties.

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Environmental Commitment Agreement Between the Government of Mato Grosso and the State Prosecutor's Office to Improve the Environmental Regularization Processes of Rural Properties

Given all these difficulties and inconsistencies, the Public Prosecutor

Service, after Operation Polygonum, signed with the State of Mato Grosso on

January 1st, 2019, a term of environmental commitment (IC 11637-010/2017), aiming at the implementation of several improvements and corrections in the process of regularization of rural properties. The agreement involves several important points, which may, in fact, result in improvements in the environmental regularization so that it can become a reality in Mato

Grosso. The main commitments made by the Government of Mato Grosso:

• Improvements in the transparency of environmental information and regular external audits of SIMCAR;

• Implementation in SIMCAR of the environmental compensation module by December 31st, 2019;

• Implementation in SIMCAR of a specific module for the registration of rural settlements that make possible the registration, analysis and regularization, in a different way, of small producers by December 31st, 2019;

• Implementation of a PRA monitoring module that includes the indicators proposed in Decree 1491/18 and promotes effectively the recovery of degraded areas in the State by December 31st, 2019.

• Elaboration and development of standard operating procedures (POP) for CAR analysis, PRA environmental compensation and monitoring of commitment terms;

• Improvements in information technology facilities, human resources and technical inputs through an modernization plan, increase and training of technical staff, automation and periodic updating of the reference bases available in SIMCAR, and acquisition and availability through SIMCAR of satellite images, up-to-date (at least 5-meter resolution) to subsidize the registration, analysis and monitoring of rural properties, with a deadline of December 31st, 2019.

In view of the commitments assumed by SEMA with the Public

Prosecution Service, it is expected that, especially, after December 31st, 2019,

143 the environmental regularization processes of rural properties in Mato Grosso could truly advance, enabling the effective restoration of legal reserve deficits and the definitive implementation of environmental compensation in the state.

Difficulties and Challenges in the Environmental Regularization Process of Rural Properties: The View of Farmers

After identifying the difficulties and challenges of regularization processes from the state perspective, we now identify and analyze the processes from the perspective of rural producers. For this purpose, the qualitative method was used, through semi-structured interviews with rural producers in Mato Grosso that provided additional and more useful knowledge about the perceptions, motivations, challenges and difficulties faced by the interviewees concerning the environmental regularization of their rural properties and, particularly, environmental compensation of the legal reserve.

Rural Properties Profile

Twenty-two rural property owners from Mato Grosso were interviewed in

13 different counties of the state, with 55% owning properties located in the

Amazon biome and 45% in the Savanna biome. All of them own medium (4 - 15

MF) or large (> 15 MF) rural properties. Producers with small properties (≤ 4

MF) were not considered in this research because, according to the CF, these rural owners are exempt from recomposing legal reserve liabilities (art. 67).

Of the 22 farmers interviewed, 21 are male and only 1 female. The predominant productive activity in these properties are the livestock (68%); and in 18% of the properties both agriculture and livestock are practiced; in 9% only agriculture; and in 5%, fish-farming and livestock.

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Table 5-6. Profile of rural properties of respondents. Size Biome Activity County

68% large (≥ 15 55% 68% livestock Juína MF) Amazon 18% agriculture Castanheira e Aripuanã 32% average (4- 45% and livestock Chap. dos Guimarães 15 MF) Savanna Água Boa Jauru 9% Agriculture Barra do Bugres N. Senhora Livramento 5% fish farming Sapezal and livestock Araputanga Sto Antônio do Leverger Pedra Preta Jangada

Degree of Knowledge of the Rural Producers About the Forest Code

One of the objectives of the interviews was to identify the farmer's level of knowledge about the requirements of the Forest Code, notably, about the rules for environmental regularization of rural properties, as well as their concern with the topic. We could see that most producers have a good knowledge of the requirements of the forest code, especially among those who own rural properties in the Amazon biome, where the legal reserve preservation rate is 80% of the property and where inspections and state monitoring are more present. Of these, 70% said they had knowledge of the Forest Code and

30% said they knew little about the legislation.

In the savanna biome, where the legal reserve requirement is 35%, farmers showed a little less knowledge, as most delegate the environmental regularization of the property to professionals or specialized companies, not delving much into the legislation. However, 20% of respondents, having already served on the board of farmers' associations, have a good knowledge of the legislation; 40% have good knowledge; and 40% understand little of the legislation.

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The interviewees' knowledge of the Forest Code was analyzed with direct questions. They were asked about the required percent of preservation of RL, mandatory CAR and PRA for rural properties, knowledge about the protection of

APP and the rules of environmental regularization among others. At this point,

20% of respondents, having already participated as directors of farmers' associations, answered “yes” to all questions that verified knowledge about the

Forest Code; 40% indicated they had good knowledge, despite having some lack of knowledge on more complex issues; and 40% understood little of the legislation, as they answered most of the questions negatively.

Table 5-7. Respondents' degree of knowledge about CF. Degree of knowledge Amazon Producers Savanna Producers

Yes, very good - 20%

More or less 70% 40%

Not, too little 30% 40%

Source: interview with farmers

Regarding environmental regularization, 100% of the rural producers interviewed already had CAR, however, none of them had their CAR validated by the environmental agency and they could not complete the regularization of the legal reserve through PRA. Only 32% said they had previously obtained

LAU. Some producers also expressed doubts about whether or not they have legal reserve liabilities, as 100% of respondents did not have their records validated by SEMA.

Table 5-8. Degree of environmental regularization of respondents' rural properties. LAU CAR (registration) CAR (validated) PRA

Yes 36% 100% - -

No 64% - 100% 100%

Source: interview with farmers

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Concerning the legal reserve deficits, as CARs still need to be analyzed and validated by the environmental agency, there are many uncertainties among producers about the amount of RL liabilities to be regularized. At this point, 45% of respondents reported having an RL deficit; 31% were not sure; and 22% said they had no liabilities. Among: those who said they had no liabilities, two respondents stood out, stating that their rural properties are composed of more than one registration and they intend to settle them separately to have the benefit of art. 67 of the CF that does not require the restoration of RL on small properties. This situation reveals a possible strategy that some farmers can use to circumvent the legislation and benefit from art. 67 of the CF exempting the small producer (rural property ≤ 4 MF) from the recovery of RL.

Still regarding the legal reserve deficit, 95% said they had deforested before July 22nd, 2008 and only 5% said they had deforested before and after this date. Among respondents 32% have already been fined or embargoed and

68% have never had any administrative restrictions.

Table 5-9. Degree of knowledge of respondents about legal reserve. RL deficit Deforestation before Penalty and / or 22.07.2008 embargo

Yes 46% 95% 32%

No 22% 5% 68%

Do not know 32% - -

Source: interview with farmers

Overall, most part of respondents expressed concern about regularizing their rural properties. About 95% said they worry about regularizing their rural properties. Producers' main concerns relate to the fear of restricted by the consumer market or financing banks, or of being fined or embargoed by the

147 state. For 77% of respondents, the major concern with environmental regularization is not being able to sell their products (meat, grains, fish etc) or not accessing bank financing if they do not obtain the regularization document, which is currently restricted to CAR. 60% of respondents pointed out that the major concern regarding regularization refers to possible fines or embargoes that may suffer from the state (table 5-10).

Table 5-10. Degree of concern about RL regularization. Degree of concern General Market restrictions Fine and / or state embargo

Yes 95% 77% 60%

No 5% 33% 40%

Source: interview with farmers

The slaughterhouses, however, have required beside the CAR, the

Provisional Operating Authorization [Autorização Provisória de Funcionamento

(APF)], a provisional license issued online by SEMA, which allows producers duly registered in the CAR, to practice agriculture or livestock, if such activities are carried out in consolidated area (deforested area before July 22nd, 2008) or areas subject to legal deforestation, and no more deforestation after this date. As the issuance is online, most producers did not have any problem getting it, with restrictions only for those who had deforested after 2008.

Although all producers are concerned about environmental regularization, some respondents mentioned ways they found to avoid any market restrictions. For example, one of the interviewees owns two farms and, because he was unable to issue the APF from one of them, that farmer uses the

CNPJ (national legal registration) of another property to be able to market cattle to slaughterhouses. Another interviewee admitted that he divided his property in two and registered a new CAR in the system, allowing him to market his

148 products without restrictions. Finally, some respondents just commented vaguely that despite market restrictions, they find a "solution" to circumvent the rules.

In any case, the producers claimed that market restrictions are one of the main reasons that drive them to seek environmental regularization. One of the interviewees summed up the concern of most farmers: “as long as we can sell our products without being blocked, you go ahead .... If you are able to work and sell your ox and cow without having any kind of lawsuit, you go on ...”18

(06/25/2019). Another interviewee concludes: “I always want to be the last to regularize, because the legislation and the system change constantly…”19

(06/26/2019).

Table 5-11. Degree of concern of respondents with environmental regularization. Producers concern about Fear of Fear of being environmental regularization suffering market charged restrictions Yes 90% 80% 60% Not 10% 20% * 40% ** * Some respondents said they did not ask banks for loans and others said they did not sell to slaughterhouses; ** Some respondents understand that they are regular and have no reason to fear penalization Source: interview with farmers

It is also notable that most farmers believe their properties are regularized, simply because they have the CAR and the APF, even though they have not completed the PRA yet. There is, in fact, a great deal of confusion, brought even by the market and the banks, which only require the producer to register with the CAR to be considered environmentally regular. However, enrollment in

18 Interview conducted in Portuguese: enquanto a gente tiver conseguindo vender os nossos produtos sem estar bloqueado, você vai tocando....Se você está conseguindo trabalhar e vender o seu boi e a sua vaca sem ter algum tipo de processo vai tocando.... 19 “eu quero ser sempre o último a regularizar, pois toda hora muda a legislação e o sistema...

149 the CAR is only the first stage of the environmental regularization process. The reason why, according to one of the respondents, the banks only require CAR registration, is that any other requirement would eventually make it impossible to release financing: “… the CAR protocol is simple… the bank requires this because otherwise it does not lend to anyone, because only a minority has a regularized area, a minority”20 (07/03/2019).

