Environment minister Ricardo Salles tackles the ‘Amazon paradox’

At the heart of the debate about the sustainability of the Amazon rainforest is a paradox, says Ricardo Salles, Brazil’s environment minister. On one hand, the region is one of the richest on earth in terms of its biodiversity and natural resources. But, on the other, it is one of the poorest in terms of human development and quality of life for the more than 20m people living there.

Solving this “Amazon paradox” is the key to ending the illegal deforestation that is currently ravaging the rainforest and sullying Brazil’s international image, according to the controversial confidant of far-right president Jair Bolsonaro.

“Certainly, the main issue or the main cause for the illegalities in the region is the Amazon paradox,” Salles says. “[We need] to mitigate and to reduce the risk of these people going back to illegal activities due to the fact that they don’t have incomes or opportunities, alternatives to survive.”

For Salles — a former lawyer who was the environment secretary for the state of São Paulo before unsuccessfully contesting congressional elections in 2018 — the key is to create economic opportunities, including new jobs and the development of the so-called bio-economy, which could harness the natural resources of the forest.

“When you go to specific regions with the highest rate of deforestation, the people living there are directly linked to illegal logging or mining and so on,” he explains.

“Once you remove that source [of income], it is vital for us to replace it with some kind of payment for an economic service. You pay for them to become a park ranger as opposed to an illegal miner. You can ask them to participate in tree replantation efforts. You can also ask them to participate in the development of products from the forest.”

It is an idea that resonates with environmentalists and scientists, who have long acknowledged that poverty is a key driver of deforestation and environmental destruction.

Yet many worry about the true intentions of Salles, who has long supported opening up protected Amazonian lands to commercial activity. Last month, the minister became mired in fresh controversy when a senior police chief in the Amazon accused him of colluding with illegal loggers. A day later, the officer was replaced.

Salles also lost credibility last year, when a video emerged of him suggesting the government should take advantage of the public’s preoccupation with the coronavirus pandemic to push through environmental deregulation.

Adriana Ramos of the Socio-Environmental Institute, a campaign group, says the question of whether the bio-economy could contribute to the maintenance of the forest depends on how it will be developed.

“I agree that bio-economics is an important element, but for it to be a vector for conservation and combating deforestation, it cannot be thought of as just about economics,” she argues.

Salles says his plans require private sector companies to begin investing in the region and creating factories and jobs. But the minister is also seeking financial support from western nations.

Last month, he requested $1bn in financial assistance from the US and European countries, in order to tackle deforestation. One-third of this would be dedicated to improving environmental enforcement in the rainforest, while the remaining two-thirds, some $660m, would go towards creating economic opportunities, he says.

The two prongs must be tackled at the same time, he says, because if you just do enforcement “you lose efficiency because you don’t have an economic incentive” for residents to stop logging.

So far, the countries that Salles approached have balked at handing out cash to Brazil before it shows any results in tackling deforestation.

Since the beginning of the Bolsonaro administration in 2019, deforestation in the Amazon has risen to its highest level in over a decade, sparking international concern about the impact on climate change. Last year, more than 11,000 sq km of Brazilian rainforest were razed.

The destruction prompted more than two dozen mostly European financial institutions to demand that Brazil reduce deforestation, with some threatening to divest from the country if the situation did not improve.

In response, Salles created an “Adopt a Park” scheme to allow private sector companies to pay to preserve parts of the Amazon and other nature reserves.

While some Brazilian companies have bought plots, the uptake by European groups has been slow, with some arguing that such a programme amounts to philanthropy and does not dovetail with their fiduciary duties.

“We would like to have the participation of foreign companies,” Salles says. “This is a very good opportunity to have critical, concrete participation in the preservation of the Amazon.” He points out that these investment groups “have their own remuneration and their own funds to do this. The cost of adopting a park is not significant, it is very reasonable.”

There is one area, however, where Salles and his European interlocutors see eye-to-eye: green bonds — sales of which are used to fund initiatives with social or environmental benefits.

Thede Rüst, head of emerging markets debt at Nordea Asset Management — which stopped buying Brazilian government bonds in 2019 because of fires in the Amazon — says: “My main wish would be that Brazil issues a green bond with a long maturity profile, capturing more than the next election cycle, so that we can invest again in Brazilian sovereign debt.”

Rüst predicts high demand for such a bond — and say that, as a result, the interest coupon Brazil would have to pay to investors is probably lower than on a conventional bond. “This is a better way for the Brazilian government to get capital for preservation than asking for cash upfront,” he suggests. “All minister Salles needs to do is call us to get the framework done.”

For his part, Salles says this is an area that Brazil is actively pursuing, and one that it is well placed to take advantage of: “This is something Brazil can do.”