Mato Grosso promises to change the dynamics of soy sales that have been in force for almost 20 years in Brazil. The main grain producing state made its most incisive move to end “Soy Moratorium” in the country. The Moratorium is a trade agreement that has existed since July 2006, in which the largest agricultural industries in the world commit not to buy soy from deforested areas of the Amazon.
The agreement requires companies to stop purchasing soybeans or offering credit to farmers who have deforested areas of the biome as of July 2008. Currently, around 250,000 hectares – one hectare is equal to a football field – in the region would be out of compliance. with the program, and most of this (191 thousand hectares) is in Mato Grosso. The industries that signed the Moratorium represent more than 90% of the purchases of grains produced in the State.
In response to the agreement, governor Mauro Mendes (União Brasil) must sanction next week the bill 2256/2023, which determines that companies that want tax benefits in the State will not be able to “be organized in commercial agreements that cause market restrictions”.
In practice, if the industry installed in Mato Grosso participates in the Soy Moratorium, it will not have access to a discount of up to 50% on the ICMS for the sale of soybean meal and oil, in addition to no longer having incentives for the installation of factories and purchase of equipment.
ADM, Bunge, Cargill, Amaggi e Caramuru Alimentoswhich currently operate in the State and are part of the Moratorium, will be directly affected in their pockets if they remain in the agreement. Exports of bran and oil, soybean by-products that benefit from tax benefits, totaled US$2.53 billion from January to August this year, according to the most recent survey by the Federation of Industries of Mato Grosso (Fiemt).
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With such a significant figure at stake, the idea, explains Mauro Mendes, is to make the tradings “Review your positions”. “I hope that these companies respect Brazilian law, and do not adhere to a rule not provided for in Brazilian legislation as a way of putting pressure on the market”, said the governor. Mendes’ claim is that there is a federal law on the subject, which Forest Codewhich already determines the occupation of space in the Amazon biome (we will explain this later).
For the Minister of Agriculture, Carlos Fávaro, “producers have the legitimate right to use the Forest Code to their advantage”. “If companies prefer to do this (the Moratorium), they do not want to comply with the law. If they don’t want to comply with the law, they don’t need to have a tax incentive”, said Fávaro, while participating in an event in São Paulo this week.
The imminent approval of the law in Mato Grosso responds to a long-standing request from soybean producers. There is at least five yearsfarmers mobilize at the federal and state levels to stop the Moratorium, with the right to a direct complaint to then president Jair Bolsonaro. Currently, the greatest pressure occurs in state legislative assemblies, with Rondônia having recently approved a similar law, while Pará, Maranhão and Tocantins also have similar projects underway.
Consultant Thiago Rocha, who is supporting the legislative push by the Soy Producers Associations (Aprosoja) in these states, stated to the portal AgFeed that the bills do not directly mention the extinction of the Soy Moratorium, “despite this being the objective”. Aprosoja de Mato Grosso estimates that the Moratorium affects more than 65 producing municipalities in the State and that, as a result, more than R$35 billion no longer circulates in the state economy.
On the side of multinationals, the Brazilian Association of Vegetable Oil Industries (Abiove), which formally represents the sector, will only speak out after the law is sanctioned.
The National Association of Cereal Exporters (Anec) says that the Soy Moratorium was the “only ongoing program that has proven capable of preventing deforestation”. “Opposing these 18 years of struggle seems like an enormous risk, capable of compromising the country’s image as a major food provider for the world”, added Sérgio Mendes, president of Anec.
The Soy Moratorium
The tug of war between rural producers and industries is old and has as its backdrop the production of soybeans in the Amazon. The Soy Moratorium came at a time when deforestation in the Amazon biome was on a record scale.
With pressure from international buyers, especially those from Europe, on Brazil, exporting companies decided to adopt a zero deforestation policy: not buying from farmers who have deforested even one millimeter in the Amazon. Monitoring is done via satellite and updated year after year. The measure seeks to stifle soybean farmers who deforest in the region by taking away their buyers and access to credit.
But, in May 2012, the federal government updated the Forest Code, the legislation that regulates the occupation of areas in Brazil. The law determined that every farmer in the Amazon biome will be able to deforest 20% of their area for agricultural production – in other biomes, this percentage is much higher.
Returning to the example of hectares and football fields. If a farmer has a farm with 100 football fields in the Amazon, 20 of them could have trees cut down and a soybean crop, or any other agricultural activity whatsoever – this is called legal deforestation. But, as the Soy Moratorium imposes zero deforestation, neither legal deforestation nor illegal deforestation is tolerated.
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This mismatch between Brazilian law and trade agreement soured the relationship between farmers and tradings agricultural, which are those who buy grain to sell on the international market.
On the producers’ side, there is a feeling of being penalized even when following the law. On the buyers’ side, the assessment is that any relaxation in the Moratorium could send the wrong message to the market, especially at a time when the European Union seeks to restrict the import of products from deforested areas.
To try to find a compromise, the law that is on the table of the governor of Mato Grosso provides that companies that adopt “requirements other than those provided for in Brazilian legislation” to comply with international requirements would not be “considered in disagreement with current legislation”.
“Certainly, they will reach a good conclusion so as not to punish producers who did everything legally”, added minister Carlos Fávaro.