Some respondents still claim their properties to be regular because they have never been charged or embargoed by the environmental agency. One of the interviewees stated:

I think I am regular; I believe… I have CAR, now I just have to migrate to SIMCAR, I haven't seen a fire in my property for over 10 years. I left the APPs all ready, well done.... I'm following the whole process, but it changes a lot.... but I'm regular21 (06/26/2019).

On the other hand, most producers feel that the law is very strict when economic imposition and embargoes prevent owners from producing and selling their products, often because of past infringements or irregularities that are questionable. Below are the statements of two interviewees on the subject:

..... For the citizen it is a matter of survival. If he cannot sell what will he do? He'll borrow a CNPJ, or he'll get something, he needs to sell his product, got it? This is a completely unacceptable thing to do, you ban the guy from working. And that is what happens! Let the producer work and give him a deadline to regularize. They don't do it, they cut you off and tell you to regularize and you can't work...22 (07/03/2019)

20 ...o protocolo do CAR é simples... o banco faz isso porque senão ele não empresta pra ninguém, porque é uma minoria que tem a área regularizada, uma minoria 21 Eu acho que eu me encontro regular, eu acredito...Eu tenho o CAR, agora é só migrar para o SIMCAR, faz mais de 10 anos que não vejo fogo na minha propriedade. Deixei as APPs todas prontas, bem feitas...eu estou acompanhando todo o processo, mas muda muito...mas eu estou regular. 22 Interview conducted in Portuguese...Para o cidadão é uma questão de sobrevivência, se ele não puder vender como que vai fazer? Vai pegar uma inscrição estadual emprestada, ou vai pegar alguma coisa, ele precisa vender o produto dele, entendeu? Isso é uma coisa completamente inaceitável você, proibir o cara de trabalhar. É o que acontece! É deixa o produtor 150

The regulator agencies are very concerned about what I did there in 1997/98, 2000, 2001,2003 and are fighting over past, I mean, they blame me for the 5% less I have protected ...the important thing to protect what is left, isn’t it? I am totally in favor of protecting ...23 (07/07/2019)

Difficulties Pointed out by Farmers to Complete the Processes of Environmental Regulation

Environmental regularization of rural properties is really a complex process and still under construction. The various changes in the legislation over the years, in fact, cause a great deal of confusion and insecurity not only among the farmers who are recipients of the standard, but also among public servants, implementers of the rules.

Given this complexity and the low levels of regularization in the state of

Mato Grosso, the farmers interviewed were asked about the main difficulties they face in regulating their rural properties environmentally. The most recurring difficulties or challenges pointed out by the producers, in order of relevance:

• Legal uncertainty arising from changes in legislation and environmental regularization procedures over the years;

• Resistance of farmers to comply with the law that they consider excessive, strict and unfair;

• Bureaucracy of the environmental regularization process;

• Financial cost for environmental regularization

• Possibility of relaxation of the law and / or amnesties for violations;

trabalhar e dá um prazo pra ele regularizar. Eles não fazem isso, eles te cortam de cara e manda você regularizar e você não pode trabalhar....” 23 Os órgãos reguladores eles se preocupam muito com o que eu fiz lá em 1997/98, 2000, 2001,2003 e ficam brigando por, vamos dizer assim, por me culpar pelos 5% que eu tenho a menos... Tem que proteger o que tá de pé, é ou não é verdade? Eu sou totalmente a favor de proteger...

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Legal Uncertainty Caused by Changes in Legislation and Environmental Regulation Procedures

Undoubtedly, this was the difficulty most pointed out by rural producers for the environmental regularization of rural properties. The constant changes in the laws over the years, the changes in procedures and the number of state and federal rules, cause a lot of insecurity in producers and discourage them to seek or complete environmental regularization. Some reports below demonstrate the insecurity of three farmers:

…Look, I can buy an area today, with the required reserves, and how do I know that after two years, the government will not come and say: No, no, these reserves are not worth anymore. Because they did it once, do you remember you had to buy in the same biome or basin? Then you could buy in the other one, then you had to go back, so you spend the money, spend 300 or 500 thousands reais, then it’s not worth it, so what do you do with that? You see, the problem that the producer has, right? Which is often not financial, it is the legal issue, insecurity...24 (07/07/2019).

I did LAU, I did CAR, SISCAR, and I don't know what's going to come next… SISCA R no, SIMCAR.... and maybe RASCAR is coming, and I don't know what lies ahead, what we’re waiting for25 (06/28/2019).

...the producers do not know what the rule is, and they are exposed to the ideology of the public agents of SEMA, IBAMA, prosecutors. A fine can make the farmer unviable or crush the rural producers. This is real26 (07/15/2019).

24 ...Veja, eu posso comprar uma área hoje, nas reservas que tem, e quem que me garante que daqui a 2 anos, o governo não vai chegar e dizer: Não, não, essas reservas não valem mais. Porque já fizeram isso uma vez, lembra que você tinha que comprar no mesmo bioma ou bacia? Depois você podia comprar no outro, depois você tinha que voltar, então você gasta o dinheiro, gasta R$300,000 ou R$500,000, depois não vale, aí o que que você faz com aquilo? Você veja o, o problema que o produtor tem né? Que muitas vezes não é financeiro, é a questão jurídica, insegurança.. 25 “Eu fiz a LAU, eu fiz o CAR, o SISCAR, e não sei o que vai vim pela frente ainda....SISCAR não, SIMCAR....e talvez vem o RASCAR ,, e não sei o que vem pela frente, estamos aguardando” 26 “os produtores não sabem qual a regra, e ficam expostos a ideologia dos agentes públicos da SEMA, IBAMA, promotores de justiça. Uma multa pode inviabilizar ou matar o produtor rural. Isto é real.

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Resistance of Farmers

In general, rural producers consider RL an unfair obligation imposed by the State, notably among those who own rural properties in the Amazon biome, where the preservation percentage is 80% of the property. The indignation of farmers leads to resistance to comply with the legislation, and according to five respondents, “as long as they can, they keep waiting …” The interviewees pointed out some reasons that lead them to conclude that the legal reserve is unfair:

• The use of only 20% of the property makes agricultural activity impracticable, especially in small properties (≤ 4 MF);

• The maintenance cost of RL is very high and imposed only on the producer, while the supposed preservation benefits are shared with society;

• Many areas of RL do not have any ecological value, as there is no biodiversity, water or fauna that justifies their preservation;

• There is no environmental gain in maintaining fragmented areas in private rural properties. The ideal decision could be to create RL in condominium or Conservation Units;

• The RL is economically undervalued, because the commercial value of the protected area (“bush area”) corresponds to 25% of the value of the “open” area of the rural property, therefore, economically, it is not worth preserving;

• There is an orientation of the producer associations not to move ahead and always wait.

In fact, the notes above allow us to understand the position of the farmers against the regularization process, although recognizing that there is no justification for non - compliance with the law.

Bureaucracy of the Environmental Regularization Process

The data show us that the PRA is not functioning properly yet in the

State, as only 794 CARs have been validated and only 46 producers have signed commitment terms for the regularization of liabilities in a universe of

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155,000 rural properties (INCRA, 2014). Therefore, there is a visible difficulty for the state to promote the environmental regularization of rural properties. From the perspective of farmers, the bureaucracy and inability of the state to meet demand is one of the main problems. Most respondents stated that the government is “excessively bureaucratic,” giving specific examples:

• There is an excess of documents that the producer needs to regularize his activity: CAR, GEO (geo-referencing), LAU, CCIR (certificate of rural property registration), APF, PRA among others, and at the same time, there is a very long delay by the Government to issue these documents, and often there is not even an answer;

• Public servants are insecure, sometimes lacking technical skills, and are afraid of the prosecutor and police, so they do not “sign” licenses, and are encouraged not to complete the regularization process;

• There are many divergent interpretations between technicians and different environmental agencies (State and Federal) which end up making the process more time consuming and complex;

• Public servants are insufficient to meet demand;

• The technology systems do not work properly and there are constant changes in the procedure, for example, SIMLAM, SICAR, SIMCAR, demanding rectification by the farmers all the time;

According to the majority of respondents, the difficulties mentioned lead to a great distrust on the part of the rural producer, who, while being discouraged in seeking regularization, also no longer believes in the process.

Financial Cost for Environmental Regularization

For 30% of producers the cost of environmental regularization is very high. Others, however, notably large producers, do not see the financial cost as a difficulty, as they claim that they would prefer to pay the amount needed to be regular if the state were able to complete the regularization process. Anyway, some producers mentioned the financial costs, both of the expenses incurred in the administrative process of regularization, as well as the eventual restoration of environmental liabilities.

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According to the official tables of SEMA and the Mato-grossense

Association of Forest Engineers [Associação Mato-grossense dos Engenheiros

Florestais (AMEF)] (2018)27, the costs of the regularization process were identified:

• CAR analysis fee (properties under 4 MF are exempt): 8 UPF28 =R$ 1,155,00

• PRA analysis fee (properties under 4 MF are exempt): 8 UPF = R$ 1,155,00

• Engineer fees: between R$ 2,000,00 and R$ 9,000,00 (depends on property size)

• Preparation of PRADA: R$ 3,000,00 to R$ 28,000,00

• PRADA Follow-up Technical Report: R$ 6,500,00 to R$ 20,000,00

• TOTAL = R$13,810 to R$ 59,310

In short, the value for the environmental regularization of rural properties, without considering any costs of other reports or projects, ranges from

R$13,810,00 to R$59,310,00, depending on the size of the property and the area to be recovered. Therefore, the costs of the regularization process can be extremely high.

In addition, there are costs for the effective recovery of degraded areas. As most producers were willing to opt for environmental compensation, which we will talk about in the next topic, the cost of this modality is equivalent to the value of the area they intend to acquire to compensate for the RL deficit. Most respondents did not have any notion of the value of the area; however, some producers said that the value in Mato Grosso was from

27 See: Forest Engineers fee reference table 2018. Retrieved on September, 09, 2019 from: https://docplayer.com.br/82730286-Tabela-referencia-de-honorarios-dos-engenheiros- florestais-2018.html)

28 UPF – Unidade de Padrão Fiscal [Tax Pattern Unit]; 1 UPF= R$144,43

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R$1,500,00 to R$2,000,00 per hectare in the Amazon biome and from

R$3,000,00 to R$4,000,00 in savanna.

