VZCZCXRO1522
RR RUEHRG
DE RUEHBR #0229/01 0501606
ZNR UUUUU ZZH
R 191606Z FEB 08
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 1028
INFO RUEHSO/AMCONSUL SAO PAULO 1617
RUEHRI/AMCONSUL RIO DE JANEIRO 5800
RUEHRG/AMCONSUL RECIFE 7701
RUEHRC/DEPT OF AGRICULTURE WASHDC

UNCLAS SECTION 01 OF 03 BRASILIA 000229 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
DEPT FOR OES/PCI - L.SPERLING AND F.COLON 
DEPT FOR OES/ENCR - S.CASWELL AND C.KARR-COLQUE 
DEPT FOR OES/EGC - D.NELSON AND T.TALLEY 
DEPT FOR WHA/EPSC - L.KUBISKE 
 
E.O. 12958: N/A 
TAGS: SENV EAGR ENRG KSCA BR
SUBJECT: BRAZIL'S DEFORESTATION CYCLE (PART 2 of 3):  FROM FORESTS, 
TO CATTLE, TO SOY OR ABANDONMENT 
 
REF:  BRASILIA 224 
 
¶1.  (U) THIS CABLE IS SENSITIVE BUT UNCLASSIFIED AND NOT FOR 
INTERNET DISTRIBUTION. 
 
¶2.  (SBU) SUMMARY.  The massive clearing that has been taking place 
in the Amazon since the 1970's (REFTEL) has generally followed the 
pattern: conversion into cattle pastures and later either soybean 
production or abandonment.  From 2003 to 2006, 94% of the 10 million 
heads of cattle added to Brazilian cattle herds were in the Amazon. 
The number of slaughterhouses in the Amazon soared from 26 in 2004 
to more than 200 today.  Logging plays a limited role in 
deforestation, mainly by building roads to remote areas that open 
the area for others.  To date, sugar cane production has not 
directly been a major factor in deforestation.  Indirectly, sugar 
cane - as well as soybeans, corn and other crops - are pushing to 
some undetermined extent cattle into the lower priced Amazon as 
pastures are converted into fields.  COMMENT.  The differential 
between higher land prices outside of the Amazon and lower costs for 
land (obtained illegally or not) within the Amazon is a critical 
factor behind deforestation.  END COMMENT. 
 
¶3.  (SBU) This cable is second in a three-part series on 
deforestation in Brazil.  The first discussed the cycle of clearing 
and the recent upswing in the rate of deforestation (REFTEL).  This 
cable looks at the causes behind the large scale clearing of the 
Amazon (by which we mean in this series the nine-state region 
referred to as Legal Amazon).  And the third will examine the 
measures taken to address the problem.  END SUMMARY. 
 
FROM CATTLE PASTURES TO SOYBEANS OR ABANDONMENT 
 
¶4.  (SBU) With the announcement on January 23 of an increase in 
deforestation (REFTEL), the debate over the principal causes has 
made front-page news.  Environment Minister Marina Silva has 
generally blamed deforestation on "latifundiarios, madeireros e 
grilheiros" (large plantation owners, loggers and land grabbers). 
With regard to the recent increase in the deforestation rate she 
claimed higher prices for beef and soybeans were the principal 
causes.  She noted that cattle ranching and soybean production were 
the typical activities in the areas where the greatest amounts of 
deforestation are occurring.  She commented, "We don't believe in 
coincidences." 
 
¶5.  (SBU) Agriculture Minister Reinhold Stephanes shot back that 
there was no need to raise cattle or grow soybeans in the Amazon 
because there was plenty of land available elsewhere.  Note. 
Stephanes point is accurate, but doesn't negate the fact that cattle 
ranching and soybean production are on the rise in the Amazon.  End 
Note.  For his part, President Luis Ignacio Lula da Silva declared 
that "nobody is to blame" for the deforestation and criticized his 
Environment Ministry and NGOs for pointing the finger at the 
agriculture sector and soybean producers. 
 
