China, EU, US trading with Brazilian firms fined for Amazon deforestation: report

Brazil-based exporters of commodities fined for Amazon illegal logging and deforestation freely trade with, and receive financing from, major importers and investors worldwide, according to a report released in April by NGO Amazon Watch and produced in collaboration with the National Articulation of the Indigenous Peoples of Brazil (APIB), the Brazilian coordinating organization for the country’s indigenous groups.

Although producers of soy, cattle, timber and other commodities were charged with environmental crimes in the Amazon, their products continue to flow into international markets, especially the country’s three largest trading partners: China, the European Union and the United States, the report said. The EU, for example, gets 41 percent of its beef imports from Brazil, while cattle ranching remains the leading cause of Amazon deforestation.

“We are all buying products that are destroying the forests illegally,” said  Christian Poirier, program director at Amazon Watch. “This research demonstrates how global markets sustain the worst actors in Brazil’s agro-industrial sector.” The wider Amazon saw 1.3 million hectares (5,019 square miles) of forest loss in 2018, while Brazil itself saw a major uptick in deforestation last year during the campaign of rightest presidential candidate Jair Bolsonaro, the election’s winner.

Transnational companies cited

Commodities originating in illegally deforested areas in Brazil freely reach a wide range of markets via supply chains worldwide, the report said. Amazon Watch named 23 importing companies that have trade or financial ties with fined Brazilian exporters, including giant transnational food-and-agribusiness commodities companies Bunge, Cargill and ADM.

In April 2018, Ibama, Brazil’s environmental regulatory agency, fined five of the biggest agricultural traders in Brazil, including Cargill and Bunge, for purchasing 3,000 tons of soy and other grains from embargoed farms that destroyed native vegetation within the Cerrado biome — Brazil’s savanna —in an operation that applied environmental fines totaling some $27 million to both traders and farmers, according to the report.

In an emailed statement, Bunge said it received a notice from Ibama in April 2018 related to the “alleged purchase” of approximately 225 tons of soy “produced in off-limit agricultural areas.” But the company said it disputes the allegations and has filed a formal response contesting Ibama’s findings. “We intend to pursue all available channels to clarify this matter, and look forward to resolving it as soon as possible,” Bunge wrote.

In an emailed statement, Cargill said “these allegations are without merit” and denied any commercial relationships with the properties in question or the alleged non-compliant transactions. “We’ve submitted our explanation to Ibama and it is important to note that to date, no fines have been levied,” the company wrote.

ADM said it wouldn’t respond to requests for comments directly but rather a response would come through the Brazilian Association of Vegetable Oil Industries (Abiove) instead. In an emailed statement, Abiove said the fight against deforestation “is treated as a priority” and that the organization has implemented several actions since 2006 “to eliminate deforestation in the soybean chain.”

Abiove cited Brazil’s “soy moratorium” which uses data from the Brazil-based governmental National Institute for Space Research (INPE) to monitor soybean planting in deforested areas occurring after July 2008, which guarantees to affiliated companies “a zero deforestation policy through independent procedures and audits that do not purchase soybeans from farms where deforestation has been detected after that date.”

Some Brazilian exporting companies linked to deforestation also receive high inflows of financing from the world’s largest banks and asset managers — mostly based in the U.S. and Europe — according to the report, which cross referenced major fines for illegal deforestation applied by Ibama since 2017, with data from 23 importing companies and four commodity traders, along with the global financial links to supply chains.

On the financial side, the report points strongly to BlackRock, the American global investment management corporation, as a “key financier of the agribusiness giants most implicated in deforestation in the Brazilian Amazon.” According to the report, BlackRock holds over $2.5 billion of shares in these Brazilian companies. BlackRock said via an email that it “won’t be providing comment.”

Amazon deforestation on the rise

“There is no balance right now between the desires of the industry and fundamental human rights and environmental protections,” said Poirier. “We’re seeing that industry is getting everything it wants and people in the forest are paying the price. We cannot permit this.”

Forest losses in the Amazon jumped 54 percent in January compared to a year ago, according to data from Imazon, a Brazilian research institute. Cattle ranching and soy production are the leading drivers of deforestation — legal and illegal — in the country, accounting together for 80 percent of Amazon deforestation, according to Amazon Watch.

Experts fear deforestation will be fueled under the Bolsonaro administration, given the president’s plans to open up indigenous lands for mining and agribusiness and the ongoing weakening of environmental regulations and agencies.

“There is a worsening trend with Bolsonaro. And we are only at the beginning of the government and amid the Amazon’s rainy season, when it is more difficult to do deforestation,” said Paulo Barreto, a senior researcher at Imazon.