All in all, the financial cost of recomposing environmental liabilities is indeed very high, and as many rural producers are still unable to see the ecological benefits of environmental preservation, the regularization of RL is seen as a huge onus on rural producers.

Possibility of Relaxation of the Law and / or Amnesties to Environmental Infractions

The possibility of changing the law and bringing benefits to producers, lead some ruralists to postpone compliance with environmental regularization. In this regard, some respondents were encouraged by the stance of the Bolsonaro Government that since the election campaign has been side by side with farmers and in conflict with the environmentalists. This political stance of the President ends up influencing producers who believe in a possible relaxation of environmental norms or even amnesties, which could benefit them in the processes of environmental regularization of rural properties.

In fact, as some respondents have said, the guidance of farmers' associations is always to "hold on" for a possible change in the law or environmental policy that could, in some way, benefit farmers, such as the revised Forest Code itself which brought important flexibilities for them. And one interviewee (07/07/2019) concludes: “quanto mais deixar quieto, melhor” [“The quieter you are, the better”].

In short, the difficulties, according to the perception of farmers regarding the environmental regularization of rural properties, are that the law is unfair, the state is bureaucratic and inoperative, the system brings legal uncertainty,

156 the cost is high for regularization, and some are still hoping to make the rules more flexible in the future. Therefore, for most respondents the best option is to

“hold on.” This passive position of the producer, together with the Government's own inability to meet demand, leads to this scenario of low environmental regularization of rural properties in Mato Grosso, and consequently, the absence of implementation of environmental compensation.

Environmental Compensation of Legal Reserve from Farmer Perspective

One of the questions of the interviews with the farmers was about what kind of environmental regularization they intended to use to recompose the legal reserve deficits, among the alternatives of natural regeneration, restoration and environmental compensation, considering, however, that all interviewees are eligible to use environmental compensation if they had cleared the RL before July 22, 2008.

Thus, when the rural producers were asked what their favorite mode of environmental regulation was, some producers did not hesitate to answer, even before knowing the actual options: “the cheapest.” Thus, certainly the criterion adopted by the rural producers, when they have to choose which alternative to use for the recovery of the RL liabilities will be economic and not environmental.

In this sense, about 22% of respondents did not indicate a specific modality, only said that they will choose the cheapest financially; but 63% of respondents ended up opting for environmental compensation and 5% chose natural regeneration, as they claim to have unproductive area that can be used for recovery of environmental liabilities within the property itself. Finally, 10% of respondents opted for two modalities at the same time, regeneration of part of the RL (in the area itself) and compensation to complement the remainder.

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Table 5-12. Preferred modalities by respondents for recovery RL deficit. Compensation Regeneration Restoration Regeneration They made no and compensation distinction and will choose the cheapest

63% 5% - 10% 22%

Source: interview with farmers

The research also sought to identify the rural producers’ preferences among the environmental compensation modalities allowed by the Forest Code: lease or environmental easement: delivery of another area; donation to the government of area within UC; or CRA (art. 66, §5 of the Forest Code). Overall, respondents demonstrated to know the first three types of environmental compensation, except for CRA. As the newest modality, and not yet regulated by the state, 86% of respondents said they had never heard of this modality and

14% had a superficial knowledge of the subject.

On the other hand, after being informed about the four compensation options, 64% of producers chose the area donation modality within the

Conservation Unit. According to the interviewees, the choice is motivated by a very simple reason: the responsibility for maintaining the RL area now rests with the state and not with the producer.

Indeed, throughout the interview, many producers complained of the obligation to maintain and care for the legal reserve area, whose financial costs, according to them, are very high, not only because they cannot use the area for farming and livestock, but they also have to ensure preservation, avoid fire, invasion, etc. Thus, the donation of an area within a UC relieves the producer of the maintenance costs while definitely ensuring the compensation of the area, since in another modality such as CRA, lease or easement, the compensation may be only temporary.

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In summary, among the respondents who opted for RL environmental compensation, 64% said they preferred the area donation modality in UC; 9% said they already had an area of their ownership and the other ones 27% did not specify the modality.

Table 5-13. Environmental compensation modalities: respondent preferences. Donation in UC Area of same Easement or CRA Did not specify ownership tenancy mode

64% 9% - - 27%

Source: interview with farmers

Therefore, according to the interviewed rural producers, the legal reserve environmental compensation is potentially the preferred modality for the regularization of RL liabilities and, among their options, the donation of UC area emerges as the favourite among producers.

However, many difficulties and challenges still have to be overcome, both by the state and by the rural producer, for the legal reserve environmental compensation to become reality in Mato Grosso. In sum, we can summarize the difficulties in implementing environmental compensation on four different topics: procedural perspectives; public servant's perspectives; political perspectives and perspectives of rural producers (Figure 5-14).

Table 5-14. Difficulties to implement environmental compensation. Procedural perspective Public servant’s Political Perspective of Rural perspectives perspective Producers Absence of Standard Insecurity and Constant Legal Operating fear of public changes in uncertainty regarding Procedure (POP), causing servants to legislation, forest law and delay and insecurity be held criminally different procedures responsible by interpretations the police or and excess of public prosecutor federal and state regulations

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Table 5-14. Continued. Procedural perspective Public servant’s Political Perspective of perspectives perspective Rural Producers Requirements to prove land Low technical Constant Financial cost ownership in environmental qualification notably changes in of regularization processes of non- technology environmental tenured civil servants procedures and regularization systems, weakening management

Lack of state monitoring Hiring non-tenured CAR Resistance of of TCCs and non-compliance employees for the prioritization producers to with obligation to compensate environmental over legal regularize, producers regularization sector reserve deficits because they regularization understand the law is unfair and rigid

Inconsistency in technology Ruralist groups Possibility of systems - SLAPR, SIMLAM, pressure on attenuation of SICAR and SIMCAR: low governments the resolution images, overlapping law and / or properties, difficulty in amnesties for identifying hydrography, violations; among others.

Lack of technology (PRA and Compensation module) that allows the conclusion of environmental regularization and compensation processes

Source: interview with farmers, public servants

After pointing out the difficulties and challenges and considering that the

State is able to overcome them, in the following chapter we will answer the fourth question of this research: “Does Mato Grosso have the necessary conditions to ensure that environmental compensation represents an environmental gain for the state’s environment?"

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CHAPTER 6 COMPENSATION OF LEGAL RESERVE IN MATO GROSSO: OPPORTUNITIES FOR ENVIRONMENTAL EARNINGS FOR THE STATE

Legal Reserve compensation, if implemented, could bring environmental gains to Mato Grosso. The focus of the study is now to discover any potential advantages from an environmental point of view, which would add to the preservation of native vegetation and guarantee the conservation of protected areas.

For this research, we consider as environmental gains two situations:

• the effectuation of environmental compensation through the donation of an area subject to land tenure regularization in the public domain;

• the possibility of maintaining the legal reserve surpluses subject to legal deforestation in private properties.

The first modality, donation of land subject to regularization in UC, may represent great environmental advantages for Mato Grosso in that it allows private property inholdings in the UCs to be effectively transferred to the public domain, allowing the “removal” of any occupants. This ensures the conservation of biodiversity, the protection of fauna and flora, and the effective implementation of these protected areas.

The second possibility of environmental gains refers to the maintenance and preservation of areas with a legal reserve surplus in rural properties, which in theory could still be legally deforested, but which, if used to offset a legal reserve deficit, may be conserved, ensuring, at the same time, additionality in the preservation of native vegetation, as it avoids further deforestation and provides remuneration for producers who have preserved beyond what is required by law.

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The implementation of this possibility may be through an easement or CRA, with the appropriate remuneration of holders of RL surplus.

The success or failure of environmental compensation from these two perspectives will depend on how the government will conduct public policy related to the issue. If compensation is made without criteria and guidance, leaving the market free, based only on the value of money of hectare of land, we will lose a unique opportunity in Mato Grosso to conserve areas of high environmental value that are now eligible for legal deforestation and susceptible to land regularization in UCs.

Thus, in order to verify the possible advantages for the environment arising from the legal reserve compensation, we made a brief analysis of the institutional scenario focused on public policy oriented to the implementation of environmental compensation, notably, the normative set, incentives, restrictions and management of the State Conservation Units. For this, the qualitative method was used, through documentary research, which through information from SEMA, ZSEE-MT and other environmental studies it was possible to find out if Mato Grosso meets the necessary conditions for the legal reserve compensation to represent an environmental gain for the state.

The quantitative method was also used, through the analysis of secondary data extracted from the SIMCAR and SICAR, ZSEE-MT, NGOs and others systems, which allowed us to identify the RL deficit and surplus in the state, by biomes, the amount of areas subject to land regularization in UCs and priority

162 areas for environmental compensation, from these studies, this research was able to produce a map of priority areas for compensation in Mato Grosso.

Environmental Compensation Through Donation of Land Subject to Regularization in Public Domain UC

UCs are protected areas created by an act of the government, for conservation purposes, because of the importance of their natural characteristics (The article 2, I of Law 9985 of 18 July, 2000 Law SNUC - National

System of the Conservation Units). The UCs in the public domain belong to the government (Federal, State or County) that establishes the use and occupation within its geographical boundaries.

In the last decades, countless UCs were created in Brazil. According to data from the MMA (2019), there are a total of 2,309 UCs in the country, of which 1,104 are federally managed, 964 are managed by state’s and 341 are managed by counties.

Municipal Federal 15% 43% Municipal State Federal State 42%

Source: MMA1 Figure 6-1. Data from UCs in Brazil.

1 See: Ministry of Environment (MMA): https://www.mma.gov.br/areas-protegidas/cadastro- nacional-de-ucs Retrieved on September 15, 2019

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Raniere et al. (2011) state that, although there was a significant increase in the number of UCs in the country, which practically doubled in the period between

2003 and 2010, there was not a growth in equal proportion of public resources for the management of these areas, which makes it difficult to achieve the objectives of these areas. In fact, many UCs are still pending implementation. The main difficulty for the implementation of the protected areas lies, notably, in the lack of land regularization, as many private landowners have not been expropriated and compensated, and continue with their properties within the boundaries of these protected areas. The set of activities necessary to effect the transfer of private areas to the public domain are called land regularization (Cheade, 2015).

