“In these 18 years of Moratorium, it is important to say that the area planted with soybeans in the Amazon has grown significantly, but not due to more deforestation…”
Frederico Favacho is a lawyer and partner at Santos Neto Advogados, has a M.Sc. in Philosophy of Law and is currently pursuing a Ph.D. at USP. He is the director of the Brazilian Agribusiness Association.
Ieda Queiroz is a lawyer at CSA Advogados, graduated from PUC and has a MBA in agribusiness from Esalq/USP.
AgriBrasilis – What is the “Soybean Moratorium”?
Frederico Favacho – The Soybean Moratorium is a voluntary, multisectoral pact initially signed between the private sector (exporting companies, industry, grain farmers) and civil society organizations (Greenpeace, WWF, TNC), which was also joined by financial institutions, such as Banco do Brasil (Bank of Brazil), and even government agencies such as the Ministry of Agriculture.
The Soybean Moratorium Pact is based on the commitment not to sell or finance soybean harvested from areas of the Amazon biome that were deforested after July of 2008.
Ieda Queiroz – The Soybean Moratorium is a private agreement adopted by companies operating in the soybean and derivatives export sector, whose signatories commit not to purchase soybean harvested from areas located in the Amazon biome that were deforested after July 22th, 2008, the date on which discussions related to the Brazilian Forest Code began.
AgriBrasilis – What was the context when the Moratorium was signed? Has this scenario changed since 2006?
Frederico Favacho – In 2006, the soybean chain was still recovering from the impacts of the temporary embargo by China which happened two years earlier when Greenpeace published a report regarding the increase in deforestation in the Amazon from 2000 to 2004. The report associated products such as vegetable oil and hamburgers with soybean farming and deforestation.
The Greenpeace report caused a boycott by consumers around the world against brands such as McDonalds and put pressure on Brazilian exporters. The Moratorium served to alleviate this pressure and to change the image of Brazilian soybean, even allowing exports to increase almost fivefold since then.
In these 18 years of Moratorium, it is important to say that the area planted with soybeans in the Amazon has grown significantly, but not due to new deforestation. It was rather due to the conversion of pastures or degraded areas. Internationally, however, pressure for the conservation of the Amazon rainforest has only increased, resulting in new commitments and initiatives such as the European Union’s anti-deforestation regulation.
Ieda Queiroz – Discussions related to the Moratorium began in 2006 in response to the Greenpeace report called “Eating up the Amazon”, which pointed to the expansion of agriculture in the Amazon region as the main source of deforestation in the biome at the time. According to Greenpeace, from 2002 to 2008 the deforestation rate in the region reached 10.6 thousand km²/year. From 2009 to 2014, after the adoption of the Moratorium and in the first years of the Forest Code, this rate fell to 3 thousand km²/year.
The Moratorium and the Greenpeace report were important in initiating the discussion of the parameters that served as the basis for the Brazilian Forest Code, sanctioned in 2012. Compliance with environmental regulations became part of the farmer’s agenda. We can mention some objective measures that were foreseen: the georeferencing of properties became mandatory for the registration of areas; it became necessary for farmers to allocate a portion of the property area for environmental preservation, without prejudice to the preservation of areas considered to be of permanent preservation, such as springs and riverbanks. These requirements foreseen in the legal regulation became mandatory for all farmers who depend on financing (public or private) or allocate their production for export and commercialization through companies operating in the sector.
“The Soybean Moratorium Pact is based on the commitment not to sell or finance soybean from areas of the Amazon biome that were deforested after July of 2008”
AgriBrasilis – What are the positive aspects of the Moratorium?
Frederico Favacho – The Moratorium reversed the negative image of Brazilian soybeans that was being established in 2006 and ended up allowing the expansion of soybean farming in the State of Mato Grosso do Sul, and in the south of the State of Pará, mainly. Furthermore, it is important to say that the Moratorium countered the initiative from purchasing countries to create a soybean certification based on criteria established by the RTPS (Roundtable on Responsible Soybean Association), based in Switzerland, which would make Brazilian soybeans more expensive and reduce the margins of the national producer.
Ieda Queiroz – The discussion brought about by the Moratorium was important to identify mechanisms for monitoring this deforestation and to force the authorities to review the preservation criteria adopted in Brazil and take a position to contain deforestation.
