Jaguars, blue macaws and giant armadillos roam the fickle landscape of
Brazil’s Cerrado, a vast plateau where temperatures range from freezing to
steaming hot and bushes and grasslands alternate with forests and the
richest variety of flora of all the world’s savannas.
That could soon come to an end. In the past four decades, more than half
of the Cerrado has been transformed by the encroachment of cattle ranchers
and soybean farmers. And now another demand is quickly eating into the
landscape: sugarcane, the raw material for Brazilian ethanol.
“Deforestation in the Cerrado is actually happening at a higher rate than
it has in the Amazon,” said John Buchanan, senior director of business
practices for Conservation International in Arlington. “If the actual
deforestation rates continue, all the remaining vegetation in the Cerrado
could be lost by the year 2030. That would be a huge loss of biodiversity.”
The roots of this transformation lie in the worldwide demand for ethanol,
recently boosted by a U.S. Senate bill that would mandate the use of 36
billion gallons of ethanol by 2022, more than six times the capacity of the
United States’ 115 ethanol refineries. President Bush, who proposed a
similar increase in his State of the Union address, visited Brazil and
negotiated a deal in March to promote ethanol production in Latin America
and the Caribbean.
U.S. companies and investors — including George Soros and agribusiness
giants Archer Daniels Midland and Cargill — are staking out territory in
Brazil, expecting even greater growth in biofuels.
“There was already a race for Brazilian ethanol, and President Bush’s
announcements gave more credibility to the process,” said Roberto Rodrigues,
former Brazilian agriculture minister, who formed the Interamerican Ethanol
Commission with former Florida governor Jeb Bush in December.
The Brazilian government and big agribusiness companies say that the
expansion of soybean and sugarcane fields doesn’t necessarily mean
devastation of the Cerrado, which hosts an estimated 160,000 species of
animals and plants, many threatened with extinction. They say they plant on
wastelands and pastures where cattle once grazed, improving the soil quality
But environmental groups argue that as soy and sugarcane displace cattle
and less lucrative crops, ranchers are moving farther into the unspoiled
areas of the Cerrado.
“There are ranchers substituting sugarcane for cattle in the Sao Paulo
area, for instance, and displacing cattle to the state of Bahia, both in the
Cerrado. So what is the point?” asks Ricardo Machado, author of a study about the
Cerrado for Conservation International.
Sugarcane and soybeans play a crucial role in Brazil’s agriculture, one
of the most dynamic sectors of the country’s economy. And both are under
pressure to expand as a result of the ethanol boom.
Sugarcane is touted by environmentalists as a better option than corn for
producing ethanol. Sugarcane ethanol costs half as much to produce, and the
process is five times as efficient in its use of fossil fuels.
Lured by the prospect of making ethanol from Brazilian sugarcane, many
U.S. firms are trying to catch up with European and Asian investors. The company
Soros is backing, Adecoagro, has become one of the main investors in
Brazilian ethanol, planning to spend $1 billion to build three plants over
the next five years. Goldman Sachs and Carlyle Group are also behind new
ethanol investments in Brazil.
In addition, as use of corn-based ethanol grows in the United States,
rising prices are influencing American soybean farmers to switch to corn.
And as the United States, the world’s largest soybean producer, cuts soybean
plantings, buyers are looking to Brazil, the No. 2 soy producer, to expand
its production. Brazilian soybean production is already at record levels and is predicted to
increase another 4.5 percent this year, according to Abiove, an industry
“There is a dual pressure in Brazil,” Buchanan said. “The direct pressure
to expand production of sugarcane and the indirect pressure to expand
Brazilian soy, if U.S. soy is reduced.”
The agriculture business and the Brazilian government say that there are
nearly 350,000 square miles of already-cleared land available for
agricultural expansion in the Cerrado. The government says more than 115,000
square miles of cattle pastures could be used — that’s enough land to more
than double soybean production and increase sugarcane production five times
and ethanol by at least 10.
“Brazil is the only country with a vast amount of land available for
immediate expansion of sustainable agriculture. If the U.S. races after
ethanol, soybean prices tend to climb and demand will be supplied by
Brazil,” said Carlo Lovatelli, corporate affairs director for Bunge, one of
the largest soy traders in Brazil, headquartered in White Plains, N.Y.
Lovatelli, who also represents companies responsible for 93 percent of
all soy traded in Brazil, said that if demand escalates, Brazilian
production could double in as little as three to four years.
And the target region has already been chosen: “Cerrado is perfect for
agriculture and will be used — there is no question about it,” Lovatelli
But Frank Guggenheim, executive director of Greenpeace Brazil, said
Brazil’s advantage could easily become a disadvantage. “Brazil is in a
special situation because of the vast amount of land available, if it uses
it in a prudent way,”Guggenheim said. “But if it just pushes the agriculture frontier and causes devastation, it will be a disaster.”
Brazil is already the scene of the most extensive deforestation in the
world, accounting for 42 percent of the world’s net forest losses from 2000
to 2005, according to a report by the Food and Agriculture Organization, an
arm of the United Nations. Nongovernmental organizations say 7 million
hectares of the Amazon were cleared in the past five years by soybean
farmers with the help of multinational companies such as Cargill.
Faced with pressure from its clients, Cargill brought other traders
together with advocacy groups and established a moratorium under which no
soybeans would be bought from devastated areas of the Amazon for two years,
beginning July 24, 2006. Although the moratorium ends next year, not even
the advocacy groups say the situation will return to what it was before.
The Cerrado, however, has not had the spotlight that the Amazon has, and
so the environmental impact of expansion of the sugarcane business into the
savanna is under less international scrutiny.
This month, Brazilian Agriculture Minister Reinhold Stephanes announced
new measures to avoid devastation from sugarcane plantations. But some
groups say enforcement would be effective only with large investments in
mapping tools and ground supervision, which the Brazilian government could
And ethanol investments keep growing. The sugar industry estimates that
$17 billion will be invested through 2012 in 86 new sugarcane processing
plants, adding to the 330 plants in Brazil today.
So far, the impact of the U.S. thirst for Brazilian ethanol has been
blunted by the 51-cent-per-gallon subsidy paid to American corn ethanol
producers and by the 54-cent-per-gallon tariff on imported ethanol. The
Senate extended the tariff until 2009, even though Bush signed an accord to
jointly promote biofuel production with Brazil.
Nevertheless, of the 680 million gallons of ethanol the United States
imported last year, about 500 million gallons came from Brazil, the world’s
leading ethanol exporter.
“The tariff was not an eliminating factor when we, last year, had
$78-a-barrel oil on a sustained basis,” says Roger K. Conway, director for
the Agriculture Department’s Office of Energy Policy and New Uses. “There
certainly could be more imports from Brazil. It depends on energy prices.”
Soros’s company in Brazil is betting that the United States will have to
increase ethanol imports and that a calendar for gradual reduction of the
tariff could be established from 2010.
“If the U.S. entirely lifts the tariff, demand for ethanol will go
through the roof and the pressure on the environment would be enormous,”
said a former Brazilian secretary of state for science and technology, Jos?
Goldemberg, speaking at a seminar on Brazilian ethanol in Washington last