Azevedo (2002), on the occasion of the III Brazilian Congress of

Conservation Units, supports the need for a previous study on the land aspects in the creation of UCs, as well as the provision of resources needed to indemnify individuals.

Therefore, land regularization is a major problem for the implementation of UCs. The difficulty is not limited to the financial issue alone, although it is the most relevant one. According to Saretta (2017), other problems were identified in the land regularization process of the UCs, such as the difficulty of proving the title chain domain, the overlapping of areas, several titles of the same area, and other complications in the documentation required by private landowners registered in UC.

However, the biggest obstacle is still the financial one. The state does not have sufficient public resources for the expropriation and compensation of private owners, which means that many protected UCs are only “paper parks.” On this 164 subject, Oliveira (2010) states that the protection afforded by the creation of these areas is only effective if the restrictions and management norms, suitable for intended purposes, are effectively applied. On the contrary, the “protection” represents a mere formality, a simple simulacrum of biodiversity conservation, deprived of any concrete result, thus, denying the provisions of both the Forest

Code and Federal Constitution,1988 (art. 225, § 1, III).

In fact, land regularization is fundamental to ensure the effective protection of the Conservation Units, especially regarding the conservation of biodiversity. A study by Saretta (2017, p.66) identified potential socio-environmental impacts resulting from the permanence of private properties within UCs:

• The public authority responsible for the UC cannot effectively manage the area with the permanence of private properties in its interior.

• Private properties within public domain UCs, while not expropriated, are not subject to the typical fences of a UC

• Maintaining activity (exploitation) within protected areas prevents the regeneration and/or restoration of vegetation.

• Fauna and flora can be impacted by soil management practices incompatible with environmental conservation as well as pesticide use, siltation, fire, deforestation, etc.

• Construction of access roads inside the PAs and unnecessary traffic.

• Socio-environmental conflicts between non-indemnified owners and the government. In RESEX, socio-environmental conflicts also involve traditional communities.

• Permanence of private landowners inside the UCs without the possibility of exploring the area, without income and waiting for compensation, damages the UC's image before the local community.

• Unconsolidated UCs are more subject to disaffection of the area, alteration of its boundaries and / or change of category.

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Thus, it is evident that the permanence of private rural properties in public domain UCs causes numerous environmental damages to these protected areas. In order to seek an alternative for the implementation of these spaces, the environmental reserve modality of legal reserve was created to allow the donation of property pending land regularization to the State (art. 66, §5, II of the Forest

Code). By means of this environmental compensation modality, rural producers with legal reserve deficit and who deforested before July 22, 2008, can acquire private properties inserted in UCs of public domain, to regularize their RL liabilities, subsequently promoting the donation of these areas to the state.

Thus, the State does not need to spend resources to compensate landowners, creating an alternative funding source for land regularization and implementation of UCs. The State, however, remains with an important role in controlling and managing the database of these areas subject to land regularization. Consequently, compensation through donation of land subject to land regularization in UCs represents a possible environmental gain for the state, which will take an important step in the implementation of its Conservation Units.

In order to identify if Mato Grosso meets the necessary conditions for the implementation of this type of compensation, which represents environmental gains for the state, this study carried out a documentary research with the Mato

Grosso Environmental Agency and Legislative Assembly, with the objective to:

• Identify the amount of area subject to regularization in the state UCs;

• Identify whether there is a database with reliable information (georeferenced properties, demarcated and registered in CAR) about properties that can be regularized in UCs;

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• Identify whether state law encourages compensation within the state of Mato Grosso or otherwise restricts compensation in other states;

• Identify whether the state has defined priority conservation areas to be intended for environmental compensation

The analysis of these data allowed us to explore whether Mato Grosso has the technical and legal conditions to promote land regularization of its Conservation

Units and if there are stimulating policies promoted by the State so that compensation can represent environmental advantages for the State.

Amount of Land Subject to Land Regularization in State UCs

For our study, we will only consider information on state administrative management UCs, not addressing federal and municipal UCs.

According to the data from SEMA, produced by the Coordination of

Conservation Units (CUCO), Mato Grosso has 25 public domain Conservation

Units, with a total area of 1,778,476.65 hectares. Of this total, about 1,563,640 hectares are still subject to land regularization, or 87% of the total, e still under the domain of private owners. If we consider the number of UCs, only 7 (seven) are regularized and another 18 (eighteen) need to go through the land regularization process. Therefore, this means that most UCs still own private property within their boundaries, whose owners still need to be financially compensated by the state in order to be able to withdraw from these protected areas.

Table 6-1. Total data, subject to regularization and regularized of Mato Grosso UCs (ha). Public domain UC Regularized UC UC pending (total) regularization

Area (hectares) 1,778,476 214,836 (13%) 1,563,640 (87%)

Number 25 7 18 Source: SEMA-MT (2019)

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Still according to the data from SEMA (2019), if we consider the areas subject to land tenure regularization in UCs by biome, we have the following situation: 1,098,892 hectares (70%) located in the Amazon biome, 245,056 (16%) in the savanna and 219,691 (14%) in the pantanal.

Table 6-2. Areas subject to land regularization in State UCs, by biome (ha). Amazon Savanna Pantanal (Wetland) Area subject to land 1,098,892 245,056 219,691 regularization (ha) Percentage 70% 16% 14%

Source: SEMA (2019)

The division of areas into biomes is important because one of the criteria established by the Forest Code for environmental compensation is precisely that the compensable areas have the same size and be located in the same biome (art. 66 § 6). Given the data, we can conclude that there are a greater that can be regularized in UC in the Amazon biome than in others, suggesting that this type of compensation may occur more frequently in this biome.

According to SEMA and Micol et al. (2013), the largest compensable legal reserve deficit in the state is concentrated on the Amazon biome, with about 8,700,000 hectares, followed by the savanna with 1,900,000 ha. According to Azevedo and Reis (2015), the Pantanal has about 174,108 ha of reserve deficit, the smallest amount per biome.

Comparing the supply of area in UC with the legal reserve deficit of each biome and, hypothetically, if we consider that farmers want to opt for this type of compensation (since it is preferred by respondents), we calculated that in the

Amazon biome, only 12.6% of rural landowners in Mato Grosso would be able to

168 acquire area in UC. In the savanna biome it would be about 12.8% and in the

Pantanal biome, considering that the amount of land regularization area in UC is larger than the legal reserve deficit, 100% of the owners could be able to use this modality, leaving a liability of approximately 26% of areas in UC to be regularized. See table (6-3):

Table 6-3. Comparison between State UC area supply and biome-wide RL deficit (ha). Amazon Savanna Pantanal (Wetland) Area subject to land 1,098,892 245,056 219,691 regularization (ha) in UCs Total legal reserve 8,700,000 1,900,000 174,108 deficit RL compensation 12.6% 12.8% 100% * percentage via area donation in UC

* Remaining 26% deficit for land regularization in UC Pantanal Source: SEMA (2019); Micol et al. (2013)

Thus, those producers who are unable to compensate via area donation in

UC should opt for another compensation modality, and for the state of Mato

Grosso to obtain environmental gains, compensation must fall on RL surpluses which are subject to legal deforestation within the territory of Mato Grosso.

Database of the Areas Subject to Land Regularization in Protected Areas

Mato Grosso has approximately 1,563,640 hectares of land subject to regularization in state UCs (SEMA, 2019). To facilitate and guide environmental compensation in this modality, a database of private properties inserted in these protected areas is essential. According to SEMA (2019), the database of properties subject to land regularization in state UCs is still under construction. Therefore, the

169 state does not currently have a database that can effectively subsidize the process of environmental compensation through the donation of land subject to regularization in state UC.

The lack of information about the properties that are inserted in the UCs can, in fact, make this type of environmental compensation difficult or even unfeasible. As stated earlier, Mato Grosso has a serious land problem: overlapping titles, fake documents, land invasions, low degree of information in official records, among others (Lima et. al, 2005). These factors particularly hinder the reliable identification of private properties within the

Conservation Units.

The land issue, in fact, is one of the problems reported by the interviewed farmers for the acquisition of area in UC. According to the reports, they are afraid of acquiring areas because they are not sure if the domain title is legitimate and legal. Thus, only a database of the state itself will give the land regularization process in UCs the necessary security for both producers and the State itself to implement this type of legal reserve environmental compensation.

However, despite its importance, Mato Grosso gives visible evidences that it does not intend to produce this database. In a recent amendment, Decree 1491,

2018, in its art. 19, made optional what was previously an obligation (State Decree

1253, 2017); that is, the maintenance, by the State, of a database with the information necessary for land regularization is no longer compulsory. In addition,

Decree 1491 (2018) provided on incomplete and insufficient list of data, which are limited to “the georeferenced perimeter of the UC, the identification of primitive titles and the CAR of rural properties within it” (Art. 19), not taking into account, 170 however, the history of land problems that occur in Mato Grosso, and neglecting updated information from rural properties registry offices, domain chain of the domain titles, geo-referencing of properties inserted in UCs, and survey of occupants, among others.

On the subject, in 2014 the MPF launched an Action Manual for “Land

Regularization in Conservation Units” (MPF, 2014). This Manual addressed the magnitude of the implementation problem of the UCs, and identified the need to develop a land regularization plan for all public domain UCs that contain private property within their geographical boundaries. Based on the rules set by the

Normative Instruction 2/2009 by the Chico Mendes Institute [Instituto Chico

Mendes (ICMBio)] and the necessity of regularizing these protected areas, the

MPF identified the need for an UCs manager, in the federal case, ICMBio, to carry out a survey of occupants inside the Conservation Unit, a notary survey of domain titles, and the geo-referencing of rural properties.

In fact, this information is essential to ensure the implementation of legal reserve environmental compensation and land regularization of public domain UCs in the state. At the federal level, the process seems to be at a more advanced stage. In 2016, the ICMBio launched, in partnership with a non- governmental organization The Nature Conservancy - TNC, the system called

SIGTERRA (Information System about Territorial Consolidation of Federal UCs), designed to manage the information of all processes of land regularization of UCs at the federal level. According to Cheade (2015), the system was planned, the analysis of the processes of land regularization can be made within the system, which will include the land matrix with their information geo - referenced in maps, 171 as well as information relating to each property and its owner, being operated via internet network, with access to all the UCs.

