Brazil and the EU: the value of going green
Environmental concerns over the Amazon serve geostrategic purposes
Representatives from Brazil and the European Union will meet next month to discuss an environmental addendum for the Mercosur-EU free trade agreement, without which the deal will not be ratified, or so says Europe.
Specifically, the EU wants Mercosur members – that is, Brazil – to reinforce commitments to the environment, climate and sustainable development.
At the heart of the issue is the Amazon basin, an enormous untamed region filled with biodiversity and natural resources. For both Brazil and the EU, the future of the Amazon ties into economic necessities and developments critical to their future.
The significance of EU-Mercosur trade has changed since initial talks started 20 years ago, when the end of the Cold War heralded a future of healthy, robust regional blocs meant to prop up a new, multipolar world. But now it’s not so clear cut. The EU grew from 15 members to 27.
Brazil became the powerhouse in Mercosur as Argentina spent the better part of the post-Cold War era tending to its sluggish economy. This is to say nothing of how the global economy has since been shaped by financial crises, a pandemic, trade wars, sanctions and so on.
This is why the environmental aspects of the FTA are so important. The two sides already have healthy trade ties: The EU is Mercosur’s second largest trading partner after China and is its top source of foreign investment. From 2000 to 2017, the accumulated stock of EU investment in Mercosur grew from 130 billion euros to 365 billion euros ($160 billion to $445 billion).
But how their ties shape up going forward will depend on how they pursue geostrategic agendas that intersect with environmental and climate concerns.
For Brazil
From Brazil’s perspective, the Amazon represents a challenge to its cohesion and national defense. A north-south socio-economic divide has been one of the country’s defining features since the second half of the 19th century. Wealth, resources and development have historically been concentrated in the south; the north, which includes the Amazon, lagged behind.
This is a problem for a central government whose wants and needs are not shared by a large portion of its citizens. The Brazilian government has thus regularly sought out strategies and projects to help decrease the socio-economic gap between the north and south.
For example, in 1953 the government introduced the concept of the Legal Amazon to group together an area of the country that historically shared similar political, economic and social challenges.
The idea was that creating a subregion would make it easier for the government to plan and promote economic development. The Legal Amazon now includes 25 million Brazilians and covers 61% of the country’s territory (about 5.2 million square kilometers).
On matters of national defense, the Amazon is a series of security problems for the central government. The length, impermeability, distance from the country’s core and lack of connectivity with the rest of Brazil make it nearly impossible for the Brazilian military to physically enforce border controls. Brazil uses the military it does have in the region as a springboard for trying to integrate the region with the mainstream country.
The Amazon Triangle (where the borders of Brazil, Peru and Colombia meet) is a hotbed for drug trafficking and other illicit activity, which eventually spreads to Brazil’s metropolitan areas. Without much of a government presence, areas such as these are vulnerable to outside influence that challenges what little control the government does have in the Legal Amazon. Finally, the region is a critical doorway for Brasilia to extend its reach into the Northern Hemisphere and to give it much-needed strategic depth.
In other words, the Amazon could be key to unlocking Brazil’s economic and geostrategic potential.
For the EU
For the European Union, the Amazon symbolises a commitment to long-term energy, finance and infrastructure strategies. Earlier this month, Brussels finally passed its multiannual financial framework, which designates EU funding from 2021 to 2027.
Much of the budget incorporated ideals from the Green Deal, which calls for environmentally friendly initiatives and clean energy, as well as the infrastructure modernisation, sustainable financing and responsible R&D to support those efforts.
The budget allocates 132.8 billion euros to the single market, innovation and digital, and 356.4 billion euros to natural resources and the environment, both of which directly fund initiatives in line with the Green Deal and which account for about 45% of the entire budget.
This being the EU, however, its members don’t all agree on the Green Deal or its mandates. The strategy promoted by the Green Deal favours Western Europe’s more developed economies.
According to the European Environment Agency, western economies also sustain the greatest amount of economic losses per capita related to climatic change. The negotiations surrounding environmental components of the EU budget pitted the interests of western EU economies against eastern EU economies.
