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Cablegate: Infrastructure Threatens Amazon Forest Conservation

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RR RUEHAST RUEHHM RUEHLN RUEHMA RUEHPB RUEHPOD RUEHTM
DE RUEHBR #0895/01 1831633
ZNR UUUUU ZZH
R 011633Z JUL 08 ZDS
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 2024
INFO RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
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UNCLAS SECTION 01 OF 11 BRASILIA 000895

C O R R E C T E D COPY - ADDED SENSITIVE CAPTION

SENSITIVE

SIPDIS

DEPT PASS USAID LAC/RSD,LAC/SAM,G/ENV,PPC/ENV
TREASURY FOR USED IBRD AND IDB AND INTL/MDB
USDA FOR FOREST SERVICE: LIZ MAHEW
USDA FOR FOREIGN AGRICULTURE SERVICE:CJACKSON
INTERIOR FOR DIR INT AFFAIRS: KWASHBURN
INTERIOR FOR FWS: TOM RILEY
INTERIOR FOR NPS: JONATHAN PUTNAM
INTERIOR PASS USGS FOR INTERNATIONAL: JWEAVER
JUSTICE, ENVIRONMENT NATURAL RESOURCES:JWEBB
EPA FOR INTERNATIONAL: CAM HILL-MACON
USDA FOR ARS/INTERNATIONAL RESEARCH: GFLANLEY
NSF FOR INTERNATIONAL: HAROLD STOLBERG

E.O. 12958: N/A
TAGS: SENV EAGR EAID TBIO ECON XR BR
SUBJECT: INFRASTRUCTURE THREATENS AMAZON FOREST CONSERVATION

BRASILIA 00000895 001.4 OF 011


1. (U) SUMMARY. Vulnerability of Amazonian rainforests is increasing
as a result of rising commodity prices and regional infrastructure
integration, as well as global climate change and fire practices.
This is the first in a two-part series addressing the regional
impacts of agricultural expansion and infrastructure (Part 1), and
climate change and fire (Part 2) on Amazon forest conservation.
Uncontrolled expansion of ranching (cattle), farming (soy, cane
sugar, palm oil), and logging, poses a serious threat of
deforestation and forest degradation in the Amazon biome. Expansive
plans for transnational road systems (e.g., Inter-Oceanic Highway)
and the Madeira hydroelectric waterway complex continue to move
ahead in the southwestern Amazon basin, promising to trigger
considerable change in some of the most biodiverse ecosystems on the
continent, and fortify a growing East-West trade axis driven by the
rising economic demands of Asian markets. Although regional
coordination has proven challenging amongst Andean and Amazon
countries, examples of cross-border governance in these integrating
regions offer hopes for future improvement in resource management
and environmental conservation. This cable draws from information
in peer-reviewed articles (Philosophical Transactions, v. 363) and
country research. END SUMMARY.

COMMODITY PRICE INCREASES DRIVE LAND USE IN AMAZON RAINFOREST

2. (U) The Amazon rainforest is home to one out of every five
mammal, fish, bird and tree species in the world. The trees of the
Amazon forest contain between 90-140 billion tons of carbon,
equivalent to 9-14 decades of global human-induced carbon emissions.
The Amazon biome plays a vital role in the global water balance by
evaporating eight trillion tons of water through Amazon forests each
year, influencing atmospheric circulation on a global scale. NOTE:
A biome is defined as a major regional ecological community
characterized by distinctive life forms and principal plant and
animal species. This cable is focused on the issues related to the
ecological community of the Amazon rather than on what each country
legally considers as Amazon (e.g., states of the Legal Amazon in
Brazil). END NOTE.

3. (U) Higher global commodity prices offer compelling incentives
for farmers, corporations, and nations to increase the productive
capacity of agricultural properties and lands which have been

BRASILIA 00000895 002.4 OF 011


considered unproductive. In the Amazon basin, rising commodity
prices are pushing the agricultural frontier deeper into pristine
lands that lack access to existing infrastructure. In a model
driven by agricultural expansion, regional economic success is
linked to expanding infrastructure that facilitates transportation,
market access, and capital mobility.

4. (U) By default, the spread of agricultural production and
infrastructure into the Amazon basin alters natural vegetation and
land conditions. Deforestation and forest degradation are the most
immediate consequences of land use changes. However, the intrusion
of agriculture and roads into pristine regions also modifies the
traditional land use practices and socio/economic conditions of
indigenous inhabitants and riverine populations in the Amazon biome.
NOTE: The FAO defines forest degradation as the impoverishment of
woody material caused by human activities such as over-grazing,
over-exploitation (for firewood), repeated fires, or other natural
causes. Degradation may occur as a rapid or gradual reduction in
biomass, changes in species composition, and soil degradation. END
NOTE.