Recently, resources from the Amazon Fund were allocated to the state of

Mato Grosso for the strengthening of Conservation Units. The Amazon Fund was created by the federal government through Decree No. 6.527 of 2008, with the objective of raising funds and applying them in actions to prevent, monitor and combat deforestation and to promote conservation and sustainable use in the Amazon biome. The fund is managed by the National Bank for Economic and

Social Development (BNDES) and the main donors are Germany and Norway. The resources are non- repayable, and the main beneficiaries are the Amazon States and the NGOs that act locally (Fundo Amazônia, 2019).

According to the Amazon Fund, in 2013, funds were transferred to State of Mato Grosso for SEMA, where one of the investment objectives is the strengthening of the protected areas (Fundo Amazônia, 2019). Among the various actions planned are georeferencing, demarcation, signaling, and a study to trace a land tenure diagnosis of nine UCs of public domain located in the Amazon biome. According to the reports in the Official Diary of the State, the contract for the execution of these services was signed in 2016 but did not succeed in coming to its end, since it was inquired by the management of the environmental agency and, subsequently, canceled by PGE's recommendation, and it is currently in the phase of new contracting.

Therefore, it is now up to the State, through environmental managers, to deliver and complete the services, which will be an important step towards the

172 formation of a reliable database for land regularization and environmental compensation in state UCs.

Scenario of State Legislation on RL Compensation in UCs

For environmental compensation in the area donation modality in UC to be effective and bring environmental gains to Mato Grosso, the state needs to adopt a proactive stance that encourages this type of compensation in the territory of Mato

Grosso. Analyzing the legal framework of Mato Grosso, it is clear that there is no incentive in this regard. The legislation about this matter, Complementary Law 592,

2017 and Decree 1491,2018, only repeated the criteria of the LC, missing the opportunity to legislate and to encourage the regularization of the UCs and protect the state's forest assets as well.

Actually, the current legislation tried to repeal a provision of State

Decree 420/2016 that only allowed environmental compensation in another state of the federation when there were not any available areas left for compensation in

Mato Grosso (art. 47). The referred norm valued the forest assets of Mato Grosso, both for those who have areas inserted in Conservation Units and have not been compensated yet, as well as those who have a legal reserve surplus and can offer these areas for compensation, through easement or CRA, avoiding new deforestation.

Therefore, currently, there is not any state legislation that encourages producers to compensate their RL liabilities in their own state, which indicates great difficulties for the environmental compensation to become a mechanism that can bring environmental gains to Mato Grosso, with the land regularization of UC’s, or even with the remuneration of forest assets of the state.

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UCs As a Priority for Compensation

The Forest Code (2012) establishes that if environmental compensation of

RL occurs outside the state, it should occur in areas identified as a priority by the

Union or by the states (Art. 66, § 6, III), which should favor the recovery of river basins, excessively deforested, the creation of ecological corridors, the conservation of large protected areas and the conservation or restoration of endangered ecosystems or species (art. 66, § 7).

According to two public servants interviewed, Mato Grosso has not established yet its priority areas for compensation. However, in a search of state law, we find that State Decree 2698 of December 30, 2014 established the priority areas for compensation based on two situations:

A. An owner of rural property located in other states of the Federation who want to compensate in MT. In this case, the priority areas would be as follows:

• Areas pending land regularization located in Conservation Units of the public domain of the State of Mato Grosso;

• Areas that shelter migratory or endangered species, according to SISNAMA list;

• Areas defined by the Ministry of Environment;

• Areas by the State of Mato Grosso, through its own normative act. (art. 1)

B. An owner of rural property located in the state of Mato Grosso who want to compensate in other states of the federation: areas located in Conservation Units.

As we can see, the protected areas appear in both situations as priorities for compensation, and this fact may contribute to the land regularization of UCs in the public domain to occur in the state.

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Besides that, the Mato Grosso Ecological Socioeconomic Zoning (ZSEE-

MT, 2018), although it has not come into force, since it is not a law yet, concluded and published an important study that can serve as an instrument for territorial and environmental planning to support political decisions, including the ones regarding the management of legal reserve compensation. In the specific guidelines provided for environmental regularization, the ZSEE- MT proposed to prioritize the legal reserve compensation in State Conservation Units that require land regularization and are in fragile environments. Therefore, the environmental studies of ZSEE-MT indicate the modality of donation of land subject to regularization in UC as a priority for environmental compensation of legal reserve.

However, it is not enough to indicate the priority areas; it is necessary that the state establish incentives and measures so that environmental compensation can be realized in these priority areas and also in areas with legal reserve surplus in the private properties (avoiding deforestation), by remunerating the producers who have preserved beyond what is required by law. We will discuss this more later.

On the whole, we can conclude that for environmental compensation, in the form of donation of land subject to regularization in UC, to be implemented in Mato

Grosso, the state must meet some conditions:

• Create a database with detailed information of private properties inserted in public domain UCs, notably, the identification of occupants, owners or squatters, notary survey, individual georeferencing and boundaries of UCs, among other data that provide a reliable record for the farmers to make use of this RL compensation.

• Set rules and legal procedures that encourage rural producers to opt for compensation in the form of acquisition of eligible areas for regularization in UC in the State of Mato Grosso. 175

Environmental Compensation through the Acquisition of Areas with RL Surplus in Private Rural Properties

Some rural producers have RL surplus in their properties and can use them to compensate other producers' deficits, through environmental easement, leasing or issuing CRA. Thus, it seems fair that rural producers that have preserved more than required by the Forest Code realize financial gains with their choice. And the more benefits they have, the more interested they are in maintaining the area as it is, and possibly, even improving the protective measures (Machado et al., 2018).

Therefore, adopting public policies that encourage compensation in the areas of forest assets (RL surpluses) that imply an additionality in the preservation, seems to be a great opportunity for the government of Mato Grosso to ensure, at the same time, environmental gains for the state, and economic gains for those who have preserved forest assets.

According to the Forest Code, there are legal reserve forest assets to be used as compensation in three different classes: I. native vegetation surplus that exceeds the requirement of 35% and 80% of RL (article 12, CF); II - RL surplus that exceeds 50% up to the limit of 80% of a private property located in the forest biome that did not suppress the vegetation at the predicted percentages at the time (art. 68, paragraph 2) ; and III - producers with small properties of up to 4 fiscal modules that can compensate their legal reserve area , regardless of size

(art. 44, paragraph 4).

Classes II and III are areas not subject to legal deforestation and, therefore, there is not any additional conservation. In these situations, the Forest Code only created a form of incentive to these owners for the purpose of maintaining and

176 preserving the remnants of native vegetation. Class I, on the other hand, consists of areas still subject to legal deforestation, which implies additional conservation, thus increasing the importance of preserving these territorial spaces. It is exactly about class I that we will focus on our research by understanding that the environmental gains of the compensation mechanism are related to the additional preservation of these areas that, legally, can still be deforested.

Micol et al. (2013) state that there is an RL deficit of approximately 8,7 million hectares in the Amazon biome and 1.9 million in the Savanna biome, totaling about 10,6 million hectares of RL deficit in the state of Mato Grosso. The study also accounted for the RL surplus of 8,8 million ha in the Amazon and 8.6 million in the savanna, totaling about 17.4 million hectares of surplus in both biomes (considering remnants of native vegetation in rural settlements). Finally, this study indicated that there are about 1.7 million hectares of areas with RL surplus that can be legally deforested (class I) in the Amazon biome and 6,7 million in the savanna. Regarding the Pantanal, Azevedo and Reis (2015) identified a total supply of 905,977 ha of RL surplus, of which 418,221 are in class I.

Table 6-4. Total amount of RL and surplus and class I (ha). Amazon Savanna Pantanal RL Deficit 8,700,000 1,900,000 174,108 RL Surplus 8,800,000 8,600,000 905,977 RL surplus that can be 1,700,000 6,700,000 418,221 legally deforested Source: Micol et al. (2013), SEMA (2019)) and Azevedo and Reis (2015)

According to the table, in the Amazon biome there is a balance between the surplus (8.8 million ha) and the RL deficit (8.7 million ha), which makes it even more important to set priorities so that compensation can fall on the producers with

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RL surpluses that can be legally deforested (class I), i.e. 1.7 million ha, representing 19% of the total supply of compensable area in the biome.

Adikusumo, Chandra e Silva (2017) state that if the state intends to contain deforestation through environmental compensation and provide additionality, i.e. environmental gains with conservation beyond what is required by law, there should be incentives for compensation to prioritize category I (areas subject to legal deforestation). In turn, Micol et al. (2013) conclude that the predominance of potential compensation in areas not subject to legal deforestation (81% of the total), with lower opportunity costs, may compromise the role of compensating for the conservation of forest assets still subject to legal deforestation. According to the authors, it will be necessary to couple other incentives, possibly linked to carbon, to make the conservation of these areas possible. For its part, in the

Savanna biome, there is a very large surplus of compensable area, about 6.7 million hectares, which indicates the need, probably, to open the compensation market to other states of the Federation (Micol et al., 2013).

In summary, this survey identified approximately 1,563,360 hectares of land subject to land regularization in State UC and approximately 8,400,000 hectares of areas with surplus RL (class I), totaling 10,381,860 hectares of priority areas for compensation in Mato Grosso. However, although Mato Grosso has an estimated

RL deficit of 10,774,108 hectares, the compensation must take into consideration the biome criterion, which leads us to the following table:

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Table 6-5. Comparison between the total area supply in UC and RL surplus (class I) and the possible compensable deficit of RL. Biome UC Offer Surplus offer Total of area RL deficit % of deficit (Class I) in UC and needed to class I compensate the total offer

Amazon 1,098,892* 1,700,000** 2,798,892 8,700,000** 32%

Savanna 245,056* 6,700,000** 6,945,056 1,900,000** 365%

Pantanal 219,691* 418,221*** 637,912 174,108* 365% (Wetland)

Total 1,563,640* 8,818,221 10,381,860 10,774,108 -

Source: * SEMA (2019), ** Micol et al. (2013) and *** Azevedo and Reis (2015)

Taking a biome analysis, in the Amazon there are 2,798,892 ha of legal reserve clearing areas for land regularization of UCs and surplus of legally deforested RL (class I), a number much lower than the total RL deficit in the biome that is 8,700,000 hectares. Thus, if the state prioritizes compensation in these two modalities, only 32% of the Amazon's legal reserve deficits would be compensated, leaving a 68% liability to be compensated through other options, including the issuance of CRA or forest easement in the legal reserve surpluses without additionality, which correspond to class II and III mentioned above.

