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Lula's Growth Strategy: Business vs Environment

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Council On Hemispheric Affairs

Monitoring Political, Economic and Diplomatic Issues Affecting the Western Hemisphere

Memorandum to the Press 05.31

Word Count: 2250
Monday, 15 March 2005

ADVISTORY: At 6PM this Friday, March 18, COHA Senior Research Fellow Richard Alan White will be discussing his new book on the celebrated Filartiga ATCA case at the University of Virginia's bookstore as part of the Virginia Festival of the Book. Young seventeen-year-old Joelito Filartiga was taken from his family home in Asuncion, Paraguay, brutally tortured and murdered by the Paraguayan police. Breaking Silence: The Case That Changed The Face of Human Rights is the inside story of the quest for justice by Joelito's father—the true target of the police—Paraguayan artist and philanthropist Dr. Joel Filartiga. That cruel death and the subsequent uncompromising struggle by Dr. Filartiga and family led to an unprecedented sea change in international law and human rights. Dr. White first became acquainted with the Filartiga family in the mid-1970s and after answering a distressed letter from Joelito’s father, he returned to Paraguay and journeyed with the Filartiga family on their long and difficult road to redress. White gives the reader a compelling first-hand, participant-observer perspective, taking us into the family with him, to give witness to not only their agony and sorrow, but their resolute strength as well-strength that led to a groundbreaking $10 million legal decision in Filartiga v. Pena. For more information on this event go to http://www.vabook.org/program/friday.html or http://www.breakingsilence.us.

Lula's Growth Strategy: Good for Brazil's Business, Bad for its Environment

• 9,000 square miles of Amazonian rainforest were destroyed in 2004, an urgent call to the Brazilian government to implement firm policies on the preservation of the country’s natural resources.

• The February slaying of U.S.–born nun and environmental activist, Dorothy Stang, peaked international awareness of the ongoing violence in Brazil over environmental and agrarian reforms.

• The recent legalization of genetically modified soybeans once more confirms that the economic benefits of Brazil’s agribusiness sector have perpetually swayed Lula away from enacting stricter environmental policies.

• In pursuit of a stronger economy and higher standard of living for Brazilians, Lula’s left-of-center administration is following a narrowly focused path of development to the detriment of the country’s ecosystems; critics argue that the various infrastructure and energy-based programs given priority are in no way conducive to a truly sustainable system.

The Challenge

On February 12, 2005, a U.S.- born environmental and human rights activist was shot dead in the northern Amazonian rainforest. Working in the notoriously volatile state of Para, 74-year-old Dorothy Stang, like many before her, was targeted because of her activism against the rampant lawlessness in the Amazon where illegal ranchers and loggers poach on the fragile rainforest. The news of her death was yet another reminder of the constant violence rising out of the ongoing dilemma in Brazil posed by unsustainable development projects.

The suffering of a country’s poverty-stricken cannot be minimized or trivialized. Therefore, Lula’s critics argue that steps must be taken to effectively deal with such socio-economic realities. The necessary goal of poverty alleviation combined with Brazil’s increasing demand for energy together give some plausibility to the current policies favoring unrestricted development. However, such a prioritization places a heavy political weight on Lula, who repeatedly has voiced concern for the state of Brazil’s natural habitat, even while he is not doing much about it.

Nevertheless, the president’s priorities have seemingly adapted to the demands of the economy, much to the dismay of environmentalists worldwide who have expressed their utter incredulity that the anti-environmental option that Lula is now exercising can produce a truly sustainable system. He gave evidence of the retreat when, referring to the Amazon in a televised speech, Lula said that “it can't be treated like it was something from another world, untouchable, in which the people don't have the right to the benefits.”

The term “untouchable” rings hollow when applied to the Amazon, where rampant deforestation, slash and burn agriculture, and an array of other despoliations have taken heavy tolls on the ecosystem. Five hundred years ago, the Atlantic rainforest covered the majority of Brazil’s 8,500-kilometer coastline, yet today less than seven percent remains. The preponderance of destruction to the Amazon, home to fifty percent of the world’s biodiversity, has taken place in the last fifty years, an acceleration that greatly concerns environmentalists who initially expressed excitement over the eco-conscious president but are now cooling off their enthusiasm, even feeling betrayed.