The Bolsonaro administration did not respond to requests for comment.

Supply chains linked to deforestation

Ranching company Agropecuária Santa Barbara Xinguara (Agro SB) tops the list of Ibama’s largest fines for illegal Amazon deforestation in 2017, totaling some $20 million, according to the report. Agro SB is owned by Opportunity Fund, which is controlled by the well-known banker Daniel Valente Dantas, who has been charged for financial crimes in Brazil.

The report points to “anecdotal evidence” that cattle from AgroSB farms are sold to JBS, one of Brazil’s biggest beef exporters, and a company linked to corruption. According to the report, AgroSB’s Fazenda Espírito Santo farm in Northern Pará state said it was named for providing the “best batch of January animals slaughtered at JBS” in 2017.

In an emailed statement, AgroSB’s people and sustainability manager Cledson Rocha Lima said the company was fined in 2017 for “alleged commercialization” of livestock from seized areas on the Vale Sereno farm, but Ibama “acknowledged that it made a mistake” and has started to suspend these sanctions since 2018.

In an emailed statement, JBS said it does not acquire animals from farms involved with environmental crimes and it has a responsible sourcing policy that establishes “strict social and environmental criteria for suppliers’ selection” through a monitoring system that employs satellite imagery and geo-referenced farm data and information from government agencies to support a daily analysis of more than 80,000 cattle suppliers in Brazil. “Any non-compliant farm is immediately blocked in the company’s purchasing system,” it said.

However, it is well known that Brazilian cattle producers and commodities companies utilize a loophole in federal regulations to launder cattle making it appear that livestock wasn’t raised on newly deforested lands.

JBS is the world’s leading beef processor, with operations in Brazil, Canada, the U.S. and Australia. The firm has a long record of corruption in Brazil, where its employees, including former CEO Wesley Batista and former chairman Joesley Batista, have been linked to bribery scandals, including the bribing of three Brazilian presidents, plus more than 1,800 elected officials, according to the report. JBS Brasil operates 35 beef processing facilities with a capacity of 34,200 head daily across 10 Brazilian states, including several in the Amazon. JBS regularly exports beef and beef products to the U.S. and Europe.

Wood products cited

Fines totaling some $3.9 million were also applied for lack of environmental oversight on traded wood between 2017 and 2018 against Nordisk Timber Eireli, which supplies a range of leading hardwood companies in Europe and in the U.S., according to the report.

Nordisk’s owner Edma Lamounier Barros denied the accusations. “I am not aware of this fine… We didn’t receive any fine from Ibama since we bought the company [in 2015],” Barros told Mongabay by phone. However, she said the company is appealing against fines charged during the administration of the firm’s previous owner. “We only work with certified wood, we have the Green Seal.… We are very careful with this… We don’t push our luck,” she said, adding that the company sells timber from management areas worldwide, including the U.S., Europe and China.

The report cites Belgium-based Vandecasteele Houtimport and Vogel Import & Export for buying, respectively, 437 and 743 tons of timber from Nordisk between 2017 and 2018. In the same period, UK-based Tradelink Group acquired 1,036 tons of timber from Nordisk, while Netherlands-based companies GWW Houtimport, Hoogendoorn Hout and Van den Berg Hardhout imported, respectively 1,122 tons, 526 tons, and 4,403 tons, the report said. U.S.-based Northwest Hardwoods is also on the list, with 60 tons of timber imported from Nordisk between 2017 and 2018, according to Amazon Watch.

The report also quotes Tradelink Group’s Brazil-based subsidiary Tradelink Madeiras as “notorious for repeatedly violating Brazilian environmental law,” citing fines amounting to some $260,000 in 2017, along with complaints of slave-like labor conditions in its supply chain in the same year.

Vandecasteele and Vogel said they wouldn’t reply individually, but they would do so through Fedustria, which represents the Belgian federation of textile, wood and furniture industries, including timber import companies.

“We want to stress that the importing companies mentioned are strongly opposed to any trade in illegal timber and have, as required by the European Union Timber Regulation, taken all possible measures and due diligence actions to ensure that no illegal timber is sourced or traded,” Fedustria’s director-general Filip De Jaeger said in a signed letter.

Jaeger added that Fedustria’s affiliates carry out a thorough due diligence process to mitigate the risks” when starting to operate with a supplier. “In the context of the EUTR [Eurpoean Union Timber Regulation] processes put in place — monitored by national authorities in the EU — information contained in the Amazon Watch report will now first be verified and controlled and corrective measures will be taken should these be required.”