On the other hand, the pantanal and savanna biome figures indicate that the supply of area in UC and class I exceeds the legal reserve deficit by 365%. Given this significant surplus, the state should prioritize compensation through donation of areas in UCs in both biomes, and encourage the opening of compensation in

Mato Grosso territory to other states of the Federation. Specifically, with respect to the savanna biome, the opportunity cost of areas with RL surplus (class I) is

179 very high, as the Savanna is an extremely valued region for agriculture, and hardly any landowner would stop producing to preserve beyond what is required by law.

In any case, if we consider only the Amazon biome for the prioritization of state public policies, about 2.7 million hectares could be compensated, providing land tenure regularization of all biome UCs and financially rewarding producers who have preserved beyond their obligation. Certainly, the implementation of these priorities would bring significant environmental gains to Mato Grosso.

Subsidies for the Definition of Priority Areas

In addition to the environmental gains from compensation in areas with surpluses of Class I RL and areas subject to land regularization in protected areas, the state shall elect other criteria for defining priority areas for compensation in

Mato Grosso: (1) Counties that have the largest areas in excess of RL (class I); (2)

Proposed Protected Areas in Mato Grosso Ecological and Economic Zoning -

ZSEE-MT (2018); (3) Priority areas for biodiversity conservation indicated by the

MMA. (4) Areas located in fragile environments defined in ZSEE-MT (2018).

(1) Counties that have the largest areas in excess of RL (class I) should be given priority by the state in the policy of controlling and encouraging environmental compensation and in fighting deforestation. Azevedo and Reis

(2015) identified the counties with the largest areas with surplus of RL in Mato

Grosso totaling 11,622,100 hectares; we highlight the top 10: Colniza, Aripuanã,

Nova Bandeirantes, Vila Bela da Santíssima Trindade, Juara, Tapurah, Canarana,

Alta Floresta, Nova Ubiratã and Feliz Natal

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Source: Azevedo and Reis (2015) Figure 6-2. Map of counties with more RL surplus areas (class I).

(2) Map of Protected Areas Proposed by ZSEE-MT (2018). The ZSEE-MT

(2018) environmental study proposes the creation of Protected

Areas, in regions that have important characteristics for the conservation of biodiversity and that can and should guide the definition by the State of priority areas for the compensation of properties with surplus RL (class I).

According to the ZSEE-MT (2018) , the definition of the proposed protected areas used the following criteria: integrity of natural systems, seeking to trace representative natural features, such as sub-basin river, mountains and plateau; maximum continuity of existing vegetation cover; contact of two or more plant types; representativeness of the Mato Grosso ecosystems; presence of important biological indicators, such as high species diversity and occurrence of

181 new species; important environments for the reproduction and/or nesting of wildlife species; contact between forest and savannah formations , resulting in ecotone systems , where different vegetation types mix and the ecological identity is given by the resulting specific composition; presence of sites with natural potential of scenic beauty, such as: rock formations, waterfalls, rapids, gullies, canyons , bays, floodplains and karst features ; assessment of current uses against the possibilities of biodiversity conservation; and presence of archaeological sites. (ZSEE, 2018).

The ZSEE- MT (2018) identified a total of 3,394,599 hectares distributed in 10 Proposed Protected Areas, which make up Sub - Category 3.2 of zoning, whose location can be found on the following map of the Proposed Protected

Areas, existing UCs and the Mato Grosso Indigenous Lands.

Source: ZSEE-MT (2018) Figure 6-3. Map of proposed protected areas, UCs and indigenous lands - ZSEE- MT (2018).

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(3) Priority areas for biodiversity conservation indicated by MMA by

Ordinance MMA 9 of 23 January, 2007 and the Brazilian Biodiversity Portal -

PortalBio. The Location Map of these areas can serve as a reference base in defining priorities areas for compensation with RL surplus. This study considered only the location of the areas defined by MMA in the “extremely high” category in terms of ecological importance and priority of actions, totaling 6,133,400 hectares, which indicates, that according to this study, they are the highest priority areas for conservation in Mato Grosso.

Source: MMA (n.d) Figure 6-4. Map of priority areas for biodiversity conservation in the extremely high category.

(4) Areas located in fragile environments defined in ZSEE-MT (2018). In defining the second guideline proposed by ZSEE-MT for the environmental regularization of rural properties, the study highlighted the prioritization of legal

183 reserve compensation in fragile environments. ZSEE has classified “fragile environments” as:

areas susceptible to concentrated erosion, due to the fragility of its sandy soils, associated with the very heavy relief, with the presence of mountains and escarpments. Portions of zones of this subcategory have areas that are not suitable for agricultural use, causing difficulties for indication of use, for this reason 12 out of its 17 zones were indicated for legal reserve compensation, thus enabling the maintenance of the original vegetation cover and the prevention of erosive processes (p.48).

Fragile environments were classified in subcategory 2.4 (Livestock and

Reforestation in fragile environments) and were indicated to be used for legal reserve environmental compensation, in order to avoid erosive processes and maintain native vegetation important for soil conservation.

Approximately 6 million hectares of fragile environments were indicated for

RL compensation, of which 47.7% is deforested area and 5.3% remaining native vegetation area.

Below is the map of subcategory 2.4, indicating the location of fragile environments in Mato Grosso.

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Source: SEPLAN - ZSEE-MT Multidisciplinary Technical Team (2018)

Figure 6-5. Map of fragile areas – ZSEE-MT (2018).

Therefore, in the implementation of the environmental compensation policy, the state should take a proactive stance, establishing rules and measures that prioritize compensation in areas subject to land regularization in State

Conservation Units and in areas with legal reserve surplus (class I).

In addition to these two priorities, the state should also observe other criteria that may contribute to the identification of important areas for environmental compensation, such as the proposed protected areas in the ZSEE-MT (2018); priority areas for biodiversity conservation indicated by the MMA; and areas located in fragile environments defined in the ZSEE-MT (2018). The table below allows us to identify the number of hectares in each of these areas that could make 185 up the map of priority areas for compensation. However, this map identified the total area of the ten Municipalities with the largest surplus of legal reserve (class I), but not all of this area falls into class I, while at the same time class I areas may exist in other municipalities. Therefore, the RL surplus areas in the ten

Municipalities should be taken as only an indication of the size of priority areas available for compensation in the state.

Table 6-6. Areas of priority for environmental compensation in MT. Areas in Municipalities Proposed Fragile Areas Pri orities TOTAL UC with RL UC Area areas for surplus conservation 1,563,640 11,622,100* 3,394,342 6,028,290 6,133,436 28,741,808

* This amount corresponds to the total area of the municipalities where the largest areas of RL surplus in MT are located; it is not possible to identify exactly the surplus areas. Source: SEMA (2019); ZSEE-MT (2018); Azevedo and Reis (2015); and MMA (n.d)

The combination of all these areas allows us to build a map of priority areas for environmental compensation in Mato Grosso. For the elaboration of this map, the methodology used was the processing of data in GIS environment in the geoprocessing laboratory of MPE-MT, using the computer program ArcMAP. A database (.gdb) has been created for Shapefiles storage, where all reference databases were stored and redesigned for the SIRGAS 2000 UTM Zone 21S system. Then the shapefiles were cut to the limits of the state of Mato Grosso and overlapped so that when one feature showed spatial overlap with another, one of them was erased in the overlapping area according to the following criteria:

Proposed UCs - ZSEE-MT > Fragile Areas > Priority Areas - MMA > IPAM

Municipalities. Finally, a shapefile (map) of “Priority areas for environmental compensation” was obtained, preserving the attribute table of each base of origin.

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Figure 6-6. Final map of priority areas for compensation in MT.

Undoubtedly, the information summarized in this map could contribute to public policies that encourage environmental compensation to be directed to these priority areas, contributing to Mato Grosso's environmental gains through the implementation of legal reserve compensation.

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CHAPTER 7 CONCLUSIONS

This research aimed to identify the difficulties, challenges and opportunities to implement environmental compensation of legal reserve in the state of Mato

Grosso.

Through a historical retrospective of the legal reserve, the Brazilian forest policy was and still is the scene of heated debates and protagonist conflicts, by apparently antagonistic interest groups, developmentalists (ruralists) and environmentalists. The debate between conservation and development led to forest policy and, notably, the legal reserve instrument, undergoing multiple legislative changes until it reached the current model of the 2012 Forest Code. The changes were driven by different historical contexts and political pressures over the years. This allowed forest legislation to sometimes become more rigid and protective (environmental pressure) or more flexible (ruralist pressure).

This alternation between flexibility and the rigidity of the law is the result of pressure group movements in Brazilian forest policy. Environmentalists gained strength notably in the 1990s, forming a group that includes extractive organizations, indigenous people, agricultural workers, family farmers and environmental NGOs and international institutions. In turn, the ruralists form a solid pressure group with strong representation in the National Congress and in important positions in the Executive Power, having made great gains in recent years, notably in the 2012 Forest Code, which represents significant setbacks in terms of forest protection in Brazil.

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The strength of the pressure groups, environmentalists and ruralists, therefore, mark a construction of the Brazilian forest policy, which reveals not only the legislative discussions, but also the strategies for the implementation of the laws.

The Mato Grosso case study showed that the implementation of environmental compensation is still a major challenge to be faced. The environmental regularization of rural properties, of which legal reserve compensation is the last step, is still in slow progress. This path is also marked by pressure from the ruralists, who impose strong resistance in fulfilling the obligation to restore a legal reserve, that is, often with the support of the state itself.

This research revealed that over 20 years of exposure to environmental compensation, in which there are 155,000 rural properties in the state, a maximum of 50 compensations have been made in Mato Grosso, with no occurrence after the 2012 Forest Code, including the existence of great difficulties and challenges for its implementation in the state. In general, we can say that the constant changes in the legal reserve legislation and, specifically, in environmental compensation brought great insecurities to the farmers and the state agents themselves, who are forced to live with an environment marked by the uncertainties of their rules. The provisional character of laws and, consequently, public policies ultimately discourage the recipients of the rules from complying with their determinations and obligations, since at any time the laws and policies may change again.

