A complementary focus on urban and rural productivity and forest protection would raise living standards while conserving the exceptional wealth of the region’s natural forests
BRASILIA, May 9, 2023 – A greater focus on productivity is urgently needed to promote economic development and reduce pressure on natural forests in Brazil’s Amazonian states, according to a new World Bank report. A Balancing Act for Brazil’s Amazonian States: An Economic Memorandum emphasizes that rising living standards and preserving standing forests can be complementary under a development model that simultaneously promotes urban and rural productivity, forest protection, and sustainable rural livelihoods. Conservation finance can play a critical role in funding this model.
According to the report, about 28 million Brazilians live in the Amazonian states, over one third of whom are poor. Most poor Amazonians live in urban areas although rural poverty is particularly severe. Considerable social deprivations exist in areas such as human capital and access to services. The Amazonian states comprise Brazil’s highest share of Indigenous people of about 380,000, and they tend to face worse living conditions.
Furthermore, deforestation threatens exceptional natural wealth in the Amazonian states, which are home to about 60 percent of the Amazon rainforest and parts of other important biomes, like the Cerrado and Pantanal. The annual value of the Amazon rainforest alone is estimated at a minimum of US$317bn: the Amazon regulates the global climate; it harbors 25 percent of known terrestrial biodiversity; its “Flying Rivers” are critical for South American agriculture and hydropower; and it provides livelihoods for many rural populations. The risk of reaching tipping points dramatically increases the cost of deforestation, the report warns. There is an urgent need to protect Amazonian forests.
“A much stronger emphasis on productivity, notably in sectors beyond commodities, would propel development countrywide and help to lift Amazônia’s economies while taking pressure off its natural forests,” said Johannes Zutt, World Bank’s Country Director for Brazil.
Frontier expansion destroys natural wealth without propelling the economy. Higher productivity growth, both in Brazil and the Amazonian states, and in sectors beyond commodities, is needed to reinvigorate economic progress and poverty reduction while moving the development model away from resource extraction.
According to the report’s recommendations, higher productivity requires reforms at the federal and subnational levels including the removal of distortions in product and factor markets (including subsidy reform) and the promotion of human capital, sustainable infrastructure and logistics.
In the Amazonian states, a strong focus on land and forest governance is needed, including the designation of large areas of undesignated public land, the implementation of the Forest Code, and effective Command and Control interventions—since most deforestation is illegal. At the same time, and complementary to investments in both productivity and forest protection, rural poverty can be reduced by unlocking the value of the forest (for example, through the bioeconomy) and through tailored social protection programs.
Conservation finance can play a critical role in funding a new development model for Brazil’s Amazonian states by monetizing a share of the region’s value. A greater focus on performance-based financing, conditioned on measurable reductions in deforestation, can leverage both public and private resources, including through market-based mechanism. Carbon markets can play an increasingly important role in this, consistent with Brazil’s efforts in strengthening carbon pricing.
“With three in four people already living in towns and cities in the Amazon, a focus on urban productivity is complementary to other efforts that raise incomes and protect forests in the region. A Brazilian growth model focused on productivity across sectors will also benefit Amazonian people and forests,” says Marek Hanusch, World Bank’s senior economist and report coordinator.
The report also draws attention to the role of the rest of the world in conserving the ecosystem services from Amazonian forests. This includes the need for more sustainable consumer behavior, sustainability-principles embedded in global value chains and trade policy, and the need to close crop yield gaps globally to reduce the pressure on natural forests across the world.