VZCZCXRO6744
RR RUEHAST RUEHDH RUEHHM RUEHLN RUEHMA RUEHPB RUEHPOD RUEHTM RUEHTRO
DE RUEHBR #0618/01 1381021
ZNR UUUUU ZZH
R 181021Z MAY 09
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 4307
INFO RUEHSO/AMCONSUL SAO PAULO 4047
RUEHRI/AMCONSUL RIO DE JANEIRO 7736
RUEHRG/AMCONSUL RECIFE 9538
RUEHLP/AMEMBASSY LA PAZ 6890
RUEHPE/AMEMBASSY LIMA 4201
RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE

UNCLAS SECTION 01 OF 03 BRASILIA 000618 
 
SENSITIVE 
 
SIPDIS 
 
DEPT FOR OES/ENRC AND OES/EGC 
 
E.O. 12958: N/A 
TAGS: SENV KGHG KSCA EAID EFIN ENRG BR
SUBJECT: BRAZIL: CONFERENCE ON FINANCE FOR REDUCING DEFORESTATION - 
MOVING FROM THE DRAWING BOARD TOWARD REALITY 
 
REF: A) 2008 BRASILIA 1462, B) 2008 BRASILIA 1159, 
C) BRASILIA 270, D) PARTO 6 
 
BRASILIA 00000618  001.2 OF 003 
 
 
(U) THIS CABLE IS SENSITIVE BUT UNCLASSIFIED AND NOT FOR INTERNET 
DISTRIBUTION. 
 
¶1.  (SBU) SUMMARY.  An international conference, April 1-4, hosted 
by the Governor of Mato Grosso Blairo Maggi and the NGO Forest 
Trends, and co-funded by USAID, highlighted how far Brazil has come 
in recognizing its problem with massive, ongoing deforestation of 
the Amazon Forest.  The conference explored an emerging category of 
market-oriented methods to finance conservation of the standing 
forest, known as Payments for Ecosystem Services (PES), which many 
expect will include Reducing Emission from Deforestation and Forest 
Degradation (REDD) from forest carbon offsets (such as under 
California's new cap-and-trade program), as well as payments for 
watershed management and biodiversity conservation. The conference 
emphasized roles for indigenous communities, farmers, and ranchers 
in such market-oriented systems.  It also referred to new sources of 
donor funding, including contributions from Norway and prospects 
coming out of the immediately preceding meeting hosted by Prince 
Charles.  END SUMMARY. 
 
KATOOMBA CONFERENCE 
 
¶2.  (SBU) Brazil is entering a new phase where standing trees could 
have more value than felled ones, according to the 1400-plus 
representatives of the national government, state governments, and 
the scientific and NGO communities at a conference held in Cuiaba, 
the capital of the State of Mato Grosso, April 1-4.  The conference 
hosted by the Governor of Mato Grosso, Blairo Maggi, and Forest 
Trends (an NGO) received financial support from USAID's Standing 
Forests Conservation Markets Initiative, of the global TRANSLINKS 
program.  The theme of "Avoiding Deforestation in the Amazon: 
[Reducing Emissions from Deforestation and Forest Degradation] REDD 
& [Payment for Environmental Services] PES" attracted tremendous 
interest.  Environment Minister Carlos Minc, Governor Maggi, and the 
governors of four other states, whose territory in aggregate include 
the vast majority of the Amazon Forest in Brazil, plus the Governor 
of the Province of Santa Cruz of Bolivia, and the Governor of the 
Department of Loreta in Peru, enthusiastically endorsed REDD and PES 
ideas and initiatives. 
 