5. (U) Uncontrolled expansion of ranching (cattle pastures),
farming, road building, and logging poses the most serious threat
for deforestation and forest degradation in the Amazon basin,
particularly in the more remote transboundary regions. Wood
extraction for charcoal production is blamed for a second wave of
forest degradation that follows the first deforestation sweep for
high-value logs. Deforestation also closely follows roads and other
infrastructure developed for oil and gas extraction. New challenges
in the forest frontier arise from the potential expansion of
biofuels.

6. (U) Illegal logging has already degraded forests in the eight
countries of the Amazon basin. Claiming 62 percent of Amazon basin
land, Brazil is responsible for 80 percent of its deforestation.
Recent reporting indicates that forests in one third of the
Brazilian Amazon state of Rondonia have been damaged. A sense of
lawlessness pervades Rondonia, a state in which logging trucks
become kings by night, and the buzz of saw mills is heard from
sunset to sunrise.


BRASILIA 00000895 003.4 OF 011


7. (U) The devastation in Rondonia is largely connected to the
BR-364, one of the primary regional highways connecting the
Brazilian cities of Porto Velho and Rio Branco and passing into
Peru. This highway lays the initial axis of what will become the
Inter-Oceanic highway, a high priority transboundary integration
project for Brazil-Bolivia-Peru. Social conflicts along this
alignment grow every day more intense between developers, extractive
actors, migrants, and indigenous communities. Transnational border
and social conflicts in the Amazon basin have historically posed
intermittent regional security concerns owing to disputes over land
tenure rights, land use in indigenous reserves, resource allocation,
and extraction rights in the mining, oil/gas, timber, and
agricultural sectors.

8. (U) Although lower than Brazilian statistics, there are also
serious threats from Amazonian deforestation in Bolivia, Ecuador,
Peru, and Colombia, primarily from commercial logging, agricultural
expansion, fuel wood collection, subsistence agriculture,
slash-and-burn land-clearing for cattle pasture, illegal drug
cultivation, mining, and oil/gas development. Although oil/gas
exploration in Peru is reportedly a minor contributor to
deforestation, 75% of the Peruvian Amazon is marked for oil/gas
concession; such exploration also plays an active role in
deforestation in Ecuadorian.

GOVERNMENTAL REGULATORY APPROACHES: FORM OR FUNCTION?

9. (U) With Brazil's recent change in Environment Minister (REFTEL
08 BRASILIA 750), environmental shows of force have been making
headlines weekly. In a recent crackdown on illegal logging, the
Brazilian government seized thousands of cattle grazing on public
land in the Amazon rain forest. In May, Brazil's environmental
protection agency seized several tons of grain, mostly soy and corn,
grown on illegally deforested lands. In June, sixty steel companies
across Brazil (not all in the Amazon) were charged nearly USD$250
million in fines for using illegally harvested forest charcoal. In
spite of these recent actions, and after three years of decline,
deforestation in Brazil's Amazon basin appears to be accelerating
again, likely in response to international demand for agricultural
products. It is hoped that Brazil's new forestry law (2006), will
help preserve forests through strategic planning, land tenure

BRASILIA 00000895 004.4 OF 011


programs, implementation of forest concessions (job creation), and
promotion of sustainable forestry.

10. (U) Bolivia is reported to be the world leader in tropical
forest certification, according to the World Wildlife Fund. In
2005, Bolivia's certified forest sector generated USD$16 million
from exports. Bolivia's government has passed laws requiring the
logging industry to replant forests to ensure sustainability;
however, loopholes have made it possible for many firms to bypass
the requirement. In Peru, the Research Institute of the Peruvian
Amazon reported that 95 percent of the country's mahogany is
harvested illegally. As of early 2006, not a single commercial
logger had been imprisoned in Peru for illegal logging. Peru's
recent creation of an Environmental Ministry and the stringent
forestry requirements of the U.S.-Peru Trade Promotion Agreement
promise to bring about positive changes in logging, processing, and
prosecution in the Peruvian Amazon. In Ecuador, legally harvested
wood essentially does not exist. Since 2000, the poorly-funded
Ministry of Environment has attempted to decentralize responsibility
for logging enforcement by placement of officers in remote regions,
in an effort to combat Ecuador's reported 3% average annual
deforestation rate. Corruption persists, however, as certification
of illegally-harvested wood continues.

