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PP RUEHAO RUEHCD RUEHGA RUEHGD RUEHGR RUEHHA RUEHHO RUEHMC RUEHNG
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DE RUEHBR #1667/01 2261717
ZNR UUUUU ZZH
P 141717Z AUG 06
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC PRIORITY 6335
INFO RUEHRI/AMCONSUL RIO DE JANEIRO 2654
RUEHSO/AMCONSUL SAO PAULO 7724
RUEHRG/AMCONSUL RECIFE 5271
RUEHWH/WESTERN HEMISPHERIC AFFAIRS DIPL POSTS
RUEHRC/USDA WASHDC

UNCLAS SECTION 01 OF 03 BRASILIA 001667 
 
SIPDIS 
 
SIPDIS 
 
STATE PLEASE PASS TO USAID LAC/RSD EGAT 
STATE PLEASE PASS TO OES/ETC 
 
E.O. 12958: N/A 
TAGS: SENV KSCA EAGR BR
SUBJECT: CAN A ROAD SAVE THE AMAZON? THE BR-163 - Corrected Version 
 
 
BRASILIA 00001667  001.2 OF 003 
 
 
 
REFTEL: (A) 05 BRASILIA 598, (B) 05 BRASILIA 2426 
 
¶1.  Summary:  BR-163 is an unpaved highway located in Brazil's 
Amazon Forest which leads from the city of Santarem, in the state of 
Para, to Cuiaba, Mato Grosso.  While abandoned for the past three 
decades, it has once again become a government priority for the 
development of that area.  The region is home to three large 
hydrographic basins, and is one of the most productive agricultural 
areas of the country, especially in terms of soybean production. 
However, the road provides a challenge for the GoB to demonstrate 
that it can sustainably develop the Amazon and mitigate the 
construction's potential environmental impacts.  End Summary 
 
¶2.  The Santarem - Cuiaba road (BR-163) was initially built in 1973 
and is approximately 1,756 km long, with roughly 956 km, as of yet, 
unpaved.  If paved, BR-163 would create a more direct route to port 
for the region's agricultural products, reducing transportation 
distances by half and representing an estimated 20% decrease in 
transportation costs for Brazilian soybean producers.  Brazil's 
agricultural boom and the subsequent producer pressure to decrease 
shipping costs have made paving BR-163 a strategic initiative in 
terms of both regional and national development.  In addition to 
agribusiness, local politicians and entrepreneurs argue that the 
road would facilitate the transportation of electronic products from 
the industrial center in Manaus to markets in the South of the 
country. 
 
¶3.  Even though there are these economic advantages to building the 
road, there remains significant concern of social and environmental 
damages associated with its construction.  The first time BR-163 was 
built there was very little planning, which resulted in 
deforestation, unorganized migration and social conflicts that lead 
to a considerable increase in violent crime including homicides in 
the region.  This time around, rural communities are demanding 
government planning in order to minimize impacts from land 
speculation, predatory exploitation, social violence and 
environmental degradation.  Initial pronouncements surrounding the 
road's paving caused the area's population to increase by 6% between 
1996 and 2000 and recent announcements about the road's future led 
to a 500% increase in deforestation in the towns along the BR-163. 
Studies show that road construction and the resulting population 
surplus generate land problems and, many times, uncontrolled 
exploitation of natural resources. 
 
¶4.  Related to development, land titling and speculation have been 
historical woes in the Amazon Basin.  The process of land occupation 
in the region started in the 1940s.  Mining, cattle ranching and 
logging were considered the ideal occupational activities for a 
location that was considered a "demographic blank" that needed to be 
developed and occupied.  Most land occupation was done illegally, 
without any government control and often within Indigenous 
Territories.  This problem has become so serious that social 
conflicts and human deaths have been part of the issue and continue 
to occur, as evidenced by the death of Dorothy Stang last year (Ref 
A).  Unclear land tenure in the region also played and continues to 
play a central role in the present rate of deforestation.  The lack 
of monitoring and government enforcement, the cheap price of land 
and high economic return, along with the expansion of soybean 
production and cattle grazing are all considered obstacles to 
sustainable development. 
 
¶5.  While paving BR-163 has become one of the Lula Administration's 
priorities, the GoB is attempting to avoid many of the mistakes 
previously made.  With USAID support, local grassroots movements, 
NGOs and civil society organizations conducted, in 2003, a series of 
participatory workshops designed to discuss regional development 
options for the BR-163 region.  This was part of the impetus behind 
the "Santarem Letter" which the BR-163 NGO network presented to the 
GoB in March 2004.  The Letter outlined the actions that the GoB 
needed to implement in order for the paving to take place in a 
sustainable manner.  After receiving the letter, the GoB convened a 
technical working group responsible for elaborating a document that 
establishes the actions and planning necessary for the construction 
of the highway. 
 