Lula’s Environmental Game Plan

Taking action in 2003 to address the issue at hand, Lula appointed Marina Silva, highly regarded at the time, as Brazil’s Minister of State for the Environment. In May of that year, Minister Silva attended a conference, co-hosted by Washington’s Woodrow Wilson International Center for Scholars, where she outlined the new administration’s plans for a more integrated approach to environmental issues. President Lula “does not want a ministerial environmental policy… but rather a governmental environmental policy,” she said. The basis for Brazil’s environmental agenda, Silva continued, consists of “the brown, the blue, and the green.” These colors refer to three major programs: the processing and disposal of solid waste while accounting for its environmental impact, the recovery of rivers and riparian buffers (e.g. damaged stream banks) while addressing air pollution, and the development of agriculture while respecting forest conservation.

Following these guidelines, the environmental ministry ostensibly sought to strengthen the articulation and coordination of all ecological policies undertaken by both federal and state agencies while assuring that their scope reflects the country’s priority for economic development. The minister maintained that the new administration “wants a model in which sustainable development will promote the social inclusion of the millions of Brazilians living below the poverty line.”

In response to the poor socio-economic situation in the country, the World Bank approved in August 2004 a $505 million loan for “Environmental Sustainability,” aimed at supporting Brazil’s goal of balancing economic growth with social development while maintaining and improving the natural environment. Silva emphasized that “One of the most important features of the government’s environmental strategy- recognized and supported by this loan- is its strong focus on involving all relevant players around key issues in the sector, something unprecedented in Brazil.” The program, it was claimed, aims to improve the efficiency and effectiveness of Brazil’s environmental management system (SINAMA) and to maintain environmentally sustainable use of natural resources through the government’s process of economic planning. The loan is the first of three in a four-year program that will provide up to $1.2 billion.

Environmentalists’ Growing Concern

During the latter part of Lula’s first year as president, environmentalists were already voicing apprehensions over his apparent abandonment of various campaign promises on which he was elected, including tough policies aimed at restraining genetically modified food, nuclear power and Amazon deforestation. In defense of the administration’s record on environmental issues, Minister Silva declared at the time that “the idea of an integrated policy is something new and has never been done before. You cannot expect to have a new paradigm fully in place after barely 9 months in power.” Although the government felt the complaints in 2003 to be unwarranted (based on the sheer complexity of the issue and the limited time it had to deal with it), the credibility of the administration undoubtedly suffered a blow that continues to reverberate in public opinion, which grows increasingly negative towards an administration that still has not provided definitive signals.

Despite the business sector’s initial criticism of Lula’s left-of-center government, today the administration pursues pro-business policies and projects meant to spark economic growth. As the first leftist president to be elected in Brazil, Lula initially faced a financial sector that suspiciously speculated whether his policies would lead the country into recession. However, this has been avoided largely due to his emphasis on agricultural programs. Economic growth in 2004 was the highest in decades - with Brazil’s GDP increasing 5.2 percent - due to record high exports. This economic growth was heavily dependent on the agribusiness, which wreaks havoc on the Amazon. It was against theses firms’ degradation of the Amazon that Dorothy Stang waged her private war. In light of the activist’s murder, Lula responded to the claims that he favors agribusiness over environmental preservation by freezing development along an Amazonian highway for six months while creating an ecological reserve and a national park within the Amazon Region Protected Areas (ARPA), an initiative sponsored by Brazil, the World Bank and World Wildlife Fund.

Stang’s death, similar to numerous others active in the same cause, resulted from the unending battle between anarchic ranchers and landless farmers who, sometimes resorting to violence, think nothing of bypassing the law and seizing land and resources from indigenous reservations and national parks. Adding to the controversy, cattle-ranching has been a leading cause of deforestation in the Amazon since the 1970s. Nevertheless, the sector’s enormous impact on Brazil’s economic prosperity cannot be denied. Today, Brazil is the leading exporter of beef and second-largest exporter of soy, second only to the United States. Exports from Brazil’s agribusiness grew 11.1 percent in January 2005, and a steady growth rate is expected throughout the coming months. Lula’s recent legalization of genetically modified soybeans is also expected to boost export figures, but the decision has sparked an outcry among environmentalists as well as Marina Silva, who many feel should resign her post as Environmental Minister in protest.

Although environmentalists acknowledge the need for growth, they nevertheless fear that these recent policies will accelerate Amazon deforestation and further threaten already marginalized indigenous communities. Figures released by the Brazilian government show that in 2004 alone the Amazon suffered the destruction of 9,000 square miles, nearly the size of New Jersey. Nevertheless, various mega-development projects are still in the works, such as the construction of a massive pipeline that carries natural gas from Bolivia into Brazil, thereby reducing Brazil’s reliance on costly diesel. This effort, known as the Bolivia-Brazil Gas Pipeline Integration Facility, is expected to spur economic growth in the state of Amazonas, home to twenty million people. Twenty percent of the project will be financed by Petrobras, the Brazilian state energy company, which plans to invest $3 billion and lay 2,921 miles of natural gas pipeline by 2010.