¶6.  (SBU) The typical pattern in the Amazon is for an area to be 
cleared for cattle first.  A field can relatively quickly be 
converted into usable cattle pasture, though without investment in 
the land it will have a useful life of a few years at best.  The 
land subsequently is typically converted into soybean production or 
just abandoned.  To prepare a former pasture for soybeans, a farmer 
almost always will grow rice first for one or more seasons.  The 
Director of the Institute for Tropical Forestry (ITF), Johan Zweede, 
estimates that about 20 percent of cleared forest lands are now 
abandoned, degraded areas. 
 
¶7.  (SBU) Cattle ranching in the Amazon has skyrocketed in just in 
the last six years, increasing by roughly 40%, from 52 million head 
in 2001 to 74 million in 2006, based on figures from the Brazilian 
Institute of Geography and Statistics (IBGE).  More to the point, of 
the 10.3 million heads added to Brazilian herds from 2003-2006, 9.7 
million were in the Amazon, or an astounding 94%.  Environment 
Minister Silva estimated that 70% of deforestation was for the 
purpose of creating cattle pastures.  In 2004, there were just 26 
slaughterhouses registered in the Amazon, and in 2007 there were 
more than 200.  These slaughterhouses processed 41% of all the heads 
of cattle in Brazil in 2007.  (Note.  Post's estimates for cattle in 
Brazil are lower than IBGE's, though we understand IBGE is likely to 
lower its figures.  While the exact number may be lower, there is 
little doubt about a substantial increase taking place in the 
Amazon.  End Note.) 
 
LINK BETWEEN COMMODITY PRICES AND DEFORESTATION RATES 
 
BRASILIA 00000229  002 OF 003 
 
 
 
¶8.  (SBU) The Environment Ministry and independent experts see a 
close correlation between prices for cattle and soybeans and 
deforestation rates.  A recent study by the respected NGO IMAZON 
showed how close.  IMAZON calculated a very strong link (a 
coefficient of 0.82) between changes in the price of cattle and 
changes in the deforestation rate.  It detected a weaker connection 
between changes in soybean prices and changes in the deforestation 
rates (0.50).  The President of the Environment Commission of the 
Brazilian National Confederation of Livestock and Agriculture (CNA) 
Assuero Veronez told the press that "it would be hypocritical to say 
the expansion of soy and cattle ranching has no influence on 
deforestation that has taken place in the Amazon in the last five 
years."  Nonetheless, CNA issued a statement that "totally 
repudiated" any link between agriculture commodity prices and 
deforestation rates. 
 
¶9.  (SBU) While the Environment Ministry today sees a strong nexus 
between rising agriculture prices and increasing deforestation 
rates, it was less convinced with regards to the reverse when 
commodity prices and deforestation rates were both falling.  The 
Ministry attributed those changes in the deforestation rates to 
successful actions of the government, and downplayed the role of 
commodity prices.  Environment Vice Minister Joao Paulo Capobianco 
reportedly has questioned the strength of the linkage between 
commodity prices and fluctuations in deforestation rates. 
 
¶10.  (SBU) The demand for land for ranching and farming has driven 
land prices to record highs.  The FNP Institute, a private 
agribusiness consultancy, reports that agriculture land prices rose 
17.83% in 2007 and predicts more increases for 2008.  COMMENT.  The 
differential between higher land prices outside of the Amazon and 
lower or no cost for land - whether obtained illegally or not - 
within the Amazon lies at the heart of the deforestation issue.  END 
COMMENT. 
 
LOGGING'S LIMITED CONTRIBUTION TO DEFORESTATION 
 
¶11.  (SBU) A common perception is that illegal logging is 
responsible for deforestation.  Without question there is a 
tremendous volume of unauthorized harvesting of wood in the Amazon. 
Although the federal government in theory has introduced a 
registration system for harvesting and sale/re-sale of wood, the 
vast majority of logging takes place outside of it.  By one 
estimate, from Greenpeace's Forest Engineer Marcelo Marquesini, 
about 80% of the wood sold in Brazil is outside the legal system. 
Nonetheless, loggers themselves are not the primary cause of 
deforestation.  In the Amazon, there are only a handful of 
commercially valuable trees per hectare, according to ITF Director 
Zweede.  Loggers have no economic incentive to clear cut an area. 
In fact, the economic interests argue against this:  i.e., not to 
spend valuable resources (human, machinery or time) on clearing the 
large amount of non-commercially valuable vegetation.  ESTH 
Counselor has visited sites where illegal logging has taken place. 
The majority of non-commercial plant life was left intact, though 
some was mangled due to the process of building roads and log 
storage areas. 
 