Environmental compensation of RL in Mato Grosso has already been the subject of four changes in federal and ten state legislation, without taking into 189 account other changes, as promoted in the process of environmental regularization of rural properties, which directly reflect on the implementation of environmental compensation.

RL environmental compensation is a final step in the environmental regularization process. If the process does not have a regular procedure, the rules are changed frequently, and the process does not end, and compensation will not be effective. Indeed, research has shown that one of the major difficulties in enforcing RL compensation is the very process of environmental regularization of rural properties, which has shown over the years to be bureaucratic and inefficient.

Mato Grosso began the process of regularization of rural properties in early

2000 with the issuance of LAU, until reaching the current model of CAR and PRA that was established in the 2012 Forest Code. Between 2000 and 2015, 9,275

LAUs were issued, a number originally low. considering that the state has 155,040 rural properties. Thus, with a percentage of only 5.9% of properties regularized over 15 years, we can conclude that there are, in fact, serious difficulties in the process of environmental regularization. After 2015, with new rules and procedures brought by the Forest Code, or environmental regularization process - PRA still suffers to be implemented, and in this period environmental compensation was ineffective.

The data show us that, at all of its stages, the technology systems and procedures adopted by the state environmental agency to promote the regularization of legal reserve deficits in rural properties were a failure. It is difficult to admit, but it is true, that the biggest obstacle to the restoration of environmental liabilities in Mato Grosso is the process of environmental regularization itself. 190

The current PRA is not yet a reality. Until 06.07.2019 only 794 rural properties were regularized by the new system - SIMCAR and among these, no compensation was made. In fact, the system has proved to be a real barrier that prevents the implementation of compensation and the completion of environmental regularization processes. It seems ironic to say, but nowadays, the technology system, which was created precisely to speed up the process, has become its biggest villain.

While PRA numbers are currently insignificant compared to the amount of rural property to be regularized, another concern is time. The Forest Code was promulgated in 2012, that is, more than seven years ago, and so far, it has not yet been able to implement the CAR and PRA, the main instruments for the legal reserve regularization.

If, on the one hand, there was an increase in the number of CARs enrolled in the database, which allows a better control of environmental liabilities and a better fight against deforestation, on the other hand, the simple enrollment to CAR does not promote the recovery of legal reserves. The MT LEGAL program, launched by Governor Blairo Maggi, in 2009, prioritized the issuance of the CAR, to meet the demand of farmers who needed to present regularity document to the market and banks, and delayed the regularization of the legal reserve for a second moment, which eventually did not happen.

Therefore, we still need to move forward, and fast. The current PRA still suffers to be implemented. CARs need to be reviewed and validated by the environmental agency in order to move to the most important phase, namely the effective settlement of legal reserve deficits. Regularization needs to get out of the 191 system and reach the floor. For this, it is absolutely necessary to overcome the technological barrier, promoting the necessary adjustments in the system

(SIMCAR), so that the execution of the terms of commitment (TC) of restoration and compensation of environmental liabilities is initiated and, finally, the degraded

RL areas are recovered.

Thus, improving the technology system with the construction of tools that enable the completion of the environmental regularization process is the first barrier to be overcome. The second step is to improve the procedures. The lack of a standard operating procedure (POP) makes it difficult to process and finalize the process. Research shows us that over the years, regularization processes, primarily through LAU and then CAR, have been suffering from going back and forth between SEMA sectors, with constant indications of documentary and technical backlogs that slow or even hinder the conclusion of the process and the regularization of the legal reserve.

One of the major procedural bottlenecks is the requirement to prove the documentary ownership of the rural property. The Mato Grosso land problem, which is not small, on the contrary, is complex and secular, was brought into the process of environmental regularization. The requirements of proof of ownership of the property and its exact location have prevented the completion of the process.

Time and energy are lost in documentary analysis of rural property and the main objective of regulating environmental liabilities is not even reached. Mechanisms must be created by state so that the land tenure issue does not prevent environmental regularization.

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Besides the land issue, the research identified other factors that hinder the conclusion of the processes. The first is the fear public servants have of giving an opinion or issuing a license that, later, might be considered illegal or irregular and that this, eventually might submit them to criminal prosecution, prison, or that they may suffer under an investigation by the public prosecution or police. In fact, the number of police operations, imprisonments, and lawsuits against public servants in recent years is considerably high. Without going into the merit of legality and feasibility in these operations, the majority based on fraud, it is certain that they promote a deep fear among public servants who, due to this, create document and technical backlogs in order to avoid concluding regularization processes.

The second factor is that the market of agricultural commodities and the financing banks have only required of rural producers, as proof of environmental regularity, the enrollment in CAR or APF, documents that are only declaratory and electronic and that, in their initial stage, do not submit to any technical analysis.

The early obtaining of the document of regularity required by the market and by the banks has driven the rural producers, after acquiring the CAR or APF, to take a passive, almost inactive stance in the process of environmental regularization and, as some of the rural producers who were interviewed mentioned, they just wait or else, they want to be the last be regularize.

In fact, the end of the environmental regularization process is the beginning of the recovery of legal reserve deficits, meaning that, from this moment, the producers must, finally, recover or regenerate the legal reserve area that was illegally deforested or acquire another area for compensation. However, as we know, the effective regularization of the legal reserve imposes financial costs on 193 rural producers and not all are willing to pay. On the other hand, even those who are willing and able to pay end up bumping into the bureaucracy of the legal process.

Combined with the financial cost of the regularization of the legal reserve, the rural producers also mention other aspects that, in their view, contribute to the lack of effectiveness in the environmental regularization process and, consequently, the environmental compensation. The first, no doubt, is that a good part of the producers consider the law unfair and excessive for requiring the rate of

80% maintenance of legal reserve in the Amazon biome and 35% in the savanna, which leads them to resist the regularization of the legal reserve liabilities. The second factor coincides with the difficulty mentioned above, concerning the uncertainty caused by the legislative and procedural changes over the years. Not having clarity about the rules of the game or knowing that at any moment they can be changed, many producers, with orientation from the Rural Producer

Associations, become inert and passive, just waiting for a firmer stance from the government that will definitely require them to make the regularization. Therefore, without demands from the government, there is no regularization.

Finally, the rural producers bet on the easing of the law and the amnesty of environmental violations and, with the strong nod from the government of President

Jair Bolsonaro, that has a less environmentally friendly discourse, the tendency is that the rural producers will increasingly stay as they are, that is, “waiting.”

Therefore, the implementation of the Forest Code (2012) is still in slow progress. The case of Mato Grosso shows us that the implementation of forest policy has been under pressure from interest groups, notably the ruralists. 194

Unwilling on the part of rural producers, who remain passive, and without a firm stance from the state, which is often subject to pressure from rural producers, the

CAR and PRA instruments are unlikely to achieve their stated objectives, thus, the implementation of environmental compensation, and the effective recovery of degraded RL will not leave the paper (or system).

The identification of these difficulties allows us to see more clearly the challenges that still have to be faced, especially by the State, for the implementation of the environmental regularization process and the legal reserve compensation. RL compensation should bring advantages not only to farmers, but especially to the environment. In this respect, the role of the state is critical in ensuring that offsets maintain “ecological identity” between areas as established by the STF and that there are incentives for producers to be able to compensate within the state itself and in areas defined as priorities. In addition, it is also up to the State to create a database of areas subject to land regularization in UC, allowing greater security for farmers who choose this modality. Finally, the CRA compensation modality will only be established if the state regulates the rules, previously established at the federal level.

In summary, we can point out the following challenges for the implementation of the environmental regularization process and legal reserve compensation in Mato Grosso:

• Technology system improvements (SIMCAR), allowing the technical analysis and validation of the CAR safely and quickly, as well as the conclusion and monitoring of the regularization processes with the construction of the environmental compensation module;

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• Improvements to CAR and PRA procedures with the definition of POPs, which reduce or inhibit the number of pending issues and the procedural back and forth, providing security to users and public servants;

• Establishment of mechanisms that detach the land tenure proof of rural property from environmental regularization;

• Reduction in the hiring of civil servants without competition, and investment in the training of effective civil servants and agreements with official institutions, such as NGOs, municipalities and other agencies, which allow accelerating the validation process of CAR information;

• Creation of legislation that stimulates the compensation of RL in Mato Grosso territory, notably, in the priority areas to be identified;

• Establishment of objective criteria that can bring definitions of “ecological identity” between compensated areas, according to the decision of the STF;

• Identification of priority areas for compensation, with the creation of mechanisms and measures that encourage compensation in the Mato Grosso territory, in areas subject to land tenure regularization in public domain UCs, and in areas with legal reserve surpluses subject to legal deforestation.

• Creation of a database with detailed information of private properties inserted in the public domain UCs, notably, the occupational identification of the owners or squatters, notary survey, individual georeferencing and boundaries of the UCs, among other data that provide a reliable register so that farmers can safely use this RL compensation modality;

• Regulation of the CRA, through laws and decrees that enable the execution of the guidelines set forth in Federal Decree No. 9,640 of December 27, 2018.

As we can see, overcoming the challenges will require proactive action by the state, adopting measures that allow the effective implementation of the process of environmental regularization. If the challenges are overcome, there is indeed a window of opportunity for the legal reserve environmental compensation to bring additional advantages to the Mato Grosso environment. This study identified environmental gains in two situations: the implementation of environmental compensation through the donation of land subject to regularization in public

196 domain in a UC; and the possibility of maintaining surpluses of legal reserve subject to legal deforestation in private property.

Compensation through donation of an area owned inside the boundaries of a UC is the preferred modality by the interviewed farmers and, if established, it might guarantee, at the same time, the regularization of legal reserve deficits and the land tenure regularization of the Conservation Units of Public Domain. The research identified that about 87% of the State UCs, or 1,563,640 ha still have land regularization pending. The first step for a Conservation Unit to get off the “paper” is land regularization, considering that the existence of private property inside it brings serious environmental consequences ranging from impact on flora and fauna, such as fire, use of pesticides, deforestation, traffic of people, etc., to social conflict, mainly between property owners and authorities. And also, the final transfer of private property to Public Powers allows the UC to be properly preserved and protected, ensuring the conservation of biodiversity and its use for the end for which it was created. In this way, to prioritize environmental compensation for land regularization of the State UCs is a measure that, beyond ensuring the recovering of legal reserve deficits, contributes to the implementation and conservation of protected areas, ensuring gains for the environment.

