One of the hallmarks of modern slavery is the subjugation of the enslaved through debt. The Lula government has a plan up its sleeve that, if put into practice, will make agricultural producers, without any exaggeration, be placed in the condition of debt slaves.
Among the measures that President Luiz Inácio Lula da Silva would announce during his visit to China is an ambitious plan to “zero deforestation” in the Amazon. In addition, the measure would dramatically increase food production in the country. Something very welcome and relevant. But the problem is how Lula wants to do it.
The president and his team are betting on the recovery of degraded areas – large clearings opened in the past, almost all of them abandoned or low-productivity pastures – which, with soil correction, could transform 40 million hectares (twice the area of the State of Paraná) in areas intended for food cultivation. I hope it works out. But the problem remains how the government intends to execute the plan.
Lula is negotiating with the Chinese so that they invest US$ 100 billion to transform old pasture into crops.
To attract the Chinese, Lula promises that the bill will be paid in goods by agricultural producers, such as corn and soybeans.
Looks like a China business. But if such nonsense gets off the ground, Lula will pawn one of the most efficient sectors in the country, further aggravating the dependence of Brazilian agribusiness on China, which is the destination of more than 33% of the country’s agricultural exports. When it comes to soybeans, the Chinese buy about 68% of Brazilian exports.
With this power in their hands, the Chinese are already capable of putting downward pressure on prices when a phytosanitary problem “appears” or even complaining about prices directly to producers. Owners of monumental food stocks, they can stop buying for weeks or even months to force the market to react according to their interests. Imagine what they will do as early owners of an important part of Brazilian agricultural production?
As creditors of a debt of US$ 100 billion contracted by Lula, but which will be paid by Brazilian farmers, the Chinese Communist Party (PCCh) will have the perfect scenario to maneuver in favor of its strategic interests. Brazil – which forgets that it is as important or even more important than China in terms of the sale and purchase of food and which is already treated by the PCCh as a farm –, as a debtor, will be a modern slave quarters.
Lula’s idea is reminiscent of one of Hugo Chávez’s capital mistakes. In 2008, he signed with China the creation of the Venezuelan Chinese Joint Fund (FCCV), administered by the Economic and Social Development Bank of Venezuela (Bandes). Originally, the deal allowed Venezuelans access to a $4 billion credit line to pay for Chinese goods and services, such as building and launching the first “Venezuelan” satellite.
The money flowed, flowed, flowed, until the debt reached US$ 60 billion. As a guarantee of payments, Chavez pledged oil production. And that has a lot to do with the social and economic tragedy that plagues our neighbors.
Venezuela’s collapse is well known. But some details need to be remembered. Since Chávez took office in 1999, Venezuela has never produced a barrel of oil more than what was extracted from the ground in the previous year. The frank decline in production, resulting from the scrapping of the state-owned oil company PDVSA, was offset by the boom in prices. But when oil prices plummeted, coinciding with the lowest oil production in Venezuela’s history, the Chavista regime found itself with a noose around its neck. In 2019, no less than 25% of Venezuela’s oil production was sent to China as debt payments. A colossal invoice that helped a lot to push the country into the abyss where it is today.
By wanting to outsource the Chinese loan bill to agricultural producers, Lula may be condemning the vigorous Brazilian agro to the collapse that brought down PDVSA, which was once one of the main oil companies on the planet and today is scrap metal sitting on a sea of oil.
If Lula is really willing to change the game in the Amazon, he would have to have the courage to face his minister Marina Silva and the sect of environmentalists who want to see agriculture out of the Amazon. The solution is internal and does not depend on Beijing, Washington or the European Union.
A few changes to the Forestry Code would be enough for the producers themselves to be attracted to the enterprise and pay the bill for recovering the pastures. The recipe is relatively simple, but implementation may be impossible due to the sectarianism of ongo environmentalism, which at times is installed in the offices of the Esplanada, at times is making a fuss abroad, painting Brazil as a scorched earth.
With the current rules, no producer, with a minimum of judgment, will buy an unproductive pasture to invest in its recovery. Although the property may have been deforested in the 1970s, the new owner will also own the environmental liabilities. He will have to reforest 80% of the area and will only be able to plant in the remaining 20%.
In the Amazon, it is cheaper to buy 100% virgin forest and throw 20% on the ground – as required by law – to make pasture and crops. Ironically, the law, which is very hard to protect, tends to encourage devastation.
If the Lula government changed the rule, just for degraded areas, it would already make them economically attractive. Reducing the reforestation obligation and expanding the right of use, in an inversion of the 80% x 20% logic, for areas of old deforestation (with more than 20 years, for example), could help to have the same positive effect for the forest , without turning producers into debt slaves.
The example above is obviously an abstraction. There are loads of studies on the subject. But the government has to be willing to face the problem. But, by all indications, the Chinese easiness is an irresistible attraction. The easy way. That’s how traps work.
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