ENVIRONMENT MINISTER AND STATES EAGER TO MOVE FORWARD 
 
¶3.  (SBU) Minister Minc gave an arm-waving, very enthusiastic, 
upbeat assessment of Brazil's efforts to control deforestation.  He 
claimed that for the ten months he has been in office the rate of 
deforestation has plummeted 45% compared with the same period the 
year before.  He noted the national government had cracked down on 
deforestation through more aggressive enforcement actions, seizing 
of cattle illegally grazing on government land, and denying cheap 
credit for those who are not complying with environmental laws. 
Further, the government had policies to promote the "Green Arc" in 
response to the "Arc of Fire," which consists of the areas currently 
being deforested.  Minc said that enforcement alone can't solve the 
problem, and the government needed to create alternative, 
sustainable jobs for the 20 million Brazilian living in the Amazon 
region.  The government has promoted certification programs where 
soy farmers and loggers can demonstrate their good stewardship and 
so improve market access abroad.  He expected to expand the 
certification plan to include cattle - one of the primary threats - 
in the Amazon.  He emphasized how he had convinced President Luiz 
Inacio Lula da Silva to include in the National Plan on Climate 
Change a target to reduce the rate of deforestation from nearly 
20,000 square kilometers per year (during the period 1996-2005) to 
about 6,000 square kilometers per year by 2017. (REFTEL A) 
 
¶4.  (SBU) The government is seeking to reorganize agriculture in the 
Amazon, not stamp it out.  Thus, the government was preparing to 
release Environmental and Economic Zoning (ZEE) Plans for the 
region, which would indicate where agriculture activity is 
prohibited and where it is allowed.  The goal is to increase the 
productivity of the already cleared land, which with cattle is 
extraordinary low (about one head per hectare).  Minc highlighted 
the Amazonia Fund (REFTEL B), which should provide funding to 
support efforts to control deforestation.  For the representatives 
from Bolivia and Peru, Minc pointed out that up to 20 percent of the 
Amazonia Fund can be used in neighboring countries to support 
efforts against deforestation of the Amazon. 
 
¶5.  (SBU) Governor Maggi, commonly known as the "King of Soy," 
 
BRASILIA 00000618  002.2 OF 003 
 
 
demonstrated how far some Brazilian attitudes have come in the last 
twenty years.  Previously, he said Mato Grosso and the rest of 
Brazil based economic growth on clearing the forests and making the 
land productive through cattle or crops.  Maggi's own vast soybean 
farms were carved out of the forest and savannah lands.  Today, he 
says that the thinking in Mato Grosso has to change and that the old 
model for economic growth cannot continue.  The environmentalists 
and those seeking economic growth have to come to an understanding, 
he said.  He added that he was no longer confronting 
environmentalists and now is working with them.  In recent years, he 
has supported programs to promote compliance with environmental laws 
- such as The Nature Conservancy's USAID/Brazil-supported program in 
Lucas do Rio Verde - and to address the problem of the lack of land 
titles in many cases.  Moreover, he was hosting (and co-funding) 
this conference. [The State Government covered about half of the 
conference cost, and Maggi's family company also contributed a small 
amount.  USAID was the second largest contributor, at about 25%, 
followed by the Moore Foundation and others.]  Minister Minc, who 
previously had tangled with Maggi on deforestation issues, now gave 
him a bear hug and applauded his efforts.  Minc and Maggi jointly 
announced a plan called "MT Legal" (Mato Grosso legal) with the goal 
to help 140,000 farmers and ranchers in the State of Mato Grosso to 
obtain legal title to the land and to bring their land into 
compliance with environmental rules. 
 
¶6.  (SBU) The other governors endorsed the need for positive 
incentives such as REDD, pointing out that the problem can't be 
solved by tougher enforcement alone.  All were in a hurry to 
implement programs to create sustainable jobs in the Amazon region. 
Some endorsed the use of reforestation to bring farms and ranches in 
the region into compliance with the requirement to maintain 80% 
forest coverage.  The State of Para, where much of the recent 
deforestation has taken place, plans to plant one billion trees by 
¶2013. 
 