INFRASTRUCTURE EXPANSION IN SOUTHWESTERN AMAZON RAINFOREST

11. (U) Infrastructure development in the name of regional economic
integration poses a significant challenge to environmental
sustainability in the Amazon basin. IIRSA, the Initiative for
Integration of Regional Infrastructure in South America (adopted
2000), aims to meet regional connectivity needs via the physical
integration of transport, energy, and telecommunications
infrastructure for twelve South American countries. IIRSA
supporters emphasize the need for improved transportation systems,
the desire to harness surplus sources of energy, and the goal to
ease economic isolation of small- and medium-sized populations
across South America. Environmental concerns of IIRSA focus on the
extensive alterations to landscapes and livelihoods that would occur
with the creation of 10 integration and development hubs.

12. (SBU) Just as IIRSA projects intend to improve efficiency of

BRASILIA 00000895 005.4 OF 011


resource extraction from the South American heartland, the projects
may also accelerate cross-continent transportation of agricultural
products to overseas markets. This regional integration offers a
potential realignment of the formerly dominant North-South trade
axis between Latin America, Europe, and the U.S., with a new
East-West trade axis directed towards the growing economic demands
of Asian countries (e.g. China and India). COMMENT: As the
economies of China and India grow exponentially, there is the
possibility that the current North-South axis of U.S.-dominated
trade will be diluted by an East-West axis based on investment from
Asian countries and raw materials exportation from regional players
(Brazil, Ecuador, Peru, Colombia, and Bolivia). Such an East-West
axis, offering Asian investors a "geopolitical window" into South
America, could have negative implications for the environment and
foreign relations in the region. END COMMENT.

13. (U) Two high priority IIRSA programs are examined here with a
focus on potential environmental impacts in the tri-border MAP
region of Peru-Brazil-Bolivia:
- The Inter-Oceanic Highway road/rail connections from Brazil,
Bolivia to ports in Peru; and
- The Madeira Dam complex (producing hydroelectric power and
hydrovias (waterways) for transport from Bolivia to the Atlantic).

14. (U) The MAP region in the southwestern Amazon biome draws it
name from the 3 contiguous regional provinces of Madre de Dios
(Peru), Acre (Brazil, neighbor state to Rondonia), and Pando
(Bolivia). This region (300,000 km2 land and 700,000 inhabitants)
is characterized by tremendous biological and cultural diversity, as
well as high vulnerability to climate change owing to its location
in the drought-prone southwestern Amazon. The region is predicted
to lose 67 percent of its forest cover and 40 percent of its
mammalian biodiversity by 2050 if current trends in land use and
road construction are maintained, according to Soares-Filho (Federal
University of Minas Gerais) and colleagues.

ROAD CONSTRUCTION: OFFICIAL AND UNOFFICIAL

15. (U) Although road building is considered instrumental to the
viability of contemporary economic activity for South America, it
also increases habitat/forest fragmentation and the ecological

BRASILIA 00000895 006.4 OF 011


vulnerability of the Amazon forest. In the MAP region, the IIRSA
Inter-Oceanic highway project (under construction) entails the
construction/renovation of 2603 kilometers of highway connecting the
Amazonian state of Acre (Brazil) with Peruvian port cities (Ilo,
Matarani, and San Juan de Marcona), passing close to the Bolivia
border.

16. (U) Discussions of infrastructure expansion, however, cannot
simply focus on the planning and construction of official roads. An
axiom of infrastructure development in the Amazon biome is that
'road construction begets more road construction'. Infrastructure
synergies demonstrate that the paving of official roads motivates
unofficial road construction, introducing intersecting forest
extraction networks that penetrate deeper into pristine territories
to exploit natural resources beyond official corridors.

17. (U) Official roads are interregional highways that link major
cities, appear on official maps, and form sparse networks, leaving
large blocs of forest intact. Official road construction via
official government projects receives attention from regulatory
agencies and financial institutions.

18. (U) In contrast, unofficial roads are narrow, often winding
paths that yield highly fragmented forest mosaics and exacerbate
ecological vulnerability. These unofficial, unmonitored roads are
built to gain access to land or timber, or in order to support local
livelihoods and community development. Environmental consequences
of unofficial road construction can include: deeper forest access
for raw material extraction, habitat/forest fragmentation,
introduction of exotic species, intensified and expanded
agricultural burning, stream degradation, and increased forest fire
risk.

