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Abstract
The trade agreement between the European Union and the Mercosur countries will increase deforestation in the Mercosur countries and Brazil, in particular, if ratified by member countries. We use a computable general equilibrium model to analyze how trade, land use, and agricultural production will change as a result of the agreement. We then use a statistical model to spatially allocate the predicted deforestation within the Brazilian Amazon. The models estimate that the agreement will cause additional deforestation in Brazil ranging from 56 to 173 thousand ha to accommodate increases in cropland area, depending on the level of governance, use of double-cropping techniques, and trade elasticity parameters. Most additional deforestation in Amazonia would be clustered near current deforestation hotspot areas. Some hotspots threaten the integrity of Indigenous lands and conservation units. Although a low deforestation scenario with gains in welfare is theoretically possible when high governance and multiple-cropping systems are in place, political challenges remain and cast doubt on Brazil’s ability to rein on illegal deforestation.
Highlights
Brazil, with its vast reserves of farmland and advanced agricultural technology, has become an agricultural powerhouse and is a leading exporter of many commodities, including soybeans, beef, and poultry, to name a few
Brazil will not increase its exports of soybeans to the European Union (EU) because it already benefits from near-zero tariffs
For much of the last three decades, Brazil and other countries of the Mercosur have inserted themselves into the global market economy and are leading exporters of several agricultural commodities
Summary
With its vast reserves of farmland and advanced agricultural technology, has become an agricultural powerhouse and is a leading exporter of many commodities, including soybeans, beef, and poultry, to name a few. The agribusiness sector as a whole accounts for almost 25% of the country’s GDP and is one of the few sectors that has not been impacted by the economic downturn that impinged on the country since 2014 [1] Part of this robustness is due to the sector’s reliance on exports, which continues to thrive even during the COVID-19 pandemic [2]. Deforestation is associated with important socio-environmental issues, including greenhouse gases emissions, loss of biodiversity, disruption of biogeochemical and water cycles, land conflicts, and threats to Indigenous populations [3,4,5,6] These concerns have been intensified by this year’s drought in Brazil, the worst in almost a century, affecting rain-fed agriculture, hydroelectricity generation, and supply of water for urban and industrial consumption in many parts of the country [7]. Free trade often increases consumers’ welfare [31,32,33] (i.e., difference between market prices and willingness to pay for products) within participating countries and this surplus can translate into higher local demand for agricultural products, leading to more deforestation
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