EXPERT SPEAKERS DISCUSS REDD, ONGOING PROJECTS, AND RISKS 
 
¶7.  (SBU) Much of the conference discussed the theory of REDD - 
providing payments to maintain a standing forest.  An expert from 
McKinsey projected significant opportunities for REDD projects in 
Brazil.  Other experts described ongoing activities to reduce 
deforestation.  Virgilio Vianna, the Director General of the 
Sustainable Amazonas Foundation discussed a project in Amazonas 
State (which includes about half of the Amazon forest in Brazil) to 
provide payments to forest residents in return for conserving the 
forest.  (See REFTEL C.)  The Nature Conservancy highlighted a 
project to encourage soy farmers to comply with environmental 
regulations.  John Carter, the Director of the Alianca da Terra 
(Alliance of the Land) focused on the lawlessness in the Amazon 
region and the effort of his organization to help interested farmers 
and ranchers to become legitimate. 
 
¶8.  (SBU) A discussion of the voluntary carbon market suggested that 
this market could provide some assistance, but that it may not 
provide the scale of funding needed to support large REDD projects 
in the Amazon without the stimulation of new regulatory market 
[Climate Convention] requirements (which do seem increasingly likely 
to emerge).  The conference organizers brought in speakers on other 
potential streams of funding to support forest conservation, 
particularly payments for environmental services beyond carbon, such 
as conserving water resources, soil, and biodiversity, which may 
show special promise when integrated or "bundled" together with 
community development/poverty reduction objectives and "living 
carbon" into premium-priced PES instruments 
 
NORWAY AND PRINCE CHARLES AND CALIFORNIA 
 
¶9.  (SBU) The dramatic difference between this conference and the 
many others on deforestation in the years before is the palpable 
sense that finally significant sums of funding for deforestation 
could be flowing into the Amazon.  Minc announced that the Norwegian 
government has contributed its first USD 120 million of a one 
billion dollar pledge to the Amazonia Fund.  The outgoing head of 
the Brazilian Forest Service, Tasso Azevedo, briefed the conference 
on the recent meeting in London of Prince Charles' Rainforest 
Initiative (REFTEL D), which signaled likely new flows of resources 
to Brazil and other countries with tropical forests. 
 
¶10.  (SBU) The appearance of a team from the State of California 
headed by Tony Brunello, the Deputy Secretary for Energy and Climate 
Change, was a striking contribution to the conference.  The team 
came to identify possible forest carbon offset projects that could 
 
BRASILIA 00000618  003.2 OF 003 
 
 
qualify under the State cap-and-trade system that goes into effect 
in 2012 under Assembly Bill 32.  Since the conference, each of the 
states in the Amazon region has been requested to submit two 
proposals to the Californians.  It appears REDD and/or forest carbon 
offset projects on a large scale will likely becoming a reality in 
Brazil in the near future.  This is apart from any arrangement 
coming out of the ongoing negotiations under the UN Framework 
Convention on Climate Change 
 
¶11.  (SBU) COMMENT.  Brazil is entering a new phase in the battle 
against deforestation, moving from identifying the problem and 
thinking about possible responses, to receiving funding and actually 
implementing projects.  In particular, the nascent Amazonia Fund, 
with projected funding of over a billion dollars, will likely become 
the first mechanism in the world to implement REDD projects on a 
large scale.  These new developments do not mean that Brazil has the 
deforestation problem under control.  The country still faces the 
challenges of dealing with large numbers of farmers and ranchers and 
loggers operating outside the law, as well as finding employment in 
a sustainable environmental manner for the twenty million residents 
of the region.  Nonetheless, Brazil seems to be moving from the 
talking phase toward real activities on a major scale. 
 
¶12.  (SBU) COMMENT.  Unfortunately, the progress seen in addressing 
the deforestation issue domestically has not had a noticeable impact 
on the Brazilian government's position in the ongoing international 
negotiations on a new climate change agreement.  The Brazilian 
delegation is led by the Ministry of External Relations, not the 
Ministry of Environment.  Brazil is one of the most vocal defenders 
of the principle of "common, but differentiated responsibilities" 
with respect to climate change.  They insist that Brazil and other 
developing countries will not accept targets for reducing greenhouse 
gas emissions.  For Brazil, the vast majority of its emissions come 
from deforestation.  Further, the Brazilian delegation continues to 
oppose including forest conservation within the scope of the new 
agreement.  END COMMENT. 
 
SOBEL