19. (U) Beyond road construction, pipeline alignments from oil and
gas exploration have historically created similar deforestation and
degradation outcomes. Pipeline alignments in the Amazon biome have
opened remote regions to migration and settlement ahead of official
roads, resulting in a proliferation of secondary roads that fragment
the Amazon rainforest into isolated forest blocks. Current
expansion of secondary roads is less tied to pipelines and more
linked to official roadways providing transportation for

BRASILIA 00000895 007.4 OF 011


agricultural products, timber, and access for resource exploration.

CONSTRUCTION OF HYDROELECTRIC DAMS AND WATERWAYS

20. (U) IIRSA's Madeira River complex, a transboundary industrial
hydroelectric and hydrovia (waterway) complex planned for the MAP
tri-border region, will also alter the southwestern Amazon basin
with extensive construction, an agricultural "boom" anticipated to
result in significant expansion of soybean cultivation, and an
immigration influx predicted to draw more than 100,000 new settlers
to this vulnerable region.

21. (U) The Madeira River project is a coordinated international
development project intended to facilitate regional and
international trade. The project consists of two dams in Brazil's
Rondonia state, the San Antonio and Jirau, the Brazil-Bolivia
bi-national Guajara-Mirin dam, the Cachuela-Esperanza dam on
Bolivia's Beni River, as well as a series of navigation locks that
will create a 4,200 km hydrovia into the navigable Amazon basin.

22. (U) In December 2007 a Brazilian consortium won the auction for
construction and operation of the planned 3,150 megawatt (MW) Santo
Antonio hydroelectric dam. In May 2008, a French, Suez-led
consortium won the auction for the upstream planned Jirau dam (3,300
MW), only 80 km from Bolivia. These projects are expected to supply
8% of Brazil's energy demand, 75% of which is currently supplied by
hydroelectric dams. With so many hydroelectric eggs in one energy
basket, energy specialists question whether Brazil will have enough
alternative generation capacity and flexibility to meet demands
during prolonged periods of drought. Energy needs in Bolivia and
Peru are less dependent upon hydroelectric power. COMMENT: The
headwaters of all three Madeira River tributaries are located in the
Peruvian and Bolivian Andean highlands. Consequently, glacier melt
driven by climate change is likely to have a major impact on future
hydroelectric potential for the Madeira River complex. At present,
only 30% of these Andean glaciers have been studied, and it is
estimated that 80-90% of the studied glaciers have already lost 30%
of their area since the 1960s. END COMMENT.

23. (U) Although no attempt has been made to assess the cumulative
impacts of the massive Madeira complex, a myriad of environmental

BRASILIA 00000895 008.4 OF 011


concerns surround the construction of the two dams, including:
deforestation and inundation of indigenous lands; decimation of a
diverse native fish population; public health disease outbreaks
(yellow fever, malaria); water quality deterioration and mercury
contamination of river and ground waters; and river bed
sedimentation yielding diminishing hydroelectric efficiency.

INFRASTRUCTURE IMPLICATIONS ACROSS THE AMAZON BASIN

24. (U) Other transboundary IIRSA projects that will directly affect
areas of high biological diversity and indigenous preserves include:
Manta-Manaus corridor (Ecuador, Brazil); hydrocarbon extraction in
Peru; Pucallpa-Cruzeiro do Sul (highway integration between Brazil
and Peru); hydroelectric plant Coca-Codo-Sinclair (Ecuador); and
Northern Corridor Bolivia (roads). The breadth of these projects is
indicative of the grand ambitions for infrastructure development in
the Amazon basin, which can lead to cumulative and indirect impacts
far beyond those considered in project-specific environmental impact
assessments.

25. (U) In particular, the Manta-Manaus corridor (from Ecuador into
the mainstream Amazon River port city of Manaus in Brazil), proposed
to pass over the Andes through one of the best preserved sections of
the Amazon rainforest, is cause for concern. While the Ecuadorian
government is proposing to limit new road construction to the last
60 km west of the river port at Coca, current highway expansion and
increased traffic along the route will no doubt have environmental
repercussions. This corridor promises to position Ecuador as a
bridge for access to markets elsewhere in South America, and to both
the Pacific and Atlantic coasts. Members of the Ecuadorian
government have referred to it as "the alternative to the Panama
Canal."

A TENSION AMIDST DEVELOPMENT

26. (U) The growing tension between implementation of a sustainable
(environmentally sound) economic model and the continuation of an
extractive development model is increasingly apparent in the MAP
region and elsewhere in developing countries of South America. The
tension arises from a variety of factors including internal and
regional politics, social movements of native populations,

BRASILIA 00000895 009.4 OF 011


environmental conservation efforts, and international economic
pressures responding to global commodity price increases.