The Huge Price of Development

Out of concern for the massive environmental ramifications of the pipeline, a specialized contracting firm has been hired to supervise the ecological aspects of the project. However, this step doesn’t appease opponents who expect the pipeline to have a wrenching effect on the rainforest, including the displacement of indigenous communities. José Freitas de Mascarenhas, a director of the Brazilian construction company Odebrecht and head of the National Industrial Confederation told Latin Trade, "Environmentalists aren't wrong to question Lula's Amazon infrastructure projects because they will have an environmental impact.” He maintains, however, that “they need to understand that environmental concerns need to be weighed against urgently needed economic growth, which will improve Brazilians' quality of life. And for the economy to grow, better roads and more energy supplying dams need to be built, even if it means building them in the Amazon."

To the discontent of many environmental and indigenous activists, an explosion of construction throughout the Amazon has become today’s reality. The International Monetary Fund (IMF) recently announced their approval in February 2004 of an arrangement to spend up to $1 billion per year, through 2007, to accommodate Brazil’s plans for additional infrastructure projects, including the construction of the BR-163 highway. Supporters of the highway, including fazendeiros and farm workers, anticipate faster shipping schedules and therefore more competitive commercial prospects. In opposition to the project, activists assert that the road would incur further deforestation and invite colonization by an inundation of commercial agriculturalists and ranchers. Those narrowly focused on rapid economic growth also expect major benefits from the Belo Monte Dam, which would provide power to foreign-owned and Brazilian-controlled aluminum plants that produce both for export and domestic consumption. Eletronorte, the state power company that would oversee the dam project, is aggressively lobbying for its approval. “Belo Monte will have the lowest generating costs of any dam ever built in Brazil, or any dam on the drawing boards,” says Paulo Cesar Magalhaes Domingues, a member of the Eletronorte energy planning council. “And this should attract industrial investors.” However, the dam’s opponents point out that it will flood the surrounding area, creating a 400 square foot reservoir.

Also contentious are the plans for a third nuclear power plant (Angra III) that has generated warranted concerns over its health and environmental hazards. Although nuclear officials claim that investing in Angra III will help the country become energy self-sufficient, much of the public, aware of the persistent problems at the country’s two functioning reactors, is not convinced that nuclear power is the best option.

The Future Seems More Grey Than Green

The future of Brazil’s environmental and economic situation rests on the shoulders of President Lula and his administration. The issues are interdependent; unfortunately, the dominant view is that the success of one comes only at the expense of the other. In this case, it is either environmental preservation or the possibility of a more promising economic future that frames the debate. Lula knows all too well the vital importance of these issues, as can be seen in his conflicting policy decisions since becoming president. “Lula is trying to appease both the developmentalists and the environmentalists,” says Amaryllis Romano, an agribusiness and construction sector analyst with Tendencias, a São Paulo consulting firm. “But if and when push comes to shove, I believe the developmentalists will win the day because after three years of near-zero economic growth, Lula has to go all out to get the economy moving, that or lose widespread popular support and part of his political base.”

For now, Lula is pursuing Brazilian economic strength through unsustainable development projects, whose ecological costs are known and pointed out by environmentalist critics. In order to reduce poverty and turn Brazil into a fully developed nation, the president will likely continue to compromise his initial goal of ecological conservation for immediate economic growth. Therefore, his critics increasingly focus on the need to manage the baleful ramifications of development, since they will be inevitably and unquestionably severe. Although many of Lula’s undertakings are beneficial for economic progress, they need to be made compatible with ecological goals in order to curb the volume of environmental calamities left for future generations to endure. It is not a question of choice but of developing an integrated approach. Lula’s opponents insist that both economic and ecological factors are essential and that pursuit of one does not necessarily sacrifice the other. Lula’s dilemma exemplifies most governments’ obstacle to creating sustainable development policies: short-term economic interests synchronize better with election calendars than long-term sustainable development.

This analysis was prepared by Amanda Smallwood, COHA Research Associate.

March 15, 2005

The Council on Hemispheric Affairs, founded in 1975, is an independent, non-profit, non-partisan, tax-exempt research and information organization. It has been described on the Senate floor as being “one of the nation’s most respected bodies of scholars and policy makers.” For more information, please see our web page at www.coha.org; or contact our Washington offices by phone (202) 223-4975, fax (202) 223-4979, or email coha@coha.org.

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