The new budget puts a premium on renewables and industrial-tech activities, which are more expensive and more difficult for the less developed eastern economies to pursue. Due to the high cost of going green, these countries tend to accept more easily the continued use of cheaper fossil fuels. While EU countries cannot undo the 2021-27 budget, the proponents of the Green Deal must regularly stand by their decision lest they risk losing face and reigniting the climate debate.
By taking up issue with the Amazon, the western, proGreen Deal countries have a convenient PR opportunity with which they can promote their ideals without alienating the eastern economies that have little to lose from greater Amazon protection.
Jockeying for Position
Brazil and the EU remain at loggerheads because their individual economic and political priorities result in competing visions for the future of the Amazon. Brazil has a need to develop Amazonian territory, including using natural resources and building out infrastructure, such as hydroelectric dams.
The EU, however, has an interest to publicly speak in favour of preservation and reduced activity. Both are motivated by fundamental needs to maintain economic and political agendas that aim to strengthen their standing in the long term, and both are trying to position themselves to achieve those ends.
Brazil is using its national sovereignty over much of the Amazon to set the rules of play. Earlier this month, for example, the Brazilian Senate approved a bill that allows foreigners to purchase rural land. Foreign land purchase has been highly regulated in Brazil; this bill merely removes certain restrictions – i.e., purchases must be less than 25% of the municipality.
Acquisition of real estate in areas essential to national security or that involve certain types of nongovernmental organisations require foreign buyers to obtain the prior consent of the National Defense Council.
The bill also specifies that any land purchase in the Amazon must have council approval. The central government believes that opening up rural land purchases could attract up to 50 billion reais ($9.6 billion) per year in
investment that would help stimulate rural economies, create jobs and i mprove food supply.
Support for the bill includes the bloc led by President Jair Bolsonaro, but opponents say it creates risks to national security and to commodity production.
Brazil also designed initiatives that focus on halting illegal activities in the Legal Amazon that leave open plans for legal economic development. In February, the government created the Amazon Council, which is meant to design plans and initiatives for protecting, defending and sustainably developing Brazilian forestry.
In practice, the council would be an intermediary between the outside world and Brazil over Amazon issues. It still supports the government’s broader development and is currently proposing reforms that would allow it to control NGOs operating in the Amazon and for the Amazon Fund to use its money to support economic development.
Both have already been rejected by the Europeans.
In April, the military started Operation Green Brazil 2, which aims to crack down on illegal logging and drug trafficking in the Legal Amazon. Its mandate was recently extended by six months to April 2021. All of these gestures are Brazil’s attempts to demonstrate some environmental concern and appease outside demands without compromising its national agenda.
For its part, the EU is trying to improve its negotiating position by targeting Brazil’s economy. Leading the charge are European Green parties, whose membership consists largely of lawmakers from France, Germany, Belgium, Austria, the Netherlands, Finland and Sweden – all developed European economies that will benefit from Green Deal initiatives.
The EU’s PR campaign has focused heavily on mobilising NGOs, one of Europe’s strengths, and the private sector to use financial pressure against the Brazilian government. Global investment funds, banks, multinationals and large Brazilian companies have threatened to divest from the country if it does not change its stance on the Amazon.
Especially concerning is the momentum building on soybeans, one of Brazil’s most prised and valuable commodity exports. Food companies such as Nestle, Walmart, Tesco, McDonald’s and others have started to ask major suppliers like Archer-DanielsMidland Co., Bunge Ltd., Cargill Inc. and Louis Dreyfus Co. to stop trading soybeans associated with deforestation in Brazil’s Cerrado region.
The food companies have said they may refuse soy from these traders if it comes from this deforested area. The Brazilian economy has performed poorly in the past decade, and especially within the last five years.
The country has been unable to execute much-needed structural reforms because of the COVID-19 pandemic and relies even more now on investment to spur economic growth. It’s vulnerable to fluctuations in European spending behaviour, so threats to investment or boycotting illegally sourced goods resonate with Brazil.
The battle over the Amazon highlights the intersection of geopolitics with environmental concerns. The latter have typically been put on the back burner, partly because climate change is such a long-term issue that it’s easy to ignore (and partly because it’s financially beneficial to).
But as climate-related issues become more important, these types of frictions will increasingly arise.
Allison Fedirka is the director of analysis for Geopolitical Futures. www.geopoliticalfutures.com