Regional Comparative Advantage, Location of Agriculture, and Deforestation in Brazil

Abstract

ABSTRACT This article highlights how deforestation is not only linked to economic processes within the Amazon, but also to economic forces in the rest of Brazil. In light of recent trends in Brazil's agricultural production inside and outside the Amazon, this article maintains that the growing importance of beef production in the Amazon relative to the rest of Brazil is likely to lead to further increases in deforestation. From 1991 to 2001 the Amazon's share of the Brazilian bovine herd increased from 15% to 25%—an average change of 1% per year. With the Brazilian herd size in 2003 estimated at 196 million head of cattle, the current rate of increase implies an increase of 1.96 million cattle per year in the Amazon. At Brazil's average stocking rate of 1.1 head of cattle per hectare, it means that an additional 18,000 km2 of land are needed each year in the Amazon to account for this expansion. However, Brazil has abundant agricultural land outside the Amazon to meet increases in demand for beef. The difficulty lies in the comparative advantage of these other areas in producing soy and grains as opposed to livestock. I conclude that targeting resources toward specific agricultural development opportunities outside the Amazon—especially grain-fed beef— would be an effective way to reduce incentives to clear land in the Amazon.