A discussion was sparked about the agricultural sector as a whole, making the deforestation criteria and environmental preservation mechanisms adopted by Brazilian legislation applicable not only to soybean crops.
AgriBrasilis – In your opinion, is the Soybean Moratorium unconstitutional? Why?
Frederico Favacho – I do not see any unconstitutionality. The Moratorium is nothing more than a response from the soybean chain to the demand of the international and domestic market, that is, it is even covered by the principle of free enterprise. The Moratorium generated pro-competitive effects, favoring the growth of the market for Brazilian soybeans, which was threatened by embargoes and price discounts.
Ieda Queiroz – Since it is a private agreement, which was not transformed into a law or normative act, the Moratorium was not formally incorporated into the Brazilian legal system. Therefore, we cannot speak of its constitutionality. It is also not an international treaty, since it does not involve a commitment between States and Governments.
AgriBrasilis – What are the effects of the recently approved law against the Soybean Moratorium in the State of Mato Grosso?
Frederico Favacho – The Law No. 12709 is nothing more than an attempt to undermine the Soybean Moratorium by threatening to withdraw tax benefits granted by the State of Mato Grosso to companies that adhere to the pact. This is the expressed purpose of the aforementioned law, as is clear from the explanatory memorandum of the Bill that originated this law and from the statements of the congressmen who supported it.
Ieda Queiroz – Law No. 12709, sanctioned at the end of October by the Governor of the State of Mato Grosso, will come into effect on January 1st, 2025. It established new criteria for granting tax incentives and revoked benefits already granted to companies that “participate in agreements, treaties or any other form of commitment, national or international, that impose restrictions on the expansion of agricultural activity in areas not protected by specific environmental legislation, under any form of organization or alleged purpose”. It is nothing more than the State using its legislative powers, granted by the Federal Constitution, to grant or revoke benefits in accordance with the intended policies.
It is important to emphasize that the State of Mato Grosso is not prohibiting companies from operating, it is simply not encouraging the activity of these companies through benefits, which is quite justifiable in a State that is the largest Brazilian producer of soybeans, has part of its territory in the Amazon biome, and has an economy based on agriculture.
AgriBrasilis – Why is this new law considered to be “less harsh” than what is expected by the sector?
Frederico Favacho – The loss of tax benefits will not apply to those companies that are adopting in their contracts the requirements imposed on them by the international market, even if these requirements are more restrictive than Brazilian legislation. Furthermore, after the vetoes to items I and II of article No. 2, it is more evident that the application of the loss of tax benefits applies only to companies that participate in the Moratorium, but not to those that, due to their own policies, refuse to sell or finance soybeans from deforested areas (even if legally under the rules of the Brazilian Forest Code).
Ieda Queiroz – The approved text also took into account some requests from trading companies. It was the fifth version, with vetoes to two items that could harm free enterprise and could generate some questions. It is important to highlight that the mechanisms for controlling and monitoring deforestation were better developed after the sanction of the Forest Code, which means that proving that there was no deforestation on the Moratorium cut-off date (July of 2008), in some cases, was subject to a certain degree of subjectivity and difficulty. The background to the discussion was the adoption of objective criteria that could be verified by the control mechanisms established by the Forest Code, without harming free enterprise. This meant that the State of Mato Grosso acted strictly within its legislative limits.
AgriBrasilis – What are the possible impacts of the new law on traders and farmers?
Frederico Favacho – We still have to wait for the law to be regulated, but we can already see some negative outcomes of the law, a shake-up in the international market’s confidence in the maintenance of the Soybean Moratorium, leading to a growth in distrust regarding the sustainability of Brazilian soy. On the eve of COP 30 in Brazil, this law could be a source of political and commercial problems for all involved.
Ieda Queiroz – The impact for traders is the revocation of tax benefits that range from the concession of land, the impossibility of companies using certain agreements and tax benefits granted by the State, etc.
For farmers, in addition to a victory in the legislative sphere, the law allows for the stabilization of soybean prices, since the criteria are now the same as those provided for in the Forest Code. Even so, we cannot forget the impact that this can have on Brazil’s image in the face of competing markets that might have more protective tendencies.
READ MORE