In an emailed statement, GWW Deputy Director Arjan de Jong said he was “surprised and shocked” to learn that one of its Brazilian suppliers is linked to failing environmental monitoring, as the company only purchases and sells certified wood.

Although GWW Houtimport has no open purchases with Nordisk at the moment, Jaeger said the company “is in talks with this sawmill, which indicates that the case is still under court and is confident that the outcome will be that no illegal practices have taken place.”

Northwest Hardwoods, Hoogendoorn Hout and Van den Berg Hardhout did not respond to requests for comment.

The report also asserts that Germany’s high-end organic supermarkets bought 9.1 tons of acai pulp extract produced on newly deforested lands in Pará state by Brazilian company Argus Comercio e Exportação de Alimentos, despite fines of $570,000 against the firm’s owner, Arnaldo Andrade Betzel between 2017 and 2018.

In an emailed statement, the company’s director of operations Rafael Siqueira said the notice of infraction drawn up by Ibama against Betzel is “undue” and has not yet been the subject of a judgment by the agency. “The company carries out its activities in the strictest legality, having all the necessary operating authorizations issued by government,” he wrote. Siqueira added that the products exported by the company come from legally licensed areas, without any legal issue surrounding planting and harvesting.

Fashion trade linked to deforestation

Amazon Watch also traced the supply chains of international fashion retailers who sell products linked to illegal deforestation. According to the report, U.S.-based accessories retail chain Brighton Collectibles bought 28 shipments of leather totaling 4.4 tons from Italian tannery Faeda, which imported leather from Brazil-based Frigorífico Redentor — a subsidiary of the family-owned Grupo BIHL, fined $1 million for illegal deforestation between 2017 and 2018. In 2009, a Federal Police investigation put four of the BIHL brothers in jail for bribing public servants and inspectors in the company’s ranching operations, the report said.

In an emailed statement, Faeda said that BIHL group is a “sporadic supplier” and it bought less than 0.2 percent of its raw material from it in the last two years, while one order of such quantity was sold to Brighton Collectibles. “We will go deeply to understand their involvement in deforestation, but for sure we will immediately stop buying from them if the news is confirmed,” the company wrote.

Faeda said it is very sensitive to the environment and sustainability and “cannot accept that our suppliers are involved in Amazonian deforestation” which is why it selects preferential suppliers among LWG [Leather Working Group] certified companies.

Brighton and BIHL did not respond to requests for comment.

Turning point: private sector driving changes

Although Brazil’s economy has been based for centuries on commodities exports — largely derived from deforested areas — conservationists and scientists have increasingly urged a halt to deforestation in the Amazon, especially as a means of maintaining carbon stores there in order to curb climate change in South America and worldwide.

“This is the Brazilian contradiction: on one hand the country has the largest tropical forest in the world — which is there to ensure the future of human life on earth… and [also possesses] an expanding agricultural frontier, with the country’s economy extremely dependent on agribusiness,” said Paulo Adario, senior forest strategist for Greenpeace International.

Driven by the commodities trade, Brazil is the world’s 22nd largest exporter, the report said. As the country faces its worst financial crisis in decades, industry spokespeople routinely highlight the agricultural sector as a priority for boosting the Brazilian economy. Agriculture and agribusiness accounted for 44 percent of the country’s exports and 23 percent of its Gross Domestic Product (GDP) in 2017 — a 13-year high, according to Brazil’s National Agriculture and Ranching Confederation (CNA).

As the Bolsonaro government moves forward with environmental deregulation, aggressive support for agribusiness and mining, and its drive to develop the “unproductive Amazon,” the private sector in both Brazil and worldwide will need to play a key role to curb the trade in products from newly deforested areas, Poirier said.

“One of the only ways to stop Bolsonaro and its government [from deforesting the Amazon] is going after international markets that sustain the primary agro-industrial sector,” he said.

“The good news is, if European and North American financiers and commodities buyers cut ties with Brazilian bad actors, they could use their market power to send a signal to Brazil’s leadership that the global community will not tolerate the policies of the new administration,” concluded Poirier.

BANNER IMAGE: An Ibama agent overlooks a portion of Jamanxim National Forest in the Brazilian Amazon clear cut by illegal loggers. Image courtesy of Ibama

*CORRECTION: This story originally reported in error that “Netherlands-based companies GWW Houtimport, Hoogendoorn Hout and Van den Berg Hardhout imported, respectively 1.1 million tons and 4,403 tons” of Nordisk timber. The correct statistics are “GWW Houtimport, Hoogendoorn Hout and Van den Berg Hardhout imported, respectively 1,122 tons, 526 tons, and 4,403 tons” of Nordisk timber.