AFi’s response to recent state-level legislation in Brazil targeting the Amazon Soy Moratorium

The protection of forests, natural ecosystems, and human rights are integral to meeting global climate, nature, and sustainable development ambitions. Meeting these goals requires transforming how agricultural and forestry commodities are produced and traded. Although national laws can support this transformation, companies often need to go beyond minimum legal requirements to achieve supply chains that are protective of people and nature. Doing so can also make good business sense.

In this context, the recent approval of state-level legislation in Brazil represents a major setback in company efforts to achieve responsible supply chains originating from the Amazon region and beyond. This includes Mato Grosso’s Law 12709/2024 and Rondônia’s Law No. 5837/2024, which both block tax incentives for companies committing to no deforestation of areas that could be legally deforested.

These laws target companies that follow the Amazon Soy Moratorium, a world-leading Brazilian initiative that began in 2006. Company signatories to the Moratorium pledge to not purchase soy that is linked to Amazonian deforestation, legal or otherwise. These recent legislative measures are part of a broader series of actions in multiple Brazilian jurisdictions aimed at restricting the choices of private companies to go beyond minimum legal requirements. The new laws will likely make it harder for companies with no-deforestation commitments to source commodities such as soy, beef, and timber from Brazil.

The Amazon Soy Moratorium’s success at decoupling soy production from deforestation

There is strong consensus that the Amazon Soy Moratorium successfully reduced deforestation, even when accounting for leakage to other regions. Furthermore, this has broadly been a win-win initiative, supporting responsible supply chains without impeding economic development from soy production. Over the last 18 years, soy exports have increased by 500% from the Amazon biome according to statistics from ABIOVE, the Brazilian Association of Vegetable Oil Industries. Government data also indicate increased production and value of soy production in Mato Grosso and other Amazonian states since the Moratorium began.

A main justification of the recent legislation is that the Amazon Soy Moratorium could curtail economic development by preventing producers who could legally expand their operations from doing so. However, existing data indicates that only 1% of the approximately 14,000 soy farms in the Amazon Biome have soy-suitable, forested areas that could be deforested lawfully, and as much as 95% of recent deforestation on soy farms in Mato Grosso was illegal under Brazilian law. The same study finds that 80% of identified deforestation occurs on just 400 properties, which is 2% of the total number of soy farms in the state. This indicates that legal deforestation for soy production is unlikely to be a major economic vehicle for Mato Grosso or other Amazonian states.

Abandoning the Amazon Soy Moratorium risks serious environmental and economic losses

Laws that penalise companies for upholding their commitments under the Moratorium stand against 18 years of success that has helped the soy sector of the Amazon come to be perceived as lower risk. If legislative measures impede the Amazon Soy Moratorium, it is possible that soy-driven deforestation will once again increase in the Amazon. This would increase reputational, regulatory, and other business risks for companies sourcing soy from Brazil.

That would not be good news for the Brazilian soy industry. Indeed, ABIOVE CEO André Nassar has warned that ending the Moratorium may result in a boycott of Brazilian soy, which could harm revenues of farmers and firms across the Brazilian soy supply chain.

The current value of state tax benefits to soy companies in Mato Grosso is $308 million a year. If lost, companies may face increased costs to maintain their commitments to no-deforestation. More responsible companies may also become less competitive relative to buyers that lack environmental safeguards. Tilting the level playing field created by the Moratorium would benefit a small group of producers and traders that seek to profit from destruction of the Amazon.

Implications for companies buying Brazilian soy

For food manufacturers, retailers, and other companies across the world committed to no-deforestation that rely on Brazilian soy, these recent legislative changes could create major headaches. The conflicting mandates of global no-deforestation commitments and legislative restrictions in Brazil affecting soy traders and other domestic companies will likely make it harder for companies that purchase Brazilian soy to incentivise their suppliers to adhere to the higher standards requested. Companies sourcing soy from Brazil should confirm the origins of goods they source and assess their suppliers’ plans and policies to ensure deforestation-free production if their purchases originate in Mato Grosso or Rondônia.

AFi supports voluntary action by supply chain companies

National law should set a baseline – not a cap – on companies’ ability to operate their business in accordance with the public good. The success of the Amazon Soy Moratorium demonstrates that voluntary initiatives that supplement minimum legal requirements can play an integral role in helping companies improve both their environmental performance and their market positioning.