Similarly, the research shows that prioritizing legal reserve compensation in properties with legal reserve surplus in areas where legal deforestation would otherwise be permitted is a means of guaranteeing additionalities in the preservation of forests in Mato Grosso and reducing deforestation. In fact, it seems fair that producers that preserved more than what was demanded by the Forest

Code, be financially compensated for their choice. The more benefits are conferred 197 to them, the more interested they will be in maintaining their areas in the present condition and, possibly, improving protective measures (Machado et al., 2018)

We classified these areas with additional preservation as class I and identified, through data published by Micol et al. (2013) and Azevedo and Reis

(2015), that in Mato Grosso there are approximately 1.7 million ha of these areas in the Amazon biome, 6.7 million in the savanna, and 418,2221 ha in the pantanal.

The offer of legal reserve in the pantanal and savanna biomes, when compared to the deficit, shows a much greater surplus, a fact that can complicate the compensation of class I areas. In the case of the savanna, for example, there is a total deficit of 1.9 million ha of legal reserve and a surplus of 8.6 million, and of this total, 6.7 million ha is of class I areas (Micol et al., 2013). And so, considering that the offer is much greater than the deficit in this biome, even in class I areas, the compensation market probably will not happen, because the excessive offer will lower the price value of compensation and not stimulate rural producers. This is exacerbated by the high opportunity cost of areas with legal reserve excess in the savanna biome since this region is extremely valued for agriculture and it is unlikely that a property owner would choose to preserve more than what is mandatory by law. Thus, in the savanna biome, the recommendation is to open the compensation market to other states in the Federation (Micol et al., 2013), so that the legal reserve excesses can be used to compensate deficits in other states.

On the other hand, in the Amazon biome, where there is a balance between the excess (8.8 million ha) and the deficit (8.7 million ha) of legal reserve, the total class I area is 1.7 million ha (Micol et al., 2013), that is, 19% of the supply, making it important to establish priorities so that legal reserve compensation falls on 198 producers who have excess of legal reserve amenable to legal deforestation (class

I). We see then, that, for owners of class I areas to feel stimulated to offer these areas for compensation, especially in the Amazon biome, the state should create incentives and mechanisms for them to receive financial return to continue to preserve beyond the requirements of the law.

Therefore, the role of the state in the implementation of environmental compensation is fundamental, not only in establishing measures to address and overcome the challenges pointed out in this research, especially in improving the process of environmental regularization, but also in creating opportunities for compensation. an environmentally beneficial mechanism, with the definition of areas subject to land tenure regularization in public domain UC, and areas with RL surplus that can be legally deforested as priorities for compensation.

The State's proactive stance in identifying priority areas for compensation may contribute to the regularization of all State Conservation Units in the public domain, i.e. 1,563,640 hectares and the preservation of at least 1,700,000 hectares of surplus of RL subject to legal deforestation in the Amazon biome.

In addition, other criteria identified in this study, allow the legal reserve compensation and also contribute to the conservation of environmentally important areas for the State such as: the areas located in the municipalities that have the largest areas in excess of RL (class I); proposed protected areas in the ZSEE-MT

(2018); priority areas for biodiversity conservation (extremely relevant category) indicated by the MMA; and Areas located in fragile environments defined in ZSEE-

MT (2018) (Figure 6-6).

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In short, environmental compensation of legal reserves in Mato Grosso is not yet a reality and the success of its implementation and any environmental gains for Mato Grosso will depend on the state adopting public policies that see compensation as an opportunity to value forest assets and prevent deforestation of new areas.

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Decree 7029, of December 10, 2009 (2009). It establishes the Federal Program for Supporting the Environmental Regularization of Rural Properties, called the “More Environment Program”, and other measures.

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Law 6938 of August 31, 1981 (1981). Provides for the National Environmental Policy, its purposes and mechanisms of formulation and application, and other measures.

Law 8171 of January 17, 1991 (1991). It deals with the agricultural policy.

Law 9605 February 12, 1998 (1998). Provides for criminal and administrative sanctions arising from conduct and activities harmful to the environment, and other measures.

Law 9985 of July 18, 2000 (2000). Regulates art. 225, § 1, items I, II, III and VII of the Federal Constitution, establishes the National System of Nature Conservation Units and other measures.

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Normative Ruling 2, of May 5, 2014. Dispõe sobre os procedimentos para a integração, execução e compatibilização do Sistema de Cadastro Ambiental Rural-SICAR e define os procedimentos gerais do Cadastro Ambiental Rural-CAR. Available from: http://www.car.gov.br/leis/IN_CAR.pdf >.

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Pacheco, R.; Rajão, R., Soares-Filho, B. & Hoff, R. V. D. (2017). Regularization of Legal Reserve debts: Perceptions of rural producers in the state of Pará and Mato Grosso in Brazil Ambiente & Sociedade, 20(2), 181- 200. https://dx.doi.org/10.1590/1809-4422asoc0012r1v2022017

Pereira, L. C. B. (2001). Uma nova gestão para um novo Estado. Revista do Serviço Público, 52(1), 5-24.

Provisional Measure 1511-17 of November, 20, 1997 (1997). Gives new wording to article. 44 of Law No. 4,771, of September 15, 1965, and provides for the prohibition of increasing the conversion of forested areas into agricultural areas in the northern and northern parts of the Midwest, and other provisions. Available in http://www.planalto.gov.br/ccivil_03/mpv/Antigas/1511-17.htm

Provisional Measure 1736-31 of December 14, 1998 (1998). Gives new wording to arts. 3, 16 and 44 of Law No. 4,771, of September 15, 1965, and provides for the prohibition of increasing the conversion of forested areas into agricultural areas in the northern and northern parts of the Midwest, and other measures. Available in: http://www.planalto.gov.br/ccivil_03/MPV/Antigas/1736-31.htm

Provisional Measure 1956-50 of May 26, 2000 (2000). Changes the arts. 1, 4, 14, 16 and 44, and add provisions to Law 4,771 of September 15, 1965, which establishes the Forest Code. Available in http://www.planalto.gov.br/ccivil_03/mpv/antigas/1956-50.htmMetzger, J. P. (2010). O Código Florestal tem base científica. Natureza & Conservação, 8(1), 92-99.

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Ranieri, V.E.L. (2004). Reservas legais: critérios para localização e aspectos de gestão. 149 f. Tese (Doutorado) – Escola de Engenharia de São Carlos, Universidade de São Paulo, São Carlos, 2004

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Rebelo, A. (2010). Parecer do relator deputado federal Aldo Rebelo (PCdoB-SP) ao Projeto de Lei nº 1876/99 e apensados. Brasília, DF: Câmara dos Deputados, 2010. 270 p.

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State Complementary Law 38 of November 21, 1995 (1995). Provides for the State Code of the Environment and other measures.

State Complementary Law 214 of June 23, 2005 (2005).Creates the Secretary of State for the Environment - SEMA, and makes other arrangements.

State Complementary Law 232 of December 21, 2005 (2005). Amends the State Environmental Code and makes other arrangements. Mato Grosso

State Complementary Law 233 of December 21, 2005 (2005). Provides for the Forest Policy of the State of Mato Grosso and other measures.

State Complementary Law 343 of December 24, 2008 (2008). Creates the Mato Grosso Program of Rural Environmental Regularization - MT LEGAL, disciplines the stages of the Environmental Licensing Process of Rural Properties and other measures.

State Complementary Law 592 of May 26, 2017. (2017). It deals with the Environmental Regularization Program - PRA, disciplines the Rural Environmental Registry - CAR, the Environmental Regularization of Rural Properties and the Environmental Licensing of Polluting Activities or Users of Natural Resources, within the State of Mato Grosso, and other measures.

State Decree 1401 of January 28, 1997 (1997). Regulates the State Environmental Code regarding the environmental licensing of forest activities. Mato Grosso.

State Decree 2698 of December 12, 2014 (2014). Provides for the identification of priority areas within the State of Mato Grosso for the purposes of Legal Reserve Compensation between States, as well as procedures.

State Decree 420 of February 5, 2016 (2016). Provides for the Rural Environmental Registry - CAR and the Environmental Regularization of rural properties; implements the Environmental Regularization Program (PRA) in the state of Mato Grosso and makes other arrangements.

State Decree 1031 of June 2, 2017 (2017). Regulates Complementary Law No. 592, of May 26, 2017, regarding the Environmental Regularization Program, the Mato Grosso Environmental Registration System - SIMCAR, the registration and analysis of the Rural Environmental Registry.

State Decree 1491 of May 15, 2018 (2018). Regulates Complementary Law 592, of May 26, 2017, regarding the forms of environmental regularization in rural properties and amends provisions of Decree 1031 of June 2, 2017.

State Law 7330 of September 27, 2000 (2000). It establishes the system of compensation between altered legal reserve areas in areas of State Conservation Units and other measures. Mato Grosso

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State Law 7868 of December 20, 2002 (2002). Amends and complements the Legal Reserve Compensation System, provided for in Law No. 7,330 of September 27, 2007, Decree No. 2,759 of July 16, 2001, and Decree No. 3,815 of January 21, 2002, as well as new criteria for Single Environmental License - LAU. Mato Grosso

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Zoneamento Socioeconômico Ecológico de Mato Grosso (2018). ZSEE-MT. Revisão do ZSEE, Caderno 2, Estudo Ambiental. Retrieved on September, 18, 2019 from: http://www.seplan.mt.gov.br/-/10951395-zoneamento- 2018?ciclo=cv_gestao_inf

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BIOGRAPHICAL SKETCH

Ana Luiza Ávila Peterlini de Souza is Brazilian, with a Degree in Law from the University of São Paulo and has been a Public Prosecutor in the state of Mato

Grosso since 1995. Mato Grosso is one of the states of the Brazilian Amazon, a region of great ecological importance to the planet. As a prosecutor, she has been active in the defense of the environment, especially against deforestation in the

Amazon. This work sparked her interest to dive more deeply into the environmental issue from a multidisciplinary perspective, leading her to the University of Florida for a Master of Arts at the Center for Latin American Studies with a certificate in

Tropical Conservation and Development (TCD).

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