¶12.  (SBU) Loggers do contribute to deforestation.  Some may clear 
cut an area if paid to do so, such as by the cattle rancher who 
wants to use the land.  Also, they can be viewed as abettors of 
deforestation because they facilitate subsequent clear cutting by 
building roads to previously inaccessible areas.  Overall, however, 
loggers play a limited role in deforesting the Amazon. 
 
¶13.  (SBU) While loggers may not be central to the deforestation 
question, another type of woodsman is threatening to become a major 
player.  This person finds any sort of wood to use for making 
charcoal to supply the voracious demand for charcoal from the pig 
iron foundries.  There are no reliable data on the wood taken for 
making charcoal.  ITF Director Zweede estimates that the volume of 
wood cut for charcoal today probably equals the volume of wood cut 
for timber, and demand for charcoal is growing rapidly. 
 
SUGAR CANE - NOT A DIRECT THREAT 
 
¶14.  (SBU) The question of sugar cane production in the Amazon has 
drawn great attention.  President Lula has reacted by claiming that 
sugar cane can't be grown in the Amazon.  Although not quite 
accurate (sugar cane is grown commercially in various places 
throughout the Amazon), the quantity is relatively small.  Mark 
Lundell from the World Bank in Brazil estimated that less than 
 
BRASILIA 00000229  003 OF 003 
 
 
100,000 hectares of sugar cane are grown in the Amazon, which 
contrasts with the millions of hectares grown in the Southern region 
of Brazil.  In fact, production figures released in November 2007 by 
the Agriculture Ministry's National Supply Company (Companhia 
Nacional de Abastecimento or CONAB) indicate only 21,500 hectares of 
sugar cane production in the Amazon. 
 
¶15.  (SBU) Nonetheless, the Lula Administration has announced plans 
to introduce legislation to prohibit sugar cane production in the 
Amazon.  This issue is very sensitive inside the GoB, and some 
officials have overreacted by claiming it is impossible to grow 
sugar cane in the Amazon region.  The government is working on a 
legislation to ban this kind of activity in the forest.  Agriculture 
Minister Stephanes suggested allowing sugar cane production on land 
in the Amazon that has already been cleared and is now unproductive. 
 The Environment Minister pushed back and won President Lula's 
support for legislation to bar outright sugar cane production in the 
Amazon region.  An analysis of this issue is underway and is 
supposed to be ready by June 2008, after which a final position on 
whether or not to allow more sugar cane production in the Amazon 
will be decided. 
 
¶16.  (SBU) Sugar cane, soybeans, corn and other crops are having an 
indirect effect of undetermined extent on deforestation.  As 
pastures outside of the Amazon are converted into crop production, 
to some degree cattle ranchers are being pushed into the Amazon, 
where land costs are lower.  Similarly, increased pork and poultry 
production raises the demand for grains for feed, which in turn 
leads to conversion of pastures into fields, and again puts pressure 
on cattle ranchers to move. 
 
NATURE - DRYER WEATHER ALLOWS MORE TIME FOR CLEARING 
 
¶17.  (SBU) The rainy season has been late to arrive in Brazil.  This 
has given those who want to clear the forest more time, which can 
explain in part the surge in deforestation realized between August 
and December 2007.  Normally, the months of November and December 
are usually the start of the rainy season and it is not typical that 
the forest is cut down at this time of the year.  In the last decade 
there have been noticeably longer and more severe dry periods in the 
Amazon. 
 
¶18.  (SBU) The rains have served as a brake on deforestation in the 
Amazon.  However, we may be witnessing increasingly dry periods 
becoming a permanent feature of the Amazon weather pattern.  In 
which case, there may soon be markedly stepped up rates of 
deforestation, such as happened at the end of 2007. 
 
SOBEL