¶6.  In paving BR-163, the government's goal is to show that it is 
possible to develop the Amazon region sustainably.  To this end, 
they have created two new policies.  The first is known as the 
BR-163 Sustainable Plan and involved the work of 17 Brazilian 
ministries.  The plan's initial actions include putting into 
practice some emergency procedures to intensify the State's presence 
and public authority in the region.  Some of these procedures 
include supplementary forest inspections and raising the number of 
personnel in the area.  Additional measures are being implemented to 
ensure public safety, land organization and environmental 
 
BRASILIA 00001667  002.2 OF 003 
 
 
monitoring, to name a few.  Compensational actions for environmental 
hazards and integrated policies, amongst all the states involved, 
for regional development are also found in the plan.  The plan 
covers seventy one cities: 28 of them are in the state of Para, 37 
in Mato Grosso and 6 in Amazonas covering a total area of 1,23 
million square kilometers.  This area corresponds to 24.6% of the 
total Legal Amazon Region and 14.47% of the nation's territory. 
Little of the Plan has, in fact, been put into practice, due to 
continued discussions concerning environmental impacts and potential 
complications.  Many communities and NGOs fear that the plan looks 
good on paper, but may never be implemented. 
 
¶7.  Complementing the BR-163 Sustainable Plan is the Action Plan for 
Prevention and Control of Deforestation in the Legal Amazon, which 
promotes a new development model for the Amazon region based on 
social inclusion, cultural diversity and economic development. 
Sustainable use of natural resources will be encouraged through 
financial incentives, the implementation of environmentally 
sustainable structure and the recovery of degraded forest areas.  In 
June 2006, the GoB officially implemented the 16 million hectare 
BR-163 forest district which utilizes the Action Plan and will 
incorporate Brazil's new forest concessions law (Ref B).  The 
district will receive investments for sustainable development and 
production of forest products.  GoB has promised to invest US$30 
million in infrastructure and public land mapping for the BR-163 
forest district.  Economic development will proceed   through 
managed logging and controlled utilization of forest resources. 
Brazil's Minister of Environment Marina Silva was quoted as saying 
that "building this road means that environment and development are 
working together." 
 
¶8.  The creation of the BR-163 Sustainable Plan involves not only 
government officials, but also the agricultural sector, NGOs, local 
communities and business.  If the actions in the plan are actually 
put into practice, little resistance from local community members is 
likely.  On the other hand, the current lack of private sector 
partners interested in paving the road might hamstring the project. 
Yet, in June, President Lula reinforced his promise to begin 
constructing the road saying that by the end of this year the laws 
with all the conditions and requirements to begin the work will be 
ready. 
 
¶9.  Nevertheless, recent events highlight how tentative BR-163 plans 
still are.  In May 2006, Brazil's Minister of National Integration, 
Pedro Brito do Nascimento, announced that the Government, together 
with the Army Engineering Forces, would begin paving the road this 
year through a Public and Private Sector Partnership (PPP).  Prior 
to the announcement, the expectation was that paving would have 
started in the beginning of this year.  As the project will rely on 
funding from the private sector, many environmentalists do not 
believe that the road will actually be paved.  Recent GoB estimates 
evaluate the total cost to pave BR-163 will be US$ 500 million and 
the project will take two to three years to conclude.  The GoB once 
again promises that paving will now take place in the beginning of 
next year, sometime after the election.  (Comment:  Given that the 
GoB has yet to fully implement its December 2004 PPP framework 
legislation, has not put any PPP projects out for bids and has not 
included BR-163 on its formal listing of initial projects to be 
considered under the PPP framework, it's very unlikely that BR-163 
will receive private funding as a PPP project any time soon.  End 
Comment) 
 
¶10.  Still other events underscore the problematic nature of the 
paving project.  Just last week, approximately 200 Indians blocked 
the Santa Helena to Itaba part of the BR-163 for two days. 
Claiming that Indigenous demands were not included in the BR-163 
Sustainable plan, the tribe was demanding additional protections of 
their lands during the paving period.  As a result of the blockade, 
Par and Mato Grosso were isolated and faced shortages of supplies 
including fuels and food.  The Caiaps Indian tribe leader, Megaron 
Txucarramce claims that the development of cities (along BR-163) is 
encroaching on Indigenous Lands.  The tribe is against paving BR-163 
unless Indigenous land delimitation takes place before the paving 
begins. 
 
 
¶11.  Comment:  The new sustainable economic/environment development 
model of the Amazon remains a controversial issue due to the 
enormous forest destruction that took place in the past and demands 
from rural and indigenous communities that still have to be 
considered.  BR-163 could be the start of a successful development 
model, if its Sustainable Plan is actually implemented and the GoB 
has the necessary funding for its paving.  Many, NGOs included, now 
see hope, as the GoB's efforts could provide a possible solution to 
the region's land speculation, deforestation and development 
difficulties.  Paving BR-163 is definitely not the solution to all 
 
BRASILIA 00001667  003.2 OF 003 
 
 
problems of the Amazon Region, but in case it works the beginning of 
a new phase for the sustainable management of the Forest could be 
starting.  End Comment 
 
SOBEL