27. (U) The tri-nation MAP region occupies a strategic position in
the regional natural resource economy owing to the convergence of
waterways, the expansion of the agricultural frontier, growing
interest in biofuels, and the substantial oil/gas resources of Peru,
Ecuador, and Bolivia.

28. (U) However, as the case of the Madeira River Dam makes clear,
this strategic position does not necessarily benefit native
populations, nor does it assist efforts to protect vulnerable
regions of high biodiversity. Instead, the two strong drivers of
resource extraction and infrastructure development intensify
pressures to remain in the trap of an unsustainable economy at odds
with sustainability and environmental conservation. NOTE: The
Bolivian government toned down its originally strong criticism of
the Madeira River project to maintain political support in a
geo-political landscape dominated by development institutions
financed by the continent's largest economies (i.e., Brazil). END
NOTE.

29. (U) The MAP Initiative was launched in the year 2000 to promote
extra-governmental leadership and collaboration between
professionals and community leaders in the tri-national frontier
region of Bolivia-Brazil-Peru. This initiative fosters
participation of local communities, NGOs, universities, and
government agencies in a hybrid regional governance model, which is
understood as a social, economic, and political process in which
civil society and governments are engaged towards their own
self-management. The MAP initiative has shown preliminary success
in building capacity and achieving a regional governance approach to
infrastructure improvement, economic development, resource
management, and ecosystem protection in this transboundary area
where cultural wealth stands beside economic poverty.

30. (SBU) Tension between a sustainable environmental development
model and a resource extraction model are evident in Ecuador, where
President Correa has offered to forgo development of the ITT
(Ishipingo-Tambocoha-Tiputini) field in Ecuador's Yasuni National
Park, home to uncontacted tribes, if the international community

BRASILIA 00000895 010.4 OF 011


will compensate Ecuador for the profits it estimates it would earn
over 35 years of drilling, or $350 million annually (REFTEL 07 QUITO
1497). The innovative offer has been on the table for a year, and
Correa has said that if donors do not agree by October 2008, he will
allow development. Chinese oil companies are interested in the
field, and have met several times with the government; so far the
international community has offered only $1,000 to set up an ITT
conservation secretariat. COMMENT: The proposal has been presented
as a choice between conservation and extraction, with no middle road
in sight; this will no doubt lead to tension with indigenous groups
if and when the field is developed. END COMMENT.

REGIONAL CHALLENGES AND ALTERNATIVE GOVERNANCE MODELS

31. (U) Recently reported increases in regional Amazonian
deforestation demonstrate how conservation efforts can founder in
the face of the twin pressures of a global economy with rising
commodity prices and national governments accelerating their
economies via infrastructure integration.

32. (U) Despite the ecologically sensitive rhetoric of governments
in Ecuador, Bolivia, Brazil, Venezuela, and other South American
countries, planning for IIRSA's transboundary mega-development
projects continues to move ahead, promising to permanently alter
some of the most biodiverse ecosystems on the planet, as well as the
peoples that inhabit them. At the same time, there is a growing
awareness among scientists, environmentalists, social movements, and
some government representatives that innovative models of governance
are needed to mitigate the negative socio-economic and ecological
effects of infrastructure and agricultural expansion on the Amazon
rainforest.

33. (U) As an example of institutional strengthening, USAID's
regional Initiative for the Conservation in the Andean Amazon (ICAA)
builds capacity for enhanced governance and increased transparency
within infrastructure development. ICAA's Working Group on
Infrastructure analyzes IIRSA projects, generates policy briefs,
provides training for improved mitigation and compliance and
convenes international finance agencies with civic and public
stakeholders across the sector. A recent ICAA workshop brought
together Ministerial representatives, indigenous leaders,

BRASILIA 00000895 011.4 OF 011


conservationists, and infrastructure analysts to assess the current
framework and gaps of the social-environmental assessments used to
determine financing and mitigation measures in IIRSA infrastructure
projects.

34. (U) Experiences in Brazil, Bolivia and Peru have shown, however,
that working at a regional level is indeed a challenge, especially
with current tensions between Andean nations and between the USG and
Latin America. In an increasingly politicized environment, Bolivian
threats to suspend international cooperation programs, tensions
between Peru and Bolivia, tensions between Colombia and Ecuador, and
Brazilian sensitivity to regional environmental projects (and NGO
involvement) all suggest that political issues must be carefully
considered in order to effect improved environmental conservation
and regional cooperation on priority environmental issues.

36. (U) This cable was coordinated and cleared with Embassies in
Lima, La Paz, Quito, and Bogota, FAS in Brasilia, and USAID and USFS
in Washington.

SOBEL

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